China’s rising tide: Expanding investment in blue finance

• China’s extensive coastline and marine resources position it as a key market for “blue finance” projects, balancing economic growth and environmental protection.Blue finance investments aim to protect the $3 trillion ocean economy and support activities such as marine ecosystem restoration, sustainable tourism and shipping and offshore renewable energy.One of the key pillars of the strategy to protect this blue expanse is the partnership between the private and public sectors.

Over the past 10 years, China’s policy-makers have made great progress in developing its marine economy, aiming to strike the right balance between economic growth and environmental protection, according to research by Swiss Re. One of the key pillars of the strategy to protect this blue expanse is the partnership between the private and public sectors.The World Bank’s International Finance Corporation defines blue finance as an “emerging area in climate finance” that will help ‘’safeguard access to clean water, protect underwater environments and invest in a substantial water economy.

More than 3 billion people globally rely on the ocean for food, jobs and their livelihoods. That puts the market value of ocean and coastal resources and industries at about $3 trillion per year — about 5% of global GDP. However, the threat from climate change, overfishing and pollution is putting as much as 40% of the world’s oceans at risk.The preservation of these blue habitats is needed not only to ensure their survival, but healthy oceans with thriving biodiversity also provide commercial opportunities, which safeguard and create jobs, particularly in emerging market economies. The ocean economy could double between 2010 to 2030 to reach $3 trillion and employ 40 million people. Much of this growth will be driven by “blue finance.”Building on the success of “green finance”, “blue bonds” and “blue loans” are financial instruments that raise and earmark funds for investments in activities such as water and wastewater management, reducing ocean plastic pollution, marine ecosystem restoration, sustainable shipping, eco-friendly tourism or offshore renewable energy.In 2020, Bank of China issued Asia’s first blue bond, raising almost $1 billion to develop marine-related projects such as offshore renewable energy and wastewater treatment.

The blue finance opportunity in China is vast. Its mainland coastline alone measures approximately 18,000 km, including many docks and harbours, the majority of which are ice-free and can be used all year round. The Chinese mainland is flanked to the east and south by the Bohai, Yellow, East China and South China seas, with a total maritime area of 4.73 million square kilometres, according to official Chinese data. In addition, more than 1,500 rivers run through the country.The focus on this emerging area of climate finance is paying off. In 2019, national gross ocean product (GOP) hit close to CNY 9 trillion ($1.26 trillion), accounting for 17% of the coastal GDP and 9% of China’s GDP that year. Meanwhile, the added value of emerging marine industries has doubled since 2015, according to China’s Ministry of Natural Resources. By the end of last year, the loan balance for offshore engineering equipment manufacturing, seawater desalination, marine environmental service and other fields increased by 28.3% year on year, according to the China Banking and Insurance Regulatory Commission.

Insurers and reinsurers are partners for both marine businesses and local and central governments, providing effective long-term protection for natural assets and enabling reliable operations for marine-based businesses.Companies like Swiss Re help by protecting assets, optimising sovereign budgets and creating financial stability. This expertise in marine insurance helped develop the Poseidon Principles for Marine Insurance in 2021, which support the decarbonisation of the shipping industry. This knowledge and expertise can aid businesses and the Chinese government to manage risk during the transition to blue finance principles. Having robust insurance programmes in place helps to minimise the impact of adverse events on biodiversity, eco-services and related business activities. By sharing data, we can support deeper insights, product development and innovation.Swiss Re played am important role in the development of China’s first Gross Ecosystem Product (GEP) insurance programme last year ­— for wetland carbon sinks at Hangzhou Bay National Wetland Park in the Ningbo region, which is now a haven for migratory birds and insects. Carbon sinks absorb carbon dioxide from the atmosphere and are vital for the health of the planet. On this project, the company provided the risk platform that establishes the correlation between major natural disasters and the value of ecological products, using agricultural risk model algorithms and big data modelling. It’s a prime example of how the partnership between government, insurance, banking and wetland management helps achieve carbon neutrality goals.By investing heavily in the protection of its marine habitats, China is taking significant strides towards a blue economy that balances economic growth with ecological resilience. As the world navigates the challenges of a changing climate and the urgent need for environmental preservation, examples such as China demonstrate how collaboration between government and the financial community will help safeguard our oceans for generations to come.