Turning the Tide A Financier's Guide to Investing in Blue Carbon Ecosystems 2026

Barriers to private finance flows TABLE 4 Project delivery risks Blue carbon projects are complex and require project developers to navigate a suite of project delivery risks. Though many of these risks can be mitigated through effective management, they collectively pose a barrier to private finance flows. These risks include: Risks associated with the host country’s regulatory framework including unclear land tenure regimes, complex permitting requirements with overlapping and/or siloed jurisdiction between different levels of government and/or between government agencies, and carbon markets policy uncertainty. The technical project implementation challenges inherent to blue carbon ecosystems include site access and vulnerabilities to climate risks. Stakeholder engagement and support are essential, given that blue carbon projects are often located where ongoing access and use of resources is required from adjacent communities. Close involvement, or ideally, leadership, from local communities in project design and implementation, as well as financial and other benefits flowing to communities, are critical to managing these risks. Project costs, revenue generation potential and return timeframesThe financial profile of carbon projects can present barriers for securing investment from private financiers seeking near- term, commercial-grade returns: Significant upfront capital expenditure (capex) is required to undertake pre-feasibility and feasibility assessments, develop project design documentation aligned with carbon credit standards, undertake on-ground interventions, and, importantly, build the community trust, buy-in and capability that is vital for projects to be durable. Particularly for restoration project types, there can be a significant lag between pre-feasibility expenditure and revenue generation from credit sales. This process can take 5-10 years. Carbon credit prices are highly dynamic and determined by project profile and jurisdictional factors outside developers’ control. In some instances, revenue solely from blue carbon credit sales may not be sufficient to cover project costs. Misaligned project finance needs and minimum ticket sizesThe project finance needs of many blue carbon projects are often below private financiers’ minimum ticket sizes, particularly where activities are implemented by multiple SMEs or community-based organizations and are not aggregated into a streamlined operation. Some blue carbon project developers report falling into the “missing- middle” between philanthropic and commercial finance. Challenges in meeting debt financing requirementsDebt financing for blue carbon projects remains particularly challenging, as most developers – especially those yet to reach first credit issuance – cannot offer the kind of security package lenders typically require. As project developers often do not own project sites, they cannot pledge them as collateral. Securing debt requires long term (7-10 years) forward commitments from offtakers, which can be challenging to secure, particularly for SME- or community-led projects with limited collateral and credit history. Shortage of skilled professionalsBlue carbon projects and enterprises require inputs from skilled professionals across blue finance, project development and implementation, project design, monitoring and reporting, as well as sales and marketing. Shortages of these skilled professionals within countries can restrict project pipeline development and scaling. Recommended solutions TABLE 5 Direct finance Offer credit offtake commitments once projects have completed foundational development milestones and are on a clear timeline to credit issuance. Make equity investments to gain control and influence project development decisions. Provide project-level loans structured, where possible, to accommodate project finance challenges. Design project funding instruments for blue carbon projects where SMEs or community groups are project proponents – similar to the concept of social forestry – tied to verified project milestones but without taking on unsustainable balance sheet risk. Structured finance Establish carbon funds and platforms to aggregate project finance needs and coordinate finance at a platform level to meet minimum ticket sizes and diversify risk across multiple projects, including portfolios of SME- and community-led interventions. Enabling finance Offer concessional and philanthropic finance to support and de-risk early project stages to unlock other capital sources (e.g. guarantees from development finance institutions can unlock bank lending). These interventions are likely to be sequenced across the life cycle of a project. Not all forms of finance will necessarily be required for projects to be commercially viable and the appropriateness of each will be dictated by a project’s commercial and operating context. Turning the Tide: A Financier’s Guide to Investing in Blue Carbon Ecosystems 10