CFI.co Autumn 2021 by CFI.co

Capital Finance International

Autumn 2021

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AS WORLD ECONOMIES CONVERGE

Prime Minister of Singapore - Lee Hsien Loong:

HUMAN CAPITAL CHAMPION ALSO IN THIS ISSUE // WORLD BANK: GLOBAL COVID-19 RECOVERY // NASDAQ: ESG TRENDS IBM: BANKS’ REINVENTION IMPERATIVE // IFC: GREEN OPPORTUNITY ACCENTURE: CREATING VALUE // PwC: DIGITAL LEADERSHIP

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First Thoughts Everyone is talking about inflation these days, and some are more worried than others. Policy makers and commentators are making good use of the “T” word. And if the rising inflation this year is indeed transitory then all will be fine. Of course, it should come as little surprise that prices are shooting up after pandemic lockdown year when we were hunkering down with the simple things of life, streaming, and basically going nowhere. It is generally thought that around two percent per annum inflation is a good thing and, even though the UK rate in 2021 is likely to be at least double that, we are witnessing an economy recovering (although tentatively) following the effects of a major health crisis. This is surely an acceptable price for a reopening of the economy. Although things were not looking too well for the UK in late September, it was comforting when Bank of England governor Andrew Bailey used the “T” word in an otherwise gloomy speech that included the whimsical question: “And when are the locusts due to arrive?” He told his audience that, “Many factors adding to higher prices will be transitory.”

First Thoughts

Venturing out earlier in the year, the prospects of higher than desirable inflation should have been obvious. Clearly supply chains were under pressure while the cost of labour was increasing dramatically. The advice to those contemplating a complex home extension was to wait until next year because certain key materials were unavailable, and costs had rocketed. Many householders are waiting in the belief that the situation is transitory on both counts. Students with good table service records can now

demand premium rates for their labour; used motor vehicles are going for crazy prices and energy costs are hitting record highs. But we understand why all this is happening and, yes, it does sound somewhat transitory. We shouldn’t be too worried about a repeat of the 1970s. Conditions then were quite different and there was no clear focus on keeping inflation under control. Double digit, or runaway inflation does not happen overnight, there is a gradual build-up. But surely poor control will not be countenanced during this decade – and certainly not after so much use of the “T” word. Have low pre-pandemic inflation rates made us complacent? Will government borrowing and spending to avert an economic collapse lead to dangerous levels of inflation? Some think so, and (well outside the consensus) Deutsche Bank warns that ignoring inflation fears could result in worldwide financial distress – with emerging markets particularly affected because of higher financing costs. However, many others believe that once things get back to normal, inflation rates will go back to where they were before Covid-19. It’s inevitable that interest rates are going to rise, but central bankers and finance ministers will be doing their level best to ensure that these increases are sensitively timed so as not to affect the recovery. Bailey pointed out that presently the UK economy is too weak to withstand a rate increase. The message is that there will be upward rate adjustments when needed, but they will not be threatening.

First Thoughts

> Correspondence

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While the Trump presidency rolled back environmental protection policies and downplayed — or downright denied — climate change, the Biden administration has given me a glimmer of hope for my country, and the planet. I was heartened to read about Biden’s infrastructure bill that will contribute towards the UN’s Sustainable Development Goal #9: Industry, Innovation, and Infrastructure. It’s a step in the right direction, but one that’s well overdue. Climate change has been affecting poorer countries for years, but the recent scourge of wildfires and flooding in the US could push policymakers to finally grasp how urgent the situation has become — and act accordingly. We’ve signed back up to the Paris Accord, and now we can only hope that our political and business leaders will rise to the challenge. I also appreciated your article about gender imbalance in the boardroom, and the “Big Three” investors (Vanguard, BlackRock and State Street) helping to correct it. We have more power than we perhaps realise when we raise our voices together as voters, consumers and shareholders to push for positive change. MARY SIMPSON (Portland, Maine) After a weekend celebrating the success of the world’s latest tennis star, Emma Raducanu, I am hungry for more sports coverage! You clearly appreciate that most top-tier business publications carry general interest content — and thanks for profiling pro athletes and the House of Guerlain in your Summer issue. I would love to see more reporting on tennis and other sporting events in future issues. And when you look at the financial rewards of the Grand Slam, it becomes clear that sport has a business side as well as entertainment value. I’m hoping to see more of Emma Raducanu (and my other sporting heroes) in the pages of a magazine I look forward to reading each quarter. ALINA ALBU (Bucharest, Romania) Our president, Andrés Manuel Lopez Obrador, has a daunting task to sort out deep-rooted corruption and gaping inequality in Mexico — but he deserves some praise for his efforts. Small gestures notwithstanding — foregoing the presidential jet and other trappings of office — he has genuinely tried to make Mexico a more equitable society, while taking on the formidable challenges of the drug cartels and our noisy neighbour to the north. As a post-colonial society, Mexico has embedded class divisions, overwhelmingly based on race: European vs the indigenous population. And that will be a difficult hurdle to overcome. It could be that AMLO’s popularity has endured because he stood up to the US and the (locally despised) DEA. One thing is for sure: originating from Tabasco state, Obrador can stand the heat. FELICIANO CUETLACHTLI BERNAL (Mexico DF)

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Autumn 2021 Issue

Full disclosure: I’m not a regular reader, and this letter is based on a half-hour browse through your magazine (at an airport, as it happens). Big, glossy, a bit full of itself, and aimed at rich people / CEOs: those were my first impressions. I did find that paging through your features helped time to pass relatively painlessly, though, so you must be doing something right. However, I do have one bit of constructive (?) criticism… As an ardent Remainer, I have recently had to struggle to avoid schadenfreude (or ranting like a lunatic) as I watch the good ship Blighty list to an apparently terminal degree as the Leavers’ wishes (and our worst fears) become reality. Empty supermarket shelves, a shortage of lorry drivers, exports down, imports more expensive, delays at Calais (and elsewhere). Brexit has been, and will continue to be, a mess. Has it really been good for anything, for anyone, anywhere? I was a little put-out by the lack of coverage in your magazine of the miserable months that have followed our (small, struggling) nation’s “liberation” from the EU. So much so that I took note of your email address to send this letter. PETER MARTIN (London, UK) While Poland has undoubtedly made enormous economic strides in the past three decades, for the World Bank to classify it as a high-income country strikes me as rather ridiculous. As a Pole who lived in the UK between 2005 and 2016, I made more money doing relatively unskilled jobs than I would have done working as a qualified engineer in my home country. Furthermore, the often-regressive sociopolitical policies of our governments have made me question how modern the Polish state really is. I always considered myself to be an Anglophile until Brexit, an event which made my mind up to return home. I found many improvements in the decade that I was away but now, five years later, believe much still needs to be done for Poland to deserve all these eulogies. MACIEJ MICHALOWSKI (Łódź, Poland) Things generally have been a bit fraught for the last two years, for obvious reasons. First there was Brexit to worry about, then the pandemic. I can’t help but notice a determination on the part of all media — your magazine included — to emphasise the positives of a situation that is, in reality, too miserable to contemplate. Lives lost, jobs lost, government stuffups, woeful vaccination programmes (for the most part), businesses ruined. Also, fortunes made (mostly by billionaires), entrepreneurs still plunging into the fray anyway — even during lockdown — to make a good fist of our collective recovery. On your pages, I have seen little about knock-on effects that will impact us all over coming months, years, and — quite possibly — decades. It’s mentioned, certainly, but mostly in passing, as you launch into yet another positive assessment of a dire situation. Admittedly, the Covid reporting space is crammed, and not exactly socially distanced, at the moment: every second article seems to mention it. But when will come the story we really need to see: the one that tells it like it is, and admits that — with Brexit, Corona, weather events, environmental destruction and other crises — we’re going to hell in a handbasket, and taking democracy, liberty, and the economy with us? SARAH PORTER (Bournemouth, UK)

> Editorial Team

Sarah Worthington George Kingsley Tony Lennox Kate Stanton Brendan Filipovski John Marinus Ellen Langford Helen Lynn Stone Naomi Snelling

Columnists

Otaviano Canuto Evan Harvey Tor Svensson Lord Waverley

Production Director Jackie Chapman

COVER STORIES World Bank Global Covid-19 Recovery (14 – 15)

IBM Banks’ Reinvention Imperative (22 – 23)

IFC Green Opportunity (24)

Distribution Manager William Adam

Subscriptions Maggie Arts

Commercial Director John Mann

Director, Operations Marten Mark

Publisher Anthony Michael

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 p26-27, 30-31, 42-43, 190 © Project Syndicate 2021

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

Nasdaq ESG Trends (28 – 29)

Cover Story Decades of Independence (32 – 36)

Accenture Creating Value (132 – 136)

PwC Digital Leadership (141)

CFI.co | Capital Finance International

Autumn 2021 Issue

FULL CONTENTS 14 – 47

As World Economies Converge World Bank Kristalina Georgieva Faty Dembele Paolo Sironi Nouriel Roubini Joseph E Stiglitz Paul Baker Otaviano Canuto

Axel van Trotsenburg OECD Rolf Schwarz IFC Evan Harvey Tony Lennox Tor Svensson

48 – 55 Autumn 2021 Special: Building

56 – 93

Europe

Brendan Filipovski Naomi Snelling Le Groupe La Poste EXIM Hungary SHARE NOW Mads Pedersen David Casas Alarcón

94 – 109

110 – 123

124 – 145

IMF Paul Horrocks IBM Kevin Njiraini Nasdaq Lord Waverley Mohamed A El-Erian

Back Better Means More Than Back to Normal

UniCredit KBC Diane Abrahams Nordea Asset Management ARCA Fondi SGR Human Edge

Laura Penna Johan Thijs BLKB Copernicus Wealth Management Erickson Davis CBRE

Yofi Grant

State Investment Corporation Ltd (SIC)

CFI.co Awards

Rewarding Global Excellence

Africa

GIPC Jason Agnew

Middle East Geidea Accenture Firas Sleiman Hesham Zreik

SATORP Alexis Lecanuet Abdulaziz bin Nasser Al-Khalifa QDB PwC Park Hyatt FasterCapital

146 – 159 Latin America Unity Willis Towers Watson Louis Ducruet Yogesh Patel EY Argentina Sergio Caveggia Suzie Allen

160 – 175

North America

Anthony Scaramucci GoldenTree Susan Margolin

Martin Kaufman Robert Zochowski

176 – 189 Asia Pacific Containers Printers Elmira Berkmurodova Shahnaz Radjy Maria Teresa Ferretti Bambang Susantono Jim O’Neill

190

Daniel Leigh Harvard Business School

Women's Brain Project Asian Development Bank

Final Thought

CFI.co | Capital Finance International

> World Bank:

Sustained Global Solidarity Needed to Achieve Global COVID-19 Recovery By Axel van Trotsenburg World Bank Managing Director of Operations

The pandemic has affected virtually everyone in the world, but its impacts have been hardest on the poor and vulnerable, deepening inequalities and exacerbating underlying challenges. Now more than ever, global solidarity is needed to address the widening gaps between rich and poor countries – particularly when it comes to responding to this crisis, enabling access to life-saving COVID-19 vaccines, and meeting the compounding impacts of climate change.

o respond to the pandemic, the World Bank Group stepped up with the largest crisis response in our history. Between April 2020 and June 2021, we deployed over $157 billion to fight the pandemic’s health, economic, and social impacts — an increase of more than 60% over the 15-months before the pandemic. We supported countries to address the health emergency and to strengthen health systems while ensuring that social protection systems were inclusive and able to support vulnerable households, preventing more households from falling into poverty. Some $50 billion of this historic WBG crisis response went to the poorest and most vulnerable countries through the International Development Association (IDA), the world’s largest source of concessional loans and grant finance. IDA’s global partners meet every three years to replenish IDA funds and review IDA’s policies, with the most recent replenishment of IDA’s resources (IDA19) finalised in December 2019. In a stunning and very promising show of global solidarity earlier this year, IDA donors and borrower countries agreed to advance the IDA20 replenishment by 12 months, with a pledging conference to be held in December 2021. The same solidarity is needed to critically step up equitable access to COVID vaccines for all countries, a prerequisite for economic recovery both domestically and globally. Together with the IMF, WHO and WTO, we formed a Multilateral Leaders Taskforce (MLT) on COVID-19 to accelerate access to COVID-19 vaccines, 14

"The World Bank has made $20 billion in financing available to low- and middle-income countries to purchase and distribute COVID-19 vaccines, tests and treatments and to strengthen immunisation systems." therapeutics, and diagnostics by leveraging multilateral finance and trade solutions. Our goal is to vaccinate at least 40 percent of people in every country by the end of 2021, and at least 60 percent by mid-2022. The World Bank has made $20 billion in financing available to low- and middle-income countries to purchase and distribute COVID-19 vaccines, tests and treatments and to strengthen immunisation systems. We are partnering with the African Union to support the Africa Vaccine Acquisition Trust (AVAT) with resources to allow countries to purchase and deploy vaccines for up to 400 million people across Africa. This is critically important with less than 3% of the African population vaccinated. There is also an urgent need to ensure timely delivery of doses ordered. The latest data collected by the MLT on vaccine delivery shows that less than 3% of doses pre-purchased by or for lowincome countries have been delivered. Delivery schedules not being met is unacceptable. CFI.co | Capital Finance International

"Poor countries generally emit the least but are the hardest hit by climate change - whether through volatile weather events, destruction of crops, reduced water resources or environments that have become so hostile that people have to leave their homes and migrate to new areas."

Autumn 2021 Issue

Managing Director of Operations: Axel van Trotsenburg

Helping countries recover sustainably from the COVID-19 crisis and regain lost ground on poverty reduction cannot happen without the world also rising – united – to meet the challenges of climate change. Poor countries generally emit the least but are the hardest hit by climate change - whether through volatile weather events, destruction of crops, reduced water resources or environments that have become so hostile that people have to leave their homes and migrate to new areas. The stakes could not be higher. Our latest research, the Groundswell 2.0 report, shows that climate change could drive 216 million people to migrate within their own countries by 2050, with hotspots of internal migration emerging as soon as 2030, spreading and intensifying thereafter.

o avoid aggravating inequality, we need to work together to help countries pursue a path to a green, resilient and inclusive recovery so they can achieve lasting economic growth and good development outcomes without degrading the environment. The World Bank Group is stepping up to provide countries with support, having increased its climate financing over $26 billion in the last fiscal year, which is 25% above FY20 (which was itself a record). The Bank’s new Climate Change Action Plan for 2021-2025 commits 35% of Bank Group financing to climate, on average, over the next five years, with at least 50% of World Bank climate finance supporting adaptation. In the same timeframe, the Bank Group will align financing with the goals of the Paris CFI.co | Capital Finance International

Agreement, while helping client countries meet their Paris commitments, including supporting and implementation of their Nationally Determined Contributions and Long-Term Strategies. Support is yielding results, including in the world’s poorest countries. In Niger for example, over 1 million people benefited from flood protection and sustainable land and water management activities increasing their resilience against natural hazards. Our collective responses to poverty, inequality, climate change and fragility are defining choices of our age. We must tackle these challenges together because no country can manage them alone. Strong and sustained international cooperation will be key to reversing increases in poverty, reducing inequalities, and ensuring that every country is on a pathway to emerge stronger from this crisis. i 15

> Kristalina Georgieva, Managing Director of the IMF:

No Time to Waste

As we look ahead to COP26, we must be ready to move decisively—together.

rt can connect us with what we know and it can inspire us to act. This issue’s cover by young Malaysian artist Nor Tijan Firdaus starkly depicts the consequences of generations of human profligacy—changing climate, biodiversity loss, and environmental degradation. All threaten the health and well-being of the future our children will inherit. Recent polls show increasing awareness of climate change, especially among young people. A majority of people consider it a global emergency—well above half in middle-income and least developed countries, and nearly threequarters among people in small island states and high-income countries. The COVID-19 pandemic has heightened concerns: 43 percent are more worried about climate change now. Yet, as Leonardo da Vinci said, ‘‘Knowing is not enough; we must apply. Being willing is not enough; we must do.’’ How do we translate concern into action? Breakthroughs in science and technology yielded COVID-19 vaccines in record time, a hopeful model for the innovation and action needed to develop and commercialize low-carbon technologies. Policy responses to the pandemic demonstrate that governments can also take unprecedented action when needed. It is critical to act with the same determination to address climate change and speedily put in place policies that can make a difference. First, we need market signals that work for the new climate economy, not against it. Politically challenging as it may be, the world needs to rid itself of all fossil fuel subsidies—equivalent to more than $5 trillion annually, yet far more costly to our future. Robust carbon pricing will help redirect private investment and innovation to clean technologies and encourage energy efficiency. Without it, we simply cannot reach the goals of the Paris Agreement. This price signal must get predictably stronger—reaching an average global carbon price of $75 per ton by 2030, way up from today’s $3 per ton. Major emitters agreeing on an international carbon price floor would be a good start. Second, we need to scale up green investments. IMF staff research projects that green supply policies could raise global GDP by about 2 percent this decade and create millions of new 16

jobs. On average, about 30 percent of new investment is expected from public sources, making it vital to mobilize private financing for the remainder. Third, we must work for a “just transition’’ to a low-carbon economy—within and across countries. For instance, revenues from carbon pricing can be used for cash transfers, social safety nets, retraining, and so on to compensate workers and businesses in affected high-emission sectors. Approaches like this are increasingly part of carbon pricing reforms, such as in Germany’s national emissions trading system and the EU’s planned Just Transition Mechanism. Across countries, it will require financial support and the transfer of green technologies. The world’s poorest countries have contributed the CFI.co | Capital Finance International

least to climate change, but are most vulnerable to its effects and least able to cover the cost of adaptation. With many of the lowest-cost mitigation opportunities in emerging market and developing economies, it is in the global interest that developed economies fulfill their commitment to provide $100 billion a year in climate finance for the developing world. We have no time to waste. As we look ahead to COP26, we must be ready to move decisively— together. We know what must be done; now we must do. i

Opinions expressed in articles and other materials are those of the authors; they do not necessarily represent the views of the IMF and its Executive Board, or IMF policy. This article was first printed in IMF’s F&D magazine.

Autumn 2021 Issue

CFI.co | Capital Finance International

> OECD:

Green, Social and Sustainability Bonds are Important Contributors to Delivering the SDGs By Paul Horrocks, Faty Dembele and Rolf Schwarz

To bridge the SDG financing gap, the challenges that the SDGs present, such as longterm climate risks, need to be matched with similarly long-term deep pools of finance. Green, Social and Sustainability Bonds can be an important contributor to this solution.

s of early 2021, the SDG financing gap in developing countries is estimated to have increased by at least 50%, USD 1.2 trillion, totalling USD 3.7 trillion in 2020. The pandemic has indeed magnified the “scissors effect” of the SDG financing gap by increasing financing needs and decreasing availability of resources. Shifting only 1.1% of global financial assets toward SDG financing needs in developing countries would be sufficient to fill the USD 3.7 trillion gap. However, it will require setting in place the right policy incentives to make a shift of the trillions possible. GSS Bonds provide an additional source of financing for SDG related projects, particularly in developing and emerging markets. At a time when bank lending is limited, GSS bonds can allow issuers to diversify their sources of funding and provide an alternative to conventional financing which can often be more expensive. Crucially, GSS bonds provide long term financing, firstly as the timing of green infrastructure projects’ cash flows is generally compatible with bonds issuance. Secondly, given the short maturity of bank liabilities and a lack of instruments for hedging duration risks, the capacity of banks to provide long-term green loans is constrained in many countries. Furthermore, corporates that can only access short-term bank credit also face refinancing risks for long-term green projects. As a result, issuing medium- and long-term GSS bonds for SDGs related projects can be an opportunity for banks and allow them to provide long-term green financing. However, recognising that this could potentially compete with bank debt products. Third, longer tenors tend to attract insurance companies and particularly pension funds seeking to match long dated liability cash flows. Insurers are indeed increasingly looking to "decarbonise" their investment footprint and seeking long-dated bonds due to several factors including regulation, solvency, asset liability management and yield levels. Prudential regulation in developed economies, however, continues to impede the growth of GSS bond market in developing economies. Regulation also redirects the investment of capital in developed economies away from infrastructure finance towards highly rated corporate bonds. 18

"Green bonds provide an opportunity to governments in developing economies to mitigate climate change risks and avoid a potential erosion of sovereign credit ratings." Sustainability Linked Bonds (SLBs) specifically could play a strategic role to fund the green transition in developing economies as they provide a necessary forward-looking dimension to the GSS bond market, with a coupon explicitly linked to the company’s ability to achieve various climate change targets or SDGs. SLBs offer greater flexibility to issuers given the unrestricted use of proceeds. However, there are legitimate concerns about the potential for ‘greenwashing’ in the transition space. This is mainly due to the fact there is still a lack of clarity as to what constitutes a genuine sustainability linked transition from sector to sector and at national levels. Green bonds provide an opportunity to governments in developing economies to mitigate climate change risks and avoid a potential erosion of sovereign credit ratings. As climate change effects are felt, investors are likely to become increasingly concerned of lending to vulnerable countries. Furthermore, climate change has already had an impact on developing countries’ credit ratings as rating agency Standard & Poor’s cited hurricane risk when it cut its ratings outlook on the sovereign debt issued by the Turks and Caico in 2018. In fact, a study by a group of UK universities has shown that 63 countries – roughly half the number rated by the likes of S&P Global, Moody's and Fitch - could see their credit ratings cut because of climate change by 2030. A shift towards GSSS bond issuances aiming at funding the green transition for sovereign issuers could contribute to mitigate such risks. Besides, sovereign green bond issuances enable governments to assert their political commitment to fight against climate change and underpin CFI.co | Capital Finance International

their broader environmental strategies. As can be seen from the world overview below there is a mixed picture of issuance in the developing world with some issuance and intent to issue but also a lot of potential future issuers. HOW AND WHY SHOULD DEVELOPMENT ACTORS SUPPORT THE GSS BOND MARKET? In the sustainability bond space, most of the 260% growth in 2020 came from supranational issuers from development banks, especially multilateral (MDBs). The World Bank as well as other players such as the Asian Infrastructure Investment Bank (AIIB) led the market. Supranational issuers represented 63% of the volume of sustainability bond issued in 2020. This reaffirms their catalytic role as ‘market enablers’ in the GSS bond space. IN THE GREEN, SOCIAL AND SUSTAINABILITY BOND MARKET, PUBLIC DEVELOPMENT BANKS CAN PLAY A MULTIFACETED ROLE: Issuers: Development banks typically borrow on the private capital markets at favourable financial conditions based on their government backing and high credit rating. They can use the proceeds of the bond(s) issued to support projects which belong to their loan portfolios and have been ‘tagged’ as green, social or sustainable. Given their high credit rating and their development mandate, they can typically appear as a riskfree investment for institutional investors looking to buy green, social and sustainable bonds. Ultimately, through these issuances, development banks can optimise their cost of funding, as their green, social, and sustainable issuances tend to be oversubscribed as well as diversify their investor base and attract more loyal sustainability-minded investors. The main barrier for further issuances from development banks resides in their ability to ‘tag’ a significant supply of eligible loans and to create the right frameworks of methodologies to assess their loans ‘contributions to the SDGs. One of the key benefits of the green, social and sustainability bond issuances for development banks is related to the opportunity to transfer the financial gains from their issuances to their end beneficiaries, in the form of better lending conditions. However, a crowding out effect could be noted as cheap lending options in hard currency could detract

Autumn 2021 Issue

In addition, pension funds or insurance investors are typically looking for investment-grade rated projects, which means that high-risk projects (including infrastructure projects) are not of interest to them, although the participation of the private sector is key for the financial viability of infrastructure projects. Without the assistance provided by credit-enhancement mechanisms, many projects remain unfeasible and unable to garner private financing.

potential corporate issuers from issuing bonds in local currency and thereby prevent them from contributing to the development of local capital markets. It could be argued, however, that cheap lending conditions contribute to reducing the cost of funding of local corporate issuers and contribute to help them grow until they reach the maturity to explore bond issuance in capital markets. Anchor investors: Public development banks can play the role of an anchor or cornerstone investor for issuances and their participation can enhance the perceived credibility of the issuer and strengthen the market by reducing perceived risk for private investors. This helps the issuing company seeking funding to build investor confidence and contribute to catalysing investments from a wider pool of private actors. Besides, Public Development Banks can support “market creation” by helping new issuers get their names out to investors, in addition to participating in first time issuances. Mobilisers of private finance: Public development banks can mobilise private investors by issuing guarantees or by providing first loss tranches to enhance the risk/return profiles of projects in developing economies and ultimately attract institutional investors. This can be achieved through blended finance and credit enhancement mechanisms, thereby reducing risk exposure, and enhancing market incentives for institutional investors. Guarantees are particularly helpful to finance green infrastructure projects in emerging markets which have a high credit risk profile. To ensure that public development banks continue to mobilise the private sector at scale, international donors, as the owners of the bilateral DFIs, and significant shareholders in many of the MDBs, should ensure that the incentives that crowd-in private investors are kept in place over time. Providers of technical assistance: Public development banks can provide technical support to prepare sovereign issuances as it was the case with the Seychelles’ first blue sovereign bond, designed with the help of the World Bank, or with the Government of Egypt, which issued its inaugural green bond in 2020. In this case,

the World Bank’s role was to provide technical assistance for preparing and issuing annual reports regarding the utilisation of Egypt’s green bonds revenues and the expected developmental and environmental impacts of approved projects. The Asian Development Bank (ADB) provides technical assistance through the Association of Southeast Asian Nations’ (ASEAN) Catalytic Green Finance Facility (ACGF) and offers bond framework development and external reviews. ADB, for example, helped Thailand’s Ministry of Finance (MOF) and National Housing Authority (NHA) in designing green, social, and sustainability bonds based on global and ASEAN standards and best practices. Another example can be found with the Inter-American Development Bank (IADB) which supported the Government of Chile in the preparation of the documentation and necessary certification for the issuance of a sovereign green bond in 2019. Capacity building is also provided through training and education, such as those provided by the Luxembourg Stock Exchange Academy. Support policy reform: Public development banks can support market regulators in the development of national sustainable bond frameworks, as well as support initiatives aiming at developing local capital markets infrastructure. As an example, through the Sustainable Banking Network (SBN), IFC works upstream with financial sector regulators, banking associations, and capital market authorities to deepen the development and implementation of national sustainable finance frameworks across emerging markets. PROMOTE THE USE OF GUARANTEES AS A CREDIT ENHANCEMENT MECHANISM One of the key limitations affecting GSSS bonds is the lack of internationally recognised credit ratings across emerging market green bonds because the ratings are key to assessing creditworthiness. However, a growing percentage of issuers have obtained a credit rating from at least one major credit rating agency over the past two years according to a report from Amundi and IFC, of the total number of green bond issues in 2020, 23 percent were rated investment grade and another 12 percent were rated sub investment grade. CFI.co | Capital Finance International

As a result, the main objective of a creditenhancement mechanism provided by donors or public development banks is to improve the credit quality of infrastructure projects, to attract more private financing for the project. Once these actors offer credit enhancement for a project, it demonstrates to other investors that the project is viable and thereby catalyses private sector investment. One prominent example can be found with the Seychelles sovereign blue bond which was partially guaranteed by a USD 5 million guarantee from the World Bank (IBRD) and further supported by a USD $5 million concessional loan from the Global Environment Facility (GEF) which partially covered interest payments for the bond. Similarly, on the corporate side, GuarantCo, a Private Infrastructure Development Group (PIDG) company, has guaranteed the first International Corporate Indian Rupee Green Bond in Asia by providing an unconditional and irrevocable guarantee, which covers 100% of the principal and interest of the Green Bond. The strength of GuarantCo’s guarantee was responsible for the strong rating (Moody’s rated the Green Bond A1 and Fitch AA), which also made it feasible for institutional investors to subscribe to the Green Bond. Furthermore, GuarantCo had contributed to the issuance of a green bond in Kenya on the Nairobi Securities Exchange (NSE). Overall, guarantees have several benefits as a blended finance instrument. They are commitments to repay in case of default of the underlying instrument and do not necessarily require an immediate outflow of funds by donors. In addition, guarantees have proven to be the most effective instrument in mobilising private resources. OECD data on private finance mobilised during the period 2012-2018 indicate that guarantees mobilised more capital than any other financial instrument and were the most effective tool for mobilising capital in every year for which data is available. THE NEED TO DEVELOP A PIPELINE OF LOCAL INFRASTRUCTURE PROJECTS Investor appetite for GSSS bonds in emerging markets and developing economies is relatively strong, as evidenced by significant oversubscriptions of recent issuances. For such markets, the lack of supply of “labelled” GSSS bonds is a major constraint. This reflects the lack of bankable green projects in some markets that can be financed or refinanced through GSSS bonds and highlights need to foster 19

robust enabling policy environments necessary for pipelines of green, social and sustainability projects to emerge at scale in developing countries. Local governments can benefit from working more closely with public development banks and investors in this process. SUPPORT THE AGGREGATION OF SMALL-SCALE PROJECTS Securitisation refers to the process of transforming a pool of illiquid assets (normally many thousands of separate assets) into tradable financial instruments (securities). The investors’ returns on the securities are drawn from the cash flows of the underlying assets, such as loans, leases, or receivables against other assets. The vast majority of securitisation is used to refinance loans to existing assets, and banks are the main issuers of asset-backed securities (ABS). Loans to small-scale projects can be aggregated and then securitised to reach an adequate deal size for bond markets. To be effective, public support for green securitisation as an example must rely on a broader favourable policy environment that generally supports investments in low carbon projects. However, careful design and oversight of markets for GSSS bonds and securitised assetbacked securities (ABS) are required. ACHIEVING POSITIVE DEVELOPMENT IMPACTS IN LOCAL ECONOMIES For donors to contribute to supporting the GSSS market, having evidence of additionality will be key. Financial additionality - Bonds are frequently used to refinance green projects or assets after the project construction phase is complete. However, one important question often asked about the additionality of GSS bonds is how the market funnels resources to new projects. Importantly, it should be remembered that refinancing can indirectly facilitate the financing of new projects as it enables risk-taking sponsors or investors, who take on the project development and construction risk, to exit once this phase of the project is over. The initial highyield debt can be refinanced by more risk-averse investors looking for stable, lower-risk longerterm investments through GSS bonds if the asset achieves a positive social or environmental impact and once it is operational. Furthermore, refinancing frees up issuers’ capital from existing assets, which can be re-invested in new projects creating an asset recycling system in the market. Despite these elements, more research is needed on the potential financial additionality of bonds aiming to refinance projects or assets. Development Additionality - GSS bonds must, by definition, have a use of proceeds that contributes to the goals of the Paris agreement (green bonds) and/or clearly demonstrate the social outcomes for defined target population as part of social bonds for example. However, there is still a need to develop metrics to better monitor, evaluate, and verify the social and environmental impact of GSS bonds. Similarly, better sustainability frameworks and harmonised 20

impact reporting could support issuer’s efforts in demonstrating how GSS bond issuances have led to actual development impacts in developing economies. THE ROLE OF THE G20 For all these elements to come together there needs to be global coordination. The G20 is an important economic actor bringing together developing and developed countries with significant funding needs and deep pools of finance looking for opportunities. The G20 has delivered through the Development Working Group a stock take report on GSS Bonds that looks at the obstacles but also identify solutions for scaling up the GSS Bond market, especially in developing countries. The OECD together with Cassa Depositi e Prestiti (CDP) produced the stock take which provides important examples and points to the important role of development actors in ensuring GSS markets can be created to deliver the SDGs. This report should inspire but also provide a direction of travel for this important contributor to development finance. i

contributing to the G20 development work. He holds a Ph.D. in International Relations from the Graduate Institute of International and Development Studies, University of Geneva. Rolf has published on the SDGs, on fragility, and economic reforms in emerging markets.

Author: Paul Horrocks

ABOUT THE AUTHORS Paul Horrocks is Head of the Private Finance for Sustainable Development Unit at the OECD Development Co-operation Directorate. Paul is working on several initiatives aiming at encouraging greater private sector investment into developing countries, on policies and approaches that governments can adopt in order to ensure that activities are aligned, and impact achieved. Prior to this, Paul was a Senior Executive in Fiscal Group of the Australian Federal Treasury, working on the domestic infrastructure market but also providing policy advise during Australia’s G20 presidency on international policy challenges. Paul has over a decade of Senior leadership at the European Institutions in Brussels, having worked on initiatives such as the deepening of European capital markets in response to the 2008 financial crisis. Paul has degrees from the University of Wales, and master’s degree from the University of Liverpool as well as an Executive MBA from Vlerick Business School in Belgium. Faty Dembele is presently working as a Policy Analyst in the Private Finance for Sustainable Development (PF4SD) team at the Development Co-operation Directorate (DCD) at the OECD. Faty has ten years of experience in the sustainable investing space, having worked for several years for an asset manager in France as a Sustainable Finance lead as well as a Equity Research Analyst at Morgan Stanley in the sustainable finance team. Faty also currently serves as an Independent Director of the Impact Investment SICAV of Financière de l’Echiquier invested in European companies whose activity provides solutions to climate and sustainability objectives, as well as a Professor of Practice on sustainable Investing at Kedge Business School. Rolf Schwarz is Senior Advisor in the OECD’s Development Co-operation Directorate (DCD), managing outreach to OECD Key Partners China, India, Indonesia, South Africa, and Brazil, and CFI.co | Capital Finance International

Author: Faty Dembele

Author: Rolf Schwarz

Autumn 2021 Issue

THE HUNGARIAN EXPORT CREDIT AGENCY

Cross-border financing solutions

for foreign customers importing from Hungary Functioning as a financial engine

for Hungarian exporters

Financing and insurance facilities for global trade

exim.hu/en

EXIM Hungary is the official export credit agency specialized in supporting Hungarian companies in their local and international investments, foreign expansion and global trade by providing various financing and insurance products. CFI.co | Capital Finance International

Paolo is the global research leader in Banking and Fin Markets at IBM, Institute of Business Value. IBV is thought leadership centre of IBM.

> Banks’ Reinvention Imperative:

Don’t Leave Money On the Table! By Paolo Sironi

The ability to change and digitally adapt has been a defining feature of business during the pandemic. According to IBM, the Institute for Business Value (IBV), almost 60% of business leaders said they had already begun dramatically accelerating their companies’ digital transformations as early as September 2020. With adversity serving as a catalyst for change, fully two-thirds of business leaders said the pandemic has allowed them to pursue specific transformation initiatives that, pre-pandemic, had encountered stiff resistance.

IBM Thought Leadership

loud technologies are central to this digital acceleration. And cloud is a fundamental enabler of successful transformation. But cloud adoption alone is insufficient to motivate significant gains in revenue and profitability. The ability to integrate functions and processes, and to enable intelligence and interoperability, is a key determinant in fully exploiting the potential value of cloud. Cloud - or, more specifically, hybrid cloud - can support levels of openness and collaboration far beyond what was possible in the past. Hybrid cloud, coupled with digital and business transformation, can generate unprecedented strategic and financial benefits for an organisation. In short, the democratisation of data and the dramatically increased intelligence and insight brought about by open hybrid technology and architecture promise to redefine the economics of business. The IBV has recently conducted a study in collaboration with Oxford Economics, based on a survey of almost 7,200 C-suite executives (almost 680 from financial institutions) across 28 industries and 47 countries. The study suggests that investment in cloud computing can generate up to 13 times greater benefits than cloud alone, when executed end-to-end in combination with other levers of business transformation. The potential impact on profitability can be up to 20 times when applied

specifically to the banking industry. To harvest all economic benefits, the relationship between cloud technologies and business transformation must include: • Mastery of data capabilities. • Level of adoption of technologies, including AI, IoT, and RPA. • Maturity of operational enablers, including workforce skills, processes and extended intelligent workflows, and cybersecurity. • Extent of shift toward an open organisation, including cultural transformation, innovation, platform strategies, and ecosystems engagement. Essentially, let’s assume that end-to-end enterprise transformation unlocks extra business value, which is 100% of a potential revenue amount on the CEO’s table. In banking, cloud adoption alone will yield only 5% of the total potential revenue from new cloud investments. This means that 95% of all the money that a bank can further earn will remain on the table

if the CEO fails to see the cloud strategy as part of a broader enterprise transformation effort. Cloud’s contribution to business value expands dramatically when business reinvention involves adopting both state-of-the-art technology and an innovation-friendly, employee-centric organisational culture. Comparing banking with other industries can provide insights about the business rational. In both industries, most of the revenue potential is expected to be generated by the interaction of new cloud investment with the other enterprise capabilities, such as transforming the organisation and the operating model with a refreshed culture that embraces open innovation, ecosystem interplay and platformoriented business models. However, the study indicates that cloud investments alone already allow automotive firms to grab 20% of the money on the table. As said, banks could size only 5%.

"Investment in cloud computing can generate up to 13 times greater benefits than cloud alone, when executed end-to-end in combination with other levers of business transformation. The potential impact on profitability can be up to 20 times when applied specifically to the banking industry." 22

CFI.co | Capital Finance International

"Typically, bank business units – and IT departments - operate with seemingly different incentives, which are focused on the clients’ subneeds instead of their continuous journey." matter of marketing. Most of all, it means changing the incentives and mechanisms of their offers to leverage exponential technologies and operate as "all-in" business platforms. This can only work when business culture is transformed to embrace the open organisation. The key message is that to maximise the revenue impact from cloud technology it is necessary to complement its adoption with enterprise transformation. i

Author: Paolo Sironi

Financial institutions need to do more to achieve more. Why this difference? Among other aspects, the shift to an open organisation is a clear driver.

About banking and financial intermediation, clients (families or corporate) looking for solutions to their financial health do not typically buy a single banking relationship but are asked to deal with a multitude of intermediaries organised across product-focused business units. However, it is the whole portfolio of opportunities that help clients personalise financial decisions over time and succeed in their financial journey. Clients have a relationship for payments and transaction

Banks are asked to revise their operating models to think and act as "all-in" digital providers of solutions. For banks, shifting from "product centricity" to "client centricity" is not only a CFI.co | Capital Finance International

More insights about banking platformisation can be learned by reading Paolo’s latest book Banks and Fintech on Platform Economies: relinks.me/1119756979 ABOUT THE AUTHOR Paolo Sironi is the global research leader in banking and financial markets at IBM Consulting, the Institute for Business Value. He is one of the most respected fintech voices worldwide, providing business expertise and strategic thinking to a network of executives among financial institutions, start-ups, and regulators. He is a former quantitative risk manager and start-up en-trepreneur. Paolo’s literature explores the biological underpinnings of financial markets, and how technology and business innovation can bolster the global economy’s immune system in today’s volatile times. Visit Paolo's website thePSironi.com for more information. Website: thePSironi.com 23

IBM Thought Leadership

Typically, clients want to buy a car with as much personalisation as they can afford. Carmakers act as providers of "all-in" solutions. They assemble vehicles based on guided preferences, engaging providers of components like automatic gearboxes, leather seats, or Hi-Fi players. Ultimately, each client meets one dealer who manages the whole tailored relationship.

banking, a relationship for treasury investments, a relationship for funding needs to buy machinery or real estate. All these dedicated interactions generate siloed data repository about the same client. Typically, bank business units – and IT departments - operate with seemingly different incentives, which are focused on the clients’ sub-needs instead of their continuous journey. Consequently, the culture and organisation of banks is way more split compared to other industries. This indicates that the benefits of hybrid cloud in terms of facilitating the accessibility and interoperability of data, insights and applications can be dramatically enhanced by an open banking organisation that can make clients the center of a platform solution shaped around personalised full needs, instead of specialised financial products.

More insights about unlocking the business value of hybrid cloud can be learned by accessing the full IBM study: ibm.com/thought-leadership/institute-businessvalue/report/hybrid-cloud-business-value

> IFC:

Southern Africa’s Green Opportunity and Imperative By Kevin Njiraini IFC’s Regional Director for Southern Africa and Nigeria

The most severe drought southern Madagascar has suffered in 40 years is threatening lives and liveli-hoods in the region.

he situation is precarious, with the UN World Food Program warning that a climate-induced famine could worsen food security for more than a million people. Thousands are already in ‘catastrophic conditions’, according to the UN.

to assess the impact of green investments, making it harder for investors to determine both the financial return and climate benefits of investments in new and emerging green sectors. And many countries’ financial regulatory systems are not yet equipped with frameworks to manage climate friendly tools such as green and other types of sustainable bonds that would help drive more finance towards climate-friendly investments.

The shifting climate is not of Madagascar’s making. The country contributes very little to carbon emissions but is among those bearing the brunt of changing and erratic weather patterns.

A growing focus of IFC’s work in developing markets has been to encourage sustainable financing by tackling these challenges. We are doing this by working with partners to create innovative funding products (including sustainable bonds), by helping countries develop green bond frameworks, and by working with partners to mobilise additional capital.

Africa, as a whole, accounts for only 2-3 percent of the world’s total greenhouse gas emissions but will bear a disproportionate impact due to climate change. Five of the 10 countries most affected by extreme weather events in 2019 were in Africa, according to the 2021 Global Climate Risk Index. In August, an Intergovernmental Panel on Climate Change report predicted that in the coming decades, countries in Southern Africa will experience both increased droughts and stronger cyclones with flooding. In Southern Africa, we are already seeing the effects of weather-related crises. The World Bank estimates Mozambique faces average annual losses of $440 million due to floods alone. Zimbabwe needed as much as $1.1 billion to recover from Cyclone Idai in 2019 to restore damaged infrastructure and livelihoods. And in South Africa, the country is facing water shortages with the country’s water demand predicted to outstrip supply by 2030, according to the 2030 Water Resources Group. These are serious threats—and they are already upon us. But we can act to make positive—and significant—change. How? The private sector has a leading role to play here by prioritising financing towards greener and more sustainable development that will reduce emissions and waste. IFC research in Côte d'Ivoire, Kenya, Nigeria, and South Africa suggests that there are potentially $300 billion in investment opportunities in green projects in sub-Saharan Africa between 2020 and 2030—including in green buildings, renewable energy, and climate smart agriculture. 24

We are getting involved earlier in project development to help create more bankable projects that support the development of greener infrastructure, renewable energy, and more resource efficient cities to facilitate the entrance of new private investors to the climate investment space. That means going into new investment areas, such as the circular economy, to prove their market viability and their impact. Author: Kevin Njiraini

If realised, these projects could avoid 154 million tons of CO2 emissions and create 13 million new jobs. In addition, the number of people pushed into extreme poverty by climate change could be halved, according to World Bank Group research. Clearly, the opportunities are there to catalyse the market and unlock investment for private sector projects that support renewable energy, energy and resource efficiency and green building to name a few. To turn these opportunities into reality we need to leverage ideas, innovations, and finance from the private sector to capture it. However, there are challenges facing sustainable finance growth and they include a lack of bankable projects for investors. Other issues include fragmented impact measurement systems CFI.co | Capital Finance International

And IFC is working with partners to coalesce the impact investing community around a harmonised set of indicators that impact investors can use to measure and report on their investment activities. Clear impact metrics are essential to making the economic and social contributions of investments measurable, allowing investors to improve their transparency, effectiveness, and accountability. Thanks to innovations such as green bonds and public policies that encourage the implementation of environmentally friendly business practices, the appetite for green investing is growing. For example, EDGE, an IFC innovation, is making it easy to design and certify resource efficient and Zero Carbon buildings. This is encouraging more developers to build more sustainably. In South Africa, financial institutions already provide 67 percent of the financing for renewable energy projects in the country. They want to do

Autumn 2021 Issue

"Greener economies will not only help minimise future disasters, but also create new industries and jobs as the world recovers from the shock of COVID-19." even more. A 2020 study by IFC and South Africa’s Financial Sector Conduct Authority of 139 retirement funds representing 74 percent of assets under management in South Africa found that 82 percent wanted to increase their funding for green and climate-focused investments. This augurs well for future investment in green projects. It won’t stave off the crises afflicting climate-vulnerable regions today—but momentum is gathering and businesses and governments around the world are rethinking economic models to support more sustainable businesses. Greener economies will not only help minimise future disasters, but also create new industries and jobs as the world recovers from the shock of COVID-19. For sub-Saharan Africa, where, according to the UN, the population is expected to double to 2.1 billion by 2050, green investments should no longer be considered a niche market. Delivering reliable and sustainable power, water, and other services to those in the continent’s growing cities will, in many cases, mean making the green option the only option. i ABOUT THE AUTHOR Kevin Njiraini is IFC’s Regional Director leading implementation of strategy for Southern Africa and Nigeria, based in Johannesburg. He manages key client, partner, government, and World Bank Group relationships. His focus is on creating, expanding, and deepening markets in Africa, and helping to encourage increased investment in low-income economies and fragile and conflict situations. ABOUT IFC AFRICA IFC has established a leading position promoting private sector investment in Africa. IFC has a committed portfolio in Africa of $13.3 billion and more than 700 staff working to expand the private sector's role in addressing urgent development challenges. IFC is a leading provider of advice to promote a sustainable private sector and mobilises capital from other investors who invest alongside IFC in critical sectors for Africa’s future. IFC is also deploying fast-track funding and advisory support to help African businesses weather the effects of the COVID-19 pandemic and manage its recovery. 25

> Nouriel Roubini:

Goldilocks is Dying

ow will the global economy and markets evolve over the next year? There are four scenarios that could follow the “mild stagflation” of the last few months.

The recovery in the first half of 2021 has given way recently to sharply slower growth and a surge of inflation well above the 2% target of central banks, owing to the effects of the Delta variant, 26

supply bottlenecks in both goods and labor markets, and shortages of some commodities, intermediate inputs, final goods, and labor. Bond yields have fallen in the last few months and the recent equity-market correction has been modest so far, perhaps reflecting hopes that the mild stagflation will prove temporary. The four scenarios depend on whether growth accelerates or decelerates, and on whether CFI.co | Capital Finance International

inflation remains persistently higher or slows down. Wall Street analysts and most policymakers anticipate a “Goldilocks” scenario of stronger growth alongside moderating inflation in line with central banks’ 2% target. According to this view, the recent stagflationary episode is driven largely by the impact of the Delta variant. Once it fades, so, too, will the supply bottlenecks, provided that new virulent variants do not emerge. Then growth would accelerate while inflation would fall.

Autumn 2021 Issue

rocking stock or bond markets. In equities, there would be a rotation from US to foreign markets (Europe, Japan, and emerging markets) and from growth, technology, and defensive stocks to cyclical and value stocks. The second scenario involves “overheating.” Here, growth would accelerate as the supply bottlenecks are cleared, but inflation would remain stubbornly higher, because its causes would turn out not to be temporary. With unspent savings and pent-up demand already high, the continuation of ultra-loose monetary and fiscal policies would boost aggregate demand even further. The resulting growth would be associated with persistent above-target inflation, disproving central banks’ belief that price increases are merely temporary. The market response to such overheating would then depend on how central banks react. If policymakers remain behind the curve, stock markets may continue to rise for a while as real bond yields remain low. But the ensuing increase in inflation expectations would eventually boost nominal and even real bond yields as inflation risk premia would rise, forcing a correction in equities. Alternatively, if central banks become hawkish and start fighting inflation, real rates would rise, sending bond yields higher and, again, forcing a bigger correction in equities. A third scenario is ongoing stagflation, with high inflation and much slower growth over the medium term. In this case, inflation would continue to be fed by loose monetary, credit, and fiscal policies. Central banks, caught in a debt trap by high public and private debt ratios, would struggle to normalise rates without triggering a financial-market crash. Moreover, a host of medium-term persistent negative supply shocks could curtail growth over time and drive up production costs, adding to the inflationary pressure. As I have noted previously, such shocks could stem from de-globalisation and rising protectionism, the balkanisation of global supply chains, demographic aging in developing and emerging economies, migration restrictions, the Sino-American “decoupling,” the effects of climate change on commodity prices, pandemics, cyberwarfare, and the backlash against income and wealth inequality. For markets, this would represent a resumption of the “reflation trade” outlook from earlier this year, when it was hoped that stronger growth would support stronger earnings and even higher stock prices. In this rosy scenario, inflation would subside, keeping inflation expectations anchored around 2%, bond yields would gradually rise alongside real interest rates, and central banks would be in a position to taper quantitative easing without

In this scenario, nominal bond yields would rise much higher as inflation expectations become de-anchored. And real yields, too, would be higher (even if central banks remain behind the curve), because rapid and volatile price growth would boost the risk premia on longerterm bonds. Under these conditions, stock markets would be poised for a sharp correction, potentially into bear-market territory (reflecting at least a 20% drop from their last high).

The last scenario would feature a growth slowdown. Weakening aggregate demand would turn out to be not just a transitory scare but a harbinger of the new normal, particularly if monetary and fiscal stimulus is withdrawn too soon. In this case, lower aggregate demand and slower growth would lead to lower inflation, stocks would correct to reflect the weaker growth outlook, and bond yields would fall further (because real yields and inflation expectations would be lower). Which of these four scenarios is most likely? While most market analysts and policymakers have been pushing the Goldilocks scenario, my fear is that the overheating scenario is more salient. Given today’s loose monetary, fiscal, and credit policies, the fading of the Delta variant and its associated supply bottlenecks will overheat growth and will leave central banks stuck between a rock and a hard place. Faced with a debt trap and persistently above-target inflation, they will almost certainly wimp out and lag behind the curve, even as fiscal policies remain too loose. But over the medium term, as a variety of persistent negative supply shocks hit the global economy, we may end up with far worse than mild stagflation or overheating: a full stagflation with much lower growth and higher inflation. The temptation to reduce the real value of large nominal fixed-rate debt ratios would lead central banks to accommodate inflation, rather than fight it and risk an economic and market crash. But today’s debt ratios (both private and public) are substantially higher than they were in the stagflationary 1970s. Public and private agents with too much debt and much lower income will face insolvency once inflation risk premia push real interest rates higher, setting the stage for the stagflationary debt crises that I have warned about. The Panglossian scenario that is currently priced into financial markets may eventually turn out to be a pipe dream. Rather than fixating on Goldilocks, economic observers should remember Cassandra, whose warnings were ignored until it was too late. i ABOUT THE AUTHOR Nouriel Roubini, Professor of Economics at New York University's Stern School of Business and Chairman 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. His website is NourielRoubini.com, and he is the host of NourielToday.com. 27

> Evan Harvey, Nasdaq:

An Overview of ESG Trends U.S. Perspective

WHEN AND HOW DID SUSTAINABILITY/ESG ENTER THE CAPITAL MARKETS IN THE U.S.? The concept of sustainable investing, or targeting investment capital flow towards a specific outcome (beyond simple return, of course) dates back a half-century. At first, religious or ethical investors wished to exclude so-called “sin stocks” from their portfolios. These were equities tied to businesses that they considered immoral, such as tobacco, firearms, and gambling. In the 1970s, some investors began to focus more clearly on environmental issues, or those companies that contributed to a healthy, unpolluted planet.

CFI.co Columnist

The next two decades saw a rise in socially responsible investing (SRI), where the emphasis shifted from green and clean outcomes to those that promoted healthy social and economic impacts. Within the last decade, “ESG” has taken on a more specific meaning: using specific preface data to ‘qualify’ for investment. And as the UN PRI signatory list makes clear, just about every investor on earth (not just in the U.S.) leverages this perspective when constructing a portfolio. WHAT ARE THE KEY ESG DEVELOPMENT MILESTONES IN THE U.S. THAT HAS BROUGHT US FORWARD TO TODAY? I would point to at least three inflection points in the U.S. market. There may be others, but most would not disagree that these three have had a lasting impact. First, Milton Friedman issued his edict (1970) declaring that returning shareholder value is not just the primary motivator for companies, but the only motivator. It’s impossible to understate just how resonant this point of view became in U.S. c-suites and boardrooms. The concept of ESG — especially if posited as any and all measurement of so-called non-financial data — had to build its business case and its support base in direct opposition to the Friedman perspective. Second, fast-forwarding almost 50 years later, we have the Business Roundtable public letter acknowledging the presence and value of multiple stakeholders. “The Statement on the Purpose of a Corporation” (2019), signed by 181 major company CEOs (full disclosure:

"For most of a generation, EU investors were more proactive, better informed, and especially faithful when it came to the sustainable profits offered by the integration of ESG into investment decision-making." Nasdaq’s CEO was one of them), revered course on Friedman and brought ESG into the U.S. business mainstream. Last but not least, I would acknowledge the reach and influence of the annual open letter written by BlackRock CEO Larry Fink. His bully pulpit — ostensibly a snapshot of the asset manager’s investment style — has repeatedly focused on the need for greater environmental responsibility and transparency. “When Mr Fink makes what sounds like a request,” said The New York Times, “in truth it is much more than that. BlackRock’s size gives it enormous influence” (Dealbook, 26 Jan 2021). What’s more, Fink is quick to point out that these strategies are designed to increase returns, not diminish them. NASDAQ OWNS AND IS INVOLVED IN MANY TECHNOLOGY BUSINESSES; IS ESG A FACTOR IN THOSE? Rather than allow this article to devolve into needless promotion — because I like to think that all of our businesses are in one way or the other focused on ESG — let’s talk about two innovative new ones. In the last few years, Nasdaq has made majority investments in both Matter and Puro.earth. Matter is a portfolio x-ray tool, designed to help investors analyse entire portfolios for specific flaws or strengths. Its AI-powered screening solution enables clients to look at a range of sustainability criteria across dozens of reliable third party sources, allowing investors to easily and clearly view the ESG ‘impact’ of their investments in real-time. Puro focuses on ESG in an entirely different way. It is a B2B carbon

removal marketplace for instruments that are verifiable and tradable through an open, online platform—and for some of world’s leading corporations, including Microsoft and SEB. HOW HAS ESG BEEN A FACTOR IN THE GROWTH OF NASDAQ’S BUSINESSES ABROAD? Nasdaq was founded in the U.S. in 1971 as the world’s first electronic marketplace. But it truly grew into a global listing venue and market maker with the acquisition of OMX in 2008 — and OMX was already a pioneer in the ESG space. Since that time, Nasdaq has issued ESG Reporting Guides (2017, 2019) that inform and engage listed companies in both the Nordics and the U.S. Our Nordic companies are able to use this guide (and its 30 key performance indicators) to upload their data directly into a data portal. The portal provides a simple and cost-effective manner for firms to showcase their ESG efforts. HOW DIFFERENT ARE THE AMERICAN AND EUROPEAN PERSPECTIVES ON ESG TODAY? Until recently, I would have said that the perspectives are quite different. For most of a generation, EU investors were more proactive, better informed, and especially faithful when it came to the sustainable profits offered by the integration of ESG into investment decisionmaking. In many cases, this extraordinary engagement was driven in part by regulatory and political pressures — two things that did not exist in nearly the same quantities in the U.S. But now, it seems like the two trends have begun to align. One is tempted to say that Europe has slowed down as much as America has caught up; overlapping and occasionally conflicting sustainable reporting projects (EFRAG, IFRS, SRD) have created some confusion—perhaps

"While I suspect that the general state of ESG performance will improve, other challenges will likely be related to specific parts of the reporting spectrum — the 'social' part of ESG, among other things." 28

CFI.co | Capital Finance International

Autumn 2021 Issue

even hesitation — in the markets. And with the shift in politics in the U.S., bringing with it a change in the regulatory mindset vis-à-vis sustainable performance reporting, we see the two regions aligning like never before. HAS NASDAQ SEEN MARKET OPPORTUNITIES IN THE ESG-RELATED BOND SPACE? The Nasdaq Sustainable Bond Network (NSBN) connects sustainable bond issuers with interested investors, empowering them to evaluate impact and make better, longer-term decisions. Issuers using NSBN can message offerings properly to potential investors, focusing on desired impacts in a standardised, standards-compliant format. Built on Nasdaq’s market-making technology and experience, bond issuer have better access to a global universe of investors—even those focused on very specific impacts, such as the UN SDGs. A recently released investor portal allows the information sharing (and data targeting) to flow both ways. WHAT ARE THE CURRENT AND FUTURE CHALLENGES FOR PUBLIC COMPANIES WITH REGARDS TO ESG? If we focus on the public company burdens — what it actually takes, in terms of time and resources, to manage ESG well — the burdens may almost seem to outweigh the benefits. To focus on one current challenge, the data landscape remains confusing and contradictory. Despite the prevalence of time-tested reporting frameworks (GRI) and the appeal of newer, more concise innovations in the space (TCFD, SASB), most companies still struggle with the form, format, target, and prioritisation of ESG reporting. Market coalescence around harmonised standards will help, as will increased engagement for regulators — but there is no existing gold standard. Companies wishing to (or pressured to, primarily by their investors) focus on more specific outcomes, such as the UN SDGs, are even more isolated in the efforts to make meaningful, numeric connections between company performance and external impact.

ABOUT THE AUTHOR Evan Harvey is the Global Head of Sustainability for Nasdaq. He also serves on the Board of Directors for the UNGC Network USA and the Global Sustainability Standards Board for the GRI. 29

CFI.co Columnist

While I suspect that the general state of ESG performance will improve, other challenges will likely be related to specific parts of the reporting spectrum — the “social” part of ESG, among other things. It is generally difficult to measure something as intangible as human rights or equitable access to capital with a simple number; yet this is exactly what more and more companies are being asked to consider. The other expected challenge has to do with the future itself. How can companies report more forward-looking data, numbers that illuminate future opportunities(think trends, targets, R&D investment), rather than past problems. i

> Joseph E Stiglitz:

Getting Finance Onside for Climate

he world has finally awoken to the existential imperative of securing a rapid transition to a green economy. Finance will play a pivotal role in that process. But while financial institutions have made a big show of doing their part – issuing green bonds and installing green lightbulbs – far too many continue to provide capital to the fossil-fuel industry and support other parts of the economy that are incompatible with a green transition. Such financing actively fuels the climate crisis. Many of these investments are long-lived. Discovering, developing, and fully exploiting 30

a new oil field takes decades, stretching well beyond the horizon in which the world must become carbon neutral to prevent catastrophic levels of warming. As such, these projects almost certainly will become “stranded assets”: holdings that have lost their value and usefulness amid the fight to save the planet. These losses pose a risk to the investor and, potentially, to the economic system and the planet. Because most owners of stranded assets will selfishly fight to exploit their holdings no matter what, financing for these investments creates an adverse political dynamic. There are powerful lobbies committed to fighting the green CFI.co | Capital Finance International

transition, lest they be the ones left holding the bag. Moreover, if the transition succeeds, these same groups will demand compensation – effectively “socialising” the downside risk of investments that never should have been undertaken in the first place. If history is any guide, they will succeed in making themselves whole. Ideally, we would simply ban such investments. But, for now, this option is politically infeasible in the United States and many other countries. Another option is to deploy regulatory tools. Since markets are short-sighted and often fail to account fully for key risks, the obligation to

Autumn 2021 Issue

than a smooth, efficient transition to carbon neutrality, with gradual adjustments in asset prices, we could end up with a more chaotic one in which prices would jump at critical moments when markets fully internalise the reality of the change. To mitigate this risk, finance must not only stop providing funds for investments that despoil our environment; it also must provide funds for the investments needed to move us in the right direction. We may need both carrots and sticks to nudge the industry along. For example, banks that make climate-risky investments should be obligated to hold more reserves to reflect that risk. Investors have been warned: those who nonetheless continue to make investments in fossil fuels should not effectively be subsidised by the public through the deductibility of losses. In the US, the government underwrites the vast majority of residential mortgages; going forward, it should do so only for green mortgages (loans for homes that are well insulated and energy efficient). Furthermore, to encourage investments that are predicated on a high carbon price, governments could issue “guarantees” that if the price of carbon turns out to be lower than expected in, say, 20 years, the investor will be compensated. This would function as a kind of insurance policy, pressing governments around the world to uphold their commitments under the Paris climate agreement. These and other similar policies will assist the green transition. But even with such prodding, the private financial sector is unlikely to do enough on its own. Many of the critical investments that we need are long-lived, and private financial markets too often focus on the short term. To help fill the gap, green development banks have already been created in many jurisdictions, including the state of New York. Elsewhere, existing development banks’ mandates have been broadened to include green development. These institutions are making an important contribution not just in providing finance, but also in assisting with the design and structuring of the green projects themselves.

ensure financial stability falls on those charged with overseeing the economy, including central banks. The 2008 financial crisis showed what can happen when even a small part of the world’s asset base (US subprime mortgages) gets repriced. The repricing of assets that are likely to be affected by climate change could have systemic effects that will dwarf those of 2008. The fossil-fuel sector is just the tip of the (melting) iceberg. For example, rising sea levels and increasingly common extreme weather events, from wildfires to hurricanes, could force a sudden repricing of vast swathes of land and real estate, too.

Thus, regulators need to require full disclosure of climate risk – which includes not just physical dangers but also direct and indirect financial risks. Even if there is not unanimity about the magnitude of these risks or the pace of the coming change, prudence requires disclosure of what could happen under the plausible scenarios that have been extensively discussed in Intergovernmental Panel on Climate Change assessments and elsewhere. Moreover, a policy regime capable of achieving carbon neutrality by 2050 (combining carbon pricing with regulations) will almost surely have a significant impact on asset prices. If the economy moves too slowly in a green direction, it increases the “transition risk.” Rather CFI.co | Capital Finance International

The climate crisis demands enormous economic and societal changes. We have no choice but to change how we consume, produce, and invest. The challenge is manageable. But if it is to be managed well, finance must play its part. And that will take more than a little prodding from civil society and governments alike. i ABOUT THE AUTHOR Joseph E Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is a former chief economist of the World Bank (19972000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation and was lead author of the 1995 IPCC Climate Assessment. 31

SINGAPOREAN PRIME MINISTER LEE HSIEN LOONG:

CONFUCIAN WISDOM GUIDES SINGAPORE THROUGH DECADES OF

INDEPENDENCE By Tony Lennox

‘It’s quite possible for us to be inventive in making new mistakes,’ admits Singaporean prime minister Lee Hsien Loong. But the leader seems intent on avoiding that scenario.

“T

he man who stands on a hill with his mouth open will wait a long time for roast duck,” according to Confucius. In Singapore there is no doubting the proverb’s meaning: There is no such thing as a free lunch.

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The Confucian bon mot describes an attitude of mind in this ultra-modern city state, a tiny island the size of Anglesey at the southern tip of the Malay Peninsula, upon which 5.8 million souls are showing the world that self-reliance and personal responsibility can deliver miracles. This is the result of the single-minded determination of Lee Kuan Yew, Singapore’s first prime minister and the acknowledged “Father of the Nation”. He was aware, in 1959, that Singapore — upon achieving self-determination — was a run-down British colony in its twilight, with no natural resources. All it had was its people, an uneasy and delicate balance of races and religions from across South East Asia. Lee Kuan Yew knew that while governments can provide impetus and infrastructure, the attitude 32

of a country’s people is paramount. “Our future is what we make of it,” he once said. Within a generation, Singapore was transformed into a gleaming metropolis, an international centre of commerce punching well above its weight, and whose power and influence extended far beyond the region. Lee Hsien Loong, the eldest son of Lee Kuan Yew, became Singapore’s third prime minister in 2004. The Confucian command to honour one’s parents is a cultural element of Singaporean society, and 69-year-old Lee is no exception in venerating his father — and carrying on his legacy. Singapore today sits proudly at the top of the league table of nations who most value and nurture their human capital. This is the result of a resolute drive to improve health, housing and education across all levels of society, coupled with a system of discipline — which has sometimes drawn criticism. But investment in human capital has delivered results. Singapore today is unrecognisable from its pre-independence shambles. CFI.co | Capital Finance International

The definition of human capital is the value of an individual’s skill, knowledge, ability, personality, and health. Together, these attributes provide what is essential to the running of a country. Under Lee Hsien Loong’s leadership, the population has adopted the concept with enthusiasm. The Human Capital Index, created and monitored by the World Bank, ranks countries by their ability to mobilise the economic potential of citizens. It measures the amount of capital a country loses through lack of educational opportunities and health facilities. Singapore has achieved the top ranking every year in which the 174-nation index has been published. It measures statistics relating to child and adult survival rates, quality and quantity of education, and the general health of the populace. Each country is ranked on the percentage of its achievements on these measures. Singapore currently ranks at 88 percent, significantly higher than other developed economies. The US, for instance, is 35th, with a score of 70 percent, while China, with a score of 65 percent, is ranked 45th.

Winter 2020 - 2021 Issue

Prime Minister: Lee Hsien Loong

It is not the only index in which Singapore scores highly. The city state is one of the wealthiest in the world, with a GDP of $340bn. It is also among the least corrupt countries, ranked third on the transparency index — and among the top 20 happiest places on the planet. Lee has overseen decades of deliberate and determined government policy, targeting health, education and housing. This has given Singapore a competitive edge. Life expectancy in the “Lion City” is 83.5 years, the highest in the 10-nation economic union, the Association of South East Asian Nations (ASEAN). It far outstrips its nearest rival, Thailand, which stands at 77 years. Infant mortality, a recognised measure of a society’s health, is 2.1 per 1,000 births. In the UK it is 4.3, while in the US it stands at 5.8. Inflation is a healthy 1.35 percent, while unemployment, before the pandemic, had fallen to 3.1 percent. The country operates a strict “workfare” system rather than paying conventional social benefit. To receive payments, applicants must demonstrate they are searching for work.

The young Lee would often attend political rallies with his father and was drawn into politics after leaving the armed forces in the 1980s. He rose through the ranks of the People’s Action Party (PAP), the political group founded by his father in 1954, and which has dominated the island’s politics since its inception. In 1990, Lee was appointed to deputy prime minister, but in 1992 he was diagnosed with an intermediate grade malignant lymphoma, which saw him step back from official duties while he underwent chemotherapy. He returned less than a year later, having been given the all-clear. It is a measure of the reverence in which Lee Kuan Yew is held by the people of Singapore that PAP has been in continuous power since independence. In the 2020 election, his son — now in his fifth consecutive term as prime minister — won 83 of the 93 available seats, despite the election being held at the height of the pandemic. Perhaps due to the economic effects of coronavirus, there was a small but significant swing to opposition parties, most notably the CFI.co | Capital Finance International

Workers Party of Singapore, which increased its number of seats to 10. Lee acknowledged that his victory was not as impressive as he had hoped. The effects of Covid-19 had created many problems for ordinary Singaporeans. Some opposition parties, and foreign observers suggested that — in the context of the history of the state — the result could be described as a defeat. Supporters of Lee’s government, however, pointed to the fact that PAP’s crushing 2015 election victory had been set against a background of celebration as Singapore marked its 50th anniversary. There had also been an outpouring of emotion following the death of Lee Kuan Yew in the same year. It would have been difficult, even in normal circumstances, to repeat that result. Judged against the performance of other South East Asian governments, Lee’s election victory illustrated the strength of popular support for Singapore’s long-term ambitions – and its record of fostering human capital. Neighbouring Malaysia, for instance, saw the fall of two prime ministers during the pandemic, and discontent on the streets. This is not to say that all is rosy, as Singapore battles the economic effects of the pandemic. There have been incidents of racial and religious disorder as a direct result of Covid-19 fears. Singapore is a country of just 280 square miles and is the second-most densely-populated 33

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Singapore scores highly on the UN’s Human Development Index, which measures life expectancy, educational attainment and per capita income, with a score in 2019 of 0.94. Early in its development, Singapore adopted English as the language of education. It is a criminal offence for parents to fail to ensure their children’s school attendance. Education is seen as the primary weapon in the battle to create a true meritocracy, a fundamental aim of the state.

Lee was born in February 1952 when Singapore was still a British colony. Like his father, he attended Trinity College, Cambridge, graduating with a degree in mathematics and achieving an MA in computer science. Lee also earned an MA in public administration at Harvard before serving in the Singaporean Armed Forces, achieving the rank of brigadier-general.

sovereign state on earth (after Monaco). Its four main ethnic groups are Chinese, who make up almost 80 percent of the population, Malay, Indian and Eurasian. Thousands of manual labourers are brought in to maintain Singapore’s superstructure, mainly from the Indian sub-continent. Up to 24,000 workers live in dormitory complexes at the edge of the city in converted containers, creating perfect conditions for the spread of the virus. Singapore initially received international praise, including the approval of the World Health Organisation, for its swift response to the pandemic. Critics say that by neglecting foreign workers triggered a surge. This, in turn, led to an increase in xenophobia, with some locals blaming foreigners for the spread of the virus. Lee tackled the issue in a televised address on Singapore’s National Day this year. The country, he said, needed to welcome foreign workers and migrants; “turning inwards” would damage the country’s standing, and cost jobs and opportunities. Racially-motivated incidents went “against our values of openness and of being accepting of others who are different from us”. “We uphold these values because they have anchored us and helped us progress over the years as a nation,” he said. “We pride ourselves as being a uniquely harmonious, multiracial society. But maintaining social harmony takes unremitting work. With every new generation our racial harmony needs to be refreshed, re-affirmed and reinforced. Issues of race and religion will always be highly emotive and can easily divide us. “It took several generations of sustained effort to bring us together and grow the common space we now share. We must not lightly give-up this hard-won and delicate balance.” When Singapore became self-governing in 1959, racial groups lived separately, attended different schools, spoke different languages and worked in different jobs. “Our nation-building has come a long way,” Lee said. “From timeto-time, new crises will test our resolve and unity — but we can face them with grit and determination, and stay one united people.” Singapore has surfed the wave of globalisation for decades. And its future success depends on that tide not turning. It’s an issue which increasingly occupies the minds of Singapore’s leaders. Since it became fully independent in 1965, the country has been a free-market bastion in the East, managing to peacefully coexist with major powers. At the World Economic Forum in Davos in 2020, Lee said that for half a century, Singapore had benefited from three external factors: the US, China, and globalisation. 34

The Vietnam War notwithstanding, the US had generated peace and security in South East Asia and the Pacific region, he said. It had been a source of investment, and a huge market for Singapore. Singapore had also developed a confident rapport with China at that time. Mao Zedong admired Singapore’s rapid development. “In terms of security, the strategic balance in the region is shifting,” Lee told the Davos audience. “China has become a more substantial participant. America is asking itself whether it is carrying too much of a burden. This is a fundamental shift of stance. “China’s relationship with the US has become more difficult to manage. Whereas it was previously effortless to say, ‘I’m friends with everybody’ now’, while we still want to be friends, we are pushed to be better friends with one side or the other.” Singaporeans would need to upgrade education and skills, he said, to navigate the next 50 years. “We remain very good friends with the US. It continues to have an important role in the region. But China is our biggest trading partner. It will have a major part to play.” The prime minister’s Davos 2020 speech urged the world’s major economies to resist isolationism. He reminded his audience of the 1930s, when so many countries threw up barriers to international commerce. That, he said, led to world trade failing by 50 percent, prompting the Great Depression — followed by a world war. “There is a lot at stake,” said Lee. “I don’t think we’ll repeat our follies in the same way, but it is quite possible for us to be inventive in making new mistakes.” Lee returned to this theme in the more sombre, virtual World Economic Forum of 2021, again urging nations to resist protectionism. International co-operation was essential, he said, to ensure the world emerged from the crisis in a better place.

He rarely misses an opportunity to appeal for tolerance and inclusion. In a recent Facebook post, several commenters noted that he’d been given his Covid-19 jab in the right arm. He explained that it was the practice to be injected in the non-dominant arm; his is left-handed. He went on to describe how left-handers, being a minority, had once been forced to use their right hands. “Let’s remember that we are all unique in our own special ways,” he said, “and we can all help to build a more inclusive world.” Lee boasts 1.2 million Facebook followers, and frequently uses the platform to talk directly to his people. In contrast to many world leaders using the site, his posts are often conversational and informal. He is clearly aware that Singapore’s human capital as a two-way street — and the citizens hold the power. Lee strives to earn the trust of Singaporeans. He appears genuinely exasperated when international observers suggest that Singapore is a one-party state because of the PAP’s dominance. Interviewed in 2017 by the BBC, he insisted that Singapore’s democratic system was open and transparent. “The population voted,” he said. “The people have confidence in the PAP to govern them. Once the government stops functioning, the situation will change overnight.” Lee is conscious that earning and maintaining the trust of a well-educated, healthy, and prosperous population is what holds society together. Confucianism is still a strong influence in Singapore. It is credited with helping to spread the notion of self-determination in the first half of the 20th century. And as Confucius put it, 2,500 years ago: “He who exercises government by means of his virtue may be compared to the North Star, which keeps its place, and all the stars turn towards it.” i

In remarks aimed at the global superpowers, he said: “Recent years have witnessed growing friction and distrust rather than co-operation. It cannot be too late for the US and China to reset the tone of their interactions, and to avert a clash which will become a generational twilight struggle.” Lee, who has agreed to host a special World Economic Forum meeting in Singapore in May 2022, has always insisted that he intends to step down before he reaches the age of 70 – a milestone he’ll celebrate in 2022. He intends to allow Singapore’s fourth generation, or 4G, leaders to take over. The pandemic has thrown a spanner in the works there. Lee now says he will continue as long as the economic effects of Covid-19 need to be tackled. CFI.co | Capital Finance International

Author: Tony Lennox

Autumn 2021 Issue

> From ‘Little Red Dot’ to Modern Metropolis:

Singapore’s Heroes Still Honoured for Transformation By Tony Lennox

Statue of Sir Stamford Raffles near Singapore river

A nation state that saw the future, and has no wish to rewrite history.

ir Stamford Raffles, largely forgotten in Britain, is still celebrated in Singapore — if not as the father of the nation, then certainly as its grandfather.

Within a few years, Stamford Raffles had turned the unpromising island into a bustling, wellordered seaport. Sensing opportunity, traders, adventurers, entrepreneurs and workers arrived from the mainland of Malaysia (then Malaya),

Raffles was a classic Victorian imperialist, but he was also a man who lived by a doctrine of resilience and unceasing self-improvement. These traits he shared with Lee Kuan Yew, the acknowledged “Father of the Nation” who, more than a century later, created modern Singapore. Lee, who died aged 91 in 2015, was brought up in an anglophile family of Chinese descent, and spoke English as his first language. While studying at Cambridge, he was known to his contemporaries as “Harry” Lee. George Brown, Foreign Secretary in Britain’s Labour government of the 1960s, once threw an arm around Harry’s shoulder and called him “the best bloody Englishman east of Suez”. CFI.co | Capital Finance International

But Lee was never an Englishman — though he did like his beer served at room temperature. Neither did he consider himself Chinese. He once said that he was no more Chinese than JFK was an Irishman. He was a Singaporean, and it was his dream that the inhabitants of the island would one day feel the same way. As a young man, Lee witnessed a brutal period of Japanese rule following the Fall of Singapore in 1942. It was the worst loss suffered by the British, and saw what Churchill called “the Gibraltar of the East” fall into enemy hands. It marked the End of Empire, and the notion of British invincibility. During the 1950s, when Lee was leading the fight for independence, he alluded to this. “There is no reason why the British should be governing me,” he said. “They’re not superior.” 35

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It was Raffles, a British East India Company administrator, who, in 1819, landed on the island — then a hot, swampy jungle, two degrees north of the equator, inhabited by a few dozen fishermen and pirates — and saw its potential. It possessed a natural harbour and lay on a strategic pinch-point in the Malaccan Straits on the busy sea-lanes between India and China.

from China, India, and elsewhere. Over the following decades, despite its size, this “little red dot” grew into a crucial colonial trading hub.

Cover Story

Singapore business district

By the end of the decade, Singapore had lost military significance and economic value to the British — and it was handed to the locals in a sorry state.

controlled demographic plan — by a mix of races and religions. Lee’s aim was to create social stability based on a multi-cultural middle class, and to establish a Singaporean national identity.

It was no longer the thriving, exotic hub of the mysterious east. The colony’s streets, laid out according to Raffles’ meticulous design, had become grubby and run-down, the palm-fringed bungalows and colonnaded shopfronts in a mix of architectural styles — Indian, Malay, Chinese and British — were in decay. A Whitehall report at the time described slums which were “a disgrace to the civilised world”.

English was adopted as the formal language of education. Schools were set up to serve all citizens, regardless of race, religion, or class. The country’s health service was revolutionised into a modern system available to all. Industrial and business structures were overhauled. With these foundations in place, Lee set about creating a booming international hub between East and West.

Lee inherited an overcrowded city, riven with industrial unrest, racial tension, and political angst. The likelihood of the nation state surviving, let alone succeeding, looked slim. It would require an economic miracle — which is what Lee achieved. The New Yorker described Lee, who held the post of prime minister from 1959 to 1990, as “a brilliant, impulsive, and sometimes irascible man” – but it was his vision which made Singapore the economic dynamo of South East Asia.

Singapore adopted a free market, low-tax system, making the leap from under-developed country to world beater in a single generation. Under Lee Kuan Yew’s leadership, it fostered the talents of its people, and became one of the world’s richest countries. It scored highly for the quality of its education and healthcare, life expectancy, quality of life, personal safety, and housing.

The nascent state initially threw in its lot with neighbouring former colonies, establishing a Malaysian Federation; the relationship was uneasy. Singapore’s population was largely Chinese, which provoked mistrust from the mainly Islamic, indigenous Malays. After a series of arguments, Singapore and the Malaysian Federation parted company. In 1965 Singapore became fully independent — and, according to Lee, alone in a sea of unfriendly neighbours. Lee embarked on a drive to build a meritocracy; a uniquely Singaporean vision of shared values coupled with individualism and high social and economic values. Singapore’s housing stock was revived, creating a high-rise city of modern apartments populated — thanks to a carefully 36

Lee wrote: “Hard-headed industrialists and bankers of developed countries never take unnecessary risks. They look around the world for places where there is political stability and industrial peace before they invest. In Singapore, they find such a place — hence the massive inflow of capital, machinery, technological knowhow and banking expertise.” More than 90 percent of homes are owneroccupied, something praised by former British Prime Minister Margaret Thatcher. While in office, she analysed every speech Lee had made. “He had a way of penetrating the fog of propaganda and expressing with unique clarity the issues of our times and the way to tackle them,” she said. “He was never wrong.” Former US Secretary of State, Henry Kissinger, said of Singapore’s transformation: “Every great CFI.co | Capital Finance International

achievement is a dream before it becomes reality, and (Lee’s) vision was of a state that would not simply survive, but prevail by excelling.” During his time in power, and beyond, Lee’s efforts were openly admired by world leaders including Richard Nixon, Barack Obama, Tony Blair, and Mao Zedung. In his memoirs, Lee wrote: “We had to make ourselves a small but useful part of the international system of the exchange of goods and services, of investments, banking and finance, transportation and communications. If we were no longer relevant to the advanced countries, our population would shrink to what it was when the East India Company first came to Singapore — a fishing village of 120 people, living at subsistence level on fishing, root-staples and piracy.” Statues of princes, adventurers, and empirebuilders are often the first colonial symbols to be removed when a country achieves independence. But there is at least one memorial to a white colonialist which stands unmolested to this day — in the heart of Singapore — and that man is Sir Stamford Raffles. Lee wrote: “Few countries in Asia or Africa have taken-over from European colonial administrations and improved on what they had. We have been able to do this because we have never been afraid to face up to our problems and to tackle them with vigour.” Lee Kuan Yew famously scorned personal monuments. But after his death, a petition to erect a statue in his honour was launched. It gained little traction, suggesting Singaporeans were reluctant to go against his wishes. At independence, some Singaporeans called for the removal of the Raffles statue. Lee was firmly opposed. He later wrote: “To keep Raffles’ statue was easy. I had no desire to rewrite the past.” i

Autumn 2021 Issue

CFI.co | Capital Finance International

> Lord Waverley and Paul Baker:

The Promise, Potential and Pitfalls of Britain’s Relationship with Africa The concept of Africa Rising is truer today than ever. Despite the pandemic disruption that has caused the continent’s first negative output growth in 27 years, Africa’s performance over the past decades has been remarkable.

any African countries have made significant improvements in terms of business environment and overall macro-economic performance, creating opportunities for growth and development.1 In Ethiopia, gross domestic product and per-capita purchasing power parity have increased by 150 percent since 2009.2 The technological advances brought about by the Fourth Industrial Revolution are allowing Africa to address some of its major challenges.

The stock of UK foreign direct investment was only £2bn more in 2018 than in was in 2008. The UK was the fourth-largest source of FDI to Africa in 2017, accounting for six percent of FDI stock.7 The UK does not have any trade agreement with 40 of the African nations, and has rolled-over the EU’s former trade agreements with 15 African nations. It has lost the former EU trade agreements with four of those nations, and there is a lot of catching-up to do. The UK will also have to compete with established and emerging partners. China, specifically, has used its Belt and Road Initiative to strengthen its presence by investing in 52 of the 54 African countries. It is poised to enter the 53rd in Sao Tome and Principe.8 China's FDI stock in Africa totalled $110bn in 2019, contributing to some 20 percent of Africa's economic growth.9

In the health sector, countries like Rwanda and Ghana are deploying drones to deliver medication, blood products and medical supplies to remote areas. In financial services, the fintech industry is transforming lives in rural and urban areas.3 There have also been significant improvements in leadership and governance; citizens are demanding accountability from their leaders and institutions. From 2008 to 2017, the Mo Ibrahim Foundation highlighted 34 African countries that improved national governance. As highlighted by Signe, since 2016 meaningful elections have led to changes in Benin, Comoros, Ghana, Lesotho, Liberia, São Tomé and Príncipe, and Sierra Leone.4

CFI.co Columnist

Africa’s ambitions are growing, too, through the vision of a pan-African common market. Africa Vision 2063 states that the continent aims to become “integrated, prosperous and peaceful”, driven by its citizens and representing a dynamic force in the international arena. The African Continental Free Trade Area (AfCFTA) represents the latest step towards that objective. Originally foreseen in the Treaty Establishing the African Economic Community (AEC Treaty), the potential of the AfCFTA is huge. With 54 contracting parties, it brings together more than a billion people and a combined GDP of some $2.6tn. That has the potential to lift 30 million people from extreme poverty and 68 million from moderate poverty. It could also increase real income gains by seven percent by 2035.5 Open markets for African goods and services, increased mobility and the reallocation of resources should lead to economic and industrial 38

diversification, structural transformation, technology improvement and a boost for human capital.6 AfCFTA can pave the way to prioritised, strategic investments in sectors with a comparative advantage, fostering development of industries that could make African businesses regional and international players. Increased regional integration from the agreement is expected to increase the economic diversification. However, in order to multiply the benefits, a comprehensive vision of trade and development is needed. In this context, the UK has the potential to be Africa’s partner-of-choice for trade, investment and development. Promoting a rules-based trade system, forging investment and advancing partnerships and technology between the UK and Africa, has potential for both sides. A lot of work must first be done to reinvigorate the existing commercial ties. Trade and investment between the UK and Africa have barely advanced over the past decade, even before the pandemic hit. A report by the Select Committee on International Relations and Defence says, “there has been ‘a flatline’ in UK trade with, and investment, in Sub-Saharan Africa”. CFI.co | Capital Finance International

The UK should also take note of the efforts of the EU, one of Africa’s traditional development partners, which in 2020 issued its EUAfrica Strategy. This aims to boost economic relations, create jobs, and deepen the EU-Africa partnership. The future of Africa does have some risks and roadblocks. The pandemic has highlighted some of them, including the urgent need to enhance health systems and increase emergency planning and preparedness. Supply chains that rely on justin-time deliveries have been disrupted, prompting some nations to impose restrictions to combat shortages of pharmaceuticals, medical equipment, food, technology, and natural resources.10 Poverty in Africa remains stubbornly high, with 437 million of the world’s poorest people merely surviving in Sub-Saharan Africa, where 10 of the world’s 19 most unequal countries are. By 2030, the World Bank forecasts that Africa could be home to 90 percent of the world’s poor.11 The AfCFTA will not be a panacea for Africa’s trade and integration barriers. Non-tariff measures, unaffordable intra-continental transport costs, poor connectivity, and weak infrastructure remain challenges for coming years. It is more expensive to send a parcel from Mauritius to continental Africa than it is to do so from France, China,

Autumn 2021 Issue

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@ IEC Ltd.

2000

2005

2010

Figure 1: UK Trade with Africa, 2020. Source: IEC; UNSD; DIT

India or even Brazil. Peace remains fragile, as do Africa’s relatively young democracies. But growth prospects are substantial, and the UK-Africa investment summit this year testifies to that. Brexit represents an opportunity for Africa to strengthen its ties with the UK.12 Britain can, and should, position itself as powerhouse for services, investment environment, standardsetting and governance. But a comprehensive and detailed strategy is needed to address the African continent’s challenges and needs. Trade ties with the AfCFTA parties must be strengthened to reduce tariff barriers, minimise non-tariff measures, and harmonise domestic regulations and regulatory practice.

Africa: much to do, much to be gained — for all. i ABOUT THE AUTHORS Lord Waverley is a Member of the House of Lords and the founder of SupplyFinder.com. Paul Baker is CEO of International Economics Consulting.

References Sangafowa Coulibaly, B. (2017). Is Africa Still Rising? Brookings, October 6. Available from: brookings.edu/ opinions/is-africa-still-rising/ 2 Oqubay, A. (2020). Will the 2020s be the decade of Africa’s economic transformation? Overseas Development Institute, January 14. Available from: odi.org/en/insights/will-the-2020s-be-the-decade-ofafricas-economic-transformation/ 3 Signe, L. (2021). US trade and investment in Africa. Brookings, July 28. Available from: brookings.edu/ testimonies/us-trade-and-investment-in-africa/ 4 Signe, L. (2020). Unlocking Africa's Business Potential: Trends, Opportunities, Risks, and Strategies. Brookings Institution Press, ISBN 9780815737391. 5 WB (2020). The African Continental Free Trade Area: 1

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Further negotiations between standard-setting bodies should take place, with support for British firms exporting to Africa and for African firms exporting to the UK. The UK should reinvigorate its position as a source of FDI to build the necessary capacities for Africa to thrive.

Economic and Distributional Effects. The World Bank Group 6 UNCTAD (2015). The Continental Free Trade Area: Making it work for Africa, UNCTAD Policy Brief No. 44, December, p. 1. 7 UK Parliament (2020). The UK and Sub-Saharan Africa: prosperity, peace and development co-operation. Select Committee on International Relations and Defence. Available from: publications.parliament.uk/ pa/ld5801/ldselect/ldintrel/88/8802.htm 8 Venkateswaran, L. (2020). China’s belt and road initiative: Implications in Africa. ORF Issue Brief No. 395, August 2020, Observer Research Foundation. 9 Ze Yu, S. (2021). Why substantial Chinese FDI is flowing into Africa. London School of Economics. Available from: blogs.lse.ac.uk/africaatlse/2021/04/02/ why-substantial-chinese-fdi-is-flowing-into-africaforeign-direct-investment/ 10 Government of Canada (2021). Minister of Foreign Affairs – Transition book. Available from: international. gc.ca/transparency-transparence/briefing-documentsinformation/briefing-books-cahiers-breffage/2021-01fa-ae.aspx?lang=eng 11 Chakravorti, B. & Chaturvedi, R. S. (2019). Research: How Technology Could Promote Growth in 6 African Countries. Harvard Business Review, December 04. Available from: hbr.org/2019/12/researchhow-technology-could-promote-growth-in-6-africancountries 12 Graham, S. (2021). Perspectives on post-Brexit AfricaUK trade: Opportunities and Challenges, in Thuynsma, H. A. (eds). Brittle Democracies? Comparing Politics in Anglophone Africa, ESI Press.

> Tor Svensson, Chairman CFI.co:

Could 6G Tech Equate to a True ‘Sixth Sense’ for Human Users? 5G sparked conspiracy theories and its successor, 6G, won’t be without detractors — but the writing is on the wall. Or in the skies…

umans have five senses — vision, hearing, touch, smell, and taste — but technology is doing its best to change all that.

With augmented reality (AR) and artificial intelligence (AI), 6G will not only enhance our human abilities; it will also boost the potential of the Internet of Things (IoT). Soon technologies will combine in quasi-cyber fashion to create a sixth “digital sense organ” to allow an elevated transfer of information. The possibility of interconnected senses, people and devices is now a real one. Most efforts are currently focused on rolling out 5G as 6G has not yet been launched — and most smartphones still rely on 4G.

"The race is under way in Asia, with the US, Europe, and the UK playing catch-up." In the same year, China started its own statesponsored R&D drive for 6G. Today, 40 percent of the world’s 38,000 6G-related patents belong to the People’s Republic. (But it must be noted that patents filed are not necessarily a measure of prowess.) China has up to a million engineers working on related technologies. It has sent up dedicated satellites, and its push for a 2029 6G launch is spearheaded by telecom giants Huawei and ZTE.

systems”. While 5G is Earth-based, 6G is in the sky. China’s satellite communications network gives it first-mover advantage. There are other players. Korea’s titans Samsung, LG, and SK Telecom aim to beat China to the punch with a commercial 6G roll-out in 2028. Japan is funding research facilities and holds 10 percent of worldwide 6G patents. NTT DoCoMO and Sony have partnered with Intel. The race is under way in Asia, with the US, Europe, and the UK playing catch-up. America — slow to roll out 4 and 5G — still struggles to get internet into rural areas. The usual suspects in US telecom and information tech are taking a keen interest in the next generation of connectivity: Apple, AT&T, Cisco, Dell, Google, IBM, Intel, Microsoft, and Qualcomm. The US holds 18 percent of all patents.

Former US president Donald Trump was ridiculed in the press when he replied to a question about 5G: “How about 6G!?”. In February 2019, he was Tweeting support for both. He had (perhaps inadvertently) spotted something new in an established technological battleground.

China is leveraging its dominance in 5G to gain a generational lead in 6G and expand its “Digital Silk Road” through investments and cooperation. China sees the strategic value of this leadership, with gains in industry and exports.

Europe is focused on its roll-out of 5G. 6G technology leadership is left to companies such as Vodaphone Germany, Ericsson, Nokia and Telefonica — all in partnership with Intel.

And like others, it potentially pits the US against China.

Experts believe 6G has the capacity to achieve seamless “air-space-earth-sea integrated

The UK has no supplier of domestic telecom equipment. Britain has lost much of its

Country/Region Ranking

Country/Region

China

Korea

Japan

USA

Europe

Companies

Huawei

Samsung

NTT DoCoMo

Apple

Vodaphone Germany

ZTE

Sony

AT&T

Ericsson

China Unicom

SK Telecom

Cisco

Nokia

State Grid Co

Dell

Telefonica

China Aerospace S&T

Google

CFI.co Columnist

IBM Intel Microsoft Qualcomm Research

Lead time in R&D

Funding $1/2 bn

Next G Alliance

Uni of Oulu (Finland)

Kings College (CTR)

40% of patents

Rollout 2028

Research facilities

Intel partnerships

Finland Flagship Project

Uni of Bristol

Satellites in orbit

10% of patents

18% of patents

Dresden Research Lab

Uni of Surrey

Launch 2029

Started R&D 2020

Research Center in Canada Global Players in 6G. Source: CFI.co 2021

CFI.co | Capital Finance International

Autumn 2021 Issue

Generation

Year Intro

Technology

2036

Satellite

2029

2018

Services

Movie Download Time

Ccyberspace human thought, Real time holograms

1 sec for 100,000 movies

Submilimetre waves, Terrahertz bands, decentralised mesh connected device-to-device

IoT, AR, AI, blockchain, Mobile edge

300 movies in 1 sec

mmWave, Hi frequency, ITU standards

Autonomous Vehicles, Remote Surgery

3 movies in 1 sec

1 movie in 20 sec

2008

LTE, WiMAX, mobile broadband

Smartphone mobile web, IP telephony, Gaming, Mobile TV, video conf, multimedia

1998

Data Transfer

Pictures, browsing (just about)

1 movie in 2 min

1991

GSM

SMS, MMS, text

1 movie in 3 hours

1979

Analog

Mobile talk

1 movie in 6 days

1971

AM Radio

Un-seamless cell

Forever

Source: CFI.co 2021

production capacity and skills base in the sector. Research facilities and manufacturing have closed, with the disappearance of companies such as Marconi, Nortel and Plessey. In May, Microsoft acquired Metaswitch Networks — a 40-year-old firm specialising in network functions virtualisation (NFV). The UK’s efforts are focused on university research at Kings College (CTR) and the universities of Bristol, and Surrey. HOW IS 6G DIFFERENT? Each new generation uses a higher frequency range. This wireless spectrum allows for the transmission of more information at a higher speed: 6G is aiming to be up to 8,000 times faster than 5G. That would mean just seconds to download hundreds of movies. The standards that will eventually define a 6G connection will be determined by the International Telecommunication Union (ITU) — as with 4G and 5G (which took several years). Due to the narrow band of the terahertz range, 6G networks will require antennae to be placed close to users. The solution may be to decentralise networks from the traditional base stations by turning every device, such as smartphones, into an antenna. So, 6G has higher speeds, lower latency, and masses of bandwidth which makes instant deviceto-device connection not only feasible – but perhaps also necessary. POSSIBLE DANGERS Conspiracy theories have dogged the 5G roll-out; it was even linked it to Covid. The verdict on the possible impact of all these invisible rays on humans and animals is still not in.

ADVANTAGES AND APPLICATIONS “6G will be inherently human-centric,” says Dimitra Simeonidou, director of the University of Bristol’s Smart Internet Lab. “It will establish a cyber-physical continuum by delivering real-time sensory information, supporting haptics (touch sensations) and holograms. “This takes us far beyond future-forecasting. Crucially, this is about having the specialist knowledge and expertise to transform visions into deliverable solutions, accelerate innovation, and make a positive difference to society worldwide.” 6G is very much part of the Fourth Industrial Revolution. It makes it possible for human thought to be supported by cyberspace through implanted and wearable micro-devices. It has been dubbed the Teleportation of Senses. Healthcare stand to benefit from the technology in terms of diagnoses and treatments, such as remote surgery. Autonomous vehicles will get a boost, and the transport and logistics sectors will be disrupted. Forecasting will improve, which for investing means better real-time calculations. Superior energy planning and smart cities will support the UN’s Sustainable Development Goals. The race is on for this exciting technology that has the potential to transform whole industries — and our lives. i ABOUT THE AUTHOR Tor Svensson is the Founder-Chairman of Capital Finance International (CFI.co), which supports the UN SDGs. Tor is senior adviser to a UN recognised NGO.

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6G terahertz waves run in a twilight zone, an experimental band spectrum between current 5G airwaves using non-ionized radiation (which should be harmless to humans, and is said not to damage cells or DNA and higher frequency bands — think X- and gamma rays — with Ionizing radiation which — with extended exposure — may damage DNA. Some experts have found that higher frequencies in narrower bands pose fewer dangers to humans. News of possible dangers will doubtless surface. CFI.co | Capital Finance International

> Mohamed A El-Erian:

Taming the Stagflationary Winds

stream of recent data suggests that the global economy is showing signs of stagflation, that odd 1970s-style mixture of rising inflation and declining growth. Those who have noticed it – and there are still too few of them – fall into two broad camps. Some see the phenomenon as temporary, and quickly reversible. Others fear that it will lead to 42

a renewed period of unsatisfactory growth, but this time with unsettlingly high inflation. But a third scenario, which draws on both of these views, may well be the most plausible. Stagflationary winds are more likely to be a part of the global economy’s upcoming journey than a feature of its destination. But how policymakers CFI.co | Capital Finance International

navigate this journey will have major implications for longer-term economic well-being, social cohesion, and financial stability. The much-needed global economic recovery has recently been losing steam as growth in its two major locomotives, China and the United States, has undershot consensus expectations. The

Autumn 2021 Issue

headwinds to a strong and sustainable global recovery are being accompanied by higher and more persistent inflation. Higher inflation is putting pressure on those central banks that wish to maintain an exceptionally loose monetary policy. At the same time, decelerating economic growth presents a problem for central banks that are more inclined to scale back stimulus measures. All this also risks eroding political support for muchneeded fiscal and structural policies to boost productivity and long-term growth potential. Some economists, and the majority of policymakers, believe that current stagflationary trends will soon be muted by a combination of market forces and changes in human behavior. They point to recent declines in previously spiking lumber prices as indicative of how competition and increased supply will dampen inflation. They think the sharp fall in Delta-variant cases in the United Kingdom foreshadows what lies ahead for the US and other countries still in the grips of the latest COVID-19 wave. And they take comfort from multiplying signs of booming corporate investment in response to supply disruptions. Others are more pessimistic. They argue that demand headwinds will intensify due to reductions in fiscal schemes that were supporting household income, citing the expiration of supplementary unemployment benefits and direct cash transfers. They also worry about the gradual exhaustion of the cash buffers that many households unexpectedly accumulated as a result of exceptionally generous government support during the pandemic. On the supply side, the stagflation pessimists welcome higher business investment but fear that its benefits won’t come fast enough, especially as supply chains are redirected. Supply disruptions will therefore persist for much longer, in their view, and central banks will fall behind with the needed policy response. I suspect that neither of these scenarios is likely to dominate the period ahead. But they will influence the alternative that does materialise.

more contagious Delta variant of the coronavirus has dampened spending in some sectors, such as leisure and transportation, while hampering production and shipments in others, particularly manufacturing. Labor shortages are becoming more widespread in a growing number of advanced economies. Add to that a shippingcontainer shortage and the ongoing reordering of supply chains, and it should come as no surprise that the

Ideally, policymakers would respond in a timely and self-reinforcing manner to the increasing evidence of stagflation. The US would lead by progressing faster on a policy pivot, with the Federal Reserve already unwinding some of its ultra-loose monetary policy and Congress enabling President Joe Biden’s administration to advance its plans to enhance US productivity and longer-term growth by boosting investments in physical and human infrastructure. Meanwhile, national and international financial authorities would coordinate better to strengthen prudential regulation, especially as it pertains to CFI.co | Capital Finance International

excessive risk-taking among non-bank market participants. These measures would lead to declining inflationary pressures, faster and more inclusive growth, and genuine financial stability. And such a desirable outcome is attainable provided the needed policy response proceeds in a comprehensive and timely manner. Absent such a response, supply-side problems will become more structural in nature, and therefore more prolonged than the transitory camp expects. The resulting inflationary pressures will be amplified by the higher wages that many firms will have to offer to attract the workers they currently lack and retain the ones they have. With central banks lagging in their policy response, inflationary expectations risk being destabilised, directly undermining the low-volatility paradigm that has helped push financial-asset prices ever higher. Because the Fed would then be forced to hit the policy brakes, higher inflation would be unlikely to persist. Unfortunately, reducing it would come at the cost of lower and less inclusive growth, especially if the Biden administration’s plans remain stuck in Congress (which would be more likely in the high-inflation scenario). Rather than prolonged stagflation, the global economy would repeat what it experienced in the aftermath of the 2008 global financial crisis: low growth and low inflation. The recent appearance of stagflationary tendencies serves as a timely reminder of the urgent need for comprehensive economicpolicy measures. The faster such a response materialises, the greater the probability of anchoring economic recovery, social well-being, and financial stability. But if policymakers delay, the global economy will neither be saved by selfcorrecting forces nor pushed into a prolonged stagflationary trap. Instead, the world will return to the previous “new normal” of economic underperformance, stressed social cohesion, and destabilising financial volatility. 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. 43

> Otaviano Canuto:

Bubble-Led Macro-Economics and the Dynamics of the US Economy Macro-economic dynamics in the US economy have been increasingly associated with asset price fluctuations in recent decades. Financial conditions have become influential in shaping the cyclical pace.

here has been a mismatch between rising wealth and the pace that new assets are created and incorporated. Secular stagnation hypotheses offer explanations for this. Public debt — and its partial monetisation by central banks — has played a stabilising role by boosting the net supply of assets available to meet demand. The US big balance sheet economy has been on a growth path dependent on the continuity of low real interest rates, as well as stretched priceearnings ratios of stocks and high corporate debt. Periodic episodes of downward adjustment in asset prices have been countervailed with lax monetary policies. INTRODUCTION Macro-economic dynamics in the U.S. economy — and arguably also in other advanced economies — has increasingly become associated with asset price fluctuations in the past few decades. Financial conditions have increasingly become an influential factor shaping the cyclical pace of the macroeconomy.

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There has been a mismatch between rising financial wealth and the pace of creation and incorporation of new assets. Along with macroeconomic and financial fluctuations, net financial wealth has, on average, grown at a faster pace than the stock of productive assets added to the real economy. That mismatch has endured because of an upward revaluation of existing assets and increased public debt. Occasional downward asset price adjustments have been followed by new rounds of finance-led booms. Bubbleblowing — asset appreciation beyond “fundamental” values — has become a major driver of macro-economic performance. The discrepancy between the growth of financial wealth and real-side asset accumulation has happened in tandem with declining long-term interest rates, rising ratios of debt, and household net worth to GDP. One reason for sliding interest rates is the abundance of stocks of financial wealth in search for yield, relative to investment opportunities from new assets. As a feedback loop, lower interest rates have supported the appreciation of outstanding financial assets 44

Figure 1: Leverage as an Amplifier of Shocks. Source: IMF (2021).

by reducing discount rates applied to future earnings. The size of the private-sector balance sheet has risen relative to GDP, with private and public debt accompanying increased private net worth. Several secular stagnation hypotheses — driven by demographics, technological evolution, and income concentration — offer some explanations. Public debt — and its partial monetisation by central banks — has played a stabilising role by boosting the net supply of assets. The US big balance sheet economy has been on a growth path dependent on the continuity of low real interest rates, as well as stretched price-earnings ratios of stocks and high corporate debt. Periodic episodes of downward adjustment in asset prices have been countervailed with lax monetary policies. Fiscal deficits and public debt can extend the lifespan of such dynamics. They can boost private assets by lifting profits and stimulating creation. Higher public debt widens the outlays to accumulate private financial wealth. In the absence of fiscal deficits and public debt expansion, the underlying imbalance between financial wealth and the real-side economy comes to the fore. Apart from occasional asset-price and balancesheet adjustments — accompanied or not by financial crises — the extension of finance-led macro-economic growth will depend on the extent to which factors leading to the relative CFI.co | Capital Finance International

insufficiency of new productive assets are reversed, while interest rates remain low. If there is no major change in the perception of government default risks, public debt-to-GDP ratios would not rise if growth rates were higher than interest rates. Such GDP performance would depend on the extent to which fiscal policy translates into lifting the accumulation of new productive assets. Otherwise, the US economy will stay on a bubbleled growth-cum-cycle trajectory, with moments of financial stress. FINANCE AND MACRO-ECONOMICS: MACROFINANCIAL LINKAGES Finance and macro-economic activity have a two-way relationship. Assets and liabilities are stocks — at a moment in time — that reflect investors’ expectations about future returns as well as the ability and willingness of money receivers to comply with obligations. All this is seasoned with varying degrees of confidence. Over time, the actual path taken by the macroeconomic activity feeds-back — positively or negatively — on finance. Finance can lead the macro-economic activity through leverage (debt in relation to income) or acquisition of shares, with cyclical and structural consequences. Figure 1, taken from the IMF’s April 2021 Global Financial Stability Report, depicts the connections between leverage, financial conditions, and macro-financial stability, which are intertwined. Financial conditions, usually measurable or observable

Autumn 2021 Issue

by a series of indicators, reflect the price of risk and liquidity in an economy and constitute a key driver of leverage build-ups. When financial conditions are loose, intermediaries and markets have a greater incentive to take on more risk and a greater proclivity to lend. At the same time, borrowers (firms and households) have a greater propensity to take on debt and, through heightened net worth associated with higher asset values, a greater capacity to borrow. Leverage build-ups may lead to a financial vulnerability, as high levels of indebtedness mean households and firms become more susceptible to adverse shocks. When financial conditions tighten, stability risks may arise from any sudden correction of asset prices and abrupt deleveraging by firms and households. The combination of risk repricing and high leverage may well spark non-linearities, whereby tighter financial conditions interact with deleveraging, which in turn causes additional repricing of risk. The higher the level of indebtedness before the shock — including degrees of time mismatches in balance sheets — the greater the likelihood of disruption. The IMF observes that leverage, while making possible a ramping-up of real economic activity, can also act as an amplifier of adverse shocks. It is a double-edged sword. Degrees of confidence are embedded in financial conditions. Hyman Minsky wrote about how leverage followed cycles of boom and bust. In periods of stability, as time passes without crisis, economic agents tend to raise leverage. The underlying macro-financial stability becomes fragile and may succumb to any shock, after which the unwinding of leverage — happening with non-linearities — leads to a crisis. That can mean “fire sales” of assets, and illiquidity turning into insolvency. Financial conditions could well be the locus of Hyman Minsky’s changes of mood about uncertainty and confidence.

ASSET-DRIVEN MACRO-ECONOMICS CYCLES… In the past 30 years, we have seen three major US asset-driven business cycles, with macroeconomic activity being lifted and then hit by large macro-economic shocks arising from the financial side. On Figure 2, notice the ascent of the net worth of US households vis-à-vis GDP, particularly during booms.

Source: Source: Federal Reserve and U.S. Bureau of Economic Analysis.

Figure 3: Corporate Profits, Rent, Interest, and Proprietors’ Income as % of Household Assets. Source: Levy, D.A. (2019).

The US business cycles that ended in the three most recent recessions involved progressively greater, and more troubling, risk-taking. Each ended with worse financial fallout, a longer period of recession, and weak recovery. A similar bubble-led growth process could be found inside the euro zone, starting with the downward convergence of perceived risks and interest rates after the introduction of the common currency. Countries that later came under stress were able to sustain domestic absorption above domestic production capacities for a time, easily financing the difference — current-account deficits — because of fallenfrom-heaven domestic asset value appreciation and external bank credit. The underestimation of fiscal risks by market participants can also be seen as a manifestation of such euphoria. SECULAR STAGNATION AND INVESTMENT DROUGHT We have so far highlighted the role of asset bubbles pulling up the growth trajectory, in tandem with declining long-term interest rates and rising household net worth and debt-to-GDP ratios. A possible explanation is a mismatch between the pace of wealth accumulation and the creation and incorporation of new assets. What if some underlying secular trend of stagnation is under way, making the economic dynamics dependent on an expanding balance sheet economy? If the growth trend is dependent on overspending induced by the financial frenzy — credit and house-price bubbles — avoiding CFI.co | Capital Finance International

future asset price booms and busts might lead to stability around low growth rates. Such a view underlines the possibility of a secular stagnation trend mentioned by economists such as Paul Krugman (2013) and Lawrence Summers (2013). They and other Keynesian economists have suggested an array of possible causes for the state of the US economy. As a result of structural conditions, aggregate spending would not be enough to ensure full employment and the use of potential output capacity — unless real interest rates become negative (or, there were very low interest rates for long periods). Such an “investment drought” —or a savings glut, as measured by levels of non-consumption expenditures required to sustain income at full employment — could be seen as underlying the fact that average economic growth rates have fallen short of previous decades. This has been the case in the US, where average growth has been lower — even with a long period without recession until 2020. Several long-standing factors could be singledout as dampening investment. First, income concentration — rising shares of income accruing to capital and the very wealthy — would lead to overall under-consumption, only occasionally countered by unsustainable overindebtedness of poorer segments of the income pyramid. Aggregate demand would become too reliant on debt. 45

CFI.co Columnist

Macro-financial policies (monetary, macroprudential, and fiscal) also influence leverage build-ups, either through financial conditions and the availability of credit, or through the effects of policies on income, unemployment, inflation, and debt service costs. Macroprudential policies can help to lean against the wind — that is, tighten to lessen risks to future financial stability. This can be accomplished by taming leverage build-ups and/or strengthening borrower and lender resilience.

Figure 2: U.S. Households Net Worth vs U.S. GDP, 1992-2018 (normalized, 1992 = 100).

Figure 4: Central Bank Asset Acquisition. Source: IIF.

Beyond a certain point, inequality weakens an economy by forcing policymakers into a difficult choice between high unemployment or everincreasing debt. This phenomenon is not unique to the US. It is widespread, judging by the weighted average displayed in Figure 3. The argument about inequality leading to secular stagnation because of lack of sufficient aggregate demand does not depend on a savings glut being created, and then searching investment opportunities. It corresponds to not fully using the installed GDP capacity over time, eventually bringing down investment rates. Demographic changes also potentially lead to investment droughts or savings gluts. Decreased mortality and increased longevity are changing the demographic structure in advanced economies, affecting demand, through increased savings, and supply, through reduced innovation activities.

CFI.co Columnist

Features of technology evolution might also be contributing factors. Steep declines in the costs of durable goods — especially those associated with information and communication technology and/or outsourcing — would mean lower spending associated with investment plans financed from corporate savings. The trajectories of technological evolution currently unfolding would not carry an array of high-return investment opportunities comparable to past ones. Cowen (2013) approached stagnation as a result of the exhaustion of a significant set of low-hanging fruit: one-off supplyside opportunities associated with post-war reconstruction, trade opening, diffusion of new technologies in power, transport, communications, and education. Think of the whole set of fixed-capital and infrastructure investments associated with the second industrial revolution starting at the end of the 19th Century, and fully developed in the last. Nothing comparable in terms of physical, tangible investments — or backward and forward cross-sector linkages — can be found in the technological revolution in course, even if it also increases productivity. 46

THE PANDEMIC Then comes the financial shock of March 2020, and the adoption of extraordinary fiscal and monetary-financial policies. Policy support launched during the containment phase of the pandemic eased market dysfunction, easing financial conditions after a sharp tightening in the first quarter of 2020. It also maintained the flow of credit to households and firms. Regardless of distinctive sectoral performances, overall trends depicted here have been exacerbated, even if in a one-shot, non-repetitive manner. The pandemic shock has increased non-financial sector leverage across economies, albeit for different reasons. The crisis has squeezed cash flows for the corporate sector and, through its impact on employment, increased the financing needs of households. Still to be seen is the extent to which the overall transfer from the public sector to households will lead to higher private savings for some, while others have simply increased leverage. The asset appreciation at this latest stage of finance-led macro-economic performance has obviously been the tech sector and others less impacted by the pandemic crisis, while non-financial corporate and household leverage partially prevented the downfall. FISCAL SPENDING, PUBLIC DEBT, AND CENTRAL BANKS To what extent have current account transactions and fiscal balances helped sustain domestic aggregate demand in the case of the US? And to what extent might fiscal deficits and public debt help fill current demand and asset gaps? Global demand and supply have balanced in America. The rest of the world has sought to accumulate US assets, and generated a persistent US current account deficit. Figure 4 shows how central bank sovereign bond purchases and holdings have also been significant in the euro zone and Japan. Since the global financial crisis, there has been an open discussion on whether the fiscal space for expansionary policies has been underused. While real interest rates remained low, higher public spending might have entailed CFI.co | Capital Finance International

Autumn 2021 Issue

GDP growth rates high enough to eventually lead to declining public-debt-to-GDP ratios. As established by Blanchard, without major change in the perception of government default risks, public debt-to-GDP ratios would not rise if growth rates remained higher than interest rates. Fiscal deficits and public debt have cushioned current demand and asset gaps (Figure 5). This process is likely to leap ahead in the US with the Biden administration’s fiscal stimulus plans on expenditure flows (via fiscal deficits) and on stocks of household assets (via public debt). Nevertheless, such a scenario depends on no significant rises in interest rates, otherwise asset prices — already thin in terms of price-earnings ratios — and risk profiles would crumble. While any chronic insufficiency of aggregate demand — or lacklustre potential growth — may be mitigated as Biden’s fiscal packages are implemented, the issue of a mismatch between asset creation and wealth accumulation may return. If the recent secular stagnation trend in net investments to GDP is not altered, public debt will reach higher levels. It will all hinge on overcoming structural trends of low investment ratios to GDP. CONCLUDING REMARKS The US big balance sheet economy is on a growth path dependent on the continuity of low real interest rates, as well as stretched price-earnings ratios of stocks and high corporate debt. Periodic episodes of downward adjustment in asset prices and balance-sheet tensions have been countervailed with lax monetary policies. Fiscal deficits and public debt can extend the life span of such dynamics in two ways. Fiscal deficits can boost the return of private assets by lifting profits and stimulating the creation of new assets. Higher public debt widens the outlays to accumulate private financial wealth. In the absence of this, the mismatch between financial wealth and the real-side economy comes to the fore. And ultimately, the impact of fiscal policies will depend on the extent to which it translates into lifting the accumulation of new productive assets.

How can the supply of real assets be increased? If the technological hypothesis CFI.co | Capital Finance International

How about tightening monetary policy, regardless of inflation, to deflate the bubble and bring the economy back to a lower, more stable, and more sustainable growth path? That would lead to a wide asset-price crash, highly likely to turn illiquidity into insolvency on many balance sheets, followed by even lower growth rates. Would financial dominance in the US be related to the outsized role of the country’s hi-tech sector, its low real asset intensity, its scale economies, and its reach in an integrated global economy? The dot.com bubble would be compatible with this. However, one should not lose sight of financial development moving finance ahead of regulators (as in the housing bubble). The eternal cat-and-mouse game since the beginning of the full development of market economies. Most advanced economies must decide what to do about financial wealth dynamics in excess of domestic private, real-side investment dynamics. Southern non-advanced economies would be a natural recipient of that excess wealth — provided that appropriate policy homework is done. i

This is an edited except from the complete article from Policy Center for the New South, August 2021, PB-21/29 with sources and references available upon request. ABOUT THE AUTHOR Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a visiting public policy fellow at ILAS-Columbia, and principal of the Center for Macroeconomics and Development. 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 Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil. Otaviano has been a regular columnist for CFI. co for the past nine years. Follow him on Twitter: @ocanuto 47

CFI.co Columnist

Apart from occasional asset-price and balance-sheet adjustments, with or without financial crises, the extension of the financeled macro-economic growth will depend on the extent to which factors leading to the relative insufficiency of new productive assets are reversed, while interest rates remain low. Otherwise, the US economy will stay on a bubble-led growth-cum-cycle trajectory, with moments of financial stress.

about secular stagnation is strong, there is not much that can be done beyond hoping that green infrastructure, for instance, plays a Schumpeterian creative-destruction role, scrapping the value of old infrastructure while bringing in new physical asset creation. The intensity of intangible assets in new tech frontiers — and lower multiplier-accelerator effects compared to previous technological revolutions — is unlikely to change. Demography is plausible as a factor. Income distribution — assuming it can be done, and in ways not incompatible with the system’s dynamics — would help.

> Autumn 2021 Special

Building Back Better Means More Than Back to Normal

rchitecture 2030, a non-profit, nonpartisan organisation established in response to the on-going climate emergency, reports that 28 percent of greenhouse gas emissions are caused by construction, and 11 percent by building operations. Around two-thirds of the buildings now in existence around the world will still be standing in 2040, meaning that energy efficiency must be improved if countries are to achieve the climate-change targets laid out in the Paris Accord. Between 2016 and 2019, energy efficiency investments and renewable energy shares in the building industry dropped by half. Operational emissions from buildings, mainly from heating and cooling systems, hit an all-time high in 2019, according to the International Energy Agency (IEA). Rising energy demands, extreme weather events and a continued reliance on fossil fuels are all culprits. But 2019 was the first time in three years that there was an increase in global spending on energy efficiency, up three percent from the previous year to reach a total of $152bn.

energy demand in the built environment, decarbonise the power sector, and implement materials strategies that reduce lifecycle carbon emissions,” says Inger Andersen, executive director of the UN Environment Programme. “Green recovery packages can provide the spark that will get us moving rapidly in the right direction. Moving the building and construction sector onto a low-carbon pathway will slow climate change and deliver strong economic recovery benefits, so it should be a clear priority for all governments.” The green building movement represents a major investment opportunity, with the International Finance Corporation estimating the market will hit $24.7tn by 2030. It is expected to grow at a compound annual rate of 11.25 percent over the next five years. The IEA estimates that up to 30 manufacturing and construction jobs will be created for every million dollars invested in energy efficiency. Assessments from McKinsey and Co show that investment today will pave the way to net-zero emissions in building operations by 2050, at an average cost of $5.80 per ton of CO2.

With populations rising and urbanisation on the increase, floor areas are expected to double by 2060: 230 billion square metres per month over the next 40 years. Architects and designers have the opportunity — and obligation — to incorporate low-carbon innovations.

Low-carbon solutions are poised to bring about a reduction in emissions and costs, and government policies and regulations are pressuring the industry to innovate. Players that are slow to comply will be left behind as investors increasingly apply ESG standards to portfolio holdings.

“Rising emissions in the buildings and construction sector emphasise the urgent need for a triple strategy to aggressively reduce

Over the next few pages, we introduce some of the entrepreneurs shaking-up the industry — and helping the world to Build Back Better. i

CFI.co | Capital Finance International

Autumn 2021 Issue

CFI.co | Capital Finance International

> CLARISSE MERLET FOUNDER OF FabBRICK Building a Better Future, One FabBRICK at a Time

The fashion industry is known for glitz and glamour — but it’s one of the biggest polluters on the planet. According to a report from the UN Environment Programme, it’s responsible for an estimated eight percent of global carbon emissions, 92 million tons of solid waste and 20 percent of global wastewater per year. Global annual construction waste, by comparison, is expected to reach 2.2 billion tons by 2025. Architecture student Clarisse Merlet sought to address these disparate and alarming statistics in an academic project that evolved into a sustainability-focused business: FabBRICK. “I started making bricks with waste from plastic bottles, cardboard, and finally textile,” she told Design Wanted. “We can make panels that improve the ambiance of a room or a public space. (The bricks) also have good water resistance, but we recommend indoor use for now.” The bricks have impressive mechanical strength, as well as insulating, acoustic, and thermal properties — and good fire-resistance. The Paris-based company has achieved national fire-resistance certification and EU certification is due soon. FabBRICK started as a one-woman operation. Merlet entered competitions — Faire Paris 2017, Petit Poucet 2019, Start’in ESS 50

2019 and Prix Gabriel 2020 — and won more than €15,500 in prizes to establish and grow her business. A crowdfunding campaign in April 2019 secured a further €10,000 to industrialise the production process. Merlet placed in the Refashion Innovation Challenge, which provided instalment payments to cover half the costs of employee recruitment and workshop installations, a total of €90,000.

“An employee of the fashion brand Jules noticed my concept. At the time, I had just the idea, the drawings, but I had not filed a patent; I did not have a machine either.”

Within 18 months, the FabBRICK team had grown tenfold. The company is still in the artisanal stage, with a small team creating multi-hued blocks, mostly by hand. The company sources textile waste — garments deemed unworthy of the second-hand market and scraps from fashion producers — from local suppliers. The shredded and colour-coded fabric is combined with FabBRICK’s proprietary, eco-friendly glue. The mixture is weighed to ensure consistent density, compressed into moulds with a mechanical jack, then left to air-dry for up to 15 days. The machines can make 200 bricks a day — and new equipment should soon boost production to 2,000 a day.

FabBRICK recovered 100kg of Vinci Construction’s worksite uniforms and converted them into eye-catching lamps and stools. “The Vinci brand initially wanted us to recycle all their textile waste,” Merlet said, but the volume was too great.

“We have already designed more than 40,000 bricks,” says Merlet, “which represent 12 tons of recycled textiles.” She attracted her first client on a French morning TV show: “I was lucky to have a very good client right away,” she told Les Echos. CFI.co | Capital Finance International

Now, FabBRICK works with 15 clients, mostly retail stores, fashion brands and architecture firms. The hands-on process requires the company to selectively sort client requests.

The eye-catching designs spark conversation and raise awareness of the social, economic and environmental consequences of fast fashion. “FabBRICK can be developed worldwide,” says Merlet. “Fast fashion is everywhere, so we can always be close to a source of textile waste. The next step is to automate production so that we can recycle even more. At the moment, the process is artisanal, the machines are manually operated.” The plan is to duplicate the model locally, in France, then begin global export.

Autumn 2021 Issue

> ARTHUR HUANG CO-FOUNDER AND CEO OF MINIWIZ ‘We Take a lot of Risks — That’s How we Grow’ The company Arthur Huang co-founded with Jarvis Liu in 2005, Miniwiz, has been praised by The Financial Times, The Wall Street Journal and the World Economic Forum for its pioneering efforts to incorporate post-consumer recycling applications into a closed-loop building model. Huang, a National Geographic explorer, had his Eureka moment in Rome, where rubbish had been used in ancient times to construct beautiful buildings. “These masterpieces of architecture, cut them open and there’s trash inside,” he realised, which led him to wonder: “Why can we not do that today?” Huang proved that we can, with the construction of Taiwan’s EcoArk Pavilion. The nine-storey exhibition centre has a ventilation system created from recycled tech waste and a core of recycled steel. The building’s façade was constructed with 1.5 million plastic bottles, which were ground, melted and blow-moulded into proprietary Miniwiz Polli-Bricks, a structural building material made from recycled polyethylene terephthalate (PET) polymer. The bricks are translucent and naturally insulating, keeping energy costs low as sunlight enters the building. The blocks connect into a strong, interlocking, 3-D honeycomb structure. Computer simulations and field tests have shown Polli-Brick constructions to be resistant to earthquakes, fire and extreme weather. Miniwiz began experimenting with the Polli-Brick concept in its first two years of operation but had delayed product development due to a lack of funding. It introduced a version of the bricks suited to interior use at a consumer electronics trade show in 2009. It was then approached by the Far Eastern Group to submit designs for the 2010 Taipei International Flora Expo. Huang tossed the Polli-Brick concept in for consideration. “This was our daring endeavour,” he says. “We promised the technology was there already. In our mind it was there — but it could have been a disaster.” Miniwiz spent $200,000 in R&D before securing the contract. “We take a lot of risks,” says Huang. “That’s how we grow.” By using upcycled materials, Huang managed to the keep the EcoArk budget to around $4m. PolliBrick assembly costs a quarter of conventional systems. “There’s a similar sized building right across the street, constructed at the same time, under government traditional budget,” he says. “That building cost $40m.” Apart from savings, recycling waste into building materials addresses a pressing global issue. “Our environment is being polluted by our

consumption patterns,” Huang warns. “From packaging to fast-fashion to car batteries, we have to actively transform all this material that’s been collecting for the past 40 or 50 years. It’s not going away, so somebody has to deal with it. “The best scenario is to make trash into a currency. So, the more valuable the transformation is, the more valuable the trash is.” Added value would stop consumers and conglomerates carelessly discarding trash — and stop wealthy economies shipping waste to developing countries. Miniwiz has created portable, solar-powered, AIdriven machines to bring recycling to the streets and engage with the public. The company has expanded its product line-up to include ecofriendly shading and shelf systems, load-bearing CFI.co | Capital Finance International

Polli-Ber brick walls, origami-styled Ricefold ceiling and floor panels, and electronicscompatible Tetrapod modules. The pandemic spurred Huang to turn his attention to the world’s overworked and undersupplied medical teams, building parts and components out of local trash. In partnership with the Fu Jen Catholic University Hospital, Miniwiz created the world's first hospital ward entirely built from recycled materials. “We don't need to create new things,” Huang insists. “We just need to use our ingenuity, innovations — and our good heart and good brain — to transform these existing materials into the next generation of products and buildings to power our economy.” 51

> JURRIAN KNIJTIJZER FOUNDER AND MD OF FINCH BUILDINGS AND CO-FOUNDER OF FINCH FLOATING HOMES Home on an Ocean Wave? Floating Eco-Homes Need Have No Fear of Rising Tides Jurrian Knijtijzer is passionate about sustainability, and hopes his stackable modular homes will help reduce the real estate industry’s carbon footprint. An architect by training, Knijtijzer launched Finch Buildings in 2014. The sustainability-driven enterprise creates homes almost exclusively from cross-laminated timber. The process involves gluing together thin sheets of wood, mostly spruce, to form a strong building composite. “And that's what I found really intriguing about it. It can literally be a substitute for concrete,” said Knijtijzer. If the concrete industry were to be viewed as a country, it would the world’s thirdmost polluting nation after the US and China. “At Finch Buildings, we try to do things differently and make buildings that are a solution for the climate-change problem.” He believes his company's biggest achievement has been to create building complexes of sustainably sourced timber modules to suit socialised rents and middle-class incomes. The key, he says, is that this is not just something for the wealthy. “It means we have to be mainstream in order to really change and have impact.” In March 2021, Finch Buildings secured $1.0m in funding from AMAVI, an independent panEuropean investor focused on supporting the PropTech sector. The investment represents more than a capital infusion for Finch Buildings, which is well established in the Dutch market. The collaboration will advance its European expansion, starting in Belgium before focusing on French and UK markets. “The time of pioneering is behind us,” says Knijtijzer. “Now we are going to scale-up.” Finch Buildings partners with contractors and manufacturers to create the prefab modules. They can be stacked up to seven storeys high, with customised exterior and interior finishes, balconies and installations. The plug-and-play design allows residents to connect to existing utilities or to set up their own renewable energy systems. A solar-panelled rooftop could power an entire complex, and a geothermal system can heat it. The modules are all-electric and have no gas connection. Wooden homes are natural CO2-storage vessels, as timber retains carbon trapped by a tree over its lifecycle. Timber is also a humidity-regulating material, which is particularly beneficial to people with respiratory problems. A non-toxic glue binds the laminate, further contributing to interior air quality. Sustainably sourced timber is renewable, thanks to replanting efforts, and the conversion of raw 52

materials requires less energy than traditional construction with steel and concrete. Timber laminate is a near-infinitely recyclable material, which supports the circular economy. Concerns over climate change led Knijtijzer to co-found Finch Floating Homes, a corporate responsibility foundation that has evolved into a viable business. The company has built a fully functional home as part of a feasibility study in the Philippines, where some coastal residents face flooding with each high tide. The aim is to build a community of floating prefabricated homes. “And then you can leapfrog that development,” says Knijtijzer. “The idea is, of course, to scale that up, because there are so many delta regions, especially in (developing) countries, that are suffering.” CFI.co | Capital Finance International

The basic floating home design uses natural airflow, awnings and other alternative technologies for cooling; air-conditioning is not needed. Including the floating “foundation”, the homes cost €7,000 to €10,000. “Our goal was to target the lowest-income bracket, because then we have the most impact. We can always make it more luxurious if people want, but our focus is on the lower-income groups.” From floating homes to social housing, Knijtijzer takes pride in catering to the masses. “Maybe it’s not so sexy if you’re an architect, but as an entrepreneur, yes, it is. And it's also necessary in terms of climate change. We really are in a rush to get this problem under control. And we need everybody to get involved.”

Autumn 2021 Issue

> GINGER KRIEG DOSIER BIOMASON CEO AND CO-FOUNDER Biotech Innovation Traces Path from Marine Structures to Carbon-Neutral Concrete Portland cement production accounts for eight percent of global carbon dioxide emissions, and uses 10 percent of drinking water. Concrete, of which cement is the vital component, is the secondmost consumed substance in the world after water. Every second, 1,000 metric tons of concrete are used across the globe. “Biomason is the only company in the world using biology to commercially produce cement, eliminating the need to emit CO2 in production,” says Ginger Krieg Dosier, CEO and co-founder of Biomason.“We are curing the disease, instead of treating the symptoms.” Krieg Dosier and husband Michael, who serves as CTO, founded Biomason in 2012. Since its inception, the company has created biocement® materials aimed at creating a positive impact on the environment, from the manufacturing process to product performance. “For millions of years, nature has used carbon as a building block for cementitious materials such as marine structures. While other cement technologies continue to rely on traditional methods of production, we at Biomason have learned to emulate nature’s blueprint of harnessing carbon to create cement in a completely different way. Our biocement technology grows in ambient temperatures, using natural microorganisms to create controlled, structural cement without emitting carbon.” Krieg Dosier recalls her first moment of inspiration to grow structurally sound materials as a child studying a seashell. Now, the company takes a cue from coral reef systems to produce carbonneutral cement. Its multi-patented biotech process combines naturally occurring bacteria, carbon, and calcium to grow biocement. Unlike traditional cement production, which requires calcination with kilns and can take up to 28 days to fully cure, biocement forms in ambient temperatures and reaches maximum strength within 24 to 72 hours. It’s also three times stronger than concrete masonry units. From 2013 to 2019, Biomason secured over $30m, including investor support from Novo Holdings, Martin Marietta and Noel Ventures. The company has seen tremendous growth over the past three years, laying the foundation to realise ambitious commercial and climate-action goals. The Biomason team — 85 and growing and with over 50 different disciplines — moved in 2020 to a new headquarters and production facilities in North Carolina’s Research Triangle Park. “Our recent additions of top-level experienced hires to our Executive Leadership Team have

positioned us for continued acceleration and expansion,” Krieg Dosier told The Digest. “2021 has been an important year for Biomason; we’re rapidly scaling our technology and team and launching projects with global brand customers.” Its first commercially available product, bioLITH® precast, is made from 85 percent granite from recycled sources and 15 percent biocement — and it’s paving the way to low-carbon building solutions across the US and Europe. “Our precast tiles are in use in multiple projects, including at H&M Group’s Swedish headquarters and at Martin Marietta’s new Raleigh location. We are actively working with clients ranging from commercial companies and developers to innovative architects and designers worldwide to incorporate bioLITH and biocement technology into their projects.” In partnership with the US Department of Defence, Biomason has developed a technology to create Engineered Living Marine Cement. Biocement is seeded with natural marine microorganisms that pull nutrients from seawater to propagate calcium carbonate structures, which results in sustained structural integrity, CFI.co | Capital Finance International

self-healing abilities and marine-floor anchoring. It has also developed an application to facilitate safe take-off and landing areas for military helicopters. “As we look toward the future for Biomason, we have no intention of slowing down.” The goals encompass business development and continued technological advancement, she says. “Primarily, we are growing our licensed manufacturing and strategic partnerships, increasing profitability, and implementing additional biocement technology platforms.” Rather than making incremental improvements on a 200-year-old formula, this revolutionary technology addresses the root cause of cementbased emissions. Imagine switching off the world’s kilns. Biomason aims to reduce 25 percent of carbon emissions from the global concrete industry by 2030. “We are continuing to iterate and advance, because we know critical accelerated change is needed across multiple applications, as we are in a climate-change crisis. The potential uses for Biomason’s technology are vast, and we are eager to see them through.” 53

> FERDINAND GRAPPERHAUS, JR PHYSEE CEO AND CO-FOUNDER Putting a Brave (and Smart) Face on the World’s New Constructions The building industry is one of the main contributors of greenhouse gas emissions. According to a 2019 report from the World Green Building Council, the energy used to heat, cool and light buildings accounts for 28 percent of global carbon emissions. Ferdinand Grapperhaus, co-founder and CEO of PHYSEE, is working to change those gloomy figures. He and CTO Willem Kesteloo founded the company in 2014, as a spin-off of the oldest and largest Dutch public technical university, TU Delft. The university remains a shareholder and collaborator of PHYSEE via Delft Enterprises. “The name PHYSEE comes from ‘physics’ and ‘seeing,’ so we make physics central to our perspective and try to make the world a better place,” Grapperhaus told Tech.eu. As a physics engineer, he credits a large part of the global climate crisis to buildings, which account for 40 percent of total global energy consumption — and he’s intent on accelerating an energy-neutral future, using dynamic façade solutions designed for user well-being and sustainable impacts. PHYSEE creates SmartSkin façades and glass coatings featuring sensor and solar technology that can reduce a building’s energy consumption by up to 30 percent. The company has given new functionality to a material that’s been around for 5,000 years. It has developed two distinct glass coatings, one for use in residential and commercial building and another for greenhouses. The latter converts harmful UV light into photosynthetic active radiation — allowing for a seven percent increase in crop growth. “Six years ago, we started with developing coatings, but right now we are an R&D company and a data company,” Grapperhaus said. “And the latter has been a pivot over the past six years, which I never anticipated.” The company works with manufacturers, providing the sensors and solar components. Then PHYSEE offers a data service which ties everything together. The PhyseeHub stores and processes localised data from the SmartSkins to generate actionable insights. Sun-shading and façade ventilation are controlled by automatic actuators to take advantage of natural light, cutting costs by reducing the need for heating, cooling and artificial lighting. “The projects that we are actually selling right now have a payback time within five years, which makes it a very attractive prospect for our customers,” Grapperhaus said. “And besides the value proposition, they enable our customers to build in a much more energy-friendly way. “And if we can now scale our business with the right funding, we can set up different commercial 54

activities in different countries by actually increasing the speed of adaptation and also disrupting the building energy markets.” PHYSEE was named as the Dutch start-up of the year when it launched and as Europe’s best energy start-up the following year. It won the World Postcode Lottery Green Challenge in 2016 and was selected by the Dutch Chamber of Commerce as the Netherland’s most innovative company in the in 2019. This recognition has helped PHYSEE secure $14.7m over five funding rounds, including investor support from Phase2.Earth, Adunare, Job Dura and EDGE Technologies. The latest injection of growth capital, totalling $9.3m, was finalised early this year. “The fact that we have been able to quickly close the second half of our Series A investment round by attracting capital from new and existing investors, is a testament to PHYSEE’s potential CFI.co | Capital Finance International

and the focus from leading real estate developers to invest in sustainable and comfort-increasing technology. We look forward to deploying this new capital to accelerate the roll-out of our smart and sustainable building platform and to speedup the commercialisation of our light-converting coatings.” The company refers to employees as PHYSEEonairs, and it’s a tight-knit group where corporate culture and product development is continuously shaped by weekly safe-space, brainstorming sessions. The multi-disciplinary team, which is 30 percent female, is made up of 12 nationalities fluent in eight languages. “We have been swimming against the tide for six years because we see that things can — and must — be done differently,” Grapperhaus said. "We spend 90 percent of our time in buildings and for a more sustainable future, we need to develop and use them in an innovative way, both at home and in the office.”

Autumn 2021 Issue

> ELAINE YAN LING NG FOUNDER OF THE FABRICK LAB AND CHIEF MATERIAL INNOVATOR AT NATURE SQUARED Designer Egged-on by Nature’s Potential for Unique Beauty The design world often looks to nature for inspiration, and Elaine Yan Ling Ng, a traditional weaver and innovative designer, finds magic in that marriage. “I am always inspired by nature and its cleverness such as its innate engineered structure,” she shared with The Luxury Conversation. “Take an eggshell for example — it appears to be fragile, but it has a very strong chemical bonding, calcium carbonate, just like seashells.” The British-Chinese artist is exploring this theme in collaboration with Nature Squared, a Swiss company that combines heritage artisan craftsmanship and sustainably sourced natural materials to create luxury surfaces. Before joining forces with Yan Ling Ng, Nature Squared specialised in bespoke projects, using feathers, bones and shells to deliver one-of-a-kind elegance. “Bespoke work doesn’t usually involve repeat processes, nor does it maximise an existing supply chain or natural materials’ potential, which limits the amount of natural waste that can be used,” she says. “With eggshells, for example, most people see them as waste, but I see an endless playground and limitless resource.” Some 250,000 tonnes of eggshell waste end up in landfill — and Yan Ling Ng is determined to harness this untapped resource in circular economies that create local employment and contribute to social sustainability. Together, Yan Ling Ng and Nature Squared have launched CArrelé, a brand name derived from the periodic symbol for calcium (CA) and the French word carreler, which means to tile or pave. Handmade eggshell tiles are the first product in this ongoing commercial project, which aims to create an ecosystem that addresses issues of sustainability and waste. “The inspiration came from the use of chicken eggshells as agricultural waste in medical and dental therapies,” she told Home and Decor. “I thought that if solid biological waste is good enough for the medical industry, that’s proof that it has great strength and stability. With a change of formula, these properties could potentially be used in other industries such as architecture.”

“Eggshell is a renewable bio-ceramic that can serve as a de-carbonating filter because it has the preference to absorb and carbonate CO2 over other gases. This is a stark contrast to the traditional production of ceramic and porcelain wall tiles,” she explains. “The CO2 emission from ceramic tiles reaches an average of 180,000 metric tonnes a year. About 80 percent of the total CO2 output is emitted during the firing and drying process. We are committed to creating a zero-CO2-emission tile, which could absorb CO2 throughout the production process.”

The Hong Kong-based designer makes regular visits to Nature Squared's factories in the Philippines and works with the R&D team to develop the eggshell tiles. The tiles are created using locally sourced white eggshells that are coloured using natural dyes and cured at room temperature.

Yan Ling Ng is an award-winning artist and Ted fellow. She graduated with a master’s in Design for Textiles Futures from Central Saint Martins College of Art and Design, London, and studied Business Sustainability Management at the University of Cambridge’s Institute for Sustainability Leadership. She founded The CFI.co | Capital Finance International

Fabrick Lab in 2013, where she serves as design director. “Throughout my career I’ve always worked to bring technology and textiles together, with sustainability hovering at the back of my mind. But now it’s great because with the pandemic I’ve seen sustainability grow into a more popular and important topic for brands and consumers alike. I’m so glad, because in the last 10 years I haven’t really been able to make that the main focus of our studio as it wasn’t the hot ticket topic that would bring in the bread and butter. Now our studio can put that in the forefront and work on implementing sustainable approaches as part of our core services, which is exciting.” For those interested in decorating with CArrelé’s eco-friendly multihued eggshell tiles, prices start at €595 per square metre. 55

> Europe

Best of Frenemies: EU and China Search for Middle Ground in the Seven-Year Negotiation Marathon By Brendan Filipovski

Prosperity makes friendships, they say, while adversity tries them. The EU and China may not be best buddies, but their relationship is maturing. In a polarising world, will they have time to build on that — or will they be forced to stand on opposite sides?

urope’s trade with China has almost doubled over the past 10 years, and in 2020, China (€586bn) replaced the US (€554bn) as its largest trading partner. The Netherlands (first), Ireland (fourth) and Germany (fifth) were among the leading FDI investors in China in 2019. From automotive to banking, European companies are getting involved with the People’s Republic, and 60 percent of these companies are planning to expand operations this year. Chinese investment in the EU peaked in 2016, since impacted by increased restrictions. Germany (fourth) and the Netherlands (fifth) were among the top recipients of Chinese FDI in 2019. That strong economic relationship should have been bolstered this year by the EU parliament’s ratification of the Comprehensive Agreement on Investment (CAI). It was agreed-to in December 2020 after seven years of negotiations, but is now on hold. This May, the EU acted on growing pressure over human rights concerns in Xinjiang and placed sanctions on four officials. China responded with tit-for-tat sanctions on several European parliament members. The EU is now demanding that those restrictions be lifted before it returns to the CAI. Italy recently announced a review of its Belt and Road agreement with China. It has also joined other EU countries in restricting Huawei’s access to its 5G infrastructure. June saw strong statements regarding China from European leaders at the G7 and NATO summits. Concerns were raised over human rights and China’s growing military might. While Europe had long expressed concerns here, it’s clear that its stance has stiffened. Changes in the US presidency have twice been a catalyst for this. Donald Trump’s unilateralism, disrespect for NATO, trade war with China and tariffs on EU steel and aluminium deeply concerned Europe’s leaders. Trump even threatened tariffs on car exports from the Continent. China spotted a diplomatic opportunity and redoubled its efforts to influence Europe. The EU, meanwhile, engaged more closely with China as it imagined a world without strong US leadership. Talk of a “European approach” to managing China emerged. Joe Biden has reversed Trump’s trends by reaffirming allegiance to NATO, multilateralism, and the transatlantic relationship. Steel and aluminium tariffs are expected to be removed. The EU’s confidence in the US has returned — for four years, at least. But Biden has continued the pressure first applied by Trump, and added fresh rhetoric. 58

"China and Europe are both hoping to lead the world in the renewable energy industry. Three of the world’s top 10 wind turbine manufacturers — including the first and second — are European; six are Chinese." He paints China as a strategic rival, a challenge to world order. He is seeking to build a new consensus among allies, backed by multilateral action: “situations of strength”. So far, the EU has been supportive. “We have to push back against the Chinese government’s economic abuses and coercion that undercut the foundations of the international economic system,” Biden said at the 2021 Virtual Munich Security Conference. “We must stand up for the democratic values … pushing back against those who would monopolise and normalise repression.” Covid-19 has also had an impact on the EU’s stance. It has highlighted the dependence of critical European supply chains on China. As a result, the EU is looking to onshore critical production from China. Several countries, including Germany, are starting to envision a future where China is a significant economic rival. China is Volkswagen’s largest market, but there could come a time when Volkswagen’s European sales are threatened by Chinese competition — particularly with EVs. China has a stranglehold on many of the rare earth minerals needed for electric vehicles. China and Europe are both hoping to lead the world in the renewable energy industry. Three of the world’s top 10 wind turbine manufacturers — including the first and second — are European; six are Chinese. Many European companies and governments are increasingly dissatisfied with the Chinese government’s efforts in addressing forced technology transfers and trade espionage. As in the US, there is frustration that trade has not led to liberal reforms. China remains strategically close to Russia. The 2017 Sino-Russian naval manoeuvres in the Baltic Sea made uncomfortable viewing for Europe. The UK, France and Germany have continued to send the odd navy ship to the South China Sea as a sign of strength. The EU is not, however, a monolith. It is a single market which can be politically fragmented. Recognising this, China has frequently focused on central and Eastern Europe. In 2012, it established the 16+1 forum in the region CFI.co | Capital Finance International

(17+1 after Greece joined) and signed-up many countries in the region to the Belt and Road Initiative. Of late, it has been particularly friendly to the Prime Minister of Hungary, Viktor Orbán, and has been generous with pandemic-related aid in the Balkans. The region is a contested space, and Chinese efforts must be maintained. As much as countries are frustrated with the EU, they remain wary of Russia and predisposed to support the US. Some have been disappointed by the lack of benefits from China. Lithuania recently left the 17+1 (presumably making it 16+1 once more). Many other countries have agreed to restrict the activities of Huawei and other Chinese tech companies. But it is not just old Soviet Bloc countries that are receptive to China. It is Germany’s largest trade partner — and Germany is wary of any US attempt to disrupt that relationship. Despite the legitimate concerns of the EU, it is important to note that the CAI is not dead. This latest setback can be seen as part of a seven-year negotiation marathon. Both the EU and China will benefit from the CAI. They will also benefit more generally from building closer relationships. Conflict is not good for either side — or the US. The current state-of-play reflects a maturing of the relationship, rather than a deterioration. The EU should draw inspiration from its long (and sometimes difficult) relationship with the US. It’s not easy dancing with a superpower. China realises that regional rivals, such as India, would be happy to take advantage of any permanent rift in Sino-European relations. The good news is that — barring any flashpoint — the EU and China should have enough time to work out any differences. Biden is likely to soften during his term, particularly if the US economy needs a further boost to recover from the pandemic. Trump’s tariffs remain a burden to many US industries, and the American consumer. Recent decades of growing trade and investment demonstrate mutual benefit. Neither sides should lose sight of this. Rather than engineering a new Cold War, Europe and China should lead the way towards a net-zero carbon future — together. i

Autumn 2021 Issue

Pandemic Shines a Light on Plight of Disadvantaged Communities — and Bolsters Social Impact Investment UniCredit continues to focus on financial inclusion and positive social impact.

he pandemic has put the spotlight on social issues, says UniCredit’s Laura Penna, head of Group Social Impact Banking. “We’re seeing much wider awareness, not only from governments and the EU, but also within corporations and the financial sector.” UniCredit’s Social Impact Banking (SIB) programme has been active since the end of 2017. Reflecting on changes in the socialimpact landscape, Penna says, "Companies want to be part of the solution and offer new products and services to support social needs". Attention to societal support will further be empowered by the EU Recovery Fund, which will direct resources towards health, education, inclusion, and support for disadvantaged people. “It will provide the social impact sector with a completely different scale of funding,” Penna believes. The sector is maturing, given the evolution around social taxonomy and shared standards at EU level. “That will significantly help the financial system to increasingly support societal challenges and avoid ‘impact-washing’,” Penna says. “That is particularly important considering the on-going ‘green transition’ that must be managed in a holistic way, taking into full account the related social impacts.” Social challenges are many and varied across Europe. Issues around poverty and unemployment are pressingly relevant in many countries and regions. “There are also differences in training and education needs,” she points out. “According to the OECD / INFE 2020 international survey of adult financial literacy, around half of the EU adult population does not have a good understanding of basic financial concepts.” Aging populations and the related pressure on the social and health system are increasing across the continent. “The pandemic revealed the urgent need of social and health system for this fine-tuning and re-assessment. “In some countries, we are seeing our society change from welfare state to community welfare, where the role of governments in directly managing social infrastructures and essential services has been delegated to the private sector. “This means that the role of banks as social actors must change. We need to better

Head of Group Social Impact Banking: Laura Penna

understand the social priorities in each of our communities and provide the right kind of support to make a concrete positive contribution in the short and long terms.” But who, exactly, is social impact banking aimed at? Penna has a simple answer. “Our first aim is to improve accessibility to finance and related services for vulnerable groups, including women, the young, the elderly, and fragile enterprises such as start-ups, NGOs, and microbusinesses. “We combine lending with support by improving financial skills and raising awareness.” Statistics show that the pandemic has had a particular impact on the livelihood of women. Last year, UniCredit launched a dedicated offer in Italy specifically aimed at female entrepreneurs and companies with a focus on women and families. “In addition, we also help companies become more ESG-focused,” Penna says. “We support their transition and mobilise capital towards the UN’s Sustainable Development Goals. All projects and initiatives we support must have a CFI.co | Capital Finance International

concrete and measurable social mission with a wider group of indirect beneficiaries.” UniCredit also works with various stakeholders to drive social inclusion and sustainability within communities. The Finance 4 Social Change Interreg project, in which UniCredit was a main partner, aims to build impact investing capacity and social entrepreneurship across the European Danube region. How the social impact banking sector will evolve depends on a few factors, Penna says. “I believe there will be a gradual adoption of common standards among all relevant financial actors, driven by the new EU social taxonomy. This will increase capital flows towards social causes as part of the ESG framework.” The overall offer of sustainable finance and inclusive finance in Europe will grow, she believes. “This will likely be accompanied by more examples of multi-stakeholder projects for the benefit of local communities and increasing attention to human rights, starting with the employee, and stretching across the whole supply chain to the end client.” i 59

> Book Review Rich Dad, Poor Dad by Robert T Kiyosaki

Working for Money? You got that one Backwards, Buddy… The best-selling finance book in history is an invitation to make money a servant instead of a master.

Rich Dad, Poor Dad is an easy and inspirational read, capable of piquing your interest and encouraging you think more deeply about the way you earn and save money. After all, as Kiyosaki points out, why work for a company if you can own one? And he owns several. He is founder of Rich Dad Company and Rich Global, and he certainly practises what he preaches in terms of investment.

f book sales are anything to go by, Robert Kiyosaki is the accidental Che Guevara of the economic world.

His seminal self-help book, Rich Dad, Poor Dad, is the easy-read guide for anyone aspiring to escape the slavery of employment. It has sold nigh-on 35 million copies, and spawned boardgames, seminars, and a clutch of related titles.

To sum up Rich Dad, Poor Dad, as it might appear in one of Kiyasaki’s own tweets: “Get out of the rat race! Seize opportunities, find solutions, take care of your business and investments. Learn how to make money work for you and not be its slave. Take care.”

As CFI.co goes to press, Kiyosaki’s 1.7m Twitter followers are receiving rallying calls to avoid what he (and others) see as an impending — and inevitable — market crash. Between acerbic swipes at the Biden administration, the author advises investment in gold, silver, and Bitcoin. But back to the book… When Kiyosaki was growing up, he was influenced by two dads. Poor Dad was his Stanford-educated biological father, an exemplar of traditional career-thinking. Rich Dad was his best friend’s father, a high school dropout who built a burgeoning business empire. The engaging parable of two fundamentally different approaches to wealth is the heart, and engine, of the book. Poor Dad plumps for a secure job with good benefits, and retires with a pension. Rich Dad recommends investing in assets, working on financial literacy, and independent thinking. The takeaway message is that money should work for you, not the other way round. Kiyosaki relates workers’ plugged-into-the-matrix stateof-being to hamster wheels: “Their little furry legs are spinning furiously, the wheel is turning furiously, but come tomorrow morning they’ll still be in the same cage.” His down-to-earth analogies frame effort as ultimately pointless; from there, he sells hope of liberation. He invites people to think differently about money, wealth, and values. When Poor Dad dies, he will leave little financial wealth behind — maybe even a few unpaid bills. Rich Dad will pass on an empire to his son, having become one of the richest 60

men in Hawaii. Throughout their lives, the Dads have had different values and relationships with money: “scarcity thinking” — “I can’t afford x,y, or z” — opposed to abundance.

Pearls of Kiyosaki wisdom: • You don’t need a big pay cheque to be rich • You’re the reflection and embodiment of your thoughts — how you think about money really matters • Being an employee is a short-term solution to a long-term problem • A well-paid slave is still a slave • There’s a difference between working for money and having money work for you • Why work for a company if you can own one? • Don’t see your home as your biggest investment. i

Financial acuity, argues Kiyosaki, is all about developing a fresh mindset. Early in the book, Rich Dad asks the two nineyear-old boys to work for free in his shop. His intention was to encourage them to create their own source of independent income. Inspiration struck when they found comic books lying around the shop. They collected them and opened a library for their classmates, with a fee of 10 cents for two hours of reading. They paid Mike’s sister $1 a week to manage the library. Soon, they were making $9.50 each week, without even having to do anything. Their first company had been born. The lesson, of course, was to use your mind and your time to create wealth through business and investments. CFI.co | Capital Finance International

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> Proud, Profitable and Prepared for Anything:

KBC Weathers the Storm

“I

n March 2020, Covid knocked on the door,” recalls KBC Group CEO Johan Thijs. “We went into crisis mode.”

held something of a nightmare for everyone, and the KBC Bank didn’t get off lightly: the country was in complete lockdown for six months.

Belgium — KBC has its headquarters in Brussels — was badly hit. The following months

It took a while for the gravity of the crisis to sink in. “A lot of Belgians went skiing and returned

CFI.co | Capital Finance International

with Covid,” says Thijs. “Belgium was one of the worst-hit in Europe. We put company in crisis mode: daily meetings with the executive committee, which was temporarily expanded with the Country Managers from our core countries.”

Autumn 2021 Issue

The primary concern at KBC was to analyse the new pandemic’s impact on the bank’s liquidity position. Operational performance continued as normal and liquidity was stabilised — not that there was much choice. “As a critical institution, we are obliged by law to always be functioning. As of day one, we shifted the staff to remote working.” The staff, in this case, meant KBC’s entire team: 41,000 people worldwide. “We had anticipated this from day one of lockdown.” That forward thinking paid-off. KBC was “in a position to put all the staff at home with no technical issues”. Not a single day was lost, Thijs says proudly — “and not a single day was from a position of concern.” After a week, the bank board felt that the organisation had moved to an improved situation. There were still some jitters for the second quarter. “We slashed costs by six percent, saving €160m,” says Thijs. “I’m proud of the way we managed the crisis: cutting costs and making sure our employees and our customers were safe”. In analysts’ reports, KBC stands out for its performance under duress. Thijs and the bank staff and board didn’t get overconfident. “We immediately shifted one gear up to anticipate what would happen in 2021 and 22. The economy of Europe had taken a hit, and this could hit the portfolio. We started anticipating potential impacts, and put €800m aside as contingency fund. We were able to do this because we were well capitalised.” KBC Group has been left with renewed confidence in its abilities and resilience. “Whatever goes wrong Covid-wise in 2022 will have no effect on us,” says Thijs. “There will be no impact we haven’t already written off. This is a huge plus for investors. Banks will again be able allowed to pay dividends.” When others became aware of the bank’s resolute performance, KBC stock rose appreciably. And it remains one of the bestquoted financial stocks in the markets, Thijs says. “The economic rebound will happen, and the (financial) impact of Covid will not be to the same extent as was anticipated. We are looking forward to stability in the long run, stability which will be provided to the outside world.”

"Thijs has been nominated three times by Harvard Business Review in its hunt for the world’s Top 10 CEOs. He has been driving KBC’s performance with the aim of being best bank in Europe." CFI.co | Capital Finance International

Sustainability is part of that future, says Thijs. In their contacts with midcap business clients, KBC's relationship managers have noted “a growing interest in a more sustainable business model. That interest is being driven by the changing expectations in society, but also the changing regulations 63

which are placing sustainability ever higher on the agenda.” KBC has tightened its policy on fossil fuels. Persistent signals from society indicate that the use and exploitation of fossil fuels is highly damaging for our planet’s future. “KBC’s updated policy relates to abstaining from any direct financing, insuring, advising and investing in the coal industry” explains Thijs. Moreover, from 2030 on, KBC will abstain from all financing or insurance of and advisory services to energy companies which have any coal-fired energy production capacity. The move recognises the fact that limiting carbon emissions from the burning of fossil fuels and the transition to alternative energy sources are key factors in bringing global warming under control. KBC communicates this focus on sustainability to its business clients. “The new policy makes clear what is expected of them in concrete terms,” says Thijs. “KBC is actively contributing to the achievement of the objectives set out under the United Nations’ Collective Commitment to Climate Action.” KBC became a signatory in 2019. “This stricter policy comes on the heels of the already fundamental adjustment of our coal policy that we carried out on July 1, 2020. Since then, we have not accepted any energy firms as new clients if they operate coal-fired power stations or are active in the extraction or processing of coal for energy purposes. “We also took a considerably stricter line with existing clients in that sector, reducing the permitted limit for their dependence on coalbased energy production from 50 percent to 25.” KBC rolled-out a new policy on diversity and inclusion and updated the socially responsible investment policy of the KBC Group Treasury and the KBC Pension Fund. A pilot project was launched to test the implementation of new measurement instruments, including PACTA and PCAF. “These instruments provide a better picture of the climate impact and transition of KBC and of certain sectors. KBC has also introduced or revamped a number of policies that contribute to the greening of business mobility. We have formulated explicit and ambitious non-financial sustainability targets.” There are mandatory transition plans for coal firms and coal-fired power stations, and KBC is redoubling its efforts to reduce its own ecological footprint. Thijs has been nominated three times by Harvard Business Review in its hunt for the world’s Top 10 CEOs. He has been driving KBC’s performance with the aim of being best bank in Europe. It 64

is ranked fifth for innovation, and is rated the “most digital and operative” bank in the world.

to provide the appropriate solution in the retail client segment.”

“Keeps me sharp,” laughs Thijs. “I’m always inspired by other industries. I was looking onto why Google and Amazon are so successful — I’m a data scientist by education, intrigued by data.”

Thijs and KBC Group's chief innovation officer Erik Luts say Kate's first six months have gone well. Almost half of the 1.6 million customers using KBC Mobile are “open towards Kate”. Some 781 000 unique customers have clicked on or used Kate at least once, resulting in 2.4m conversations to date — a third of which resulted in further action.

“When I saw what other industries were doing, we could bring this to the banking industry. We changed the way we approach our customers. When it comes to inspiration, we credit other industries we observe.” KBC will fully tailor financial services to meet customer needs, in a pro-active digital first manner. “This is a game-changer,” says Thijs, “a new strategy as the ultimate goal of all financial institutions: to be data-driven.” KBC’s AI system, dubbed Kate, is already putting in 24/7 on the AI front for customer services. “Kate will find your solution,” says Thijs. “It understands 90 percent of customer’s questions, but it is not yet able to provide always the right solution. The ambition is clear: within two years Kate will understand everything and will be able CFI.co | Capital Finance International

Since the end of November 2020, private customers at KBC have – as standard – been able to call upon the services of the digital assistant. Kate proactively provides personalised and relevant solutions at the right time in KBC Mobile for customers who want them. Independent international research agency, Sia Partners, has crowned KBC Mobile the world’s best mobile banking app, explicitly referring to KBC’s digital assistant Kate and its customercentric approach. This recognition is doubly rewarding for KBC, because the scope of its survey has expanded to include 135 banks from 17 countries. i

Autumn 2021 Issue

> Bon Courage:

Hard Work, a Tight Team and a Bold Approach Have Taken Le Groupe La Poste Ahead Le Groupe La Poste’s director of strategy, Diane Abrahams, believes in challenging the status quo. “We must have the courage to surround ourselves with people who contradict us,” she says. “They help us escape our own cognitive biases.”

n 2015, Abrahams joined Le Groupe La Poste's Service-Mail-Parcels business unit; she was appointed director of the Paris Nord Gonesse Mail Industrial Platform in 2016, leading 650 workers into industrial modernisation. She became head of strategy, partnerships, and innovation at Le Groupe La Poste in 2019, the position she currently holds.

subjects, solutions and ideas from one business line to another within the group. “The team members must all have a clear idea of what their colleagues are doing. We must get along with one another, otherwise we are no longer useful. Teamwork is a real strength: we did not call on any outside consultation to produce the 2030 strategic plan of the group.

Her career path began in 2008 as sustainable development officer for a social housing company after graduating from the prestigious Ecole Polytechnique and from Ponts et Chaussées. She later joined the sub-directorate for sustainable development of the French Civil Aviation Authority as head of the emissions unit.

“It's a team that is curious about everything, that has to be able to slip in the right contact or the right idea from outside. For that, they have total autonomy. They also need to ‘press where it hurts’ sometimes, which requires a lot of rigour and finesse.”

In 2012, Abrahams joined the French Ministry of Ecology, Sustainable Development and Energy as an advisor in charge of nuclear safety and security and technological risks. She was also in charge of moving to a circular economy and governing policies on waste and environmental health.

Abrahams sees her role in La Poste as ensuring that the strategic options of a branch or subsidiary do not destroy value elsewhere in the group. “I believe that this mixture of free creativity and more austere instruction is ultimately a richness in any team.”

Diane Abrahams is involved with associations encouraging young women to take up scientific careers, and secondary school students from disadvantaged social backgrounds to pursue higher education. “I joined the La Poste Group because it is a company that is highly innovative, a pioneer in the environmental field and capable of testing services that are intensively human, such as visits to the elderly, as well as services that are increasingly technological, such as VR-augmented mail or digital certified identity

Director of Strategy: Diane Abrahams

even though the volume of mail has halved in 10 years.” La Poste’s bank is the first to offer services to vulnerable people in France, and the only option for those excluded from traditional banking. “I get up in the morning for the people who need us, to find long-term solutions,” she says.

“It has a very strong social model; 7.7 percent of our employees are recognised as disabled, and we consulted more than 140,000 people — 135,000 of them postal workers — to draw up our strategic plan,” she says. “It's exciting to work for a company with this culture: we innovate, and we do so with extra meaning. It's very strong.

To be a strategy director at the end of one Strategic Plan (2014-2020) and about to build a new one projecting to 2030 is “special”, she says. “We put all the subjects on the table, nothing was taboo. My added value was to ensure that we didn't forget any strategic option, that we didn't let short-term habits win out over strategic ambition. We have remained coherent on the strategic big picture, and we haven’t left any central questions unanswered. It's an exciting collective challenge.”

“The stakes are not only enormous — €31.2bn in sales, 249,000 employees — but above all, particularly human. Le Groupe La Poste wants to retain as many postal delivery jobs as possible,

Like all successful businesses and operations, it comes down to an effective workforce, she believes. “My team is small, and must have the particular ability to cross-functionalise projects, CFI.co | Capital Finance International

What are the key traits of a good corporate leader? “A leader who surrounds himself with a team of diverse profiles,” she replies. “Only diversity offers new ideas, abundant brainstorms, pointsof-view that illuminate blind spots. I think that the similarity of profiles and hires in a team is deadly. “A good leader applies the principle of subsidiarity, does only what his departments or teams cannot do. A corporate leader must be a bit stubborn on the vision, square on some objectives, exemplary and uncompromising in his or her own practices with respect to speech and values. But then they must be able to delegate. Otherwise, the leader’s own added value will be less than what it could be. “A good leader knows the field, and hears the field. I am struck by how quickly we can forget that, behind a PowerPoint presentation or a sentence in a decree, there are people, places, working conditions... A regular reality check seems indispensable for leadership that produces positive added value. “When I see a leader to whom no one dares to say no, I know that he or she has reached the end of their usefulness.” i 65

> Le Groupe La Poste:

Committed to its Customers — and Sustainability

ince the 15th century, French postal service Le Groupe La Poste has been connecting the country, keeping pace with societal changes and continuously serving the public.

Groupe La Poste has set itself the target of developing sustainable sources of growth in buoyant markets. Through profitable growth, it can continue to invest and achieve a sustainable business model.

The first is to serve its customers with the highest level of quality — and acquire new ones, including young professionals. The range of services is meant to be digitally accessible 24/7, and customer-centricity is assured.

Faced with the current decline in mail volume, and the boom in digital and e-commerce, the group is reinventing itself with a strategic plan — "La Poste 2030, Committed For You" — settingout the ambition, objectives, and priorities to be achieved by 2030. The plan is based on a participatory approach, with input from 135,000 La Poste employees and 6,500 customers and elected representatives.

“We are pursuing our ambition of becoming the leading European platform for links and exchanges, human and digital, green and civic-minded, at the service of our customers in their projects and of society as a whole in its transformations,” explains chairman and CEO Philippe Wahl. To achieve this and ensure profitable growth, the group's plan is based on seven strategic priorities.

La Poste intends to innovate and develop personalised services that respond to emerging customer needs and habits. At the end of this year, the La Poste mobile application will feature a real-time location tracker. It will enable customers to access all postal services in their vicinity.

CFI.co | Capital Finance International

The same application can be used to consult the parcel-tracking service of other operators.

Autumn 2021 Issue

by voicemail — their delivery person. It will be possible to arrange a home appointment within 24 hours. To accelerate matters, the group is developing digital trust services, such as digital identity certification, and contributing to digital inclusion as a strategic priority. Digital trust will be maintained with a data-ethics policy and by taking part in the founding of a French digital sovereignty hub. To accelerate the transformation, the group deploys a digital culture among its employees. For its customers, La Poste will build on its laposte.fr website, which is used by 25 million unique users each month. This will become a benchmark open platform for all types of dispatches for private or business customer needs. The group aims to maintain its position as a leader in ecological transformation, and to ensure its services are accessible to all. As a pioneer in the ecological transition — it has been carbon-neutral since 2012 — the company is protecting the environment and aiming for zero emissions. La Poste and its subsidiaries aim to meet customers' expectations by reducing the group’s carbon footprint, and sharing and transmitting the real impact of the postal products and services.

La Poste Ventures, a corporate venture-capital fund, has been launched to identify start-ups that generate added value for customers. Another priority is to be ever more present by sharing the combined power of the group's physical, digital, and human networks with customers. With close relationships with local authorities and citizens, La Poste is consolidating its regional presence. It has set itself the goal of increasing the number of access points with at least one postal service from 32,000 points to 40,000 by 2025. La Poste will be providing "l'appel facteur" (the postman’s call) service through which people can contact — online or

It has also set itself the target of being the first company to be SBTi-certified for resources. In terms of logistics, the group is the leader for ecologically friendly deliveries in France and Europe, helping to make city air more breathable. The transport and delivery of goods will increasingly use carbon-free solutions. In tangible terms, the objective is to achieve 100 percent green deliveries in 225 cities across Europe, including 22 French centres, by 2025. La Poste aims for nothing less than truly responsible e-commerce. In terms of finance, La Banque Postale aims to become Europe's No. 1 institution for positive-impact finance. It is committed to achieving zero net-carbon emissions by 2040 CFI.co | Capital Finance International

for all banking activities — 10 years ahead of the Paris Agreement recommendations. It is already the first general fund manager to provide 100 percent socially responsible investment, with a certified label. Drawing on six centuries of experience and unifying public service missions, Le Groupe La Poste has defined its purpose as a missiondriven company. At everyone's service — and of use to each individual — La Poste is a people-orientated company with a local presence that develops exchanges and builds essential links by contributing to the wealth of society as a whole. By giving itself a purpose, La Poste formalised its commitment to conducting its business in a responsible manner. This anchors its desire to accompany society in its major transitions: digital, territorial, demographic and ecological. La Poste is a bridge between history and the world of tomorrow. La Poste is not limited to geographic boundaries. It is the number one parcel service in Europe. Through its subsidiaries, it operates in 48 countries and has 40 percent of its €31.2bn revenues abroad. It is committed to doubling its international revenue value in 2030 via profitable sources of growth and seized diversification opportunities. By 2030, Le Groupe La Poste will be one of the world's top 10 e-commerce service operators — and the European leader in urban logistics. The strategic plan focuses on the development of cross-border flows within and without Europe, with the goal of quadrupling its market share. For La Banque Postale, 20 percent of its NBI will come from international business by 2025 — notably through specialised financing and the development of CNP Assurances, as well as development opportunities in Africa. The success of this ambitious strategic plan requires commitment from 249,000 postal workers. They are central to the new corporate social pact. Innovative career paths are in place to promote professional development and training in key areas such as customer culture and digital technologies. i 67

> BLKB:

Sustainable by Conviction, not Merely by Convention

LKB is a future-orientated Swiss bank — with history.

It was founded 150 years ago to meet local financial needs and has been taking responsibility for its region ever since. Today, BLKB’s forward-looking orientation expresses its comprehensive sustainability efforts. 68

With a focus on people, society and the environment, BLKB's mission is to create a positive and responsible impact. Employees, customers, business partners, the region and the environment benefit from this added value. BROAD INTERPRETATION OF SUSTAINABILITY BLKB's approach is distinguished by CFI.co | Capital Finance International

holistic and comprehensive understanding of sustainability. This is primarily about taking the long view, asking whether today’s actions will still be correct tomorrow. "That's why we also talk about future orientation at BLKB," explains Marilen Dürr, head of sustainability at BLKB. "Future orientation expresses our deep conviction that sustainable development is

Autumn 2021 Issue

"BLKB is sustainable by conviction, and actively shapes social discourse on the subject. It is committed to greater sustainability in various membership and partnership projects." worthwhile for everyone, and that we assess issues holistically and in the long term." Based on its mission statement, at the beginning of 2021, BLKB defined sustainability goals that it aims to achieve by 2030. These overarching objectives serve as the basis for the definition of annual targets and future strategy periods. ESG criteria are incorporated along with financial goals. At the operational level, BLKB attaches importance to ecologically responsible banking operations and serving clients with integrity and prudence. It provides an inspiring working environment for its employees, and maintains that future-orientated attitude. The aim is for sustainability to become the standard in all areas of the bank’s operation. BLKB regularly measures its progress and publishes the results in its sustainability report. BROAD ANCHORING IN THE COMPANY BLKB’s sustainability management includes work with "topic owners", a group of employees who take responsibility for, and further develop, one or more sustainability topics in sometimes cross-functional teams. They receive support from the “Champions of Future Orientation”, ambassadors of forwardthinking who provide advice and support.

"At the operational level, BLKB attaches importance to ecologically responsible banking operations and serving clients with integrity and prudence."

Coordination is carried out by the sustainability team, in close consultation with the CEO and the executive board. "In this way, we can work consistently on anchoring future-orientation in business policy, products and services, processes, corporate culture, and internal and external communications," says Dürr. In its multi-faceted approach to sustainability, since last year BLKB even has a Sustainability Advisory Board at its disposal. "This gives us a continuous view from the outside," says Marilen Dürr. The advisory board is independent of the bank council and the CFI.co | Capital Finance International

executive board. It deals with strategic and operational issues relating to sustainability in the bank's field of activity, and draws up concrete recommendations. ACTIVE COMMITMENT BLKB is sustainable by conviction, and actively shapes social discourse on the subject. It is committed to greater sustainability in various membership and partnership projects. For several years, it has been a member of Familienfreundliche Wirtschaftsregion, a programme promoting positive work and community conditions in the Basel economic region. BLKB is also a signatory of the Work Smart Charta, a cross-company initiative advancing flexible forms of working. The bank has been working with the organisation womenmatter/s for two years, driving gender equality in the workplace. BLKB has long been committed to an environmentally friendly financial market. It has been a signatory of the United Nations Principles for Responsible Investments (PRI) since 2014, and the Montréal Carbon Pledge since 2018. BLKB joined Swiss Sustainable Finance at the end of 2019. The bank takes a proactive role in climate protection. It is a member of the Swiss cleantech business association, committed to a CO2-neutral economy in Switzerland. BLKB is also part of the Smart Regio Basel association, which — with members and partners from business, administration and science — is driving the Basel region towards smart city status. BLKB recently entered into collaboration with the Association of Swiss Cantonal Banks (VSKB) in the area of sustainability consulting services. "Through our handson accompaniment, other organisations can benefit from our experience and our learnings", says Dürr. i 69

> EXIM Hungary:

Hungary’s Export Expert has Strong Focus on Finance and Foreign Market Expansion

E 70

XIM, the official export credit agency of Hungary, is the only domestic bank and insurer specifically focusing on international trade, foreign market expansion, and investments.

EXIM Hungary is the junction of two legal entities: the state-owned Hungarian ExportImport Bank (Eximbank Plc) and the Hungarian Export Credit Insurance (MEHIB Plc). It operates within an integrated CFI.co | Capital Finance International

framework facilities.

for

financing

and

insurance

It provides a stable financial background for Hungarian export companies, suppliers,

Autumn 2021 Issue

and businesses planning to export with foreign trade-related credit services and risk-insurance products that promote the expansion of their activities. With EXIM’s expertise and experience — acquired over 25 years of operation — the agency has helped to get Hungarian products and services to 150 countries. “If we only look at the past five years, we increased our total exposure by more than 50 percent,” says Gergely Jákli, CEO and chairman of the EXIM board of directors. “We almost doubled the number of clients, and we are the largest Hungarian state-owned equity investor, with 74 investments in 25 countries.” In addition to the Budapest headquarters, EXIM operates representative offices in four other countries. It has some form of risk exposure in 62 countries, many of which have been co-financed or reinsured with other ECAs worldwide. “We have also acted as an agent in a large transporting project within the framework of these consortia partnerships,” says Jákli. “We are constantly monitoring major development projects around the world to ensure that we promote the integration of companies, not only as a financial service provider but also as a facilitator. “Our mission is to support Hungarian enterprises to drive the success of domestic exporters in foreign markets — and to deliver a kind of passport to businesses to promote their foreign market success.” EXIM Hungary is one of the 84 export credit agencies of the world and — as the Hungarian player in a global institutional system — its operation is governed by the relevant provisions of the OECD and the European Union. “We faciliate the successful sale of Hungarian goods and services in foreign markets through the provision of effective and specialised financing and insurance facilites. We are functioning as a financial engine of succesful exports of Hungarian companies.”

“We facilitate the successful sale of Hungarian goods and services in foreign markets through the provision of effective and specialised financing and insurance facilities.”

The aim is to cover the entire sphere of export activities with EXIM banking and insurance services and products, including current assets, investments or equity financing through Hungarian and international investment funds, buyer credit, discounting, export credit insurance, loan, and commercial guarantees. That extends from supplier processes prior to export, through manufacturing and production, to entry and sales on foreign markets. Almost 90 percent of EXIM clients are active in the SME segment. CFI.co | Capital Finance International

EXIM Hungary, like commercial banks, manages resources from money markets in the broader sense — in addition to the capital provided by the owner — and finances its operation from domestic and international bond issues and bilateral loans. The Covid crisis has proven once again that, as the Hungarian stakeholder of the export credit and investment insurance industry, the agency is an indispensable player in global trade processes. “Our function in the world economy is once again in the spotlight,” says Jákli. “Every eighth Hungarian forint of the corporate loans disbursed by the Hungarian banking system was an EXIM loan in 2020.” Environmental protection and sustainabilityfocused financing in business activity are key aspects of EXIM strategy. “In our offices, we are constantly taking the necessary steps to facilitate change,” Jákli says, “and as a result, we became a PET-bottle-free workplace last year. Now we are working on paperless offices, with a particular focus on e-mobility.” Providing opportunities and supporting clients in their endeavours targeting sustainability is a “must” for EXIM. It has launched a Green Financing Programme to encourage companies to go transition towards a greener future. “Sustainable future starts with sustainable developments,” Jákli points out, “but sustainable developments need sustainable financing approach from us.” Since 1998, EXIM has been a member of the Berne Union, a global association for the export credit and investment insurance industry. The union’s annual meeting was hosted by EXIM in Budapest this year, attended by 160 guests from some 50 industry stakeholders. The platform allowed them to cultivate future and on-going collaborations in person. In 2020, the event was twice postponed because of the pandemic. Operating in one of the world’s most open economies – the volume of export account counts for nearly 80 percent of GDP and comprises on of the most important indicators of national performance – the industry has a key role to play. And EXIM is ready to step up to the plate. Covid-19 and its consequences affected all members of the professional community that convened in Berne Union — as well as the mindset of all those involved in global trade and FDI projects around the world. “This situation presents us with opportunities and challenges. Co-operation is becoming increasingly important in the financial world.”i 71

A BRIEF HISTORY OF TIME GETS A NEW CHAPTER “I have wondered about time all my life.” - Professor Stephen Hawking

Professor Hawking did more than wonder about time. He spent most of his life probing into the beginnings of our universe, and discovered the very origins of time itself. And then, this theoretical physicist, whose legacy stands alongside those of Galileo, Newton and Einstein, made his discoveries accessible to everyone. The fact that he did all of this whilst battling debilitating motor neurone disease was all the more remarkable, showing Hawking’s courage, insatiable curiosity, and ambition. The Hawking limited series watches are a fitting tribute to this titan of science, and Bremont is proud to present them alongside Professor Hawking’s family.

CFI.co | Capital Finance International

Autumn 2021 Issue

> Nordea Asset Management:

Meet the Responsible Investments Team Nordea Asset Management has one of the largest and most experienced responsible investment teams in Europe: 20 dedicated ESG analysts from academia, independent organisations, and investment circles. Responsible Investments (RI) team Head of RI Eric Pedersen

ESG Analysts

ESG Quant

Climate

Eric Pedersen Head of ESG Quant and Climate

o stay at the forefront of responsible investing (RI), the team — set up in 2009 — continuously refines its ESG approach in keeping with the increasing complexity, depth and scope of the field.

The strength of NAM’s approach is that its investment teams and RI team are fully integrated — ESG analysts sit side-by-side with equities and fixed-income teams. Fund managers are involved throughout the research process and directly tie results to their investment decisions. Besides being fully integrated with NAM’s investment boutiques managing ESG products, the team carries out research, active ownership, and represents NAM in international RI initiatives. NAM’s RI team is subdivided into five units. • The Active Ownership team is responsible for NAM’s engagement activities, as well as for driving the Responsible Investment Committee agenda and RI Policy development. This group also works with the corporate governance team on proxy voting. • The Climate group maintains focus on climate

ESG Products and Research

Active Ownership

Michaela Zhirova Katarina Hammar Head of ESG Head of Active Products and Research Ownership

change factors and policies, implementation and reporting on TCFD recommendations, and the firm’s membership and obligations under the Net Zero Asset Managers Initiative. • The ESG Private Equity team supports NAM’s private equity collaboration with Trill Impact. • The ESG Products & Research team carries out company-specific ESG research and engagement for NAM’s ESG funds, as well as product development. • The ESG Quant team develops and maintains NAM’s proprietary ESG scoring model, as well as advanced applications of ESG data. The team maintains both a broad RI coverage and a particular focus on NAM’s ESG-enhanced strategies, working closely with their respective portfolio management teams. Members frequently participate in client meetings and engagements — in 2020, the team led 924 engagements and voted in 701 AGMs. In 2021, NAM ramped up its voting activity — over 90 percent of its holdings were voted on, with about 10 percent of votes going against management. Votes related to climate and social issues were prioritised. CFI.co | Capital Finance International

ESG Private Equity

Hetal Damani Head of ESG Private Equity

Through the STARS funds, the team contributes to the analysis of the holdings and engages with companies and portfolio managers. i

Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB (“the Legal Entities”) and their branches and subsidiaries. This document is advertising material and is intended to provide the reader with information on Nordea’s specific capabilities. This document (or any views or opinions expressed in this document) does not amount to an investment advice nor does it constitute a recommendation to invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. This document is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instruments or to participate to any such trading strategy. Any such offering may be made only by an Offering Memorandum, or any similar contractual arrangement. This document may not be reproduced or circulated without prior permission. © The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and/or subsidiaries. 73

> The Power of Active Ownership:

Battling the Vung Ang 2 Threat What should a responsible investor do when they see a company carrying out harmful activities? Eric Pedersen, Head of Nordea Asset Management's Responsible Investments Team explains the company’s philosophy.

ordea Asset Management regularly ponders the “What should we do?” question.

controversies due to the proximity of its coal ash heap to residential areas and farmland, as well as its CO2 emissions.

One option is to exclude offending companies from our portfolios, but this is not our first choice. Exclusion may align a portfolio more closely with ESG criteria, but it rarely leads to meaningful real-world change.

Global emissions standards have been tightened since the power plant was approved in 2009, and we believe Vung Ang 2 will not meet them. Independent analysis conducted by Environmental Law Alliance Worldwide (ELAW) found that key aspects of the project’s 2018 Environmental Impact Assessment (EIA) did not meet internationally accepted standards for evaluating the potential environmental impact.

We exclude only companies whose operations are truly incompatible with our mission to deliver returns and responsibility, or those that are not open to engagement. We prefer to use “active ownership” to encourage companies to improve their corporate behaviour, although individual funds may have tighter exclusion rules. Active Ownership includes voting — making sure we use our rights as shareholders to voice our opinion about the way the company is managed — and engagement. This means interacting with the companies to share our expectations, and giving them support to enhance their sustainability performance. We believe that improved management of sustainability risks and opportunities is vital to creating returns and responsibility, and that engagement can increase the likelihood of longterm success — benefitting companies, investors and society. Many of our engagements cover all our funds and take a range of forms, including company meetings and calls with management, letters to management, and visits to headquarters or production facilities. NAM’s engagement activities are led by our 20-strong Responsible Investments team. The team carries out many engagements solo, but also collaborates with other investors as the weight of greater shareholder pressure can be more effective. We gathered a group of investors to work with us when we became aware of the damage that might result from the proposed development of the Vung Ang 2 power station in central Vietnam. Vung Ang 2 is a planned coal-fired power station that will be sited next to the controversial Vung Ang 1 plant. Vung Ang 1 has already caused major environmental pollution and has faced 74

Key findings of the ELAW analysis concerned the use of weaker emission standards by the EIA than those applied internationally, as well as the conclusion that the EIA — in violation of international standards — failed to consider alternatives to coal power in its assessment. The Paris Agreement and the UN Sustainable Development Goals (SDGs) have set clear targets for addressing climate challenge and set out guidelines for responsible companies. We believe the Vung Ang 2 project is incompatible with these targets. As a responsible investor, we expect companies to take action to meet these targets such as setting a net-zero emissions business strategy. Research such as that carried out by Climate Analytics concludes that coal power must be globally phased out by 2040 to meet the Paris objective of limiting global warming to 1.5°C. Historically, coal plants have been retired after a lifecycle of about 46 years. Any new coalfired power plant, including Vung Ang 2, is inconsistent with the goals and timelines of the Paris Agreement. All these factors resulted in our decision to engage with the companies that tied to the project, urging them to withdraw and commit to exit the coal industry. We extended an invitation to our clients as well as other investor peers to join us in this. We knew that by working collectively, we could leverage the knowledge from other investors and have a greater impact by involving a larger percentage of the companies’ shareholders. CFI.co | Capital Finance International

Head Responsible Investments Team: Eric Pedersen

We have gathered a group that now consists of 25 investors representing €4.8tn in AUM, increasing the pressure on the companies to meet our expectations. Media interest in this engagement has been extensive and has contributed to an increased public opinion against the construction on a company level. Thus far, the work carried out by the collaborative group has contributed to Kepco, Samsung C&T, Mitsubishi Corporation and SMFG all announcing an end to coal projects. Challenges remain, especially in terms of geopolitical forces. China and Japan are involved through state-owned companies. But Japan, China and South Korea — where participating companies are based — have all made net zero commitments within the past year; this may spur change. At the same time, banks remain supportive, even though the financial argument for the power station appears weak. The fall in costs of renewable energy since the power station was initially approved now makes alternative energy more financially viable than a new coal-fired station. Following our high-profile engagement with the Ving Ang 2 power station, there is a momentum in terms of companies withdrawing from this CFI.co | Capital Finance International

specific project and committing to an exit from coal. This is a clear example of the potential of active ownership — but our engagement is not over. We will continue to urge the companies involved to withdraw from the construction project and to make commitments to end involvement in new coal projects in line with the recommendation of the United Nations Secretary General. i Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB (“the Legal Entities”) and their branches and subsidiaries. This document is advertising material and is intended to provide the reader with information on Nordea’s specific capabilities. This document (or any views or opinions expressed in this document) does not amount to an investment advice nor does it constitute a recommendation to invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. This document is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instruments or to participate to any such trading strategy. Any such offering may be made only by an Offering Memorandum, or any similar contractual arrangement. This document may not be reproduced or circulated without prior permission. © The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and/or subsidiaries. 75

> Embracing Change and the Thrill of Challenge:

It's All Part of the Business

hange is the only constant — and Marco Boldrin, CEO and co-founder of Lugano-based Copernicus Wealth Management, embraces it. “One of the most thrilling things about business is the challenge of managing change,” he says. It’s not enough to react, Boldrin adds. “It’s essential to anticipate it and be an integral part of it. Nowadays it’s not enough to just have a vision — you must execute the objectives and broaden your horizons beyond your own knowledge. But innovation does not mean abandoning one’s cultural roots and traditional values.” Copernicus manages more than CHF3bn ($3.22m), has some 40 staff members, and is in the process of opening an office in Zurich. Asked about the starting point of his career, Boldrin reports that this was on the trading floor of Caboto Holding in Milan (now Banca IMI, part of BancaIntesa Group). He began by working on the structured bond desk and later moved to interest-rate derivatives. Then came the move to Lugano, Switzerland, working for the BSI banking group as head of quantitative models in the asset management division, and later as coordinator of investment specialists for the Swiss private banking division. “I worked on a project which created the wealth management arm of the BSI Group, Patrimony 1873, becoming its partner and deputy CIO. In 2016, with four other partners, we co-founded Copernicus Wealth Management, which is regulated by FINMA.” Boldrin became its CEO and began a process of development and growth there that has led to partner with the second-largest Swiss bank and one of the leading financial players in the south of Switzerland. Asked about lessons learnt, Boldrin says that his career has taught him many lessons — and three of them are prominent. “I’d like to highlight them because they don’t only concern the world of work.

CEO and Co-Founder: Marco Boldrin

Turning to Boldrin’s motivation in the business he leads, he explains that this comes from his entrepreneurial passion — and his responsibilities within the company. “My enthusiasm stems primarily from the fact that I’m a manager, and one of the partners. I believe in our projects, and the results we’re achieving confirm the validity of our vision and business model.” Asked about the reasons for this success, he reveals that there is no secret sauce. “I don't have any magic ‘recipes’, but fairness is the basic ingredient to run a successful organisation,” Boldrin believes. “Entrepreneurship is one area on which we focus, and I think this sets us apart.

“Firstly, fairness — not only in business and human relationships, but also in the decisionmaking process. Secondly, pragmatism: I’m a realist, and I keep my eye on the journey and outcome required.

“There must be an equilibrium between strategy and corporate culture — it’s essential for the success of a company. Behaviours and stability make the difference. You don't need to do a thousand things — just do one or two things a thousand times.”

“Thirdly, problem-solving: solutions are always readily available, one must analyse, and propose alternatives. To abandon is the extreme solution.”

Like most leaders, Boldrin believes in the importance of teamwork. “I know I have the right people, in the right places, using different skillsets. Our processes and rules are clear and

CFI.co | Capital Finance International

well-defined: easy dialogue and discussion and a streamlined, flat, and lean structure that has allowed us to build an excellent relationship of trust between the members of the executive team, along with the motivation to achieve our objectives.” What, in Boldrin’s opinion, are the key traits of a good corporate leader? “The ability to listen and give feedback, and the ability to communicate in a transparent and simple way. A good leader must be empathetic. “Finally, they must also possess a ‘growth mindset’, because it’s about each individual and their attitude: being able to overcome any constraint, face any challenge. That allows our growth, and the growth of the company. Growthfocused leaders make it their mission to learn new things.” Those characteristics do not depend on industry, sector, company size or geography, Boldrin says. “In summary, a good leader must be a good psychologist in the early stages of his or her career — and then become an equally good sociologist.” i

Belvoir’s Rental Index...

Autumn 2021 Issue

...a detailed review of the UK’s latest market trends, not only for the UK on average, but also for each county and region. Visit belvoir.co.uk/rental-index With over 170 offices around the UK, our property experts are always nearby when you need a hand. Over the last twelve years we have produced the Belvoir Index to give landlords an upto-date and accurate picture of what’s actually happening in the rental market. Visit belvoir.co.uk to find your local property expert.

CFI.co | Capital Finance International

> SHARE NOW:

Sharing is Caring, Cool, and Convenient: a Pioneer of Sustainable Urban Mobility SHARE NOW is a prime example of how collaboration can be more powerful than competition. SHARE NOW was born as a joint venture between two dominant original equipment manufacturers (OEMs) in Europe — Daimler and BMW — after almost a decade of rivalry.

ach had created its own car-sharing service, car2go and DriveNow, and both pioneered the business model. Since 2019, under one brand, SHARE NOW operates 11,000 vehicles throughout 16 cities in eight countries across Europe. More than 25 percent of the fleet is electric, making the company the continent’s largest operator of an electric, free-floating, car-sharing enterprise. HOW IT WORKS Whether for three minutes or 30 days, a spontaneous trip around town or a long-awaited vacation by the seaside, SHARE NOW customers can be mobile without the cost and hassle of owning and maintaining a car. From compact city cars to chic coupés, SHARE NOW offers vehicles for every occasion — on every street corner, and at all times. From registration to driver licence-validation and invoicing, everything — even unlocking the vehicle — can be done via smartphone. And at the end of the trip, vehicles can be dropped off anywhere within the business area. FINANCIAL TRANSPARENCY Next to convenience, financial transparency is one of the key advantages of car-sharing with SHARE NOW. There are no annual or monthly fees. Billing is calculated by the minute, hour or day, according to the model and rate. Whether ICE or electric power, taxes and insurance are included, as is parking at public spaces in the business area. All prices are visible in the app, which makes it easy to calculate a mobility budget. HOW IT HELPS Car-sharing is not just a cost-effective and convenient mobility alternative. It plays a defining role in the urban mobility of tomorrow, and has proven to reduce parking pressure, space requirements, mileage and emissions. One shared vehicle can replace eight to 20 private cars, according to studies, and on average is used up to six times more frequently. Fewer unused cars take up the limited space in city centres. In Berlin, SHARE NOW's hometown, this 78

CEO: Olivier Reppert

CPTO: Slavko Bevanda

frees-up over 12,000 square metres of parking; in Munich, it’s around 5,600 square metres.

in the company’s corporate culture and decisionmaking processes.

Older, inefficient and underused models are being replaced by fewer and more environmentally friendly vehicles. Car-sharing fleets boast significantly lower CO2 emissions than individually owned vehicles.

One of the most important use-cases is to ensure the availability of vehicles in the right place, at the right time. The AI calculates in advance when, where, and how many cars are needed. Proprietary algorithms calculate demand at street level. Particularly important are the parameters of time, place, or public holidays, as well as historical rental data.

"As a practical addition to the urban mobility mix, flexible car-sharing fulfils both the desire for convenient mobility and sustainability considerations — making a significant contribution to solving traffic problems and leading to a better quality of life in the cities," says SHARE NOW CEO Olivier Reppert. THE ROLE OF DATA Since the positive environmental effects of vehicle-sharing are strongest with cars in constant movement, intelligent fleet management and maintenance are of the utmost importance. AI and machine learning processes have been the key drivers for the recent success of SHARE NOW. Data intelligence and AI are deeply rooted CFI.co | Capital Finance International

Another crucial success factor for any fleet operator is the fleet itself. SHARE NOW operates premium vehicles from manufacturers such as BMW, Mercedes-Benz, MINI and smart. 100% IN-HOUSE TECH One of the obstacles faced by car-sharing companies is the lack of control over the duration between rentals. With a traditional company, each rental period ends with the car back to a station. It may be inconvenient for the customer, but it gives the company the opportunity to clean and fuel the vehicle.

Autumn 2021 Issue

That's a luxury a free-floating car-sharing company doesn't have. To ensure that customers get a clean, safe car, SHARE NOW has developed software solutions that predict when cleaning and repairing will be needed. Predictive maintenance involves algorithms that use data on usage, the time of the last cleaning, the vehicle model, and — the most important component — customer feedback. The data are combined in a machine learning process, and supplemented by mileageand vehicle-specific data. Equally important is the software system used, from app to website to fleet management systems and service provider applications. While competitors outsource their technology, SHARE NOW has developed its own awardwinning tech stack. The company has gained unique knowledge in creating a suitable tech environment for a free-floating car-sharing service. "With our technology, we can scale globally in an instant,” says SHARE NOW CPTO Slavko Bevanda. “In the back-end, each city’s operations run as microservices, meaning we have 250 running at once. Our tech runs

completely on the cloud using Amazon Web Services, which enables us to operate on a higher level of efficiency in terms of deployment and frequency of updates.

Organisation Germany in Berlin. Three years later, he moved to DaimlerChrysler Overseas in Stuttgart as manager of after-sales marketing and communication.

"This means that regardless of where the customer is in the world, they would experience the same speed to unlock the vehicle, despite the fact that the architecture running in the background is in Europe. There is no decreased latency or decreased speed. Our tech is set-up with international use in mind, allowing us to grow and scale to any part of the world."

From 2004 to 2008, Reppert was responsible for dealer network strategy and development at DaimlerChrysler Schweiz AG in Zurich, initially as project manager and subsequently as a member of the board. He then returned to Stuttgart, where he was appointed to the Board for Global Business Management of Daimler AG, with responsibility for regional strategy in China, India and Russia.

And that's exactly what the company aims for. IN THE DRIVING SEAT Olivier Reppert (46) has been CEO of SHARE NOW since February 2019. He is responsible for the global business of SHARE NOW, which emerged as one of five mobility services from the joint venture between the BMW Group and Daimler AG. Mobility has been his passion throughout his professional career. In 1998, he was after-sales product manager at the DaimlerChrysler Sales CFI.co | Capital Finance International

At the end of 2010 he joined smart, and took over as head of sales for the company in Germany in 2013. From November 2014 to October 2016, he was head of brand and product management at smart as well as a member of the smart management team. He then became CEO of what at the time was the biggest free-floating, car-sharing company worldwide, SHARE NOW predecessor car2go. Since February 2019, Olivier Reppert has been managing SHARE NOW. i 79

> ARCA Fondi SGR:

Innovation, Sustainability, and Modern Technology ARCA Fondi is a leading asset management company serving individual and institutional clients. It has deep roots in the Italian financial market. The company was founded in 1983 by 12 popular banks, and is now owned by BPER Banca (57.061 percent), Banca Popolare di Sondrio (34.715 percent) with the balance taken up by other major Italian banking institutions.

anaging a client base of more than 800,000 investors with AUM of more than €35 billion (as of September 2021) offerings include Mutual Funds, Luxembourg Sicav, Pension Fundi, and Institutional Accounts. This places ARCA Fondi firmly among the leading national asset management companies. ARCA Fondi assets under management represent €28.0bn in mutual funds (with an Italian market share of 2.8 percent); €4.3bn in ARCA Previdenza Open Pension Fund, (market share 16.3 percent as at year-end 2020); €0.7bn is under management for institutional clients, and €2.8bn acting as Investment Manager for Sidera Funds Sicav - a set of funds dedicated to private banking clients. Institutional assets under management are assigned to ARCA by pension funds (contractual and pre-existing), retirement funds, and foundations; by banks and large company portfolios; by insurance companies and other mutual funds, or by Sidera Funds SICAV. STRONG GOVERNANCE Customer protection is ARCA Fondi’s primary aim, and operational decision-making is in accordance with the governing bodies in continuity and autonomy. There is a guarantee both for customers and in terms of company governance via the adoption of Protocollo di Autonomia (Protocol of Autonomy) by Assogestioni (Italian association of asset managers). This is the reference point for determining best practice as regards conflict management. RELIABILITY AS THE KEY TO SUCCESS With over 40 years of experience, ARCA Fondi SGR is known as a reliable partner that creates value over time and can count on an extensive network of distributors. More than 100 banks and financial institutions around the country have come to rely on ARCA. These close and successful relationships translate into hundreds of thousands of customers entrusting the company with their savings. INNOVATION, SUSTAINABILITY, EDUCATION, AND SOCIAL MEDIA Thanks to flexible solutions that are within the reach of all, ARCA Fondi has been satisfying 80

CEO: Ugo Loeser

investors since their first products were launched in the Italian market. The company introduced the greatest innovation for Italian investors of the past 12 years namely, ARCA Cedola, fixedhorizon, coupon paying funds. It also gets involved in real economy, with PIR Funds (Piani Individuali di Rispamio), a product designed to allow an investment approach suitable for all Italian savers and in which ARCA has a 12 percent share of the domestic market. In 2019, to formalise its commitment to financial sustainability, ARCA Fondi signed the UN Principles for Responsible Investment (UNPRI). This led to the creation of several ESG Funds and an innovative proprietary ESG Rating model. Recently, the company has chosen to focus on creating a digital ecosystem that offers innovative services aimed at both investors and financial partners. With a significant investment in economic terms, ARCA has renewed its website, initiated a dedicated finance blog, developed an app, a chatbot for customer care, and landed on social media. Concrete projects designed to encourage greater saver interest in financial issues have received major awards. CFI.co | Capital Finance International

AWARDS Over recent years ARCA Fondi SGR has been recognised among Italian mutual funds and pension funds, both in Italy and elsewhere in Europe. For example, as winners of CFI.co’s Best Emerging Markets Debt Manager (Europe) award in 2015, 2016, 2017, 2018, 2020 and 2021; CFI.co’s Best Pension Fund Scheme - Italy 2020 and CFI.co’s Best SME Equity Fund – ltaly 2021. CONSTANT GROWTH AND A COMMITMENT TO ESG ARCA Fondi SGR has the goal of becoming the reference company in the Italian financial market, creating added value for its customers over the long-term. With its range of ESG funds, ARCA is ready to meet the needs of a new generation of investors increasingly concerned about sustainability and the environment. Currently, the range of sustainable investments includes two equity and two flexible funds, while new solutions are under study to address this new market segment. ESG investment funds need a particular rating in compliance with restrictive environmental, social and governance standards.

Autumn 2021 Issue

LEADERSHIP Ugo Loeser has been CEO and general manager of ARCA Fondi SGR since 2011. He has a Degree in Economics and Social Sciences from the Bocconi University of Milan, and prior to joining

ARCA had experience in investment banking and management consulting. He was director at Finlabo SIM and Banknord SIM, a partner at Bain & Company Italy (promoting the practice of asset and risk management) and a senior strategist for CFI.co | Capital Finance International

the European market of derivatives on fixed income at Paribas. Loeser was also the executive director of Fixed Income Research at Goldman Sachs International, and he is a member of the Executive Board of Assogestioni. i 81

> Erickson Davis:

Forging Strong Relationships in European Capital Markets After a Return to the Fold Don’t tell Erickson Davis you can’t go home again. Davis, an American citizen, re-joined investment bank KBW (Keefe, Bruyette & Woods) in April 2019 as Head of European Equities. Such was his impact, across both borders and product lines, that he has now taken on responsibility for the entirety of Stifel's equities operations on the Old Continent.

tifel acquired KBW back in 2013 as its financial services arm, bringing with it a financial institutions specialist sales force, extensive research coverage and investment banking capabilities. In the United States, KBW was already the leading advisor on bank M&A deals and a top market maker of financial stocks. Davis had returned after a successful tenure as CEO of Autonomous Research, an institutional research provider. KBW´s Chief Executive, Thomas Michaud, describes him as “a forwardthinker with deep knowledge of the financial services sector. This appointment was heralded as a prime example of the firm’s commitment to Europe and efforts to attract the very best talent.” According to Davis, this has been “an exciting time to re-join one of the best recognised and most respected brands in global financial services.” Davis points out that “financials are the single largest sector of the European market and some of the world’s most innovative fintech companies are based on this side of the Atlantic.” The first spell for Davis at KBW lasted seven years and saw him working out of New York, Boston, and San Francisco. His appointment at Autonomous Research took him to the UK. “After selling to Alliance Bernstein, I had the opportunity to join the Stifel and KBW platform and remain in London. And while I intend to spend time across all our offices in Europe, much of my time is going to be spent further improving our competitive positioning in the UK, where we have strong momentum.” His experience at Autonomous in managing the global heads of research, sales, and trading 82

"Our industry expertise in corporate finance, thought leadership from research, and trans-Atlantic distribution capabilities combine to deliver the right outcomes and solutions for our corporate clients." across the European, US and Asian businesses, as well as implementing the firm’s MiFID II strategy, made Davis a perfect fit for the KBW & Stifel role. As Head of Equities in Europe, Davis leads a team of c. 250 staff across 8 offices spanning the UK and Continental Europe. His ambitions are to drive the firm towards being the leading pan-European investment bank for middle markets companies. Considering the impact of Brexit, Davis comments: “Brexit has created a more cumbersome process for UK firms to service continental investors. Our advantage lies in our distribution footprint with sales teams across 7 cities in Europe that can leverage and monetise products and services in the UK. Stifel’s distribution capabilities in Europe, the UK and N. America are a competitive advantage for us.” CFI.co | Capital Finance International

"From his office opposite St. Paul's Cathedral, Davis is overseeing 'strong momentum at Stifel, particularly in financials, healthcare, and tech' while continuing to grow and invest in the business."

Autumn 2021 Issue

Head of Equities: Erickson Davis

Davis jointly coordinates the strategy for ECM focus in Europe with Rob Mann, head of corporate finance, and that partnership has been productive. “Our industry expertise in corporate finance, thought leadership from research, and trans-Atlantic distribution capabilities combine to deliver the right outcomes and solutions for our corporate clients.”

some intersection between KBW and Stifel. We are seeing real momentum building off the strategy we have implemented around various research products, unique and insightful conference experiences and corporate finance capabilities.”

He believes the thought leadership coming out of the research groups is a key differentiator for the firm. Fintech has been a key area of focus for Davis and the KBW/Stifel teams and is an example of where cutting edge research, which explores the intersections between tech and financials, work well, with the individual KBW and Stifel focuses remaining clear.

“In April, we led the IPO of fintech company Pension Bee, which is a technology platform that enables consumers to consolidate dormant pension pots and take control of their retirement journey. We've been working with this company for several years helping to bring them more investor visibility through our conferences and research products. So when the company wanted to explore growth capital, KBW and Stifel was a very natural destination for them. With the listing of

“FinTech has been a core focus for us, both in Europe and the US, and that’s where there's

Davis offers two examples in the UK:

CFI.co | Capital Finance International

Pension Bee, we were able to reopen the high growth segment of the LSE which was another important milestone for the London market and for KBW. “Several months later, we led a pre-IPO private capital raise for Lunar, a Nordic neo bank. We raised €210m to support their growth as a digital lending and neo banking operation”. From his office opposite St. Paul's Cathedral, Davis is overseeing “strong momentum in healthcare, tech and other areas beyond fintech” while continuing to grow and invest in the business across continental Europe. He signs off by emphasising, “We think this is an exciting story to follow.” CFI.co will be doing just that. i 83

> The

Fed vs the Communist Party By Mads Pedersen Managing Partner & CIO of Human Edge

Recent quarters, months, and weeks have seen a remarkable clash between the goals of the US Federal Reserve and Chinese Communist Party.

ne is trying to expand credit into a "supercharged, super-fair recovery", the other trying to rein-in what they see as excessive capitalism in general and, particularly, as market excesses.

"It would be foolish to assume that some of the best-educated and best-informed people in the world would not have foreseen that the blows that they delivered to these growth companies would have devastating consequences."

This is not a war between enemies, or even a battle in a traditional sense. But it is a significant clash for the global political narrative and economic development in coming years. In the short-term, global market stability is at stake. Supported by low interest rates and strong earnings, US equities made further progress since the last edition of the Human Edge Global Market View publication, and we had another strong quarter across mandates and funds. The situation was very different in emerging markets caught between a strong US dollar and Chinese politics. We at Human Edge hold little exposure in this sub-asset class and don’t see the sell-off as a reason to add. To assess whether to remain fully invested in equities, or “risk on”, as we call it, in a tense environment like this, we rely on our algorithms and their daily assessment of the risk to global financial stability. Since 2011, these algorithms have been set up as a traditional investment committee, with human analysts and portfolio managers organised in "teams" covering macro, fixedincome, credit market, equities, and market risk. Compared to a traditional investment committee, the algorithms are more concise and consistent in their communication and conclusions, which

they provide every morning around 4am CET. Like markets, the Fed, the Communist party, and their regulators, the algorithms work every day, winter and summer. We have often discussed the perspective of the Fed and the US Administration; let’s now focus on the action in China. What initially looked like a campaign focused on tech tycoons has developed into something more akin to a massacre of Chinese equities, expressed by the decline in the Nasdaq Golden Dragon China Index, (HXC), the Hong Kong index, CSI 300 and in DIDI, seen in Figure 1. This campaign has a primary goal, but also produces collateral damage. It’s clear that the Chinese Communist Party is happy to encounter less rivalry from billionaires for the attention of society, which runs across the board from public prestige to cash and data control. The same holds true for cryptocurrencies. On one hand, Bitcoins collide with the environmental

Figure 1: Global equity market. The US moves on while China corrects.

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goals of the Chinese government, and the governments of most other developed countries. On the other, decentralised finance and crypto currencies collide, in general, with government control of markets and movements of capital. This is not in the interest of a country such as China, with controls on movements of capital. Human Edge therefore cautions anyone from excessively celebrating the recent bounce in crypto prices. A more interesting development will be the digital currencies from the Swiss and the Chinese central banks, and whether they can be used to ease global transactions without upsetting the US Department of Justice. The fact that the clampdown started more than half a year ago and included Ant Financial, the politically sensitive education sector, and the Didi listing, makes it clear that even though Chinese market regulators have talked to local and western banks and calm the situation, the aims are backed by the real powers in the Communist Party. It would be foolish to assume that some of the best-educated and best-informed people in the world would not have foreseen that the blows that they delivered to these growth companies would have devastating consequences. It is likely that even the latest game of chicken — in which the Chinese "blinked first" — was part of the original strategy. As our market risk algorithms show, stay positively positioned is warranted, because the recovery is on-going, markets are well supported, and the outlook favours equities and credit

Autumn 2021 Issue

Figure 2: Return across bond market - US aggregate bonds index. Note: ACCI Global Fixed Income Opportunities (blue line) is managed by Human Edge.

Figure 3: USD yield normalisation continues as government bonds sell off.

risk over high-grade bonds and duration. We therefore remain fully invested in these types of assets, together with our long held US equity and USD overweight, across our USD, Euro and CHF mandates and funds. • We maintain a 100 percent equity allocation in our Systematic Equity Allocation Strategy, significantly above the long-term balanced level of 60 percent. The year-on-year return is a respectable 25% percent at the end of Q3. The year-to-date return is 15 percent. The associated ACCI SA fund is comfortably in the top 10 percent of its peer group. • In our multi-asset mandates and funds, we retain the full allocation to equities and the enhanced 30 percent allocation to high yield bonds with duration of around 3 years. These portfolios are up 9-12 percent year-to-date. and 12-15 percent year-on-year— all dependent on risk level and currency. • In our Global Fixed Income Opportunities strategies and funds, we maintain our highyield bond positions. These portfolios are up two percent year-to-date and eight percent yearon-year. It is worth noting here that the current

short duration positioning has not helped much in recent months but should find support if the Fed's renewed optimism regarding the US recovery turns out to be justified. THE CHINESE MARKET MASSACRE AND GLOBAL MARKETS Human Edge has a long record of participating in and chairing investment committees, and for a number of years we were simultaneously running a traditional committee and a virtual committee of algorithms. In recent years we have shifted to the virtual version, where the actual Global Investment Committee is a group of virtual "analysts" represented by algorithms which are combined to form an aggregate reading. They always have a consistent and updated conclusion (much easier to understand than policy language of economists). At the moment, that conclusion advises us to stay invested in equities. Unless there is more noise from China, global investors are probably best advised to ignore it. This is not always the CFI.co | Capital Finance International

case, but as opposed to the situation in the second-half of 2015 and early 2016, the rest of the world is running full steam ahead. According to our analysis data for equities, fixed income, macro, monetary policy, and looking at market momentum and the vulnerability of market sentiments, the correction in Asian markets is visible at the segregated data level. When we combine these data to obtain an overall reading, we get a rather solid signal of 0.4 — much like in early 2017. Figure 2 shows the readings of these algorithms in 2015 and 2016 the collapses during that period. Figure 3 shows the situation on the macro side of the economy back in 2015. After a severe setback in the commodity sector, investment demand and commodity prices took a severe blow, credit spreads widened, and financial conditions tightened in a classical reflexive move of self-reinforcing deteriorations across macro and markets. Now the situation is different, because the Fed’s fixed-income market operations — and the 85

"Returning to the currency and markets, England, Germany, and France learned long ago that they cannot control their currencies, interest rate levels and financial markets, independently of the US or the Fed." strong cyclical position of the US economy — support credit formation and markets. So does the extreme profit recovery, much stronger than expected by a chorus of equity analysts and macro strategists. The reading of our profit algorithms remains at 1.0, the maximum capped-out reading, and well above where they went even in the period January 2015 to July 2017, as shown in Figure 3. Our profit algorithms are useful, because they have helped us to remain fully invested and to enter the market in early 2016 and stay invested in 2017 — which proved to be beneficial. And while we maintain that earnings is a lagging indicator, we also know that selling early feels great for the portfolio manager who executes the sale or for the analyst who recommends, but it is not necessarily quite as beneficial for the actual investor. Other important factors are technology trends, optimism, exuberance and nervousness and the panic probabilities of the markets. The aggregate result of our algorithms have not changed much. For the time being, we remain fully invested. If the algorithms change across their respective thresholds, we will change our positions — accordingly and decisively. The clash between the US Federal Reserve and Chinese Communist Party is not a war; the main goal is not to inflict damage. But it is a significant battle, with the global narrative and global markets at stake. It would be optimistic to expect the result to be a stable equilibrium. And it was probably judicious for the Communist Party to blink first. In our experience, the Chinese authorities know what they want to achieve on a one- to five-year horizon. They will then move back and forth as they feel their way. The overall target is to re-establish respect for, and the undisputed authority of, the Chinese Communist Party. The immediate effect has been the largest slaughtering of potential and prospective unicorns in Asian history and a severe correction in Chinese and Hong Kong equity markets and their US sister listings. As of July 28, the Nasdaq Golden Dragon Index was down 50 percent from its peak and on the morning of the 30th it was down 20 percent for the month. In this context it is worth remembering that a core lesson learned the hard way is that the Chinese cannot control the value of their own currency, since any significant movement has uncertain consequences for exports, imports and growth. 86

The US is a large economy with limited dependence on trade and strong and welltested institutions. The Chinese economy is driven by domestic demand for investment and consumption, but China is a large economy with a dependence on foreign trade and new institutions. No one is more aware than Xi Jinping, for example, that the presidential reelection is locked in a fixed framework and can be changed. Returning to the currency and markets, England, Germany, and France learned long ago that they cannot control their currencies, interest rate levels and financial markets, independently of the US or the Fed. We also expect the Chinese to maintain the nationalistic façade, while in practise the issue will remain hidden under a capital account that remains closed for the masses — and for the publicly known billionaires as well. It is now clear that to be rich in China is a lot less glorious than it used to be. For the current leadership in China, the number one institution is the Communist Party — and it has lost too much control in relative and absolute terms. Xi has therefore made it a top priority to turn this development around. Such a development is not easy to control or stop once it has started, and it should therefore be assumed that the trend will continue — but it is unlikely to bring down global finance. The Chinese depend on global trade and will keep it open. They don’t depend as much on their currency reserve as they used to, so maybe they could sell their holdings of US treasury. A simple calculation might solve the issue. If the Chinese hold $1,200bn, this will equal 10 months of current QE. If they had $3,600bn, it would require three years’ worth QE at the current run rate. In both cases, it could be an extension to the QE. If this were to happen overnight, it would be very disruptive. In some ways the situation would be comparable to the moment when world realised that Covid was not just a Chinese problem, but a global one. It would therefore require a pandemic-like response from the Fed and the Treasury. And it could take weeks to get the situation under complete control, because markets would be very volatile. It is unlikely, however, that $2tn in fiscal support would not be required. Also, BOE, BOJ, SNB and even the ECB would probably help; in this case, hopefully without the president feeling the need to say anything unhelpful or unwise. i CFI.co | Capital Finance International

Autumn 2021 Issue

> Adversity Can Be a Surprising Catalyst for Business Success By Naomi Snelling

From living on the streets to selling a seven-figure IT company, Phil Base has gone from rock-bottom to living the dream.

early three decades ago, Phil Base was living on the streets of Bournemouth with a cardboard box for shelter. Now, at the age of 49, he spends his time inspiring others via networking groups and charity events. He’s thinking of branching out as a motivational speaker, and sold a successful business, Offsite Servers, in 2020. This rags-to-riches tale is one of remarkable resilience. Just a few years ago, Base would have given several reasons for his success — but none of them would have included his six-month stint living homeless and destitute. “I’m happy to talk about it now, but for years I was too ashamed,” he explains. “I joined the army at 17 to escape my abusive stepfather. He was violent with my mother, my sister and me, and it came to a head when I came home from hospital after having my appendix removed and he punched me in the gut, splitting open my wound and landing me back in hospital. I have a nineinch scar as a memory. “The army was the worst place for me. I didn’t fit in. I now understand that I’m ‘on the spectrum’ and have high-functioning Asperger’s, but it wasn’t so widely understood back then — particularly not on the council estate I grew up on. I had no friends and I was badly bullied, and in a way I went from one abusive situation to another. I guess that being abused was something I was used to.” Showing the tenacity and resilience that would later stand him in good stead, Base endured four years in the army before finally being discharged, aged 20. But he didn’t have anywhere to go. “I jumped on a coach to Bournemouth and when my money ran out, I ended up homeless. I was too ashamed to go to my birth father. It was one of those Catch-22 situations; I couldn’t get benefits because I didn’t have an address, and I couldn’t get an address because I couldn’t get benefits. And so, I was living in a cardboard box on the streets.”

Phil Base on his 1,000-mile fundraising walking challenge, raising money for Solihull Moors Foundation. Follow him at #Basey1000 #B1000

down the deposit for me on a bedsit, and I would say that his act of kindness and generosity had the single biggest impact on my life.” The day after he moved into his digs, Base repaid his benefactor’s faith in him. He walked through Bournemouth, knocking on doors and asking for work, and landed a job with a printing company, Premier Print. There he learned how to cut business cards and create leaflets and flyers. He moved to another printing firm, and in his spare time started taking computers apart, getting to grips with software and hardware. “I met a fellow Brummie who regularly visited friends in Bournemouth,” he recalls. “He was in his 60s and I was in my 30s, but we had a shared interest in computers. We used to swap software and try different programmes. “We kept in touch, and when I moved back to Birmingham in 1997, he lent me £1,000 to buy everything I needed to start my IT business. He was a lifelong friend, and it was his generosity and belief in me that enabled me to get where I am today.”

After six months of surviving on food from the local soup kitchen, Base was given a chance to escape the approaching winter.

Base didn’t have conventional therapy to help him process his past trauma. Instead, he worked with life-coach Marie McCreedy. “I surrounded myself with good people and I did things a bit differently,” he says. “I joined the Rotary Club when I was 32 years old.

“There was an old man who regularly walked past me. He was a Christian, and he said that God wanted him to help me. I don’t have a faith as such, but I do believe in an almighty being; I would like to believe there is a God. (The man) put

“I’ve been very lucky in my life, and I’ve been helped by some generous people along the way. But when people ask me how I turned my life around, I point to some of my very worst moments: my stepdad telling me, ‘You’re a waste CFI.co | Capital Finance International

of breath, a waste of life and you’re never going to succeed’. “If it wasn’t for him, and for believing in my heart that I needed to prove him wrong, I wouldn’t be as strong as I am now. To not achieve anything would mean he had won. He’s dead now, but if he was alive, I’d buy him a beer. There’s no point holding a grudge. There’s no point in being negative. It only hurts you.” Since selling his business in 2020, Base has been busy creating new Business Network International (BNI) groups. “I see smiling faces and I see them all doing business together, and it makes me feel good because I know they’re getting a better standard of life because of what I created.” Following a Sahara trek he did in 2013 to raise funds for the Marie Curie cancer-care charity, he has been striding out on a 1000-mile charity fundraiser for Solihull Moors Foundation that has involved 156 organised walks. And now, as well as setting up more BNI groups, Base is coaching small businesses — and getting ready to marry his long-time partner. He’s also conquering his fear of public speaking. “I want to help people, and if I can help people with my story, even though it would be emotionally challenging, I think it would be a good thing to do.” PHIL BASE’S TOP TIPS FOR SELF-IMPROVEMENT • Believe in yourself • Surround yourself with positivity • Don’t pretend to be someone you’re not • Don’t stress about things you can’t change • Don’t be a victim • Work on creating a positive mindset. i 87

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Autumn 2021 Issue

> Clarity,

Clarity … Whither Art Thou? By Naomi Snelling

ward-winning filmmaker and director David Lynch famously urged creatives to “focus on the donut, not the hole”. It wasn’t just a riff on “be thankful for what you have”; he was trying to put a laser focus on whatever creative “surface area” was available — and ignore any distractions.

The grande dame of dystopian fiction, Margaret Attwood, paraphrases some of this “donutology” into her novel, The Blind Assassin: “As you ramble on through life, Brother, Whatever be your goal, Keep your eye upon the donut, And not upon the hole.” Known as The Optimist's Creed, these same words adorned every box of Mayflower Donuts from the 1930s to the 1970s. Originally alleged to have been the personal motto of Mayflower founding father Adolph Levitt, it turned out to be some doggerel he had seen framed in a dime store, and re-purposed. But the message endures: focus on the donut. Clarity, like a donut, is desirable. And like any aspirational quality, it’s launched a million memes and inspirational quotes. Fashion designer Diane Von Furstenberg once compared clarity to pruning a garden. “If you are not clear, nothing is going to happen. You have to be clear. Then you have to be confident about your vision.

"If you are not clear, nothing is going to happen." And after that, you just have to put a lot of work in.” Without her clarity, the world may never have known the figure-flattering silhouette that is the DVF wrap dress. (It should perhaps be pointed out that excessive focus on donuts could spoil that silhouette.) It has been said that the crucial function of leadership is to provide clarity. Benjamin Hardy, organisational psychologist and author of Willpower Doesn't Work, Personality Isn't Permanent, and Who Not How, is often featured talking about goals. “Choosing ONE OUTCOME is essential to having clarity and focus,” he writes. “Therefore, you must look at all of the ‘potential futures’ you have in your mind, and start making some decisions. “Look at all of your goals. Which ONE is clearly the most important? Put another way, which one, CFI.co | Capital Finance International

if you accomplished it, would change your life the most? Which one, if you truly focused on it and succeeded, would make the biggest impact on your future?” Hardy frequently references a quote from freelance writer Robert Brault, whose pithy wisdom on the matter was this: “We are kept from our goal not by obstacles, but by a clear path to lesser goals.” ONE THING AT A TIME In today’s world, with multiple communication platforms vying for our attention, it can be tempting to juggle too many balls. But as billionaire Gary Keller said: “Success demands singleness of purpose. You need to be doing fewer things for more effect, instead of doing more things with side effects. It is those who concentrate on but one thing at a time who advance in this world.” Whether you quiet your mind with walks in Nature, yoga sessions, meditation, or thoughtmapping, clarity remains a journey and a destination. “Clarity equals victory,” says director Shane Kuhn. And if you’re still on the path to creating more clarity in your life, a lesser victory can be found in not eating all the Krispy Kremes. i 89

> CBRE:

Tech Adoption Accelerating Across Real Estate Industry By David Casas Alarcón CBRE Property Management Accounting Lead

The expanding deployment of technology, from connectivity and hardware upgrades to machine learning and AI, means that almost every feature of the property industry can evolve quicker than ever.

eal estate had been slower to integrate new tech than other sectors. The pandemic has brought the integration of technological solutions that deal with immediate challenges — managing remote working, health and sanitation tracking. touchless movement. Normal business practices are being upended, spurring experimentation.

This shift builds on digital transformation as the technology ecosystem around the built environment matures and consolidates. Consumer and company expectations are rising, underpinned by demographic changes that see demands for greater tech capacity for homes and workplaces. Figure 1: Regional funding per annum ($ billions). Source: “The Automation Imperative”, MCKinsey & Company Operations, September 2021

The technologies that are now available — and others being developed — are set to radically reshape how we interact with and use buildings, and have the potential to lead to more human-centric, resilient and responsible built environments.

companies being funded, continues at elevated levels, driven by a variety of capital sources. Funding is migrating towards more established companies, with most capital going to laterstage funding rounds and products with strong adoption post-Covid.

New technologies, new companies and new operating models have made it difficult to navigate the shifting landscape. Businesses are often left overwhelmed. Where and when does a business start to invest, and how does one know which area to prioritise?

Built environment technology start-ups can be found around the world, and the more established companies have global operations and customer bases.

SIZING THE PROPTECH MARKET The number of companies providing technologybased services across the real estate industry has risen by 300 percent since 2010; venture capital and other funding has also risen. But it remains a relatively young ecosystem, with around threequarters of those companies founded in the past 10 years.

AUTOMATION AND AI Nearly all technology applications across the built environment are based on advanced data processing, analytics, and automation. Infrastructure and buildings are pumping out data, and across the core set of technology types and tools — from smart buildings and cities to automated workflows and property accounting in the cloud — the ability to gather, process and analyse this information is crucial.

Consolidation and in-house investment by established property companies has fewer startups being founded. Funding, and the number of

But siloed, partial, and lagged data inhibit the ability to use the available technology. Manual

data collection, lack of company and industry data standardisation, lack of integrated software or complex data privacy statements are the issues here. Centralised, structured information is key to some of the most exciting applications of new tech, with the greatest ability to boost efficiencies and aid decision-making. Generating trust in data and technology — particularly for AI applications where these automate processes or are publicfacing — is crucial for acceptance and adoption. Creating the information infrastructure to attain these benefits can be achieved through a combination of industry collaboration, regulation, and enterprise-wide data platforms. HUMAN-CENTRIC ENVIRONMENTS Integrating health and occupancy tracking with facilities management systems can lead to much more convenient and efficient services. Touchless technologies such as voice or gesturecontrolled access systems permit occupants to

"Nearly all technology applications across the built environment are based on advanced data processing, analytics, and automation." 90

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Autumn 2021 Issue

move around a building freely, while occupancy tracking can allow real-time cleaning schedules to be automatically adjusted. The past year has also seen experimentation with advanced robotics in facilities management, with remotecontrolled and even autonomous robots able to manoeuvre around properties. DYNAMIC PORTFOLIO MANAGEMENT Improvements in automation and AI analytics offer significant scope for recalibrating portfolio strategies and management for investors and tenants. Automating existing processes makes real-time updates available for fund benchmarking and reporting, while the use of larger and more targeted datasets will make the portfolio strategy process more granular. The shift towards space-as-a-service and higher levels of engagement and customisation aligns priorities between landlords and tenants where there is a need to cater to the user, employee, or customer experience across asset classes. For tenants, tech-enabled portfolio management will support dynamic and flexible hybrid workforces, providing the right space in the right markets at the right times. TECH AND ACTIONABLE DATA With the stakes so high, it is crucial to invest in tech that delivers strong ROI and helps informed decision-making. It should also lower costs, shorten response times, and reduce downtime. It is vital to separate the hype from reality and focus on tech that will have a measurable impact on operational performance. It is also imperative that the facility management (FM) software is user-friendly. If people who interact with it struggle to use it or have to use to multiple apps or portals to complete their task, they are less likely to engage with it. Having the right skills in the right teams is essential to ensure that the data are correctly analysed and effectively communicated. i

Author: David Casas Alarcón

Autumn 2021 Issue

> Bank

Launches and Alternative Lenders Create More Funding Opportunities for UK Business Four new banks were launched in the UK in the first 10 months of the coronavirus crisis, adding to the 41 launched over the previous seven years.

ebt advisory specialist ACP Altenburg Advisory says this is a sign of the growing options available to businesses looking for finance.

With the CBILS & BBLS schemes having ended at the end of March, ACP says businesses looking to grow may need to turn to an alternative source of finance as high street banks decrease lending to SMEs. Including the four new banks, 23 UK banks have launched since 2013, along with 22 which set-up in the UK as branches or subsidiaries of overseas banks. These figures do not include the larger challenger banks that have launched since the credit crunch such as Shawbrook, Metro Bank and Aldermore. The figures show the competition challenger banks are presenting to high street banks, especially in providing lending to SMEs. In addition to challenger banks, there are hundreds of debt funds looking to provide funding.

Partner at ACP Altenburg Advisory Dan Barrett says high street banks are likely to reduce their credit appetite over the short term “while the dust settles on the vast amount of money they have lent under the BBLS and CBILS schemes”. “With nearly two dozen new UK banks launching in the eight years, together with hundreds of alternative lenders and debt funds, the funding options for UK businesses outside of the high street banks have never been greater,” he says. ACP Altenburg Advisory says the three most common types of lending are asset backed lending (ABL), real estate and cash flow. While the number of lenders and range of debt products has increased across all three types, cash flow lending has seen the biggest increase in the number of lenders and products over the past decade While the cost of borrowing is largely a function of the level of risk that a lender is being asked CFI.co | Capital Finance International

to take, it is also partly related to the level of flexibility a borrower requires. Those that secure a funding package with greater amounts of flexibility — a debt solution tailored to the business, ample covenant headroom, lower levels of (or even zero) amortisation and/or certainty of follow on funding — are likely to pay a higher price. Unitranche funding solutions (a hybrid debt facility that combines senior debt and subordinated/ mezzanine debt into a single facility) come with a greater degree of flexibility than more traditional debt packages (term loans, overdrafts, RCFs etc), hence the higher cost of lending. ACP Altenburg Advisory says there is a shortage of lenders providing capital at a cost of around four to six percent.The more traditional banks, which tend to be more conservative with their lending appetite, tend to lend below five percent. Alternative banks and funds tend to lend with costs above six percent. i 93

ANNOUNCING

AWARDS 2021 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.

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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 2021 Issue

> IBM: OUTSTANDING WORKFORCE TRAINING GLOBAL 2021

IBM has around 350,000 staff, 160,000 partners, and countless more clients worldwide and it is committed to their continuous development with its HR 3.0 system. Its aim is to build ‘Cognitive Enterprises” with data and AI transforming the workplace. Together IBM staff and partners provide training to IBM clients. Staff have access to “Your Learning”, a state-of-the-art cognitive-driven learning ecosystem. It is a one-stop ed tech system that is personalised for users using AI. It focuses on skills and

agile practices. Over 99 percent of staff used the system in 2019. Every staff member is expected to spend a minimum of 40 hours in training and personal development each year. Staff, partners, and clients can also earn badges and certifications online through IBM Credentials. IBM also provides versions of its HR 3.0 systems to clients as part of its Talent Management Services. IBM is committed to transforming itself, its partners, and clients. The CFI.co judging panel also commends IBM on the

launch of its SkillsBuild platform. The platform helps long-term unemployed, veterans, asylum seekers, refugees, and other jobseekers to start a career in IT using HR 3.0 systems. Job seekers can learn to code, earn IBM credentials, and enjoy career focused development. IBM sees a new world where micro-credentials can replace degrees for some workers. The CFI.co judges are more than pleased to present IBM as the winner of the global award for Outstanding Workforce Training Global for the second consecutive year.

> BANCO DO BRASIL: BEST SUSTAINABLE BANK SOUTH AMERICA 2021

Brazil is celebrating 200 years of independence in 2022 – and throughout that time Banco do Brasil has played an essential part in the growth of the nation. Opened in 1808, today it is one of Latin America’s biggest banks – but refuses to rest on its laurels. Banco do Brasil was one of the first Brazilian financial institutions to recognise the challenges of the 21st century, and was quick to adopt sustainable business policies. In 2003 Banco do Brasil introduced management strategies to shape the company’s social and environmental responsibilities - now a fundamental plank of its operations. Since

2005, BB has an ambitious sustainability plan which currently involves 40 actions and 110 indicators maintaining its alignment with the UN’s Sustainable Development Goals. Also, in 2021, Banco do Brasil established 10 Long-Term Sustainability Commitments, with goals to be implemented by 2030, involving 3 work fronts: Sustainable Businesses, Responsible Investment and ESG Management. These Commitments aims at developing sustainable businesses, allocating finance on the basis of a business’s positive impact on the environment, including reduced carbon emissions and improved social benefits.

The bank’s current sustainable credit portfolio is the biggest in Brazil’s finance industry. As the main financier of the country’s agribusiness, Banco do Brasil supports the sector at all stages of its production chain, and has fostered sustainable agriculture. The company’s aim is to ensure the spread of good ESG practices. The judging panel notes that the bank demonstrated its early adopter status when, in 2016, it won the Cfi.co award for Best ESG Management Team Brazil. In 2021 the judges have no hesitation in presenting the bank with the award Best Sustainable Bank South America.

> AccountAbility: BEST ESG STRATEGY DEVELOPMENT PARTNER GLOBAL 2021

Over the past 25 years, AccountAbility has solidified its position as the most comprehensive value proposition on the market for ESG advisory, standards, and research. As a pioneer in the sustainability arena, AccountAbility integrates technical expertise from industry leading standards combined with practical and relevant counsel to advance its clients’ sustainability performance and impact. The firm applies a principles-based approach to sustainability management through its consulting and across its AA1000 Series of Standards, which includes the world’s first non-financial assurance standard, the top-ranked global stakeholder engagement standard, and its signature standard measuring inclusivity, materiality, responsiveness, and impact.

AccountAbility will be pursuing Public Benefit Corporation status in 2022, and has a team of international sustainability advisors and subject-matter experts that provide ESG consulting for clients. With a presence in Dubai, London, New York, and Riyadh, the firm serves clients across North America, Europe, the Middle East, Asia, and Africa. AccountAbility has partnered with some of the biggest names in financial services, power and utilities, energy and extractives, technology and telecommunications, healthcare and pharmaceuticals, real estate, and consumer products sectors. It works with investor coalitions, governmental agencies, and multilateral organisations. CFI.co | Capital Finance International

AccountAbility has worked with the World Bank Group since 2007, the International Finance Corporation since 2011, and the International Monetary Fund since 2013, in the areas of Sustainability/ESG Strategy, ESG Metrics and Scorecard Development, and Reporting & Disclosure. AccountAbility is recognized by the World Economic Forum as an ESG framework developer. The firm is considered a thought-leader in sustainability strategy, governance, and impact, and has hosted conferences and forums to encourage the adoption of more transparent, responsible, and effective business practices. The CFI.co judging panel presents AccountAbility with the 2021 global award for Best ESG Strategy Development Partner. 95

> KBC GROUP: BEST BANK GOVERNANCE EUROPE 2021

Thanks to solid contingency planning, KBC Group was well-prepared when the Covid pandemic hit. The company slipped smoothly into crisis mode, with its 41,000 staff transitioning to remote working and daily virtual meetings of executive committees to keep operations on track. It experienced no downtime and expanded its Group executive committee with the CEOs from its core countries to actively monitor the local situation during Covid. The group's long-term vision and stable liquidity allowed it to set aside

€800m for contingencies and cut costs in the second quarter by six percent (€160m). KBC stands out in operational performance. Its preemptive actions to write off potential impacts in 2021 and 2022 have contributed to investor confidence, paved the way to pay out dividends - and caused a rise in KBC stock. CEO Johan Thijs has been thrice nominated in the top 10 of the world's best chief executive by the Harvard Business Review. Data scientist Thijs looks to other industries to drive innovation in banking.

His leadership has helped the group to achieve a number one global ranking in terms of innovation and digital operations. Products and services are tailored to proactively meet changing customer needs. The latest development - KATE, an Aldriven tool - can understand and solve 90 percent of customer queries. Within the next two years, KATE is expected to reach 100 percent capacity. The CFl.co judging panel is impressed, and announces repeat winner KBC as winner of the 2021 award for Best Bank Governance (Europe).

> ENERGEAN: BEST ESG ENERGY GROWTH STRATEGY EUROPE 2021

Exploration and production company Energean has assets and projects in nine countries around the Mediterranean and North Sea. Over the past five years, it has increased reserves and resources nearly sixfold through organic growth and strategic acquisition. Engergean’s flagship project is an Israeli offshore gas development; in Greece, it is exploring the potential of underground storage for captured carbon. The company, listed on the stock exchanges of London and Tel Aviv, is a signatory of the United Nations Global

Compact and has pledged to become netzero by 2050. It adheres to recommendations from the Task Force on Climate Related Financial Disclosure, and in the Carbon Disclosure Project, Energean’s performance was ranked in the top third of exploration and production companies. It made progress on several medium-term targets in 2020, including increased production and revenues. It switched to renewable sources in Prinos, Greece and in 2021 rolled this strategy out across the operated Italian portfolio so cutting

Scope Two emissions. Energean is aiming for a medium-term CO2-intensity target of less than half the global average for the oil and gas industry. The company has 620 employees and contractors from 23 nationalities, and the board and senior management teams are about one-third female. It prioritises employee wellbeing and promotes healthy lifestyles via online resources. The CFI.co judging panel recognises repeat programme winner Energean with the 2021 award for Best ESG Energy Growth Strategy (Europe).

> SHARE NOW: BEST MOBILITY INNOVATION EUROPE 2021

Private car ownership is on the decline, but car-sharing is — figuratively, at least — putting people back in the driver’s seat. And that means no parking fees, insurance premiums, or fuel costs. European company SHARE NOW formed from the merger of Car2Go and DriveNow. The company sees technology as a means to improve city living. SHARE NOW has thousands of premium brand models — BMW, Citroën, Fiat, Mercedes-Benz, MINI, and smart — in 16 cities in Austria, Denmark, France, Germany, Hungary, Italy, 96

the Netherlands and Spain. The SHARE NOW app allows drivers to make brief bookings for short trips — errands, commuting, or city outings — while long-term rentals for up to 30 days mean the freedom to explore or travel. There are rental rates by the minute, hour, or day, and the company says its services are 70 percent more cost-effective than the taxi option. Users can find a suitable car on the app map and unlock it with a smartphone. The app never sleeps, and clients can skip the waiting lines and paperwork normally CFI.co | Capital Finance International

associated with car rental. The cars can be picked up in one location and dropped anywhere within the home area. Inter-city travel is possible, but ending your rental is only allowed in the same city where you started the rental. SHARE NOW notes that studies show car-sharing schemes reduce private ownership and traffic congestion, with each shared car taking up to 11 others off the streets. The CFI.co judging panel presents SHARE NOW with the 2021 award for Best Mobility Innovation (Europe).

Autumn 2021 Issue

> NATWEST: BEST MORTGAGE PROVIDER UK 2021 As one of the UK’s largest mortgage providers, NatWest has always been a popular destination for home buyers. The bank also has its finger of the pulse of public opinion, and has committed to becoming climate positive by 2025. Part of that initiative includes the bank’s Green Mortgage scheme. The company offers lower rates to those looking for a more eco-friendly, energy-efficient home. UK homes account for 15 percent of the country’s total climate emissions. Lower rates are offered to those buying properties with an energy certificate performance (EPC) of A or B. The project is in response to research which shows that 70 percent of its customers are concerned about climate change but are unsure how to react. Green Mortgages are part of NatWest’s

promise to have a positive impact on the environment. The scheme is one of a number of ideas aiming to encourage greener choices. The scheme offers a reduction on a two year or five year fixed rate mortgage. The bank is a principal sponsor of COP26, taking place in Glasgow in November 2021, an illustration of its determination to be a leading voice in climate change, recognising the need for collaboration and co-operation between government, business and society in general. The company sees its role as providing support for those seeking a transition to a low carbon economy. The judging panel, for the second consecutive year, recognises NatWest’s commitment to the industry, and in 2021 is pleased to present the award, Best Mortgage Provider UK.

> BELVOIR GROUP: BEST PROPERTY NETWORK GROWTH STRATEGY UK 2021 Over the past 25 years, property franchise Belvoir Group has built a network of 467 offices offering residential lettings, property sales and propertyrelated financial services. The group added 20 lettings and estate offices to the network, including the acquisition of independent real estate company Nicholas Humphreys in March. Belvoir Group strengthened its alliance with the Nottingham Building Society through the acquisition of its financial services subsidiary, Nottingham Mortgage Services. These deals cost Belvoir over £5m and were funded from cash reserves. Belvoir Group was pleased to report another half-year of strategic and trading growth, achieving revenue growth across its three business lines. First-half results have outperformed expectations, with a 41 percent increase in

revenue over the same period for 2020, from £9.8m to £13.8m. Basic earnings per share are up 36 percent, and interim dividends rose by 17.6% to 4p per share for the half year. The group’s resilient business model has allowed Belvoir to capitalise on opportunities in this year’s buoyant housing market — and ensured its growth strategy was unaffected by the pandemic. Investments in earningsenhancing businesses have expanded its property and financial services divisions, leading to high activity across all business areas — and confidence that the group will achieve a strong trading performance for the full year. The CFI.co judging panel recognises Belvoir Group, a repeat programme winner, with the 2021 award for Best Property Network Growth Strategy (UK).

> JUSAN BANK: BEST BANK KAZAKHSTAN 2021 Since its launch in 1992, Jusan Bank has always been a pioneer in the Kazakhstani banking industry. Over a decade ago it opened its own processing centre, thereby greatly reducing its operational costs. After a major stabilization programme by management in 2019, the Bank has achieved increasingly positive financial results. This was largely due to the launch of innovative new products such as an internet banking system serving over 600,000 private customers, a mobile App supported by the Bank´s own digital mobile operator, Jusan Mobile, and more than ten new products for SME clients. The turnaround in the last two years has been remarkable, bearing fruit and restoring a healthy balance sheet. Its corporate business and SME deposit portfolio has grown by 17 times and current account balances are up by over 250

percent. The Bank´s development strategy has created several services which offer a far more personal service to its retail customers: by investing heavily in its digital offering, customers can now order cards without having to visit a branch, pay utility bills, buy insurance products and top up their mobile phones. The Jmart marketplace offers over 200,000 products at affordable prices, which can be purchased in instalments over a two-year period. Furthermore, it is the only bank to offer investment services via the application. In May 2021 Jusan Bank acquired ATF Bank, increasing its total volume of assets to around three trillion Tenge (USD 7 billion). The CFI.co judging panel recognises this outstanding transformation and presents Jusan bank with the 2021 award for Best Bank (Kazakhstan). CFI.co | Capital Finance International

> UniCredit: BEST SOCIAL IMPACT BANK EUROPE 2021

Pan-European commercial bank UniCredit levers its strong profitability, capital and liquidity positions to fulfil its “Do Right” commitments. UniCredit has Italian roots and an established network in Western, Central and Eastern Europe. The group operates on a value system of ethics and respect, and integrates sustainability across financial, human, social, intellectual, and natural capital strategies. UniCredit took proactive steps to protect and support staff and clients during the pandemic. It moved quickly to remote working and trained team

leaders in virtual environments. Discounted financing solutions and repayment moratoriums helped to ease stress for clients. UniCredit has launched initiatives to accelerate sustainable development, including financial education for youth and capacity-building programmes for female entrepreneurs. The group is proud of its diverse, multicultural team, and over the next two years it aims to double the percentage of women in senior leadership roles, which was at 15 percent in 2020. Last year, the group’s community contributions totalled €42m, and it

intends to raise support for projects with positive social impacts to €1bn by 2023. UniCredit prioritises environmental responsibility through tree-planting partnerships, energy efficiency campaigns and science-backed climate action. It has taken a hard stance against coal, putting restrictions on new financing while increasing investments in renewable energy. UniCredit is an ESG-aligned bank making clear progress on ambitious targets. The CFI.co judging panel presents repeat winner UniCredit with the 2021 award for Best Social Impact Bank (Europe).

> LE GROUPE LA POSTE: BEST TRANSFORMATIONAL STRATEGIC PLAN FRANCE 2021

French postal service Le Groupe La Poste this year announced a strategic plan to develop sustainable sources of growth. The self-supporting business model consolidates traditional activities and public service missions, accelerates growthproducing activities, and develops models for the future. The group has been carbon-neutral since 2012 and is moving towards carbon-free delivery solutions in 225 cities across Europe. The group has distinguished itself in the finance field, with La Banque Postale ranking number one with several sustainability rating agencies

and aiming to become Europe's premiere positive-impact bank. Here, too, internal operations are carbon-neutral — they have been since 2018 — and there is a target of net-zero emissions across all banking activities by 2040. The financial institution operates in line with the Paris Accord, and as a fund manager selects only socially responsible investments. It has pledged to double financing for energy transition projects by 2023. Le Groupe La Poste aims to become the first European exchange and link platform, serving clients and community with a

focus on digital, green, and civic transformation. It benefits from its impressive physical presence and commercial network, serving over a million customers each day across 17,000 retail outlets nationwide. Two shareholders own the group: 66 percent is held by the Caisse des Dépôts et Consignations, the remainder by the French government. The CFI.co judging panel salutes a forward-thinking service provider, and declares Le Groupe La Poste winner of the 2021 award for Best Transformational Strategic Plan (France).

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> MURDOCH ASSET MANAGEMENT: BEST INVESTMENT MANAGEMENT SOLUTIONS UK 2021

UK firm Murdoch Asset Management was built from the ground up over the past decade. The firm takes care with employee recruitment, only onboarding those with the highest academic and industry qualifications. It takes equal care with staff retention to ensure those contributing to the operation’s success receive the respect and renumeration that they deserve. Murdoch Asset Management claims the 'gold standard' distinction of Corporate Chartered Financial Planner accreditation — an honour granted to only six percent of the country’s financial 98

planning businesses. This certification inspires trust and underscores the firm’s commitment to first-class services and practices. Another element that sets Murdoch Asset Management apart is its individualised client focus, with one of its three directors and two financial planners serving as the client’s dedicated adviser. Clients can expect to see the same friendly face anytime they seek financial advice, which is always based on individual needs and delivered with clear communication. Murdoch uses risk allocation models to compete across asset classes. Austen CFI.co | Capital Finance International

Robilliard, the firm’s investment director, spent 12 years developing this system, which has garnered attention for its innovation. Risk is based on volatility, but that’s not the only factor. As the firm asserts, risk is more than a mere consideration — it’s the start and end of investment management. Murdoch Asset Management’s compound yearon-year growth lends confidence in the firm’s long-term approach to wealth creation and alpha generation. The CFI.co judging panel presents the company with the 2021 Best Investment Management Solutions (UK) award.

Autumn 2021 Issue

> NORDEA ASSET MANAGEMENT: BEST ESG TEAM EUROPE 2021 The Nordea family of financial service providers dates back over 200 years, and famous fairy tale author Hans Christian Andersen was one of its early customers. Nordea Asset Management (NAM) remains true to its Nordic origins as one of the oldest sustainable investors having delivered responsible returns for over three decades. Of NAM’s €274bn assets under management, around 64 percent is currently allocated to solutions like the ESG STARS Funds range, which seek to find tomorrow’s sustainable investments, and to other SFDR Article 8 and 9 products, including Nordea 1 - Global Social Empowerment Fund and Nordea 1 - Global Climate and Social Impact Fund. Nordea Asset Management takes pride in its ESG leadership, industry-

leading corporate-level Responsibility Investment policy, focused on achieving both sustainability and attractive returns through deep ESG analysis and a worldclass engagement and voting program. All of these efforts build on what CFI.co rates as currently the European Asset Management industry’s strongest ESG team. Over the years, NAM’s Responsible Investments team, one of the largest and longest-standing teams in the business, has continued to grow and deepen its experience within all areas of ESG. Today, the team is a true leader in European ESG investing. The CFl.co judging panel applauds NAM’s efforts which have taken sustainability from a fairy tale to a reality, and presents Nordea Asset Management with the 2021 award for Best ESG Team (Europe).

> GNB GESTÃO DE ATIVOS: BEST FIXED INCOME FUND MANAGER PORTUGAL 2021 Fixed income is a popular vehicle for risk-adverse investors looking for steady, reliable returns - and in Portugal, GNB Gestão de Ativos (GNBGA) is the go-to firm. GNBGA was founded in 1992 and benefits from a cohesive team with extensive experience in financial markets. It has shown courage and competence in backing worthy investments and manages portfolios with a clear goal on healthy returns. It promises transparency and seeks to create value for clients and the results speak for themselves: NB Euro Bond, for instance, have won awards almost every year since 2010. The Lisbon-headquartered asset manager offers a range of investment solutions, including fixed income and equity funds, asset allocation products, pension fund management and discretionary portfolio management. GNBGA is the asset

management arm of Novo Banco Group and caters to the needs of private and institutional investors. ESG criteria is becoming a central part of the firm's fiduciary duty, and GNBGA intends to prioritise investments that support climate action, circular economies, biodiversity, healthy communities, equality, regulatory compliance and consumer and shareholder rights. The GNBGA team has worked together for decades, with more than 20 years of specialisation in fixed income funds. Despite the recent market turmoil, GNBGA has managed to retain a full staff and compensate for portfolio deviations. The CFl.co judging panel salutes this steadfast performance and presents GNB Gestão de Ativos with the 2021 award for Best Fixed Income Fund Manager (Portugal).

> COPERNICUS WEALTH MANAGEMENT: BEST WEALTH MANAGEMENT TEAM SWITZERLAND 2021 Copernicus Wealth Management was founded in 2016 in the Swiss canton of Ticino, an Italianspeaking region south of the Alps. The company’s business model was designed to serve institutional and high-net-worth individuals in the Swiss market. Copernicus offers assistance with discretionary management mandates, actively managed certificates, and undertakings for collective investment in transferable securities. It ranks among the top three wealth and asset management firms in the region. The Copernicus leadership team of five partners is supported by a 40-person workforce. Copernicus Wealth Management operates in a highly regulated environment, where its financial products and services are subject to comprehensive oversight. It stays abreast of all compliance guidelines, internal

and cross-border regulatory developments, and administers funds in Luxembourg, Liechtenstein and Ireland. The company takes a 360-degree approach to wealth management by focusing on clients and tailoring services to meet their needs. It aims to create long-term value, helping to build and safeguard generational wealth by acting responsibly and remaining vigilant about risks. Copernicus feels confident that it will be able to adapt to any changes in the industry by identifying market trends and swiftly responding to tweak an offering where needed. The company is eyeing expansion opportunities, with special attention being paid to Switzerland and the Zurich and Geneva markets. The CFI.co judging panel is pleased to present Copernicus Wealth Management with the 2021 award for Best Wealth Management Team (Switzerland). CFI.co | Capital Finance International

> JPMORGAN CHASE: BEST CSR BANKING UNITED STATES 2021

When Jamie Dimon, the chairman and chief executive of JPMorgan Chase & Co talks of “corporate citizenship”, he’s not paying lip service to a business fad – he’s deadly serious. Corporate Social Responsibility (CSR) is integral to the bank’s culture. “When everyone has a fair shot at participating in the rewards of growth, the economy will be stronger and society more cohesive,” he says. He insists that the US must address widening income inequality. “The fault line for discord is a fraying American dream – the enormous wealth of our country

is accruing to the very few. The fault line is inequality.” The company believes that as the world emerges from the pandemic it must build fairer, sustainable infrastructures. In 2018 the organisation launched a five-year $1.75b fund to support initiatives worldwide, including aid to urban communities. The JPMorgan Chase mission involves investment in customers, employees and communities, breaking down barriers to opportunity and creating lasting change. It aims to attract and retain employees in an environment where they can thrive. The

bank, which operates in 65 countries, invests $300m in employee training every year. In terms of diversity, 49 percent of global new hires are women, while 58 percent of new US hires are ethnically diverse. JPMorgan Chase believes business has a vital role to play in the drive towards a low-carbon economy. The company is applying its expertise to tackle climate change and promote a sustainable future. In 2021, the CFI.co panel is pleased to present, for the third consecutive year, the award, Best CSR Banking United States.

> CASINOS AUSTRIA INTERNATIONAL: OUTSTANDING CONTRIBUTION TO RESPONSIBLE GAMING EUROPE 2021

Casinos Austria International is committed to good corporate governance and responsible gaming. In 2018 alone, the company conducted 1,600 counselling interviews with guests, initiated 10,000 entry restrictions, and received and enacted 4,000 self-exclusion orders. This underscores the company’s ethical stance: it’s not about maximising profits at the expense of gamers, it’s about building long-term relationships with stakeholders. Casinos Austria International has a 40-year history

and a foothold in 35 countries. It recently to biodegradable straws and convinced one conducted a material analysis to pinpoint how of its suppliers to replace plastic wrapping best its operations could contribute towards with reusable palette covers. Casinos Austria the UN’s Sustainable Development Goals. International aims for top-employer status It has published a CSR report, highlighting by embracing diversity, providing training, performance metrics and targets for and supporting employee volunteerism. It’s tayeb koncept sarl 2015 improvement. Casinos Austria InternationalLe 04 marsone of the biggest contributors to Austria’s TANGER FREE ZONE upgraded a computer-centre cooling system coffers, paying some €650m in taxes, duties Propositions du nouveau logo TANGER MED ZONES which cut CO2 emissions by 115 tons per and social security contributions. The CFI.co year. It increasingly uses renewable energy jury announces Casinos Austria International and is reducing waste, particularly single- as winner of the 2021 award for Outstanding use plastics. The firm switched from plastic Contribution to Responsible Gaming (Europe).

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> TANGER MED ZONES: BEST INDUSTRIAL FREE ZONE GLOBAL 2021

TANGER MED Tanger Med Zones occupies a prime position at the gateway between Europe and North Africa, with 5000 hectares of land in an 80-kilometre radius around the largest port in Africa and Mediterranean sea, Tanger Med Port (Tanger, in its French spelling). Tanger Med Zones has established an integrated industrial platform of eight special economic zones: Tanger Free Zone, Tanger Automotive City, Renault Tanger Med, Tetouan Park, TetouanShore, Economic and Logistics Activity Zone, and Retail Zone. Over the past decade, Tanger Med Zones has attracted $5.9m in FDI and 1,100 tenants. Fourteen of the 100

world’s 20 largest automotive suppliers have set up in the free zone, exporting a million 700 000 Moroccan-manufactured vehicles each year. Aeronautical manufacturers have found a base here, too. The free-zone port boasts the best maritime connectivity in Africa, ranked 24th globally, and links 187 ports around the world. Seven million passengers and 700,000 trucks pass through Tangier on an annual basis — and 90,000 jobs have been created throughout the zones and the port. Foreign subsidiaries benefit from investment incentives offered by the Moroccan government, including a business-

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friendly tax framework and VAT exemption. Tanger Med Zones plug-and-play platform streamlines business set-up, cutting through red tape by consolidating dealings within the free zone authority rather than via separate governmental departments. Tanger Med Zones promises a quick and easy installation process, with documentation usually processed within 10 business days. There are 900 export-geared companies, with goods worth $10.4bn, in residence. The CFI.co judging panel presents Tanger Med Zones with the 2021 global award for Best Industrial Free Zone.

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Autumn 2021 Issue

> THE AES CORPORATION: BEST ESG POWER PRODUCER GLOBAL 2021 Over the past forty years, the AES Corporation, a global energy company, has demonstrated its commitment to building a greener, smarter energy future. In 1989, it created one of America’s first carbon-offsetting programmes when it planted 52 million trees in Guatemala to balance emissions from its power plant in Connecticut. In the early 2000s, the company stepped up its focus on cleaner energy solutions, when it began to invest in wind and solar power. The company also pioneered the application of lithium-ion batteries for energy storage, a critical technology in the broader adoption of renewables. Today, AES works with its customers of all kinds to co-create solutions that meet their business objectives. The company is a major developer of renewable projects and integrator of technologies. It sees climate change as a global challenge that the public and private sectors

must address through innovation, collaboration, and knowledge-sharing. The company engages in technology innovations that support renewable energy systems, and it has applied AI to crack tougher challenges. AES has been a leader in batterybased energy storage projects for more than 14 years. It has introduced a prefabricated solar solution produced by Australian company 5B that can double energy density while using fewer resources — and is able to withstand hurricanes and other extreme weather events. AES was also the first publicly traded US energy company to issue a climate scenario report aligned with recommendations from the Task Force on Climate-related Financial Disclosures. The CFI.co judging panel sees in AES a catalyst for positive change and presents the corporation with the 2021 global award for Best ESG Power Producer.

> MCKINSEY & COMPANY: BEST MANAGEMENT CONSULTANCY SPAIN 2021 Many businesses were tempted to hunker down and wait out the Covid-19 storm which hit in late 2019. Not so McKinsey and Co. The US-based global management consultancy, the oldest and largest in the world, was on the front foot, immediately evaluating risk, and conceiving strategies for businesses and economies to emerge the stronger. Nowhere was this more evident than in Spain, a country particularly vulnerable to the pandemic, given its reliance on tourism. McKinsey has operated offices in Barcelona and Madrid for more than 40 years, offering advice across the private, public and social sectors, transforming organisations and building enduring capabilities. In 2020, McKinsey staff in Spain produced a detailed report - The Future of Work after Covid-19 - focussing particular attention on the travel and tourism sector. The report

not only outlined areas of risk, but offered guidance to overcome the problems faced by travel-dependent businesses. Tourism represents 14.3 percent of Spain’s GDP. The McKinsey report suggested that by the time the sector recovered, Spain could face cumulative GDP losses of $300b, and up to 4.4 million jobs might be lost. The company’s experts urged government and travel businesses to work together on high-priority areas to turn the tide and hasten recovery. Suggestions included the need for business to become more agile; to react quickly to changes in demand, and to innovate customer interaction. In 2021, the judging panel recognises, for the second successive year, the contribution made by McKinsey & Co, and is pleased to present the company with the award, Best Management Consultancy Spain.

> YLG GROUP: MOST RESPONSIBLE GOLD EXPORTER ASIA 2021 Gold has been a cornerstone of commerce from the earliest civilisations. Since the minting of the first rude coins, the precious element has been the basis of trade across the planet. But this most ancient of industries is undergoing rapid change. The YLG Group of Thailand, established in Bangkok as the Yoo Lim Gold Factory only 20 years ago, has understood that speed and adaptability are the keys to success. The company, today the leading importer and exporter of gold bullion in Thailand, prides itself on reacting quickly to the needs of clients. YLG is a member of LBMA, the London-based organisation responsible for ensuring integrity and transparency in the global precious metals industry. YLG has established a secure online trading platform for the trading of bullion, and provides gold futures brokerage services for

Thailand’s Futures Exchange Market (TFEX). It also runs a 24-hour online platform for gold investment. YLG has developed a onestop solution for gold trading and investment, employing a team of experts to offer advice to clients across all sections of its business. The company also employs goldsmiths, designing and manufacturing a range of high quality jewellery. Every piece of work meets internationally-recognised standards. YLG is expanding internationally, having established, at the invitation of the Singaporean government, operations to help Singapore become an international hub in the gold trade. In recognition of the company’s dedication to quality and service, the judging panel has no hesitation in presenting the YLG Group the 2021 award, Most Responsible Gold Exporter Asia. CFI.co | Capital Finance International

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> PIRELLI: BEST ESG RESPONSIBLE MANUFACTURER ITALY 2021

If the world-famous Pirelli calendar is a record of the times, the 2021 Zeitgeist is accurately captured by the fact that its publication has been cancelled in the face of Covid-19. The news that the Canadian singer and photographer, Bryan Adams, has been enlisted to shoot the 2022 edition is a hopeful sign. But the multinational Italian tyre manufacturer has been far from idle during the pandemic. The Milan-based firm is a shining example of the rapidly changing focus of industry, being among the first o adopt Environmental, Social and Governance (ESG)

principles in the early years of the 21st century. Throughout the disruption of the pandemic, Pirelli stepped up its continuous and transparent dialogue, not only with stakeholders, but with the communities in which it operates. During the height of the pandemic the company was involved in numerous projects focussed on community support. Pirelli operates 19 plants in 12 countries on four continents, all of which are managed with a view to environmental efficiency. Targets include reducing water withdrawal, energy consumption, CO2

emissions, and waste recovery. Pirelli achieved 97 percent waste recovery in 2021, in pursuit of the group’s target of zero waste to landfill. The company is investing heavily in innovation, with ground-breaking research into new raw materials in its production process, with the aim of developing products with an improved life-cycle and better environmental efficiency. In 2021, for the second consecutive year, the CFI.co judging panel is pleased to present Pirelli with the award, Best ESG Responsible Manufacturer Italy.

less than one second - with zero requotes or rejections since its launch in 2009. It offers over 25 secure payment methods across 16 full-feature trading platforms. The company is highly-regulated with offices worldwide. It's a large, well-established company that favours the human approach. XM Management has visited 120 cities to conduct face-to-face meetings with clients and partners. The XM Group partners

with investment-grade international banks, and maintains segregated accounts ensuring safety for client funds. All clients benefit from XM's negative balance protection policy, which means they can never lose more than their account balance. The CFI.co judging panel presents repeat programmer winner XM with dual global awards for 2021: Most Reliable Broker and Most Transparent Broker.

> XM: MOST RELIABLE BROKER & MOST TRANSPARENT BROKER GLOBAL 2021

The web is awash with brokers making big promises - but few can compete with the execution, customer support and transparency of XM. The online broker has been in operation for over a decade and serves some five million customers in 196 countries. It offers customer support in 30 languages and has a hi-tech infrastructure that ensures swift and reliable trading execution. More than 99 percent of its 2.4 billion trades have been executed in

> GEIDEA: BEST SME PAYMENT SOLUTIONS PROVIDER GCC 2021

Geidea is a market pioneer that believes problem-solving requires genius ideas (hence the name — Geidea). The Saudi start-up was the first fintech in the kingdom to be licensed as a payment institution — and the only non-bank to be granted a license by the Saudi Central Bank to process end-toend payment solutions. Within four years of its first product launch, Geidea had secured half of Saudi Arabia’s POS market. There are now more than 500,000 Geidea terminals in Saudi Arabia, representing 75 percent of the 102

market share. Business clients are offered a selection of POS devices to streamline sales, and an app to manage inventory, orders, and invoicing. Geidea processes more than four million transactions daily, and 100,000 merchants have signed up for the service, including local and international brands, SMEs, and e-commerce firms. For companies without a web presence, Geidea helps to showcase products to drive online sales. It has taken the first steps towards GCC expansion this year, in a partnership with Egypt’s Bank CFI.co | Capital Finance International

Misr. The fintech company is funded by some of the region’s most prominent investors — Gulf Capital, AO and RAI — and has partnered with multinational financial service companies to bring innovative solutions to market. Geidea is supported by a growing multicultural team representing some 50 nationalities. The CFI.co judging panel salutes a company bringing best-in-class technologies to market to help small businesses. Geidea wins the 2021 award for Best SME Payment Solutions Provider (GCC).

Autumn 2021 Issue

> GHANA INVESTMENT PROMOTION CENTRE: BEST INVESTMENT PROMOTION AGENCY AFRICA 2021 By embracing technology, social media and webinars during the pandemic, Ghana Investment Promotion Centre (GIPC) has strengthened client relations and aftercare practices. GIPC established a diaspora investment desk and collaborates with the World Economic Forum to redefine investment criteria. It highlights responsible and sustainable principles that drive positive impacts for environment and communities. Ghana is a solid investment location, boasting one of the world’s fastestgrowing economies; it is ranked number one in West Africa for ease of business. It has been ranked fourth worldwide and first in Africa on the global retail development index. The English-speaking West African nation is easily accessible to Europe and the US, with one of the best ultramodern airports in Africa. It boasts

one of the largest ports in Africa, with a shippingcontainer capacity of 3.5 million TEUs. Ghana has a thriving fintech sector and one of the highest mobile and data penetration rates. A stable government and favourable regulatory framework offer tax and duty incentives for manufacturing and export businesses. GIPC has positioned itself as the main hub for investor activity in a country which prides itself on being the “gateway to Africa”. The centre played a key role alongside the UNDP, in rolling out the SDG Investor Map, which guides investment into key sectors, including agriculture, infrastructure, technology, health and education. The CFI.co judging panel congratulates repeat winner GIPC on its apt slogan — “Grow in, and with, Ghana” — and confers on the firm the 2021 award for Best Investment Promotion Agency (Africa).

> SANGO CAPITAL: BEST AFRICA MID-MARKET INVESTOR SOUTH AFRICA 2021 Sango Capital has been active in Africa since 2011, building relationships, pursuing growth orientated top-quartile mid-market returns, and contributing to value creation. It is committed to responsible stewardship of the capital, people, resources, relationships and communities with which it has been entrusted. Sango Capital's annual forums facilitate networking and encourage international best -practice. The firm takes a thematic approach to investing, selecting funds with potential for high growth and returns, executing direct co-investments and other customised investment structures and building platforms in select sectors along with fund and non-fund partners. Investments target Africa's fastest-growing sectors: consumer goods, energy, natural resources, and infrastructure services. Sango Capital diversifies across countries,

industries, and teams to structurally mitigate capital loss. As an active investor, it engages with its fund partners and investee companies to help deliver high impact socio-economic development, continent-wide. The firm is one of the few in Africa to raise a long-term capital pool. It credits its success to its unrelenting pursuit of excellence and its high-calibre team. Endowments, foundations and family offices trust the firm's local expertise to uncover and execute on promising opportunities. Sango Capital promotes Africa as the last remaining scalable geographic investment opportunity, a burgeoning GDP and attractive asset pricing. The CFl.co judging panel recognises a firm with fair and transparent practices, and presents Sango Capital with the 2021 award for Best Africa Mid-Market Investor (South Africa).

> MAC SA: BEST STOCKBROKER TUNISIA 2021

MAC SA has evolved over the past two decades, to become the market leader in terms of securities trading and investment transactions. The company offers a full suite of financial services from stock broking and securities trading to asset management, equity research, fund raising, IPO’s, M&As, private placements and bond origination. Thanks to its independence and expertise, MAC SA has been serving institutional, corporate and individual clients in Tunisia over two decades with innovative solutions. It has built a sizable customer base including high net worth clients, family offices and foreign investors (individuals and funds) by offering tax foreign accounts regulated by the FATCA laws. Despite the difficult economic situation in Tunisia, the company has expanded direct investment inflows and assets gatherings for its fixed-income fund, Fidelity SICAV Plus, which has posted the highest returns for more than 3 consecutive years. In 2021, MAC SA conducted important acquisition transactions (BTK, UBCI, BH-Assurances) and was the lead of the national bond issues.

MAC SA understands that a diversified offering makes good business senses and has recently developed private equity business, through its subsidiary MAC Private Management, to meet the needs of Tunisian SME’s. Convinced on its professionalism and know-how, the German cooperation organization GIZ - Tunisia, has just signed a partnership agreement with MAC SA to launch a new and innovative private equity fund to alleviate the debt of Tunisian companies. With a such successful business model that has shown its effectiveness locally, the company has grown beyond its borders and has established in Ivory Coast to serve the regional stock exchange of the West African Economic and Monetary Union region. After few years, the subsidiary MAC African SGI ranked in the top 5 of the most active brokerage firms in the region. A successful model of south-south cooperation. MAC SA promises confidentiality and independence via a one-stop business model. The CFI.co judging panel declares MAC SA winner of the 2021 award for Best Stockbroker (Tunisia). CFI.co | Capital Finance International

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> METITO: MOST IMPACTFUL WATER COMPANY GLOBAL 2021

Water is such an integral part of all life forms, and it is one people take for granted. But water is a scarce resource with only 1% of earth’s water suitable for drinking. The growth in the global population, rapid industrialization, increasing pollution levels and climate change have put this already fragile global water supply under significant pressure. These macro factors are increasing the gap between the demand for water, which is at an all-time high, and the declining quality of existing supply resources. Metito has been at the forefront of the water and wastewater industry for over 60 years, creating sustainable and intelligent water management and treatment systems that balance political, social, economic, and environmental issues. Metito is strongly committed to the United Nation’s Strategic Development Goals, particularly, goal 6 – clean water and sanitation, goal 7 – affordable and clean energy, goal 11 – sustainable cities and communities and goal 13 – climate action through its three business areas: design and build, specialty chemicals, and utilities. It works closely with governments in the region and beyond to enhance water security and achieve local water and sanitation

goals, while providing job opportunities and upskilling talent to deliver long-term, worldclass quality practice and deliverables. Metito addresses the pressing challenges of water scarcity by establishing strong public and private partnerships (PPPs) and mega infrastructural projects. A testament to this successful approach: • In Rwanda, Metito has built the first bulk surface water supply PPP Project in SubSaharan Africa. The plant meets approximately 40% of Kigali city’s potable water requirements, a milestone that has had a huge impact on the socio-economy of the country. • In Egypt, • Al Mahsamma agricultural drainage treatment, recycling and reuse plant, a project developed by a Metito JV, which contributes to the cultivation of 70,000 acres and conservation of the region’s ecology. At time of award and construction, this was the largest of its kind in the world with a capacity of one million cubic metres of water per day. • El-Hammam plant, agricultural drainage, recycling and reuse plant, is another project developed by a Metito JV, which produces six million cubic metres of water per day, providing

up to 515,000 acres of water to the west of the Nile Delta area. This is now the largest plant of its kind in the world. • In the Kingdom of Saudia Arabia, Metito is currently developing the Jubail II seawater reverse osmosis (SWRO) desalination plant in Saudi Arabia producing 400,000 cubic metres of water per day. The location of the plant is significant being an integral industrial hub that significantly contributes to the Kingdom’s vision to secure a more diversified economy. This is also one of the largest SWRO plants developed by the company in recent years. • In the Republic of Serbia, expanding their global presence further, Metito is also developing the first-ever wastewater treatment plant in Serbia, in line with the Serbian government’s strategic water agenda. With these remarkable achievements, despite the challenging times that were brought about with the evolving Covid-19 pandemic, and Metito’s growing impact on water and energy sustainability, the CFI.co judging panel applauds the tireless efforts of Metito and confers on it the 2021 Global Award for the Most Impactful Water Company.

> ETIHAD CREDIT INSURANCE: MOST INNOVATIVE FINANCE SOLUTIONS MIDDLE EAST 2021

Etihad Credit Insurance (ECI), the UAE Federal export credit company, was established in 2017 through a government initiative to foster economic diversification in the UAE — and help reduce its reliance on oil resources, which accounts for about a third of GDP. ECI can be considered the fastest growing and the most innovative export credit agency in the Middle Est and Africa, securing a record non oil trade value of USD 2.7 Billion in a few years since its start of operations in February 2018. ECI has achieved lots of firsts: • first ECA in ME to launch an online Trade Credit Insurance solution for SMEs (named SME Protect, awarded by CFI.co in 2019). • first ECA to develop a credit scoring model based on Artificial Intelligence, to underwrite risks on SMEs (Awarded by Abu Dhabi Global 104

Market and the UAE Central Bank in 2020) • first ECA to develop a Sharia Compliant solution for short term credit insurance (awarded by CFI.co in 2020) ECI supports the growth prospects of local businesses looking to expand internationally, particularly in high-growth emerging markets. It offers exporters and re-exporters peace of mind with credit insurance solutions that protect against the potential insolvency or delinquency of buyers. Local investors can insure their foreign investments and projects against noncommercial and political risks. It works with local and international banks and financial institutions to provide factoring insurance, loss payee guarantees, letter-of-credit confirmations and surety bonds — which can help unlock funding opportunities, supported by its rating AACFI.co | Capital Finance International

from Fitch, reconfirmed for the third consecutive year in October 2021. It collaborates with private credit insurers to offer “top-up” plans for businesses with existing policies looking to increase a buyer’s credit limit. It levers a global network of more than 320 million businesses to bolster international relations, enhance trading opportunities, and deliver market insights. Over the past four years, ECI has facilitated over $572m (2.1 billion Emirati dirhams) to support SME trade finance. The listed company is owned by the UAE federal government and the emirate governments of Abu Dhabi, Dubai, Ajman, Ras Al Khaimah and Fujairah. The CFI.co jury announces Etihad Credit Insurance, a repeat programme winner, as the recipient of the 2021 Most Innovative Finance Solutions (Middle East) award.

Autumn 2021 Issue

> SAUDI ARAMCO TOTAL REFINING AND PETROCHEMICALS CO. (SATORP): MOST INNOVATIVE PROJECT FINANCE DEAL GCC 2021 SATORP, established in 2014, has been described as the Rolls Royce of refineries. Situated in Jubail, Saudi Arabia, it has a capacity up to 460,000 bpd and its production is sold to shareholders Saudi Aramco and Total. According to the panel, SATORP’s recent factoring within a corporate finance deal deserves a similar comparison to the famous car maker. SATORP’s Treasury main aim was to improve cash flow. Factoring (much cheaper than other working capital facilities) offered a brilliant solution, but the arrangement was no walk in the park. SATORP’s senior debtors are a dozen regional and international banks. According to a spokesman at investment bank Natixis, similar schemes had been tried elsewhere

but would end in failure. Here the lenders were confident because SATORP was appropriately organised and negotiated well. Natixis plans to try this scheme out with other clients. Legal advisers at Allen & Overy were similarly impressed. Time was of the essence as receivables have a limited shelf-life, and there had to be a seamless process to deal with the complicated paperwork. According to the law firm, there have been no dramas, shouts for help, or complaints from any parties. This arrangements allow for significant savings and factoring will be crucial going forward. The panel applauds SATORP for a job well done and is delighted to confirm the award: Most Innovative Project Finance Deal GCC 2021.

> stc KUWAIT: OUTSTANDING ACHIEVEMENTS IN CORPORATE GOVERNANCE & STAKEHOLDER PROTECTION KUWAIT 2021 This year, stc Kuwait completed a profound and comprehensive exercise to strengthen and improve its corporate governance and stakeholder protection policies and procedures. This important initiative was carried out under the guidance of stc advisers PwC Middle East. According to the CFI.co judging panel, the results have been exemplary and stc Kuwait deserves to be congratulated on their fruitful efforts. As part of the certification process, CFI.co considered, inter alia, the company’s board composition and member responsibilities, compliance policy, transparency, regulatory reporting requirements (to the Capital Market Authority), risk management, internal and external controls (including audit), codes of conduct, and the regulations to address conflicts of interest and other potential problems. The panel feels that the framework in place to

ensure good governance and protect all stakeholders is robust, meaningful, and worthy. Furthermore, there is confidence that stc Kuwait’s commitment to these virtues and critical corporate characteristics is unwavering and that the quest to secure, defend, and improve upon them will continue as the years unfold. It is obvious to the panel that the corporate culture at stc Kuwait is wholly supportive of the needs, aspirations and hopes of stakeholders as expressed in the company’s various policy statements. CFI.co thanks stc Kuwait and PwC Middle East for providing all necessary support during this certification process. The panel applauds the accomplishments and honourable intentions of stc Kuwait and has no hesitation in confirming the 2021 award for Outstanding Achievements in Corporate Governance & Stakeholder Protection (Kuwait).

> CFI FINANCIAL GROUP: BEST ONLINE FINANCIAL TRADING SERVICES MENA 2021 The CFI Financial Group and through its multiple regulated entities around the world is the preferred broker and trading provider of the Middle East, with over two decades of experience and an online trading platform offering thousands of stocks, Forex pairs, commodities, indices and ETFs. The company has invested in top-tier technology to provide traders with advanced order execution, strategy automation, powerful charting capabilities and a next-generation interface. Clients can choose between MetaTrader 5, MetaTrader 4, and cTrader platforms, three of the industry's cuttingedge solutions. The globally regulated company operates out of multiple regulated jurisdictions including London, Dubai, Larnaca, Beirut, Amman, Port Louis, and others. CFI offers lowlatency, fast execution, spreads from zero pips and zero commissions. The company has clients

from over 100 countries, providing personalised services through dedicated, and one-on-one account managers. Clients can open a trading account with no minimum deposit or hone their skills in a demo account that simulates the real environment with virtual cash. CFI publishes daily technical reports and hosts free webinars to educate traders of all levels, helping them to avoid mistakes and gain confidence. Information on the company’s products and services are easily located on its intuitive website. The company enjoys many word-of-mouth referrals given its ever-improving reputation, based on its superior support services and a track record of going above and beyond client expectations. The CFI.co judging panel presents CFI Financial Group, a repeat program winner, with the 2021 award for Best Online Financial Trading Services (MENA). CFI.co | Capital Finance International

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> CHASE: MOST INNOVATIVE RETAIL BANKING SERVICES US 2021

US consumer and commercial bank Chase serves half of America’s households. It is a subsidiary of JPMorgan Chase, a global financial services provider with $2.6tn in assets and operations. Chase offers a comprehensive suite of services, including personal banking, credit cards, mortgages, auto financing, investment advice, small business loans and payment processing. The bank hopes to expand its market penetration still further with incentives, including a $225 signing bonus for

new customers who set up a direct deposit or meet specified balance averages. Clients can access their accounts through the secure digital platform or via the thousands of physical Chase branches and ATMs. They can choose between credit cards with cashback incentives or rewards for hotels, airlines and entertainment. The bank encourages its clients to build their savings, and provides digital tools to advance financial awareness. It offers certificates of deposit with competitive interest rates. Chase

also helps people to realise their home dreams with the “DreaMaker” mortgage, which allows for down payments as low as three percent of the purchase price, a $2,500 grant to help with closing costs, and a $500 bonus for completing a homeowner’s educational course. Clients can also seek a mortgage or home equity line-ofcredit to pay off debts or make renovations. The CFI.co judging panel announces Chase as winner of the 2021 award for Most Innovative Retail Banking Services (US).

> UNITY WILLIS TOWERS WATSON: BEST SUSTAINABLE INSURANCE SOLUTIONS TEAM CENTRAL AMERICA 2021

Unity Willis Towers Watson is an insurance and risk-management specialist with an established presence in the Central American corridor. The broker places the client at the centre of operations and works with regional companies to offer individual, corporate, and group insurance solutions. Families can find peace-ofmind with tailored plans covering home, health, auto and life. Corporations come to Unity Willis Towers Watson for property insurance and group coverage plans for employees. Unity recently joined forces with US-based Willis Towers Watson, a global advisory, broking and

solutions company with a 193-year history and a presence in 140 countries. Both groups have benefitted, and the integration of accounts and personnel was a smooth process, despite the challenges of the pandemic. The acquisition has afforded Willis Towers Watson a stronger foothold in Central America and granted Unity access to a broad global network. Unity Willis Towers Watson has a peerless capacity for risk analytics. Operations and the executive team of Unity Willis Towers Watson remain unchanged, with some regional positions filled in-house. The company knows its people are a driving

force for sustainable growth, and a longstanding corporate governance framework ensures operations remain transparent, efficient and ethical. It follows through on commitments to social responsibility via national development initiatives, corporate volunteering programmes in local communities, and outreach programmes promoting healthy lifestyles. The CFI.co judging panel has followed the company’s progress for several years and has found cause for further recognition: Unity Willis Towers Watson wins the 2021 award for Best Sustainable Insurance Solutions Team (Central America).

> PPS PORTFOLIO PERFORMANCE: BEST INVESTMENT SERVICES FOR PENSION FUNDS BRAZIL 2021

PPS Portfolio Performance boasts nearly three decades of experience in the application of methodologies of portfolio evaluation in Brazil as well as other sophisticated tools for the development of asset liability management, lifecycle projects and the likes. PPS has developed a robust database on Brazilian portfolio managers through profound analysis and investigations based on the work of its due-diligence team. The firm tailors services to client needs and is committed to managing returns to meet actuarial goals. As interest rates have dropped in Brazil, the need for sophisticated investment 106

instruments has become even more important. PPS Portfolio Performance board members and executive managers must adapt to rapidly changing regulations and capital markets, and the firm’s leadership is responsible for arming them with the educational resources to meet those challenges. CEO Everaldo Guedes de Azevedo França and Rafael Sampaio, a senior investment consultant and partner at PPS Portfolio Performance, have trained more than 500 people in such subjects as investments policies, portfolio construction, risk management, compliance, conflicts of CFI.co | Capital Finance International

interests and asset liability management. The two executives have been frequent speakers at both domestic and international events. PPS Portfolio Performance is a pension-fund pioneer in the Brazilian market. It advocates for international diversification of portfolios and, over the past year, has seen a 15 percent increase in revenues. The CFI.co judging panel has followed the company for several years and is pleased to note its continued progress: PPS Portfolio Performance, a repeat programme winner, takes the 2021 award for Best Investment Services for Pension Funds (Brazil).

Autumn 2021 Issue

> BANCO SANTANDER MEXICO: MOST INNOVATIVE BANKING SERVICES MEXICO 2021 Banco Santander Mexico has an 89-year history, 19 million customers, 25,500 employees and 1,300 branches. It forms part of the global Santander network that has provided €33.8bn in green finance since 2019 — and invested €408m in communities, universities and social programmes in 2020. Banco Santander Mexico has achieved 13 percent return on tangible equity and €387m in underlying attributable profit. Over the past five years, the bank has made significant investments in digitalisation — and more than five million customers rely on its digital financial services. Clients can explore Santander Mexico’s digital investment offering and earn up to two percent cashback by transferring funds from another bank. Onboarding is simple and straightforward, with a low starting minimum of five thousand pesos ($247). CETEs, or Mexican Federal

Treasury Certificates, are available in various term limits and the same minimal buy-in. CEDES (fixed-term deposit certificates) offer attractive returns and monthly interest. These deposits are protected (currently to a maximum of some $135,000) by an inflation-linked public insurance scheme. Banco Santander Mexico offers innovative fund solutions using technology and quantitative models to build dynamic portfolios that adjust to market conditions. Its debt-plus fund (STERMXN) invests in American debt, converted to pesos, while its reward fund (RCOMP) offers complete capital protection. The CFI.co judging panel applauds the group’s commitment to ensure growth remains inclusive and sustainable, and presents Banco Santander Mexico the 2021 award for Most Innovative Banking Services (Mexico).

> VICTORIA MUTUAL: BEST FINANCIAL ADVISORY TEAM CARIBBEAN 2021 Victoria Mutual was founded in 1878 to “meet the needs of the deserving thrifty” and empower Jamaicans to pool resources and become homeowners. The mission remains the same, but the product range has expanded. Through its subsidiaries and partners, Victoria Mutual offers savings, deposits, loans, forex trading, money transfers, insurance, residential and commercial mortgages, and real estate services. Its members can control their wealth via Victoria’s pension fund management, administration and consultancy. The firm serves island residents and the diaspora community with 16 branches across Jamaica and representative offices in the UK and US. Victoria Mutual weathered the pandemic by digitalising operations; face-to-face meetings gave way to virtual events, online communication, and social media

webinars. A trustee training workshop registered thousands of attendees, and a June expo to highlight innovation attracted more than 16,000 viewers on Facebook, YouTube and Instagram. There were virtual property tours and members were encouraged to submit queries electronically; Victoria Mutual was quick to make detailed responses. The team adapted well to remote working conditions, with no loss in productivity or accountability. Victoria Mutual is driven by a qualified workforce and an executive board that is 40 percent female. The CFI.co judging panel has followed the firm’s progress for several years and is impressed with its cool competence throughout the pandemic challenges. Repeat winner Victoria Mutual takes the 2021 award for Best Financial Advisory Team (Caribbean).

> COMMERZBANK: BEST UNIVERSAL BANKING SERVICES GERMANY 2021 Flexibility and innovation have enabled Germany’s Commerzbank to adapt and prosper for more than 150 years. These aptitudes are as important today as ever as the world adjusts to the consequences of climate change, and Commerzbank, a leading player in both SME and corporate finance, is moving rapidly to tackle the challenges. Indeed, Manfred Knof, the recently installed CEO of Commerzbank, describes his organisation as “financiers of the green transformation”. Sustainability, he says, has become a fundamental pillar of the company’s business model. Commerzbank has set a commitment to become a net zero business by 2050 at the latest. The company has pledged to support its 11.6 million customers to make the transition to full sustainably. To that end Commerzbank plans to mobilise 300 billion

euros by 2025, tripling its sustainable business volumes from its 2020 position. An indication of the company’s intentions is a guarantee not to finance any new coal-fired power plants. In the past two years alone, the bank’s exposure to coal-related business has been halved. Commerzbank intends to expand this policy to include gas and oil by 2022. Despite its size, the bank prides itself on a focus on personal contact with customers, maintaining teams of hands-on advisors for clients across its network of 800 branches. Approval ratings indicate that the level of customer satisfaction with Commerzbank services remains consistently high. In 2021, for the third consecutive year, the CFI.co judging panel has no hesitation in presenting Commerzbank with the award, Best Universal Banking Services Germany. CFI.co | Capital Finance International

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> CHINA CONSTRUCTION BANK: BEST RETAIL BANKING SERVICES CHINA 2021

Over the past 67 years, China Construction Bank Corporation (CCB) has evolved into a comprehensive financial service-provider with 346,671 employees, 14,741 domestic branches, and hundreds of overseas subsidiaries. CCB serves hundreds of millions of customers around the world and ranks as the fourth-largest listed bank in terms of market capitalisation — and second in Tier 1 capital. CCB’s “New Finance” approach focuses on home rental, inclusive finance, and fintech. The state-owned bank expands its user base via digitalisation

initiatives. At the end of Q1 this year, CCB’s housing rental platform covered 328 cities and 34 million registered users. Inclusive finance loans have radically increased, helping to tackle poverty and revitalise rural areas. Fintech has been harnessed to facilitate the sharing of data and to improve agricultural livelihoods. CCB targets five regions, helping to lift 750,000 people in 2,486 villages out of poverty. Inclusive finance solutions expand through an online-offline financial services system that prioritises lower-tier cities and rural

areas. CCB’s brand, Yunongtong, covers the nation with 527,000 service points, providing services to 41 million rural residents through the Rural Revitalisation campaign. The bank has built 2,022 schools and organised 45,000 training sessions, including several geared to financial literacy and poverty reduction. Over three million rural residents have benefitted from the programme. The CFI.co judging panel recognises the inclusive momentum of China Construction Bank with the 2021 award for Best Retail Banking Services (China).

> CONTAINERS PRINTERS: BEST SUSTAINABLE PACKAGING TECHNOLOGY AND MOST INNOVATIVE PACKAGING TEAM SOUTH EAST ASIA 2021

Containers Printers (CP) is a leading provider of metal and flexible-laminate packaging solutions for the nutrition and medical industries. The Singapore-based company was founded in 1981, and since then has continuously driven innovation and sustainability. CP works with clients from 30 countries and operates to the highest global standards, with ISO certification for quality management systems, workplace safety, and environmental performance and compliance. It supports Singapore’s Towards Zero Waste initiative and is committed to minimising packaging, which accounts for

about a third of domestic waste by weight. CP helps its customers to meet the requirements of Singapore’s 2021 Mandatory Packaging Reporting regulation, including by developing and executing 3R plans for their packaging. The company’s solar panels, LED lighting and upgraded equipment are the result of ongoing sustainability programmes and the EENP Energy Efficiency National Partnership. In-house energy measurement systems systematically measure and manage consumption, and identify avenues for increased efficiency. CP combines stateof-the-art technology and advanced design in

digital solutions to identify counterfeit products, track supply chains, and connect with clients. Quality management systems for material handling, hygiene and food safety inspire trust, while CP’s design capabilities offer creative consistency. The company values its staff and has established an in-house training centre to develop individual technical and leadership skills. The CFI.co judging panel presents Containers Printers — a repeat programme winner — with the 2021 awards for Best Sustainable Packaging Technology and Most Innovative Packaging Team (South East Asia).

> CHINA LIFE INSURANCE (GROUP) COMPANY: BEST LIFE INSURANCE SERVICES CHINA 2021

China Life Insurance (Group) Company, headquartered in Beijing, provides insurance and annuity products to clients across the mainland and abroad. China Life received an A1 financial strength rating from Moody's and A from Standard & Poor's. It ranks 32nd in Fortune’s 2021 Global 500 Companies. According to Forbes, China Life has a market capitalisation of $57.3bn and sales of $113.8bn. The stateowned company is the country’s largest insurer in terms of assets. It divides insurance business into life, health, accident, and other financial 108

services, including asset management. It has a nationwide service network, with a million sales-force channels serving over 500 million customers. It administers some 303 million long-term annuity contracts and policies for individual / group health and life insurance. The corporate mission calls for prudent operations and progress fuelled by trustworthy service and innovative products. China Life aims to be a lifelong partner that fulfils lifelong promises. Its wholly-owned subsidiary, China Life Insurance (Overseas) Company CFI.co | Capital Finance International

(CLIO), acts as the group’s overseas business development arm. CLIO has established a foothold for the group in South East Asia, with offices across Hong Kong, Macau, Singapore and Indonesia. The CFI.co judging panel cites the group’s strong management and harmonious development as factors in its growth. The judges present China Life Insurance (Group) Company — listed on the stock exchanges of Shanghai, Hong Kong and New York — with the 2021 award for Best Life Insurance Services (China).

Autumn 2021 Issue

> BANQUE NEUFLIZE OBC: BEST ESG PRIVATE BANKING STRATEGY FRANCE 2021 France's private Banque Neuflize OBC was founded by entrepreneurs and philanthropists over 350 years ago. lt believes in balancing investment with positive outcomes for society and the environment, and statistics show that 63 percent of the French population is in agreement. For more than a decade, carbon emissions in the bank's operations have been offset via reforestation programmes. Banque Neuflize OBC sees finance as an opportunity to drive positive transformation. lt takes a holistic approach which guides investment towards "virtuous" sectors, and it is committed to ESG. lt takes into account the extra-financial value of companies — based on CSR, ESG and SRI criteria — to integrate sustainability into all processes. lt focuses on supporting clients'

transition towards a sustainable future, and enriches employees' experience by integrating environmental concerns and with community support. One fund aims to accelerate sustainable development by investing in renewable energy and agriculture in emerging countries. Others seek to promote financial inclusion via microfinance and impact-aligned emerging-market debt. The bank has launched two non-profit foundations. The Neuflize OBC Foundation has supported cultural and arts patronage for about 25 years, while the Philgood Foundation gives clients access to a carefully curated and fully transparent collection of philanthropy projects. The CFl.co judging panel presents Banque Neuflize OBC with the 2021 award for Best ESG Private Banking Strategy (France).

> SONY BANK: BEST ONLINE BANKING SERVICES JAPAN 2021 Sony Bank has been providing Japan with convenient and secure digital financial services for two decades. It is part of Sony Group Corporation, and eschews physical branches in favour of digital platforms and an independent, third-party ATM network. Sony Bank has earned top-class credit ratings and a reputation for reliability. Its sound security system inspires trust in online accounts, and customers can transact in yen and 11 foreign currencies. Sony Bank offers competitive interest rates and fees on exchanges, remittance, and withdrawals. Customers can access their money globally via Sony Bank’s WALLET International Visa Debit card, which promises seamless, fee-waived payments. The bank has introduced an Englishlanguage app to serve the country’s growing

number of expats, who sometimes struggle with Japan’s banking regulations and documentation requirements. Accounts can be opened by downloading the app and scanning relevant documents — without needing to affix the official seals typically required in Japan. There are no minimumstay requirements for customers, who can expect to receive their WALLET within 10 days. The card comes with cashback schemes to reward consumers in Japan; clients with higher account balances receive benefits as “Club S” members at silver, gold, or platinum levels. The CFI.co judging panel notes high levels of customer satisfaction, a deciding factor in the decision to confer on Sony Bank the 2021 award for Best Online Banking Services (Japan).

> CAMLIFE: BEST MICROINSURANCE COMPANY CAMBODIA 2021 Camlife was founded in 2012 as Cambodia's first life insurance company – and it remains a Company all Cambodia can be proud of. This Company, which is fully owned by a Cambodian, Neak Oknha Kith Meng, Chairman of Royal Group of Companies, takes great pride in its national heritage. Since its first operation in the Kingdom’s market, Camlife has been remarkably expanding to insure more than 83,000 lives amid mass transmission of Covid-19 pandemic which has triggered economic uncertainty to businesses. Camlife focuses on micro insurance which it views as the best way to serve the Kingdom’s population. Camlife has a big network opportunity among subsidiaries under the Royal Group of Companies to support each other. It’s also the Chairman’s intellectual facilitation which plays a vital role in widening network among senior managements for growth, mutual leveraging and development. Camlife has tapped into a wide spectrum

of customers nationwide through a series of well thought products design aimed to meet the needs of the market especially the middle low-income market segment in ensuring that all families are always financially secured. Camlife has also a plan to broaden its business with commercial banks and MFIs for bancassurance products to their customers as well as extending partnership with insurance brokers to reach insurance products and services to end customers. Besides the business expansion, Camlife is adopting a cutting-edge core system to support the micro insurance operation more efficiently. The continuous growth of Camlife is largely attributed to the technical support of the Insurance Regulator of Cambodia under non-Bank Financial Services Authority. The CFI.co judging panel recognises a company with foresight and commitment, and names Camlife winner of the 2021 award for Best Microinsurance Company (Cambodia). CFI.co | Capital Finance International

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> Africa

Young, Booming and Hip: Africa’s Musicians Making ‘Local’ Styles International By Brendan Filipovski

African music has had an enormous impact on the Western world — and now, in the digital age, the beats are becoming big business.

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n March, Nigeria’s “African Giant” — Damini Ogulu, aka Burna Boy — won a Grammy for Best Global Music Album for Twice as Tall. He sings and raps in a mixture of pidgin English and Yoruba. American producer Sean “Diddy” Combs produced the album, but the melodies and beats are unmistakably African. Burna Boy, a champion of pan-Africanism, draws on traditional styles as well as those of the diaspora. “We’re all going through the same problems,” he told Jon Pareles in a New York Times interview, “we just speak different languages. I want my children to have an African passport, not a Nigerian passport.” And his audience is global. Twice as Tall peaked at number 10 in the Netherlands, 11 in the UK, 12 in Switzerland, 19 in Canada, and number one on the Billboard World Albums chart. He sees his music as up-and-coming pop — with an African soul. He is at the vanguard, along with a plethora of African artists including Wizkid, Davido, Mr Eazi, Tiwa Savage Master KG, and Sho Madjozi. But unlike the individual success stories of past generations — think Nigeria’s Fela Kuti, Mali’s Salif Keita, Benin’s Angelique Kidjo, and Senegal’s Youssou N'Dour — external factors are aligning to push Burna Boy and his cohorts to even greater global prominence. Music-streaming services are investing in Africa. Spotify aims to be in 39 of the continent’s 54 countries by the end of the year; Apple is already in 33. Netflix is also investing in African content. Several Africa-based streaming services have emerged, including Boomplay and Mdundo. Boomplay started in Nigeria in 2015, and now operates in Kenya, Ghana and Tanzania. It has over 50m users. These companies are hungry for local talent to stay relevant, and domestic streaming services see it as their competitive advantage. This provides a fresh source of revenue for musicians, and has been a boon during the concert-cancelling misery of Covid-19. In 2020, streaming was the largest revenue source for African and Middle Eastern music, responsible for 36.4 percent of all recordings. And this is just the start, with many artists using smartphones and 4G internet to produce content. 4G connections are expected to increase from nine percent in 2019 to 27 percent by 2025. A Tanzanian artist who signs to Spotify not only reaches an established domestic audience, his or her output stretches around the world. Expect

"Burna Boy, a champion of panAfricanism, draws on traditional styles as well as those of the diaspora. 'We’re all going through the same problems,' he told Jon Pareles in a New York Times interview, 'we just speak different languages. I want my children to have an African passport, not a Nigerian passport.'" to see more African songs popping up in your Spotify playlist: streaming is flattening audience access. YouTube and social media are also providing opportunities. The viral hit Jerusalema was recorded in South Africa in November 2019 by Master KG and singer Nomcebo. With its infectious rhythm and accompanying dance, the song spread across the world thanks to posts on social media. It enjoyed a further boost when it was remixed by Burna Boy in June 2020, and by Venezuelan Micro TDH and Colombian Greeicy in September of the same year. The original version has over 440m views on YouTube and reached number one in six countries. A template has been established. International record companies have steppedup their interest. Universal has been in Africa for 30 years, but until recently was focused on the largest domestic market: South Africa. Now it is thinking pan-African. In 2018, it bought a stake in Kenya’s AI Records. It has offices in Nigeria, Cameroon, Côte d’Ivoire and Morocco. In 2020, it formed the Def Jam Africa label to take advantage of the growing rap scene. Another global giant, Warner Music Group, bought out a South African label in 2013 and has been expanding through partnerships with companies and distributors, such as Nigeria’s Chocolate City. Companies are signing deals with local and international streaming services, increasing local and international exposure. Underlying this international interest in African music is a growing population, increased urbanisation, and rising income levels. Africa’s

population is projected to grow from 1.34bn in 2020 to 2.49bn by 2050. And by 2055, it will have the highest percentage of working-age people in the world. Most developed countries are projected to have decreasing, ageing populations by 2050. By then, Africa will have the world’s fastest urban growth rate. It is easy to understand why many industries, including the music sector, are investing. Africa is young, booming, and hip. Of course, tastes and styles vary across a continent as big and diverse as Africa; Afropop is a broad church with over 50 genres. Genres developed via fusion of traditional and modern elements, including Afrobeat (a West African mix of jazz, funk, calypso, and brass), Mbalax (Senegalese dance music with a strong drumming influences), and Kwaito (a South African mix of jazz, house, and hip hop). Newer artists such as Burna Boy are drawing from all genres, and this, combined with the rise of streaming, could be creating a new style: Afrofusion. It is likely to draw a growing international audience into the musical mosaic. The rising interest in the potential of the African market is providing African artists with new opportunities, and audiences. New stars are emerging. Cross-pollination between Africa and the West is strong, but these new styles are still truly African. “There is a certain smile of recognition when Africans recognise a sound, or a process that is truly African,” said the late musicologist AM Jones. The world is recognising that sound too. i

"The rising interest in the potential of the African market is providing African artists with new opportunities, and audiences. New stars are emerging. Cross-pollination between Africa and the West is strong, but these new styles are still truly African." 112

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> Ghana Investment Promotion Centre:

Laws of Attraction GIPC Draws Global Attention to the Investment Opportunities in Ghana

he Ghana Investment Promotion Centre has over the years, adopted multi-tiered approaches to carry out its mandate, in promoting and attracting investments into Ghana. The Centre has initiated and supported dynamic measures to enhance the business climate for Ghanaian and foreign enterprises. 114

The GIPC takes pride in being world-class experts in facilitating international investments into Ghana and connecting Ghanaian businesses with the rest of the world. It serves as a major conduit between investors and the vast unified African market as Ghana hosts the secretariat of the African Continental Free Trade Area. CFI.co | Capital Finance International

The Center is widely regarded as the best IPA in West Africa, having consistently attracted gamechanging investments to Ghana in order to support new industries, improve existing ones, create jobs, and strengthen the Ghanaian economy. GIPC’s diverse team — trade and investment analysts, researchers, and industry experts —

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Chief Executive: Yofi Grant

services, leveraging digital technology and social media to better serve investors, reinforce its commitment to the buoyancy of the global economy and keep up with changing business trends.

named it best investment promotion agency in West and Central Africa for five years in a row, and CFI.co named it best investment promotion agency in Africa for two years in a row.

At GIPC, the notion of investment promotion goes beyond traditional media and events promotion. It makes aggressive use of digital media, coupled with high-level stakeholder engagements and business-to-business links. With this strategy, the GIPC, even amid the pandemic, recorded impressive FDI inflows, placing Ghana among the top recipients of FDI on the African Continent.

Yofi Grant, CEO of GIPC, was elected to the World Association of Investment Promotion Associations' Steering Board in 2019 to represent Sub-Saharan Africa. He serves on the board of the Organization of African, Caribbean, and Pacific States, representing West Africa as an external independent member of the Endowment and Trust Fund.

To widen the investment pool, the GIPC is a pioneer of Diaspora Direct Investments in Africa as nascent steps are being taken by the Center to harness and coordinate the global African resource potential. Its Diaspora Investment Desk distinctively caters Investment and commercial activities between Ghana and the African diaspora. This compounds with the GIPC’s Aftercare Division, established to provide postinvestment services to nurture lasting stakeholder relationships.

continue to provide insights on investment opportunities and assist investors to seamlessly integrate into the Ghanaian business world. A UNIQUE APPROACH The GIPC's work continues, despite increased global uncertainty as a result of the ongoing health crisis. The Center has transformed its

In line with the global drive for sustainable investments, the GIPC encourages investments that have positive economic, social, and environmental outcomes. It recently collaborated with the UNDP to launch the SDG Investor Roadmap, which aims to mobilize private-sector investments to advance the Sustainable Development Goals. A GROWING REPUTATION The last four years have been busy for GIPC. The Annual Investment Meeting (AIM) awards CFI.co | Capital Finance International

DRIVING REGIONAL TRADE AND GROWTH The GIPC has been instrumental in boosting intra-African trade through its involvement in the implementation of the African Continental Free Trade Area. The Centre works with stakeholders to ensure that the necessary infrastructure and policies are in place. The Centre spearheads the Invest Ghana agenda by disseminating limitless business opportunities in sectors such as agriculture, real estate, manufacturing, health, and tourism. Its multi-faceted approach to investment attraction has played a direct role in the increasing buoyancy of the regional economy. “We welcome the world to explore Ghana’s investment opportunities,” says Grant, “with us being your first port of call.” i

More information: @gipcghana on Facebook, Twitter, Instagram, LinkedIn and YouTube. Website: gipc.gov.gh 115

What you do not see can often be of immense value. Like the right word at the right time. An appropriate silence. A listening ear. It’s our attention to both the essentials and the details that makes a difference, and reveals the spirit of our bank.

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> State Investment Corporation Ltd (SIC):

Mauritian Investment Body Has Country’s Best Interests in Mind The State Investment Corporation Ltd (SIC) — the investment arm of the government of Mauritius — was founded in 1984 with the objective of funding high-growth entrepreneurial ventures and helping businesses to industry-leading positions.

IC has proven itself a valuable partner for local and foreign entrepreneurs and owns a diversified investment portfolio which has seen continuous growth to be worth $176.7m (as at December 31, 2020).

The SIC is structured into three main business clusters: gaming, property, and portfolio management. As an apex body, it is supported by key subsidiary companies: • Capital Asset Management Ltd (CAM) Asset and fund manager CAM provides asset allocation advice, equity and fixed-income portfolio construction. Its services include the development of strategies for local and foreign markets and private equity appraisal. • Prime Partners Ltd (PPL) PPL provides a range of corporate services to the SIC Group of Companies and to some stateowned enterprises, including insurance, banking and financial institutions. Services include corporate secretarial, accounting, and share registry. • SIC Development Co Ltd (SICDC) SICDC is responsible for channelling funding through a line of credit from the EXIM Bank of India to public sector entities in Mauritius for major infrastructure projects, the Metro transport system and social housing among them. As the investment arm of the government, SIC supports entrepreneurship in impact projects. In this process, it works with three organisations: (i) Development Bank of Mauritius Ltd (DBM) The bank has been at the forefront of socioeconomic development by providing finance to micro, small and medium enterprises (MSMEs) through tailor-made products and industrial space to entrepreneurs setting-up their enterprises. (ii) Investment Support Programme (ISP) Ltd This is wholly government-owned. It devises financial schemes to provide leasing and factoring facilities to micro-entities, SMEs and Mid-Market Enterprises (MMEs). It also provides corporate guarantee facilities secured by SIC.

Chairman: Jairaj Sonoo - C.S.K

Managing Director: Goolabchund Goburdhun - G.O.S.K.

(iii) SME Equity Fund Limited (SEF) The objective of the SME Equity Fund is to provide equity and quasi-equity financing to local companies. The SEF invests in start-ups, expansion projects, and new lines of business. SEF comprises of shareholders (including SIC) from the public and banking institutions in the ratio 57.5 percent:42.5 percent.

submission to approval, as well as subsequent performance monitoring.

THE CONTEXT OF COVID-19 Following the outbreak, the government of Mauritius sponsored several support measures for impacted entities, including loans and leases at preferential rates to SMEs, equity/quasi equity, and corporate guarantee to banks — across all economic sectors. In this respect, SIC, DBM, SEF and ISP have agreed to operate a one-stop cell (guichet unique) to receive and process applications for financial support. These state-owned entities operate in synergy and have leveraged advanced IT technology and platforms to enable the timely processing of applications from date of CFI.co | Capital Finance International

THE WAY FORWARD SIC is committed to maintain leadership, empowerment, and employee engagement at all levels to sustain growth and development. As part of its investment management activities, there is a gradual and smooth portfolio transition to emerging sectors. This strategy is expected to translate into a resilient portfolio for long-term growth and sustainable returns. The board of directors of the SIC comprises professionals with wide experience in finance and business management: • Jairaj Sonoo - C.S.K., Chairman • Goolabchund Goburdhun - G.O.S.K., Managing Director • Premode Neerunjun, Director • Kritananda Naghee Reddy, Director • Anandsing Acharuz, Director • Cader Jaunbocus, Director • Mohummad Shamad Ayoob Saab, Director i 117

> Must

Inequality Be Our Constant Companion? By Jason Agnew

The UN’s sustainable development goal number 10 addresses this issue, and, for humanity’s sake, better solutions must be found.

he aim of SDG10 is, by 2030, to progressively achieve and sustain income growth of the bottom 40 percent of the population — at a rate higher than the national average.

Inequality has always been with us. In the West, many considered that we had come close to solving the problem in the three decades that followed the World War II. The UK did become a more equal nation in those post-war years. The share of income going to the top 10 percent of the population fell over the 40 years to 1979, from 34.6 percent in 1938 to 21 percent in 1979. The share going to the bottom 10 percent rose — slightly. But by 2010, the top 10 percent were receiving the same as back in 1938, and that figure has remained virtually unchanged. In terms of wealth, in 2010 (the most recent year for which data are available), 45 percent was held by the richest 10 percent of the population. The poorest 10 percent held just one percent of the riches. On July 12, the British government announced that it would reduce its foreign aid budget, from 0.7 percent of GDP to 0.5 percent, breaking its 2019 manifesto pledge. The move had majority 118

"China and India have seen massive economic growth and have lifted millions out of poverty." support; people considered that, in these difficult times, money should be spent “at home”. The difference between the two above figures is around £4bn; the government insists that the measure is temporary. Although many have criticised it, the UK’s aid budget is still higher than those of Japan, Canada (yes, really) and the US, which allocates a paltry 0.17 percent of GDP to foreign aid. Government figures for 2019 show that Pakistan was the top recipient in that year of bilateral aid, followed by Ethiopia, Afghanistan, Yemen, Nigeria, Bangladesh and Syria — all countries which will feel the cuts. The organisations affected include the UN’s children’s fund, UNICEF, and its family planning agency. In Pakistan, according to the International Rescue Committee, that will hit education. Nearly 11,000 girls in rural Pakistan may not be able to attend school if the funding stops. Women and CFI.co | Capital Finance International

children inevitably suffer more when inequality increases. There has been good news, however. China and India have seen massive economic growth and have lifted millions out of poverty. But while major progress has been made, more than 75 percent of households in developing countries live with greater income inequality than in the 1990s. Balancing income levels must be addressed in parallel with inequalities based on disability, gender, race, and religion. Discrimination on these grounds is illegal in many countries, but movements such as Black Lives Matter demonstrate that much remains to be done. The populists who try to make a virtue out of disparity has brought into question just how enlightened modern societies really are. Climate change is another major factor. As the United Nations University Institute for Environment and Human Security (UNU-EHS) states: “Losses and damages from climate change are not just a future risk, but a reality for vulnerable people today. Many places around the world are becoming uninhabitable because of environmental problems.” The picture is indeed bleak, but optimism is an important virtue. We are in definite need of it in these turbulent times. i

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The Fintech Ecosystem in Africa is Entering into a New Era of Growth and Consolidation FinTech Africa Transactions. Source: Verdant Capital, S&P Capital IQ

795 674 555

457

208 79

2017

2018

he fintech ecosystem in Africa is entering an exciting and challenging phase with more capital, more competition, and more consolidation.

As key segments grow, the rewards and risks grow for challengers and incumbents. Available capital has grown in amount and breadth recent years. “Home-grown” funds specialising in fintech — often with the support of international development finance institutions — have become a core part of the investor group. Generalist investors from the African continent have taken a more active role, with most having made investments in the fintech sector from recent fund vintages. As the sector in Africa has scaled and grown, larger, more mature players have started to catch the eye of global tier 1 venture funds. The recent Softbankled $400m round into Opay is a case in point. Verdant Capital fintech transactions in the past year have involved investors from the US, Japan, China, the Netherlands, Switzerland, France and the Baltics. Certain major global VC investors, such a Partech Global, investor in tech-enabled asset finance business Tugende, and others — such as Wave, in Senegal — have invested from the dedicated Africa Fund since 2018. More VCs are now investing directly from global funds.

2019

2020 .................................................. 9M 2020

Barriers to entry are high, with significant minimum capitalisation for bank, insurance and other licences, lengthy application processes, and the importance of brand in the sector. The movement of financial and human capital has enabled the fintech sector to overcome these barriers. Scale is becoming an important differentiator in the success of the funding rounds: “It’s good to be the best, but it’s better to be the biggest.” In some ways, this represents convergence with the major tech and venture ecosystems, where growth is prioritised above all — including profitability. In theory, this is justified by platform economics — the theory that the additional revenue from each additional “node” has a more linear impact on the aggregate revenues. Despite the theory’s logical basis, many unicorns, such as Uber and WeWork, remain unprofitable after multiple successful funding rounds. In Africa, most fintech players have historically had to “eat what they kill”, i.e. prioritise profitability over growth to achieve profitability sooner. The latent potential of many fintechs, including disrupters to credit and payments, has made for rampant growth in the best operators. Zeepay, a pan-Africa, pan-diaspora electronic payment disrupter, has grown its revenues 13fold in three-and-a-half years while maintaining constant profitability.

Large corporates have entered the competitive landscape through minority investments, such as incumbent payment businesses such as Mastercard and Visa. Others have used corporate repositioning, for example a recent Airtel decision to partially spin-off its mobile money business. It’s a strategy likely to be replicated by other mobile network operators.

The preference for scale has also been driven by the entry to Africa of the Tier 1 global VCs. This has given fintechs in Africa an additional growth incentive to obtain the higher cheque amounts — and, typically, higher valuations. It has also been driven by competitive strategists from within and without.

Availability of capital is crucial for fintech. By its nature it is disrupting the financial services sector, which was in need of renewal, and had major barriers to entry. This is because of humanand operating expenditure-heavy product life cycles (lending or insurance), and over-reliance on legacy infrastructure not consistent with evolving customer preferences.

Scale, growth, and competition have prompted consolidation from push and pull perspectives. Africa has an aggregate population and GDP similar to India’s, but fragmented into 54 countries. This has prompted cross-border M&A as the sector has matured, and larger players have pursued platform economics by adding national markets. CFI.co | Capital Finance International

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Horizontal consolidation across segments is also an exciting trend, with payments and credittech increasingly seen as highly synergistic. The “rails” to reach lower- and lower-middle market customers, and to receive data and repayments in the other direction, is a critical component in many credit-tech and tech-enabled businesses. Crossfin’s shareholding in Retail Capital, a leading South African tech-enabled SME-lender, is an example of a payment platform acquiring interests in the credit segment. The “push” factors of strategic threats, including by global payments groups and regional telcos, has led to some fintechs in the growth phase to take pursue either an ever-larger capital round, or an exit. In some cases, the status quo is not an option. The early-stage VC scene (angel, seed stage, and series A) has recently been pushed out of the headlines by the larger transactions, but activity levels are growing. Newer disrupters are focusing on more recent themes, such as insurtech, and several ventures are targeting the crossover between fintech and cleantech — for example, OWatt from Nigeria. Insurtech has several interesting players getting closer to “escape velocity”, including Briisk, in South Africa, Alpha Direct, in Botswana, and Kalibre, a global insurtech with roots in South Africa. Insurtech has greater barriers to entry than many other fintech segments, including a lack of real domain expertise and a longer revenue-building cycle (although the revenues are much “stickier” once built). Credit tech still has a range of interesting start-ups and earlier stage businesses, including Finclusion, an embedded credit-player in southern and eastern Africa, and asset financing businesses, such as Planet42 in South Africa and Mexico. As African start-ups from the early and mid-2010s reach a global audience, there is a fascinating new cohort arising… i 119

> The Good Coach Wins the Game:

The Chairman and Their Team In professional sports, mental readiness is key for champions. This is highlighting the importance of being mentally balanced also for senior executives. The Non-Executive Board must observe and nurture the mental health of the firm’s top executives in addition to overseeing the firm and acting as the interface between shareholders and executive management, to create resilient and sustainable organisations. EXECUTIVES ARE SKILLED, ABLE, AND WELLMEANING! YET, IN SITUATIONS OF RAPID CHANGE, THEY ARE OBSERVED TO ACT DYSFUNCTIONAL. Research has shown, executives are skilled, able, well-meaning, and well-informed about the firm and its surroundings. In general, they are motivated to pursue the best interest of the shareholders. However, in economic turmoil, executive teams have been observed, to fall into a cycle of dysfunctional communication. This is starting with a state of secrecy and denial, further escalating to blame and scorn, avoidance and turf protection, and finally passivity and helplessness.

“Some pressure is good. It makes them run faster!” Research has outlined stress factors for Executives in situations of economic distress. Source: Rafferty, 2019

A myth in management claims: A level of stress enhances the task performance of the employees. This belief is based on research results conducted in 1908 by the two animal behaviourists Yerkes and Dodson at the animal behaviour faculty of Harvard on Japanese dancing mice and has been challenged by various scholars in the past years. Unless the executive team has been recruited from Japanese dancing mice, an increased stress level is diminishing executive performance. GLOBAL SPORTS MANAGEMENT IS AHEAD OF BESPOKE MANAGEMENT PRACTICE Across different disciplines the global market for professional sports achieved 2019 a total revenue of $1.8 billion, leaving an average sports team with a revenue of $39.5 mil., in the same spot, as many SMEs. The sports industry is in reality a subbranch of the media and entertainment sector, where task-performance objectives are only on semblance reduced to scoring goals, similarities to business are stronger than one may think. Muscles and brains cannot be separated from each other. For professional athletes, peak performance is the result of rigorous training regimes and a state of mental readiness. Yet, other than in economics, mental preparation is not left at private discretion but is nurtured by mental coached, preparing athletes for the match. Mental readiness is understood as a 120

critical factor, which is attended with thorough attention.

of rapid change. This can be a foundation for growth and sustainability.

WHEN IT REALLY MATTERS, THE FRAMEWORK FOR TOP EXECUTIVE PERFORMANCE IS AT ITS WORST Stress factors, related to situations of rapid change, where the dynamics of the transformation keep accelerating and exceed the level of control of the management, are identified and can be categorised. Excess executive stress under distress and turmoil conditions is driven by four aspects:

“A coach, allowing his team to be mentally distracted before the championship, will be fired on the spot! For a reason!”

• Rapid and drastic changes in the work environment, including increased workload, changes in processes, style, and communication • Financial and legal concerns, caused by reduced payouts, fear of job loss, potential personal liabilities (et al.). • Emotional disruption, through continuous and repeatedly non-appreciating communication with various stakeholders, but also including disharmony in the intimate relationship. • Future worries, for reputational consequences, the continuation of the own career path etc.

Capital markets are sensitive to the emotional well-being of the CEO already on a much lower level. Research has proven correlations between the emotional distraction of the experience of a recent divorce and the reactions of the capital markets.

Clustering the drivers for executive stress, most stress drivers are triggered by immediate and internal processes. The Board-of-Directors holds the authority, to establish a culture, voiding the most notorious stress drivers, to protect and retain executive performance in situations CFI.co | Capital Finance International

In situations of rapid change, higher levels of emotional stress and turmoil are suspected to be the differentiating element between the executive teams of firms in distress that must be liquidated and those, that manage to recover.

IN THE 21ST CENTURY, WE ARE APPLYING EXECUTIVE (SELF-)LEADERSHIP OF THE 1800S For once, let’s be honest: We all «kind of» know about the risks of Burn-out and the importance of mental health in the Executive world, yet, a stressful workday, permanent connectivity, and late hours in the office are treated by many executives as "scares of honour". Regrettable yet excusable liabilities to the family, the intimate relationship or the own, personal balance and well-being. For career frontliners, this is accepted as the price for success.

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In parallel, Executive incentive systems are set up to foster the short-term profitability of a firm, yet often fail to include mental balance of the executives in the considerations. It is fair to argue, high paid executives must observe their capabilities to perform themselves, yet, ignoring the relevance of mental balance for executive performance and focus on short term outcomes exclusively, can diminish the resilience of the organisation. In sports this would be equal to send the best player of the team to the match, whilst ignoring recent, previous injuries. Chances are: small problems will cause bigger problems and end in negative outcomes when it really matters.

“A small injury, left unattended, can prove being fatal in the final match.” THE GOOD COACH For the coach it is key to understand, performance levels vary even for top players. This can be due to daily performance variance, subject to dealing with legacy issues, or emotional burdens. In either case, the result of today’s match may be depending on high performance to be delivered to the point. To win the match the coach must exercise the right assessment of the status of the team and its key players. For the Chairman, the ongoing monitoring of the capabilities of the executive team is at the core of her responsibilities in order to facilitate long term and sustainable growth and success and foster the resilience of the firm. Executives are on top of the daily challenges and routines. Even on a „bad day“ they will perform on a sufficient level. Things can turn critical if the tides are rising. It has been observed, companies, heading for growth and, firms exposed to disruption in the external environment, carry high risk of failure. Resilience is key for the executive team, to deal with situations of rapid change, where the dynamics of transformation keep accelerating and the level of control is diminishing. Here, executives need excess capabilities to control the situation and quickly adapt to a new reality. For the chairman, it is key to understand, if she has the right team in the game. Cheering and motivating, directing from the sideline, bringing in expert players for special situations but also making sure exhausted players rest, and bringing in fresh blood to the match are part of orchestrating a match. RIGOROUS TRAINING LEADS TO THE CHAMPIONSHIP Success is not born on match day, but build up over the season. Resilience and engagement on the executive level is the result of a process. To the good, a healthy and well-facilitated culture, regular executive education can build up a strong CFI.co | Capital Finance International

"Understanding the skills and current capabilities of the executive is at the heart of the chairman’s responsibilities." and capable team, able to take on turmoil and situations of rapid change; yet, to the bad, toxic work environments, unhealthy relationships, exhausting periods at work without rest, etc. can deplete the resources of the executives and bring individuals close to a point, where breaking sooner or later is inevitable. A little increase in pressure and the capabilities of the team can be exceeded. TAKE AWAY – GAME CHANGER OR PLAYMAKER?! Understanding the skills and current capabilities of the executive is at the heart of the chairman’s responsibilities. Selection, succession planning, challenging, re-training, of the executive team – these are disciplines, easily agreeable to be mastered by the Non-Executive Board. Yet, there is more to it. Identifying and mentoring key players on different levels of the organisation, assessing temporary downturns of individual performance, and understanding trends vs. events is key to be able to facilitate sustainable success and build resilience throughout the organisation. Also, creating a culture, which is aware and hedging for systematic stress drivers, the executive team is facing, specifically in situations of rapid change and moments of turmoil, is key to create value from the board and prepare an organisation for rough times ahead. i ABOUT THE AUTHOR Kolja A Rafferty is a seasoned expert for strategy, turnaround and crisis management, corporate restructuring, refinancing, M&A and the implementation of ambitious growth strategies. For more than 15 years, he has been intensively involved in solving pressing entrepreneurial challenges in situations of rapid change for both SMEs and multinational corporations. The former commissioned officer of the paratroopers solves complex situations in a hostile environment with agility and a distinct get-in-done-Approach. He graduated of the prestigious INSEAD business school, is also a certified Turnaround Practitioner by the Global Turnaround Management Association (Chicago) and has a proven track record of revitalising companies in distress situations. As founding partner of the Zurich consulting boutique Leverage Experts, Rafferty advises entrepreneurs, boards of directors and investors on the development of short-term plans for survival and long-term visions for innovation and growth. He draws lessons learned from moments in which the survival of a firm was at stake and shares them in keynote speeches and in his personal blog koljarafferty.com. 121

> The

Road to Decarbonisation By Otaviano Canuto

he transition to zero emissions will involve three simultaneous economic processes: change in the relative prices of goods and services, with prices starting to reflect the intensity of emissions of carbon; labour relocation; and asset value scrapping. The socioeconomic return from decarbonisation must include preventing heatwaves, hurricanes, droughts, floods, and storms like those of this year from becoming even more intense and frequent, the cost of which would involve even higher GDP losses for nations. The report of the United Nations Intergovernmental Panel on Climate Change (IPCC), released at the beginning of August, left no room for doubt. According to its estimates, it will be necessary to accelerate the pace of global containment of carbon emissions if the expected increases in global average temperatures are to be kept below 2 or 1.5 degrees Celsius, with correspondingly less-dramatic climatic consequences. Even if emissions of greenhouse gases are reduced over the next few decades, global warming will continue for at least another century. To give an idea of what's at stake, look at the numbers in a paper by Jean Pisani-Ferry at the Peterson Institute for International Economics. Starting from pre-pandemic emission levels (emissions declined during lockdowns, but have rebounded), the stock of greenhouse gases in the atmosphere compatible with limiting the global temperature increase to 2 degrees Celsius would be achieved in less than 25 years. The period shortens to seven years in case the limit is to be reduced to 1.5 degrees.

Figure 1: Global Fossil Fuel CO2 Emissions, 1990–2030 (Billions of tons).

Source: IMF (2021). Fiscal Policies to Address Climate Change in Asia and the Pacific, March 24.

Figure 1 shows projected global fossil fuel CO2 emissions, according to the International Energy Agency and IMF staff calculations. After falling during the pandemic, they are projected to rise by about 20% by 2030. This contrasts with the 25% to 50% decline consistent with the 1.5 to 2 degrees warming limit. Limiting temperature rises will require less smoothness and gradualism of emissions tapering than was expected until recently. Acknowledgement of the urgency appears in commitments by countries responsible for around 70% of global carbon emissions and global GDP to reach ‘zero emissions’ by 2050 or 2060 (IEA, 2021). Figure 2 shows the baseline CO2 projection of emissions in 2030, displaying China and United States as the world’s largest emitters. However, decarbonisation will be a bumpy road. The transition to zero emissions will involve three simultaneous economic processes (Pisany-Ferry, 2021): 122

Figure 2: Large ermitters. Source: IMF Gaspar, V. and Perry, I. (2021). A Proposal to Scale Up Global Carbon Pricing, June 18.

First, a significant change in the relative prices of goods and services, with prices starting to reflect the intensity of emissions of carbon, the price of which will have to rise from zero to significant levels. Gaspar and Parry (2021) proposed that, at international level, measures be taken to reach a carbon price equal to or greater than US$75 per metric ton by 2030. CFI.co | Capital Finance International

Such a carbon price may be established and charged explicitly and/or indirectly through the effects of regulations or limits on uses. Decarbonisation will be negligible if the price of carbon remains that of a ‘free good’ provided by nature. Carbon prices will also have to be among the factors influencing people's behavior and lifestyle.

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Additionally, workers will have to be relocated from carbon-intensive activities to greener substitutes. There will be not only the challenge of labour reskilling, but also of ensuring that new jobs are sufficiently created in dynamic activities. It is known, for example, that the production of electric cars requires less labour than that of combustion engine vehicles. Third, there will be accelerated obsolescence of existing stocks of physical assets (machinery and equipment, buildings, vehicles) and intangible assets associated with carbon-intensive activities. The counterpart to this will have to be accelerated investment in new assets to replace what is being phased out. The good news about such replacement is that the evolution towards cleaner technologies with declining costs is taking place. The bad news is the presence of obstacles to such investments, particularly in the case of green infrastructure in non-advanced countries (Canuto, 2021). The transition of decarbonisation will possibly have regressive income impacts. For example, real estate to be rebuilt or retrofitted corresponds to the largest share of assets of people in the lower half of the income pyramid. Direct carbon taxation will have different impacts on different urban groups. Likewise, it is important not to lose sight of the re-qualification and employment needs of workers directly affected. It will be important to ensure income transfer mechanisms within countries and internationally associated with carbon pricing, to mitigate the regressive impacts of combating climate change. The trajectory of decarbonisation will also have implications for public budgets and debt; see Zenios (2021) in the case of Europe. In addition to compensatory expenditures for the regressive impacts of carbon pricing mentioned above, public expenditure on infrastructure to enable the transition will be required. Except in the unlikely event of full coverage of expenditures with some carbon tax, the trend will be for increasing public debt. In this case, without intertemporal injustice, as future generations will be grateful not to have to live permanently with an even more adverse climate. What about GDP and its growth during the transition? Here the duality of impacts discussed above is repeated. On the one hand, there will be capital destruction, in addition to a relative price shock that, as Jean PisaniFerry observes, bears similarities to the “supply shock” that happened when oil prices suddenly and drastically soared in the 1970s, including by temporarily reducing potential growth. But while oil prices were later reversed, the carbon price cannot be allowed to do so if the world is to be decarbonised. If the need for greater investment as a share of GDP to accompany decarbonisation collides with supply capacity limits, consumption will have to adapt downwards throughout the transition. On the other hand, cleaner technologies will also generate opportunities to increase productivity. In any case, the socioeconomic return from decarbonisation must include preventing heatwaves, floods, hurricanes, droughts, floods, and storms like those of this year from becoming even more intense and frequent. The cost of that would involve even higher GDP losses for nations. i

This story first appeared at Policy Centre for the New South. 123

> Middle East

Arab Space Programme Soars into the Skies, Powered by a Thirst for Knowledge and Scientific Progress By Brendan Filipovski

How long does it take a country with a population below 10 million to launch a probe to Mars? China has more than 1.3 billion people — and took over six decades. The UAE has taken less than 15 — and Mars is not the prime motivation. There is something more ambitious at the core of this effort.

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s a young man, Sheikh Zayed bin Sultan Al Nahyan loved spending time in the desert with the Bedouin people. There were no modern schools in Abu Dhabi at the time, so his classroom was his land: the sand, the stars, the oil industry, and his compatriots. In 1953, he made his first trip to Europe — to Paris — to take part in a legal case with his brother over oil rights. Seeing the French capital’s schools and hospitals stirred him to transform the emirate.

In 1969, he watched the Moon landing and was transfixed. Later, as the leader of Abu Dhabi and the first president of the UAE, he made good on his vision to build schools, hospitals, and a modern nation. But while his feet were in the sand, his gaze remained on the stars. In 1976, Al Nahyan arranged to meet with three astronauts from the Apollo 17 mission. A photograph from the occasion shows him inspecting a model of the Space Shuttle. This was the same year he formed the Abu Dhabi Investment Authority, now among the world’s richest sovereign wealth funds. It was the UAE people he most cared about, and he saw space exploration as a way to inspire his people, and the Arab world. “The real asset of any advanced nation is its people, especially the educated ones, and the prosperity and success of the people are measured by the standard of their education,” he said. In 2006, the Sheikh’s son — and UAE president — Khalifa bin Zayed Al Nahyan took the first steps towards the kingdom’s space programme. He signed an agreement with South Korean firm Satrec to jointly build a satellite, which was launched in 2009. In 2014, he announced “the Arab world’s Moonshot”: a plan to send a probe to Mars. The probe, called Al-Amal (Arabic for hope), blasted off in 2018 to reach Mars in 2021, the year of the UAE’s 50th anniversary. Progress was rapid. The satellite was solely built by Emirati engineers, a space agency was formed, astronauts were recruited and trained. Co-operation agreements were signed with NASA, and knowledge-transfer agreements were signed. In 2019, Hazza Al Mansouri flew to the International Space Station, the first Emirati in space. In 2020, Nora Al Matrooshi became the first UAE woman to begin astronaut training. More importantly, six space research centres have been set up at UAE universities. A satellite challenge has been set up in schools. The Arab Space Pioneers programme in 2020 attracted over 37,000 applications from Arab scientists, engineers, and researchers. The UAE played a key role in creating the Abu Dhabi-based Arab Space Co-operation Group 126

"The success of SpaceX, Virgin Galactic, Blue Origins, and CubeSat show that space is becoming big business: Space-as-a-Service. The UAE is poised to capitalise on that. It has even announced plans for space tourism in collaboration with the Abu Dhabi Airports company." with 10 other member countries. The aim is to exchange knowledge and encourage joint projects. “Most people assume (the Al-Amal probe) is for prestige, but it’s actually not,” says Nidhal Guessoum, an Astrophysics professor at the American University of Sharjah. “Emirati leaders hope to inspire a new generation of young Arabs to pursue careers in the sciences, stimulating competition in a region beset by numerous challenges.” The average age of the Emirates Mars Mission (EMM) team is 27. And the members have been hungry, working “from leadership (positions) to engineer and everywhere in between” while learning from foreign experts and scientists. Al-Amal was built with the help of the Laboratory for Atmospheric and Space Physics (LASP) at the University of Colorado Boulder. The probe’s instruments were built at the Mohammed bin Rashid Space Centre by Emirati scientists with help from LASP, Arizona State University, and the University of California, Berkeley. Hope launched on July 19, 2020. It embodied Emirati ambition and knowledge and US knowhow, and sat on a Mitsubishi Heavy Industries H-IIA rocket. The UAE had previously launched missions from Kazakhstan, Russia and India. On February 9, 2021, the Al-Amal probe reached Mars and began its orbit. This made the UAE the fifth country to make it. A day later, China’s Tianwen-1 spacecraft entered the Mars orbit and became the sixth; NASA’s own Perseverance Rover landed on February 18. The mission aims to study the planet over a full Martian year of 687 days: a search for water and ozone using three instruments: a camera, an infrared spectrometer, and an ultraviolet spectrometer. CFI.co | Capital Finance International

The UAE Space Programme is sharing data with scientists around the world. This fits with its ethos of co-operative space exploration. The UAE is not interested in a space race, but in developing and sharing knowledge. The UAE space agency has turned its long-term focus to building a sustainable Mars habitat by 2117. In the shorter term, it plans to send a rover to the Moon by 2025 and to build “Mars Scientific City”, a series of labs in the UAE to solve the challenges facing the 2117 mission. Space exploration is a core focus of the UAE’s Centennial 2071 plan (the UAE was formed in 1971), announced on June 6 this year. It is integral to two of the core pillars in the plan: “excellent education” and “a diversified knowledge economy”. The success of SpaceX, Virgin Galactic, Blue Origins, and CubeSat show that space is becoming big business: Space-as-a-Service. The UAE is poised to capitalise on that. It has even announced plans for space tourism in collaboration with the Abu Dhabi Airports company. Oil and gas continue to dominate the kingdom’s economy. In 2019, it produced over three million barrels a day and has proven oil reserves of over 97,800 million barrels. But diversification efforts have seen oil and gas drop to around 30 percent of GDP. A lucrative space industry will allow further diversification, directly and indirectly, through the impact of its innovations on other industries. On those desert nights of his youth, Sheikh Zayed bin Sultan Al Nahyan was in awe of the firmament itself; he would have been more amazed if he could have foreseen the progress his nation would make to reach those stars. i

A wide range of industries in over 50 countries trust us for managing their water needs. Our 60 plus years experience could be just

CREATING SHARED VALUE FOR A BETTER FUTURE

reason.

Geidea Fuelling Growth for SMEs while Expanding Across MENA — and Beyond

eidea is a fully licensed paymentservice provider of digital banking technology, point-of-sale terminals, and business management solutions for financial institutions and SMEs.

Founded in Saudi Arabia in 2008 by entrepreneur Abdullah Faisal Al-Othman, Geidea’s mission is to empower merchants of all types and sizes with the tools to start, manage, and grow their business. The company believes that the latest payment and commerce technology should be accessible, affordable, and intuitive to use. Geidea operates under the ownership of UAEbased Gulf Capital and its founder, Abdullah AlOthman. At the Geidea helm is group CEO Renier Lemmens. Lemmens was appointed this year, and is mandated with the responsibility of driving Geidea’s strategic regional growth, strengthening strategic partnerships in payments and financial networks, and identifying emerging business opportunities. Lemmens also serves as the point-person for regulatory authorities and key stakeholders. He has extensive experience in the payments field, providing Geidea with unique expertise and insight in fintech innovation. He previously served as CEO of PayPal Europe, Middle East, and Africa, and was a board member of the UK digital banking app Revolut, and chairman of Divido and TransferGo.

sector, and the announcement cemented Geidea as a category-defining start-up.

Under his guidance, the company made significant strides in 2021 as it strategically expanded across the Middle East in North Africa. Earlier this year, Geidea became the first non-banking institution in Saudi Arabia to be granted an acquiring license. It was a major milestone for the kingdom’s fintech

Following the launch of Phone POS, Geidea entered into strategic partnerships with global payment institutions — including Mastercard, Visa, and major Saudi player SABB Bank — to scale the technology across the MENA (Middle East and North Africa) region.

In March, the company signalled its intent to transform digital payments within the SME space with the launch of Phone POS technology. The ability to transform smartphones into pointof-sale terminals empowers businesses of all sizes to gain a foothold in the online economy.

Building on its successes in the kingdom, Geidea expanded into Egypt in May and received a payments facilitator licence from the Central Bank of Egypt. It cemented partnerships with Egypt’s leading entities, including the National Bank of Egypt and Banque Misr, to support the country’s drive towards digital transformation — and the goal of financial inclusion for all.

'Tap on Phone' technology transforms smartphones in to point of sale terminals.

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Geidea has begun its expansion into the UAE, too, and has cemented a partnership with leading fintech Magnati, the payments arm of First Abu Dhabi Bank. The collaboration will offer a suite of tailored payment solutions for UAE-based companies across the banking, retail, food and beverages, wholesale, hospitality, and healthcare sectors. CFI.co | Capital Finance International

Based in Riyadh, Geidea has more than 700 employees and some 100,000 merchants. It provides support to 600,000 payment terminals and ATM networks. The company is rapidly expanding with branches across the GCC, the UAE and Egypt. There are plans for further growth in 2022. i

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> Meet the SATORP Team:

Guardians of the Rolls-Royce of Refineries

CFO: Vincent Guerard

President and CEO: Sulaiman M Ababtain

SULAIMAN M ABABTAIN Sulaiman M Ababtain, president and CEO of SATORP, oversees one of the world’s most advanced refineries, capable of processing 460,000 barrels of oil per day. He is also on the steering committee for the Amiral Project, a massive chemical plant that has attracted investment of over $9bn and produces 2.7 million metric tons of high-value chemicals in Jubail. Ababtain has held several international roles, including president of Aramco Asia, the primary hub of Saudi Aramco global downstream expansion which oversees 60 percent of Saudi Aramco crude sales, including marketing and logistic services. He has represented Saudi Aramco on the boards of several global corporations. Ababtain has more than 30 years of diversified industry experience and a deep understanding of downstream business. He is an active participant on various local and international committees. He has held various managerial positions with direct exposure to oil-supply planning and

Treasurer: Ramez Sabawi

scheduling and Saudi Aramco International Joint Ventures Management. Ababtain has also managed crude oil and product sales and marketing departments.

with the financing of several international solar assets. From 2014 to 2016, he shouldered the CFO role at the Renewable Division of TotalEnergies.

Sulaiman Ababtain is the chairman of SATORP’s social responsibility company, Torathuna, a nonprofit that focuses on developing and protecting Saudi handicrafts, traditional arts, and cultural heritage, sponsoring over 90 kingdom-wide projects.

He also served as deputy CFO of the Gas Renewable and Power Division of TotalEnergies SE. Vincent Guerard is a graduate of the London Business School.

He holds a BSc in Systems Engineering from King Fahad University of Petroleum and Minerals, and an MSc in Industrial Engineering and Operations Research from Purdue University West Lafayette, Indiana, US. VINCENT GUERARD Vincent Guerard had a wealth of financial experience before being appointed SATORP’s chief financial officer in July this year. He joined Total SA in 2000 and has held various positions in the gas and power downstream sector. From 2010 to 2014, he was corporate and project finance manager at Total, dealing CFI.co | Capital Finance International

RAMEZ SABAWI Ramez Sabawi has more than 29 years’ experience in banking, corporate finance, and Treasury. He has also worked in sectors and industries including engineering, consulting, telecom, shipping, trading and oil and gas. His career path started with major banks in London in the early ‘90s, after which he led the corporate treasury functions of major corporates in the Middle East and the GCC. Ramez Sabawi holds an MBA from England’s Durham University, and a Bachelor of Business from Monash University in Australia. He holds many memberships and affiliations in a wide spectrum of professional bodies. i 129

> SATORP Knows the Value of People, Pride, Professionalism, and Partnership:

Four Ps That Are Keeping This Giant Refinery At The Top of Its Game

ne of the world’s largest refineries, the Saudi Aramco Total Refining and Petrochemical Company (SATORP) joint venture, recently increased its capacity to 460,000 barrels per day (bpd) from the planned 400,000. 130

The refinery always aims to maximise shareholder value — and consider the environment: its refined products meet the most stringent global specifications. SATORP is capable of refining Arabian Heavy Crude oil to produce diesel, jet fuel, gasoline, LPG, and CFI.co | Capital Finance International

petrochemical products such as paraxylene, aromatic benzene, and propylene. The company benefits from being close to the Arabian Heavy Crude supply system and its prime location within the excellent facilities

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and infrastructure of the Jubail Industrial City. It also has access to the export facilities at the King Fahad International Port (KFIP). SATORP is blessed with assets like no other, as it is operated by a highly professional workforce committed to growing the company into a world-leading integrated refinery and petrochemical facility capable of benefitting from fuel and petrochemical cycles. On its continuous journey towards the excellence, SATORP has won many important awards which reflect its best performance in Operational Excellence, Health, Safety and Environment. Satorp excellence awards included 2019 and 2021 Saudi Aramco President’s Excellence Award, 2018 Total Refining and Petrochemical Orient Safety Award, 2021 Total Safety Award 2021, and crowned its achievements with King Abdul Aziz Quality Award, the highest prestige award in Saudi Arabia KEY ADVANTAGES SATORP’s process facilities feature proven technologies that include the deep conversion technology that enables production of a high percentage of light products and value-added petrochemicals. The design configuration incorporates an integration between fuels and petrochemicals. The refinery treats 100 percent Arabian Heavy Crude with a profound conversion, leading to no fuel-oil production with its coker. It is the first refinery in Saudi Arabia — and one of the biggest in the Middle East — to produce petroleum coke and paraxylene. Its configuration is based on two crude oil trains, and both trains include a Crude Distillation Unit and a Heat-Integrated Vacuum Distillation Unit. The twin-train arrangement provides operating security and flexibility. Compared to other refineries, SATORP is a step ahead when it comes to economic diversification and maximisation of hydrocarbon value. It provides ultra-clean fuels and chemical products that create value and meet growing global demand for greener products.

"SATORP always looks for more efficient and innovative ways to streamline and increase shareholder value."

SATORP is mainly an export refinery; its production meets the most stringent global specifications to reach the profitable markets of Europe, the US and Asia. SATORP started the ISF facility to supply the Saudi Aramco bulk plant with diesel and gasoline (P91 and P95) for the domestic market. This ensures the safe and efficient distribution of fuels to the Eastern Province, with positive impacts downstream. CFI.co | Capital Finance International

The refining process is top-of-the-line in terms of conversion, with zero percent fuel production. It aims to maximise the value of each molecule processed: hydrocracking capacity, FCC conversion, and naphtha reforming. These units are all part of a scheme geared towards petrochemicals components and high-value fuels (10ppm diesel, lowdensity jet fuel). At an early stage, a strategy was put in place at the very start to use proven and best-inclass technology. This strategy includes very advanced tools in terms of data processing and unit optimisation. SATORP’s main units are equipped with advanced process control to monitor units’ performance and improve entire performance with better yields, minimal give-aways and reduced stabilisation periods. A complete software package links operations — maintenance, mass balance, performance control — in the projects. SATORP leverages digital technology to efficiently manage plant optimisation, inspection, maintenance and project changemanagement. All individual process units are represented with process models linked to represent the whole refinery, a key tool to monitor actual vs theoretical performance. The refinery has been designed to meet the stringent environmental regulations of the Royal Commission for Jubail and Yanbu. A state-of-the-art bio-treating facility ensures effluents and sulphur recovery units comply with the highest standards. All stack emissions and effluent releases are monitored. PROJECT FINANCING SATORP is considered as a key strategic asset for Saudi Aramco and TotalEnergies. SATORP enjoys a strong relationship with top-rated banks from local and international financial institutions. SATORP always looks for more efficient and innovative ways to streamline and increase shareholder value. It has won the King Abdul Aziz Quality Award, the most prestigious award in Saudi Arabia, as well as the 2019 and 2021 Saudi Aramco President’s Excellence Awards, and top honours for Operational Excellence and most improved Health, Safety & Environment. This award and others The execution of the factoring facility which was created within project finance parameters was recognised by CFI.co, reflecting the overall team spirit and present SATORP culture of excellence inspired by SATORP’s 4Ps: People, Pride, Professionalism, and Partnership. i 131

> Interview with Alexis Lecanuet, Regional Managing Director, Accenture Middle East:

Creating Value Through Continuous Transformation HOW HAS YOUR PROFESSIONAL JOURNEY QUALIFIED AND PREPARED YOU FOR BEING THE MIDDLE EAST REGION MD FOR ACCENTURE? As a true veteran at Accenture, starting my journey with the company back in 1996 – I am proud to champion large-scale transformation projects in the region by spearheading valueadded advantage for stakeholders. Over my 25-year tenure, I also led large, complex transformation projects across Europe, MENA, and Turkey.

In Saudi Arabia, we are deeply rooted in Vision 2030 and are aligned to the strategic pillars of the country. The vision of Accenture in Saudi Arabia is to become the partner of choice in the country's economic transformation by bringing together the right capabilities to co-create and deliver innovative ideas and solutions. We believe that Saudi's vision has a clear aim – to bring public and private organisations together, to collaborate on shared objectives and make way for a stronger, more innovative future.

I'm humbled by the opportunities and experiences I have embarked upon, and along with an outstanding leadership team, we are excited to deliver on our business objectives in the region, emphasising innovation and human ingenuity at the core of everything we offer. Our strategy, purpose, and brand are grounded in Accenture's enduring formula for market leadership: embracing change and continually transforming the business to create value, powered by the talent and creativity of our people.

WHAT ARE SOME OF THE MAJOR CHALLENGES AND OPPORTUNITIES FACING BUSINESSES IN THE REGION? Organisations globally are looking to accelerate innovation to support business and operating model reinvention, fast-tracking transformation programs to future proof their businesses. According to our latest Accenture Innovation Maturity Index, Middle Eastern companies registered a significant surge in their innovation strategy scores as businesses reviewed their strategies due to COVID-19. In the past five years, we found that 67% of Middle East executives indicated that they had taken measures to modernise their existing technology infrastructure – moving from data servers to cloud storage. In the next five years, this figure is poised to increase to 86%.

WHAT SETS THE MIDDLE EAST APART FROM THE REST OF THE WORLD? The Middle East has undergone a tremendous transformation in less than half a century, and with this region's bold leadership visions, we know the best is yet to come. Speed, agility, and change are at the core of each of these visions and we are confident that this region will reach new heights in a very short period. In line with the UAE Vision 2021, Accenture maintains its support to private and government businesses to further enable the UAE to become a leading technology hub by helping establishments and governments apply technology to create positive change and transform business and society. Taking Expo 2020 as an example, the digital infrastructure we have built with the underlying software to navigate the Expo logistics to connect all vendors, participants and visitors is a significant infrastructure to run the best worldwide events. Building digital capabilities for Expo 2020 is a giant cannon shot for Dubai to enhance the tourist experience in the future. This is the biggest post-pandemic hybrid event of this scale, and the next ten most significant events on earth will leverage the same technology, backoffice capabilities, and digital experience that this Expo has used. 132

Moreover, yet despite the pandemic opening doors to embrace new ways of working and doing business, there was only a marginal uptake in companies reimagining themselves, reflected by a 1% increase in the overall index score. This signifies the regional dichotomy between a culture that sets companies up to innovate new ways of working enabled by technology and traditional ways of doing business, which often require a physical presence. There is no doubt that companies must intensify their innovation priorities in the region and make greater strides in their business transformation. There is a real opportunity and a short window to make this a reality. Secondly, we believe that a knowledge economy is the end game. The race to attract top talent will only get more heated, leading organisations to work harder to create positive corporate cultures that focus on helping the personal and professional development of their employees. When it comes to managing talent, some of the CFI.co | Capital Finance International

key challenges companies face revolve around learning how to manage a multi-generational workforce and retain talent. Managing today's workforce has become more challenging than ever. With the rapid rate of innovation and the widespread use of technology, generational differences have become exacerbated. Comprised of baby boomers, Generation X, and millennials, and with Generation Z starting to enter the workforce, companies will need to be aware of the differences between each generation to ensure that they are engaging all employees. In the UAE, especially, there is an additional layer of complexity added on by a workforce made up of over 200 different nationalities. To retain talent in a post COVID world, you have to go beyond the transactional to truly understand employees. Today, we see that shared humanity

Autumn 2021 Issue

Alexis Lecanuet (right)

at work can make all the difference in this crisis. Therefore, companies need to go beyond the transactional to truly understand their employees if they want to create productive, inclusive, and rewarding working environments for the long haul. The effect of this positive environment cannot be overlooked. Our research has shown that an empowered workplace, which means a workplace where there is a culture of equality and where employers make decisions that positively impact employees, can positively impact employees' capacity to innovate than even pay rises or advanced degrees. In other words, empowered employees could raise global GDP by $8 trillion by 2028. The UAE is definitely on route to seizing this potential. Accenture for example is helping shape the future workforce in the region through multiple

initiatives including: The Hour of Code initiative; the 2020 Hours of code with Expo 2020; our collaboration with Al Maskari Holding to equip UAE nationals with the skills needed to futureproof their careers and to strengthen the local talent base; training blue-collar workers with Smart Labour; female empowerment, talent development, and gender balance in the region through our collaboration with E7. Lastly, the intersection of digital technologies and sustainability is critical. According to Accenture's 'Care to Do Better' September 2020 report, approximately 70% of workers expect that companies will start to behave more responsibly and equitably than they did before the pandemic. Roughly one in two workers agree that the ethical, sustainable and moral values a company holds will become more important to it following the pandemic than they were before. CFI.co | Capital Finance International

Today, Accenture is pioneering '360-degree Value' – and helping clients transform and reinvent their businesses, reskill their employees or simply become more sustainable through transitioning to the cloud to ensure clear financial return. Exponential changes in technology were transforming the way we work and live before COVID-19, and now its impact has raised change to a new level, requiring companies to reimagine everything and requiring economies and entire industries to rebuild. At this moment, to emerge stronger, there is only one choice: embrace change and ensure that it benefits all — your customers, people, shareholders, partners and communities. PLEASE GIVE AN EXAMPLE OF HOW TECHNOLOGY AND INNOVATION HAS BENEFITED ONE OF YOUR CLIENTS Expo 2020 aspires to attract approximately 25 million visits by 15 million unique visitors during 133

the six months. The mega-scale multinational event that is Expo 2020 Dubai will be nothing less than a once-in-a-lifetime celebration of technology and human ingenuity. The first significant post-pandemic global gathering, and arguably one of the most important, this Expo will define the future of mega-scale, multinational events for the foreseeable future. Indeed, the subsequent 10 most significant events on earth will leverage the same technology, capabilities and infrastructure, and digital experiences that this Expo is deploying. Expo 2020 is a living example of Accenture's perspective on the way organisations must move from a partial focus on customer experience to full-business alignment around delivering the best possible experience to everyone involved. As the Digital Services Premier Partner, Accenture hit the ground running, marrying technology with human ingenuity – or what we call the "Business of Experience", organising the whole entity around the delivery of exceptional experiences. Since the beginning, Accenture appreciated the ever-increasing speed of tech innovation and the need to ensure that this World Expo leveraged the latest possibilities. But with the unforeseen impact of Covid-19, the visitor context has also shifted. But focusing on the visitor experience from the very start proved to be the golden thread that tied everything together, ensuring a seamless, connected Expo 2020 visitor experience. This was manifested across five broad areas: The first was the actual visitor layer itself. Creating a unique experience for millions of people – across ages 5 to 85 – was vital. This Expo needed to cater to all. The second was supporting the more than 190 participant nations and each one's large team. The third was empowering the Expo's thousands of workers who are the front line of delivering the famously warm and uniquely Emirati hospitality, both in person at the event and in the background. The fourth was spurring data-driven decisionmaking throughout the organisation to ensure all efforts were motivated by real-time intelligence shaping personalised experiences. Finally, the fifth area was coordinating the vast, multi-cloud infrastructure, making it run seamlessly across all teams and users. With a single-minded focus on relevant, personalised experiences, the event will deliver the best possible experience for everyone – from all the participant nations, managing teams, contractors and vendors, plus on-site and behind the scenes workers, to the actual visitors at the event itself, not to mention the millions who will interact with the Expo digitally. Accenture also laid the foundation for future innovations and technologies at Expo 2020 that create a positive impact through digital innovation and improve the way the world lives 134

and works. With innovation and technology being at the heart of Expo 2020 Dubai, we share a common goal of joining together businesses, systems, and people worldwide while providing the smartest and most innovative experiences for participants and visitors. Accenture implemented and integrated intelligent systems to support various Expo teams – from procurement and marketing, to finance and HR, as well as participants and partners– to achieve their goals on smart and secure platforms. As Expo's Systems Integrator, Accenture coordinated more than 15 applications behind the scenes, supported by our robust Services Delivery Platform. As the first World Expo to be hosted in a multi-cloud environment, Accenture helped manage the apps and infrastructure for a secure, reliable, and resilient event. WHAT ARE YOUR KEY SERVICES IN THE MIDDLE EAST? Accenture is a global professional services company with leading capabilities in digital, cloud and security. Combining unmatched experience and specialised skills across more than 40 industries, we offer Strategy and Consulting, Interactive, Technology and Operations services—all powered by the world's largest network of Advanced Technology and Intelligent Operations centers. Our 569,000 people deliver on the promise of technology and human ingenuity every day, serving clients in more than 120 countries. We embrace the power of change to create value and shared success for our clients, people, shareholders, partners, and communities. Since 2011, Accenture has been leading rapid digital transformation for various clients in the region, from government entities to private enterprises and multinationals. WHAT INDUSTRY AND SERVICES SECTORS DO YOU FOCUS ON? Accenture provides services and solutions across more than 40 industries in five industry groups. This industry focus gives Accenture's professionals a thorough understanding of industry evolution, business issues and applicable technologies, enabling us to deliver innovative solutions tailored to each client. As the largest independent technology services provider, we have a privileged position in the ecosystem and are a leading partner of many key players, including SAP, Microsoft, Oracle, Salesforce, and Workday. The scale and scope of our global delivery capabilities are unmatched, with skilled professionals working from more than 50 delivery centers and at client sites around the world. In terms of services, we offer: Strategy and Consulting works with C-suite executives and boards of the world's leading CFI.co | Capital Finance International

Dubai

Autumn 2021 Issue

"The COVID-19 pandemic has driven a rapid uptake of digital banking around the world. The incredible speed of the adoption has rewritten some of the industry's fundamentals, including how consumers behave and what they expect from banks in 2021." organisations, helping them accelerate their digital transformation to enhance competitiveness, grow profitability and deliver sustainable stakeholder value. We use our deep industry and functional expertise underpinned by data, analytics, artificial intelligence, and innovation to help clients solve a diverse set of business challenges, including identifying and developing new markets, products and services; optimising cost structures; maximising human performance; harnessing data to improve decision-making; mitigating risk and enhancing security; implementing modern change management programs; shaping and delivering value from large-scale cloud migrations; building more resilient supply chains; and reinventing manufacturing and operations with smart, connected products and platforms. Interactive combines creativity and technology in service of meaningful experiences that drive sustainable growth and value for our clients. Our capabilities span ideation to execution: growth, product and culture design; technology and experience platforms; creative, media and marketing strategy; and campaign, content and channel orchestration. With strong client relationships and deep industry expertise, we are uniquely positioned to design, build, communicate and run experiences, reimagining the entire journey for customers, employees, patients and citizens alike. We embed this focus on experience across our services. Technology provides innovative and comprehensive services and solutions that span cloud; systems integration and application management; security; intelligent platform services; infrastructure services; software engineering services; data and artificial intelligence; and global delivery through our Advanced Technology Centers. We continuously innovate our services, capabilities and platforms through early adoption of new technologies such as blockchain, robotics, 5G, quantum computing and Edge computing. Technology also leads the innovation and R&D activities in our Labs, our investments in emerging technologies through Accenture Ventures, and the management of our ecosystem alliance relationships across a broad range of technology providers. Operations operates business processes on behalf of clients for specific enterprise functions, including finance and accounting, sourcing and procurement, supply chain, CFI.co | Capital Finance International

marketing and sales, as well as industry-specific services, such as platform trust and safety, banking, insurance and health services. We help organisations to reinvent themselves through intelligent operations, enabled by SynOps, our human-machine platform, powered by data and analytics, artificial intelligence, digital technology, and exceptional people to provide tangible business outcomes at speed and scale, including improved productivity and customer experiences as well as sustained long-term growth. HOW IS DIGITAL TRANSFORMATION FOR FINANCIAL SERVICES? The COVID-19 pandemic has driven a rapid uptake of digital banking around the world. The incredible speed of the adoption has rewritten some of the industry's fundamentals, including how consumers behave and what they expect from banks in 2021. To manage disruption and create new value in a rapidly changing world, financial institutions need to change in order to become more innovative, agile and human. 2020 gave the banking industry a glimpse of the future. However, it will be 2021 that will determine how much of that future is institutionalised and how much reverts to the way things were preCOVID. This year bank management teams will need to decide how much they want to lead versus follow. How much do they want to maintain the stretch versus letting the elastic relax a little. In areas where they take the learnings of 2020 and build a slingshot, how many shots should they take, how far away should the aiming point be, and how should they trade off the reward of hitting those targets against the cost of failed launches? The potential energy created by the stretch of 2020 can certainly be used to accelerate the development of the banking industry on multiple dimensions. We'll look back on this period as an inflection point and many metrics will show a preversus post-pandemic discontinuity. However, the desire to build slingshots is not without risk. There are many areas where it isn't clear if bank employees, customers, or regulators are ready for revolution rather than evolution, and there will be a need for the industry to take a collective breath in 2021. The ability to navigate these trade-offs by leading rather than following will differentiate those institutions that will widen the competitive gap in 2021 versus those that will snap their elastic or be embarrassed by a misfire. The world of retail and commercial banking was already a 135

complex and fast-moving sector, and the fallout from COVID will make navigating it even harder.

and having a robust digital infrastructure in place, and the future budgets reflect that reality. Moreover, governments in the region have long realised the deployment of digital technologies as part of their national strategy of moving away from a primarily oil-based economy to a knowledge-based digital economy with a thriving private sector.

WHAT ARE SOME OF THE STRENGTHS ACCENTURE BRINGS TO STRATEGY, VALUE CREATION AND DIGITAL TRANSFORMATION? Business speaks in the language of value. We believe 360-degree value has the potential to transform our industry and the larger business community—and ultimately make a real difference in society. For our clients, this means helping them transform and reinvent their businesses, reskill their employees, or become more sustainable by moving to the cloud with clear financial return.

Today, the region has emerged as a global forerunner in advanced connectivity, with the UAE, Saudi Arabia, and Qatar, among the first countries in the world to deploy game-changing power of new technology, including 5G networks, cloud, edge computing, AI – among others.

Our global workforce of 569,000 delivers on the promise of technology and human ingenuity every day, serving clients in more than 120 countries. We embrace the power of change to create value and shared success for our clients, people, shareholders, partners, and communities. Regional Managing Director: Alexis Lecanuet

Moreover, in the last year – we have re-shaped our focus by finding appropriate solutions at speed to help our stakeholders mitigate the effects of the pandemic. We launched Accenture Cloud First with a US$3 billion investment over three years to help clients across all industries rapidly become "cloud first" businesses and accelerate their digital transformation to realise greater value at speed and scale. Our unique depth and expertise mean we can go straight to the heart of our client's most pressing challenges and fully deliver value. HOW DOES ACCENTURE SUPPORT SOCIO-ECONOMIC DEVELOPMENT AND A KNOWLEDGE-BASED SOCIETY? Comprehensive socio-economic development based on digital transformation is namely one of the key objectives of government plans in the region with major economies making massive investments in AI, IoT and other such technologies as a part of initiatives like Saudi Arabia's Vision 2030, UAE's Vision 2021, and Qatar's National Vision 2030 development plan. In the region, we are committed to our partnerships that complement and help governments and organisations harness the power of people, technology, and processes to promote employer brand, employee experience and up-skill the future workforce. For example, as the Digital Services Premier Partner and Systems Integrator for the Expo 2020 Dubai, Accenture committed to a framework that guaranteed social and economic benefits for Expo teams, nations, vendors, suppliers, and visitors. We led several smart and innovative ventures and partnerships to create an engaging digitaldriven experience that brings Expo 2020 to life for millions of visitors and audiences worldwide. Not only that – but on a community level and as conscious corporate citizens – we also supported Expo Live – Expo 2020's global innovation and partnership program. We teamed up with Smart 136

Labour, a UAE-based Expo Live grantee helping blue-collar workers gain new skills for the digital economy. Moreover, our commitment to gender balance and inclusivity in the region is unwavering. By championing equal opportunity as a company – we also realise our responsibility to the community. Earlier this year, we announced a three-year partnership with UAE-based 'e7 Daughters of the Emirates'. This endeavor will contribute to systemic in-country change through expert training and development in SME-led capability, storytelling, design thinking, cost control, and artificial intelligence (AI). We have also dedicated qualified professionals to mentor and help fill the gap between theory classes and real-life work experience to equip female students with future-ready skill sets. These activities also help embed a stronger culture of responsible business practices with all stakeholders within Accenture's communities. On a global level – we have championed sustainability practices and committed to achieving net-zero emissions by 2025. Accenture will make actual reductions in emissions by powering offices with 100% renewable energy, engaging key suppliers to reduce their emissions, and equipping Accenture's people to make climate-smart travel decisions. To address the remaining emissions, the company will invest in proprietary, nature-based carbon removal solutions, such as large-scale tree planting, that will directly remove carbon emissions from the atmosphere. WHAT EXCITES YOU THE MOST ABOUT THE REGION'S FUTURE? The Middle East is paving the way for enterprises to reap the benefits of next-gen networks and technologies. The new post-pandemic way of working harshly reminded enterprises of the importance of keeping business hyper-connected CFI.co | Capital Finance International

This is truly an exciting time for Accenture in the region and me personally. While governments and organisations alike are looking to accelerate innovation to support business and operating model reinvention, as well as fast-tracking transformation programs – we are delighted to be the partner of choice on their ambitious journey. i ABOUT ACCENTURE Accenture is a global professional services company with leading capabilities in digital, cloud and security. Combining unmatched experience and specialised skills across more than 40 industries, they offer Strategy and Consulting, Interactive, Technology and Operations services — all powered by the world’s largest network of Advanced Technology and Intelligent Operations centers. Thei 569,000 people deliver on the promise of technology and human ingenuity every day, serving clients in more than 120 countries. They embrace the power of change to create value and shared success for their clients, people, shareholders, partners and communities. For more information: accenture.com ABOUT ALEXIS LECANUET Alexis Lecanuet is the Regional Managing Director for Accenture in the Middle East. In his role, he is responsible for Accenture business in the region, including defining and executing Accenture’s strategy, leading the clients’ portfolio, and managing the local operations. Previously, Alexis led and grew the company’s products portfolio in the Middle East and Turkey region and focused on onboarding and retaining the largest names in the retail business. Over his 24-year career with Accenture, he has commanded large, complex transformation projects across Europe, MENA, and Turkey. Alexis holds a Masters in Business Consulting from ESCP Europe Business School and a Business Finance degree from SKEMA Business School. He is married with four children and is currently based in the UAE.

Autumn 2021 Issue

achieving excellence to take you further stc.com.kw

Outstanding Achievements in Corporate Governance & Stakeholder Protection Kuwait 2021

CFI.co | Capital Finance International

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> Interview with Abdulaziz bin Nasser Al-Khalifa, CEO of QDB:

Agile DNA Embraces Disruption

CFI.co's Chairman Tor Svensson and Director Marten Mark meet with Abdulaziz bin Nasser Al-Khalifa CEO of Qatar Development Bank (QDB)

WHAT ARE QATAR DEVELOPMENT BANK’S VISION AND MISSION FOR SUPPORTING QATAR’S PRIVATE SECTOR AND SME ECOSYSTEM? Through an expanding ecosystem of subsidiaries and affiliate institutions, Qatar Development Bank (QDB) aims to develop and empower Qatari entrepreneurs and innovators towards realising their growth ambitions in Qatar and beyond, while contributing to the diversification and sustainability of the Qatari economy. Having gone through over two decades of deliberate transformation, the Bank today stands as the main supporting arm for Qatar’s private sector and its SME and innovation ecosystems through three access-based pillars to privateenterprise support: Access to Finance, Access to Markets, and Access to Capability. Our whole-journey support system includes numerous funding programs and initiatives, a full suite of advisory and consultation services and training programs, and a number of incubation and capacity-building platforms that span various domains including manufacturing, sports-tech, fintech, and fashion. This inclusive approach to support has helped us create myriad success stories for private enterprises in Qatar and the region, while at the same time playing a pivotal role in the country’s achievement of ranking 1st in the Arab region and 22nd globally in the 2019 Global Entrepreneurship Index, among other coveted rankings. The success of the Bank’s vision and strategy also lives in our numbers. In 2020, our suite of virtual consultation services reached over 470 SME beneficiaries – a 34% increase over the previous year. Demand for our virtual training and workshops also saw an impressive 200% jump, reaching more than 7,500 aspiring entrepreneurs. Meanwhile, the total number of SMEs incubated or accelerated increased by more than 25%. In parallel, financing increased by 9% to reach QAR 7.31bn, which was used to support over 860 companies, driving a 20% growth in our capital deployed in startups. This is in addition to increasing the volume of exports by registered Export SMEs by 23%, which approached the QAR 700mn figure, and boosting the growth rate in export financing by 18% with a cumulative total support of QAR 1.27bn. THE PANDEMIC HAS AFFECTED EVERY ORGANISATION ACROSS THE WORLD AND HAS FORCED THEM TO ADAPT; CAN YOU TELL US ABOUT QATAR DEVELOPMENT BANK’S EXPERIENCE ON THIS FRONT – AND HOW THIS HAS SHAPED YOUR ORGANISATION OVER THE PAST 18 MONTHS? Just like every other organisation and economy, the pandemic presented QDB – and the wider 138

"We’ve accelerated our digital transformation drive by adopting a digital-first approach to service delivery, which was bolstered by the launch of the NUMU platform – a next-generation omni-experience digital platform for SMEs and entrepreneurs that we believe marks a milestone in the Bank’s digital transformation and reinvention journey." entrepreneurship ecosystem in Qatar – with a set of novel challenges. But our “agile” DNA prompted us to embrace disruption and see it as an opportunity to turn the crisis into a lever for growth and innovation, not just for the Bank, but also for the SMEs and startups that we serve. In this context, we set into motion a number of swift measures and initiatives that not only helped us overcome those challenges, but more importantly transformed how we and our entrepreneurs operate and achieve growth in times of uncertainty, as well as amplified our role as SMEs and startups' go-to support provider. With this in mind, we delayed loan repayments for SMEs without interest fees or charges for six months and launched the National Guarantee Program to help private companies finance their employee wage bills and pay rental fees, which has benefited more than 4,150 enterprises to date. We also reintroduced our Situation Room to help SMEs deal with supply chain disruptions and other pandemic-induced challenges, launched the Covid-19 Hackathon to help develop innovative solutions for the pandemicrelated challenges, and established the Revive program to provide entrepreneurs with integrated programs and support packages that allow them to thrive in a post-pandemic economy. Moreover, we’ve accelerated our digital transformation drive by adopting a digital-first approach to service delivery, which was bolstered by the launch of the NUMU platform – a nextgeneration omni-experience digital platform for SMEs and entrepreneurs that we believe marks a milestone in the Bank’s digital transformation and reinvention journey. Taking this agile approach to the next level, nearly all of our training programs, exportermatchmaking events, as well as our key conferences and exhibitions have been delivered virtually since the onset of the pandemic. Among many advantages, this has broadened our reach, enhanced the accessibility of our platforms, and helped our events and conventions achieve healthier participation and engagement levels. CFI.co | Capital Finance International

HOW DO YOU CREATE AN ENVIRONMENT WHERE SMES CAN TAKE RISKS AND INNOVATE, WHILE ENHANCING THEIR CHANCES OF SUCCESS? An appetite for risk-taking and thinking ‘outside the box’ is why entrepreneurs are often the ones to advance technologies, build novel platforms, and develop future-defining products and services. So, in everything we do, we fully embrace these traits as part of the entrepreneurial DNA, and therefore we build every product and service within the QDB ecosystem to encourage healthy levels of both. In Qatar, however, entrepreneurs are uniquely positioned to successfully tackle challenges that result from innovation, disruption, and risk-taking as well as other external factors, for a number of reasons. The Qatar National Vision 2030 has clearly defined socio-economic development objectives that lay down a clear roadmap for entrepreneurs to identify voids in the market and find room for disruptive innovations that steer the growth of their enterprises, sectors, and the entire economy. Moreover, the increasing number of collaborations within Qatar’s rapidly evolving Research, Development, and Innovation ecosystem positively impact entrepreneurs’ capacity for discovery, idea development, and innovation. Within the SME ecosystem, where QDB plays a leading support role, we have designed our products, services, and programs, to help SMEs overcome any emerging challenges and maximise their results at every stage of their growth journeys. In this context, we have also been increasing our focus on helping make Qatari entrepreneurs more resilient and their businesses more sustainable by arming them with all the cutting-edge tools and resources they need to leverage disruptions for potential growth and more innovations. We are also adopting the same philosophy within our organisation as well as in our undertakings and collaborations with other institutions and key players in the national and global innovation

ive us w cl vie Ex ter In

Autumn 2021 Issue

Tor Svensson (pictured right) interviewing Abdulaziz bin Nasser Al-Khalifa

ecosystems. For example, QDB’s leadership exercises an innovation mindset when driving our digitisation and growth strategies. By the same token, and to develop and deliver many of our capacity-building programs and platforms, we have also partnered with renowned international stakeholders and organisations that have innovation built in their own DNA as well as in their offerings to SMEs and stakeholders.

Center (QBIC), which today stands as one of the largest mixed-use business incubators in the MENA region. The success of QBIC’s Lean Startup, Lean Acceleration, and Lean Manufacturing programs – from which hundreds of local entrepreneurs have graduated – and the growth it spurred within the ecosystem, then inspired us to launch specialised programs in strategic sectors.

HOW DOES QDB’S LINEUP OF INCUBATORS AND CAPACITY-BUILDING PLATFORMS SUPPORT AND NURTURE EARLY-STAGE STARTUPS AND DISRUPTIVE SMES, THROUGH ITS VC INVESTMENT APPROACH? As part of our whole-journey support system, we provide startups and SMEs with access to finance, markets, and capability across all growth stages in order to help them realise their ambitions and write their success stories. At the heart of our holistic support ecosystem lies a growing lineup of capacity-building platforms that include 5 major incubators spanning a wide range of areas and specialisations and offering them all the tools and resources they need to innovate, penetrate, and grow.

The Qatar Sportstech Accelerator and Fintech Incubator and Accelerator programs welcome both local and international startups in those domains and grant them access to nearby markets.

QDB started by incubating early-stage entrepreneurs and startups with the establishment of the Qatar Business Incubation

Furthermore, and with the intention of expanding our incubation ecosystem, we have established Factory One – a model factory that offers manufacturing SMEs lean and Industry 4.0 capabilities – and Scale 7, our first incubator/accelerator in the fashion and design domain. Through such platforms, incubated startups continue to leverage a wide range of advantages, including ready-to-operate manufacturing facilities, state-of-the-art labs, funding, coaching, and workspaces, to name a few. CFI.co | Capital Finance International

Finally, in terms of providing early-stage and disruptive startups with access to finance, QDB’s investment team evaluates between 100-150 startups per year. As a result, we have invested an average of QAR 20 million per year over the last 3 years, in addition to investing QAR 160 million in international VC funds to date towards encouraging investment in Qatari startups. The importance of VC to the success of SMEs stems from its capability to quickly transfuse this burgeoning sector with the funds it requires to accelerate growth and achieve a sustainable level of development. We follow the same investment approach as any other VC investor with a developmental mindset, trying to balance financial returns with the positive impact the investment will have on the Qatari innovation ecosystem. QDB achieves this purpose through two different programs, one aimed at seed-stage companies and the other at more developed SMEs, operating in growth and scalable sectors of the Qatari economy. We are also selectively investing in international companies that are affording synergies with Qatar. Today, QDB has backed 30 companies through these two programs, in addition to a program allowing us to invest in 139

funds, within which we have already invested in 7 funds in Europe and the Middle East. HOW DO YOU ASSIST QATARI COMPANIES SCALING INTERNATIONALLY? To support Qatari companies in scaling internationally, we build their capacity to compete in global markets through a number of programs. These include the Go Global Accelerator, which was launched in partnership with the HEC Paris in Qatar and the International Trade Centre (ITC) to help SMEs overcome the challenges they face when engaging in international markets and effectively network with potential clients or affiliated enterprises, as well as help them develop their export plans and global business strategies. We also build their capacity to scale via the Global Trade Helpdesk, which was launched in collaboration with the ITC, the United Nations Conference on Trade and Development, and the World Trade Organization (WTO) to provide them with accurate, up-to-date, and comprehensive market data that is tailored to their specific sectors and expansion goals and can enhance their chances of global success. We also offer them access to international markets that include the US, Russia, and many others, through exhibitions, trade missions, and on-ground and virtual matchmaking events. This is another area where our digital-first strategy has paid off, as the new virtual format of our matchmaking services and platforms has turned this into a year-round activity and has improved innovative Qatari entrepreneurs’ access to markets. Furthermore, TASDEER’s Enterprise Europe Network (EEN) membership grants Qatari companies access to importers, distributors, and suppliers in more than 65 countries as well as helps them reach over 500 million direct consumers. As a result, our international matchmaking events in 2021 saw the participation of over 130 of our local companies in more than 140 meetings, generating over $19mn in booked orders. In addition, we held over 90 B2B meetings between Qatari SMEs and Russian stakeholders in Moscow ahead of our participation at the St. Petersburg International Economic Forum this year, resulting in over $70mn worth of deals that are currently under negotiation. HOW DO YOU SEE YOUR ROLE WITH REGARDS TO THE UPCOMING FIFA WORLD CUP QATAR 2022™? At QDB, we help innovative SMEs and private enterprises reach their potential in their respective domains and contribute to making the economy flourish and become more resilient. With this in view, the upcoming FIFA World Cup Qatar 2022™ is poised to leverage the innovations of the companies and startups that we helped, especially in the Fintech and 140

Sportstech domains. In this context, QDB has worked with many companies and startups that have indirectly contributed to hosting international sporting and non-sporting events. One such example is SPONIX, a €40 million Dohabased startup and the graduate of our Sportstech Accelerator program. With the help of QDB’s support ecosystem, SPONIX’s sports technologies have powered the fan-viewing experiences of several international events including the Euro 2020 and the UCL, and is currently discussing participation in the upcoming FIFA Arab Cup™. Another company that QDB supports – in this case through financing solutions – is Coastal Qatar, which won a contract to manufacture seats in six stadiums that will host the FIFA World Cup Qatar 2022™ and has played a major role in setting up the Khalifa International Stadium through the manufacturing, supply, and delivery of secondary structural steel and cladding works. To date, the company has manufactured nearly 250,000 seats. TELL US MORE ABOUT THE QATAR FINTECH HUB AND QATAR DEVELOPMENT BANK’S EFFORTS IN BUILDING A DY-NAMIC ECOSYSTEM IN THE COUNTRY? In a post-pandemic world, digital technologies will play a pivotal role in socio-economic life. Therefore, it is no surprise that by 2025, the FinTech industry is estimated to grow to $305 billion. With a growing focus on transitioning to a cashless economy, Qatar has rapidly become one of the leading FinTech hubs in the MENA region. QDB continues to play an instrumental role in this ongoing development. QFTH, which was co-founded by QDB is on a mission to transform Qatar into a vibrant FinTech community and cement its position as the goto destination for international FinTech startups. We are achieving this by providing Fintechs with access to collaborative public and private sector opportunities, legal and regulatory frameworks, and support from existing ICT infrastructures, while leveraging partnerships with international stakeholders. Recently, the 2nd wave of QFTH programs witnessed a massive turnout, receiving more than 550 applications from 57 countries including the United States, United Kingdom, Hong Kong, Singapore, Nigeria, Russia, Turkey, and India. To date, 41 startups have successfully completed QFTH’s programs and are now well on their way to launch a host of new and innovative services to accelerate the digital transformation of global markets. The traction our programs have gained within and beyond the industry didn’t go unnoticed. In May of this year, research and intelligence firm MAGNiTT ranked QFTH as the second top investor in FinTechs across the MENA region in the first quarter of 2021. i CFI.co | Capital Finance International

Autumn 2021 Issue

> Interview with Firas Sleiman

Partner and Technology, Digital & Cyber Leader at PwC in Qatar

Digital Leadership

CFI.co's Chairman Tor Svensson in conversation with PwC Qatar's Firas Sleiman

ABOUT QATAR AND DIGITAL What technology or digital trends should the Qatari leader watch out for and invest in for the next decade? In the next few years, the focus of public and private sector CxOs and digital leaders will gradually shift from applications and data centers, to client and experience-centric models through data liberation, monetisation and analysis. Data will become one of the core assets of most organisations, and a key enabler of revenue, market dominance and operational optimisation. As data takes the center-stage, enabling technologies will undoubtedly emerge, such as cloud, analytics as a service, IoT and cyber security. What are digital opportunities for Qatar to lead regionally? Qatar has always been at the forefront of education, research and innovation. The country's investments in education and research make it a prime location for regional digital innovation hubs, accelerators, incubators and think tanks. Additionally, the availability of low cost energy and real estate will allow Qatar to take a regional lead in cloud data center hosting, and other digital platform free zones. Which sectors have the highest need, dependency or readiness for digital transformation? Given Qatar's commitment on sustainability and renewable energy, the energy sector is a prime candidate for further transformation and optimisation using data, analytics and IoT. Additionally, as the public sector grows with Qatar's booming economy and its investment in education, healthcare and immigration, those public sector domains will highly benefit from additional digitisation, and a customer-centric view of simplification using technology. As the new generation of nationals and expats take leading roles in the society, their expectations from digital are high, and their service needs are ever-growing.

ABOUT PwC What are your investments, no-regret bets and digital themes for the next few years? In line with our view and predictions on digital trends and opportunities in Qatar and the region, we are making several investment bets around 4 main themes: • Data as an Asset: make data a priority and success factor in every organisation. • Cloud First: use native cloud services and platforms to accelerate value and growth. • Security at the Core: build-in protection at each layer of the organisation's ecosystem.

Firas Sleiman and Tor Svensson

• Innovation in Transformation: get ready for a disruptive digital future to meet the new generation's needs. What advice and tips would you give to growing digital leaders in Qatar? Focus on quality rather than cost. From our experience, we find that it is far more expensive to build a low quality product and try to fix it, rather than build it right the first time, even at a higher initial cost. For most organisations, we find that the real cost of low quality is not measured in money and additional costs alone. The reputational brand damage, loss of client loyalty, demotivation and turn-over of staff, and long time-to-market due to rework, are some of the unfortunate consequences of low quality. i ABOUT FIRAS SLEIMAN Firas Sleiman brings 24+ years of experience in the US and MENA regions, focused on leading effective tech and consulting organizations through growth and value generation, solving complex business and technology challenges through cross-domain modern IT architecture, C-level IT, digital and data strategies, large-scale technology and cloud transformation, big data analytics and agile product implementation. ABOUT PwC IN QATAR PwC is strongly committed to Qatar where they established their practice in 1981. Today they have more than 350 people, including 12 partners, 25 directors, operating from their CFI.co | Capital Finance International

office in Doha. PwC has contributed to iconic government projects supporting the state of Qatar working together with local organisations towards achieving social and economic development and Qatar’s National Vision 2030. Through their Assurance, Advisory, Tax and Legal Services practices based here they advise a wide range of clients including family-owned companies, high-profile local businesses, industrial and service companies, and global organisations. They are also the lead business advisors to the Government and some of the largest public sector entities in Qatar. As part of their commitment to Qatar, PwC’s Academy is dedicated to the learning and development of Qatari nationals as well as improving the knowledge, skills, competence and expertise of people in finance and business; to help organisations across the region grow and retain their talent. Due to their long history of delivering services from this region,they have extensive experience of working with clients in most industries. THeir experts work together to provide seamless advice to their clients who can be assured that PwC complies with all legal requirements set by the various regulatory bodies in Qatar. Their people understand the local market and culture and are passionate about working in one of the most exciting and dynamic places in the Middle East. 141

A Pearl of Sophistication and Art Triumphs Over Pandemic Woes It’s a tough life for CFI.co’s Chairman Tor Svensson, who reports from one of the most luxurious hotels in Doha, Qatar…

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hen veteran hotelier and general manager Stefan Gaessler opened the Park Hyatt Doha some 18 months ago, the timing could hardly have been worse.

The pandemic was in full force and international travel was pretty much frozen. Nonetheless, the sophisticated retreat has managed to thrive — and expand. Now business is picking up as the pandemic recedes, the blockage is over, and CFI.co | Capital Finance International

major events — including the FIFA World Cup — are coming to town. Gaessler, German by birth, is calm and comfortable in his situation, and “it’s still early

Autumn 2021 Issue

He is complimentary about his adoptive city; Qatar, in his words, is “secure, clean and vibrant”. Doha, while not party central, offers plenty of leisure, art and culture, and is nicely set-up for tourism with sport events, exhibitions and museums. The Formula 1 circus will soon be heading here. Voted Airport of the Year by Skytrax, Hamad International is busy, and growing as a stop-over hub. This is welcomed by Gaessler. Hyatt sales and marketing director Deep Kumar Sindhi is busy tailoring solutions for meetings and events, including for the Apartments, which provide luxury serviced accommodation. The hotel and the surrounding community are owned by Msheireb Properties, a real estate development company and a subsidiary of Qatar Foundation (QF). Msheireb Properties was established as a commercial venture to support the foundation's aims, and the Qatar National Vision 2030. Founded by the former emir Hamad bin Khalifa Al Thani, QF is a nonprofit organisation comprising some 50 entities working in education, research, and community development. Billed as “a luxurious oasis amidst the pulsating capital”, the Park Hyatt Doha handily manages to stand out from the competition in Doha. And that competition is stiff, with the presence of an assortment of international five-star hotel brands. The Park Hyatt Doha differentiates itself in some distinct ways. The first is its location in Msheireb Downtown, where Doha’s pearl-fishing past meets the modern day. Msheireb’s architects have artfully reinvented this historic commercial district for urban and modern community living. Msheireb is a word-class sustainable regeneration project featuring some beautiful artwork.

days”, he points out. His journey with Hyatt started 32 years ago and has taken him to destinations around the world. The years and the miles have taught this senior executive to embrace different cultures.

Nearby is the Heritage Quarter, with four historical Qatari houses now transformed into museums. A few blocks away is Souq Waqif, Doha’s atmospheric traditional marketplace. Just around the block is the Barahat Msheireb, stunning and creative, a climate-controlled town square for vendors, local residents, and visitors. CFI.co | Capital Finance International

The architecture and design are refined and immaculate promoting a sense of wellbeing. Contemporary and international, communal areas and rooms have flourishes of Qatariinspired design. Famous New York based Japanese hospitality architect, Jun Aizaki, has struck a non-intrusive balance between art and utility. His stated desire to “do good for others” is at the core of his work. This is reflected in thoughtful detail of this elegant and tranquil building. Fine dining are taken care of by two exceptional restaurants. Opus was created by Michelin star chef Jean-Francois Roquette, from Paris, and excels in modern renderings of French and Qatari cuisine. Steffen Schnetzke, the Hyatt’s director of food and beverages, ensures an outstanding gastronomic experience. “We are dedicated to offering simply the best culinary dining experience, whether casual or fine,” he says. On the 21st-floor rooftop is Sora, a Japanese restaurant and lounge serving sharing dishes and stand-out sushi. The outdoor terrace offers a panoramic view of The Doha Palace and the Green Mosque. On clear Arabian nights, the West Bay skyline shines bright. Gaessler defines key components of luxury as “private attentive service with attention to detail, and high-quality spacious rooms”. Even with 187 rooms, this hotel retains a boutique air. What defines luxury for the individual is personal. The Hyatt strives for the level set by founder Jay Pritzker’s vision in 1957. His goal was to create an intimate hotel experience that celebrated fine art, great service, and delicious food. Sustainability and a commitment to serve the community and all stakeholders are priorities. Hyatt is dedicated to supporting the UN’s Sustainable Development Goals. Hyatt’s aim is to care for people so they can be their best selves, which guides every aspect of the business. This year, Hyatt launched World of Care as its ESG platform to further efforts to address the world’s pressing challenges. Through pearls of luxury like the Park Hyatt Doha, Qatar is moving into a new era. i 143

> Recipe for Success:

Blend Inspiring Partners with Hard-Working Teams and Have a Proven ‘Killer’ Product CFI.co’s Tor Svensson in conversation with Hesham Zreik CEO of FasterCapital

FasterCapital is an online incubator/accelerator diverse and inclusive global company whose expert team works with partners in media, dealflow, start-up co-support in portfolios, and co-investments.

t is connected with 180 ecosystem players including SeedStars, Oasis500, Softweb, Techcode.

HOW HAS YOUR PERSONAL JOURNEY PREPARED YOU FOR RUNNING A GLOBAL INCUBATOR AND ACCELERATOR FOR START-UPS AND ENTREPRENEURS? I have started my journey as an entrepreneur in 2002. I was lucky to start working on mobile apps back then. I started a company in 2002 and we were the first to publish a game on AT&T. The company expanded rapidly and we got a valuation of $3M from a public company in 2005. From 2002, I’ve always been present in the intersection of technology and business. My academic studies and career combine both aspects. By 2009 and with the surge of demand for mobile apps and IT startups, there were lots of non-technical entrepreneurs working on establishing businesses and it was difficult for them to find the right technical cofounders. I was able to devise (along with cofounders) a model where FasterCapital will become the technical cofounder and invest half of the money needed. Providing professional and cheap technical development per equity has allowed us to attract lots of startups and help them succeed. We developed later a similar model where we provide business development per equity through our Grow your Startup program. We also provide assistance in raising capital for startups and SMEs. PLEASE DESCRIBE THE FASTERCAPITAL ECOSYSTEM FasterCapital’s ecosystem is big and strong and it has been built over the years. It mostly consists of investors, mentors and representatives worldwide. Our ecosystem members are enthusiastic toward our unique model and approach to help startups. The community is open, and we work with inspiring people. Our ecosystem partners’ team have worked hard — especially last year — on expanding our network and joining forces with other organisations that are supporting start-ups to create valuable collaborations. GIVE TWO PIECES OF ADVICE TO A DIGITAL START-UP THAT’S SEEKING FINANCE 1. Plan well and assess risks wisely: many entrepreneurs unfortunately jump direct just 144

"The 'ideal' business is one that has proved itself to be worthy in real life." because they are enthusiastic. While enthusiasm is necessary but it’s not sufficient! 2. Be ready to pivot a lot. You will eventually discover that some of your assumptions were wrong. Those who survive are those who can pivot always and quickly! Another piece of advice is to work on your product; everything else will fall into place. When you’re working on a tech project, your one and only hero is the product. This is the number one priority. Validate the concept as well as you can, don’t be afraid to make big changes where necessary, build and test your product, then start acquiring customers. That sounds like 10 pieces of advice combined but it isn’t. Create a killer product and investors will come to you. It always has been, and will always be, the story of success. WHAT IS UNIQUE ABOUT FEMALE ENTREPRENEURS AND START-UPS BY WOMEN? I think the main unique aspect is the real value they are bringing to communities and societies. Women entrepreneurs are bringing attention to issues, social or not, that have not been addressed by their male counterparts. There is a gap in the ecosystem (which has been dominated by male founders) for such innovation and for new startups that approach social networks from a female perspective. Also, many women have acquired valuable specialist expertise that we need. Many innovative edtech solutions are being put forward by former or current women teachers as women make up a greater percentage of educators. So, the expertise and reclaimed potential of women will enable a much better stance, and a much more CFI.co | Capital Finance International

practical and well-informed approach to building a business. PLEASE DESCRIBE THE IDEAL BUSINESS FROM A FUNDRAISING PERSPECTIVE Let me start by saying that investors should not have an “ideal business” in mind when looking for funding opportunities. They should have a flexible and open approach. However, there are some elements that contribute to making the business more appealing from a funding point of view. First of all, the team behind the start-up; it’s a must for the founder to be truly passionate, professional, skilled, dedicated and able to handle the future challenges. After all investors are investing in the team more than in the idea. For the idea to be successful, you need good execution. Second is a valid market opportunity. If it is not clear how you are going to be different from your competitors, chances are you will not create an impact. Third, the “ideal” business is one that has proved itself to be worthy in real life. Not all investors are risk-takers, some need evidence that this business is worth their money, so businesses with big sales and revenues definitely have the upper hand. HOW DOES FASTERCAPITAL MANIFEST INTELLIGENT CAPITAL AND START-UP SUPPORT? Our model mostly revolves around smart capital. All of our programmes provide participants with services in addition to 50 percent of the costs needed as an investment. We are committed as long-term partners with entrepreneurs in our network, and we make sure we offer expertise and advisory — not just money. FasterCapital becomes an investor and a supporter of the startup and our team works hand-in-hand with the start-up team. This creates a perfect environment for small businesses to grow. We also encourage smart investments through our Raise Capital programme by matching the founders with investors who are either industry experts or who have already invested in similar startups and who have the experience needed.

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HOW MANY BUSINESSES AND JOBS (INCLUDING ALSO CONSULTANTS) HAVE FASTERCAPITAL HELPED TO CREATE? FasterCapital has helped create jobs for more than 6000 people in more than 470 startups. It has also created an opportunity for over 1,000 mentors to be featured on the website to connect with founders. We have also more than 1,000 representatives and regional partners on a global level. WHERE DO YOU SEE HUBS OF DYNAMISM IN THE REGION? If you are referring to the Middle East region, then GCC countries — especially Saudi Arabia and the UAE — and Egypt are the go-to markets for creative minds. We are a global incubator, so on a global level, the US is surely always leading on this front. Germany and the UK are also one of the most dynamic hubs for start-ups. YOU MUST GET SOME GREAT INSIGHT FROM ALL THE BUSINESS PLAN SUBMISSIONS… Sure, I’m very lucky to work daily with such innovative people. Being in contact with passionate and talented entrepreneurs inspires me and keeps me updated with the world’s latest technologies and trends. It also enables me to predict and foresee what the next big thing might be! I can also put some of my experience with entrepreneurs and we can work together to improve the offerings and address some of the problems that they might be facing. The real-life lessons and stories of hard work, and teamwork, are invaluable and inspiring. HOW DO YOU ENVISION TECHNOLOGY INNOVATION AND DIGITAL TRANSFORMATION IN THE FUTURE? AI has been taking over many aspects of our lives for the past 20 years and I guess AI will be taking most of creative jobs in the coming 20 years. Many have predicted this in the past and failed but now it’s different. The advance in AI, processor speeds and the creation of new hardware processors dedicated to AI will change the game. Hopefully, this will be for the benefit of humankind: to distribute and use resources more efficiently and wisely. I am generally positive about the future, but I bear in mind that technology is a powerful tool that requires wise people at the helm. i

CEO: Hesham Zreik

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> Latin America

Latin American Countries Proved Slow to Join Start-up Ecosystem — but there is Movement Afoot By Brendan Filipovski

The Latin American start-up ecosystem is a bit of a late bloomer. It has grown from $7bn in 2010 to $221bn in 2020 — and most of the growth has come in the last four years.

n 2019, Softbank announced that it would invest $5bn in the region. Many saw the opportunity, but until recently only a few invested. The good news is that there is still ample room for growth. “Innovation creates opportunities, and those opportunities create more demand for innovation,” says Diego Molano Vega, Colombia’s former Minister of Information Technologies and Communications. The economic potential of Latin America is undeniable. It has twice the population of the US and a combined GDP double the size of India’s — or around 40 percent of China’s. Like India and China, it also has a growing middle class. But that potential has been thwarted. From political instability and income inequality to under-investment in infrastructure, the region has been more capybara than jaguar. Despite this, the start-up scene has exploded. Behind the economic dysfunction lurks a virtual economy that is starting to rev its engines. Internet penetration (70 percent) and mobile internet penetration (67 percent) surpass that of India and China. Brazil has the fifth-highest number of social media-users in the world. Over 40 million unbanked Latin Americans entered the system for the first-time last year through online banking. The increase was largely the result of government pandemic subsidies forcing people to open accounts, and the rise of neobanks. In 2020, fintech represented 40 percent of deals by value and 26 percent by volume. E-commerce was second with 12 percent of value and 10 percent. Internet penetration has allowed a growing middle class to gain access to neo-banks and insurtech companies. When Brazil’s Nubank began operations in 2013, it was spurned by most investors. Sequoia Capital jumped in, driven by faith in the founder rather than the business model. Today Nubank has over 40 million customers. The pandemic has accelerated the rate of digitalisation for fintech and e-commerce, with 75 percent of Latin Americans now making purchases online. And those transactions are growing at 2.8 times the rate of in-store. This growth is but the first fruit. Apart from the region’s economic potential, several factors point to an explosion in fintech and e-commerce. SMEs make up over 90 percent of companies in the region — but only two percent sell online. There is enormous potential for B2C and B2B start-ups to unlock online growth. Currently, most of the focus is on the consumer side. There is also enormous potential for fintechs in the cross-border payments space. The increase in foreign investment in the region is due to fintech and e-commerce. Many start-ups now have a track record or a model of success to take to investment meetings. This was not the case seven years ago. 148

"The good news for these ecosystems, and Latin America as a whole, is that there is still plenty of room for growth. Public sector support is mixed. While it has been a boon in Chile, Colombia, and Mexico, more can be done in Brazil and Argentina." The pandemic has also seen the flattening of the global ecosystem, which has helped Latin America. Previously, a young Latin American business had to build contacts and then travel to Silicon Valley to secure funding. Today, a Zoom call will do the trick. This can be seen in the rankings of individual Latin American countries and cities. In the 2021 StartupBlink report, five countries make the top fifty: Brazil (24), Chile (36), Mexico (38), Argentina (39), and Colombia (47). Uruguay (51) falls just outside. In terms of cities, Latin America has four in the top 100: São Paulo (20), Mexico City (50), Buenos Aires (60), and Santiago (70). Miami ranked 31st, and while it’s in North America, it is positioning itself as a hub for Latin American start-ups, is already a financial hub, and has large numbers of immigrants — including entrepreneurs like Cuba’s Manny Medina. Brazil is the clear regional leader; São Paulo is a world leader in fintech (Nubank is based there) and ranks 19th for transport technology. Five Brazilian cities are in the top 200. Seven of Latin America’s most valuable start-ups are based there. The country represents 45 percent of the Latin American start-up ecosystem by value, and 51 percent by volume. Brazil has a population of over 200 million; most of its unicorns serve the domestic market. But low levels of English and Spanish proficiency in the Portuguese-speaking nation are barriers to overseas expansion and discourage some investors. Large Brazilian companies have taken an interest, however. Chile benefits from a strong economy, led by its capital, Santiago. It has also benefitted from the success of the Start-up Chile programme. This is the leading accelerator in Latin America and ranks in the top 10 of some global surveys. It was started by the Chilean government in 2010 and has been successful in attracting business, as well as developing a strong national brand. It currently has 1,960 start-ups. Despite this, there are no Chilean unicorns. Most start-ups are domestically focused and slow to turn their attention to Peru, let alone the rest of the world. Mexico and Mexico City are benefitting from strategic geographic position. Mexico has also CFI.co | Capital Finance International

been attracting a lot of international investors, including the likes of SoftBank, which recently invested $150m in Grupo Bursátil Mexicano, which has a growing digital trading platform. Mexico City’s champion is the online used-car platform Kavak. Founded in 2016, it is already worth over $4bn. Argentina stands out for its large pool of skilled tech developers and programmers. But economic instability and bureaucracy are holding the startup scene back. It does, however, lead the region in terms of overall start-up value (45 percent). By volume it only has an eight percent share. Colombia has been buoyed by the growth of the economy over the past 20 years. Government programmes have also helped. Start-ups here have a strong regional focus; on-demand delivery firm Rappi (valued at over $5bn) operates in nine Latin American countries and over 250 cities. The good news for these ecosystems, and Latin America as a whole, is that there is still plenty of room for growth. Public sector support is mixed. While it has been a boon in Chile, Colombia, and Mexico, more can be done in Brazil and Argentina. Bureaucracy is a sore point for many countries. None of the larger Latin American economies ranked well in the World Bank’s Ease of Doing Business Report 2020; Chile was highest, at 57th. The private sector is investing in some Latin American countries, but local investment is low. The IDB Lab study found that the region invests $7 per capita in start-ups per year. Israel invests 117 times more, Estonia 42, and China seven. Education can also be improved. The PISA rankings of most Latin American countries are hardly stellar, Chile being the exception. Diversity is another area that can be improved — for women and minorities. The Latin American ecosystem has come a long way since 2010 and if its economies and middle classes continue to grow — and international investors maintain their interest — start-ups could transform the region. Domestic investors and governments also need to do their part. Could we be talking about a Latin American tech miracle in 2030…? i

Here’s to greater possibilities together Something remarkable happens when just the right elements come together - ideas with technology, data with inspiration, investors with solutions. That’s what we do every day. Let’s invest in greater possibilities together. invesco.com/together

Invesco Distributors, Inc.

> Unity Willis Towers Watson:

Old as the Ages, Wise as the Hills, a Global Leader with History and Scope

nity Willis Towers Watson is a global leader in consulting, brokerage, and financial solutions.

It offers reliable and extensive services to clients on every continent except Antarctica. Unity Willis Towers Watson has been operating in Latin America for more than 50 years, with offices in the region’s main markets and more than 3,000 collaborators. It 150

administers more than two million individuals through its life and benefits insurance plans. Its operations in Central America date back over 40 years, with six regional offices, more than 500 collaborators, and some 760,000 policy holders. Unity Willis Towers Watson’s value proposal centres on providing an integral service offering consulting, brokerage, and solutions, through four CFI.co | Capital Finance International

key business segments. Those are Investment, Risk and Reinsurance, Corporate Risk and Brokerage, Human Capital and Benefits, and Benefits, Delivery and Administration. The firm’s unique perspective allows the identification the critical intersections between talent, assets and ideas, maximising client potential. While many companies focus exclusively on loss mitigation, Unity Willis Towers

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Executive Director for Central America: Louis Ducruet

More than 40 years ago, the firm’s executive director for Central America, Louis Ducruet, began his career in the insurance industry. One of the greatest impacts Ducruet has had on the business has been the creation of insurance programmes designed to meet the specific needs and requirements of local and global clients. After more than four decades which have taken him to the top of his career, Louis Ducruet has extensive knowledge and deep experience on the insurance industry and its diverse lines of business. He has participated in the Panama Canal Risk Management Programme and has been involved in the creation of all the firm’s regional client programmes. He has actively participated on various insurance industry committees, and presided on the commission that created the Captive Law of Insurance and Reinsurance of Panama.

Watson demonstrates how a unified standpoint — considering people as well as risk — leads along the road to growth. With more than 45,000 employees around the world, the company values have been honed to guarantee a responsible and professional performance. Those values define the business approach: a focus on the client, teamwork, integrity, respect, and excellence.

His experience and knowledge are in demand extramurally as well. In addition to his responsibilities at Unity Willis Towers Watson, Ducruet participates in other companies and associations. These other duties and obligations include Capital Bank, of which he is a founding partner and director. He is also director of Foresza, a factoring company, and is a partner and director of printing company Formas Eficientes and Visa and Mastercard personalisation company Fesa Card. CFI.co | Capital Finance International

Ducruet is a member of APEDE (Asociación Panameña de Ejecutivos de Empresa de Panamá, or the Panamanian Association of Business Executives of Panama). He is a former director of the Ronald McDonald Foundation, a member of AMCHAM, the American Chamber of Panama, and was a founding partner and director of Capital Bank and Subsidiaries. The Unity Willis Towers Watson Editorial Unity was established in 2008, with broad local and regional knowledge on insurance brokerage. It recently united forces with Willis Towers Watson. The partnership combines 193 years of history and enhances a presence in 140 countries. At Unity Willis Towers Watson, human capital is considered indispensable for continued growth and assured customer service, focused on high quality and world class standards. Its collaborators are a driving force for sustainable growth, committed to social responsibility through national development initiatives, corporate voluntary service and awareness programmes promoting healthy lifestyles. Corporate sustainability has been central to Unity Willis Towers Watson over the years. It ensures a long-term approach based on the economic, environmental and — most of all — social pillars. Those guidelines apply within the organisation, to the firm’s collaborators, and to its clients. The aim is to improve organisations, and through them, general quality of life. i 151

> Matchmaking:

Can Private Finance and Green Infrastructure Combine? By Otaviano Canuto

The world faces a huge shortfall of infrastructure investment relative to its needs. With a few exceptions, this is greatest in emerging and developing countries.

he G20 Infrastructure Investors Dialogue estimated the volume of global infrastructure investment needed by 2040 to be $81tn, $53tn of which would be needed in non-advanced countries. The dialogue projected a global gap — in other words, a shortfall in relation to the investment needs — of around $15tn, $10tn of that in emerging economies (Figure 1, left panel). The World Bank has estimated that for emerging and developing economies to reach the Millennium Development Goals for 2030, their infrastructure investment would have to correspond to 4.5 percent of their annual GDPs (Figure 1, right panel).

Figure 1: Infrastructure gaps. Note: *to achieve SDGs and Paris-Agreement goal of limiting global warming to <2°C by 2100.

Source: IIIF (2021). Green Weekly Insight - Thacking the infrastructure jigsaq, June 24th.

There is also a need for that investment to be “greened” as rapidly and extensively as possible to minimise the negative impacts of global warming. The energy sector must expand the use of renewable sources. Increases in use-efficiency, and the elimination of subsidies for fossil fuels, would be part of this. Transport is now responsible for 25 percent of the world's greenhouse gas emissions. This must be reduced by shifting to low-carbon transport options, in addition to investments in energyefficient equipment and the transition to electric vehicles and fleets. A major part of the greening will be in cities: improved water supply and sanitation services, changes in energy supply, waste recycling, and greater energy efficiency through better building standards and/or renovation of existing buildings. This transition, as for manufacturing and agricultural activities, will require investment in infrastructure. A major obstacle holding back such investment is the lack of fiscal space, which is constraining public spending. This has been made worse by fiscal packages adopted because of the pandemic. While the largest advanced economies can afford to increase their public debt, with a low risk they will face deteriorating financing conditions, this does not apply to emerging economies or those grappling with unsustainable debt trajectories (Figure 2). 152

Figure 2: Higher global debt across the world. Source: IIF (2021). Global debt monitor - Chipping away at the mountain? May 13.

Measures need to be taken to expand the options for the private financing of infrastructure projects. According to data from the Institute of International Finance, over the past 15 years, institutional investors with long-time profiles in their assets, such as pension funds, have been gradually increasing their allocations to infrastructure investments and alternatives to fixed income instruments, equity, and other traditional instruments. Stable and long-term returns from infrastructure projects dovetail with the commitments of those financial institutions, particularly in the context CFI.co | Capital Finance International

of declining long-term real interest rates on public and private bonds, as seen in recent decades in advanced countries. Surveys carried out by Preqin show fund managers already pointing to the decarbonisation of energy as a factor in attracting private investment to infrastructure. The biggest challenge is to build bridges between infrastructure needs in non-advanced countries and private sources of finance with opportunities for returns on their liability side.

Autumn 2021 Issue

Figure 3: Taxonomy of instruments and vehicles for infrastructure financing.

Source: OECD (extracted from IIF (2021). Green Weekly Insight - Tacking the Infrastructure Jigsaw, June 24).

"Investors have different mandates and skills regarding the risk-management of such projects and phases of project investment. They demand coverage of risks whose exposure is not adequate or permitted by regulation." This requires the development of properly structured projects, with risks and returns inline with the preferences of the different types of financial intermediation, would help close the private financing gap in infrastructure. Investors have different mandates and skills regarding the risk-management of such projects and phases of project investment. They demand coverage of risks whose exposure is not adequate or permitted by regulation. The absence of complementary instruments or investors is one of the most frequently identified causes of failure in the financial completion of projects. Figure 3 provides a snapshot of the diversity of instruments and vehicles through which private finance can participate in infrastructure projects. The constrained fiscal space in emerging and developing countries can be used to mainly cover such risks and enable the building-up of investment, rather than replacing private investment: crowding-in private finance rather than crowding it out. National and multilateral development banks could prioritise this instead of financing total investments. Identifying attractive investment opportunities for different types of investors and combining these perspectives more systematically around specific projects or asset pools is a promising CFI.co | Capital Finance International

way to fill the infrastructure financing gap. The planning and integrated issuance — with different time profiles — of fixed-income securities, bank loans, credit insurance and others — for the various phases from project preparation to operation — make that combination possible. The second task to boost private infrastructure investment in emerging and developing economies is the reduction of legal, regulatory, and political risks. Transparency and harmonisation of rules and standards can increase the scale of comparable projects and make it possible to build project portfolios. Non-banking financial institutions often cite the absence of sufficiently large project portfolios as a disincentive to setting-up focused business lines. This is a particular weakness in the case of smaller countries and economies. The contrast between the scarcity of investments in infrastructure — and the excess of savings invested in liquid and low-yield assets in the global economy — deserves to be confronted. Greening infrastructure in non-advanced economies would benefit if greenbacks can be attracted. i

This story first appeared at Policy Centre for the New South. 153

> Viva la Revolución!

Past Events, Politics and Poverty Have All Had an Impact on Modern-Day Cuba By Yogesh Patel

L 154

a Revolución is the title given to the Cuban rebel uprising — and subsequent government takeover — that took place in 1959. The main aim is to implement

a socialist society and economy. I say is, not was, because while La Revolución refers to a specific event, the concept and ideology are constantly evolving and still hold meaning. CFI.co | Capital Finance International

From the time when the revolutionaries hid out in the Sierra Maestra mountains, the concepts of education and the redistribution of land and wealth have been seen as vital. The National

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Literacy Campaign of 1961 and the Agrarian Reform are changes that point to the lasting impact the revolution has had on business. The drive for literacy and the redistribution of land have forever changed the relationship between employer and employee — and, as a result, the nature of business. The National Literacy Campaign helped to cement the newly formed government in place. Prior to 1961, the standard of education in Cuba was poor. In 1955, only 51 percent of primary-school aged children were enrolled, the fourth-lowest rate among Latin American countries. There were major discrepancies in the literacy rates between rural and urban areas. In the wealthy, urbanised province of Havana, the illiteracy rate was 9.2 percent. In rural provinces such as Oriente and Pinar del Rio, it was above 30. By eliminating the barriers to access — namely wealth and class — Cuba’s literacy rate and education were boosted. In little more than a decade, the government managed to enrol 90 percent of primary school-age children. This landmark campaign championed a society fit for skill-dependent professions and nudged along a growing economy. To instil self-confidence in the population, the Literacy Campaign served as a springboard. All Latin America was, or had been, going through reforms in the sort of shift seen in Europe when rural workers began migrating to cities in search of better-paid work. Increased education meant more skilled workers, which benefited businesses. The 1959 Agrarian Reform was one of the most revolutionary policies implemented in Cuba. Until then, as in many other countries, large amounts of land had been owned by (largely foreign) private owners and corporations. The first Agrarian Reform gave the state control of roughly 60 percent of all farmland: about six million hectares.

In the second Agrarian Reform, the state took control of 70 percent of farmland — a 10 percent increase. Medium-sized farms were able to offer higher wages, and the quality of life rose for rural Cubanos. This would continue for two decades, and state ownership eventually peaked at 82 percent. All that changed in the 1990s. Until then, the main source of food imports had been the Soviet bloc. But the 1989 Soviet collapse took that preferential trade with it. This limited trade opportunities of state-led farmers, resulting in the agrarian crisis. To combat this, the Cuban government introduced a third reform in 1993. This reform aimed to incentivise agricultural workers who had seen wages fall as a result of the decrease in trade. The co-operative model cranked-up, and the level of state ownership dropped to 40 percent. This meant the majority of land was effectively privatised, and co-operative-led businesses could diversify. This reduced reliance on trade and boosted the domestic market. The economy nonetheless entered what is known as el Periodo Especial, or the Special Period. “Special”, in this case, meant an economic downturn and recession. There were huge changes in the business landscape. While privately owned agricultural businesses began to see gradual rises in income, other industries hit trying times. The energy sector collapsed without Soviet crude oil, and citizens were asked to reduce their electricity consumption.

La Revolución fundamentally changed the nature of the Cuban economy — through political ideology, and the reforms implemented to sustain it. The Literacy Campaign and Agrarian Reform helped mould modern Cuba — and continue to impact the lives of its citizens and businesses. i

This was roughly divided. One million hectares of sugar cane land was owned by the state, 2.8m hectares by the granjas del pueblo, or people’s farms. Some 875,000 hectares were given to given over to small and medium farms, and the remaining 1,425,000 hectares stayed in private hands. Rents were abolished, and farm tenants became owners.

"Prior to 1961, the standard of education in Cuba was poor."

How did this affect business? Initially, it caused a boom in rural incomes: a success in the eyes of the revolutionaries. This has endured until today, with a large proportion of Cuban land-ownership in the hands of co-operatives. This shift also led to a rise in income levels. CFI.co | Capital Finance International

Author: Yogesh Patel

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> EY Argentina:

What New Trend in Global Taxation of Digital Economy Means for Argentina By Sergio Caveggia

n May and July, the G7 and G20 groups — consisting of Central Bank governors and the finance ministers of developed and developing countries — confirmed a new tax policy on the digital economy.

The OECD has devoted six years to reaching an international agreement on digital economy taxation. The agency believes that the world economy will become digital in the medium term, and thereafter the fundamental international taxation bases will no longer be useful. The policy proposal came from the Organisation for Economic Co-operation and Development (OECD), and the confirmation reinforces a commitment to award taxing rights to the jurisdictions in which digital service markets are located. Rates are at least 20 percent of profits, exceeding a 10 percent margin obtained by the multinational enterprises (MNEs) that meet the parameters of the OECD’s Pillar I, which focuses on new regulations for nexus and profit allocation among the countries involved in a certain enterprise’s business model. A country’s right to levy taxes will not be bound to a company’s physical presence in its jurisdiction. It is aimed at the market where end users are located, with the right to levy taxes on a portion of the digital business profits regardless of whether the enterprise providing such services has a physical presence. This specific action is changing almost 100 years of international taxation fundamentals. The concept of “nexus” ruled the basics of taxation in different countries around the world in the past century. Pillar I is now proposing a change to this concept for certain sectors of the global economy: ADS (automated digital services) and CFB (consumer-facing businesses). ADS are defined as activities that “are provided on an automated and standardised basis to a large and global customer or user base and can do so remotely to customers in markets with little or no local infrastructure. They often exploit powerful customer or user network effects and generate substantial value from interaction with users and customers”[1]. Social networks may be included within this definition. CFBs are composed of those sectors that are “able to engage with consumers in a meaningful way beyond having a local physical presence and 156

can thereby substantially improve the value of their products and increase their sales. “This significant and sustained engagement is able to take place and create value for consumer-facing MNEs because of the broader digitalisation of the economy, as technology facilitates more targeted marketing and branding, and the collection and exploitation of individual consumer data — all of which can be achieved with greater efficiency and remotely.”[1] Steaming and music platforms can be included within this scope. Out-of-scope activities are those related to the extraction of natural resources, financial services, construction, sales, and the leasing of residential property and transport businesses. Pillar II attempts to levy a global minimum tax on international digital services which would discourage the remittance of profits to preferred jurisdictions or systems. The purpose here is to prevent international planning structures using intellectual property rights to shift profits to lowor nil-tax jurisdictions, or the abusive use of tax treaties or special systems. The OECD defined Pillar II as providing “a solid basis for a systemic solution that would address remaining base erosion and profit-shifting (BEPS) challenges, and sets out rules that would provide jurisdictions with a right to tax-back where other jurisdictions have not exercised their primary taxing rights, or the payment is otherwise subject to low levels of effective taxation”. These rules would ensure that all large internationally operating businesses pay a minimum level of tax. [2] The global minimum tax will consider a base determined by consistent accounting criteria (IFRS or similar standards). It is centred on two main aspects: Global Anti-Base Erosion rules (Globe Rules) consisting of Income Inclusion Rules (IIR) under a top-up tax mechanism at the Ultimate Parent Entity and Under Tax Payment Rules (UTPR); and a Subject to Tax Rule (STR) that allows source jurisdictions to tax certain inter-company flows below a minimum rate. No one dares to issue a hard-and-fast conclusion as to the winners and losers of this new international trend. Somehow, this mechanism will discourage digital business models from remitting or deferring profits to low- or nil-taxation countries or preferred systems, as income will be CFI.co | Capital Finance International

subject to tax in the country where the service is used, or with the global minimum tax. The OECD states that about €100bn in annual revenues will be reallocated to market jurisdictions, and that €150bn in additional revenue will be raised in connection with Pillar II. Such a change in the global taxation scenario gives rise to innumerable doubts and uncertainties to be agreed upon at an international level.

Autumn 2021 Issue

Author: Sergio Caveggia

Argentina needs to modernise and simplify its current system to benefit from a revenue source as a market jurisdiction, mainly under Pillar I. Although Argentina does not impose DST, it levies cross-border digital services with a local tax in some provinces, and particular indirect surtaxes at the federal level (impuesto pais — country tax — and income tax surcharges) that would need to comply with OECD guidelines. Although such taxes are not imposed on the MNEs acting remotely, they disclose the uncoordinated status of the local tax regime vis-à-vis the future OECD trends aimed at levelling the global tax playing field. i

[1] OECD, Pilar I Blueprint, October 2020. [2] OECD, Pilar II Blueprint, October 2020.

How is this new scenario impacting Latin American countries in general, and Argentina in particular? For multinational enterprises, a foreign source income is currently captured by domestic legislation and there are, generally speaking, no specific rules for tax deferrals or exemptions for foreign source income. Pillar II’s top-up approach would be applicable for those multinationals to be subject to a global minimum tax according to the new OECD guidelines.

Latin American countries— and Argentina in particular — would be more impacted by Pilar I, which would drive more revenue sources from consumers in their respective markets.

ABOUT THE AUTHOR Sergio Caveggia is a tax partner currently in charge of 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. Sergio is also focus on servicing clients in the Private Client Services (PCS) area. He is highly experienced in inbound and outbound investments, buy side, sell side and restructuring services within the Transaction Tax area.

But the domestic tax system needs to be amended to comply with a common standard before Pillar I and II rules can be included in domestic legislation. The OECD guidelines provide for abrogation of unilateral measures (DST, or digital services taxes) imposed mainly in European jurisdictions as a sort of “condition precedent" to apply Pillars I and II. CFI.co | Capital Finance International

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> Kellogg Insight:

Six Strategies for Improving Diversity in an Organisation By Suzie Allen. Based on research by Ivuoma Ngozi Onyeador

The racial reckoning of Spring 2020 showed that failures of diversity and inclusion can no longer be ignored. Many organisations rolled out programmes aimed at addressing these shortcomings — in particular, diversity training.

ut training alone can’t address longstanding organisational failings, argues Ivuoma N Onyeador, an assistant professor of management and organisations at the Kellogg School. “It’s fine to have trainings,” she says, “but trainings are only the beginning of the efforts needed to improve diversity.”

"Organisations can build support for diversity programmes by proactively addressing employee concerns."

On its own, training can’t address systemic problems: pay inequity, leadership that is mostly white and male, failure to hire under-represented groups. Additionally, some trainings just don’t work or even backfire. Research has shown that implicit bias training — a popular approach that seeks to help participants recognise and overcome unconscious prejudices — does not reliably reduce bias in the long term, and may reduce participants’ sense of responsibility over their own behaviour. Yet some organisations have implemented implicit-bias training and figured that’s enough.

they’ll be passed-over for promotions in the name of diversity or punished for “saying the wrong thing”, or they may simply believe that diversity isn’t important — worries that can be allayed before a new programme is introduced by addressing them in ways that fit your specific organisations’ culture and context.

In a new policy paper, Onyeador and co-authors Sa-kiera TJ Hudson, of Yale University, and Neil A Lewis Jr, of Cornell University, explore how organisations can move beyond implicit-bias training. The researchers reviewed the existing literature on diversity efforts and developed a set of evidence-based recommendations for creating a robust, multifaceted approach to achieving diversity goals.

One recent study found that interracial interactions help white people perceive and combat inequality; another showed that, after hearing people of colour discuss their cultural backgrounds, white people displayed more inclusive behaviour toward non-white coworkers. By creating opportunities for co-workers of all backgrounds to gather and talk openly, organisations can bring about a more inclusive culture.

FACILITATE INTERGROUP CONTACT It’s also important to create dedicated spaces for under-represented groups. When majority group members interact with under-represented groups, their attitudes change.

MESSAGING MATTERS, BUT ACTION MATTERS MORE It’s easy to sing the praises of, say, your company’s family-friendly policies in a job description. But it’s much harder to actually be accommodating when an employee needs several days off to care for a sick child. Research shows that organisations that include organisational-diversity messages in job descriptions aren’t necessarily better at recruiting a diverse pool of employees or less likely discriminate against them. “We want to make sure that both of those pieces are in there,” Onyeador explains. Inclusive language “is important, because it signals to your potential pool of applicants that the organisation could potentially be a supportive place for them. But then it’s really important to follow that up with action.” TREAT DIVERSITY AS AN ORGANISATIONAL GOAL Action means creating accountability structures — which, according to one 2006 study, is the single most effective way to improve managerial diversity. Assigning institutional responsibility “can look a number of different ways, like having a chief diversity officer with some sort of oversight role, or diversity officers within units reporting up to a leader who has the power to hold units and managers accountable”, Onyeador says.

Onyeador highlights six key takeaways… PREPARE FOR BAD REACTIONS Diversity efforts may be poorly received. The backlash can range from eye-rolling in a training session to a sense of grievance that underrepresented groups get “special treatment” to outright hostility. Organisations should be realistic about these challenges and have plans to address them. “We do this in other arenas — we would never launch a product without anticipating potential snags in the process,” Onyeador explains. Organisations can build support for diversity programmes by proactively addressing employee concerns. Majority group workers may fear 158

But it’s essential to recognise that intergroup contact may also place a burden on underrepresented group members, who may feel exhausted, singled-out, or responsible for teaching others. That’s why it’s just as important for organisations to create dedicated structures such as affinity groups that allow under-represented groups to gather. In addition to providing camaraderie, these spaces can facilitate career networking and advancement. “People of colour, for instance, are having a very different experience in these organisations than white people, and it can be nice to have a space where you meet other people and solve problems, share resources, and find role models,” Onyeador says. CFI.co | Capital Finance International

Organisations can also create incentives for participating in inclusion efforts, like bonuses or perks for serving on a diversity council. “People are very motivated by extra money at the end of the year,” she points out. “I suspect that if bonuses were tied to diversity metrics, we would see things shift. We would find the black engineers. They’re there.” YOU CAN’T IMPROVE WHAT YOU DON’T MEASURE Often, organisations are reluctant to collect and analyse data on diversity programming. But that mentality wouldn’t fly with any other important organisational objective, so it shouldn’t be acceptable for diversity efforts. If a

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"Organisations can also create incentives for participating in inclusion efforts, like bonuses or perks for serving on a diversity council." particular programme or training didn’t work, it’s imperative that we know that, she says — so it can be improved. There’s a similar hesitance about studying outcomes for the overarching goals of organisational change. All too frequently, companies will set out to improve diversity — but fail to measure the variables of interest. Onyeador summarises the attitude: “Did we increase the number of women in the C-suite? It’s not clear. Is the climate different? We have no idea. Are we retaining more people? Nobody knows.” Organisations have the data to answer such questions. Deciding to pay attention to it “will go a long way”. None of this is easy. That’s OK. Diverse organisations are not built overnight or by accident. But just because the work is challenging doesn’t mean it’s impossible. In fact, “as organisations, as companies, as universities, we’re used to doing hard things by putting our heads down, figuring it out, being really careful, and thinking through everything,” Onyeador says. There’s no reason, she says, that the same level of effort can’t be applied to diversity. i

This article first appeared in Kellogg Insight. FEATURED FACULTY Ivuoma Ngozi Onyeador, assistant professor of Management and Organisations ABOUT THE WRITER Susie Allen is a freelance writer from Chicago. ABOUT THE RESEARCH Onyeador, Ivouma N, Sa-kiera TJ Hudson, and Neil A Lewis, Jr. 2021. Moving Beyond Implicit Bias Training: Policy Insights for Increasing Organisational Diversity. Policy Insights for the Brain and Behavioural Sciences.

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> North America

Viva Mexico! As US Tightens Restrictions, Migrant Labour Supply Falters — and Central Americans Find a Fresh Focus By Brendan Filipovski

Since 2007, the number of Mexican migrants in the US has been decreasing — and that is reshaping regional migration patterns

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espite the images on TV and social media, Mexican migration is not oneway: people from Central America are increasingly settling in Mexico, more Mexicans are voluntarily returning from the US — and fewer are leaving in the first place. The US-Mexican border wall was one of Donald Trump’s most controversial pre-election promises. He painted a picture of illegal immigrants flooding into the US, and criticised the number of approved asylum-seekers and legal immigrants.

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The rise of the migrant caravans from Central America in 2018 strengthened Trump’s stance and led to a harsh zero-tolerance policy which resulted in families being separated. The pandemic has also seen a drop in legal immigration. Executive orders abound. In the first six-months of 2021, a rise in illegal border crossings had President Joe Biden trying to walk the line between tough and humanitarian. Vice-president Kamala Harris famously told Guatemalans: “Do not come”, and the US has been repatriating asylum seekers. Mexico can be seen as a sieve as migrants flow through Central America and join the procession. While the dramatic news coverage cannot be dismissed, an increasing number of Central Americans are choosing to stop short of the US, and settle in Mexico. After peaking at 12.8 million in 2007, the number of Mexican immigrants to the US has been decreasing, according to the Pew Research Centre. Between 2005 and 2014, more Mexicans left than entered. And while net migration has since tilted back towards the US, its advance has diminished. Between 1995 and 2000, net migration to the US was 2.27 million. From 2013 to 2018, the figure was 160,000. The effect of the pandemic on these trends is unclear. While green cards and temporary visas for Mexicans have decreased during the pandemic, unauthorised migration has increased. This may be because of stricter enforcement via Trump’s Executive Order 42 and/or because legal channels have dried up. The US recession of 2007-09 and resulting job losses discouraged migration, while many unemployed Mexicans returned home. The pandemic may have had a similar effect, but with the US economy recovering and labour shortages in some industries, many may again try their luck. The Mexican economy has also performed better over the past 25 years. Since the 1994 peso crisis and the resulting recession in

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Chart 1: Real GDP Growth. Source: IMF

1995, Mexican GDP has largely tracked that of advanced economies. There have even been occasional runs of out-performance (see chart 1). This has been driven by improved macroeconomic fundamentals and the positive impact of NAFTA (now USMCA), which started in 1994.

Some of this can be explained by Trump’s “Migrant Protection Protocols”, which require an application for asylum before arrival — and the wait for a decision outside the US. But many are seeking a new life in Mexico as hopes of an American dream fade.

Some 33 percent of Mexican adults canvassed in 2015 said that life at home was equivalent to life as an immigrant in the US. In 2007, only 23 percent had felt that way.

With improvements in its economy, Mexico has become a more attractive destination for Central American migrants. Many Mexican companies based in poorer states have embraced migrant workers. Added to this is a shared language and similar cultures. The adjustment is easier.

The growth rate of working-age Mexican citizens has been decreasing since the early 2000s. In the mid-1980s, that population was growing at around 18 percent. This fell to seven percent in 2020 and is expected to drop below zero by 2050. Some commentators are predicting the end of low-skilled migrants. This is coupled with a decreasing fertility rate and diminishing family size, resulting in a falling child-dependency and total dependency ratios since the 1970s. Mexican workers are supporting fewer people and there is less pressure to migrate for financial reasons. It also means a drop in “family chain” migration. Since 2007, Mexicans have found it easier to get temporary work visas. This has allowed them to come to the US for seasonal work such as fruit picking and return home afterwards. In the past, they would probably have stayed in the US. In 2019, there were around 260,000 Mexicans following this pattern. The pandemic has disrupted that. The other side of the story is increased migration to Mexico from El Salvador, Guatemala and Honduras. Some are looking to enter the US, but an increasing number settle in Mexico. Migrants claiming asylum in Mexico have increased from 3,424 in 2015 to 70,302 in 2019. The figure for 2021 is expected to be around 100,000.

Mexico also has a broad definition of “refugee”, making it easier for asylum-seekers facing general violence. It is not all milk and honey though. Mexican law requires asylum seekers to reside in the states in which they register — mostly in the poorer southern states such as Chiapas and Tabasco. Economic conditions are tougher than in the northern states and there are higher levels of gang-related violence. For some, this is still better than the conditions in their home countries. There is also a dynamic with family-chain migration. As Central Americans move to Mexico, they draw family members in their wake. Immigration to the US poses more difficulty, too; in 2019, only 8,000 temporary work visas were issued to Central American migrants. The US will continue to face pressure from Latino migrants in coming years, and it will remain a politically divisive issue. If the Mexican economy continues to make ground and the growth of its working-age population continues to slow, there could come a day when the US would be competing with Mexico for low-skilled labour. If that day ever comes, the iconic statue on Liberty Island will once again have to open her arms — and maybe learn a little Spanish. i

"The US will continue to face pressure from Latino migrants in coming years, and it will remain a politically divisive issue. If the Mexican economy continues to make ground and the growth of its working-age population continues to slow, there could come a day when the US would be competing with Mexico for low-skilled labour." 162

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ICONIC TIMEPIECES With classic Scandinavian timepieces and timeless men’s accessories, Georg Jensen prides itself on having designs that every gentleman will truly appreciate. CFI.co | Capital Finance International

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> Anthony Scaramucci:

Mooching Towards Washington, With No Polyester Suits in Sight

Entrepreneur and author Anthony Scaramucci has seen plenty of ups and downs — and the US presidency may not be out of his reach, despite an unfortunate beginning to his political career.

uintessential New Yorker Anthony Scaramucci was former US president Donald Trump’s outspoken communications director — and he was fired after just 11 days. His trademark wit didn’t fail him, even then. “When you take a job like that,” he said, “your expiration date is coming. I didn’t think I’d last too long, but I thought I’d last longer than a carton of milk.”

Scaramucci’s blue-collar background had prepared him for life’s ups and downs. Expectations of him were low, and he was never to develop a sense of entitlement. When his father heard that the young Scaramucci had been hired for a desk job, he laid down the law. “He told me that there should be no complaints now,” the Mooch recalls, “and no whingeing. ‘You are indoors, you are out of direct sunlight, and there’s no heavy lifting involved.’ So, when I got fired from the White House, it wasn’t such a big deal, and I thought, ‘Well, let’s just get back to work’.” Culturally, he led a sheltered home life growing up. “There were no books in the house and the only newspaper we took was the tabloid Daily News. There may also have been a subscription to Readers Digest. “I had never hit a golf ball or picked up a tennis racquet in my life, and my lack of social graces was to hold me back. My interviewer at Goldman Sachs told me that I was a smart kid, but he was appalled to see me wearing a polyester suit. I was by far the worst-dressed of the applicants. “That had to change, and it did. But I got the job.” He says his law school education allowed him to synthesise a lot of complex ideas. With college libraries suddenly available to him, Scaramucci became an avid reader and student of history. His academic hero is his faculty adviser at Tufts University, Sol Gittleman, now 87 and living in a retirement community. Scaramucci believes that a letter of recommendation from Gittleman helped open doors for him at Harvard. 164

Scaramucci prefers not to name any of the villains he has come across. “I tend to see the good as well as the bad side to people,” he says. He thinks of villainy in the abstract and mentions the “sins” of ego, pride, and self-importance — and is prepared to be called to account for such flaws in himself. Scaramucci founded alternative investment firm Skybridge in 2005 and is still its managing partner. The organisation produces an annual thought-leadership event known as the Skybridge Alternatives (SALT) Conference. The Mooch, as he is affectionately known, also hosts a weekly podcast, Mooch FM, and is a busy author. Reviewing his career, the Mooch offers a quotation from Winston Churchill: “When you’re going through hell, keep going.” Scaramucci resolves not to be distracted from his goals. He has suffered setbacks, pitfalls, market-based calamities — and several firings — without losing his sense of purpose. The business world excites Scaramucci because he gets his kicks from meeting people, from sharing ideas, and by adapting to new technology. Scaramucci believes leaders in business and public life should be judged on their core values and principles. “And the team captain is there to help other people rather than fixate on themselves,” he says. “In politics, too many people are more interested in preserving their power than serving the public, and this is becoming dangerous.” The markets, he believes, are probably the most meritocratic instrument of society. “(Markets) don’t care if you attended Eton, Oxford, or Harvard. You can drop out and still make it big if you’re brilliant. It’s the flattest playing field I know. What the markets care about are your acumen and insights. “I wake up each day feeling challenged, recognising that my assumptions may turn out to be false. The world changes very quickly, and what is particularly exciting is that there are lots of unknowns coming our way. We must adapt.” How does Scaramucci find the time to run the SALT conference, the portfolios, the podcast, and CFI.co | Capital Finance International

write business books? A readiness to delegate a massive amount of work. “I would rather people ask for forgiveness than permission,” he says. “I don’t mind them getting things wrong if they are trying hard. These arrangements have allowed us to break into the crypto markets, create thought-leadership programmes, and set up the publishing arm SALT Books. Skybridge initiatives are supported by entrepreneurs inside the organisation. They come to me with ideas and suggestions for growth. “I am happy to allow autonomy. And whether it is the CEO of SALT or the CIO of a particular fund, they should create and run their own businesses. But with this empowerment comes accountability: our entrepreneurs are responsible to the rest of us. “This has helped the organisation tremendously, and I’m proud of our team: they think with the right pronouns, namely, ‘we’ and ‘our’ rather than ‘I’, ‘me’ and ‘mine’.” The latest book by Scaramucci is The Sweet Life With Bitcoin, which raises awareness of the blockchain and cryptocurrencies which he

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Founder and Co-Managing Partner of SkyBridge: Anthony Scaramucci

believes are key elements of the future of finance. “It’s early days,” he admits, “but I think it very important that investors have some exposure. “We have $700m in Bitcoin and Ethereum across our portfolios, and I maintain that it is critical to buy into publicly traded stocks that are tied to that ecosystem.” The First Trust Skybridge Crypto Industry and Digital Economy EFT was launched in late September. The Scaramucci organisation will be conducting more private equity / venture capital business and digital assets exposure is to increase. “We believe that the hedge fund industry is alive and well,” he says, “and we are going to be growing that core business too. “We hope to see a doubling of assets in five years, and this will come from organic growth and the acquisition of new clients. We are already coming to see a greater diversity of assets and expect to launch one or two more ETFs during the coming year.” He is considered a likely presidential candidate and says he would never rule out a political future — but it’s not something he’s thinking

about now. “My family comes first, but the possibility of public service may be something to revisit in five or 10 years,” he says. “Frankly, I am somewhat unsuited to public life because I’m not allergic to the truth. Our politicians don’t like telling the truth. As Jack Nicholson’s character in A Few Good Men points out: ‘The truth? You can’t handle the truth.’

friends who want smaller government everywhere, except in the bedroom.” Women have a right to choose when it comes to abortion, he believes. “I am a Roman Catholic and it’s my right to practise my religion as I see fit, but that doesn’t mean I have to impose my views on others. Pro-life, pro-choice makes good sense to me.”

“To take that step, I would have to see public exasperation and the voters tired of the same old politics. Perhaps they will be looking for someone a little more entrepreneurial, more commonsense-orientated, and a solutions-based thinker.

Both parties, according to Scaramucci, are failing. “The extremism on the left is unsatisfactory,” he says, “but perhaps not as dangerous as that of the radical right. There is no question that this extremism is hurting both parties. I reject the Republican hype about deficit-spending and the pretence that they are fiscally prudent — which could not be further from the truth.”

“I’m opposed to left/right attitudes and would want to look instead for what’s good for the people. I don’t think we are ready for that yet. To run for office, I would have to go through the labyrinth of the Trump Republican party, and they don’t look like or act like the sort of Republican politicians I respect. I’m progressive in terms of social issues and see myself as a moderate Republican in the classical sense.” Scaramucci admits that he harbours some Democratic views. “I laugh at my conservative CFI.co | Capital Finance International

Scaramucci isn’t sure which party he belongs to anymore. “This is one of the big problems these days,” he concludes, “and is explained by the political environment of tribal identity. I’m hoping for a move to something more transformational.” Such a move could take the Mooch all the way to Washington, DC. i 165

> IMF:

How the Pandemic Widened Global Current Account Balances By Martin Kaufman and Daniel Leigh

2020 was a year of extremes. Travel all but ceased for a period. Oil prices wildly fluctuated. Trade in medical products reached new heights. Household spending shifted to consumer goods rather than services and savings ballooned as people stayed home amid a global shutdown.

xceptional policy support prevented a global economic depression, even as the pandemic took a heavy toll on lives and livelihoods. The global reaction, as seen in major shifts in travel, consumption, and trade, also made the world a more economically imbalanced place as reflected in current account balances — a record of a country’s transactions with the rest of the world. In our latest External Sector Report we found that the global reaction to the pandemic further widened global current account balances — the sum of absolute deficits and surpluses among all countries — from 2.8 percent of world GDP in 2019 to 3.2 percent of GDP in 2020. Those balances are set to widen further as the pandemic continues to rage in much of the world. If not for the crisis, global current account balances would have continued to decline. While external deficits and surpluses are not necessarily a cause for concern, excessive imbalances — larger than warranted by the economy’s fundamentals and appropriate economic policies — can have destabilising effects on economies by fueling trade tensions and increasing the likelihood of disruptive asset price adjustments. A YEAR LIKE NO OTHER The dramatic fluctuations in current account deficits and surpluses in 2020 were driven by four major pandemic-fueled trends: • Travel declined: The pandemic led to a sharp decrease in tourism and travel. This had a significant negative impact on the account balances of countries that rely on tourism revenue, such as Spain, Thailand, Turkey, and even larger consequences for smaller tourismdependent economies. • Oil demand collapsed: The collapse in oil demand and energy prices was relatively short lived, with oil prices recovering in the second half of 2020. However, oil-exporting economies, such as Saudi Arabia and Russia, saw current account balances decline sharply in 2020. Oil-importing countries saw corresponding increases to their oil trade balances. 166

Pandemic Pressure: Factors related to the COVID-19 crisis changed the course of the global current account balance (percent of world GDP). Source: Census and Economic Information Center; IMF, Information Notice System; IMF, International Financial Statistics; IMF,

WEL, and IMF staff estimates. Nore: See 2021 External Sector Report for details on the COVID-19 factors.

• Medical products trade boomed: Demand surged by about 30 percent for medical supplies critical for fighting the pandemic, such as personal protective equipment, as well as the inputs and materials to make them, with implications for importers and exporters of these items. • Household consumption shifted: As people were forced to stay home, households shifted their consumption away from services toward consumer goods. This happened most in advanced economies where there was an increase in the purchase of durable goods like electrical appliances used to accommodate teleworking and virtual learning. All of these factors contributed to some countries seeing a wider current account deficit, meaning they bought more than they sold, or a larger current account surplus, meaning they sold more than they bought. Favorable global financial conditions, with the unprecedented monetary policy support from major central banks, made it easier for countries to finance wider current account deficits. In contrast, during past crises where financial conditions sharply tightened, CFI.co | Capital Finance International

running current account deficits was harder, pushing countries further into recession. On top of these external factors, the pandemic led to massive government borrowing to finance health care and provide economic support to households and firms, creating large uneven effects on trade balances. THE OUTLOOK Global current account balances are set to widen even further in 2021 but this trend is not expected to last. The latest IMF staff forecasts indicate that global current account balances will narrow in the coming years, as China’s surplus and the US’ deficit falls, reaching 2.5 percent of world GDP by 2026. A reduction in balances could be delayed if large deficit economies like the US undertake additional fiscal expansions or there is a fasterthan-expected fiscal adjustment in current account surplus countries, like Germany. A resurgence of the pandemic and a tightening of global financial conditions that disrupt the flow of capital to emerging markets and

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developing balances.

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Despite the shock of the crisis and possibly due to its worldwide impact, excessive current account deficits and surpluses were broadly unchanged in 2020, representing about 1.2 percent of world GDP. Most of the drivers of excess external imbalances pre-date the pandemic and include fiscal imbalances as well as structural and competitiveness distortions.

REBALANCING THE WORLD ECONOMY Ending the pandemic for everyone in the world is the only way to ensure a global economic recovery that prevents further divergence. This will require a global effort to help countries secure financing for vaccinations and maintain healthcare. A synchronised global investment push or a synchronised health spending push to end the pandemic and support the recovery could have large effects on world growth without raising global balances.

Governments should step up efforts to resolve trade and technology tensions and modernise international taxation. A top priority should be the phasing out of tariff and non-tariff barriers, especially on medical products. Countries with excess current account deficits should, where appropriate, seek to reduce budget deficits over the medium term and make competitiveness-raising reforms, including in education and innovation policies. In economies with excess current account surpluses and remaining fiscal space, policies should support the recovery and medium-term growth, including through greater public investment. In the years to come, countries will need to simultaneously rebalance, while ensuring that the recovery is built on a solid and durable foundation. i

Source blogs.imf.org/2021/08/02/how-the-pandemic-widenedglobal-current-account-balances/

The evolution of Current Account Balances (Percend of World GDP).

Source: IMF, 2021 External Sector Report. IMF.org/social. Note: AE = advanced economies.

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The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board. 167

> Rescued by Helicopter Reserves?

SDRs Are a Bit More Complex… By Otaviano Canuto

The world woke up on Monday, August 23, with higher international reserves for all countries. A new allocation of $650bn in Special Drawing Rights (SDRs) by the International Monetary Fund (IMF) to its member countries is in force.

he 450 billion SDRs are from an international reserve asset created by the IMF and added to countries' other foreign reserves. It is not a currency that can be used by private agents. Governments, on the other hand, can unconditionality exchange them for foreign and make payments with them. It is a supplement to foreign reserves, without depending on the issuance of external or domestic debt for its acquisition. SDR value is calculated daily by the IMF, based on a basket of international currencies which, in fixed proportions, include the dollar, yen, euro, pound sterling and renminbi. The composition of the basket is reassessed every five years. It is an asset that simultaneously pays and charges interest. It all depends on the balance between the allocations received by the country, and their use. If it does not use its SDRs, interest income and payments outweigh each other, and the cost is zero.

Figure 1: SDR Composite Interest Rate.

Source: Ramos, A. and Moreno, D. (2021). IMF Ready for Sizeable “Helicopter Reserves” Allocation, Goldman Sachs, July 20.

The SDR interest rate is set weekly as a weighted average of interest rates on short-term government bonds in the money markets of the countries of the basket. It is currently at its floor: 0.05 percent (Figure 1). In the case of nonadvanced economies, it is still below the rates charged by the markets. There is, therefore, even a potential pecuniary advantage of using SDRs to redeem other external debts. Everything depends on institutional arrangements within countries, particularly regarding who holds foreign reserves and manages foreign exchange flows, as well as the transfer of resources from central banks to the Treasury. About 70 percent of countries have their central banks as SDR recipients. In the US, for example, SDR assets and liabilities are recorded on the government balance sheet. President Lopez Obrador of Mexico has already mentioned using the opportunity to prepay external public debt. Although local law does not allow transfers from the central bank to the executive, the government can acquire reserves other than SDRs if it has balances in Mexican pesos with the central bank, as part of public debt management. Basically, this would result in 168

Figure 2: Sub-Saharan Africa’s share of newly created SDRs and their share to countries’ GDPs.

Source: Hilgenstock, B. and Sezercan, D. (2021). The 2021 SDR Allocation’s Effect on SSA, Institute of International Finance – IIF, June 14.

an exchange of reserves in hard currencies for the added SDR. SDRs were created in 1969 and their general allocations are made to IMF member countries according to their fund quotas. The IMF has the prerogative to ask for its cancellation, but that has never happened. Previous general allocations occurred in 1970-72, 1979-81, and 2009, in the last case accompanied by a special allocation. The extraordinary character of the allocation initiated this time is the fact that its amount is more than double all allocations made to date. CFI.co | Capital Finance International

The exceptional circumstances of the pandemic, putting the external accounts of many economies in a precarious situation, were the motivation. However, as allocations follow country IMF quotas, relief for those in need of reserves will come as an excess in other cases. China has added another $41.6bn to its already high reserves, Brazil $15.1bn, and 35 advanced economies another $399bn. The arrival of reserves in the form of SDRs will give some breathing space to Argentina, Ecuador, and El Salvador, as well as to Sri Lanka, Zambia, Liberia et al. Venezuela will receive its allocation, but

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without unconditional access, given the Maduro government's non-recognition as legitimate by more than 50 member countries, including the largest shareholder: the US. The global increase in reserves will not have a great impact, being equivalent to something around 0.7 percent of world GDP. However, it will provide a lifeline, temporary or not, for countries facing low reserves and high external financing requirements. Sub-Saharan Africa received a small share of the newly created SDR (Figure 2, left side). However, they will be substantial as a share of GDP in some cases (Figure 2, right side). As a next step, the IMF set out to find ways in which countries with SDR surpluses can channel them to those in need. They can be

lent to the fund that the IMF uses to make concessional loans to low-income countries (Poverty Reduction and Growth Trust, or PRGT), as well as to a new fund to support more vulnerable countries to undertake structural transformation, including adaptation to climate change (Resilience and Sustainability Trust – RST). Surplus SDR could also be channelled to support lending by multilateral development banks and even donations to the concessional arm of the World Bank, the International Development Agency (IDA). The development impact of the SDR allocation can be magnified. The fact is that creation of SDRs following IMF quotas provided a very small share for low-income countries (69 economies that will receive $21.2bn), while they are most negatively affected by the crisis, with slower vaccination and the worst debt. CFI.co | Capital Finance International

As noted in a report by Alberto Ramos and Daniel Moreno (Goldman Sachs, July 20), the increase in SDR stocks does not automatically correspond to an increase of money supply in the global economy. The use of SDRs only transfers hard currency from one country to another, with corresponding changes in the composition of reserves. There will only be such an increase if the central bank that issues the hard and convertible currency granted in exchange for the SDR does not sterilise its monetary impact. SDRs do not constitute money thrown from a helicopter, as in the famous image used by Nobel Prize-winning economist Milton Friedman in 1969 and cited in Ramos and Moreno's Helicopter Reserves report. But one cannot deny that this allocation came at a good time for economies struggling with a shortage of reserves and immediate needs for external financing. i 169

Emerging Market Debt Has Promise that GoldenTree Understands and Harnesses — Even In Trying Times

acro-economic crosscurrents have led to a broad opportunity set in credit markets, and global credit manager GoldenTree's offerings have delivered compelling returns to investors despite the turbulent times. GoldenTree Asset Management, to give it its full title, is an employee-owned firm founded in 2000 by Steve Tananbaum. It is one of the largest independent global credit asset managers, with some $46bn in AUM across a broad platform of alternative and fixed-income strategies, with a dedicated offering in emerging market debt. GoldenTree's value-based investment approach — consistently implemented over 25 years — emphasises a high margin of safety, attractive relative value, and a catalyst to drive total return. The team comprises 65 professionals with an average of 15 years of investment experience. GoldenTree’s dedicated emerging markets debt (EMD) strategy opportunistically invests across EM sovereign, quasi-sovereign, and corporate debt in hard and local currencies. GoldenTree has been investing in EMD since its inception, and has made over $25bn in these investments. The dedicated strategy is managed by lead portfolio managers Matias Silvani and Vladimir Liberzon, who each have more than two decades of expertise in the area. Before joining GoldenTree as head of emerging markets, Silvani was MD and head of New York Sovereign Emerging Markets Debt at JP Morgan Asset Management, responsible for portfolios worth $15bn.

Lead Portfolio Managers: Matias Silvani and Vladimir Liberzon

"The strength of GoldenTree’s EMD team, and its differentiated approach, has resulted in a fund that has outperformed the JP Morgan EMBI Global Diversified by an average of nearly 230 basis points per annum, net of fees and expenses, through the end of Q2 2021."

Before joining GoldenTree, Liberzon spent a decade at Goldman Sachs Asset Management, where he was a portfolio manager for hard currency EMD across the entire GSAM fixedIncome platform. The lead portfolio managers are supported by a team of analysts in New York, London, and Singapore. The EMD specialists work collaboratively with the firm's 65-person investment team, which has expertise across industries and asset classes, as well as significant legal and restructuring expertise.

market returns. Compared to its peer group, as measured by the Lipper Emerging Market Hard Currency sovereign universe, the strategy has outperformed by over 330 basis points per annum, net of fees and expenses, through the end of Q2 2021.

The strength of GoldenTree’s EMD team, and its differentiated approach, has resulted in a fund that has outperformed the JP Morgan EMBI Global Diversified by an average of nearly 230 basis points per annum, net of fees and expenses, through the end of Q2 2021. On a calendar year basis, the strategy has outperformed every calendar year since inception by preserving capital during drawdowns and generating outperformance in years of strong

Since inception, GoldenTree's EMD strategy’s annualised return has consistently been in the top decile of its peer group, as shown in the Mercer Insights Database. GoldenTree has achieved these results through an investment process focused on fundamental country and security selection that considers the entire capital structure of emerging market countries and opportunities in securities excluded from the EMBI GD.

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GoldenTree's strategy has been optimised to capture a broad opportunity set with the ability to invest in securities issued by nearly 90 sovereigns, along with quasi-sovereigns and corporates across EM domiciles. The approach, applied to the asset class, has been successfully executed since 2000. The investment process is complemented by a proprietary system, the FSI, designed in-house specifically for the Emerging Market asset class. The FSI outputs a score that quantifies the credit quality of each sovereign within the strategy's investable universe. The emerging markets team aggregates data from sources including the IMF, International Institute of Finance, World Bank, Bank for International Settlements, and national

Autumn 2021 Issue

GoldenTree’s Consistent Top Decile Returns The GoldenTree Emerging Markets Fund has consistently performed in the top decile of its peer universe in the Mercer Insight Database Since Inception Annualized Returns (as of Calendar Year-Ends & Current) Gross Return %

15%

90th Percentile

94th Percentile

91st Percentile GoldenTree Emerging Markets Fund

10% Top Quartile

Median

0% Bottom Quartile

-5%

-10%

Bottom Quartile

Jun 2021

Dec 2020

Dec 2019

Dec 2018

AsofofJune June 2021 and since inception of the GoldenTree Emerging Markets Fund on Returns March are 21,sourced 2017.from Returns are sourced from the Insight Database, and are As 30,30, 2021 and since inception of the GoldenTree Emerging Markets Fund on March 21, 2017. the Mercer Insight Database, andMercer are stated gross of fees. Mercer maintains

stated gross ofand fees. Mercerthe maintains the peer universe determines theMarkets appropriate universe for are theonly GoldenTree Emerging Markets strategy.Emerging Calendar year-ends the peer universe determines appropriate peer universe for theand GoldenTree Emerging strategy.peer Calendar year-ends displayed for years in which the GoldenTree Markets strategy

are only displayed for years in which the GoldenTree Emerging Markets strategy has a full year track record. March 2017 performance is for a partial month. The Fund was incepted on March 15, 2017. The Fund was not fully ramped until March 21, 2017; as such is the case, the return period begins March 21, 2017. A holding period return methodology was used to calculate the return during the ramping period, whereby the full contribution amount was applied to the March calculation. Please note that Please note that the figures above are audited through year-end 2019. Past performance is not indicative of future results. the figures above are audited through year-end 2019. Past performance is not indicative of future results. has a full year track record. March 2017 performance is for a partial month. The Fund was incepted on March 15, 2017. The Fund was not fully ramped until March 21, 2017; as such is the case, the return

period begins March 21, 2017. A holding period return methodology was used to calculate the return during the ramping period, whereby the full contribution amount was applied to the March calculation.

authorities. An important differentiator is the forward-looking nature of the data incorporating GoldenTree's projections and analysis. This analysis is based on extensive research involving discussions with fiscal and monetary policymakers and third-party providers of alternative data that can provide meaningful insights. GoldenTree's proprietary system allows the emerging markets team to efficiently collect data, analyse the data, and calculate a realtime FSI score. The FSI database also allows the team to analyse macro-economic thematic exposures, such as sovereign sensitivities to various commodities. The team also incorporates GoldenTree’s macro-economic views into portfolio construction, and is deliberate with its duration exposure and correlation to variables. This FSI database enables the team to continuously perform relative value analysis on the sovereign universe and creates a foundation for decisionmaking. ESG considerations are incorporated into the team’s analysis. GTAM has partnered with Verisk Maplecroft, a leading data-modelling and risk analysis firm that calculates and maintains indices that measure environment, political,

social, and economic risks. The UN’s Sustainable Development Goals (SDGs) provide a framework for assessing emerging market countries from an ESG perspective. Verisk Maplecroft has mapped their proprietary ESG / risk indices to each of the 17 SDGs.

will exit or avoid investments entirely when the risk-return profile is unfavourable. This provides an advantage over managing blended EMD strategies with more index-constrained guidelines that force the manager to own an investment regardless of the fundamentals.

The goals include eliminating poverty and hunger, and promoting education and gender equality. Others are environmentally focused, including climate action, protecting wildlife, reducing waste, and providing basic infrastructure. They require progress across sectors that address economic and environmental sustainability as well as social issues.

GoldenTree takes an index-aware approach to ensure a comprehensive relative value analysis. It views the index as an important risk-management tool, providing insights into exposures of the strategy relative to the index. It is important to monitor various portfolio characteristics such as correlation and Beta to the index.

Through the team's decades of experience, GoldenTree believes an actively managed and opportunistic approach is optimal to capitalise on opportunities in EMD. GoldenTree views local currency as an opportunistic exposure in the strategy, seeking to gain exposure to the asset when it is optimal and being deliberate with exposures so local assets do not adversely impact the strategy's volatility or return profile. GoldenTree does not have a required minimum exposure to local currency investments. It CFI.co | Capital Finance International

GoldenTree’s EMD team has identified a breadth of opportunities across the asset class. In 2021, as in previous years, sector, security selection and active portfolio management have been critical to generating outperformance and delivering positive performance through a year when most EM benchmarks were negative. The firm’s investment team, its process, and the flexible nature of its strategy, enable GoldenTree to identify investments with the most attractive risk-return profiles across market environments. i 171

> Why

Even the Most Profit Centered Businesses Should Care About ESG Issues By T. Robert Zochowski, Program Director Multi-Faculty Impact Investing and Sustainability Special Projects at Harvard Business School

• Investors and corporations that do not have an explicit mandate to manage social or environmental issues still have an implicit interest in such issues • The strongest way to manage risk is to consider the broadest number of issues material to all stakeholders • Financial performance and expected regulatory changes

ver the past decade, the proliferation of companies providing ESG metrics has increased substantially by a number of measures. In its 2020 Survey of Sustainability Reporting, KPMG noted that 96% of the G250 companies and 80% of the N100 provided sustainability reports, up from 35% and 24% in 1999 respectively.1 However, reporting, often provided by a reporting, investor relations, or CSR team does not always equate to action for majority of the organisations. However, I would argue that both corporate executives and investors that do not have an explicit interest in social or environmental issues have a substantial implicit interest in understanding potential impacts and in managing risks related to catalyst events. Materiality is a concept that is well rooted in financial reporting. In that context, it requires disclosure of all information that is could be reasonably expected to influence the decisions made by the primary users of financial statements on the basis of those statements. The Sustainability Accounting Standards Board, now named the Value Reporting Foundation, has advanced the idea that sustainability information can be material to investors if it is likely to pose a financial risk, and they have provided a number of tools to companies and investors in identifying likely material issues for a given industry. This view of materiality aligns closely with the traditional definition in that the primary stakeholder perspective considered is that of the equity or debt investors. A number of other organisations have advanced the idea of ‘double materiality,’ which is the idea that issues that are material to the aforementioned group as well as issues which are material to other stakeholders, such as employees, customers, communities, or the environment, among others, should be disclosed and managed. This greatly expands the constituent base to those whose needs may not have been historically considered under traditional financial reporting or investor and management attention. However, I argue that paying attention to issues that fall under double materiality goes well

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"Negative association between environmental intensity and market valuation has become more sizable in more recent years since 2010." beyond corporate beneficence; indeed, it is a critical component of risk management to the business. A recent paper by Jean Rogers, George Serafeim, and David Freiberg2 documents the dynamic nature of issues considered to be financially material and hypothesises a pathway by which issues can rise, often extremely quickly, to the level of financially material from material to stakeholders. This can happen slowly over time, as climate change and emissions have, or rapidly, as with the #MeToo movement that advanced examination of corporate culture and harassment. The massive networks of Facebook, Instagram, Twitter, Google, and others have significantly increased the speed at which issues are disseminated and escalated globally, making significant catalyst events that turn issues affecting stakeholders, perhaps historically deemed remote, unimportant, or tangential, much more likely to become known and financially material. Critically, the authors discuss how important proper organisational and industry response to the elevated demands of stakeholders is to preserving shareholder value. Proper risk management dictates that corporations should be anticipating and managing material issues to stakeholders; a business cannot operate at odds with stakeholders for long without these issues impacting the business itself and therefore investors. Anecdotally, it is easy to recall the number of corporate scandals that have emerged in recent years which seemingly took shareholders and managers by surprise but which would likely have been known if they were paying attention to a broader definition of materiality. CFI.co | Capital Finance International

Indeed, information on broader materiality issues is already being digested by the markets. Research by the Impact-Weighted Accounts Initiative shows that environmental intensity3 is correlated with lower equity valuations for several measures; specifically greater environmental intensity is negatively correlated with both Tobin’s Q4 and the price to book value of equity ratios. This is after controlling for other determinants of valuation ratios, such as return on assets, leverage, firm size, capital expenditures, R&D expenditures, and dividends divided by sales. All models include industry, country, and year fixed effects. The estimates suggest that a firm with twice the environmental intensity has 2.4% lower Tobin’s Q and 5.2% lower price to book value of equity.5 They also find that the negative association between environmental intensity and market valuation has become more sizable in more recent years since 2010. The same conclusion holds true for environmental intensity scaled by operating income. Regulatory authorities also are recognising the importance of these issues. In the United States, the SEC requested feedback on climate risk disclosures in June 2021, with a rule proposal expected by the end of the year. In the European Union, progress is progressing rapidly. An proposed update to the Non-Financial Reporting Directive (NFRD), which lays down the rules on disclosure of non-financial and diversity information by certain large companies, debuted last year, the Sustainable Finance Disclosure Regulation (SFDR), which lays out disclosure requirements for financial market participants and financial advisors on their underlying investments debuted in March 2021, and the Corporate Sustainability Reporting Directive (CSRD) would amend the existing requirements of the NFRD to extend the scope to all large companies in European Union Member States and companies listed on regulated markets (except listed micro-enterprises), require the audit of reported information, include more detailed reporting requirements, and provide information in a machine readable format for faster incorporation into capital markets.

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These are just a few of the expanding reporting requirements and voluntary frameworks happening globally. For investors and corporate executives, the clear takeaway is the following: proper discharge of one’s fiduciary duty requires understanding and management of issues which historically may have been considered out of scope or corporate charity. Protecting long term-shareholder value requires managers to look around corners and anticipate future issues that may not be immediately financially material but which could lead to catalytic stakeholder defections should the right catalyst event (as defined in Rogers et al, 2019) occur. i Footnotes 1 The N100 refers to a worldwide sample of 5,200 companies. It comprises the top 100 companies by revenue in each of the 52 countries and jurisdictions researched in this study. These N100 statistics provide a broadbased snapshot of sustainability reporting among large and mid-cap firms around the world. The G250 refers to the world’s 250 largest companies by revenue as defined in the Fortune 500 ranking of 2019. Large global companies are typically leaders in sustainability reporting and their reporting activity often predicts trends that are subsequently adopted more widely. https://assets.kpmg/content/dam/kpmg/be/ pdf/2020/12/The_Time_Has_Come_KPMG_ Survey_of_Sustainability_Reporting_2020.pdf 2 Freiberg, David, Jean Rogers, and George Serafeim. "How ESG Issues Become Financially Material to Corporations and Their Investors." Harvard Business School Working Paper, No. 20-056, November 2019. (Revised November 2020.) 3 Environmental Intensity is calculated as total environmental impact divided by revenues 4 Tobin’s Q is a measure of the market value over the replacement value of assets. 5 Freiberg, David, DG Park, George Serafeim, and T. Robert Zochowski. "Corporate Environmental Impact: Measurement, Data and Information." (pdf) Harvard Business School Working Paper, No. 20-098, March 2020. (Revised February 2021.)

Author: Robert Zochowski

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> Kellogg Insight:

Private-Equity Firms are Back at the Deal Table, so Here’s What to Expect By Susan Margolin

When the US first confronted the pandemic, Alex Schneider, co-founder of private-equity firm Clover Capital Partners, watched as the private-equity industry pressed pause on deals.

uring the past year, deals were down about a quarter (though the average size of deals increased). But now, it is safe to say that the pause is over.

“There’s a lot of deal-making happening right now, and there’s a lot of money out there to do it,” Schneider says. Sellers who would have gone to market in a normal year but held off are now back in. The US election is over, the markets proved resilient, and vaccines have buoyed hopes of economic recovery. Companies’ values are high, interest rates are low, and PE funds are ready to invest. “Other than a few weeks’ uncertainty at the end of March and early April 2020, there was substantial liquidity to keep credit markets alive,” Schneider says. “Prior to the pandemic, there had been a lot of wealth created and limited places to invest.” Which is why he predicts that the next year will be a busy one. One reason why the industry has rebounded so quickly is that many PE firms were in strong shape heading into 2020 — and there was a pause on deploying that capital in early stages of the pandemic. America’s longest bull market ended in March 2020, Schneider says, leaving PE firms with large reserves to safeguard against an inevitable market downturn. In 2019, so-called “dry powder” totalled $2.5bn and grew to $2.9bn in 2020, Bain reports. As a result, PE firms are now primed to spend on buyouts. And due to President Joe Biden’s proposed changes to the capital-gains tax, there will probably be more assets to acquire. Currently, owners who sell their businesses this year should have their capital gains taxed at 20 percent. The current administration’s proposal would double that for households making more than $1m annually. This provides sellers with a strong incentive to close deals in 2021 rather than waiting for later. 174

"In addition to fierce competition for deals, PE firms will also face significant challenges gauging the quality of these deals." “There’s still demand to put capital to work through traditional PE funds,” Schneider says. “There’s going to be a bit of an urgency to deploy some of that capital here in short frame. I would see multiples increasing and higher prices, which I think ultimately benefits sellers. We saw this in 2012 before the capital-gains rates changed from 15 percent to 20 percent.” Still, for PE funds looking to invest, deals may not necessarily be easy to come by — and competition for the best companies will be fierce. Private companies looking for funding or an exit now have a range of options including corporations, sophisticated family offices, and Special Purpose Acquisition Companies (SPACS). “Corporate M&A is starting to pick up again largely because many large companies adapted during the pandemic and restructured — cutting costs and hoarding cash. Many are in a favourable position now to attack market share and innovation through acquisitions,” Schneider says. “That’s particularly true in the food industry, where companies like Kraft, Modolez, General Mills, and Unilever performed well through the pandemic and now have funds to invest.” Some sophisticated family offices are also staffing-up, hiring their own investment professionals to source and execute deals directly, rather than investing in larger “blindpool” funds. This allows them to reduce the amount of fees they pay for deploying capital. Multigenerational family offices also tend to CFI.co | Capital Finance International

have a longer investment horizon than the typical three-to-five-year hold of a private-equity fund. This longer horizon is often an attractive feature to sellers as well. SPACS, which the SEC calls “blank check companies”, go public as shell companies without commercial operations. Their only assets are investments and IPO proceeds, which they later leverage to purchase a company. The Wall Street Journal likens them to “big pools of cash listed on an exchange”. “SPACS go public and then they look for a company to acquire,” Schneider says. “This is puts them into competition with a lot of larger private-equity firms. There’s a ton of interest from institutional investors in this strategy right now, even if the market may be overheated at the moment.” While all of these have existed for decades, they have returned to vogue as companies seek financing options that have a greater deal of liquidity than typical private-equity investments can offer. In addition to fierce competition for deals, PE firms will also face significant challenges gauging the quality of these deals. With many businesses having endured a highly atypical year, firms are having to find new ways to accurately assess companies’ health. Add to that the difficulty of gauging when certain sectors will fully rebound, and some deals may not be as easy to close as they were in the past. “PE firms are analysing year-over-2019, because 2020 was so different,” Schneider says. “The metric that they’re looking at is, how do we compare to the last year of pre-pandemic, and will that be accurate?” One challenge for firms looking to invest: ongoing global supply-chain challenges, in terms of materials and labour. The pandemic has wreaked havoc here. Lead times have substantially grown, in particular

Autumn 2021 Issue

"With many businesses having endured a highly atypical year, firms are having to find new ways to accurately assess companies’ health." with the global microchip shortage upending the production of machinery for factory automation and automobile production. This has left plenty of otherwise promising companies with a lot of demand they cannot execute on. Ditto for labour. “There’s a need for labour in the market right now, particularly in manufacturing, retail, and the service industry,” Schneider says. “The demand is there for workers, but companies are struggling to hire.” There is some optimism from business owners that as legacy Covid unemployment programmes trail off, the available supply of labour will bounce back, but it will take some time before supply and demand reach equilibrium. The biggest question for buyers and lenders is how well a company managed risk at a time when the priority went from value creation to value preservation. Those that got through the past year unscathed are going to make attractive targets. “For a lot of business owners, the past 12–18 months have been the most challenging of their career,” Schneider says. “They’ve experienced how events outside of their control could have a very meaningful impact on their business. As a result, many are more open to a sale or financial partner as a way to diversify their own risk. The second half of this year should see a wave of private-equity deals.” i

This article first appeared in Kellogg Insight. FEATURED FACULTY Alex Schneider is adjunct lecturer of innovation and entrepreneurship at the Kellogg School; he is the programme lead for the Zell Fellows: Acquisition and Ownership. ABOUT THE AUTHOR Susan Margolin is a freelance writer based in Boston.

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> Asia Pacific

Small in Japan? Start-up Sector Has Been Lagging in Recent Years By Brendan Filipovski

Could recent developments nudge the country into the leading position everyone had been expecting?

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here are all the Japanese start-ups? The world’s third-largest economy has given us instant ramen, Space Invaders, the Walkman, Pikachu, Just-In-Time, and SoftBank — but ranks 21st in terms of global start-up ecosystems. In the 1980s, it was seen as a dynamic economy set to displace the US from top position. But while Silicon Valley ascended, Tokyo Bay never left the ground. Whether because of natural conservatism, lost decades or a lack of support, the Japanese scene has disappointed. But progress in the past five years could mark a turning of the tide. E-commerce giant Rakuten is one of Japan’s most successful start-up stories of this century. It began in 1997 as an online shopping mall and has expanded worldwide to be worth around $18bn. And there are more success stories just out of the limelight, albeit on a smaller scale. Ubie is a health-tech start-up founded in Tokyo in 2017. It provides doctors with AI-based triage decisions and assistance with diagnoses. There is also a symptoms-checker for the public, which has more than a million users. In its latest round of Series B funding, Ubie raised $18.7m. Synspective is a space-tech company founded in Tokyo in 2018, offering AI-based satellite land-monitoring and geospatial services. It has raised $111.8m so far. There are also recently minted unicorns such as Liquid Global. Founded in Tokyo in 2014, it is one of the world’s largest cryptocurrency exchanges, worth over $1bn. Japanese companies are blazing trails, but the start-up scene has not yet reached the heights that were anticipated. In StartupBlink’s 2021 report, Japan still trails China, South Korea, Russia, India, Ireland, Spain, and Estonia. Tokyo is the only Japanese city in the top 100. In terms of the number of unicorns (as of April 2021), Japan ranks 13th in the world with four, the same as Australia. The US leads with 288, followed by China with 133, India with 32, the UK with 27, and Germany with 15.

"Universities long ago introduced incubator programmes. The bonds of loyalty between corporation and salaryman are not what they once were. Still, entrepreneurship is not winning enough hearts and minds." There is a general conservatism and risk-aversion in Japanese society. The salaryman is valued over the inventor. Students strive to gain acceptance at the most prestigious universities so they can move into corporate life. And once entrenched, they tend to remain. Entrepreneurship is not seen as a career path. Nor is there a culture of middleaged entrepreneurs as in the US. Universities long ago introduced incubator programmes. The bonds of loyalty between corporation and salaryman are not what they once were. Still, entrepreneurship is not winning enough hearts and minds. In the 2019-20 Global Entrepreneurship Monitor, Japan ranked last of the 50 countries surveyed over faith in opportunities to start a business (10.6 percent). It also scored poorly in the skills and knowledge to start a business (14 percent), and entrepreneurial intentions (4.3 percent). Another issue is that Japan’s conglomerates rarely look to start-ups or universities for innovation. Instead, they follow the established pattern of working with suppliers to deliver new products and breakthroughs. It’s a successful strategy — but need it be the only one? At university level, the commercialisation of ideas is discouraged — and those that do rise are often smothered by regulations. Japan’s Venture Capital market is relatively small; in 2019, it was worth around $4bn. In the US that figure was $137bn; in China, $52bn. This puts Japanese start-ups at a disadvantage and means that many will seek overseas funding.

Like an issun-boshi — the “One-inch Samurai”, Japan’s version of Tom Thumb — the country can do more. And after three decades of missed growth, it should. A recent white paper by McKinsey and the American Chamber of Commerce in Japan found that unlocking startup potential could add as much as $735bn to the Japanese economy over the next decade.

Starting a business in Japan is an onerous task. The World Bank ranked it 29th overall in the 2020 Ease of Doing Business report — but 108th for the ease of starting a business. On average, it takes twice as much procedural effort as the OECD average to get a business off the ground — and it is more expensive.

A lack of ideas and research is not the problem. Japan regularly ranks third in the world for patents granted and research is generally well funded. The problem lies elsewhere.

A deficit of software engineers is another brake on growth. They are an integral ingredient, and the shortfall stems from a lack of relevant courses at Japanese universities. Japan has 29 universities

with software engineering programmes; the US has 117. A lack of English proficiency forces many entrepreneurs to focus on the large domestic market. In the long-term, this places a hard cap on growth potential and limits appeal to global investors. It doesn’t help that the population is shrinking. Despite these obstacles, there are some positive developments. The big conglomerates are starting to invest in start-ups through corporate VC funds (CVC); the number doing so increased from six in 2015 to 49 in 2019. With conglomerates taking a greater interest, space has been created for new enterprises to develop in robotics, automotive, consumer electronics, and entertainment sectors. Japan’s corporations could slingshot a new wave of start-ups — and in the process could unlock new growth in themselves. Asian hedge funds are also taking an interest. Hong Kong-based Pleiad started a PE company in Japan in 2020, raising over $135m. Tybourne Capital Management and the Soros family offices invested in fintech Paidy this year. US PE firm KKR is looking at Japanese cloud-based start-ups. The government has stepped up its support for new business. On top of its 2018 J Startup programme and start-up visa system, it recently launched the Start-up City Acceleration Programme. It focuses on key cities and aims to improve start-ups’ international business development and fundraising. This is on top of several regional support programmes in Kyoto, Fukuoka, Nagoya, and Kobe. The government has made proactive reforms to the Banking Act and Payments Act to encourage financial APIs and facilitate the settlement of cryptocurrencies. This, along with Tokyo’s role as a global financial centre, is a boon for Japanese fintech. Prime Minister Yoshihide Suga has announced the creation of a digital agency to oversee the digitalisation and streamlining of government administration. This eventually should make it easier to start companies in Japan. Estonia has shown the benefits of such a system. While more needs to be done, the Japanese startup scene is growing, and more dynamic than it was 10 years ago. Tokyo is finally emerging as a leading start-up city, and Japanese conglomerates, government and investors are all increasing their interest. The narrative is changing. i

"The big conglomerates are starting to invest in start-ups through corporate VC funds (CVC); the number doing so increased from six in 2015 to 49 in 2019." 178

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> Containers Printers:

Sustainability is Non-Negotiable for a Packaging Firm with a Conscience After a challenging 2020, this year has continued to present problems for businesses, individuals, countries and economies. Despite increasing difficulties in material availability, shipping routes, and pricing, says Container Printers CEO Amy Chung, the company has accelerated its transformation efforts.

ovid-19 brought workforce shortages, reduced visitor access to the Containers Printers (CP) site, and inevitable disruption to the supply chain. CP has risen to meet and overcome those challenges, says Chung, and it has remained operational throughout the pandemic. Initiatives such as remote audits, combined with safe distancing, have prompted CP to embrace a new way of working. “Adopting the changes makes us more prepared to work this way,” she says, “and has accelerated some trends and projects, including the digitalisation of our factories.” Containers Printers was founded in Singapore back in 1981 with a humble, everyday product: the square cooking oil tin omnipresent in Southeast Asia. The firm’s portfolio has diversified to include metal and flexible laminate packaging solutions for a global market, and sustainability is now front and centre. That momentum has created a buzz throughout the CP hive. “We’re supporting customers to meet new packaging legislation, and sustainability targets,” Chung says. Singapore’s new Mandatory Packaging Reporting (MPR) legislation requires companies to provide packaging data to the government. The island state has announced its 2030 Green Plan, laying out national agenda on sustainability. This includes a path to carbon-

"The firm’s portfolio has diversified to include metal and flexible laminate packaging solutions for a global market, and sustainability is now front and centre." neutrality and a circular economy, areas to which CP is committed. Customers continue to request recyclable packaging, as well as packaging with recycled content — and the pace of change is accelerating. In the UK, the Plastics Packaging Tax targets packaging with less than 30 percent recycled content, starting in 2022. CP is continuing research work with partners looking into advanced technologies, such as chemical recycling and digital solutions to support Lifecycle Assessments. i

"Customers continue to request recyclable packaging, as well as packaging with recycled content — and the pace of change is accelerating." CFI.co | Capital Finance International

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> China’s

Renminbi Must Become Convertible to Internationalise

By Otaviano Canuto

On July 21, the Official Monetary and Financial Institutions Forum published its eighth annual report on Global Public Investors. It included a survey the asset allocation plans of reserve managers of central banks, sovereign wealth funds, and public pension funds.

he 102 investors who responded to the survey collectively manage $42.7tn in assets (Figure 1). The survey highlighted notable changes in the composition of portfolios planned by global public investors. About 18 percent of respondents said they intended to reduce their holdings in euros over the next 12 to 24 months, while 20 percent said the same but with respect to the dollar. Twenty years ago, the dollar represented 71 percent of reserve assets; today it’s 59 percent. The presence of the euro increased from 18 percent to 21 percent over the same period. Such changes have been smooth, progressive and orderly, noted Jean-Claude Trichet, former president of the European Central Bank. One notable shift shown by the survey appears to be that the renminbi is set to become a more significant part of the global financial system as central banks add the Chinese currency to their reserve assets. About 30 percent of central banks plan to increase their allocations to renminbi in the next 12-24 months, compared with just 10 percent in last year's report; 70 percent said they intended to do it in the long term.

Figure 1: Total GPI Assets by Institution Type, $ trillions. Source: OMFIF analysis (GPI 2021).

Central banks in all regions will be net buyers of Chinese bonds over the medium term. This is particularly true in Africa, where nearly half of central banks plan to increase their renminbi reserves. Asian assets in general are in high demand, with 40 percent of global public investors hoping to increase their exposure (Figure 2). However, the starting point for the inclusion of the renminbi in the composition of reserve assets is still low, at only 2.5 percent, indicating that its inflection point as an international reserve currency remains somewhat distant. In 2015, when the renminbi was incorporated into the currency basket that serves as the basis for Special Drawing Rights (SDR) — the accounting currency issued by the IMF for central banks — China easily met the requirement of being among the world's five largest exporters. But its currency did not fully meet the requirement of being “freely usable”, i.e. able to be used for payments in international transactions and traded in major foreign exchange markets. 180

Figure 2: Total GPI Assets by Region, $ trillions, 2016-20. Source: OMFIF analysis (GPI 2021).

The expansion of commercial transactions, and increases in official reserves denominated in renminbi — the expansion of which was captured in CFI.co | Capital Finance International

the OMFIF report — have not yet been accompanied by an equivalent increase in transactions or in unofficial reserves with Chinese bonds.

Autumn 2021 Issue

Figure 3: TDespite the Recent Increase in Flows, Foreign Bond Holdings are Small in China. Note: USD = U.S. dollar; GBP = pound

sterling; EUR = euro; AUD = Australian dollar; JPY = Japanese yen; CHF = Swiss franc; CNY = Chinese renminbi. Source: Lanau, S.; Ma, G.; and Feng, P. (2021). Economic Views – Reserve Holdings in Renminbi, Institute of International Finance, July 20.

"Less than three percent of international payments are made in renminbi. Global reserves of the currency are modest as a percentage of China's GDP and relative to its international trade, especially when compared with well-established reserve currency issuers." Also in the week that the OMFIF report was published, the Institute of International Finance (IIF) published a report on the presence of the renminbi in international reserves, observed from purchases of Chinese bonds by non-residents, official or private. It found that while Chinese government bond purchase flows have increased since last year, central banks accounted for a third of the total flow in 2020 — and more than half in the first quarter of this year. Total Chinese bonds held by foreigners are still small by the standards of emerging and developed economies. Despite recent increases, Chinese external bond liabilities remain small relative to China's GDP and its share of global trade (Figure 3). Less than three percent of international payments are made in renminbi. Global reserves of the currency are modest as a percentage of China's GDP and relative to its international trade, especially when compared with well-established reserve currency issuers. As Trichet said on the launch of the OMFIF report: “The problem remains that the renminbi is not yet fully convertible. When (it become so), I expect a big jump. This is the view of Chinese friends, including the former governor of the central bank, Zhou Xiaochuan, who called for complete liberalisation of the renminbi. That time will come. And when it comes, you will see the full realisation [of what the OMFIF survey suggests].” CFI.co | Capital Finance International

Given the size of China and the limited role of foreigners in local markets, it is safe to say that foreign acquisition of bonds and foreign reserves in renminbi could grow. However, it is best to avoid working with big, fast-rise scenarios. USChina relations could remain tense and complex, possibly dampening the appetite of risk-averse reserve managers. That said, the contribution of reserve accumulation to China's bond flows could be large, even under conservative scenarios. If global reserves in renminbi increase from 1.8 percent to three percent of China's GDP over the next decade, annual flows to the local bond market would consistently exceed $400bn. If purchases by private investors remain stable, total foreign holdings in government bonds could reach five percent of GDP, not far from the 5.6 percent median of emerging markets. Commercial transactions and reserves of central banks and other global public investors could strengthen the position of the renminbi as an alternative to the dollar, euro, yen and pound sterling. But the qualitative leap towards the internationalisation of the Chinese currency as a full reserve currency will happen only when confidence in its convertibility is sufficient to convince private investors. i

This story first appeared at Policy Centre for the New South. 181

> Elmira Berkmurodova, Advisor to the Uzbekistan Ministry of Energy:

Uzbekistan on the Path to Becoming Carbon-Neutral In the race to become carbon-neutral, it is useful to look at where the race began. In Uzbekistan, a nation rich in natural gas, it began with nearly all energy requirements — 96.75 percent in 2019 — being met by fossil fuels.

rom that perspective, the goal of netzero by 2050 looks intimidating, if not impossible. But Uzbekistan is on the way to making the impossible at least probable.

In just over a year, it has set a series of ambitious goals for a fundamental transformation of the national energy mix. Chief among them is a shift to renewables. From almost a standing start, the country is planning to build a renewables sector generating a minimum of 25 percent of its energy needs. This is despite a fast-growing population and an even faster-growing economy, demanding greater energy. It is worth comparing low-income Uzbekistan with high-income Norway to illustrate the point. Despite its North Sea oil wealth, Norway has domestically relied on a different source of energy: water. Hydroelectricity provides as much as two-thirds of Norway’s primary consumption — and has done so for many years. In 2020, the average Norwegian consumed 26,500 kWh in electricity. In Uzbekistan, the average citizen consumed well under 10 percent of that: about 1,850 kWh. As incomes rise, so does energy use. That is Uzbekistan’s challenge. By the end of the current decade, most forecasts indicate its population will surpass those of Ukraine and Poland, making it the second-largest of all the nations once dependent on, or part of, the USSR. It expects to graduate to middle-income status, with an increasingly affluent middle class expecting modern kitchens, air-conditioning and all the comforts of modern life. There is one more challenge, or opportunity: to reduce the consumption of natural gas from 16.5 182

"In Uzbekistan, the average citizen consumed well under 10 percent of that: about 1,850 kWh. As incomes rise, so does energy use." to 12.1 billion cubic meters by 2030 — and to use domestically produced gas for conversion into polymer products with high added value and export potential. This is an important component in Uzbekistan’s national industrial policy. The nation is also hard at work upgrading transport systems to reduce waste and introducing smart metering for home and industrial power and gas consumption. Gas production and processing are also being modernised to minimise waste. When you do the math, it becomes clear that other sources of energy are needed — and to stick to the Paris Agreement commitment to reduce greenhouse gas production by 10 percent by 2030, those new sources cannot be hydrocarbon-based. CFI.co | Capital Finance International

"The nation is also hard at work upgrading transport systems to reduce waste and introducing smart metering for home and industrial power and gas consumption."

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Elmira Berkmurodova

"Any visiting tourist can attest to Uzbekistan’s fine weather. On average, 320 days a year are essentially cloudless."

Any visiting tourist can attest to Uzbekistan’s fine weather. On average, 320 days a year are essentially cloudless. In the three decades since independence, it has been so busy searching underground that the Sun’s potential has been overlooked.

capacity of 100 MW — was commissioned in the Karmaninsky district of Navoi by Masdar (UAE). The facility is expected to produce enough power for 31,000 households and save 160,000 tonnes of CO2 emissions each year.

That is now changing, as is the national attitude to the forceful winds that blow across plains and through valleys. Over the coming decade are plans for five GW in wind power and seven GW in solar generation. Independent power producers are being invited to enter into power purchase agreements for wind, solar and biogas production. Hydroelectric production is being expanded too, with 35 new plants planned along with modernisation of 27 existing facilities.

Another 100 MW solar power plant will soon be commissioned in the Samarkand region. It is being built in public-private partnership with the French company Total.

On August 27, the country's first industrialscale solar photovoltaic power plant — with a

What once seemed impossible is now looking entirely achievable. i

CFI.co | Capital Finance International

In all, some 16 power-purchase agreements have been signed over the past year, most of them for renewables projects. The forecast is now for electricity production to double by 2030.

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> Women's Brain Project

An Investment Gap Worth Its Weight In Gold: Women Leaders, Women’s Causes By Shahnaz Radjy Communications Working Group, Women’s Brain Project, and Maria Teresa Ferretti Chief Scientific Officer, Women’s Brain Project

Why we aren’t investing as much as we think in women, and how it might cost us.

o we, as a society, have a blind spot in how we’re funding innovative and disruptive projects? Do even the most equalitarian and open-minded structures tend to view funding opportunities with gender bias? We live in a man’s world, but many of us like to believe that there is a shift happening. Is this accurate, or merely wishful thinking? Research shows that women-run organizations and women’s causes are both underfunded, and tend to be judged by different criteria. The same is true in research, science, and medicine. Let’s review the evidence, and see what we – you – can do to implement big and small changes to the way we do things to contribute to the Sustainable Development Goals and a more equitable world. THE POWER OF INVESTING IN WOMEN When women are in leadership positions, businesses – and the world at large – benefit. Over the past decade or more, research has been published again and again proving that female leadership gives businesses a competitive edge, that women-led companies are better for employees, and that firms with women in leadership positions perform better. It’s such an important topic that McKinsey has been running an annual report “Women in the Workplace” for seven years in a row – and counting. In the worlds of development, humanitarian activity, and disaster management, investing in women extends the reach and multiplies the impact of interventions, as women often run households, play caregiving roles for children and the elderly, and will use resources to improve their situation as well as their families’. One of the “silver linings” of the pandemic is that it put a spotlight on the importance of sex and gender differences – not just because women were getting COVID-19 at different rates than men, but because their symptoms and response to treatment differed, and because women were a majority of the front-line healthcare workers. Such differences are at the core of what the Women’s Brain Project (WBP) is about. In fact, WBP co-founder and CEO, Dr Antonella Santuccione Chadha was instrumental in establishing a COVID-19 hospital in record time (less than three months) in her homeland of Italy

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"Whiteness and maleness are silent precisely because they do not need to be vocalized. Whiteness and maleness are implicit. They are unquestioned. They are the default. And this reality is inescapable for anyone whose identity does not go without saying, for anyone whose needs and perspective are routinely forgotten. For anyone who is used to jarring up against a world that has not been designed around them." Caroline Criado Perez Invisible Women: Data Bias in a World Designed for Men

by guiding policy makers, private investors, and other relevant stakeholders. Unfortunately, in the world of science, too, female leadership tends to be underappreciated. That’s why initiatives such as the Emotions Brain Forum – an itinerant event showcasing 40 women across eight themes in eight cities – exist, to highlight female excellence in science. So, if there’s so much evidence around benefits of addressing and doing away with gender bias, why is it so hard to – as the saying goes – put our money where our mouth is? COGNITIVE BIAS AND DOUBLE STANDARDS In scientific grant allocations, knowing that the scientist applying for funding is a woman will reduce the chances of the project being financed. In venture capital (VC) situations, women tend to be judged on their past performance and men on their potential. This influences the types of questions asked, whether or not a business gets funding, and how much funding it gets. Such a cognitive bias, a systemic error in thinking that is in many ways the result of your brain’s attempt to simplify information processing, requires self-awareness as a first step to change. HOW CAN WE ALL CONTRIBUTE TO A MORE EQUITABLE WORLD? There is no single solution, but a number of approaches can shift the needle and fuel a systemic change powered by individual awareness and action. Statistics from the TV show “Shark Tank” show that female investors are 30% more likely to engage with female entrepreneurs. This is consistent with the “industry representation hypothesis” which states that having more CFI.co | Capital Finance International

women in decision-making positions may improve funding for female entrepreneurs. Therefore, supporting women in their careers so they achieve leadership positions is not only good for business, but a key way to address gender bias. Furthermore, “blinding” investment processes the same way a growing number of organizations are making job applications “anonymous” may be another way to pave the way for more women in leadership positions, more women in VC, and overall, less biased allocation of funding. Gender lens investing, whereby organizations are explicit in seeking out opportunities related to products for women, workplace gender equality, and women’s access to capital, is an intentional “overcorrection” to rebalance systemic biases mentioned above. A growing number of funds are taking a gender lens to their investment portfolio, adding gender as a requirement for projects to make it into their pipeline and as an integral part of their due diligence process. Last but certainly not least, we can all make a point of asking questions rather than relying on assumptions about any given project, leader, and funding opportunity, as well as sharing any examples we come across of outstanding female endeavours – from Goldieblox (a company designing engineering-inspired toys for girls) to A Mighty Girl (a platform providing resources around female empowerment for parents who are raising daughters), Dame Sarah Gilbert (British vaccinologist who helped lead the development of the Oxford/AstraZeneca coronavirus vaccine), or Dr Rita Levi Montalcini (one of 12 women out of the 224 laureates who received the Nobel Prize for Medicine).

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At WBP, for example, the organization is named to emphasize research around the sex and gender differences, because the default in science is to focus on the male brain. It does not mean we focus exclusively on women, but rather, that we take an inclusive approach to better understand brain characteristics related to sex and gender as a gateway to precision medicine – with the goal of shifting the mindset from patients' differences to patients' characteristics, for better health outcomes for all, and to render healthcare systems sustainable.

This innovative approach is building momentum, but almost every new partnership requires overcoming the biases described above. While this is par for the course in some ways, as any project seeking support or funding will have to build its case over and over again, the suggested changes in behaviour will pave the way for us to achieve SDGs in a more streamlined manner. This will require a wholeof-society approach, with the work of female entrepreneurs, scientists, and more an integral part of the solution.

It won’t happen overnight, but just as you wouldn’t wake up, decide you want to run a marathon, and go out to achieve that goal, shifting our mindsets to be more equitable will take practice. WHAT NEXT? Despite this added stress and overall exhaustion, women are rising to the moment as stronger leaders. As mentioned, COVID-19 put sex and gender differences front and centre in many ways, and as we collectively figure out “the new normal”, we have an opportunity to recalibrate our standards and give the deserved recognition to women, who have always and will continue to play key roles across the board – at home, in the office, in labs and research settings, and more. So, if you do nothing else to change the world this week, see if you can recognize and support a woman (or women!) in their roles as entrepreneurs, scientists, and in the front-lines of the pandemic. i

Author: Shahnaz Radjy

Author: Maria Teresa Ferretti

CFI.co | Capital Finance International

ABOUT THE AUTHORS Shahnaz Radjy is a member of the Women’s Brain Project Communications Working Group and Maria Teresa is a neuro-immunologist; she is co-founder and chief scientific officer of the Women’s Brain Project. 185

> Widening Global Imbalances and the Pandemic:

Which Way Now?

By Otaviano Canuto

The International Monetary Fund’s 10th annual External Sector Report released in August shows how current account deficits in the global economy widened during the pandemic. But the report also argues that overall, the misalignment between fundamentals and current account balances has not been exacerbated.

he sum of absolute values of current account deficits and surpluses went from 2.8 percent of global GDP in 2019 to 3.2 percent last year, reversing a downward trajectory since 2015.

The report points out four major impacts brought about by the pandemic to explain that increase. First, the dramatic drop in travel and tourism has significantly shrunk the balances of countries dependent on tourism receipts, including some Caribbean countries, Thailand, Turkey, and Spain. Additionally, the demand for oil and its price underwent a deep collapse. Although oil prices began a recovery in the second half of the year, oil-exporting countries experienced a sharp drop in current account balances in the year. On the other side, oil-importing countries saw corresponding decreases in their oil trade deficits.

Figure 1: Role of COVID-19 Sectoral Schocks (% of Global GDP).

Source: IMF (2021). External Sector Report - Divergent Recoveries and Global Imbalances, August.

The explosion in the trade of medical products also had effects: a 30 percent increase in external demand for essential medical supplies needed to fight the pandemic, and for inputs and raw materials for its production. Importers and exporters faced corresponding impacts. Changes in household spending patterns because of the pandemic also had an impact on foreign trade. Staying at home meant spending less on contact-intensive services and buying more durable consumer goods, including electronic devices used in teleworking and distance learning. Not by chance, the economic recovery was faster in Asian countries that export such manufactures. Figure 1 projects where the sum of current account balances in the global economy would have gone were it not for the effects of the pandemic, according to the IMF report: The extraordinarily lax monetary policies adopted by major central banks made the financing of widening current account deficits unproblematic. That was a difference compared to previous crises, where external financing difficulties pushed some countries into recession. 186

Figure 2: IMF Staff Current Account and Real Effective Exchange Rate Gaps.

Source: IMF (2021). External Sector Report - Divergent Recoveries and Global Imbalances, August.

The policies of flattening the pandemic curves led governments to raise large volumes of loans to cover expenses related to health services and economic support for families and companies, which had asymmetric effects on trade balances. Richer economies used their available fiscal space more than poorer economies to implement even more aggressive fiscal policies, borrowing relatively more than poorer economies. The corresponding fall in current account balances, on average, was therefore greater. As a result, the pandemic has slowed the already declining flow of funds from the richest countries to the poorest. CFI.co | Capital Finance International

An important exercise included in every annual IMF External Sector Report goes beyond monitoring of current account balances to examine the extent to which current account imbalances can be considered excessive, relative to economic fundamentals and appropriate economic policies. The calculation is made for each of the 30 economies considered systemically relevant and covered by the report. Excessive imbalances are associated with overvaluation of real effective exchange rates, when deficits are larger (or surpluses smaller) than suggested by adequate fundamentals and

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policies. Symmetrically, there is also an excess when larger surpluses (or smaller deficits) than those foreseeable from fundamentals and appropriate policies suggest undervalued real effective exchange rates. Excessive imbalances can generate instability by fuelling trade tensions and increasing the likelihood of sharp adjustments in asset prices. Despite the increase in global current account balances in absolute terms by 0.4 percentage point of global GDP, excessive global imbalances — that is, the sum of the absolute values of the balances considered to diverge from the levels corresponding to fundamentals and adequate policies in the medium term — remained at around 1.2 percent of world GDP, close to previous levels. Risks and obstacles to recovery in the global economy continue to be strongly associated with the local trajectories of the pandemic, the consequences of which in terms of divergence between countries are still unfolding.

significant fiscal response to the pandemic and an additional weakening of the domestic investment climate. Turkey’s external position in 2020 was moderately weaker than the level implied by medium-term fundamentals and desirable policies. In Turkey’s case, according to the ESR: “Expansionary monetary policy and rapid provision of credit by state-owned banks put pressure on the lira last year through dollarisation, import, and financial account channels, which led in turn to sales of foreign exchange reserves to support the lira. “Despite the marked real exchange rate depreciation, the CA deficit resurfaced because of lower exports (including tourism) and robust imports (including gold). The monetary tightening beginning in late 2020 saw a return of capital inflows and modest reserves build-up, but outflows and reserves losses resumed in March 2021, amid rising policy uncertainty and lira depreciation.

According to the IMF report: • Twelve of the 30 economies were in 2020 aligned with levels consistent with their medium-term fundamentals and policies considered appropriate: Australia (AUS), Brazil (BRA), China (CHN), Hong Kong (HKG), India (IND), Indonesia (IDN), Italy (ITA), Japan (JPN), South Korea (KOR), the Euro Area (EA), Spain (ESP), and Switzerland (CHE). • Nine economies exhibited a devalued effective real exchange rate or larger balances — larger surpluses or smaller deficits — than those suggested by fundamentals and adequate policies: Germany (DEU), Malaysia (MYS), Netherlands (NLD), Poland (POL), Sweden (SWE), Thailand (THA), Singapore (SGP), Mexico (MEX), and Russia (RUS). • The other nine economies — Argentina (ARG), Belgium (BEL), Canada (CAN), France (FRA), Saudi Arabia (SAU), South Africa (ZAF), United Kingdom (GBR), United States (USA), and Turkey (TUR) — had current account balances that suggested their real effective exchange rates had excessively appreciated, with smaller surpluses or deficits larger than those indicated by fundamentals and adequate policies. Figure 2 gives a snapshot on where the real effective exchange rate (REER) and the positive or negative current account (CA) gaps were last year, relative to what would correspond to fundamentals and appropriate policies in each of the 30 economies. Mexico and Turkey look like outliers for special reasons. Mexico’s external position strengthened in 2020 because, while large fiscal expansions took place in other major economies — whose actual fiscal balances went relatively further below their desirable medium-term levels — Mexico had a nonCFI.co | Capital Finance International

“Policy uncertainty, large gross external financing needs, and relatively low reserves increase Turkey’s vulnerability to shocks. Only over time will the REER undervaluation, with its usual lags, help move the current account back toward its norm, aided by less expansionary policies.” The evolution of current account balances will depend on the fiscal trajectories ahead. The US — the biggest economy among the cases of appreciated REER — is expected to delay adjustments, judging by the fiscal packages sought by the Biden administration. In turn, Germany — and its devalued REER — would have an even more imbalanced position if it resorted to quick fiscal adjustments. A tightening of global financial conditions with an impact on capital flows to emerging and developing economies could also affect their balances (although factors mitigating those risks can be pointed out). Going forward, countries with excessive current account balances should seek to shrink their budget deficits over the medium term, and to implement reforms that increase their competitiveness. Economies with excessive current account surpluses and some fiscal space should adopt policies to strengthen recovery and growth over the medium term, including greater public investment. As highlighted by Martin Kaufman and Daniel Leigh: "A synchronised push in global investment or health spending to end the pandemic and support recovery could have considerable effects on global growth without raising global balances." i

This story first appeared at Policy Centre for the New South. 187

> Asian Development Bank

Another Casualty of COVID-19: Water Security in Asia and Pacific By Bambang Susantono

The coronavirus disease (COVID-19) pandemic not only weakened economies and health systems, and resulted in human loss in the millions, but also widened existing gaps in realising development targets on water security.

he United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) Progress Assessment shows that Asia and the Pacific is off track on achieving all of the Sustainable Development Goals (SDGs) by 2030. Among those is SDG-6, which targets the provision of universal access to safely and sustainably managed water and sanitation. Five of the six indicators for SDG6 that have credible estimates have barely reached the mid-point from the 2000 baseline. The disease may not be water-borne, but proper handwashing is essential in preventing and controlling infection. COVID-19 has therefore also highlighted the importance of safe and adequate water services for hygiene, disinfection as well as for drinking. VULNERABILITY IN ASIA AND THE PACIFIC In Asia and the Pacific, the proportion of people without access to safe drinking water declined from 17.8% in 2000 to 6.3% in 2015. But water contamination and unequal access remain critical issues. During the same period, the proportion of people without access to safely managed sanitation declined from 48% to 35%, representing an additional 580 million people gaining access to safe sanitation. Regional disparities are still apparent with as many as 59% of people in South and South-West Asia still facing poor sanitation. In a recent report, 22 out of the 49 developing member countries tracked for water security by the Asian Development Bank were found “insecure,” representing 2 billion people or about half of the region’s population. Urban slums face their own particular water security challenges . For example, in India, an estimated 80% of the 7 million residents of Dharavi, Mumbai—the largest slum in Asia—have no running water. With inadequate distancing measures, long queues at communal taps present high transmission risk of COVID-19. In Pakistan, an estimated 34 million people who live in katchi abadis or urban informal settlements pay for tankered water at exorbitant 188

Water sector response has been particularly difficult for urban slums. Communal taps present high transmission risk of COVID-19.

prices, which leads households to scrimp on water use including for handwashing. Low-income households in Penjaringan, Jakarta, resort to buying water from their neighbors, which is 40– 60 times more expensive than subsidised piped water supply. The financial burden of spending as much as 36% of household budget on water is aggravated by the logistical challenges of sourcing water during a pandemic. The pandemic’s impact on the water sector has had significant gender implications. In many developing countries, women and girls are responsible for fetching water from communal sources or water vendors, potentially increasing their risk of COVID-19 exposure. Shared and poorly maintained sanitation facilities put women and girls at heightened risk of contracting COVID-19 as they manage their menstrual hygiene needs. Asia and the Pacific is also the most disasteraffected region in the world, home to more than 40% of the globe’s calamities and 84% of the people they affect. This adds another dimension to the region’s water insecurity since many water utilities and resource managers in the region have been faced with dual challenges of dealing CFI.co | Capital Finance International

with COVID-19 and disasters, such as super cyclones Amphan and Yaas that hit South Asia in 2020 and 2021. UNCERTAINTIES FACING WATER SERVICE PROVIDERS Many governments have intervened to ensure the continuity of critical water services during the pandemic, in some cases providing direct financial support to water service providers. In the absence of government relief, the financial losses from the pandemic are borne by water service providers. Revenue decline is the single biggest financial impact to water service providers. This is due to the sharp decrease in commercial and industrial water consumption that may not be fully offset by the increase in household consumption. Even with increased household consumption, some utilities have been unable to collect payments from residential customers in part due to customer relief efforts. Prolonged uncertainty over how service providers will be compensated for losses incurred due to the pandemic—either through government transfers or increased customer tariffs — may lead to reduced capital and maintenance spending, as well as significant changes to operating and maintenance planning, in the future.

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Pacific, service providers must consider NBS and green design as components of healthy, livable, and resilient cities, in the immediate aftermath of the pandemic and beyond. TOWARD A NEW NORMAL FOR WATER SECTOR The postpandemic “new normal” of the water sector will require a strong focus on preventing and responding to future health crises, accelerating universal access to water and sanitation, and adopting digital technologies. Asia and the Pacific is also the most disaster-affected region in the

In many developing countries, women and girls are responsible for

world, home to more than 40% of the globe’s calamities.

fetching water from communal sources or water vendors.

As long as the pandemic persists, full financial recovery (i.e., returning to pre-pandemic levels of financial health) for many service providers may not be possible. The resumption of some economic activities has partially increased water demand and revenues for service providers, but many are still operating at a loss.

scale applications. This is in contrast to the large economies of scale that water service providers and resources managers are typically configured for; in this way, decentralisation offers the potential for equitable service provision, provides redundancy in the systems, and helps speed up the implementation of suitable water supply and sanitation services and localised water resource management.

POST-PANDEMIC ERA The post-pandemic recovery of the water sector will require a strong focus on preventing and responding to future health crises, and acceleration of universal access to water and sanitation. In particular, governments and service providers must provide greater sanitation access. There are 369 million people in Asia and the Pacific without access to basic sanitation services, and the sanitation burden is borne disproportionately by the poor and vulnerable. Designing safe, inclusive, sustainable, culturally sensitive, and resilient sanitation services present an investment opportunity not only for governments but also for the private sector. Conventional sewerage implemented by wastewater service providers is not only costly, but also impractical in many instances. Citywide Inclusive Sanitation is an urban sanitation concept that ensures everyone has access to safely managed sanitation by embedding a range of services—both onsite and sewered, centralised, or decentralised—tailored for the realities of the world’s burgeoning cities. The water sector after the pandemic must have a thorough understanding of the vulnerabilities and risks facing all of its stakeholders, systems, and resources. Service providers must identify and assess the risks faced by marginalised and vulnerable groups within their ambit of service, and the risks to their resources – physical and human. This will help them manage their resources and understand the possible ways for extending critical services to presently unserved groups or areas, to prepare for more effective and efficient crisis response and management. Extension of water supply services to the entire population and sustainable management of water resources entail employing both established and innovative approaches, including decentralisation and digitalisation. There are technologies that work more efficiently and are cheaper at low-

ACHIEVING RESILIENCE Water services and resource management must be designed for sustainability and long-term resilience. Water is the primary medium through which we will feel the effects of climate change. The pronounced impacts of climate change on the water cycle also alter the operating parameters for many service providers and water resource managers in terms of supply and quality. Legacy systems are already at risk of failing to meet the demands of countries that experience rapid climate change such as Nepal and in the Pacific region. This does not bode well for developing countries that are intensifying investments in inflexible infrastructure, such as large multipurpose dams. The pandemic also showed the need for water managers to be digitalised. Innovative technologies are available at affordable costs, that increase efficiency and bring resilience to both service providers and communities. Remote monitoring of quantity and quality of water, digitalised billing, and early warning systems to handle disasters, are a few examples. Adoption of technology has been slow in the water sector, despite evidence of its success across a wide range of applications. Demystifying the technology and demonstrating that users can choose the speed at which they implement it is key to its adoption. Nature-based solutions (NBS) can support long-term sustainability by providing flexibility and adaptability to water service providers and managers. For example, China’s “sponge city” design approach — a suite of integrated NBS and “green and blue” infrastructures that aim to enhance urban water management in major cities such as Beijing, Tianjin, Wuhan, and Shenzhen— is envisioned to improve water retention (to avoid flooding and increase local water supply) and water quality (for reduced pollution and potential decentralised water sources). As rapid urbanisation and population growth sweeps across Asia and the CFI.co | Capital Finance International

The “new normal” of the water sector must include a thorough understanding of the risks faced by vulnerable groups in society. Service providers must identify and assess the risks faced by marginalised and vulnerable groups. This will help them understand the possible ways for extending critical services to presently unserved groups or areas, as well as prepare for more effective and efficient crisis response and management. Achieving this will not only help prepare for any new pandemic, but will be key to tackling the bigger climate change challenge ahead. i ABOUT THE AUTHOR Bambang Susantono is Vice-President for Knowledge Management and Sustainable Development at the Asian Development Bank (ADB). Previously, he was the Acting Minister, and Vice-Minister of Transportation of Indonesia, and Deputy Minister for Infrastructure and Regional Development at the Office of Coordinating Ministry for Economic Affairs. ABOUT ADB The Asian Development Bank was founded in 1966 and is headquartered in Manila. ADB is composed of 68 members, 49 of which are from Asia and the Pacific. The organisation assists its members and partners by providing loans, technical assistance, grants, and equity investments to promote social and economic development. Under its long-term Strategy 2030, ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. At the 26th UN Climate Change Conference of the Parties (COP26) hosted by the UK in Glasgow in October-November, ADB will be cohosting an Asia Water Hub.

Author: Bambang Susantono

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> Jim O’Neill:

Will the BRICS Ever Grow Up? Having created the BRIC acronym to capture the collective potential of Brazil, Russia, India, and China to influence the world economy, I now must ask a rather awkward question: When is that influence going to show up? Given today’s global challenges and the enormous issues facing the BRICS (which subsequently became a real-world entity and was expanded in 2010 to include South Africa), the bloc’s ongoing failure to develop substantive policies through its annual summitry has become increasingly glaring.

his November will be the 20th anniversary of the BRIC acronym, which I first used in a 2001 Goldman Sachs paper entitled “Building Better Global Economic BRICs.” At the time, I offered four scenarios for how each country could develop over the next decade, and made the case for why global governance needed to become more representative and include these four rising powers. That paper was followed by a series of others, starting in 2003, which showed how China’s economy could become as large as the US economy (in nominal dollar terms) by 2040; how India could surpass Japan to become the thirdlargest economy soon thereafter; and how the BRIC economies together could grow larger than the G6 (the G7 minus Canada). But the bloc’s economic trajectory since 2001 has been a mixed bag. While the first decade was a roaring success for all four countries, with each surpassing all four scenarios that I originally outlined, the second decade was less kind to Brazil and Russia, whose respective shares of global GDP have now fallen back to where they were 20 years ago.

Final Thought

If it weren’t for China – and India, to some degree – there wouldn’t be much of a BRIC story to tell. Yet, notwithstanding the difficulties the BRICs have faced, China’s growth alone is on track to lift the technical aggregate of all four economies to match the size of the G6. In terms of global governance, the only notable shift over the past two decades has been the rise of the G20 since it took center stage in the response to the 2008 global financial crisis. Representing the world’s 20 largest economies, the organisation seemed immensely powerful at the time, and it managed to implement policies of potentially lasting importance. But since then, it has generally been a disappointment, saying much but achieving very little. For their part, the BRICs held their first annual meeting as a political club in 2009, in Russia 190

"Moreover, while the BRICS have little in common other than large populations, they also share a significant exposure to infectious diseases." (the first to include South Africa took place in China in 2011). And this year, Indian Prime Minister Narendra Modi hosted the BRICS leaders (virtually) for their 13th summit. Every leader made bold statements about what they had supposedly achieved together, and all discussed avenues for future cooperation. Yet they have accomplished very little; lofty statements are usually accompanied by only scant policy moves. Nothing in the bloc’s latest joint declaration suggests that anything has changed. Perhaps not surprisingly, most of the attention this year has been on security and terrorism. After all, recent developments in Afghanistan will have serious, direct implications for Russia, India, and China. But this singular focus is disappointing nonetheless, because it highlights the group’s limited joint ambitions. Modi would seem to agree, saying, “We need to ensure that the BRICS are more productive in the next 15 years.” Beyond creating the BRICS Bank, now known as the New Development Bank, it is difficult to see what the group has done other than meet annually. Following the bloc’s rather dismal second decade, there are many things that BRICS leaders could do collectively to help revive the kind of economic gains made in the first decade, all of which would be good for the rest of the world, too. In doing so, they could create a much stronger impression of their usefulness alongside the G20, strengthening the case for more substantive reforms to global governance. For starters, the BRICS need to strengthen trade between themselves. China and India could both gain enormously from a more open and ambitious trading relationship, which would redound to the CFI.co | Capital Finance International

benefit of the rest of the region, the other BRICS, and the world. In fact, more India-China trade alone would visibly boost global trade. Moreover, while the BRICS have little in common other than large populations, they also share a significant exposure to infectious diseases. The Review on Antimicrobial Resistance that I led in 2014-16 showed that all of the BRICS were worryingly vulnerable to drug-resistant tuberculosis. And as COVID-19 has shown, most have health systems that are poorly equipped to deal with pandemics. Unless they treat global infectious diseases more seriously, they will never be able to reach their economic potential. Since the fall of 2020, I have had the privilege of serving on the World Health Organization’s independent Pan-European Commission on Health and Sustainable Development, which is chaired by former Italian Prime Minister Mario Monti. One crucial proposal from our initial Call to Action this past spring, now outlined in detail in our final report, is to establish a Global Health and Finance Board under the auspices of the G20. The reasoning is simple: unless we place global health challenges at the heart of regular economic and financial dialogue, we will remain ill prepared for them. And as the pandemic has shown, global health challenges are also economic and political challenges. This proposal already has the support of several key governments, notably those of the United Kingdom, the United States, France, Italy, and the European Union. Yet for reasons I fail to understand, the BRICS, especially China, seem to be opposed to it. Such resistance makes no sense and will have dire consequences for the rest of the world. It gives me and other longtime champions even more reason to doubt the group’s collective potential. 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 and a member of the Pan-European Commission on Health and Sustainable Development.

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