17 April 2024

IFC and T.Rowe Price pledge $150m to blue bond strategy

The International Finance Corporation (IFC) and T.Rowe Price have revealed they will each invest $75 million in their blue bond strategy. 

Speaking at the Environmental Finance Sustainable Debt EMEA conference in London earlier this week, Tongai Kunorubwe, head of ESG fixed income at T. Rowe Price, said the strategy will also fundraise among private investors over the next year.  

He was unable to disclose the total fundraising target. 

Announced last November, the strategy will invest in bonds issued by companies who proceeds will be put towards sustainable marine and freshwater projects in emerging markets. It claims to be the first dedicated blue bond investment strategy. 

Tomasz Telma, director of financial institutions group at the IFC, told the conference that the strategy will be further tailored throughout the fundraising process. He said it will “listen to investors”, particularly those which are ‘impact’ labelled, on whether they would like it to focus on marine projects versus wastewaster initiatives. 

He said he is “not worried” about finding enough projects to deploy the capital, as the gap between “the needs and what we’re going to be raising in the next 12 months will be significant”.  

Internal research by the partnership found that around $90 billion worth of ‘blue’ projects are available in emerging markets, but currently just $5 billion of financing is geared towards investments categorised as ‘blue’. 

This funding gap was attributed largely to a lack of focus on ‘blue’ issues, mismanagement of resources and limited measuring of the economy’s impact on nature.  

Telma said part of the strategy is “to bring awareness and understanding of the fact it is so underfunded within the whole sustainable development challenge, and this is something that the private sector, not just the public sector need to take seriously”. 

The strategy aims to publish its internal fund guidelines, which T. Rowe Price’s Kunorubwe said will help hold the projects to account, while also help further “crowd in capital” into blue projects. 

“It’s not just about the success of the product, it’s not enough. We need to get the entire private capital sector moving on this. It’s absolutely critical”. 

The IFC has previously published its own guidelines for blue finance which set out nine categories of investment and several sub-categories. The categories include water supply, water sanitation, ocean-friendly products and fisheries. 

Scaling up financing also comes down to labelling, Telma said, arguing that unless “we more clearly designate what is blue, then [Sustainable Development Goals 6 (clean water and sanitation) and 14 (life below water)] will never be delivered”.  

While he recognised that blue bonds are technically a sub-set of ‘green bonds’, “unless we dedicate more capital and direct more resources to the needs of the ocean, to clean water or sanitation, it can very easily get overlooked when focusing on climate change”. 

Kunorubwe agreed that under the current status quo of green bonds we’re “not getting the funding”.  Without distracting from the importance of green targets, blue projects need to be highlighted as ‘mission critical’, he said, and “show we are intentional about scaling up capital” into this area. 

He put simply “there is no green, without blue”. 

IFCT. Rowe Price