As sea-levels rise, so does the urgency to act — yet the capital required to protect our marine ecosystems and coastal communities is barely trickling in.
Oceans generate an estimated $2.5 trillion in economic value each year, supporting the livelihoods of over 3 billion people, while the SDG14 — Life Below Water — receives less than 1% of global climate finance. Coastal communities face the most immediate climate risks — coastal erosion, extreme weather, biodiversity loss — yet remain underinvested.
This week, the UN Ocean Conference 2025 in Nice, France, will set an ambitious goal: to mobilize $100 billion in new ocean financing to advance a more resilient blue economy. But the critical question remains — where will this capital come from? As the most recent edition of the State of Blended Finance 2025 outlines, in a global context of declining foreign aid, efforts to preserve marine ecosystems and scale climate adaptation in coastal regions must increasingly look inward to domestic capital.
By aligning international capital with local market realities, blended finance is uniquely positioned as a structuring approach to not only to unlock foreign investment, but to activate domestic financial resources by supporting local institutions and markets, fostering long-term resilience, and scaling adaptive climate solutions driven by frontline communities.
Local Capital on the Sidelines: An Untapped Opportunity for Adaptation
Local market actors in coastal countries such as domestic financial institutions, regional development banks, insurance companies, and pension funds collectively manage billions in assets — yet only a fraction is directed toward blue economy or climate resilience investments. These projects are perceived as high-risk, with a limited pipeline of investable, well-structured coastal adaptation projects.
There is also a mismatch in time horizons: capital providers often seek returns in the short to medium term, whereas infrastructure and ecosystem restoration require long timelines to generate measurable impact and reliable revenue.
Compounding this is the lack of mature revenue models for nature-based solutions tied to SDG 14, making it harder to draw in capital. As a result, many projects remain overly dependent on international donors or substantial concessional financing, which can undermine long-term sustainability and dilute local stewardship. To truly scale resilient, climate-smart solutions along the coast, local capital must be unlocked — not only to close the financing gap, but to build accountability amongst the communities, contextual relevance for the solutions, and a sustainable impact.
Blended Finance Approaches to Mobilizing Local Capital in the Blue Economy
In 2018, the Seychelles Blue Bond, the world’s first sovereign blue bond, pioneered a model for financing climate-smart fisheries while laying the groundwork for local capital mobilization. Though its investors were international, the bond channeled proceeds through local institutions and supported domestic financial infrastructure—strengthening local investment capacity and creating a replicable model for national investment in ocean sustainability. A few years later in 2022, the Fiji Sovereign Blue Bond employed a more direct approach to mobilizing local capital, explicitly structuring the bond to be accessible to domestic investors, including local banks and financial institutions. The bond was accompanied by the Blue Accelerator Grant Scheme (BAGS), a strategic grant-to-investment accelerator, providing capacity-building, impact finance, and structured de-risking to convert locally-developed blue economy projects into investable businesses.
Other successful examples include the The Meloy Fund, which blends concessional capital with private investments from high-net-worth individuals and family offices in Southeast Asia for loans to small-scale fishers and other community actors. Another by the Global Fund for Coral Reefs, actively seeks co-investment and syndication with local financial institutions for reef-positive projects, businesses and Special Purpose Vehicles. And finally, The Blue Alliance Blended Finance Facility encourages local financial institutions and investors to participate in funding sustainable blue economy initiatives by de-risking businesses through grants and impact debt capital. Profits generated from these businesses are reinvested into regional Marine Protected Areas, creating a self-sustaining model that supports locally-led coastal biodiversity preservation and livelihoods.
How to Build Local Climate Finance Capacity in Coastal Regions
Scaling climate-resilient blue economy solutions requires a concerted effort to mobilize local capital through thoughtfully-structured blended finance. Donors and development finance institutions and multilateral development banks should design investment vehicles that intentionally crowd in domestic actors with concessional tranches, guarantees, and technical assistance to lower entry barriers. They can also collectively drive the appropriate frameworks and guidelines for blue economy investments, such as the International Finance Corporation’s practitioner’s guide on blue bonds created in collaboration with the International Capital Markets Association, United Nations Environment Programme Finance Initiative, UN Global Compact and the Asian Development Bank.
National and subnational governments also play a vital role by providing tax and regulatory incentives to local investors—as seen in Fiji’s Green Bond exemptions—and by mandating local development banks to prioritize blue and adaptation finance.
Meanwhile, philanthropies and ecosystem partners can support the ecosystem by funding early design work, creating replicable project models, and convening local stakeholders to build capital stacks that align with their risk appetite. An example is Ocean Risk and Resilience Action Alliance (ORRAA), recently announcing grants to be deployed under the Outrigger Technical Assistance Facility to support early-stage regenerative and sustainable blue economy businesses across 35 Small Island Developing States.
These initiatives together can create the enabling conditions for long-term, domestically-anchored climate finance. By engaging local capital, ocean finance can unlock greater capital flows and stronger local participation, creating solutions that are more sustainable, inclusive, and rooted in long-term community ownership of coastal and marine ecosystems.
Join us at the upcoming Global Blended Finance Forum in Washington DC November 3-5 2025, where we’ll delve into local capital mobilization and other key challenges shaping the future of blended finance. Register now!
