Approximately 500 million people depend directly on coral reefs for food and income, but 60% of those ecosystems are under immediate threat. While marine protected areas (MPAs) can play a crucial role in protecting them, 70% of the MPAs worldwide struggle to meet minimum management standards due to insufficient, grant-based funding. New financing models that are able to attract new sources of capital (e.g. through blended finance) are needed to inject additional capital to support development projects that are advancing sustainable management of these areas.
The Blended Blue Finance Facility
In 2020, Convergence’s Asia Natural Capital Design Funding Window awarded Blue Finance a proof-of-concept grant to design a new investment facility, the Blended Blue Finance Facility (BBFF), that aggregates a pipeline of “bankable” high-impact MPA projects and provides an opportunity for investors to participate with concessionary capital in ecological resilience, while empowering local communities. The facility uses concessional, subordinated debt, alongside grant funding and commercial loans to unlock different types of capital by reducing risks for investors.
Through the BBFF, opportunities for the MPAs to generate revenues will be developed through tourism, blue-carbon credits, and community small-business models such as responsible aquaculture. The BBFF structure will also bring together local communities (through livelihood development, new job opportunities, and capacity building), local conservation NGOs, government, donors, and investors in a collaboration that seeks to blend commercial finance and grant funding to finance the up-front capital needs of the MPAs.
The grant from Convergence served as critical early-stage capital to support facility design and structuring, fundraising, and marketing, and getting several MPAs to investment readiness in Asia. Most importantly, it helped aggregate several investment-ready, high-impact MPA projects into the BBFF, increasing the investment size and making it more attractive to commercial investors.
As of early 2022, Blue finance, with local partners, manage five MPAs preserving 1,000,000 ha of high-biodiverse coral reefs, protecting over 40 endangered species, and improving the livelihoods of over 20,000 coastal community members in the Caribbean, South East Asia, and Sub-Saharan Africa.
All MPAs will become progressively independent from donors through tangible revenue models based on eco-tourism programmes, blue carbon, and other innovative blue economy initiatives in and around MPAs. Each of the MPAs also has a long-term mandate, from their respective governments, for operational management with trusted local partners.
Shifting to an entrepreneurial mindset
A unique challenge Blue Finance has come up against in their drive to make MPAs commercially viable through the facility is helping local conservation organisations, which are used to working with grant funders rather than investors, increase their entrepreneurial capacities and mindset. The team found that traditional technical assistance approaches, which rely on ad-hoc, one-off trainings, have often been insufficient, so they take a more long-term approach to building local expertise. Depending on the MPA, Blue finance either works with existing partners and staff or sets up a new co-management entity and recruits dedicated staff who can help overcome these challenges. Blue finance provides direction on local human resources (recruitment and performance evaluation), supervises the local entities’ financial operations (e.g. centralized accounting tools, budgets, and strict payment authorization procedures), and reports on MPA performance (regular monitoring of progress, work plans, key performance indicators).
The way forward
Blue Finance is currently looking to identify new partners to join their other impact investors and deploy capital investments in the MPAs for vessels and ranger stations, which are responsible for implementing the day-to-day activities of the MPA (e.g. enforcement and education) and for revenue-generating activities such as eco-tourism facilities, artisanal aquaculture hatcheries, and sustainable fisheries. In addition, five new MPAs are currently in preparation.
As oceans continue to warm and sea levels continue to rise, solutions like the BBFF that are replicable and scalable, while supporting local communities, will be critical to drawing in the capital needed to keep our oceans healthy and sustainable.
The next deadline for the Asia Natural Capital Design Funding Window is coming up on September 30, 2022. Go to our Design Funding page to apply and explore our other open Windows.