Sovereign blue bond market ripe for the African continent

Since issue of the world’s first sovereign blue bond by the Republic of Seychelles, which raised a total of Sh1.5 billion, the world of blue bonds has steadily gained attention.

Like green bonds, blue bonds, which operate similarly to other debt instruments by providing capital to issuers who repay the debt with interest over time, have offered a solution for conservation – in this case, marine projects.

This innovation is timely as oceans – which are a significant wealth generator estimated at an annual value of Sh150 trillion per year, making it the world’s seventh largest economy – take the centre stage on matters climate change.

With a massive unexploited potential of marine resources, Kenya (and the continent) have a reason to get a piece of the blue bond action. Here are couple of reasons why.

One; with a coastline of over 47,000 kilometres that holds 38 coastal cities and island states, Africa’s blue sector is crucial in providing food security and nutrition to millions of its inhabitants.

According to the Food and Agriculture Organisation (FAO), the fisheries and aquaculture sector alone employs more than 12.3 million Africans, estimated to generate roughly Sh2.4 trillion.

As investors show growing interest in committing capital to solve environmental challenges, blue bonds will not only improve food security and protect livelihoods but also help drive sustainable ecosystems.

Two; the blue economy holds a great potential to contribute to higher and faster Gross Domestic Product (GDP) growth for countries such as Kenya.

According to the Kenya Maritime Authority (KMA) estimates, the blue sector has the potential to inject between Sh15 billion and Sh20 billion to the country’s GDP annually.

The Kenya Marine and Fisheries Research Institute (Kemfri) also estimate the country’s marine fisheries have the potential to produce 150,000 to 300,000 metric tons of fish every year.

Moreover, fisheries, which accounts for over two million Kenyans through fishing, boat building, equipment repair, fish processing and other ancillary activities, contributes 0.5 percent of the GDP. All this shows a big scope for blue bonds to promote economic growth.

Three; blue bonds provide a path for the country to achieve part of the Global Sustainable Development Goals.

UN Sustainable Development Goals goal number 14 (life under water) aims to conserve and sustainably use the ocean seas and marine resources for sustainable development. The organisation estimates the cumulative economic impact of poor ocean management practices is at least Sh20 trillion per year.

Additionally, FAO estimates approximately 57 percent of fish stocks are fully exploited and another 30 percent are over-exploited, depleted or recovering. Sustainable investors would no doubt find this new credit asset exciting.

As Kenya basks in the glory of its recent green bond success, blue bonds open yet another door to tap the global market in the coming years.

While it’s too early to tell whether the blue bond market will grow with the speed of green bonds or if current interest will, the solution has nonetheless gathered enough investor interest and is no longer a niche market.