Creating a Corporate Coastal Resilience Security Bond

Project Leads: GreenSquare Ventures
Support: AXA XL
Financial Support: In-kind

Location: Global

Summary 

Businesses in coastal areas in tropical countries and Small Island Developing States (SIDS) are increasingly vulnerable to ocean risk. ORRAA is working with GreenSquare Ventures to create a Corporate Coastal Resilience Security Bond which will mitigate the issuer’s exposure by allocating proceeds towards sustainable infrastructure investments and a low-carbon business transition strategy –increasing coastal resilience while mainstreaming nature-based solutions through a financially viable approach. 

Challenge 

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 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 of a lack of financially sustainable funding mechanisms. 

Solution

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 as well as 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) metrics and biodiversity/climate impact objectives.

Scalability and Next Steps

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).