RESEARCH AND ANALYTICS

We all have heard of the Green Economy, which has found many proponents across the world. However, have you heard of a Blue Economy?

The Blue Economy, hosting assets worth USD 24 trillion, refers to the sustainable use of ocean resources for economic activities such as shipping, fishing, aquaculture, coastal tourism etc. to improve human lives and create jobs while keeping the marine and coastal ecosystem healthy. In fact, if global oceans were a country, the Blue Economy would be the 7th or 8th largest economy in the world and is expected to double during 2010-2030 according to OECD. But this economic importance is—to put it mildly —dwarfed by the necessity of the Blue Economy for the sheer existence of life. Oceans are home to 80% of Earth's biodiversity, and a primary source of food to half of the world's population. They are also the largest natural carbon sink, absorbing 30% of greenhouse gases and providing 50% of oxygen for breathing.

Now, here's the thing: The Blue Economy is in danger. Irresponsible usage and exploitation of ocean assets by humans through overfishing, destructive fishing, hydrocarbon exploration, oil spills, shipping activities, acidification and plastic pollution are fast nibbling away at its health. Studies shows that estimated annual damage from plastic to the marine ecosystem is USD 13 billion, while other unsustainable practices lead to economic losses of USD 83 billion annually. To protect this incredibly valuable resource, The United Nations has drafted clear targets under Sustainable Development Goal 14 — Life below Water.

Time to choose: ecosystems or economic systems?

Given rising wealth creation around the world, it seems that institutional philanthropy (forming focused institutions to encourage strategic asset deployment, improve collaboration and deliver greater impact in handling economic and social issues) is on the rise. So how much wealth do these institutions really manage?

According to a 2018 report by Harvard Kennedy School that studied 23 countries incl. HK, global philanthropic assets totalled US$1.5 tn. As global wealth is concentrated in the US and Europe, it is only natural that philanthropic spends should also be the highest in these two regions globally: the top 6 countries (the US, the Netherlands, Germany, Switzerland, Italy and the UK) accounted for almost 90% of these assets! The US was leading at US$890bn with the Netherlands a distant second with US$108bn. That's how concentrated philanthropy is globally.

Apart from making philanthropy a more balanced global trend, the size of these assets needs to increase too. Fact: the total value of philanthropic assets rarely goes above 5% of the GDP for any of the countries, except two: the Netherlands with foundation assets at 14% of GDP followed by Switzerland at 13.3%.

Guess the world needs to 'go Dutch' when it comes to philanthropy!

What’s common between Jay-Z, Shaquille O’Neal, Serena Williams and Billy Beane (“Moneyball” fame)? They are all associated with SPACs, or Special Purpose Acquisition Companies.

Basically, a SPAC does not have its own operations (i.e., it is a shell company) but has reputed people backing it. It raises money through an IPO first and acquires a private company with that money afterwards. SPACs were preferred far more to regular IPOs in 2020 by US companies, and SPAC fans cite two reasons for that.

First, efficiency. A regular IPO process involves lot of marketing activity, financial analysis and regulatory checks before companies can raise money publicly. SPACs are faster: they first raise the money and then acquire a target. The money raised is put into an interest-earning trust account and is returned to the investors – plus interest – if not used within 2 years.

Second, timing. Financial markets are highly volatile (case in point: 2020!) and if the investor sentiment nosedives, an improperly timed IPO can be unsuccessful. Instead, SPACs can choose to invest the raised money when the timing is suitable.

Are SPACs risky? Clearly, yes. In fact, as investors don’t know where the money would be invested, a SPAC is also called blank check company.

Anyway, how’s this for popularity: The number of SPAC deals in the US in 2020 exceeded those in 2017, 2018 and 2019 combined! And number of SPAC deals in the first 2 months of 2021 already exceeded half of those in 2020!

Interesting times, no?