T. Rowe Price Group Inc. has secured funding support from Lukas Walton's impact investing platform to launch a new corporate bond fund. Walton is an heir to Wal-Mart Inc. The fund will focus on thematic investments related to water security and ocean conservation in emerging markets.
Samy Muaddi, head of the emerging markets fixed income division at the Baltimore-based asset management company, said the new fund targets a fundraising goal of up to $500 million. In an email statement to Bloomberg, T. Rowe Price said that Builders Vision, the impact investing platform founded by Walton, and water technology company Xylem Inc. are early investors in the fund, contributing a combined $200 million.
Muaddi revealed that T. Rowe Price is jointly launching this fund strategy with the International Finance Corporation (IFC), the World Bank Group's private sector arm, with expected annual returns for investors of 400 basis points (4%) above U.S. Treasuries.
"We are trying to drive private sector capital into blue finance—this type of capital deployment might not happen at all without this kind of innovative collaboration," Muaddi said in an interview.
Blue bonds were first issued by the World Bank in 2018, designed to direct funding toward projects addressing water pollution, overfishing, and the impacts of climate change on oceans and rivers. These challenges are particularly pronounced in developing countries, which have consistently faced difficulties in accessing the capital needed to address such risks.
Mohamed Gouled, Vice President of Industry Sectors at the International Finance Corporation, noted in an email statement: "The launch of this fund represents a crucial step in building a stronger blue economy—an economic model that will protect water resources, drive investment, and create quality employment opportunities in emerging markets."
T. Rowe Price and the International Finance Corporation first announced their "Emerging Markets Blue Economy Bond Strategy" in November 2023. According to data provided by T. Rowe Price, the current global blue bond market is approximately $20 billion, with emerging market issuers accounting for about 15%.
Matt Lawton, head of T. Rowe Price's impact fixed income division and co-manager of the blue bond fund, said that new issuances of blue bonds by emerging market companies could reach as much as $2.5 billion over the next 12 to 18 months.
Recent examples of blue bond issuances by emerging market companies include Cia de Saneamento Básico do Estado de São Paulo (Sabesp). The company issued a $500 million, 5-year blue bond underwritten by Goldman Sachs Group Inc., Itau Unibanco Holding SA, and JPMorgan Chase & Co., first priced on July 24 with a coupon rate of 5.7%.
Muaddi acknowledged that attracting investors to water-related financial products still presents challenges: "Without private sector participation, we cannot fill this funding gap."
Notably, T. Rowe Price has proceeded with this blue bond fund launch amid growing opposition to sustainable finance in the United States. The asset management company initially planned to raise more than $500 million for its blue bond strategy by the end of last year but ultimately delayed this timeline.
"We are working to build a capital market that didn't exist before," Muaddi said. "We are trying to match bond issuance capacity with client demand for bonds."
However, he also noted that over the past 12 months, "attention to water-related themes has increased significantly." "We firmly believe blue finance remains a long-term growth area. Among our client base, water issues have become a highly cohesive consensus point."