‘First-ever’ blue bond in MENA region sees light of day

December 26, 2024, by Sara Kosmajac

Dubai-based terminal operator DP World has issued a staggering $100 million blue bond, becoming the first company in the Middle East to mark this ‘milestone’.

According to DP World, the blue bond will aim to fund environmentally friendly projects across marine transportation, port infrastructure, marine pollution, and nature and water-positive initiatives

A blue bond is a ‘groundbreaking’ financial instrument in the maritime industry crafted to fund projects that benefit ocean preservation, eco-friendly marine resources, and blue economy initiatives. It adheres to the guidance provided by the International Capital Markets Association (ICMA) as well as other relevant organizations.

It is believed that DP World is ‘the first’ to issue a blue bond in the wider, MENA (Middle East and North Africa) region, extending all the way to Central and Eastern Europe. The company’s five-year blue bond—backed by U.S.-based investment management firm T. Rowe Price Associates—was priced at a 5.25% coupon rate.

As disclosed, the blue bond issued by DP World has a very low extra interest rate (0.996%) compared to the safer US Treasury bonds. This is reportedly the lowest extra rate DP World has ever had to pay for its bonds or Sukuks, which are Islamic financial certificates similar to a bond but structured to comply with Islamic law principles, which prohibit earning interest.

Through this issuance, the UAE-based terminal operator said it hoped to aid in closing the ‘considerable’ funding gap for the UN Sustainable Development Goal 14 (UN SDG 14), titled “Life Below Water”—which promotes environmentally conscious use of and the conservation of the oceans, seas and marine resources—and for the UN Sustainable Development Goal 6, i.e. “Clean Water and sanitation” that aims to ensure the availability and ecologically responsible management of water and sanitation for all.

Sharing thoughts on the development, Sultan Ahmed bin Sulayem, Group Chairman and Chief Executive of DP World, remarked: “We are increasingly working in regions where the ocean is being polluted, coastal biodiversity is being lost, and critical resources like water are becoming scarcer, posing significant threats to both nature and people.”

“This issuance represents DP World’s second foray into the sustainable financing capital markets highlighting our commitment to sustainability and demonstrates our approach towards sustainable business practices,” he added.

As per DP World, eligible projects included within the Blue Bond portfolio include:

Sustainable marine transportation: Supporting research, development, and procurement of alternative fuels and technologies to reduce carbon emissions, and other sources of marine pollution in the maritime sector;
Eco-friendly ports development: Funding infrastructure upgrades to minimize environmental impacts, noise and air pollution;
Marine ecosystem conservation and restoration: Expanding nature-based projects to conserve and restore marine ecosystems, and solutions to improve biodiversity;
Marine pollution: Initiatives to address waste and pollution in coastal and marine environments, as well as improvements to water quality and ensuring equitable access to water.

It is understood that the blue bond is in line with DP World’s recently unveiled Ocean Strategy and its ‘long-standing’ Decarbonization and Water Strategies, the former of which was reportedly envisioned as a path to link global trade and environmental stewardship and support the company’s efforts within ‘sustainable blue economy’.

Representatives from DP World added that the strategy also has a goal of ‘advancing’ the Paris Climate Agreement, and the Kunming-Montreal Global Biodiversity Framework that was adopted at the UN Biodiversity Conference (COP15) in December 2022, outlining global goals and targets for halting and reversing biodiversity loss by 2030 and ensuring its eco-friendly use by 2050.

Earlier this year, DP World published its inaugural Green Sukuk Impact and Allocation Report. As elaborated, of the $1.5 billion raised last year, $1.17 billion has been allocated to eligible green projects. Financed through the Sukuk, the projects are said to have contributed to avoiding more than 177 million kg of CO2 emissions, saving 466,057 MJ of energy and generating 866,686 kWh of renewable energy.

It is worth noting that the “first-ever” blue bond in the shipping industry was issued in January 2024 by Japanese shipping heavyweight Mitsui O.S.K. Lines (MOL). The blue bonds amounted to JPY 10 billion (about $70.45 million) and would have a maturity of five years, the company stated at that time.

MOL revealed that the Blue Bond Framework developed for the issuance of the bonds would make sure that all uses of the bonds’ proceeds will contribute to a sustainable blue economy.