Can we financially engineer our way out of climate change and polluted oceans? Maybe not, but financial innovation is emerging as a popular tool to help in the race to protect the planet. Last year, the market for “green bonds,” a decade-old asset class that funds environmentally friendly projects, reached a record $163.7 billion, up from $36.6 billion issued in 2014, according to the Climate Bonds Initiative, an international not-for-profit.
Now there is a wave of novel financial instruments aimed at saving the oceans and alleviating the world’s water crises. They include “blue bonds,” which, structured like their chromatic cousins, are being used to raise money to tackle issues from the ocean’s plastic waste problem (Morgan Stanley recently sold $10 million worth) to wastewater management. Last year, Seychelles launched a multimillion-dollar blue bond, and the Nordic Investment Bank, on behalf of Baltic and Nordic countries, did so this year. “We’re just scratching the surface,” says Navindu Katugampola, head of green, social, and sustainability bonds at Morgan Stanley.
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