ADB BRIEFS NO. 297 APRIL 2024 KEY POINTS • Blue finance, which is becoming more prominent in sustainable economic development frameworks, currently falls short of global expectations in terms of capital and debt mobilization for bankable projects. • This brief shares the Asian Development Bank’s experience of developing a blue taxonomy in Qingdao city, Shandong province, the People’s Republic of China, which involved adapting international principles, standards, and guidelines. • The lack of precise, consistent frameworks and definitions of what qualifies as a “blue activity” can be addressed through the development and adoption of a blue finance sector taxonomy (blue taxonomy). • To promote sustainable development standards, such as a blue taxonomy, a financial institution can consider adopting a gradual stepping-up process to ease the burden for transitioning industries while ensuring continued development momentum. However, this must be accompanied by timely enhancement of such standards to meet the highest international requirements. ISBN 978-92-9270-673-9 (print) ISBN 978-92-9270-674-6 (PDF) ISSN 2071-7202 (print) ISSN 2218-2675 (PDF) Publication Stock No. BRF240237-2 DOI: http://dx.doi.org/10.22617/BRF240237-2 Blue Finance Development in Shandong Province, People’s Republic of China Anqian Huang Principal Financial Sector Specialist Finance Sector Office Sectors Group Asian Development Bank Meijia Zhuan Project Consultant Beijing Institute of Finance  and Sustainability Yunwen Bai Senior Researcher Beijing Institute of Finance  and Sustainability INTRODUCTION: SAVING THE OCEANS— FROM OURSELVES Healthy oceans are vital to the environment and natural biodiversity. They are also critical to humankind’s well-being and long-term survival. Yet, the demand for greater resources has caused grave physical impacts on the environment and inflicted evergrowing damage on the oceans. Degradation and Depredation. The oceans are often used as garbage dumps and septic tanks. Soaring production, consumption, and disposal have polluted the land and river systems, and through them or by other means, many of the Earth’s blue waters. Overfishing contributes to the rapid depletion of fish stocks and causes an imbalance in the underwater ecosystem. Rising Cost. Worsening climate change patterns have led to oceans’ growing acidity, rising temperatures, and shifting currents. The rising ocean temperature also creates storms and droughts of unprecedented intensity, melting the ice caps and raising sea levels in ways that can make populated parts of Earth uninhabitable.1 The sea life on Notes: In this brief, “CNY” refers to Chinese Yuan. ADB recognizes “China” as the People’s Republic of China. 1 NASA. How Does Climate Change Affect the Ocean? https://climatekids.nasa.gov/ocean/ #:~:text=As%20Earth’s%20climate%20warms%2C%20the,or%20stop%20in%20some%20places. ADB BRIEFS NO. 297 which a large swath of humanity depends for food is increasingly imperiled by pollution and global warming, as are the livelihoods of more than 3 billion people who depend on marine and coastal biodiversity for a living. Building a Blue Finance Solution. Blue finance supports the sustainable use and conservation of ocean resources and ecosystems, an area that was largely ignored. The initiative also supports a blue economy by providing capital for ocean-related activities while, among others, minimizing harm to the ecosystem. Building a blue economy advances the global agenda on climate change and sustainable development. Next Steps to a Blue Sector Taxonomy. The Asian Development Bank’s (ADB) support to the Bank of Qingdao, a provincial commercial bank in the People’s Republic of China (PRC), is helping the latter attain its blue development goals. At the same time, it helps identify areas for improvement, including the need for better blue frameworks; management systems; and especially a formal blue sector taxonomy that can alleviate confusion among hesitant investors about blue activities, improve confidence among investors and lenders, and catalyze blue finance pipelines. The role of Bank of Qingdao is examined, and a preliminary blue sector taxonomy is proposed based on its own catalogue and adoption of international blue standards and guidelines. HIGH AIMS, INADEQUATE FINANCING, FAULTY FRAMEWORKS Global Agenda Set. The global community views ocean and marine ecology depredation and degradation as a crisis inflicting irreparable harm