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T. Rowe, IFC Seek Investors for Blue Emerging Market Bond Fund

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(Bloomberg) —

International Finance Corp. the private sector arm of the World Bank Group, and T. Rowe Price are seeking investor commitments for a fund that will invest in emerging-market blue bonds. 

The T. Rowe Price Emerging Markets Blue Economy Bond Strategy plans to raise more than $500 million over the next 12 months, said Samy Muaddi, head of emerging markets fixed income at T. Rowe Price. The strategy, which will invest in bonds by financial and non-financial companies, will target a return of 300 basis points to 600 basis points over the US Treasuries yield curve, he said.

Blue bonds invest in financially viable projects that support the health, productivity, and resilience of the world’s oceans and water resources and help to contain the impact of climate change, overfishing, and pollution. While blue bonds have been so far a marginal source of funding, the size of the market for emerging-market corporate blue bonds has the potential to reach between $70 billion and $100 billion by 2030, Muaddi said.

“The objective here isn’t just our vehicle, it’s also crowding in financing,” said Muaddi in an interview Friday, adding that the mobilized capital could be between three and five times the fund’s size. “It’s more about putting in precedents and transactions in the market and crowding in capital to some of the most underfunded SDGs,” referring to the United Nations Sustainable Development Goals. 

While the market for deals supporting world oceans and waterways remains nascent, investor interest is growing. Over half of 600 investors surveyed globally are now prioritizing water or ocean sustainability in their portfolio investments, according to a recent survey by law firm Simmons & Simmons. 

T. Rowe Price Blue investment activities will be complemented by a technical assistance facility managed by IFC designed to increase the quality and quantity of blue bond issuance, the institutions said in an emailed statement. 

“Blue is really something that’s underrepresented, (so) we felt that there is a compelling story from the development perspective and from a finance need perspective to go into the direction” said Tomasz Telma, IFC’s global head of financial institutions group. 

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