CFI.co Autumn 2019 by CFI.co

Capital Finance International

Autumn 2019

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AS WORLD ECONOMIES CONVERGE

Axel van Trotsenburg, World Bank Managing Director of Operations:

CAPITAL MARKETS IMPACT INVESTING ALSO IN THIS ISSUE // WORLD BANK: FAMILY WELFARE IN BURKINA FASO // UNOPS: SUSTAINABLE DEVELOPMENT IBM: DIGITALISATION AND 4IR IN MENA // OTAVIANO CANUTO: THE BUSINESS CASE FOR ACHIEVING THE SDGs EBRD: SUSTAINABLE INFRASTRUCTURE TO ADVANCE UN’S SDG AGENDA // UNCDF: BLENDED FINANCE & ROI

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Editor’s Column Let’s Put Our Faith in Cool Heads and the SDGs

Forget, if only for a moment, the politically correct discourse: the doublespeak that often obfuscates more than it illuminates. The 17 Sustainable Development Goals (SDGs), set out in 2015 to propel humanity out of poverty and want, provide a coherent, intertwined, and practical framework on which to build future growth and prosperity whilst minimising the environmental impact. Jointly, the SDGs represent a vision and point to a path. Their strength lies in the recognition of the human condition: the desire to monetise whatever endeavour undertaken. Any plan to change the world that depends on the emergence of an altruistic “new man” – who prioritises the collective over the individual – is doomed to fail. History is littered with attempts to reshape the natural inclination of humans to seek a profit. All have ended in abject failure – and lakes of tears. There is an argument to be made that nearly all law originates from the need to restrain humans from causing excessive harm to others in the pursuit of profit. The trick is to find the right balance between the interests of society and those of the individual. That balance is under assault.

Editor’s Column

It is precisely here that Extinction Rebellion gets it wrong. The global activist movement, a successor to Occupy but with a redefined message, aims to force governments to take swift and decisive, if not dramatic, action to prevent a breakdown of climate and collapse of the environment leading to the sixth mass (Anthropocene) extinction. Who could possibly be against saving humanity from its sorry self? One of the demands made by the rebels is for a carbonneutral world by 2025. In its 10-point manifesto, Extinction Rebellion aims for “system change” and the creation of a “regenerative culture”. In point five, the rebels declare a willingness to “reflect and learn” after each “action” and before planning follow-up actions. Tremble at the thought of yet another group of act-nowthink-later do-gooders setting the agenda and redirecting the course of history – clearing, as it were, the road to hell, to use a Churchillian turn of phrase. No carbon emissions in about six years from now means outlawing most forms of 8

air transport and erecting, just in the UK, close to 17,000 new wind turbines to generate enough renewable energy to power utopia – covering an area twice the size of Wales with spinning blades. Of course, private car ownership would need to be severely curtailed as well and people would need to go vegan – if not out of conviction then at least for the planet’s sake. Even venerable academics have left their ivory towers and joined the rebellion to call for radical change. Dr Gail Bradbrook of the University of Manchester and co-founder of the rebellion admitted that practicalities are of little consequence: “This is not the time to be realistic. This is the time for humanity to completely change course.” At least she’s honest about it. Such an attitude, grounded more in panic than in reason, is not sustainable. With its proposition of a brave new world, Extinction Rebellion joins the ranks of dangerous radicals who know better than most what is good for all. Their intentions may be good, even noble, but their approach is every bit as destructive as climate change. For solace and guidance look to the sustainable development goals. These offer a viable and practical - if less romantic set of policy guidelines to make the world a better place. The SDGs build on the human dimension, empower people, and – crucially – offer marginalised populations a future worth living for. The SDGs were formulated to lessen humanity’s carbon footprint and impact on the environment whilst offering hope to future generations. They do so by engaging private enterprise and capital, steering the drivers of development towards smarter choices that ensure sustainable profits and benefits for all. Rebels may well argue that the SDGs will probably not prevent another mass extinction. Those not yet in panic mode may well answer that the single-minded pursuit of brave new worlds usually ends in mass extinctions of sorts. The world’s current plight calls for cool heads to prevail and come up with workable and sustainable solutions – such as the 17 SDGs already being implemented. Wim Romeijn, Editor CFI.co | Capital Finance International

Editor’s Column

> Letters to the Editor

“ “ “

How wonderful to see CFI.co devoting so much of the summer issue to the UN´s Sustainable Development Goals! The United Nations doesn´t have the best record when it comes to affirmative action, but SDGs do appear to address the main issues we face, from poverty to equality to environmental protection. I also appreciated the real-life examples of entrepreneurs working to attain these goals and was fascinated by Tor Svensson´s piece on digital health and how SDG 3´s framework will benefit from that. I had come across the SDGs before, but to see them explained so rationally was edifying. I look forward to reading more about them in future issues. My congratulations. STEFANIE EYANGO (Yaoundé, Cameroon) As Lord Waverley points out in the summer issue of your magazine, the potential of blockchain is enormous — but the technology is still not fully understood. He does a good job of explaining the many ways in which it can benefit us, but not enough challenging and relevant questions are being asked on the tech side. As a result, development of distributed ledger technology is being delayed. Lord Waverley may be in a good position to encourage interested parties in the UK, and beyond, to address this. SURESH PATEL (Ahmedabad, India)

While reading Otaviano Canuto’s interesting article on the possible existence of a middle-income trap, and whether economic growth is stalling in certain countries, a young Swedish girl appeared on my television screen, eloquently berating pretty much the whole world order for talking about money and spreading fairy tales of eternal economic growth. Is it unreasonable to believe that our leaders would have access to the latest scientific data on climate change and, if so, to question why they aren´t thinking about their children´s and grandchildren´s futures? Greta Thunberg is to be applauded for taking a stance on climate change. Young people often force change on the status quo, after all. But it must be noted that it’s easy to criticise economic growth when you come from a country with one of the highest per-capita GDPs in the World. JAMES WATSON (Beaconsfield, UK)

Autumn 2019 Issue

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The now unpaid staff of collapsed travel company Thomas Cook are to be applauded for reaching out to desperate customers from the generosity of their heart. The same cannot be said of a top management that has been pocketing obscene bonuses whilst presiding over this unsurprising decline and demise. A name once held in high regard among travellers, Thomas Cook could not adapt to the digital world. The UK government is to be congratulated on promising to bring stranded holidaymakers home and for not considering a bail-out for a company that deserved to fail. GRETCHEN HILL (Cape Town, South Africa) Praise be that Boris Johnson has received his comeuppance from the Supreme Court of the United Kingdom. There is no doubt now that his decision to advise the monarch to prorogue parliament was unlawful. Amazingly, Boris has not ruled out suspending parliament again and does not intend to resign after misleading Queen Elizabeth the first-time round. Back in 2004, he was a member of a cross-party group hoping for the impeachment of Tony Blair in connection with the invasion of Iraq; perhaps Boris could soon find himself in that sort of hot water. GEORGIA KNIGHT (Lake George NY, USA) You seem to confuse spiritual values with monetary value. Can you explain to me the difference between “an enlightened entrepreneur” and a moneygrabbing monk? You profiled billionaire Acharya Balkrishna as if his white robes somehow justified the walking paradox of a holy man with a 10-figure bank balance. In the Forbes rich list? How nice for him, and his “charismatic yoga disciple” business partner. I have visited India and I found peace, serenity, and riches that cannot be folded into a wallet, or displayed on an ATM screen. That rarefied air is inspirational, but it is not usually the catalyst for a business plan of the sort that has made Patanjali Ayurved a commercial success. I would expect — at least — that a monk would use some of the profits to benefit the poor people of his country. SHARON HUGHES (Manchester, UK)

Editor Wim Romeijn

Assistant Editor Sarah Worthington

COVER STORIES

Executive Editor George Kingsley Production Editor Jackie Chapman

Editorial Tony Lennox Kate Stanton Brendan Filipovski John Marinus Ellen Langford

Columnists Otaviano Canuto Evan Harvey Tor Svensson Lord Waverley Ian Fletcher

Distribution Manager William Adam

Subscriptions Maggie Arts

Commercial Director John Mann

Otaviano Canuto & Paula Tavares The Business Case for Gender Equality in Achieving the SDGs (14 – 16)

Digitalisation and 4IR in MENA Augmented Intelligence from Data and Self-Learning (24 – 25)

Cover Story Capital Markets Impact Investing (32 – 34)

EBRD Investing in Sustainable Infrastructure Helps Advance the UN’s SDG Agenda (56 – 58)

Director, Operations Marten Mark

World Bank

Publisher Anthony Michael

(82 – 85)

Capital Finance International Meridien House 69 - 71 Clarendon Road Watford WD17 1DS United Kingdom T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co Editorial on p18-23, 126-127, 158 © Project Syndicate 2019

Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

Can Safety Nets Close the Poverty Gap in Burkina Faso and Ensure Family Welfare?

UNOPS Quality Infrastructure is Central to Sustainable Development (94 – 96)

UNCDF & Bamboo Capital Partners How Blended Finance Can Deliver on its Promise of ROI (155 – 157)

CFI.co | Capital Finance International

Autumn 2019 Issue

FULL CONTENTS 14 – 39

As World Economies Converge Otaviano Canuto

Paula Tavares

Nouriel Roubini

Joseph Stiglitz

Hala Hanna

Vilas Dhar

Bashar Kilani

Inez Murray

Axel van Trotsenburg

Lord Waverley

40 – 47

Autumn 2019 Special: Movers, Shakers, and Money-makers

48 – 63

Europe

64 – 77

Delen Private Bank

René Havaux

Liechtenstein Bankers Association

Simon Tribelhorn

EBRD

Nordea Life Assurance Finland

Wey Education

CBRE

CFI.co Awards Rewarding Global Excellence

78 – 99

100 – 113

Africa World Bank

Amina Semlali

Rebekka Grun von Jolk

Frieda Vandeninden

Banco Económico

La Société Centrale de Réassurance (SCR)

Powergas

Simba Group

Credit Direct

UNOPS

Invest Durban

Middle East Etihad Engineering

COO Network

Arbah Capital

Etihad Credit Insurance

Dammam West Independent Sewage Treatment Plant

114 – 121

Editor’s Heroes Men and Women Who are Making a Real Difference

122 – 137

Latin America Mohamed A El-Erian

Megalabs

Valores Unión S.A. Agencia de Bolsa

138 – 145

North America ADAM Global

Pillsbury Winthrop Shaw Pittman LLP

146 – 157

158

Asia Pacific Thailand’s Government Pension Fund

Fortman Cline

UnionBank

Bamboo Capital Partners

UNCDF

Containers Printers

Final Thought CFI.co | Capital Finance International

> Paula Tavares (World Bank) & Otaviano Canuto (Center for Macroeconomics and Development):

Turning Promises Into Reality –

The Business Case for Gender Equality in Achieving the SDGs As world leaders gathered this month for high-level talks at the 74th United Nations General Assembly, pressing global issues were at the forefront of discussions, including progress toward the 2030 Agenda and the Sustainable Development Goals (SDGs).

hile taking stock of how far we have come in realising commitments in key areas, including to end poverty and hunger, expand access to health, education, justice and jobs, promote inclusive and sustained economic growth, and protect our planet from environmental degradation, heads of state and government convened at the SDG Summit also faced heightened pressure to increase actions and implementation efforts to achieve the 2030 Agenda goals and concrete targets agreed upon in 2015.

CFI.co Columnist

Four years into the implementation of the 2030 Agenda, countries have made efforts to align national development plans and strategies with the SDGs and address the different challenges, with positive results in some areas. Notwithstanding, the 2019 Sustainable Development Goals Report shows slow progress in many indicators: at current rates, 6% of the world’s population is predicted to still be living in extreme poverty by 2030, global hunger is increasing, and vulnerabilities remain high, with inequalities in wealth, incomes and opportunities increasing in and between countries. Additionally, environmental degradation and climate change continue at rates that bring potentially disastrous consequences for humanity. As the world enters the 10-year countdown to making good on mutual commitments on behalf of a sustainable future for the planet, achieving Goal 5 of gender equality and the empowerment of women and girls is on the front burner of most governments, the business sector and civil society. Indeed, as stated in the 2019 SDG Report, gender equality is a key area for action to ensure progress across targets, including poverty alleviation, reduced inequalities and in particular, economic growth. GENDER EQUALITY AND THE ECONOMIC OUTLOOK Nonetheless, progress on gender equality and reaping its potential impact on inclusive growth has also been limited. In parallel, according to the OECD’s latest Interim Economic Outlook, warning signs of a potential slowdown in the global economy are multiplying, with a large share of developing countries struggling to 14

"There is ample evidence that when women are able to develop their full labour market potential, there can be significant macroeconomic gains." achieve sustained growth in per capita incomes and productivity. Increased debt vulnerability and challenges faced by both emerging and developed economies, combined with rising income and wealth inequality, risk undermining efforts to achieve the Sustainable Development Goals, as predicted in the World Situation and Prospects 2019. Moreover, even where greater expansion has occurred, inequality remains high and not all are benefiting from improved economic conditions. The persistence of low economic growth at the global level and the potential crisis looming over the world may further thwart efforts and add to the negative impacts. In this context, urgent and concrete measures are needed to redirect the global economy trajectory toward a sustainable path, which calls for sound macroeconomic policies and strategies adopted by countries for boosting the economy. This includes ensuring a strategic focus on issues of inclusive growth, employment and inequality, through addressing issues hindering gender equality and creating conditions for shared prosperity and sustainable growth. WHY INVESTING IN WOMEN MATTERS No country or economy can achieve its potential while critical gaps persist between men and women. As half the world’s population, women have an equal role in driving economic growth and sustainable development. However, their contribution remains far below its potential, thwarted by gender-specific constraints. Women’s full participation in the labour force and earning potential is limited by formal and informal gender-specific barriers in nearly every CFI.co | Capital Finance International

country today. This includes legal barriers to employment and earning opportunities affecting over 2.7 billion women globally, as Women, Business and the Law data and research shows (chart 1). According to a recent IMF staff study, despite progress, female labour force participation remains lower than that of men’s, with no advanced or middle-income economy having reduced the gender gap below 7 percentage points. ILO research shows that women are less likely to participate in the labour market and more likely to be unemployed in most parts of the world, with significant potential GDP growth across the world if participation rates were closed by a mere 25% (chart 2). In addition, gender wage gaps are high, and women are overrepresented in the informal sector and among the poor. As a result of gender-specific barriers, World Bank estimates show that women account for less than 40% of global human capital wealth, with global losses amounting to $160 trillion in wealth because of differences in lifetime earnings between men and women. Lagarde and Ostry (2018) also argue that this uneven playing field between women and men comes at a significant economic cost as it hampers productivity and weighs on growth. Research by McKinsey (2016) additionally shows that the share of women’s care work which goes uncompensated amounts to an estimated value of $10 trillion, or 13% of global GDP. Evidence from another report further documents that the lack of parity for women in the workforce, including in wages, career growth opportunities and in leadership positions, also hurts business and economic growth. There is ample evidence, including by the IMF (2013), that when women are able to develop their full labour market potential, there can be significant macroeconomic gains. The employment of women on an equal basis would allow companies to make better use of the available talent pool, with potential growth implications. Closing gender gaps to women’s economic participation by reducing barriers to women in the workplace would significantly boost welfare and growth (chart 3), while equal

Autumn 2019 Issue

access to inputs would raise the productivity of female-owned companies. Agénor, Canuto & Pereira da Silva (2014) and Agénor & Canuto (2015) approach several channels through which gender equality affects macroeconomic growth. In designing macroeconomic policy for promoting growth, gender-specific constraints should be taken into account, as policy goals can be thwarted if gender effects are not taken into consideration (Seguino, 2019). This could further enhance the potential impact of policy in boosting economic activity through increasing women’s economic participation.

EQUALITY OF OPPORTUNITY IS KEY TO WOMEN’S ECONOMIC PARTICIPATION Ensuring equal opportunity in access to jobs and entrepreneurship and enabling improvements in the productivity of their work is key to boosting women’s economic participation. This includes removing gender-discriminatory laws and creating a regulatory framework that enables women’s labour force participation and business ownership. Access to opportunities is a major source of gender inequality (Klasen 1999) and as research by Gonzales et al shows, restrictions on women’s rights to inheritance and property, as well as legal impediments to undertaking economic activities, are strongly associated with larger gender gaps in labour force participation.

On the other hand, where women have equal opportunities to access jobs, more women work and earn relative to men, and where they have access to property, they can leverage finance to start and grow businesses. Over the last ten years, considerable progress has been made in improving laws and regulations to promote women’s economic inclusion. This includes, for example, 35 countries that implemented 15

CFI.co Columnist

According to the World Bank’s Women, Business and the Law, women in many parts of the world still face discriminatory laws and regulations at every point in their economically active life. Globally, over 2.7 billion women are legally restricted from having the same choice of jobs as men and in 59 economies no laws exist on sexual harassment at work, leaving over 500 million women unprotected. Additionally, in 75 economies, women’s property rights are constrained; and in 5 women are not allowed to register a business in the same way as a man. Women’s financial inclusion is also impacted by such legal barriers; in 62% of countries worldwide, no laws exist to prohibit genderbased discrimination in financial services. And still today, the research shows that women are accorded only three-quarters of the legal rights that men enjoy globally, constraining their ability to get jobs or start businesses and make choices that are best for them, their families and their communities.

"It is the world’s responsibility and within its power to make the next decade one of action and delivery for gender equality." potential candidates to falling into the middleincome trap (Canuto, 2019). This is especially true for low-income countries.

Chart 1: Gender equality in labour law is associated with more women working and earning more relative to men.

Source: World Bank, Women, Business and the Law

Chart 2: Potential GDP growth if women participation rates were increased by 25%. Source: ILO

Comparative evidence from the IMF (2016) shows that income and gender inequality, including from legal gender-related restrictions, arguably impede growth mainly in countries at earlier stages of development. Nonetheless, the adverse effect of legal barriers to women’s participation in economic activities remains significant for countries at different stages of development. As we enter a decade that will be decisive for both current and future generations, it is the world’s responsibility and within its power to make the next decade one of action and delivery for gender equality, sustainable development and inclusive growth. This requires urgent and focused policymaking that takes into account gender-specific impacts. Time is now for investing in women and ensuring countries and the world can honour commitments and achieve the Goals agreed upon to ensure a prosperous and sustainable world for generations to come. ABOUT THE AUTHORS Paula Tavares is a Senior legal and gender specialist at the World Bank with expertise in international development and comparative analysis focusing on gender equality, women’s economic inclusion and private sector development. Her work with the World Bank’s Women, Business and the Law currently focuses on promoting gender-informed policy making, improving the legal framework protecting women from discrimination and gender-based violence, and enhancing women’s economic opportunities.

Chart 3: Economic gains. Reducing barriers to women in the workplace significantly boosts welfare and growth (percent).

Source: IMF staff calculations (2013). Note: See “Economic Gains from Gender Inclusion: New Mechanisms, New Evidence”, IMF Staff

CFI.co Columnist

Discussion Note No. 18/06 for explanations of the calculations

legal protections against sexual harassment at work, protecting nearly two billion more women than a decade ago, 22 economies that removed restrictions on women’s work, reducing the likelihood that women are kept out of working in certain sectors of the economy, and 13 economies that introduced laws mandating equal remuneration for work of equal value. But much faster progress is needed if gender equality is to be achieved in the next ten years. The World Economic Forum’s Global Gender Gap Report 2018 makes a stark projection: at current rates of 16

progress, it may take another 202 years to close the economic gender gap globally; the impact of which will be felt on the global economy as a whole. BOTTOM LINE Ultimately, it is clear from the evidence that inequality, both income and gender, impede growth. Given that barriers to women’s economic participation are somewhat mitigated in countries that have achieved higher levels of gender equality, issues remain regarding those that are CFI.co | Capital Finance International

Otaviano Canuto is principal at the Center for Macroeconomics and Development, a senior fellow at the Policy Centre for the New South and a non-resident senior fellow at Brookings Institution. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund, and a former vice-president at the InterAmerican Development Bank. Otaviano has been a regular columnist for CFI.co for the past seven years.

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> Nouriel Roubini:

Four Collision Courses for the Global Economy

n the classic game of “chicken,” two drivers race directly toward each other, and the first to swerve is the “loser.” If neither swerves, both will probably die. In the past, such scenarios have been studied to assess the risks posed by great-power rivalries. In the case of the Cuban missile crisis, for example, Soviet and American leaders were confronted with the choice of losing face or risking a 18

catastrophic collision. The question, always, is whether a compromise can be found that spares both parties their lives and their credibility. There are now several geo-economic games of chicken playing out. In each case, failure to compromise would lead to a collision, most likely followed by a global recession and financial crisis. The first and most important contest is between the CFI.co | Capital Finance International

United States and China over trade and technology. The second is the brewing dispute between the US and Iran. In Europe, there is the escalating brinkmanship between British Prime Minister Boris Johnson and the European Union over Brexit. Finally, there is Argentina, which could end up on a collision course with the International Monetary Fund after the likely victory of the Peronist Alberto Fernández in next month’s presidential election.

Summer 2019 Issue

In the first case, a full-scale trade, currency, tech, and cold war between the US and China would push the current downturn in manufacturing, trade, and capital spending into services and private consumption, tipping the US and global economies into a severe recession. Similarly, a military conflict between the US and Iran would drive oil prices above $100 per barrel, triggering stagflation (a recession with rising inflation). That, after all, is what happened in 1973 during the Yom Kippur War, in 1979 following the Iranian Revolution, and in 1990 after Iraq’s invasion of Kuwait. A blowup over Brexit might not by itself cause a global recession, but it would certainly trigger a European one, which would then spill over to other economies. The conventional wisdom is that a “hard” Brexit would lead to a severe recession in the United Kingdom but not in Europe, because the UK is more reliant on trade with the EU than vice versa. This is naive. The eurozone is already suffering a sharp slowdown and is in the grip of a manufacturing recession; and the Netherlands, Belgium, Ireland, and Germany – which is nearing a recession – do in fact rely heavily on the UK export market. With eurozone business confidence already depressed as a result of Sino-American trade tensions, a chaotic Brexit would be the last straw. Just imagine thousands of trucks and cars lining up to fill out new customs paperwork in Dover and Calais. Moreover, a European recession would have knock-on effects, undercutting growth globally and possibly triggering a risk-off episode. It could even lead to new currency wars, if the value of the euro and pound were to fall too sharply against other currencies (not least the US dollar). A crisis in Argentina could also have global consequences. If Fernández defeats President Mauricio Macri and then scuttles the country’s $57 billion IMF program, Argentina could suffer a repeat of its 2001 currency crisis and default. That could lead to capital flight from emerging markets more generally, possibly triggering crises in highly indebted Turkey, Venezuela, Pakistan, and Lebanon, and further complicating matters for India, South Africa, China, Brazil, Mexico, and Ecuador.

"There are big egos in the mix, some of whom might prefer to crash than be perceived as a chicken."

In all four scenarios, both sides want to save face. US President Donald Trump wants a deal with China, in order to stabilise the economy and markets before his re-election bid in 2020; Chinese President Xi Jinping also wants a deal to halt China’s slowdown. But neither wants to be the “chicken,” because that would undermine their domestic political standing and empower the other side. Still, without a deal by year’s end, a collision will become likely. As the clock ticks down, a bad outcome becomes more likely. Similarly, Trump thought he could bully Iran by abandoning the Joint Comprehensive Plan

of Action and imposing severe sanctions. But the Iranians have responded by escalating their regional provocations, knowing full well that Trump cannot afford a full-scale war and the oilprice spike that would result from it. Moreover, Iran does not want to enter negotiations that would give Trump a photo opportunity until some sanctions are lifted. With both sides reluctant to blink first – and with both Saudi Arabia and Israel egging on the Trump administration – the risk of an accident is rising. Having perhaps been inspired by Trump, Johnson naively thought that he could use the threat of a hard Brexit to bully the EU into offering a better exit deal than what his predecessor had secured. But now that Parliament has passed legislation to prevent a hard Brexit, Johnson is playing two games of chicken at once. A compromise with the EU on the Irish “backstop” is still possible before the October 31 deadline, but the probability of de facto hard-Brexit scenario is also increasing. In Argentina, both sides are posturing. Fernández wants a clear electoral mandate, and is campaigning on the message that Macri and the IMF are to blame for all the country’s problems. The IMF’s leverage is obvious: if it withholds permanently the next $5.4 billion tranche of funding and ends the bailout, Argentina will suffer another financial collapse. But Fernández has leverage, too, because a $57 billion debt is a problem for any creditor; the IMF’s ability to help other distressed economies would be constrained by an Argentinean collapse. As in the other cases, a face-saving compromise is better for all, but a collision and financial meltdown cannot be ruled out. The problem is that while compromise requires both parties to de-escalate, the tactical logic of chicken rewards crazy behavior. If I can make it look like I have removed my steering wheel, the other side will have no choice but to swerve. But if both sides throw out their steering wheels, a collision becomes unavoidable. The good news is that in the four scenarios above, each side is still talking to the other, or may be open to dialogue under some face-saving conditions. The bad news is that all sides are still very far from any kind of agreement. Worse, there are big egos in the mix, some of whom might prefer to crash than be perceived as a chicken. The future of the global economy thus hinges on four games of daring that could go either way. i ABOUT THE AUTHOR Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. 19

> Joseph Stiglitz:

No More Half-Measures on Corporate Taxes

lobalisation has gotten a bad rap in recent years, and often for good reason. But some critics, not least US President Donald Trump, place the blame in the wrong place, conjuring up a false image in which Europe, China, and developing countries have snookered America’s trade negotiators into bad deals, leading to Americans’ current woes. It’s an absurd claim: after all, it was America – or, 20

rather, corporate America – that wrote the rules of globalisation in the first place. That said, one particularly toxic aspect of globalisation has not received the attention it deserves: corporate tax avoidance. Multinationals can all too easily relocate their headquarters and production to whatever jurisdiction levies the lowest taxes. And in some cases, they need not CFI.co | Capital Finance International

even move their business activities, because they can merely alter how they “book” their income on paper. Starbucks, for example, can continue to expand in the United Kingdom while paying hardly any UK taxes, because it claims that there are minimal profits there. But if that were true, its ongoing expansion would make no sense. Why

Autumn 2019 Issue

$500 billion per year as a result of corporate tax shifting. And Gabriel Zucman of the University of California, Berkeley, and his colleagues estimate that some 40% of overseas profits made by US multinationals are transferred to tax havens. In 2018, 60 of the 500 largest companies – including Amazon, Netflix, and General Motors – paid no US tax, despite reporting joint profits (on a global basis) of some $80 billion. These trends are having a devastating impact on national tax revenues and undermining the public’s sense of fairness. Since the aftermath of the 2008 financial crisis, when many countries found themselves in dire financial straits, there has been growing demand to rethink the global regime for taxing multinationals. One major effort is the OECD’s Base Erosion and Profit Shifting (BEPS) initiative, which has already yielded significant benefits, curbing some of the worst practices, such as that associated with one subsidiary lending money to another. But, as the data show, current efforts are far from adequate. The fundamental problem is that BEPS offers only patchwork fixes to a fundamentally flawed and incorrigible status quo. Under the prevailing “transfer price system,” two subsidiaries of the same multinational can exchange goods and services across borders, and then value that trade “at arm’s length” when reporting income and profits for tax purposes. The price they come up with is what they claim it would be if the goods and services were being exchanged in a competitive market. For obvious reasons, this system has never worked well. How does one value a car without an engine, or a dress shirt without buttons? There are no arm’s-length prices, no competitive markets, to which a firm can refer. And matters are even more problematic in the expanding services sector: how does one value a production process without the managerial services provided by headquarters?

New York, USA: NYSE

increase your presence when there are no profits to be had? Obviously, there are profits, but they are being funneled from the UK to lower-tax jurisdictions in the form of royalties, franchise fees, and other charges. This kind of tax avoidance has become an art form at which the cleverest firms, like Apple, excel. The aggregate costs of such practices are enormous. According to the International Monetary Fund, governments lose at least

The ability of multinationals to benefit from the transfer price system has grown, as trade within companies has increased, as trade in services (rather than goods) has expanded, as intellectual property has grown in importance, and as firms have gotten better at exploiting the system. The result: the large-scale shifting of profits across borders, leading to lower tax revenues. It is telling that US firms are not allowed to use transfer pricing to allocate profits within the US. That would entail pricing goods repeatedly as they cross and recross state borders. Instead, US corporate profits are allocated to different states on a formulaic basis, according to factors such as CFI.co | Capital Finance International

employment, sales, and assets within each state. And, as the Independent Commission for the Reform of International Corporate Taxation (of which I am a member) shows in its latest declaration, this approach is the only one that will work at the global level. For its part, the OECD will soon issue a major proposal that could move the current framework a little in this direction. But, if reports of what it will look like are correct, it still would not go far enough. If adopted, most of a corporation’s income would still be treated using the transfer price system, with only a “residual” allocated on a formulaic basis. The rationale for this division is unclear; the best that can be said is that the OECD is canonising gradualism. After all, the corporate profits reported in almost all jurisdictions already include deductions for the cost of capital and interest. These are “residuals” – pure profits – that arise from the joint operations of a multinational’s global activities. For example, under the 2017 US Tax Cuts and Jobs Act, the total cost of capital goods is deductible in addition to some of the interest, which allows for total reported profits to be substantially less than true economic profits. Given the scale of the problem, it is clear that we need a global minimum tax to end the current race to the bottom (which benefits no one other than corporations). There is no evidence that lower taxation globally leads to more investment. (Of course, if a country lowers its tax relative to others, it might “steal” some investment; but this beggar-thy-neighbor approach doesn’t work globally.) A global minimum tax rate should be set at a rate comparable to the current average effective corporate tax, which is around 25%. Otherwise, global corporate tax rates will converge on the minimum, and what was intended to be a reform to increase taxation on multinationals will turn out to have just the opposite effect. The world is facing multiple crises – including climate change, inequality, slowing growth, and decaying infrastructure – none of which can be addressed without well-resourced governments. Unfortunately, the current proposals for reforming global taxation simply don’t go far enough. Multinationals must be compelled to do their part. i ABOUT THE AUTHOR Joseph E Stiglitz, University Professor at Columbia University, is the co-winner of the 2001 Nobel Memorial Prize, former chairman of the President’s Council of Economic Advisers, and former Chief Economist of the World Bank. His most recent book is People, Power, and Profits: Progressive Capitalism for an Age of Discontent. 21

> Hala Hanna and Vilas Dhar:

How AI Can Promote Social Good

rtificial intelligence is now increasingly present in corporate and government decision-making. And although AI tools are still largely in the hands of institutions that focus on profit before purpose, these new technologies could be equally powerful in promoting social good. To that end, a joint effort by MIT Solve and the Patrick J. McGovern Foundation shows 22

how AI applications can be used to extend prosperity to economically marginalized groups. Already, entrepreneurs are exploring how AI can be used to address some of the world’s thorniest challenges in thoughtful, creative, and previously impossible ways.

causational conclusions and ultimate decisionmaking to humans. This human-machine interaction is particularly important for socialimpact initiatives, where ethical stakes are high and improving the lives of the marginalized is the measure of success.

AI is most exciting when it can both absorb large amounts of data and identify more accurate correlations (diagnostics), while leaving the

What’s more, algorithms are only as good as the data that train them, and the choice of which data to include in AI models is inherently

CFI.co | Capital Finance International

Autumn 2019 Issue

biased. Or, as the saying goes, “bias in, bias out.” Take the issue of financial inclusion and creditworthiness. For people without a bank account, getting a loan or credit card is near impossible. Yet many of the unbanked can prove their creditworthiness in other ways, such as through a history of paying utility and phone bills on time. Destácame, an AI-based platform that now serves 1.3 million people in Chile and Mexico, uses an algorithm to create an alternative credit score using data not reported to credit bureaus. By proving its clients’ ability to repay loans, the platform helps to reduce the barriers that often prevent financial institutions from lending to them. In education and health, meanwhile, AI can dramatically reduce the cost of providing high-quality services, and improve outcomes. Century Tech’s educational platform, for example, makes teachers more productive by automating rote and administrative tasks. And by understanding how each student learns, it provides customized individual plans aimed at improving their performance in school. In a similar vein, Ada Health serves both patients and health workers. The platform’s conversational interface, backed by natural language processing, gives patients instant personalized medical insights that help them to identify appropriate next steps. Its AI engine and curated medical knowledge base, meanwhile, provide semi-skilled health professionals such as community health workers, pharmacists, nurses, and midwives with clinical decisionsupport tools. At the frontlines of healthservice delivery where worker shortages are acute, such support can make the difference between sickness and health. Yet there is a limit to what bots can do. Although AI tools can triage customer-service requests or even make psychological support available to larger numbers of people, forging a genuinely deep connection requires a human touch.

"Although AI tools can triage customerservice requests or even make psychological support available to larger numbers of people, forging a genuinely deep connection requires a human touch."

The ISeeChange platform, for example, combines natural language processing with user-generated data and sensor networks to give cities critical data to improve their climate resilience, infrastructure design, and even public

CFI.co | Capital Finance International

safety. Residents submit detailed stories and data about their neighborhoods to the platform, which then aggregates these individual experiences into climate models. Crisis Text Line, meanwhile, uses machine learning to analyze words and phrases associated with youths in crisis through text messages, and triages messages to ensure at-risk users get help fast. By processing vast amounts of data, the organization has identified some of the most likely predictors of the need for an emergency response. For example, it found a high correlation between the word “ibuprofen” and attempts at self-harm. By using AI, messages containing this word are now prioritized in the queue. But the outreach is done by human volunteer counselors who contact the distressed texter. These examples show how new business models are helping to extract additional value from big data and AI technologies, benefiting those previously excluded from the data economy. That is why MIT Solve and the Patrick J. McGovern Foundation are collaborating to support tech entrepreneurs solving global problems. We will continue to identify promising ventures in their early stages; equip them with the capacity to grow, scale, and diversify; and champion their stories to bolster the use of AI for social good. And Solve judges will select a new cohort of tech entrepreneurs at the upcoming Solve Challenge Finals. AI has the potential to improve billions of people’s lives – but only if it creates and delivers value directly to those most in need, rather than fattening the bottom line of businesses already serving the most privileged. By harnessing these technologies for social good, today’s new breed of entrepreneurs can bring about lasting, transformational change. i

Crisis Text Line is a Patrick J McGovern Foundation grantee and Solver finalist. Inclusion in this commentary has no influence on Crisis Text Line’s likelihood of being selected for the MIT Solve program.

ABOUT THE AUTHORS Hala Hanna is Managing Director, Community at MIT Solve. Vilas Dhar is a trustee of the Patrick J McGovern Foundation. 23

> Digitalisation and 4IR in MENA:

Augmented Intelligence from Data and Self-Learning Tor Svensson and Marten Mark have a conversation with IBM’s Bashar Kilani in Dubai

Bashar Kilani oversees IBM business in the Gulf Countries and the Levant, working with clients and partners across industries. Kilani has a passion for thought leadership around Digital Transformation, Artificial Intelligence, Blockchain and Cloud. CFI.co met with him in Dubai for a conversation and tour de force of thought leadership on new technology and applications in the region. In these times in the Middle East several forces are coming together: the young population, the focus on women empowerment and also the strong drive for digital transformation that is really helping both the faster developing countries and the slower developing countries at the same time.

“W

hen I got back from the World Economic Forum in Jordan earlier this year, the theme of the conference was the fourth industrial revolution in MENA.

“The first point is on the special demographic setup in the Middle East, it's a very young population. These are educated people who are qualified to participate in the fourth industrial revolution. “The second theme was the focus on women’s employment; this is an area where there's huge untapped potential because in this part of the world about half of university graduates are women but only 15 percent are active in the workplace. “The third point was digitalisation; and digitalisation is possibly the largest economic opportunity in the next few years. Maybe the most obvious one is retail and you can see that retail is moving into online and digital faster than other industries. If you look at the numbers that we have today between 2018 and 2022, in the UAE online retail will double and inside Arabia it's going to be similar to that. That's a big transformation and you've started to see big players like Amazon make inroads into smart retail, for example. “You've seen some home-grown organisations like Noon offering digital transformation and online shopping. This is going to be driving a lot of GDP. “In the UAE all the major banks will be launching digital-only banks. You are also starting to see airlines looking at the complete journey not only airport to airport but city to hotel or home to hotel, the whole journey around digital transformation and that's a big play. “In the UAE we're very lucky to have a forwardlooking government that is actually setting the pace. Maybe in other countries you'll see the private sector leading but in this part of the world there's a huge drive on digital transformation. You 24

“If you go to Pakistan or Egypt for example, you will find a very different situation, you will come across very different challenges, including low standards of education and healthcare and low levels of digital and financial inclusion. Digitalisation is a great tool to help elevate these.

can see that in government, the first AI appointed minister is in the UAE and of course that creates a huge expectation, but it also creates a drive for the growth of artificial intelligence.

“I'll give you a statistic from Jordan; 50 percent of all university graduates are women, 25 percent of all university graduates in Jordan have an ICT focus. You will find similar numbers in other parts of the Middle East. IT and digitalisation are a huge enabler, especially for the young and for women. If you look at the start-up scene in the Middle East, you've got a lot of talent coming out of this part of the world.

“There's a lot of training going on, there's a lot of enablement going on, there's a lot of partnerships going on around making artificial intelligence and digitalisation one of the big industries that this part of the world will become known for within the next 10 years. There was a study recently which concluded that by 2030 15 percent of GDP will be driven by AI.

“Careem is an example, the ride hailing app, which was just acquired by Uber for $3.1 billion dollars. There are three founders, one Pakistani, one Saudi and I think the third one was Swedish. Three of them came together and they revolutionised transportation. They created jobs, they empowered people, they helped in solving congestion issues.

“It will create value because you will have new tools and capabilities that will make people more efficient and effective, you will see productivity going up, you will see a better understanding of how to handle data and analytics, how to create economic value out of data, how to discover patterns and so on. This is going to have a direct impact on GDP across the region and that's the reason there's a lot of focus on education, enablement and attracting start-ups and talent.

“That's all coming together with the fourth industrial revolution and I think you will see the impact in terms of GDP growth, improvements in healthcare and education standards will have a more dramatic impact on the economy and wellbeing than you will probably see in other parts of the world. It's just happening all together at this point.

Bashar Kilani at the World Economic Forum

“This region is unique because you've got the AI and blockchain focus but at the same time you've got challenges with digital and financial inclusion, and that's the beauty of this part of the world. You travel out of Dubai, and within two hours you're probably in a completely different world, while the opportunities and challenges you have in Dubai are around a society that has hyper-connectivity, huge penetration of mobile phones and high education standards. I would say a level of digitalisation that's probably one of the best in the world. CFI.co | Capital Finance International

“We're doing things in the region that are probably on a par with, if not better with than elsewhere, especially because the government is so forwardlooking and you can actually engage in things quicker and easier than you would be able to do in a traditional European or American environment. “Healthcare and education are a big emphasis for us. I think no areas have been changed by data and analytics and have a potential for AI like healthcare and education. “We've got digital studios in the UAE that are state of the art, we've got a local blockchain node

Autumn 2019 Issue

that is also state of the art and if you look at what we're doing with some of these initiatives, it's really innovative. You can have your blockchain network locally in the UAE, so you don't have to send your data outside the UAE, this is very convenient for many government or banking organisations. We've got one in Dubai and one in Abu Dhabi, they run on very solid technology as it comes from the mainframe business that we have. “For certain industries or clients there's a requirement for data not to leave the UAE. In some cases, there are regulations covering this. For these reasons we’ve chosen to have two nodes in the UAE, it's called the IBM Blockchain Platform. “You can start seeing a lot of people using this in supply chains, tracing medicines and of course in banking. There's a famous saying; the blockchain will do for digital transactions and for trading digital assets what the internet did for information. “All our exchanges in the future will be done with digital assets that we can freely use in blockchain transfer. There's the concept which is very active now called digital twins, so when you digitise a process or an operation you create a digital twin. There are many examples of creating digital twins for processes in banking and for government. IBM has worked with one of the ports in Europe, I think it's Rotterdam, to create a digital twin for that port so you can simulate in a digital virtual world; the tide, the docking, loading or unloading and undocking of ships. “All the mundane stuff, collecting data, analysing data and discovering patterns will come from AI driven systems. The same applies for management and engineering, so today in IBM we have AI tools to help managers with some HR related tasks. For example, if you have a budget and you're looking at distributing certain pay increases, you get recommendations based on people's performance, experience and skills and Watson gives you these kinds of recommendations. “The APIs or the technology interfaces make up the artificial intelligence engines within IBM and these engines are being developed in our research labs, a lot of it also is done in partnership with our clients and partners because a lot of artificial intelligence depends on the data that you have, how you train the system on the data, what kind of efficiency and effectiveness are you getting out of it and so on. “With a data lake, these systems become selflearning, they do machine learning, so they understand these data patterns and they start to become more accurate in their predictions and they start to become more efficient and effective in analysing the data. It removes a lot of the unneeded, unnecessary data, it focuses on data that is important for them and then of course you can add different types of data.

Bashar Kilani talking to CFI.co

“There is what we call dark data, there is deep data. Dark data is the data that is not available searching the internet, it is data kept within organisations and enterprises. For example, if you are in the medical space, you can look for people’s vital values like blood pressure and so forth, this is also deep data because it is related to time. You must go deeper in time in order to access that data. Public data is the 20 percent that's accessible and the 80 percent is dark data. All the data that we have today is less than one percent of what can be measured once we digitalise our world, once we start trading digital twins. “It's a common application especially in sales. People in sales use these kinds of tools to understand their clients, they collect the data from different sources, they look at, for example, financial reports that have been published to understand trends. They also access platforms like LinkedIn to understand the people, the organisation and the culture. “They probably also look at the social data from platforms like Twitter and so forth. Again, we're talking here about augmenting intelligence. Today an AI engine can do it at a fraction of the time to far greater accuracy. “We call it IBM Cloud Private for Data. We are moving into a world where everybody is a data CFI.co | Capital Finance International

scientist. I think a key skill that everybody needs is to become a data scientist in his field. You need to know how to use these technologies and you also need to know what you're looking for. If I'm a doctor and I'm looking for certain patterns around some certain cancer cells and so forth, then I need to use my medical knowledge with data science to do this. “And we can move on from one industry to another because everything is digitised, and we work with all these digital twins that use the IoT to give us a lot of data and we will have to make judgements on what to do with it. Therefore, we need AI. Fifteen percent of GDP in 10 years from now will come from AI, because data will be the new oil and AI will be the electricity that powers it and gets value out of it. “The UAE is very well positioned because it has a very wide set of cultures and backgrounds living in the region. We've got more than 200 nationalities, they speak many languages, they have a lot of cultures so the type of data that you collect in the UAE is very diverse, it's very spread, it's inclusive and if you use this data to train artificial intelligence engines, it will become better, more effective than if you use data that comes from just one culture. The data you get in the UAE is probably of higher quality than the data you would get in other parts of the world that have a single culture and background.” i 25

> Interview with CEO Inez Murray:

Financial Alliance for Women Tor Svensson interviews Inez Murray

WHAT IS THE FINANCIAL ALLIANCE FOR WOMEN? The Financial Alliance for Women is a global network of financial institutions that have committed themselves to supporting the female economy in a truly robust, holistic way. This involves offering women clients more than just access to traditional banking services – it also entails providing women with access to relevant information and education services, networks, as well as recognition for their achievements. With the support of the Alliance and our network, our members currently work in more than 135 countries to provide their women clients with these tools, which we’ve found through decades of experience are the ones women truly need to build their resilience and a strong economic future. WHAT ARE YOU TRYING TO ACCOMPLISH? Creating greater opportunities across all segments of the female economy – from unbanked women to women business owners to high-net-worth women – underpins everything we do at the Alliance. We believe the private sector has a huge role to play in this, and the financial services industry in particular is uniquely positioned to be able to provide exactly the type of support that can make a difference for women’s economic futures. In recognition that all financial institutions, not just banks, are needed to move the needle forward for women, we are now actively recruiting insurance companies, asset management companies, payments companies, FinTechs as well as banks, and have modified our name from the Global Banking Alliance for Women to the Financial Alliance for Women. Helping financial services providers to see that this is not only the right thing to do, but there is a legitimate and strong business case for serving women well, is critical. From our own research as well as the research of our members, we know that women are not only great savers, they also tend to repay their loans at a higher rate and are loyal customers, if treated properly. Every year, as we collect more sex-disaggregated data from our members and the business case gets stronger and stronger. This means we’re able to convince more and more financial services providers that this is really a space where if they’re not engaging, they’re missing a massive opportunity. SOME IMPACT SUCCESSES (EXAMPLES)? Of course, every woman who becomes banked or launches a successful business or simply gains more confidence in her financial knowhow is a success story for us, but from the perspective of our members we have several examples of organizations that have done 26

exceptionally well with the Women’s Market. In fact, we have a series of Case Studies that are available in our resource library that detail exactly that. One standout case from that series is the case of BLC Bank in Lebanon, which in a country with a hugely competitive banking sector and numerous social barriers to women’s economic empowerment has seen really strong results from their focus on women. Within only 2 years after launch of the bank’s We Initiative Women’s Market program, BLC Bank started seeing significant business returns, and the programme currently represents more than 18 percent of bank profits. In fact, the programme has positioned BLC Bank as the bank of choice for women across the entire country. WHY IS THE FEMALE ECONOMY SO IMPORTANT? When we talk about the female economy, we’re talking about more than half the population. This isn’t some niche segment that’s being overlooked; by continuing to let economic gender gaps go unaddressed, the world is missing out on a massive opportunity. McKinsey research has shown that up to $28 trillion could be added to global GDP by 2025 if women participated in the economy at the same rate as men, and we know that women tend to reinvest a significant portion of their income into their families and communities – so there’s a very strong virtuous cycle there. In terms of the banking sector, work that we did with McKinsey found that the opportunity of banking unbanked women alone could be greater than $24 billion globally. Closing these gaps could truly be a rising tide that lifts all of the economic boats. WHAT ARE SOME INNOVATIVE AND VALUE CREATION STRATEGIES FOR FINANCING WOMEN BUSINESSES? I would say that essentially all of our members are engaging in innovative activities to help women entrepreneurs get business financing, whether it’s accepting non-traditional forms of collateral; partnering with alternative lenders (i.e. NatWest’s “Back Her Business”; working with development finance institutions such as the IFC, EBRD, FMO, OPIC etc. to access funds for on-lending and issue gender bonds; working with eCommerce sites to finance women owed/ led businesses that dominate these platforms; partnering with fast moving consumer packaged goods companies to finance ‘mom and pops’; investing in Venture Capital funds that target women founders; and of course providing access to all the non-financial services to help her grow her business. Several of our members, including NatWest in the UK and TEB in Turkey, have even set up robust voluntary certification programmes for staff members who want to be able to provide expert advice to women business owners. CFI.co | Capital Finance International

Autumn 2019 Issue

HOW CAN FINANCIAL INSTITUTIONS BEST REACH OUT TO WOMEN? One of the biggest mistakes we’ve seen financial institutions make when trying to reach out to women is the use of what has been termed “pink” or “fluff” marketing. This is essentially marketing and advertising that doesn’t take women’s needs or goals seriously, which women understandably can find quite condescending. The best advice we can give to financial services providers seeking to speak to women effectively is to avoid this type of marketing as well as the stereotypes of women that are typically associated with it. Instead, make every effort to engage on a personal level in a way that is actually relevant to their needs and everyday lives. Make them feel that you value them and offer them solutions not products. WITH REGARDS TO SDG 5, WHAT NEEDS TO HAPPEN? The part of SDG 5 that we focus on is of course access to financial services (5A) which we believe play a pivotal role in achieving the other areas of SDG 5. To ensure equal access to financial services the first thing we need is to get more and better sex-disaggregated supply and demand side data. We won’t know what to address if we don’t know where the gaps are, and we won’t know how to address it if we don’t know what the underlying causes are. Collection, analysis and use of sexdisaggregated data to create evidence-based interventions is key to all of this. In terms of financial inclusion, the gender gap has been stuck at 9 percentage points since 2011, which was the first year the World Bank started collecting the data. More and better financial inclusion data will enable policy makers to design and monitor better interventions and will also enable financial services providers to build their business cases for targeting women as clients, leading to expanded financial access for women. Recently for instance, NatWest spearheaded the Investing in Women Code1 in the UK which calls on all financial services providers to share sex-disaggregated data on financing small businesses with the UK government, so that gaps and patterns can be understood and effective policy designed.

commonly agreed set of data concerning all-femaleled businesses; mixed-gender-led businesses and all-male-led businesses. HM Treasury will collate this data and publish it on an aggregated and anonymised basis in an annual report. 2 The Global Findex Database 2017

ABOUT FINANCIAL ALLIANCE FOR WOMEN Founded in 2000, the Financial Alliance for Women — formerly the Global Banking Alliance for Women — is the only global consortium of financial institutions dedicated to supporting its members to capture the opportunity of the Women’s Market. Members work in more than 135 countries and across all segments to serve the female economy profitably and at scale. The Alliance provides a wide range of services to help organisations design, implement and refine effective Women’s Market and Internal Gender strategies. Financial institutions seeking to harness the untapped potential of women are encouraged to join the Financial Alliance for Women (the Alliance), which supports the needs of women as customers as well as employees. CEO Inez Murray leads the Alliance, which currently has more than 50 member institu-tions, each striving to make the business case for women’s economic empowerment. Prior to joining the Alliance, Murray served as executive vicepresident of Women’s World Banking and was responsi-ble for its gender empowerment programmes and advisory practices. The Alliance helps member institutions establish programmes and policies designed to drive profits and performance through a trifold operational focus. It organises peer learning opportunities to share best practices and accelerate the learning curve. It collates results from its own research and mem-bers’ experiences into a repository of accessible knowledge and market intelligence. The collective voice of Alliance is a force that advocates for global policy changes to financially empower women. More information financialallianceforwomen.org Twitter: @FAforWomen Facebook.com/FAforWomen

WHAT IS THE IMPORTANCE OF DIGITAL INCLUSION IN THE EMERGING AND FRONTIER ECONOMIES? Digital inclusion has already proved itself to be a huge driver for financial inclusion, and it is going to continue to be critically important to bringing more and more women into the formal financial system. Just over 1 billion unbanked adults globally have a mobile phone including 605 million women2. Digitising government payments, wages and agricultural payments are all vital to bringing more women into the system. i 1 Organisations will provide HM Treasury, or a relevant industry body designated by HM Treasury, a

CFI.co | Capital Finance International

CEO: Inez Murray

> Tor Svensson, Chairman CFI.co

Inspired Digital Insurance — Full-Stack Insurtech Innovation is the Way Ahead This article first appeared October 2nd, 2019 as Google Top Story and Google Top News on InsurTech.

Insurance goes back 4,000 years, and has not gained a terrific reputation during that period. Tech syste ms lo wer cos t • Finance

Filing an insurance claim can be an eye-opener in terms of the number of documents required and how difficult it can be to receive a pay-out — in particular for small claims. And after that pay-out, insurers may increase the premium or terminate the customer relationship.

Insurance fraud is a significant crime. Fraud, detected and undetected, amounts to up to 10 percent of claims in Europe and 5-10 percent in the US and Canada.

Data

Value Chain

The result is higher premiums for the majority of honest customers. Another victim is the insurance company that has to invest in processing and detecting fraud.

Admin

CFI.co Columnist

• Admin • Real-time service • Pay-out • Processing

• Compliance • Service • Client retention

Placing the customer at the centre stage in an ethical setting is part of the solution. This also helps to make the sale in the first place. Data play their part, matching tailored benefits and pricing to individual needs – making the policy proposition relevant.

Sales

• Channels • Bots • Captive • Independent • Affiliate

Claims

Digitalisation and data analytics are making it easier to catch the fraudsters using predictive patterns — and to combine with behavioural sciences to prevent dishonesty in the first place.

Data changes increase insurer’s understanding of risk, and can prevent claims from happening in the first place through risk mitigation, enabling them to offer improved lossprevention advice to policyholders.

• Client acquisition • Products • Risk management

Capital

This inherent conflict of payment can create a toxic relationship between the insured and the insurer. This increases insurance fraud and, in some quarters, makes it almost acceptable (while still illegal).

AI, an a

iums rem wp , lo ics lyt

• Carrier • Reinsurance • Investments • Overhead

Efficiency Drivers

AI, bots, cross-selling

A recent cynical definition of insurance from Urban Dictionary: “A business that involves selling people promises to pay later that are never fulfilled.”

ts, mi cro , le ss f raud

t protects against financial loss, using risk management to counter uncertainty. Risk can be transferred to an insurer, also called a carrier or underwriter.

bo , I A

acy g e l , no AI, bots

Figure 1: Insurtech value chain barriers to change and efficiency drivers. Source: CFI.co

Figure 1. CFI.co Insurtech ValueInternational Chain Barriers to Change and Efficiency Drivers | Capital Finance Source: CFI.co

bots

smart phone app

blockchain

fraud prevention

customer centricity

regulation compliance

DLT big data

data cloud

Summer 2019 Issue

with the customer and improve the overall experience.

data client acquisition

brand value

data cloud

data rich

fraud prevention

regulation compliance

DLT

data

lifetime value

claims experience

reimagined reinsurance

machine learning

claims experience

data cloud

client acquisition

IoT

data rich

risk management

prediction tool

The new data-rich environment can help drive the statistical modelling that underpins the on-demand policy-writing process and product creation.

blockchain

data protection

deep learning analytics

digital intermediary

customer centricity

real-time processing

CFI.co | Capital Finance International

The data and fully automated AI-powered real time (chatbot) services can reduce the claims processing cost by 70-80 percent, in particular for micro-insurance processed with no human touch. A digital value creator, Snapsheet has excelled in crafting a simplified automated online claims process.

BLOCKCHAIN Blockchain and distributed ledger technology (DLT) are likely to have a disruptive effect in the industry.

It provides an unchangeable and verifiable record of transactions and data, and the need for a third party to authenticate the information is eliminated. Blockchain can reduce cost, while increasing transparency and trust. It could be transformative in detecting fraud and engineering better payment systems, smart contracts, performance guarantees, and securely storing individual data (including heath). FULL-STACK START-UP A full-stack start-up develops technology to provide the end-customer with a complete product-service which conducts the whole value chain. The full-stack company controls the service and the total experience beyond the traditional separation of skills and functions such as marketing, manufacture and technology. Often, these companies deliver superior service through transforming operational complexity across the value drivers. Innovations in web technology can eliminate marketing, admin and logistics intermediaries to allow direct engagement with the end user. Uber is an example of a full-stack disruptor transforming confusing logistics into a simple app. A physically powered service turned upside down becomes a digital technology business. Apple is another example of full-stack and omnichannel integration, controlling manufacture, instore sales, and delivering premium service. 29

CFI.co Columnist

FigureSAVES 1. Tag Source: CFI.co INSURTECH INNOVATION THECloud DAY for Insurtech P&C and auto insurance is linked to SmartphoneInsurtech offers technological innovations based telematics apps tracking driving behaviour. to improve efficiency and savings, as well as Allstate and Progressive share first-mover change more traditional carrier business models advantage. (see figure. 1). Insurtech is a fusion of the words insurance and technology, inspired by the terms In property insurance, new understanding fintech and akin to regtech. of risk is gained from geospatial analytics and drone inspections powered by machine For outdated insurance giants, insurtech is learning; add to this smart home sensors and both a disruptive force - and an enabler of tools IoT. to improve their efficiency. The reckoning for the incompetents is when new omnichannel The rapidly growing robotic process automation distribution, real-time service and lower (RPA) technology captures and reads applications premiums are set against the traditional “brand to process transactions using data and converse value” and legacy cost structure. Brokers and with other systems, reducing the need for agents are swapped with chatbots, and actuaries administration. are swapped for AI systems. Insurtech innovation has the capacity to improve The speed of digitalisation and innovation in all the elements of the value chain (see figure 2), data collection brings gains to be reaped in the including sales innovation such as impulse buys insurance industry – as well as bringing new and alliances with points-of-sale. savings and benefits to the consumer. While investments in digital transformation Efficiencies and insights from new technology are rampant, the insurance industry’s digital open access to new markets and niche segments adaptation curve is often viewed to be a decade to be the targets of the insurtechs, such as behind fintech and other sectors. The consumer Property and Casualty (P&C), life-annuities, is accustomed to — and has come to expect health, retirement, assets (e.g. satellites), auto, — smartphone real-time services with tailored travel, and cyber. products and solutions. Data is pivotal to engage

Small (and hi-frequency) claims can be expensive to process and can cost about 10-12 percent in lossadjustment expense (LAE) which is associated with investigating and settling an insurance claim.

wIn the B2C insurtech space there are two main avenues. The full-stack insurer, with its own licensed insurance company regulated by national (such as BaFin in Germany) or state-wide (US) supervisory authority. Operations are generally vertically integrated across the value-chain, including underwriting. Still, even full-stack players may find themselves pairing with a carrier to lessen regulatory burdens.

The advantage for the Full-stack is in redesigning the entire insurance process and products, having the potential to squeeze out operational inefficiencies that exist in the conventional standard model.

Some MGA’s include Jetty (renters and condos), Hippo, Simpleinsurance, and Ladder.

The most prominent customer-centric full-stack efficiency insurtech is Lemonade. This firstmover company has an unconfirmed valuation of some $2bn and has received cash funding of about $500m. Thus, in less than five years, Lemonade’s co-founders Daniel Schreiber and Shai Wininger have value-created $1.5bn from redefining insurance. Lemonade’s user experience is helped by restored trust, and from supported ethical behaviour, a flat fee structure and a charity donation strategy. And claims are paid instantaneously.

The advantage for the MGA avenue for B2C insurtechs is that the time to market may be shorter, with less regulatory burden and smaller investment. However, the full-stack insurer

On the other hand, the MGAs such as Insureon and Policygenius can focus solely on innovation in the distribution of insurance — and not all the value chain components, such as

Some of the full-stack insurtechs include US auto insurers Metromile and Root Insurance Co as well as German pioneers Coya and Ottonova.

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retains all the profits (less of reinsurance), while the MGA must share with the carrier. Both can control the customer relationship.

A Managing General Agent (MGA) interacts with the insured and contracts with a carrier which is ultimately responsible for the claims.

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the development of the products and the underwriting. How insurance is sold and how it is embedded in the overall process is part of the new customercentricity play. Paying up and caring for the full customer experience is not a bad turn after only four millennia... i

ABOUT THE AUTHOR Tor Svensson, Chairman of Capital Finance International (CFI.co), is Senior Advisor to a UN recognised NGO.

Autumn 2019 Issue

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Impact Investing with the World Bank:

HOW TO

MAKE A DIFFERENCE THE CASE OF IDA

By Axel van Trotsenburg, Managing Director of Operations, World Bank

For over 70 years, the World Bank Group has successfully raised funds in the capital markets to invest in development projects. Through its arm for middleincome countries, the International Bank for Reconstruction and Development (IBRD), the World Bank Group funded public sector projects like roads, green energy, health or education systems; and through the International Finance Corporation (IFC), it provided capital to the private sector in developing countries to help businesses grow and provide jobs, taxes and other wider societal benefits.

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ssuances from these World Bank Group institutions have long been popular among investors seeking safe, fixed income investment opportunities, and more recently also for their development purpose. Together, IBRD and IFC have raised over $900bn USD equivalent since 1947 thanks to a conservative risk profile and predictable financial returns. Since 1960, a third institution of the World Bank Group – the International Development Association (IDA) – had executed a different mandate. IDA was set up to provide grants, concessional finance and technical assistance to the low-income countries, with funds provided via shareholder donations. Donors meet every 32

"With IDA joining IBRD and IFC as a premier impact issuer in the capital markets, investors can do well and do good." three years to replenish IDA resources and review its policy framework. In 2015, following the adoption of the United Nations’ 17 Sustainable Development Goals (SDGs), there was growing recognition that

existing financing mechanisms for development would be insufficient to deliver the ambitious agenda. At a meeting of multilateral development banks (MBDs), it was agreed that the world must ramp up development financing by an order of magnitude — “from billions to trillions.” This meant thinking beyond aid, to private finance and unlocking developing countries’ own resources. Moreover, the international community recognised this was most pressing for the poorest countries that often have the biggest development needs. IDA was expected to play its part and increase the level of assistance it provides. With a short time-

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Autumn 2019 Issue

frame in which to achieve the SDGs, additional sources of finance were urgently needed. Although IDA had not previously raised funds from the markets, it was well-placed to do so based on several factors. First, it has a strong equity base of $163 billion, more than all the other MDBs combined. Second, it typically enjoys preferred creditor status and had an excellent track record of repayments on its concessional loans. Third, it has very strong shareholder support, as demonstrated by its history of three-yearly replenishments that had raised a total of over $270 billion since 1961. Fourth, IDA carries virtually no debt. ` Finally, IDA offers investors a unique opportunity to support development projects in some of the world’s low-income countries, especially in Africa, which will receive around $45 billion in IDA funds in the three financial years between 2017 and 2020. As an increasing number of investors look to direct capital to products that fulfill their financial requirements and serve a positive social purpose, IDA is a compelling story. Once the decision was made to tap the capital markets for additional funds to supplement donor resources, a compelling package was put together. IDA secured a AAA/Aaa rating (S&P/ Moody’s) and its first bond, issued in April 2018, was oversubscribed by four times, raising US$1.5 billion to address some of the most pressing development issues. The successful outcome can be viewed from several viewpoints. First, it has leveraged donor resources so that every $1 in partner contributions generates about $3 in spending authority. Second, it has helped investors add assets to their portfolios that significantly scale up support toward achieving the SDGs and contribute to global development. Most importantly, it means that millions more people will benefit from IDA programs that build infrastructure and public services like schools and health clinics in some of the world’s poorest places. Since the first issuance, IDA has enhanced its borrowing program to offer short-term debt instruments, reaching an outstanding amount of $1.9 billion as of June 30, 2019. These volumes are only a start. Additional planned issuances in the coming years are in the tens of billions of dollars, a conservative estimate in line with IDA’s large capital base and its strong support from its shareholders.

People everywhere are rightly concerned by a broad range of development issues, which 33

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Clearly, this success is a tribute to IDA’s strong track record in delivering measurable and impactful results in low-income countries. We also believe our success is due to our approach to sustainable investing and achieving a positive impact.

makes IDA an exciting investment. IDA seeks to improve living standards in low-income countries through a comprehensive set of interventions that include policy reforms that stimulate growth and private sector development, building infrastructure to help farmers bring their products to market, and building energy systems that increase electricity access for households and small businesses. Interventions also address basic human development needs that range from supporting primary, secondary and higher education, through to strengthening health systems and providing social safety nets for the needy. And, IDA is at the frontline of supporting countries that go through crises, be it those caused by natural disasters or by war and violence, and its support is directed to building resilience and addressing the causes of fragility and conflict. In short, investments that promote hope for a better future. This broad development agenda, and IDA’s ability to touch the lives of many people seeking a better life in low-income countries, enables investors to generate returns while joining the global coalition that aims to achieve the SDGs. This is a sweet spot that IDA seeks to occupy and broaden. At the World Bank Group, we have long history of working with the capital markets to raise financing for development projects. This approach was pioneered by IBRD, and later by IFC. With IDA joining IBRD and IFC as a premier impact issuer in the capital markets, investors can do well and do good, knowing that their capital is at work in the low-income countries where they may otherwise not have the opportunity to invest. i ABOUT AXEL VAN TROTSENBURG Axel van Trotsenburg is the World Bank Managing Director of Operations.

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In this role, which he assumed on October 1, 2019, van Trotsenburg oversees the Bank’s operational program and ensures that the Bank’s delivery model continues to meet the needs of client countries. He also builds support and mobilises financial resources across the international community for efforts to assist low and middle-income countries. Van Trotsenburg brings deep experience in regional operations and finance, drawing on his experience as currently the longest serving Vice President at the Bank, with two tenures in the Finance Complex and two in Operations. A Dutch and Austrian national, he was Acting World Bank CEO from September 2 – 30, 2019 and served as World Bank Vice President for Latin America and the Caribbean from February 2019. In this latter position, he led relations with 31 countries in the region and oversaw a portfolio of ongoing projects, technical assistance and grants worth more than US$30 billion. 34

Managing Director of Operations: Axel van Trotsenburg

From 2016 to January 2019, van Trotsenburg served as World Bank Vice President of Development Finance (DFi). Here, he oversaw strategic mobilization of resources, and was responsible for the replenishment and stewardship of the International Development Association (IDA), the largest source of concessional financing for the world's poorest countries. He has led the policy negotiations and process for two IDA replenishments, which together mobilized a record $125 billion — $50 billion in 2010 for IDA16 and $75 billion in 2016 for IDA18. Under his leadership, for the first time, IDA leveraged its equity by blending donor contributions with internal resources and funds raised through debt markets. In his DFi role, van Trotsenburg also oversaw the International Bank for Reconstruction and Development (IBRD) corporate finances. He coled the World Bank Group's efforts to obtain a capital increase which resulted in shareholders endorsing a transformative package in April 2018, including an increase of the IBRD capital by $60 billion. He also co-chaired the replenishment negotiations for the Global Environment Facility (GEF) that were successfully concluded in April 2018 and was responsible of a multi-billiondollar trust fund portfolio.

Prior to joining the World Bank, van Trotsenburg worked at the OECD in Paris. He has Dutch and Austrian nationality, and holds a master’s and a doctorate degree in economics and a master’s degree in international affairs. He is married and has two children.

IBRD AND IDA: JOINT ACTION The International Bank for Reconstruction and Development (IBRD) is a global development cooperative owned by 189 member countries. As the largest development bank in the world, it supports the World Bank Group’s mission by providing loans, guarantees, risk management products and advisory services to middle-income and creditworthy low-income countries. It also co-ordinates responses to regional and global challenges. The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. Overseen by 173 shareholder nations, IDA aims to reduce poverty by providing loans (called “credits”) and grants for programmes that boost economic growth, reduce inequalities, and improve people’s living conditions.

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Autumn 2019 Issue

> Sustainable Development Goals:

Countries Battling to Fulfil Planetary Obligations By Brendan Filipovski

Heads of state and governments met at the United Nations in New York in September for the SDG Summit to review progress on the Sustainable Development Goals (SDGs).

he SDGs represent an ambitious global effort to build on the momentum of the Millennium Development Goals (MDGs), with a greater focus on sustainable development. The potential gains for the planet are enormous and some would even argue that the SDGs are a matter of survival. Can the World afford not to achieve the SDGs? While there has been some impressive progress, no country is yet close to achieving its SDGs by 2030 — and there have been alarming regressions. The goals are based on three key strands of sustainable development — economic growth, social inclusion, and environmental protection — brought together in the form of 17 global targets. This is the result of pioneering work in the field of sustainable development by the Brundtland report (1987), Agenda 21 (1992), and the goalsetting success in economic development and social inclusion of the MDGs (2000). The SDGs, the Paris Agreement on climate change and the Sendai Framework for Disaster Risk Reduction provide a composite framework for a sustainable future. The SDGs were adopted by the UN General Assembly on September 25, 2015, as part of the 2030 Agenda for sustainable development. The overall aim is to meet global economic and social development needs without compromising the environment. To assist with practical implementation, 169 targets and 230 indicators for the 17 goals were constructed (with space for more indicators to be added as needed). The latest progress update on the SDGs was released in July this year, showing the predicted trajectory for all 193 UN member states. The report and the SDG Summit marked the end of the first four-year review cycle.

International political support for the programme remains strong, and at the summit there was a renewed commitment to the goals. In 2019, a

SDGs 12 to 15, protecting biodiversity and the environment — and many developed countries have their worst result here." record 47 countries submitted Voluntary National Reviews for their SDG progress. The devil, as always, is in the detail. Nearly all countries agree with the sentiment, but falter when it comes to implementation. The interdependence and complexity of the goals, and a lack of finance, are key sources of concern. To tackle complexity, The World in 2050 initiative and the UN introduced the concept of the Six Transformations in July. The transformations map the 17 SDGs into six groups based on agency, interrelatedness and economies of scope (table 1). They are the key interventions needed to achieve the 17 SDGs and correspond to typical government departments. The aim is to make implementation easier for governments, civil society, and businesses. The 2019 Global Sustainable Development Report (GSDR) released at the summit addresses the issue of complexity. It recommends an integrated approach to maximise synergies and mitigate unavoidable trade-offs. It argues that there are diverse entry-points and pathways to unlock gains. Entry points include building sustainable food systems and healthy nutrition patterns, achieving energy decarbonisation and providing universal access to energy. The GSDR also points to the importance of marshalling key players (government, civil society, business, and academia) around the four “Levers of Transformation”: governance, economy and finance, individual and collective action, and science and technology. The GSDR is based on the latest scientific consensus, and plays a key role in reviewing the SDGs and the 2030 Agenda. It was recommended by the Rio+20 conference in 2012 and has become a quadrennial and independent CFI.co | Capital Finance International

report for the UN’s High-Level Political Forum on Sustainable Development (HLPF). The challenge of financing is ongoing. Reforming the international system so that it is better aligned with the goals is one solution, but intermediate steps are needed. Some links created have fallen short of creating a new paradigm. The 2019 Financing for Sustainability report found under-funding was a concern, along with growing trade protection, a possible slowdown in global economic growth, rising inequality, and the impact of climate change. The report calls for a financing framework to support countries’ individual development goals, and a long-term focus on financing. In terms of progress so far, Nordic countries scored best. Denmark topped the list with a score of 85.2 (an average 85.2 percent of the way to achieving its best outcomes). The UK ranked 13th (score of 79.4), the US ranked 35th (74.3), China ranked 39th (73.2), Russia 55th (70.9), Brazil 57th (70.6), and Singapore 66th (69.6). The three lowest-ranked countries are the Democratic Republic of Congo (44.9), Chad (42.8), and the Central African Republic (39.1). OECD countries have generally performed better on the goals focusing on economic development and social inclusion, such as SDG 1 (no poverty), SD3 (good health), and SD6 (clean water and sanitation). Trends for SDG 13 (climate action) and SDG 14 (life below water) are alarming, and greater progress is required in the areas of agriculture and diet (SDG 12), and gender equality and income inequality (SDG 10). Eastern Europe and Central Asia performed best on SDGs 1 and 7 (Affordable and clean energy). SD16 (Peace, justice, and strong institutions) 35

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The struggle for most countries centres on SDGs 12 to 15, protecting biodiversity and the environment — and many developed countries have their worst result here.

"The struggle for most countries centres on

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remains a challenge for many regions. For all, SDGs 12 to 15 remain a challenge.

addressed (SDG 16). SDG 2 (no hunger) is also a persistent problem.

Latin America also performed well on SDGs 1 and 7, and is making rapid gains in SDGs 6 and 8 (decent work and economic growth). More progress is needed in the areas of SDG 10 (reduced inequalities), and SDGs 3 and 4 (quality education).

Sub-Saharan Africa faces major challenges in achieving all the SDGs; while lower levels of consumption mean that SDGs 12-15 are less of an issue, urban pollution and deforestation are a worry.

East and South Asia performed best on SDGs 1, 4 and 7. More progress is needed in the areas of SDG 2 (no hunger) and SDGs 3 and 5 (Gender equality). The Middle East and North Africa performed best on poverty, and is making good progress on SDGs 6 and 7. Generally, labour rights, corruption and pressure on political freedoms need to be 36

The individual indicator with the highest number of red ratings across countries was Sustainable Nitrogen Management (under SDG 2: zero hunger). This is a measure of efficiency in agricultural production and the level of pollution from fertilizer use. The 2019 Sustainable Development report found that many countries have not yet implemented the mechanisms for monitoring or achieving

their SDGs. Of 43 countries surveyed (including OECD countries and countries with populations over 100m), only 18 had mentioned SDGs in their central budget documents. Many have insufficient data, but this was recognised at the outset of the SDGs, and is why improving data collection and indicators has been given a high priority. The Brundtland Report, officially known as Our Common Future, was delivered by the World Commission On Environment And Development in 1987. The report was a follow-up to the 1972 United Nations Conference on the Human Environment. Growing environmental problems in the 1970s and ‘80s prompted the UN to find a path between economic development and environmental protection. The Brundtland report was seminal in defining sustainable development

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Autumn 2019 Issue

(economic, social and environmental) and promoting the idea of intergenerational equity.

Agenda 21 formed the blueprint for sustainable development up until Agenda 2030 was created in the Rio+20 conference in 2012. Agenda 21

accepted standard for eliminating and monitoring poverty. As Bill Gates said, it became the “global report card for development”.

The MDGs were born of the UN’s Millennium Summit in September 2000 and the accompanying Millennium Declaration. They were formed from debates around economic development in the 1990s, including a reaction against the Washington Consensus. The idea of set goals came from a set of development goals developed by the OECD in 1996, called the International Development Goals. It was envisioned that the MDGs would be the responsibility of all member states, but the application would largely be with developing countries. The MDGs were to be reviewed every five years, and considered highly successful for the progress made by developing countries and because they became a universally

The debate emerged on whether to extend the MDGs past 2015 or develop new goals. Prior to Rio+20 in 2012, Colombia began to champion the idea of building on the MDGs and Agenda 21 to create SDGs. Support gradually built among member countries, as they realised that they could use the MDG framework to confront poverty reduction and sustainable development. Environmental issues have risen to crisis levels, and now demand greater attention.

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With renewed commitment from the SDG Summit in September, and new tools such as the Six Transformations, countries should be better placed in the fight to achieve their SDGs. i 37

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Five years after that report, the UN held the1992 Rio Earth Summit to review progress on the environment and sustainable development. It was the first development conference after the end of the Cold War and was attended by 100 heads of state, spiritual leaders, actors, and even pop stars. Five agreements emerged, including the Framework Convention on Climate Change (bolstered by the Kyoto Protocol in 1997) and Agenda 21. It also led to the creation of the UN Commission for Sustainable Development, later replaced by the HLPF.

was a non-binding agreement which identified key issues in terms of economic and social development and environmental protection.

> Lord Waverley:

Drone Industry Needs a Coherent Voice — and Some Interest From Investors Drones are changing the way in which we interact with one another.

rom commercial applications to lifesaving transportation, drones are a reality which cannot be ignored. The potential of these remote-controlled flying robots is unlimited.

But to unlock the full potential of this industry, a rapid change in perception and regulation is needed. Drones are mainly thought of as toys and regulated as such. The technology arrived in the form of children’s playthings some 10 years ago. Ever since, we have been on a learning curve. Business and industry have learned that toy drones cannot (yet) handle industrial tasks; they are too fragile. Negative public perception and a lack of interest is holding the industry back.

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A recent PwC report concluded that by 2030, drones could increase UK GDP by some £42bn. Companies have been founded to produce drones for commercial use — and it is clear that we face a future which will include this technology. The flying machines are being used daily to boost productivity and growth. In cities, global giants such as Amazon are changing logistics through domestic drone deliveries. In rural areas, farmers are using them as eyes in the sky to spot weeds, then deliver minimum levels of pesticides.

The military application of AI-run drones is a widely debated subject. Through its Horizon 2020 research and innovation programme, the European Union has funded an AI-based drone project to autonomously patrol Europe’s borders, identifying individuals and determining whether they represent a security threat. This was once the domain of science fiction; now it’s a reality that we must face. Companies and governments need autonomous flight paths to be consistent, so data becomes comparable over time. Manual flying precludes good data management. Autonomously flown drones will be essential in the gathering of digital audit and evidence trails. Professor Stephen Hawking once wrote in reference to AI drones: “Once this Pandora’s box is opened, it will be hard to close.” In the spirt of these words, we must now look beyond the negative headlines of drone misuse at airports and master the use of the technology before it becomes a threat. As industrial use takes off, we need to change the way in which we think. We need to see bilateral co-operation between governments in providing a universal legislative framework which safeguards security but doesn’t stifle innovation and development.

One can easily imagine the London Port Authority using the technology to undertake volumetric analyses and generate 3D scans of the Thames and the Thames Barrier.

The British police and fire departments currently rely on Chinese-manufactured toy drones. They have discovered that these drones are not fit for purpose. In addition, the Pentagon, the MOD and the White House have signalled data-integrity problems.

Britain is a nation that exports standards. The UK, through H Robotics, has developed the first entirely modular, interoperable drone. Regardless of the application, the potential for productivity and growth is unparalleled. And yet this technology is still greeted with suspicion and alarm, rather than the needed intrigue.

While governments are addressing the legislative and regulatory gaps, it could be argued that — as we have seen in other tech sectors — public policymakers are failing to keep up with the speed of the market. Rushing to fill legislative voids, without consultation or consideration of future applications, will suffocate this promising industry.

Despite the relative youth of the industry, the technology has advanced beyond recognition. Drones are still limited by human input, but it is only a matter of time before they are powered by artificial intelligence.

Drones could be used to better manage urban construction, large infrastructure projects, building inspections and more, but the law lumps toys and industrial tools in the same category.

AI has the potential to change life on a scale similar to that of the Industrial Revolution. Once drones have the capacity to make decisions and to function independently of humans, the benefits to business could be huge. 38

The lack of a singular, authoritative industry voice is another stumbling block. In some sectors, drones have failed to meet expectations because of security and privacy concerns. An industry voice could provide details of the safeguards, training and standards needed. CFI.co | Capital Finance International

Autumn 2019 Issue

Regulators could require that all drones have height and distance limiters. The airspace is becoming increasingly controlled by mandatory geofencing. But this lacks nuance. If a drone is flying on controlled autonomous pathways at, say, 100 feet above a local construction site, and is under the control of the building company concerned, it should pose no danger to air traffic. In light of the negative perceptions held by the media, businesses — through fear of reputational damage — have put off investment. Ministers need to be much more proactive in promoting the commercial opportunities here. Policymakers have for too long focused on reacting to concerns, rather than providing practical industry-led policy solutions that encourage business growth. One of the biggest challenges faced by the drone industry is the lack of interest in research and development. Here the policy leaders need to act to encourage skills development and assist in countering negative perceptions. When it comes to commercial applications, it is universally acknowledged that fear of potential misuse is holding the industry back. We are seeing innovation in the design and manufacturing of drones, but little is being done to train staff in the technology. Without investment in accredited training programmes, businesses will be unable to ensure maximum commercial output. I am encouraged by some aspects of the UK’s Drones Bills, but I fear that if we continue down the path of reactive legislation, without international co-operation and with limited foresight of future opportunities, such legislation could prevent benefits from being realised. The UK has a proud record as a global leader in emerging technologies. If policymakers and industry leaders can come together to provide the investment that is needed, and legislation can ensure public safety, the next important thing is a change in perception: the industry should inspire innovation and development. Then we may allow this evolving industry to improve our lives better and make our businesses more efficient in years to come. i

CFI.co Columnist

ABOUT THE AUTHOR Lord (JD) Waverley Member House of Lords, London

Founder SupplyFinder.com Strategic Advisor SmarterContracts.co.uk jd@lordwaverley.com CFI.co | Capital Finance International

> Autumn 2019 Special

Movers, Shakers, and Money-makers

ore women are entering the workforce and advancing into leadership positions, and the evidence of their impact is undeniable.

Research from McKinsey & Company has shown that companies with gender-diverse executive teams are 21 percent more likely to hit aboveaverage profitability, and 27 percent more likely to demonstrate greater long-term value-creation. According to the International Monetary Fund, the addition of one woman to senior ranks yields higher asset returns of between eight and 13 basis points. Women make up half of the population and control the majority of household spending, and their value as a consumer target has long been exploited. But common sense — along with new research from the Centre for Talent Innovation — asserts that corporate teams must include members who represent the end user if they are to truly understand their target audience and effectively push their product. A vast library of research exists enumerating the productivity and profitability benefits that diversity brings, and many corporate leaders have begun to implement the necessary changes to ensure women feel welcome in the workforce — and are rewarded for their efforts. According to Glassdoor’s 2019 Gender Pay Gap report, despite the marginal progress made in select countries a significant divide remains. Women in the US, on average, earn 79¢ on the dollar compared to men. In the UK, that number is slightly more encouraging, with women earning 82 pence on the pound. Women of colour are

short-changed even further, reporting the lowest median weekly earnings in the US. Across Europe the gender pay gap varies significantly, with reports from Catalyst placing Estonia at the highest gap and Romania at the lowest. Legislation is making overt gender discrimination more difficult, but to unleash the full power of women’s economic force, employers must implement support systems to address issues that cause women to leave the workforce and prevent them from returning. The balancing act between family obligations and professional ambition can become a tightrope walk. Women have traditionally been expected to bear the brunt of household duties, but millennials tend to have more egalitarian notions of gender roles and responsibilities. As they enter the workforce — with work-life demands such as flexible schedules, remote work options, and equal parental-leave policies — the corporate world is taking notice. As more women settle into C-suite offices, they are asserting their financial independence by seeking impactful investment opportunities. Financial providers need to tailor their approach towards relationships rather than transactions, helping to educate women to leverage finance as a tool to reach their long-term life goals. Interest in investing is strong, and asset managers worldwide are scrambling to create portfolios that promise healthy returns as well as social and environmental progress. Demand outstrips supply for investment, but the UN’s Sustainable Development Goals can help investors to pinpoint companies with a proven blend of principles and profit potential. i

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Autumn 2019 Issue

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> INEZ MURRAY CEO OF THE FINANCIAL ALLIANCE FOR WOMEN You Can, And Should, Bank On Women Women wield considerable power in the global economy. They make (or influence) up to 80 percent of household buying decisions and own or operate 33 percent of private businesses worldwide. Research data indicate that women tend to be loyal — as a workforce and consumer base — when their needs are met. But 73 percent of women around the world report dissatisfaction with their banking services, and 68 percent of female-led small and medium enterprises (SMEs) in emerging economies complain of unmet credit needs. Financial institutions are encouraged to join the Financial Alliance for Women, an international consortium supporting women’s needs with members in 135 countries. Alliance CEO Inez Murray previously served as executive vice-president of Women’s World Banking, and was responsible for its gender empowerment programmes and advisory practices. The Alliance helps member institutions establish programmes and policies designed to drive profits and performance through a trifold operational focus. It organises peer learning opportunities to share best practices and accelerate the learning curve. Its own research and members’ experiences combine in a repository of accessible knowledge and market intelligence. The collective voice is a force that advocates for global policy changes to financially empower women. “Membership in the Alliance provides member institutions with a unique platform for peer learning, giving them the resources they in turn need to serve women customers well,” Murray says. “Along with building member banks’ capacity, the Alliance uses its collective voice to advocate for greater awareness of women’s economic role as consumers, investors and jobcreating entrepreneurs.” The Alliance assists member institutions to build innovative, comprehensive programmes delivering access to capital, information, education and markets. One benefit of an Alliance membership is networking potential. In Murray’s opinion, “there is a correlation between the size of your network and your success”. Women tend to be less financially literate than men, she says, and more hesitant to make buying decisions. The Alliance provides relevant and actionable financial information as a solution. As companies around the world clamour to restructure operations with the Sustainable Development Goals (SDGs) outlined by the

United Nations, Murray says investing in women is a smart choice for companies — and countries. SDG 5 calls for an end to gender discrimination. The Alliance identifies companies that are making a strong business case for SDG delivery, and assessing how it affects their bottom line and stakeholders. “Our aim is to try to highlight maybe 150 or so business cases for the first SDG delivery over the course of this year, and then promote those cases to our audience.” At the World Investment Forum in Geneva last year, one of the topics was the need for formal and blended financing that target women’s circumstances and demands. According to the World Bank’s Global Findex database, women are 15 percent less likely than men to have a bank account at a formal financial institution, and 20 percent less likely to have taken out a formal loan.

The World Bank estimates the global finance gap for women-owned micro, small, and medium enterprises at an $1.7tn. But the Alliance presents the female economy as expansive and expanding. It pegs women’s consumer spending at $18tn in 2018 and believes it could hit $72tn in coming years. Women hold some 36 percent of global wealth and can expect to inherit $28.7tn in intergenerational wealth over the next 40 years. The Alliance insists that providing women with high-quality financial services is a highly profitable business opportunity. They are prudent borrowers, steady savers, and loyal customers. What’s more, if they’re pleased with the service and the provider, they tend to purchase more financial products than men. The message is clear: you can, and should, bank on women.

"Our aim is to try to highlight maybe 150 or so business cases for the first SDG delivery over the course of this year, and then promote those cases to our audience." 42

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Autumn 2019 Issue

BOARD CHAIR, HOTEL OWNER AND OPERATOR, > JAGRUTI PANWALA AAHOA FOUNDER AND CEO OF WEALTH PROTECTION STRATEGIES

Wisdom and Warnings from a Female Hotel Industry Pioneer

Jagruti Panwala is the first female officer to serve as the voice of America’s hotel owners in the 30-year history of the Asian American Hotel Owners Association (AAHOA). The recently elected association chairperson has applied wisdom gained from her entrepreneurial family, along with the shrewd management skills and vision she has developed herself, to conquer many business challenges. Panwala owns and operates hotels across the north-east of the United States, and began her career with the lease-to-own acquisition of a run-down 44-unit property with the help of a family loan. She benefitted from the hands-on experience, along with her parents and brother, as they manned the front desk, tidied rooms, and maintained the property. They even lived in the hotel to cut costs. Panwala quickly mastered best-practice for the industry, and with strategic personal and familial sacrifices, saw the business begin to turn a profit. The hands-on hotel experience had provided valuable insights. “I didn't have liquidity to hire a salesperson or a manager,” Panwala says. "We really had to just cut out all the expenses and do everything ourselves. We still have that property 22 years later. If I had had money and if we had purchased a property, I probably wouldn't understand the hotel business as well as I do now.”

Today she owns and operates five hotels in Pennsylvania, New York and New Jersey. Panwala served as female director-at-large of the AAHOA for six years before her appointment to the chair in April this year, and has been involved in the organisation for two decades. She noticed over that time that women were under-represented at board level and at AAHOA events, and vowed to push for equality. She wanted to increase women's participation and to bring awareness and diversity to the association. Panwala spearheaded the creation of educational platforms geared at helping women personally and professionally, and organised meetings throughout the US. At each event, she posed the question: “What is it that women need to be successful in this business?” Panwala and her AAHOA team shifted the educational platforms to focus on women’s needs and created outreach programmes to encourage female participation in the industry. Membership and participation have increased and more women are taking board positions. “We have more women on the board level as ambassadors [and] as committee members than ever before,” she said. “I'm hoping that … in the next five years or 10 years, we have multiple women in top leadership.” In addition to her AAHOA responsibilities and her role as a hotelier, Panwala is also the president and CEO of Wealth Protection

Strategies, a full-service financial planning firm providing individuals and business owners with asset protection, wealth transfer strategies, life insurance options, and business succession planning. More than half of the AAHOA members depend on independent management companies to handle their multi-property portfolios, and younger generations are more inclined towards asset management rather than dealing with the day-to-day operations. She urges business owners, particularly those in the hospitality industry, to heed the warning signs of an inevitable impending economic recession. “My advice is not to forget what happened in 2008, which is something we may want to do when everything is going well,” she says. “It’s a cycle that goes up and down, so we shouldn’t be surprised. “Right now, the economy and industry are doing well because of tax savings, and they’re putting money back in the market, but I think owners need to be smart and strategic; don’t think about just today, think about five years down the road. “Whether investing or developing property, you need to think about how that’s going to play if there is a downturn in five years. In my opinion, the biggest mistake a hotel owner or developer can make is to have no liquidity.”

"We have more women on the board level as ambassadors and as committee members than ever before." CFI.co | Capital Finance International

> NADIA ISLER SDG LAB DIRECTOR Implementing the UN SDGs: A Job for Everyone, Everywhere Everyone seems to agree that the UN Sustainable Development Goals (SDGs) make perfect sense. Countries and companies, individuals and industries are proudly flaunting their commitment to the United Nations 2030 Agenda — but the pledges can be tricky to implement, and the results difficult to measure. Fear not: SDG Lab director Nadia Isler — aka “the alchemist of sustainable development” — has the situation under control. SDG Lab is located in Geneva, a centre for international commerce and co-operation, and the perfect base for the people and organisations driving the implementation of the SDGs. Isler hopes to “piggyback on this dynamic and make sure that it blossoms all over”. SDG Lab — an organiser, amplifier and innovator — is a nexus for a diverse ecosystem focused on delivering on the UN’s agenda. “This is a neutral space to test ideas, identify past mistakes, and replicate the experiences that have been successful in implementing the SDGs,” Isler explains. The 2030 Agenda for Sustainable Development outlines 17 overarching SDGs and 169 targets. It was negotiated and adopted by all 193 UN member states, and officially came into force on January 1, 2016. “These goals are nothing less than a historic commitment of every (UN) country towards defining precise sets of common objectives in addressing the social, economic and environmental challenges of our world,” Isler says. The goals are “unique in that they call for action by all countries — poor, rich, and middleincome — to promote prosperity while protecting the planet”. Isler serves as the SDG Lab team leader, sharing the expertise gained from a lengthy career in international development and firsthand experience in bilateral co-operation and multilateral affairs. Her career — from a Swiss diplomat to a communications officer for Doctors Without Borders — has given her a breadth of knowledge and experience that she can use for the benefit of the lab, and the fulfilment of the 2030 Agenda. She describes the agenda as “more than a political commitment” and “a platform for action that every citizen can contribute to”. She urges people to inform themselves on the scope of focus of the goals, and to discuss them whenever possible. Isler would like to see the SDGs incorporated in the school curriculum, so that younger people could learn to badger parents, politicians and corporations.

She reminds the public that the 17 SDGs are indivisible, and should be addressed in their totality. “Many people think of the goals as being discrete stand-alone objectives, or that some might be more important than others,” she says. “What we do at the SDG Lab in Geneva, and in the broader UN system, is to drive home the message that it is an integrated agenda that cannot be separated. “If a country fails on one SDG, it will not be able to address the other goals. If we want to achieve SDG Three (Good Health and Wellbeing) it means … you also need to address issues related to education, clean water, access to food, gender equality. The 2030 Agenda is a recognition that the international community must address today’s global challenges in an

integrated and a systemic way.” There is one recurring question: who’s going to foot the bill? The answer, according to Isler, is no one — and everyone. She cites estimates of $5 to $7tn yearly to close the gap, and calls for organisations and governments to optimise operations for more efficient use of resources. The burden should be shared through publicprivate partnerships, she says, and sees private finance playing a bigger role as consumers demand evidence of SDG contributions. “This is what makes me think we’re in a new era,” she says. “As grey as everything might seem, I think it’s not naïve to be an optimist. I think there are positive signs that there is a huge new dynamic towards more co-operation, partnership and cross-partnerships.”

"What we do at the SDG Lab in Geneva, and in the broader UN system, is to drive home the message that it is an integrated agenda that cannot be separated." 44

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> LISE KINGO EXECUTIVE DIRECTOR, UN GLOBAL COMPACT Key Role for Businesses in Achieving SDGs, and Spin-off Benefits To Be Had Lise Kingo, the executive director of UN Global Compact, speaks here about the scope of the initiative. UN Global Compact is an initiative designed to drive business awareness in support of the 2030 deadline for the 17 Sustainable Development Goals (SDGs). The SDGs articulate a set of goals to drive sustainable development and action from all stakeholders. Companies wishing to get on board with UN Global Compact must commit to integrating 10 principles — relating to human rights, labour, the environment and corruption — into their business operations. The principles outline the values that global businesses should adopt to remain competitive in a world aiming for sustainability. The previous set of UN goals — called Millennial Development Goals — aimed to lower child mortality and improve the health of people in the developing world. But Lise Kingo feels they did little to address the key role that business can play. “The UN ran a three-year stakeholder engagement process where Global Compact engaged lots of companies to provide input as to what this new set of goals should include,” she says. The SDGs provide a framework for turning environmental and social risks into business opportunities and creating a sustainable society. “The goals are very helpful in directing the kind of transformation that all companies and all industries find themselves in today. No matter if we look at the food sector, or fashion, or energy, they are all in transformation to become more sustainable, more ethical, more environmentally sound.” Many companies have signed up to the UN Global Compact to integrate the 10 principles into their business models, Kingo says. They have improved corporate governance and optimised operations — and achieved stronger financial performance, better stock performance and higher return on equity. A study by the Boston Consulting Group and JP Morgan shows UN Global Compact companies have up to 12 percent higher margin premiums than other companies, up to 19 percent higher market value agent premiums, and a positive impact on their long-term creditworthiness. Global Compact runs a marketing campaign called Making Global Goals Local Business, reaching out from the UN’s New York headquarters to help companies around the world understand, implement, and benefit from the SDGs. “Once a year, we publish a progress report where we show how our companies fare on

integrating the principles and the goals,” Kingo says, reporting that 81 percent of Global Compact companies are actively pursuing the SDGs, and 69 percent claim the sustainability agenda is driven by the company CEO. Global Compact was at the UN General Assembly in September, attracting stakeholders from across the public and private sphere — including climate change activist Greta Thunberg. Global consensus is shifting towards sustainability, but Kingo worries about the systemic nature of the challenges and the massive financing gap — an estimated annual deficit of $2.5tn. “We need to rethink our economies and their incentive structures,” she believes. “In today’s world, where natural resources are scarce and our earth systems are under growing pressure, economic growth to the detriment of our global commons is no longer an acceptable business model.” In Davos last year, she issued a corporate call-to-action, urging companies worldwide to consider funding the goals. “We have an amazing initiative on how to finance the goals, because sometimes… you just have to simplify a bit.” The deficit could be solved by allocating just one percent of global wealth to sustainable

development, she says, and corporate pension funds are a good place to start. “By some estimates, already a quarter of assetsunder-management can be characterised as sustainable investments. “JPMorgan and BNY Mellon investment banks expect this to grow 20 times over the next decade.” Companies can support the SDGs with direct investments or by issuing or purchasing green sustainability bonds. About the UN Global Compact As a special initiative of the UN SecretaryGeneral, the United Nations Global Compact is a call to companies everywhere to align their operations and strategies with ten universal principles in the areas of human rights, labour, environment and anti-corruption. Launched in 2000, the mandate of the UN Global Compact is to guide and support the global business community in advancing UN goals and values through responsible corporate practices. With more than 9,500 companies and 3,000 non-business signatories based in over 160 countries, and 70 Local Networks, it is the largest corporate sustainability initiative in the world.

More info: @globalcompact | unglobalcompact.org

"We need to rethink our economies and their incentive structures." CFI.co | Capital Finance International

> SALLIE KRAWCHECK ELLEVEST CO-FOUNDER AND CEO Invest In Women: You Just Know It Makes Sound Business Sense

Money matters, and according to Ellevest cofounder and CEO Sallie Krawcheck, women just don’t have enough of it. The gender pay gap is decades away from closing in the US. Women are paid less than their male counterparts, and yet they’re asked to pay more for many products because of “Pink Tax” practices. Add in a longer life expectancy for females, and it’s easy to see how women are getting short-changed at every turn. The gender pay gap certainly contributes to the imbalance of wealth amongst the sexes, but Krawcheck argues that the gender investing gap is just as much — if not more — to blame. “The biggest investing mistake that women make is we tend not to invest,” said Krawcheck. “There are all kinds of gender money gaps, and one is the gender investing gap. Women don’t invest as much as men do. Women keep the majority of their money in cash. Men invest more of it, so women haven’t earned those returns.” Depending on the profession, this could translate to hundreds of thousands — or even millions — in lost earnings over a lifetime. Krawcheck launched Ellevest in 2014 to encourage more women to get started with investing. Before that, she’d served as CEO of Merrill Lynch Wealth Management, Smith

Barney, and Citi Private Bank. Throughout her Wall Street career, she encountered homogenous groups of power — white and male — with token splashes of diversity. Despite reams of research insisting that greater diversity leads to higher profitability and increased innovation — and after billions of dollars invested over the years to make the boardroom more heterogeneous — she realised that little progress had been made. Krawcheck sought to establish an investment platform that would put power — and money — in the hands of women. She partnered with tech entrepreneur Charlie Kroll to assemble a team with expertise ranging from product and design to engineering and finance. The Ellevest platform was conceived and created in collaboration with its clients to identify and meet real needs. The team logged 200 hours of interviews to get to the heart of the matter. Women tend to be more goal-oriented and risk-aware — rather than riskaverse — and strongly inclined towards impact investing. Research has shown that although over 80 percent of women have expressed interest in impact investing, less than 10 percent of financial advisors have even broached the topic with them. At Ellevest, the investment approach is both the means and the end-result: it helps

women reach their financial goals by investing in companies that advance women. “The research shows that we’re not lowering our standards in business in order to promote women and people of colour,” she said. “We actually hold them to a higher standard — that white men are promoted based on potential, whereas women and people of colour are promoted based on what they’ve achieved.” Ellevest invests for impact — without sacrificing competitive returns — by supporting companies with strong female leadership that prioritise women’s advancement. It invests in sustainable and accountable companies striving for more ethical and equitable practices, and companies that support thriving communities with inclusive and educational services. Krawcheck argues that everyone benefits when women are stronger and more financially stable, and she hopes that Ellevest’s success can power the global advancement of women. The corporate creed has fallen on receptive ears, and Ellevest has experienced rapid growth, closing a $33m funding round in March with some big-name repeat investors (including Melinda Gates) and pushing Ellevest Private Wealth Management to reach over $100m in assets under management.

"The biggest investing mistake that women make is we tend not to invest." 46

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> INDRA NOOYI AMAZON BOARD OF DIRECTORS AND FORMER PEPSICO CEO Nooyi Leaves Top Job at Pepsico with Thanks for Support and Advice for Former Colleagues Indra Nooyi has the confidence and conviction to unite people behind a common vision and unleash the power of collaborative innovation. The business mogul was appointed to Amazon’s board of directors after stepping down from her role as CEO of the PepsiCo company, where she spent 24 years. She started out as CFO before taking the leadership role at PepsiCo, and the results of her stint as chief executive are unequivocal. She steered the company towards impressive revenue growth through strategic acquisitions to satisfy consumers’ evolving health-conscious habits. The company’s revenue doubled from 2006 to 2017 under Nooyi’s guidance, raking in $63.5b and delivering a 162 percent shareholder return. Indra Nooyi says succeeding at her various roles — executive, wife, mother and daughter — was a juggling act. “Being a CEO is a full-time job,” she says. “Being a mother is a full-time job. Being a wife is also a full-time job. And in the Indian context, sometimes being a daughter and a daughter-in-law are also full-time jobs. So to expect us to do great in all the jobs is crazy. There is no easy answer.” When she joined PepsiCo, one of her daughters was a toddler, the other just nine years old. She was leading a large-scale transformation of the company, with a gruelling schedule of early mornings and late nights. In the interests of balancing her personal and professional lives, she made her office “kid-friendly” after 5pm. “(My daughters) were allowed to play, to sleep in my office, do whatever,” she said. “If I couldn’t go home and take care of the kids, my office was … the place where they would hang out.” She evoked a roar of approval from the audience at the 2019 Women In The World Summit when asked if she received any flak from her bosses at the time. “Did they have a choice?” she responded. “If you establish a niche for yourself (and) you’re competent, and you make yourself indispensable based on competence, what can they do without you? If they didn’t want me because they didn’t want kids running around, get somebody else.” Nooyi met no resistance from the company or her colleagues, who pitched in to strengthen her family support system. “On a relative basis, yes, I’ve had it all,” she admits. “Lots of tradeoffs and sacrifices, but I think somehow I’ve had the strength to power through all of that.” She also gives credit to her husband, Raj K Nooyi (the president of Amsoft Systems) who valued her professional contribution and insight. Without his support, Nooyi doubts she would have been able to manage.

Childcare is a burden for many women seeking to enter the workforce, and even with childcare professionals among the lowest-paid workers in the US, Nooyi says it remains a luxury many can’t afford. Millennials can be saddled with the additional burden of caring for aging parents, she points out, calling for “systemic solutions to address this issue”. “The nature of work has to change,” she says. “Work was devised from a time when the woman stayed home, and the man worked nine to five. That’s not the way life is today. We have to use technology more intelligently.”

In a farewell address to her PepsiCo colleagues, Nooyi urged them to consider their goals — and decide how much they were willing to sacrifice to accomplish them. “Think hard about time,” she advised. “We have so little of it on this Earth. Make the most of your days, and make space for the loved ones who matter most. Take it from me: I’ve been blessed with an amazing career, but if I’m being honest, there have been moments I wish I’d spent more time with my children and family. So I encourage you: be mindful of your choices on the road ahead.”

"The nature of work has to change. Work was devised from a time when the woman stayed home, and the man worked nine to five. That’s not the way life is today. We have to use technology more intelligently." CFI.co | Capital Finance International

> Europe

A New Turn, or a U-turn? Public Transport with Battery Power is on Comeback Trail In 1907, the London Electrobus Company began operating electric double-decker buses in the capital, reaching a peak of 20 vehicles in 1908. More than a century later, the city’s famous double-deckers are going electric once again.

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hina dominates the world in BEB (battery electric bus) manufacturing with around 95 percent of all buses running on volts rather than fossil fuels. But Europe is joining the green renaissance. In 2014, Europe had just 240 electric buses in use; today, it has around 3,500. Orders are also growing (245 in 2015, 408 in 2016, and 1,050 in 2017). Around nine percent of all new buses in Europe are now electric — with electric cars trailing at around two percent. The growth of electric buses in Europe is being driven by policy, falling initial costs, and performance improvements. Air pollution is the largest single environmental health risk in Europe, leading to around 400,000 premature deaths each year. Traffic is one of the main sources of air pollution in European cities, with road transport the top source of nitrous dioxide pollution. It also contributes to global warming; around a quarter of Europe’s greenhouse gases pollution comes from transport. Tightening emission standards for diesel vehicles and the use of catalytic converters has helped, and the move to electric vehicles is a boon. Electric vehicles emit 20 times less nitrous oxide and four times less particulate matter than internal combustion engines. The European parliament has passed a law requiring up to 45 percent of all new buses to have zero emissions by 2025, rising to a maximum of 66 percent by 2030 (depending on the size of the country and its GDP). Some European countries and cities are setting even higher goals. The Netherlands is aiming for 100 percent of new buses to be zero-emission by 2025, Norway and Belgium are going for no less than 100 percent (zero emission or biogas), Paris has settled for 66 percent, and London wants the full 100 percent by 2037. The EU has also been running large pilot programmes for BEBs to encourage their uptake. The Zero Emission Urban Bus System (ZeEUS) programme trialled over 800 buses across 90 European cities between 2013 and 2018; 67 percent of the buses used were BEB.

"The growth of electric buses in Europe is being driven by policy, falling initial costs, and performance improvements." high initial cost because of set-up, battery and charging infrastructure. This is trending down as the technology matures and manufacturers gain scale. The estimated total cost of ownership (TCO) for BEBs is now often less than diesel, hybrid, and gas buses. This will improve over time as battery costs continue to fall (by an estimated 20 percent in 2025). Improved battery performance is also a plus. BEBs were initially small and used for short journeys with airports and major sporting events being the prime users. Now the power and range of electric batteries has improved so much that electric articulated buses are being made. BEBs still have limitations, including poor performance in extreme weather conditions. The US city of Albuquerque recently returned its BEBs and cancelled orders because the range of the vehicles decreased in its warm climate (there were also build-quality issues). Cold weather can also decrease range. The conversion of existing buses faces several obstacles. The market for new buses is larger than the that for conversions. New BEBs take advantage of specifically designed electric drivetrains and batteries, with tailored suspension and lower overall weight thanks to aluminium and carbon fibre. Nor are BEBs suited to all diesel bus routes.

BEBs outcompete sales of electric trolley buses (eight percent of all electric bus orders in 2017), fuel cell electric buses (FCEBs — one percent), and ultra-capacitator buses (“capabuses”, still in early trials). BEBs need less infrastructure than electric trolley buses and feature a more mature technology. Hybrid electric buses are not zero emission.

Chinese manufacturers lead, with the firm BYD having the largest market share (an estimated 20 percent). It has manufacturing plants in Hungary and France and partnered with Alexander Dennis Limited (the biggest UK bus manufacturer) to supply London. Dutch firm VDL has supplied around 500 BEBs. Polish-Spanish manufacturer has supplied 330, with orders for 470: Berlin (90), Madrid (250), and Warsaw (130). Paris has placed an order for 800 BEBs to be delivered by 2025; these buses will be supplied by Heuliez Bus and French multinationals Bollore, and Alstom. Chinese manufacturer Yutong has sales in Bulgaria, Finland, and Copenhagen. Sweden’s Volvo is focusing on the plug-in hybrid segment.

Falling initial costs have also contributed to the growth. BEBs have lower maintenance and operating costs than regular buses but their higher initial cost was prohibitive. BEBs have a

The most common battery variant used is LFP (lithium-ion phosphate oxide), predominantly made by Chinese manufacturers (CATL, BYD and Guoxuan), which can source most of the raw

CFI.co | Capital Finance International

materials locally. Battery manufacturers outside of China mostly produce NMC (lithium nickel manganese cobalt oxide, made by LG Chem and Samsung SDI) or NMA (lithium nickel cobalt aluminium oxide — Panasonic). NMC and NMA are considered less safe than LFP, with a higher risk of explosion, but are more energy-dense, giving a longer-range. LFP batteries generally cost less to produce. The safety of NMC and NMA expected to improve and with their better energy density, their worldwide share is expected to rise. The leading manufacturer of lithium batteries for BEBs in Europe is BYD, with around a 75 percent share boosted by sales of its own BEBs. BYD and CATL are looking to establish factories in Europe. LG Chem and Samsung SDI already have European factories but appear to be more focused on electric cars. BMW, Siemens, and Swedish firm Northvolt recently embarked on a joint venture to build electric batteries for cars, though this could be extended to buses. The world sales leader in electric batteries for cars, Panasonic, has not yet transferred its dominance to the BEB sector. Some BEBs and FCEBs make use of ultracapacitors (also called supercapacitors) to supplement battery power. Ultracapacitors store energy electrostatically rather than through chemicals. They are up to 60 times more powerdense than batteries, can be charged within minutes and discharge energy quickly. They are also very stable, have a long lifespan, and do not use harmful chemicals. Some buses have been developed to use ultracapacitors, but their range is small (around five km). So far, ultracapacitors provide bursts of energy for acceleration, and capture energy from braking. New developments with the use of carbon and graphene promise to extend the range of ultracapacitors. If this potential is realised, ultracapacitor buses could displace BEBs as the zero-emission bus of choice. The leading producers of ultracapacitors are American (Cellergy, Ioxus, and Maxwell) but Europe has two manufacturers: Skeleton Technologies (Estonia) and ZapGo (UK). Skeleton Technologies have been developing ultracapacitors with graphene while ZapGo has developed a carbon battery. i

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> Delen Private Bank and Digitalisation:

A Perfect Blend of Technology and Personal Service Delen Private Bank is specialised in asset management and estate planning for private clients. Group Delen has over 41 billion euros in assets under management.

elen is one of the largest independent private banks in Belgium. CFI.co talked with René Havaux, who joined the executive committee in 2000 and was appointed CEO in April 2019. In this interview, he shares some of the areas in which Delen tries to make a difference and explains why he cherishes digital technology. Congratulations on winning the award of Best Digital Private Bank of Belgium for the third year in a row. Are you happy with the title? René: Absolutely, it was very important for Delen Private Bank to win this award. Our IT specialists are continuously working hard to provide the customer with a user-friendly, trustworthy digital environment that is adapted to everyone’s personal needs. We feel winning this award is the icing on the cake. Which digital solutions do you offer? Any major changes since last year? René: Last year we made substantial efforts to improve the Delen app and the Delen OnLine platform. We improved and standardized the user experience and added several new functions. For example, both applications are accessible via the Itsme® app, which makes interaction safe, fast and simple. The most important feature we added this year is the digital vault. Clients can scan important documents with their smartphone, and store them safely in their personal vault. No more looking after lost documents, deeds or contracts… It is all neatly arranged in the safe IT-environment of the bank. The digital vault is part of our new service Delen Family Services. What makes Delen Family Services or ‘DFS’ so unique? René: DFS consists of three dimensions: overview, analysis and planning. First, the client brings all pieces of the puzzle together, in the safe vault. Next, his relation manager makes an analysis of his total assets: investment portfolios, real estate, insurances, art… you name it. In a last step, our estate planners can advise clients on succession and planning. It was extremely important to have DFS available to all clients, regardless of their assets and whether they want to use a digital tool or not. At Delen Private Bank, clients decide how they want to interact with the bank – not us.

CEO: René Havaux

One last question: the jury mentioned that technology enables your investment managers and staff to dedicate more time to personal contact with clients. Are digital solutions not leading to less customer contact? René: We have a strong belief that purposeful investing in digital solutions eventually results in enhanced client satisfaction and even more customer contact. Personal contact and digital technology are complementary. Today, customers expect to be able to check their financial status 24/7, and we are glad to provide that service. The goal is not digitalisation in CFI.co | Capital Finance International

itself, but to offer an increasingly transparent and efficient private banking experience with high-performance tools. New clients can set up an account with Delen’s digital onboarding process for example, requiring little more than an ID card and a digital signature. Thanks to digital solutions, the client is instantly updated with the latest information, which increases interaction and reduces the distance. Finally, thanks to technology we get to know our clients better, which improves the quality of client conversations and allows us to fully concentrate on their needs. i 51

> Delen Private Bank:

Perfectly Combining a Personal Touch with the Latest in Digital Technology

The Belgian bank specialises in private wealth management and has managed to combine what many other banks are finding impossible: keeping a personal touch while introducing the latest technology.

elen is not afraid to go against the flow. While other banks are replacing staff with robots capable of answering basic queries, Delen continues to put priority on the personal touch. As other banks close branches, Delen has been opening new regional offices across Belgium in recent years. In addition to Antwerp (where it has its headquarters), Brussels, Ghent, Hasselt, Liège and Roeselare, the bank now has offices in Namur, Kempen area, Knokke, Leuven and – since last June – Waterloo. “We are committed to keeping and even growing our local roots, to ensure we keep the personal touch with our clients,” says CEO René Havaux. “Being able to meet a client close to their home or office is a prerequisite, preferably without unnecessary traffic woes.” In Belgium the bank has 380 employees; it also has offices in Luxembourg, Switzerland, the United Kingdom and the Netherlands. Running parallel with this commitment to the personal touch is a drive to introduce the latest technology. While private banking has long been considered rather slow-moving in its embrace of the digital era, Delen Private Bank once again swims against the flow. It’s been recognised as a trailblazer in harnessing the power of IT to deliver a superior private banking product, with the attendant excellence in client services.

Delen Private Bank is continuously investing in innovative solutions – digital or not, that’s up to

its clients – and making substantial efforts to improve them and enhance client satisfaction. Having this in mind, it launched Delen Family Services, a platform that brings all of the client’s assets together to offer an excellent overview of his investment portfolios, real estate, insurances, art etc. All neatly arranged in the bank’s safe IT environment. Moreover, this platform can be smoothly integrated in the existing Delen app for mobile devices and Delen Online. Delen’s efforts to improve the functionalities and user experience of its awardwinning app convinced the jury to reward the bank once again with the award.

FROM FAMILY BUSINESS TO ACKNOWLEDGED NICHE PLAYER Established by André Delen in 1936, Delen Private Bank initially operated as an exchange office. The bank has grown steadily since then, acquiring various private banks and asset managers. “Their teams are still part of the Delen Investments group today,” adds René Havaux, “since continuity is key to the bank’s growth strategy.” In 1975 the founder passed the management of the company to his sons. Delen Private Bank is now part of the holding company Finaxis,

“We are committed to keeping and even growing our local roots, to ensure we keep the personal touch with our clients,” says CEO René Havaux. “Being able to meet a client close to their home or office is a prerequisite, preferably without unnecessary traffic woes.” 52

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which is mainly controlled by Ackermans & van Haaren, and Promofi. The Finaxis portfolio also comprises Bank J. van Breda and Co., which caters mainly to entrepreneurs and professionals. In 2011 Delen acquired a 74% (today 91%) majority stake in UK brokerage JM Finn and Co. In July 2015, it reached an agreement to acquire Oyens & Van Eeghen, a transaction which marked the company’s debut on the Dutch market. On 16 September 2019, the bank took over the assets of Nobel Vermogensbeheer, consolidating its position in the region. Delen Private Bank is a credit institution under the supervision of the NBB (National Bank of Belgium) and the FSMA (the Belgian Financial Services and Markets Authority).

Delen Private Bank has no corporate finance, a limited credit activity, a sound financial base and a highly stable and healthy balance sheet. On June 30, 2019, the equity capital amounted to €741,6 million thanks to a Tier 1 capital ratio of 31,5%, and a cost/income ratio of 58,6%.

of clients’ property (Estate Planning) the bank’s lawyers and tax consultants provide detailed and personal advice. They are experts in all matters concerning succession, donations and business transfer, and follow the current fiscal and legal affairs.

FOCUSED, NO-NONSENSE AND PERSONAL APPROACH Delen Private Bank prides itself on its focused and no-nonsense approach, which covers discretionary asset management and Estate Planning, and enables client assets to grow in a balanced and sustainable manner.

A PASSION FOR ART Art and interior design are among Delen’s passions. This is reflected in the selection and design of the bank’s various offices, as well as in its involvement with artistic events. The bank partners with BRAFA, the Brussels Art Fair (created in 1956). BRAFA has become one of the world’s most prestigious art fairs, famous for fine art, antiques, modern and contemporary art and design. In 2020 BRAFA and Delen Private Bank will celebrate their 14th year of cooperation. i

Clients can leave the financial management of their portfolio (Discretionary Asset Management) to a team of financial experts who closely follow the markets. They act proactively, always from a long-term perspective. For the financial planning CFI.co | Capital Finance International

> Simon Tribelhorn CEO of Liechtenstein Bankers Association:

Sustainability Matters The Principality of Liechtenstein and its financial centre take a holistic approach to sustainability, aligned with the UN’s Sustainable Development Goals.

“C

limate change” is a term on everyone's lips, and a fourth summer of record heat in a relatively new century has ensured that not only activists, scientists and media are focusing on the problem. The topic is now mainstream. For many, enjoyment of “nice weather” is tempered by concern for the future. With melting glaciers, fish kills, floods in Asia, hurricanes in Florida and heatwaves in Greenland, the latest report from the International Panel on Climate Change (IPCC) is more than a wake-up call — it's a kick in the ass. In the words of Pat Cox, former president of the European Parliament: “We are the first generation which destroys our planet, and we are the last which can save it.” The world is confronted with some major challenges, and the outlook is alarming. There is an urgent need to transform society and the economy — quickly and decisively. The climate goals of the Paris Agreement are no longer seen as paying lip-service to the issue. No single country, company, or institution can overcome the challenges; they are too complex, and have a global dimension. To achieve the goals of the Paris Agreement in the EU alone, additional investment of around €180bn is needed — a substantial part of which must come from the private sector. The banking sector plays a central role in mobilising and channelling these financial resources, and the Liechtenstein financial centre is ready and willing to accept the challenge. Sustainability is more than “just” climate protection; the UN recognised this early on. In 2015, it adopted the 17 Sustainable Development Goals (SDGs). They provide a shared blueprint to achieve a more sustainable future for all and acknowledge that ending 54

poverty and other privations must go hand-inhand with strategies that improve health and education, reduce inequality, and spur economic growth — all while tackling climate change and working to preserve our oceans and forests. The SDGs address the global challenges we face as a society; they interconnect and aim to leave no one behind. The Liechtenstein government published its first interim report on the implementation of the SDGs in July, highlighting that sustainable development is a key priority. Liechtenstein has been the “solar world champion” since 2015, with the highest per-capita installation of photovoltaic equipment. Each municipality is committed to increasing energy efficiency, leading to Liechtenstein becoming the first “Energy Country”. To mark World Water Day, on March 22, 2017, “Waterfootprint Liechtenstein” was launched. The principle behind the project was straightforward: Drink tap water, and donate drinking water. Liechtenstein aimed to be the first country to provide access to clean drinking water to one suffering person for every Liechtenstein resident — so improving the basic living conditions of around 38,000 people. The initiative is well on the way to achieving this target. More than 22,000 “water footprints” have been activated. The government, schools, municipalities and many companies — among them all the major Liechtenstein banks and the Bankers Associations — refrain from buying bottled water and use tap water. COLLABORATION Then there is the “Liechtenstein Initiative”, a plan to end human trafficking and modern slavery. The project is a partnership between the governments of Liechtenstein, Australia and the Netherlands along with the United Nations University Centre for Policy Research and a consortium of banks, philanthropic foundations, and associations. CFI.co | Capital Finance International

The Liechtenstein Bankers Association and its members are part of these supporting organisation – for good reason. The UN estimates that more than 40 million people live in captivity, are exploited by forced labour, or suffer some other form of serfdom. Some 25 million of them are pushed into forced labour, 16 million in the private sector. Although 58 percent of the people who work as slaves live in India, China, Pakistan, Bangladesh and Uzbekistan, around one million people in Europe also live in quasislavery. The goods produced often end up in normal sales channels, for example as textiles or food. The International Labour Organisation of the UN estimates that around $150bn is traded annually through slave labour and human trafficking.

Autumn 2019 Issue

CEO: Simon Tribelhorn

And this is where the financial sector comes in. It can be associated in various ways with modern slavery and human trafficking, for example, by handling money generated from such practices, or by financing goods and services whose supply chains include modern slavery or human trafficking. According to studies, modern slavery and human trafficking are the most common predicate offences to money laundering and terrorist financing in the world today. DRIVING THE CHANGE In light of the global nature of the activity and the need to access financial data to identify abuses, the involvement of the financial sector is essential. Liechtenstein’s financial community and regulatory authorities have considerable expertise in combating illicit

financial flows, and can play a pioneering role in tacking human trafficking and modern slavery. This can take place through the promotion of a high due diligence standards, the development of responsible investments, or the promotion of inclusive financial technologies. The Principality's banks and the bankers association actively support the Liechtenstein Initiative. The commission has been holding global consultations since September 2018 to discuss the sector’s approach to anti-slavery and anti-trafficking compliance; responsible lending and investment; and financial sector innovation. Experts from around the world present their research and initiatives at these meetings, and CFI.co | Capital Finance International

a catalogue of measures places the financial sector at the centre of worldwide efforts. This catalogue takes action against those who enrich themselves illegally and at the expense of others, and financial institutions are advised on how they can protect themselves against these transactions. In September 2019, during the 74th Session of the UN General Assembly, the commission has released a blueprint for accelerated action. Banning unworthy working conditions and forced labour would contribute to more climate protection. How? Legal jobs can be regulated in such a way that less environmental pollution or waste of resources occurs. The circle to the Paris goals closes — and the holistic approach of Liechtenstein makes even more sense. i 55

> EBRD:

Investing in Sustainable Infrastructure Helps Advance the UN’s SDG Agenda By Nandita Parshad Managing Director, Sustainable Infrastructure Group, EBRD

At the beginning of this year, the European Bank for Reconstruction and Development (EBRD) created the Sustainable Infrastructure Group (SIG).

he bank merged its energy and infrastructure businesses to capitalise on synergies between these sectors. It delivers investments that ensure a cleaner, healthier, and more inclusive economic development, while also addressing the rapidly growing concern about the climate emergency. Establishing the cross-sectoral group — covering the old transport, municipal, and energy teams — fits the needs of today. The market is driving more and more towards the integration of solutions that these sectors offer, through increasing electrification of services, decarbonising sources of electricity and increasingly important digitalisation. When bringing these together, while considering the challenges of climate change and sustainable development, it is also critical to address the challenges of timing and scale. The infrastructure ensures quality of life in the countries EBRD operates in, helping to mitigate climate change and increasing resilience to it. But the historic rate of investment in sustainable infrastructure needs to double over the next 15 years. These investments need to be of the highest standard, in made in an inclusive manner to involve the local population and apply rigorous safeguards. The need for high quality, clean and futureready infrastructure investment is evident. We are in the midst of a global infrastructure boom, and investment choices made now will determine the level of emissions, the quality of life, and economies for decades to come. Framing this work are a series of international agreements, including the Paris Agreement and Agenda 2030, supporting a strategic long-term vision for development, as set out in the United Nations’ Sustainable Development Goals (SDGs). There is also substantial market pull. The drop in the cost of renewable power generation, the increasing digitalisation of infrastructure services (smart cities), and the prospect for scaling-up the electrification of transport and other public services offer new opportunities. SIG believes that EBRD is uniquely placed to support the private sector in this. 56

Tajikistan: Qauirokkum dam

Eurasia tunnel

The 17 SDGs are an international currency, a multilateral concept that is recognised by donors and countries of operations as well as other development partners. Pursuing the SDGs also dovetails with the delivery of the EBRD’s mandate, as encapsulated in the six Transition Qualities through which impact is measured. These define a sustainable market economy as competitive, well governed, green, inclusive, resilient, and integrated. CFI.co | Capital Finance International

EBRD investments already deliver against a number of SDGs, because it is pursuing projects that lead to positive results. To develop this further requires the integrated delivery of multiple SDGs in a single project or programme, as well as the ability to measure its impact through the SDGs. An excellent example of such an initiative is EBRD Green Cities, the framework for investment in cities that want to lead the sustainability

Autumn 2019 Issue

Moldova

Eurasia tunnel

Albania

drive. This initiative is unique in the world of development finance, taking the policy-based approach of, for instance, the late EU Covenant of Mayors, and merging it with investments in concrete projects that will have an impact on urban areas and residents. The Green Climate Fund has recognised this initiative, and supports EBRD Green Cities with €87m of concessional and grant co-finance. The range of projects under way already includes a fleet of electric buses in Sofia, Bulgaria. and a new district heating plant in Banja Luka, Bosnia and Herzegovina that runs on sustainably sourced biomass. So far, 32 cities have signed up, with the aim to reach 100 Green Cities projects by 2024. Case studies include Green Cities in Moldova, Green City Planning in Tirana, Albania, PublicPrivate Delivery of Connectivity in Turkey, and Comprehensive Power Sector Climate Action in Tajikistan. One example is the investment in the modernisation of residential and public buildings in the city of Chisinau in Moldova, a €25m project supported by the E5P donor fund. Modernising buildings has positive impacts. It enhances has positive impacts on health, energy use, and longevity of the asset. It reduces heating costs, by reducing energy use by up to 50 per cent, and can make a significant difference to poorer families. Refurbishment of schools provides students with a more amenable learning environment. The project was what EBRD calls a “trigger” project for Chisinau’s participation in EBRD Green Cities. In parallel with its implementation, the city commenced a planning process to become an EBRD Green City. This requires Chisinau to develop a tailored Green City Action Plan to instil a more conscious framework to address short-, medium- and long-term sustainability issues.

In Chisinau, this initial project addresses six SDGs: • SDG 1: No poverty; • SDG 3: Good health and well-being; • SDG 4: Quality Education; • SDG 7: Affordable and clean energy; • SDG 11: Sustainable cities and communities; • SDG 13: Climate Action. TIRANA ACTION PLAN Tirana completed its Green City Action Plan (GCAP) in April 2018, setting out a clear vision for a sustainable future. The GCAP identifies a programme of over half a billion euros of investment in five priority areas: sustainable mobility, green spaces and biodiversity, sustainable energy, resource management, and climate change resilience and adaptation, along with growing the resources and capacity of Tirana to implement and manage these projects. The GCAP identifies projects to address major challenges faced by Tirana: a move to sustainable urban mobility by shifting traffic away from the car, reducing congestion, air pollution, and travel times, or by creating new green spaces close to the city. Tirana’s GCAP is a locally driven, comprehensive planning document for the municipal government that will enable the city to continue to develop and thrive when these projects are implemented by the municipal government and its partners. The first project to be financed under Green Cities is a loan of up to €30m to Ujesjelles Kanalizime Tirana, Tirana's Water & Wastewater Utility Company, in two tranches. The priority will be the extension of the capacity of the Bovilla Water Treatment Plant and the construction of a new water pipeline. The pipeline will provide gravity CFI.co | Capital Finance International

transfer of water from the plant to the northwestern part of the city. In Tirana, the implementation of the GCAP will address the following nine SDGs: • SDG 3: Good Health and Well-Being • SDG 6: Clean Water and Sanitation • SDG 7: Affordable and clean energy; • SDG 8: Decent work and economic growth; • SDG 9: Industry, innovation, and infrastructure; • SDG 10: Reduced Inequalities; • SDG 11: Sustainable cities and communities; • SDG 12: Responsible Consumption and Production; • SDG 13: Climate Action. LINKING CONTINENTS VIA EURASIA TUNNEL EBRD provided US$150m to finance the construction of the Eurasia tunnel, linking the European and Asian continents in Istanbul. A Turkish-South Korean consortium manages the 33-year concession, and a partnership of 10 development and private banks provided the financing. The tunnel was also the first publicprivate partnership (PPP) project in Turkey piloting the concept of a direct agreement with the Ministry of Transport and where a debt assumption agreement was put in place with the Ministry of Treasury and Finance. The 3.34km-long tunnel presented construction challenges, as the deepest double-deck undersea tunnel in the world. Its deepest point it is 106 meters below sea level, and it is capable of carrying over 40,000 cars per day. Since opening in December 2016, it has cut the commute between the two sides of Istanbul from 90-minutes to 30. This provides savings in time, fuel and money. In a country facing economic 57

volatility this is an important benefit for people. On the macro-economic level, the tunnel has a beneficial impact on congestion, with positive effects on cross-Bosporus integration and economic growth. Eurasia Tunnel addresses the following five SDGs: • SDG 8: Decent work and economic growth; • SDG 9: Industry, innovation, and infrastructure; • SDG 11: Sustainable cities and communities; • SDG 13: Climate Action; • SDG 17: Partnerships CLIMATE ACTION IN TAJIKISTAN In the power sector, the recently launched second phase of the US$196m refurbishment of the Quairokkum hydro power station on the Syr Darya river is an excellent example. The work on the station, in northern Tajikistan, was supported by bilateral and multilateral donors, including the Climate Investment Funds and the Green Climate Fund. Quairokkum plays an important role in the provision of clean water and irrigation for agricultural land. Author: Nandita Parshad

Constructed in the 1950s, it is in urgent need of refurbishment for safety reasons. The operator, Barqi Tojik, will replace obsolete power generation systems and adapt the dam to a changing climate. Installing new turbines will add 48 MW of generation capacity, and reconstructing spillways will help the dam cope with changing rainfall patterns. EBRD also works with the operator Barki Tojik, to integrate modern climate and weather science into the operational regime of the dam. When the new power generation equipment is operational, the clean power production will produce over 800 GWh of power per year. The Qauirokkum dam refurbishment addresses the following four SDGs: • SDG 7: Affordable and Clean Energy; • SDG 8: Decent Work and Economic Activity; • SDG 9: Industry, Innovation, and Infrastructure; • SDG 13: Climate Action. As the case studies show, addressing the SDGs is something that is integral to the operations of the EBRD. Its approach to Sustainable Infrastructure rests on its unique ability to mobilise crosssectoral teams, the setting and enforcing of high-standards for ESG considerations, and the investment to deploy best available technologies. A continuous drive to mobilise private investment and to maximise connectivity of public services supports this, together with our ability to raise donor support. This blending of finance allows EBRD clients to respect affordability constraints and maintain fiscal stability over the long-term, while delivering first-class infrastructure projects. More needs to be done to fully link up the three sectors in the EBRD, and this will be achieved by proactively seeking out system-level linkages between renewable energy generation projects and increased electrification, in particular of 58

individual and public transport and municipal services. The bank will continue to offer its clients and countries policy dialogue to deliver policies that promote legal and regulatory change to enable this, such as regulations that create positive economic externalities and minimal rent-seeking behaviour. To be able to deliver this the bank will also continue to create blended finance packages for clients and use a broad base of donor resources in a targeted and economically efficient manner in line with its IFI principles. Sustainable infrastructure is rightly receiving a lot of attention amongst global investors, and EBRD will continue responding to this increased demand. i ABOUT THE AUTHOR Nandita Parshad is the Managing Director of the Sustainable Infrastructure Group at the European Bank for Reconstruction and Development (EBRD). Parshad has 30 years’ experience in financing and investing in the energy and infrastructure sector in diverse emerging economies such as India, Eastern Europe, former Soviet Union, Mongolia, Turkey, Middle East and North Africa. Since joining EBRD in 1992, Nandita has led several complex project financings involving debt, equity, syndications and intensive policy dialogue at the highest level in governments and with reputable domestic and international strategic investors. Parshad led the Energy & Natural Resources Business Group prior to her current role. She is a member of the Energy Transition Commission and the World Economic Forum Global Future CFI.co | Capital Finance International

Council on Energy. Nandita Parshad has also held various supervisory board and Board of Directors memberships in investee companies, and served as a director on the International Board and Trustee of the United World Colleges. Prior to working at the EBRD, Parshad worked as a consultant for the World Bank in the Finance Department in Washington D.C. in 1986-1987 and from 1988-1992 as a Project Officer in the Energy Sector in New Delhi, India. She was born in Kolkata, India, and holds undergraduate (AB 1986) and graduate degrees (MPA 1988) from the Woodrow Wilson School of Public and International Affairs at Princeton University. She supports a number of charities in India and is an active volunteer with the Princeton Alumni Schools Committees in India and the UK. ABOUT THE EBRD The European Bank for Reconstruction and Development (EBRD) was founded in 1991 to move into a post-Cold War era in central and eastern Europe. It is now doing more than ever before — across three continents — to progress towards “market-oriented economies and the promotion of private and entrepreneurial initiative”. The Sustainable Infrastructure Group at the European Bank for Reconstruction and Development (EBRD) consists of 200 staff covering the power, energy, transport, social infrastructure, and municipal infrastructure sectors in all the bank’s countries of operation. This group invests more than €3.5bn a year on EBRD’s account in over 100 new transactions, representing a third of the bank’s annual business activity. The group holds a portfolio of about €20bn.

Autumn 2019 Issue

> Nordea Life Assurance Finland:

Maintaining Focus on Key Issues Takes Assurance Company to a Winning Position Nordea is thrilled to have been recognised for its continuous efforts for achieving exceptional customer experiences through operational excellence.

ordea Life concentrates on simplicity, agility, efficiency and quality, and maintains a focus on positive employee experience and wellbeing. Also in constant focus are strong financial stability, and sustainable saving and investment offerings.

“We are happy and proud to have won the CFI.co award for the Most Sustainable Assurance (Nordic) 2019 — for the second consecutive year,” says Chief Investment Officer Petra Särkkä. SUSTAINABILITY IN INVESTMENT PRACTICES Sustainability is an integral part of Nordea Life’s investment strategy and processes. The company believes that via its investments, it makes a positive contribution to environmental, social and governance (ESG) issues. “We are able to mitigate risks while achieving competitive returns,” says Särkkä. “We continuously aim to improve sustainability in our investment portfolios by increasing investments that are prepared to mitigate ESG risks and support transformation to a carbon-free economy.” “Our vision is to improve the quality of life for our customers by getting the best possible returns in a responsible way, and we strive to offer responsible, value-adding solutions to our clients.” SOLUTION FOR SUSTAINABLE SAVING AND INVESTING In 2019, the company has taken further steps to offer sustainable investment solutions. “We have launched a new set of multi-asset investment products, called Globe Baskets,” Särkkä explains. “Through these baskets, our customers can make a positive contribution to ESG issues.

CIO: Petra Särkkä Photo: Petri Wäänänen

“We see that through our investments we can contribute positively to environmental issues and society, support innovation and employment as well as enhance economic growth.” SUSTAINABILITY IN REAL ESTATE Sustainability aspects are embedded in Nordea’s direct real estate investment process. “We want to be good ‘property owner and landlord’ to our tenants,” says Särkkä. “We focus on environmental issues, such as energy efficiency, improved trash management and reducing water use.”

“All underlying investments in Globe Baskets have specific sustainability goals, for example, a lower carbon footprint than the reference group or benchmark, active engagement with companies to push for sustainable development, and investments in companies that build solutions for sustainable future, such as renewable energy.

“During 2019 we have actively geared our properties towards using green electricity, and we encourage our tenants to make similar decisions. We take good care of our properties, with systematic renovation and maintenance activities, and prioritise safety for tenants and construction workers. We have also initiated a process to certify the sustainability our properties.”

In addition to this initiative, Nordea Life strives to broaden sustainable offerings.

Nordea Life, together with other large real estate investors, participates a Finnish corporate CFI.co | Capital Finance International

sustainability programme. “We are actively developing tools for sustainable real estate activities and communication. In addition, we have joined Green Building Council Finland network to share knowhow and activate dialogue on how to improve the built environment and eventually make it carbon-neutral.” GROWTH COMPANIES PLAY A KEY ROLE Nordea Life has invested in several domestic and Nordic venture and growth funds. “We believe that start-up and growth companies can play a key role in developing and providing solutions to tackle global challenges,” CIO Petra Särkkä adds. “We see that through our investments we can contribute positively to environmental issues and society, support innovation and employment as well as enhance economic growth.” i 59

CFI.co | Capital Finance International

Autumn 2019 Issue

> Wey Education:

Wey to go! Education Group has Interests of Students at Heart Wey Education solves the problems of the one-size-fits-all education system.

t challenges the outdated bricks-andmortar buildings and mandatory PE lessons with the flexibility and autonomy of online learning. Times are changing, technology is changing; now is the time for the education sector to draw level. Using state-of-the-art digital technology, Wey Education operates two established divisions. InterHigh, a non-selective fee-paying online primary and secondary school, provides students with the flexible balance between school and other commitments, enabling them to thrive by offering everything that a traditional school can — and then some. Wey also supports students with special learning needs through its alternative provision platform, Academy 21, a B2B division serving other educational providers, schools, local authorities and public bodies. For the outstanding work it does, Wey Education has won the award for the Best Online Educator

— Global 2019 for Centre of Excellence Awards. It illustrates the strides the firm is making in the sector, and recognises the opportunities that their schools provide. Describing Wey as “a class act”, judges commend the business for establishing an independent academic advisory board to cut through the white noise of commercial concerns, enabling them to make recommendations based on the pursuit of education excellence. Wey Education was also celebrated for putting children’s learning experiences at the heart of everything it does. Wey Education CEO and co-founder, Jacqueline Daniell, was driven to start the business when she noticed how some young people were experiencing difficulties. She noticed that the traditional education system no longer supported all young people, especially those who are struggling to find alternative learning styles. CFI.co | Capital Finance International

Through this understanding and gap in the market, Wey Education was formed to help learners reach their full potential. From that moment, the business has progressed into a successful online education platform. Despite challenges of first bringing the idea to the market, with far less technology and a majority of people still using dial-up internet, Wey Education has developed one of the UK’s leading online schools, InterHigh. It has done so by staying true to its core values of providing all students with the best possible education prospects, regardless of where they are in the World or what else they have going on. Wey Education presents a viable and proven alternative to traditional education. The inroads into online learning being made are profound and unmissable by those in the education sector — and this is just the beginning. i 61

> CBRE - European Capital Value Performance:

A Snapshot of Industrial, Retail and Office

By David Casas Alarcón CBRE Property Management Accounting Lead

he Coldwell Banker Richard Ellis Group (CBRE) is an American-headquartered and glboal commercial real estate services and investment firm.

In 2018 it was the largest commercial real estate services company in the world. It has released the Q1 2019 Valuation Report for Europe with an overview of the Capital Value variances of the main Real Estate investment assets per region. On the quarter, positive capital value performance continued in Europe at a faster pace than seen in Q4 2018.

Figure 1: Pan-Europe sector capital values. Source: CBRE Valuation, Q1 2019

The “All property types” index moved up (+0.9 percent) on the quarter vs (+0.3 percent) the previous quarter, driven by the industrial and office sectors. Although, retail recorded a negative capital value (-0.9 percent), the fall was not as great as Q4 2018 (-1.9 percent). At the “All property” level, most countries and regions saw positive capital value performance albeit at a slower pace than 2018: France increased 3.1 percent (6.2 percent 2018), Germany 6.7 percent (9.2 percent 2018), Nordics 3.3 percent (7.7 percent 2018) and Southern Europe & Ireland 3.2 percent (8.1 percent 2018). The UK was notable as one region where capital value change in 2018 surpassed 2019 – decreasing by -0.7 percent compared to a 5.5 percent in 2018. On a trailing 12-month basis (TTM), the “All property” values increased 3.4 percent over the 12 months to end of Q1 2019 (4.5 percent ex-UK), which compares to 6.5 percent in the period to end of Q1 2018 (6.7 percent ex-UK). Behind the headline figure it is notable that the Shopping Centre sub-sector saw the weakest value performance (-5.1 percent). That tendency was mainly driven by the UK (-13.5 percent) and The Netherlands (-9.2 percent). Industrial was the strongest performer over the 12 months (11.0 percent), with office values increasing c. 5.8 percent.

Figure 2: Regional European capital values. Source: CBRE Valuation, Q1 2019

The Industrial sector was once again the leading performer, with value growth of 2.3 percent Q1 2019 vs 2.4 percent Q4 2018. Offices saw the next largest increase: rising by 1.7 percent vs 1.2 percent in comparison to last quarter. Industrial values benefitted from both yield compression and rental value growth. Excluding UK, industrial values grew steadily at 2.7 percent vs 2.3 percent in Q4 2018. The 62

Figure 4: Industrial Capital Value Components (Europe ex-UK). Source: CBRE Valuation, Q1 2019

CFI.co | Capital Finance International

Autumn 2019 Issue

Nordics, the CEE and the Southern Europe and Ireland were the leading performers in Q1 2019. The majority of this gain came through the yields while rents increased marginally (+0.8 percent). In terms of rental growth, Southern Europe and Ireland as well as the CEE countries were the leading performers in Q1 2019. Although negative, the pace of Retail values decline (ex-UK) slowed over the quarter (-0.4 percent in Q1 2019 vs -1.1 percent the previous quarter). With regards to the yield impact, most of the countries experienced a noticeable upturn except for France, Germany and the CEE countries. Offices (ex-UK) saw values continue to grow at 2.0 percent in Q1, mainly driven by yield impact. The yield movements considerably improved in the Nordics and the Benelux. Simultaneously, France recorded a positive spike in Q1 2019 (0.2 percent) vs Q4 2018 (-0.3 percent). In terms of rental growth, most of the countries were relatively stable except for the Netherlands and the CEE countries which experienced a substantial increase.

Figure 3: Annual Capital Value Change Q4 18 and Q1 19. Source: CBRE Valuation, Q1 2019

In conclusion, compared to the previous year, the first quarter of 2019 showed a gain in momentum in the Office and Industrial sectors, that continue to demonstrate strength, while the Retail sector has begun to trend down. For following periods, Office and Industrial capital value is expected to continue its growth boosted primarily by an strong European leasing activity. i

Figure 5: Retail Capital Value Components (Europe ex-UK). Source: CBRE Valuation, Q1 2019

ABOUT THE AUTHOR David Casas Alarcón is an economist at the university of Malaga, Spain, with more than 10 years of experience in the real estate and finance industries. In 2012, he took over the role of Outsourcing Analyst for Capgemini Consulting, where he advised the company’s real estate clients on the most efficient solutions for financial process externalisation. Since 2016, Alarcón has been part of the CBRE Corporate Outsourcing Hub in Warsaw, which drives the finance process transformation for property management and other CBRE business lines across Europe, Middle East and Africa (EMEA) region, delivering efficiencies and compliance.

Figure 6: Office Capital Value Components (Europe ex-UK). Source: CBRE Valuation, Q1 2019

Author: David Casas Alarcón

CFI.co | Capital Finance International

ANNOUNCING

AWARDS 2019 AUTUMN HIGHLIGHTS Once again CFI.co brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative. All the winners announced below were nominated by CFI.co audiences and

then shortlisted for further consideration by the panel. Our research team gathered additional information to help reach a final decision. In many cases, senior members of nominee management teams provided the judges with a personal view of what sets their companies and institutions apart from the competition.

CFI.co | Capital Finance International

As world economies converge we are coming across many inspirational individuals and organisations from developing as well as developed markets - and everyone can learn something from them. If you have been particularly impressed by an individual or organisation’s performance please visit our award pages at www.cfi.co and nominate.

Autumn 2019 Issue

> MANULIFE INVESTMENT MANAGEMENT: BEST ESG TEAM NORTH AMERICA 2019

For Manulife Investment Management, environmental, social and governance (ESG) analysis and integration are not merely an aspirational policy – they are seamlessly part of the daily practices of the firms’ global investment teams. The firm operates as the global wealth and asset management segment of Manulife Financial Corporation, providing investment solutions to clients across its institutional, retail and retirement businesses globally. As a signatory to the PRI since 2015 – the world’s leading international network for the promotion of responsible investment – Manulife Investment Management strives to implement a best-in-class ESG integration program for an organization of its size and boutique investment approach. The improvement in its PRI assessment each

year (A to A+ across all reported categories in 2019) reflects the innovations of the ESG team and global efforts of the global investment teams. Active and responsible stewardship is a core component of Manulife Investment Management’s sustainable and responsible investing agenda. This means intentional effort is placed on seeking to catalyse long-term sustainable business strategies and operational excellence among investee companies. Manulife Investment Management pursues ongoing innovation in sustainable and responsible investment. As part of this, the ESG team has embraced the Sustainable Development Goals as an emerging framework for sustainable investment solutions which aim to contribute to positive environmental

and social outcomes. Manulife Investment Management collaborated with its group affiliate, John Hancock Digital Advice, to launch the digital advisor platform COIN. The COIN offering attracts “conscious investors”, even those with no investment experience or knowledge, as it empowers the individual to align their capital with SDG thematic areas of their choice. Manulife Investment Management has been lauded for its exemplary SDG leadership and its comprehensive contribution to ESG accountability and transparency throughout the industry. The CFI.co judging panel declares Manulife Investment Management the winner of the 2019 award for Best ESG Team, Investment Management, North America.

> ETIHAD ENGINEERING: BEST MRO SERVICES PROVIDER MIDDLE EAST 2019

Etihad Engineering is a nexus of aviation activity and expertise, located at the centre of the world's key aviation markets. As the largest commercial provider of maintenance, repair and operations (MRO) services in the Middle East, Etihad Engineering spearheads the UAE's burgeoning role as a global aerospace hub and its efforts are delivering results. Etihad Engineering has demonstrated a surge of growth with reports of its MRO operations exceeding financial targets in 2018. The company strengthened its market presence globally with its customer portfolio growing steadily across continents in Asia, Africa, Europe and Latin America, maintaining a consistently high rate of customer satisfaction

throughout the year. The team logged more than 1.6 million man-hours, servicing around 300 aircraft and 32,000 aircraft components with third-party customers contributing a major part of the revenue. Etihad Engineering maintains its strong market position by consistently expanding its capabilities and geographical reach, increasing third-party business, building strategic partnerships, and streamlining its systems and processes. The company has been setting new benchmarks in the industry with many firsts to its credit. Etihad Engineering is the first organisation in the Middle East to be granted an EASA Part 21J Major Approval and Part21G Production Organisation Approval CFI.co | Capital Finance International

(POA). It is the first MRO in the world outside the Boeing network to fully strip and paint a Boeing 787 and the first MRO in the Middle East to carry out a heavy maintenance check on a Boeing 787. Etihad Engineering is also at the forefront in terms of innovation and adoption of new technologies, being the first airline MRO with EASA approval to design, certify and fly 3D printed parts. The CFI.co judging panel applauds the company for its high quality standards, reliable performance, high levels of customer satisfaction and relentless commitment to excellence. Etihad Engineering wins the 2019 award for Best MRO Services Provider (Middle East). 65

> EUROPEAN ENERGY EXCHANGE (EEX): BEST ENERGY & COMMODITIES TRADING HOUSE GLOBAL 2019

The European Energy Exchange (EEX), is the leading physical commodity and derivatives energy exchange in Central Europe. In 2018, its revenue grew by 19 percent to €267.7 million with earnings before tax increasing by 24 percent to €92.1 million. Active in 20 markets in Europe and as part of EEX Group, commercially active in the USA and Asia, the Exchange develops, operates, and connects secure, liquid and transparent markets for energy and related

products. EEX offers contracts on power and emission allowances in addition to freight and agricultural products. In 2018, the company managed to maintain its position as the world´s leading power trading exchange for the second year in a row. In the gas sector, performance was outstanding, with growth of 34 percent in the spot markets. The emissions business also had a fine year, with overall volume more than doubling. Significantly, EEX migrated its

IT systems to Deutsche Börse’s state-of-theart infrastructure. This will fulfil additional regulatory requirements and provide extra protection against cyber-attacks. The innovative application of blockchain technology further enhanced customer experience. The CFI. co judging panel notes these many worthy achievements and wishes to offer EEX the 2019 award for Best Energy & Commodities Trading House Global 2019.

> EXXARO RESOURCES: MOST RESPONSIBLE MINING LEADERSHIP SOUTH AFRICA 2019

Exxaro Resources' purpose is "to power better lives in Africa and beyond". The diversified group is based in South Africa, with mining operations in coal, iron ore, zinc, and titanium dioxide spread across Europe, America and Australia. Exxaro has established itself as a global industry leader on the FTSE Russell ESG index, averaging nearly twice the points in corporate peer comparisons of overall ESG rating and environmental and social metrics. The group off sets the environmental impact of mining

through comprehensive programmes that set ESG guidelines for operations and a plan for the land's eventual rehabilitation. Exxaro recognises the global threat that climate change represents and has pledged to be a catalyst for a cleaner future. In 2012, Exxaro bought a partnership stake in two wind farms in South Africa, and this year took full ownership of the assets with a $105m investment. The group aspires to safeguard the planet for generations to come and empower people through

educational outreach. Exxaro counts its team as its greatest resource, and it has invested over $26m in socio-economic development initiatives designed to create communities of competitively skilled professionals. Exxaro is listed on the Johannesburg Stock Exchange and included in the FTSE/ JSE Responsible Investment Index. The CFl.co judging panel presents Exxaro Resources with the 2019 award for Most Responsible Mining Leadership (South Africa).

> BANCHILE INVERSIONES: BEST STOCK BROKERAGE CHILE 2019

Banchile Inversiones has made its mark on the Chilean economy as the country’s leading brokerage house and the preferred stockbroker of international investors. The investment firm is a subsidiary of Banco de Chile, the country’s largest bank with over 125 years of history, two million clients, and $55m in assets under management. For the past 38 years, Banchile Inversiones has maintained a leadership position in the Chilean investment sector, serving more than 300,000 retail, public sector, and institutional clients via a nationwide network of 295 branches. Operations are divided between the firm’s two subsidiaries: 66

Banchile Administradora General de Fondos handles investment management, while Banchile Corredores de Bolsa serves as the brokerage house. Through a joint venture with global financial conglomerate Citi, Banchile leverages its local knowledge to provide clients with expert research analysis of publicly traded Chilean corporations. The agreement also gives Banchile’s local clients access to Citi’s global investment markets in 100 countries. Banchile helps companies throughout Latin America seize the opportunities presented by the integration of regional markets into a more competitive collective. The firm has launched CFI.co | Capital Finance International

a digital investment platform — the first of its kind in Chile — that has increased efficiency, decreased risk, and enhanced customer service. Clients can digitally sign contracts and manage their portfolios — whether trading stocks or investing and divesting funds — through Banchile’s apps. The CFI.co judging panel has recognised Banchile in past award programmes for bolstering the country’s capital markets and stimulating economic growth throughout the nation. The judges announce Banchile Inversiones as the worthy winner of the 2019 award for Best Stock Brokerage (Chile).

Autumn 2019 Issue

> STANDARD CHARTERED WORLD ELITE MASTERCARD: BEST CREDIT CARD MIDDLE EAST 2019 Standard Chartered Bank, Bahrain is the country’s leading financial institution, boasting a 100-year legacy as an industry trend-setter. Standard Chartered has a strong international presence with operations in Singapore, Hongkong, Korea, and the United Arab Emirates. That global network enables a free flow of best practices, learning opportunities, technological innovation, and human capital. Standard Chartered offers a full suite of financial products tailored to meet clients’ needs, but it leads the Bahrain market in terms of credit cards and motor vehicle loans. Of all the cards issued by the bank, the World Elite Mastercard is the most prestigious consumer variant available. The card marks another pioneering moment for Standard Chartered as the first card in the market to introduce the tapand-go ease of contactless transactions. This sleek black card entitles holders to VIP treatment

and exclusive privileges with premium providers at home and abroad. The card creates added value for the most affluent of clients. A key feature is the exceptional rewards programme, which offers maximum points per purchase and affords holders unparalleled benefits on luxury travel, dining, shopping, and lifestyle experiences. World Elite Mastercard acts as a privileged pass, granting holders access to over 800 airport lounges and gold-status service at more than 500 hotels around the world. The CFI.co judging panel was especially intrigued by the World Elite Mastercard 24/7 concierge service, which helps clients with anytime, anywhere assistance for planning trips, booking tickets, and making reservations, amongst others. The judges declare the Standard Chartered World Elite Mastercard as the Best Credit Card in the Middle East for 2019.

> VALORES UNIÓN S.A. AGENCIA DE BOLSA: BEST SUSTAINABLE SECURITIES BROKERAGE BOLIVIA 2019 Bolivian brokerage house Valores Unión has been in operation for a quarter of a century, developing a wide portfolio of clients and providing committed customer care. The broker aims to fuel the country´s economic and social development by democratising financial service access. Valores Unión provides clients with sound fiduciary advice and money management services, including the structuring, registration and placement of securities as well as stock market intermediation. The talented and dedicated Valores Unión team works to craft optimal investment strategies that advance client objectives, assess market performance, and meet regulatory compliance. Valores Unión offers clients the discretionary and non-discretionary accounts that best suit their needs, managing liquidity surpluses to maximise

portfolio performance and leveraging through the stock market if necessary. Valores Unión welcomes individual and institutional investors alike to explore its full range of financial products and services. In March 2017, the company pioneered the use of participative bonds in the stock market as a new financial instrument to support SMEs. The brokerage house has been ranked for three consecutive years by the Bolivian Stock Market as the Best Stock Market Agency in Secondary Market. Valores Union is a part of the Grupo Financiero Unión family and a subsidiary of Banco Unión, one of the country’s leading banks. The CFI.co judging panel declares Valores Unión as the worthy winner of the 2019 award for Best Sustainable Securities Brokerage (Bolivia).

> HOTEL DU CAP-EDEN-ROC: BEST HOTEL EXPERIENCE EUROPE 2019 Nestled into a private bay on the Côte d’Azur of the French Riviera stands a timeless legend, the Hotel du Cap-Eden-Roc. The guest list of this iconic hotel, founded in 1870, is an eraskipping who’s-who of the rich and famous, from Pablo Picasso and Ernest Hemingway to Heidi Klum and Kylie Jenner. The resort’s blend of exclusive service — discerning, dedicated, and discreet — has been honed over the generations to perfectly match the luxurious setting. The hotel caters to the most refined palates with gourmet dishes created by a team of celebrated chefs, and for those with a sweet tooth there is an artisanal chocolate atelier hand-crafting delectable treats. Guests can enjoy a Mediterranean panorama from the heated luxury of the saltwater infinity pool, while 30 cabanas

tucked into sculpted gardens offer residents secluded sea views. Sumptuous spa treatments offer a relaxing and rejuvenating respite after personalised coaching sessions with Olympic medallist trainers and private yoga instructors at the modern fitness facilities. There are 117 guest rooms in the palatial hotel and two private villas, all airy, light, and decorated in classic French style. A private limousine shuttle service completes the five-star experience. The Hotel du CapEden-Roc makes its attentive staff and grand setting available for exclusive events, and the entire property can be reserved for private, personalised use. The CFI.co judging panel unanimously agrees: Hotel du Cap-Eden-Roc is the winner of the 2019 award for Best Hotel Experience (Europe). CFI.co | Capital Finance International

> FIDEICOMISO HIPOTECARIO (FHipo): BEST SOCIAL IMPACT MORTGAGE PROVIDER MEXICO 2019

Fideicomiso Hipotecario — FHipo for short — is Mexico’s first investment vehicle offering institutional and individual investors access to the country’s attractive real estate market. Founded in 2014, FHipo is a mortgage REIT (real estate investment trust) that acquires, originates, coparticipates, services, and manages mortgage loan portfolios. The firm follows a business strategy that prioritises partnerships and synergy among stakeholders. FHipo partners with Mexico’s two largest mortgage originators, Infonavit and Fovissste, to provide home loans and mortgage financing, particularly for borrowers without access to traditional banks. Alliances with fintech companies have opened

digital channels to attract new clients and help the firm hone its innovative edge. New government policies targeting social impact dovetail with FHipo’s own corporate awareness, which aims to improve customers’ quality of life and contribute to national development. Since its inception, FHipo has amassed a diversified portfolio which amounted to more than $1.5 billion USD as of the second quarter of 2019 and contributed to the creation of 100,000 homes. FHipo is listed on the Mexican Stock Exchange and offers investors — whether institutional or individual, in Mexico or abroad —attractive returns fuelled by steady cashflows from mortgage interest and amortisation.

Workers registered with Mexico’s Retirement Funds Administrators (AFORES) form part of FHipo’s stakeholder network — as investors and as borrowers. Mortgage repayments can be made through direct payroll deductions, cementing FHipo’s status as a low-risk, high social impact investment opportunity. The firm first attracted the attention of the CFI. co judging panel in 2017 for its contribution to creating a more competitive and accessible mortgage industry. The judges congratulate Fideicomiso Hipotecario on its continued growth, and name FHipo winner of the 2019 award for Best Social Impact Mortgage Provider (Mexico).

> SIMBA GROUP: BEST DIVERSIFIED SOCIO-ECONOMIC VALUE CREATION NIGERIA 2019

To run a successful and sustainable business, profits must be balanced with social impacts. It’s a formula that Nigerian conglomerate Simba Group has been applying over the past three decades for the progress and prosperity of its clients and the country. Simba Group is a diversified corporation comprising five companies across industries crucial to Nigerian development: agriculture, alternative energy, backup power-supply systems, commercial vehicle sales and servicing, ICT infrastructure development, and networking and data transmission. The quality of the group’s products, and its commitment to service, unite the diversified companies. With a customercentric focus, Simba Group fills the role of

service provider and problem-solver, tackling the population’s most pressing challenges: power supply and transport. Simba’s transport division showcases the company’s contribution to the national economy. It can trace its roots to a bicycle business, but now also produces motorcycles and three-wheeled vehicles. These are products that help Nigerians meet their “last-mile” transport needs — and augment their earning potential. Each vehicle creates opportunities for riders, drivers, mechanics, dealers and parts distributors, making the sector one of the country’s biggest employment generators. Simba takes pride in providing clients with seamless power solutions, such as its Luminous “always-on” power inverter,

the most advanced of which now comes with an in-built Lithium-Ion battery – a first for Nigeria. The newly launched, Luminous Regalia range are compact wall-mounted units which regulate and store energy to ensure safe and on-demand access to electricity. Meanwhile, on the other end of the spectrum, the Luminous DeLite provides an ultra-affordable entry range of inverters suitable for lighter loads, yet backed by the same level of quality and service that customers have come to expect from Simba. The CFI.co judging panel is pleased to present Simba Group, a repeat awards programme winner, with the 2019 award for Best Diversified Socio-Economic Value Creation (Nigeria).

> McKINSEY & COMPANY: BEST MANAGEMENT CONSULTANCY SPAIN 2019

Professionals — globally, and across industries — trust McKinsey & Company to provide thoughtprovoking and change-inspiring research. The firm has established regional offices to help private and public organisations tackle local challenges with a precise focus. McKinsey Spain was founded to extend the reach of the global firm, fuel the country’s reform and boost the economy. McKinsey has established a strong presence in Spain over the past four decades, undertaking upwards 68

of 2,000 projects and serving more than half of the nation’s largest companies. McKinsey Spain clients come from a range of sectors, including finance, telecommunications, energy and consumer goods. McKinsey’s Madrid and Barcelona offices employ 160 consultants and 220 staff, conducting management research to develop long-term perspectives and influence public debate on the most critical economic challenges facing today’s businesses and economies. McKinsey CFI.co | Capital Finance International

Spain puts itself in the co-pilot’s seat for clients’ transformational journeys, turning ideas into reality and creating change that has a lasting impact. The CFI.co judging panel has seen McKinsey & Company intelligently steer public debate with its insightful research publications, and finds that its locally tailored client services are of equally high calibre. The judges declare McKinsey as the winner of the 2019 award for Best Management Consultancy (Spain).

Autumn 2019 Issue

> JP MORGAN: BEST CSR BANKING UNITED STATES 2019 JP Morgan is a trusted global financial institution with a 200-year legacy and a presence in over 100 markets worldwide, serving millions of consumer and corporate clients in the US as well as governments, investors, and institutions around the world. Corporate social responsibility (CSR) is the cornerstone of its operations, with billions invested in — and even more pledged to — initiatives that address the world’s most pressing environmental and social concerns. By the end of 2108, JP Morgan had facilitated more than $100bn in funding for businesses in the renewable energy and clean technology sectors and companies developing sustainable transportation, waste management and water treatment solutions — with a pledge of $200bn more by 2025. JP Morgan, understanding that sound environmental, social, and governance (ESG) policies lead to sustainable business growth and greater stakeholder engagement, has established a Sustainable Investment Leadership

Team to coordinate strategies that systematically incorporate ESG factors along with client objectives. JP Morgan attributes its success in large part to a diverse workforce of talented professionals united behind the common purpose of contributing to the sustainable growth of economies and communities. JP Morgan fosters a work environment that celebrates diversity and has launched two flagships initiatives — Advancing Black Leaders and Women on the Move — aimed at attracting, retaining, and promoting the top talent from underrepresented demographics. JP Morgan has demonstrated a commitment to uplifting underserved communities; 30 percent of the new branches planned for 2019 are slated for low- to moderate-income neighbourhoods with employee hourly rate increases of 10 percent. In recognition of exemplary corporate citizenship, the CFI.co judging panel declares JP Morgan as the 2019 winner of the Best CSR Banking (United States) award.

> MACK INTERNATIONAL: BEST INVESTMENT MANAGER EXECUTIVE SEARCH FIRM UNITED STATES 2019 Providing experienced executive investment talent to family offices and family investment firms for over seventeen years, Mack International dominates its area of specialisation providing executive search solutions and consultancy services across the global investment industry. The firm’s clients include family offices, wealth and investment management firms, financial institutions and philanthropic foundations. Renowned for its reputation for excellence, unique specialisation and utmost discretion and confidentiality, the firm’s name carries considerable weight in spearheading searches for executive leadership and providing in depth business counsel. Established in 2002 Mack International has established a long, successful track record in finding the right candidate through a combination of creativity and commitment to “getting it right the first time, every time... on-time and on-target.”

The firm takes great care in engaging with each client and their culture to fully understand— and often help define—their unique ethos and vision. Executive search engagements are led by a dedicated, senior-level team using a proprietary process and approach helping family offices and family enterprises hire leadership talent with the requisite skill, experience and “culture fit” to meet key business objectives for the long term. Mack International’s personalised approach carries through to the boutique firm’s consultancy services where it tailors solutions to overcome business, human capital, marketplace or industry challenges. The CFI.co judging panel have been impressed by the comprehensive nature of Mack International’s services. Mack International is a repeat winner of the Best Investment Manager Executive Search Team United States Award and the judges are pleased to add 2019 to the firm’s accolades.

> MINDMAZE: BEST AI & MIXED REALITY TEAM GLOBAL 2019 Switzerland’s first “unicorn” company, MindMaze, transforms futuristic possibilities into today’s reality. The company is an innovative disruptor with extensive knowledge and experience in neuroscience, mixed reality, and artificial intelligence (AI). MindMaze has developed a breakthrough neuro-inspired computing platform that enables a human-machine interface. The MindMotion platform for neurorehabilitation— a complex medical process to aid recovery from injuries to the nervous system — has been a gamechanger. FDA-approved MindMotion combines medical technology, motion-capture cameras and sensors with AI computing, all within a virtual reality environment. Therapy starts with MindMotion Pro hospital sessions, while the MindMotion GO system enables patients to continue with homebased care. It presents more than 30 gamified neurorehabilitation activities — game-playing

elements to encourage patient engagement — rooted in evidence-based neurorehabilitation principles to enhance recovery potential. The latest innovation from MindMaze is its patent-pending CogniChip, a next-generation neurotech chip designed to mimic the brain’s capacity for simultaneously processes by integrating continuous data streams from multiple sensors. MindMaze’s breakthrough technology can capture brain activity upon intent with the prescient decoding of brain signals via neural prediction. These developments have nudged MindMaze closer to its ultimate goal of creating a fully interactive, synchronous, multi-sensory virtual reality. MindMaze is spurring transformation in the healthcare and gaming sectors, as well as other industries. The CFI. co judging panel declares MindMaze as the winner of the 2019 award for Best AI & Mixed Reality Team (Global). CFI.co | Capital Finance International

> ETIHAD CREDIT INSURANCE: MOST INNOVATIVE FINANCE SOLUTIONS MIDDLE EAST 2019

When vision and values align, promising results are likely to follow. Etihad Credit Insurance (ECI) is the specialised state partner helping Emiratis expand their businesses internationally. ECI supports and develops the UAE’s non-oil exports, trade, investments, and strategic sectors — an anticipated value-creation of about $3bn over the next two years. ECI was founded as a result of an initiative by the federal government to fuel national export activity and advance the UAE Vision 2021 agenda. ECI has made remarkable strides since its late-2018 launch to forge strategic partnerships that promote the

export and trade of Emirati goods and services and protect Emirati foreign investments. During ECI’s start-up phase, a “Customer Voice Project” was established in collaboration with the UAE Chambers of Commerce to understand the challenges faced by Emirati manufacturers, entrepreneurs and exporters. ECI provides customers with trade credit insurance products that cover UAE exporters against commercial and non-commercial risks, including buyer insolvency or refusal of delivery of goods, import bans or cancellation of import licence, as well as civil disorder and natural disasters. ECI

surety bonds provide guarantees for contract bids, repayments, customs duties, and new employee hires. ECI partners with commercial banks to provide export financing solutions at concessional interest rates designed to facilitate business and boost sales. It has also developed an export trade credit solution for UAE-based SMEs to expand in high-growth markets. The CFI.co judging panel is impressed with the progress made in such a short time-span, and declares Etihad Credit Insurance the winner of the 2019 award for Most Innovative Finance Solutions (Middle East).

Boutique investment firm Fortman Cline Capital Markets has found its niche by serving emerging conglomerates and mid-market entrepreneurs and corporations. The approach has served it well; since its inception in 2007, the Hong Kong-based corporate finance advisory firm has closed more than $16bn in mergers and acquisitions and fundraising transactions. Its expertise covers a diverse spectrum of industries, including consumer products, healthcare, natural resources, power and energy, technology, and

transport. The firm has a proven record of creating strategic opportunities for its clients in emerging Southeast Asian markets. Fortman Cline’s superior customer service is backed by profound industry experience and cross-border expertise, leading its ranking in the top five financial advisers in the region. Outstanding client care starts with an engaged and motivated work force, and Fortman Cline embraces and endorses that by providing its team with professional and personal development opportunities.

Mentorship programmes enable new recruits to learn from seasoned veterans, and Fortman Cline president and co-founder Danny Ibasco has personally taken interns under his wing for one-on-one training. The company treats its clients like partners, providing them with sound fiduciary counsel. Its presence in Southeast Asia consists of 3 offices, in Hong Kong, Manila and Singapore. The judges present Fortman Cline Capital Markets with the 2019 award for Best M&A Advisory Team (Southeast Asia).

> FORTMAN CLINE CAPITAL MARKETS: BEST M&A ADVISORY TEAM SOUTHEAST ASIA 2019

> GRUPO INTERBROK: BEST INDEPENDENT INSURANCE BROKER BRAZIL 2019

Brazilian insurance broker Grupo Interbrok is a company with a long history of prioritising quality. The group has been in operation for over a century, proving that committed and individualised customer service wins through. Grupo Interbrok serves companies throughout the country via a nationwide network of offices in São Paulo, Rio de Janeiro and São Bernardo do Campo. A team of 130 professionals of unrivalled experience in domestic and international insurance dedicate the necessary time to fully understand — and tailor solutions 70

to — each client’s unique insurance needs. Interbrok insurance offerings include corporate coverage, reinsurance, and personal products. Corporate coverage exemplifies Interbrok’s tailor-made concept, providing companies with differentiated and exclusive services to create the best insurance plan possible. The focus on quality, dedication and individual treatment are factors that guide all our efforts. Besides P&C lines Interbrok also offers benefit products such as life, health, and dental insurance, and affords clients access to international CFI.co | Capital Finance International

reinsurance markets. As part of its long-term growth strategy, the group also specialises in mergers and acquisitions. Grupo Interbrok came to the attention of the CFI.co judging panel last year as a story of long-enduring success, built upon ethical and transparent practices and driven by a well-integrated and high-tech back office. For a company that has shown great consistency and commitment over the years, the judges are delighted to present the repeat winner, Grupo Interbrok, with the 2019 award for Best Independent Insurance Broker (Brazil).

Autumn 2019 Issue

> GOVERNMENT PENSION FUND (GPF): BEST PENSION FUND GOVERNANCE THAILAND 2019 Thailand’s Government Pension Fund (GPF) is tasked with looking after members' savings — and it’s a responsibility the company takes to heart. The way forward, in GPF’s opinion, lies within good corporate governance principles paired with an investment approach that prioritises sustainable development. GPF follows a strict code of ethical conduct and strives to avert any conflicts of interest with caution, honesty, and scrupulous accordance with regulations. Environmental, social, and governance (ESG) goals guide the organisation. At present, GPF throws its weight behind ESG recommendations throughout the stakeholder network, which includes the companies it funds, the retirees it protects, and the communities in which it operates. GPF was established in 1991 by government decree to guarantee pension payments for retired civil servants and

promote member savings. GPF is classified as neither a government nor state organisation, but Thailand’s Finance Minister oversees and supervises the fund’s general management. To balance investment management for healthy long and short-term returns, GPF focuses on reducing the risk of negative returns for any given year. The organisation anticipates the increase of measurable ESG indicators will prove a handy metric for future riskmitigation strategies and enable it to cherrypick investments that inspire confidence. As a signatory of the Investment Governance Code of the Securities and Exchange Commission, GPF commits to good governance and forwardthinking management in pursuit of positive returns. In recognition of its highly principled management practices, the CFI.co judging panel presents GPF with the 2019 award for Best Pension Fund Governance in Thailand.

> CONTAINERS PRINTERS: BEST SUSTAINABLE PACKAGING TECHNOLOGY SOUTHEAST ASIA 2019 Containers Printers is a progressive company with a forward-looking business plan that addresses the megatrends associated with climate change action and the fourth industrial revolution. Founded in 1981, the Singapore company develops packaging solutions that never compromise on quality or the environment. Containers Printers specialises in the printing and production of metal and flexible packaging products and invests considerable effort and funding into R&D initiatives. The company deploys cuttingedge technology and skilled technicians to custom-craft packaging solutions with precision and efficiency. Advances in big data promise to transform the industry, providing crucial insights into customer trends and the optimisation of production and logistics. The company works with clients from 30 countries across Europe,

Southeast Asia, the Middle East, Africa, Australia and New Zealand, providing bespoke packaging solutions that are visually stimulating, responsibly sourced and of the highest quality and safety standards. Containers Printers welcomes client challenges as an opportunity for innovation and collaboration. The company is successful in sourcing difficult types of substrates for industries requiring specific manufacturing capabilities through agreements with multinational corporations and institutions. The CFI.co judging panel has recognised the company in previous years for its innovative packaging, and the judges are now delighted to focus praise on its environmental stewardship. Congratulations to Containers Printers, the 2019 winner of the Best Sustainable Packaging Technology (Southeast Asia) award.

> KRUNGTHAI BANK: BEST SOCIAL IMPACT BANK THAILAND 2019 With the Thai government as a majority stakeholder, Krungthai Bank is fulfilling its mission of economic growth for the country and its citizens. Krungthai Bank has been instrumental in implementing governmental initiatives, including the National e-Payment and Cashless Society schemes. It has also brought in Thailand’s 4.0 initiative, a digital transformation to boost innovation and competitiveness. The bank contributes to the sustainable growth of the Thai economy and an improved quality of life for the Thai people by digitalising financial services across five ecosystems: mass transit, healthcare, education, government, and payments. As a commercial government bank, Krungthai Bank aims to deliver competitive shareholder returns while respecting its responsibilities to Thai society and the environment. One of the bank’s flagship products, the government welfare card, provides low-income earners with digital financial services. In the project’s second

phase, Krungthai Bank distributed around 14.6 million welfare cards to underprivileged groups of the population — including the elderly, disabled people, and bed-ridden patients — for purchasing power at more than 35,000 Blue Flag shops and 24,000 nationwide vendors of the Thung Ngern Pracharat app. The app makes it easier for store owners to collect money from social welfare card holders. Recent government efforts to boost the economy “from the grassroots up” have taken advantage of Krungthai Bank’s infrastructure to facilitate government-allotted incentives for domestic travel, as well as to provide subsidies to low-income earners nationwide. The CFI.co judging panel has followed the bank’s progress for several years and has found it be a model of integrity and responsibility. The judges present Krungthai Bank, a third-year repeat winner, with the 2019 award for Best Social Impact Bank (Thailand). CFI.co | Capital Finance International

> KING ABDULLAH ECONOMIC CITY (KAEC): BEST LOGISTICS HUB RED SEA 2019

King Abdullah Economic City (KAEC) is one of the key players advancing the economic diversification vision of Saudi Arabia. KAEC is a port city located along the Red Sea, a busy maritime nexus of trade routes to some the world’s fastest developing economies. KAEC furthers Saudi Vision 2030 in its role as a regional and global hub of trade and industry, bolstering the Kingdom’s status as a gateway to new markets by strategically developing a commercial corridor connecting three continents. KAEC has attracted $15bn in investments and established itself as the largest

logistics hub of the region — with aims to become the biggest in the world. The KAEC Industrial Valley houses the manufacturing and logistics facilities, which achieved 50 percent growth of port container handling in 2018. Inaugurated in 2013, the King Abdullah Port now handles around three million shipping containers, and it’s only scratching the surface of capacity; with just 55 percent currently utilised, there’s plenty of room to grow. The port features state-of-theart equipment and advanced infrastructure, including the deepest water berths and largest

and most advanced cranes in the world, to ensure that trade flows smoothly. The probusiness regulatory environment contributes to its increasing popularity amongst publicprivate partnerships from near and far. KAEC encourages synergies across the city’s sectors, with manufacturing businesses feeding product through the logistics facilities, boosting the nation’s export and import capacity and fuelling maritime and freight transport industries. The CFI.co judging panel declares KAEC winner of the 2019 Best Logistics Hub (Red Sea) award.

Before launching in 2017, Saudi Arabian healthcare provider My Clinic canvassed hospitals at home and abroad to learn the most common patient complaints about their care. It was determined to learn from others’ errors to improve patient outcomes and experiences. My Clinic offers a full range of clinical care, minus the operating theatre, and specialities in women’s and children’s health, family medicine and chronic disease management. It started out with just 30 patients and now has more than 1,000 — a figure expected to double by the end of the year. The centre recognises stress as a barrier to

healing and focuses on putting patients at their ease. Its fertility clinic features sofas and soft lighting, and appointments allow adequate time for patients to voice concerns and for doctors to give advice. The children’s department uses decoration to brighten the day for young patients, with lively colours, games and toys. My Clinic’s home services include morning visits to collect samples for blood work, because who wants to face a hospital visit before coffee? The team of internationally certified doctors and consultants is united behind the mission to provide top-level clinical care and the best possible experience.

Digital advancements enable greater patient engagement, with automated appointment reminders and test results available by app or email. Patients can book appointments online or via the app with a guaranteed rendezvous within five days. Customer satisfaction is a priority and guiding force for My Clinic, and it solicits and analyses patient feedback after each visit to identify strengths, weaknesses, and areas for improvement. The CFI.co judges present My Clinic with the 2019 award for Best Clinical Patient Outcome (Kingdom of Saudi Arabia).

> MY CLINIC: BEST CLINICAL PATIENT OUTCOME KSA 2019

> ARBAH CAPITAL: BEST SHARIAH-COMPLIANT FUND MANAGER SAUDI ARABIA 2019

According to Shariah principles, wealth is one of the five fundamentals of human existence that must be preserved and protected. Islamic wealth management (IWM) has become increasingly popular with investors worldwide, Muslim and non-Muslim. Over the past decade, Saudi Arabian boutique investment firm Arbah Capital has committed to realising clients’ financial ambitions through careful consideration of each investment profile, with strict adherence to IWM processes. Arbah Capital takes the time to thoroughly understand clients’ circumstances and investment goals, and to create solutions 72

designed to deliver long-term, risk-adjusted returns. The firm establishes enduring relationships with clients ranging from large corporates to high-net-worth individuals, providing discretionary and advisory investment services geared to creating a financially secure future. Arbah Capital offers a spectrum of investment services: wealth and asset management, real estate investment, private equity and corporate finance, as well as brokerage, custody, and advisory services. The firm manages two Shariahcompliant funds. The GCC Liquidity Fund aims for consistent short- to medium-term capital CFI.co | Capital Finance International

growth, and allows for daily liquidity requests; the Arbah Saudi Equity Fund seeks medium to long-term capital growth through Saudi equities investments. Arbah Capital started out with a focus on traditional Saudi financial markets, and expanded business internationally — most recently with the $76m acquisition of the UK’s historic Sauchiehall building. The CFI.co judging panel applauds the firm’s blend of traditional values, market expertise and client focus, and declares Arbah Capital the winner of the 2019 award for Best Shariah-Compliant Fund Manager (Saudi Arabia).

Autumn 2019 Issue

> WEY EDUCATION: BEST ONLINE EDUCATOR GLOBAL 2019 Wey Education develops online learning platforms that cover the full gamut of teaching and learning. The UK company established the first online school in the country, providing an attractive — and accredited — alternative to the classroom. InterHigh is one of the company’s flagship products, an online feepaying primary school, secondary school, and sixth form college providing an accredited UK curriculum for students near and far. About 30 percent of InterHigh pupils are taking courses from outside the UK. Wey Education supports students with special learning needs through Academy21, working with 1,000 students each year to fulfil personalised Education, Health, and Care Plan (EHCP) mandates through alternative educational provision. Although Wey Education has achieved great success as a for-profit enterprise, it holds education to be an essential public service and creates learning

platforms that are accessible, engaging, and effective. Wey Education established an independent academic advisory board to cut through the noise of commercial concerns and make recommendations based exclusively on the pursuit of educational excellence. It challenges the outdated educational system of brick-and-mortar buildings and mandatory physical attendance with the flexibility and autonomy of online learning. Wey Education has recently collaborated with the Department of Education to develop an online teacher certification programme, immersing the next generation of educators in both the technology and methodology of online learning. For a class act that prioritises children’s learning experience — while also outperforming market expectations — the CFI.co judging panel declares Wey Education as the 2019 winner of the Best Online Educator (Global) award.

> IDFC FIRST BANK: MOST PROMISING NEW BANK INDIA 2019 IDFC FIRST Bank is a new bank in India formed by the merger of IDFC Bank and Capital First in December 2018 and led by the former founder and Chairman of Capital First after the merger. The history of the two entities couldn’t be more different. In 2015, IDFC Limited, India’s premier Infrastructure Financing Institution with loans in excess of $12b, secured a commercial banking licence and spun out its loans to create IDFC Bank. Capital First on the other hand was founded by entrepreneur Vaidyanathan who acquired 10% in the company and executed a leveraged Management Buyout (LBO) in 2012. The company grew from $14m in 2010 to $4.3b in 2018 all

focussed on financing consumers and small entrepreneurs. The new bank re-constituted as IDFC First Bank, has stated that it proposes to expand is the analytics-inspired consumer lending of Capital First on the superior liability platform of the former IDFC Bank. And why not, after all Capital First shareholders had seen their wealth multiply 10 times in six years ending 2018. Though loss making yet, it’s got a leadership team that once turned around an entity thatentity that made losses off $4m to a strong entity posting profits of $47m in 2018. The judges declare IDFC FIRST Bank as the winner of the 2019 award for the Most Promising New Bank (India).

> MEGALABS: BEST HEALTHCARE REBRAND LATIN AMERICA 2019 Over the past 25 years, Latin American pharmaceutical titan Megalabs has built an empire by adapting well, driving innovation, honouring commitments, and prioritising people. Megalabs’ operations are at the Science Park of Uruguay’s Free Trade Zone and feature a chic corporate headquarters, cutting-edge pharmaceutical plant, R&D centre, and a logistical specialist. Previously known as Mega Pharma, the company is undergoing a rebrand and consolidating production and R&D under the new, unified Megalabs identity. The company considers its production plant as the emblem of its innovative vision. The Megalabs plant, which inspired the new corporate denomination, is the most advanced pharmaceutical producer in Latin America. The 22,000m2 facility is the result of a $110m investment, combining modern technology with precise industrial practices to produce more than 75 million units annually. The R&D Centre transforms ideas into action, deploying a team of

chemical and pharmacological experts that lead, manage, and develop as many as 20 initiatives each year. The centre was meticulously planned according to the concept of Quality by Design (QbD), which aims to improve the performance of the final product — ensuring consumers receive the safest and most effective medical products. This is achieved by structuring production processes according to pre-defined objectives based on solid science, management, and risk control. The Megalabs campus was designed to self-manage energy and water resources and comply with international WHO, BMP, and Leed’s standards — an investment of over $90m. The company, which enjoys a leading market position in Latin America and a growing foothold in international markets, anticipates biomedicine becoming big business any time soon. The CFI.co judging panel applauds the company’s innovation and vision and presents Megalabs with the 2019 award for Best Healthcare Rebrand (Latin America). CFI.co | Capital Finance International

> UNITY: BEST SUSTAINABLE INSURANCE SOLUTIONS TEAM CENTRAL AMERICA 2019

As the only insurance broker spanning the entirety of the Central American regional corridor, Unity’s name is particularly fitting: its branches are united in ensuring the best possible level of customer care. That is no small feat with a presence stretching from Panama and Costa Rica in the south to Nicaragua, El Salvador, Honduras, and Guatemala. Unity was founded in 2008, and has established a reputation for excellence that is strengthened by its teams of local talent. Each adheres to country-specific best-practice while at the same time upholding an integrated

corporate system of standardised processes and technologies. Unity serves private and corporate clients with a range of risk-management solutions. The company offers cover for home, health, life, and vehicles to its private customers, while corporate clients trust Unity to provide skilled risk advisory, management, and insurance services covering everything from property and bonds to civil liability and cargo insurance. Unity also offers group policies for collective employee health and life plans. All clients benefit from the company’s convenient mobile app, enabling

around-the-clock communication and access to policy information, payments and claim support. The company shows just as much dedication to making sure its employees feel appreciated as it does to caring for clients. The CFI.co judging panel is familiar with the company’s track record of upright corporate governance and good citizenship, and Unity is a repeat winner in the awards programme. The judges are delighted to present Unity with the 2019 award for the Best Sustainable Insurance Solutions Team in Central America.

Planning for the golden years of retirement has long been a priority, and a preoccupation, for many. In the Brazilian market, one company has become synonymous with trusted pension investment advice — PPS Portfolio Performance. Founded in 1996 by Everaldo Guedes de Azevedo França, PPS modernised the Brazilian market with innovative software to analyse investment portfolios, using objective metrics to measure risk and return. Although staff turnover at the

company is low, there has been an influx of new talent which has resulted in an increase in mathematical modelling and a succession of sophisticated international investments. PPS prides itself on its history of conflict-free policies, eschewing partnerships with banks or portfolio managers that clash with investors’ interests. It applauds recent Brazilian legislation — bringing the country into line with long-established PPS policies — that limit conflicts of interest and

crack-down on corruption. In an often-turbulent political situation, PPS clients remain strong and steady — another sign that public confidence in the company’s stewardship is sound and justified. For the third consecutive year, the CFI.co judging panel recognises PPS Portfolio Performance as a trusted and competent authority for optimising portfolio performance. The panel confers the award for the 2019 Best Investment Services for Pension Funds (Brazil).

> PPS PORTFOLIO PERFORMANCE: BEST INVESTMENT SERVICES FOR PENSION FUNDS - BRAZIL 2019

> BANCHILE INVERSIONES: BEST INSTITUTIONAL INVESTMENT SERVICES CHILE 2019

Over its 38-year history in the investment industry, Banchile Inversiones has established itself as a leader in Chilean financial markets. Its professional teams have earned their spurs in finance and investment management, and take pride in their enduring client relationships. The firm works with pension funds, family offices, private banking customers, and other institutional investors to sustainably manage wealth, through the collaborative efforts of its subsidiaries: brokerage house, Banchile Corredores de Bolsa, and investment management arm, Banchile Administradora General de Fondos. More than 300,000 retail, public sector, and institu-tional 74

clients in Chile trust the firm to manage their investments, and as a subsidiary of Banco de Chile, Banchile Inversiones benefits from an expanded market reach of a customer base two million strong. An affiliation with global financial group Citi pairs Banchile’s local expertise with Citi’s international reach to bring foreign in-vestment to regional companies. Banchile Inversiones manages $21.8m in assets on local and international markets, and has the largest domestic share — a 20 percent leadership position. Growth in Banchile’s Real Asset Investment Funds, specifically rental properties, infrastructure, and real estate CFI.co | Capital Finance International

development, enables cli-ents to customise their portfolios for added diversification and dividend yield steadiness. Digitalisation and automation are transforming clients’ investment experi-ence, cutting time spent on manual tasks with the automatic rebalancing of portfolios, while an automated database of up-to-date market information strengthens and simplifies due diligence processes. The CFI.co judging panel is familiar with the firm’s merits, as it has warranted recognition in previous award programmes. The judges this year present Banchile Inversiones with the 2019 award for Best Institutional Investment Services (Chile).

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> SAÏD BUSINESS SCHOOL: MOST INNOVATIVE DIGITAL VALUE CREATION PROGRAMME UK 2019 The University of Oxford is a name that resonates throughout the world as a pinnacle of academic excellence, and an affiliation with the institution carries a certain gravitas. Saïd Business School is more than a mere affiliate: its programmes are embedded in the fabric of Oxford’s collegiate offering. Saïd Business School taps the brightest minds from academia and industry to help guide student discussions about the challenges and opportunities facing the business community — and the world at large. It has the aim of solving societal issues through research, education, and engagement. Saïd approaches its mission from the perspective of people, purpose, and partnerships, collaborating with global research projects and initiatives in societal enterprise, impact finance, inclusive capitalism, and responsive business practices. The business school offers face-to-face degree and open enrolment programmes at the Oxford campus, as well as online courses to allow

broader access. Saïd students pursue business degrees and diplomas in economics, finance, management, and leadership. They can also delve into hi-tech subjects such as AI, algorithmic trading, blockchain and fintech. The school offers learning opportunities tailored for busy business lead-ers, with executive educational programmes providing a blended learning experience — online, on-campus, and on-site. These include practical and impactful projects as well as one-on-one coaching support. The CFI.co judging panel agrees with Saïd that education is about transformation, and believes the school has the power to influence policy through its research efforts. The judges were also convinced that it can create meaningful change in individuals and organisations via its strong portfolio of programmes. The panel declares Saïd Business School the winner of the 2019 award for Most Innovative Digital Value Creation Pro-gramme (UK).

> KORTA: BEST TURNKEY PAYMENT SERVICES EUROPE 2019 Icelandic company KORTA is one of Europe’s most preferred payment partners. The company was founded in 2002 to develop debit and credit-card-acquiring ser-vices with a focus to minimise transactional costs and cater to customer needs. KORTA is more than a software house, handling the complete payment service cycle. Its expertise covers technical setups and connections, data delivery, authorisations and merchant service, as well as billing and settlements. As a licensed Icelandic payment institution and member of Mastercard International and Visa Europe, KORTA is a trusted ally of European merchants of all scales and sizes, providing online payment services that are simple and secure. KORTA became the first Icelandic company to be certified as conforming to Visa and Mastercard’s exacting data security standard, the PCI

DSS (Payment Card Industry Data Security Standard). This framework provides a strict, established protection system to protect clients’ data. Addi-tional security features supported by KORTA include 3D Secure, Verified By VISA, and Mastercard SecureCode. By partnering with KORTA, clients can avoid the hassle and headaches of setting-up and maintaining their own payment systems and security certifications. With that stress out of the way, they can concentrate on pushing their businesses forward. The firm impressed the CFI.co judging panel by delivering competitive terms — without sacrificing on security — and providing payment processing and settlement services that are nimble and flexible. The judges announce KORTA as the winner of the 2019 award for Best Turnkey Payment Services (Europe).

> INTESA SANPAOLO BANK ALBANIA: BEST BANK GOVERNANCE ALBANIA 2019 Intesa Sanpaolo Bank Albania is a financial institution that abides by strong ethical codes and uncompromising standards of corporate conduct. There are 35 bank branches strategically spread across Albania, providing clients with a suite of financial services and solutions. The bank’s improvement initiatives are dictated by cus-tomer demand, monitored via a programme entitled Listening 100%, customer surveys, and Instant Feedback Platform. The bank has identified key contributors to economic growth, including female entrepreneurism, agricultural business and eco-tourism, and offers special-rate lending to strengthen these sectors. Intesa Sanpaolo Bank Albania approved subsidised loans worth €2m in the last

years through its Women in Business programme; in 2019, the credit line has been raised to €5m to be disbursed in the next 5 years. Internet and mobile banking services provide real-time account information and facilitate payments, even in foreign curren-cies. Customers can also opt for multi-term deposit accounts in Lek, Euros or US Dollars. The bank offers its staff flexible working options to boost motivation and productivity. Intesa Sanpaolo Bank Albania has come to the attention of the CFI.co judging panel in the past for its role in driving national economic development. The judges are pleased to see the trend continue, and Intesa Sanpaolo Bank Albania wins the 2019 award for Best Bank Governance (Albania). CFI.co | Capital Finance International

> IBM: OUTSTANDING WORKFORCE TRAINING GLOBAL 2019

Technological breakthroughs are forcing the modern professional to commit to life-long learning to remain relevant and competitive. IBM works with individual and corporate clients worldwide to help them reinvent themselves and futureproof their careers. Organisations can contact an IBM Global Training Provider to create a continuous learning programme that drives employee performance and improves retention. Studies from IBM Research indicate that initial employee training results in 60 percent of new hires deciding to stay, as opposed to only 21

percent otherwise. Well trained teams showed a 10 percent increase in productivity translating to annual savings of $70,000. Companies deploying learning technology enjoyed a 16 percent increase in customer satisfaction. Investing in continuous development of employee capabilities — from soft skills to tech — creates a corporate culture based on respect, responsibility, and reward. IBM also offers a personalised digital learning platform, featuring more than 7,000 educational offerings, including over 2,000 courses as well as more than 4,000

no-cost opportunities, such as articles, podcasts, and tutorials. Students work through the IBM portal at their own pace and according to their interests and needs. The IBM Digital Learning Subscription provides full content at a budget cost. The CFI.co judging panel agrees with IBM’s assertion that corporate ladders are a relic of bygone days, replaced by the “job-lattice” age: which encourages job movement over the course of a career. The judges unanimously declare IBM as the 2019 global award winner for Outstanding Workforce Training.

> AIICO CAPITAL LIMITED: BEST MULTI-ASSET FUND MANAGER WEST AFRICA 2019

AIICO Capital urges Nigerians to aim higher and reach further when considering their financial health and future. The firm is a subsidiary of parent company AIICO Insurance plc, which was founded in 1963. It manages investments for AIICO as well as for over 13,000 institutional and retail clients across several industries, and has assets valued at more than US$350 million under management. The firm’s researchbacked investment approach and astute risk-management skills have delivered client returns that exceed portfolio benchmarks.

AIICO Capital claims the lion’s share of the fixed income investment market in Nigeria, and its steady stewardship of equity has produced healthy returns in a market that has recorded a 40% decline over the past five years. AIICO Capital offers investment management services through its SEC-registered mutual funds – the A+ rated AIICO Money Market Fund and the AIICO Balanced Fund, which has diversified investments in equities, gov-ernment securities, and money market securities. It offers fixed income investments via Nigerian and USD-

denominated guaranteed treasury notes, Nigerian Federal Government Treasury Bills and Bonds, United States Treasuries, and Eurobonds. AIICO Capital plans to launch an investments platform to increase financial inclusion by targeting middle, and bottom-ofthe-pyramid mass of the Nigerian market. The CFI.co judging panel commends the firm’s research-based and results-driven ap-proach to fund management, and declares AIICO Capital Ltd as the winner of the 2019 award for Best Multi-Asset Fund Manager (West Africa).

> OSTEC: BEST IT INFRASTRUCTURE SOLUTIONS WEST AFRICA 2019

Ostec is a front-runner of Ghana’s IT sector, and offers infrastructure solutions, managed services and consulting sessions to help clients extract the biggest bang from their tech investment buck. Ostec applies an industry focus to a comprehensive portfolio that targets banking and finance, telecoms, consumer and government products and services, and resources. It delivers industrytailored solutions that are flexible, scalable, and crafted with a thorough understanding of the evolution and applicable technologies of each 76

sector. Ostec urges clients to resist tech fads and instead take a more measured approach with a process of continuous tech updates. Ostec gives clients space and freedom to grow within the scope of their needs, scaling tech services as required. The company builds and operates data centres that clients trust for the protection, processing, and storage of their data. Ostec helps companies overcome crises with its Disaster Recovery Solutions operation, equipped with technology, connectivity, and a specialised support crew. Over CFI.co | Capital Finance International

the past two decades, the company has been key to Ghana’s growing reputation for top class tech infrastructure and has enabled its clients — from SME to blue-chip — consolidate their IT performance. As the company continues to fulfil its leadership role in the Ghanaian market, it envisions expansion into neighbouring countries such as Nigeria and Cameroon over the next five years. The CFI.co judging panel is pleased to present Ostec with the 2019 award for Best IT Infrastructure Solutions (West Africa).

Autumn 2019 Issue

> POWERGAS AFRICA LTD: BEST NATURAL GAS VALUE CREATION AFRICA 2019 Taking the steps towards sustainability and making the switch from oil (Liquid Fuels – Diesel & Low-Pour Fuel Oil, LPFO) to Natural Gas is not an overnight process, but Nigerian Powergas Africa has spent the past 20 years working to change mindsets and develop the country’s abundant reserves of clean energy. Nigeria ranks amongst the top 10 countries, with rich natural gas reserves, and Powergas has made immense investments in developing the Clean Energy Infrastructure particularly in “Virtual Gas Pipeline” for Industrial Processes & Power Generation, while also contributing towards flare-gas elimination. Challenges such as unreliable energy grids and limited gas pipeline infrastructure led Powergas to pioneer the “Gas on Wheel” Model, supplying Compressed Natural Gas (CNG) solutions to Commercial & Industrial Clients. Lean Natural Gas is firstly treated for impurities, and then compressed into high-pressure gas Tankers (skids) for delivery to power generation companies, heavy industries, commercial complexes, and residential estates. With this unique “gas-on-wheels” supplychain model, Powergas is expanding its service across the Nigerian landscape, and hopefully soon into other African geographies. The first Powergas plant was inaugurated in 2009 and with a fifth facility under construction — slated

to be the biggest in the continent and push the company’s daily production capacity to over a million standard cubic metres. The company supports the nation’s economic recovery through the creation of jobs, the provision of clean energy solutions based on domestically available Natural Gas (contrib-uting to import substitution & saving in foreign exchange reserves), and the responsible management of resources. Natural Gas based Clean Energy Solutions is the fundamental ethos of the company’s DNA, and the Powergas management team possesses extensive expert knowledge of the local market & business environment. The company drives local capacity building through constant training & technology transfer. With Nigerians making up to 90 percent of the workforce, including key executive positions in finance, technology and environmental social governance (ESG), technology transfer is retained locally. Over the years, Powergas has main-tained a steady track record of recruiting, retaining, and developing top local talent, and ensuring that the local communities are part of the company’s success. Based on the foregoing, the CFI.co judging panel declares Powergas Africa as the winner of the 2019 Best Natural Gas Value Creation (Africa) award.

> eBSI EXPORT ACADEMY: BEST ONLINE TRADE FINANCE ACCREDITED COURSES GLOBAL 2019 The highly successful often share one trait: they’re life-long learners. The drive to improve oneself, hone skills and expand knowledge, is crucial now that societies and economies are evolving at record pace. eBSI Export Academy was founded in 2002 to provide accredited trade and finance courses to a worldwide audience through a digital learning platform. Since its launch, the academy has delivered certificationconferring courses to thousands in over 70 countries. It also develops bespoke e-Learning programmes and portals for Trade Finance Banks and Export Promotion Organisations. All eBSI courses encourage the constant development of professional competencies and are accredited by the CPD (Continuing Professional Development Certification Service) in the UK. eBSI Export Academy specialises in trade certifications and has established strategic partnerships to offer professionals

around the world certifications through the Institute of Export & International Trade in the UK, the Institute of Supply Chain Management, and the Institute of Chartered Shipbrokers. It has partnered with the International Finance Corporation (IFC) to deliver an e-Learning based International Trade Finance certification that has reached over 1000 graduates in 25 countries in around the world. Through its SME Export Capacity Building programme – the International Trade Specialist programme, eBSI Export Academy asserts that anyone with gumption and grit can go from zero to hero in the export-import industry with its on-point CPD courses. The CFI.co judging panel is convinced that with eBSI, no professional is left behind. The judges name eBSI Export Academy as the worthy winner of the 2019 Best Online Trade Finance Accredited Courses (Global) award.

> TADAU ENERGY SDN BHD: BEST SOLAR POWER DEVELOPER & OPERATOR MALAYSIA 2019 Since its launch in 2015, Tadau Energy has been an advocate for and participant in the accelerated worldwide development of renewable and clean energy. The company has done much to bring solar energy into lower income areas of Malaysia. Tadau operates two solar power plants in agricultural regions, supporting the country’s power grid by feeding renewable energy to around 380,000 households. The plants stimulate regional economic growth and increase employment and training opportunities. The company fosters environmental responsibility and awareness with all stakeholders, starting with the professionals it employs and the communities it impacts. It promotes the benefits of clean energy and bioagricultural practices, considering bioenergy as an avenue for diversification. Tadau made news in 2017 as the first company in the world to issue a green sukuk, a sustainable

Islamic-finance bond. Tadau promotes solar power as an ideal energy solution and partners with clients worldwide to help them realise their clean energy ambitions, covering the full spectrum of developer and operator services. The company helps clients source engineering, procurement, and construction providers; manage project development; and handle day-to-day opera-tion and maintenance. It provides technical engineering consultations to ensure civil, electrical, and power systems are working to the highest standards. Tadau serves as a venture capitalist for clients looking to boost sales, enhance operations, and capture new markets. The CFI.co judging panel feels that the future looks brighter with Tadau Energy and presents the company with the 2019 Best Solar Power Developer & Operator (Malaysia) award. CFI.co | Capital Finance International

> Africa

Tanzania’s Dream of Middle-Income Status Still Tantalisingly Out-of-Reach Tanzania has seen gains in economic and human development over the past decade — but rapid population growth means middle-income status has not yet been achieved.

Tanzania: Dar es Salaam

CFI.co | Capital Finance International

Autumn 2019 Issue

CFI.co | Capital Finance International

mproving the local business environment is one of the government’s key strategies for increasing growth, but this requires a multi-faceted approach. Can the government deliver?

Over the past 10 years, Tanzania has enjoyed significant improvements. Economic growth has averaged 6.3 per cent. The percentage of the population living below the poverty line has fallen from 34 percent to 28, and life expectancy has increased by 15 years. These results have been driven by good policy, political stability, and abundant natural resources. But while economic growth has been good, the population is growing faster — and is expected to double by 2045. Tanzania needs to increase its per-capita GNI (Gross National Income) to reach middle-income status. With an average of three percent growth over the past decade, the GNI figure will hardly have moved by 2045. John Magufuli became president in 2015, committed to the Tanzania Development Vision 2025 goals of middle-income status and semiindustrialisation. In 2016, the new government released its five-year development plan, which was merged with the national strategy for growth and poverty reduction. Improving Tanzania’s business environment was high on Magufuli’s agenda. The country’s macro-economic conditions are relatively stable, but the World Bank’s Ease of Doing Business report of 2019 ranked Tanzania 144th — well below neighbours such as Rwanda (20th), Kenya (61st), and Zambia (87th). Improvements could come from a reduction in corruption, a boost for the public sector, better transport infrastructure and access to electricity, and the development of Special Economic Zones (SEZs) and Export Processing Zones (EPZs). The government has prioritised reducing corruption to benefit public services, and early results have been impressive. In Transparency International’s Corruption Barometer for Africa 2019, 72 percent of Tanzanians felt corruption had decreased, with the “bribery rate” falling from 25 percent in 2015 to 18 percent in 2019. A majority (71 percent) of Tanzanians believe that the government is doing a good job in this area, up from 37 percent in 2015. This has been achieved with the establishment of a special court, more powers for the country's anticorruption watchdog, and increased discipline. The efficiency of the public sector has also been in Magufuli’s focus. In 2016, the government cracked down on 10,000 public service “ghost jobs” — saving $2m per month in bogus wages. New ethical standards for the sector were set with a purge on falsified education credentials. Accountability measures for local government 80

"Railway freight capacity has declined over the past 10 years, but the potential remains clear. At its peak, the central line carried 1.5m tonnes, now down to some 200,000 tonnes." spending still need improvement, and building on the Integrated Financial Management System is one way to achieve this. The government is working to improve access to electricity to encourage entrepreneurship and enliven the service sector. This is also pivotal to industrialisation and poverty reduction strategies. With just 33 percent of the population having access to power, this is below the average for Sub-Saharan Africa (45 percent). There is also a strong urban and rural divide (65 percent / 17 percent access). The quality of supply is also an issue, frequent outages: an average of 45 hours each month. A plan to boost electricity generation by 600 percent by 2025 will focus on hydro-electric and gas generation. Historically, Tanzania has relied on hydroelectric power, with potential capacity estimated at 38,000 MW. The discovery of large deposits of natural gas in the 2000s has taken this secondary source to 40 percent of total generation, but hydroelectric is set to increase once more with new resources due to come online. The government is developing new dams, but the keystone is Rufiji. Envisioned since the 1960s, the Rufiji dam in Stiegler’s Gorge will be bigger than Egypt’s Aswan when completed (due in 2023). It will add 2,115 MW to the grid, more than doubling Tanzania’s current output. The project is not without controversy. There are environmental concerns about downstream effects and the impact on the World Heritage Selous game park. The new dam will cover around three percent of the reserve. There are also concerns over the cost and funding of the project. Tanzania has 57 trillion cubic feet of natural gas. While extraction of many of the offshore reserves is currently too costly for domestic consumption and is destined for export, reserves closer to shore can be developed. The development of gas-powered power stations is also open to private investment. In 2018, Siemens announced that it would build a 1,000 MW powerplant, with 800 MW to come from natural gas. CFI.co | Capital Finance International

There are plans to connect the national grid to those of neighbouring countries and two regional grids: the Southern Africa Power Pool and Eastern Africa Power Pool. Regional integration will increase supply and provide a market for Tanzania’s increased generation. This will also require the government to liberalise the domestic electricity market. Improved road and rail infrastructure and increased port capacity at Dar es Salaam will mean better access to urban jobs and markets for rural residents. This would also strengthen Tanzania’s position as a regional economic hub — six landlocked neighbours rely on Dar es Salaam’s port facilities. Railway freight capacity has declined over the past 10 years, but the potential remains clear. At its peak, the central line carried 1.5m tonnes, now down to some 200,000 tonnes. Locomotives and rolling stock for the central line have been upgraded, and new single gauge tracks will reach from Dar es Salaam to the interior. The Maritime Gateway project aims to modernise Dar es Salaam to receive larger ships. The government is also working with the World Bank to improve the road infrastructure and planning in eight key cities. There are plans for road links with Kenya, to be financed by the African Development Bank. This will build on improvements to the national road trunk network. The government is also developing the SEZs and EPZs to foster growth in key industries and attract FDI. The goal is to provide the zones with the best possible infrastructure and logistics, to act as beacons for the economy. The EPZ policy was introduced in 2002, and the SEZ in 2006. Both programmes have attracted investment, but there is still room for improvement. Key priorities include infrastructure boosts for Bagamoyo SEZ, Kigoma SEZ and Mtwara SEZ. Tanzania’s government is working across a range of projects. There is a lot of ground to make up, but small improvements could have positive impacts. i

Under the Patronage of HH Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai

Tolerance in Multiculturalism: Achieving the Social, Economic and Humane Benefits of a Tolerant World

ToSmile ToLove ToPractise Tolerance

13-14 NOVEMBER 2019 Madinat Jumeirah Conference & Events Centre

DUBAI

#ToleranceForAll

‫التسامح_للجميع‬#

> World Bank on Social Protection in Africa:

Can Safety Nets Close the Poverty Gap in Burkina Faso and Ensure Family Welfare? By Amina Semlali, Rebekka Grun von Jolk & Frieda Vandeninden

With focused and courageous policy decisions, Burkina Faso’s government can cover the country’s poor with an effective and efficient safety net. This end is achievable simply by realigning and better targeting existing expenditures. The reallocation of energy subsidies that mainly benefit the rich would further open fiscal space.

social safety net is a set of programmes meant to catch you if you fall on hard times.

It is “poverty insurance”, and many countries have some form of non-contributory protection. If you fall below a certain poverty line, you should be eligible and get the benefits at no cost. These safety nets are usually a component of larger social protection systems that also include contributory social insurance, as well as labour market policies and programmes. Predictable cash transfers to poor households — often in exchange for school attendance or for family health checks — have become one of the most effective global poverty reduction strategies. Investments in these programmes — especially those that target vulnerable children — generate high returns. Each year, social safety net programmes in developing countries lift an estimated 69 million people out of absolute poverty, and assist some 97 million people in the bottom 20 percent. Life in a rapidly changing world is fraught with complex risks, making social safety nets more important than ever. They help to protect households exposed to shocks from disasters such as droughts, floods, epidemics and illnesses. They are interventions that, in principle, help poor households manage risk and invest in their livelihoods. Without them, poor people are often forced to adopt negative coping strategies that can lead to chronic poverty. Photo: A beneficiary from the World Bank’s Youth Employment & Skills Development Project and added on Mobile Childcare project.

A CENTRAL PART OF AFRICAN DEVELOPMENT In Africa, social safety nets have become a central part of development strategies and are being rapidly expanded. While there is substantial variation across countries, on average, governments in Africa spend about 1.3 percent of Gross Domestic Product (GDP) on social safety nets. That rate which is slightly lower than what transition economies spend (on average 1.5 percent). 82

Photo credits: Amina Semlali / World Bank.

Although these increasing levels of social safety nets expenditure are good news, the existing programmes fail to cover most of the people living in poverty. In fact, only 18 percent of the poorest quintile in Africa are covered. Research conducted on social safety nets in Burkina Faso (and presented in the recent CFI.co | Capital Finance International

book The Way Forward for Social Safety Nets in Burkina Faso) show a similar pattern. THE LAND OF HONEST PEOPLE Burkina Faso — the “Land of Honest People”, as the Republic of Upper Volta was named in 1984 by then-president Thomas Sankara — is a landlocked country in West Africa, surrounded

Autumn 2019 Issue

"There is a clear gap between the impact of current safety nets and the impact they would have if resources actually reached the poorest people. The exciting news is that with improved targeting the poverty gap in Burkina Faso could be eradicated! The size of the actual poverty gap equals 2.26 percent of GDP, which is close to the actual spending on safety nets." population benefitting. A notable example is that the fourth-richest quintile (Q4) benefits more from all safety nets than does the absolute poorest quintile (Q1). For example, scholarships benefit next to no poor people.

Percent 4 Total

3 2 1 0

All social assistance

Scholarships

Government support (in case of shocks)

Other transfers

Support from NGOs

Food distribution

Figure 1: Social safety net coverage by type of program and quintile. (Q1=poorest quintile, Q5=richest quintile)

a. Distribution of benefits

b. Distribution of beneficiaries 100

100 Q5 Q4 Q3 Q2 Q1

80 60 40

60 40 20

20 0

Scholarships

Other transfers

Scholarships

Government support (in case of shocks)

Other transfers

Support from NGOs

Food distribution

Figure 2: Social safety net targeting, by share of benefits and beneficiaries.

a. Gas

c. Fuel

b. Electricity

Percent 80

1 2 3 4 5 6 7 8 9 10 Decile (poorest to richest)

2 3 4 5 6 7 8 9 10 Decile (poorest to richest)

1 2 3 4 5 6 7 8 9 10 Decile (poorest to richest)

Figure 3: Share of household income spent on energy consumption, by decile.

by Mali to the north, Niger to the east, Benin to the south-east, Togo and Ghana to the south, and Côte d’Ivoire to the south-west. The country has experienced sustained economic growth over the past decade, primarily due to its main export commodities of cotton and gold — but this growth has not benefited the majority of Burkinabe. Although the poverty headcount ratio has declined, the absolute number of poor has increased and extreme poverty is rampant in rural areas. More than 61 percent of its youth are illiterate, the nation is one of the least developed in the world.

SOCIAL SAFETY NET SPENDING HAS INCREASED Overall, social protection expenditure in Burkina Faso has increased at a steady pace, which is positive. Expenditure on social safety nets increased from 0.3 percent of GDP in 2005 to 2.3 percent in 2015. This increase indicates a growing Government appetite for finding more effective methods of protecting the poor. Burkina Faso outspends other sub-Saharan countries on social safety nets relative to GDP, but challenges remain. YET ONLY FEW BENEFIT Social safety net coverage is not in line with poverty, with only 2.6 percent of the entire CFI.co | Capital Finance International

AND THOSE MOST IN NEED ARE LEFT UNPROTECTED Coverage in Burkina Faso is not in line with vulnerability across the life cycle. There is an urgent need to use social protection expenditure to build human capital where it matters most: early childhood development, nutrition and literacy. Looking at poverty headcounts by age groups and risks along the life cycle offers important insights on where public interventions should focus. Risks are not evenly distributed and are typically higher earlier in life. Children are the poorest and most vulnerable members of the population, yet only six of Burkina Faso’s main programmes focus on the 0–5 age group. Only two percent of the country’s children benefit from critical early childhood development programmes — the second lowest rate in the World after Afghanistan. POORER REGIONS ARE BARELY TARGETED Social safety nets are not aligned with poverty across the country’s regions, and mainly target beneficiaries on a geographical basis. Data show that the largest concentration of beneficiaries of cash transfers (34.7 percent) reside in the wealthier Central region, with only a few percent reaching the poorest regions. MOST SAFETY NET BENEFITS ARE ACCRUED BY THE RICH Distribution of beneficiaries and benefits (the latter is only available for scholarships and ‘other transfers’) also shows that most of the benefits are accrued by the richest quintile. Moreover, even though many beneficiaries are in the second poorest quintile (Q2), their transfers are small; while the large transfers are mainly collected by a few rich households. …BUT THE GAP CAN BE CLOSED There is a clear gap between the impact of current safety nets and the impact they would have if resources actually reached the poorest people. There is a need for better targeting and an integrated approach to assess socioeconomic needs. Interventions must be aligned with areas that suffer from high poverty rates and low coverage. 83

"Even though many beneficiaries are in the second poorest quintile (Q2), their transfers are small; while the large transfers are mainly collected by a few rich households." FISCAL SPACE COULD OPEN UP Simulations conducted for this review show that removing the gas subsidy alone would enable savings equivalent to 0.36 percent of GDP, which is the equivalent to one of the largest existing safety nets programmes (national school feeding). Savings from phasing-out subsidies and redirecting that expenditure toward social safety nets - and to a lesser extent renewable energy - would improve matters. Given rapid demographic growth, more resources will need to be allocated to programmes for the poorest and most vulnerable. Funding should be better aimed or the overall budget should be increased. Burkina Faso’s revenue sources are unlikely to create further substantial fiscal space. It is more realistic to reallocate expenditures from less efficient programmes before considering a budget increase. The poor consume barely any electricity and it is important to educate the public about the benefits of safety net programmes before reducing energy subsidies.

The exciting news is that research and simulations show that the poverty gap in Burkina Faso could be eradicated without increasing current spending on social safety nets. The size of the actual poverty gap equals 2.26 percent of GDP, which is close to actual spending on safety nets. THE RICHEST REAP THE BENEFITS OF ENERGY SUBSIDIES Part of the social protection budget is allocated for energy (1.05 percent of GDP in 2015). But there is a fundamental problem with this: subsidies benefit the richer segments of society more than the poor. They are expensive and inefficient, failing to deliver value equal to the money spent on them. ...WHILE FUELING CLIMATE CHANGE Burkina Faso relies on extremely costly imported 84

heavy fuel oil and diesel and buys a large share of its electricity from neighboring countries. Globally, energy subsidies contribute toward climate change by depressing the price of fossil fuels and thereby encouraging greater production and wasteful consumption – and thus carbon emissions. Moreover, energy subsidies discourage needed investments in clean energy. Burkina Faso has, for example, excellent solar irradiation, and solar energy could potentially become a low-cost source of energy. The government is aware that there are more effective, less costly and more environmentally friendly methods for contributing to economic, human and social development. Energy subsidies have experienced a downward spending trend, with electricity subsidies weighing down the national budget over the past decade. In 2016, the government took steps to try to address this. CFI.co | Capital Finance International

…WITH A FEW CORAGEOUS POLICY DECISIONS Research shows that with focused and courageous policy decisions, several issues related to the Burkinabe social protection system could be converted into opportunities. By regaining the fiscal space, the government could cover the country’s poor with an effective and efficient safety net. This end is achievable simply by realigning and better targeting existing expenditures. The reallocation of subsidies and scholarships would further open fiscal space, some of which could also be directed toward renewable energy. Safety nets are affordable, while the social cost of not having them is high and disproportionately borne by women and children. It is a precondition for sustainable growth and social inclusion. This important lesson from Burkina Faso could benefit a global audience of policy makers determined to reduce poverty (and carbon emissions). i

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ABOUT THE AUTHORS Amina Semlali is a human development specialist that works on social protection issues for the World Bank – specialising in labor markets, skills development and social protection policies. She currently works on donor relations and on social protection in the Africa region. Prior to this, Semlali worked on senior leadership development and helped the World Bank articulate organisational strategy. She has conducted applied research on poverty and inequality and provided policy advice to numerous governments in the Middle East. She is an expert on strategic communications and led the communications work for the Bank's Social Accountability Practice. Semlali holds a Master’s degree in Political Science from Uppsala University, Sweden.

Rebekka Grun von Jolk is an economist with 20 years of experience working on the design, appraisal, implementation and evaluation of policies. Grun has worked with the World Bank since 2005, currently as team leader for Social Protection in the Africa region. Before that, Grun was an advisor to the World Bank president, and led her sector’s re-engagement in the Middle East/North Africa after the Arab Spring. She has guest-lectured at Stanford and Georgetown, and received awards for her research and policy design work. Prior to joining the bank, she worked on the UK Prime Minister’s Strategy Unit and consulting. Grun holds a PhD in Economics from University College London and a lic.oec. from St. Gallen.

Frieda Vandeninden is a development economist with a specialisation in social protection policies. She has worked with the World Bank since 2012 on a wide range of social protection topics, including providing Government technical assistance, organising trainings, social protection policy dialogue, field data collection, and the management of the social protection global database ASPIRE. Vandeninden is the author and co-author of reports on social safety nets assessments and expenditure reviews. Alongside this work, she conducts academic research focused on the evaluation of social protection policies and aid effectiveness at the University of Liege and the United Nations University in Maastricht. Vandeninden holds a PhD in Economics from Maastricht University.

Amina Semlali

Rebekka Grun von Jolk

Frieda Vandeninden

CFI.co | Capital Finance International

> Banco Económico:

Angola on the Brink of a New Era

ngola is a country with huge economic potential that is facing an encouraging political environment for foreign investment.

There are several activity sectors with a strong development potential, including agriculture, tourism, infrastructure, environment and the manufacturing industry. Although the next two years will still be a time of economic adjustment, now is the time to look for investment opportunities in the country. 86

This may be a challenging year in the Angolan market, considering the economic adjustments that will continue to affect families and companies. The expected increase in prices of utilities will have a further impact on the economy. Unemployment levels are currently uncomfortably high, and cost-reduction will be mandatory for many companies. The adjustments introduced in the economy will show results in the medium term. Investment is critical for the development of the economy, CFI.co | Capital Finance International

with the creation of new businesses and jobs. Given the state's limited capacity in this role, the private sector and external investment must play a part in boosting the economy and ensuring a steady evolution of the main macroeconomic indicators. The Angolan government is working hard to improve the business environment and to promote the country to private and international investors. In terms of economic outlook, these measures to attract foreign capital to the Angolan

Autumn 2019 Issue

economy are very positive, and market agents are reacting positively. Investors, banks and the international community are enthusiastic, and if things continue along this path, the benefits should soon be seen. In the banking industry, results of the consolidation efforts in the financial system are expected for the year ahead. The central bank will continue to raise the requirements on the financial sector. An asset-quality review will be carried out this year, which may dictate additional capital requirements. Attention is focused on the availability of capital, so new players in the market, mainly foreigners, can be expected. Another factor in the equation is the Extended Fund Facility agreement with the IMF. This facility will allow the government to make necessary structural investments and reforms. The entry of the IMF also adds peace of mind to some investors, and can boost confidence for foreign investment. Banco Económico: Headquarters

Some challenges remain. Although the foreign currency market has stabilised, the economy contracted significantly last year. The devaluation of the currency had a huge impact on sales for many companies, with reported reductions of 3040 percent as a result of a loss of local purchasing power. In the corporate and financial industries, cost reduction strategies and adjustments to business structure must be considered. In 2018, we had a solid increase in terms of commercial activity. Our year-end results will be positive. We also have improved all of our KPIs in terms of the bank’s commercial activity. We have raised our customer base by 20 percent and increased revenues and the number of transactions made, year-on-year. For that, it was very important to stabilise the foreign currency market. The new policies from the central bank stabilised the operations of our corporate customers, who can now access foreign currencies more easily and regularly through the banks. In March 2018, for the first time, we published our Moody’s rating — becoming the second bank in Angola to be rated by this international agency. It was a significant step for our clients who had faced restrictive rules for banking services, and an asset for our banks. Moody’s ranked us at the same rate level of the Angola Republic, a great outcome. Banco Económico has a sound market strategy based on deep market segmentation of products and services for retail consumers and corporate clients. The bank has a solid portfolio of financial solutions, including current and savings accounts, leasing, trade finance, investment banking, digital banking, savings and investment solutions, insurance, forex hedging products, CFI.co | Capital Finance International

real estate and pension investment funds. Banco Económico is well exposed to the corporate segment and expecting continuous growth. Through a structure based on specialised business areas, Banco Económico has different products and services customised to the needs of different economy sectors — oil and gas, trade finance, investment banking, corporate and entrepreneurship — as well as to the main economic activities, which are vital to the country’s sustained development. Banco Económico has been an active supporter of the country economic development due to its strong position in the corporate segment, mainly in the top-level corporates and SMEs. On the individual consumer side, we have been moving from an approach of private banking to a more retail, mass-affluent market bank. We are preparing for a new phase of the Angolan economy. We believe this new influx of foreign investment will create more companies, more jobs and more wealth, and problems we have faced — such as high unemployment and lack of capital — will decrease in upcoming years. We are preparing the bank for this period, and revisiting our business plan and our strategy to start approaching new market segments that have so far not been tackled. Angola is entering a new era and we will have the opportunity to target lower and emerging market sectors. We will push our operation and business results forward. These are the main changes in terms of how Banco Económico will approach the market, and the future. i 87

> La Société Centrale de Réassurance (SCR):

Assuring the Future of Reassurance with Training, Compliance and Effort

a Société Centrale de Réassurance (SCR), a subsidiary of the Caisse de Dépôt et de Gestion (CDG), holds a leading position in the Moroccan reinsurance market.

YEAR 2018 FIGURES (IN MILLIONS) • ROE = 12.26% • Solvency ratio = 218.81% • Written premium: 210.68 USD • Dedicated Gross Investments: 1,149.19 USD • Total Balance: 1,553.53 USD It acts as an institutional investor by participating in keeping insurance premiums in-country, and mobilising savings in the national economy. The SCR’s profitability is ensured by placing the company at the service of the Moroccan market while simultaneously developing foreign business. The SCR’s long experience and thorough understanding of international reinsurance markets enables it to shelter the Moroccan market from international turbulence regarding reinsurance conditions. SCR is one of the oldest reinsurance companies in Africa and the Middle East. With three contact offices in Rwanda, Egypt and the Ivory Coast, SCR has contributed to the creation and operation of regional organisations such as the Arab General Insurance Union and the African Insurance Organisation. The SCR has also worked towards the creation of regional companies, such as the Arab Reinsurance Company and the African Reinsurance Company, firstly at the studies stage, and then as a founding member and shareholder. SOME KEY FIGURES FROM 2018 SCR has used its experience to assist many Arab and African countries that have created similar companies, welcoming their representatives to its informational and training missions. Main strategic priorities: • Reinsurance support for the Moroccan market • General interest missions: central role in the management of the catastrophic-risk plan • Serving Moroccan insurers and major companies in their international development • Implementation of new products on behalf of Moroccan and African insurance companies (credit and surety, parametric insurance, insurance against political violence) • Underwriting Zone: Africa, Middle East and 88

certain Asian markets (India, China, South Korea, Pakistan et al) SCR is the only Moroccan company with an AAA Rating from Fitch Ratings (local level). Since 2017, the AAA (Mar) grade that Fitch Ratings assigned to SCR reflects its solid institutional framework and the fact that it is adequately capitalised and has healthy governance and financial management. This confirmation by Fitch of the Moroccan reinsurer’s solidity bolsters the strategy SCR has been pursuing in terms of transformation based on the “Strong II” plan, which aims at growing facultative reinsurance assignments in terms of profitability and revenue at national and international levels. In addition to its Fitch rating, SCR has a B++ grade from AM Best, which confirms its underwriting policy and its financial and technical fundamentals. “STRONG II” TRANSFORMATION PLAN The “Strong II” Transformation Plan is considered an essential tool for SCR’s medium- and long-term strategic development, delivered across several projects. The plan was launched in 2016 and works to put in place a global projects portfolio, mobilising and bringing together all associates in service of SCR’s clients. This plan is organised along four developmental axes: • Future growth and visibility • Technical and risk-management expertise • Operational excellence and client satisfaction • Company culture and improvement of management style Through this plan, the SCR will reinforce and consolidate its role in Reinsurance at local and regional levels, while accounting for new development challenges in the Moroccan and international markets. CFI.co | Capital Finance International

HUMAN CAPITAL The SCR invests in several projects to develop human capital, all of which target the increase and reinforcement of associate skills, as well as the strengthening of management style, team cohesion and company culture. In parallel, the SCR regularly promote internally and recruit externally high potentials for certain job openings. The goal is to offer growth opportunities to its associates and loyalty among its best team members while maintaining mixt promotion internally and externally. Knowing that it must always invest, especially in human resource development, the SCR has continued to pursue its policy of professional development to maintain competence and achieve the expectations of clients and partners. Most SCR associates receive professional development along profession-specific and riskmanagement themes, as well as other crossfunctional and linguistic training. The SCR is in the process of deploying one of the best risk management tools in the world. It is a highly calibrated SAS solution to manage well our appetite of risk. It should be noted that the SCR is the first and only reinsurance company with a high performance ERM tool in the region. DYNAMISM To meet the demands of the Insurance and Reinsurance Markets, the SCR launched its SCR Academy RE foundation, an initiative whose objective is to provide SCR’s technical expertise in various lines to its Moroccan and African partners, as well as to SCR employees. Strong momentum has been gained in the foundation, with a programme covering different insurance lines (fire, engineering, aviation, maritime and liability) as well as pricing, actuarial and prevention. i

Autumn 2019 Issue

> Powergas:

Fulfilling an African Energy Need with Safety, Drive and Efficiency Powergas is the largest Producer & Distributor of compressed natural gas (CNG) in the off-pipeline Gas Distribution in Africa.

t provides CNG to clients where piped natural gas (PNG) is unavailable. Its operations are predominantly in Nigeria, one of Africa’s largest economies and a major natural gas producer.

Powergas operates four CNG plants in the country, with a total production capacity of over 720,000 SCM (standard cubic metres) per day, and is building a fifth plant which will add an additional 384,000 SCM to daily capacity (equivalent to almost 180-200 MW Power Generation Capacity). The plants are strategically located in Lagos, Ogun, Abia and Rivers States with distribution network extended to 18 (of 36) States. In the past seven years of operations, Powergas has a 100 percent safety record in more than 75,000 CNG deliveries to power generation companies, heavy industries, commercial complexes and residential estates. Deepak Khilnani is the chairman/CEO of Powergas Africa. With over 30 years' experience in Energy and Industrial Power Distribution, Khilnani is committed to driving the firm’s long-term vision to deliver clean, cost-effective and reliable energy solutions. He is a chartered accountant (UK – ICAEW) and has held many senior positions in business development and general management. He is a member of the Oil and Gas Advisory Board of UKTI (a UK government-industry consultancy body) and a board member of Pratham, one of India’s largest education charities. Pulak Sen, MD/CEO for Nigeria Operations, has over 30 years of senior management experience in West Africa and Asia. With a Master’s degree in Technology and an MBA from the Indian Institute of Management, Ahmedabad, Sen worked with leading multinationals including the Tata Group, Inlaks Group and Larsen & Toubro (L&T) before joining Powergas. He holds vast Nigeria experience in the Oil & Gas, Power & Engineering and Procurement & Construction (EPC) industries. He has successfully driven Powergas' strategic vision and leadership position in the CNG market, while implementing a strong governance platform. i CFI.co | Capital Finance International

CFI.co | Capital Finance International

Autumn 2019 Issue

> Simba Group, Nigeria:

Strategy Written in Pencil, Values Engraved in Stone CFI.co interviews Kunal Grover, Head of Strategy at Simba Group

CFI.co: Simba is present in several sectors that are key to Nigeria’s development. Can you tell us about the group’s journey to this point? Kunal Grover: The Simba Group has been operating in Nigeria since 1988. Our flagship company, Wandel International, started its journey with a simple idea: to offer our customers the highest quality products, sourced from around the World but customised to their taste, usage conditions and operating environment. The vision has expanded to include products and solutions, with a specific emphasis on service and innovation, but three decades later, this idea still represents our core philosophy. CFI.co: To what to do you owe the success of your businesses across industries? KG: We place a lot of emphasis on the values established by our founder, Vinay Grover, which serve as guidelines for many of the questions our business leaders face. Operating in a continent of opportunity and challenge, it’s impossible to stick to one strategy. I believe ours is written in pencil, while our values are engraved in stone, and the latter guides our decision-making. When it comes to selecting international partners, we identify companies which are aligned to our values, and share our vision for innovation, localisation and commitment to investing in after-sales support. We represent TVS Motors, part of the $8bn TVS Group, for assembling, distributing and servicing TVS motorcycles and tricycles in Nigeria. We also represent Mahindra EPC, part of the $20bn Mahindra Group, for agricultural equipment and mechanisation solutions. We partner with Luminous Power Technologies, part of the $25bn Schneider Electric group. What’s important is not their size, but that these companies share our values and are committed to sustainable development in their respective economies. CFI.co: The Simba Group has recently been recognised for socio-economic value-creation in Nigeria. How much of a role does this play in your strategy? KG: The recognition is truly humbling and serves to reaffirm the importance of what we are doing. Socio-economic value-creation is fundamental to what we do. Our motorcycles and tricycles touch the lives of millions of Nigerians every day — taking them to work, to school, to pray — driving them, and driving the economy in turn. Our inverters and solar solutions bring light into people’s homes, and our agricultural solutions help improve efficiency across the agricultural

Head of Strategy: Kunal Grover

value-chain, so that that the food they eat is affordable. Our impact is even more direct in terms of the employment our products create, even beyond our factory walls. The riders of the motorcycles and tricycles earn a daily wage ferrying passengers toand-fro. Then there are our dealers, microfinance partners and fleet owners who play critical roles in our value chain, and ensure that the vehicles are made available. Tens of thousands of mechanics and spare-parts dealers repair and service the vehicles and ensure that they are back on the road as soon as possible. CFI.co: How do you ensure your products are affordable and accessible by those who stand to benefit most? KG: At the heart of our vision is a desire to enrich Nigerian lives — and that unambiguously CFI.co | Capital Finance International

means all Nigerian lives. While we have high-end inverter systems for large homes and offices, we also have solutions such as our Luminous DeLite range, which consists of affordable entry-level inverters and batteries which can deliver four hours of standby power to a small home. This comes at an accessible price point, but with the same level of service we assure across our product range. We also recognise that some of our products are used in commercial applications, such as our motorcycle and tricycle taxis. Affordability is key, but so is ensuring minimal downtime for the vehicle owners, whose livelihoods depend on our products. Our leadership position in this industry is testament to the creation of an ecosystem consisting of affordable, quality products, backed by a network of service centres, and supported by mechanisms for providing access to finance. i 91

> The Credit Direct Story:

Audacity, Innovation, and a Heart for Inclusiveness

ith a culture of simple execution, consistency, dedication and authenticity Credit Direct Ltd has carved a niche for itself in Africa’s largest economy and most populous nation. Credit Direct pioneered the unsecured lending business in Nigeria, and in the following decade 92

it has continued to embrace its leadership role by setting the pace for non-bank financial services inclusiveness in the country.

Direct as the first mover, operator numbers have grown from just Credit Direct in 2007 to structured operators across Nigeria.

The company, with its bold entrance into the Nigerian market, led a movement that has seen exponential growth of consumer and retail lending organisations across several market segments. Twelve years after the advent of Credit

This innovation has created a multi-billion Naira industry that now employs several thousand people. It ranks as one of the most important developments in the Nigerian economy in recent years.

CFI.co | Capital Finance International

Autumn 2019 Issue

MD & CEO: Akinwande Ademosu

It has had a significant impact on the financial industry for the underbanked and unbanked segments of Nigerian society and on the growth of the country’s middle-class. The business model it introduced has countered lending biases that existed against women in the financial services sector. Now men and women can equally exercise their entrepreneurial skills, contributing to their family living standards and the country's GDP. In the short time Credit Direct has been in operation, it has empowered more than 1.5 million Nigerians from all walks of life with a disbursement of well over N150billion ($410m) across the country. The injection of this much-needed, unsecured credit has significantly cushioned the sometimes harsh effects of economic reality. That effort is having a catalysing effect on entrepreneurial activities at small- and medium-scale enterprises, as well as on personal well-being.

"The company, with its bold entrance into the Nigerian market, led a movement that has seen exponential growth of consumer and retail lending organisations across several market segments."

Salary earners and small enterprises excluded from funding by traditional financial institutions now have access to credit. Previously they were either neglected or had to borrow at rates ranging between 120 and 500 percent per annum from unstructured loan companies using their personal belongings as collateral. Credit Direct re-wrote this otherwise painful experience and changed Nigeria’s lending space forever. CFI.co | Capital Finance International

Credit Direct ran with an idea that many thought would fail. With singular focus, resilience, teamwork, technology, and outstanding leadership, the model is now tried and tested and continues to thrive. The company is more determined than ever to lead technological advancement and expand the horizons of financial service and customer experience. Credit Direct’s story over the past 12 years has been been led by Akinwande Ademosu, whose stewardship brought about the paradigm shift in the unsecured lending business. Akinwande says: “The understanding that social capital is the key to serve, and lead, successfully, and our pragmatic position in this regard, could be considered our stroke of genius. Our team members are connected and committed to the same purpose.” Credit Direct has maintained a sterling record of corporate governance, regulatory compliance, effective risk management, innovative technology and profitability that are well above the industry average. The company has progressively put together the components for sustainable growth, and indicated a resolve to remain the dominant player in its market space. i 93

> UNOPS:

Quality Infrastructure is Central to Sustainable Development By Grete Faremo Under-Secretary-General and Executive Director of UNOPS

As human beings, we go through our lives using infrastructure without really thinking about it. From roads to electricity, water and waste management to telecommunications, the quality of our life depends on the smooth running of infrastructure. It makes it possible for communities to function and thrive. It’s key to providing human dignity and improving everyone’s well-being.

he organisation I lead, UNOPS, has a mandate in infrastructure. We know, from our experience and research, that infrastructure plays a key role in sustainable development. Last year, research by UNOPS and the University of Oxford found that 92% of the targets that underpin all 17 Sustainable Development Goals (SDGs), rely on quality infrastructure. Because of its longevity, infrastructure can influence development far into the future, both positively and negatively. If not designed, built and maintained appropriately, infrastructure can lead to adverse social and environmental impacts, be vulnerable to natural disasters or leave communities and countries with unsustainable debt. Estimates suggest that more than $90 trillion in global infrastructure investment is needed by 2040 to support sustainable development. This is a huge investment. The world has a moral as well as financial responsibility to ensure that the infrastructure we build is inclusive, sustainable and resilient. INFRASTRUCTURE SYSTEMS DO NOT EXIST IN ISOLATION No infrastructure system exists in isolation. We should not view infrastructure as individual buildings or networks, such as a hospital or power distribution system, but as part of a system that together have great potential to deliver on our global goals. Take as an example SDG 3, to ensure healthy lives and promote well-being for all at all ages. To access health services, and to be able to carry out medical research, development and training, 94

communities need reliable networks of energy, water and digital communications infrastructure. To limit the spread of diseases, and decrease the risk of maternal, neonatal and child mortality, we need sanitation services through clean water provision and waste disposal. In rural or remote communities, we may need roads and transport infrastructure to access health services. In an increasingly connected world, digital technologies can help share knowledge, records and results, assisting in recruiting and training health workers, helping manage medical conditions, or quickly getting the information needed to reduce health risks from natural and man-made hazards. In Ghana, for example, UNOPS works to combat maternal and child mortality. With 36 under-five deaths per 1,000 live births, and a maternal mortality ratio of 319 per 100,000 live births, Ghana is behind global targets to reduce underfive and maternal mortality. One of the main barriers to improving child and maternal survival rates in Ghana is a lack of access to skilled health professionals, as well as wellfunctioning health infrastructure and medical equipment. To address this, UNOPS partnered with the Korea International Cooperation Agency (KOICA) to construct and equip a new midwifery training college in the Keta Municipality. An inclusive approach ensured that the finished facilities met the unique needs of a wide range of people. The project supported livelihoods through the contracting of local workers, firms and suppliers whenever possible. Community perspectives were encouraged at every stage of the planning and implementation process to CFI.co | Capital Finance International

ensure a sense of national ownership. Today, over 300 students attend the college, a valuable addition to the health facilities in the region. INFRASTRUCTURE CUTS ACROSS SDGs The SDGs are complex with many themes integrated throughout the goals. Gender equality is one such theme. SDG 5 specifically aims to achieve gender equality and empower all women and girls. But gender equality goes beyond SDG 5 and relates to all dimensions of sustainable development.

Autumn 2019 Issue

UNOPS is encouraging more women to work in the construction industry as part of a road infrastructure project in The Gambia. Photo credit: ©UNOPS

Infrastructure is key to achieving gender equality. Much of traditional infrastructure is gender-blind, and can create inequalities that last for a long time.

try to avoid harassment by skipping travel altogether. This could mean losing access to education and job opportunities, potentially limiting their economic growth.

Transport infrastructure designed without attention to women’s needs can expose them to safety and security risks, such as sexual, verbal or physical harassment. If women do not feel safe travelling on public transport or if they feel unsafe in transport stations because they are not adequately lit, they may

In Pakistan, for instance, lack of safe transport affects women’s employment and education opportunities. Less than a quarter of Pakistan’s women work, and the lack of safe and secure public transport is a reason for this. There, with support for the government of Japan, UNOPS provides CFI.co | Capital Finance International

women-only buses that help women access education and jobs. Gender equality considerations should be at the front and centre of development projects. This means considering women not just as the users of infrastructure projects, but as the workforce too. Existing gender stereotypes mean that infrastructure is often viewed as a male-dominated industry. Yet when women work on infrastructure projects, in contexts as different as Afghanistan or The 95

UNOPS works with partners to reduce maternal mortality and strengthen healthcare services in Kenya. Photo credit: © UNOPS / John Rae

Gambia, our projects have the opportunity to not just provide livelihoods and training, but also challenge stereotypes.

Quality infrastructure that is inclusive has the power to open up opportunities for the marginalised and excluded populations, reduce inequality and grow economies.

To support infrastructure projects in maximising opportunities to advance gender equality, UNOPS has developed, SustainABLE, a free online tool that identifies and recommends actions to ensure that infrastructure projects are gender-sensitive.

The extent of the world’s infrastructure needs are huge. With only a decade left to achieve the rightly ambitious SDGs, we have a collective- and urgentresponsibility to ensure that this infrastructure investment does not leave anyone behind. i

INCLUSIVE INFRASTRUCTURE CAN OPEN UP OPPORTUNITIES Practical actions, such as those outlined in SustainABLE, are key to ensuring that infrastructure identifies and responds to the needs of all its users. For infrastructure to be inclusive, these actions need to be taken during the planning, delivery, operation and maintenance of projects.

ABOUT THE AUTHOR Grete Faremo is the Under-Secretary-General and Executive Director of UNOPS - the UN’s infrastructure specialists. She previously served in the government of Norway and led four ministries in her time there. Prior to joining UNOPS, Ms Faremo was also Director of Law, Corporate Affairs and Public Relations at Microsoft’s Western European Office.

Engaging with all the stakeholders at each phase of an infrastructure project is key, so we can identify everyone’s needs, including those of the most vulnerable users. This can help influence the design of the infrastructure, to ensure that it caters to diverse needs.

ABOUT UNOPS // unops.org UNOPS mission is to help people build better lives and countries achieve peace and sustainable development. We help the United Nations, governments and other partners to manage projects, and deliver sustainable infrastructure and procurement in an efficient way.

CFI.co | Capital Finance International

Author: Grete Faremo

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> Invest Durban:

‘First-Stop-Shop’ to Stimulate Growth in South African Metropolis

nvest Durban was an initiative recommended by the Durban City Council and private businesses as the “first-stopshop” to stimulate new investment in the South African metropolis.

Investor support encompasses a four-part business mandate: investment promotion and marketing; foreign investment identification, attraction and facilitation and FDI aftercare and expansion.

It acts as a link between the council and the private business sector, offering a free investoradvisory service as well as promotion, facilitation, and aftercare services for all investment stakeholders.

Invest Durban works with organisations such as the Department of Trade and Industry, Invest SA, Trade and Investment KZN (TIKZN), the Durban Chamber of Commerce and Industry, the KZN Growth Coalition, and State-Owned Enterprises

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such as Dube TradePort, the DBSA, IDC, ACSA and others. The thrust of Durban's proposition to attract investors can be put into three broad categories: 1. Premium destination; a business and lifestyle environment most conducive to profitable, sustainable investments, with ample land available. 2. Catalytic Projects; initiatives with the potential to shift the socio-economic landscape and trigger

Autumn Autumn 2019 2019 Issue Issue

a series of investments across several sectors. 3. Priority Sectors; areas attracting planners in various ways, including the creation of clusters and the development of value chains to promote new ventures and investment opportunities. Durban is working on a number of large-scale projects with the potential to make a regional impact. The location of these projects is vital. They must either be on national trade routes or should help to break down the old apartheid living/working dynamics. Projects are selected for their scale in terms of job creation, investment size and potential revenue creation. Ideally, the projects should include a combination of uses (retail, commercial and housing, for example) and they should fit in with the United Nation's Sustainable Development Goals. The Point Waterfront Development, for instance, an ambitious plan linking the city's beach promenade and the harbour, fits into the category of a catalytic project. Projections put the potential investment value at R40bn (£2.3bn), with the creation of 6,750 jobs. Property use for the development offers a mix of office space, retail, residential and leisure options. The 55-ha site has already seen significant investment. A new cruise line terminal in the harbour, backing on to the Point, will dovetail well with the new precinct’s atmosphere.

South Africa: Durban

"It acts as a link between the council and the private business sector, offering a free investor-advisory service as well as promotion, facilitation, and aftercare services for all investment stakeholders."

Other major projects include: • GO!Durban Transport Oriented Development, which has received major road upgrades and will facilitate trade; • Centrum Government Precinct which would formalise the relationship between buildings such as the International Convention Centre (and extensions) and a related hotel, the library, council chambers and the redevelopment of Gugu Dlamini Park; • Cornubia integrated human settlement development north of Durban, on 1,300 ha, a partnership between Tongaat Hulett Development, the human settlement departments at national and provincial level, and eThekwini municipality • Dube TradePort, the multi-modal

CFI.co CFI.co || Capital Capital Finance Finance International International

facility at King Shaka International Airport. CLUSTER INITIATIVES Durban has a diverse economic landscape, including some largescale enterprises. Co-operation between the public and private sectors is formalised by cluster initiatives which draw experience and expertise from commerce and industry, labour organisations, government and academia. Under manufacturing, the following clusters or programmes are active: • KZN Clothing and Textile Cluster (KZN CTC) • Durban Automotive Cluster (DAC) • Durban Chemical Cluster (DCC) • eThekwini Maritime Cluster (EMC) • KZN Furniture Incubator • Agro-processing development programmes Research in how best to grow particular economic sectors is ongoing, and in-depth discussions are being held about how to develop and grow value chains. The resources of the KwaZulu-Natal province are mostly consumed or exported in their raw state; more could be done to add value through processing. The priority sectors are: • Automotive and allied industries • Logistics and logistics management • ICT and BPS (IT and communications) and Business Process Services • Agri-processing • Life sciences (pharmaceuticals, medical device manufacturing, and Health Facilities) • Tourism asset development Some of these initiatives play to the existing strengths of the regional economy, some seek to exploit newer avenues with the emphasis on the environment. A variety of projects link tourism, renewable energy generation, recycling and job creation. There are various programmes with their own goals and positive spin-offs for targeted sectors. These include the drive to increase local content, boosting metal fabrication across sectors; the promotion of black industrialists, promoting exports; and the over-arching eThekwini Industrial Development Policy Action Plan. i 99 207

> Middle East

Being Resourceful: UAE Pins Hopes on Oil but is Careful to Hedge Bets Before the arrival of the Portuguese and the British, the coast of the UAE thrived with a mix of trading, pearling, and agriculture. Its main cities were key players in regional trade and the silk route. Pearling came to dominate between 1869 and 1938, but its eventual demise left local economies vulnerable. Oil was the saviour, but also bore the threat of dependency. The UAE is among the world’s top oil nations and ranks third in terms of oil reserves per capita, behind Kuwait and Venezuela. It is the seventh-largest producer (3.9m barrels per day) and has tripled production since 1985. It also has the eighth-largest oil reserves (97.8bn barrels). Oil is the top sector in the UAE economy, with a 29.5 percent share of GDP in 2017; it is also the top export (30 percent). Oil rents as a percentage of GDP are 13 percent, which is higher than the top OECD oil producers: US, 0.17 percent; Canada, 0.9 percent; Norway, 3.8 percent; and the UK, 0.3 percent. The UAE has had success in diversifying its economy, and more is needed to reduce dependence on oil. Oil rents as a percentage of GDP have fallen over time despite increasing production (chart 1). Oil as an export has also fallen, down 35 percentage points since 1997. Dubai, the largest emirate by population (35.7 percent), has led the way in diversification for the UAE and the Middle East. Its main economic sectors are wholesale and retail (26 percent of its GDP), transport (12 percent), finance and insurance (11 percent), and manufacturing (9 percent). Oil and other mining are only one percent. But Dubai’s diversification model is under pressure. The 2009 global debt crisis weighed on its real estate market, construction, and tourism, pushing several Government Related Entities (GREs) close to insolvency. Dubai was able to borrow $20bn from Abu Dhabi to avert crisis and so far it has been able to keep rolling the debt over. S&P recently questioned whether Dubai could weather another economic crisis pointing to the high debt levels of the government and GREs. The government has $65bn in debt, which is equivalent to 56 percent of Dubai’s GDP. Concern over this debt is low because most of it is owed locally to government-owned banks and funds, and to Abu Dhabi (including the $20bn bailout from 2009). The debt does however reduce the government’s ability to help GREs with any future debt problems. The GREs have $59bn in debt (52 percent of GDP) with $44bn due to mature over the next three years. The $44bn is not expected to be a problem but this could change if another local or global economic crisis were to strike. The economic boycott of Qatar and the tightening sanctions for Iran have not helped Dubai. Dubai’s diversification was driven by necessity and entrepreneurial thinking. It has the second largest oil reserves of the seven emirates (4 percent) but oil production peaked in 1991 and its reserves will be depleted in 20 years. Diversification has long been a part of Dubai’s strategic thinking, coupled with entrepreneurial drive to make the emirate a key trading centre. This predates the discovery of oil in 1968, and it includes the development of the city as a British steamship port, a pearl port, and later a gold port. Oil provided the means to achieve its goal.

ntrepreneurial thinking has been evident in Dubai’s policies over time: committed to openness and to enabling business. In 1901, it declared itself a “free city”, removing trade duties and providing incentives for merchants. In modern times, it was the first emirate to introduce free trade zones (Jebel Ali in 1980), and to expand their roles from duty-free zones to independent commercial jurisdictions (1986). Dubai has also worked hard at streamlining regulations, administration, and the judicial system. It introduced specialist commercial courts in 2008 and an electronic case management system in 2014. Through its Dubai Smart City plan, it aims to bring all government services online. Such initiatives and the free zones have helped propel the UAE up the World Bank’s “Doing Business” rankings (11 in 2019). Entrepreneurism is also evident in the sectors it has promoted. Chief among these has been trade and transport infrastructure. In 1963, it dredged Dubai creek to allow bigger ships to dock, and in the 1970s it began building the Port of Jebel Ali, now the biggest port in the Middle East and the largest man-made harbour in the world. In 1960, Dubai International Airport was opened, and in 1985, Emirates Airlines was founded. The airport is now the third-biggest airport by passenger numbers; Emirates is the fourth-biggest airline by passenger numbers and second-biggest in terms of freight-tonne kilometres flown. This investment is reflected in the UAE’s high ranking in the World Bank’s Logistics Performance Index (11th in 2018). With the increase in the oil price in the 2000s, Dubai invested in tourism: hotels, attractions, upgrading its airport and planes. In a short time, it has become the number one tourist destination in the Middle East, with almost 16 million visitors in 2018. It provides 66 percent of the UAE’s tourism revenue.

Dubai has also cultivated a finance and insurance sector with the goal of becoming the main finance hub for the Middle East. In 2004, it established the Dubai International Finance Centre, a special economic zone which has its own financial regulator, judicial system (a common-law system in English), a financial exchange, and tax incentives. It also allows 100 percent foreign ownership. Today it has over 2,000 firms, 24,000 workers, and has become a centre for fintech. Dubai has also led the way in promoting ITC companies and tech entrepreneurs. In 2000, it opened the first free zone for ITC (Dubai Internet City), followed by an incubator in 2003, and a free zone dedicated to outsourcing in 2007. It has a range of initiatives in line with the UAE Vision 21 strategic plan, including initiatives to use blockchain technology for city systems. Abu Dhabi, the second-largest emirate by population (34.7 percent) and the seat of the UAE federal government, has trodden a different path to diversification. It has 94 percent of the UAE’s oil reserves, which are expected to last for another 150 years. Oil and mining are its largest sectors, providing 49 percent of its GDP. The next biggest sector is construction, at 12 percent. Abu Dhabi has invested in Sovereign Wealth Funds (SWF), the oldest and most famous being the Abu Dhabi Investment Authority (ADIA). It was in 1976 and is the and third-largest UAEfounded Oil Rents, Production Price SWF in the world with close to $700bn under management; equivalent to 46 percent of the UAE’s GDP. The ADIA is the fund manager for the Abu Dhabi government, and provides extra funding to the government when requested. It has an average annualised return of 5.6 for the past 20 years. It invests in a global range of assets, listed and private equity. In 2017, Abu Dhabi created the Mubadala Investment Company (MIC) SWF, merging the

International Petroleum Investment Company (1984) with the Mubadala Development Company (2002). It has $229bn under management. MIC differs from the ADIA in that its mandate includes the development and diversification of Abu Dhabi. Its activities more closely resemble the Dubai’s diversification efforts. Its investments in Abu Dhabi include an aluminium smelter (a joint venture with Dubai), healthcare facilities, aerospace (Strata Manufacturing), and Masdar city (a technology park and high-tech real estate development). Abu Dhabi has also begun to replicate many of Dubai’s successful policies. In 2013, it created the Abu Dhabi Global Market (ADGM) free zone. Like Dubai’s International Financial Centre, it has its own independent regulator and judicial system, but it also has its own digital registry authority, a crypto asset exchange. Abu Dhabi is also committed to ITC, tech entrepreneurship and alternative energy in line with Vision 21 and its local initiative Ghadan 21. Masdar city includes the Masdar Institute of Science and Technology (now part of Khalifa University) which has a focus on alternative energy and the environment. Abu Dhabi is also building four nuclear power reactors at Barakah, with the first to be operational in 2020. A startup accelerator has also been established in the ADGM, Hub71, with potential funding and introductions by MIC. MIC has also invested in leading superconductor manufacturer Global Foundries. Abu Dhabi’s oil wealth means that any diversification effort is less vulnerable than Dubai to debt (Abu Dhabi’s debt to GDP is less than 10 percent). But it remains vulnerable to long-term and short-term fluctuations in the oil price. Perhaps the UAE has found a formula for diversification with the separate paths of Dubai and Abu Dhabi providing a natural hedge. i

70 %

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Crude Oil Production, Index: 201=100 (RHS)

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Chart 1: UAE oil rents, production and price. Source: World Bank WDIs, World Bank Commodity Price Data, and OECD

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Autumn 2019 Issue

> Etihad Engineering:

One-stop Provider for Aircraft Maintenance and Engineering Consistently Delivering Excellence

Etihad Engineering has carried out stripping, painting and livery application on more than 100 aircraft from all over the world - this special livery features Special Olympics athletes from the UAE

tihad Engineering, situated in Abu Dhabi at the very heart of one of the world’s most prolific aviation growth markets, is the largest commercial maintenance, repair and operations (MRO) services-provider in the Middle East. It is one of the world’s leading MROs in terms of capabilities and global customer footprint. Etihad Engineering offers industry leading aircraft maintenance and engineering solutions on all major Airbus and Boeing aircraft types including the A380 and 787 Dreamliner, and more recently, the A350. The company is a member of the Airbus MRO Alliance, which aims to grow high quality services worldwide — and address the increasing demand for MRO services forecast for the next 20 years. Etihad Engineering’s mission is to be a onestop MRO solutions-provider, delivering reliable, quality performance and a superior customer experience with competitive economics. Its comprehensive range of services includes major structural repairs, cabin modifications and refurbishment, connectivity embodiments, aircraft painting, component repair and overhaul, as well as a wide array of design and engineering services. The multinational team of around 2,000 people from more than 60 nations at Etihad Engineering delivers reliable support, ensuring every customer gets the highest quality of service, leveraging decades of hands-on experience and expertise.

• The only MRO in the Middle East with both Part 21J and Part 21G approvals • In-house 3D printing lab • Onsite flammability testing lab • More than 25 international regulatory approvals • Multiple hangars, including paint hangars and one custom designed to accommodate up to three A380 aircraft • More than 500,000 square metres of site area adjacent to Abu Dhabi International Airport

Etihad Engineering has extensive capabilities for cabin configuration and modifications

Etihad Engineering's state-of-the-art facility in Abu Dhabi is spread across a site area of 500,000 sqm

Within a short period of time, Etihad Engineering has evolved to become a formidable global player in the MRO industry by consistently expanding its capabilities to include new platforms, streamlining its systems and processes, adopting new tools. It has expanded its geographical reach and established strategic partnerships with industry leaders from around the world. Etihad Engineering has many firsts to its credit: • First organisation in the Middle East to be granted a Part21G Production Organisation Approval (POA) by the European Aviation Safety Agency (EASA) • First Middle Eastern MRO to receive EASA Part 21J Major Approval • First MRO in the world outside the Boeing network to fully strip and paint a Boeing 787 • First MRO in the Middle East to carry out a heavy maintenance check on a Boeing 787 • First airline MRO with EASA approval to design, certify and fly 3D-printed parts

Etihad Engineering has been strengthening its global reach in recent years with a portfolio extending beyond the Middle East across Asia, Africa, South America, Europe and Australia.

The company has consistently demonstrated its commitment to excellence, something that has been acknowledged by stakeholders, customers, OEMs, partners, aviation authorities and the industry with international and regional awards and acknowledgements. i

KEY FACTS AT A GLANCE • Middle East’s largest commercial MRO • Capability for all major Airbus and Boeing commercial aircraft

To find out more about Etihad Engineering’s full range of services, visit etihadengineering.com and follow the company’s latest news and updates on LinkedIn at bit.ly/EYEngLinkedIn CFI.co | Capital Finance International

The onsite Lantal flammability testing lab at Etihad Engineering

Etihad Engineering has more than 65,000 sqm of hangar area including dedicated paint hangars and Hangar 6 that accommodates up to three A380 aircraft simultaneously

In-house additive manufacturing (3-D printing) lab at Etihad Engineering

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Stay Ahead

www.industrialvalley.com

Summer 2019 Issue

> Unveiling the Role of the COO:

The Playing Field is Changing While the role of the Chief Operating Officer, or COO, has been embraced by organisations for decades, the true value of the position is still unfolding as economies emerge and diversify.

s the way we work, live and interact evolves, the essence of the role is having a greater impact on the wider economy. Emerging COOs need to equip themselves with new skills, connections and insights. There is notion that once you reach the C-suite, the need for learning and professional development diminishes. After a year of studies into the needs of COOs across the GCC region — with a focus on the UAE — a trend has emerged. There appears to be a need for a platform where COOs can to share their challenges and solutions to benefit one another. COOs also require real-time insights on emerging trends and challenges which may impact their firms and roles. Founder and Board Member, Mandip said: “The vision of the COO Network (Middle East) is to address these needs. The network aims to build a more vibrant ecosystem for COOs to continue developing their roles, while building a more meaningful peer group to solve emerging challenges.” The forum was established and is operated as a not-for-profit organisation, and serves as a platform for: • Building an inclusive and diverse network of like-minded COOs, who can learn, share and develop together; • Sharing insights which will drive commercial and strategic thinking; • Providing a platform for COOs to engage in thought-provoking themes which will impact the evolution of the role; • Supporting the drive for an inclusive boardroom through mentoring and coaching. The network was founded by a group of senior professionals with experience in the role, or who are positioned to provide strategic development for a community of change-makers. The founding partners represent firms such as McKinsey & Co, Standard Chartered, Thomson

"The network was founded by a group of senior professionals with experience in the role, or who are positioned to provide strategic development for a community of change-makers." Reuters, Clyde & Co, Hawkamah, Beehive, Heidrick & Struggles, and Aditya Birla. Founding partner and board member Pierre Arman, of Thomson Reuters, shares his insights on the need for such a network: “COOs play a critical role in today’s corporate world and yet, it is often overlooked from a career development perspective. “The COO Network’s aim is to provide a platform for existing and aspiring COOs to up their game and skillset with their peers, mentors and coaches, but also to stay up-to-date with best-practice and insights. “It is humbling to be part of such great initiative, especially supporting the continuous development of local talent in the Middle East.” COOs operating in today’s rapidly evolving market must develop new skills and disciplines to remain relevant and invigorated for future challenges. The COO Network aims to solve such problems for the C-suite professionals who are central to driving this change. i

For further details on the network, please visit coonetwork.me 105

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Autumn 2019 Issue

> Strength at the Helm:

Vital for Progress in a Tough and Challenging Environment

rbah Capital’s management, counting on a team of seasoned professionals, is definitely on track to deliver superior results with its newly formulated strategy. The senior management comprises of visionary leaders, highly-skilled through their experience and diversity in their respective sphere of duties.

boards of various organisations, and has had senior roles in many GCC bodies. He has led and co-ordinated investment banking and wealth management efforts, ensuring the realisation of corporate objectives. Al-Kooheji is a seasoned executive who has held several senior roles across banking and investments, with many multi-million-dollar transactions conducted globally under his belt. He has been involved in the acquisition and exit of prime assets and large syndicates, and has more than two decades of experience. Prior to Arbah Capital, he served as an executive director at GFH Financial Group, a leading international investment firm in Bahrain. He was part of the senior management team that devised the overall strategy for the revitalization of the group after a crisis. He remained with GFH group for three years.

Over the years, the firm has successfully transformed itself into a progressive boutique investment firm, supported by a sturdy financial base and guided by a strong and stable management team. As a result, the firm’s investors have stood by it, and shown exceptional loyalty, throughout the years. The firm’s management, being equipped with contemporary tricks of the trade and proud of it, is careful to avoid any and all unnecessary risks. At the same time, interactions has been able to help its investors with financial advice and planning, in the process emphasizing the need for risk-adjusted returns achieved through management’s proficiency and dedication. The senior management of Arbah Capital is of the view that, “Arbah Capital has posed remarkable achievements over the years, the firm since its establishment successfully acquired and exited from many attractive Shari’ah Compliant investment opportunities. Our CEO: Mahmood Yousif Al-Kooheji investment services are persistently getting enriched, and now allowing our investors enjoy larger investable universe and provide our access to ever-greater opportunities”. investors with well-considered opportunities”. Further, “Despite the on-going global economic challenges affecting the financial sector, we are proudly steering the firm and its investors in a positive direction. Arbah Capital’s vision, mission and goals are well directed towards fulfilling all our investors’ expectations by providing best value-added products and services. Furthermore, we have the right balance of skills, experience and backgrounds to support the management team to achieve our business goals”. “We look forward to continue to work in the direction that would lead to: post superior financial results while maintaining high professional level,

ABOUT THE CEO CEO Mahmood Yousif Al-Kooheji joined Arbah Capital in late 2017. He immediately enriched the vision of the firm by unfolding geographical boundaries. The company has evolved thanks to international investment exposure, and facilitates investment by carrying out all the necessary actions as a prerequisite to meeting client needs. Yousif Al-Kooheji belongs to a reputable business family based in Bahrain. He is an enthusiastic proponent of diversified investment solutions. He has represented top-tier high-net-worth Individuals and corporations. He holds positions on the CFI.co | Capital Finance International

Previously, he was Head of Investor Relations at Tadhamon Capital, a Bahrain-based investment firm, and served as a key member of Arcapita Bank’s placement team that carried out billion-dollar transactions. He also held senior positions at Al-Salam Bank Bahrain, Bahrain Development Bank (BDB), and Kuwait Finance House (KFH) Bahrain. He was a founding member of Al Salam Bank and KFH Bahrain. At Al Salam Bank he managed to finance large business syndicate deals. Al-Kooheji also played a vital role in raising deposits and participation in mega projects through approaching high-net-worth Individuals and Institutions. At BDB he was the head of investments, and laid the foundation of Islamic Structured Finance Department, Business Development and Corporate Communication. He has worked in all fields of investment banking, including deal sourcing, syndication, management and exit strategies. He qualified in areas including secondary education at Bahrain-based educational institutions. He holds a Bachelor’s degree (with distinction) in International Business and Economics from the University of Texas and a Master’s in Finance from the DePaul University, Chicago. i 107

> Arbah Capital:

Netting ‘Firsts’ and Paving the Way for Islamic Investment firms in KSA

rbah Capital is the first Islamic boutique Investment firm, which was established in the Eastern Region of Kingdom of Saudi Arabia.

an IPO fund, which has outperformed similar funds over the years. It has been recognised as the best IPO fund of 2015 and the best IPO fund over three-year period.

It started its business operations in 2008, and was licensed by the Capital Market Authority (CMA) in the KSA as a Closed Saudi Joint Stock firm. It is headquartered in Dammam with a paid-up capital of 220 million Saudi Riyals ($58.7m). The firm prides itself on being fully Shari’ah-compliant.

A Discretionary Portfolio Management service is provided through sophisticated structured mechanism; advanced financial tools and best industry practices ensure that the objectives of investors are met. Arbah Brokerage Services has been one of the most stable revenue contributing segments of the firm, providing global capabilities with the concept of “Access the World from anywhere”.

Arbah Capital has the complete spectrum of investment services, and has been granted licences to operate in Dealing as Principal, Agent and Underwriter, Managing Investment Funds and Discretionary portfolios, as well as Arranging, Advising and Custody Services. The firm’s principal activities include asset management, real estate investment, private equity and corporate finance, brokerage services, wealth management, custody and advisory services. The firm has steadily grown by acquiring various prime assets and activating new business lines. The firm’s management possesses the set of traits required for any investment firm to accomplish its aim and register persist growth even against all the odds. Since establishment Arbah Capital has persistently strengthened all its revenue generating arms. The innovation has remained the continuous process for the firm. Over the years, Arbah Capital has successfully adapted to environmental changes, accepting all challenges with vigour — and effective responses. Arbah Capital’s objectives align with the investment needs of clients. The widely accepted “IWM” processes are used by Arbah Capital are holistic, and take into account the investor’s financial viewpoint while adhering to Shariah standards. The company is on an ambitious and visionary mission to offer outstanding investment solutions, with strategies tailored for clients and all efforts directed towards impressive risk adjusted returns. It manages goals which are compatible with client profiles and financial ambitions. Arbah Capital was one of the first investment firm in the Kingdom of Saudi Arabia to launch 108

The real estate investment arm was activated soon after the incorporation of the firm. Arbah Capital initiated exclusive real estate deals, encompassing project acquisitions and development. The real estate investment focus now has global exposure. A recently acquired iconic property, Sauchiehall Glasgow — worth £59.5m — was a milestone achievement. The acquisition is in-line with the firm’s strategy of targeting quality assets to establish broad base of income yielding real estate assets. The Sauchiehall Building is the anchor building in Sauchiehall Street, Glasgow, UK. Sauchiehall Street forms part of the ‘Golden Z’ of the 3 most prime retail streets in Glasgow City Center, and has the largest footfall of 16 million p.a. Private Equity and Corporate Finance is relatively a new addition to the firm, but a rapidly growing one. It has made the successful acquisition of state-of-the-art projects and effective fundraising part of the equity package. Arbah Capital successfully raised £26.5m mezzanine finance for the development of 18th Century masterpiece, Regent Crescent, in London. The deal serves as the beginning of new era for Arbah Capital as it is the first ever deal of the firm outside the region. Arbah Capital will be looking forward to expand its footprints as its building block of the growth spree. The required momentum has been gained to further expand our portfolio through similar acquisitions. Advisory services is emerging as a vital segment by strengthening the firm’s foothold. It has acted in the capacity of financial advisor to select clients and works with clients as an extension of their management to advise them on complex investments, credit arrangements, profitability analysis, monitoring of portfolios and recommendations on organizational restructuring. i CFI.co | Capital Finance International

London: Regent Crescent

"A recently acquired iconic property, Sauchiehall Glasgow — worth £59.5m — was a milestone achievement."

Autumn 2019 Issue

"Arbah Capital successfully raised £26.5m mezzanine finance for the development of 18th Century masterpiece, Regent Crescent, in London."

Glasgow: Sauchiehall

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> Etihad Credit Insurance:

Creating a Central Role in a Changing Economic Landscape The UAE’s burgeoning non-oil exports over the past three decades have made it one of the most diversified economies in the GCC.

y using the UAE as a model, Massimo Falcioni, the CEO of federal export credit company Etihad Credit Insurance, has demonstrated how to play a key role in supporting diversification and economic growth by being a stabiliser and an accelerator.

governments of Abu Dhabi, Dubai, Ras Al Khaimah, Fujairah and Ajman. The company started its operations in 2018 and has played a vital role in the development of strategic sectors, under the leadership of H.H. Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai, UAE Minister of Finance, and Chairman of ECI; and the strategic direction of H.E. Eng. Sultan bin Saeed Al Mansoori, UAE Minister of Economy, and Deputy Chairman of the Board of Directors at ECI.

The UAE's central bank revised its growth forecast for the economy upward to 2.4 percent for 2019, from an earlier projection of two percent in May. The economy grew by 2.2 percent in the second quarter, with non-oil growth expanding 1.5 percent. This compared to an official estimate of non-oil growth of 0.3 per cent in the first quarter by the Federal Competitiveness and Statistics Authority of the UAE.

ECI has been steadily progressing its mission of support for the UAE’s non-oil exports, trade, investments, and strategic sectors development. Its has supported UAE businesses’ regional and international expansion with strategic platforms across government, insurers, re-insurers, banks and lenders, regional and international Export Credit Agencies, governments, and trade promotion agencies, in addition to world organisations for economic development.

These statistics underline the importance of diversification, something further proven by the manufacturing sector’s contribution to the UAE’s non-oil GDP; that grew by 2.5 per cent to Dhs122bn ($32bn) in real prices in 2018. The UAE has always played an important role in the arena of exports and re-exports, as evidenced in a recent Ministry of Economy’s report.

CEO Etihad Credit Insurance (ECI): Massimo Falcioni

The global non-oil foreign trade of the UAE in 2018 accounts for $443bn, of which $54bn is exports and $126bn is re-exports. Over the past three decades, the UAE has achieved steady economic growth and noteworthy export diversification. The UAE also remains to be the main regional destination of Foreign Direct

Investment (FDI) inflows attracting about $11bn in 2018, which is equivalent to 2.9% of the country's GDP. The UAE Federal Export Credit Company, Etihad Credit Insurance (ECI), was established by the UAE Federal Government and its founders, the

ECI’S JOURNEY The first initiative that ECI undertook was the customer voice project. It collaborated with Abu Dhabi Chamber of Commerce and Industry, RAK Chamber of Commerce and Industry, and Dubai Chamber of Commerce and Industry. The ECI team interacted with a diverse group consisting of 60 manufacturers, entrepreneurs, and exporters to quantify and qualify the challenges. The recommendations put forth by this group were further analysed and studied to identify the key areas of support.

"The global non-oil foreign trade of the UAE in 2018 accounts for $443bn, of which $54bn is exports and $126bn is re-exports." 110

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Autumn 2019 Issue

"ECI’s first mission, steered by its deputy chairman, His Excellency Sultan bin Saeed Al Mansoori, UAE Minister of Economy to Italy, concluded with a successful partnership with SACE, the Italian export credit company (CDP Group)." This categorisation put ECI on the path to generate a sample based on the team’s interaction with 80 global entrepreneurs, and by comparing the local and global scenarios. The responses helped ECI to gain a deeper understanding of the challenges faced by exporters, and were used to create customised solutions based on prevailing requirements — ranging from accessing new markets, investing abroad, and protection for existing customers. BUILDING A STRATEGIC ECOSYSTEM A comprehensive glimpse into ECI’s activities since 2018 shows its solid advancement in terms of goals and vision. One of the striking accomplishments was the company’s establishment in a record time of just 11 months. ECI’s first mission, steered by its deputy chairman, His Excellency Sultan bin Saeed Al Mansoori, UAE Minister of Economy to Italy, concluded with a successful partnership with SACE, the Italian export credit company (CDP Group). ECI later joined hands with the Abu Dhabi, Dubai, Fujairah, Sharjah and RAK Chambers of Commerce, and has informed the exports and re-exports sector through seminars. ECI has also tapped the banking sector — regionally and internationally — through partnerships with FAB, RAKBANK, Emirates Development Bank, Abu Dhabi Commercial Bank, Standard Chartered Bank, and Natixis. ECI has partnered with international entities including Dhaman (the Arab Investment and Export Credit Guarantee Corporation) and Markel International. It collaborates with key ECAs like SACE, the Italian export credit agency, and the UK Export Finance and Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC). ECI has memberships in associations such as Berne Union and Aman Union, and

has been sending out an emphatic statement of commitment to its mandate. LAUNCH OF A SPECIALISED PRODUCT The UAE government is committed to boosting the contribution and performance of SMEs and has established strategic initiatives to support funding. ECI participated with the launch of SME Protect, an export trade credit solution specifically designed for UAE-based SME expansion plans into high-growth markets. It aims to improve ease of doing business, accelerate SME growth and sustain the UAE’s non-oil foreign trade growth development. PATH AHEAD ECI has a clear mandate to connect with various industries in the marketplace through interactive workshops to educate the UAE businesses about ECI’s solutions. According to Global Industry Reports, 2019 has been a challenging year for the global economy. To help the insured UAE businesses cope with risks, it is crucial to understand the nature of challenges and risks. ECI’s role is to minimise risks and stabilise economic development by facilitating trade and investment, and affording access to funding. ECI believes that a strong credit agency corresponds to a robust economy — which in turn equates to a strong country. In terms of specific sectors, manufacturing is one of the least insured. ECI understands that the reason behind this is a lack of understanding and a lack of knowledge on the risk associated with trade and exports. The company believes that by tapping the existing openings in the insurance marketplace and educating local businesses, an export credit agency can augment the confidence of the insured while expediting the exporters’ turnover. i

Volume of Non-Oil Foreign Trade. Billion USD 2011-2017, including Free Zone, & Warehouse (2016-2017)

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> Dammam West Independent Sewage Treatment Plant:

Another Step to Realising Ambitious Infrastructural Projects in the KSA

he Saudi Ministry of Environment, Water and Agriculture is embracing a new approach to strategic projects, contracting the country’s first independent sewage treatment plant project to the consortium led by the Metito Group and comprising of the companies; Metito, Mowah, and Orascom Construction. 112

The Dammam West independent sewage treatment plant (ISTP) — the first ISTP project in the Kingdom of Saudi Arabia — has been awarded to a consortium led by the Metito Group on a Build Own Operate Transfer (BOOT) basis. This is in-line with the Kingdom’s Vision 2030, and the wider initiatives approved by CFI.co | Capital Finance International

the Cabinet of Ministers to encourage privatesector participation in economic development initiatives. His Excellency Abdulrahman Al Fadley is Minister of Environment, Water and Agriculture and chairman of the Water And Electricity Company. He is also the chairman of the

Autumn 2019 Issue

"We are confident that it will serve as a model for other similar projects in the Kingdom and further afield." supervisory committee for privatisation in the environment, water and agriculture sectors. Al Fadley awarded the sewage treatment agreement (STA) for the plant serving the western region of Dammam, with a designed capacity of 350,000 cubic meters per day, and an initial capacity of 200,000 cubic meters per day.

developments were taking place in the kingdom. “The Dammam ISTP is a true landmark,” he said, “being the first of its kind to be developed. We are very proud that the consortium led by Metito has been awarded a project of this size and importance in one of the most dynamic markets in the World.

Signing the agreement was an integral part of the plan set by the ministry to tender similar projects to investors in various KSA regions. The project aims to upgrade services, make them more sustainable and increase capital spending efficiency by making the best use of the private sector experience in the environment, water and agricultural sectors.

“We are confident that it will serve as a model for other similar projects in the Kingdom and further afield.”

The National Centre for Privatisation and PublicPrivate Partnerships, led by CEO His Excellency Turki Abdulaziz Al Hokail, supports and enables the privatisation programme in the kingdom to develop and efficiently operate public-private partnerships (PPP) projects. This initiative is the second privatisation initiative in the water sector, signed in less than a month. The centre is working closely with the Ministry of Environment, Water and Agriculture to complete similar projects.

"Signing the agreement was an integral part of the plan set by the ministry to tender similar projects to investors in various KSA regions."

Khaled bin Zwaid AlQureshi, CEO of the Water and Electricity Company, said that the project is expected to begin operating early in 2022. Deciding to develop the project under an STA aimed to secure more benefits, making the project more sustainable and eco-friendly through the use of technological solutions to reduce odours and noise, and cut energy consumption. Metito Group chairman and CEO Mutaz Ghandour said major infrastructure CFI.co | Capital Finance International

Sami Alrayes, Mowah chairman and CEO, said: “We are proud that the Metito / Mowah / Orascom Consortium has been awarded this contract. “The objective of the privatisation projects is to achieve 2030 Vision targets by boosting service levels, improving capital and spending efficiency, and to benefit from private sector experience and participation in finance and investment.” Osama Bishai, CEO of Orascom Construction, said the initiative was a continuation of efforts to build a solid portfolio of water-related construction projects. Contributing to a greener footprint, the project is being developed on the smallest area of land required for a plant of this capacity. It uses the most advanced technologies in the treatment process, reducing power consumption. The quality of the treated effluent is one of the highest in the KSA, and the sludge quality is an EPA Class A, which can be used for landscaping and irrigation. This is truly turning waste into wealth, and the plant is equipped with a biological scrubber odour-control system to keep the surrounding area unaffected. i 113

> THE EDITOR’S HEROES Heroes Fast and Thick

hilst representing great value and the best humanity brings forth, heroes – luckily – still come fast and thick: there is, as usual, no shortage of people who insist on doing the right thing – even in the face of seemingly insurmountable odds. Take the much-maligned voter: though a fair number fell prey to demagoguery and succumbed to populism, many keep their heads cool even as the world around them – familiar and comfortable – changes at a dizzying pace, creating new realities and challenges in the process. That, given the circumstances, is a brave and even heroic attitude – and one that inspires: vast numbers of voters can still see through the clutter and reject simplistic solutions to often highly complex problems. However, the times do call for leaders with an equal supply of courage who adhere to reason and stand up to those who peddle – naively or maliciously – solutions that may look and sound wonderful but are wholly impractical or senseless, or – worse – cater to mostly irrational gut feelings as expressed in pubs while holding a pint. Sadly, there are quite a few of those too – not quite the stuff of heroes. During the recent diplomatic spat with Turkey, Geert Wilders, leader of the Dutch xenophobe Party for Freedom (PVV), called on Prime Minister Mark Rutte to completely sever relations with Ankara and order the Turkish embassy in The Hague closed. Wilders stopped just short of demanding a declaration of war be issued. The primeminister’s reply: “You’ve just illustrated the difference between leading a country and proffering pseudo-solutions via Twitter.” The priceless put-down sealed the election which took place a few days later with Wilders’ PVV coming in a distant second to the ruling Liberal Party. This issue’s heroes – a tiny and perhaps even eclectic selection out of a huge field of candidates – features people from nearly all walks of life; from screen queen Meryl Streep who dared stand up to President Trump to Professor Kwame Anthony Appiah who argues, quite convincingly, that cultural differences run less deep than is generally accepted. Prof Appiah in fact shows that

humanity is one: we share most essential values and our differences are cosmetic rather than meaningful. What a most refreshing and encouraging thought. Sharon Osbourne is lauded for her steadfastness and dedication to her, at times, rather unruly family: petite, almost fragile, Osbourne towers head and shoulders above her surroundings, keeping life on an even keel, offering meaningful support whenever needed, all the while standing strong and proud. Meanwhile, Karen Holden, a London lawyer, shares a few insights into the often obscure world of legal professionals. She turned into a rebel of sorts and set out to prove her peers wrong by setting a different example – one with a human heart and face. Lawyers are people after all (…) and we have Holden to thank for showing a softer – yet no less effective – side of the legal profession. A famously slow writer, albeit one with an outsized imagination, George RR Martin provides a measure of literary solace, entertaining untold millions with phantasmagorical tales of a vast and complex universe set in a distant past. The creative genius behind the wildly popular HBO Game of Thrones television franchise, George RR Martin treads alongside other giants such as JK Rowling and Stieg Larsson to keep readers and viewers enthralled. As a sign of gratitude, hero status is hereby conferred upon the author. Last – of course not least – New York Times columnist and Nobel laureate Paul Krugman reminds us that Keynesianism is not dead, yet. Raising formidable arguments against the austerity fad, Krugman shows – and proves – that anticyclical government spending can be leveraged as a powerful force to protect against the social fallout of economic downturns. In fact, Krugman argues that the preservation of the social fabric of crisis-ridden societies is essential if such countries are to ever bounce back. Not quite fashionable, or welcome, in today’s world, Krugman deserves a wide audience. After all, the approach first suggested by British economist John Maynard Keynes is as powerful today as it was in the late 1940s when it managed to resurrect entire economies destroyed or impoverished by war. i

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> SHARON OSBOURNE Lending a Strong Arm to Heavy Metal The formidable power behind the throne of rock and roll’s enfant terrible Ozzy Osbourne, she is credited with, repeatedly, rescuing her husband’s erratic career and laying the groundwork for a veritable business empire that made her one of Great Britain’s five wealthiest ladies, according to The Sunday Times Rich List. For, if anything, Sharon Osbourne is a lady, albeit perhaps an unconventional one. Osbourne’s unlikely rise to fame, and fortune, came after she negotiated a deal with MTV for The Osbournes, a first-generation reality show that aired on the television network between 2002 and 2005 in weekly instalments portraying the hectic, confusing, expletive-laden, yet strangely well-structured, family life of a rock star family. Just as the fictional The Sopranos offered a glimpse into the domestic affairs of a mob crime boss, The Osbournes appealed to the voyeuristic streak most reality television viewers share. Providing a backbone to the unruly family, Sharon Osbourne almost immediately became the star of the show – the only ‘together’ member of an altogether dysfunctional family. Diminutive, yet indefatigable, Sharon Osbourne used the show, and the fame it rekindled, as a springboard for a number of business ventures centred around top-tier media productions. Invited to host a number of talk shows in both the UK and the US, Osbourne fared less well due to her, purported, inability to stick to scripts and refusal to take orders from cue cards. She proved more successful as a judge and mentor on the UK edition of the X-Factor and America’s Got Talent. Osbourne proved her own talent, for business, as she almost singlehandedly rescued her husband’s career which had become stuck after the vocalist was fired from rock band Black Sabbath in 1979 for substance abuse. The daughter of a music promoter, Osbourne recruited a new band and relaunched the previously abandoned Blizzard of Ozz project, getting the vocalist back in the studio to record the new album which promptly stormed the charts. A string of hit albums followed. By now, Osbourne had launched her own management agency which was soon hired to inject new life into the careers of a number of rock bands such as Motörhead and The Smashing Pumpkins. She did, however, dismiss similar career guidance requests from Guns N’ Roses and Courtney Love. Sharon Osbourne Management also manages the wildly popular Ozzfest tour, the centrepiece of Osbourne’s strategy to return, and keep, her husband in the limelight. However, the

Ozzfest only got its start after the Lollapalooza Festival refused to sign him on for being past his prime, too drugged up, and “uncool”. Now approaching its twentieth iteration, Ozzfest Summer Touring Festival has become a globetrotting show offering fans in the US, Europe, and Japan a taste of the crop of heavy metal. Earlier this year, Osbourne was instrumental in arranging one last show of the original Black Sabbath band – or what’s left of the group – in its home city Birmingham – the culmination of a world tour aptly named The End. After fifty years in the music business, one of its most rowdy chapters was closed when Black Sabbath, reunited with its frontman in 2011, took to the stage for one last time to deliver its signatory blend of heavy metal, psychedelic rock, and blues. After the show Osbourne

commented: “I first saw them when I was 16. Now, I’m 66. Where has my life gone.” This quote was sanitised for editorial reasons. As it happens, Osbourne’s life with numerous ups and downs, has been an inspiration to many as she battled, and overcame, domestic violence, alcoholism, extramarital affairs, cancer, and a plane crash to emerge victorious, fully in charge of her own destiny and that of her family. Her autobiography Extreme remained at the top of the Sunday Times Bestseller List for fifteen weeks, selling more than 620,000 in the UK, and smashing the previous record set by David Beckham. Two more autobiographies – Survivor and Unbreakable – followed the success of the first one and attest to the resilience of a rather unlikely heavy metal groupie-turned-wife and impresario.

“Just as the fictional The Sopranos offered a glimpse into the domestic affairs of a mob crime boss, The Osbournes appealed to the voyeuristic streak most reality television viewers share.” 116

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Autumn 2019 Issue

> GEORGE RR MARTIN Master of Character

He created a vast universe out of thin air, provided it with an intriguingly rich and diverse society, and put a bewildering number of dynasties in charge of it all. The world he shaped has the world in thrall. George RR Martin of Game of Thrones (GoT) fame is not a garden-variety novelist. A master of character development sans pareil, Martin takes his time to craft and weave a storyline across multiple dimensions. The runaway success

of GoT – now ready for its anxiously-awaited seventh season on HBO television – is invariably ascribed to the plot’s unique blending of high drama and a slight touch of magic, just enough to set the pace and keep audiences hankering after more. In a 2011 interview with The Guardian, Martin explained that the ultimate fate of Westeros and its people remains a mystery. He belongs to the gardening variety of writers who

dig a hole, plant a seed, and keep watering it, all the while wondering what will sprout. “I am certainly not an architect-type writer who plans everything, up to the smallest detail, ahead of time and constructs the entire edifice before putting pen to paper.” JK Rowling is such an architect. She worked three years on tracing the precise trajectory of Harry Potter before writing The Philosopher’s Stone (1997) – the first book in a series of seven. Whilst architect writers’ approach to their craft is meticulous and mostly set in, well, stone, gardeners have no clue where their story will end up: “They find that out as it grows.” Sometimes, the creative gardening process gets out of hand with books running to beyond 1,500 pages. In a 1993 letter to his publisher, Martin stated that he is likely to lose all interest in pursuing a predetermined storyline: “I do, however, have some strong notions as to the overall structure of the story I’m telling, and the eventual fate of many of the principle characters in the drama.” This fluid method allows the writer to richly flesh out characters as the storyline unfolds, adding traits almost at will. Maintaining an open canvas also enables Martin to push the envelope in any direction he chooses: “Once he puts it all into a cohesive story, then he says ‘I have done it, I can’t revisit it because I’m going to be bored.’ He experiences the story as he writes it and he wants to be able to surprise himself to some extent or get new ideas along the way,” explains Linda Antonsson who, with Martin, co-authored A World of Ice and Fire (2014), a companion book to the A Song of Ice and Fire fantasy series from which GoT is extracted. Back to gardening and its inherent risks. What started out as a trilogy became a much larger work when Martin suddenly discovered that even at 1,400 pages he had failed to reach the halfway point of his story. With characters strung out over an immense world, the writer also faced a challenge in meshing the various storylines and bridging time gaps in the sprawling narrative. The fourth book – the first one of the second trilogy (…) – A Feast for Crows, published in 2005, immediately claimed top spot on bestseller lists the world over. By now, Martin had gained iconic status, not least after he was tipped as the next JRR Tolkien whose The Lord of the Rings trilogy had enjoyed renewed popularity after being released as three blockbuster movies between 2001 and 2003. Propelled to fame, Martin struggled with time management, eventually ditching his involvement with the GoT television franchise to concentrate on finishing the next two or more instalments of the book series.

“What started out as a trilogy became a much larger work when Martin suddenly discovered that even at 1,400 pages he had failed to reach the halfway point of his story.” CFI.co | Capital Finance International

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> KAREN HOLDEN Upending the Legal Industry Lawyers, right? Perhaps, not the most loved of professions. Everybody, or so it would seem, has a story to tell about some less savoury member of the legal trade. Still, according to the latest Veracity Index, compiled annually by the pollsters at Ipsos MORI, lawyers don’t do all that bad: fully half of those queried trust them to tell the truth. Politicians and government ministers are at the bottom end of the index, whilst physicians bask in the public’s trust at the other end of the scale. Lawyers, then, are not so bad after all. Karen Holden (40) is doing her bit to improve the profession’s standing. Disgusted by the prevailing bottom line culture and mindset at big law firms, she exited the world of large-scale corporate law to start her own boutique outfit – “a very scary proposition” – based on a deceptively simple, yet novel, idea: giving clients the service they deserve (and, presumably, pay for). A City Law Firm, founded in 2009, has proved a hit in more ways than one. Replacing the money of the business with trust and respect for both clients and staff, has allowed selfproclaimed mumpreneur to do what she likes best: push the boundaries of the legal profession, broaching new frontiers, and offering exquisitely tailored solutions to issues that other largely ignore or dismiss as too esoteric. A lawyer motivated by the sheer beauty of the law is a rarity indeed. “At big law firms, associates are often discouraged to set their own agenda or pursue interests in legalities that do not promptly impact the bottom line. That approach, regrettably, can lead to a dulling of the senses and run-of-the-mill outcomes. Yes, results are obtained this way, but their quality could have been so much better.” At A City Law Firm, Holden allows, and encourages, staff members to freely explore novel tactics to square away any given issue. Flexibility and a multidisciplinary are central to the firm’s approach. Another innovation pioneered by Holden is her insistence on maintaining a strict separation between personal and private spheres: “A happy workplace greatly contributes to entrepreneurial success and quality outcomes. Having staff plugged in 24/7 does not make such a workplace. In order for us to consistently deliver peak performance, we need a rest every now and then. It is a fallacy to think that clients are best served with professionals who are always on the go.” Akin to blasphemy in the high-octane London legal world, the relaxed, yet focused,

Photo: BusinessLeader.co.uk

approach introduced by A City Law Firm is yielding good dividends. The firm has just moved into its own building – no mean feat in London – and manages to retain its professionals better than most. “We emphasise life-long education and personal development. That means, professionals who are in it for the love of their craft seldom wish to jump ship, whilst those seeking to maximise billable hours – to the detriment of the client – are kept away. That’s how we like it.” Business has been good, if not booming. Word of mouth worked its wonders and steadily, clients have found their way to A City Law Firm with business streaming in from Hong Kong, New York, Dubai, Gibraltar, and the Caribbean. The firm also found its own niche – helping businesses deal with the legal aspects of new technology. “This constitutes an exciting new field, essentially uncharted territory. The speed at which technology developments is such that the law cannot keep up. That, in turn, creates all sorts of risks to both companies and their

investors. We help to temper the initial excitement that usually accompanies the unveiling of the next-greatest thing. That excitement may blind businesses to risk factors which may end up affecting their sustainability or clash with risk mitigation frameworks.” It used to be – once upon a time – that the legal profession was the preserve of classicists – artists, really, who diligently studied history to decipher the thoughts and philosophies that went into the organisation of society and ensured its progress. The difference between the letter and spirit of law – that fertile hunting ground of lawyers – offered an opportunity to experiment, probe, and establish jurisprudence. Any effort to rescue law – that most noble of pursuits – from the clutches of bean counters and other assorted miscreants is both welcome and desirable. Holden, by declaring her independence from Big Law, may be somewhat of a quixotic rebel; however, she may just be destined to remind her fellow lawyers of their chosen profession’s beauty and its importance – if done right.

“At big law firms, associates are often discouraged to set their own agenda or pursue interests in legalities that do not promptly impact the bottom line. That approach, regrettably, can lead to a dulling of the senses and run-of-the-mill outcomes. Yes, results are obtained this way, but their quality could have been so much better.” 118

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Autumn 2019 Issue

> PAUL KRUGMAN The Last of the Keynesians He doesn’t hold out high hopes for the Trump presidency: in fact, calamity is on the horizon. Barely a month into the Trump Administration, economics professor and New York Times columnist Paul Krugman concluded that the high and exalted office has failed to rub off on, or ennoble, the real estate tycoon: “Every day brings further evidence that this is a man who completely conflates the national interest with his personal self-interest and who has surrounded himself with people who see it the same way. Each day also brings further evidence of his lack of respect for democratic values.” Krugman (64) writes and speaks with considerable authority. In 2008, he was awarded the Nobel Memorial prize in Economic Sciences for his research on trade flows and economies of scale. A prolific as well as opinionated writer, Krugman authored over twenty books and many hundreds of columns and essays. A self-styled modern-liberal, the New Yorker played a minor role in the formulation of 198s Reaganomics – an episode he remembers as both thrilling and disillusioning: “Already then, I was quite convinced – as I am today – that the welfare state represents the most decent economic arrangement yet devised.” That opinion makes Krugman an instant outsider in a world obsessed with – though not addicted to – fiscal probity. Krugman is an unabashed social democrat – and as such, an oddity in the United States – who incessantly argues that capitalism needs to be saved from itself to the benefit of all people – as opposed to the oligarchic few. Considering President Trump’s proposals for the US economy as “Reaganomics on steroids”, Krugman fears that the white working (or salaried) class that propelled him to the White House is in for a rude awakening: “They are about to be betrayed and won’t be happy for long. The numbers tell an interesting story. Thanks to Obamacare, the number of uninsured Americans fell by thirteen million. Whites without a college degree, who voted for Trump by a two-to-one margin, account for almost two-thirds of that decline. That means around five million Trump supporters just voted to makes their lives nastier, more brutish, and shorter.” Most may not have fully understood what was at stake, or believed Trump’s repeated assurances that he would replace Obamacare with something “great”. It never fails to amaze Krugman how many voters insist on self-harm. The gullibility with which simplistic solutions to complex issues are accepted as the ultimate truth, lays bare an inconvenient truth in politics: demagoguery wins. It just happens that Donald

Photo: The Salt Lake Tribune sltrib.com

Trump, for all his shortcomings, is a marketing genius. Of late, Krugman has attracted significant flack when debunking fallacies in economic thinking. The myth of trickle-down economics is one of his favourites bugbears as is the more recent window dressing by the Trump Administration: border taxes and strong arming corporations to stay at home are to Krugman a sure-fire way to undermine US productivity – and by extension prosperity – levels. Contrary to popular perception, Krugman was no fan of President Obama and his economic take. He thought the stimulus plan that followed the 2008 financial crash too small in relation to the size of the US economy and too tilted to providing relief to the financial sector.

Though he advocates free trade, Krugman did suggest subjecting imports from China to a surcharge in order to compensate for the country’s insistence on keeping the exchange rate artificially high, thereby indirectly subsidising Chinese exporters. A Keynesian through and through, Krugman never tires in criticising governments that in times of crisis chose fiscal austerity over full employment: “lives are blighted by the absence of jobs as recessions turn into depressions. When caught in a downwards spiral, the only feasible solution is to provide stimulus via increased expenditure. Not doing so, affects the social fabric of society and causes damage that, of not irreparable, always proves very expensive to repair.”

“Considering President Trump’s proposals for the US economy as “Reaganomics on steroids”, Krugman fears that the white working (or salaried) class that propelled him to the White House is in for a rude awakening: “They are about to be betrayed and won’t be happy for long.” CFI.co | Capital Finance International

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> KWAME ANTHONY APPIAH Universal Values Offering help to those in need may perpetuate misery and dependency. Whilst the largesse of donors often can address immediate needs, sustained efforts at providing assistance usually fail to attain the desired outcome – people remain poor and nations underdeveloped. Thus, kindness to strangers may ultimately prove futile. Professor Kwame Anthony Appiah (63) urges people and nations to take full responsibility for their own actions. A cosmopolitan in heart and mind, the professor argues that governments must be made to serve and further their nations’ best interests. Countries struggling to attain a modicum of prosperity should, at most, receive assistance on the theory and practice of good governance. Prof Appiah’s pragmatic approach to the human condition is not universally popular. In fact, the British academic caused a small firestorm when he stated, rather boldly but not without reason, that western civilisation as it is generally understood does not exist. The celebrated ideal is not quite what it seems. In Mistaken Identities - one of last year’s Reith Lectures broadcast by the BBC - Prof Appiah unravels the many myths and misconceptions surrounding the concept of western civilisation, concluding that its core humanistic values are, essentially, universal ones that may readily be applied to any culture and adopted by people of any creed, race, or nation. In this era of rising populism, Prof Appiah’s message is an important one: values such as democracy, tolerance, rational inquiry, and liberty are not a birth right; they need to be actively cultivated, studied, cherished, and used in order to be preserved. Moreover, such values are, Prof Appiah argues, not the hallmark of the west: “The modern concept of western culture largely took its present shape during the cold war. We forged a grand narrative about Athenian democracy, the Magna Carta, Copernican Revolution, and so on – weaving a direct line from Plato to NATO.” Western civilisation was understood to be liberal, tolerant, democratic, and progressive although Europe was none of these things until the turn of the last century. Spain, to take but one example cited by prof Appiah, resisted the advent of liberal democracy until well into the 1970s, by which time, it had already firmly taken hold in India and Japan – part of The East and purportedly the cradle of Oriental despotism. Conversely, the American Founding Fathers’ love of Anglo-Saxon freedom and Athenian liberty did not stop them from creating a slave republic. The western narrative that connects the thoughts and ideas espoused by Plato, Aristotle,

or Saint Augustine to the present day world may be entirely correct, but that does not guarantee their longevity. “It is delusional to think that enjoying mere access to these values keeps them alive indefinitely.” In a distant past, the centrality of Aristotle’s teachings to Islamic thought went unquestioned. Early Muslim theologians such as Averroes, Alpharabius, Alkindus, and Avicenna considered the Greek philosopher their ‘first teacher’ and built upon his work to formulate a Muslim philosophy that, in turn, influenced and inspired Thomas Aquinas and many others (Heidegger, Kant, Dante). Yet today, Aristotle features not even as a footnote amongst Islamic scholars. That said, the Aristotelian essence is still present in Muslim culture and may be easily revived, “should people elect to do so,” says Prof Appiah: “These values are only ours if we care about them. They represent choices to make, not tracks laid down by a western destiny.” Cramped on a warming planet adrift in

a universe of unimaginable size, some seven billion people can no longer afford to ignore the cosmopolitan impulse that originates from our common humanity. According to Prof Appiah it is hard, if not impossible, to improve on Publius Terentius Afer – Terence the African, a freed Roman slave of Berber descent and a celebrated playwright. In The Self-Tormentor, his second play (or third – historians disagree) first performed in 165 BCE, one of the characters, apologising for his intrusion onto the scene, is quoted saying: “I am human, and nothing of that which is human is alien to me” – cosmopolitanism in a nutshell. An idea in urgent need of rescue. Professor Kwame Anthony Appiah holds an appointment at the Philosophy Department of New York University. Foreign Policy Magazine rated him one of the world’s top thinkers. In 2012, Prof Appiah received the National Humanities Medal from then-US President Barack Obama during a ceremony at the White House.

“A cosmopolitan in heart and mind, the professor argues that governments must be made to serve and further their nations’ best interests.” 120

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Autumn 2019 Issue

> MERYL STREEP Inexplicable Magic She takes no prisoners and is terrifying. At this year’s Screen Actors Guild Award in Los Angeles, Hugh Grant confessed to being properly intimidated by Meryl Streep, his co-star in the 2016 British comedy-drama Florence Foster Jenkins. “Normally, people you’re frightened of get better in reality, when you meet them it is often not as bad as you thought. This, however, was frightening throughout. I’m still frightened of her.” Not so US president Donald Trump who branded the grand dame of Hollywood “overrated” after she chided the then-president-elect for mocking a disabled reporter. Adding his voice to the abuse hurled at Streep on social media, Mr Trump also called the actress “flunky” and denied he ever made fun of a disabled person: “Couldn’t do it.” In her acceptance speech for the Cecile B DeMille lifetime achievement award at the 2017 Golden Globes, Streep (67) cautioned against the erosion of moral values. Whilst not mentioning Mr Trump by name, the actress stressed that the occupant of the “most respected seat in the country” gave a performance – imitating a disabled reporter – that sank her heart: “I still can’t get it out of my head because it wasn’t in a movie. It was real life.” “This filters down into everybody’s life, because it kind of gives permission for other people to do the same thing. Disrespect invites disrespect. Violence incites violence. When the powerful use their position to bully others, we all lose.” One of only six actors to have won three Academy Awards, Meryl Streep is considered the voice of the Hollywood liberal elite, even though the Los Angeles Times tentatively concluded no such body exists. The paper’s year-long investigation into the film industry’s portrayal and espousal of American values started off on the premise that Hollywood is merely an industrial complex run by white men for the benefit of their peers. “These men prefer to make films and television shows about other white men, who are often alienated, wield guns, and fight to survive as individuals against a corrupt or sinister system,” wrote columnist Mary McNamara. Still, the perception not only lingers but has intensified since Donald Trump took up residence in the White House. Meghan McCain, daughter of the senator and 2008 Republican presidential nominee John McCain, promptly tweeted: “This Meryl Streep speech is why Trump won. And if people in Hollywood don’t start recognising why and how — you will help him get re-elected.” However, anyone less out-of-touch with moral values than Streep is hard to imagine. She enjoys a well-earned reputation for directness,

established during the shooting of Out of Africa when she took on – and triumphed over – director Sydney Pollack (1934-2008). “She was so direct, so honest, so without bullshit. There was no shielding between her and me at all,” remembered Mr Pollack afterwards. Whilst the film proved a hit at the box office and received much acclaim, a few critics remarked that Meryl Streep somehow never seemed to play herself. Her technical finesse of the seventh art is such that the persona disappears – or morphs seamlessly into the character portrayed. Yet, Streep is decidedly not devoid of personality. She has battled against the popular notion that the US film industry is a last bulwark of progressive liberal elites, drawing attention to the modest origins of most of her fellow movie stars and their political diversity.

Streep has long advocated for women’s rights and donated her one million dollar fee for The Iron Lady – in which she memorably portrays Margaret Thatcher – to the National Women’s History Museum. She also established two scholarships at the University of Massachusetts Lowell for English and Math majors. Quite exceptional for a well-known personality in the US, Streep admits to not belonging to any church, temple, or synagogue, saying that she doesn’t believe in the power of prayer: “It’s a horrible position as an intelligent, emotional, yearning human being to sit outside of the available comfort. But I just can’t go there.” She does, however, believe in “love and hope and optimism – you know, the magic things that seem inexplicable.” Nothing, though, to be afraid of.

“Meryl Streep is considered the voice of the Hollywood liberal elite.” CFI.co | Capital Finance International

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> Latin America

Too Big to Fail? Looking Beyond the Facade of Brazil’s Bolsonaro It never takes long for Brazilian voters to regret their choice. Congressman Jair Bolsonaro took the reins as the country’s 38th president in January, promising to deliver the nation from leftist politicians and put Brazil on the path of prolonged growth. “Sustainable” is not a word Bolsonaro favours: he’s not into terms that imply political correctness, let alone carry any environmental connotations. Against a background of devastating forest fires, the Bolsonaro regime is accused of allowing destruction by reducing levels of land protection and spouting anti-green rhetoric. Bolsonaro has in turn accused NGOs and environmentalist groups of starting the fires with the aim of “causing embarrassment” to the government. Years of political infighting, and the lingering effects of the 2008/9 financial meltdown and the tapering of the commodities super cycle, had left deep marks on the Brazilian economy. Lula’s Miracle 2.0 turned into a corrosive economic nightmare with bulging deficits all-round and a steep recession with the contours of a full-blown depression. Considering that change couldn’t possibly make matters worse, investors welcomed the Bolsonaro administration with an optimism that bordered on the reckless. Not all were welcoming, however; Bolsonaro was stabbed at a Minas Girais rally in early September. He is now recovering from post-attack surgery, having lost 40 percent of his blood in the incident. His attacker was said to have been suffering from mental illness, but this was far from being his only detractor. After the restoration of democracy in 1985, some 18 years went by before the country’s electorate turned to an outsider in desperation over successive failed presidencies. Long discarded as a dangerous extremist by a nation that traditionally seeks compromise and prefers to avoid confrontation, Workers’ Party frontman Luiz Inácio “Lula” da Silva was reluctantly dispatched to the Palacio do Planalto – the Brazilian seat of power. Shedding most of his ideological baggage and embracing pragmatism, the former metalworker and union leader quickly became the darling of the nation and the global business community. Lula set Brazil on a path of accelerated growth that was to last, without too many hiccups, for seven years.

President: Jair Bolsonaro

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Autumn 2019 Issue

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owever, the Second Coming of the Brazilian Miracle ended in disappointment with the former president now languishing in prison, serving a 12-year sentence for corruption and money laundering. Hoping to repeat the initial performance, if not the ending, Brazilians last year decided to look to the far right for an outsider with answers. REALITY CHECK Throughout the lean years, most investors had remained inexplicably upbeat on Brazil, pushing the benchmark Bovespa Index upwards from an early 2016 low of around 38,600 to well above 95,000 in late March, just off its all-time high slightly north of 100,000. After Bolsonaro secured his mandate in the October 28 runoff election, domestic sentiment improved. According to a barometer maintained by the Getúlio Vargas Foundation, consumer optimism reached a seven-year high in February. The thinktank also noted that the gap between expectation and reality has never been larger. Unemployment, at 11.6 percent, is no longer falling. Retail sale volumes dropped by 2.2 percent late last year. Car production slumped, retreating 10 percent year-on-year. This prompted Itaú Unibanco to shave half a percentage point off its 2019 growth forecast, which now stands at two percent. The construction sector, one of the main pillars of the economy, is unable to find its groove after the government scaled back infrastructure investments in the wake of the Car Wash investigation that uncovered and mapped a disconcertingly wide network of collusion between builders and politicians. Employment levels at construction firms shrank by about 40 percent and are unlikely to recover soon; the government budget for infrastructure investment has been all but depleted. Although the courts are actively pursuing cases against politicians, captains of industry, civil servants and others who monetised their power, the prevalence of corruption throughout society is hampering development. Over the years, a vast legal framework has been erected to fight it — but the resulting bureaucratic labyrinth has not contributed to an improved business climate. The World Economic Forum (WEF) in 2018 ranked Brazil 136th of 137 for burden of government regulation. For decades, private employers have complained about compliance costs spiralling out of control, yet no government has addressed the issue. Businesses also suffer from overly complex social security and pension laws and regulations which add almost 60 percent to the net payroll. In a global survey, the World Bank found that Brazilian corporations spend almost 2,000 hours to prepare their annual tax filings compared to a global average of 236 hours. The number still represents an improvement of sorts: in 2013,

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Brazilian companies needed all of 2,600 hours to comply with tax law. Though some 600 hours have been slashed, Brazil still tops the ranking of countries for fiscal compliance burden (Bolivia comes in second). CLEAN SWEEP Holier-than-thou Lula fell for the lure of easy money, and nobody is truly safe. Bolsonaro, elected to execute a clean sweep of Brasília, promised zero tolerance for corruption. But three members of his cabinet have been implicated in ongoing affairs, and his senator son Flávio caused an uproar when he asked a Supreme Court judge to suspend an investigation into a series of suspicious transactions involving an aide. Flávio Bolsonaro reminded the Supreme Court that, as a member of the upper house, he enjoys full legal immunity. The case centred on a sum of about $320,000 that moved in and out of a bank account registered to Fabrício Queiroz, the long-time driver and aide of the “first son”. Some of the money that appeared in Queiroz’s account was transferred to Michelle Bolsonaro, Brazil’s first lady – bringing the dubious transactions uncomfortably close to the presidency. Investigators noted that over a period of three years, some $3.5m moved through the aide’s bank account. The suspicious transfers came to light as police and prosecutors took a closer look at the dealings of Rio de Janeiro state legislators, who may have lined their pockets via the hiring of phantom office staff, whose fictitious salaries they are alleged to have pocketed. Queiroz came into focus after his daughter was found to be on the payroll of then-state legislator Flávio Bolsonaro, yet never reported for work. Anti-corruption watchdog Transparência Brasil (TP, or Transparency Portal) does not expect the Bolsonaro administration to live up to the president’s campaign promises. “It would seem to be business-as-usual and we do not anticipate big changes,” said TP-director Manoel Galdino. During the election campaign, Bolsonaro lambasted the misuse of legal immunity, calling it a “garbage” provision. At the annual summit of the World Economic Forum in Davos, Switzerland, he emphasised his administration’s commitment to stamping out corruption and reducing the bureaucratic burden on businesses. The “Trump of the Tropics” also pledged to rid Brazil of left-wing ideology and transform the country into a profit machine: “This is a turning point for my country. Ideological bias will be purged from our policies.” At Davos, Bolsonaro received a lukewarm welcome. He represents in many ways the antithesis of the Davos Man – liberal, global, and, above all, politically sensitive and correct. Ending his brief statement to an audience more curious than convinced with his motto “God above all”, the Brazilian president drew brief applause. His nationalist and paternalist style does not sit well CFI.co | Capital Finance International

with the global elite; nor does his lack of interest in environmental causes. FINE Only hours after his inauguration, Bolsonaro signed a decree transferring the administration of indigenous reserves and the quilombos founded by maroons — runaway slaves — in the 18th and 19th Centuries to the Ministry of Agriculture. The ministry has been entrusted to Tereza Cristina, who for years headed the rural caucus in congress and is considered a representative of the agribusiness sector. Bolsonaro has repeatedly questioned the territorial extension of protected lands and has opened vast tracts to mining and agriculture. Some 13 percent of the country’s landmass has been set aside for about one million native peoples. The internationally respected federal agency for indigenous affairs, Funai, which is recognised for its anthropological expertise, has been reassigned from the Ministry of Justice to the politically insignificant ministry of Women, Family, and Human Rights, which is controlled by an evangelical pastor. Bolsonaro may harbour a slightly mischievous streak: Funai has long been at odds with evangelical missionary societies trying to contact isolated tribes and communities. The agency has expelled missionaries from the reserves it used to manage, sometimes even prosecuting individual pastors for trespassing. Bolsonaro has also degraded the federal environmental protection agency Ibama — but not before demanding the nullification of a $2,500 fine he received in 2012, but never paid, for illegally fishing in a marine reserve. The officer who wrote the ticket, and who had since progressed through the ranks to become head of Ibama’s Air Operations Centre, was fired from his job a few weeks after Bolsonaro took office. The government has unveiled plans to privatise most of the country’s national parks, including the Foz de Iguaçu reserve which straddles the tricountry border with Paraguay and Argentina and includes one of the world’s largest waterfalls. Also in the list of parks to be auctioned-off is Fernando do Noronha island, with its pristine underwater reserve, as well as the Itatiaia, Pau Brasil, and Chapada dos Veadeiros nature reserves. HESITANT START The Bolsonaro Administration has come under increased pressure to take the stalled legislative initiative and jumpstart the economy. According to the Getúlio Vargas Foundation, the country is close to registering its worst economic decade since GDP measurements begin in 1901. If forecasts remain unaltered, growth between 2011 and 2020 will have averaged just 0.9 percent annually – far below the level needed to keep up with population growth. While the administration celebrated February’s job figures, which showed that more than

Autumn 2019 Issue

173,000 jobs had been added to the economy, corporates are less upbeat. Swiss pharmaceutical giant Roche announced the shuttering of its production facilities in Brazil, with the loss of 500 jobs. According to a statement by the company, its Rio de Janeiro factory is no longer financially sustainable. Colombian airline Avianca also closed its Brazilian operation, allowing its local subsidiary Avianca Brasil to file for bankruptcy in December. In April, the airline stopped servicing its 21 routes and dismantled its offices. In February, Ford Motors closed a truck manufacturing plant in São Bernardo do Campo, an industrial city adjacent to São Paulo, with the loss of 3,200 jobs. Workers at a nearby Volkswagen facility accepted a steep pay cut to keep their facility open. Most large corporates have now scaled back their investment plans, awaiting developments in Brasília, particularly the ongoing tug-of-war between congress and the administration over pension and social security reform. DEALING WITH CONGRESS Late March, Bolsonaro warned that a failure to write the proposed reforms into law would bankrupt the country, while economy minister Paulo Guedes said he would quit if his recommendations were not followed. Both Bolsonaro and Guedes lost their patience after extended negotiations with congress failed to yield any discernible result. Instead, lawmakers supported a surprise move by a few of their peers to assert and seize control of the federal budget. Earlier, 11 political parties demanded that the administration tweak its reform plans to spare rural, elderly, and disabled people. While the speaker of the Chamber of Deputies denied that the power-grab would handicap the government’s reform plans, markets disagreed and plunged. The Bovespa stock market index nosedived 8.5 percent in one week as the Brazilian real lost 2.3 percent of its value vis-à-vis the US dollar. The Bovespa has since clawed back. The Chamber of Deputies is aware that Bolsonaro’s convening power is waning, and with it his ability to set — and drive — the national agenda. The administration already suffers from the lowest approval rating of any presidency since the early 1980s. Polling agency Ibope found that just 34 percent of the people it canvassed described Bolsonaro’s performance as either excellent or very good – down from 49 percent in January. Almost one in four Brazilians now considers the present government terrible or bad. Some 44 percent of the people interviewed by Ibope do not think that the president can be trusted to deliver on his campaign promises. The moment to enact a broad reform agenda may thus have passed. Investors are becoming slightly less confident that the president, once properly beset by a number of affairs swirling around Brasília, may prove unable to govern effectively. Their concerns are partially grounded in the experience of Bolsonaro’s predecessor, Michel Temer, whose reform plans were also scuppered by accusations that he authorised the payment of bribes to members of congress. Though the president survived the resulting scandal, his policy initiative did not. CFI.co | Capital Finance International

Market watchers agree that the Brazilian stock market has so far proved fairly firm thanks to the optimism of local investors. Since last year’s final quarter, foreign investors have exited the market shrinking their exposure by at least $3bn. Markets remain jittery and react instantly to any developments in the clash between the president and congress. The Bovespa Index retreated 7,000 points in mere hours after the Rodrigo Maia, chairman of the Chamber of Deputies, told the president to get off Twitter and start rallying support for his plans in congress. An attempt to calm frayed nerves backfired when Economy Minister Paulo Guedes refused to engage with congress, and dispatched his technical team instead. Guedes turned up next day to reboot negotiations. GOING FOR 12 ROUNDS Bolsonaro shows no signs of giving up the fight to save his reforms plan – or his administration. Brasília politics favour compromise. Guedes knows this and admits that he over-asked to get a result close to the one he could live with. No member of congress will want to be seen to take away pension entitlements without offering something of roughly equal value in return. As Bolsonaro’s predecessors know only too well, this give-and-take is a zero-sum game. The resulting quandary is how to boost Brazil’s economic output in an environment that does not seem to allow for meaningful expenditure cuts. One solution would be to expand GDP, and narrow the seven percent fiscal gap, by focusing on policies that seek to improve the overall investment climate and make Brazil a more welcoming place for foreign businesses while easing the administrative burden. The Bolsonaro administration is aware that it enjoys the leeway to do just that. Scrapping leftist policies that hamper business growth implies doing away with often cumbersome legislation that was put in place to combat illicit practices and discourage unhealthy liaisons. Most of these checks are of little practical value. Finding economic growth is essential at this stage of Bolsonaro’s presidency: negotiations with congress are usually much easier to conduct when the country is growing at a solid clip. Administrations beset by salacious affairs and suffering from slow or negative growth soon find that congress will assert its powers. Bolsonaro is not the type of leader to command a lame duck administration. He should also not be dismissed as all-talk, no action. As a long-time backbencher he is aware of the way congress operates, and how to negotiate with political adversaries and reluctant allies. Though his administration is currently going through a dip, Jair Bolsonaro is neither down nor out. Investors taking a breather on the sidelines waiting for a breakthrough on pension reform may be disappointed, but those brave enough to jump in as soon as other fronts start reporting progress could be in for a windfall. Brazil may look odd from afar, but it seldom disappoints. It is a country too big to fail. i 125

> Mohamed A El-Erian:

Who Lost Argentina, Again?

nvestors and economic observers have begun to ask the same question that I posed in an article published 18 years ago: “Who lost Argentina?” In late 2001, the country was in the grips of an intensifying blame game, and would soon default on its debt obligations, fall into a deep recession, and suffer a lasting blow to its international credibility. This time around, many of the same contenders for the roles of victim and accuser are back, but 126

others have joined them. Intentionally or not, all are reprising an avoidable tragedy. After a poor primary-election outcome, Argentinian President Mauricio Macri finds himself running for another term under economic and financial conditions that he promised would never return. The country has imposed capital controls and announced a reprofiling of its debt payments. Its sovereign debt has CFI.co | Capital Finance International

been downgraded deeper into junk territory by Moody’s, and to selective default by Standard & Poor’s. A deep recession is underway, inflation is very high, and an increase in poverty is sure to follow. It has not even been four years since Macri took office and began pursuing a reform agenda that was widely praised by the international community. But since then, the country has

Autumn 2019 Issue

Although they have been committed to an ambitious reform program, Argentina’s economic and financial authorities have also made several avoidable mistakes. Fiscal discipline and structural reforms have been unevenly applied, and the central bank has squandered its credibility at key moments. More to the point, Argentinian authorities succumbed to the same temptation that tripped up their predecessors. In an effort to compensate for slower-than-expected improvements in domestic capacity, they permitted excessive foreign-currency debt, aggravating what economists call the “original sin”: a significant currency mismatch between assets and liabilities, as well as between revenues and debt servicing. Worse, this debt was underwritten not just by experienced emerging-market investors, but also by “tourist investors” seeking returns above what was available in their home markets. The latter tend to lack sufficient knowledge of the asset class into which they are venturing, and thus are notorious for contributing to price overshoots – both on the way up and the way down. Undeterred by Argentina’s history of chronic volatility and episodic illiquidity – including eight prior defaults – creditors gobbled up as much debt as the country and its companies would issue, including an oversubscribed 100-year bond that raised $2.75 billion at an interest rate of just 7.9%. In doing so, they drove the yields of Argentine debt well below what economic, financial, and liquidity conditions warranted, which encouraged Argentine entities to issue even more bonds despite the weakening fundamentals. The search for higher yields has been encouraged by unusually loose monetary policies – ultra-low (and, in the case of the European Central Bank, negative) policy rates and quantitative easing – in advanced economies. Systemically important central banks (the Bank of Japan, the US Federal Reserve, and the ECB) thus have become the latest players in the old Argentine blame game.

Buenos Aires, Argentina: National Congress building

run into trouble and become the recipient of recordbreaking support from the International Monetary Fund. Argentina has fallen back into crisis for the simple reason that not enough has changed since the last debacle. As such, the country’s economic and financial foundations have remained vulnerable to both internal and external shocks.

Moreover, influenced by years of strong central-bank support for asset markets, investors have been conditioned to expect ample and predictable liquidity – a consistent “common global factor” – to compensate for all sorts of individual credit weaknesses. And this phenomenon has been accentuated by the proliferation of passive investing, with the majority of indices heavily favoring outstanding market values (hence, the more debt an emerging market issues, like Argentina, the higher its weight in many indices becomes). Then there is the IMF, which readily stepped in once again to assist Argentina when CFI.co | Capital Finance International

domestic-policy slippages made investors nervous in 2018. So far, Argentina has received $44 billion under the IMF’s largestever funding arrangement. Yet, since day one, the IMF’s program has been criticized for its assumptions about Argentina’s growth prospects and its path to longer-term financial viability. As it happens, the same issues plagued the IMF’s previous efforts to Argentina, including in the particularly messy lead-up to the 2001 default. As in Agatha Christie’s Murder on the Orient Express, almost everyone involved has had a hand in Argentina’s ongoing economic and financial debacle, and all are victims themselves, having suffered reputational harm and, in some cases, financial losses. Yet those costs pale in comparison to what the Argentine people will face if their government does not move quickly – in cooperation with private creditors and the IMF – to reverse the economic and financial deterioration. Whoever prevails at next month’s presidential election, Argentina’s government must reject the notion that its only choice is between accepting and refusing all demands from the IMF and external creditors. Like Brazil under then-President Luis Inácio Lula da Silva in 2002, Argentina needs to embark on a third path, by developing a homegrown adjustment and reform program that places greater emphasis on protecting the most vulnerable segments of society. With sufficient buyin from domestic constituencies, such a program would provide an incentive-aligned path for Argentina to pursue its recovery in cooperation with creditors and the IMF. Given the downturn in the global economy and the rising risk of global financial volatility, there is no time to waste. Everyone with a stake in Argentina has a role to play in preventing a repeat of the depression and disorderly default of the early 2000s. Managing a domestic-led recovery will not be easy, but it is achievable – and far better than the alternatives. i ABOUT THE AUTHOR Mohamed A El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He is President Elect of Queens’ College (Cambridge University), senior adviser at Gramercy, and Part-time Practice Professor at the Wharton School at the University of Pennsylvania. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse. 127

> Megalabs:

Brand-new Brand with Innovative Values and Penchant for Perfection Megalabs is a leading branded specialty Latin American pharmaceutical company, committed to healthcare, strategically oriented towards innovation, and dedicated to affordable therapeutic solutions.

t combines experience and innovation in its trajectory, but maintains a strong vision of the future, supported by its production capabilities.

“We are a brand that reflects current and future trends,” says Megalabs , “transparent and fresh, proud of what we do. We have created a flowing line through the brand; ‘Megalabs’ is a unique word, written in upper and lower case, friendly and easily understood.” In the transformation process, the former isotype logo — the Southern Cross of Mega Pharma — became a star. “A star that is made up of the diversity of all of us, which expresses the cultures of Latin America,” says The different shades of green in the Latin American landscape make sense of the colour identity, a brand committed to life. Through constant research and innovation, and acting under ethical and accountable standards, Megalabs aims to strengthen its leadership position — and expand its presence in new markets. Megalabs integrates Latin American charisma with a global vocation for innovation, applying cutting-edge techniques to R&D, production, marketing and distribution of its therapeutic solutions. The company has undergone brand changes to bring unity to its relations and operations at an international level. “Now we can introduce ourselves as a unified group. This allows us to make our activity in different areas more transparent, and take full advantage of the potential of the joint work we do in the 18 countries in which we operate.” The new Megalabs brand expresses the reality of a pharmaceutical company that stands close to the patient and goes far beyond standard Quality Assurance. “Our commitment to excellence leads us to explore paths in our continent, that no one has ever ventured before. 128

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Autumn 2019 Issue

To meet efficacy and safety requirements we strive to provide: Bioequivalence, Interchangeability, Biosimilarity, Pharmacovigilance, Clinical trials and Updated documentation”. How does Megalabs achieve these goals?

18 countries 17 production sites 6 R&D sites +1,800 products in main Pharma segments +1 M prescriptions a month in Latam

• Using cutting-edge technologies in product development and manufacturing. • Fostering integration with academia and highly specialized research centers. • Systematically training multidisciplinary teams. • Keeping at the forefront of biomedical research.

“We are involved with our communities and aspire to be a fundamental ally for all health stakeholders.”

“With our rebranding we expect to achieve improvements in the regulatory field, allowing the geographical interconnection of our products. From the point of view of the operation, it will simplify the actions to integrate all these aspects behind an identity that reflects our potential as a company, our vocation for growth, modernity and investment based on a promise of producing accessible and highquality products.

Megalabs brand values: • Credibility • Closeness • Multiculturality • Innovation • Excellence • Transparency • Honesty • Global vocation • Regional support CFI.co | Capital Finance International

“We have always worked with honesty to build credibility in all our stakeholders, and we are very aware of that legacy. We embrace multiculturalism and offer products that apply to the real needs of our communities. “Megalabs is committed to being a key player in a regional context, so we work towards constant improvement in our strategies to be the ideal partner for accessing Latin America. “We transform the potential of our business — and the capabilities of our people — into realities that allow us to build a future.” i 129

Autumn 2019 Issue

> Breaking into the Bolivian Stock Market

Made Easier and Simpler

Valores Unión S.A. Agencia de Bolsa (Brokerage Agency) has participated in the Bolivian Securities Market since 1994, carrying out stock exchange operations.

Valores Unión: The Team

ith 25 years of experience in the Bolivian Stock Market, the brokerage has become a reference for longevity and expertise. The firm has contributed to the development of the Grupo Financiero Unión (Financial Group), as well as that of the national economy.

over the past decade. The Valores Unión S.A. team has extensive experience within the stock market. They are committed to developing the country and maximizing customer satisfaction. The team provides timely and personalized advice to clients, and is always looking to bring efficiency and quality to each of the firm’s processes.

legal, risks, and technology — and these diverse skillsets merge to reward their daily labours. The team’s backgrounds and expertise have led to the firm being honoured for three consecutive years with recognition from the Bolivian Stock Exchange as the Best Securities Exchange Agency. This serves as a great incentive for the entire team, which strives each day to for efficiency.

Valores Unión S.A. has taken on the important role of supporting the country’s Small and Medium-sized Enterprises (SMEs), advising private individuals on access to the stock market, and informing its diverse client base about stock market benefits.

They share a common objective to provide a simple and satisfactory stock market experience to its various clients, while focusing on the common welfare to achieve a high social — as well as economic — impact.

Valores Unión S.A. Agencia de Bolsa has been providing clients for more than 25 years with quality stock brokerage services in a warm, timely and efficient manner. i

Contributing to the economic and social development of the country, and democratizing access to financial services for all Bolivians, has been the premier objective of Valores Unión S.A.

The team has extensive experience, specialized knowledge and technical skills in areas that strengthen the agency’s operations — investments, finance, structuring, accounting,

Valores Unión S.A. Agencia de Bolsa 25 years of trajectory and experience

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> Valores Unión S.A. Agencia de Bolsa:

Quarter-Century of Dedication and Experience in Bolivia

alores Unión S.A. Agencia de Bolsa (Brokerage Agency) has dedicated the past 25 years to managing stocks and bonds on the Bolivian stock market and over-the-counter trading market.

The firm provides the community with comprehensive services and a business model that offers customers efficient, tailored solutions. Technological and IT development at Valores 132

Unión evolves according to the needs and nature of its customers. The agency’s human capital allows it to carry this out with professionalism. The mission of Valores Unión S.A. — part of the financial conglomerate Banco Unión S.A. — is to contribute to the economic and social development of Bolivia by democratising access to financial services via capital markets to all Bolivians. CFI.co | Capital Finance International

Its noteworthy values include: • Ethics: Work with transparency, honesty and integrity according to the interests of the Grupo Financiero Unión (Financial Group). • Innovation: Create ideas and solutions that improve service offerings and customer satisfaction. • Responsibility: Fulfill commitments and assume responsibility for actions. • Commitment: To believe in the mission and

Autumn 2019 Issue Agencia de Bolsa Nº12

Agencia de Bolsa Nº11

2.42% 2.91%

Agencia de Bolsa Nº10

Agencia de Bolsa Nº9 Agencia de Bolsa Nº8 Agencia de Bolsa Nº7

Agencia de Bolsa Nº6 Agencia de Bolsa Nº5

5.18%

6.07% 6.55%

7.15% 7.97%

Agencia de Bolsa Nº4

10.16%

Agencia de Bolsa Nº3

10.42%

Agencia de Bolsa Nº2

10.66%

Valores Unión S.A. Agencia de Bolsa

11.04%

19.47%

Source: Boletín Informativo Bursátil y Financiero

It supports Bolivian SMEs with long-term stockmarket financing featuring standardized, simple and swift procedures. In 2018, the agency managed to surpass its record in volume traded on the Bolivian Stock Exchange (BBV), reaching $6.62bn — an increase of 25 percent on the previous year. This represents 19.47 percent of the overall volume traded in the BBV, both in fixed income and equities instruments. Valores Unión has marked the greatest movement in the stock market and obtained — for the third consecutive year — the award for Best Stock Exchange Agency in a Secondary Market. The firm has a lot of history and experience invested in the Bolivian Stock Market. It is fortified by a team of professionals dedicated to financial and legal advisory services and committed to customer satisfaction. The firm also has extensive experience in structuring, recording, and placing financial instruments on the securities market, including bank bonds, corporate bonds, equity bonds, and promissory notes. Banking entities represent one area of the agency’s diverse client list. One challenge for management is the search for new customers, both for the development of stock instruments and for financial intermediation. The firm is always looking to innovate in the stock market in support of the national productive sector.

put every effort into achieving the objectives set by the Unión Financial Group. • Solidarity: Understand and support the needs of customers, colleagues and the country. In 2017, Valores Unión S.A. became the first Bolivian brokerage to carry out the structuring, registration and placement of equity bonds for a Small and Medium-sized Enterprise.

Valores Unión S.A. offers a full suite of services to a wide range of customers. When it comes to financial advice, the team assesses and evaluates companies’ current situations from different perspectives, and defines optimal portfolio structures according to stock market conditions. The team will also recommend financing alternatives by structuring financial obligations through instruments on the Bolivian Securities Market. The Investment Advisory team also provides advice for decision-making in the purchase and sale of securities in all modalities complying with current Bolivian regulations. An investment portfolio allows clients to maximize the return on liquidity surpluses for institutional CFI.co | Capital Finance International

investors, banks, investment fund management companies, and pension fund managers. Anyone who wants to participate in the securities market through discretionary and nondiscretionary accounts can create a portfolio that reflects their needs and objectives. Valores Unión S.A. also provides a National Securities Market Intermediation Service. At client request, the Stock Exchange carries out buy-and-sell operations with fixed income and equity financial instruments for all its modalities on the Bolivian Stock Exchange. In the area of treasury, each client is different in terms of portfolio needs and objectives. Valores Unión S.A. collaborates to structure each portfolio according to the current securities market. In turn, it performs the management of liquidity surpluses, in order to maximize its performance. If the situation calls for it, the agency provides the possibility of leverage through the securities market. Other services offered include portfolio valuation, securities custody and the collection of economic rights. Among benefits offered to clients is the publication of weekly reports of stock trades to clients, including relevant information about the securities market. This report is an important complement to making any investment decision — an added value to the brokerage service as a whole. The institution has marked major achievements in recent years, including: • Creditor for past three consecutive years, recognized with the Best Stock Exchange Agency in Secondary Market award from the Bolivian Stock Exchange, recognizing the high volume of operations carried out by the agency. • Recognition for performing the first operation on the SMART BBV electronic platform in 2017 • Recognition in 2018 as Best Stock Exchange Operator, awarded by the Bolivian Stock Exchange. To stay ahead of challenges, Valores Unión S.A. ensures its technological innovation is in line with market changes. It prides itself on being a benchmark of the Bolivian Securities Market, and aims to support more Bolivian SMEs with stock market access. i Esta entidad es supervisada por ASFI. 133

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> EY:

New Foreign Exchange Restrictions Imposed by the Government and the Central Bank of Argentina By Sergio Caveggia, María Florencia Ranieri & Guillermina Quevedo

Argentine Companies and individuals are currently analysing the new economic scenario after the issuance of Presidential Decree No. 609/2019 (September 1st, 2019), which introduced a series of measures to preserve the level of foreign currency reserves at the BCRA (Central Bank of Argentina) and enabled Government debt redemption to settle employer and employee contributions to the Single Social Security System.

he purpose of this contribution is not to judge the timing or convenience of the economic policy measures. The truth is that they are now a reality, and companies and individuals must adapt themselves and act accordingly. The new foreign exchange regulations are effective through December 31, 2019, even though the current and short-term macroeconomic scenario may cause current authorities or new Government to extend them. It should be noted that Argentina is approaching presidential elections and current administration may renew for an additional four year period or a different party may be elected. Presidential Decree No. 609/2019 and BCRA Communiqué A 6770 and supplementary regulations set forth the following controls on inflows and outflows of currency: • Restriction to access the foreign exchange market. In the case of artificial persons, mutual funds, trusts and other vehicles created in Argentina, the BCRA must approve the access to the foreign exchange market. On the other hand, individuals are subject to a foreign currency purchase cap of USD 10,000 per month with no previous authorisation. • Non-resident operations: Prior authorisation from the BCRA is required by non-residents to access the foreign exchange market for amounts greater than USD 1,000 per month. • Exports of goods and services: Obligation to convert into Argentine pesos the foreign currency amounts earned from the exports of goods and services. The collection of exports of goods must be entered and settled in the foreign exchange market within a period of 15 calendar days or

"In the case of artificial persons, mutual funds, trusts and other vehicles created in Argentina, the BCRA must approve the access to the foreign exchange market." 180 calendar days, depending on the kind of transaction. Regardless of the abovementioned terms, if the exporter collects the export before the deadlines, the foreign currencies must be entered and settled within 5 business days from the collection date. Exporters must enter and settle in the local market the foreign currency resulting from their exports of services within a maximum of 5 business days from the collection in the country or abroad, or the deposit of the amounts in foreign bank accounts. • It is admitted to use export collections to settle export prefinancing prepayment and loans in certain cases. • Financial Debts: There is a requirement to enter into the local market and convert to Argentine pesos the new financial payables to foreign parties, as well as to prove the compliance with this requirement to access the foreign exchange market to service the related principal and interest. Also, prior authorisation from the BCRA is required for cancellation with more than 3 business days anticipation of capital services and interest on financial debts granted from abroad. • Capital contributions: There is no obligation to enter capital contributions from non-residents and to convert them to Argentine pesos. However,

it is still required to assess how the mechanism will work upon any future capital reduction or redemption. • Debts between residents: There is a prohibition to access the foreign exchange market to settle payables and other obligations in foreign currency among residents, if agreed as of September 1, 2019 (except in some cases). • Profits and dividends: The BCRA’s previous approval is required to access the foreign exchange market to draw profits and dividends. • Imports of goods and services: A prior authorisation is required for the pre-cancelation of debts corresponding to imports of goods and services. The BCRA’s previous approval is also required to access the foreign exchange market to settle payables due or on demand from the imports of goods with foreign affiliates if exceeding an amount equal to USD 2 million per month per resident customer. The BCRA’s prior approval is required to access the foreign exchange market for the payment of services with foreign affiliates, except for card issuers in relation to tourism and travel drafts. These measures should be evaluated and analysed according to the local company or individual that is subject to the restrictions. In other words, hardly are any generic or standard recommendations to face these restrictions. In fact, the solution should be brought in each particular case depending on the variables of the operating and business model of the company or individual. However, the investments or foreign currency “accumulated stock” should be distinguished at

"There is no obligation to enter capital contributions from non-residents and to convert them to Argentine pesos." CFI.co | Capital Finance International

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"The presidential decree that imposed foreign exchange controls also defined a plan for the payment of social security obligations through certain Argentine Treasury debt bonds." the time of the foreign exchange measures from the future currency “inflow” that the company’s new operations will produce. Preserving freelyavailable accumulated assets is as important as the future generation of foreign assets. In previous contexts of foreign exchange controls, the companies have tried to internationalise functions and risks to preserve the value upon the obligation to enter and convert the exports of goods and services into Argentine pesos and the restriction to access the foreign exchange market. Summing up, an analysis of this kind should consider foreign-source and transfer pricing regulations to support any structural change in the company’s business model. Finally, the presidential decree that imposed foreign exchange controls also defined a plan for the payment of social security obligations through certain Argentine Treasury debt bonds. In fact, the decree determined that the holders of public debt securities detailed in the exhibit of Presidential Decree No. 596/2019 (Letes, Lecap, Lecer and Lelink), whose original maturity date has already elapsed, may deliver them to settle social security obligations due and payable as of July 31, 2019.

Family Allowance System. Law No. 24,714. • Employee contributions to the Argentine Employment Fund. Law No. 24,013. This measure is beneficial because the public debt securities used to settle the abovementioned obligations will be calculated at their technical value as of their original maturity date. In addition, the abovementioned obligations – plus their compensatory and punitive interest and fines – will be calculated until the settlement date through the delivery in lieu of payment of the securities contained in the exhibit of Presidential Decree No. 596/2019 (Letes, Lecap, Lecer and Lelink). General Resolution (AFIP) 4593/2019 has recently regulated the manner and conditions for taxpayers to settle their obligations due through this mechanism. i ABOUT THE AUTHORS Sergio Caveggia is a tax partner currently in charge of the Transaction Tax area in Argentina. He joined EY Argentina in 1994, and has developed expertise over 24 years in international taxation and merger and acquisition matters. He is highly experienced in inbound and outbound investments, buy side, sell side and restructuring services within the Transaction Tax area.

These include: • Employer and employee contributions to the Argentine integrated social security system (SIPA). Law No. 24,241. • Employer and employee contributions to the INSSJP (Argentine Institute of Social Services for Retirees and Pensioners). Law No. 19,032. • Employer contributions to the Argentine

Caveggia has served in a variety of industries and has also been involved in many due diligence procedures performed in the past 20 years. He has given lectures in national universities and is a frequent speaker in tax seminars. He has also written several articles dealing with Argentine tax issues

Author: Sergio Caveggia

Author: María Florencia Ranieri

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He is a Certified Public Accountant who graduated from University of Belgrano in Argentina. He obtained his Tax Specialist’s Degree at the University of Belgrano, and has a postgraduate certificate in Business and Management from Universidad Catolica Argentina (UCA). He is also a member of the Professional Council of Economic Sciences of Buenos Aires and the Argentine Fiscal Association. María Florencia Ranieri is a Tax Manager currently working in the Transaction Tax area in Argentina. She joined EY Argentina in 2007. She has extensive experience in acquisition structures, buy-side and sell-side due diligence processes in numerous companies in different industries within the Transaction Tax area. Florencia is a Certified Public Accountant graduated in 2006 from UADE (Universidad Argentina de la Empresa). Additionally, Florencia obtained her Degree in Business Administration also at UADE in 2008. She has attended several Tax Seminars in Argentina. Guillermina Quevedo is a Public Accountant graduated in 2013 from UNR (National University of Rosario). In 2018 she obtained her Master´s degree in Tax Law at UTDT (Torcuato Di Tella University). Currently, she is Senior of the International Transaction Tax Services area in Argentina. She has been part of EY since 2018. In addition, before that, she worked in the PwC´s Tax area for four years.

Author: Guillermina Quevedo

> North America

Obama is Gone, but Obamacare Lives On — and Will Be an Issue in the 2020 US Election Campaign While the streamers from his inauguration parade were still being cleaned up, President Donald Trump issued Executive Order number 13765 encouraging government agencies to give states and individuals greater flexibility around Obamacare, in anticipation of its repeal.

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he repeal failed, but Obamacare continues to weaken under the Executive Order and related lawsuits. This is starting to affect the rising numbers of uninsured, and the November 2020 Presidential election looms as a key battle. A win by Trump would turn the shadow over Obamacare into an existential crisis. The Patient Protection and Affordable Care Act 2010 (ACA), to give Obamacare its full name, has affected the number of US citizens without medical insurance (chart 1). This is a patchwork dominated by employer-based insurance (55 percent of those insured in 2018), governmentprovided insurance for the elderly and disabled people (Medicare, 18 percent), and the poor (Medicaid, 18 percent). Medicare and Medicaid are a legacy of Democratic president Lyndon B Johnson’s Great Society. Obamacare aimed to fill in the remaining gaps. The key reforms of Obamacare are the individual and employer mandates, tax penalties to encourage insurance take-up. It is a package of subsidies and tax credits to encourage individual insurance take-up, aimed at health exchanges (online regulated insurance marketplaces) regulating benefits for individual insurance plans. It prevents insurance companies from excluding people with pre-existing medical conditions, and expands Medicaid coverage. During his 2016 election campaign, Trump promised that Obamacare would be repealed. However, all attempts have been defeated in the Senate, with several Republicans, including an ill John McCain, crossing the floor. Despite this, Republicans have continued with lawsuits and amendments. In 2017 and 2018, premiums for individual insurance increased by an average of 25 and 30 percent respectively (ACASignups.net), and in 2018, the number of uninsured increased for the first time since the introduction of Obamacare, up by 27.5 million people and 7.9 percentage

from 2017 (US Census Bureau). This year may see an even greater increase. The November 2020 presidential and congressional elections will be a key battleground. It is unlikely that either party can gain a supermajority (two-thirds) in the House of Representatives and in the Senate1, which would allow them to pass legislation irrespective of a presidential veto. The main fight will be in the presidential election. One side will have a parade, the other will be rained on. If Trump wins and the Republicans gain a majority in both houses, then Obamacare will probably be repealed. If Trump wins but the Democrats win a majority in either house, Congress will not repeal Obamacare — but Republicans will continue with their current campaign. If a Democratic candidate wins the presidency but the Republicans win a majority in either of the houses, then Obamacare will be safe from repeal and will be restrengthened. If the Democrats win the presidency and both houses, Obamacare will be safe, but may usher in further reforms. Joe Biden promises to build on Obamacare, while two of the other leading candidates, Bernie Sanders and Elizabeth Warren, promise a replacement single system, dubbed “Medicare for all”.

Obamacare and 41 percent against (Kaiser Family Foundation). This is an ideological battleground and given the high stakes, it will probably galvanise both parties. It is also likely that US economic developments will overtake healthcare as the main issue of the 2020 elections. Trump and the Republicans have weakened Obamacare in five main ways. On December 20, 2017, Congress passed the Tax Cut and Jobs Act 2017, which set the tax penalty for the individual mandate to zero (from $695). This removed an effective inducement to for the take-up of individual insurance. The zero rate took effect at the start of 2019 and could see a rise in the number of uninsured. Second, Trump and Republican state governments have targeted enrolments, reducing promotion funding for enrolments and for “navigators” who help people choose insurance on the exchanges. Many state governments have halved or shortened the time period in which people can enrol into individual plans. Third, the Trump has removed the Cost-Sharing Reduction (CSR) payments to insurers, leading them to pass on costs to consumers. The administration has lowered the level of tax

Trump wins Presidency

Democratic Candidate wins Presidency

Obamacare Repealed

Restrengthening of Obamacare

Houses are shared

Continued weakening of Obamacare

Restrengthening of Obamacare

Democrats gain a majority in both houses

Continued weakening of Obamacare

New reforms building on or taking Obamacare further – “Medicare for all”

Republicans gain a majority in both houses

Diagram 1: Likely Outcomes for Obamacare from the 2020 elections

The Democrats campaigning on the issue in the 2018 midterms led to gains, and recent polls show 53 percent of people in favour of

credits by allowing the baseline silver insurance plans for individuals to deviate from actuarial value by four percent (previously two percent)

20 Number of Uninsured (millions)

Percentage Uninsured

0 2008

2009

2010

2011

2012

2013

2014

2015

Chart 1: Number of uninsured and uninsured rate among the non-elderely population.

Source: Key Facts about the Uninsured, Kaiser Family Foundation; Kaiser Family Foundation Analysis of 2008-17 Amercian Community Surveys, 1-year estimates.

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2017

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tolerance. Tax credits are based on the second-lowest silver plan in the relevant state. Fourth, Trump has allowed and encouraged lesser insurance plans to compete with Obamacare plans. New rules for short term health plans extend their maximum term from three months to 12, creating a viable alternative to individual insurance. Government agencies have also encouraged navigators to direct people to short-term health plans, association health plans, and other alternatives. Typically, these have lower overall benefits than the Obamacare plans. If enough people choose these over Obamacare plans, the premium for Obamacare plans may rise. The administration has also introduced new rules to encourage employers to move staff from employer-based insurance to individual plans with the likely outcome of cost savings for the employer — and lesser insurance benefits for employees. Fifth, the federal agency the Centre for Medicare and Medicaid Services (CMS), with encouragement from the Trump Administration, has allowed states to place a work or looking-for-work requirement on Medicaid. CMS has also encouraged states to redirect funding away from Federal health schemes to state-based schemes. In addition, three lawsuits have been brought against the Federal government and Obamacare. The first two failed. In the National Federation of Independent Business vs Sebelius (2012) the Supreme Court ruled that the tax penalty for the individual mandate is a constitutionally valid use of Congress’ taxing powers. In Kings vs Burrell (2015), the Supreme court ruled that premium tax credits could be paid for insurance plans from state and federal exchanges. The third lawsuit, Texas vs Azar (2018) sees 20 states led by Texas arguing that because the zero tax penalty, the individual mandate — and thus Obamacare — is constitutionally invalid. The case is currently in the Fifth Circuit Court of Appeals and will probably head to the Supreme Court during the election. The Department of Justice has informed the Fifth Circuit Court that it agrees with the lawsuit and will not defend the law; the defence has been taken up by states that are in in favour of Obamacare. The lawsuit is likely to be dismissed by the Supreme Court, but the lawsuit will be front and centre in the 2020 elections. i A supermajority in both houses has only happened six times in US history. The Democrats would have to win all but one of the 35 seats up for vote to gain the 67 seat two-thirds supermajority (they retain 33 seats from previous elections). The Republicans would have to win all 35 seats and then rely on the two independents for a two-thirds supermajority. 1

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> Global Reach, Personalised Service Proves a Winner ADAM Global provides a platform for independent professional business services and networks, operating out of London and Dubai.

t all began back in 1999, with a group of close friends and business associates who shared a vision of cultivating longterm relationships, and enhancing their global business exposure, through networking. The concept was first implemented in 2012, and ADAM Global has grown to become the world’s largest platform for multi-disciplinary professional business services, with unparalleled global reach across industries, geographies and 12 vertical markets. The firm has brought business and thoughtleadership to its clients and members, and is run by Yogan Yoganandan, a seasoned marketing and management executive. ADAM Global is a B2B operation, a multidisciplinary platform of professional services, from law to accounting, finance to business consulting. It brings together independent professional companies and enables them to have a global presence through trusted, accredited members. It focuses on bringing in projects that are relevant to its members’ businesses, and facilitates and executes deals — but it can also stretch beyond its members’ disciplines. The firm has 500 members and eight networks, and it is in scale-up mode. ADAM Global hopes to soon have thousands of members, and move into the consumer sector. There are plans afoot to become a B2C operation, and ADAM’s sights are set on becoming the best-known brand in the category. It wants to change the way people interact with professional services, and grow its multi-disciplined platform to include immigration, education, healthcare and wealth management. It also aims to facilitate its referral business as its core offering.

featured keynote speaker. He started his career as a consultant at King's College Hospital, London, with a specialist interest in cardiac and liver transplantation anesthesia and Intensive Care Medicine. He was a director of Intensive Care Medicine at Queen Mary's Hospital, London, and completed the Chartered Director’s Programme at The Institute of Directors, London, in 2003.

ADAM Global was founded by Dr Tahir Akhtar, who says he wants to elevate the firm’s members to become the preferred supplier of services wherever a consumer interaction is relevant. “We want to grow our business to be relevant to all users of the online space,” he says, “and become the ‘Amazon of professional services’.” Akhtar is a serial entrepreneur based out of London, a government advisor and a regularly 142

Recently, Tahir Akhtar was appointed as a Member of the Independent Monitoring Board in London by the British Home Secretary. His awards include Best Medical Entrepreneur of The Year from the House of Lords, Houses of Parliament, and the UK. ADAM Holdings, ADAM Global Network, ADAM Consulting are his “brainchildren”.

Founder: Dr Tahir Akhtar

CFI.co | Capital Finance International

He is also an advisor to governments in the Middle East and Africa. i

> Pillsbury Winthrop Shaw Pittman LLP:

LIBOR – The Next Chapter

By Trevor Wood Partner and Henrietta Worthington Associate

For those of you who are following the LIBOR saga, the next chapter has just been published with the London Loan Market Association (LMA) announcing the publication of its (a) compounded SONIA based sterling term and revolving facilities agreement and (b) compounded SOFR based dollar term and revolving facilities agreement on 23 September 2019.

hilst the LMA is keen to point out that that the documents are "exposure drafts" only and are therefore not recommended forms for members to take off the shelf and use, they do represent a step forward for the European markets following the ARRC's (the US Alternative Reference Rates Committee) publication of fall back language for bilateral loans, syndicated loans, FRNS and securitisations in April 2019. The LMA notes that the intention of the exposure drafts is "to facilitate awareness of the issues involved in structuring syndicated loans referencing compounded SONIA, SOFR or other RFRs and the development of an approach to these issues by market participants". So the template documents are not final form precedent documents promulgated by the LMA but very much a first attempt by the LMA to suggest how facility agreements used in the European markets will look if the loan market decides to follow on the heels of the floating rate note (FRN) market and adopt a compounded average look-back basis when calculating interest using risk free rates (RFRs) in the future. In its announcement the LMA said that "the publication of the Exposure Drafts is not intended as a recommendation for any particular form of averaging calculation by the LMA" but it stands to reason that by providing drafts in this form there is an acceptance by the LMA that this is likely the way it is to go in the loan market. However, when asked whether the LMA was ultimately accepting that this was the case (as the FRN market has already done so), the LMA said that efforts were still being made to continue lobbying for LIBOR, and a forward looking RFR. Indeed, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) mentioned in its May 2019 statement that three administrators (FTSE Russell, ICE Benchmark Administration and Refinitiv) have confirmed that they are working on the development of this and the RFRWG expected this to continue throughout 2019;

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"Where all else fails, the lenders' cost of funds is used as an optional solution. This simplified fallback waterfall, we are told, better reflects how lenders want the fallback provisions to operate." whether a forward looking RFR will become available during 2019 seems increasingly unlikely, but there is clearly a desire from many in the loan market for this to happen. The LMA Exposure Drafts provide drafting guidance on SONIA and SOFR documentation for sterling or US dollar facilities where interest for any given interest period is determined by reference to a compounded average of the respective RFR and that compounded average is calculated over an observation period commencing before the start of and ending before the end of that interest period. Certain key elements of the drafting remain outstanding for market participants to develop and give feed back to the LMA; these include: A screen-based compounded average of the relevant RFR – this currently does not exist although the hope is that an external provider will publish this in the future. In the meantime, this calculation will need to be undertaken by the facility agent on a fallback basis (thereby causing a significant amount of work for the facility agent). Determination of the lag time – the Exposure Drafts use a lag structure (commonly used in FRN issuances) as a solution for calculation of the interest over a given interest period. This operates by using an observation period which CFI.co | Capital Finance International

begins and ends a given number of days prior to the first and last day of the interest period. The lag time is not specified in the documents (although a 5-business day period is used in a worked example in the LMA commentary) and is left for the parties to the loan to determine what is appropriate in their particular transaction. Adjustment spread – whether this is included is optional. Interest which is payable under the loan may simply be the aggregate of the margin and the reference rate. If an adjustment spread is to be included, the reference rate is adjusted to include this although the amount of any adjustment spread is left blank for the parties to determine. Fallback provisions – the primary fallback where the relevant RFR is unavailable is based on central bank rates given that these should always be available. Where all else fails, the lenders' cost of funds is used as an optional solution. This simplified fallback waterfall, we are told, better reflects how lenders want the fallback provisions to operate. Optional break costs – Break costs reflect the assumption that lenders have funded the loan by "match funding" arrangements (i.e. borrow an amount equal to the amount of the loan for a period equal to the interest period) and early repayment of all or part of the loan will result in a loss for the lender. Given that by using an RFR lenders are likely to be obtaining funding on a rolling overnight basis, the basis of break costs may fall away and this has therefore been made optional in the Exposure Drafts. Market Disruption – The Exposure Drafts are drafted such that (i) the facilities are priced on the basis of an identifiable approximation of the lenders' likely cost of funds plus a credit margin and (ii) market disruption provisions may not be considered commercially appropriate in the circumstances. In view of this market disruption provisions are also left as optional.

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Whilst the LMA Exposure Drafts will generally be welcomed by participants in the loan market and the UK regulators who are anxious to see that some tangible progress is being made, this appears to be merely a holding position pending the further RFR developments (as was the ARRC's publication of fall back language earlier in the year in view of the waterfall provisions dealing with the selection of the reference rate being used). Unless the loan market (following the lead of the FRN market) whole heartedly accepts the backward looking compounded average RFR structure with a lag and resolves the points left open by the LMA, or something else (such as the publication of a forward looking RFR), it will be difficult for financial institutions to commit and build their systems and infrastructure around the new regime given the time, cost and complexity involved in doing so. In the meantime, the level of awareness and preparation for the switch to RFRs still remains questionable, with even some large UK corporates taking the view that the market will provide the solution in due course and they would rather not get involved the nitty gritty development of the RFRs. i

Author: Henrietta Worthington

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Author: Trevor Wood

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> Asia Pacific

Swings and Roundabouts for SE Asian Countries Caught Up in On-going US-China Trade Dispute Several Asian economies are reaping short-term benefits from the US-China trade war, but that situation may not endure. Replacing Chinese imports falling foul of the tariff battle is the largest source of potential gains for other countries. In 2017, the US imported goods worth $525bn from China, while China imported $155bn from the US. Asian countries make up five of the of the top 12 nations to have increased their share of US imports in Q2 2019 compared to the same quarter last year, which marked the start of the trade war (chart 1, next page). Vietnam leads the way with a 27 percent increase in imports, increasing its share by 0.5 percent. Taiwan, and Japan increased their share of 0.34 and 0.27 percent respectively. Only India had an increasing share in the two years prior to the trade war. China’s US imports fell by 2.5 percent. In any trade war, initial gains for countries not directly involved in the dispute are achieved by using excess capacity to replace lost imports. Chinese imports cannot easily be replaced because of their volume. The next stage in gains will come from relocating factories, and gains will be realised as new factories come online. A recent survey by the American Chamber of Commerce in Shanghai found that 40 percent of its members had relocated or were considering it. Of the Chinese relocations so far, 25 percent have been to South East Asia. A recent World Bank survey found 23 of 33 companies were relocating to Vietnam. FDI in the country has increased 6.1 percent in the first eight months of 2019. Relocations have been helped by the start of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It has eased the flow of goods and capital between members, making it easier for them to be integrated into global supply chains. China’s Belt and Roads initiative has improved regional transport infrastructure, which helps China to replace US imports. Thailand has introduced a range of incentives to attract relocations. The , Thailand Plus incentives include extended tax holidays and tax deductions for technology firms. Indonesia is also planning to drop its corporate tax rate from 25 to 20 percent. This may be the start of a new trend in the region.

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hinese companies have been relocating for many years as the country seeks to produce more sophisticated goods and move labour-intensive production offshore. China’s share of world apparel exports remained steady from 2010 to 2017 (35 to 36 percent) while its share of electrical goods increased from 20 to 31 percent. The trade war has strengthened this trend. China has a competitive advantage over many of its neighbours in this sector but continued foreign investment could see increased trade diversion over time. Vietnam is feeling the pressure from increased production, and industrial rents have doubled in some areas. Demand for labour is fierce, with unemployment at 2.16 percent. Shipping tonnage is up 20 percent — and expected to increase again this year. The government estimates that ports need an investment of $3$4bn to increase their capacity. In 2018, the World Bank ranked Vietnam 47th in the world in terms of trade infrastructure; China is ranked 20th. Japan, Singapore, South Korea and Taiwan have good trade infrastructure, but also have low levels of unemployment. Inability to meet demand is not just a lost opportunity. Governments and chambers of commerce need to work with potential partners to ensure long-term reputations are not damaged. Not every foreign investor can be accommodated — but they should be left with a good impression. A continued trade war will hurt the region. Japan provided the example of export-led development post WW2, and the rest of Asia followed, buoyed by trade liberalisation in the 1980s. Protectionism is kryptonite for export-led economies. It reduces the gains from trade as comparative advantages

are ignored; consumers pay more and buy less. It also increases global supply chains costs, giving an advantage to companies which consolidate production in a smaller number of countries, or domestically.

has three criteria to identify unfair trade practices: a trade surplus with the US of greater than $20bn, a Current Account Surplus of greater than two percent of GDP, and an annual purchase of national currency greater than two percent of GDP.

Market uncertainty is decreasing global growth by 0.8 percent, according to US Federal Reserve figures. The IMF and OECD have revised their growth forecasts downwards, with the OECD expecting the lowest global growth in a decade. Global trade volume growth has also slowed to around 0.5 percent in Q2 2019.

On the US watchlist are Japan, South Korea, Malaysia, Singapore, and Vietnam. India was only recently removed. Donald Trump recently called Vietnam one of the “single worst abusers of trade”. Vietnam’s re-export of Chinese steel to the US has resulted in a 400 percent tariff.

Singapore, a key entrepot and manufacturer, is a good barometer for regional trade. Signs do not look good. In Q2 2019, Singapore grew at its slowest rate in 10 years (0.1 percent) missing forecasts by around one percent. Forecasts for 2019 have now been reduced to between one and zero percent — with some commentators fearing a recession. Business confidence fell to -11 points in Q2 2019, while the Industrial Production Index decreased to -8.1 percent in July. The CPTPP may help counter the effects of the trade war. It promises to add $147bn to global income. If China or the US were to join the CPTPP, these gains would be multiplied. ASEAN is also pushing ahead with its Regional Co-operation Economic Partnership (RCEP) agreement with FTA partners China, Japan, South Korea, India, Australia, and New Zealand. This would deliver a large free-trade dividend and help to re-establish confidence in multilateral trade policy. In the medium to long term, Asian economies face the threat of becoming targets of US trade policy. Since 2015, the US has been monitoring the trade practices of its top trading partners. It

Given the US’s preoccupation with China, Asian countries are probably safe for the immediate future. China’s $419bn bilateral surplus with the US dwarfs that of others on the watchlist. Japan and Germany have the next largest, at $68bn. Vietnam has $40bn, Malaysia $27bn, South Korea $18bn, and Singapore $6bn. Germany also has the world’s largest current account surplus, 7.3 percent of GDP, and had a record budget surplus in 2018 despite slowing domestic growth. Germany also enjoys the deflationary impact of other EU member states on the Euro. China is unique in that the US has strong grievances over its use of intellectual property. The spat began in March 2018, when the US imposed tariffs on a range of Chinese goods. China retaliated with its own tariffs a month later. Trade talks in 2017 broke down over US requests for China to reduce its bilateral trade surplus, and the issue of intellectual property. This month, the US and China will hold their 13th round of highlevel trade talks. While some Asian countries are enjoying the increased attention from investors and US buyers, most will be hoping for a timely resolution to the dispute. i

1.2% Q2 2016 to Q2 2018

Q2 2018 to Q2 2019

1.0%

0.8%

0.6%

0.4%

0.2%

0.0%

-0.2%

-0.4%

-0.6%

-0.8% Mexico

Vietnam

France

Taiwan

Netherlands

Japan

Belgium

Chart 1: Top 12 countries with the biggest increase in the share of US imports since start of the trade war (percentage points)

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Ireland

India

South Korea

Colombia

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> More Than Profits for Thailand’s Government Pension Fund:

Thai Guideline to Maximise Returns and Remain True to Spirit of Responsibility The role of secretary general to Thailand’s Government Pension Fund means Vitai Ratanakorn is entrusted with fiduciary responsibility to the pension’s members.

is role is to ensure that the fund maximise profits for all members. Ratanakorn, however, thinks he can do more. He is inspired by the idea that financial returns need not be sacrificed for social returns. It is possible, he believes, to do both. Fiduciary responsibility is imperative, but social responsibility is more than a secondary consideration. To engage internal and external stakeholders in social responsibility, Ratanakorn has a vision to become the Thai leader of ESG investment and has initiated projects — an ESG-focused portfolio, ESG due-diligence based on OECD responsible investment guidelines, and ESG factor-integration — based on PRI’s integration framework. A major achievement was the introduction of Collaborative Engagement and Negative List Guidelines for ESG Investing. To stimulate institutional investors — key players in the Thai capital market — to move toward ESG investing, Ratanakorn has initiated a project called Collaborative Engagement: Negative List Guideline. The project was developed on the belief that collaborative engagement can enhance investors’ influence and improve efficiency of the engagement process. After meetings and discussions with capital market policymakers and institutional investors, Ratanakorn came to the conclusion that a common and effective goal of all institutional investors was positive engagement and negative list guidelines for listed companies that breach Thailand’s securities legislation, or do not comply with ESG’s best practice. His initiative was well-received. As many as 32 institutional investors with over THB10.8tn ($1.8tn) in assets under management signed the Memorandum Of Understanding and became signatories to the guideline. Signatories agree to conduct joint-

Secretary General: Vitai Ratanakorn

collaborative dialogue to influence a company that breaches Thailand’s securities legislation, or does not comply with ESG best-practice.

a positive result, the signatories will resume the normal transaction. If not, the signatories will add the name of the stock in a negative list.

During the dialogue process, further buying of the stock in question will be depend on the outcome. After the dialogue, if the management of the company complies to best practices and yields

The introduction of Collaborative Engagement and Negative List Guidelines for ESG investing is marked as the first major achievement in pursuing ESG investment in Thailand. i

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― EXCELLENCE – ENGINEERED. SOLUTIONS – DELIVERED. FOR A NEW ERA OF THE FOOD AND BEVERAGE INDUSTRY ―

Understanding today’s customer needs goes beyond products and technology. It’s holistically solving every problem with an intelligent overview of their needs. With our promise, SIG is setting out into a new era of food and beverage packaging – ready to partner with customers and open up new opportunities for performing better and growing faster. Discover more at sig.biz

EXCELLENCE – ENGINEERED. SOLUTIONS – DELIVERED.

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> Are Boutique Investment Banks Here to Stay? The financial crisis of 2007 spawned a proliferation of boutique investment banks as larger institutions started laying-off staff and eliminating proprietary trading desks.

ost investment bankers have from time-to-time questioned what talents — other than deal-making — they possess. Those unable to think and act laterally begin to question their skill sets. The smaller banks themselves began to wonder: did they lack a brand identity, or an association with a bulge-bracket Wall St firm? These doubt have been eliminated by the success of firms such as Evercore and Moelis and other boutique institutions which have captured at least 20 percent of market share for M&A fees.

Fortman Cline: Team

This recent phenomenon has given career bankers inspiration: it is possible to become entrepreneurial without having to make sudden career shifts. In 2007, a boutique investment banking firm called Fortman Cline Capital Markets, based in Hong Kong, was formed by Daniel Ibasco and Gary Cheng. The pair had spent many years with large investment banks, including Bear Stearns and JP Morgan. They started out with a mission to serve the needs of the owner-managed, or entrepreneurial, segment of the South East Asian market. They were determined to provide service in areas not covered by large investment banks. Those larger banks required bigger deals and higher minimum fees. Fortman Cline had a significant market opportunity: servicing clients where funding needs where less than $100m, and where fees were not of sufficient scale to meet the overheads of the large institutions. Fortman Cline: Lobby and trophies

This market opportunity, combined with a strong customer service component, allowed Fortman Cline to capture the moment, the target entrepreneurial market it intended to serve — and large corporations as well. “We started with very little capital and hired 15 smart kids fresh out of college,” says Ibasco. “We trained them ourselves, edited their work in terms of financial models and grammar, and within three years we had created a talented team. “Pretty soon, those former college kids were closing large, complicated transactions. We

had created a distinct corporate culture of hard work and co-operation. It was, and is, a workplace of fun where people are paid for doing what they love.” Ibasco compares it to a FIFA World Cup event, where major teams such as England have star players. “We were like Germany, that had a lot of young and unknown players but made the semi-finals and finals.” For Fortman’s, success is not about being smarter than the competition. “It’s just plainand-simple customer service,” Ibasco says. CFI.co | Capital Finance International

“Customer service means objectivity in advice, a quick response time, post-transaction services and treating clients as partners. “We love to make millionaires billionaires. As they can no longer sustain organic growth, we help them with transformational transactions such as mergers and acquisitions, or the right strategic partnerships. “As family businesses mature, we help in the whole monetisation process. There are always things we can add, at each stage of a business life cycle.” i 151

> Containers Printers:

A Word in Your Ear… via Your Eye! The Fine Art of Communicative Packaging This is something that Containers Printers CEO Amy Chung understands only too well as a basic principle of marketing. Her Singapore-based company looks to technology to provide more product control for clients, and value-added gains for shareholders.

hung has been leading the productpackaging company since 2014, and she has a clear vision for its direction. “I want to drive the company from what can be considered a conventional industry to something more technological,” she said. “We are therefore upgrading our capabilities beyond conventional packaging solutions to be able to do functional printing and smart packaging.” The modern manufacturing machines lining the company shop floors produce eye-catching results. Packaging comes in two materials (metal and flexible laminates), both of which can be customised with unique textured effects. Containers Printers is in the process of further digitising its operations. Chung intends to extend the company’s digital capabilities into the clients’ space by offering cloud-powered product traceability and authentication services. The company is a leader in Singapore’s digital transformation initiative, and has been nationally recognised for its approach to innovation and technological advances. The company’s global reach —and potential to upscale — attracted the attention of Singapore’s Economic Development Board, which tapped Containers Printers to participate in a programme matching top global brands with local companies to forge profitable and productive partnerships.

benchmarks to meet, but it was a success. Chung and her company were praised for their performance. “We took the challenge and rolled the dice,” Chung said. “We were told that we were one of the most successful partnership that came out of this.” The company’s success garnered more local attention, and Containers Printers was selected to participate in a skill-sets development programme, overseen by the Singapore Ministry of Manpower. Containers Printers was showcased in a session with the country’s Prime Minister, Lee Hsien Loong. “I jumped immediately into the Manpower Ministry's programme, which the government has been actively promoting in Singapore,” said Chung, whose company has been classified in the space of small to medium enterprises (SMEs). The programme aims to drive the industrial adoption of digital transformation strategies. Containers Printers was invited to participate in the programme for its proactive and innovative implementation of the latest tech advancements. Highlights for Chung included the programme’s lean-manufacturing training courses, which detail tech-enhanced manufacturing processes to improve efficiency and reduce redundancies.

“Last year we were selected by our Economic Development Board for a special programme,” said Chung, “where they tie us to global multinationals to gear us up in our capabilities, and to meet the strict requirements of these global multinationals. We were able to perform to their satisfaction, so with this programme we are now being selected and shown to the Minister for the manufacturing industry in Singapore.”

According to Chung, the company’s operations are aligned to the “Three Rs” principle (Reduce, Reuse, and Recycle), and sustainability is built into its corporate culture. Containers Printers sources and selects benign materials and employs solvent-free manufacturing processes where possible. The company’s latest sustainability initiatives will be operable by mid 2019, when its two manufacturing plants will be topped with solar panels. “I think that’s really working towards a corporate philosophy where everyone starts thinking about sustainability,” said Chung.

Chung is proud of Containers Printers’ selection for the programme, in which it took its first foray into the medical industry. The process was demanding, with tight deadlines and stiff

“We cannot enforce and impose, but we can build up a corporate culture and values, so that slowly everyone practices the three Rs as though it’s just something that they do — it’s natural.” i

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> UnionBank's Dual Transformation Goes

Full Speed to ‘Tech-up Philippines’ Awarded — once again — as the Best Universal Bank Philippines 2019 by CFI.co, UnionBank is a top-tier financial institution.

ith a transformation dubbed by international finance magazine Euromoney as the “best in the region”, Union Bank of the Philippines is on target to achieve its goal of becoming one of the top three universal banks in the country. Thrice awarded by Asiamoney as the Best Digital Bank Philippines, UnionBank continues its progress in its dual transformation. The bank has an advocacy called TechUp, Pilipinas, which seeks to harness technology to push for inclusive and sustainable prosperity. The first part of the dual transformation involves building UnionBank into the Best Digital Bank in the country — by strengthening and digitalising the bank’s core capabilities. The second part pertains to its openness to alternative “non-banking as usual” business models that will thrive in tomorrow’s world — especially if these are connected to the Internet of Things (IoT) where the banking / financial services provider is an embedded experience. UnionBank recently became the first bank to introduce a Central Bank-compliant, two-way virtual currency ATM in the Philippines. It was also the first to successfully pilot the use of tokenised fiat in a cross-border transaction from OCBC Bank, Singapore’s longest-established bank, to an account holder at Cantilan Bank – a rural bank in Surigao Del Sur province in the Philippines. It was also the first bank to launch a “stablecoin” to provide rural banks under its blockchain-powered platform easier access to remittance and payments.

This came after the bank launched Project i2i — Island-to-Island, Institution-to-Institution, Individual-to-Individual — which provides rural banks a secure and cost-effective way to connect to universal banking, improving the customer experience in rural communities. In 2017, the bank introduced EON – the first “selfie-banking” system in the Philippines, where customers can log into their account by snapping a selfie. Then there is Chatbot Rafa, the country’s first banking chatbot that aims to deliver provide customer service 24 / 7. UnionBank’s Hackathon provides students and professionals with the opportunity to develop digital innovations, and the chance to develop careers with the bank. Its open banking operates by exposing its catalogue of application programming interfaces, where fintechs can add their APIs to UnionBank’s, giving access to anyone on the platform. And let’s not forget about The ARK – the Philippines’ first fully digital bank branch along Ayala Avenue in Makati, which seeks to ferry Filipinos to the future of banking — or the UnionBank Online mobile app, which allows clients to open an account via the app — without going to a branch. UnionBank president and CEO, Edwin Bautista, is quick to emphasise that all of the bank’s pioneering and game-changing initiatives are geared to enable financial inclusion, as around 70% of the population is still unbanked, with the goal of creating a better Philippines. “While other companies aim to transform industries, UnionBank is committed to transform the Philippines,” Bautista said. i

"UnionBank recently became the first bank to introduce a Central Bank-compliant, two-way virtual currency ATM in the Philippines." 154

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> UNCDF and Bamboo Capital Partners - A Framework for Dual Impact:

How Blended Finance Can Deliver on its Promise of ROI By Jean-Philippe de Schrevel

Blended finance — the use of official development assistance to crowd-in private investment towards projects with development impact — has driven much of the conversation pertaining to economic development.

t has done so for several reasons: an annual sustainable development impact where it is In December 2018, UNCDF partnered with impact investing fund manager Capital Partners with the intent to "The difficulty of these SMEs Bamboo financing gap to achieve the Sustainable needed. That is the question that guided our launch a permanent blended finance “BUILD Fund” the “Fund”) in early-2020. TheFund. Fund will financially Development Goals that is calculated at vehicle journey towards the BUILD to (the attract capital is aor classic $2.5tn, the downwardopportunities, trend of official operating primarily in some of most excluded and marginalized communities in the support SDG-positive example of market failure, and development assistance (with ODA levels FRAMEWORK FOR BLENDED FINANCE world (primarilyby inthree Least Developed (“LDCs”)). financial envisaged the provision of down year-over-year percent, accordingCountries The isBUILD Fund isthrough a partnership between blended financeThis presents thesupport to theand OECD), and that the downward trend of Bamboo Capital Partners, a Geneva-based debt equity capital. potential corrective." ODA flows to the least-developed countries (LDCs) is even more pronounced.

impact investing platform and the UN Capital finance vehicle, while not truly appreciating the Development Fund, the agency focused on driving The rationale for setting up a blended finance vehicle is driven bycapitalise UNCDF’s to connect theLDCs. larger capital different kinds of financiers that it. commitment public and private finance to the When But perhaps the strongest reason behind the A blended finance vehicle has to calibrate riskthe fund was designed, the vision was to attract mobilization efforts of the SDGs to last mile environments. These countries and segments of society consistently fail to allure for blended finance is the simplest — that it adjusted rate-of-return for a group of investors concessional and commercial growth finance to receive products services varied needed to develop. These geographies are inpipeline dire need of responsive capital representsvarious the potential to leverageand concessional by the incentives that motivate their UNCDF’s of SMEs, financial services capital to de-risk investments that would investments, the threshold of risk that tempers providers and local infrastructure projects in the solutions to support financial intermediaries, small and medium enterprises, and project developers who operate in these otherwise be overlooked by private investors, their investments, and the overall strategic goals LDCs. communities. As one example, LDCs only receive 6% of the total blended finance capital flows provided to developing particularly for SMEs that are creating investable that shape their investments. markets solutions inworldwide. digital innovation, clean energy and In leveraging our firm’s experience in impact financial services in the world’s toughest markets. Blended finance vehicles are expected to house investment, as well as learning lessons through three categories of investors: governments the process of collaborating with a UN agency ItThe is expected thatSMEs the BUILD unique in terms of itswhich investment thesis and on fill delivering a gap that is rarely occupied difficulty of these to attractFund capitalwill is be and multilateral institutions, are largely focused financial inclusion and by a classic example of market failure, and blended concessional finance investors; institutions, impact investors, in form least developed countries, the journey multilateral development banks or development notwho evengrowth in the of blended finance vehicles. finance presents the potential corrective. are looking for ROI but represent more patient we embarked on had us arriving at a framework This is due to the intended size of the capital investments, and the (perceived) risks—and early-stage nature of the business and who define investment success by a framework for structuring blended finance models whichthis the Fund seeks invest. The gap in between potential and theto reality development impacts, and institutional investors vehicles to deliver sustainable impact in the remains substantial, particularly when it comes to who are motivated by traditional ROI. world’s toughest markets and ROI to investors. LDC markets. One need only reference the recent The Fund is UN intended to provide investment positive primarily reportBUILD published by the Capital Development The question to capital ask is notfor whySDG blended finance business The first opportunities element of the framework is agenerated laserFund and the OECD on blended finance in the flows have not been optimally aligned with focus on addressing the “missing from UNCDF’s pipeline, but also on behalf of the broader UN Development System (“UNDS”). With its array of middle”. specialized LDCs. development need or investable opportunities What we have recognised is that the greatest agencies that allow it to tackle complexindevelopment priorities globally, the UNDS could utilize this innovative blended LDC markets. The critical question is how a challenge to SMEs is not access to start-up It shows vehicle that all the mobilised blended finance can bearound structured soworld. capital, but access to follow-on capital. The finance toprivate drive finance concrete and sustainable SDGvehicle outcomes the by official development finance interventions that it can attract investors of varied motivations, blended finance structure of the fund is designed Fund (Target Commitments) $50M to prevent a situation where the future growth of between 2012 and 2017, approximately $9.3bn, BUILD interests and risk thresholds, while still delivering or six percent, of private finance mobilised went an SME is constrained by addressing this gap to LDCs. By contrast, about 70 percent went — where SMEs are too risky to receive capital to middle-income countries. A blended finance from domestic banks, too big for microfinance, deal in an LDC market has an average value of and too small for larger development finance Class A Shares (Senior Tranche) just over $6m, as opposed to $27m per deal institutions and institutional investors. This focus for low-income countries and $60m per deal enables us to provide opportunities in investable in middle-income markets. The rise of blended companies, that have also proven to be engines finance as a tool has not translated into greater of transformational change in their communities amounts of private investment capital in LDCs. when they are able to scale. Class B Shares (Mezzanine Tranche) The UNCDF/OECD report notes that in the early 2000s, private investment inflows at their peak The second element is leveraging and optimising represented six percent of gross domestic product a layered funding approach. BUILD is structured of LDCs. In 2010, the figure would be three in a similar manner to a traditional investment Class C shares percent; by 2016, it would be two. fund. It has several layers of risks and returns, (Catalytic First Loss Tranche) all of which share the same investment portfolio. A core reality is often overlooked. When Layering funding is not a new phenomenon; it discussing blended finance, the focus is often has been common practice for the best part of BUILD Fund: Target commitments on the different kinds of finance in a blended two decades. But as a blended finance vehicle,

• $0.5m avg. Deal Size • Open Ended Fund Term • 3 to 5 Year Lockups • $10M minimum Catalytic First loss (20% already CFI.co secured) | Capital Finance International • 3% Target annual dividend in Senior • Primary focus on Least Developed Countries • 5% Target annual dividend in Mezzanine

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"The critical question is how a blended finance vehicle can be structured so that it can attract investors of varied motivations, interests and risk thresholds, while still delivering sustainable development impact where it is needed. That is the question that guided our journey towards the BUILD Fund." 156

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Autumn 2019 Issue

supporting demonstration effects that catalyse subsequent investment in those markets. For BUILD, the vision for the next decade is that the first loss layer will no longer be required because private companies will have tested these markets and be more comfortable investing in them. INTENTIONALITY TO IMPACT The recent trendlines regarding blended finance flows and LDC markets proves the same point when it comes to innovative finance. There is nothing inherently impactful about an investment mechanism. Blended finance vehicles will not be the powerful corrective that the impact investment and development circles yearn for because it mixes commercial and concessional capital. Intentionality, a vision, and a framework are always required to ensure that the mechanism is delivering the returns and the impact you are looking for. BUILD includes a “first loss” layer, which is complemented by “senior layers” on top. If there is a loss in your portfolio, the first loss layer takes the hit, protecting the senior layers of investors. The main difference lies in the type of investor. The first loss layer has been designed to appeal to traditional donors, charities and philanthropic organisations. A traditional donor would historically give a dollar to a cause they support. But with BUILD, they invest that same dollar to support the cause. This initial investment will have a major catalytic effect on the rest of the fund. It will trigger further investment from private companies into the senior layers of the fund, who will benefit from the protection of the first loss layer. So instead of one dollar being invested into this cause, the donor has now sparked the investment of four, five, or six dollars that can be re-invested. Blended finance can enable truly efficient and sustainable philanthropy. The private companies that invest in the senior layers of BUILD also benefit from its blended finance approach. They receive financial returns that they would not have expected from an impact fund because they are protected by the first loss layer. The lower returns generated by the impact-geared portfolio become marketbased, risk-adjusted returns. This overcomes a major barrier that traditional institutions with a fiduciary responsibility face with impact investing. The first loss layer allows them to prove the financial returns from an impact fund. The final element is the commitment to generating demonstration effects. A central reason for the lack of private capital flows to LDC markets, even blended finance, is that investors mistake the lack of demonstrable investment opportunities for the actual lack of such opportunities. Conversely, every sound investment supports a demonstration effect for the “investability” of that market. Impactful blended finance vehicles can do more than deliver ROI. They can focus strategically on

As Bamboo and UNCDF proceed on the journey of the BUILD fund, there is at least one reality that all of us should consider. Whether it is our framework or someone else’s, the need for intentionality will be essential to ensuring that private finance will deliver to investors and deliver on the promise of leaving no one behind. i ABOUT THE AUTHOR Jean-Philippe de Schrevel leads business development at Bamboo Capital Partners. Previously, he co-founded BlueOrchard Finance in 2001. Prior to that, he was the Dexia Micro-Credit Fund Manager at Dexia Asset Management, a Junior economist in Romania for a EU PHARE technical assistance program, Field Consultant in Microfinance for a Belgian NGO, an Associate with McKinsey & Co, the Operations Director of a private Microfinance Foundation in Argentina, and a Consultant for the UNCTAD Microfinance Unit in Geneva. Jean-Philippe is fluent in French, Spanish and English. He holds a MA in Economics from Université Notre-dame de la Paix in Namur, Belgium, and an MBA from the Wharton School of Business.

ABOUT UNCDF UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. UNCDF pursues innovative financing solutions through: (1) financial inclusion, which expands the opportunities for individuals, households, and small and medium-sized enterprises to participate in the local economy, while also providing differentiated products for women and men so they can climb out of poverty and manage their financial lives; (2) local development finance, which shows how fiscal decentralization, innovative municipal finance, and structured project finance can drive public and private funding that underpins local economic expansion, women’s economic empowerment, climate adaptation, and sustainable development; and (3) a least developed countries investment platform that deploys a tailored set of financial instruments to a growing pipeline of impactful projects in the “missing middle.’’ ABOUT BAMBOO CAPITAL PARTNERS Bamboo Capital Partners is an impact investing platform founded in 2007 by Jean-Philippe de Schrevel which provides innovative financing solutions to catalyse lasting impact. Bamboo bridges the gap between seed and growth stage funding through a full suite of finance options – from debt to equity – which it activates unilaterally or through strategic partnerships. Bamboo aims to generate lasting impact and improve the lives of the world’s most marginalised communities while delivering strong financial returns. Since its inception, Bamboo has raised over $400m for developing countries, positively impacting over 152 million lives and creating over 40,000 jobs through its investments in over 30 countries. The firm has a team of 30 professionals active across Europe, Latin America, Africa and Asia. For more information, please visit www.bamboocp.com or follow @bamboocp

Author: Jean-Philippe de Schrevel

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> Jim O’Neill:

The Return of Fiscal Policy

As we enter the last quarter of 2019 (and of the decade), cyclical indicators point to a slowing world economy amid wide-ranging structural challenges. There are plenty of issues to keep one up at night, be it climate change, antimicrobial resistance (AMR), societal aging, strained pension and health systems, massive debt levels, and an ongoing trade war.

ut as the old adage goes, one should never let a crisis go to waste. Among the countries feeling the worst effects of the global trade tensions is Germany, where policymakers finally are waking up to the glaringly obvious need for productivityenhancing, investment-based fiscal stimulus. Similarly, beneath all the chaos caused by Brexit, the United Kingdom is also looking at its fiscal-stimulus options. So, too, is China, as it searches for measures to reduce its vulnerability to disrupted trade and supply chains. Policymakers around the world are coming to realise that it is neither wise nor feasible to rely constantly on central banks for economic-policy support. In today’s environment of low – and in some cases negative – interest rates, the case for shifting the burden from monetary to fiscal policy is more apparent.

Final Thought

Earlier this month, the European Central Bank decided to pursue interest-rate cuts and another round of quantitative easing (QE) – a move that appeared to accelerate a sharp sell-off in global bond markets. Yet in announcing the decision, ECB President Mario Draghi echoed a growing chorus of commentators now calling for more fiscal-policy measures. He was right to do so. Yet one can only wonder what benefit he expects to follow from further easing, given that ultra-low interest rates have already failed to boost investment or consumer spending. As for QE, a return to the unconventional monetary policies that started after the 2008 crisis will merely add to the social and political woes already afflicting Western democracies. After all, it is well known that the benefits of such policies accrue mostly to wealthy households that already have significant financial holdings. Meanwhile, the monthly data from China offer further evidence of an ongoing slowdown there, 158

"The slowdown in Germany is equally apparent. Owing to its excessive dependence on exports, the German economy is flirting with recession despite firm domestic demand." with a softening of exports clearly suggesting that the trade war with the United States is taking its toll. Perhaps for this reason, Chinese policymakers have eased up on their policy of discouraging domestic leverage (the priority last year), in order to focus on supporting growth. The slowdown in Germany is equally apparent. Owing to its excessive dependence on exports, the German economy is flirting with recession despite firm domestic demand (by Germany’s lowly standards). I have long argued that Germany’s economy is not as structurally sound as it seems, and that a shift in its policy focus is long overdue. For over a decade, Germany has adhered to a narrow fiscal framework and focused constantly on reducing government debt. But now even German policymakers are recognising the need for a change. The country’s ten-year bond yields are well below zero, its debt-to-GDP ratio is below 60%, its current-account surplus is obscenely high (nearing 8% of GDP), and its infrastructure is deteriorating. Since 2008, the US current-account deficit has fallen by half, to below 3% of GDP, and China’s has fallen from 10% of GDP to almost zero. Yet Germany’s external imbalance has continued to grow, threatening the stability of the eurozone as a whole. A major German fiscal expansion could start to reverse this trend. It also would likely have positive multiplier CFI.co | Capital Finance International

effects for private investment and consumption, thus creating export opportunities for other struggling eurozone members. Moreover, a shift in Germany’s fiscal-policy approach could open the door for a loosening of eurozone fiscal rules. European governments need to have the option of pursuing a more active role in the economy, so that they can invest in the sources of long-term growth and lead the process of decarbonisation. Turning to the UK, two issues beyond Brexit deserve attention. First, Boris Johnson, the recently installed prime minister, has already given major speeches in England’s North, signaling his support for the “northern powerhouse” model of geographically targeted development. To be sure, many see Johnson’s embrace of the North as a cynical ploy to rally his base before the next election. But surely Johnson and his advisers aren’t so daft as to assume that votes can be bought that easily. Besides, solving the North’s long-term structural challenges and boosting its productivity are even more important for the UK economy than the trading relationship with the EU – as important as that is. Second, Chancellor of the Exchequer Sajid Javid’s recent spending review augurs a change in UK fiscal policy. Owing to low interest rates and a sharp narrowing of the fiscal deficit over the last decade, Javid believes it is time to start addressing the country’s massive domestic infrastructure needs. He has suggested a new fiscal rule to distinguish between debt levels, with an exclusion for investment spending. Given today’s circumstances, such a rule would make a lot of sense not just for the UK, but also for the EU, Germany, and many other countries. i

ABOUT THE AUTHOR Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK Treasury Minister, is Chair of Chatham House.

BROADSWORD