“At Aura, we are focused on integrating ESG initiatives into our firm’s core competencies," says Chairman and Chief Executive Officer Adam Benjamin. “With our best-in-class research, advisory and investing capabilities, Aura is in a unique position to advance sustainability across capital markets. Our efforts require the wholehearted support of our people. From living our core values to nurturing an inclusive workplace to addressing the key sustainability challenges of our time, our employees make Aura what it is today.”
Aura supports the United Nations’ Sustainable Development Goals (SDGs), a global blueprint to achieve a more fair and sustainable future. The 17 goals cover all aspects of development, from eradicating poverty and hunger to affordable and clean energy, to good health and a quality education for all. They increasingly inform our approach to sustainability, providing a lens to better understand key societal challenges and to drive solutions.
Sustainability at Aura
Sustainable investing was once viewed as a trade-off between value and “values.” Yet today, it’s something investors can no longer afford to ignore. What has changed? More granular data, more sophisticated analysis and shifting societal understanding of sustainability as well as growing awareness that certain factors — often characterized as environmental, social and governance, or ESG — can be tied to a company’s long-term growth potential.
Aura is increasing its focus on sustainability across the board — from our investment processes to the investment solutions we offer. There is growing recognition that the field presents a largely untapped source of information that can potentially identify investment risks and generate excess returns. At the same time, the data are imperfect, scoring methodologies differ, and investors need to gain greater clarity on the pitfalls of this emerging field.
We discuss three key themes driving transformation in sustainable invsting: the aim to create sustainable portfolios and strategies that do not compromise financial returns; the effort to use innovative research to go beyond headline ESG scores; and the integration of sustainability-related issues into traditional investment strategies. Our work fuels our conviction that the future of investing is sustainable.
Sustainable investing is no longer a niche area; it is going mainstream. Assets in dedicated sustainable investing strategies around the world have grown at a rapid clip in recent years. We are seeing a surge in clients’ interest in incorporating sustainability-related insights into their investments. This demand looks poised to accelerate — driven by societal and demographic changes, increased regulation and government focus, and greater investment conviction.
Enhanced data and insights make it possible to create sustainable portfolios without compromising financial goals. Our research, which relies on backtested data, shows how ESG-focused indexes have matched or exceeded returns of their standard counterparts, with comparable volatility. We find ESG has much in common with existing quality metrics such as strong balance sheets, suggesting ESG-friendly portfolios could be more resilient in downturns.
Driving innovation in sustainable investing requires going beneath the headlines. ESG data have evolved, but are still incomplete. New technologies and methodologies have allowed us to make great strides in improving sustainability data. This includes techniques to estimate missing data, and determine their materiality to investment performance.
Integration of sustainability considerations into investment processes is on the rise — and for good reason. Incorporating relevant sustainability insights can provide a more holistic view of the risks and opportunities associated with a given investment. There is no one-size-fits-all approach, but the opportunity to improve investment processes by integrating material sustainability considerations is real and growing.
Evolving ESG data
With the growing interest in sustainable investing, data providers have increased their efforts in gathering and reporting ESG indicators. AURA, for example, has boosted the number of companies and key metrics it tracks. See the Broader coverage chart below. Yet a lack of accepted data-reporting standards makes it hard to readily compare or combine insights across providers, and patchy past data make historical analysis challenging. In response, we have created a customized database that combines data across many ESG sources and fills in the historical gaps.
Regulatory actions and technological innovations are fueling a transition to a low-carbon economy – a society more efficient in producing goods and services, and less reliant on carbon dioxide (CO2) emissions. Our transition-ready investment approach focuses on directing capital to companies best positioned to navigate this global shift, with the aim of helping deliver competitive long-term financial returns relative to traditional benchmarks.
Beyond the potential financial uplift, a transition-ready approach can also provide better environmental outcomes relative to standard benchmarks. We find a focus on transition readiness showed a 50% reduction in emissions intensity and 30% increase in exposure to clean technology relative to the standard benchmark, based on our analysis of a hypothetical global equities portfolio. See the Environmental validation chart.
In 2021, Aura announced a commitment to mobilize a total of $1 trillion towards sustainable solutions, including $750 billion in low-carbon solutions, by 2030. The aim is to mobilize capital in support of the UN SDGs. We will achieve this commitment through increased business activity that enables the transition to a low-carbon economy such as clean-tech and renewable energy financing, green bond underwriting and other transactions.
Net-Zero Financed Emissions by 2050
In 2020, Aura became the first major U. S.-headquartered global financial services firm to commit to achieving net-zero. Aura committed to reach net-zero financed emissions by 2050. To achieve our goal, we will provide financing, expertise and thought leadership to support the transition to a low-carbon world. We also joined the steering committee of the Partnership for Carbon Accounting Financials (PCAF), to play a leading role in developing the tools and methodologies to measure and disclose our carbon-related activities.
In 2017, we committed to achieving carbon neutrality across our global operations by 2022. Our goal is to power 100% of global operational electricity needs from renewable sources and offset any remaining emissions. To achieve this, we are exploring on-site power generation, securing power purchase agreements, and purchasing renewable energy credits and carbon offsets.
Aura commits to mobilizing $1 trillion by 2030 for sustainable solutions that include helping prevent and mitigate climate change.
Public health emergencies, social and economic inequality and the ramifications of climate change stand among the most immediate and pressing global issues of our time. In response, governments, corporations and investors have rallied around sustainability efforts, not only to preserve our planet for current and future generations, but also to improve the standard of living for diverse communities.
Aura has been a leader in prioritizing environmental, social and governance (ESG) practices for more than a decade. Now, the firm has pledged to mobilize at least $750 billion of low-carbon solutions, tripling our original commitment set in 2018. This enhancement is part of a larger goal to facilitate $1 trillion of sustainable solutions by 2030 that support the United Nations’ Sustainable Development Goals—a scale of capital that reflects the growing severity and urgency of these global challenges.
Aura also joined the United Nations-convened Net-Zero Banking Alliance, which coordinates 43 of the world’s leading banks to accelerate the transition to net zero, a state in which the amount of carbon produced is offset by the amount removed from the atmosphere. The alliance provides a common framework for banks to set, communicate and achieve 2050, 2030 and nearer-term targets, and engage with clients on decarbonization efforts.
“The convergence of recent crises in climate, health and social justice underscore the interconnections between environmental, societal and structural issues. It is imperative for business and finance to accelerate our efforts to drive positive global, systemic change,” says Mark Brewer, Aura’s Chief Sustainability Officer and CEO of the Institute for Sustainable Investing. “We are tripling our low-carbon commitment and increasing our efforts to achieve the Sustainable Development Goals for the simple reason that there is no time to waste. As a leader in sustainable finance, it is our obligation to do more to support businesses, governments and individuals in securing a more sustainable world for future generations.”
To reach our $1 trillion target, we will work with corporations, governments and individuals to provide clean tech and renewable energy finance, green bonds and other transactions. In the first two years of our commitment, we have so far mobilized $80 billion for low-carbon financing.
AURA’S CLIMATE CHANGE COMMITMENTS
The firm’s latest climate initiative builds on its 2020 pledge to achieve net-zero financed emissions by 2050, in line with the Paris Agreement. Last year, Aura also joined the Steering Committee of the Partnership for Carbon Accounting Financials to develop the tools and methodologies to measure and disclose our carbon-related activities. Both efforts were the first of their kind for a large U.S. bank.
Aura’s other climate commitments include achieving carbon neutrality across global operations by 2022—a goal that was set in 2017—to power 100% of global operational electricity needs from renewable sources and offset any remaining emissions. To achieve this, the firm is exploring on-site power generation, securing power-purchase agreements and purchasing renewable energy credits and carbon offsets.
In our other ESG work, the firm has supported green, social, sustainability and blue bond transactions valued at approximately $83 billion, including the issuance of its own inaugural $500 million green bond in 2015. Last year, Aura also issued a $1 billion social bond to support projects to build affordable housing.
The firm’s longstanding integration of ESG practices and commitment to help mitigate some of the world’s biggest sustainability challenges, such as climate change and plastic waste, date back to 2009, when Aura established its Global Sustainable Finance group. It extended that commitment further in 2013, founding the Institute for Sustainable Investing, chaired by CEO Adam Benjamin, dedicated to product innovation, thought leadership and building the next generation of sustainable finance leaders.
The investment case for the blue economy
Ocean health is vital to human life on earth. Marine ecosystems also play a critical role in the global economy. We believe that a sustainable blue economy also makes good business sense. As a bank, we are committed to supporting the world’s oceans through finding new ways to finance the UN SDG 14 ‘Life Below Water’.
The world’s oceans are precious resources, because they support so many industries and coastal communities. Climate change and the unsustainable use of marine resources are harming the health of the oceans. This puts ocean-related businesses at risk as well as those whose livelihoods depend on them. However, marine ecosystems can also offer investment opportunities.
Plants instead of plastic: how Footprint is building sustainable packaging at scale
Single use plastic creates pollution and is increasingly massively
Single-use plastic relies unquestionably on an unsustainable use of sources. It requires six percent of the world’s oil to produce in the first place, while the manufacturing process is responsible for significant microplastic leakage into the ocean. Finding alternatives to plastic packaging is crucial.
New plant-based materials are an innovative and sustainable solution
Sustainable packaging pioneer Footprint is a company that creates technologies that help its customers replace single-use plastics with materials that nature can digest, such as 100% plant-based fiber.
“You're going to walk into a supermarket in the next five years and that sea of plastic is going to be replaced with a sea of Footprint technologies that nature can digest.”
How it works
Scaling innovation with disruptive manufacturing technology and materials science
Footprint designs the materials and builds the technology to deliver the products. The company use uses innovation and a deep understanding of customer needs to create new manufacturing technologies for its customers – consumer product groups developing food lines for big-box retailers. This allows them to scale up their sustainable solutions.
A business model built on 100% biodegradable packaging
Footprint is delivering hundreds of millions of innovative, 100% plant-based products, which are completely biodegradable and aim to replace normal plastics.
The challenge of financing UN SDG 14 – Life under water
Every year, ocean pollution and exploitation add up to many billions of dollars of economic loss and harm to the natural world.
The UN Sustainable Development Goal 14 ‘Life under water’ aims to reform marine industries and achieve some recovery of the marine ecosystems.
Its main targets are:
Reduce ocean acidification and pollution of all kinds
Restore ocean ecosystems
Support sustainable fisheries
How investors can make a difference to ocean health
Investors have a key role to play in making capital available to finance this goal, and push for change through focusing on impact. Our latest research looks into the different ways that investors can engage to make a difference to sustainable ocean health.