As climate change accelerates, countries face mounting pressure to invest in sustainability. However, for many emerging economies, financing climate action remains a challenge. Traditional green bonds have provided capital for environmental projects, but they are primarily focused on land-based initiatives such as renewable energy and reforestation. In contrast, blue bonds specifically target marine conservation and sustainable ocean economies, which are crucial for many developing nations. By directing capital toward the ocean-based industries of the Global South, blue bonds help shift financial power and decision-making away from the historically dominant economies of the North. Often incorporating debt restructuring and attracting multilateral backing, they present a more viable and attractive financing option for emerging economies, particularly those with large coastlines and marine-dependent industries.
What are blue bonds?
Blue bonds function similarly to green bonds but with a focus on ocean and water-related projects. Governments or financial institutions issue them to raise capital for marine conservation, sustainable fisheries, and climate-resilient coastal infrastructure. The first sovereign blue bond was issued by Seychelles in 2018, raising $15 million to expand marine protected areas and promote sustainable fishing.
Like green bonds, blue bonds attract impact investors looking for environmentally sustainable financial products. However, their distinct focus on marine ecosystems makes them particularly relevant for countries where ocean-based industries play a crucial economic role. While developed markets are beginning to explore blue bond issuance, they remain more commonly issued by developing economies such as Gabon, Turkey, and Vietnam, as these nations stand to benefit most from improved coastal resilience and sustainable ocean management.
How do blue bonds differ from green bonds?
Although both blue and green bonds raise funds for environmental projects, their financing mechanisms can differ significantly in ways that make blue bonds more suitable for emerging economies.
A key feature of many blue bond deals is the inclusion of a structure that allows countries to restructure debt in exchange for conservation commitments. This mechanism is particularly beneficial for emerging markets, which often struggle with high sovereign debt. Moreover, this model is unique to blue bonds as conservation efforts need to provide measurable benefits to both the debtor country and the global community, but green bonds tend to have localised benefits unlike ocean projects which have transboundary benefits.
Blue bonds also often receive credit enhancements from institutions like the World Bank to make them attractive to investors. In contrast, green bonds are typically issued by corporations and municipalities rather than sovereign governments, meaning they do not always provide debt relief to cash-strapped nations. Since many wealthy nations and corporates issue essentially risk-free green bonds, investors would rather spend their capital on these projects versus more risky green bond projects in emerging markets.
But blue bonds address coastal resilience, sustainable fishing, and coral reef restoration, which are critical for climate adaptation in small island nations and coastal economies. When combined with the unique debt-for-nature element of blue bonds, emerging markets are partial to issuing blue bonds over green bonds (and vice versa—developed nations are partial to issuing green bonds) which make blue bonds an attractive financial tool to move climate-related capital towards the Global South.
Why are blue bonds vital for developing economies?
Developing economies are disproportionately impacted by ocean-related climate incidents such as hurricanes, rising sea levels, and coral reef degradation. Blue bonds help bridge this funding gap and offer a strategic trade-off between debt and conservation. By using debt-for-nature swaps, blue bonds allow countries to reduce debt obligations while committing to long-term environmental protection. This approach not only enhances fiscal stability but also ensures that conservation is financially viable for governments. However, these structures must be carefully designed to ensure they do not perpetuate financial instability or create unrealistic conservation expectations.
Where have blue bonds worked and where have they struggled?
The Seychelles issued the first sovereign blue bond in 2018, raising $15 million to create marine protected areas covering 30% of its ocean territory. The deal was backed by World Bank guarantees, making it an attractive investment. However, Seychelles’ experience also highlighted some of the challenges in blue bond execution, such as high transaction costs and complex stakeholder coordination. Belize followed in 2021, restructuring $364 million in debt while committing to protecting 30% of its ocean territory. The blue bond mechanism helped reduce Belize’s debt by 12% of GDP, freeing resources for development. However, some critics labeled the deal “greenwashing,” arguing that it did not address Belize’s underlying debt sustainability issues. Concerns wereraised that, despite the conservation commitments, the deal primarily benefited financial institutions rather than ensuring long-term economic relief for Belize.
Ecuador completed the largest blue bond deal in 2023, restructuring $1.6 billion in debt and directing $323 million toward marine conservation in the Galápagos Islands, showing how large-scale blue bonds can drive substantial conservation impact.
The future of blonds
As ocean-related climate threats intensify, blue bonds provide a critical pathway to protect marine ecosystems while ensuring economic stability. However, their success depends on transparent governance, realistic financial structures, and equitable benefit-sharing with local communities. Without careful design, blue bonds risk becoming another tool for financial speculation rather than a genuine mechanism for sustainability. For blue bonds to achieve their full potential, governments, investors, and multilateral institutions must collaborate to expand their adoption and standardise regulations. The future of sustainable finance must include the ocean, and blue bonds offer a scalable, impactful way forward—if implemented thoughtfully and equitably.
Student voice
The Wheeler Institute for Business and Development is seeking to understand, illuminate and offer solutions to the challenges faced by the developing world, with an aim to identify the role of business in addressing these challenges and a focus on the implications and actions for those in developing countries. In support of our students, we approach this blog section as a reflective platform and a space where individuals can generate debate as long-term agents of positive change. This article is solely authored by a student and reflects their individual research, opinion and point of view and is not based on research led or supported by the Wheeler Institute.
About the author
Keertana Anandraj (MBA 2026) is an intern at the Wheeler Institute for Business and Development. Prior to joining London Business School she was a member of the International Sustainability Standards Board’s Technical Staff where she helped develop the first-ever global sustainability standards on climate-related risks and opportunities. A graduate of Wellesley College, Keertana is passionate about the role businesses can play in tackling the climate crisis.