The ocean is fundamental in the fight against climate change [1].  Its ecosystem services are key in the battle against climate change whether it is by protecting coastal communities from extreme weather events such as typhoons, where mangroves and coral reefs function as natural barriers against these phenomena [2]. Or by curbing climate change itself, namely through CO₂ absorption. This reduces the effect of greenhouse gases (GHG) on the atmosphere which, in turn, protects the global ecosystem [3].

  The ocean, of course, it’s a major source of food security. Ocean fisheries provide an essential protein source, especially in the Global South, supplying over 3.3 billion people with at least 20% of their average per-capita animal protein intake [4]. Unfortunately, ocean health is declining, and pollution, overfishing, and excess CO2 absorption are disrupting these positive effects and worsening the crisis [5] . While global climate change funding is growing, ocean conservation still has a significant funding gap that keeps these challenges from being adequately addressed, estimated anywhere from USD 383 billion up to $717 billion per year [6].

  The focus on developing countries’ ocean ecosystems is key. The populations in these countries’ coastal areas are at risk of suffering the consequences of poor ocean health as usually these countries have poor public infrastructure to withstand challenges facing coastal communities, such as extreme weather events and sea-level rise. From a global perspective, there are still important ecosystems to protect compared to developed countries that have either destroyed theirs, sometimes beyond repair [7], or have the capacity to self-fund rehabilitation. To combat this issue, governments and international organizations have promoted blue bonds, a debt instrument designed to raise capital for marine and ocean-based projects that have long-term sustainability goals [8]. The aim was for private and blended-finance investors to finance not only with more security because of the institutional backing behind these projects, but also because doing so would help private investors to shape a better image for the consumer. There have been a small number of blue bonds issued over the last few years, notably Belize in 2021.

  Belize’s economy is very reliant on the tourism industry; this sector suffered enormously because of COVID-19 and so sovereign debt became unmanageable as default worries loomed once more over the country [9]. The Nature Conservancy (TNC), an environmentally focused non-governmental organization, managed to broker a deal with Credit Suisse, backed by the U.S. International Development Finance Corporation, which provided insurance. Through this process Belize was able to reacquire USD 553 million of its debt for 55 cents on the dollar, resulting in an estimated USD 180 to 200 million of debt being forgiven [10] [11].

   This caused the debt rating of Belize to be revised upward, which makes it so that Belize was able to acquire more debt with significantly less interest. In exchange, its government vouched to increase the coverage of Marine Protected Areas (MPAs) to 30% of its maritime zones by November 2026 [12], with half of it being strict “Biodiversity Protection Zones,” areas where all fishing is illegal; to create a legislative framework for the protection of key marine and marine-adjacent areas such as mangroves and coral reefs; and to establish maritime spatial planning to improve transparency and encourage better rationality in the use of its natural resources [13].

   TNC is also committed to work with scientists and fishers in order to communicate the importance of respecting the MPAs and using less destructive fishing practices for the sake of future sustainability in local fisheries. There was some criticism regarding this kind of deal, with particular concerns about “blue-colonialism” [14]. The argument is that developed countries and their institutions pressured Belize’s sovereignty by leveraging its debt. The Belizean Prime Minister at the time, John Briceño, somewhat echoed this view: “when asked about the alternative to the Blue Bond arrangement in a press conference he bluntly answered: default” [15]. This, in turn, raises two issues, one about the ethical implications of the deal, which we will not go into, and the other, perhaps more pragmatic, about engagement. In this view, if Belize is externally strong-armed into following a certain policy line with, at best, reluctant institutional support, one can wonder whether this project can truly succeed. The counterfactual that could be presented is that, had this deal not been reached, nothing would have been done, leaving Belize’s maritime zones as unprotected as before and the Belizean people having to face another default.

  From what is known, while some local governmental sources seem to point toward promising results, having reached approximately 25% of maritime zones designated as MPAs as of August 2025 [16], the reality is that a lot of MPAs, regardless of country, are protected in name only, often referred to as “paper parks” [17], either lacking proper surveillance or enforcement to properly function. This is not to say that this is the case with Belize’s MPAs, but this number alone is insufficient to make a judgement. There has not been significant corroborating data published publicly to support a conclusion either way. Even so, Belize has apparently recovered economically, which is undoubtebly a positive outcome. Ultimately, it is a complex situation, and whether one falls on either end of the spectrum or somewhere in between, it is important to consider how these tensions shape these deals, even if the only concern is the end result.

  Most other blue bonds followed similar structures, with small developing states facing sovereign debt crises seeking debt relief to avoid default, with the first one in Seychelles in 2018 [18].  The consequences of the pandemic and the post-pandemic economy caused an uptick in demand, with Ecuador’s Galápagos transaction being the largest so far in 2023, with a value of over USD 650 million [19].  Recently the Philippines secured a  loan with a value of USD 500 million from the Asian Development Bank to scale up their blue economy, and climate resilience [20].

  These deals have been seen as moderate successes, as these kinds of instruments have only entered the market less than a decade ago; however, much of the financing gap remains and private capital has had a lack of initiative on ocean conservation. So far, noteworthy projects have been in the range of millions of dollars, focusing mostly on port and water management and relatively small-scale projects [21]. Private capital was involved in the above-mentioned deals, to be sure; for example in Belize, it was mostly private investment companies that held the debt and assumed the loss. However, this was largely done because the remaining debt was backed by the United States, thereby providing assurance of some liquidity as opposed to the risk of total loss. 

  This financing gap can be attributed to private companies abandoning ESG goals or placing less focus on the sustainability portion, but there are more aspects to consider. Financial stakeholders are usually reluctant to invest in developing countries; political and economic stability, quality infrastructure, and rule of law are usually favored factors that these countries tend to struggle with [22].  Political and economic stability gives confidence to investors that these countries will follow their obligations to term, lessening the risk of abandonment, whether because an administration with a wildly different agenda is likely to gain power or because economic crises force a complete shift in priorities. Infrastructure is fundamental in guaranteeing success not only because it allows tracking to be more precise or research to be more effective, for example by having well-equipped universities, but also because it provides risk mitigation in case of project failure, ease of access for maintenance, and a well-equipped coast guard able to enforce MPAs.

  Of course, risk aversion can somewhat overcome with the expectation of high returns, but in reality most sectors benefit only indirectly from a healthy ocean. Even within the ocean economy, only fisheries and ecotourism are set to derive direct financial returns, and even the former are often against MPAs as they cause temporary decreases in activity in an already precarious industry [23].

  This is worsened by the fact that these projects must be run locally due to their public nature, which can leave investors out of the decision-making process and cause transparency and accountability concerns. These challenges further affect private capital investors, as non compliance by the state can leave them empty-handed.

  Moreover, some ecosystems usually take a long time to recover; coral reefs, for example, can take more than a decade to recover from bleaching, given ideal, borderline impossible to recreate conditions [24] and private capital is usually structured around short-to-medium-term results. For these investors, every quarter is under review, and returns must be visible quickly. In contrast, most private equity investments reach maturity in about 7 years, this an issue even in the public sector, governments operate under four-to-five-year mandates, where re-election incentives make the preference for fast political victories clear. 

  The interconnectedness of the ocean can also be a challenge for local preservation efforts. Communities and small countries can follow best practices, but these can prove insufficient. While locally reducing ocean pollution can increase coral resilience to bleaching phenomena, more widespread challenges like ocean acidification, one of the largest drivers of coral reef death, require far greater international coordination. 

  Green bonds, for example, are more widespread, have larger volumes, and in some cases more clearly defined goals. For comparison, green bond issuance exceeded USD 670 Billion in 2024, while blue bonds have comparatively reached only USD 3.2 billion, representing less than 1% of the sustainable bond market [25] [26].

  The result is that even when projects are financed through blue bonds, the raised capital is usually fairly low relative to the risks involved, reinforcing a negative cycle: financing is insufficient, results are unsatisfactory, and investors withdraw. From this point, two paths are clear. The first is to abandon blue bonds as a means to raise capital and focus on interstate agreements and public funding to address the gap. This approach has the advantage of relying on mechanisms that have delivered results so far, but it faces challenges in overcoming the funding gap through public or quasi-public funding alone. The other approach is to increase investor confidence as much as possible by creating streamlined and standardized investment models, guidelines, best-practice manuals, and specialized teams to ensure projects meet feasibility criteria and sufficiently address the challenges faced by developing countries in securing funding. This is a gargantuan task that, even if well executed, does not guarantee success, as capital may still prefer faster or more lucrative investments. 

  These challenges paint a profoundly serious outlook for the future of blue bonds and, regrettably, for ocean health. It remains unclear whether private capital will ever be a significant force in its protection. States and institutions must choose a path and see it through; whatever the decision, it is critical that established blue bonds and their projects succeed, not only for their own sake, but to build institution-backed trust. To that end, it is important that the world continues to support these countries and their communities, as their success may well be the ocean’s success.

[1] Intergovernmental Panel on Climate Change (IPCC), Sixth Assessment Report: Impacts, Adaptation, and Vulnerability (Geneva: IPCC, 2022), https://www.ipcc.ch/report/ar6/wg2/