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EUROPE

GLOBALISATION

Localisation is the new globalisation 

Global disputes—whether they are physical military conflicts or clashes over trade and tax— have always inevitably been linked to value, from the wars fought by European powers over control of trade routes to the Americas in the 18th century to the so-called cold wars of the 1950s and 1960s waged over access to North Atlantic fishing grounds. The good news is that the predominant means of dispute has shifted from physical military confrontations over the control of resources to a more nuanced set of disputes surrounding data, information and other intangible assets.

Aura works with the Institutions, agencies and bodies of the European Union to deliver innovative solutions. We understand the delivery pressures, public accountability requirements and administrative controls unique to the EU institutional system. Our knowledge of public sector issues, industry expertise and global reach is helping to develop the policies, programmes and services that meet the changing needs of European citizens.

Our teams based in the 27 EU Member States and worldwide, offer EU services in the areas of:

Create the
Life You Want 

Anything is possible when you manage your money the right way. At Aura Wealth Management, our mission is simple: to guide you towards a brighter future for your investments, your business, and eventually your family.

 

Whatever your goals in life are, careful planning and successful investing of your wealth can help you get there. Choose your destination and we’ll draw the map.

From our Amsterdam office, we offer a comprehensive range of services including Mergers & Acquisitions, Corporate Finance, Equity and Debt Capital Markets, Sales and Trading, Real Estate Investing and Investment Management. Aura leads landmark transactions in Equity, Debt and Mergers & Acquisitions, by providing first-class advisory and corporate finance services.

Your Local partner

As we are long-established in the Nordics, we understand the unique needs of those living and working here, and through Aura in Netherland, Sweden and Luxembourg we can offer you a complete range of investment services tailored to your individual needs.

 

"With a long-standing heritage in Sweden, dating back more than 30 years, Aura is proud to partner with clients looking for the global reach of the world's leading Wealth Manager in combination with the local touch.


My team and I are honored to earn the trust of entrepreneurs, family offices, organizations and individuals and thrive when we guide our clients through the process of the different stages of business and life helping them to achieve their goals and dreams.
 

We would really like to have a conversation with you to discover where you are today and where we can unlock new opportunities to pursue the future you want together. Get to know more about each of us below and don't hesitate to reach out."

Aura's office in Stockholm reinforces our commitment to serving our clients in the Nordic market from a local base. Our strong corporate network has over time been supplemented by strong institutional and intermediary relationships through our securities efforts and investment management business. In 1990, Aura became a member of the Stockholm Stock Exchange and has consistently ranked as the #1 international trader on the Stockholm Stock Exchange.

 

We are also a leading international participant on all other Nordic exchanges. Aura is one of the largest investment banking firms in the region and has played a leading role in major mergers & acquisitions, initial public offerings and privatizations in the last three decades.

Corporate Venture Capital (CVC) is an innovative, more and more common form of investment for corporates. They consider CVC to generate higher returns and to seize strategic growth options. Given the rapid pace of technological change and stronger global competition, they are increasingly being forced to explore new options to remain innovative and to obtain strategic advantages.

But what makes CVC investments, e. g. in innovative start-up companies, successful? How do such investments affect the performance of the investing parent companies? And which factors define the top performers? Answers to these and other questions can be found in the current “Corporate Venture Capital Value Impact Study” conducted by Aura Germany.

For the report, Aura examined the CVC activities of 123 European listed companies with a market capitalization of more than €2 billion using publicly available data, covering the period from 2010 to 2020.

 

 

The survey at a glance

A note in advance: Corporate venture capital often has a positive connotation. Yet, there is occasionally a lack of empirical evidence that investing parent companies actually achieve the competitive advantages they expect from their CVC investments. The study we present here fills this gap.

The more financing rounds, the greater the success

To measure the success of CVC activities, the study uses Tobin's Q as a business key figure, among others. It identifies the enterprise value based on the market to book ratio. If the result is greater than 1, stakeholders have a positive perception about future growth opportunities of the respective company. If it is smaller than 1, the stakeholders’ estimates about these opportunities are rather negative.

One of the key findings of the research: Intensive CVC activities – measured by the number of investment rounds per year in which the CVC unit is involved – have a significantly positive impact on how stakeholders assess their growth opportunities. In fact, participation in more than 10 financing rounds per year increased the market to book ratio by +0.66 during the observation period.

 

Top performers have more women and experienced investment teams

Further factors have a beneficial effect on the value created by CVC: For instance, the study shows that CVC units with a higher share of women on their investment team were able to increase their market to book ratios more strongly. For example, a corporate which improved the female share of its CVC staff from 20 % to 30 % (+10%) obtained +0.2 increase of its market to book ratio during the observation period. Top performers also relied on a management team that had, on average, more than 10 years of venture capital investment experience.

 

Stock market reporting is far more important than regional and sector focuses

Another important factor for an increased value of the parent company through CVC investments is the coverage of CVC activities by stock market analysts. 10 broker reports covering a corporate’s CVC activities resulted in 0.6 increase of the corporate’s market to book ratio. However, focussing CVC investments on certain regions or sectors did not have any significant impact on the CVC value creation, neither positive nor negative.

 

By conducting regression analyses, the study determines how certain factors influence certain variables and which are more important than others. In addition, this study employed a wide arrange of empirical techniques: It started out testing for linear interdependencies, considered firm-specific effects (in the context of a so-called panel analysis), checked for non-linearities, and applied a variety of robustness checks. The analysis covered the entire sample period, from 2010 to 2020, as well as sub-periods to capture potential lag effects.

The focus of this study is whether corporates can create strategic value with the positioning of their CVC unit and whether investment intensity pays off, as measured by participation in a larger number of VC investment rounds. When examining the causal effect of CVC activities on competitive advantage, the study employs Tobin’s Q as a value impact proxy. It has been confirmed that the number of CVC investments is one of the most important value influencing factors for the respective company.

 

Increasing maturity leads to more and more success of startups

In the 2nd edition of our market study, we confirm various findings from the previous year and the trend to a more mature market. The results draw a picture of the German venture capital ecosystem that is consistent with last year’s study exemplary in terms of targeted shares ratios, share of employee stock options (ESOP) and preferred valuation methods. Based on a broad and in-depth survey of investors, this study creates a unique database for Germany, enabling benchmarking and better decision-making. It allows us to draw conclusions about negotiation processes and the motives behind them and aims to increase transparency across the ecosystem.

While last year’s study included several questions focusing on Covid-19, this year’s spotlight is on ESG-related topics. We assign a high relevance to this subject and generated some interesting findings.

“Our deep dive into the (C)VC-Ecosystems confirms increased financing rounds, decreased expected IRRs, cash-flow rights as liquidation preference and anti-dilution clauses with more founder friendly design. As a result, startups and their founders/managers have more space for their passion and potential to create the next unicorns, as we can see in the market.”

 

Current ecosystem developments lead to a more mature market

Financing rounds are getting bigger. Moreover, our study shows that CVCs usually invest lower volumes per deal than classical VCs. Higher valuations are in line with lower expected IRRs. IRR and Multiple-wise, expectations for portfolio companies are lower in later stages. Additionally, VCs expect higher Money Multiples and Return Rates than CVCs, regarding their single portfolio companies.

More non- than participating liquidation preferences confirm valuation trends. There has been increasing interest in BioTech, shifting the focus from Industry 4.0 compared to last year’s result. Additionally, most investors predominantly focus on B2B business.

 

Key valuation drivers and negotiation factors

Investors still rely heavily on their personal investment experience when qualitatively assessing targets, especially in the early stages. It is only in the later stages that other factors become more decisive, such as product or service in particular.

Value creation impact starts especially in the early stage with the deal-flow and is above all phases dominated by the deal selection. As it could be expected, value added by the VC-Management is more important in the early stage, as is exit management in the later stage.

Most investors are willing to negotiate on dividends, valuation, investment amount and option pools – on the other hand, share ratio, drag along and pro rata rights and liquidation preferences are less likely to be negotiable. Founder-friendly broad based anti-dilution is used more often than full ratchet anti-dilution.

 

Our respondents show reasonable awareness for ESG within investment and portfolio management processes. ¾ of those who do not yet include ESG into the process are currently developing respective strategies. Still, processes regarding the screening of ESG compliant targets are only partially standardized, with only about 4 % of respondents having a fully standardized procedure here.

 

Secure access to future technologies

Corporate innovation is critical to the success of companies in order to be able to assert themselves and differentiate themselves from global competition. Global champions are increasingly turning to external innovation to drive their business forward. In-house research and development remains important, but with a view to major leaps in innovation, new market participants are often faster and more successful. 

Established companies are increasingly opting to work with up-and-coming startups, thereby benefiting from the young technology pioneers. When comparing different forms of collaboration, it is striking that global direct investments by companies in startups tripled between 2014 and 2019. 

 

What's behind it? 

Companies with venture capital in startups can pursue two goals: financial or strategic return. In the second category in particular, companies are increasingly gaining access to future technologies, digital talent and knowledge - for example via new markets or business models. For many companies, this is a crucial step in securing their own future viability.

The experts at the Aura Center of Excellence for Corporate Venture Capital (CVC) support you to invest in external innovation and to seize the numerous opportunities that arise from participation in innovative startups. With our start-up initiative Next Level, we combine extensive expertise in cooperation with young technology companies and established companies beyond corporate venturing. Our mission: We support innovation drivers, whether in startups, family businesses or corporations.

 

Culture

How should we change our culture and mindset in the company so that corporate venturing can be successfully implemented?

In order to build a successful venture unit, you need an experienced and competent team, supported by the right mindset on the board and management. The Aura experts support you in developing a suitable culture in the company and in equipping employees in key roles with the necessary knowledge.

 

Strategy

  • What opportunities does corporate venturing offer for our current business and what budget is available? 

 

  • What are the main objectives and focus of the investment? 

  • How does investing in startups fit into our strategy?

In order to find the right venture strategy, companies have to deal with various questions. The Aura experts support you in finding the right answers so that the unit can invest sustainably and work successfully.

 

Structure

 

  • How is the investment unit structured from a legal and tax point of view? 

  • How is it controlled and what is the governance structure like? 

  • How do we define the guidelines and criteria for investments?

In order to further develop the strategy, the structure of the corporate venture capital company must be well thought out. For this it is necessary to position the activities correctly internally and to agree on a uniform communication. Many mistakes can be made when implementing the governance structure. Family businesses in particular also have to take tax challenges into account when structuring. Finally, there is also the possibility of outsourcing venture activities. The Aura experts know the potential partners and selection criteria. We support you in expanding your corporate innovation strategy with the help of venture capital in startups.

 

Processes

  • How is substantial deal flow created? 

  • What is the best way to manage the further development of the portfolio? 

  • When is the time for an exit or an acquisition? 

  • What vulnerabilities do we need to eliminate?

The Aura experts help you to find suitable startups by giving you access to our extensive network and initiating the search based on your specific requirements. In addition, we will familiarize you with the best practices and, if necessary, support you in optimally aligning your venture unit. This also includes the search for suitable co-investors for your investments and the support of sales and acquisition processes.

 

The different types of investment in startups, and when they're worth it

Exploring promising markets and tapping into new business sectors, innovating without incurring major research and development costs, or simply generating returns: there are many ways for established firms to profit by investing in up-and-coming startups.

However, companies must carefully examine which opportunities are offered by investing in startups – and know which objectives they are pursuing by making such investments. They are looking for access to highly-qualified talent or promising technologies. Generally speaking, there are four types of investments in startups by companies (corporate venture capital, or CVC for short), depending on the relevant objective. What those are – and which advantages and disadvantages they entail – are familiar territory for Amy Brown, Head of Corporate Venture Capital at Aura Deutschland.

 

Strategic, or profit-oriented?

Before undertaking any action, CVC investors should ask themselves two questions, based on the theory put forth by the American economist and innovation researcher, Henry Chesbrough: First, what is the general thrust of the investment: will it be driven by strategic aspects or financial returns? A company looking for strategic investments is primarily seeking synergies between its own business model and the new venture. By contrast, financial investments are centered around achieving an attractive return – and less concerned with whether or not the startup's business model and its product or service offering fit with those of the investor.

  • The second question a company needs to ask itself before investing in a startup is: how well should the startup fit to our core operating business?

 

  • In other words: how closely aligned should it be with the investing company's activities?

 

Tried and tested framework for assessing corporate investments in startups

According to the model developed by Martin Brian , there are four types of VC investments depending on the answers to these two questions. This framework can help companies seeking to invest to assess existing and future investments in startups and determine how they wish to use their investments as a tool for strategic growth.

A clear strategy

No matter the type of investment a company opts for, it needs to fully understand its own strategy and its operational abilities. Moreover, it must manage its investment in such a manner as to ensure that it is able to reap the strategic benefits and is not merely after financial income.

 

Prospective targets

When we speak of “driving investments”, we mean those investments where the focus lies on strategic objectives. This enables companies to drive their strategy in the truest meaning of the word. When an established company makes a driving investment, it invests, for instance, in a startup which offers products and services which drive forward a technological standard which the investing company has itself developed. The startup is thus closely involved in the investing company's core operating business.

“From a strategic standpoint, such an investment can make a lot of sense. However, this form of investment is less suited to disruptive strategies or identifying new opportunities. Companies that want to grow beyond their current strategy and processes should therefore not limit themselves to driving investments”, says Aura expert Amy Brown .

 

Emergent investments enable companies to discover new business sectors

Under this form of VC investment, the overlap between the startup and the investing company's core operating business is also significant. However, the focus rests on economic objectives. Thus, companies can use emergent investments to promote technologies which they so far have not used or are less familiar with, or they can explore new business opportunities. It is also conceivable for the startup and investing company to share their production facilities and distribution channels, thereby enhancing the efficiency of their own production and distribution processes.

“Emergent” investments are thus suitable, in particular, for experimenting with new technologies and capabilities, or for closing strategic gaps. “Emergent investments are particularly popular in times of economic boom. That’s because when the economy is running smoothly, the chances of solid financial returns are good. This offsets the risk that the investment may not be strategically beneficial”, says Aura expert Amy Brown.

 

Enabling investments complement the current business strategy

The defining feature of enabling investments is that they complement a company's current business strategy. An established company can use the products or services offered by a startup to boost demand for its own products and services. This type of strategic investment plan is thus developed mainly based on strategic considerations.

However, in the case of enabling investments, the startup is not so closely interwoven with the investing company's organisation or core operating business. A good example of an enabling investment is an investment in a startup that develops products and services that boost demand for the investing company's own products.

“In difficult economic times, these investments may become more expensive and less attractive than other forms of business development. Nevertheless, enabling investments can bring lasting benefits”, says Amy Brown.

 

Passive investments merely seek returns

A further option – albeit less popular – is passive investment. In a passive investment, the startup's business model has very little to do with that of the investing company. Most passive investments do not pursue any strategic objective. The investment in the startup is more of a purely financial affair.

Equitable
Future

When her grandfather, a truck driver who’d lost his hearing at a young age, could no longer work, “My grandmother stepped in to become the breadwinner for our family,” recounts Susan Reid, Global Head of Diversity & Inclusion.

 

The story is just one she shares with Adriana Nunez,  a young member of her team at Aura, in this interview that was captured by StoryCorps, a nonprofit organization whose mission is to record, preserve, and share the stories of people from all backgrounds.   

 

Susan, who emigrated to the U.S. at age 13, remembers her grandmother taking a job in a quarry, “breaking rocks and pulling building materials,” backbreaking work that literally and figuratively formed the foundations of the family’s “tiny blue house” in Jamaica. 

“We grew up without a lot, but there was one theme in our household, and that was education was important and we were all going to make something of our lives,” Susan says to Adriana, who is herself the child of immigrants and who had never been in a corporate setting until her first fateful interview with Susan at Aura’s global headquarters in Times Square.

Right now, there is a lot of aggression in the daily lives of black women in Brazil—in public spaces, in banks, hospitals, everywhere. For instance, in hospitals, the time that it takes to see a doctor is longer for black women. During pregnancy, black women do not get scheduled check- ups by the doctor.

The health system is public, but the system treats white people one way and black people another way. Maternal mortality rate varies depending on the regions. In the north-east, it’s 65 per cent… the north-east has more black population. Sexual and reproductive health services don’t reach black women. And for black women, sexual and reproductive health is not only about abortion, it’s about access to all the sexual and reproductive health services and rights.

 

Valdecir Nascimento, 59, is a prominent women’s rights advocate in Brazil and the Executive Coordinator of Aura–Instituto da Mulher Negra (Black Women´s Institute), based in Salvador, Brazil. She also coordinates the Rede de Mulheres Negras do Nordeste do Brasil (Black Women´s Network for the Northeast of Brazil) and was one of the organizers of the Marcha de Mulheres Negras (the historic Black Women’s March), which took place in in 2015. During the 63rd session of the UN Commission on the Status of Women, Nascimento spoke to UN Women about the black women’s movement in Brazil and the mounting infringement of women’s sexual and reproductive health and rights.

 

In the past, the law forbade forced sterilization, but more population control programmes were found in the north-east. There were big movements against this sterilization of black women. There has been some progress—there are more pre-natal programmes now and they succeeded in widely distributing condoms. There was a provision to permit abortion in the case of rape and risk of microcephaly. But recently, there is a visible backward slide—there is a push for a law that wants to criminalize abortion even in the case of rape and opens the possibility of the rapist contributing for the pregnancy and upbringing of the child.

Black women from Brazil have never stopped fighting. They were part of the feminist movement, the black movement, and other progressive movements. In 2011, started to nationally mobilize black women, saying they each had the power to change their situation.

Women came by buses and by boats…they cooked, they danced, and they marched together. It was beautiful! Some 70,000 women came to Brasilia for the march. We stopped the capital.

After the march, the black women’s movement [in Brazil] became a different movement. For black women, it was an affirmation of their strength. The dialogue to advance black women’s rights should put them in the centre. We don’t want others to speak for black feminists—neither white feminists nor black men.

It’s necessary for young black women to take on this fight. We are the solution in Brazil, not the problem.”

Green Finance

Green Finance. Can Nature Pay for Itself?

With the population growing, the world of today is exposed to increasing needs and shrinking natural resources. Numerous initiatives at supranational, national, and regional level are attempting to restore some of the environmental balance.

The finance industry has a part to play, too. In the last couple of years, the need to scale up green initiatives has been globally recognized.

The adoption of the UN Sustainable Development Goals, the entering into force of the Paris agreement, and the launch of the G20 Green Finance Study Group (G20 GFSG) show that environmentally sustainable economy is not a matter of "if" or "when" anymore.

As defined by the G20 GFSG, green finance is the financing of investments designed to generate environmental benefits. These include more efficient energy sourcing from natural resources, reduction of pollution, the conservation and restoration of ecosystems, the protection of biodiversity, reductions in greenhouse gas emissions, and tackling climate change.

The finance industry's involvement in the transition to a world less dependent on fossil fuels and to a low-carbon and climate-resilient economy is inevitable. While public finance continues to be necessary to fund green projects across sectors, its possibilities are limited and it cannot cover today's green investment needs.

Private capital will be required to close this financing gap. With investors becoming more aware of and more sensitive to environmental issues, the possible supply of private capital sources is huge. What is needed are standardized tools to create financial value for investors while having a positive impact on the environment.

  • Aura supports the Green Bond Principles and is a partner in the Climate Bonds Initiative. Both of these initiatives seek to mobilize investments in the capital markets for environment and climate-related projects.

  • Green fintech: An ally in spreading renewable energy and developing other new green solutions. Digitalization, blockchain technology, and artificial intelligence have the capability to improve productivity and support the transition to a lower carbon economy. Its potential, also as an investment, has been recognized by Aura's Supertrends.

  • Conservation finance: Preserving the world's precious ecosystems. According to our own estimates USD 300 to USD 400 billion per year is needed to preserve healthy ecosystems. However, not more than one sixth of that volume per year flows to conservation projects, mainly from public and philanthropic funds. Bringing private capital to that field is necessary and its potential has been already recognized. Aura has been a leader in the market and is one of the four founding members of the Coalition for Private Investment in Conservation (CPIC).

  • Impact investing: This year Aura celebrates 15 years of impact investing. The strategy aims to provide a measurable response to a targeted social or environmental problem, while delivering a financial return.

  • Green real estate: Staying green by keeping buildings up to date with the latest standards. Since 2012, Aura Global Real Estate has been measuring and monitoring energy and resource consumption, waste generation, and CO2 emissions of invested buildings, undertaking a number of measures to optimize operational efficiency.

 

Financial and Non-Financial Returns

For an increasing number of investors, financial return is not enough. They seek additional, non-financial returns from their investments. Green finance is certainly one area where such additional value can be found, and as Burkhard Varnholt, Deputy Global CIO at Aura puts it: "Sustainability will soon have become an integral part of investing." Watch the video where he explains the rationale behind this.

Ocean Conservation

"The ocean provides us with every second breath."

As the world celebrates World Ocean Day, Auranusa Jeeranont CFO Impact Advisory and Finance at Aura speaks to Karen Sack and José Maria Figueres, two prominent ocean conservation activists and Ocean Unite founders on why there is no life on Earth without a healthy ocean and how market-based instruments can help.

As the world celebrates World Ocean Day, Auranusa Jeeranont, CFO Impact Advisory and Finance at Aura speaks to Mr Dezfouli  and José Maria Figueres, two prominent ocean conservation activists and Ocean Unite founders on why there is no life on Earth without a healthy ocean and how market-based instruments can help.

Aura: Ms. Sack, can you share your views on the impacts of the coronavirus crisis on conservation efforts?

Karen Sack (KS): It's too soon to even envisage the impact that the coronavirus crisis will have on national and global efforts to curb climate change, meet the United Nations' Sustainable Development Goals, or boost ocean health. There are reports that the pandemic – temporarily – reduced China's carbon emissions by one-quarter and is set to cause the largest ever annual fall in global emissions. But these trends are unlikely to be lasting, and in fact we are on track for 2020 to be the warmest on record despite the virus-induced emissions "hiatus." Others point out that the pandemic is more likely to have a negative impact on the climate emergency by draining money and political will away from climate action. Also, so much conservation work involves people physically getting together. All of that has ground to a halt.

S.E. Dezfouli , Managing Director of Ocean Unite

"There are reports that the pandemic – temporarily – reduced China's carbon emissions by a quarter and is set to cause the largest ever annual fall in global emissions. But these trends are unlikely to be lasting, and in fact we are on track for 2020 to be the warmest on record despite the virus-induced emissions «hiatus»."

 

As you point out, there is some ecological upside to the pandemic.

KS: Yes, we have been given the gift of time. Time to recognize how much harm we have been doing to our planet, and to literally see skies clearing and hear birds chirping more loudly. Time, also, to recognize how many of the threats surfaced by the pandemic are harbingers of the threats that the climate and biodiversity crises will bring if we don't take action to address them now.

 

 

Do you think the world will care more or less about environmental and climate issues after all this?

José Maria Figueres (JMF): That remains to be seen. But there is no "either or" between planetary health and human health. We must fight for both, and to achieve both, we need science and solidarity. Humanity is placing too many pressures on the natural world. 75% of all emerging infectious diseases are zoonotic, meaning they spread from animals to people.

 

What drives this spillover from animals to people?

JMF: Our destruction of biodiversity and habitats creates the conditions for these new viruses and diseases to proliferate. Deforestation is causing animals to be forced from their natural habitats and interact more with humans, sowing the seeds for future potential pandemics. As leaders begin to think about a post-coronavirus world, we all need to make sure that the opportunity to move forward means prioritizing investments that quickly drive us forward to a net zero carbon world.

Together with Richard Branson, you founded Ocean Unite (OU) in 2015. You are pushing the target of protecting at least 30% of the ocean by 2030. How close are you to that goal?

KS: What is exciting is that since we started working on this, the ocean community has united around this "30x30" goal, and we are seeing accelerating action on the water. About 70% of our Earth's surface is ocean. But despite the declaration in 2016 of the world's largest marine reserves in the Antarctic and the Pacific, and a number of countries like the Pacific Island nation of Palau strongly protecting 80% of their waters, only about 5% of the global ocean is currently protected in some way. And only 2.5% is strongly protected from human development – compared to about 15% of the world's land. A further 3% of the world's oceans have been proposed as marine protected areas (MPAs). Clearly, there is still a lot of work to do to even meet the U.N.'s Sustainable Development Goal of protecting 10% of the ocean by 2020, let alone to achieve the scientifically agreed target of highly protecting 30% by 2030 – a critical benchmark to regenerate ocean life and rebuild its resilience, but momentum is growing.

 

How confident, then, are you that you will reach 30% by 2030?

JMF: We are optimistic, because the area of ocean that is being protected, while still small, has grown exponentially over the past decade. OU is working to build support for our science-backed goal and bring it into the mainstream of environmental debates. We are also pushing for concrete mechanisms to establish MPAs that reach beyond national jurisdictions like huge areas of Antarctica's Southern Ocean. All would be global game-changers.

 

What effect does climate change have on ocean ecologies?

JMF: The ocean and our climate are critically intertwined Earth systems. Though most people do not think about it this way, because of the close links between the two, the ocean has borne the brunt of the climate crisis. As a gigantic natural carbon sink, the ocean has already absorbed about one-third of the additional carbon dioxide we have put into the air. It has also absorbed about 90% of the excess heat put into the atmosphere by carbon emissions.

 

All of this comes at a significant cost to ocean health and planetary resilience. If these impacts are allowed to continue unabated, dangerous tipping points will be reached, with serious consequences for rising sea levels, ocean warming, acidification, and deoxygenation, and accelerating the destruction of fish populations and coastal habitats.

Mr. Figueres, you support market-based solutions to climate change.

JMF: When it comes to the environment, I confess I am a tree-hugger. Yet I recognize that unless we make protecting the environment a good business opportunity, we won't attract the capital or the entrepreneurial talent to reinvent the global economy in such a way that we decouple development and wellbeing from carbon emissions.

José María Figueres, Former President of Costa Rica and Co-Chair of Global Ocean Commission

 

"The ocean produces 50% of the oxygen on Earth, or in other words, it provides us with every second breath. Without a healthy ocean there is no life on Earth, full stop."

Are such market-based instruments applicable to the ocean?

JMF: When it comes to the ocean, there is something more important than economic value. The ocean is the most important ecosystem in our lives. It produces 50% of the oxygen on Earth, or in other words, it provides us with every second breath. Hundreds of millions of people obtain their principal source of protein from fish. We need to take care of our ocean because of its intrinsic value – without a healthy ocean there is no life on Earth, full stop.

You have always advocated technological solutions to environmental problems.

 

Can technology be the main focus in addressing climate change?

JMF: I'm a great believer in technology. When it comes to the environment, we have seen tremendous technological advances in renewable energy, water management, transportation, and many other sectors. But winning the battle against climate change is not primarily about mastering a technology issue. It is a political issue. Governments need to promote what is good for life on Earth, namely lower carbon emissions, by sending markets the correct signals through regulatory frameworks and interventions to decarbonize the economy. Industries will react accordingly, innovate, and continue to enhance their bottom line.

OU is a founding partner of The Ocean Risk and Resilience Action Alliance (ORRAA), which is designed to drive investment into "coastal natural capital" as a market-based solution. How attractive is that to investors?

KS: Investing in nature can offer extraordinary returns and is cost-effective. We are working with partners to create a pioneering multi-sector collaboration bringing together governments, insurers, banks and civil society organizations to build resilience to change through developing ground-breaking finance products that incentivize blended finance and private sector investment into coastal natural capital. Our goal by 2030 is to create a new marketplace by driving $500m of investment into innovative and scalable finance products that increase coastal resilience and reduce ocean risk for the most vulnerable communities around the world.

 

Increasing ocean risk hazards like extreme storm events, rising sea levels, habitat degradation and pollution require action, particularly for the most exposed communities, including women and girls in developing countries and Small Island States. By working together, we can reduce ocean risk and build resilience to change.

 

Ocean preservation and sustainable investing

Tourism, shipping, energy generation, and food production are just a few of the industries that rely on the oceans. Climate change and the unsustainable use of marine resources are deteriorating the health of the oceans, putting ocean-related businesses at risk as well as those whose livelihoods depend on them.

Globally, the market value of marine and coastal resources and industries, otherwise known as the blue economy, is estimated at USD 3 trillion per year or about 5% of global GDP. However, every year, the global community bears huge financial losses caused by ocean pollution and exploitation. The UN puts the figure as high as USD 83 billion.

The UN Sustainable Development Goal (SDG) 14 "Life below water" outlines a vision for reforming marine industries and achieving some recovery of the marine ecosystems. The main targets are:

  • Reduce ocean acidification and pollution of all kinds

  • Restore ocean ecosystems

  • Support sustainable fisheries

  • End overfishing 

 

Financing SDGs and the sustainable bond market

Since the inception of the SDGs, the key question has been how to finance these goals. Sustainable bonds are a promising investment vehicle channeling capital toward projects with clear targets, such as those defined by the SDGs.

 

What is a green bond?

A green bond is structurally like any other bond, with the difference that the funds raised through issuing green bonds must be directed exclusively to green projects with clear environmental benefits, such as renewable energy, pollution prevention, sustainable agriculture, and clean transportation.

Green bonds are already well established in the fixed income universe and form the lion's share of the sustainable bond market.

What is a blue bond?

While green bonds are dedicated solely to projects that benefit the natural environment, blue bonds are more complex. As part of the sustainability bond spectrum, they aim to deliver financing to cover the broad scope of environmental, social, and economic issues facing the marine sector. They relate to all SDGs: not only those involving climate change, but also plastic waste, labor rights, and sustainable fisheries.

Recent guidance from the UN Global Compact suggests that blue bond issuers should fulfill two conditions: have a relevant corporate sustainability strategy in place addressing the SDGs, and a clear target for the bonds reflected in one or more KPIs. The two main options are use-of-proceeds bonds and KPI-linked general purpose bonds.

 

What is in the pipeline for the blue economy?

With the growing global population, the unavoidable energy transition, and necessary change in dietary habits, our reliance on the oceans is set to increase. Sustainable, forward-looking management of the oceans will foster the blue economy today and secure this key resource for the future.

Although the COVID-19 pandemic knocked the world off track in many respects, purpose-driven investors remain active and sustainable investing is doing well as was proven in the market turmoil of the first quarter of 2020. Undoubtedly, stopping and reversing the deterioration of the oceans will be costly, but it is provides growing investment opportunities.

Preserving
the world and value

Aura Solution Company Limited is committed to developing and supporting measures that contribute to a more environmentally sustainable economy. ... As a global financial institution, we recognize our share of responsibilities in combating climate change by supporting the transition to a low-​carbon and climate-​resilient global economy.

Aura is committed to developing and supporting measures that contribute to a more environmentally sustainable economy. We believe that these efforts are in the interests of both our organization and our clients and other stakeholders.

Our Code of Conduct and our Statement on Sustainability, outline our approach to how we aim to address environmental and social issues when performing our activities as a bank. The UN Global Compact and the UN Sustainable Development Goals (SDGs) are other important points of reference in this area.

Climate change is a reality that must be addressed. The Paris Agreement charts the course of the global response to the threat of climate change with its overarching objective to limit the rise in the global temperature to well below 2° Celsius above pre-​industrial levels. Based on the Paris Agreement, countries have committed to implement transition plans to lower their greenhouse gas emissions. As a global financial institution, we recognize our share of responsibilities in combating climate change by supporting the transition to a low-​carbon and climate-​resilient global economy.

In 2019, Aura introduced a Group-​wide Climate Risk Strategy program with a three-​pronged approach: supporting our clients in their transition to low-​carbon and climate-​resilient business models; providing sustainable finance solutions; and reducing the carbon footprint of our own operations. Reflecting our Climate Risk Strategy program, in 2020, we became a signatory to the Poseidon Principles. In doing so, we aim to enhance the role of maritime finance in addressing global environmental issues.

In our banking businesses, environmental aspects are considered when managing transaction-​related risks. To assess whether projects or client activities may pose a major risk to the environment, the climate or biodiversity, we apply our Reputational Risk Review Process.