Summary

‘Blue finance’ is an emerging area of climate finance that aims to channel investment towards activities promoting the long-term health and sustainability of the marine environment. In the Philippines, mobilising blue finance to scale up investment in mangrove protection can improve the health and livelihoods of coastal fishing communities whilst contributing to climate change mitigation, adaptation, and resilience. This report assesses the use of ‘debt-for-mangrove swaps’ and proposes a high-level conceptual framework for operationalising them to bridge the current funding gap.

Introduction

The Philippines is one of the most vulnerable countries globally to climate impacts, including typhoons, flooding, and sea-level rise. It was ranked seventh among countries most affected by extreme weather events in 2025 and experiences an average of 20 typhoons annually. Approximately 60% of the population lives in coastal areas, making disaster risk management a top priority. Mangroves provide essential nature-based protection from storm surges, act as nursery grounds for fisheries, and serve as potent carbon sinks. However, more than half of the Philippines’ mangrove ecosystems have been lost since 1918, primarily due to aquaculture conversion and fuelwood extraction.

The mangrove policy and funding landscape in the Philippines

Mangrove cover in the Philippines was measured at approximately 311,216 hectares in 2020. The province of Palawan contains the country’s largest mangrove ecosystem, representing roughly 22% of the total. Historically, management focused on shrimp aquaculture expansion, which undervalued ecosystem services. Analysis of 88 official development assistance (ODA) funded projects between 2010 and 2025 identified nearly US$6 billion in blue economy funding. This represents less than 2% of total ODA flows, with investments mostly concentrated in sustainable fisheries management (US$3.3 billion) and ecosystem restoration (US$1.5 billion).

Blue economy initiatives and barriers to mobilising blue finance

A significant global funding gap exists for nature-based solutions, estimated at US$942 billion per year until 2030. Ocean conservation currently receives less than 1% of international climate finance. A review of 20 debt-for-nature swaps globally between 2010 and 2024, totalling US$6.3 billion, reveals effectiveness challenges. Less than 30% of funding typically went to conservation relative to the total volume of debt treated. These instruments are often complex, involving high transaction costs and creditor-driven incentives that limit scalability and raise social equity concerns regarding the participation of local communities.

Conceptual framework: ‘debt-for-mangrove’ swaps in the Philippines

Mangrove restoration requirements in the Philippines are estimated to cost at least US$71–97 million. Since Philippine debt is not distressed, large-scale debt buybacks are less attractive than in other nations. Instead, the report proposes an innovative financing structure linking multilateral development bank (MDB) debt management tools, such as flexible loan products, to modify repayment terms. Resulting fiscal savings could be channelled into a mangrove trust fund, comprising a community fund for livelihood projects and an endowment fund to ensure long-term financial sustainability beyond the duration of the swap agreement.

Policy implications: the role of institutions

Improving governance mechanisms is critical to de-risking investments. Local governments face capacity gaps in project development and lack direct access to international climate finance. Successful implementation requires transparent governance and meaningful community engagement. Case studies, such as the Tubbataha Reefs Natural Park, demonstrate that effective management relies on sustainable funding models; over 50% of Tubbataha’s revenue comes from tourism entry fees. Strengthening trust with local communities is identified as the most important and low-cost strategy to reduce funding gaps in enforcement and patrol activities.

Conclusion and next steps

The report identifies several research priorities to support implementation. These include exploring how debt-for-nature swaps fit into large-scale lending programmes, strengthening the economic case for mangrove-based livelihoods through business models like beekeeping, and co-designing a blue carbon market. Well-designed incentives, such as payments for ecosystem services, can increase community participation, but there is an urgent need for long-term funding mechanisms. Mangrove-based ecotourism could also become a significant economic driver to increase jobs for local fishers whilst maximising ecological outcomes.