Blue finance: beyond climate, highlighting nature objectives

What makes a bond (or other financing) blue? Blue bonds are a subset of Green bonds, as such as blue bond is aligned to the International Capital Market Association (ICMA)’s Green Bond Principles. Blue is a thematic, a label to highlight the domain or area of the financed use of proceeds. What falls under “blue” is not strictly defined, and there are various perspectives in the market: One perspective, followed by the ICMA in its 2023 Practitioner’s guide, is to focus on marine resources and coastal ecosystems. The other is to have a broader interpretation, including freshwater and wastewater management, and the overlap with environmental objectives such as pollution prevention and control, natural resources conservation, biodiversity and climate change mitigation, which is the stance taken by the International Finance Corporation (IFC) in its Guidelines for blue finance.

In practice, as highlighted for instance by Fitch’s 2024 research paper on the topic, freshwater projects receive a larger share of funding compared to marine initiatives. From the investor side, interest in blue bonds has been notable, one example featuring this appetite being Fidelity’s launch of a dedicated blue fund in October 2024, which contribute to both ocean and freshwater objectives. This separation between “marine” and “freshwater” investments is not strictly followed in the market, and Natixis GSH encourages a consolidated approach in coherence with the water cycle, that encompasses multiple interactions. Indeed, the water cycle (also called hydrological cycle), encompasses various stages, and interrelations between freshwater bodies (like rivers, lakes, and wetlands) and marine ecosystems (oceans and seas). Rainwater that falls on land flow into rivers and eventually reach the ocean, making freshwater ecosystems vital to the health of marine environments. Land runoff carries nutrients and organic matter into marine systems, which when in excess, harm these ecosystems. This was the reason why in the Equity Index “Euronext Water and Ocean Europe 40 EWD5” designed by Natixis, the eligibility criteria target companies contributing both to supplying, treating, preserving, optimizing the freshwater resource but also protecting oceans.

Issued in October 2024, Saur's blue bond represents a milestone in the evolution of the blue market. As a leading sustainable water utility, Saur's blue bond will finance expenditures related to water supply and wastewater treatment, financing its core mission of preserving water resources, particularly vulnerable to the challenges of climate change. This transaction extends opportunities for blue finance beyond ocean & marine protection. Natixis acted as Global Coordinator and ESG Coordinator for this transaction, highlighting Saur’s environmental contributions and developing the blue market.

From the perspective of Bénédicte Peyrol, Saur’s Head of Sustainability: “the blue label was a natural choice to reaffirm our leadership role in the water transition, from reducing consumption upstream to valorizing wastewater downstream. It also aligns with our strategy of innovation, as we develop into industrial water solutions and expand nature-based solutions. This blue bond further highlights our commitment to resource preservation and brings more light to the crucial topics of protection of ecosystems and sustainable water management”.

Investor response to Saur's blue bond was positive, with over 100 investors engaged during the two days of marketing. This strong interest allowed the issuer to seize its largest bond size ever (upsizing to €550 million) thanks to qualitative demand (€1.95bn of final investors’ interests) and at very attractive financing conditions (the issuer achieved its strongest spread tightening in the euro market).

As Saida Eggerstedt, Head of Sustainable Credit at Schroder Investment Management, an investor in the bond, highlighted: “The Blue Bond will finance predominantly CAPEX for Water production and supply as well as wastewater collection and treatment, supporting to provide citizens with clean drinking water and efficient, effective wastewater treatment. This fits our impact objectives of a healthy society with access to essential services like clean water and responsible use of resources like water. In longer term, it also helps health and wellness. Blue bonds are rare and while they are technically a branch of green bonds, it needs to be embraced by water-related issuers to meet SDG 6 goals, and hopefully over time also to protect life below water, SDG 14, as all water ends in the sea.”

The second largest bank in Latin America by total assets, Banco do Brasil, has closed its first Blue financing in March 2025 with Natixis CIB as counterparty and Blue Coordinator. The Blue Repo was a USD 95 million 2-year transaction which will finance Banco do Brasil’s eligible water and sanitation portfolio. As one of the largest financial institutions in Brazil – covering 92,9% of municipalities – the Bank plays an important role in enabling sustainable development at the local level, which includes enhancing water supply and improving sanitation coverage. The transaction will support Brazilian states and municipalities in financing water capture, distribution and treatment projects, and the expansion of basic sanitation.

Francisco Lassalvia, Chief Wholesale Officer, highlighted Banco’s do Brasil commitment to sustainable finance and innovation by stating "the transaction reinforces Banco do Brasil's pioneering role in structuring treasury operations focused on sustainable finance, consolidating our leadership position in this segment. Once again, we have the support of a major international partner, such as Natixis CIB, in this transaction, […] which demonstrates our commitment to innovation and sustainability in the global financial market.”

For José Ricardo Sasseron, Vice President of Government and Corporate Sustainability “This transaction is a milestone and was only possible precisely because of Banco do Brasil's leading role in operations with the public sector in supporting public policies. We are excited about the success of the 'Blue Repo' transaction and believe that it will have a significant impact on promoting new water and sanitation projects”

The Blue Repo highlights the use of different financing instruments in sustainable finance, in this case, providing helpful optimization and liquidity in the broader context of sustainable funding programs. 

Tracking blue debt remains somewhat complex due to the diversity of labels (blue, water, etc.), at the discretion of the issuer, and heterogenous market guidance. Data from Bloomberg underscores the growth in blue bond issuance over the past few years. In 2023, the market achieved a total of $4.79 billion from 16 blue bonds, largely propelled by a $1 billion issuance from the Export-Import Bank of Korea in November. The momentum has continued into 2024, which has already seen over $3.2 billion raised through 22 blue bond issuances. Although the total amount issued in 2024 is lower than in 2023, the increase in the number of bonds demonstrates the development of this format among issuers.

Current blue bond issuers (as tracked by Bloomberg) are mainly SSA (Sovereign, Supranational and Agency) and corporate issuers, with a few financial institutions also present in this segment. Geographically, most of the blue bond activity is concentrated in the Asia-Pacific region, with some issuances in South America. In hjyubn, featuring a few examples such as the €100 million blue bond issued by Ørsted in 2023 to finance offshore biodiversity, and Saur’s recent issuance (see above).

The rising interest in blue transactions aligns with a broader trend in sustainable finance, where themes related to nature, particularly biodiversity, are gaining prominence. Water issuers overlap not only with biodiversity but also climate adaptation, as water supply and wastewater treatment investments are directly impacted by droughts, heavier rainfall patterns as well as increased frequency of extreme weather events.