T. Rowe Price launches Article 9 blue bonds strategy

T. Rowe Price, an asset manager with $1.73tn under management has announced the debut of its emerging markets-focused blue bond strategy. The strategy, T. Rowe Price Blue, has received initial commitments of over $200m.

The target investment universe for the strategy is corporate bonds issued by companies in emerging markets. Capital allocation will be guided by the Blue Impact Investment Guidelines – jointly developed by T. Rowe Price and the International Finance Corporation (IFC). The IFC will also be investing in the strategy.

Blue impact

Blue bonds are similar to their green counterparts in that they are use-of-proceeds linked instruments. In this case, the list of eligible projects covers coastal climate adaptation, clean water infrastructure, wastewater management and marine conservation among others.

The strategy falls under Article 9 of the EU’s SFDR regulations. Article 9 products explicitly involve sustainable investment as an objective, compared to Article 8 products where such investments are ‘promoted’.

A spokesperson for T. Rowe Price confirmed that the strategy has a return objective of 3-5% over cash, annualized over the life of the portfolio.

“The debut of T. Rowe Price Blue marks a significant step in addressing the need for sustainable water management and ocean preservation,” said Eric Veiel head of global investments and CIO at T. Rowe Price.

Investment decisions for this strategy will be guided by guidelines developed in collaboration with the IFC.

“The strategy will directly benefit from IFC’s Blue Finance Guidelines, which provide a clear framework for channelling capital into high-impact ocean and water projects. Together, they give investors both the investment products and roadmap to scale credible blue finance”, commented Mohamed Gouled, vice president, industries at the IFC.

Initial commitment

Early backers of the strategy include listed water solutions company Xylem.

“The Blue Bond partnership with T. Rowe Price is a strategic step forward in building a more water-secure world,” said Claudia Toussaint, Xylem’s chief people and sustainability officer, Xylem.

Builders Vision, an impact investment platform has also committed capital to the strategy. “T. Rowe Price Blue is exactly the kind of differentiated investment strategy we need to create value for institutional investors while ensuring resilience for ocean ecosystems,” said Noelle Laing, chief investment officer at Builders Vision.

The strategy will be led by co-portfolio managers Samy Mauddi and Matt Lawton. Mauddi, who is currently head of emerging market fixed income at T. Rowe Price, is also a portfolio manager for the firm’s emerging market bond strategy. Lawton is T. Rowe Price’s head of impact fixed income.

“With T. Rowe Price’s established track record in emerging market debt and strong relationships with key stakeholders, this strategy is well positioned to accelerate the issuance of blue bonds. We look forward to seeing how it helps unlock the deeper institutional participation needed to transform the space”, says Laing.

The combined portfolio manager experience along with the strategy’s initial momentum commitments will be key to the strategy’s next phase – crowding in private capital. The debut of T. Rowe Price Blue marks the beginning of an effort to attract institutional capital into blue bonds, which in that context, remains a nascent proposition.