Black Rock CEO Larry Fink recently mused that he’s “ashamed” to be part of the Environmental, Social, and Governance (ESG) debate as a coalition of honest brokers, mostly at the state level, have exposed it for what it is: a scam. Instead of reconsidering the policy, he and his fellow financial elites will embark on a superficial rebranding exercise allowing non-pecuniary, feel-good measures like blue bonds to persist.  

Blue bonds are debt instruments issued by governments, banks, or corporations designed to support investments in ocean conservation and blue economies. ESG proponents are embracing them “to fulfill their corporate social responsibilities” to “generate benefit for the ocean and humankind.”

Renewable energy companies like Orsted, naturally, are jumping on them. Orsted recently unveiled blue bond investment commitments to fulfill its ESG goals. 

The Danish-based company is the first private actor to issue them. The five-year blue bond will be valued at $100 million Euros at a 3.6325% fixed-rate maturing in 2028. 

“Blue bonds assist in diversifying and expanding the market for sustainable ocean financing, which is crucial for enhancing ocean health,” the company said

In 2018, the Republic of Seychelles—with World Bank backing—first launched sovereign blue bonds. This particular bond has “a ceiling value of US$15 million, with a maturity of 10 years.” 

Unlike conventional bonds—loans made by investors to borrowers—blue bonds are financial instruments aimed at supporting ocean sustainability and are considered a “subset” of green bonds. 

Blue bonds are very similar to green bonds—which are issued on the “promise to use the funds raised for specific green, climate and sustainable purposes.” But like green bonds, investing in blue bonds could lead to financial instability. I noted the Ghana case study on IWF’s blog last summer: 

The Ghanaian government was the first in the continent to raise $5 billion from international capital through Green, Social and Sustainability (GSS) Bonds. GSS bonds fund projects with supposed environmental and social outcomes. In May 2022, the World Bank called GSS bonds a “new frontier for Africa that will help the continent build a deeper, resilient, and sustainable financing, according to policymakers, regulators, and peer sovereign issuers from across West Africa.”

But instead of the promised “new frontier,” Ghana experienced high consumer inflation and higher cost of living which prompted protests in the capital, Accra. Earlier this year, Moody’s warned global sustainable bond issuance would be “flat” in response to Russia’s invasion of Ukraine—which is down 28% from Q1 2021. The Ghanaian government didn’t do itself any favors after imposing a tax on electronic payments at the same time. Now the nation, on the brink of economic collapse, is in talks with the International Monetary Fund (IMF) for a bailout.

What would blue bonds be directed towards? Supporters claim investments will boost ocean biodiversity and related sustainability goals. One “innovative marine protected area finance mechanism” that’s being lauded by the International Union for Conservation of Nature (IUCN) is Marine Protected Areas (MPAs). But MPAs aren’t new and they’re hardly solutions either.  

California has experimented with these protected marine areas at the expense of its sportfishing industry. The American Sportfishing Association (ASA) warned MPAs act as marine reserves or no-take zones that convert popular fishing waters into no-go zones permanently closed off to recreational fishing access. If people are displaced from access here in America, fishing and its related industries will suffer economically. In turn, it’ll undermine conservation funding generated by fishing licenses, tackle, boats, and motor fuel expenditures. 

Blue bonds will also encourage certain renewable projects like offshore wind farms despite boasting technology that is not only potentially destructive to the environment but also difficult to offset. Offshore wind’s environmental impact is potentially destructive and will be hard to offset using blue bonds.  

Ocean industrialization affects fish migration patterns, causes seafloor disturbance that results in fewer food sources like plankton, and results in noise vibrations to the detriment of fish and other marine species, among other listed concerns.

The Marine Mammal Commission (MMC) warns “…considerable uncertainty exists regarding the potential short- and long-term impacts of offshore wind development on marine mammals that occur in U.S. waters (such as North Atlantic right whales).” 

Protecting and conserving our oceans is a laudable goal—one, sadly, that would be sullied by ESG bonds and impractical finance tools that call for displacing conservation stakeholders, including anglers and boaters, from public waters. 

To learn more about this ESG enforcement mechanism, go HERE.