Financial constraints hinder the transition to a sustainable ocean economy. This chapter outlines the role of development co-operation in addressing these bottlenecks. It emphasises the need to improve the use of official development assistance (ODA) in terms of targeting, predictability, and volume, as well as the importance of leveraging ODA strategically to unlock other sources of capital—both public and private. Finally, the chapter provides guidance on specific financing mechanisms and instruments relevant to a sustainable ocean economy, highlighting their particular use cases, requirements, and challenges.
Promoting Sustainable Ocean Economies
Guidance for Development Co-operation
Abstract
Despite the case for investing in a sustainable ocean economy, estimates suggest large unmet financing needs. A combination of macroeconomic constraints and project-level barriers – both financial and non-financial – impede the flow of adequate finance for a sustainable ocean economy. Development assistance, which is a critical source of external finance for many developing countries is also limited in its support for a sustainable ocean economy.
The recommendations in this chapter detail how development assistance can facilitate the flow of adequate and effective finance and investment towards a sustainable ocean economy. Based on the current allocation patterns of ODA for a sustainable ocean economy, the first recommendation identifies opportunities to improve its targeting and predictability (Section 4.1). It also underscores the value of scaling up sustainable ocean economy ODA to meet existing global commitments. The second recommendation recognises that while ODA is a critical source of funding, it is not the only one. It outlines the various channels through which ODA can unlock other sources of finance, both public and private (Section 4.2). The third recommendation delves into specific financing mechanisms and instruments for a sustainable ocean economy, including emerging economies, and highlights where they can be used and the role of development co-operation in their implementation (Table 4.4 contains a synthesis).
Ensure balanced and tailored allocations across countries and sectors
A balanced allocation of ocean-related ODA across countries ensures that development assistance is in line with countries’ needs and vulnerabilities. Development co-operation funds for a sustainable ocean economy remain heavily concentrated in a small number of developing countries. For SIDS, which are economically dependent on the ocean, ocean-related ODA only accounts for a small share (6% in 2022) of total ODA committed to them. Moreover, there is evidence that ODA funding is not always well targeted. ODA funds intended to curb plastic pollution, for instance, do not always flow to the countries with the greatest incidence of plastic leakage (Agnelli and Tortora, 2022[1]). Better targeting can, therefore, help maximise the impact of limited ODA funds in advancing the four goals of a sustainable ocean economy (outlined in Section 2.1). Measures of vulnerability – such as the Multidimensional Vulnerability Index (UN, 2024[2]), which factors in risks associated with the ocean (e.g., low lying coastal zones) – can also be a useful and complementary tool for informing the geographical allocation and use of ODA funding.
Diversifying the sectoral focus of ocean-related ODA is a priority. Current allocations mainly target sectors in which development co-operation providers have historically operated (e.g. maritime transport). Providers are less active in novel ocean economy sectors, like marine biotechnology and offshore or ocean-based renewable energy. This is largely due to the emerging nature of these sectors, making them risky and unfamiliar areas of co-operation for providers. However, these sectors could be engines of economic diversification, making them an important area of focus for development co-operation. Development co-operation can also help to ensure that developing countries, and particularly marginalised groups, are able to reap equitable rewards from these sectors. Hence, it will be important to scale up support for these emerging sectors with a focus on knowledge, technology transfer, capacity gaps and proof-of-concept. The sectoral allocation should nonetheless account for sector-specificities. Table 4.1 presents key priorities across sector types to help inform a differentiated approach to ODA funding.
Improve the predictability of ocean-related ODA
Greater predictability can be achieved by shifting away from project-based financing to more long-term approaches. As shown in Figure 1.4, ODA for the ocean economy experiences marked year-over-year volatility. Annual spikes in ocean economy ODA commitments are driven by large individual projects. This reflects the skew of these commitments towards project-based financing. Shifting towards other approaches, such as sectoral budget support, can be one way of ensuring more flexibility and long-term predictability for partner countries.
Ensuring that ODA committed for the ocean economy is disbursed as scheduled can also help alleviate variability. There is a major difference between amounts of ODA committed for sustainable ocean economies versus the amounts disbursed (Table 4.2). This is a challenge across countries in all regions and income categories, except for upper-middle-income countries, where the amounts committed and disbursed were roughly the same (OECD, 2024[3]). Development co-operation providers can support partner countries by ensuring that committed sustainable ocean economy funds are disbursed as scheduled, particularly for those countries that may be particularly dependent on these funds, such as LDCs and SIDS.
Note: LDCs= least developed countries; LMICs=lower-middle income countries; UMICs=upper-middle income countries; SIDS= small island developing states.
Source: OECD (2024[3]), Data Platform on Development Finance for a Sustainable Ocean Economy, https://oecd-main.shinyapps.io/ocean/.
Finally, greater predictability can be achieved by clarifying which providers are active in specific ocean sectors and geographies. This transparency can help both development co-operation providers and partner countries. For providers, a clear sense of what sectors and regions other providers are operating in can enable effective coordination, to avoid redundancies or gaps. Information on the providers’ ocean portfolios can also help partner countries identify the right providers for their individual priorities. The provider profiles on the OECD Data Platform on Development Finance for the Sustainable Ocean Economy are a useful resource in this regard (OECD, 2024[3]).
Consider how global commitments can be met through a sustainable ocean economy, as a means to scale up ocean-related ODA
While there is no explicit global funding commitment for the ocean, ocean-related support can help meet existing commitments in other policy areas. This reflects the key role that the ocean can play in advancing other priorities, including climate action (e.g. through supporting coastal resilience, and decarbonisation of ocean economy sectors) and biodiversity protection (e.g. safeguarding marine biodiversity). In this context, scaling up ocean-related ODA can help meet recently announced global funding targets, namely:
Financing the implementation of the Kunming Montreal Global Biodiversity Framework: At the conclusion of COP16 in February 2025, Parties to the Convention on Biological Diversity set the target of mobilising at least USD 200 billion per year by 2030. This includes a target of USD 20 billion a year in international flows to developing countries by 2025 (increasing USD 30 billion a year by 2030) (CBD, 2025[4]).
New Collective Quantified Goal on Climate Finance (NCQG): At COP29, countries set a target of USD 300 billion per year of climate finance by 2035 (tripling the previous goal of USD 100 billion). The NCQG also calls on “all actors to work together to enable the scaling up of financing to developing country Parties for climate action from all public and private sources to at least USD 1.3 trillion per year by 2035” (UNFCCC, 2024[5]).
These links may also create a clear rationale for less active providers to scale up their support for the sustainable ocean economy. A small set of development co-operation providers, who have longstanding familiarity with ocean-related issues, account for the bulk of ODA for the sustainable ocean economy. Recognising that supporting a sustainable ocean economy can go hand-in-hand with other global financial commitments may create an impetus for diversifying the provider base of ODA for the sustainable ocean economy.
Build and nurture partnerships across ocean finance stakeholders
There is a rich landscape of actors engaged in financing a sustainable ocean economy. This presents opportunities for innovative new partnerships to maximise the resources and skills of different stakeholders, while ensuring that development co-operation efforts are aligned. There is increased recognition of the importance of investing in a sustainable ocean from across a diverse range of stakeholders (Table 4.3). Governments (at all levels), local community organisations, non-profit organisations, development partners, philanthropic foundations, multilateral organisations, research and science entities, private companies, innovators, financial institutions, investors, sovereign wealth funds, and many more actors are all already playing important roles in helping to advance a sustainable ocean economy.
This richness provides fresh opportunities for co-operation and to “blend” different types of capital in innovative and mutually reinforcing ways. Various finance providers have also developed specific ocean economy focused technical and financial assistance funds and programmes over recent years (such as the World Bank’s PROBLUE programme and the UK’s Blue Planet Fund), while new multilateral funds and initiatives have also emerged (such as the Global Fund for Coral Reefs and the Ocean Risk and Resilience Action Alliance). Looking ahead, partnerships will also be essential if development co-operation is to potentially venture into new domains, such as marine biotechnologies, “blue foods”1, and artificial intelligence, where technical and scientific expertise will be paramount to ensure that developing countries are able to maximise new sustainable development opportunities, while mitigating risks.
Strengthen domestic resource mobilisation for the ocean economy
Development co-operation can support the domestic resource mobilisation efforts of partner countries and align more domestic resources with sustainable ocean economies. Domestic public resources are by far the largest and single most important source of financing for sustainable development, including for a sustainable ocean economy (Sumaila et al., 2020[6]). Boosting domestic resources for sustainable ocean economies could therefore have a major positive impact on ocean health, livelihoods, resilience and other areas. Many developing countries have however found it hard to mobilise additional revenues over the recent period in a context in which they have been buffeted by multiple overlapping crises, such as the COVID-19 pandemic, high inflation, climate-related shocks, and other crises and challenges. At the same time, relatively little ocean-related ODA focuses on domestic revenue mobilisation. In 2022, just USD 7.5 million (out of USD 3.5 billion) were committed for this purpose across all development co-operation providers and all ODA recipients (OECD, 2024[3]).
When it comes to a sustainable ocean economy, public expenditure does not fall neatly into sectoral or ministry lines. For these reasons, many governments may not necessarily be aware of how much is being spent on a sustainable ocean economy, how effective this expenditure is, and what opportunities are being missed. Information gaps can be particularly challenging at a sub-national level. In fact, in certain cases, even when countries have a dedicated ocean economy strategy or policy, they do not include a budget for implementation (OECD, 2024[7]).
Development co-operation support can help developing countries to understand how domestic resources are being, or can be, deployed at both national and sub-national levels. For example, it can support public expenditure reviews focused on the ocean economy, as well as budget tagging exercises as a tool for monitoring and tracking ocean-related expenditures in the national budget system (see Box 4.1 for existing guidance and case studies). Development co-operation providers can also help to identify where environmental fees or taxes, licensing fees, other user charges, or other mechanisms could be implemented to mobilise funds sustainably over the long term for coastal and marine conservation – particularly marine protected areas – as well as how new technologies can be leveraged to make fee collection systems more efficient. For those countries with stronger governance and public financial management systems, providing sector budget support could be extremely efficient.
Better management of ocean economy sectors can also strengthen domestic resource mobilisation (OECD, 2022[8]). Developing country governments often struggle to capture the full value generated by ocean-based activities due to challenges like illegal, unreported, and unregulated (IUU) fishing, which results in global losses of up to USD 23 billion annually (FAO, 2017[9]). These leakages weaken fiscal capacity and can limit public investment in sustainable ocean economies. Robust management is also important for emerging ocean economy sectors, which can provide new revenue streams (OECD, 2022[8]) and offer significant potential to increase domestic public resources. However, converting this potential into tangible gains requires fit-for-purpose policy and regulatory regimes, access to new technologies to prevent and detect illicit practices, and improved capacity. Here, development co-operation has an important role in enabling developing countries to establish frameworks for ocean economy management and to monitor compliance (Chapter 3).
Guidance on public financial management for a sustainable ocean economy
Practical guidance exists for national and sub-national governments which are seeking to mobilise and align more domestic public resources with a sustainable ocean economy. The World Bank’s Blue: Public Expenditure Review Guidance Note aims to help country authorities to identify and quantify: (1) insufficient public expenditure related to the ocean economy; (2) excessive public expenditure (e.g. on activities that generate negative externalities); and (3) missed opportunities (e.g. through sub-optimal tax policies on ocean economy sectors and beneficiaries of blue natural capital) (World Bank, 2021[10]). This can help governments to identify and mobilise the full range of resources in support of sustainable ocean economies.
UNDP BIOFIN
The UNDP’s Biodiversity Finance Initiative supports developing countries to develop and implement biodiversity finance plans. The initiative’s work in Zanzibar is an illustrative case study of its impact on the marine space.
Zanzibar’s coastal and marine environment is home to a rich variety of species, including fish, corals, dolphins and sea turtles, and supports local livelihoods, such as fishing and tourism. However, these ecosystems are under serious threat from habitat destruction and climate change. Marine protected areas have been established to protect these ecosystems, but traditional funding sources, such as government grants, donations and visitor fees, have proven insufficient for effective MPA management, enforcement and research.
To close the funding gap, UNDP’s BIOFIN initiative looked at ways to optimise entry fees for MPAs and terrestrial protected areas (TPAs) while improving fee collection through digital payment systems. BIOFIN support focused on two areas: (1) modelling various fee levels to identify a fee structure that would not reduce the attractiveness of these protected areas for tourists, but be high enough to cover the costs of nature conservation management; (2) increasing efficiency in the collection of entry and other fees to reduce losses and increase funding for conservation by introducing digital payment systems in the protected areas.
UNDP BIOFIN worked with various stakeholders on this initiative, including the Ministry of Blue Economy and Fisheries, the Ministry of Agriculture, Irrigation, Natural Resources and Livestock (which oversees the TPAs), and other partners such as the Ministry of Tourism and the Zanzibar Association of Tourism Investors, to review and optimise the fee system. Through the initiative, the aim is to both increase funding for conservation while also promoting sustainable tourism (Hadimoglu, 2024[11]).
Use ODA to overcome the high-risk profile associated with ocean-related investments and to attract private investment, directly and indirectly
Given the limited nature of ODA resources, they need to be used in the most strategic and catalytic ways to support sustainable ocean economies. Different countries will, however, have very different needs and priorities and may require a mix of different types of support in order to unlock financing for sustainable ocean economies. Figure 4.1 outlines both the direct and indirect ways that development co-operation can help to unlock such financing.
Directly, ODA can help to derisk commercially viable projects, reduce investment risks and make them more attractive to private sector investors. This can be done through a combination of grants, concessional loans, insurance and guarantees. Together, these mechanisms enable the strategic deployment of ODA to create favourable conditions, reduce financial barriers and the cost of capital, and stimulate sustainable investments in ocean economies.
Indirectly, ODA can unlock finance by strengthening enabling environments; developing capacities; funding research, science, and data collection; and developing standards and taxonomies. Policy support, in particular, is a vital capacity development modality. Effective and stable governance and policy frameworks are crucial to support ocean health and sustainability and enable investments from all sources in a sustainable ocean economy. Governments –both national and sub-national– have a key role to play in creating attractive financing conditions by reforming policies and creating regulations that strengthen the sustainable management and governance of marine and coastal natural capital, and facilitate new forms of sustainable enterprise in balance with ocean and coastal ecosystems (Sumaila et al., 2020[6]).
Understanding where the major bottlenecks lie in a particular context can help development co-operation providers to understand where their interventions will be most catalytic. Often, an integrated approach which encompasses mutually reinforcing actions across policy, capacity development, data collection, and direct financial support will be most effective in supporting countries to unlock financing for sustainable ocean economies.
Enable developing countries to leverage domestic and international capital markets, where appropriate, through blue bonds
Blue bonds are an innovative tool to mobilise funds for sustainable ocean economies from domestic and international capital markets. While there is no single internationally accepted definition of what makes a bond “blue”, in broad terms a blue bond is a debt instrument issued by governments, municipalities, development banks, corporate entities or others to raise capital from investors to finance marine and ocean-based projects that have positive environmental, economic, social and climate benefits. Blue bonds are modelled on green bonds, which have witnessed extraordinary growth since 2007, when the European Investment Bank issued the world’s first Climate Awareness Bond (EIB, 2024[12]). Green bond issuances (by all issuers) totalled over USD 870 billion in 2023 (Climate Bonds Initiative, n.d.[13]). The blue bond market size is a small fraction of this, with total issuance reaching USD 6.8 billion in 2023 – however, 60% of all blue bonds were issued in 2023, indicating a growing investor appetite for these types of securities (S&P Global, 2024[14]).
Amongst developing countries, sovereign blue bonds have been issued by Fiji (2023), Indonesia (2023) and the Seychelles (2018). These have helped to mobilise capital for investments in areas such as sustainable fisheries, the development of the maritime sector in more sustainable ways, aquaculture, solid waste management, and nature-based solutions for coastal protection to support low-lying vulnerable coastal communities (UNDP, 2023[15]; UNDP, 2023[16]). Blue bonds have also been issued by private entities in developing countries. For instance, the Cabo Verde International Investment Bank issued a blue bond on the Blue-X platform to raise USD 3.5 million (Joint SDG Fund, 2023[17]).
Robust metrics to measure the impact on ocean health and sustainability are key to the future success of blue bonds and for establishing and maintaining the credibility of this asset class. In Fiji and Indonesia, UNDP-led technical assistance helped to design appropriate impact measurement and management frameworks to ensure bond proceeds would be used in impactful ways for their sustainable ocean economies.
Other important types of donor support for blue bonds include credit enhancements. In the Seychelles, the issuance of the bond was supported by a World Bank (International Bank for Reconstruction and Development) partial guarantee (USD 5 million), which lowered the Seychelles’ borrowing costs by about 2% per year. An additional USD 5 million concessional loan from the Global Environment Facility (GEF) also partially subsidised payment of the bond coupon and further lowered the Seychelles’ net borrowing cost by over 3% per year. These credit enhancement instruments allowed for a reduction of the price of the bond by partially de-risking the investment. As a result, the bond paid a 6.5% annual coupon to investors, but the GEF loan reduced the cost to the Seychelles to 2.8% (Figure 4.2). This arrangement allowed the Seychelles to save over USD 8 million in interest charges over 10 years (World Bank, 2019[18]). The Rockefeller Foundation also covered most of the transaction costs, while the World Bank led outreach efforts with the impact investment community to privately place the blue bond (World Bank, 2018[19]).
Source: Adapted from World Bank Group (2018[20]), Innovative Financing for Healthy Oceans, https://www.worldbank.org/en/news/infographic/2018/10/25/innovative-financing-for-healthy-oceans
The quality of the investment pipeline is also paramount. Through its Healthy Oceans and Sustainable Blue Economies programme, the Asian Development Bank runs a “blue bond incubator” which provides research and development in sovereign and corporate blue bonds and helps build the pipeline of projects suitable for blue bonds (Asian Development Bank, n.d.[21]). This is an area that has also been supported by the World Bank, UNDP and others.
While blue bonds are an important financing instrument set for further growth, they will not be appropriate for all countries; for some developing countries, additional debt may not be an advisable strategy. They can also be complex transactions to develop and deliver. The Seychelles’ blue bond illustrates the important role that development co-operation providers can play in blue bond issuance. This includes direct financing support (to de-risk the bond and thus make it more affordable), as well as their role in project identification, targeted investor outreach, and other areas. Without this, it is unlikely that the country could have issued its pioneering blue bond. But while this collaboration undoubtedly led to a more robust and transparent process, it also substantially increased the lead time needed to prepare the issuance.
A strong policy environment is also important to support a successful blue bond issuance. Prior work to develop national ocean economy policy or cross-sectoral instruments like a marine spatial plan2 can help to reduce investment risk and ensure the proceeds from the bond are well used. The benefits of a blue bond issuance will be undermined (and the bond will be less attractive to the market) if countries cannot (or will not) ensure the meaningful protection and effective management of their marine and coastal ecosystems in ways that include and benefit local communities. Policy support is therefore also needed in the context of blue bond issuances and shows the importance of an integrated approach.
Help develop novel insurance schemes and resilience bonds to improve disaster risk reduction and resilience in developing countries
Parametric insurance
Development co-operation can play a critical role in helping to boost new approaches to insurance and risk mitigation. These approaches can be effective for enhancing the financial resilience of states and coastal communities, as well as supporting the recovery of key marine and coastal ecosystems. Development co-operation providers can work with the insurance industry to support new research and trial new approaches. Development co-operation finance can also help to fund or subsidise insurance premiums for vulnerable countries and communities to ensure that no one is excluded.
Insurance has seen significant innovation, with new approaches trialled. These include insurance initiatives specifically designed to target ocean health and sustainability. Often, these involve partnerships between insurers/re-insurers, government bodies, development partners and non-profit organisations. Examples include parametric insurance3 for key marine ecosystems, such as coral reefs, which have been successfully developed in both Mexico and Fiji. In Mexico in 2020, Hurricane Delta triggered a USD 850 000 payout from the Quintana Roo insurance policy to help the natural asset recover (TNC, 2024[22]). Under Fiji’s parametric insurance policy, island communities can benefit from a payout of up to USD 450 000 to support reef restoration and recovery following a tropical cyclone or excess rainfall (PCRIC, 2023[23]). Livelihood insurance to support fisherfolks’ financial resilience and incentivise improved fisheries management has also been developed, both in the Caribbean and the Pacific (Box 4.2). Research is also underway into other potential insurance instruments for ocean and coastal health and resilience. These include insurance for mangrove forests for the valuable flood risk reduction and coastal resilience services they provide (TNC, 2023[24]; TNC, 2023[25]).
The Caribbean Ocean and Aquaculture Sustainability Facility (COAST) has been developed with the financial support of the US State Department and has been led by the World Bank and the Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company. COAST is a parametric insurance product for vulnerable fishing communities in the Caribbean. It is designed to support governments’ efforts to rapidly put money into the hands of those impacted by extreme weather events, providing them with immediate economic relief and promoting a culture of building back better to enhance coastal community resilience after an extreme weather event.
The insurance incorporates a livelihood protection component (akin to microinsurance) and a tropical cyclone component (sovereign insurance). The COAST product provides coverage to fisherfolk for losses caused by “bad weather” and for direct damages caused by tropical cyclones (wind and storm surge) to fishing vessels, fishing equipment and fishing infrastructure. So far it has been piloted in Grenada and Saint Lucia (CCRIFF SPC, 2024[26]). The insurance is purchased by governments and provides a model which is highly replicable in other regions and countries.
COAST’s innovative features include:
First ever climate risk parametric insurance developed for the fisheries sector, spearheaded by the Caribbean. For the first time, vulnerable fishing communities will have access to insurance developed specifically for their needs.
Incentivising policy reforms for the uptake of climate-smart fisheries practices. This will build a stronger foundation for the sustainable ocean economy, while supporting the livelihoods of those who depend on this valuable marine natural capital.
First time insurance coverage of “bad weather” events, defined as high waves and occurrence of heavy rainfall throughout the policy year.
Payouts are channelled through the Ministry of Finance of the participating countries within 14 days of the covered event, followed by a rapid transfer to fisherfolk and other beneficiaries.
Parametric fisheries insurance payouts tracked at the scale of individual beneficiaries for the first time.
COAST encourages inclusiveness and women’s participation. It is intended to include all participants in the fisheries sector, including crew members, captains and/or boat owners, as well as of fish vendors and processors, who are mostly women (World Bank, 2019[27]).
Resilience bonds
Development co-operation can support resilience bonds to increase the resilience of development interventions in developing countries. Resilience bonds are an innovative financial instrument modelled on traditional catastrophe bonds that combine an insurance product with a debt instrument sold to investors to collateralise the insurance coverage.
Resilience bonds are designed to help governments increase their financial resilience to disasters through insurance coverage, while at the same time incentivising capital investments in physical resilience projects that reduce the expected losses from disasters (CPIC, 2024[28]). Under the model, the sponsors of the bond (insurance providers, local government and businesses) deposit the proceeds from the bond issuance into a collateral account and make fixed coupon payments to investors. They return the principal to investors when the bond matures unless a qualifying natural disaster occurs, in which case the principal can be used by the sponsors to help cover the costs associated with that disaster. To date, these instruments have not been deployed at scale. Since the attractiveness of resilience bonds to private investors may be a challenge, MDBs may be best placed to back these instruments.
The novelty of the resilience bond approach is that investors decide in advance to discount the coupon they receive when specific risk-reduction projects are completed during the bond term, such as mangrove restoration. Financial catastrophe models are used to validate whether a resilience project will reduce expected losses. This determines the reduction in interest payable to investors. The cost savings from this reduction are distributed back to the sponsors in the form of a resilience rebate, which can be used to finance risk reduction investments (CPIC, 2024[28]). In the ocean economy sphere, examples of how such approaches could be used include investments in mangrove restoration and conservation, coastal wetlands and other coastal natural infrastructure projects. The European Bank for Reconstruction and Development (EBRD) launched the first-ever resilience bond in 2019, which received a AAA rating and raised USD 700 million for investments in climate resilience projects (Green Finance for Latin America and the Caribbean, 2019[29]).
While resilience bonds will not be appropriate for countries that cannot accumulate more debt, for others they may be able to offer a much-needed way to leverage finance for resilience from the private sector. Scaling up such approaches will depend on advances in catastrophe modelling methodologies to robustly link reduction in expected losses from natural infrastructure projects to natural capital assets (CPIC, 2024[28]). It will also depend on the issuance of such instruments in line with widely respected market principles, standards and taxonomies for sustainability-themed securities (such as the International Capital Market Association’s Green Bond Principles). Development co-operation can be used to support early-stage feasibility work and project development costs. It can also be used to subsidise coupon payments to investors to make it more affordable for the bond’s sponsors.
Boost marine conservation efforts through a suite of financing tools, ranging from conservation trust funds to debt-for-nature swaps
Marine Protected Areas (MPAs) are the conservation instrument used most frequently by countries, but their effectiveness is often undermined by a lack of funds. More than 5 000 MPAs have been established around the world; together, they covered about 8% of the world’s oceans in 2023 (National Geographic, 2024[30]). However, one study of MPAs in developing countries estimates that about 27% of these are little more than “paper parks”, i.e. MPAs that are legally designated but essentially ineffective due to a lack of financial resources, poor monitoring and/or enforcement, or other challenges (Relano, 2023[31]). Many, therefore, largely fail to achieve their conservation goals. To address this challenge, new financing models have been devised which aim to leverage private finance and provide new opportunities for collaboration between public authorities, development co-operation providers, the private sector and local communities.
Source: Pike et al (2024[32]), Ocean protection quality is lagging behind quantity: Applying a scientific framework to assess real marine protected area progress against the 30 by 30 target, https://conbio.onlinelibrary.wiley.com/doi/pdfdirect/10.1111/conl.13020
Conservation trust funds
Conservation Trust Funds (CTFs) are an important approach to generating financing for marine protection. These are private, legally independent institutions designed to mobilise financing to promote the financial sustainability of key terrestrial and marine conservation initiatives. There are now more than 100 CTFs around the world, and they have a key role to play in promoting new and creative ways to sustainably manage key ecosystems. With good design and management, CTFs can provide the institutional structures at the local and national levels for transparent and accountable fund generation and allocation to support ongoing protected area management.
CTFs vary in their design but should all have a stable and lasting financial structure, providing a normalised flow of funds not subject to the vagaries of project funding. They can be structured as endowments, sinking funds, revolving funds, or any combination of these.4 A core feature of many CTFs is the implementation of innovative financial mechanisms, such as carbon revenues, alongside more traditional revenue streams such as user fees or tourism taxes. Another common source of funds for CTFs is debt-for-nature swaps (discussed in more detail below). These revenue streams are often supplemented with funds from national budgets and/or providers. In the marine conservation area, prominent examples include the Caribbean Biodiversity Fund and the Mesoamerican Reef Fund.
Key success factors for CTFs include meaningful community engagement and local-level support for the approach; political buy-in; a clear vision; strategic partnerships with organisations or individuals which can provide mentorship, technical assistance and financial advice; diversified systems of financing; and independent and participatory governance. Development co-operation providers can support CTFs in diverse ways, such as funding technical feasibility studies; supporting CTF design; financially supporting the organisations delivering technical assistance to the CTF; supporting the development of appropriate reporting, monitoring and evaluation frameworks, as well as direct capitalisation of the CTF.
Debt-for-nature swaps
The application of debt-for-nature swaps (DFNS) to marine conservation activities, particularly for financing MPAs, has increased in prominence over recent years. The Seychelles (2018), Belize (2021), Barbados (2023), Ecuador (2023), Gabon (2023), Indonesia (2024) and The Bahamas (2024) have all used the mechanism in slightly different ways to reduce or refinance debt, and in so doing have mobilised funds for marine conservation. Under these approaches, the developing country is supported to “buy back” costly bondholder debt (typically at a discount), then issue new debt (blue bonds) at a lower interest rate and longer maturity, with the savings generated by the transaction ringfenced for marine conservation. Box 4.3 illustrates this through Ecuador’s debt-for-nature swap.
DFNS provide opportunities for diverse development partners to engage with each other and with the private sector in innovative ways to mobilise new funds for marine conservation. They are, however, extremely complex and require significant technical expertise to realise. They are also unlikely to be suitable for all countries and depend on the debt profile of the developing country.
There is an important role for development co-operation at the early stages of a transaction to help fund feasibility work, as well as the technical and legal advisory services required by the transaction at the later stages, which can often be extremely expensive for developing countries. Development co-operation providers can also work with the various parties to the transaction to encourage meaningful and robust community engagement and participation, to ensure that local stakeholders can inform the social, economic and environmental outcomes to be achieved, and that they can benefit fully from the transaction. Funds from MDBs and DFIs have also been used to provide partial credit guarantees to lower interest costs on the new “blue bonds” issued as part of the debt buy-back (swap) operation.
Ecuador’s DFNS is by far the largest debt for marine conservation swap to date. The transaction centred on the issuance of a conservation-linked bond (the Galápagos Marine Bond), which was used to exchange USD 1.63 billion of Ecuador’s international bonds for a USD 656 million loan. The transaction provides an example of the complementary roles that different public and private sector actors can play.
Philanthropic organisation Pew Bertarelli Ocean Legacy Project developed the early-stage DFNS concept alongside specialised private sector company Climate Fund Managers, which acted as a key advisor to the transaction through its marine ecosystem venture firm, Oceans Finance Company. Climate Fund Managers invested USD 2 million in early-stage development capital via its Climate Investor Two (CI2) Fund.
Regarding bilateral and multilateral development co-operation providers, the Dutch Fund for Climate and Development, the European Commission and several others provided the risk capital to the CI2 Fund (Climate Fund Managers, 2023[33]). The US International Finance Corporation provided USD 656 million in political risk insurance, while the Inter-American Development Bank gave a USD 85 million guarantee (DFC, 2023[34]; IDB, 2023[35]). The Global Green Growth Institute, with funding from the Latin American Development Bank, acted as an advisor to Ecuador’s Ministry of Economy and Finance throughout the transaction by providing technical and financial advisory services (GGGI, 2023[36]). Finally, the commercial bank Credit Suisse acted as the lead arranger for the transaction, facilitating the debt buyback.
Although the transaction did not significantly reduce Ecuador’s debt stock, it was extremely valuable from a conservation perspective. The debt conversion will generate an estimated USD 323 million for marine conservation in the Galápagos Islands over the next 18.5 years, including approximately USD 12.05 million of new funding annually and around USD 5.41 million annually, on average, to capitalise an endowment for the Galapagos Life Fund (GLF). The endowment, which will be a source of permanent funding for the GLF to continue supporting marine conservation projects beyond the term of the transaction, is estimated to grow to more than USD 227 million by 2041. Combined, the debt conversion and endowment will generate more than USD 450 million for marine conservation in the Galápagos Islands (DFC, 2023[34]).
Public-private partnerships for marine protected areas
Public-private-partnerships (PPPs) offer another way to address the financial shortfalls affecting MPAs. Under this model, MPAs are jointly managed by a non-profit entity, a co-management company (Special Purpose Entity) and the national or sub-national authority through a collaborative management arrangement (CPIC, 2021, Blue Alliance, 2024). This arrangement aims to help an MPA become financially sustainable by generating its own income streams through a mix of statutory user fees, payments for ecosystem services (such as blue carbon), and other revenue streams. It uses a blended finance approach in which impact investors are targeted to provide the initial working capital investment, with development co-operation providers providing a blend of grants, concessional loans, and guarantees/political risk insurance to improve the attractiveness of the investment to private investors (Blue Alliance, 2023[37]; CPIC, 2021[38]). Development co-operation providers can also support local capacity development.
So far, this approach has been implemented in Belize, the Dominican Republic, Indonesia, the Philippines (Box 4.4) and Zanzibar (Blue Alliance, n.d.[39]). Advantages to the approach include the potential for MPAs to become financially self-sufficient, the involvement of local communities in the ongoing management of the MPA, and opportunities to foster new forms of sustainable enterprise linked to the MPA (such as ecotourism or sustainable aquaculture). Governments can also focus on core functions such as regulation and compliance if they are freed from the day-to-day management of the MPA. Challenges include the complexity of the model, which involves multiple stakeholders whose interests and incentives may not be aligned (including local government, local communities, local businesses, investors, non-profit entities, and others), the ability of the MPA to generate sufficient revenues to fully cover its costs plus an investment return, and local capacity to implement and manage the model to a high standard.
In 2021, the local government units (LGUs) of Baco, Calapan, Puerto Galera, and San Teodoro signed agreements with Blue Alliance, a non-profit organisation specialised in MPA management, for the delegated management of the North Mindoro MPA network, comprising nine MPAs covering 62 000 hectares (ha) of municipal waters. In mid-2023, the municipality of Abra de Ilog signed a similar agreement, adding three more MPAs covering 50 000 ha of additional municipal waters. In 2024, an agreement was signed with Sablayan, adding ten more MPAs spanning 76 000 ha.
Through these agreements, LGUs aim to improve the health of marine ecosystems for local fisher communities, and to provide alternative livelihood options in the ocean economy, through aquaculture, ecotourism, and blue carbon projects.
Each agreement runs for 10 years (and renewable) and defines the specific roles and obligations of Blue Alliance in the day-to-day MPA management. Blue Alliance Philippines undertakes marine conservation activities, encourages sustainable fishing practices, and actively promotes reef-positive businesses in and around the MPAs. Its on-the-ground management team monitors and protects natural resources through enhanced compliance and enforcement activities, long-term community engagement programmes, and regenerative projects for environmental protection.
The revenue streams under development for the MPA include dive tourism, aquaculture (sea cucumbers and mangrove crabs) and blue carbon credits. The aim is to achieve the long-term financial self-sufficiency of the MPA, with other revenue streams from fisheries improvement schemes and plastic recycling also under exploration (Blue Alliance, n.d.[40]).
Other community-managed and led models for MPA management and financial self-sufficiency have also emerged. For example, New Zealand’s Ministry of Foreign Affairs and Trade is funding The Nature Conservancy (TNC) to support the Arnavons Community Marine Park (ACMP) in the Solomon Islands to protect the largest Hawksbill turtle rookery in the South Pacific and become a model for community-led eco-tourism and conservation. By investing in local women, ecotourism planning, marketing, and infrastructure, TNC will build the Arnavons into a key tourism destination for the Solomon Islands, which delivers tangible benefits to local communities and the women’s civil society organisation, KAWAKI, who will manage it. The goal of this activity is to support local partners to develop the Arnavon Islands as an ecologically and economically sustainable eco-tourism destination led by the KAWAKI women’s collective.
Accelerate investment in nature-based solutions by assisting developing countries in setting up high-integrity markets and pay-for-success models
Blue carbon
Payments for “blue” ecosystem services have emerged as an innovative mechanism to help deliver more finance for investing in the restoration and protection of valuable coastal and marine ecosystems, such as mangroves, salt marshes, seagrasses and coastal wetlands. Also referred to as natural capital markets or nature markets, these innovations provide a mechanism for private investment in nature through the sale of units of ecosystem services, such as carbon credits, biodiversity credits, nutrient credits and coastal protection services.
While natural capital markets are mostly in their infancy, voluntary blue carbon markets are more advanced, and there are already examples of successful projects in this field. “Blue carbon” refers to the carbon stored in coastal and marine ecosystems, such as mangroves, tidal marshes and seagrasses (The Blue Carbon Initiative, n.d.[41]). In blue carbon projects, in order to compensate for their own emissions5, individuals and companies purchase carbon credits from projects which reduce or remove CO2 or equivalent greenhouse gas emissions from the atmosphere. While blue carbon markets are newer than those linked to terrestrial projects, they have already been successfully implemented in several developing countries, with most focused on mangrove restoration (Box 4.5). However, the transparency and integrity of blue bonds – which are generally subject to fewer regulations than more established instruments, and can suffer from the absence of a “universal” definition of the sustainable ocean economy – is not always guaranteed (OECD, 2024[7]). Furthermore, ensuring the long-term effectiveness and permanence of carbon storage can be complex due to natural disturbances, land use changes, and the uncertain impacts of climate change.
Such markets are expected to grow further in the future. Commercial interest in blue carbon is already high and several major international banks and financial services companies have launched natural capital funds focused on a sustainable ocean economy, including investments in blue carbon projects. These include Mirova’s Sustainable Ocean Fund, which has invested in marine protected area management, including a blue carbon project in Turneffe Atoll Marine Reserve in Belize (Mirova, 2023[42]).
The world’s first blue carbon project, Mikoko Pamoja, was developed in 2010 in Southern Kenya. It is a community-led mangrove conservation and restoration project certified by Plan Vivo, a leading community-centred carbon credit accreditation standard. Under the project, local communities receive a minimum of 70% of revenues derived through blue carbon credits, which are used to fund water and sanitation projects in local communities (Plan Vivo, n.d.[43]).
More recently, Colombia’s Vida Manglar mangrove forest project sold nearly all credits from its first issuance in just under one year. Its carbon credits were fully certified in 2021 using the Verra Verified Carbon Standard (VCS). The project’s 11 000-hectare mangrove forest is expected to sequester nearly 1 million metric tons of carbon dioxide over its 30-year lifespan (Conservation International, 2021[44]).
Although at a much earlier stage, there is growing interest in the biodiversity credit market, though very few private investors are currently comfortable investing in this area. The Montreal-Kunming Global Biodiversity Framework, adopted in December 2022, expressly refers to voluntary biodiversity credits as an example of an innovative scheme for financial resource mobilisation (Convention on Biological Diversity, 2022[45]). Although quantifying biodiversity units is more challenging, new standards have recently emerged to help develop the market: in 2023, Plan Vivo launched a new biodiversity standard (Plan Vivo, 2023[46]), and IUCN has also developed the Species Threat Abatement and Recovery (STAR) metric, designed to help the financial sector and investors better target their investments to activities that achieve conservation outcomes (IUCN, n.d.[47]). Verra also launched a consultation in 2023 on its Nature Framework, which outlines how projects can generate “nature credits” (Plan Vivo, 2023[48]). Other initiatives include the Biodiversity Credit Alliance (BCA), which aims to foster a transparent, trustworthy and efficient market in biodiversity credits (Biodiversity Credit Alliance, n.d.[49]); and Opwall, which is looking at possible biodiversity metrics for coral reefs, amongst other ecosystems (Operation Wallacea Ltd., n.d.[50]). These developments can allow projects to “stack” revenues from both carbon and biodiversity ecosystem services, enabling project developers and local communities to maximise the income from their conservation projects. This, in turn, can enable more projects to become financially viable.
Development co-operation providers can help to ensure integrity in nature markets by supporting the continuous development (and improvement) of good practice standards and taxonomies in this field, informed by the latest science. Integrity is the bedrock of nature markets and significant effort is required to build – and maintain – trust and integrity in voluntary natural capital markets. This is underpinned by an understanding that every credit issued will make a measurable and verifiable impact on the environment and/or climate. This is particularly important in a context in which the quality and climate impact of some voluntary (terrestrial) carbon credits has been challenged (Greenfield, 2023[51]). Blue carbon projects in particular need to demonstrate that the emission reductions or removals are real, measurable, traceable, permanent, additional and independently verified to internationally accepted standards such as the Verified Carbon Standard or the Gold Standard (Verra, n.d.[52]; Gold Standard, n.d.[53]). Verification is still a developing practice, however, and the availability of scientific evidence for certain marine habitats, such as seaweed and seagrasses, is still at a relatively early stage. Verification can also be extremely costly, though advances in satellite technologies, artificial intelligence, and environmental DNA sampling can be expected to lower some of these costs over time.
Verification depends on the availability of data. Compared to the significant work undertaken over recent years to map and monitor mangrove ecosystems around the world, the status of many seagrass meadows and other marine and coastal ecosystems is unknown. Up-to-date information on their status and condition will be essential if their ecosystem services are to be conserved and, where appropriate, monetised. Local knowledge also needs to be better recognised, nurtured, used and rewarded. Development co-operation can play a vital role in these areas, through support for data collection and analysis of coastal and marine ecosystems; investments in capacity development through education, training and support for local knowledge; technology transfer; and the collection and exchange of data to help facilitate the development of ocean conservation and restoration projects from the bottom-up.
Another critical challenge is how to define and distribute the benefits from blue carbon projects. This includes issues around land tenure and carbon rights, community benefit and the inclusion of women. For many nature-based projects, including blue carbon, it can be challenging to clarify land ownership, which is often the basis for assigning primary carbon rights. Even where reliable data and records on land ownership are available, if the owners of that land are not the same as the people who live in the project area and who depend on its natural resources for their lives and livelihoods, there is a risk that people who lack tenure could receive little to no income from nature-based projects, including blue carbon. Certain environmental interventions can also lead land to be reclassified – for example, where land is reflooded or degraded areas restored. This can potentially weaken Indigenous peoples’ and local communities’ land tenure in the project area. These are challenges that not only have an impact on local communities and on equity, but also on the potential longevity and therefore integrity of nature-based projects.
In this context, policymakers and development co-operation providers have a critical role to play to ensure that local communities are not simply passive beneficiaries of projects, but are actively involved in their design and development from the outset. Gender equity in blue carbon projects is critical, in particular because there is evidence that women are particularly dependent on the services ecosystems such as mangroves provide, such as firewood and near-shore fisheries, to support their livelihoods and family health (Reef Resilience Network, n.d.[54]). Initiatives like the Blue Carbon Code of Conduct, developed in 2017 by NGOs, UN agencies and other partners, can be a useful tool to ensure inclusive, socially just and accountable blue carbon projects are developed (Blue Forests Project, 2017[55]). Box 4.6 synthesises lessons learned from blue carbon projects.
Consult with local stakeholders from the beginning to understand local demand, and desired outcomes and to build ownership for the project.
Define project objectives, and have in-country capacity for monitoring, reporting and verification.
Consider potential impacts of climate change for site selection, prioritising areas most resilient to sea-level rise.
Conduct an early-stage feasibility assessment to explore technical, legal, financial planning and community engagement considerations.
Develop a business plan that shows when credits will begin to be accumulated, how much they will be worth, and how much can be expected over the life of the project. Blue carbon projects can be expensive up-front and carbon credits do not kick in for several years after the project has been established.
Trust funds can help to improve the transparent and accountable disbursement of carbon credit revenues, ideally with a professional board and fund manager who can provide regular, detailed reporting on the receipt and use of funds.
Incorporate livelihood considerations into conservation and restoration projects for blue carbon, including with a focus on women and marginalised communities.
Commit to long‐term adaptive management, including monitoring, to assess and adjust management of blue carbon habitats, as needed.
Source: Adapted from Reef Resilience Network (n.d.[56]), Blue Carbon Projects, https://reefresilience.org/blue-carbon/blue-carbon-projects/
Results-based payment models
Environmental impact bonds (EIBs) are financial instruments tied to the achievement of certain outcomes. Although less “mature” than other innovations in the finance field, and with perhaps more limited potential for scale, they can also be used to mobilise funds for sustainable ocean economies. Through EIBs, project developers raise upfront capital for environmental interventions from private capital markets, with investors repaid (with interest) by outcomes funders (such as providers or philanthropic finance providers) on the condition that the project achieves specific pre-agreed outcomes. As such, the instrument shifts the risk of non-performance to private investors. Should the outcomes achieved be more successful than those pre-agreed, “performance payments” can be adjusted upwards; similarly, if some outcomes are achieved but they fall below pre-agreed targets, investors may not receive any interest payments (but recover their principal). This will depend on how the impact bond is structured.
Properly designed, EIBs can help to restore coastal habitats, such as coastal wetlands, while generating cost savings through the ecosystem services provided by these habitats, such as land loss and flood risk reduction and the increased resilience of local communities to storms and sea level rise. Often these projects generate additional benefits, including climate change mitigation, uplifts in biodiversity and new opportunities for sustainable livelihoods (e.g. related to eco-tourism) (CPIC, 2021[38]).
Because payment-for-performance is a critical element of an EIB’s design, establishing appropriate metrics is essential. Each EIB will have its own metrics against which performance is measured to influence the rate of return to investors (CPIC, 2021[38]). These are typically centred around a primary outcome metric that is tied to repayment. Various performance tiers can also be set – such as base/expected performance, under-performance, and over-performance. Each of these scenarios would result in a different level of return to investors.6 Examples of metrics related to coastal wetlands could include reduced infrastructure maintenance, reduced frequency of nuisance floods and increased presence of specific native species (CPIC, 2021[38]). Additional outcome metrics could be related to social and community benefits, such as the number of new livelihoods or job opportunities created.
These types of instruments are relatively new, and in the ocean and coastal sphere most experience with EIBs is limited to advanced economies, notably the United States. Current research suggests that the instrument has been used about 10 times in total so far and has raised approximately USD 284 million for environmental interventions (terrestrial and coastal) (Trotta, 2024[57]). Indonesia’s coral bond is the World Bank’s first outcome-based financing instrument that aims to positively impact ocean biodiversity (Box 4.7). EIB models are characterised by a high level of financial sophistication, complex decision-making processes, and governance mechanisms. The main scientific literature on this topic also suggests that further research is needed on quantifying outcomes informed by the latest conservation science (Trotta, 2024[57]). Other challenges to implementation include the high-risk and long-term characteristics of some nature restoration projects, which can significantly add to financial uncertainty. Some researchers have pointed to the opportunities provided by new technologies such as blockchain, AI and other digital technologies in helping to measure risks, devise better risk mitigation strategies and improve the measurement and monitoring of impacts in more efficient and cost-effective ways (Trotta, 2024[57]). However, these are all at a relatively early stage.
Development co-operation can play a variety of roles in supporting environmental impact bonds. Since they are new to the ocean economy sphere, there is an important role for ODA to fund early-stage feasibility and design work. Local counterparts may also require technical assistance to understand the model and be able to apply it to their project. Providers are also important outcomes payers under the model.
Indonesia’s Coral Bond is the World Bank’s first outcome-based financing instrument. It aims to positively impact ocean biodiversity and over 5 million hectares of marine protected areas (MPAs). The instrument is being issued by the World Bank in collaboration with the Government of Indonesia, the International Union for Conservation of Nature (IUCN), the Global Environment Facility (GEF) and BNP Paribas.
Under the outcome bond structure, investors agree to forego bond coupon payments, which will instead be used to finance conservation initiatives in four MPAs that host some of the most biodiverse coral reefs in the world. Project success will be measured according to pre-identified coral reef health and management effectiveness targets, such as (1) select MPAs achieve independently verified conservation outcomes in line with the IUCN Green List of Protected and Conserved Areas; and (2) live coral cover and coral reef fish biomass in select MPAs are maintained or increased.
If the project is successful, in addition to principal redemption of the bond, investors will also receive a success payment at maturity, paid by the World Bank with funds provided by a performance-based grant from BNP Paribas and the GEF. Under the approach, project risks are transferred to capital market investors while providers pay for conservation outcomes that have already been achieved.
The project activities will be implemented by the Indonesian Environment Fund, in collaboration with the Ministry of National Development Planning and the Ministry for Marine Affairs and Fisheries. Critical to success is the government’s commitment to marine conservation in Indonesia, and the project is part of a much wider conservation initiative, thereby building on and leveraging existing initiatives (ICRI, 2024[58]).
Boost local private sector sustainable ocean economy activity through microfinance and dedicated accelerator programmes
Microfinance
Development co-operation can help to unlock the liquidity available within domestic financial systems and orient these funds towards a sustainable ocean economy. Domestic financial systems can play a prominent role in financing a sustainable ocean economy. However, key industry actors such as small-scale fishers and aquaculture farmers often face significant constraints in accessing credit, insurance, savings, money-transfer and payments products and services. This undermines their ability to enhance production, add value and improve livelihoods. While there is often high liquidity in the domestic financial sector, commercial financial institutions, credit unions and other financial services entities are often highly risk-averse, while the market may be relatively small, highly dispersed and poorly understood. Few prospective clients also meet financial institutions’ requirements (e.g. for collateral or guarantees).
Microfinance can play an important role in serving economically active poor and low-income groups, including women, that have extremely limited or no access to services offered by formal financial institutions. Microfinance has been applied to areas such as small-scale fisheries (Box 4.8) and aquaculture, particularly for capital expenditure for the purchase of new vessels and fishing gear. Microfinance services are also often accompanied by training in financial literacy and business skills. Many programmes also target women. Microfinance products can be more affordable and flexible than those offered by commercial financial institutions, and documentation and approval processes simpler and faster. Collateral and guarantees are also often not required. These features make microfinance an important vehicle to advance a sustainable ocean economy.
Despite the benefits to sustainable ocean economy enterprises and coastal communities, microfinance services for a sustainable ocean economy represent just a small share of the overall microfinance market, estimated at between 5-10% (FAO, 2020[59]). Microfinance institutions (MFIs) are also generally more interested in providing support to the aquaculture sector than to capture fisheries, with the latter often perceived as higher risk for a variety of reasons, including regulatory and management gaps, low education and capacity within the sector, and the frequent social exclusion and stigmatisation of fisherfolk (Box 4.8) (FAO, 2020[59]). Other challenges in delivering microfinance services to these communities include low investment returns and frequent political and social interference in the sector. MFIs and local commercial financial institutions or credit unions often lack the technical sectoral knowledge or risk tolerance to move into this area without external technical and financial support. Additionally, very few MFIs and other local financial institutions have a “blue mandate” or explicit policies to support a sustainable ocean economy.
Governments, development agencies and other institutions can facilitate the delivery of microfinance to ocean sectors in a variety of ways. This includes providing technical assistance, business planning and other capacity development support to SMEs, as well as channelling funds to local financial institutions for mechanisms such as guarantees. Building knowledge and capacities of local financial institutions on the ocean and supporting them with capital (including risk capital) can enable them to enter a new market they would otherwise have been reluctant to enter. These activities can help to boost local livelihoods and private sector activity aligned with a sustainable ocean economy. Financial inclusion programmes can also be specifically oriented towards women to enable more women-owned and women-led SMEs to enter the market and contribute to the sustainable ocean economy.
In 2019, the Asia-Pacific Rural and Agricultural Credit Association (APRACA) and the Food and Agriculture Organization of the United Nations (FAO) developed the Guidelines for Micro-finance and Credit Services in Support of Small-scale Fisheries in Asia: A handbook for finance and fisheries stakeholders (APRACA and FAO, 2019[60]). The guidelines provide useful information on the importance of microfinance and credit for small-scale fisheries and explain why many small-scale fisherfolk are not currently able to access finance. They suggest entry and leverage points for stakeholders interested in helping small-scale fisherfolk (SSF) to access financial services. They describe some key good practices in the provision of microfinance and credit to SSFs and provide details on the markets; main activities and possible products; the role of product design, policies and procedures, marketing and promotion, risk assessment and credit analysis, delivery channels, loan monitoring and repayment elements; and the need for product pricing to contribute to institutional sustainability.
Incubator and accelerator initiatives
Incubator and accelerator initiatives are tools to build the pipeline of “investment-ready” or “bankable” projects in the ocean economy; they play a critical role in the financing ecosystem. Finding ventures with tangible, positive impacts on the ocean but which meet investors’ risk-return requirements is often challenging, resulting in a limited pipeline of suitable ocean economy-positive businesses. Many enterprises are pre-revenue and require both business acceleration support and technical assistance.
Through incubation and accelerator initiatives, enterprises can receive this support alongside concessionary capital, financial guarantees, links to the impact investment community, and other services. Examples of such initiatives include the Blue Natural Capital Financing Facility, the Blue Carbon Accelerator Fund, the Global Fund for Coral Reefs (Box 4.9) and the Ocean Risk and Resilience Action Alliance’s Sea Change Impact Financing Facility (Blue Natural Capital, n.d.[61]; Blue Natural Capital, n.d.[62]; Global Fund for Coral Reefs, n.d.[63]; ORRAA, n.d.[64]). Some operate competitive calls for proposals, while others work with small businesses selected by NGO partners.
Development co-operation funds can play an important role in capitalising incubation and acceleration initiatives with both grants and concessional loan financing. Incubator and accelerator initiatives not only increase the supply of bankable projects; they also demonstrate to the market that “blue” projects, particularly those that involve SMEs or natural capital solutions, constitute a viable investment proposition. Many ocean economy incubator initiatives remain at an early stage and are relatively small in scale; however, there is significant scope to scale the approach should early initiatives prove successful in accelerating the supply of sustainable ocean economy projects suitable for private investment. Development providers can also assist with technical expertise.
The Global Fund for Coral Reefs (GFCR) operates a range of incubation, acceleration and investment programmes, all of which are designed to complement one another and help accelerate private investment in coastal reef ecosystems, communities and local economies:
The GFCR’s USD 90 million Grant Fund provides business incubation services and pipeline development for reef-positive enterprises, finance mechanisms and other solutions to help projects become investment ready.
The USD 135 million Investment Fund is a blended finance vehicle, which includes USD 125 million in first loss capital from the Green Climate Fund. It invests in commercial projects and companies with viable business models that reduce threats to coastal habitats, including coral reefs.
The REEF+ Accelerator acts as a platform to showcase reef-positive enterprises supported through GFCR blended finance programmes, as well as other scalable and replicable solutions. Developed by the UNDP and the Conservation Finance Alliance, the platform also shares a curated collection of knowledge products on investing in a sustainable ocean economy in order to build knowledge and capacity and promote good practices.
Since its 2020 launch, the GFCR has supported pipeline development and early investments in 23 coral nations, and reports 3 million ha of coral reefs to be under improved management. So far, reef-positive businesses have been supported across three areas: environmentally responsible fishing and aquaculture practices; sustainable ecotourism, coastal infrastructure, and coral restoration revenue models; and sustainable infrastructure and waste management to reduce pollution and sedimentation affecting coral reefs. Lessons learned from the first three years of implementation include:
Recognise and amplify locally led actions and the voice of local communities in tackling the biodiversity crisis.
Engage private sector stakeholders; this is crucial to accelerate efforts to bridge the coral reef funding gap and bolster ecosystem resilience.
Source: Global Fund for Coral Reefs (2023[65]), 2023 Action Report, https://cdn.sanity.io/files/bcil16f4/production/7fa8c297fdb614674c2fb3c8ebea769c9cbe0145.pdf.
Facilitate sustainable ocean economy projects’ access to private capital through impact investment funds
Impact investment funds focused on ocean sustainability capitalise on the increasing number of investors interested in ocean impact alongside a financial return. Over the last decade, several impact investment funds (both debt and equity) focused on a sustainable ocean economy have emerged, targeting competitive investment returns alongside impacts in sectors such as fisheries, aquaculture, the circular economy and marine conservation. One of the largest is Mirova’s Sustainable Ocean Fund, which reached a final close in 2020 at USD132 million of commitments. It has funded investments in sustainable seafood in Latin America and Asia, as well as seafood processing, initiatives to tackle marine plastic pollution and the creation of Marine Protected Areas (Mirova, 2024[66]; Mirova, 2023[42]). Others include Katapult Ocean, an equity fund with an ocean technology focus. Its investments include regenerative ocean farms, new solutions to plastic packaging and plastic waste capture, plant-based seafoods, and new AI technologies for data collection and analytics to support sustainability (Katapult Ocean, n.d.[67]).
Development co-operation funds, philanthropy and other sources of highly concessional capital have played a key role in several ocean-focused investment funds. This includes support for Conservation International Ventures, which invests in businesses that contribute to healthy ecosystems, including marine and coastal ecosystems (Conservation International Ventures LLC, n.d.[68]). Its investment programme is focused on SMEs, early-stage businesses and innovative untested solutions – all areas which often find it challenging to access mainstream finance. Provider and philanthropic capital are used to provide flexible, patient and risk-tolerant investments to sustainable enterprises in key ecosystems. All returns are re-invested into more businesses (Conservation International Ventures, LLC, 2024[69]). Another example is Circulate Capital, which focuses specifically on fighting ocean plastic in South and Southeast Asia through new solutions to innovative materials, recycling, and other areas.
Table 4.4 summarises all the various financing mechanisms for a sustainable ocean economy discussed in the sections above.
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← 1. Blue foods refer to “fish, invertebrates, algae, and aquatic plants captured or cultured in freshwater and marine ecosystems”, see https://doi.org/10.1016/j.gfs.2022.100637.
← 2. MSP can help to identify new investment opportunities in a sustainable ocean economy, and provide the social, environmental and economic rationale for investing in these areas. It can help to ensure that technical and financial support to governments and the private sector is well targeted, while minimising risks associated with any new development activities.
← 3. In such insurance schemes, the payout is triggered by an agreed parametric trigger (e.g. storm reaching a certain windspeed) rather than the economic valuation of the damages. See https://doi.org/10.1787/bede6513-en.
← 4. Endowment funds are where the initial capital comes from donations and the investment returns only are spent from year-to-year on charitable activities. A sinking fund is a fund created to save money for infrequent, high value expenditure. Sinking funds are created when revenue is set aside over a period of time with the interest earned added to the balance each year. A revolving fund is a pool of money that is used to finance an entity’s on-going operations. The fund is replenished when the organisation receives money back from loans made from the fund.
← 5. For instance, Sonangol E.P, together with Otchia NGO, supported the reforestation of mangroves (a blue carbon ecosystem) in Angola to offset its emissions. See https://sustentabilidade.sonangol.co.ao/wp-content/uploads/2023/11/SNL_Sustainability-Report-2022-Executive-Summary-EN.pdf.
← 6. If the project over-performs relative to expectations, investors can receive a higher interest rate.