11 May 2021

‘Blue’ finance holds promise for a greener future in Cabo Verde

The island state plans to become a sustainable finance hub for Africa.

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On March 25 2021, the United Nations Development Programme (UNDP) and the Cabo Verde Stock Exchange committed to establishing the world’s first sustainable financing platform dedicated to the blue economy. This commitment marks a strategic leap towards diversifying the country’s sources of financing and achieving its ‘Ambition 2030’ strategic vision.

Like most small island developing states (SIDS), Covid-19 dealt a blow to Cabo Verde’s economy. The economic downturn underscored the importance of building long-term resilience and sustainability on the country’s path to upper-middle-income status. Unfortunately, constrained access to finance, especially foreign direct investment, remains a persistent obstacle, slowing the pace of change.

The development of the ‘blue’ finance platform offers an innovative way forward. As the first step in this process, the Cabo Verde Stock Exchange, in partnership with the United Nations Development Program (UNDP), organised a ‘sustainable finance’ training event targeting the leading players in the country’s financial ecosystem. The training took place within the scope of the country’s Integrated National Financing Framework, currently under development with funding from the Joint SDG Fund and support from UNDP, International Labour Organisation and the UN Office on Drugs and Crime. 

The training aimed to promote local technical capacities and enable requisite market conditions to develop sustainable finance instruments and services based in Cabo Verde. The training focused on the fundamentals of sustainable finance, market trends and trajectories, relevant products and standards, and an overview of key players and regulations, with a specific thematic focus on a relatively new instrument: ‘Blue bonds’.

Blue bonds are debt securities issued by governments to finance projects related to the ocean economy and marine resources. The projects are as ‘green’ as they are ‘blue’. The bonds not only generate returns for the investors who buy them, but they also have positive economic, social, environmental and climate impacts. In other words, they facilitate the transition towards an inclusive and sustainable blue economy that serves people and the planet.

The Luxembourg Green Exchange (LGX), an imprint of the Luxembourg Stock Exchange and the world’s first and leading platform dedicated exclusively to sustainable finance, delivered the training. LGX shared knowledge and information essential for promoting sustainable financing in Cabo Verde, including expanding the national capital market through innovative financing instruments focused on impact investments. 

For Steven Ursino, Head of the UNDP, UN Children’s Fund (UNICEF), and UN Population Fund (UNFPA) Joint Office in Cabo Verde, the training offered a unique opportunity to get key actors together in one room. “What particularly fascinated me,” said Ursino, “is how the training brought a highly diverse set of actors and institutions together to learn about the intricacies of sustainable finance, converge around this theme in the context of the blue economy, and collectively chart a path forward.”

The platform is a significant step towards improving the island state’s regional and global integration, a cornerstone of Cabo Verde’s ‘Ambition 2030’. The objective is to establish Cabo Verde as a sustainable finance hub for Africa, capitalising on the country’s comparative advantage in governance, institutions, and human capital. The hope is that other states –  Small Island Development States (SIDS), the Economic Community of West African States (ECOWAS) and Portuguese-speaking African countries (PALOP) – will benefit from and utilise the platform’s services in the future.

The next step is to bring together domestic and foreign stakeholders, including Cabo Verde’s Ministry of Finance and stock exchange, to launch a complete project pipeline for blue economic activities.

The success of future endeavours depends largely on Cabo Verde’s engagement with its large ex-pat community, primarily based in the United States, Europe and Brazil, and other private and public actors who share an interest in the blue economy.

Once operational, the platform will begin to unlock investments, catalysing the development of a vibrant, entrepreneurial, and innovative blue economy sector in Cabo Verde. Complemented by inclusive finance initiatives developed under the INFF umbrella, this platform will go a long way toward ensuring all Cabo Verdeans benefit from the generation of new ‘blue’ opportunities.