A pioneering blended finance Blue Impact Fund – a blueprint for Conservation Finance
The Blue Impact Fund (BIF), developed by Finance Earth (FE) in partnership with WWF, is a pioneering approach to restore marine habitats using conservation finance.
The regeneration of our seas and oceans is crucial to deliver wide environmental benefits, but the current level of spending is currently insufficient, with the majority of funding sources coming from public and philanthropic sources. Our aim is to close this key funding gap and increase the amount of private funding flowing towards the sustainable Blue Economy and have created the Blue Impact Fund to that intent.
While our initial market and investor engagement demonstrate strong interest for the Blue Economy from investors, several barriers prevent investment at scale. The main barrier identified is the perceived risk profile of the embryonic UK conservation finance market and blue ecosystem services sector, leading to a risk/return profile of the Fund too imbalanced for investor to support the BIF. Some investors have expressed strong interest in the development of a de-risking approach through blending and the use of first-loss capital as a way to mitigate some of the inherent risks, which will be established as the central focus of this project.
Although blended vehicles have been deployed with success in Development and Social Impact Investing, there are few if any examples in UK Conservation Finance. Further, SDG 14 (Life Below Water) is now recognised as one of the least well supported and funded. The creation of a landmark blended finance vehicle will provide a blueprint for the wider market and bring momentum to the Conservation Finance sector, unlocking new sources of capital for climate and biodiversity investment.
Through this project, the aim is to create a replicable blended vehicle model for the conservation finance sector and share knowledge with the wider investor market. Ultimately, our goal is to up to £75m (with at least £10m from first-time investors in marine conservation) to provide project finance for blue ecosystem services projects and growth capital for sustainable seafood.
The Fund will ultimately act as a proof-of-concept and demonstrate the potential to create fair financial returns through investments in marine and coastal habitat restoration and sustainable seafood businesses. By demonstrating the Investibility of the marine environment, the fund will encourage further investment activity into the sector.
Project Aim
The development of a blended fund model to support and increase the amount of private funding flowing to the sustainable blue economy.
To restore and protect a wide range of marine and coastal ecosystems and close the funding gap for sustainable marine businesses with a positive impact on the environment
Project partners
Funding model
The Blue Impact Fund is the result of a two-year mapping exercise, where the most promising opportunities for marine conservation that would be the most suited to attract private capital and scaled-up, were identified.
The Fund will generate returns through the sale of commodities (e.g. seafood) but also from the sale of Ecosystem services. The Fund will explore how enterprise can monetise benefits derived from their activities (such as water quality for mariculture, carbon for seaweed farming) and will support blue projects to generate revenues from the sale of voluntary ‘blue’ carbon credits created from habitat protection or restoration. The Fund will further consider other ecosystem payments where appropriate, including Biodiversity Net Gain or water quality benefits and explore other restored marine habitat revenue streams as a secondary priority, including flood defence benefits or eco-tourism. A key intention for the Fund would be to secure first loss capital as part of a blended finance approach to attract mainstream investors by reducing downside risk.
Future Investment Potential
The BIF will support projects and businesses that have a positive impact on the environment and will address five of the 25 YEP Goals, 3 of which are detailed below. They will help reverse the ongoing trend of marine and coastal habitat degradation and support regenerative sustainable aquaculture practices.
Clean and plentiful water: healthy marine ecosystems such as saltmarsh, seagrass, kelp and some aquaculture businesses can improve water quality through nutrient removal or water filtration.
Mitigation of and adaptation to climate change: Marine and coastal ecosystems are crucial for the carbon cycle and can sequester vast amounts of carbon.
Thriving plants and wildlife: restored marine ecosystems, such as saltmarshes, seagrass meadows and kelp forests address biodiversity loss. Aquaculture businesses can also increase species abundance and diversity in surrounding waters.
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