Creating a Corporate Coastal Resilience Security (bond)
Industries operating in coastal areas, such as real estate, ports, and tourism or hospitality, are increasingly vulnerable to extreme weather events and ocean-derived risks. In tropical areas and Small Island Developing States (SIDS), many private businesses are seeking to limit their exposure with well-targeted insurance solutions, but their financial viability is undercut by rising insurance premiums and diminishing asset values.
Ecosystems such as mangroves, coral reefs, seagrass beds and salt marshes act as a natural defence and mitigate business exposure to ocean hazards. Yet the private sector has not been able to fund natural capital because there are currently no financially sustainable funding mechanisms available.
ORRAA is working with Greensquare Ventures to design and arrange financing for a Corporate Coastal Resilience Security (bond), and identify a private sector issuer. The security will mitigate the issuer’s exposure to ocean risk in coastal areas by allocating proceeds towards sustainable infrastructure investments and a transition to a low-carbon business strategy.
The security has the potential to mainstream nature-based solutions through a financially viable and cost-sensitive approach, with benefits for various actors in addition to the private sector issuer. The insurance sector will mitigate its exposure to ocean risk and will strengthen client portfolios and partnerships by limiting or reducing premium increases; local communities and governments will profit from more resilient and productive coastal ecosystems; and investors will be able to participate in a security that offers risk-adjusted returns aligned with their Environmental, Social and Governance (ESG) Impact objectives.
The security will be designed to be replicable and scalable across a range of coastal ecosystems. As part of the project, Greensquare Ventures will also design an Environmental, Social and Governance (ESG) Impact, Measurement and Reporting Framework aligned with relevant sustainability standards and, where relevant, include coastal ecosystem impact as measured by the Coastal Risk Index (CRI).