Guest view: Blue finance can save Asia’s oceans

A plastic bottle drifts on the waves of the sea at a fishing port in Isumi, east of Tokyo, Japan November 21, 2018. REUTERS/Issei Kato – RC1B9B07A350

WASHINGTON, May 12 (Reuters Breakingviews) – The plastic water bottle has become almost ubiquitous. Maybe you have one sitting on your desk or in your refrigerator right now. But think about what happens to it once you’re finished with it.

Along with billions of other single-use plastic items, that water bottle may well end up in the world’s oceans. It’s impossible to know for certain how much plastic has already found its way into our seas, but it could be as high as 200 million metric tons, the United Nations estimates.

We do know, though, that it takes the ocean hundreds of years to break plastic down. The pollution produced as it degrades has damaging effects on both the environment and the economy, impacting plants, animals and ecosystems, as well as coastal tourism that accounts for a large share of GDP in many developing economies.

Nowhere is this problem more acute than in Asia, which produces more than 80% of marine plastic waste. Rapid urbanization, a rising middle class and Covid-19 have all contributed to increased plastic consumption in recent years. But local waste management infrastructure has not kept pace, and the environment is paying the price. Fifteen of the world’s 20 most plastic-polluted rivers flow through the region, and the ASEAN Catalytic Green Finance Facility estimates total cleanup costs for those in Southeast Asia alone at almost $300 billion.

Blue finance has emerged to help solve this crisis. Built on the model that made green finance a success, the World Bank and the Republic of Seychelles issued the first sovereign blue bond in 2018. Demand for the asset class has grown since.

IFC recently invested in the first blue bonds issued by banks in the Philippines and Thailand. Thai Union (TU.BK), the world’s largest canned-tuna producer, has issued sustainability-linked debt with blue performance targets. Dedicated venture-capital funds are getting involved, with Singapore-based Circulate Capital raising more than $100 million in 2019 for the first investment fund committed to addressing Asia’s plastic crisis. Blue-carbon offset projects are also emerging.

This is important progress. But a lot more needs to happen to build the blue finance ecosystem the world needs. The cost of implementing the UN’s Sustainable Development Goal aimed at conserving oceans, seas, and marine resources is estimated at $175 billion per year through 2030, per the Konrad-Adenauer-Stiftung think tank, far higher than the current $26 billion spent annually.

Government action is likely to push demand even higher. In March, 175 countries endorsed an historic resolution at the UN Environment Assembly in Nairobi to end plastic pollution, and ASEAN member states launched a regional action plan last year to tackle the crisis. Green Public Procurement, where governments use their purchasing power to buy sustainable goods and services, is also gaining traction. Wider adoption of these efforts could be game-changing. Governments around the world spent $11 trillion on public contracts in 2019, equivalent to 12% of global GDP.

Meeting this demand for blue finance will require a multi-pronged, multi-stakeholder response. IFC is committed to doing its part. We recently published our first Guidelines for Blue Finance, which are designed to unify standards and help investors and issuers identify eligible blue-project categories. We’re also educating banks to develop bankable and sizable blue assets for investment and helping them create new environmental and social risk-management mechanisms for blue sectors.

But significant support will also be needed from both the public and private sectors. Regulators must introduce more policies to help fully unlock blue investment opportunities. This includes redesigning recycling standards for packaging and setting mandatory recycled content standards. Central governments must also create an enabling environment for cities to borrow responsibly, allowing them to better manage their plastic waste.

We need to harness the innovative power of the private sector as well. We’re already seeing this sort of innovation in action. The plastic water bottle on your desk or in your fridge could soon be made entirely from plant materials. Elsewhere, chemical recycling is creating value from previously unrecyclable plastics such as crisp packets by breaking them down into petrochemical feedstock, which can be reused to make new polymers. We will need more of these great ideas, at an even greater scale, if we’re to effectively limit the impact of plastics on our oceans; blue finance will play an essential role in getting us there.

The green bond market has surpassed $1.5 trillion of issuance. We now need its blue cousin to make a similar impact. We must harness international support for blue finance from governments, businesses, investors, and development institutions. The world’s oceans are counting on it.

CONTEXT NEWS

– Makhtar Diop is Managing Director of the International Finance Corporation.

Editing by Antony Currie and Katrina Hamlin

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