Blue Bonds: Empowering investors focused on water
The acceleration of the water cycle due to global warming is leading to increased evaporation and more intense rainfall, heightening the risk of flooding. These risks cut across sectors, affecting construction, agriculture, industry, and energy. Investors are feeling the impact of scarcity: according to the 2024 Thematics Barometer by BNP Paribas Greenwich1, 23% of thematic investors rank water among their top three priorities. Investing in water-related projects through blue bonds provides a means to address freshwater scarcity with robust infrastructure solutions.
Water’s neglect in environmental policy
Projections from the Aqueduct Water Risk Atlas2 of the World Resources Institute indicate that the global distribution of freshwater will become increasingly disrupted between 2030 and 2080. The rising likelihood of droughts, floods, and water shortages has direct repercussions on ecosystems and leads to higher insurance costs. Despite this, water often remains a lower priority in environmental policies. Alongside reducing CO2 emissions, Emma Haziza, member of UNICEF’s Scientific Council, identifies three key priorities: “We must focus on mitigating flood damage, safeguarding water reserves by reducing consumption, and improving water quality.”
A role for asset managers
The financial sector complements government efforts by employing various tools to address water-related challenges. In recent years, asset managers have supported funds targeting companies that offer water management solutions and have helped craft policies requiring businesses to report their water usage. This enables investors to better incorporate water-related challenges into their decisions. BNP Paribas measures the water footprint of its investments and sets goals to reduce their impact. With public investment in water infrastructure falling short, private investors have a critical role to play. Private investments can drive the adoption of new technologies in the water sector.
Blue bonds contribute to sustainability
Blue bonds are instruments that finance the water-related (blue) economy. They enable companies to fund vital projects that protect water resources and address the impacts of climate change. These innovative financing tools are essential for securing our future water supply and supporting sustainable development.
The first blue bonds in the water sector
In October 2024, BNP Paribas CIB assisted the leading industrial water management company Sauer in issuing the first blue bonds in the water sector. The €550 million issuance, maturing in 2029, generated significant interest, with demand exceeding supply by more than threefold. Sauer will use the proceeds for projects including water production and distribution, wastewater collection and treatment, and seawater desalination using environmentally friendly technologies.
“This is more than just a technical challenge; the biggest issues are societal rather than technological. How do we convince consumers, individuals, farmers, and businesses that managing freshwater—sustainably, healthily, and equitably—comes with costs that we must be willing to pay and share fairly?”
Sébastien Soleille, Global Head of Energy Transition and Environment at BNP Paribas
The successful issuance of blue bonds underscores the growing recognition of water management’s importance. It represents a pivotal development in financing sustainable water projects globally.
1 BNP Paribas Greenwich; 2024 Thematics Barometer
2 World Resources Institute; Aqueduct Water Risk Atlas