A combination of climate change, overfishing and pollution is bringing the planet’s vibrant oceans to the brink of collapse. The pain inflicted on the oceans by climate change is especially intense in Latin America and the Caribbean, where many economies and the livelihoods of millions of people are closely linked to the sea.
The sea represents 60% of the territory in 22 countries in the region, with a coast that extends for more than 70,000 km. In Latin America alone, 25% of the population lives in coastal areas, while almost 100% do so in the Caribbean.
The looming crisis facing the oceans will be a key point in the COP28 discussions taking place at the end of November in Dubai, where world leaders will seek to deploy an arsenal of initiatives to confront the challenge of climate change. One of the pillars of these efforts will likely be a nascent set of financial tools, including blue bonds and blue loanswhich has already taken its first steps in the region and which contains enormous potential in the battle against climate change.
These instruments raise funds for water-related projects, such as preserving access to clean water, wastewater treatment plants, plastic recycling, restoration of marine ecosystems, sustainable shipping, eco-tourism and offshore renewable energy.
In Brazil, Chile, Mexico and Peru, it is estimated that the blue finance market exceeds 7 billion dollars (mdd). Opportunities include increasing recycling in Brazil, which would reduce the 830,000 tons of plastic that end up in marine environments each year, making fish and potentially humans sick.
Similarly, investments in sustainable salmon production in Chile represent an investment potential of $5 billion and could help increase sector income, boost exports and support local jobs, while preserving natural resources.
Some countries are already paving the way for the development of blue finance in the region. This is, for example, Ecuador, where Banco Internacional became the first bank in the region in 2022 to issue blue bonds. The issue, which had the support of the International Finance Corporation (IFC), could be a benchmark in a country that is home to the largest small-scale artisanal fishing fleet in the southeastern Pacific Ocean and which also has enormous growth potential in the blue economy. The Ecuadorian fishing sector contributes around 1.5% of the country’s Gross Domestic Product and 13% of its non-oil exports, and employs 108,000 people.
Since 2020, IFC has provided more than $1.3 billion in loans and blue bonds to financial institutions and private sector companies. In Colombia, one of the five most diverse nations on the planet, BBVA became, with the support of IFC, the first financial entity in the country to issue blue bonds. This is a first tranche for 50 million dollars destined to finance projects for the construction of water and sewage treatment plants, preservation of the oceans and protection of lakes, moors and mangroves.
In the middle of last year, IFC granted a loan of $150 million to the Companhia de Saneamento Básico do Estado de São Paulo (SABESP), one of the largest water and sanitation companies in the world. The impact of the loan is huge, as it will be used to finance investments focused on improving water quality and expanding wastewater collection and treatment in the poorest neighborhoods of São Paulo.
Despite these cases, there are still many tasks to be accomplished for blue finance to take root in the region. It is key, for example, to develop duly defined taxonomies, certifications and standards so that blue finance becomes tools that meet its impact expectations. The Guidelines for Blue Financea document developed by IFC that identifies eligibility criteria for blue projects, seeks precisely to translate the general principles of blue economy financing into guidelines for blue bond issuances and blue loans.
This story is not only an opportunity for growth, but also a commitment to the preservation of our environment. Investing in the blue economy, supported by strong financial institutions and regulations, can make a difference in preserving our oceans and fighting climate change.
According to an estimate by the Organization for Economic Cooperation and Development (OECD), the blue economy represents about 2.5% of global GDP. Likewise, its scope can provide a substantial change in problems such as the scarcity of fresh water or the use of renewable energy, thereby promoting a better quality of life for people who live linked to the sea.
Today, the blue economy has already confirmed its potential by generating palpable benefits in some cases such as the decarbonization of maritime transport in Brazil, support for sustainable tourism in Chile, the protection of marine biodiversity in the Eastern Caribbean and the Galapagos Islands, the restoration coralline in Belize and the preservation of species in the Mar del Plata in Argentina, to mention a few.
___________________________________________
There is no sustainable horizon without private innovation
Efforts to combat climate change will not succeed without massive increases in private capital to developing economies, which account for more than 60% of global decarbonization investment needs. According to their annual report (Building a Better Future), IFC committed a record global amount of $14.4 billion in climate finance by 2023. Starting July 1, 2023, 85% of all new IFC investments will be consistent with the goals of the Paris Agreement, increasing to 100% on July 1, 2025, meaning it will include climate mitigation and adaptation. climate change in all investment decisions. Mere financing is not enough: innovation also plays a fundamental role, especially in protecting the planet’s carbon reserves. In the field of blue finance, for example, IFC published this year A study that detects opportunities to finance projects that contribute to safeguarding the carbon stored in the world’s coastal ecosystems. In Latin America and the Caribbean, the safeguarding of so-called blue carbon – that which is stored in the form of biomass and sediments in coastal ecosystems – will be one of the main areas to explore in terms of blue finance in the years to come.
#blue #finance #works #Latin #America #Caribbean