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World Water Day update: ICMA-backed consortium to develop blue bond guidelines

Ocean Finance Taskforce is also underway, whilst ISS ESG launches water risk rating.

To mark World Water Day, ICMA is collaborating with UNEP FI, the Asian Development Bank (ADB), UN Global Compact (UNGC), and the IFC to develop ‘Global Blue Bond Guidance,’ RI understands. 

The institutions aim to aid private, sovereign, and multilateral issuers in using sustainable bonds to credibly access financing for projects and strategies that advance ocean-related objectives in the issuance of blue bonds. 

RI understands the guidance is meant to be used in conjunction with ICMA’s green and sustainability bond guidelines and will build on UNEP FI’s Sustainable Blue Economy Finance Principles and other relevant resources. 

Work has begun on the initiative by the organisations; the hope is for it to be discussed at the UN Ocean Conference held in Portugal in June.  

In related news, ADB – which launched its debut blue bonds in September – is in the midst of developing its Blue Bond Incubator to support both sovereign and corporate blue bonds. 

A representative for ADB told RI: “The Blue Bond Incubator is still in development. ADB is researching and consulting with partners to better understand the challenges faced by blue bond issuers and the opportunities for ADB’s support.” 

There has also been progress on a proposed UNGC Ocean Finance Taskforce. 

Suzanne Johnson, senior advisor to UNGC’s Sustainable Ocean Business platform, explained to RI that the initiative aims to: grow a pipeline of diversified investment related to a sustainable and productive ocean, identify and coalesce around blue standards, increase data, transparency and criteria, and identify tools for CFOs to address the cost of blue issuance. 

Currently it is in its scoping phase and UNGC is working with a range of unnamed stakeholders, including investors and banks. 

On investor action, Thomas Schumann’s TSC Water Security Index has been made available to global capital markets for direct investing on Allindex. 

“Unlike existing water indices, which invest solely in a concentrated basket of water purification manufacturers and water utilities, the TSC Water Security Index provides exposure to a diversified basket of large-capitalisation companies across all sectors weighted by the exposure to Water Risk, while tracking UNSDG 6,” the announcement said. 

Currently, the index family consists of security indices for the US and EU; however, a global equivalent has recently been built. The aim is for it to be launched around the end of May. 

Schumann also told RI that the UCITS ETF to track TSC Water Security Index is in final launch preparations.  

In addition, the Thomas Schumann Water Security Fund is being set up for venture philanthropy capital.  

“The first portfolio company Global Water First is being funded as we speak to deploy 30 water installations to Ukraine as a humanitarian relief mission that provides access to clean water to refugees in and near the borders of Ukraine,” he added. 

Providers are also weighing in on the issue of water risk with ISS ESG launching the ISS ESG Water Risk Rating. 

The responsible investment arm of the Institutional Shareholder Services (ISS), said its new offering helps investors identify and manage freshwater-related risks in portfolios, build freshwater-focused portfolios, funds and indices, as well as support their water-related stewardship and engagement programmes. 

Initially the rating covers approximately 7,400 companies globally. 

Finally, research by Sustainalytics, a subsidiary of Morningstar, has found that firms with high water intensity display high ESG risk, high return, high standard deviation of returns, and high downside deviation of returns, the firm said. Water intensity, however, weakly relates to risk-adjusted return, it found. 

The research was based on an application of Sustainalytics’ water metrics, which are a part of its ESG risk ratings. The results were published yesterday to shed light on the growing effects of water scarcity on companies and countries. 

Today is the 30th iteration of World Water Day and the theme for this year is ‘groundwater – making the invisible visible.’