CFI.co Spring 2022 by CFI.co

Capital Finance International

Spring 2022

£9.95 // €14.95 // $15.95

AS WORLD ECONOMIES CONVERGE

President of the European Central Bank Christine Lagarde:

MONETISING EUROPE

ALSO IN THIS ISSUE // WORLD BANK: CLIMATE INVESTMENT // NASDAQ: UNDERSTANDING MATERIALITY IBM: GLOBAL OUTLOOK FOR BANKING AND FINANCIAL MARKETS // DELOITTE: BUILDING A SUSTAINABLE FUTURE ACCENTURE: MAKING EXPO 2020 DEEPLY PERSONAL // IMF: SUSTAINABLE FINANCE IN EMERGING MARKETS

WAT C H M A K I N G O N C E A G A I N F I N D S BRITISH SHORES The Limited Edition Bremont Longitude is a groundbreaking timepiece that not only looks back at our country’s legacy but also forward to an exciting future of British watchmaking. The watch’s case back incorporates brass from the original “Flamsteed Line,” in Greenwich, the very spot where the first Astronomer Royal made his celestial observations in pursuit of an aid to navigation. It has long been the goal of Bremont to bring watch manufacturing back to Britain. The Longitude represents a milestone in that journey, a homecoming of sorts, and proof that, to get where you’re going, you need to know where you came from.

Performance Charged

Experience the new Levante GT Hybrid. Discover more on maserati.ch

Levante GT Hybrid: Fuel consumption (l/100 km): combined 10.7 - CO2 emissions (g/km): combined 243 - Efficiency class: G The stated energy values correspond to the WLTP standards. CO2 target value 118 g/km, average CO2 emissions 169 g/km.

CHRONOMAT

The Cinema Squad Charlize Theron Brad Pitt Adam Driver

First Thoughts Vladimir Putin’s invasion of Ukraine has not only removed Covid from the forefront of world consciousness, but also united the democratic world. On March 2, 141 countries approved a UN resolution demanding that Russia end its military operations. Only four countries (other than the invader) voted against it: the despotic havens of North Korea, Syria, Belarus, and Eritrea. This is the most serious challenge to European security since World War II — but the unity of purpose shown by democratic countries must surely have given Putin pause for thought. Ukraine has won hearts and minds, with recent North American and European defence and economic policies showing accord. French Foreign Minister Bruno Le Maire did not mince his words: “We are waging total economic and financial war on Putin.” The most devastating financial sanctions came in the blink of an eye. The Central Bank of Russia (CBR) was mauled when the G7 froze much of its $630bn in foreign currency reserves. The rouble plummeted, and the CBR doubled its interest rate and closed the Moscow Stock Market. On March 10, the World Bank predicted that Moscow would default on its debt repayments. This has happened twice in recent history: in 1917, during the Russian Revolution, and in 1998, after the fall of the Soviet Union, when the domestic economy was heavily burdened by the costs of war in Chechnya.

First Thoughts

With each passing day came more restrictions. It is open season on oligarchs, and anyone else with interests in the invader. Companies have pulled out en masse — because trading

there would be hopeless, or unacceptable to stakeholders. The US and UK were quick to ban oil imports, and the EU committed to reducing its reliance on Russian gas. But with 40 percent of Europe’s supplies originating there, buying continues. Enraged by the West’s economic onslaught, Russia threatened to close the Nord Stream 1 pipeline to Germany — something that would also deprive it of revenues to replenish Putin’s war chest. A focus on alternative energy is likely, given the joint crises the world is facing. The first is Putin, the second is climate change. As we work to reduce dependence on Russian gas, we should be thinking of the planet. Renewables have been reducing in cost over the past decade to become the cheapest sources of energy. Past dependence on fossil fuels has been partly due to inertia, and partly due to vested interests. These limited resources are haphazardly scattered around the world, whereas sun and wind are everywhere. We must harness these renewable resources. Russia and Ukraine account for 30 percent of the world’s wheat production — and both sources are now at risk. Food and other prices in the West rose sharply after the invasion. The risk of 1970s levels of inflation — low when Covid was the enemy — is more serious now. Affluent individuals who care about freedom should stop complaining about high energy and food prices until Ukraine is safe, and concentrate on helping the beleaguered nation. Those — in Europe and elsewhere — who are less fortunate, and hard-hit by the rising costs, must be supported by Western governments.

First Thoughts

> Correspondence

“

In First Thoughts (Winter issue) you reflect on two years of Covid-19 reporting. There really was little choice as the pandemic, with all its twists and turns, has been “the big story” for so long. CFI.co’s reporting and editorialising on the economic aspects of this modern-day plague have been sensible, measured, comprehensive, and generally optimistic. There is one obvious, and tragic, reason to think that a change of focus is now likely. I often lament the lack of journalistic coverage my country of birth receives. That’s about to change, but it won’t be the news we wanted to share. Although I have not lived permanently in Ukraine for many years, my heart is still there. Putin’s invasion has done nothing to change that. I am writing at the end of the first week of atrocities and have no way of knowing how things will be when you read this message. However, I can make two confident predictions. One, that we will never acquiesce to the will of the attackers. Two, that if CFI.co runs a “Person of The Year 2022” feature, the subject will be the president of Ukraine. Please listen to what Volodymyr Oleksandrovych Zelenskyy shares with the world about our predicament, and implore your leaders to give us what we desperately need. We are all in this together and we must work as one. The economic sanctions against Russia are to be welcomed, but we must, at all costs, ensure the effective defence of Ukraine and its people. The kindness and generosity of the governments and people of Europe have brought me to tears. We thank you all for extending help during this dark hour. ANICHKA KOVAL (Geneva, Switzerland)

“

The UK should be responding to Russian aggression alongside the EU, not from the sidelines. It seems wholly wrong that the country that secured freedom for Europe in the 1940s should depart the Union that has safeguarded our shared values and way of life. Britain’s support to Ukraine has not matched that of the EU, as evidenced by the Home Secretary’s stipulation that the UK visa scheme should be widened — but only for refugees who have relatives here. Someone should tell Priti Patel that there is little, if any, correlation between the need for shelter and the location of one’s family members. The Poles seem to have the right idea, treating the 50,000 or so Ukrainian refugees who arrive in their country each day as honorary family members. BRUCE GEDNEY (Chatham, England)

Spring 2022 Issue

“ “ “

I loved your Winter Special, featuring one of my heroines, Dolly Parton, and five other inspirational women about whom I had heard surprisingly little. The profile of women in business is on the rise, and discussion about gender balance and equality is becoming more common. Which is good — and bad. Great that it’s aired in tandem with (and in almost the same breath as) sustainability, the circular economy, climate change, EVs and CSR. But why hasn’t this been sorted out by now? Aren’t checks and balances in place to prevent discrimination or unequal pay between sexes? And if they are indeed in place, why aren’t they having the required effect? The passing — almost without mention — of another International Women’s Day keeps the flame burning, I suppose. I’m just a little resentful that someone still needs to tend the wick. I’m not an ardent feminist, just a logical woman who cannot understand why the issue of gender equality is still festering so long after the Suffragettes paved the way for us. SHEILA THOMPSON (Bournemouth, England) I found Paolo Sironi’s article on banking and fintech platforms (CFI.co Winter 2021-22) fascinating. I was made to realise how dependent we have become on these innovations since the outbreak of the Covid-19 pandemic. As a person of a certain age, I was initially reticent when my bank invited me to embrace online banking several years ago — until I realised that I could effect a transfer while lying in bed at seven o’clock in the morning rather than rushing to my local branch and joining the queue. Now I can order a takeaway, book a flight, or buy all manner of goods — without speaking to anyone. However, not everyone has adapted so smoothly (or belatedly, as in my case) and the closure of bank branches and post offices in villages has caused many elderly or disabled people considerable hardship. Useful, but not for everyone. GILLIAN SMYTHE-GONZALEZ (Madrid, Spain) Otaviano Canuto once again hit the nail on the head by identifying production and supply chain issues as the main drivers of inflation — at levels not seen in the developed world for over 30 years. He was probably spot on in predicting an “adjustment ... as interest rates rise”. But, of course, events have overtaken us, and the sanctions imposed on Russia for its cruel invasion of Ukraine are exacerbating inflation as the former’s oil and gas, and the latter’s grain and cereals, become scarce. Tough times ahead, I fear. WOUT GOUWELEEUW (Utrecht, Netherlands)

> 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 Lord Waverley

COVER STORIES World Bank Climate Investment (14 – 15)

Nasdaq Understanding Materiality (20 – 21)

Production Director Jackie Chapman

IBM

Distribution Manager William Adam

(22 – 23)

Subscriptions Maggie Arts

Global Outlook for Banking and Financial Markets

IMF Sustainable Finance in Emerging Markets

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 18-19, 28-29, 38-39, 182 © Project Syndicate 2022

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

(26 – 27)

Cover Story An Outsider on the Inside Shaking Up the Establishment, One Suit at a Time (30 – 34)

Deloitte Building a Sustainable Future (131)

Accenture Making Expo 2020 Deeply Personal (132 – 133)

CFI.co | Capital Finance International

Spring 2022 Issue

FULL CONTENTS 14 – 41

As World Economies Converge World Bank Nouriel Roubini Paolo Sironi Marten Mark Rohit Goel Wim Romeijn Mari Pangestu

Anshula Kant Evan Harvey IBM BeApp Fabio Natalucci Lord Waverley

Otaviano Canuto Nasdaq IMF Deepali Gautam Mohamed A El-Erian Joseph E Stiglitz

42 – 49

Spring 2022 Special: Style Meets Sustainability

50 – 95

Europe

Brendan Filipovski Naomi Snelling ARTICO Partners Jürgen Eichner AVEVA CBRE Aéroports de Paris Johan Lema Gabriel Brenna

96 – 115

SegurCaixa Adeslas Andrew Amoils Lindsey McMurray VIA optronics Peter Herweck David Casas Alarcón Orbian EMCORE Eccelsa Aviation

Tony Lennox Isomer Capital Pollen Street Capital Volocopter Martha Reyes Augustin de Romanet KBC Asset Management Stephan Knuser Liechtensteinische Landesbank AG

CFI.co Awards

Rewarding Global Excellence

116 – 123

Africa

Omnia Holdings

124 – 145

Seelan Gobalsamy

Middle East

TANQIA Ibrahim Elwan Damian Regan Accenture Yogesh Patel Ahli United Bank QNB ALAHLI Mohamed Bedeir Applied Science Private University

Société Générale Congo

Deloitte Angelo Lorusso Jason Agnew ICBC Dubai (DIFC) Branch

146 – 155

Latin America Kellogg Insight David Fernandez

156 – 169

North America

Alimentation Couche-Tard GoldenTree

Phillip Braun

Infinity Asset Management

Susie Allen Steven Tananbaum

Kickstart Seed Fund AccountAbility

170 – 181

Asia Pacific

Tryggvi Gudmundsson Itai Agur Giovanni Dell’Ariccia Damiano Sandri Antonella Santuccione Chadha Harris Eyre Philippine Economic Zone Authority (PEZA)

182

Damien Capelle Brain Capital Paweł Świeboda

Final Thought CFI.co | Capital Finance International

> World Bank

Together, We Can Close the Gap in Climate Investment By Anshula Kant Managing Director and Chief Financial Officer, World Bank Group

We are all witnessing the dramatic impacts of climate change, with increasingly frequent and severe natural disasters and extreme weather putting lives at risk and destroying assets globally. No country is immune, and the connection to human well-being is increasingly visible. Unchecked, climate change is projected to push 132 million people into poverty over the next 10 years, undoing hard-won development gains.

t COP26, the UN Climate Change Conference in Glasgow in November, countries acknowledged that much more needs to be done. They agreed to develop more robust emissions reduction plans for 2030, including by phasing down coal — the biggest source of greenhouse gas emissions — and phasing out fossil fuel subsidies. A strong push on adaptation also emerged — reflecting recognition that impacts are already happening here and now. But to drive these commitments forward and turn ambition into action, trillions of dollars will be needed — vastly more than the billions that are already in play to support climate action. Where will money at this scale come from? Amid economic shocks brought on by the pandemic and severely constrained public budgets, this question becomes even more critical. The World Bank Group is today the largest multilateral funder of climate investments in developing countries, providing over $26 billion in 2021 alone. In 2020, our support accounted for over half of multilateral climate finance to developing countries and over twothirds of adaptation finance. We have made key commitments in our recent Climate Change Action Plan that will boost our efforts even further. IBRD and IDA have committed to aligning all new operations to the Paris Agreement by July 1, 2023. IFC and MIGA will align 85% of new operations by July 1, 2023 and 100% by July 1, 2025. Even with these ambitious new targets on climate finance, a sizeable financing gap remains; and along with multilateral institutions like ours, the private and public sectors will both have a vital role in bridging it. There are encouraging signs that the private sector is stepping up on climate action: more than 4,000 institutional investors have signed on to the UN Principles for Responsible Investment, committing to integrate environmental, social, and governance factors into investment decisions.

The International Bank for Reconstruction and Development (IBRD), which lends to middle and 14

Author: Anshula Kant

low middle income developing countries, and our private sector arm the International Finance Corporation (IFC), raise private capital in the global markets to support project financing. IBRD raises on average $50-60 billion each year through the sale of Sustainable Development Bonds and green bonds to fund activities in middle-income countries. IFC raises $12-$13 billion from the global capital markets through its annual funding program, which includes CFI.co | Capital Finance International

thematic bonds such as green and social bonds, for loans to private sector enterprises in emerging markets. The International Development Association (IDA), the entity of the World Bank Group that provides funds to the poorest and most vulnerable countries, is a relatively new issuer in the capital markets. IDA started accessing the capital markets in 2018 to scale up its activities and is now raising upto $10 billion per year through bonds. All three

Spring 2022 Issue

help investors assess a bond’s environmental impact. Second, more transparency about the issuer’s overall sustainability targets and commitments. Third, simple structures, with lower transaction costs. Fourth, borrowing that is consistent with fiscal spending and deficit plans. And fifth, policy work to create the enabling environment to attract investors and issuers. Here’s how we are helping. First, on data and transparency: The World Bank Group’s Sovereign Environmental, Social and Governance Data Portal is providing robust, measurable, and comparable data on sovereigns. Since its launch in 2019, the portal has had nearly 20,000 visitors. Investors are using it to develop their own ESG ratings systems or integrating the information into their analytical processes. We are creating platforms for the public and private sectors to meet and collaborate, while building the capacity of debt management offices to engage with investors on ESG issues. Photo: Nepal. Aisha Faquir/World Bank.

Second, we are sharing our experience with public sector issuers to structure transactions that are consistent with robust debt management strategies, in line with international best practices and market expectations. For example, in 2021 we facilitated Colombia’s inaugural sovereign green bond, the first to be issued in local currency in Latin America. And third, we are helping financial regulators create the enabling environment for private sector finance to flow toward climate-friendly investments in developing countries. Countries like Indonesia, Malaysia, and Vietnam are developing guidelines, regulations, and green taxonomies for sustainable financing.

Photo: Madagascar. Mohammad Al-Arief/World Bank.

issuers are rated triple-A by the credit rating agencies. Green bonds, which the World Bank pioneered in 2008, are recognised by many large fixedincome investors as an effective way to mobilise private capital for the common good. The growth of these bonds has yielded capital to address environmental and social issues at a scale that public financing cannot achieve — $620 billion in 2021 alone. The volume of labeled bonds underrepresents the change they have catalysed in the markets towards transparency and a different mindset that integrates ESG considerations in investment decisions. Last October, I hosted a roundtable with major emerging market investors, where I saw first-

hand how interested they are in financing climate action in developing countries. Green, social, and sustainability (GSS) bonds are their preferred instruments, with proceeds earmarked for environmentally sustainable activities. Some are also willing to consider sustainability-linked bonds, which commit to measuring performance in meeting a predefined sustainability target. As demonstrated by IFC’s partnership with asset manager Amundi, there is increasing global demand for emerging market green investment opportunities. Some are seeking to establish sovereign green bond funds. But what will it take to get them to invest in GSS bonds in these markets at scale? Based on our experience and insights gleaned from international capital markets, we need several key things. First, better quality data to CFI.co | Capital Finance International

Greener investing can have a bigger impact on economic growth in emerging markets and could generate much-needed employment. For example, reforestation and watershed restoration investments have very high employment multipliers (around 30 jobs per $1 million). Construction of clean energy infrastructure is also labor-intensive, creating twice as many jobs per dollar as fossil fuel investments. A shift to low-carbon, resilient economies could create over 200 million new jobs globally by 2030. We also estimate that building resilient infrastructure in low- and middle-income countries could unlock $4.2 trillion in socioeconomic benefits over the lifetime of the investments. The positive return on these types of investments makes a strong case for channeling more private sector funds toward emerging markets. GSS bonds are an easy and practical way for emerging markets to tap investment flows from international capital markets. From building the policy environment to facilitating transactions, the World Bank Group will continue to help emerging markets develop their capacity to issue these bonds. This is critical to scaling up finance for the challenges ahead. i

References available online. 15

> Otaviano Canuto:

Some Economies May Soon Face a Hard Landing Weaker performance of emerging markets is expected in the immediate future.

his year began with simultaneous signs of a slowdown in global economic growth and a reorientation toward tightening of monetary policies in advanced economies.

In its latest Global Economic Prospects, the World Bank forecasts that global growth — at 5.5 percent last year — should moderate to somewhere between 3.2 and 4.1 percent this year and next. In addition to the effects of the pandemic, a fall in fiscal support and lingering supply chain disruptions point to a slowdown. For China, the World Bank expects a GDP growth of 5.1 percent this year, well below the eight percent that had been forecast. In addition to possible restrictions on mobility due to the “zero covid” approach, the adjustment in the property sector will contain consumer spending and residential investment.

CFI.co Columnist

While advanced economies reduce their pace of expansion, central banks are on a tightening path — apart from the Chinese case. The Federal Open Market Committee (FOMC) believes the reorientation of its monetary policy since October has been made clear in the minutes of its meetings, and in statements by Federal Reserve chair Jerome Powell. With unemployment rates below four percent, consumer price inflation ended the year at seven percent, a level not seen since the early 1980s. Its listing as a “transient” phenomenon has been abandoned by the Fed. A FOMC meeting last September suggested an interest rate hike this year. The end of the Fed's bond-buying programme was brought forward, while Powell telegraphed that the Fed's balance sheet reduction should begin as early as midyear. After interest rate hikes in England, Norway, and New Zealand, the same is expected in Canada. Similar moves by the European Central Bank and Sweden are anticipated for early 2023. This is the scenario faced by emerging and developing economies that are making a slow recovery from the pandemic. The World Bank does not expect a return to pre-pandemic GDP and investment trends in 2022-23. 16

Figure 1: Emerging Market and Developing Economies lagging behind. Source: World Bank (2022). Global Economic Prospects, January.

Figure 2: Emerging market trade balances. Source: Lanau, S. and Fortun, J. (2022). Economic Views – EM External Imbalances in

2022, Institute of International Finance – IIF, January 11.

High inflation rates and public debt during the pandemic are constraining the adoption of expansive fiscal and monetary policies. Not coincidentally, higher interest rates and the downward revision of fiscal support have taken place in many cases. The question is whether the growth slowdown, with tightening financial conditions in advanced economies, is likely to be disastrous for some countries. Tightening external financial conditions will doubtless accentuate challenges for emerging market policy-makers. For emerging market economies undergoing domestic inflation, the risk of additional pass-through pressures from currency depreciations — after markets embed higher US interest rates — will be key in setting monetary policy. While tightening cycles began CFI.co | Capital Finance International

in 2021 in Brazil, Mexico, and Russia as inflation rates moved above target levels, central banks in India and Indonesia maintained an accommodative stance. Pro-cyclicality of capital flows would also be a factor for those countries. Emerging market economies with a high share of foreign participation in domestic capital markets and more open financial sectors are vulnerable to the volatility of such flows. Central banks in these countries may be forced to tighten monetary policy beyond what would be adequate from a growth perspective: South Africa and Mexico are potential examples. In cases of financial markets that are largely domestically funded — India, Brazil, and

Spring 2022 Issue

Malaysia — the vulnerability to capital outflows driving substantial currency depreciation is lower. The answer to the question about the nature of landing of emerging market economies will ultimately depend on how aggressively the monetary policy reorientation in advanced economies takes place. If growth remains minimally robust as inflation moderates in the US, due to reduced fiscal stimulus and fading supply chain restrictions, emerging markets could avoid a hard landing.

Sergi Lanau and Fortun also highlight that emerging-market current account deficits have been low or nil in the past two years. In the case of Latin America, foreign reserves increased in 2021, following the reinforcement of liquidity buffers started in the second half of 2020, in

Are exchange rates at levels of overvaluation that make them vulnerable to sudden and catastrophic devaluations? Here Robin Brooks, Fortun, and Jack Pingle, all from the IIF, suggest a more heterogeneous picture. Although most emerging currencies have experienced real devaluation in the past decade, there is huge differentiation, with some now exhibiting devaluation and others overvaluation. In the case of Brazil, they estimate a degree of around 20 percent of excess devaluation of local currency below what its fundamentals would indicate, such as current account balances and stocks of foreign assets and liabilities. The nonreturn of the exchange rate to pre-pandemic levels contributed to the Brazilian inflation ending 2021 in double digits — on top of food and energy shocks. In the case of Brazil and other emerging countries without exchange overvaluation, a high probability of dramatic exchange rate adjustments is not foreseen — provided that the reorientation of monetary policy in advanced countries does not take on dramatic contours. CFI.co | Capital Finance International

Except in the case of drastic monetary adjustments in advanced economies, one must focus on domestic factors to understand the weaker performance of emerging markets in the immediate future. i

This article first appeared at Policy Centre for the New South. 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 ten years. Follow him on Twitter: @ocanuto 17

CFI.co Columnist

There has not been a large inflow of foreign capital into emerging market economies in recent years. Jonathan Fortun, in the capital flows tracker by the Institute of International Finance (IIF), suggests that there has already been a sudden stop, albeit with great differentiation between emerging markets.

addition to the increase in Special Drawing Rights (SDRs) by the IMF last year.

> Nouriel Roubini:

Russia's War and the Global Economy

n late December, I warned that 2022 would prove to be much more difficult than 2021 – a year when markets and economies around the world fared well overall, with growth rising above its potential after the massive recession in 2020. By the eve of the new year, it had become apparent that the surge of inflation would not be merely temporary, that the ever-mutating coronavirus would continue to sow uncertainty around the world, and that looming geopolitical risks were becoming more acute. First among the three geopolitical threats that I mentioned was Russian President Vladimir Putin’s massing of troops near its border with Ukraine. After two months of stop-start diplomacy and bad-faith negotiations on the part of the Kremlin, Russia has now launched a full-scale invasion of Ukraine, in what American officials say is an operation to “decapitate” the current democratically elected government. Despite repeated warnings from the Biden administration that Russia was serious about going to war, the images of Russian tanks and helicopter squadrons blitzing through Ukraine have shocked the world. We now must consider the economic and financial consequences of this historic development. Start with a key geopolitical observation: This is a major escalation of Cold War II, in which four revisionist powers – China, Russia, Iran, and North Korea – are challenging the long global dominance of the United States and the Western-led international order that it created after World War II. In that context, we have entered a geopolitical depression that will have massive economic and financial consequences well beyond Ukraine. In particular, a hot war between major powers is now more likely within the next decade. As the new cold war rivalry between the US and China continues to escalate, Taiwan, too, will increasingly become a potential flashpoint, pitting the West against the emerging alliance of revisionist powers. A STAGFLATIONARY RECESSION A major risk now is that markets and political analysts will underestimate the implications of this geopolitical regime shift. By the close of the market on February 24 – the day of the invasion – US stock markets had risen in the hope that this conflict will slow down the willingness of the US Federal Reserve and other central banks to raise policy rates. But the Ukraine war is not just another minor, economically and financially inconsequential conflict of the kind seen elsewhere in recent decades. Analysts and investors must not make the same mistake they 18

"In terms of the economy, a global stagflationary recession is now highly likely. Analysts are already asking themselves if the Fed and other major central banks can achieve a soft landing from this crisis and its fallout." did on the eve of World War I, when almost no one saw a major global conflict coming. Today’s crisis represents a geopolitical quantum leap. Its long-term implications and significance can hardly be overstated. In terms of the economy, a global stagflationary recession is now highly likely. Analysts are already asking themselves if the Fed and other major central banks can achieve a soft landing from this crisis and its fallout. Don’t count on it. The war in Ukraine will trigger a massive negative supply shock in a global economy that is still reeling from COVID-19 and a year-long build-up of inflationary pressures. The shock will reduce growth and further increase inflation at a time when inflation expectations are already becoming unanchored. The short-term financial market impact of the war is already clear. In the face of a massive riskoff stagflationary shock, global equities will likely move from the current correction range (-10%) into bear market territory (-20% or more). Safe government bond yields will fall for a while and then rise after inflation becomes unmoored. Oil and natural gas prices will spike further – to well above $100 per barrel – as will many other commodity prices as both Russia and Ukraine are major exporters of raw materials and food. Safe haven currencies such as the Swiss franc will strengthen, and gold prices will rise further. The economic and financial fallout from the war and the resulting stagflationary shock will of course be largest in Russia and Ukraine, followed by the European Union, owing to its heavy dependence on Russian gas. But even the US will suffer. Because world energy markets are so deeply integrated, a spike in global oil prices – represented by the Brent benchmark – will strongly affect US crude oil (West Texas Intermediate) prices. Yes, the US is now a minor net energy exporter; but the macro-distribution of the shock will be negative. While a small cohort of energy firms will reap higher profits, households and businesses will experience a massive price shock, leading them to reduce spending. CFI.co | Capital Finance International

Given these dynamics, even an otherwise strong US economy will suffer a sharp slowdown, tilting toward a growth recession. Tighter financial conditions and the resulting effects on business, consumer, and investor confidence will exacerbate the negative macro consequences of Russia’s invasion, both in the US and globally. The coming sanctions against Russia – however large or limited they turn out to be, and however necessary they are for future deterrence – inevitably will hurt not only Russia but also the US, the West, and emerging markets. As US President Joe Biden has repeatedly made clear in his public statements to the American people, “defending freedom will have costs for us as well, here at home. We need to be honest about that.” Moreover, one cannot rule out the possibility that Russia will respond to new Western sanctions with its own countermeasure: namely, sharply reducing oil production in order to drive up global oil prices even more. Such a move would yield a net benefit for Russia so long as the additional increase in oil prices is larger than the loss of oil exports. Putin knows that he can inflict asymmetrical damage on Western economies and markets, because he has spent the better part of the last decade building up a war chest and creating a financial shield against additional economic sanctions. DAMAGE CONTROL IS LIMITED A deep stagflationary shock is also a nightmare scenario for central banks, which will be damned if they react, and damned if they don’t. On one hand, if they care primarily about growth, they should delay interest-rate hikes or implement them more slowly. But in today’s environment – where inflation is rising and central banks are already behind the curve – slower policy tightening could accelerate the de-anchoring of inflation expectations, further exacerbating stagflation. On the other hand, if central banks bite the bullet and remain hawkish (or become more hawkish), the looming recession will become more severe.

Spring 2022 Issue

"The US will try to mitigate the increase in gasoline prices by drawing down its Strategic Petroleum Reserves, and by nudging Saudi Arabia to use its spare capacity to increase its own oil production." Inflation will be fought with higher nominal and real policy rates, increasing the price of money, and thereby dampening the overall economy. We have seen this movie twice before, with the oilprice shocks of 1973 and 1979. Today’s re-run will be almost as ugly. Although central banks should confront the return of inflation aggressively, they most likely will try to fudge it, as they did in the 1970s. They will argue that the problem is temporary, and that monetary policy cannot affect or undo an exogenous negative supply shock. When the moment of truth comes, they will probably blink, opting for a slower pace of monetary tightening to avoid triggering an even more severe recession. But this will de-anchor further inflation expectations. Politicians, meanwhile, will try to dampen the negative supply shock. The US will try to mitigate the increase in gasoline prices by drawing down its Strategic Petroleum Reserves, and by nudging Saudi Arabia to use its spare capacity to increase its own oil production. But these measures will have only a limited effect, because widespread fears of further price spikes will result in global hoarding of energy supplies. Under these new circumstances, the US will feel even more pressure to reach a modus vivendi with Iran – another potential source of oil – on reviving the 2015 nuclear deal. But Iran is effectively allied with China and Russia, and its leaders know that any deal they do today could be tossed aside in 2025 if Donald Trump or a Trump wannabe comes to power in the US. A new nuclear deal with Iran is thus unlikely. Worse, in the absence of one, Iran will continue to advance its nuclear program, heightening the risk that Israel will launch a strike against its facilities. That would deliver a doublewhammy negative supply shock to the global economy. The upshot is that various geopolitical constraints will severely limit the West’s ability to counter the stagflationary shock inflicted by the war in Ukraine. A NEW-OLD PROBLEM Nor can Western leaders rely on fiscal policy to counter the growth-dampening effects of the Ukraine shock. For one thing, the US and many other advanced economies are running out of fiscal ammunition, having pulled out all the stops in response to the COVID-19 pandemic. Governments have amassed increasingly

unsustainable deficits, and servicing these debts will become much more expensive in an environment of higher interest rates. More to the point, a fiscal stimulus is the wrong policy response to a stagflationary supply shock. Though it may reduce the negative growth impact of the shock, it will add to inflationary pressure. And if policymakers rely on both monetary and fiscal policy in responding to the shock, the stagflationary consequences will become even more severe, owing to the heightened effect on inflation expectations. The massive monetary and fiscal stimulus policies that governments rolled out after the 2008 global financial crisis were not inflationary because the source of that shock was on the demand side, driven by a credit crunch at a time when inflation was low and below target. The situation today is entirely different. We are facing a negative supply shock in a world where inflation is already rising and well above target. It is tempting to think that the Russia-Ukraine conflict will have only a minor and temporary economic and financial impact. After all, Russia represents merely 3% of the global economy (and Ukraine much less). But the Arab states that imposed an oil embargo in 1973, and revolutionary Iran in 1979, represented an even smaller share of global GDP than Russia does today. The global impact of Putin’s war will be channeled through oil and natural gas, but it will not stop there. The knock-on effects will strike a massive blow to global confidence at a time when the fragile recovery from the pandemic was already entering a period of deeper uncertainty and rising inflationary pressures. The knockon effects of the Ukraine crisis – and from the broader geopolitical depression it augurs – will be anything but transitory. 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. 19

> Evan Harvey, Global Head of Sustainability, Nasdaq

Understanding Materiality: History, Context, Purpose

ateriality is one of the organizing principles of corporate reporting. It is meant to focus the reader’s attention on primary concerns, rather than dissipating emphasis across less urgent concerns. The concept is sound: When faced with an array of competing options, we need a system to set priorities, define boundaries, and escalate awareness. But competing definitions of materiality abound, and a concept that seems so fundamental is also subject to various interpretations. Millennia before large accountancies offered their guidance, materiality was specifically and purposefully understood. Aristotle contended that all things are expressions of matter (the source material) and form (the final shape), thus materiality was understood to be essentially inseparable from — and likely meaningless without — form. I’ll clear the subsequent philosophical fog from Aquinas and Hobbes, but keep this very old idea in mind as we explore how materiality may still be understood and defined by the context of its usage.

CFI.co Columnist

This is not to say that materiality and sustainability are the same. Whereas the context of sustainability has grown broader, the idea of materiality as a driver for sustainability reporting has grown narrower. According to the Oxford English Dictionary, the 17th century began materiality’s shift into legal terrain (the quality of being important enough to affect the ruling in a particular case) and the 20th century (after fits and starts) has pushed it into an accounting context. “Materiality is an accounting principle which states that all items that are reasonably likely to impact investors' decisionmaking must be recorded or reported in detail in a business's financial statements using GAAP standards” (What is Materiality in Accounting, and Why is it Important, Harvard Business School, 05 Jan 2016). Now we have multiple forms of materiality competing for our attention in the sustainability reporting context, including: • Single Materiality, focused on disclosures that directly the reporting company or its investors • Context-Based Materiality, which identifies “impacts on capitals vital to stakeholder wellbeing, determines if impacts compromise carrying capacities of capitals, and ascertains strategic innovation opportunities to enhance capitals” [r3.0] 20

"Millennia before large accountancies offered their guidance, materiality was specifically and purposefully understood." • Double Materiality, which examines risks to the company versus risks that the company creates for third parties • Dynamic Materiality, advocating continuous monitoring of issues as they shift in material relevance and trigger stakeholder engagements Each one has its advocates and detractors, which is important because different interpretations of materiality underlie the remaining, large sustainability reporting frameworks. Pressure from the marketplace to harmonize reporting metrics ignores the fact that there are conflicting versions of materiality driving those metrics; national and international regulators are similarly bound by disparate views. Software analytics platform Datamaran has published a good overview of the history and shifting business applications of materiality (datamaran.com/materiality-definition), and strongly advocates for a formal process – a materiality assessment – to drive decisionmaking. Their own research shows a dramatic rise in the popularity of materiality assessments, from just 69 large companies reporting on materiality in 2011 to 329 in 2018. “The context-based definition of materiality is correct because it includes and transcends all the other definitions,” said Bill Baue, Senior Director of r3.0 and co-Founder of the Sustainability Context Group. Other definitions inevitably fall short because sustainable outcomes are complex and multifaceted. “Issues are material when they involve vital capital resources that rightsholders rely on for their wellbeing,” he said. This creates a duty of care for companies to manage its impacts sustainably, because “the carrying capacities of those capitals are typically delineated by ecological, social, and economic thresholds.” CFI.co | Capital Finance International

When it comes to single- versus doublemateriality, Baue finds shortcomings in both. “Single materiality addresses only outside-in impacts and risks,” he said, so it fails to integrate risks for the outside world. Double materiality is designed to address both outside-in and insideout impacts and risks, but it ignores broader impacts that define sustainability — such as the social and planetary repercussions of company operation. Baue also takes issue with dynamic materiality – an emerging concept, promoted by the World Economic Forum and others, advocating continuous monitoring of issues and more aggressive stakeholder engagement. “It does not address thresholds,” he said. “It describes a process that may result in addressing sustainability thresholds, but it does not require this, so it is inherently insufficient.” A threshold is the point at which a given system cannot recover. Once a threshold is passed, there can be no meaningful return to its original state. Thresholds are vital reporting concepts in this debate, creating tension between those who keep their focus on systemic breaking points and others (sometimes called incrementalists) who focus on moderate, gradual change. But moderate, gradual change — however well-intentioned, however palatable for companies — may still be insufficient to avert tipping points. For more context, I recommend an article co-written by Baue: Thresholds of Transformation: A Common Denominator to Transcend Incrementalism (29 Oct 2020). In conversation with Adam Kanzer, Head of Stewardship, Americas, for BNP Paribas Asset Management, the discussion of materiality again returned to the importance of context. “What is significant?” Kanzer wondered rhetorically. “The context of a decision defines the scope of the information that is material. Are you evaluating a merger? Voting on a board of directors? Considering whether to buy a stock? Trying to determine the most significant contributors to income inequality or to climate change? These are all valid questions, but radically different information sets are required to answer them.” This is not an invitation to get so buried in data that the best course of action gets obscured. “Materiality helps sort out the most important

Spring 2022 Issue

"The context-based definition of materiality is correct because it includes and transcends all the other definitions." stuff,” Kanzer said, “but different people – and different investors – disagree about what is most important. Materiality is in the eye of the beholder. A narrow focus on financial materiality too often produces disclosures that are too narrow, or too short-term, and the focus, at least in securities filings, is ‘risk to the issuer.’ I’d prefer a 360-degree view.” For disclosure purposes, he cites nearly a century of U.S. law – beginning with the Securities Act of 1933 and ultimately codified by the Supreme Court. The prevailing legal standard affirms a fact to be material if there is “a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote. Put another way, there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available” (TSC Industries, Inc. v. Northway Inc., 426 U.S. 438, 1976). Such a perspective works in theory, Kanzer believes, but not in practice. Although ‘reasonable investors’ may have a right to grapple with the ‘total mix’ of information, it is generally left to corporate counsel to decide what to disclose. “Good corporate lawyers diligently work to protect their client — the company — and not necessarily the shareholder. They often don’t see much upside to disclosing more than is clearly required. So, the system doesn’t really work to fulfill the Supreme Court definition.” Kanzer believes that line-item disclosures and more holistic interpretations of materiality are necessary regulatory steps. Overreliance on a principles-based approach has proven unsatisfactory, as the Center for American Progress recently pointed out:

Until then, many believe the prevailing standard to be so vague as to be unactionable. When materiality depends upon “a substantial

It's important to note that materiality used in this way – for financial reporting – is different than the way it is used in sustainability reporting. The former may limit scope to a single stakeholder set (shareholders) and a single area of impact (financial), whereas the latter tends to expand both boundaries considerably. Financial reporting traditionally targets the needs of investors, however one may define those needs. If a narrow focus on ‘financial materiality’ artificially limits stakeholder integration, or obscures negative externalities (immediate or potential threats to financial, social, geopolitical, or planetary stability), then it is not fit for purpose. Let’s not forget that current disclosure standards failed to anticipate or remediate the 2008 financial crisis, the climate crisis, the biodiversity crisis, the social justice crisis, the widening wealth gap, or a global pandemic. “Either disclosure is flawed as a risk management tool,” Kanzer said, “or the information we’ve been getting is incomplete.” If we could somehow drive greater consensus — or unified, reasonable regulation — on the scope and boundaries of materiality, would that also fuel more sustainable development? Baue believes so, but only if it includes broad application and regulation of context-based materiality: “It is the only route that shows promise. All the other approaches lack vitally important aspects of sustainability, so they are structurally inhibited from triggering true sustainability.” i ABOUT THE AUTHOR Evan Harvey is the Global Head of Sustainability for Nasdaq. He manages all corporate sustainability (environmental, social, and governance strategy), philanthropy, and volunteerism efforts for the global exchange. Evan currently serves on the Network USA Board of the United Nations Global Compact (UNGC) and the GRI Global Sustainability Standards Board (GSSB), and previously chaired the WFE Sustainability Working Group. He also actively supports the Impact2030 Metrics Council, the Social & Human Capital Coalition, the Strategic Investor Initiative at CECP, and the 30% Club. His work has been published in Forbes and Capital Finance International. Evan holds a B.A. and an M.A. from the University of Texas, and lives outside Washington DC. 21

CFI.co Columnist

In a system that relies mainly on a principlesbased approach or on the broad concept of materiality, even where disclosures occur, they are unlikely to be consistent over time or comparable across firms. Regrettably, the SEC has yet to impose specific line-item disclosures for climate and many other ESG factors. It did rely on a principles-based approach for climate disclosures in 2010 guidance, but this has not resulted in reliable, consistent, or comparable disclosures about the climate risks that companies face and how they are handling those risks. The SEC Has Broad Authority to Require Climate and Other ESG Disclosures, 10 Jun 2021

likelihood that a reasonable person would consider it important,” one wonders how we collectively define all the adjacent concepts: substantiality, reasonableness, or even importance?

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

> Paolo Sironi:

2022 Global Outlook for Banking and Financial Markets

IBM Thought Leadership

n the third year of a global pandemic, the financial services industry appears to be acclimating to a new reality. Many temporary measures put in place are now poised to become permanent, and a new industry structure is emerging. While the industry may have averted a major crisis, it is still underperforming its pre-financial crisis levels. It has lagged many other industries — and a host of new competitors — in several dimensions, including financial performance, customer experience, and embracing new business, operating, and collaboration models. Banks are facing three key transformation needs. First, they must address the end-to-end digitisation of enterprise-wide operations to enable new customer-centric business models, new products and services, new ways of working, and an ecosystem of partners. Digitisation is critical to meeting customer expectations and powering financial performance across revenue, costs, and capital. Second, they must transform the core data environment to drive efficiency and flexibility. They must leverage the collaborative use of deep analytics and AI at scale. This includes building an ethical framework around how data is captured, stored, and used. Third, they must enable a modern and flexible technology architecture to deliver optimal interoperability and portability to support the deployment and management of workloads across multiple compute environments, while helping financial services organisations meet security and compliance requirements.

In this year’s Global Outlook for Banking and Financial Markets, the IBM Institute for Business Value invited the global IBM industry experts to discuss these transformation needs, reflecting on their experience with clients over the last 12 months and their expectations for the coming year. Their collective point-of-view highlights ten top industry imperatives: – Real industry reinvention. Begin real reinvention — now—to solve the structural weaknesses that constrain financial performance. Financial

"Banks must address the end-to-end digitisation of enterprise-wide operations to enable new customer-centric business models, new products and services, new ways of working, and an ecosystem of partners." 22

CFI.co | Capital Finance International

institutions must seek out new business models to drive incremental revenue gains, new operating models and compute environments that structurally reduce operating costs, and new approaches to improve the efficiency of capital. – Customer-centric business models. Build new customer-centric platform business models to orchestrate and integrate the many needs of ecosystem participants in a more frictionless environment. Leading financial institutions are creating their own bank-led ecosystem business models to serve attractive market segments, while deeply integrating their products and services with other companies’ well-established platforms. – End-to-end digitisation. Embrace end-to-end extreme digitisation to reshape operations and drive innovation. To win the race to all things digital, financial institutions are adopting new ways of exploiting exponential technologies such as automation, hybrid cloud, and AI. They drive digitisation across internal business units and their ecosystem of external partners while helping ensure security and compliance.

at a structurally lower cost across their operating model. – Emerging digital assets. Tap into the growing momentum for digital assets by working to create new customer and partner ecosystems, new products and services, and new use cases. Financial institutions can be enablers and product providers in the fast-growing digital asset marketplace. – Security and fraud. Stay one step ahead in the new frontiers of cybersecurity as bad actors become increasingly sophisticated. While new business and operating models are providing innovative ways to serve customers anywhere and anytime, they also create opportunities for security breaches. Financial institutions are revisiting their enterprise risk profile and deploying enhanced security capabilities within their walls and across their ecosystems. Many organisations have already started addressing some or most of these compelling needs. Others are not keeping pace. A new model for consuming financial services and

accelerated digitisation across the industry demands that institutions adjust course and begin real transformation today. i

The 2022 Global Outlook for Banking and Financial Markets can be downloaded in full found on IBM, the Institute for Business Value pages: ibm.co/2022-banking-financial-markets-outlook 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 entrepreneur. 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.

– Operational resilience. Act with urgency to increase resiliency for better risk management and to address regulatory concerns. As financial institutions pivot workloads and volumes to new channels, operations, and partners in response to the pandemic, resiliency has leapt to the forefront of industry priorities. Further resiliency improvements are required to support new business and operating models now being embraced by the industry. – Viable sustainability. Find viable sustainability models so financial institutions can launch initiatives to meet market expectations, regulatory requirements, and corporate ethical objectives — all with an acceptable cost-benefit case.

IBM Thought Leadership

– Transformed use of data and AI. Deploy AI factories and transformed data environments that put data in action to accelerate transformation. By ethically adopting new deep analytics and AI tools, financial institutions can enhance operations and customer experiences, and better meet regulatory obligations. – New workforce and new workplaces. Embrace the reality of a new workforce in new workplaces that redefine how, where, and when work is performed. The financial institution’s workforce now incorporates employees, subcontractors, vendors, and partner employees. New models can enable effective collaboration across this expanded workforce in changing physical and digital work environments. – New ecosystem architectures. Engage an ecosystem of partners to fuel faster innovation and efficiency. As financial institutions accelerate their transformation, they increasingly partner externally to deliver better functionality

Author: Paolo Sironi

CFI.co | Capital Finance International

> International Investor Opportunities for New App:

BeApp Allows Meaningful Discovery Works with Android and iOS (get it from Google Play, App Store or download from beapp.co)

Social media continues to grow and is a fundamental part of our lives. It knows no borders or boundaries. Being “alone on your phone” in public is nothing new. Having over 1,000 friends and followers you’ve never met, is a cliché we live with. Social media isn’t going anywhere, but, finally, BeApp represents a paradigm shift in how we use it.

eApp founder Marten Mark points out that, “If you’re a marketeer, entrepreneur, or someone who has pondered how to use social media in new and novel ways, then you’ve sensed untapped potential. How do you gain followers, likes, or leads without posting more content? How can you leverage your uniqueness, your current location, or your surroundings? How do you post even better content?”

HOW TO RISE ABOVE THE NOISE There are countless professionals asking themselves this question daily. Millions sit on subways, in waiting rooms, hallways, and public events with their heads down, staring into their screens. You scroll through your feed searching for an answer or maybe just to kill time.

Be Business: Switch to Business profile if you wish to promote your business.

Occasionally, you look up, and survey your surroundings. Everyone seems to be in their private digital world. What if the head-hunter across from you is searching for your exact skill set? That boisterous group on the subway follows all your favourite streaming channels. The person next to you is the love of your life, and this is your one and only chance. If only you had an icebreaker, such as, “Hi, I just came back from Machu Picchu. I see you have been there, too.” Experiences around you are being recorded in videos, pictures, blurbs, tweets, and posts. BeDiscoverable App, BeApp, or simply Be, was developed to connect our stories. To take the digital you back into the real world. To be discoverable and create meaningful discovery. A GREAT EXPERIENCE Mark reflects on his motivations for developing Be: “You would have to follow a person’s social media to see what they post, but I thought it would be useful if I could turn a phone into a beacon that radiates accounts to everyone around them. This way, we can all discover and be discoverable. Thus – BeDiscoverable App – BeApp – was born.” 24

Discover: People closest to you appear higher up in the list.

Profile: See social media accounts around you.

Whether you want to expand your professional network, circle of friends, or dive into a new adventure, BeApp offers an impressively simple user experience. That’s because the app’s inventor wants social media to enable your next connection, not distract from it.

media accounts to the nearby area. Let’s find out what BeApp can do.

FEATURES AND BENEFITS BeApp makes personal and professional connections possible by beaming your social CFI.co | Capital Finance International

General and Personal Use • Discover what’s near you: people, businesses, and places • BeApp integrated messaging: allows you to connect with others in a flash • Adjustable halo: change your broadcast radius for super-centralised contact or to reach a wider audience

Spring 2022 Issue

• Users ranked by proximity: by physical proximity to your halo • Accounts visible outside your halo: users outside your halo clearly marked • Ensured privacy and security: nothing private is broadcasted, only your chosen public profiles • Stay in control of what and when you share: toggle when you share on the fly with simple on/ off switches for each social media account • Broadcast WiFi and password: want to make friends at the airport? Broadcast your WiFi name and password • Offline and airplane mode using Bluetooth and chat: No internet connection? No problem! BeApp uses Bluetooth and its integrated messaging system for online and offline modes • Works well with WhatsApp and Telegram: get in touch with those around you via the integrated messaging system, save their WhatsApp or Telegram account, and keep in touch • No more asking for WiFi from cafés and restaurants: business broadcasting near you makes their WiFi name and password visible • Get phone numbers with a tap of a button: broadcast your phone number and the person standing next to you appears at the top of your home screen (because they are closest). Share your number without removing your phone from your pocket • Save Accounts to your Be contacts list: allows you to save contacts on the app. Make a connection and connect with them later later even when out of range • Works on smartphones and tablets: developed for Android and iOS Professional Use • Business Profile Mode: businesses and venues can switch to Business Profile to share their WiFi name and password with customers. Thus, you can be the first shop on the block on their list! • Gain followers from people in the area: broadcast your social media accounts while you stream, present, or sport a new suit • Sell your product or service: Got a new product? Selling your car? Broadcast your profile page, phone number, and contact info. You just increased your real estate and walk-in traffic! • Switch to sharing only your LinkedIn profile in professional settings: you’re always in control of what and when you broadcast. Tailor your presence to show only the most relevant information.

Founder & CEO: Marten Mark. Photo: © M Cher 2022

ABOUT THE FOUNDER Marten Mark is an experienced entrepreneur, businessman and systems developer. He is cofounder and Director of Capital Finance International (CFI.co), the print journal and online resource reporting on international economics, business, and finance (cfi.co). Mark is the founder and CEO of Be (beapp.co) - a social media connector app. His previous work experience includes a spell at Union Bancaire Privée (a private bank and hedge fund manager) and AXA Corporate Solutions UK.

No matter your profession or number of followers, BeApp opens a whole new world of possibilities. Don’t get left in the dust. Join in the next evolution of social media and human connection.

He holds a Computing BEng degree from Imperial College London.

Get BeApp free, today!

“We are currently working on launcing in the Middle East and Europe and actively seeking partnerships with venues, events, organisations, etc. The idea is to have many people in one location using the app simultaneously to fully benefit from its capabilities and functionality.

MARK LOOKS AHEAD “Future plans include incorporating a payment solution within Be, so users can ping each other funds. This will include offline payments as Be also works over Bluetooth only – for example, on an aeroplane.” i

AN INVITATION TO INVESTORS FROM MARTEN MARK

“There is a funding requirement for the development of new features and given the projected exponential growth in user numbers, we need to efficiently handle the back-end surge and invest in a more robust infrastructure. We are open for talks with international investors.”

CFI.co | Capital Finance International

> IMF

Sustainable Finance in Emerging Markets is Enjoying Rapid Growth, But May Bring Risks By Deepali Gautam, Rohit Goel & Fabio Natalucci

Financial stability concerns include potentially higher sensitivity to global financial conditions.

by non-financial firms and government related sectors, a subject we will detail in a forthcoming IMF staff paper.

As a result, their market share has increased for the first time since 2016, underscoring the growing investor appetite for environmental, social, and governance (ESG) products, but this growing opportunity also poses new risks.

One key dynamic of the emerging-market ESG world is growth outside of China. Issuance excluding China made up almost half of the total in 2019-21, compared to only about a third during the preceding three years. Other increasingly important players in the sustainability market are Chile, where ESG issuance has reached nearly 12 percent of gross domestic product over the last five years, as well as Peru and Mexico. Some low-income countries, like Benin and Togo also issued ESG-linked debt in 2021.

ost of the activity in the rapidly growing world of sustainable finance has been previously concentrated in advanced economies, but emerging markets, while still a small share of the total, saw a surge last year.

ESG’S RISING PROMINENCE Sustainable finance incorporates ESG principles into business decisions and investment strategies, covering issues from climate change to labor practices. It has become more mainstream in emerging markets in part because of pandemic-related financing needs, such as healthcare, as well as Latin America’s surge in climate-related borrowing. ESG-linked debt issuance more than tripled last year to $190 billion. Sustainability-related equity fund flows also rose, to $25 billion, bringing total assets under management to nearly $150 billion. ESG investments now make up almost 18 percent of foreign financing for emerging markets excluding China, quadruple the average for recent years. This raises questions about possible financial stability risks. EXPANDING ACROSS DIMENSIONS The ESG ecosystem in emerging markets has grown not only in size but also broadened across other dimensions. Green bonds remain a core part of this ecosystem, with volumes growing at an average rate of 20 percent. However, social and other sustainability-linked instruments are becoming more important, reaching almost half of total issuance in 2019-21, up from about a fifth in 2016-18. This expansion of sustainable finance is also evident in the more active green bond issuance 26

PRIVATE FINANCE ROLE Recent gains in ESG markets may be an important opportunity for emerging markets to access more stable funding sources and develop a broader and more mature sustainable finance ecosystem. With many of these nations highly exposed to climate hazards and already facing related transition challenges, private finance will play a crucial role in mitigating these risks and strengthening the financial sector. But there are also risks that emerging-market policymakers must monitor and challenges they need to address. Financial stability risks include the different investor base relative to more traditional investors and a potentially higher sensitivity to global financial conditions, given the technologyheavy composition of many ESG indices. That’s an important consideration in the current policy environment, with central banks in advanced economies raising interest rates and reducing policy accommodation put in place during the pandemic — a development that is starting to tighten financial conditions around the world. Policymakers should strengthen the climate information architecture to incentivise efficient pricing of such risks and avoid greenwashing, the use of green labels or strategies that are often unverified or deceptive about environmental CFI.co | Capital Finance International

Spring 2022 Issue

Breakout year: Sustainable-debt issuance in emerging economies more than tripled last year to $190 billion, while equity flows also rose. (billions of $US). Source: IMF. Bloomberg NEF, EPFR, IMF Staff Calculations.

Growth metrics: ESG investing in emerging markets has expanded across regions, types, and sectors in the past three years. Source: IMF.

Bloomberg NEF; IMF Staff calculations. Note: The chart plots the composition of EM sustainable debt issuance. The split by sector is just for the green bonds. The EM Sample consists of the 13 largest EMs in this segment including Chile, Peru, Mexico, China, Turkey, Malaysia, Poland, South Africa, India, Indonesia, Brazil, Colombia, and Russia.

soundness. Policies should aim at improving the quality, consistency, and comparability of climate data, develop classifications that align investments with climate goals, and enhance global disclosure standards.

a green economy and to the availability and quality of climate data. To avoid fragmentation of markets and regulatory approaches, international coordination and the adoption of global standards remain paramount. i

While some of these issues are also common in advanced economies, emerging market economies face additional challenges, particularly with respect to the transition to

Source blogs.imf.org/2022/03/01/sustainable-finance-inemerging-markets-is-enjoying-rapid-growth-but-maybring-risks/

CFI.co | Capital Finance International

> Mohamed A El-Erian:

The Ukraine War's Multifaceted Economic Fallout

ussia’s invasion of Ukraine, and the sweeping sanctions the United States and Europe have imposed on Russia in response, have triggered economic disruptions at four levels: direct, blowback, spillover, and systemic. To contain their longer-term consequences, we must start working on recovery plans now. 28

Needless to say, the Ukrainian and Russian economies are being hit the hardest. Economic activity in Ukraine is likely to contract by well over a third this year, aggravating the rapidly escalating humanitarian crisis. Already, the war has led to more than 750 civilian casualties and driven 1.5 million Ukrainians to flee to neighboring countries, with millions more on the move internally. CFI.co | Capital Finance International

While Russia is not enduring large-scale human suffering or physical destruction, its economy is set also to contract by about a third, owing to the unprecedented severity of the sanctions it is now under. In particular, a freeze on the central bank’s assets and the exclusion of selected Russian banks from SWIFT, the financial messaging system that enables most

Spring 2022 Issue

international bank payments, are bringing the economy to its knees, with “self-sanctions” by households and companies, from Apple to BP, compounding the damage. Russia is now headed toward severe foreignexchange constraints, massive goods shortages, a collapsing ruble, mounting arrears, and the expectation among households that things will get worse before they get better. This picture has much in common with what I saw when visiting Moscow in August 1998. Even if the war ended tomorrow, it would take years for these economies to recover; and the longer the war continues, the greater the damage, the larger the potential for vicious interactions and adverse cycles, and the deeper the consequences.

Economic and financial divergence will also increase elsewhere in the world. Some commodity producers stand to gain enough from higher export prices to offset losses caused by lower global growth. But a far greater number of countries – especially those located near the fighting and fragile developing economies – will face pressure from several sources, including adverse terms of trade, migration flows, a strengthened US dollar, reduced global demand, and financialmarket instability.

In Ukraine, physical and human infrastructure have been hit very hard. The country can expect massive external support for its reconstruction, during which it might be able to address past weaknesses and build new economic structures and relationships at home and abroad. But the process will take time, and there will be bumps along the way.

Commodity importers will struggle to cope with sudden across-the-board price surges, which are both hard to pass on to consumers and difficult to subsidise. The potential impact could include more debt restructurings. Unless policymakers pursue timely responses, the weakest economies face the prospect of food riots.

For its part, Russia will find it very difficult to reestablish economic, financial, and institutional links with the outside world, particularly the West. This will hamper the eventual economic recovery, which will depend on the pursuit of a number of complex and costly internal restructurings with institutional, political, and social dimensions.

Then there is the future of multilateralism, the fourth fallout. In the short term, the West has reasserted its dominance over the international system that it built in the aftermath of World War II. But it should expect a serious longer-term challenge from an intensification of the China-led effort to build an alternative system one economic or financial brick at a time.

But the economic consequences of the war will not be confined to the countries fighting it. Already, the West has started to feel the “stagflationary” blowback. Existing inflationary pressures will be compounded by the surging prices of commodities, including energy and wheat. Meanwhile, another round of supply-chain disruptions has begun, and transportation costs are again increasing. Disrupted trade routes are likely to place further downward pressure on growth.

"Economic activity in Ukraine is likely to contract by well over a third this year, aggravating the rapidly escalating humanitarian crisis."

On both sides of the Atlantic, one can expect increased – and, at times, unsettling – market volatility. The financial losses will be greater in Europe, with certain sectors – notably, certain banks and energy companies – being hit very hard.

The extent of the damage these developments cause will vary widely, both across and within countries. Absent a timely policy response, the advanced economies should expect lower growth, worsening inequality, and wider performance discrepancies among countries. Overall, the US is likely to outperform Europe, which is likely to slide into recession, owing to the American economy’s greater internal resilience and agility, though the US Federal Reserve’s failure to respond to inflation in a timely manner last year – a historic policy mistake – will undermine policy flexibility. CFI.co | Capital Finance International

It is often said that within every terrible crisis lies great opportunity. While it is imperative that countries continue to come together to oppose Russia’s illegal invasion of Ukraine, it is also vital that they take timely action to mitigate the longer-term economic risks the conflict raises – and even to bolster future resilience and cooperation. The world proved up to the challenge in the aftermath of WWII. We must now focus on ensuring a similar response as and when peace returns to Ukraine and Europe. i

ABOUT THE AUTHOR Mohamed A El-Erian, President of Queens’ College, University of Cambridge, is Professor at the Wharton School, University of Pennsylvania, and the author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse, Random House, 2016. 29

CHRISTINE LAGARDE:

AN OUTSIDER ON THE INSIDE SHAKING UP THE ESTABLISHMENT, ONE SUIT AT A TIME By Wim Romeijn

Monetary hawk or dove, interventionist or laissez faire, insider or outsider: the thoughts and convictions of European Central Bank (ECB) President Christine Lagarde are largely hidden by a cloak of pragmatism. She is certainly an outsider in the universe of central bankers. A soft-touch feminist at heart with an impeccable sense of style, a shrewd political operator, and trouble shooter par excellence with an impressive list of accomplishments.

W Cover Story

hen the going gets tough, Christine Lagarde has often been called upon to broker a deal or find the solution to a conundrum that baffles lesser minds. In a word: she gets going and likens that to being suspended from a ‘glass cliff’ – as opposed to bumping against a glass ceiling – a phenomenon whereby a complex and hazardous job is handed to a woman, making her success improbable, and affording men a measure of plausible deniability. A surprise candidate for one of Europe’s top jobs, Lagarde – an antitrust lawyer by training – had big shoes to fill. Her predecessor, Italian economist Mario Draghi (aka Super Mario) expertly steered the 19-strong eurozone through its first existentialist crisis, including the near bankruptcies of Greece and Spain. 30

TWO WORDS Lagarde boasts a singularly impressive résumé that includes many firsts. She was the first chairwoman of the prestigious Baker McKenzie law firm of Chicago; the first woman to become finance minister of a G7 economy, and the first woman central banker who excelled at competitive synchronized swimming as a member of the French national team. Barely settled into her new job, Lagarde faced a steep learning curve and suffered a baptism of fire as the first wave of the Corona Pandemic sent economies into a tailspin, promptly submerging the eurozone into its worst post-war recession. With all eyes trained on the ECB in Frankfurt, Lagarde acted quickly and decisively, emulating her predecessor’s (in)famous “whatever-it-takes” warning – the three words that reverberated CFI.co | Capital Finance International

throughout the financial universe and saved the euro by instantly calming agitated markets during the hectic days of the Greek debt crisis in mid-2012. In 2020, Lagarde needed just two words to bolster investor sentiment and calm the waters: ‘no limits.’ She was as good as her word and no trader or hedge fund manager dared challenge the ECB to a showdown. The hastily organised Pandemic Emergency Purchase Programme (PEPP), now being tapered, injected €1.85tn into the eurozone economy on top of a series of other asset purchase initiatives totalling some €3.3tn, pushing the bank’s balance sheet well north of €8tn. SLIPS With numbers that big, market watchers tend to follow Lagarde’s every move and hang on

Spring 2022 Issue

her every word. Early-on in the pandemic she slipped when commenting that it was not her or the ECB’s job to “close the spread” in sovereign debt markets. The comment, a faux pas of note, triggered the largest single-day drop in Italian bond prices in over a decade. Though Lagarde apologised profusely for her poor communication skills, and backpedalled quickly, she also clarified that the ECB remained “fully committed” to avoiding any fragmentation in the euro area. In other words: Italy was to be kept safe under the ECB’s monetary umbrella.

AMERICAN SOJOURN Lagarde lived in the United States in the 1980s and between 1999 and 2005. Before that, she spent a year as an exchange student with a family in Maryland where she is remembered for adding some continental flair and glamour to an

During the Watergate Scandal and impeachment procedure against President Richard Nixon that followed, the young Lagarde briefly interned at the congressional office of Republican Senator for Maine William R Cohen who needed a French speaker for his partly Francophone constituency. Speaking to the Washington Post in 2011, she later called her year in Maryland “one of the most formative” of her youth. IMF AND GREECE In late June 2011, the executive board of the International Monetary Fund (IMF) elected Lagarde as its managing director. Just like her experience years later at the ECB, she was almost immediately confronted with a crisis of magnitude when Greece faced an acute cash crunch that threatened to spill over to other weak eurozone economies such as Spain and Portugal. The often-forgotten origin of that sovereign debt crisis was the decision of credit rating agencies to downgrade Greek bonds to junk status in April 2010 after the country reported lower than expected GDP growth. Also, parts of the country’s debt had been kept off the books via cross currency swaps – a legal, if contentious, manoeuvre making use of a loophole in the Maastricht rules on debt and deficits. Of that time, she remembers that the IMF hastily cobbled together a massive bailout package, putting close to a trillion dollars in play to CFI.co | Capital Finance International

dissuade any market attack on eurozone member states. However, under the First Economic Adjustment Programme – a joint operation of eurozone countries and the IMF – Greece received a €110bn bailout, conditional on the implementation of a long series of austerity measures. A year later, the partners forced commercial banks to accept a 50 percent “haircut” (write-off) on significant tranches of Greek debt. The almost draconian austerity imposed on Greece depressed the country’s economy and lopped a quarter of the country’s GDP. Lagarde later was to recognise that the rescue package prepared for Greece fell well short of what was required. In 2015, the IMF belatedly concluded that Greece’s debt burden was “unsustainable” and economic recovery “unlikely” absent a massive write-off. A year later, the fund tuned out after eurozone countries refused to countenance measures to provide meaningful and structural debt relief. GERMAN JITTERS During and after the Greek debt crisis, Lagarde clashed frequently, and sometimes, publicly, with Germany’s guarding of fiscal and monetary probity such as the combatant former Finance Minister Wolfgang Schäuble who may have been a passionate believer in Franco-German cooperation and European integration but was also vociferously critical of French mercantilism and lax fiscal standards. It was Schäuble who, in 2016, opposed any additional discounts on Greek debt and caused the IMF to withdraw from 31

Cover Story

Soon after becoming Finance minister of France in 2007, Lagarde gained a measure of notoriety as ‘Madame la Gaffe’ for her penchant of landing in hot water. Though she did manage to keep President Sarkozy’s more esoteric economic ideas in check, she also angered many with her Americanised management style and philosophy. Her barely veiled criticism of France’s almost sacrosanct 36-hour work week and five weeks of annual leave enjoyed by most, did little to enamour her with French voters. Nonetheless, The Financial Times in 2009 ranked Lagarde best finance minister of the eurozone for her brave efforts to cut the deficit and reduce debt levels.

otherwise unremarkable, if not drab, suburban environment.

any future contributions towards the restructuring of that country’s burden. Unsurprisingly, Germany was less than thrilled at Lagarde’s nomination to lead the European Central Bank amid suggestions she was likely to expand the bank’s bond-buying programme. At the time, Berlin made no secret that it had preferred the hawkish Jens Weidmann, then head of the Bundesbank, to succeed Draghi. The concern over Lagarde centred on fears that she could favour a more redistributive – and politicised – approach to the monetary union, possibly steering the ECB away from its pricestability mandate. In late September 2019, just one month before Lagarde was to start in her new job, Germany’s most senior official at the ECB, Sabine Lautenschläger, unexpectedly resigned from the ECB executive board. She did so long before her term was due to end and without giving an explanation. It is, however, widely believed that Lautenschläger’s departure was caused by the ECB’s decision to resume and expand quantitative easing (QE) in the hope of stoking inflation towards the stated goal of two percent. She was the third German to bow out over “excessive” bond-buying. In 2011, both Axel Weber, former president of the Bundesbank, and Jürgen Stark, member of the ECB executive board, cut their term short for the same reason.

Cover Story

The exit of Lautenschläger allowed Lagarde to quickly consolidate her hold over the ECB with a more conciliatory German on her team. Lautenschläger’s replacement, Isabel Schnabel, helpfully cautioned against making the European Union a scapegoat for all perceived national ills, pointing to Brexit as evidence of the damage caused by misinformation. Schnabel also repeatedly came out against the idea that German savers and taxpayers are being asked to foot the bill of troubled eurozone “Club Med” members. FRANKFURT SKYLINE Lagarde’s ECB is everything the German Bundesbank, also headquartered in Frankfurt, is not. The differences are evident even in architecture, contrasting the gleaming glass tower that houses the ECB with the austere brutalist structure that is home to the Bundesbank. Not since its first president, Dutchman Wim Duisenberg, have the Germans been able to get a firm grip on the ECB and its policy. Though it, of course, has considerable heft in setting European monetary policy, the Bundesbank and its hawks had to let go of their laser-like focus on stability. Their rigid attitude – derided by Draghi as “nein zum allen” (“no to everything”) – hasn’t helped either. Ever larger bond-buying programmes have been speedily implemented over German objections. Lagarde visibly enjoys shaking things up, pushing boundaries, challenging convention, and causing “men in grey suits” to break a sweat. She is not as nerdy (or academic) as, say, former US Federal 32

Spring 2022 Issue

Reserve Chair and current US Treasury Secretary Janet Yellen or former Bank of England Governor Lord Mervyn King. She even had a “psychedelic” carpet installed in her office at the French Finance Ministry to get the “suits” confused and ushered out of their comfort zone. Her experience in politics is a definite plus for a central banker such as when Lagarde, at the beginning of the Corona Pandemic, exhorted eurozone governments to share the burden of providing economic relief, explaining that monetary policy alone could not possibly provide the stimulus needed and a relaxation of fiscal policy was called for. Thus, she ventured onto terrain seldom, if ever, visited by central bankers. Lagarde, ever the pragmatist, also showed a willingness to rip up the rule book in the face of a severe crisis. In early 2020, as the first wave of the pandemic rolled over Europe, she tinkered with the rules governing the ECB’s asset-buying programme which held that the bank was to buy a country’s bonds in rough proportion to its GDP. Instead, Lagarde ordered the bank to buy additional assets in Spain and Italy. Moreover, she introduced a one percent bonus for commercial banks on their credit portfolio, encouraging them to keep distributing ECB funds to private business. Earlier versions of QE saw banks redeposit their ECB funds at the central bank in a rather cynical form of arbitrage whereby bankers eagerly pocketed the interest rate differential and refused to supply credit to businesses. GENDER AND GREEN Battling the pandemic’s fallout has so far largely prevented Lagarde from implementing her cherished green agenda. Climate change and gender equality, two issues she vigorously promoted at the IMF, are soon to become policy pillars at the ECB, much to the chagrin of most monetary policymakers – the men in grey suits. Where her predecessor Draghi often spoke about inflation, and the need to either control or stimulate it, Lagarde prefers to talk about climate change, an issue mostly ignored by Draghi. Only of late, with inflation roaring back, has Lagarde given the phenomenon its due.

On gender equality, Lagarde is adamant that it is good both for business and stability. She points to exhaustive research conducted by the IMF that shows a straightforward correlation between the

BOYS CLUB When she became president in 2019, Lagarde was the only woman at the bank’s governing council. Since then, that number has doubled – to two. Of the 63 central bank governors who have served on the council, only one was female. In an attempt to get a better gender balance, the ECB has set a target of filling “half or more” top echelon positions with women. Lagarde also objects to the bank’s long-standing refusal to grant more generous paternity leave which remains capped at two weeks, as opposed to six months of maternity leave. The imbalance at the ECB top has even caught the attention of the European Parliament which mulls an intervention of sorts. Helena Dalli, European Commissioner for Equality, said that high profile public institutions such as the ECB should lead by example and noted that the central bank has the power to reject candidates proposed by national governments. This, however, is unlikely to happen. Though in 2012 the European Parliament opposed the nomination of Yves Mersch, former head of the central bank of Luxemburg, to the ECB executive board on gender grounds, the move merely delayed the appointment but did not stop it. NEW KEYNESIAN PERSPECTIVE After a solid year of deliberation, the ECB announced its new and revised monetary policy strategy in June 2021. Two elements stand out: inflation target symmetry and the use of “especially forceful or persistent” measures when the eurozone economy is close to the effective lower bound (ELB), i.e., the point at which cuts in interest rates no longer have a positive effect on aggregate demand; or the point at which further interest rate cuts would cause adverse effects in the financial sector. The symmetry concerns unwelcome deviations – negative and positive alike – from the ECB inflation target of two percent over the medium term. Both eventualities should spark equally forceful measures. However, this is where ELB becomes relevant. Though the central bank can – in principle – always hike interest rates in response to an inflation spurt, it may not be able to cut them if the room to do so is limited or absent as has been the case as of late. With the substantial decline in the natural rate of interest observed over the past decade, the monetary wriggle room between the natural rate of interest and the effective lower bound has become rather cramped – rendering the desired response symmetry ineffective if 33

Cover Story

Rather controversially, Lagarde repeatedly indicated that she considers the fight against climate change part of the ECB’s primary pricestability mandate. She is determined to steer any future QE initiatives towards green businesses and initiatives – and away from polluters. This approach horrifies most central bankers who fear mission creep and argue that it is the job of politicians to tackle environmental degradation. Former Bundesbank President Weidmann is on record saying that climate change has little to no bearing on prices and by extension on inflation.

number of women on the board of banks and financial supervisors and institutional stability. She maintains that the fate of Lehman Brothers – the spark that set off the 2009-10 banking crisis – might have been different if it had been Lehman Sisters. However, she admits that gender equality remains an uphill battle, especially at a male-dominated bastion such as the ECB.

Christine Lagarde

not impossible to attain. This is precisely what happened during the last ten to fifteen years as interest rates dropped and deflation loomed large with central banks almost desperately providing shock treatment to lacklustre economies in the form of QE. Though the ECB monetary policy strategy now embarks into technicalities that may appear esoteric to the untrained eye or mind, its fundamentals are fairly simple. Symmetry is mostly desired to match an economy’s risky steady state – a sort of natural equilibrium – to the target inflation rate. In this state, the expectations of economic actors are kept in line with those of the monetary policymakers. However, the limits and threats imposed by ELB could force the central bank to show a greater tolerance for above-target inflation than for below target developments. This may well introduce inflation bias (expectation) which then alters the risky steady state and undermines the central bank’s mission to keep price levels steady and predictable.

Cover Story

The above but serves as the theoretical foundation of the ECB’s formal adoption of, and adherence to, New Keynesianism which supports, amongst others, central bank asset purchases as a valid instrument to compensate for (impossible) interest rate cuts below ELB. AGAIN GERMANS Again, the Germans may not be so pleased but may possibly enjoy the last laugh as in its March quarterly economic review the ECB came out surprisingly hawkish and determined to unwind the last of its asset purchase programmes by next September. The upswing of inflation and the damage being wrought by spikes in energy prices 34

and Putin’s War in Ukraine caused different policymakers to propose differing views – “in all directions,” as Lagarde put it succinctly. Analysts quickly picked up on the plethora of views at the ECB top and pushed the yield on Italian 10-year bonds up by twenty basis points in the expectation that a coordinated monetary and fiscal response – the (in)famous bazooka – to the sudden price shock is not likely to materialise. Lagarde preferred to speak of a “balanced” approach; one that entrusts the heavy lifting to the fiscal cavalry as the monetary troops have been exhausted. Forecasts for the eurozone are currently all over the place with GDP expected to gain 3.7 percent this year, down from 4.2 percent. The ECB quarterly review now sees average inflation heading towards 5.2 percent, up from the 3.2 percent predicted in Q4 2021. In response to the revised numbers, BlackRock Chief Macro Strategist Rupert Harrison fumed that the ECB persists in its “policy errors” with growth forecasts “unrealistic and engineered” to allow the monetary hawks an opportunity to kill off asset purchases altogether. According to Harrison, the impact of Putin’s War on the eurozone is being severely underestimated. A POPULAR HASHTAG ON TWITTER #whatwouldMariodo, is awash with criticism of Lagarde and her cornered bank now largely bereft of monetary instruments and caught between rising inflation on the one hand and on the other a eurozone economy struggling with energy prices that threaten to undermine consumer confidence and collapse demand. To raise interest rates in such a volatile climate – the market expects a first quarter-point hike in October – is a risky proposition indeed. CFI.co | Capital Finance International

FUNDAMENTAL DIFFERENCES To her critics, insofar as they are not ignored, Lagarde suggests that the eurozone is in a fundamentally different spot than the US or UK as continental Europe has been much more successful in keeping its workers employed. In fact, the eurozone has currently more people in jobs than before the Corona Pandemic hit. This has helped business retain the talent and skills needed to fully cash in on the post-lockdown economic upswing. Unemployment now stands at its lowest since the euro’s creation. As a result, wage pressures have been minimal. Lagarde surprised many by suggesting that she would welcome “somewhat faster” wage growth. The eurozone also does not suffer from the negative labour supply that the UK inflicted upon itself with Brexit. Lagarde seems unwilling to be intimidated by inflation’s sudden but not entirely unexpected return. She played down chances of a “measurable tightening” of monetary policy, promising only gradual changes. Although she signalled “unanimous concern” within the executive board over inflation, she also saw no rush to any premature conclusions, saying the outlook remains “way too uncertain.” With the Bank of England and the US Federal Reserve soaring high on the wings of its monetary hawks, Lagarde seems determined by conviction to keep the ECB on its moderately dovish path, handing the “frugals” a few minor concessions in order to keep the peace and the overall course unaltered. Tightening policy for credibility rather than fundamental reasons is not on the agenda: This lady is not for turning. i

A BRIEF HISTORY OF TIME GETS A NEW CHAPTER

Spring 2022 Issue

“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

> Lord Waverley — First In, Best Dressed:

UK’s Bid to Join Key Regional Trade Agreement The United Kingdom has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement between 11 countries stretching from Vietnam to Peru, including Japan.

ts members contain some of the fastestgrowing economies in the world, with an expanding middle class. Asia has taken centre stage to become a key global export destination. Membership of the CPTPP is central to trade strategy and key to ensuring future prosperity and influence in the IndoPacific. This partnership is potentially the most important regional trade agreement that the UK will negotiate with wide-ranging repercussions, strengthening of ties with international allies, and signalling commitment to free trade. Representing one of the largest trading blocs in the world, home to half the global population, the wider Indo-Pacific region is the planet’s growth engine. If just Thailand and South Korea were to join the agreement, it would almost treble the long-run economic benefit from £1.8bn to £5.5bn.

CFI.co Columnist

It should be noted, however, that this is an accession process, not a new negotiation. It is not feasible to seek significant change with the goal of joining a high-standard agreement. The first phase of negotiations covered the UK’s compliance against each of the CPTPP chapters. Evidence has been submitted, which members are currently reviewing, before giving the green light to progress to the second phase and negotiate market access. There is clear value and opportunity in working with bloc members to shape economic issues and be at the forefront of digital and trade provision innovations. Membership will deliver new opportunities for British business across many sectors, enabling the manufacture of products for various markets without the need to change processes, parts, suppliers, or components. This would be a critical enabler of supply chains, allowing companies to import and export more easily, and making investments more competitive. Membership benefits would include modern digital trade rules that allow data to flow freely 36

and swiftly eliminate tariffs on exports. Examples such as whisky, down from 165 percent duties to 0 percent in Malaysia, and reducing car duty to 0 percent in Canada by 2022, illustrate the benefits. Expansion to like-minded market economies is a key reason for the existence of the CPTPP. Membership will encourage free and fair trade, fight protectionism, and remove barriers to trade. Market access provides a single set of rules of origin, accumulating content from all member countries. If goods have at least 70 percent CPTPP content, they qualify for preferential tariffs. Questions regarding the protection of UK food standards, environment, IP, climate and data — and how this FTA will promote human rights, international development and union rights — are yet to be clarified. There are differing approaches, across the CPTPP, to animal welfare, environmental protection, and the use of antibiotics and pesticides. Other questions that need to be resolved before accession is decided upon include rules of origin and the European Patent Convention, whose requirements jeopardise the UK’s membership of the European Patent Office. An agreement would embody high standards in areas such as intellectual property, investment, procurement, rules on state-owned enterprises, and data flows. CPTPP has a dedicated chapter on financial services, which will open new opportunities. The provisions in that chapter include non-discrimination obligations and the liberalising of cross-border flows of financial information. There is also an annexe on professional services that encourages mutual recognition of professional qualifications. No trade agreements should stand apart from human rights, workers’ rights, consumer rights, or gender issues. The content of negotiations also has important implications for consumers — the choices they make, the prices they pay, CFI.co | Capital Finance International

Spring 2022 Issue

"There is clear value and opportunity in working with bloc members to shape economic issues and be at the forefront of digital and trade provision innovations." the standards they can expect and the rights they can rely upon. Consumers rightly expect the strengthening of four key priorities: maintaining health and safety standards of food and products, maintaining data security regulations that protect consumers’ digital rights, protecting the environment, and using trade to address inequalities. More economies wish to sign up. Political sensitivities surround China and Taiwan, which both want to join. Thailand and South Korea do as well, with Ecuador being the latest country to indicate an interest. The sequencing of further applications is important with accession indicators suggesting that the UK will be dealt with before China and Taiwan. China will require significant work to meet CPTPP rules. If they both succeed, the UK’s trade relations with those two countries will in future be regulated by the terms of the CPTPP and not, as now, by shared WTO status. The sequencing of these three bids for CPTPP membership, over which there is no control, could present challenges. The least likely eventuality is that China, or Taiwan, or both, join ahead of the UK. In that case, they would have a say over the terms of accession. More likely is that two or three countries join simultaneously, in which case the UK will have no say over the terms under which the others join. Should Britain join first, however, we will have an equal say with other CPTPP members over the terms of accession of China and Taiwan. i

CFI.co Columnist

ABOUT THE AUTHOR Lord (JD) Waverley Independent Member House of Lords Twitter: @LordWaverley LinkedIn: linkedin.com/in/ jdwaverley 37

> Joseph E Stiglitz:

A Balanced Response to Inflation

lthough some supply shortages were anticipated as the global economy reopened after the COVID-19 lockdowns, they have proved more pervasive, and less transitory, than had been hoped. In a market economy that is governed at least in part by the laws of supply and demand, one expects shortages to be reflected in prices. And when individual price 38

increases are lumped together, we call that inflation, which is now at levels not seen for many years. Nonetheless, my biggest concern is that central banks will overreact, raising interest rates excessively and hampering the nascent recovery. As always, those at the bottom of the income scale would suffer the most in this scenario. CFI.co | Capital Finance International

Several things stand out in the latest data. First, the inflation rate has been volatile. Last month, the media made a big deal out of the 7% annual inflation rate in the United States, while failing to note that the December rate was little more than half that of the October rate. With no evidence of spiraling inflation, market expectations – reflected in the difference in returns on inflation-indexed and

Spring 2022 Issue

– some transitional costs are likely, because investment in fossil fuels may decline faster than alternative supplies increase. But what we are seeing today is a naked exercise of oil producers’ market power. Knowing that their days are numbered, oil companies are reaping whatever returns they still can. High gasoline prices can be a big political problem, because every commuter confronts them constantly. But it is a safe bet that once gasoline prices return to more familiar pre-COVID levels, they won’t be fueling any remaining inflation momentum. Again, sophisticated market observers already recognise this. Another big issue is used-car prices, which have highlighted technical problems with how the consumer price index is constructed. Higher prices mean that sellers are better off vis-à-vis buyers. But the consumer price index in the US (unlike in other countries) captures only the buyer’s side. This points to another reason why inflation expectations have remained relatively stable: people know that higher used-car prices are a short-term aberration that reflects the semiconductor shortage currently limiting the supply of new cars. We know how to make cars and chips as well today as we did two years ago, so there is every reason to believe that these prices will fall, giving rise to measured deflation. Moreover, given that a large proportion of today’s inflation stems from global issues – like chip shortages and the behavior of oil cartels – it is a gross exaggeration to blame inflation on excessive fiscal support in the US. Acting on its own, the US can have only a limited effect on global prices. Yes, the US has slightly higher inflation than Europe; but it also has enjoyed stronger growth. US policies prevented a massive increase in poverty that might have occurred otherwise. Recognising that the cost of doing too little would be huge, US policymakers did the right thing. Moreover, some of the wage and price increases reflect the healthy balancing of supply and demand. Higher prices are supposed to indicate scarcity, redirecting resources to “solve” the shortages. They do not signal a change in the economy’s overall productive capacity.

non-inflation-indexed bonds – have been duly muted.

The pandemic did expose a lack of economic resilience. “Just-in-time” inventory systems work well as long as there is no systemic problem. But if A is needed to produce B, and B is needed to produce C, and so on, it is easy to see how even a small disruption can have outsize consequences.

One major source of higher inflation has been energy prices, which rose at a seasonally adjusted annual rate of 30% in 2021. There is a reason why these prices are excluded from “core inflation.” As the world moves away from fossil fuels – as it must to mitigate climate change

Similarly, a market economy tends not to adapt so well to big changes like a near-complete shutdown followed by a restart. And that difficult transition came after decades of shortchanging workers, especially those at the bottom of the pay scale. It is no wonder that the US is experiencing CFI.co | Capital Finance International

a “Great Resignation,” with workers quitting their jobs to seek better opportunities. If the resulting reduction in labor supply translates into wage increases, it would begin to rectify decades of weak to nonexistent real (inflation-adjusted) wage growth. By contrast, rushing to dampen demand every time wages start to increase is a surefire way to ensure that workers’ pay is ratcheted down over time. With the US Federal Reserve now considering a new policy stance, it is worth noting that periods of rapid structural change often call for a higher optimal inflation rate, owing to the downward nominal rigidities of wages and prices (meaning that what goes up rarely comes down). We are in such a period now, and we shouldn’t panic if inflation exceeds the central bank’s 2% target – a rate for which there is no economic justification. Any honest account of current inflation must carry a big disclaimer: Because we haven’t been through something like this before, we can’t be sure of how things will evolve. Nor can we be sure what to make of the Great Resignation, though there is little doubt that workers at the bottom have plenty to be angry about. Many workers on the sidelines may be forced back to work once their cash reserves run out; but if they are disgruntled, that may well show up in the productivity figures. This much we do know: A large across-the-board increase in interest rates is a cure worse than the disease. We should not attack a supply-side problem by lowering demand and increasing unemployment. That might dampen inflation if it is taken far enough, but it will also ruin people’s lives. What we need instead are targeted structural and fiscal policies aimed at unblocking supply bottlenecks and helping people confront today’s realities. For example, food stamps for the needy should be indexed to the price of food, and energy (fuel) subsidies to the price of energy. Beyond that, a one-time “inflation adjustment” tax cut for lower- and middle-income households would help them through the post-pandemic transition. It could be financed by taxing the monopoly rents of the oil, technology, pharmaceutical, and other corporate giants that made a killing from the crisis. 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 (1997-2000), 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. 39

> World Bank

Investment Push Needed for Green, Resilient & Inclusive Development By Mari Pangestu Managing Director, Development Policy and Partnerships, The World Bank

As we enter the third year of the COVID-19 crisis, we face a world with a serious ‘reversal’ problem – a reversal in development progress made over the last 20 years, of a magnitude not seen in a generation. It is the poor and vulnerable that are hit hardest. The per capita income gap between rich and poor countries is widening; poverty and inequality is increasing, both within and across countries; and globally, a decade worth of gains in human capital outcomes have been lost, as the impact of climate change worsens.

ost advanced economies are expected to restore their real per capita income to pre-pandemic levels next year. But 40 percent of emerging and developing economies will remain below their 2019 levels—including more than half of fragile and conflict-affected areas and three-quarters of small states. There has also been a surge in debt levels, with about half of low-income countries in or at risk of debt distress. The big challenge for 2022 – if not for the next decade – is how to tackle this reversal, putting countries back on a path toward green, resilient, and inclusive development. In the decade before the pandemic, structural weaknesses had already led to a slowdown in growth. Despite the damage, we now have a unique opportunity for a “reset,” not only to address deficiencies in policies and investment gaps of the past, but to make sure that the interlinkages between people, planet and the economy are adequately considered in tackling ongoing global crises including climate change. The needs are vast and urgent. The focus of the UN Climate Change Conference (COP26) in Glasgow last November was on the “billions to trillions” that would be required to decisively shift to low-carbon, resilient growth. For example, estimates show that even with the appropriate policy environment, low-carbon, climate-resilient infrastructure, including energy, transport, water, and flood management, would require at least 4.5 percent of the GDP of low- and middleincome countries, or US$1.55 trillion per year between now and 2030. There is broad consensus on the critical need for a major investment boost in all forms of capital— human, physical, social, and natural— to reap the benefits from the opportunities offered by a low-carbon future, while considering countries’ development needs and providing targeted support for the poor. The question is how, given the constraints we see in the global economy today. 40

Author: Mari Pangestu

CFI.co | Capital Finance International

Spring 2022 Issue

"We are also playing a key role in in supporting policy, legal and regulatory reforms to unlock private finance, not only for mitigation but for adaptation, which is a priority for many developing countries." First and foremost, for a big investment push to succeed, the starting point must be through strong country leadership and actions. Countries can demonstrate political will by committing to a low-carbon, long-term development strategy to foster predictability and certainty, which will serve as the basis for an investment program with a portfolio of purposeful and transformative projects. Countries also need to create the right conditions to encourage investment through reforms in policies, institutions, and regulations. Arrangements that bring countries, donor partners, multilateral development banks, the private sector, and other stakeholders together to coordinate their efforts will be helpful. They can be used to identify the most appropriate structure and sources of financing for countryled investment programs and transition strategies. For example, South Africa has recently created a platform for transitioning energy away from fossil fuels, which can help facilitate the acceleration of investments and the mobilisation of finance. Other countries are also in the process of designing similar comprehensive platforms that include exiting from fossil fuels, repurposing assets, facilitating a just transition and providing replacement or access to renewable energy. To deliver the scale of investments needed, a revamp will be required in domestic as well as international finance, both public and private. Governments will need to reform their fiscal systems to mobilise domestic resources more effectively. Taxes on ‘public bads’ such as pollution are a large and unused potential revenue source that can incentivise the private sector to invest in more sustainable activities. Elimination of fossil fuel and other detrimental subsidies can also generate additional revenues. Official development assistance and concessional climate finance needs to be expanded as well, to support investment and mitigate associated risks. Strong private sector involvement is essential, not just for investments and finance but also to access and develop better technologies. The participation of the private sector was highly visible at COP26, many leading their own initiatives and ramping up partnerships. We should not lose this momentum. For the World Bank Group - the biggest multilateral funder of climate investments in developing countries – these developments are CFI.co | Capital Finance International

encouraging. Our new climate finance targets mean we will be providing, on average, about $25 billion per year to support climate action, with at least 50% allocated to adaptation. It is vital to help developing countries make the right investments now, to deliver finance for the most effective solutions, and to help mobilise and scale up resources. For the poorest countries, the World Bank mobilised a $93 billion replenishment package of the International Development Association (IDA) to support recovery from the COVID19 crisis and transition to green, resilient and inclusive development. A substantial portion of these funds will go towards adapting to rising climate impacts and to prepare for future crises. We are also playing a key role in in supporting policy, legal and regulatory reforms to unlock private finance, not only for mitigation but for adaptation, which is a priority for many developing countries. The Bank has channeled grant and concessional resources for project preparation, as well as blending and de-risking finance to improve the risk-reward profile. Working across the Bank Group with the International Finance Corporation (IFC) and Multilateral Investment Guarantee (MIGA), we also support financial solutions that can be structured as risk sharing or guarantee products,. For example, in Luanda, Angola, the Bank Group provided a guarantee of US$500 million that mobilised US$910 million from international commercial lenders for the Bita Water Supply Project. The investment is designed to improve access to potable water service for over 2 million people in Luanda, reducing the population’s exposure to climaterelated shocks and water scarcity. Past crises show that recovering from reversals in development progress takes time, putting a heavy burden on developing countries. Governments in developing countries have a responsibility to create the conditions to attract investments that are fit-for-purpose, integrating climate with their development goals. The global community can play an important role by exploring all possible means to scale up transformative investments. Close coordination will be critical to avoid fragmentation and maximise impact for a green, resilient and inclusive future. The costs of inaction are now higher than the costs of action. There is no time to waste. i 41

> Spring 2022 Special

Style Meets Sustainability as Fashion World Moves to a New Level of Cool

he fashion industry accounts for 10 percent of global greenhouse gas emissions, and almost a fifth of the world’s wastewater — often tainted with lead, mercury, and arsenic.

The devastating impact on the environment is sometimes brushed-off as “unavoidable”. The industry heroes on the following pages prove that this is not the case, and collectively show that production changes can be implemented without any loss of creative flair. We meet people like Martin Höfeler, whose company Armedangels demonstrates that the union of style and environmental protection is not only desirable, but feasible. The firm’s commitment is to “give people what they want before they want it”. So, no change there. But Höfeler is also a passionate advocate for fair trade in fashion, with the drive and initiative to change consumer attitudes. Luke Haverhals, of Natural Fibre Welding (NFW), provides an eco-conscious alternative to synthetics. Headquartered in Illinois, NFW works with iconic brands including Ralph Lauren, Pategonia, and BMW. Haverhals’ scientific breakthroughs can be traced back to his time as an instructor at the US Naval Academy. He shows in no uncertain terms that synthetics have had their day. Spanish fashion brand TWOTHIRDS, headed by German-born Lutz Schwenke, is a blissful marriage of surf culture and environmentalism. The company is driven by a passion for the world’s oceans, and the will to care for them. His love of surfing and dedication to marine ecology came to the fore as a 12-year-old in Hawaii. The exploits of French oceanographer Jacques Cousteau

inspired Schwenke’s own love of the foamy depths. Charlotte McKurdy, faculty member at the Rhode Island School of Design, has developed a bio-based, carbon-neutral, petrochemicalfree plastic for the fashion industry. This involves the cultivation of marine macroalgae, which represents absolutely no threat to people, planet, ecosystems, or living things. Renewcell’s Patrik Lundström has put a novel spin on recycling, declaring that primary raw materials for fashion are unnecessary. In a world-first, Renewcell has developed 100 percent recycled cloth fibre pulp, working in conjunction with Stockholm’s KTH Royal Institute of Technology. This year, Renewcell will be moving to its commercial phase at a modern production facility in Sundsvall, northeast Sweden. Tamsin Lejeune, founder of the Ethical Fashion Forum, dipped out of a promising career in architecture to work in the fashion industry in lower-income countries. Her laudable ambition is to take sustainable fashion “from niche to norm”. Bravo to that. Clearly, the fashion world is reaching the point where consumers can be heartened in the knowledge that the stylish goods they seek have been responsibly produced. Sustainability is here to stay, and awareness of environmental challenges is on the rise. Buyers are now demanding a sustainable product that incorporates gorgeous fabrics, stunning lines — and clear consciences allround. And that’s largely thanks to people like the six influencers profiled in this issue. i

CFI.co | Capital Finance International

Spring 2022 Issue

CFI.co | Capital Finance International

> CHARLOTTE MCCURDY DESIGNER & RESEARCHER Getting Creative about Climate Change: Time to Plant the Seed Charlotte McCurdy, a Rhode Island School of Design graduate and professor, wants creatives to join the fight against climate change. McCurdy believes the world needs more STEM innovators to solve its most pressing challenges — and more dreamers to ask the right questions. “Design is demonstrably an important factor of choice,” she says. “Design is the business of shaping desire, and therefore behaviour, and we need a lot of that right now. We need creative practitioners of all stripes to be imagining the possibility of a better future.” McCurdy is an interdisciplinary designer and researcher with a passion for materials innovation and decarbonisation. Petroleum-based plastics are omniprevalent across industries and applications, but McCurdy believes alternatives will soon break society’s dependence on “the energy of ancient sunlight”. Petroleum is a finite resource, formed by the decomposition of organic matter — primarily zooplankton and algae — under intense heat and pressure over millions of years. In contrast, McCurdy’s algaebased plastics rely on present-day sunlight and atmospheric carbon as the primary input. She developed the bio-based, carbon-negative, petrochemical-free plastic as part of her industrial design graduate studies. It’s an ideal solution for the fashion industry, which accounts for more greenhouse gas emissions than the airline and shipping industries combined. Fast fashion tactics and an overabundance of petroleum-based plastics in textiles have already taxed the system, and global demand for plastic is expected to increase threefold by 2050. “Expanding the cultivation of marine macroalgae to meet our demand for plastic will not divert freshwater resources, will not compete with the food supply, will increase biomass and carbon sequestration, and will have the potential to offer refuge and support to marine ecosystems that are already stressed by the effects of climate change,” she wrote in an op-ed for Inverse. McCurdy has showcased the algae-plastic as a raincoat at the Cooper Hewitt Smithsonian Design Museum to spark conversation and raise awareness. “I wanted an object that embodies the immediacy of climate change in the extreme weather we already face. I hope a raincoat also invites you to imagine putting on a future where we have broken free from our dependence on fossil-carbon.” She also collaborated with luxury fashion house 3.1 Phillip Lim, using the algae-plastic to form translucent green sequins for a catwalk 44

creation. McCurdy introduced the product in the fashion industry partly due to the sector’s heavy carbon footprint — and for its thriving luxury niche. She points to the iPhone, which spurred miniaturisation of smartphone components, and to solar panels, which spent 60 years as a luxury item before becoming sufficiently costcompetitive. “We like the hypothesis of having to start in lowvolume, high-margin markets where people are willing to invest in this vision and this value,” she said. “That's how the technology will be able to get cheaper, more efficient, more accessible to everyone.” Investing in material innovation often means slow returns when compared with apps reaching unicorn status in record time. But McCurdy urges investors to play the long game and back the innovators. The world is at a crossroads of risk and reward, with the opportunity to get in on the ground floor of the next industrial revolution. CFI.co | Capital Finance International

She likens the moment to the metaphor of germination. “You have you have to plant the seed, even if it's a challenge, or a long shot, or will take lots of nurturing and work. We need serious investment in material innovation and its slower returns. “ESG funds have outperformed our expectations, and my contention is that other, even more ambitious, slower capital investments will probably be even more important and outperform even more — because there is no cogent alternative.” McCurdy is working to patent the process — not for commercialisation, but for democratisation. She hopes to see a climate-action thinktank formed to draw on various disciplines, much like MIT’s Media Lab unites research in technology, media, science, art and design. Within 10 years, she would like to be collaborating with a multiinstitutional coalition of technical engineers and creative thinkers, working to replace the current gloomy narrative with determination — and hope.

Spring 2022 Issue

> LUTZ SCHWENKE FOUNDER & CEO TWOTHIRDS Life — and Business — on an Ocean Wave

Wooden Film

Devon has some of the best surfing beaches in the UK — a fact which may have played a part in persuading a young Lutz Schwenke to study at the University of Plymouth. But it was also the knowledge that the institution is ranked number one in the world for its marine ecosystem research which drew the German-born founder (and future CEO) of Spanish fashion brand TWOTHIRDS to England. While the Devon coast offers its own chilly challenges, Schwenke’s passion for waves began in warmer waters. At the age of 12, he was sent to Hawaii’s Maui Ocean Academy, where he acquired a love of surfing — and a lasting appreciation of marine ecology. As a youngster, he was greatly influenced by the films of French marine conservationist Jacque Cousteau, and over the years became increasingly concerned about the ecological threat to the world’s oceans. He founded TWOTHIRDS 12 years ago to create a clothing brand which combined surf culture and environmentalism, under the motto: “Protect what you love.” (The company name is a reference to the fact that oceans cover two-thirds of the planet’s surface.) Further inspiration came to him on surfing trips

to San Sebastian on Spain’s Catalonia coast. “I liked the idea of creating a brand that showed passion for the sea, and taking care of it,” he says. “I have a special bond with the water. It’s a very important part of my life.” The 39-year-old entrepreneur is married, with three daughters, and remains as enthusiastic as ever about surfing. He writes a blog about his favourite beaches, and during lockdown missed the sport so much he posted a tongue-in-cheek video to Facebook. It showed Schwenke and his dog, Lala, balancing shakily on a surfboard in front of a home-cinema big screen of breaking waves — and garnered plenty of views. “Founding a brand is a journey back to yourself,” he says. “It forces you to define who you are, and what you truly stand for. Then there’s this incredible moment when everything aligns, and the brand becomes a pure expression of your values.” TWOTHIRDS employs 35 people, creating clothing from sustainable sources that have zero impact on the planet. All the products are climate-neutral, and made from natural materials including cotton, hemp, fibre from trees — and even algae. The company’s Barcelona HQ is entirely powered by solar panels, and its transport CFI.co | Capital Finance International

fleet is electric. The firm uses trusted suppliers in Portugal, France, Italy and Spain, where fair labour is an overriding principle — and donates 10 percent of gross profits to ocean conservation. Schwenke’s greatest criticism of the traditional clothing industry is the waste it produces, particularly the amount of “deadstock” — items manufactured but never sold because of changing vogues. “Fashion is fickle,” he says. “We are not.” He was clear from the start that his garments should be durable, but also free from the usual constraints of fashion. TWOTHIRDS designs rise above the volatility of trends, he says. When he began the company, Schwenke assumed his target market would be the male surfing set, where robust and stylish clothing was essential. But it soon became apparent that the brand’s ecological message was attracting a broader clientele. The target customer in 2022 is a woman in her 30s who takes care of her health and fitness, and eats organic food… Lutz Schwenke gained a BA honours degree from Plymouth before completing an MA in Economics at the University of Hamburg. He later worked for the United Nations, researching sustainability initiatives, before starting TWOTHIRDS in 2010. 45

> MARTIN HÖFELER ARMEDANGELS CEO Fashions Come and Go, but Style — and Environment — are Forever It’s all about sustainability in 2022, and there’s likely to be no lessening of focus in coming decades. Sustainability matters, in a way that other modern notions and buzzwords don’t. People matter; the planet matters. In the fashion industry, brands — and, perhaps more importantly, consumers — are carrying our collective environmental conscience, and shouting their call for unity from the rooftops. Enter Martin Höfeler, CEO of German fashion firm Armedangels, who sees no dichotomy here. There’s no issue, he has always believed, that makes attractive fashion and environmentally friendly fashion incompatible. Höfeler’s aim from the word go has been to combine sustainability and design. And the “word go” was uttered some time ago — before such attention was paid to the planet, its resources, or its people. “Ten years ago,” he told New Zealand’s the-spin-off.com back in 2016, “we only existed as an idea on white paper. Five years (earlier), we were known as an online shop for sustainable T-shirts and prints. Today, we belong to the best-known fair fashion labels in Germany — in wholesale, and with our own online shop.” Five years may be a long time in fashion, but a decade — especially one prior to 2016; the company was founded in 2007 — would take us back to the dark ages in terms of awareness of global issues. Martin Höfeler was one of the pioneers, an early adopter who has benefitted from astute choices made at the right time. “Fair fashion” is his continued focus, and — as you may have guessed — in 2022, he is eyeingup the next 10 years to follow through on his ideas and ideals. His values haven’t changed one jot. Of course, it’s one thing to run a business in a sustainable way, to do everything “right” in all the important ways. It’s another to fulfil a fashionista’s role: to give people what they want — before they know they want it. Höfeler has not been fazed. As far as Höfeler is concerned; his mission is ongoing, and his creative output has not faltered. “We want to convince people to rethink their buying behaviour,” he famously said. So much for the continued sustainability focus, all-important to his personal and professional quest. Höfeler has juggled those human and environmental values with the maintenance and expansion of an constantly evolving fashion brand. “Nobody wants to wear an ugly T-Shirt, no 46

matter how sustainable it is in production,” he was once quoted as saying. Climate change is one of the most prominent threats facing the modern world, and it’s a doozy. Solutions, in terms of resetting the clock, are — for the moment, at least — out of reach. And the fashion industry is part of the problem. It’s rated as one of the dirtiest industries — and in a world of nukes, fossil fuels and microplastics, that’s saying a lot. Armedangels was founded, Höfeler told FashionUnited, not “to make fashion, but to make change for planet and people". Colours nailed to the mast, right there. While the first years may have been slow, as Höfeler and his team overcame general ignorance and apathy, but 2021 came with its own special challenges. CFI.co | Capital Finance International

Special challenges, however, are bread and butter to the German fashionista. One of the company's visions “is to change things beyond its own product by supporting NGOs (and) activists on the frontline”. In March last year, his Solidarity Series was introduced. The spotlight was, thanks to events in the US, on black and indigenous voices. A T-shirt edition was created in collaboration with US activist Tamika D Mallory, featuring her Speech of a Generation, delivered after the death of George Floyd. During the 2021 federal election, Armedangels — in co-operation with the GermanZero organisation — designed a “1.5°” T-shirt to coax more climate-friendly measures from politicians. All profits from that went to GermanZero. The motto: "Change politics, not climate."

Spring 2022 Issue

> LUKE HAVERHALS FOUNDER & CEO OF NATURAL FIBER WELDING Tech Platforms Unlock the Superpowers of Plants to Combat the Plastic Menace Plastic is affordable, widely available, durable and versatile — but its environmental costs have become too steep. Great masses of discarded plastic swirl around the ocean and break down; scientists have found microplastics even in remote and pristine places such as the Arctic. Synthetic textiles are used to create about 60 percent of the clothing manufactured worldwide. And as those clothes are worn and laundered, they continuously shed microfibres into the air and waterways. Luke Haverhals, CEO and founder of Natural Fiber Welding (NFW), is giving retailers and consumers an eco-conscious alternative to petroleum-based synthetic materials such as polyester, acrylic and nylon. He believes synthetics have had their day. “When it comes to performance, we’ve learned that nature does it best,” he says. “We’ve been able to prove that not only can natural materials perform just as well as synthetics, but unlike plastic-based materials, they can also sustainably scale.” The company works with natural fibres like cotton, flax, silk and wool to develop and scale circular textile solutions with uncompromising sustainability standards. NFW’s scientific breakthroughs began during Haverhals’ teaching career at the US Naval Academy. Headquartered in Illinois, NFW holds eight global patents, with another 90 pending. Its technology platforms unlock the superpowers of plants. It has developed two key products in this vein — CLARUS® and MIRUM® — which have attracted investors and brand collaborations. NFW was launched with a grant from the US Department of Defence and fast-tracked in Fashion for Good's 2018 scaling programme. It raised $13m in a late VC funding round led by Ralph Lauren Corporation in mid-2020, and another $15m the following year’s round, led by The Community Development Venture Capital Alliance and BMW i Ventures. In December, NFW was shortlisted as a finalist in the Conservation X Labs Microfibre Innovation Challenge. The capital infusion will help to cover commercialisation and expansion plans, including 110,000 square feet of new manufacturing space and a threefold growth in the workforce. “With our new manufacturing capabilities, and the support of companies like CDVCA and BMW i Ventures, we are advancing NFW’s mission to eliminate the need for plastics in the shoes we walk in, the upholstery we sit on, and accessories that surround us in our everyday life,” Haverhals said. “The extensibility of our platform and the tunability of NFW materials means that we can

serve many customers spanning multiple large, global markets.” The company has ongoing collaborations with leading brands. NFW and Ralph Lauren debuted the RLX x CLARUS® product line — the world’s first high-performance, 100-percentcotton apparel — at the 2022 Australian Open. Consumers can expect to see CLARUS technology in some of Patagonia’s upcoming collections, and BMW drivers can soon enjoy a guilt-free ride with the MIRUM plant-based leather alternative. “NFW has literally signed-on dozens of brand partners in the past couple months ... with hundreds of brands in our pipeline that all agree that plants and photosynthesis are the scalable answer to delivering performance, luxury, efficiency, economy, sustainability and circularity,” Haverhals announced on LinkedIn. “This is the beginning of a true revolution in product design that holistically respects people, animals and the planet we share. “CLARUS breaks the stranglehold that synthetic, petrochemical-based, microplastic shedding CFI.co | Capital Finance International

textiles have on performance apparel. Consumers now have a very clear choice: enjoy the same comfort and features of synthetic performance apparel with the peace of mind that their clothing is from a renewable nutrient resource, contains meaningful recycled content, and will not contribute to persistent plastic microfibre pollution.” NFW pledges to be a responsible steward of material abundance, with efficient supply chains that make use of renewable resources and textile waste. “We are pioneering an entirely new system that simultaneously enables all-natural performance fabrics while reducing waste and eliminating the need for synthetic plastics,” Haverhals said. “The textile industry is overreliant on non-biodegradable petroleum-based synthetics. In addition, there is a gap in the industry for scalable, high-performance options for recycling natural fibres. Our solution balances performance, sustainability, scalability. “Using abundant natural and scrap resources, we can tune fibres to outperform traditional textiles, making this process truly environmentally friendly.” 47

> TAMSIN LEJEUNE FOUNDER & CEO OF ETHICAL FASHION FORUM AND COMMON OBJECTIVE Saving the World in Style Tamsin Lejeune, founder and CEO of the Ethical Fashion Forum and Common Objective, is uniting a global community behind a mission to make fashion more sustainable. Lejeune worked as an architect before striking out in the fashion industry. She grew up in Africa, has worked in shanty towns in Cambodia, and launched a fair-trade clothing label in Bangladesh. “I am passionate about the potential for business to transform livelihoods and break the poverty cycle in communities all over the world,” she wrote on LinkedIn. “Entrepreneurs (and intrapreneurs) with ideas, creativity and drive are a powerful force for global change.” The ultimate goal is to make it easier for global industries to generate value in three dimensions: the “triple bottom line” of people, planet and profits. Lejeune opted to start with the fashion industry in part for its outsized role in global pollution and labour violations, but also for the variety of industries that it encompasses: agriculture, textiles, manufacturing, logistics, design and more. “As the devastating impact of the fashion industry on the environment gathers pace, I (and thousands of others) have gained a sense of urgency,” she writes. “We all share a common objective — that of building smarter businesses, that safeguard our global environment.” Lejeune set up the Ethical Fashion Forum (EFF) in 2006, citing the need and demand for an industry body dedicated to promoting environmentally and socially responsible practices. “Our mission has always been to create a platform through which great business is done — business that maximises benefits to people and minimises impact on the environment, from one end of the supply chain to the other,” Lejeune told fashion magazine Drapers. “Fashion business, done well, is transformative, creating inspiring products and sustainable, fulfilling jobs, grounded in fair practices between buyers and suppliers.” Lejeune is intent on taking sustainable fashion “from niche to norm”. In 2011, the EFF introduced an online platform to facilitate sustainable sourcing across the fashion industry. Lejeune spearheaded efforts to secure funding to scale the tech-powered network. The Ethical Fashion Group (EFG) was founded in 2015 as a limited-share company with the capacity to raise equity investment. It built 48

Drapers

on the forum’s legacy to develop a rebranded sourcing platform, Common Objective (CO), which has become a recognised trading name for EFG. CO closed its latest funding round in May 2020, raising £350,000 through the crowdfunding platform Crowdcube. Funding to date totals £1.1m and includes seed capital support from French designer Roland Mouret and industry veteran Harold Tillman, a founding investor who serves as chair emeritus. Tillman, former chairman of the British Fashion Council, says the tech platform is a gamechanger that will meet “the growing customer demand to know where and how their garments and accessories are made”. CO aims to disrupt the $2tn fashion industry with a global B2B sourcing and information platform that rewards sustainable businesses with higher search rankings. CO membership is free for individuals and businesses, but PRO plans come with unlimited connections and privileged access to content, events and courses. The platform is used by more than 30,000 fashion professionals in 150 countries. The group launched a fashion consultancy practice in late 2019, CO Consults, bringing CFI.co | Capital Finance International

together experts from fashion subsectors to put sustainability front and centre. Lejeune was recently announced by LinkedIn as the UK's best-connected woman in fashion and textiles. She believes this points to growing consensus about the importance of ethical and sustainable business in the industry, which accounts for an estimated 300 million workers across related sectors. “If we can build collaboration between those professionals who want to see change — we can move mountains.” However, the pandemic has threatened the momentum, particularly on the social front. “There are millions of people being laid off in fashion, both in the consumer-facing side and in supply chains,” Lejeune warns. “In recent years, the focus on sustainability has ramped up, but the discussion has mainly been around the environment. The social issues have been less relevant. The two are entwined but we’ve overlooked the human side. We can’t do that now. “Our fashion system has supported millions of people, and the two sides of the coin need to be looked at. We need to look at the environmental impact and how the industry is structured — how you build a business model that protects everyone involved.”

Spring 2022 Issue

> PATRIK LUNDSTRÖM RENEWCELL CEO Break on Through to the Green Side of Clothing Production… Every entrepreneur wants to build a business on a breakthrough process; not many have done so. On the back of a breakthrough process, perhaps; but true pioneers are thin on the ground. We have one for you here, though, all the way from Sweden: meet Patrik Lundström, CEO at Renewcell. Lundström has taken an existing idea — recycling — and given it such a novel spin that an entire industry has taken note. While recycling is increasingly popular across industries and sectors, Renewcell operates in one that thrives on the new, the fresh, the avant garde: the world of fashion. Well, perhaps a precursor to fashion — but raw materials have to come from somewhere. Lundström has ensured that the “somewhere” is beyond reproach when it comes to sustainability. Renewcell’s breakthrough process is that rarest of fish, a true world-first: it produces 100 percent recycled fibre pulp, at scale. It receives used clothes and textile production waste with high cellulosic content, such as cotton. After being denuded of zips, buttons and baubles, the raw materials are shredded and chopped into a slurry. Contaminants are separated and filteredoff; the remaining goop is Circulose-branded dissolving pulp, which is formed into sheets. This is forwarded to fibre producers as a replacement for new cotton, oil and even wood. Circulose fibres are indistinguishable from viscose derived from other sources; the only difference is in the circularity. Brands use them in place of virgin materials to reduce environmental impact. The best part? There’s no compromise in terms of quality. The patented process tech was developed in conjunction with researchers at Stockholm’s KTH Royal Institute of Technology. For the first five years — it was founded in 2012 — Renewcell was little more than a research project. “In 2017, we started our demonstration plant in Kristinehamn,” Lundström told Fibre2Fashion magazine, “where we produced at industrial scale and launched clothes made with Circulose in stores with global brands.” Taking things to the next step — to commercial scale, at a modern plant in Sundsvall — is happening this year, with 100 employees already lined-up and ready for action. Maximum production? An impressive 60,000 tonnes per year, if things go according to plan. And there’s no reason to suspect that they won’t. In the increasingly aware fashion industry, demand for Circulose products is off the hook — and permanent, positive change for relevant

industries is a real possibility. Hundreds of thousands of tonnes of used garments that would otherwise go to landfill are now riding on the hips and backs of trendsetters and influencers. And this, believes the Renewcell CEO, is just the beginning. His firm is partnering with suppliers of post-consumer and post-industrial textile waste to obtain material with a minimum of 95 percent cotton content, compliant with its supplier code of conduct. Contracts for more than 40,000 tonnes of waste have been signed. CFI.co | Capital Finance International

Lundström is well qualified for the task, as well as having the nous to spot an opening and create a niche that benefits just about everyone. He has a Masters degree in chemical engineering from KTH Royal Institute of Technology, and an executive MBA from Stockholm School of Economics. And he’s hands-on, in terms of involvement. He holds, personally and through the company, 49,029 shares and 22,236 warrants that entitle to the subscription of 1,445,340 shares — as well as 49,895 warrants from the latest incentive programme that entitle him to 49,895 shares in the company. 49

> Europe

‘Iron-hearted’ German Economy Must Embrace Silicon to Move to the Future By Brendan Filipovski

With the departure of Angel Merkel and the birth of a new coalition, Germany has entered a new era. But what is unchanged is the country’s digitalisation deficit.

ome 94 percent of its citizens believe that their nation lags behind other EU members in this area. Various surveys agree, and show it well behind the US, China, and several Asian countries.

Germany has long been the EU’s economic and industrial powerhouse. In 2020, its share of EU GDP was 25 percent, its share of industrial production 29 percent. Germany has a reputation for superb engineering and technical excellence. This is reflected in its third-place ranking in export complexity (Japan and Switzerland take the top two spots). A move to electric vehicles demonstrates its ability to transition to new technology. After the debacle of “Dieselgate”, Volkswagen is targeting EVs to make up 70 percent of its sales by 2030. But in some areas, Germany looks decidedly average. It ranks 11th of 27 EU member states in the Digital Economy and Society Index (2021), behind Denmark, Sweden, Ireland, Estonia, Malta, and Austria. The lack of progress in digitalisation is flowing through to the strength of the new German economy. Berlin is the country’s only city to be ranked in the world’s top 30 start-up ecosystems: 22nd in that list. London is second, Paris is 12th, and Stockholm is 17th. Berlin rates poorly in terms of performance, knowledge, market reach, and talent. Germany does have 15 tech unicorns, which is the fourth-highest tally by country — but the UK has 27, China 133, and the US 288. Israel and South Korea have 11. As you might expect, the problem is not human capital. Germany ranks well above the EU average in terms of basic and specialist ICT skills. It has more ICT graduates and specialists than many, and it is equipping its future workforce with the DigitalPact school programme. Nor is the problem one of basic ICT infrastructure. Germany has 92 percent fixed broadband takeup, compared with the EU average of 77 percent. And 95 percent of households have access to 30 Mbps or more. But there is a clear urban-rural divide, with the need for more fibre-to-the-home in rural areas, currently only at 9.8 percent coverage. Spain leads with 60.5 percent, but the federal government is committed to nationwide gigabit access by 2025. Germany has higher 5G coverage, and has already assigned 100 percent of its 5G spectrum to communication companies. So, if the foundation of human capital and basic connectivity is in place, why is Germany lagging? The answer is paper. The Mittelstand firms — representing around 99 percent of all companies — have embraced the cloud, AI, big data, social media, and e-commerce. But they still rely on paper in key areas. 52

"In the past, the various levels of government were also rightly blamed for being a drag on Germany’s digital progress. German bureaucracy, hospitals and schools are still stuck on paper." Only 18 percent of enterprises use e-invoicing, against an EU average of 32 percent. Only 29 percent share information electronically; EU average: 36 percent. The EIB Corporate Digitalisation Index of 2020 showed that German companies trail other EU members in terms of digital intensity, general digital infrastructure, and the use of digital tools for HR and corporate organisation. Sometimes the hardest things to change are the most mundane. AI, the cloud, and big data are compelling new tools, and e-commerce is a growth area. But e-invoicing and HR are not exciting, and the benefits are not as dramatic. In the past, the various levels of government were also rightly blamed for being a drag on Germany’s digital progress. German bureaucracy, hospitals and schools are still stuck on paper. Germany’s federal system makes change and standardisation difficult. Each of the 16 states has policy control over key areas such as health and education. Until recently, the federal government struggled to build electronic platforms that integrated state systems. But recent initiatives have started to make a difference. In 2017, the Onlinezugangsgeset (Online Access Act) was adopted. It requires all levels of government to provide electronic access to their services by the end of this year. While some agencies will meet the deadline, others may need more time. The government also established the Bundescloud, a single data platform in a cloud available for use by public agencies. This saves agencies money and helps them with data protection. In March 2021, the Registermodernisierungsgesetz (Register Modernisation Act) was adopted to harmonise administration data by linking it to citizen’s tax-file numbers. This is key as it will make it possible to integrate citizen data across systems. Despite these initiatives, the pandemic revealed that different levels of government have more work to do. Various state health systems struggled with the administrative strain. On the home front, parents and children persevered through intermittent internet connections and systems not suitable for remote working. CFI.co | Capital Finance International

Money from the European Commission’s Recovery and Resilience Facility has been used to improve digital systems for health and education, but more strategic initiatives are required. The new coalition comes with fresh energy, and promises. It has made digitalisation one of its top three priorities, along with climate protection and scientific research. Chancellor Olaf Scholz has promised a once-in-a-century transformation of the German economy. The coalition agreement includes commitments to blockchain, quantum computing, and AI. Just as importantly, it includes a commitment to the modernisation and reform of IT security laws, a separate, centralised digital budget, and a “digitalisation check”. All of this sounds like an improvement on Angela Merkel’s neuland approach. Many are disappointed by the failure to set up a new Ministry for Digital Transition to coordinate the process for states and agencies. Instead, for better or worse, the existing Ministry for Digital and Transport (BMDV) will continue to lead efforts at the federal level. There are still question marks over what, exactly, will be entrusted to the BMDV — and whether the ministry needs restructuring. If the promises of the new government give way to more digitalisation disappointments, then Germany’s future economic growth and low unemployment rate could be at stake. Its economic prominence could slip as more dynamic digital economies, such as that of Scandinavia, continue to rise. Germany’s dominant industry is automotive. It represents around 10 percent of GDP and employs some 930,000 people. But with the rise of EVs, the industry is expected to lose up to 400,000 of those jobs by 2030. This slack could be picked up by a booming ICT industry — if the right steps are taken now. Small countries like Estonia have made great progress in digitalisation; so have larger ones like the US and China. Over 150 years ago, Germany was able to restructure its education and industrialise. Now it must transform itself again — as Scholz promises. The iron manufacturing heart of Europe must embrace silicon, or gather the rust of receding relvancy. i

Spring 2022 Issue

> SegurCaixa Adeslas:

A Strategy Based on Value Creation — and a Track Record of Innovation

Current affairs are not allowing the economy to breathe. We had not yet overcome the health emergency of the pandemic when fresh events have cast a cloud over the future.

n this scenario, the insurance business is increasingly important — in all facets of life.

Aware that the social demands are opening significant business opportunities, SegurCaixa Adeslas has doubled its efforts to provide a response to its customers’ needs. The Spanish insurance company, belonging to the Mutua Madrileña Group and in which CaixaBank has an ownership interest, has focused on a strategy to create value for its insured parties. One of the central components of this plan is digitalisation, which has made its services more accessible.

Health premium volume (in millions of euros). Source: ICEA

MyBox insurance product range, which maintains the premiums over three years. The fact that this formula was well received led to an increase in the arrangement of new policies in Health, Multirisk and Car Insurance, in a strategy coordinated with the bank. In 2021, Adeslas’s customers made 4.8 million virtual medical consultations. One of the key projects in technological transformation is Adeslas Salud y Bienestar, the company’s digital health centre, which has obtained 500,000 registered users thanks to the traction of their new functions, which are accompanied by videoconsultations, telemedicine services, electronic prescriptions, online appointments, healthcare provider list queries relating to proximity or inclusion in health plans, among others. In the current context, the need for certainty took the company to develop with CaixaBank the

From a corporate viewpoint, SegurCaixa Adeslas occupies a central role in the shaping of the Spanish insurance business, based on its involvement in two operations of significant importance. Firstly, the Company became a significant player in the main movement of Spanish financial reorganisation. The merger of CaixaBank and Bankia opens the doors for SegurCaixa Adeslas to over 2,000 branches that provide a service to 6.8 million customers. The operation, of great complexity, promises to take the successful banking assurance model to another level. CFI.co | Capital Finance International

Secondly, the entry of the Mutua Group into the distribution giant El Corte Inglés provides access to a portfolio of 12 million customers, half of which have a retail operator loyalty-building card. SegurCaixa Adeslas will have exclusivity in the health and funeral policies at over 2,000 sales outlets, which receive 700 million visits a year. The operations will begin to reap their first fruits in the current year. In the past, SegurCaixa Adeslas deposited €4,156 million in premiums, which represents 4.5% more than in the previous year. The Company thus regained its growth rate in this manner, once again above the Nonlife market average, following the turbulences created by the pandemic on a global scale. Despite the fact that the claim rate rose following the health emergency, the insurer recognised profit of over €421 million. i 53

> Augustin de Romanet, Chairman & CEO of Groupe ADP (Aéroports de Paris):

‘Keeping the World’s Gates Open’ — Airport Chief Shares Insights and Aims

Recent years have been difficult across countries and industries, but Groupe ADP leader Augustin de Romanet sees a bright future for his business.

ith nearly 80 years of experience, Groupe ADP is a worldwide leader in the airports industry. From engineering studies, masterplanning, and design to the operation of complex infrastructures such as terminals, runways or luggage sorters, the group is active in every step of the value chain. Its activities are structured around the pillars of airport activities (conception, organisation, and access), travel retail (duty free shops, food & beverages) and services (real estate, international airports development and information and communication technology). Strong in expertise and its ability to overcome hardship, Groupe ADP’s chief executive is confident for its future, and aims to create a new sustainable airport model. The 2025 Pioneers plan is a new strategic roadmap based on long-term vision and the transformation of airports towards multimodal energies hubs. De Romanet’s faith rides with a passengercentred approach for his business — and a fierce engagement in the fight against climate change. CFI.co put him in the hot seat to share his vision… CFI.CO: HOW DO THE CHALLENGES THAT THE AVIATION INDUSTRY FACES AFFECT YOUR COMPANY? Augustin de Romanet: The pandemic has generated further expectations from travellers. More than ever, they expect safe, sanitary and comfortable surroundings. Our focus is to maintain a highquality standard at the airport by implementing appropriate health policies, technologies, and services. We have reduced waiting time during check-in and controls with digital tools such as biometrics. We strive for excellence of hospitality for travel retail and imbue our terminals with a positive ambiance. We have developed multi-modality for public transportation solutions, boosting rail-air connections. Linking all these topics in “smart airports” is the drive to make the passenger to feel cosy and relaxed. The priority over the 20 next years is to assure the sustainability of air travel by decarbonisation 54

CFI.co | Capital Finance International

Spring 2022 Issue

transport and airplanes with hydrogen or SAF. This kind of major change will take time, but our goal is clear: to reach carbon-neutrality by 2030 for all airports belonging to our network. Then we aim for zero-net emissions by 2050 for ParisCharles de Gaulles and Paris-Orly. HOW DID THE CRISIS RE-SHAPE YOUR INTERNATIONAL AMBITIONS? We operate a network of 29 airports worldwide, and our ambitions remain intact and strong. We recently acquired Almaty airport in Kazakhstan via our Turkish subsidiary, TAV Airports. In 2020, we acquired a 49 percent stake of the Indian GMR Airports in New Delhi and Hyderabad. ADP’s international development will continue selectively as we maintain our ambition to keep the world’s gates open, despite the upheavals that the pandemic raised. of the industry. As airports operator, we're pushing innovation through sustainable, flexible and modular construction, and introducing better operationnal practices to reduce carbon emissions. With our new strategic roadmap called 2025 Pioneers, we're launching a long-term transformation to reinvent airports. HOW CAN THE AIRPORT INDUSTRY CONTRIBUTE TO THE FIGHT AGAINST CLIMATE CHANGE? First, it should be said that airport contributions to CO2 emissions are rather low. The impact is

just five percent of the aeronautic industry’s emissions — which in total represents around three percent of global emissions. In ParisCharles de Gaulles and Paris-Orly Airports, we reduced per-passenger emissions by 71 percent between 2009 and 2020. That said, we still have a crucial role to play in sustainable development. We will be a part of the change by supporting clean energies: biomass, green electricity, hydrogen and sustainable aeronautics fuels (SAF).

TELL US ABOUT YOUR COMPANY STRUCTURE… From a strong-growth paradigm to a new airport model that is more sustainable, Groupe ADP is ready for take-off. We are a responsible corporate citizen, and customer-centred strategy shapes new horizons for passengers, stakeholders, and the environment.

We are working on the concept of an energetic hub in airport to supply ground vehicles, public

The Covid pandemic has been hard on aviation. Groupe ADP’s total traffic hit 160 million

CFI.co | Capital Finance International

Our focus on safety, customer experience and ecological transition is part of a new game that the group is ready to play.

passengers in 2021 — 41.9 million of them in Paris — which was just 45.6 percent of the 2019 total. It’s a gradual process, but we expect full recovery in Paris between 2024 and 2027. We have been able to adapt airport’s reception capacities, means of production, and commercial offer. The passenger experience is central to Groupe ADP’s DNA. We pride ourselves on providing the highest standards of hospitality for travellers. We showcase our expertise in this area. In Paris, Groupe ADP labours under the slogan “Paris Loves You” to offer a singular, emotional and profoundly Parisian experience. Paris-CDG Airport was last year ranked 15th in the Top100 Skytrax best-airports list. It was 94th in 2014. Groupe ADP addresses the main concerns of passengers, such as waiting times. We’re working closely with the Home Secretary to make the EES system as painless as it can be, while controls will be strengthened for all non-Schengen Travelers. THE PANDEMIC ALSO PUT THE FOCUS ON TRAVELLERS’ NEED TO HAVE A SAFE JOURNEY WHILE TRANSITING AIRPORTS. HOW HAVE YOU RESPONDED TO THAT? We implemented several targeted sanitary initiatives, for instance the opening of PCR and antigenic testing centres at Paris terminals and organising sanitary corridors during the peak of the first pandemic wave. As a result, 27 out of 28 Groupe ADP’s airports have received Airport Health Accreditation (AHA), certified by ACI (Airports Council International), the benchmark of the industry. WHAT IMPACT HAS GLASGOW’S COP26 SUMMIT HAD ON ADP’S APPROACH TO THE ENVIRONMENT? Groupe ADP has been involved in sharing greener horizons, by taking field measures and applying fierce engagement. All but one of the airports in the network have signed the Airports for Trust charter in favour of a more responsible and sustainable industry. ADP was one of the first airport operators to develop renewable energy solutions such as geothermal, biomass or photovoltaic energy at Paris-CDG and Paris-Orly. And the work continues… GROUPE ADP’S GOALS ARE AMBITIOUS: CARBONNEUTRALITY BY 2030 IN PARIS AND MOST OF AIRPORTS MANAGED OUTSIDE FRANCE… Action pillars have been leveraged: energy sobriety, durable construction, renovation of old facilities, transition towards renewable energies and reduction of emissions linked to mobility. Already, 33 percent of the light vehicles used at Paris airports run on electric or hybrid energy. We have 100 percent renewable electricity in Paris and Santiago airports, and pay attention to biodiversity, with no phytosanitary products used in Paris-Orly or in Liège. The future is looking bright for Groupe ADP, because in a socially and environmentally sustainable way we implement our belief that a better world is an open one. i 56

Chairman & CEO: Augustin de Romanet

CFI.co | Capital Finance International

Spring 2022 Issue

> KBC Asset Management:

‘Everyone Invested’ Strategy Has Taken Belgian Firm to Prominence Banking and insurance group KBC has a big, sprawling family: 41,000 employees and 12 million clients spread across Belgium, Czechia, Slovakia, Hungary and Bulgaria.

he man at the helm is chief executive Johan Lema, who has years of experience in the financial sector, including strategy, merger and acquisitions, sales, banking, asset management, and private equity. KBC Asset Management NV (KBC AM) acts as the group's investment arm, working with retail and institutional clients, developing products for intra-group distribution, and providing investment fund sales and advisory support. KBC AM’s motto of "Everyone invested all the time" starts with the 293 employees at the Brussels-based office. The company prioritises the health, wellbeing, and work-life balance of its employees as the surest path to business success. The talented team pulls together to ensure proper asset allocation in managed funds and portfolios. KBC AM strives for maximum investor participation by lowering threshold requirements and focusing on digitalisation. The KBC virtual assistant, dubbed KATE, helps clients to navigate investment options on digital channels, which account for more than half of KBC investment plan sales. KBC AM was the first Belgian asset manager to launch a fund with an investment strategy is driven by AI software. As of the end of 2021, it reports €236bn in AUM. Lema started his professional career in 1996 with the former Kredietbank, which later became KBC Group. He has previously held the roles of business development manager at KBC Asset Management and senior investment manager at KBC Private Equity. In 2004, he moved to the strategy and expansion department, becoming head of Group Corporate Development in 2006, responsible for managing KBC Group’s expansion in Central Europe. In 2008, he was appointed to the position of GM of Group Strategy and Corporate Development. In 2010, he was appointed CEO of KBC Asset Management Group international. In 2012, he joined the management committee of Business

CEO: Johan Lema

Unit Belgium, with responsibility for customer support retail, and private banking and business clients. In September 2017, he was appointed CEO of KBC Asset Management Group international. CFI.co | Capital Finance International

Johan Lema holds various mandates in investment management subsidiaries of the KBC Group, and is the president of BEAMA, the Belgian Asset Managers Association, and a member of FEBELFIN, the Belgian financial sector federation. i 57

> Asymmetry, Risk, Reward & Commitment:

Balancing Acts are EMCORE’s Stock-in-Trade “Investing asymmetrically means using significant market advantages,” says EMCORE board chairman Stephan Knuser. “Risks are minimised, opportunities are optimised and implemented in a targeted manner.”

nuser most certainly knows what he’s talking about. EMCORE, based in Baar, Switzerland, and Vaduz, Liechtenstein, was founded as a financial boutique in 1998. The goal was to provide institutional investors with tailor-made, return-orientated risk and asset management services. In 2022, the company remains committed to client’s best interests, Knuser says. “As an independent financial partner, the house of asymmetry operates free of any internal interests or binding obligation to third-party product providers,” he explains. The quantitative portfolio management approach allows EMCORE to provide products that meet the risk/return objectives of its clients. The combination of customised, independent solutions and active portfolio management results in products not found elsewhere. Consistent risk management is an integral part of the overall investment process. “All risk factors that are decisive for a strategy are monitored, assessed, and controlled on a continuous basis,” Knuser says. EMCORE’s range of solutions includes tailored mandates in the areas of overlay, yield-enhanced solutions, liquid bond and equity alternatives, convertible bonds, and mutual funds. The firm acts as a strategic partner for investors, helping with comprehensive derivative overlay strategies. With targeted exploitation of asymmetrical securities parameters, it has generated steady performance within reasonable risk budgets. EMCORE PRODUCTS Convertible Bonds Due to the lower price sensitivity to equities and the bond floor, convertible bonds cause lower 58

volatility in downward-trending markets. The call option included enables positive asymmetry in upward-trending markets. Investors benefit from these attributes. With convertible bonds, the price potential of equities combined with the defensive character of bonds limits the loss potential. “The niche segment of convertible bonds has occupied us since the founding of EMCORE,” says Knuser. “Through a strategic or tactical addition, the risk-return profile can be optimally shaped.” EMCORE Overlay Solutions Holding positions in securities or foreign currencies means a volatility risk for which investors are not compensated. A focused investment approach, coupled with effective risk-management, is crucial. Volatility is expected to remain elevated, providing an attractive environment for Overlay Strategies. A sustainable overlay strategy is equipped with suitable risk / return objectives. With a quantitative investment process, combined with technical sensitivity and risk-control methods, asymmetrical set-ups on the financial market are continuously exploited over the implied volatility. EMCORE can apply tailor-made derivative strategies by exploiting market advantages and implementing them according to the specified risk budget. The main areas of overlay solutions are divided into three pillars. 1. Cashflow strategy of existing positions, with the aim of generating stable additional income. Risk-return targets can be continuously adjusted. 2. Hedging strategy to eliminate market risks or reduce them to a defined minimum and can range from a classic to an active approach. 3. Dynamic strategy, with the aim of managing securities holdings in a targeted manner. Positions are built or reduced using derivative strategies. CFI.co | Capital Finance International

The overlay solutions of EMCORE can be implemented for single stocks or in a multi-asset portfolio EMCORE FX-Hedge Solutions Internationally active import and export companies are exposed to fluctuating exchange rates. The performance of the respective currency pair on Forex markets can have an enormous impact on business results. “Utmost importance should be given to the active management of foreign currencies and their risks,” advises Knuser. EMCORE has a quarter-century of expertise managing foreign and general currency for global clients. “We also assist institutional asset managers in managing substantial portfolios with foreign currency positions, and

Spring 2022 Issue

offer our specific expertise in active currency management and profiting from currency volatility.” EMCORE Actively Managed Certificate AMCs are cost-efficient financial instruments in the category of structured products, Knuser believes. “An AMC is usually actively, dynamically, discretionarily, and professionally managed. The excellent time-to-market of the issuance process, economies-of-scale, and high flexibility in product design are convincing arguments for choosing these products. “Thanks to our long-standing and trusting broker relationships, the set-up of the AMC can also be realised efficiently — and the individual needs of the client can be addressed.

“EMCORE recently established an AMC in healthcare which includes pharmaceutical and medtech companies, as well as dynamic healthcare companies from the biotechnology sector.” EMCORE Emission Certificates One way of reducing greenhouse gas emissions and lowering carbon footprints in sustainably oriented portfolios is to add emission reduction certificates. Climate-positive projects, such as reforestation, are financed to neutralise climatenegative contributions in the portfolio in return. “The topic of emissions trading and general ESG issues will gain significant resonance in the near future, and move even closer into the focus of investors,” Knuser predicts. EMCORE Investment philosophy Risk budget specifications form the basis of CFI.co | Capital Finance International

every investment decision. The budget, or risk capacity and risk-worthiness, determine the potential return. In the case of convertible bonds, the optimal ratio of bond floor, option value, and delta provides investors with a good participation in the underlying value — while maintaining valueprotection. Stringent investment structures keep risks as low as possible. “Our option-based investment strategies open up additional investment opportunities and ensure maximum flexibility in risk budgeting,” Knuser says. “The steady generation of income plays a central role. The level of risk is always considered in relation to the premium generation over time of the corresponding option portfolio.” 59

Chairman of the Board: Stephan Knuser

CEO / Portfolio Manager: Thomas Keller

EMCORE AS A PARTNER As an independent financial partner, EMCORE operates free of any internal interests or binding obligation to third party product providers. “Our commitment is exclusive to our client’s best interest,” Knuser says. EMCORE acts freely and independently, assessing all activities for best execution. Consistent risk management is an integral part of the overall investment process. ABOUT EMCORE All investment strategies are tested with the company's own capital prior to launch. A solid ownership structure, high equity ratio and a healthy balance sheet have granted it long-term stability. The founding partners and managing division heads are experienced and involved in daily processes. EMCORE has continuously developed in terms of AUM and product range. “We’re proud to be one of the leading solution providers in the field of convertible bonds and option-based investment strategies,” says Knuser. MEET THE EMCORE TEAM Chairman of the Board Stephan Knuser is an entrepreneur and asset manager with 30 years of financial experience. His focus is on convertible bonds and derivative investment strategies (overlay) in various asset classes. He has held senior positions in asset management for institutional clients, and portfolio/risk management for banks and insurance companies. In 1998, Knuser founded the financial boutique EMCORE Asset Management. He is chairman and delegate of the Board of Directors. 60

CEO / Portfolio Manager Thomas Keller joined EMCORE in 2014 and was instrumental in the development of EMCORE's overlay strategies. He manages these strategies together with Stephan Knuser. Keller is an investment specialist with two decades of experience in the financial industry. CFI.co | Capital Finance International

His focus is on derivative investment strategies (overlay) in various asset classes. He has a proven track record in equity and currency portfolios. His previous experience lies in stock market trading and portfolio management in the areas of derivatives and volatility risk-management for financial products at banks and asset managers. i

access more potential

Spring 2022 Issue

Through Tailor-Made Solutions in Trade Finance The Access Bank UK Limited takes an innovative approach to trade finance, delivering financial solutions that are designed for the African market. / Export Letters of Credit / Import Letters of Credit / Standby Letters of Credit Contact us: tradefinancesbu@theaccessbankukltd.co.uk www.theaccessbankukltd.co.uk

more than banking

The Access Bank UK Limited is registered in England & Wales, Company Number 06365062. Registered Office: 4 Royal Court, Gadbrook Way, Gadbrook Park, Northwich, Cheshire, CW9 7UT. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. FCA & PRA Registration Number 478415. CFI.co | Capital Finance International 61

CFI.co | Capital Finance International

Spring 2022 Issue

> Liechtensteinische Landesbank AG:

Tradition Meets Innovation in Liechtenstein Banking

iechtensteinische Landesbank AG (LLB) is the oldest financial institution in the Principality of Liechtenstein.

LLB’s shares are listed on the SIX Swiss Exchange, with the Principality of Liechtenstein itself holding the majority stake. As a universal bank, LLB provides its clients with comprehensive wealth management services, including private banking, asset management and fund services. The LLB Group employs a staff of 1,056, and has branches and offices in Liechtenstein, Switzerland, Austria and the UAE (Abu Dhabi and Dubai). The company closed 2021 with a business volume of CHF 105.7 billion (GBP 86.78 billion). The CEO at the helm of the organisation, Dr Gabriel Brenna, earned his doctorate at the Swiss Federal Institute of Technology, ETH Zurich, and a Master’s of Science from the Swiss Federal Institute of Technology Lausanne (EPFL). He also attended Stanford University from 1997 to 1998 and the Carnegie Mellon University in Pittsburgh from 1995 to 1996. The Swiss-Italian currently lives in Triesen, Liechtenstein. His career path brought him to Liechtensteinische Landesbank in 2012, when he joined the Board of Management and Group Executive Management, while heading the Private Banking Division. Prior to joining LLB, Brenna worked for McKinsey & Company in London and Zurich from 2005 to 2012, becoming Partner and Head of the Swiss Private Banking and Risk Management Practice. From 2002 to 2004, he was the Senior Project

CEO: Gabriel Brenna

Leader at Advanced Circuit Pursuit in Zollikon, and from 2000 to 2004, he took part in research and teaching activities at ETH Zurich.

CFI.co | Capital Finance International

Brenna also serves as a member of the Board of Trustees of the ‘Future Foundation of Liechtensteinische Landesbank AG’. i

> Eccelsa Aviation

Preferred Access to Costa Smeralda: You are Entering a Genuine VIP Zone

ardinia’s Costa Smeralda, created in the 1960s, has become a Mediterranean destination known for well-appointed residences, luxury hotels, and exclusive yachts.

Eccelsa Aviation, the private aviation handler at Olbia Airport, gives its all to ensure that the customer experience on arriving or departing from Sardinia by hired or privately owned aircraft meets the highest expectations. Based out of Olbia Costa Smeralda Airport, Eccelsa Aviation is the only fixed-base operator (FBO) for the island destination. The international elite know that with Eccelsa, comfort, reliability, and convenience come as standard. Eccelsa Aviation’s terminal is an architectural masterpiece, with clean, sleek lines that seem to swoop skyward like giant wings. As passengers relax in the comfort of the terminal, natural light floods in, creating a sense of peace and privacy. In the evening, carefully designed lighting creates a tranquil ambience. The terminal covers some 4,000 square-metres and includes various ways for clients to relax during transit. There is a coffee shop and a bar that serves food all day — so a delicious regional dish and a good glass of wine or local spumante is never far away. The facility also features a luxury eye wear shop, a selection of local, national, and international fine foods and wines, local produce, and rare handicrafts from the island. There is also a classy clothing shop and even a helicopter company. San Marino Aircraft Registry has its office there, and Bombardier and New Jet have their summer sales base in the terminal. One feature makes the airport unique: a formidable outer wing that allows guests to enter and exit the terminal directly from their aircraft. Should the aircraft be parked slightly away from the terminal, passengers will be ferried in sleek VVIP minivans — while Eccelsa’s expert team handles the luggage. With parking dedicated to private jets, Eccelsa can serve airplanes up to Airbus A340s or Boeing B747s in executive configuration. Clients can fly above Europe, or cross the ocean, perfectly relaxed. Should they wish, they can carry out private business sessions before landing at their holiday destination. 64

MAKING YOUR TRIP SPECIAL Eccelsa Aviation is an independent firm, 100 percent controlled by airport management company Geasar SpA. This premium serviceprovider has fully embraced its role by combining professionalism with effortless charm — years of experience garnered from liaising with discerning, and often celebrity, clients.

ranging from simple sandwiches to lobster, local Sardinian specialties, and fine wines.

The 50-strong team is adept at finding solutions to any problems that may arise, no matter how unusual, very much aware that in the service industry, service is everything.

Eccelsa Aviation may not be the reason why the global elite visit the incredible Costa Smeralda — but it certainly guarantees arrival and departure in absolute comfort, safety and security, and premium service.

“We are all very much aware that the reason why our customers land in Olbia is because this airport is located only 30 minutes’ drive from the luxury destination and its renowned resorts,” says Eccelsa GM Francesco Cossu. “We have invested in infrastructures, equipment, human added-value and relevant training to make sure that each trip to Olbia turns into a great customer experience as well. We feel this is a real asset for the airport, for the territory, and for the final destination, the Costa Smeralda, which is the real reason why Eccelsa Aviation is so busy during the Summer Season.” The terminal’s concierge service can organise everything visitors may require ensure their stay is a perfect one: horse trekking, private aircraft or helicopters, Ferrari, Bentley or Aston Martin rentals, yacht charters — bare-boat or with a skipper and crew. Eccelsa, through its sister company Cortesa, provides first-class in-flight catering with a menu CFI.co | Capital Finance International

Eccelsa has an agreement with Olbia Airport’s maintenance team to deliver first-class ground assistance, integrated services for flight crews, and the option for aircraft to remain in hangars while in Olbia.

Geasar/Eccelsa have a very ambitious Green Vision Plan but on which it is perfectly in line with the programmes. Olbia is one of the few airports to be at the forefront of the Carbon Accreditation process and expects to reach the "total airport electrical transition" in 2025, thus reaching the highest level of the challenging and demanding Carbon Accreditation programme. This is a truly impartial thermometer that determines the total integration of the Company with the Territory, not only from the economic development and well-being of the population perspectives, but also within the increasingly important environmental domain. Sardinia is a well visited destination for its unspoiled nature, clear and crystalline waters, pure air, as well as for the renowned tourist resorts of international appeal. Eccelsa doesn’t limit its actions to proclamations and Mission Statements (although important...), but has always acted in a concrete and tangible way for the conservation of environmental heritage”. i

Scottish Friendly - Best Mutual Insurer UK 2022 Scottish Friendly pulls from a 160-year history to deliver value for members, colleagues and the community at large. The group helps members plan for the future with an affordable selection of life, savings and investment products, including adult and junior ISAs under the Scottish Friendly brand as well as working with a number of partners to manufacture life and critical illness products. The Glasgow-based group manages more than £5.4bn for 776,000 members. Scottish Friendly believes that exceptional customer care starts with a focus on colleague well-being. The past couple of years have been taxing for everyone, and Scottish Friendly has introduced numerous measures to ensure colleagues feel supported and engaged — leaving them in the best possible position to look after its members. Collaborative working groups and yoga classes helped keep the team centred and connected. Scottish Friendly has continued to achieve strong sales, with a robust capital ratio considerably higher than regulatory requirements. The agile reaction times and stability of the group has allowed it to weather the storm of the last couple of years — however, it warns members that the year ahead will be difficult, with inflation expected to reach double digits as well as rising costs across the board. Consistent marketing campaigns ensure members stay informed and prepared for what’s to come. Scottish Friendly pledged a £10 donation for each new ISA account opened during the month of December 2021 — resulting in a £23,500 donation to support vulnerable families and children. This campaign forms part of the group’s ongoing community support programme of activity. The CFI.co jury presents repeat winner Scottish Friendly with the 2022 Best Mutual Insurer (UK) award.

> Philanthropy

Weds Business Nous in a Piquant Tale of Gentleman’s Relish

Tony Lennox discovers the whale that swallowed Patum Peperium has retained the tiny company’s ethos of compassion and responsibility.

atum Peperium, or Gentleman’s Relish, is a salty survivor of Dickensian cuisine. According to legend, the recipe for the spiced anchovy paste is a closely-guarded secret known to only one person at any given time, and passed down through the generations. John Osborn, who created the piquant comestible in 1828, intended for the paste to be spread thinly on hot, buttered toast — and named it The Gentleman’s Relish because he considered its flavour to be too strong for Victorian ladies. Neither was it, he argued, likely to be appreciated by the Great Unwashed.

Patum Peperium is hardly a staple item in the nation’s pantries, being something of an acquired taste. It was produced for more than 150 years in a small rural factory on the outskirts of Saffron Walden, Essex — until the brand was acquired by Associated British Foods (ABF) towards the end of the 20th Century, when production shifted to a modern factory.

Pataks Indian sauces, Ryvita, Silver Spoon sugar, and Twinings tea. In ABF’s retail division, Primark is its flagship brand. It’s the UK’s largest clothing, footwear and accessories retailer, with a presence in Europe and the US. The business was the brainchild of W Garfield Weston, born in 1898, the son of a Toronto baker. He was only a few hours old when his father carried him into the small bakery to introduce him to the smell of baking bread. Aged 19, Weston defied his father to enlist and join his Canadian comrades in the trenches of the Western Front. During leave visits to England, he studied the country’s baking industry — and came to the conclusion that it wasn’t as efficient as it could be. During the Great Depression of the 1930s the young baker saw opportunity in Britain. He moved his family to England and created a business that — to help hard-pressed farmers in his homeland — used only Canadian wheat.

That ABF — one of the UK’s biggest food and retail businesses — should purchase a niche brand would have come as no surprise to those who knew the company. It has thrived on variety throughout its history.

Weston earned a reputation for refusing to layoff workers during the Depression. Indeed, he stepped-up production and took advantage of conditions to acquire several failing bakeries in the UK and Canada.

ABF is a diversified international food, ingredients and retail group with interests in agriculture and pharmaceuticals — and sales of £13.9bn in 2021. It employs more than 128,000 people and has operations in 53 countries across Europe, Africa, the Americas, Asia and Australia. The business consists of five divisions: grocery, sugar, agriculture, ingredients, and retail. It operates 289 factories, warehouses, distribution centres and offices.

By the start of World War II, he was the head of a thriving trans-Atlantic business based in London. He donated cash to help build Spitfires and tanks. During the Blitz he set up canteens to feed the people sheltering in the London Underground during bombing raids.

In the UK, nine out of 10 households use ABF brands, many of which occupy leading positions in world markets. Originally a breadmaking business, it now produces a range that includes Allinson’s bread, Blue Dragon Chinese food products, Dorset Cereals, Jordans Cereals, Kingsmill bread, Mazola corn oil, Ovaltine, 66

This philanthropic streak was formalised in the 1950s, when Weston put aside a slice of the family’s fortune to create a charitable foundation. In a letter to his children, he wrote: “Great wealth has great responsibility. It can destroy all those who have it, or if they wisely control it, I am sure it can bring great blessings in its distribution.” Today the Garfield Weston Foundation is one of the UK’s leading grant-making charitable institutions — and it is still mainly funded by CFI.co | Capital Finance International

the dividends it receives from ABF. On its 60th anniversary in 2019, the foundation had handed out more than £1bn to deserving causes. The descendants of Garfield Weston are committed to the business ethos and retain control of the company in the UK, the US, and Canada. There are over-arching values contained in the company’s “Red Book”, communicated to all employees: a set of principles, in which respect, dignity, integrity, and collaboration are core elements. Weston instilled in his successors the belief that the greatest strength of any business is its connection to customers and markets — and that that is best achieved through local autonomy. Management teams across all divisions are given the freedom to act with speed and flexibility, so that decisions are taken as close as possible to their point of impact. Local managers are best placed to know their supply chains, communities, customers, and employees.

Spring 2022 Issue

The company focus is on human and labour rights, traceability and transparency, and continuous improvement — in all areas. Employees are encouraged to consider the effects of climate change and to be energy-efficient in their work, making finite resources go further. ABF’s commitment to sustainability and fairness was most recently illustrated at Primark when the “Primark Cares” strategy was unveiled. It promised to minimise fashion waste, reduce its impact on the planet, and improve the lives of the people who make Primark’s clothes.

soil health, biodiversity and water quality. It is committed to ensuring that all those involved in the making of its clothes receive a fair living wage to. The company aims for gender balance by increasing opportunities for women through skills-development, and has widened access to physical and mental health support. In 2020, Primark joined the UN’s Fashion Industry Charter for Climate Change, committing to a 30 percent reduction in greenhouse gas emissions by 2030.

The company has pledged to eliminate single-use plastics, increase the use of recycled materials, and minimise waste in its processes. All Primark clothes will be “recyclable by design” by 2027, the company says. And by 2030, they will be made from recycled fibre or sustainably sourced materials.

British Sugar, a business acquired by ABF in 1991, is the largest sole processor of sugar beet in the UK. Its systems have been modernised to the extent that today there is virtually zero waste from its factories, with byproducts going directly into ABF’s animal feed business.

Primark is working with cotton farmers to reduce carbon emissions and deliver better

The Gentleman’s Relish anchovy paste, it must be admitted, is a tiny part of ABF’s food and CFI.co | Capital Finance International

retail empire, but its continued production epitomises a link with the past — and symbolises the traditional values of one of the UK’s major international businesses. ABF is keen to take a lead role in the creation of a sustainable future, and practises what it preaches. On a 1kg bag of Silver Spoon granulated sugar, you won’t find any mention of ABF. Instead, the message on the (recycled paper) packaging informs the consumer that the product is entirely made from sugar beet grown by 1,200 British farmers in East Anglia, just a short journey from its Bury St Edmunds factory. Nothing is sent to landfill. As an added bonus on that sugar bag label, customers are treated to the information that the Fenlands — where ABF’s sugar beet is grown — are home to a quarter of the world’s population of pink-footed geese. There’s a tidbit to relish… i 67

CFI.co | Capital Finance International

Spring 2022 Issue

> ORBIAN:

Optimised Supplier Strategies and Ongoing Recognition

or 2022, Orbian has again been presented with CFI.co’s global award for Most Innovative Trade Finance Solutions. This award follows Orbian’s similar success in 2021, and confirms the company’s position as the most thoughtful and innovative provider of worldwide supplier finance services and solutions. For 2022, CFI.co’s judging panel was most impressed with Orbian’s new regional control and analysis tools. As with the 2021 award based on Orbian’s development of fixed rate SCF solutions, these latest innovations not only allow for substantially greater collaboration and efficiency between Buyers and Suppliers; but are also genuinely unique propositions for Orbian in the global marketplace. Fixed rate solutions are providing great opportunities for suppliers to manage program costs in a world of less accommodative central bank policies. Likewise, the innovations underpinning 2022’s award will allow Buyers to understand exactly how their SCF programs can be used to support

"Fixed rate solutions are providing great opportunities for suppliers to manage program costs in a world of less accommodative central bank policies." regional development agendas for local and national governments. Not only will this allow Buyers to support “levelling up” programs, but will also allow them to ensure optimised supplier strategies relative to local, national and supranational subsidy arrangements. ABOUT ORBIAN Orbian is a pioneer of supply chain finance, creating expansion opportunities for businesses small and large and delivering steady returns for investors over the past 20 years. Orbian understands that supply chain finance greases the wheels of global commerce and has a developed a trade finance platform to streamline connections between suppliers, corporate buyers

"Orbian is a pioneer of supply chain finance, creating expansion opportunities for businesses small and large and delivering steady returns for investors over the past 20 years." CFI.co | Capital Finance International

and funding providers. It works with businesses to custom-create scalable supply chain finance programmes to accommodate working capital and cash flow goals. To date, Orbian has processed five million transactions and $240bn in trade finance — while maintaining an errorfree transactional record. It has achieved a 100 percent integration success rate across all major Enterprise Resource Planning systems and proprietary A/P systems. Supplier onboarding is a simple web-based process with documentation specialists on-hand to support thousands of suppliers across the 53 countries where it currently operates. Orbian broadens the potential investor pool by giving suppliers access to multibank and source-agnostic funding. Flexible funding structures allow suppliers to use excess cash to fund the finance programme. Orbian invests a portion of annual revenues into the development of staff skills and enhancement of the customer experience. The company fuels growth through a process of continuous innovation, which includes regular upgrades to its state-of-the-art platform. i

Chairman: Thomas Dunn

155 69

> Full Fibre’s Oliver Helm:

Prioritising Long-term Value for Communities — and Giving Industry its Wings By Naomi Snelling

For Full Fibre CEO Oliver Helm, the “deep purpose” of the wholesale broadband company is simple: to help create a competitive, long-term marketplace that allows industry to bloom.

n the fast-moving telecoms industry, having a clear purpose and commitment helps elevate industry players onto a rapid-growth path. That is something that Full Fibre has achieved: it has grown from a team of 20 in January 2021 to a current headcount 10 times that. It has a mandate to deliver connectivity to half a million homes in UK market towns by 2025. “The innovation, and the pace at which the industry moves, are staggering,” says Helm. “Every day we’re learning and refining — and we’re still in the start-up space. We’re now operating in 11 counties across the UK, with four regional offices and a fifth and sixth planned for this year.” With a background in digital marketing, Helm moved into telecoms when he was exploring internet solutions. “I worked with a series of businesses building fibre networks, becoming a specialist in modelling and analysis. And it became apparent that everyone was building in the same way.” Full Fibre was founded on a commitment to adaptability and innovation. It collects data from its engineer field force, swiftly analysing it to flexibly assess build and deployment. “When we hit a problem in the field, we collect and audit the data in real-time,” says Helm, “and we’re able to make real-time decisions. “We face a myriad of issues. We use a lot of existing network infrastructure, and when you re-use existing structures there are a lot of unknowns. You don’t know, for example, if there’s too much cable in a duct. Our approach enables us to plan new methods rather than down-tools, which saves deployment hold-ups.” When a company grows as rapidly as Full Fibre has, the escalation calls for robust leadership skills. What does leadership mean to Helm? “Being able to imprint your values and vision on a company early on is really powerful,” he says. “Innovation and developing an innovative mindset — these are at the heart of Full Fibre. 70

Part of this involves me, as a leader, building a culture that helps my team to develop an innovative mindset. “It’s about encouraging them to know they’re in a safe space to deviate from the norm, understanding that there is (always) a risk. I want them to assess and take risks rather than stay in the ‘safe’ way of doing things — to find new and better ways of doing what they’re doing. There’s a mindset-change involved, because people like to have a process they can follow. Taking risks is often outside their comfort zone. “There is so much room for innovation in this industry. Nobody has done fibre at scale, so this is a new thing, and lots of learning is involved. But the basic network creation, digging holes in the road, etc — this has been done for decades, and there’s a lot of dogma around perceived ways to do something. “Trying to change that into an innovative mindset is a fascinating challenge.” CFI.co | Capital Finance International

When it comes to leadership inspiration, Helm looks closely at tech leaders. “As an individual, you can only fundamentally change so much. I focus on understanding my strengths, and where I need to bring in strengths. This way I can play to my strengths while building a strong team around me.” And the most important decisions he makes as a leader? Helm points to clear priorities and sticking by them. Make sure they are successfully communicated, he advises. “You have to make sure people understand what success actually looks like. It’s easy to prioritise based on what screams the loudest, so my job is to get clarity on what’s really important. “One of the things I respect in other leaders is humility — the ability to say: I’ve got something to learn, too.” Full Fibre has three company values it lives by: to be innovative, passionate, and safe in all areas. “We’re asking our people to do dangerous

Spring 2022 Issue

CEO: Oliver Helm

things, so keeping them safe is crucial,” says Helm. “Innovation is at the heart of what we do; being a wholesale business is an innovative space within telecoms, and we have to focus on the build, and on building at scale. “Unlike many telecoms companies, we don’t have to worry about customer service. We worry about innovation.” And passion? “We’re building these networks for a reason: to bring back a competitive market. This focus flows through everything we do. I’m proud that we’ve built a coherent team in such a short time-scale — the team really worked together. A start-up is a hard place to be, particularly when it’s growing at a really fast pace.” Helm points out that connectivity has become even more crucial in the wake

of a spike in remote- and hybrid-working prompted by the pandemic, and cautions on the potential pitfalls of being “too connected”. “We’ve become so connected it sometimes poses a risk for people’s ability to focus and get things done. Having instant access to people is something to be carefully thought-through. When people are continually in touch, it can derail their train of thought and make it harder to do flowstate work.” As well as focusing on business growth, Helm pays attention to his own personal growth, and advises other leaders to invest in coaching. “You need someone you can have blunt and real conversations with about where things actually are,” he says. “Find a coach you like and respect, and who you can connect with on a personal level.” i

Author: Naomi Snelling

Are Millionaires Beginning to Leave the UK?

s part of their upcoming Global Wealth Migration Report, wealth intelligence firm New World Wealth have reviewed millionaire migration trends in the UK.

The UK has traditionally been seen as one of the world’s top destinations for migrating millionaires (HNWIs) and for many years (from 1980 to 2010) the country attracted huge numbers of HNWIs from Africa (South Africa especially), Asia (Russia and India especially), the Middle East and Europe. However, this trend began to reverse around five years ago as more HNWIs left the country and less came in. Notably, during the period from 2017 to 2020, the UK has lost approx. 9,000 more HNWIs than it has gained.

Possible reasons for the exodus include: • Brexit impact • Taxes on HNWIs in the UK have been rising and are now amongst the highest in the world. • Non-dom numbers in the UK are down substantially over the past five years. Many nondoms are HNWIs so this has an impact. CONCLUSION Although it is possible that this trend will flatten out over time, it is clear that the UK is certainly no longer seen as a prime destination for the world’s wealthiest individuals. That title has now firmly shifted to the likes of Australia, Switzerland and the UAE. i • “Millionaires” or “high net worth individuals” or “HNWIs” refer to individuals with wealth of CFI.co | Capital Finance International

US$1 million or more. • “Wealth” refers to the net assets of a person. It includes all their assets (property, cash, equities, business interests) less any liabilities.

New World Wealth provides information on the global wealth sector, with a special focus on high growth markets. Their research covers 90 countries and 150 cities globally. For more information, visit: newworldwealth.com ABOUT THE AUTHOR Andrew Amoils founded New World Wealth in 2013. He previously worked as a wealth analyst for Progressive Media (now Globaldata) in London. His work has been featured in several international publications including: BBC, CNN, the New York Times and Forbes. 71

> Isomer Capital:

Dedicated to European Tech and Unlocking Potential for Investors Truly independent and focused on the European technology sector, Isomer has an effective investment approach to a dynamic market.

uring the first part of the 2010s, the intention to invest in European tech usually garnered the same response: “There is no tech in Europe.”

While advising investors on their private asset allocations for Cambridge Associates, Isomer founder and managing partner Joe Schorge saw that the European tech sector was on the verge of taking off. All the ingredients were there: large addressable market, high number of developers, and elevated levels of education. Following the 2008 financial crisis, there was an explosion of company creation: entrepreneurship had become a respectable career path in Europe, development tools became freely available, co-ordinated public policies and the large deployment of capital into the venture sector ignited the European tech flywheel. It was the start of the “virtuous tech circle”, leading to an exponential growth of unicorn companies (those valued at over €1bn).

thing” in Europe, when opportunities arise across countries and sectors? Think of Spotify (Stockholm), UiPath (Bucharest), Avast (Prague), BlaBlaCar (Paris), Glovo (Madrid), Deliveroo (London).

But a challenge remained for investors: How to invest in these companies, on a continent composed of 44 countries, each with its own tech ecosystem, language, and distinct cities developing their own tech clusters? How could an investor identify and access the “next big

Even more challenging, how could one identify and access high potential startups in the early stages of their development, before they are worth billions of euros? For Schorge and his co-founders the answer to those questions lay in the creation of Isomer Capital.

Graph: Number of European unicorns per year. Source: State of European Tech 2021.

CFI.co | Capital Finance International

The firm was founded in 2015 to overcome such challenges, and provide investors with access to high potential investments. By studying how Europe’s tech companies were funded, the Isomer team noticed that the first professional investors — after friends, family and angels — were local early-stage venture capital managers who have the best knowledge of the ecosystem. They are the first people to know and back these entrepreneurs. These “local digital champions” have skills to help entrepreneurs during the critical first stages of development.

Spring 2022 Issue

The same VCs lacked something of paramount importance: value-added investors to help them in their mission, and to support portfolio growth. By creating a team with complementary skills to balance investment acumen with company building and operating experience, Isomer provides the capital these VCs are looking for entrepreneurial and collaborative efforts help unlock and build portfolio value. Today, investors don’t ask themselves whether there is any tech in Europe; rather the thoughtleaders are rushing to secure their place in the ecosystem. In 2021, more than half the capital invested in European startups came from international investors. Renowned VC investors such as Sequoia have opened offices in London and elsewhere; Europe now generates more unicorns than China. As an early mover, Isomer and its investors benefit from this growth. Researching over 950 venture capital firms in Europe — having backed 60 funds and coinvested in many of their portfolio companies - Isomer has become a leading player. Their early stage portfolio has 20 unicorns to date, including Deliveroo, Darktrace, ManoMano, Sorare, Clark, and Tier. It has controlled risk through diversification and creating co-investment opportunities. What differentiates Isomer from its competitors is that it is a rigorous institutional investor — but also an insider in the European tech ecosystem. Isomer has invested and partnered with European VCs including Hoxton Ventures, Seedcamp and Kibo Ventures. Its partnership approach is appreciated by a highly valued group of investors, from family offices to sovereigns, foundations, pensions, and corporations. For this last group, Isomer has designed a specific programme to enable corporations to unlock CFI.co | Capital Finance International

strategic value from their investment — and to enable technology startups to engage larger corporates, from product development and new market entry to investment and M&A. Isomer acts as a “market sensor” for its corporate partners, helping them monitor exciting businesses emerging across Europe, testing technologies, exploring new business relationships, and identifying early potential targets. “This is a true partnership where — in addition to capital flows — Isomer’s partners on both sides can leverage each other’s networks and knowledge, from tech companies to VC funds to limited partners" says Schorge. Having created an institution to back the future, Isomer remains confident. “The European tech ecosystem will thrive over coming years, creating more unicorns, decacorns and even €100bn+ global champions,” Schorge predicts. “We have positioned Isomer to partner and access this opportunity in the most effective way, combining trusted partnerships and strong execution.” Isomer is conscious of increasing competition, with the venture market taking a similar direction to that of the US. Access to the best early-stage funds is increasingly difficult, with VC managers choosing their investors. Most of the rounds in the best companies are insider events reserved for specific investors. By positioning itself as a value-added investor, a pioneer in the development of the European tech ecosystem, and an early backer of funds starved of capital, Isomer has secured its access to the best funds in Europe. It has access to the most competitive insider coinvestment deals, and Isomer is well positioned to deliver returns to investors. . i 73

> North By No Means?

Lucre is Luring Developers to Earth’s Last Wilderness Tony Lennox considers the likelihood that a North-East Passage could revolutionise global shipping routes — and devastate a delicate ecosystem.

orsemen believed that in the far north, beyond an impenetrable wall of snow and ice, there existed “a land of gold and green woods”. Over the ages, expeditions to the inhospitable polar region have proved the legend to be false. But as climate change warms the waters of the Arctic Ocean, a new generation of polar adventurers is discovering potential riches of a different kind: new trading passages across the top of the world. As the ice retreats, fresh seaways are emerging — with the promise of cheaper, shorter trade voyages. The North-West Passage, which weaves through the thousands of islands of the northern Canadian archipelago, is now navigable for many months of the year, but the route still presents significant challenges for larger shipping. The same does not apply to the North-East Passage (NEP) in the sub-Arctic coastal seas off northern Norway and Russia. The seas which link the Atlantic and Pacific Oceans have until now remained permanently frozen. With global warming causing the millennia-old ice to melt, these waters now offer, say the NEP proponents, a summer alternative to the Suez Canal for eastwest trade. In March 2021, global trade was plunged into chaos when the Japanese-registered superfreighter, the MV Ever Given, slipped sideways during a sandstorm and blocked the Suez Canal for six days. Hundreds of ships were caught in the ensuing jam. While it was a rare event, the blockage illustrates the fragility of the 153-yearold trade route. Russia, engaged in an elaborate plan to develop the NEP, was quick to react. It invited global shipping companies to explore the benefits of the northern route. Russian entrepreneurs and government officials are investing billions to make the dream of an unhampered northern trade route a reality. The first non-Russian commercial voyage across the NEP occurred in the late summer of 2010, 74

when a Norwegian vessel shipped 40,000 tons of iron ore from Kirkenes in northern Norway to China. The 4,000-mile voyage took 21 days, compared with the 37 days it would have taken had the ship travelled the conventional route. The Norwegian company saved an estimated $300,000. The NEP, almost ice-free in the summer months, is now seen by many as commercially viable. A Norwegian research group which has been monitoring ice thickness for decades estimates that with the current rate of climatedriven ice reduction, the Arctic Ocean could be entirely ice-free during summer months within 30 years. And while conservationists are concerned for the future of the wilderness region and its wildlife, capitalists see opportunities for global trade. Tour companies, using specially adapted cruise ships, have been offering trips to the Arctic seas for more than a decade. The summer ice-melt means that tourists can sail in relative comfort to watch walrus, whales and polar bears in their native habitat. The Kremlin has created the Northern Sea Route Administration (NSRA) to develop infrastructure, including new and regenerated northern seaports from Murmansk to the Bering Strait, and new road and rail links. The Russians have been wooing the international community in a bid to raise investment, as the eventual cost is likely to be beyond the grasp of the country’s economy. Russia has also been constructing a fleet of huge merchant ships with ice-breaking capabilities, and claims that even without climate-accelerated change its ships will be able to smash through the ice year-round. Novatek, Russia’s biggest private gas company, is working on a project to transport liquid gas across the NEP by ship. China, too, is showing interest in the NEP’s possibilities. The government has calculated that if even 10 percent of its exports can be transported across the northern seas, it would be worth an estimated $700bn and open regions previously of minimal economic interest. CFI.co | Capital Finance International

Significant obstacles to the route’s expansion remain. In 2020, 33 million tons of cargo transited the NEP. While that figure seems impressive, it pales in comparison with the Suez Canal, which handles a billion tons each year. The Arctic Ocean remains a harsh environment. Even in summer, ships run the risk of hitting icebergs and rely on an escort of Russian icebreakers. And even then, conventional ships cannot use the route. The remoteness and lack of support and rescue facilities pose issues for shipping companies and marine insurers. There is also the danger of oil leaks in the delicate ecosystem: toxic substances break down slowly in colder climates. Some global shipping firms say they have no plans to use the route. Bud Darr, executive vicepresident of maritime policy at the Mediterranean Shipping Company (MSC), went a step further in 2019. “Attempting to open new navigation routes which skim the polar ice cap sounds

Spring 2022 Issue

like the ignorant ambition of an 18th century explorer,” he said, “when today we know that this would pose further risks to humans and many other species in that region, as well as worsen the impact of shipping upon climate change.” Darr believes that the risks outweigh any potential benefits, and that the route’s development should “definitely be avoided”. MSC issued another statement in 2021, reaffirming its stance. Then there are geopolitical issues to consider. Tensions are high because of Russia’s military presence along the polar fringes. Russia claims to have planted a flag on the seabed beneath the North Pole in 2007, asserting sovereignty — a claim that has been studiously ignored by the rest of the world. The Worldwide Fund for Nature (WWF) has called for the strongest governance framework for the route’s development, including oversight of shipping activities and improved rescue and

response capabilities. The WWF has funded expeditions to the region and fears that increased development would cause lasting impact to a fragile environment. Other groups are concerned that the development of the NEP is linked to Russia’s determination to exploit the region’s oil and gas reserves — in the face of a global trend towards decarbonisation. Russian ambitions in the region are nothing new. Tsar Peter the Great funded an ambitious expedition in the early 1700s — at enormous cost — which led to an eastward expansion of his empire. Russian colonists in search of furs travelled in flexible, flat-bottomed boats, all the way to California. And there is another element to consider, something early explorers would certainly have understood: Mother Nature. In 2021, for the first time in a decade, the polar ice refused to melt. Both routes remained firmly ice-bound. Not a land of gold and green woods, after all, perhaps. i CFI.co | Capital Finance International

Author: Tony Lennox

> ARTICO Partners:

Combining Investment Performance, Sustainability and Climate Objectives

CEO: Gabriel Herrera

Chairman: Ulrich Niederer

“A

RTICO Partners’ policy has always been to invest in companies that are fundamentally good,” says CEO Gabriel Herrera. “Over time, this has been enriched by incorporating responsible investment criteria and concrete carbon footprint objectives into the investment process.”

The team at ARTICO Partners has been together for 11 years, a journey which has seen the company recognised as Switzerland’s Best Sustainable Fund Manager for 2021. “The key, at every step, was to preserve the fundamental qualities of the portfolio while achieving a quantum leap in terms of ESG scores and carbon footprint,” says Herrera.

Head Portfolio Mgmt: Michael Brenneis

CIO: Tero Toivanen

policy focuses on those rare situations where it would vote against management to promote its sustainability and decarbonisation agenda. Academic evidence about the effect that ESG factors have on performance diverges, depending on the scope and period of the analysis. ARTICO’s own research about the predictive power of raw ESG scores on future outperformance was equally inconclusive.

COO: Andreas Konrad

senior management teams have sustainability as a strategic priority. 2. A high score will attract a long-term capital flow as ESG investing becomes increasingly mainstream. Companies with better scores will attract more capital. 3. ESG scores provide a prediction of investment risk. A high score minimises the risk of unpleasant surprises by reducing the exposure to environmental, social, and reputational risk.

Integral to sustainable investing is the adoption of negative exclusion criteria, which limits the available investment universe to varying degrees. A light ESG-exclusion approach has only a marginal impact. A strong ESG-exclusion approach means investing only in best-in-class companies, which can be overly restrictive. ARTICO Partners’ approach is to obtain maximum sustainability impact with a moderate restriction of the investment universe. Applying sustainability and ESG criteria across all ARTICO funds has been a complex, multidimensional task. Engagement and voting are important components of a sustainable strategy: shareholders can and should actively engage with management to achieve ESG progress. Most large-scale and passive investors choose this avenue, given their broad and static portfolio holdings. Small, active managers such as ARTICO Partners are able to avoid companies with significant ESG issues. Investment candidates lagging in this area will be divested. ARTICO’s voting 76

“That’s why we developed — and apply — our own ARTICO-ESG factor,” says Herrera. ARTICO’s in-house research showed that the full integration of ESG scores as positive selection criteria during portfolio construction leads to a higher probability of superior investment performance. There are three main reasons for that: 1. An impressive ESG score is a useful indicator of good strategic management. A few decades ago, ESG investing was a niche, and listed companies did not truly focus on sustainability. Today, boards of directors and CFI.co | Capital Finance International

Many ESG-focused strategies have no explicit climate objectives. ARTICO focuses on reducing its carbon footprint to align its portfolios with the climate objectives of the Paris Agreement. Typical passive investment benchmarks focus either on ESG or on Paris-alignment. ARTICO Partners intends to achieve both with a systematic approach. ARTICO’s sustainable portfolios are the first funds enabling investors to combine excellent fundamental characteristics with very high ESG ratings (AA or AAA) and a very low carbon footprint. i

Spring 2022 Issue

CFI.co | Capital Finance International

> Lindsey McMurray, Pollen Street Capital Co-founder:

Purpose and Progress Rooted in Business ‘Finance represents the infrastructure for positive change,’ believes leading private equity investor.

ollen Street Capital co-founder Lindsey McMurray has been a private equity investor for 25 years, with a particular focus on financial services.

Since 2013, Pollen Street Capital has built deep capabilities across the financial and business services sectors, aligned with the mega-trends that are shaping the future of the industry. Managing director McMurray and her founding partners committed to the creation of a firm with a quality institutional infrastructure. The key elements at the heart of this are a shared purpose and a focus on ESG. “We have steadily built our business,” she says, “balancing strong governance and an institutional set-up with agility and our sector specialism. “As we grow, we want to ensure that we continue to build a purpose-led asset-management business. Our overarching purpose is to deliver long-term sustainable performance by enabling society through frictionless financial services.” The firm is committed to being: • Honest and fair with investors and portfolio companies • A good corporate citizen, driving growth that delivers a positive impact • A responsible and responsive employer that treats each individual as a whole person • A guardian for the next generation, contributing its expertise to promote a better world. Pollen Street manages more than £3bn in AUM across private equity and credit strategies for investors including leading public and corporate pension funds, insurance companies, sovereign wealth funds, endowment funds and foundations, asset managers, banks, and family offices. “Financial services have an important role to play in building a more sustainable future,” says McMurray. “Private capital can power change by funding green alternatives for homes and transport, accelerating financial inclusion, and helping to drive greater diversity and inclusion across the industry.

Co-founder: Lindsey McMurray

the

committed to maintaining and enhancing its focus on actions that generate positive impact for investors, its people, portfolio companies, and wider society. Pollen Street kicked off 2022 by signing up to the ESG Data Convergence Project, which seeks to standardise ESG metrics and comparative reporting for the private market industry.

Pollen Street — a signatory of the UN Principles for Responsible Investment since 2019 — is

“ESG diligence and monitoring are truly embedded in our day-to-day operations and investment activity,” says McMurray. “I’m proud

“In many cases, finance represents infrastructure for positive change.”

CFI.co | Capital Finance International

of the way that purpose is rooted in our business, and how this has driven progress and tangible positive impact for our portfolio, our investors, our people and our planet.” Lindsey McMurray supports several charities, with a particular focus on mentoring children in state schools, supporting climate-action initiatives through the production of documentary films, and supporting the speech and language charity Auditory Verbal UK. i

Spring 2022 Issue

> Chanel No 5 — a Fragrance that Caused the World to Swoon By Naomi Snelling

s it possible to be endlessly bold and eternally modern at the same time? Mais oui — Chanel No 5 is the definitive answer to that question.

advertising fragrance. Embraced by the trendsetters from fashion photographers to movie directors, advertising campaigns for No 5 have over the years starred Hollywood legends: Lauren Hutton, Catherine Deneuve, Nicole Kidman, Marion Cotillard.

A triumph of zeitgeist-grabbing, brand positioning and celebrity-leveraging swirled together with an intoxicating blend of more than 84 aldehydes, the famous scent has enchanted lovers of luxury and fragrance since its launch in 1921.

And for the first time in history, a man — Brad Pitt — was used to promote the perfume. He famously became the face of the 2012 campaign by delivering a soulful monologue that once again positioned the brand as unique, and compelling.

Still the best-selling fragrance in the world, Chanel No 5’s legacy is as complex, mysterious and iconic as Mademoiselle Chanel herself. The heady bouquet of scents dreamed up by French-Russian chemist and perfumier Ernest Beaux for Gabrielle “Coco” Chanel revolutionised the world of perfume; the truly daring fragrance cut across the one-scent offerings of the day. For the first time, a perfume tapped into the alchemy of scent by using aldehydes, organic compounds containing a functional group with the structure −C(H)=O. These formyl groups accentuate various elements of a scent, creating layers of complexity.

There are many “firsts” and famous moments in the history of Chanel No 5. In 1959, it was honoured by MoMA in New York, which placed a bottle in its permanent collection. In the 1980s, pop artist Andy Warhol commemorated it with a series of silkscreens. It was also the first perfume to be advertised at the Superbowl.

Marilyn Monroe

“Provocative” perfumes — those laced with animal musk or jasmine — were in her eyes suitable only for courtesans, or ladies of the night. “A woman’s perfume, with a woman’s scent” is what Coco Chanel wanted. She was looking for something that encapsulated the liberated feminine esprit of the 1920s.

The marketing success was almost instantaneous, making Coco regret giving them such a generous share. During World War II, when Paris was under German occupation, Chanel based herself in the Ritz Hotel, where she found a new lover — Baron Hans Günther von Dincklage, director of Nazi propaganda for the third Reich. She tried to use antisemitic laws to remove the Wertheimers from the contract.

Legend has it that she nearly swooned at the fragrance of the fifth sample Beaux presented to her — and from which No 5 draws its title. Chanel embraced numerology and enjoyed the notion that the number five had a magical, lucky quality. Other legends hint that Beaux’s assistant accidentally overdosed the sample with aldehydes. Either way, Chanel No 5 became the epitome of feminine chic. Its complexity, innovation, and its simplistic name elevated Chanel No 5 into a league of its own. Presented in the unfussy lines of a laboratory vial, its minimalist design distinguished it from elaborate containers of the day. Rumour has it that the flacon-style bottle was inspired by a whisky decanter owned by her lover, Captain Arthur Edward "Boy" Capel, an English polo player. A stronger bevel cut, inspired by the geometry of the original bottle, and a chunky stopper cut like a diamond were added in the 1950s. Positing that perfume was as important for a woman as her dress, Coco Chanel issued tantalising guidelines on how No 5 should be applied: “A woman,” she said, “should wear perfume wherever she would like to be kissed.”

Behind any successful brand lies an equally successful marketing strategy. In 1924 — before Chanel No 5 had found true fame — Coco Chanel went into business with the Wertheimer brothers, Pierre and Paul, directors of the perfume house Bourjois. Together they created Parfums Chanel. The Wertheimers managed production, marketing, and distribution of Chanel perfumes, No 5 obviously included, in exchange for a 70 percent share of the company.

Chanel No 5. Photo: @LauraChouette

No mention of the iconic scent would be complete without a nod to one of its most famous fans. Marilyn Monroe, when asked what she wore to bed, famously replied: “Just a few drops of Chanel No 5.” Those words secured the perfume’s place in history, and continue to waft through the decades, underpinning its legendary status. Coco Chanel herself was the first “face” of Chanel No 5, photographed at the Ritz for an advertisement published by Harper's Bazaar in 1937. It pioneered a whole new way of CFI.co | Capital Finance International

After the liberation of Paris, perhaps to salvage her reputation, Chanel offered free bottles of No 5 to American GIs and other Allied soldiers. She subsequently fled to Switzerland to escape criminal charges, where she lived with Von Dincklage before returning to Paris in 1954 — and successfully re-starting her fashion house. Ironically, Coco Chanel’s comeback was financed by Pierre Wertheimer — who realised that her continued fashion success would be to their mutual advantage. Chanel No 5 is unarguably one of the most iconic fragrances of the 20th Century, one that has managed to resist the whims of fashion and the passage of time. As mysterious and compelling as Coco Chanel herself, it remains an inspiration for all women. i 79

> All Players are Part of the Solution:

Proceed with Purpose to Maximise ESG Impact

ollen Street Capital is a purpose-led asset manager whose overarching purpose is to deliver long-term sustainable performance through frictionless financial services.

That means commitment to actions that generate positive impact for investors, people, portfolio companies and wider society. 80

As stewards of capital, asset managers are uniquely positioned to power change through diverse areas: funding green alternatives for homes and transport, accelerating financial inclusion, and helping to drive diversity and inclusion in the businesses they support. Gone are the days when ESG fell squarely on the shoulders of largest corporates; all players must now be part of the solution. CFI.co | Capital Finance International

Private capital finance can function as the rails to guide the train of positive change. Pollen Street Capital MD Lindsey McMurray says her firm believes in the potential for positive impacts that investment and support can have. “Our experience gives us a unique insight into the challenges facing businesses,” she says. “We’re in a position to use that experience to help drive positive impact — not just in how we

Spring 2022 Issue

Hub director Alison Collins says Pollen Street’s experience has helped to build a set of consistent, practical steps to help social businesses achieve positive outcomes. “Whether you’re a firm’s ESG champion, a board member or CEO, there are some practical actions that can amplify the positive impact of your business and drive forward an ESG agenda,” she says.

When Pollen Street onboards a new business, impact areas are mapped-out with a focus on sub-sector, customer base and value proposition, strategy and team expertise.

1. ELEVATE THE DISCUSSION There’s a responsibility to bring ESG considerations to board discussions — and beyond. “In setting up an ESG programme, it’s important to set the tone from the top,” says Collins, “and to create a sense of purpose and guiding principles. As with any change in a business, culture is key.” Senior sponsorship is crucial to empower employees to “own”, and run with, ESG projects.

4. GET THE BASICS RIGHT Once ESG strategy has been addressed, create an action plan with initiatives to deliver tangible outcomes and address any identified gaps. Setting and communicating an ESG policy could be an initial step.

ESG is not a tangential exercise, but part of responsible and sustainable business operation. “When ESG is integrated into the DNA of a business and aligned with the strategy, teams are better placed to understand and drive progress towards a core mission.” 2. CREATE A COMMON LANGUAGE Not everyone is familiar with the vocabulary of ESG and its relationship with asset management. Take the time to discuss what ESG means for your business, and how it can generate impact for the environment, on emissions and the carbon footprint across a company’s operations. Address resource management and propositions that address climate change, such as green mortgages.

invest, but also through the support we give to our portfolio.” Support is provided through the Pollen Street Capital Hub initiatives, through which portfolio-wide issues can be addressed and solutions developed for common opportunities. In particular focus is the advancement of ESG considerations for positive impact.

Businesses should map the areas where they can have most impact: core competencies, stakeholder priorities, and overall strategy and growth goals.

5. SUPPORT WITH THE RESOURCE IT DESERVES ESG impact requires correct resourcing, such as a dedicated team. But the crucial element is to ensure that employees feel supported to focus on ESG impact areas, from reporting and carbon-reduction initiatives to charitable programmes. ESG is not a topic that falls entirely under the umbrella of a single team; it is fundamental to every role. A cross-functional working group and engaged staff play important roles. Championing the ESG agenda helps to embed the approach and drive projects forward. 6. USE THE COMMUNITY TO SHARE BEST PRACTICE Private equity firms help businesses through experience and expertise. Firms across industries are faced with common problems — but those that are supported by active managers don’t have to start at square one.

Examine how a company manages its relationships with employees, suppliers, customers, and the community. Issues include employee health, wellbeing, and engagement; diversity and inclusion, supply chain standards, Human Rights, customer and product responsibility, and local communities and charitable support.

The Pollen Street Hub enables knowledgesharing across the portfolio to accelerate thinking and turn intentions into actions. Make use of networks to access best-practice, acquire recommended suppliers, and give navigational support through the complex regulation and reporting requirements.

Governance deals with effective controls and risk management, business ethics (including anti-bribery and anti-corruption measures), board diversity and structure, and data privacy and security. With a common understanding of topics specific to the business, a structure can be created to better guide your efforts.

7. GOING BEYOND REPORTING All too often, ESG is seen as a tick-box exercise — but over-focus on reporting can move attention away from real impact. Minimise the reporting burden by highlighting the work the business does — and maintain focus on strategically important impact areas.

3. FOCUS ON THE IMPACT With the increasing focus on ESG, the challenge is not in demonstrating its importance, but in helping the businesses align behind their impact areas.

Create structured, easy-to-understand reporting frameworks, supported by a knowledgeable asset-management team. Remove the notion that ESG is all about reporting.

Every business is positioned to tackle a specific set of issues, and should define broad sustainability objectives that link to strategy and values. And these should align to the UN’s sustainable development goals.

Show people that their actions matter; be proud of their successes. Spreading good news encourages employee engagement and accelerates impact with others tackling similar issues. i

CFI.co | Capital Finance International

Spring 2022 Issue

> Jürgen Eichner - CEO & Founder, VIA optronics:

Vision of VIA optronics Boss Takes Company on Whirlwind Trajectory

CEO & Founder: Jürgen Eichner

hen Jürgen Eichner founded VIA optronics in 2005, he already had extensive experience in engineering and sales. That combination of skills has proven

invaluable. Eichner identified a gap in the market and took the bold step of single-handedly setting up VIA optronics. The only assistance he received came from a friend in the sector, who offered him clean room space and seconded two workers to help from time to time. The German government gave him some financial assistance for six months, but other than that he was on his own.

In 2009, taking advantage of the contacts made throughout his career, Eichner’s company acquired part of White Electronics, establishing a foothold in the North American market. Eichner´s leadership landed contracts with Dell and Hewlett Packard, both IT firms interested in tech for their laptops. Realising that by now he needed to improve the firm´s supply chain, Eichner opened a production centre in Suzhou, China, and in 2018, acquired a touch sensor supplier in Japan. By 2020, Eichner decided it was time to go public. He supported the initial public offering of VIA optronics to extend the public knowledge of the company. The US, he notes, is a market that engages with its products.

Nevertheless, in his first year the company had a turnover of €200,000 — which in 2007 increased tenfold to €2m. By 2008, it had quadrupled to €8m. Having achieved such exponential growth in just three years, the company no longer required funding — it needed working capital.

In 15 years, VIA optronics had grown from a oneman band to a listed entity with 800 employees; Eichner has had to learn to delegate, and reports to shareholders every three months. He sees this as an advantage: valuable feedback from investors exposes him to disparate viewpoints.

He succeeded in this by winning contracts with a German-Swiss equipment manufacturer, producing displays for its excavators, and a Bavarian car firm. At the Bavarian car firm, the industrial technology of optical bonding was applied to the automotive sector.

Eichner takes his responsibility as an employer seriously. “We don’t believe in a hire-and-fire system, but in nurturing talent and retaining staff over the long term.” He acknowledges that it has sometimes been difficult to find enough highlyqualified employees, and recognises the value CFI.co | Capital Finance International

of providing exciting and challenging careers in tight and dependable teams. The pandemic has been a double-edged sword for VIA optronics. Production in China ground to a halt for two weeks, but on the other hand, the explosion in home-study and remote working boosted the market. Eichner earned a master’s degree in Science in Electronics Engineering from the University of Applied Sciences in Nuremberg. He then embarked on a career as a development engineer at global defence company Diehl, where he rose to become the head of the company´s electronic service centre. From 1998 to 2000, he served as business development manager and director of Origin Germany’s professional services group. He then took on the role of head of sales EMEA at White Electronic Design Corporation. As Eichner looks to the future and thinks back on his career, he is increasingly conscious of the need to identify and appoint successors able to ensure the continued success of the company. His time at the helm of VIA optronics, however, indicates that he still has plenty to contribute himself. i 83

> VIA optronics AG:

Challenged by Optics or Display Issues? VIA’s Got This One Covered

ermany’s VIA optronics prides itself on being a one-stop solution provider of interactive display systems and solutions.

The company is headquartered in Nuremberg, Germany with production facilities in China and Japan, and further subsidiaries in USA, Taiwan and Philippines. VIA provides technologies for the industrial, and consumer electronics markets, with a particular focus on the automotive sector. The current focus is on the high-growth electric vehicle segment, and VIA works with several manufacturers. VIA’s offerings for automotive applications include navigation displays, instrument clusters, rear-seat entertainment and infotainment systems, and interactive display systems. Solutions for industrial applications include displays for “ruggedised” laptops, marine navigational systems and fish finders, agricultural equipment, surround views, digital signage, and interactive conference room displays. Consumer applications include solutions for notebooks, tablets, and all-in-one monitors — in a range of display sizes from one inch (25mm) to over 84 inches (2.13m). When it comes to interactive display, VIA combines system design capabilities, interactive displays, software, hardware, and cameras.

Headquartes: Nuremberg

VIA’s customisable tech is well-suited for highend markets which have specific requirements to overcome technical and optical challenges.

Its innovations have successfully surmounted issues such as bright ambient light, vibration and shock, extreme temperatures, and condensation.

Demonstrator of an Interactive Display System

CFI.co | Capital Finance International

Spring 2022 Issue

"To round-out the elements of an interactive display system, VIA has the know-how to provide integrated solutions, interfaces and applications such as object recognition."

Process Step Optical Bonding

The technology itself is based on VIA’s patented optical bonding process with a proprietary silicon-based material. It provides excellent sunlight readability and slim product design as well as flexible applications on bendable, foldable and curved display surfaces. The company partners with Corning , a leading glass manufacturer with its cutting-edge Coldform™ Technology for curved automotive displays. VIA meets the most exacting requirements for design, volume, and proximity manufacturing through its production sites in Germany and China. The agile production capacity allows projects to be moved between the two sites without delay. Manual, semi- and fully automated production lines enable the handling of any project, from specialised, small-batch runs to high-volume production.

Copper Metal Mesh Touch Sensor

And VIA optronics’ expertise does not stop at optical bonding. It designs, develops, and produces touch sensors at its subsidiary in Japan. The company’s metal-mesh touchsensor is based on a grid patterned on a transparent film that can be laminated to any type, shape and composition of cover lens material — including curves and plastic. With high conductivity, touch sensors allow active pen- and glove functionality, large size applications, and superior performance. The technology supports flexible, foldable, and curved applications, as well as touch functions in areas beyond the display (in housings, for example). VIA optronics also designs and develops cameras with a focus (no pun intended) on the automotive and transport markets. These customisable devices are used for viewing and sensing applications such as driver monitoring, ADAS, mirror replacement, or surround view. To round-out the elements of an interactive display system, VIA has the know-how to provide integrated solutions, interfaces and applications such as object recognition.

Graphic Interactive Display

CFI.co | Capital Finance International

Whatever it may be, VIA ensures it’s in the eye of the beholder. i 85

> Volocopter:

Pioneering Air Mobility and Shaping World’s Urban Skies with Electric Fleet

erman start-up Volocoptor pioneers sustainable air taxi and cargo solutions for urban communities.

The German urban air mobility (UAM) firm is committed to providing multidimensional mobility in megacities around the globe. It combines electric vertical takeoff and landing (eVTOL) technology with a partnership approach to create safe, sustainable, scalable, and affordable air taxi services. The company’s mission is to improve quality of life for city dwellers with a radically new form of transport. Volocopter is edging closer to the commercial launch of a seamless, fully integrated UAM system for urban skies. Full certification from the European Union Aviation Safety Agency (EASA) is imminent for all Volocopter’s air taxi solutions. That milestone will result in substantial commercial opportunities — and UAM services are likely to be launched in Paris and Singapore within two years. VoloPort atop urban building with VoloCity and VoloConnect

As the world’s population grows, people increasingly flock to cities. Some come to live and work, others to pursue personal ambitions. One way or another, urban spaces labour under multiple strains: congested roads, overcrowded public transport, rising air pollution, and increasing disparity in quality of life. Urban land is scarce, and an overhaul of existing under- and overground infrastructure is essential as megacities struggle to accommodate this persistent influx of people. By creating the dimension of verticality, Volocopter offers a safe, fully electric alternative that has the potential to take the pressure off existing travel and transport options. It addresses and embraces the trend towards sustainable mobility. PRODUCT LINE-UP AND UAM ECOSYSTEM Volocopter has created a trio of eVTOL aircraft to serve different urban missions. The two-seater VoloCity is its metropolitan air taxi, ferrying passengers over traffic-clogged streets and thoroughfares. The VoloDrone is the VoloCity’s cargo-carrying equivalent, a heavy-duty drone capable of delivering goods within cities — or to more remote destinations. Last, but certainly not least, is the VoloConnect: a four-seater air taxi with a 100 km range, 86

2X flies over Stuttgart

unlocking fresh possibilities for urban and suburban transport. All Volocopter craft are designed to meet the highest standards and safety ratings demanded by the EASA, which is equivalent to the certification process facing commercial airliners. CFI.co | Capital Finance International

The company is determined to secure safety certification from a globally recognised regulator — Volocopter craft will be flying above densely populated cities, after all. The VoloCity and VoloDrone are expected to launch in the next two years, while the VoloConnect is set to take to the skies in 2026.

Spring 2022 Issue

UAM flight in Korea

VoloCity front view in an urban setting

Yoga ball prototype flight

VoloDrone (front view)

In addition to the design, Volocopter will fly and operate the aircraft, covering the entire customer journey from bookings and vertiport operations through to flights. “To offer customers an exceptional service, we have created the VoloIQ, a digital network solution that will be the backbone for ensuring safe and efficient operations,” says CEO Florian Reuter. “It will connect customers, aircraft, and infrastructure. The VoloPort, the vertiport infrastructure, will cater specifically to urban settings. This holistic approach is what makes Volocopter unique — and puts it ahead of the pack.” PUBLIC ACCEPTANCE AND POTENTIAL ROUTES To accelerate the adoption of UAM in cities, Volocopter has gone the extra mile to be transparent about its aircraft and commercial launch aspirations. Public awareness and acceptance play a vital role in the industry’s success, which is expected to become a multitrillion-euro market by 2030. “Since 2017, the company has conducted over 1,000 test flights with a prototype,” says Reuter. “That includes public flights and local displays of full-sized VoloCity models in major cities such as Dubai, Singapore, and Paris. “This gives people the chance to see, hear, and familiarise themselves with the concept of UAMs, and how they will operate.” Test flights

have been conducted in all three modes: piloted, uncrewed, and autonomous.

help accelerate the evolution of the entire UAM universe.

Volocopter has published detailed roadmaps on the reasoning behind its focus on intra-city travel, and how aircraft design is shaped by customer needs. There is full disclosure on aircraft safety, how redundancy measures are applied, and why certain metropolitan routes are best suited to UAMs. Volocopter recently announced the routes it will offer in Singapore, with cross-border flights to Malaysia and Indonesia planned.

“The company has built up strong working relationships with local authorities, including the Singaporean government, Aéroports de Paris, and Aeroporti di Roma.”

“To gain public acceptance and map out flight plans, Volocopter must forge strong links with cities and organisations,” Reuter points out. “This way, it can promote its services at local level and spread the word about the benefits UAM offers. “There is also a need to work with public infrastructure and communication system operators to set up a physical and digital network on the ground — well in advance of commencing operations.” For Volocopter to literally take off and become commercially viable as soon as it receives EASA certification, it needs more than just a sleek fleet, the CEO admits. “That’s why we are offering an accompanying ecosystem that encompasses the VoloPort and VoloIQ, solutions that will CFI.co | Capital Finance International

FUNDING AND THE FUTURE Volocopter has embraced the challenge of launching commercial services, with an accompanying UAM ecosystem, in a nascent industry. It is powering ahead by working closely with EASA to share technical details and the status of developments. “It is also brokering deals with strategic global partners who have a wealth of experience in manufacturing, technology, and R&D,” says Reuter. “These partners operate at various levels and range from governments and city authorities to the automobile, aviation, transport, and finance sectors.” Many of these partners are also equity investors, who have helped Volocopter to raise some €495m. Among them are global players such as the Mercedes-Benz Group, Geely, Tokyo Century, BlackRock, DB Schenker, and Intel Capital. Volocopter intends to go public once its corporate business strategy and market conditions align. i 87

> AVEVA:

Software is the Key to Sustainable Industries By Peter Herweck CEO of AVEVA

Digital thinking and data-led operations will accelerate the drive to net-zero and a decade of action.

he world is on the cusp of transformation to sustainability. Global leaders are faced with a golden — but finite — window of opportunity.

Climate change effects have accelerated and are already impacting countries across the globe. But as international players look to address energy efficiency and emissions, targeting sustainability has shown itself to be an important lever of global growth and innovation. Making the most of these tools can help us meet the challenges — and bring about a new era of energy and resource efficiency. The UN has declared the 2020s as the decade of climate action. Without immediate efforts, at scale, we will miss the Paris Agreement goal of limiting global heating to 1.5°C. Now is the time to think about the role that industries can and must play. SOFTWARE DRIVES SUSTAINABILITY Despite the gravity of the crisis, there is good news: the software to enable companies to reach net-zero exists — and it is affordable and accessible. Fourth Industrial Revolution tech such as AI, machine learning, cloud computing, biotechnology and the industrial internet of things can help to achieve 70 percent of the United Nations’ Sustainable Development Goals over the next decade, according to the World Economic Forum. Sustainable development is within our reach — but getting to that point demands a new way of thinking. SUSTAINABLE AND DIGITAL With the private sector accounting for 75 percent of global GDP, businesses have a responsibility to work with governments and policymakers, and digital technologies are a key part of this plan. An enterprise supported by a digital data backbone is more agile, innovative, and resilient. It can also be more sustainable and carbon-neutral. Consumer goods and industrial chemicals manufacturer Henkel realised that supply88

CEO: Peter Herweck

chain resource efficiency slashed filling-line waste and energy consumption by up to 16 percent. It introduced digital solutions to track activities along the value chain, from raw materials to finished goods. One of North America’s largest clean power generators, Canada’s Ontario Power Generation, boosted energy efficiency and saved $4m by implementing the AVEVA PI System and AVEVA Predictive Analytics solution to optimise performance of their hydro-electric and nuclear power networks. CFI.co | Capital Finance International

WINDOW FOR CLIMATE ACTION AVEVA believes that a tremendous opportunity exists for industries to build new, more sustainable business models. This decade of action will leave the world changed. Companies that proactively embed data intelligence and predictive analytics throughout their value chains will be the first to reap the benefits of this new era. Welcome to the age of performance. i

Open your world to new discoveries. Introducing the World Elite Mastercard with the contactless feature. Mastercard credit cards. Free access to over 850 airport lounges worldwide with one guest**

Concierge** services

50% discount* on movie tickets

Buy-1-get-1 offer* at Costa Coffee and many other outlets

10% discount* on air tickets through “Cleartrip”.

For more information, please call our 24 hours Phone Banking on 17531532. Download “Mastercard for you” app on your phone to know the World Elite Mastercard features.

sc.com/bh * Terms and conditions apply. ** Exclusive beneﬁt for World Elite Mastercard customers.

Licensed by the Central Bank of Bahrain as a Conventional Retail and a Wholesale bank.

> Sanctions

Against Russia Resemble a Boxing Match By Otaviano Canuto. First appeared in Policy Center for the New South.

he economic sanctions against Russia announced last week by the US and Europe are having a profound impact on the Russian economy — and repercussions at home. As in a boxing match, the expectation is that blows to the opponent can knock them out, despite exposure on the puncher’s side. The US has applied several sectoral and economic sanctions against Russia since the annexation of Crimea in 2014, and during military clashes in eastern Ukraine. Nothing has been comparable, however, to what was announced last week. Between February 22 and 27, there were sanctions by the United States on the secondary market for Russian sovereign debt securities issued after March 1, and a German decision to suspend certification of the Nord Stream 2 pipeline. There have since been announcements — by the US, the 27 members of the European Union and the G7 countries — of the freezing of assets of Russian banks and some individuals, and controls on the export of technology products. This culminated with the removal of some Russian banks from the SWIFT system and the banning of transactions with the Central Bank of Russia. SWIFT is a messaging network connecting banks worldwide that is considered a backbone of international finance. SWIFT is a consortium managed by employees of member banks, which include the central banks of the US, Europe, Belgium, England, and Japan. Based in Belgium, the consortium links more than 11,000 financial institutions in 200 countries and territories, enabling international payments. In 2021, the system recorded an average of 42 million messages each day, including payment requests and confirmations, negotiations, and currency exchanges. About one percent of these are believed to have involved Russian payments. Would there be any alternatives for Russians to transfer and normalise their operations outside of SWIFT? Russia has an one, the System for Transfer of Financial Messages, but it cannot be a replacement. By the end of 2020, the system included only 400 participants from 23 countries. Also, China's cross-border interbank payment system could not be a perfect replacement, at least not any time soon, as it does not incorporate SWIFT members. Last week's sanctions are already having a significant impact on the Russian financial system and its economy. The value of the rouble collapsed. The Central Bank of Russia put interest rates up, to limit the transmission of currency devaluation to inflation. Restrictive capital controls, and possibly bank holidays, lie ahead. 90

Figure 1: Bank of Russia - assets have been moved away from US and EU. Source: Bank of Russia, IIF.

Figure 2: Annual EU27 natural gas domestic production and imports (TWh). Source: Bruegel

Despite the strategy of reducing exposure since the beginning of sanctions in 2014, via geographic relocation of reserves and acquisition of gold, and changing currencies in commercial transactions — a kind of “de-dollarisation” — Russia has not become invulnerable and the impact will be great (Figure 1). The GDP contraction will not be light, given the tightening of financial conditions accompanying ultra-high interest rates and banks without access to foreign currency. And outside Russia? Of course, the receiving end of payments — creditors, asset investors — will be impacted. The consequences will only be extended if the devaluation of the corresponding assets leads to some contagion effect: withdrawal of funds by investors in mutual funds forcing their managers to liquidate other assets in their portfolios to pay for the withdrawals. The sanctions were tentatively designed to minimise their effect on Russian gas imports to Europe. The sanctions are more limited in scope than the broader targeting advocated by other countries to win Germany's support. It will be through the rise in energy commodity prices — in addition to possible restrictions on the transport of Russian products — that the war in Ukraine will affect the economies on the other side of the fight. Also, because of a statistically proven asymmetry: what happens in the subgroup of energy commodities affects others, such as food and metals. On top of that, the global supply of wheat will be negatively impacted, which is particularly CFI.co | Capital Finance International

important in regions such as North Africa and the Middle East. Russia is also a major supplier of fertilizers, palladium, and other products which may be affected by supply chain restrictions. The inflationary shock coming from that, and higher commodity prices, will accentuate the dilemma faced by central banks on both sides of the Atlantic. How quickly and intensively can financial conditions be tightened in the face of inflation, while not bringing down the pace of economic activity? The deteriorating macroeconomic outlook prompts analysts to predict that the Federal Reserve will opt for 25 basis points. There is a fear that these economies would return to conditions like those of the early 1980s, when the second oil shock occurred while inflation was already high. The bet is that Jerome Powell and his colleagues at the Fed are not like Paul Volcker, chairman of the Federal Reserve at the time, whose option was to bring down inflation at any cost. Returning to sanctions: of course, additional rounds extending the reach can still be adopted in new rounds of the boxing match. The Bruegel Institute, a Brussels-based think-tank, tackles scenarios such as how Europe would suffer from a halt in the flow of Russian gas (Figure 2). The boxing match via financial and commercial sanctions has just begun. The willingness to seek Russia’s knockout in this way seems more robust than the fear of its consequences. i

Spring 2022 Issue

Opening the door to property, mortgage and franchise experties To find out more, visit belvoirgroup.com

CFI.co | Capital Finance International

> Could

Cryptocurrency Really Be the Future of Institutional Investment?

Martha Reyes, head of research at digital assets brokerage platform BEQUANT, looks at the immediate prospects for crypto.

he December Federal Reserve minutes confirmed that the Fed would end the purchase of bonds by March — and seek to raise interest rates three times in 2022.

These hawkish comments triggered short-term volatility in the US stock markets, and caused another round of selling tech names and digital assets. Bitcoin and Ethereum prices fell, with BTC breaking below $40k and ETH below $3k. Prices were also hit by the internet shut down in Kazakhstan, the world’s second-largest bitcoin mining hub. These types of sell-off are not uncommon in the digital asset space. Data shows that retail investors have not been as active as they were during the spring rally of 2021 and that institutions are now more involved. It can be argued that digital currencies will have a higher correlation with traditional markets as investors tend to de-risk across the board. Coinbase’s Quarterly results show a clear acceleration of institutional interest, growing from 60 percent of total investment through the platform to 72 percent. So what does institutional investment look like? For some, it's buying and holding coins, treating them like appreciating assets. For others, it’s for trading against fiat, pair trading against other cryptocurrencies, or arbitrage trading, similar to a stock or equity. For venture capital firms, it may be longer term investing into crypto start-ups and infrastructure companies, of which some of that investment may be in cryptocurrency. DeFi (decentralised finance) has been the subject of much discussion over the past two years, and institutions are entering the space to increase their returns via higher yields. We are seeing the rise of permissioned pools, which are KYC/AML compliant and institutional custodian solutions. Total Value Locked in DeFi has grown dramatically to over $240bn — but is still tiny compared with the hundreds of trillions in traditional markets.

Quarter Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 92

Retail ($bn) 18 32 120 145 93

The sector should continue to grow, especially as regulation around stablecoins and tokens becomes clearer, and security improves, while real interest rates remain low.

high performance, though not a guarantee, mean even a small percentage of a fund dedicated to crypto could offer substantial returns for investors, while improving the Sharpe ratio.

Digital assets have a number of advantages over traditional investment classes. High volatility and arbitrage opportunities mean highfrequency trading strategies can offer large rewards. Potential for mainstream adoption and technological innovation can also be attractive for buy and hold strategies. Volatility and historically

The year 2021 was a turning point, when the industry became more visible and was acknowledged by regulators. Mass adoption has not taken place yet, so there is still a first-mover advantage for many managers. Institutional money is already entering the market through lots of different avenues. Some investment is going directly into tokens while additional capital is supporting the growth of businesses in the space.

Institutional ($bn) 27 57 215 317 234

Total ($bn) 45 89 335 462 327

% Institutional 60 64 64 69 72

CFI.co | Capital Finance International

Institutions that are in the space are already seeing rewards and, if analysts are correct, the market looks to be healthy and buoyant for the foreseeable future. i

Spring 2022 Issue

Inflation Has UK’s SMEs in a State of Worry for 2022 Research by lender iwoca outlines concerns for small business owners

he rise in inflation predicted by the Bank of England, and the threat of rising interest rates, worries 71 percent of Britain’s small business owners.

As energy, fuel and raw material prices rise, almost half (46 percent) named increased running costs as a concern. And with the dual impact of Brexit and the pandemic disrupting global trade routes, a quarter of small business owners also expressed concern about supply chains. The threat of further restrictions remains a worry for small businesses, with 66 percent of small business owners citing additional Covid-19 measures as a key concern. As concerns mount over the future of the economy and its effect on their business, four in five business owners do not expect to hire new employees this year, with only one in ten expecting to take on new staff. Optimism among small business owners remains low, with 30 percent expecting to be worse off by the end of the year. Only 28 percent expect 2022 turnover to grow.

Harp Gill, the Milton Keynes-based owner of mobile catering business The Rub, said Covid restrictions had led to a string of cancellations. “While no new restrictions are imminent, we have been hit by shortterm worries surrounding inflation and rising business costs,” he said. “Over the past few months, supply chain issues and rising costs have meant we have had to remove certain meats from our menus, including beef and lamb. We hope that as people see the back of the pandemic and get out to celebrate their lives, we will return to normality.” Seema Desai, iwoca’s COO, said the results showed that small business owners are concerned about knockon effects. i Top three concerns business owners have about 2022 • Increased business running costs: 46% • Supply chain issues: 25% • Staff illness: 24% Top three concerns business owners have about the economy in 2022 • Inflation: 71% • COVID-19 restrictions returning: 66% • Political uncertainty: 43%

AI and Satellite Tech Fight Climate-Change, Boost Diversity

n intelligent sustainability management system (ISMS) could soon help companies achieve their sustainability and biodiversity goals.

California-based provider of satellite and AI-powered operations, Aidash, announced the development at the COP26 climate change summit in Glasgow. Its ISMS solution would enable customers — including energy company National Grid — to meet proposed 10 percent biodiversity net-gain standards and allow digital operation of land surveys that are currently performed manually. AiDash has developed the ISMS over the past nine months, working with the National Grid Partners Innovation team.

“Existing tools and techniques lack the ability to analyse historical data and make data-driven environmental improvements,” he said. “Our new platform allows organisations to achieve resource efficiency and implement (the UN’s) Sustainable Development Goals.” In a recent survey by SAP and Oxford Economics, utility and energy executives said increased process complexity is a hindrance to meeting sustainability goals. The ISMS Land module will reduce laborious fieldwork through the AI-backed image-analysis for systematic mapping, planning and assessing land enhancements. Greenhouse gas emissions across sources such as well pads and gas pipelines would be measured through the ISMS Air module.

The UK’s Environment Bill will mandate a 10 percent net gain in biodiversity for all new developments, and raise the imperative of land sustainability.

“It's a crucial step in helping us to achieve our regulatory obligations and make our contribution towards the biodiversity crisis and climate change,” said Prem Gabbi, head of National Grid Property.

Organisations with large landholdings, such as energy, water, and wastewater companies, use on-the-ground surveying methods to map land types and measure biodiversity levels. The cost and process complexities of using these methods can hinder the implementation of natural capital enhancement plans, says Abhishek Singh, co-founder and CEO of AiDash.

AiDash's satellite-powered ISMS could enable environmental surveys and audits without manual fieldwork. “We could efficiently leverage repeatable and transparent satellite data to design optimal strategies,” Gabbi said. This could enhance biodiversity across some 3500 hectares of non-operational National Grid land in the UK, the company says. i

CFI.co | Capital Finance International

> CBRE:

Multifamily Assets Consolidate Real Estate Investment Growth By David Casas Alarcón Property Management Accounting Lead at CBRE’s European Center of Excellence

Real estate investor appetite for European multifamily properties has been thriving in the past decade. Resilient income-driven performance, sustained by strong occupier market fundamentals and long-term socio-demographic trends, should continue to fuel the rise of this asset class.

ast year ended by beating European multifamily records with nearly €100bn invested. With a compound annual growth rate of over 15 percent in total investment into the sector between 2012 and 2020 and a larger than 50 percent annual increase in 2021, multifamily has moved from the fringes of investors' barometers to sit firmly in the sights of those looking to deploy capital. Mega-deals have taken the investment market to new highs, such as German-listed Vonovia’s takeover of rival Deutsche Wohnen for around €23.5bn (which included €1bn in nursing home assets, or AXA’s €2bn purchase of a portfolio developed by intermediate housing provider In’li in the Greater Paris region.

Robust factors underpin the performance of the multifamily sector. These include continued urbanisation and strong city demographics, changes to household formations, affordability challenges, and persistent supply-demand imbalances. These factors are typically delinked from economic cycles and have allowed the sector to continue performing well during a period of wider economic instability through 2020 and 2021. Figure 1: European multifamily investment sharp increase in 2021. Source: Savills Research

STRATEGIC PARTNERSHIPS There is a general shortage of modern, efficient investment grade stock in mature multifamily markets, while the opportunity to buy fully stabilised assets is virtually a non-starter in nascent investment locations. With compressing yields, many investors are also looking up the value chain towards development opportunities and taking advantage of local partnerships or inhouse development expertise. With the ownership of a scaled platform the continued goal for many investors, some are looking even further up the value chain and taking stakes in developers as a way of securing pipeline, or working on a more strategic manner across a number of sites. The 32 percent of equity invested in the European multifamily sector during 2021 came from cross94

border investors, roughly in line with the five-year average. Nearly three-quarters of cross-border capital invested throughout 2021 came from other European countries, significantly above the five-year average (52 percent). Asian and North American money accounted for around 10 percent of total cross-border investment, but are increasingly involved in assessing deal opportunities. URBANISATION TRENDS Demographics probably constitutes the most relevant factor when assessing residential property investments. As in most regions, population growth prospects are expected to be impacted by an increasingly ageing society and a subdued birth rate in the coming decades. Despite a muted top-down picture, some European countries are likely to experience a CFI.co | Capital Finance International

Figure 2: Expected demographic growth 2020 - 2035.

Source: Oxford Economics

dynamic population development between 2020 and 2035 (see Figure 2). This is evident in countries such as Sweden (ca. 13 percent) and Ireland (ca. 10 percent).

Spring 2022 Issue

Despite the increasing digitalisation of the job market, which enjoyed an additional boost from the pandemic, urban centres will remain the hotspots for the service sector, which makes up the largest stake of the job market. These locations are likely to remain attractive due to their cultural and entertainment offering. However, as home- and near-office activities are expected to gain traction, suburban municipalities and well-connected secondary cities — particularly locations with strong public transportation links — will probably become more attractive. This could also influence the geography of the European multifamily market on a micro-level.

removal following a national court ruling. The new coalition government does not look likely to grant the state’s wishes to grant it the legal mechanisms to re-introduce the freeze, but popular and media perception will continue to influence investor behaviour.

The threat of regulatory changes constantly looms over the sector. Despite record levels of investment, there remain some headwinds, not least political interventions in the housing and investment markets that could restrict investment opportunities and deter potential new entrants.

At a broad level, most investors are generally not deterred so long as regulation is stable, well-signposted and proportionate, but local and national governments need to ensure private capital is not deterred from helping meet housing related challenges. These include facilitating newbuild delivery to ease supply constraints and renovating stock to improve quality and energy efficiency.

Regulatory changes were felt in various locations over the past year and the outlook in many cases remains uncertain. The best-documented intervention was the rent freeze introduced by the Berlin government and its subsequent

Elsewhere, Spain’s Housing Law has progressed and includes provisions for rent control (already enacted by Barcelona) and taxation of empty flats. During last year, the Irish government tightened permitted rent increases in Rent Pressure Zones (RPZs) and introduced a transfer tax surcharge on bulk purchases of single-family rental homes.

Europe’s multifamily market has grown from a small, geographically concentrated market to CFI.co | Capital Finance International

an investment opportunity with more depth and complexity. Despite some near-term concerns over rising interest rates, multifamily returns are still significant, and it continues to be one of the more favourable real estate sectors across the continent. Equally investors are turning to multifamily-adjacent sectors — particularly shared and single-family rental — to achieve higher returns and bring portfolio diversification benefits. i

Author: David Casas Alarcón

ANNOUNCING

AWARDS 2022 SPRING HIGHLIGHTS Once again CFI.co brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative. All the winners announced below were nominated by CFI.co audiences and

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

CFI.co | Capital Finance International

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

Spring 2022 Issue

> ENGIE NEW VENTURES: BEST CLEANTECH STRATEGIC INVESTOR GLOBAL 2022

ENGIE New Ventures (ENV) levers a €180m fund to back cleantech energy companies striving to digitise, decarbonise and decentralise the power industry. It makes direct investment to scale operations of cleantech companies with proven track records, working closely with leadership teams to form long-term partnerships and guide ENGIE innovators strategic growth. The VC firm looks for logotype_solid_BLUE_CMYK with solutions for Decentralized clean 14/04/2015 energy generation, smart cities and mobility, green gases such as green hydrogen and biomethane, carbon capture and usage, etc. The ENV

24, rue Salomon de Rothschild - 92288 Suresnes - FRANCE Tél. : +33 (0)1 57 32 87 00 / Fax : +33 (0)1 57 32 87 87 Web : www.carrenoir.com

portfolio features dozens of start-ups pushing the boundaries of possibility. AI-powered microgrids, decarbonising tech for natural gas, off-grid biogas appliances, solar films for buildings and energy efficiency upgrades with no upfront cost for customers — this only touches the tip of the iceberg. All ENV investees present a technology, RÉFÉRENCES COULEUR customer solution or business model with the potential to unlock new market opportunities and spur innovation across ENGIE Group’s business C100% units. ENV typically makes minority-stake investments, ranging between €1m and €5m

and focusing on B2C, B2B and B2T (territory) companies entering growth and expansion phases. The firm points to 3 differentiators that have proven key to its success: support from sector experts, access to markets, and quality of the teams. Headquartered in Paris with offices in San Francisco and Santiago, and representations in Tel Aviv and Singapore, ENV is driven by a diverse and knowledgable workforce. The CFI.co de protection 1 judgingZonepanel announces ENGIE New Ventures Zone de protection 2 as the Zone 2022 winner of the global award for Best de protection 3 CleanTech Strategic Investor.

helps policy holders manage their health and offers personalised planning in anticipation of optimal results. The digital health initiative has been very well received, with patients showing full confidence in the company’s online support. According to the CFI.co judging panel, this winner is to be congratulated on the steps it has taken to ensure that policy holders benefit from the best possible services. It is also quite adept at avoiding premium increases. Furthermore, there is a closeness to patients that really must be described as

exemplary. This insurer bettered the market in 2021 and has continued to grow despite the problems caused by the pandemic. SegurCaixa Adeslas has helped many thousands of Covid sufferers even though not contractually obliged to do so. It has given generously to a solidarity fund protecting Spanish healthcare workers and likewise supported the medical suppliers and hospital providers in its network. The panel agrees unanimously that repeat winner SegurCaixa Adeslas is deserving of the CFI.co 2022 award: Best Insurer (Spain).

> SEGURCAIXA ADESLAS: BEST INSURER SPAIN 2022

SegurCaixa Adeslas, the leading health company in Spain, continues to power ahead of the competition. It now controls almost one third of the health insurance market in the country. The company is continuously monitoring customer satisfaction levels and is doing all possible to ensure that experiences are uniformly good. New products and digital services have been well thought out and skilfully executed. Adeslas Salud y Bienestar is the number one health insurance app in Spain and boasts 450,000 users. The platform

> COUCHE-TARD: BEST CONVENIENCE STORE DIVERSITY & INCLUSION EMPLOYER GLOBAL 2021

Alimentation Couche-Tard has grown through acquisitions and organic expansion from one Canadian convenience store in 1980 to a global network with 14,200 stores and a growing international presence in North America, Europe, and Asia. Couche-Tard, a Canadian company, has its primary corporate office in Laval, Quebec. The company values remind people to act as one team, do the right thing, take ownership, and play to win. Couche-Tard prioritises diversity and inclusion throughout the organisation, aiming to build a workforce that’s reflective of

the diverse communities it serves. It leaves no stone unturned when recruiting for top talent — then gives them the room and attention to grow. Couche-Tard has made inroads on gender diversity targets, with women holding 60 percent of shop floor positions. Couche-Tard CPO Ina Strand, an engineer, was brought into the executive leadership following the acquisition of a major oil company nearly a decade ago. She has spearheaded efforts to position the company as an ally to underrepresented groups. Strand offers 30-minute “Engage with Ina” CFI.co | Capital Finance International

sessions to address the ideas and concerns of all employees — from the floor to the c-suite. Mentoring and sponsorship programmes are bringing more women to leadership positions: five of Couche-Tard’s 16 executives are female. The company has an active women’s council as well as global groups for underrepresented minorities, the LGBTQ+ community, and people with disabilities. The CFI.co judging panel presents Couche-Tard with the 2021 award for Best Convenience Store Diversity & Inclusion Employer. 97

> AUTOMOBILI PININFARINA: BEST AUTO DESIGN INNOVATOR EUROPE 2022

Fearless innovation and above all it must be beautiful — those principles display the ethos of legendary Italian design house Pininfarina. The group began in the 30s, designing luxury car bodies for brands such as Ferrari or icons such as the famous Cisitalia that are now owned by collectors or parked in prestigious museums. Automobili Pininfarina, builds now the Battista – the first solely Pininfarinabadged car in the brand’s history. It pulls from a more than 90-year multidisciplinary heritage of artisan elegance and high-performance innovation to revolutionise the future of mobility and electrification in the luxury segment. Automobili Pininfarina envisions

a new era of luxury, where sumptuous and sustainable are not mutually exclusive. It promotes responsible practices focused on the sustainable material design area, inspiring collaboration and competition. It works with partners dedicated to sustainable innovation to help accelerate positive change, upcycling natural materials and precious metals, selecting suppliers that use for example Econyl, a nylon thread made by upcycling ocean harvested discarded fishing nets and converting them into durable, high-quality yarn to produce textiles such as the Battista floor mats. Sustainability drives Automobili Pininfarina’s decision-making processes, development and design. It stands for beauty and

performance, as evidenced in the pure lines and extreme power of the world’s first luxury electric hyper performance GT. Automobili Pininfarina’s Battista, named after the brand’s founder, is faster from 0-62mph than a current Formula One car and offers up to 310-mile range with zero emissions. Automobili Pininfarina is driven by an international team of 110 professionals drawn from 21 nationalities worldwide, situated in Munich and Turin, with an average age of 37. The CFI.co judging panel commends the timeless aesthetics and future-forward performance of Automobili Pininfarina — winner of the 2022 Best Auto Design Innovator (Europe) award.

> WISEENERGY: BEST SOLAR ASSET MANAGER UK 2022

WiseEnergy is fueling growth and innovation through a groupwide focus on strategy, culture and globalisation. The Company has a growing international presence on four continents, including offices in the UK, Italy, Spain, Portugal and the US. WiseEnergy has been active in the solar industry for over a decade, and its wheelhouse of service delivery expertise covers the entire solar asset spectrum from construction through to operation. WiseEnergy’s goal is to maximise revenue, reduce operational expenditure and minimise risk for clients; in summary, maximising their clients’ return on

investment. WiseEnergy sets the groupwide strategy from its London headquarters, defining global objectives and individual country targets. It unites multiple nationalities and disciplines — finance, technology, project and contract management — into global teams working on portfolios with a wide geographic focus. The group cultivates a work culture of equity, diversity and inclusion. It invests in employee wellbeing and has increased mental health support to help team members cope with the pandemic. WiseEnergy promotes knowledge sharing throughout the company and industry.

Team members stay connected through frequent country-wide and global company update sessions and represent the group at conferences and other external events. It has also introduced new processes and systems to ensure greater resilience and flexibility across the business. For example, it has recently migrated three separate accounting systems into one global application. This was a time-consuming task, but it has made reporting across different countries an easier and more effective. The CFI.co judging panel presents WiseEnergy, a repeat programme winner, with the 2022 award for Best Solar Asset Manager (UK).

> ISOMER CAPITAL: BEST EUROPEAN TECHNOLOGY INVESTMENT STRATEGY UK 2021

The early bird gets the worm in fast-moving commoditised markets — and Isomer Capital has the agility to lever its connections and databacked research to get ahead of investment trends. The private firm was founded in 2015 by technology investors, operators and entrepreneurs. Isomer has built an extensive network of contacts across the private market space, and these relationships have opened a pipeline of valuable information and exciting opportunities. It targets venture capital deals across Europe, backing tech entrepreneurs 98

through primary and secondary investments in VC funds and company co-investments. Isomer has made 50 VC fund investments, supporting 1,387 underlying portfolio companies in 37 countries. The firm is singularly focused on the European tech ecosystem. It’s an inside player contributing to the development of technology and talent throughout the region. It takes a partnership approach to venture capital and operates with complete independence and no conflicts of interest. Isomer monitors hundreds of funds and thousands of companies as part CFI.co | Capital Finance International

of its own market research. Strong tech and operational backgrounds allow the team to identify rising stars — and to help them soar. Isomer does its due diligence on companies and management teams, as investment terms and working relationships tend to last between five and 10 years. The firm follows its instincts, not the herd, to uncover new partners and shared prosperity. The CFI.co judging panel unanimously voted for Isomer Capital in the 2021 Best European Technology Investment Strategy (UK) award category.

Spring 2022 Issue

> POLLEN STREET CAPITAL: BEST RESPONSIBLE ALTERNATIVE INVESTMENT TEAM UK 2022 Compassionate, committed and caring — that’s how the Pollen Street team operates. Pollen Street Capital is a purpose-led asset manager with ambitious ESG targets to manage its carbon footprint. The firm expects to achieve carbon neutrality by the end of the year and takes steps to help portfolio companies become carbon neutral within five years of investment. The firm aims to generate positive impacts for its investors, people, portfolio companies and society at large by embedding ESG diligence throughout its operations and investments. Pollen Street employs more than 70 professionals through its London and New York offices. It operates dedicated private equity and credit strategies. The firm markets itself as a partner for growth rather than simply an investor. It

recruits top talent and harnesses their insight and expertise to drive financial results and accelerate positive change. Digital transformation, analytical rigour and technology deployment are key elements of the investment approach. Pollen Street backs portfolio companies and credit partners that help consumers make greener choices, increase their access to finance and SMEs to promote job creation and socioeconomic growth. It’s a diversity champion working to close the gender funding gap and pushing for a target of 25 percent women at the board and executive level of portfolio companies by 2025. The CFI.co judging panel presents repeat winner Pollen Street Capital with the 2022 award for Best Responsible Alternative Investment Team (UK).

> AGEAS: BEST SUSTAINABLE INSURANCE SOLUTIONS EUROPE 2021 Over its 200-year history, Ageas has evolved into an international insurance provider with operations in 14 countries across Europe and Asia. Ageas has developed a long-term sustainable growth strategy that capitalises on existing core business while tapping into new markets. The group places sustainability at the centre of decisionmaking processes and prioritises engagement with all stakeholders: employees, partners, customers and communities. It reviews and adjusts sustainability strategies on a three-year cycle, using external industry standards as a guide to set objectives. The group has a four-pillar focus on product innovation, responsible investing, highquality employment and reduction of greenhouse gas emissions. Ageas will scale innovations — addressing issues

like ageing, health, wellbeing and financial literacy — to create economic and societal value for over 40 million customers. Ageas has set a 2024 target for achieving carbon neutrality for its own operations. By the end of 2020, it had invested €6.5bn into sustainable projects, like renewable energies and social housing. It has pledged to invest €10bn by 2024 in projects making a positive contribution to the sustainability transition. It already has real estate and ESG infrastructure projects in the pipeline. The group fosters a work culture of inclusivity, diversity and continuous learning. It has defined ambitious ESG targets and implemented measures to reduce or offset carbon emissions. The CFI.co judging panel presents Ageas with the 2021 award for Best Sustainable Insurance Solutions (Europe).

> SENER: BEST ENGINEERING CORPORATE GOVERNANCE EUROPE 2021 Spanish engineering and technology group SENER continues to build on a 66-year foundation of innovation, quality and independence. The group focuses on three main business lines: Aerospace (space, defence and science); Engineering (infrastructure, energy and marine); and Renewable Investments. SENER deploys a workforce of 2,400 professionals across five continents to deliver high-tech solutions that push the realms of possibility. The organisational structure of the group facilitates collaboration between the multidisciplinary departments, which has resulted in significant tech innovations. The group, which was awarded the Family-Friendly Company Certificate by the Másfamilia Foundation, invests considerable resources into the recruitment and retention of top talent. SENER upholds ethical principles of corporate governance, with systems in place to ensure compliance with legislation as well as ESG

benchmarks. It aims to create sustainable value for all stakeholders through the long-term management of operations, innovations, investments and CSR activities. It assesses the impacts of its operations to balance solutions with environmental respect. SENER takes a partnership approach to suppliers and allies to establish long-term relationships based on collaboration, loyalty and fairness. The group carries out a range of CSR projects and initiatives to support the wellbeing and socio-economic development of the communities where it operates. The SENER Foundation supports the development of solidarity projects via grants, sponsorships and donations. SENER — with €24m in 2021 in R&D investments — fosters innovation to create sustainable value for society and the environment. The CFI.co judging panel announces SENER as the winner of the 2021 award for Best Engineering Corporate Governance (Europe). CFI.co | Capital Finance International

> RBC CARIBBEAN BANKING: BEST DIGITAL BANKING SERVICES CARIBBEAN 2022

RBC Caribbean Banking forms part Royal Bank of Canada, one of world’s largest banking groups, among the top five in North America. RBC Caribbean Banking levers enterprise resources to best serve the local markets — 10 Caribbean countries and territories and serves more than half a million clients. It offers a diversified service suite tailored to fit the needs of individual, SME, government and multinational corporate clients. RBC Caribbean Banking began investing in digital transformation strategies a decade ago, allowing it to outpace other regional banks in the rollout of tech advances.

Access and convenience was a driving factor for the early investments. People rely on the bank’s digital services, which have proven convenient in normal times and critical during a crisis, like the pandemic. Clients can manage most of their day-to-day banking services, such as bill payments and transfers through the digital platform — and ongoing development promises to incorporate more of the bank’s service range over time. But RBC Caribbean Banking has no intentions of becoming a digitalonly bank. It will maintain a strategic branch network for more complex financial advice,

supported by knowledgeable staff and modern tech infrastructure. The idea is to complement the bank’s growing digital services with that ever-inestimable human touch. It already has 170,000 active users on the digital platform and processes over two million annual digital transactions. But that figure comprises less than two percent of RBC Caribbean Banking’s total transactions — leaving plenty of room for continued growth. The CFI.co judging panel presents RBC Caribbean Banking with the 2022 Best Digital Banking Services (Caribbean) award.

> IMCI GROUP INTERNATIONAL: BEST ALTERNATIVE PROJECT FINANCE SOLUTIONS GLOBAL 2022

IMCI Group International has grown from a single proprietorship firm to a global business consultancy in under 20 years. The group takes a 360-degree approach to project finance that’s underpinned by an international network of over 200 engineering, procurement, and construction partners and technology and industrial providers. IMCI maintains cooperative relationships across the interim management, project management, auditing, legal and fiscal sectors — leaving the group in a privileged position to collaborate on government and public-private-partnership

projects. IMCI benefits from a global structure, with a presence throughout the continents and in over 70 countries. It also has direct or syndicate links to 70 banks and privately owned institutional investors. IMCI offers eight alternative project finance programmes, starting with interest-based programs for smalland large-caps, government and philanthropic structures. It offers equity, bond, stock-listed and crisis-based project finance programmes. IMCI’s Swiss headquarters controls investments and fortifies the global group structure with managerial support. IMCI credits its success

to a process of continuous improvement of the group’s structure, services and products. It operates along three main business lines: consulting and M&A services, corporate finance and investment solutions, and tailored advisory and coaching services. The group combines these divisions with flexibility and speed, local understanding and global vision to help clients fuel business growth. The CFI.co judging panel has followed the group’s progress over the years and once again found cause for merit. IMCI Group International wins the 2022 global award for Best Alternative Project Finance Solutions.

> KRUNGTHAI BANK: BEST SOCIAL IMPACT BANK THAILAND 2022

Founded in 1966, Krungthai Bank is a publicly listed company whose main shareholder is the Thai government. The bank has evolved to provide clients with ever-increasing convenience and functionality. Krungthai conducts business with the goal of growing together for sustainability and serving all segments of Thai society. The bank approached the pandemic as an opportunity to further develop digital capacities and incorporate AI technologies. It was able to slash the turnaround times on loan applications, using AI and big data to deliver 100

real-time verdicts. Krungthai offered its third index-linked, principal-protected note in January, this time basing returns for the fiveyear note on a global AI and ESG index. The note aims to capitalise on the rising prevalence of AI across societies and industries, while the ESG focus underscores its commitment to improving the lives of Thai people and supporting the SDGs. It has expanded into digital bonds with low price points, which has facilitated financial inclusion. The youngest digital bond subscriber is only 15 years old. CFI.co | Capital Finance International

On the other side of the spectrum, Krungthai offers digital literacy assistance to older populations through a 1,000-branch network. The Krungthai mobile apps have millions of users, including 40 million people who used the bank’s digital wallet to register for the Covid vaccine. The CFI.co judging panel has followed the bank for several years and is pleased to note its continued progress. The judges present Krungthai Bank with its fifth CFI.co accolade: Best Social Impact Bank (Thailand).

Spring 2022 Issue

> VOLOCOPTER: BEST URBAN AIR MOBILITY INNOVATOR GLOBAL 2021 Alexander Zosel and Stephan Wolf, and Thomas Senkel who is credited by the Guinness Book of World Records with the first manned flight of an electric-powered multicopter, established Volocopter in 2011. Since that landmark prototype launch, the company has been awarded the Lindbergh Prize for advancements in green aviation and raised a total of €322m (US $365m) over a total of 5 funding rounds (Seeding + A-D rounds). The German aircraft manufacturer is a pioneer of urban air mobility, paving the way for a future mode of transport that will change city life forever. It’s the only player in this space making real progress on development, production, regulatory compliance and commercial scalability. It has partnered with leading international brands to establish a solid supply network that lends confidence to investors and clients. Volocopter has run through

several generations of its electric vertical take-off and landing (eVTOL) aircraft — and sustainability is at the heart of the ecosystem it’s creating. It references the UN’s SDGs as a roadmap for development and benefits from support of influential partners like the World Economic Forum. Volocopter has developed a family of eVTOL aircraft to cover the full mission spectrum: a heavy-lift cargo drone and urban air taxi both expected within the next 2 years and a four-seater for long hauls by 2026. Volocopter has conducted over 1,000 regulatory-approved test fights globally (EMEA, US, Singapore, etc.), committed to air taxi services in Paris and Singapore within the next 2 years, and has commercial launch plans in Rome and China. The CFI.co judging panel announces Volocopter as the global award winner for Best Urban Air Mobility Innovator.

> AVEVA: BEST SUSTAINABLE INDUSTRIAL SOFTWARE SOLUTIONS GLOBAL 2021 AVEVA connects teams with trusted information and insights to spark industrial ingenuity that enables responsible use of the world’s resources. Sustainability is key to the company’s mission and everyone in the team is committed to driving digital transformation that can accelerate decarbonization, efficiency and growth for customers across twelve industry verticals from energy and manufacturing to infrastructure, pharmaceuticals and marine. The portfolio spans the industrial lifecycle, combining data analytics, cloud computing and visualization with human insight to drive informed decision making, boost operational agility and optimize performance. Solutions span the spectrum from design and engineering to asset performance, monitoring and control and operations optimization. AVEVA puts customer needs at the centre of the industry lifecycle, using AI to predict challenges before they occur, and staying ahead of trends. The company has set ambitious carbon reduction goals, aiming to achieve net-zero emissions by

2030. AVEVA further benefits from the world’s largest industrial software ecosystem, with 5,500 partners and 5,700 certified developers, who unlock operational efficiencies for more than 20,000 customers. AVEVA believes that a diverse and inclusive work culture fosters innovation, performance, and profitability. It has more than 6,500 employees working at 90 sites in 40 countries — and has implemented a number of policies and programmes to ensure each individual feels valued and included. As an organisation AVEVA is committed to ensuring all policies, processes and behaviours promote diversity, equity, and inclusion. Employees are kept connected through open lines of communication, using multiple channels. The company recently launched a fiveyear Diversity, Equity and Inclusion Plan and an Impact Fund to support its regional and global diversity, equity and inclusion networks and employee groups. The CFI.co judging panel presents AVEVA with the 2021 award for Best Sustainable Industrial Software Solutions.

> OTP PRIVATE BANKING: BEST PRIVATE BANKING SERVICES HUNGARY 2022 The OTP Group has become one of the major financial institutions in Central and Eastern Europe over the past quarter century. The organisation, which began life in 1949 as a state-owned national savings bank during the communist era in Hungary, was privatised in 1995 a few years after the country’s transition to an independent, democratic state. Today the Budapest-based bank serves more than 16 million customers, having expanded into 11 countries in the region, using its local experience as a key pillar of the bank’s operations. OPT’s private banking arm is one of the largest independent financial service providers in Central and Eastern Europe, employing teams of experts with local expertise allied to a global network. Its specialists work with clients to create personalised asset

management advice, taking advantage of the bank’s up-to-the-minute analyses of market trends. OPT believes its significant weight of local knowledge is what gives it the edge in delivering a tailored, quality service to customers. The cornerstone of its operation is transparency and innovation. The group’s goal is to continue to strengthen its position as a dominant regional player by providing a broad product portfolio and serving a diverse client base, offering innovation through the use of new technologies. OTP Bank is also committed to the improvement of social values in the region, and supports a range of activities and events which contribute to social wellbeing. The CFI.co judging panel, in 2022, has no hesitation in presenting OPT with the award, Best Private Banking Services Hungary. CFI.co | Capital Finance International

101

> BTG PACTUAL: BEST INVESTMENT BANKING SERVICES CHILE 2021

The constant exchange of ideas is a core principle of BTG Pactual, a leading investment bank in Chile’s financial sector. The business is an arm of the parent group founded in Brazil in 1983. Today it employs 2,300 staff across eight countries. The company is managed on a meritocratic, horizontal model - the main pillar of its culture. BTG values business with integrity, and has adopted Environmental, Social and Governance (ESG) objectives throughout the organisation. BTG signed up to the Principles of Responsible Investments (PRI) in 2015, pledging to embrace

the values of human rights, labour relations, the environment, and to fight corruption. Today its asset management division operates from offices throughout Latin America, North America and Europe. It prides itself on encouraging the exchange of ideas, evaluation of investment opportunities across borders, and diligent risk management. BTG’s research team constantly studies global trends to inform investment strategy. The company invests on behalf of institutional investors, pension funds, corporations and governments, and individuals. In Chile, the

company runs conversation events - BTG Talks which connect businesses and entrepreneurs with global experts, where new ideas are exchanged and strategies formed. BTG promotes an online forum which publishes articles on politics, economics, and cultural trends. It also contributes to the community beyond its core business, developing and supporting various artistic, cultural and sports initiatives in Chile. In recognising the work of BTG Pactual, the CFI.co judging panel is pleased to present it with the 2021 award, Best Investment Banking Services Chile.

> MAN GROUP: BEST INVESTMENT MANAGEMENT SERVICES UK 2021

In terms of the technology of the day, the rum ration given to Admiral Nelson’s sailors arguably gave the Royal Navy of the 18th century something of an edge. The rum was supplied by James Man, son of a Billingsgate barrel-maker. Today the company he founded in 1783, is using more sophisticated technology to stay ahead of the curve. The London-based Man Group is a major independent active management firm, employing more than 1,000 staff in 15 centres across the globe. Technology is the driving force of its success in delivering good investment

performance and client portfolio solutions. It uses up-to-the-minute tech advances to stay at the forefront of a sector which is constantly evolving. Man Group, which manages almost $140b for its global clients, offers bespoke services which utilise the skills of its expert staff, but in order to stay ahead, the company is continuously investing in the latest technology to deliver the best results for clients. The company always aims to achieve superior investment performance by being original in its thinking. In partnership with Oxford University’s science

department, it has led revolutionary research into quantitative finance, machine-learning and data analytics since the founding of the Oxford Man Institute in 2007. This collaboration between business and academia continues to develop new tools for decision-making, involving artificial intelligence, financial theory and practice, and mathematics. In 2021, the judging panel, in recognition of the company’s trail-blazing approach, is pleased to present Man Group with the award, Best Investment Management Services UK.

> ASSOCIATED BRITISH FOODS: BEST ESG GROCERY & RETAIL SECTOR UK 2021

Associated British Foods (ABF) is a diversified food, ingredients and retail group with operations in 53 countries. ABF grocery brands are consumer favourites in nine out of 10 UK households. ABF Sugar is one of the largest sugar producers in the world and the sole processor of UK sugar beet. The group works with all stakeholders — clients, consumers, communities, suppliers, employees, shareholders and the planet — to create value responsibly together. ABF structures commitments around a value system of 102

respecting people’s dignity, acting with integrity, delivering with rigour and progressing through collaboration. The global workforce comprises 128,000 professionals, many of whom have built enduring careers with the group. A low turnover rate, especially at the executive level, lends to a strong sense of continuity. ABF made substantial investments in safety risk management in 2021 — £39m — 24 percent of which went to Covid safety measures. The group put another £34m towards environmental risk management and CFI.co | Capital Finance International

achieved an 11 percent annual reduction in scope one and two greenhouse gas emissions. It recycled, recovered or made use of 79 percent of waste generated and reused 25 percent of water abstracted. More than half of its energy usage in 2021 came from renewables. The group is making progress on goals to source only cage-free eggs and switch completely to reusable, recyclable or compostable packaging. The CFI.co judging panel presents Associated British Foods with the 2021 award for Best ESG Grocery & Retail Sector (UK).

Spring 2022 Issue

> TANQIA: BEST SUSTAINABLE GROWTH STRATEGY MIDDLE EAST 2022 TANQIA is a Regulated utility provide critical-need solution and far-sighted business vision. The Utility affirms its mission in its name, which means 'purify' in Arabic. As the first privately owned, government-regulated wastewater collection and treatment utility in the UAE, TANQIA deploys stateof-the-art technology and deep industry expertise to strengthen water resiliency in Fujairah, which like much of the Gulf region, relies on desalination and underground aquifers for its water needs. With declining ground water reserves and rising salinity caused by over-pumping and seawater ingress, the use of treated wastewater is even more crucial. TANQIA serves a concession area in Fujairah via a wastewater collection network running 546 kilometres. The Utility has revised its expansion plans to accommodate the recent boom in population growth - and the corresponding spike in demand for wastewater services.

The first phase of the Revised Expansion Plan is slated for completion by the end of the year and the second Phase by mid-2023. TANQIA will increase installed treatment capacities from 16,000 to 46,000 m3 per day and provide 1.5 billion gallons of high-quality effluent for sale through the distribution network developed by its partner Etihad Water and Electricity, a utility itself (EWE). TANQIA aims to drive down the costs of its operations and sale to partner of highly treated wastewater for reuse in restricted irrigation, while promoting sustainability and accommodating for future demand. TANQIA's upcoming Green Energy Project is expected to cover 40% percent of the treatment plant's average annual energy requirements from Solar Energy and lower emissions by 6,061 tons of CO2 per year. The CFl.co jury presents repeat winner TANQIA with the 2022 Best Sustainable Growth Strategy (Middle East) award.

> QNB ALAHLI: BEST SME BANK EGYPT 2022 AND BEST RETAIL BANK EGYPT 2022 Egypt is the most populous country in the Arab world, with a head count estimated at 105 million — and QNB ALAHLI counts 1.3 million of them as clients. The QNB Group acquired a majority stake in NSGB bank in 2013 and rebranded the strengthened entity as QNB ALAHLI. The bank ensures absolute client centricity through a nationwide network of 231 branches, 872 ATMs, 62,234 point-of-sale merchants, robust digital channels and a 24/7 call centre. It wows retail clients with a comprehensive range of services and products: savings accounts and CDs; loans, credit and financing facilities; credit cards, prepaid cards and wristbands; selfemployed professionals packages; payroll services; and luxury plans. It rolls out the red carpet for business clients — from multinational corporations to

local SMEs — pulling from 44 years of market experience to develop products and services for key industries and sectors. It can assist entrepreneurs and business leaders with corporate banking, financial advisory, project financing, structured financing, trade financing, cash management and foreign exchange services. QNB ALAHLI believes SMEs have the power to push growth and deliver sustained development, and the bank is committed to supporting them throughout the peaks and troughs of market cycles. It has become a preferred partner of multilateral financiers for the distribution of credit to small businesses. The CFI.co judging panel presents QNB ALAHLI, a repeat programme winner, with the 2022 awards for Best SME Bank and Best Retail Bank (Egypt).

> FORSYTH BARR: BEST INVESTMENT BANKING SERVICES NEW ZEALAND 2022 A commitment to customer service underpins every activity at Forsyth Barr, a New Zealand-based investment bank which has earned a reputation for problem-solving and risk management. Forsyth Barr, established in Dunedin in 1936, has broadened its horizons over the years, expanding from its core stockbroking activities, and moving into the provision of fixed interest monitoring services and investment solutions. The company continued to expand during the second half of the 20th century, developing cash management and nominee services, portfolio management and low cost retirement funds, and opening offices in Christchurch, Wellington, Auckland and Invercargill. Growth has continued, through acquisition and partnerships, and Forsyth Barr now operates 24 offices across New Zealand, providing investment advice and portfolio management

covering more than $20b of clients’ investments. In December 2021, the company announced the launch of a specialist funds management operation, Octagon Asset Management – a new entity designed to expand Forsyth Barr’s established funds management offering, with the aim of breaking into new markets. The business is fully focussed on sustainability, and has recently joined six other major companies in New Zealand to support an ambitious initiative to tackle the country’s housing shortage. The Aotearoa Pledge, based on the Maori name for the country, is bringing together investors from a range of sectors, and community housing providers to create a $100m fund to help finance affordable new homes across New Zealand. In 2022 the CFI.co judging panel is pleased to present Forsyth Barr with the award, Best Investment Banking Services New Zealand. CFI.co | Capital Finance International

103

> THE ACCESS BANK UK LIMITED: BEST AFRICA TRADE FINANCE BANK 2022

Founded in 2008, The Access Bank UK Limited levers a strong home base and international branches to build relationships with clients worldwide. The Access Bank UK Limited offers a wide range of Trade Finance, Commercial Banking, Private Banking and Asset Management products and services. The Head Office is located in the heart of the City of London and the Operations Division is based near Manchester. The Access Bank UK Limited has a branch operation within Dubai’s International Finance Centre and offices in Lagos, Nigeria. The Access Bank UK Limited

is a subsidiary of Access Bank Plc which has recently also established business in South Africa and extended its operations in Zambia. Currently Access Bank Plc is ranked as the 14th largest banking group in Africa and its expansion efforts continue to gather momentum, with six new country projects underway. The Access Bank UK has continued its controlled growth and expansion leveraging its trade finance capabilities. The bank saw an 8 percent increase in trade finance business in 2021, with nearly $4bn in trade finance over 4,500 transactions. It has established

correspondent banking relationships in Nigeria and in several additional African countries. The Access Bank UK Limited credits the growth — and its dependable reputation — to the relationship model of the business. Customer satisfaction is a primary concern, which shows in the bank’s high rate of referrals and retention. During the pandemic the Bank has continued to grow and expand, recently welcoming new team members. The CFI.co judging panel presents The Access Bank UK Limited, a repeat programme winner, with the 2022 award for Best Africa Trade Finance Bank.

> ECCELSA AVIATION: BEST PRIVATE AVIATION TERMINAL OPERATOR EUROPE 2022

The coronavirus pandemic grounded planes worldwide, cutting air traffic by 66 percent from 2019 to 2020. But private aviation has seen a bump in business, up 25 percent as more affluent travellers seek to escape commercial airways. Eccelsa Aviation operates a private and executive terminal in Sardinia along the Costa Smeralda in Italy. Sardinia was fortunate and not hit as hard by Covid as the majority of the country. Eccelsa Aviation capitalised on the rise in private air travel to exceed growth expectations for 2021. While others were

operating in survival mode, Eccelsa Aviation was investing to expand the aircraft parking area and accommodate more traffic. The Eccelsa team pulled together to implement health and safety procedures and ensure clients stayed informed of documentation requirements for travel. Streamlined operations mean that clients spend the minimum time necessary in procedures. The company runs 28 flights per hour through the Olbia Costa Smeralda airport, rolling out the red carpet with concierge services that go above and beyond. Eccelsa Aviation can provide

clients with chartered jets and yachts, luxury rentals, limousine chauffeurs, catering and tailored security services. Aircraft crews receive a warm welcome and appreciate Eccelsa’s snooze room and express laundry services. Eccelsa Aviation first registered on the CFI.co radar for its capacity to handle custom requests and its committed sustainability progress. The judging panel is pleased to confirm a three-year winning streak for Eccelsa Aviation with the 2022 award for Best Private Aviation Terminal Operator (Europe).

> CAMRADATA: BEST INVESTMENT ANALYTICS TEAM UK 2022

CAMRADATA has been connecting asset owners with the right managers over the past two decades. The UK firm provides analytical tools to navigate constantly evolving markets. It provides independent analysis and research, with consideration for quantitative as well as qualitative factors, on over 700 global asset management firms and 5,000 investment products across 250 asset classes. CAMRADATA operates according to the belief that all institutional investors should have global access to investment information. CAMRADATA provides free investment data and analysis to 104

institutional investors through a live feed. It acquired a specialist publishing business, Funds Europe, in 2017 that has extended its database reach in Europe, resulting in a boost in research, publishing and events business. CAMRADATA established a dedicated division to meet the needs of defined-contribution (DC) pension schemes, allowing it to capitalise on investment reporting and governance opportunities in DC market. It works with asset owners and managers, providing clients with investment analysis via an accessible and open platform. The company is driven by a genderCFI.co | Capital Finance International

balanced team with deep industry experience. The team aims to propel CAMRADATA into a one-stop-shop for trustworthy investment research. It focuses on client engagement and long-term relationships. CAMRADATA works with investment consultants, pension schemes, insurance firms, financial mutuals, wealth managers and charities and provides information around ESG and Diversity & Inclusion in the investment sphere. The CFI.co judging panel announces CAMRADATA as winner of the 2022 award for Best Investment Analytics Team (UK).

Spring 2022 Issue

> AQUIS EXCHANGE: BEST PAN-EUROPEAN EQUITIES TRADING EXCHANGE 2022 Aquis Exchange is the pan-European equities trading arm of exchange services group Aquis Exchange PLC. It is Europe’s 7th largest exchange by value traded and operates a unique subscription-based fee model that rewards its biggest users. Over 2,000 stocks from 16 European markets are available to trade on Aquis Exchange and in April 2022, it completed its takeover of the UBS MTF non-displayed business to complement its two lit pools operating from the UK and Paris offices. In addition to its pan-European trading business, Aquis operates one of only two full equities exchanges in the UK (Recognised Investment Exchange) – the Aquis Stock Exchange (AQSE). AQSE focuses on the IPO and secondary trading of small and medium sized growth companies on the two segments of its Growth Market:

Apex for more mature companies and Apex for smaller, more early-stage ventures. During 2021, a record 24 companies floated on AQSE, raising over £100m in the process. In March 2022, Aquis Exchange PLC joined AQSE’s Apex segment itself, having first listed on AIM in 2018. The third arm of Aquis is its technology licensing business – Aquis Technologies – which develops, licences and operates exchange software for third parties on a global basis. This division is increasingly focused on providing businesses with cloudbased platforms for their exchange business in an array of asset classes ranging from crypto, to reinsurance, and bonds. The CFI.co judging panel present Aquis Exchange – a repeat programme winner – with the 2022 award for Best PanEuropean Equities Trading Exchange.

> BEDROCK GROUP: BEST INVESTMENT PORTFOLIO MANAGER UK 2022 Over the past 18 years, Bedrock Group has evolved into a consolidated contact for the investment and administrative needs of high-net-worth families, endowments, foundations, institutions and investment professionals. It has recruited industry experts with shared values to oversee the management of client assets. Teams of Bedrock professionals collaborate from offices in London, Geneva and Monaco to provide clients with independent and unbiased global investment and advisory services. It tailors solutions to client circumstances and offers direct access to the founding partners. Bedrock has achieved economies of scale and passes associated savings along to clients with competitive fees for institutional banking and share classes. It offers a range of wealth structuring solutions, from estate planning and custodian arrangements to

the creation and administration of brandspecific funds. It’s a preferential partner for high-net worth individual clients, affording prime access to and pricing power for some of the most stable balance sheets in the industry. Bedrock applies dynamic investment strategies in pursuit of absolute returns — and has a track record of hitting its mark. It rotates assets as required, and over the past year, has reduced bond exposure and increased the ratio of commodity-related assets. It has maintained global equity, which it believes to be one of the best asset classes, between 40 and 45 percent. It’s targeting high-dividend companies rather than high-growth sectors. The CFI.co judging panel announces Bedrock Group — a repeat programme winner — as the recipient of the 2022 award for Best Investment Portfolio Manager (UK).

> SCOTTISH FRIENDLY: BEST MUTUAL INSURER UK 2022 Scottish Friendly pulls from a 160-year history to deliver value for members, colleagues and the community at large. The group helps members plan for the future with an affordable selection of life, savings and investment products, including adult and junior ISAs under the Scottish Friendly brand as well as working with a number of partners to manufactur life and critical illness products. The Glasgow-based group manages more than £5.3bn for over 750,000 members. Scottish Friendly believes that exceptional customer care starts with a focus on staff wellbeing. The past couple of years have been taxing for everyone, and Scottish Friendly has introduced numerous measures to ensure staff feel supported and engaged — leaving them in the best possible position to look after members. Collaborative working groups and yoga classes helped keep the team centred and connected.

Scottish Friendly has continued to achieve strong sales, with a solvency ratio considerably higher than the regulatory requirement. The agile reaction times and stability of the group has allowed to weather the storm of the last couple of years — however, it warns members that the year ahead will be difficult, with inflation expected to rise beyond six percent by this summer as well as rising costs across the board. Consistent marketing campaigns ensure members stay informed and prepared for what’s to come. Scottish Friendly pledged a £10 donation for each new ISA account opened during the month of December — resulting in a £23,500 donation to support vulnerable families and children. This campaign forms part of the group’s ongoing community support programmes. The CFI.co jury presents repeat winner Scottish Friendly with the 2022 Best Mutual Insurer (UK) award. CFI.co | Capital Finance International

105

> KBC ASSET MANAGEMENT NV: BEST ASSET MANAGEMENT TEAM BELGIUM 2022

KBC is a banking and insurance group with 41,000 employees and 12 million clients across Belgium, the Czech Republic, Slovakia, Hungary and Bulgaria. KBC Asset Management NV (KBC AM) acts as the group's investment arm, working with retail and institutional clients, developing products for intra-group distribution and providing investment fund sales and advisory support. KBC AM lives by the motto of "Everyone invested all the time" - starting with the 293 employees at the Brussels-based office. The company prioritises the health, wellbeing and work-life balance of its employees as the surest

path to business success. A talented team works together to ensure proper asset allocation in managed funds and portfolios. KBC AM is striving to realise a dream of maximum investor participation, allowing people from all walks of life to benefit from capital markets. It has removed roadblocks to retail investing by lowering threshold requirements and focusing on digitalisation. The virtual assistant of KBC, named KATE, helps clients navigate investment options on digital channels, where over half of KBC investment plans is now sold. KBC expects artificial intelligence to play an

increasingly important role in the future and was the first Belgian asset manager to launch a fund which investment strategy is driven by artificial intelligence software. KBC AM achieved significant growth in 2021, delivering strong performance on multiple fronts. Long term performance, with a mindset of fighting for every basis point, is core ambition of KBC AM’s investment teams. As of the end of 2021, KBC AM reports €236bn in AUM. The CFl.co judging panel announces KBC Asset Management NV as the 2022 Best Asset Management Team (Belgium) award winner.

> LIECHTENSTEINISCHE LANDESBANK: BEST PRIVATE BANK LIECHTENSTEIN 2022

The Liechtensteinische Landesbank (LLB) group pulls from a 160-year legacy to navigate evolving market conditions and regulations with confidence and competence. LLB is majority owned by the Principality of Liechtenstein, where the group is headquartered and has established a leading market position. It also has a strong presence in Austria and Switzerland and is increasingly active across Central and Eastern Europe as well as in the Middle East. LLB provides a broad range of products and services for private, corporate and institutional clients. It helps private clients to manage assets and plan for the future. Corporate

clients appreciate the bank’s robust digital offerings and financing solutions. It enables institutional clients to make more time for their customers with LLB Xpert Monitoring and LLB Xpert Solutions. LLB has proven itself a reliable partner during challenging times. LLB business volume in 2021 exceeded 100 billion Swiss francs (CHF 105.7 bn). The bank’s Aa2 rating was reaffirmed by Moody’s this spring, placing LLB among the most stable and secure banks worldwide. The bank has a Tier-1 ratio of 20.3 percent. AUM is up more than 15 percent and there’s been an incremental increase in loans as

well, contributing to an 25 percent rise in net profits. It has invested heavily in digitalisation over the past few years and continues to adopt more sustainable practices and products. The LLB Group's banking operations has become carbon-neutral in 2021 – making it the first bank in Liechtenstein and one of the first in Switzerland and Austria to do so. At the same time, the LLB Group is introducing measures to reduce the emissions of its own banking operations to net zero by 2040. The CFI.co judging panel cites these milestones as justification for LLB winning the 2022 award for Best Private Bank Liechtenstein.

> DPM FINANZAS: BEST INDEPENDENT FINANCIAL ADVISORY TEAM SPAIN 2022

DPM Finanzas believes that good investments start with the right financial advisor. Founded in 2013, DPM Finanzas is one of the few CNMV- regulated Spanish investment services companies that exclusively provides independent financial and wealth advice. Its “fee only” financial advisory model is reinforced by its exclusive specialisation — it does not provide any additional services or develop its own products — and the equity of the company is entirely in the hands of the management team. DPM Finanzas tailors bespoke solutions to client needs, working 106

mainly with family groups, entrepreneurs, sports stars, charities and endowments. Services are supported by a strong technological platform, but the firm credits its team as the greatest asset. The firm recruits professionals with significant recognition in the sector, including high technical financial knowledge and extensive experience. Above all, they must share the values of the firm, always putting the client at the centre of decisions and acting with transparency and honour. DPM takes client commitments seriously, applying independent decision-making with a prudent, CFI.co | Capital Finance International

future-forward, global vision to differentiate solutions for each client’s circumstances. It assists clients to align portfolios according to their personal sustainability priorities. DPM’s unique advisory model, together with an important rigorous analysis and global investment strategy, has allowed the firm to achieve continuous and strong growth since its foundation, both in terms of clients and assets under advice. The CFI.co judging panel presents DPM Finanzas with the 2022 Best Independent Financial Advisory Team (Spain) award.

Spring 2022 Issue

> EMCORE ASSET MANAGEMENT: BEST INDEPENDENT INVESTMENT BOUTIQUE DACH 2022 EMCORE Asset Management isn’t afraid of market volatility — it has the competence and diligence to turn uncertainty into opportunity. The staff-owned financial boutique takes an active approach to portfolio management using asymmetrical securities parameters to meet clients’ risk and return objectives. EMCORE has found targeted asymmetrical investing to minimise risks and optimise opportunities. It offers customised solutions combining derivative overlay strategies, yieldenhanced products, liquid bond and equity alternatives, convertible bonds and mutual funds. It doesn’t aim to be the biggest, but the best. EMCORE, as an independent financial partner free of any third-party obligations, promises continuity and commitment to client interests. Teams of investment professionals collaborate to tailor strategies according to each client’s risk tolerance and financial goals. They monitor risk parameters across numerous investment strategies, objectively

assessing market activities through a quantitative lens combining technology, rules and human experience — then acting with confidence and precision to ensure optimal asset allocation. Sustainability commitments are integrated across the investment decision-making process. EMCORE excludes controversial industries and companies with poor ESG performance from the investment universe. It practices responsible asset management and engages with portfolio companies to support their sustainability journey. It prioritises transparency as an integral factor in building a reputation as a trustworthy and reliable partner. EMCORE Asset Management presents itself as a “House of Asymmetry” with a track record of generating steady performance with little risk. The CFI.co judging panel presents EMCORE Asset Management with the 2022 Best Independent Investment Boutique (DACH) award.

> Aéroports de Paris (ADP): BEST AIRPORTS LEADERSHIP EUROPE 2021 Aéroports de Paris (ADP) has responded quickly to the unprecedented challenge of the Covid-19 pandemic to the global air transport industry. The company, a world leader in airport design, construction and operation, runs a network of 28 airports, employs 26,000 people, and handles 230 million passengers in a normal year. The ADP ethos has always been that airports should be run like hotels – that hospitality and comfort are essential requirements for passengers who spend an average of three hours in every airport visit. The company believes travellers should never feel anxious – which is why ADP reacted quickly to the crisis, ensuring the safety of passengers and staff was its top priority. Cleaning operations were tightened, sanitisers installed, and thermal imaging cameras and screening stations were set up in Arrivals. ADP worked

closely with health officials, implementing the protocols of the European Aviation Safety Agency, re-establishing passenger confidence. Throughout the pandemic ADP has striven to maintain its position at the forefront of the drive towards sustainability, recognising that the challenges of ecological and health concerns are changing attitudes. The group is determined to win the trust of passengers by ensuring safe travel environments, while accelerating the transition to low-carbon aviation. ADP has, for instance, remodelled plans for a Charles de Gaulle airport project, aiming to achieve carbon neutrality by 2030, introducing new capabilities to handle hydrogen-powered aircraft, and catering for the need for alternative fuels. The judging panel is pleased, in 2021, to present ADP with the award, Best Airports Leadership Europe.

> EUROFAST: BEST CROSS-BORDER TAX ADVISORY SOUTH EAST EUROPE 2022 Over the past 44 years, Eurofast has helped clients navigate complex and constantly evolving tax requirements in the emerging markets of South East Europe and the Middle East. Eurofast employs tax advisors across 23 municipal jurisdictions at offices interconnected via state-of-the-art tech. The group is headquartered in Athens, Greece, with offices in Albania, the Baltics, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Egypt, Georgia, Greece, Iran, Kosovo, Montenegro, North Macedonia, Romania, Russia, Serbia, Slovenia, Ukraine and the UK. An intranet portal organises tax regulations by jurisdiction, making it easier to tailor advisory to each client and circumstance. The company partners with leading global brands and institutions, deploying a workforce of 220 professionals to look after 1,510 active clients. It can assist with transfer pricing and

international tax, payroll and employment solutions, citizenship and residency, audit and assurance, accounting and tax compliance, M&A and corporate finance as well as corporate and trustee services. Eurofast presents itself as a onestop-shop for professional services, boasting 24 service lines and competency in 14 languages. Client needs are addressed with proactive efficiency — usually in a single meeting. The company credits its success to a “dream team” of professionals with backgrounds in tax, law, corporate finance, payroll, accounting, auditing and consulting. Eurofast fuels growth by investing in product innovation, talent recruitment and jurisdiction expansion. The CFI.co judging panel announces Eurofast — local experts with global knowledge — as the 2022 Best Cross-Border Tax Advisory (South East Europe) award winner. CFI.co | Capital Finance International

Since 1978

107

> FEDERAL REALTY INVESTMENT TRUST: BEST ESG REAL ESTATE INVESTMENT STRATEGY US 2022

Federal Realty Investment Trust, one of the oldest US REITs, boasts a 54-year record of annual dividend growth, the longest record in the REIT sector. The company targets highdensity coastal markets where retail demand exceeds supply. It develops, operates and owns a portfolio of properties ranging from neighbourhood shopping-centres to mixedused urban communities. Federal Realty is a long-term holder of real estate and its success is founded on continual reinvestment in its properties to meet evolving community and

market demands. It has appointed a dedicated head of sustainability to oversee and coordinate all ESG efforts for its properties and external reporting. A multi-disciplinary sustainability council and Board of Trustee oversight support the goal of exemplary corporate governance. Federal has invested nearly $2.3bn in buildings that have achieved or are expected to achieve LEED-certification with most of that investment being in buildings with goldlevel certifications. It has invested heavily in energy efficiency measures with 13.6 MW

of solar capacity from its properties and LED lighting in more than 65% of its properties. Federal protects the biodiversity in its markets by not developing on greenfield locations and incorporating water conservation measures into its projects. Through a local partnership Federal is also investing in historically underserved markets and helping to drive their economic growth. The CFI.co jury presents Federal Realty Investment Trust with the 2022 Best ESG Real Estate Investment Strategy (US) award.

> KICKSTART FUND: MOST INNOVATIVE VENTURE CAPITAL TEAM US 2022

Kickstart Fund is a seed-stage venture capital firm based in Salt Lake City, UT. Started during the Great Recession of 2008, Kickstart took an innovative approach from the start. Led by visionary leader and seed investment specialist Gavin Christensen, Kickstart has a laser-like focus on backing the best early stage companies and founders in the Mountain West. The Kickstart team builds relationships with scrappy, resilient founders even before

companies are fundraising. After investment, Kickstart plugs their portfolio companies into their community, helping to strengthen both the companies and individuals leading them. Kickstart’s mission is to help build great companies in the Wild West by backing the boldest entrepreneurs with capital, community, and expertise for the journey. Kickstart has even sponsored a student-run VC fund called Campus Founders Fund. Initial

investment amounts are typically between $250k - $2M with reserved capital for follow on investments as part of the long-term commitment. Kickstart’s portfolio consists of 150+ companies who have raised over $2.7B combined. Alumni companies include the unicorns Podium and Lucid. The CFI.co judging panel is pleased to present Kickstart Fund with the 2022 award for Most Innovative Venture Capital Team (US).

> TIRUPATI GRAPHITE: BEST SUSTAINABLE VALUE CREATION STRATEGY GLOBAL 2022

Tirupati Graphite is a proactive corporate citizen levering the power of scientific knowledge, innovation and sustainability to combat global threats and create value for all stakeholders. The group is headquartered in the UK with natural flake graphite mining and processing operations in Madagascar and downstream graphite and graphene processing projects in India. The company makes a strong case for flake graphite, which has been classified as a critical material by multiple countries, including the EU and US. Flake graphite has over 150 applications and is a central component in energy storage, 108

fire safety and thermal management. It improves energy efficiency and reduces energy and fossil fuel consumption, contributing to a greener footprint across numerous applications. The flake graphite market registers a 32 percent compound annual growth rate from green applications. Tirupati Graphite invests considerable resources into tech innovation and has developed processing technologies that maximise resource usage and reduce carbon emissions. The company capitalises on opportunities for sustainable value creation in the green economy. It seeks to create value CFI.co | Capital Finance International

for the planet and for future generations by developing materials and technologies with numerous green applications. It supports the personal and professional development of employees and aims to improve quality of life in the communities where it operates. In addition to providing financial support, Tirupati Graphite has established health care, education and recreational facilities for local communities. The CFI.co jury presents repeat programmer winner Tirupati Graphite with the 2022 Best Sustainable Value Creation Strategy award.

Spring 2022 Issue

> AVL: BEST MOBILITY TECH & ENGINEERING INNOVATOR GLOBAL 2021 AVL has been driving mobility innovation for more than seven decades. It embraces the changes occurring throughout the automotive industry and shapes future mobility trends through active R&D investments. AVL directed 12 percent of 2020 turnover (€1.7bn) towards R&D, leaving the group well positioned to weather the pandemic. Headquartered in Austria, AVL is supported by a global workforce exceeding 11,000 employees. The private company was able to maintain full ranks, and staff responded to pandemic pressures with a surge of creativity and initiative. AVL introduced new patents, products and services last year — while much of the competition was merely treading water. AVL is a mobility tech powerhouse with a comprehensive range of solutions, including engineering, testing, simulation technologies, manufacturing,

development speed and methodology. The group aims to accelerate a carbon-neutral future by pioneering affordable technologies that effectively reduce emissions. It pursues sustainable mobility advancements together with an international network encompassing 26 countries and 45 AVL Tech and Engineering Centres. It is paving the way for automated and connected mobility through investments in digitalisation and advanced driver-assistance systems. AVL was founded in 1948 by Austrian technical scientist, inventor and entrepreneur Hans List. The group has been run by the founder’s son, AVL chairman and CEO Helmut List, since 1979. The CFI.co judging panel has recognised AVL in previous awards programmes and is pleased to see continued cause for celebration. AVL claims 2021 global bragging rights for Best Mobility Tech & Engineering Innovator.

> MERRILL EDGE SELF DIRECTED: BEST EASE OF USE MOBILE BROKER GLOBAL 2022 In barely two decades the world’s banking industry, in response to rapid technological advances and the growing sophistication of consumer demand, has changed beyond recognition – and Merrill Edge Self Directed a self-directed electronic investing platform, and a subsidiary of Bank of America, is leading the field in providing cutting-edge and efficient mobile investment tools. Merrill Edge Self Directed launched in 2010, responded quickly to investor trends to seek out sustainable and eco-friendly investments. Merrill has developed applications which provide a mobile gateway to individual customers, allowing access to ideas, and helping tailor portfolios to clients’ own values. Merrill, a leader in Environmental, Social and Governance (ESG) investing, is focussed on sustainable and impact investing, presenting customers with

access to a mass of information to guide decisions. Individual customers are able, with a few clicks, to delve into the background of companies to check operations are in line with their own social values. Its latest apps, designed to be uncluttered and intuitive, help clients choose new investments, or evaluate existing portfolios, and can be used to drill down into layers of information, providing ESG scores for businesses, up-to-date insights, and access to the analysis instruments of MSCI, the global provider of index reports. Merrill advisors are also on hand, via phone or chat features, to give advice. This ease of access, says the company, means that users don’t have to be research experts. The CFI.co judges have no hesitation in presenting Merrill Edge Self Directed with the 2022 award Best Ease of Use Mobile Broker Global.

> HFM: BEST FOREX TRADING APP GLOBAL 2022 HFM and HF Markets are the brand names of HF Markets Group, a global conglomerate of regulated multi-asset brokers operating across numerous borders. Since its launch in 2010, the Group has solidified a market-leading position by focusing on superior customer care and modern tech infrastructure, with its comprising entities serving clients worldwide. It has more than 200 employees and 3.5 million active trading accounts. HFM welcomes retail and professional traders to explore the platform, account options, software and tools. All clients — from beginners to institutional experts — enjoy a tailored trading experience that fits their skills and ambitions. Less experienced investors can hone their trading skills in live webinars that are free to clients and held three times

per week. HFM is a client-centric company offering low spreads and competitive fees on over 1,200 trading instruments. It has introduced reward programmes designed to put extra cash in clients’ hands, including $1m in cash prizes through its ROFM (Return on Free Margin) promotion and its newest programme, RevShare+, which aims to increase partner earnings with up to $5,000 in extra rewards. Sports fans will be happy to hear that the company has renewed its partnership with Paris Saint-Germain. HFM continues to garner media praise and win industry awards — now at 60 and counting. The CFI.co judging panel adds another accolade, presenting HFM — a repeat programme winner — with the 2022 global award for Best Forex Trading App. CFI.co | Capital Finance International

109

> MOODY'S INVESTORS SERVICE: BEST CREDIT RISK ANALYSIS LATAM 2022

Moody's has a 100-year history of facilitating better business decisions and protecting the integrity and transparency of capital markets. The group continues to strengthen its presence in Latin America through product innovation and regional partnerships. Moody’s follows country-specific methodologies to calculate domestic credit ratings in Argentina, Bolivia, Brazil, Panama, Peru and Uruguay. It has introduced a crossborder investor service and established a strong domestic platform with regional ratings and local languages. Moody’s Investors Service helps clients navigate global debt markets, tracking

debt across 130 countries and thousands of corporate and public finance issuers and structured finance obligations. Moody’s Investors Service has been in Latin America since 1997, supporting capital market and risk management professionals in more than 400 organisations. Expansion plans have been especially successful with the launch of Moody's Local Brazil and the upcoming launch of Moody's Local Mexico. Moody’s has achieved another milestone in its ongoing ESG journey with the addition of products related to green bonds. Moody's Investors Service is a leading provider of credit ratings,

research and risk analysis. Moody's commitment and expertise contributes to transparent and integrated financial markets. Moody's Investors Service is a subsidiary of Moody's Corporation (NYSE: MCO), which reported revenue of $6.2 billion in 2021, employing approximately 12,000 people worldwide and maintaining a presence in 40 countries. The CFI.co judging panel has recognised Moody’s in previous award programmes and continues to find cause for celebration. Moody's Investors Service claims the 2022 award for Best Credit Risk Analysis (LATAM).

> INFINITY ASSET MANAGEMENT: BEST FIXED INCOME FUND MANAGER BRAZIL 2022

Infinity Asset Management began as a brokerage service provider 25 years ago in São Paulo, Brazil, and switched to fund management and custom investment solutions in 1999, recruited experienced finance professionals and developed their talents through training programs. Since then, the company have won several awards, with a focus on the fixed income strategy, vehicle for risk-adverse investors looking for steady, reliable returns. It takes a partnership approach to the management of human capital- from staff to clients. Investment committees, monthly newsletters, weekly economic reports drive our investment process, with periodic media updates, and a tireless pursuit to decipher the challenges of the World

today - using cutting edge research to validate and execute our investment principles. Infinity manages fixed income, equity, and hedge funds. ESG criteria is becoming the core of our business: now, we are in the process of launching our first ESG fund, working with a focus on land that generates carbon credits, reforestation, projects for the production of clean energy and water recovery and treatment. Despite recent market instability, the results speak for themselves: our two-year return from three of our fixed income funds. Infinity also took advantage of this period to bring in new professionals to compose a highperformance cross-functional team. Infinity takes a 360-degree view of macro and microeconomic

trends to balance diversification across investment funds. The team keeps in close contact with clients and collaborates to preserve and grow their wealth. We design credit solutions to meet companies' financing needs and invest in real estate and participation funds, which deal with shares, debentures, subscription bonuses and other bonds and securities. It combines products and services to create custom equity structures for organizational and fiscal optimization, succession planning, governance, and asset security, among others. The CFI.co judging panel announces Infinity Asset Management as the 2022 award winner for Best Fixed Income Fund Manager (Brazil).

> AAY INVESTMENTS GROUP: BEST INTERNATIONAL PROJECT FINANCE TEAM PANAMA 2022

AAY Investments Group provides financial and insurance services to clients across the public and private sector. The group is headquartered in Panama with 45 employees across the network. Credit intermediation is the main focus of the group, which comprises four subsidiaries and six affiliated partners. AAY Investments Group credits its success to the calibre of its team and the long-term relationships it establishes with clients. The group was founded in 1986 and is driven by a senior management team with more than 95 years of combined finance experience. 110

The group has assembled a team with high qualifications and diverse backgrounds in law, risk management, investment banking, commercial project financing and venture capital funding. AAY aims to create a corporate culture where employees feel like valued members of a family. Department heads are focused on understanding their people’s needs — staff and clients. The group considers how its actions could impact stakeholders throughout the decision-making process. This attention to detail has resulted in high rates of customer loyalty and staff retention. CFI.co | Capital Finance International

AAY Investments Group adheres to strict standards of confidentiality and non-disclosure, never sharing information with third parties. It has become a trusted partner of wholesale insurance brokers as well as governments, publiclisted companies, professional service providers and private-project owners. Future expansion plans include construction project insurance and investment solutions. The CFI.co judging panel presents AAY Investments Group with the 2022 Best International Project Finance Team (Panama) award.

Spring 2022 Issue

> ORBIAN: MOST INNOVATIVE TRADE FINANCE SOLUTIONS GLOBAL 2022 Orbian is a pioneer of supply chain finance, creating expansion opportunities for businesses small and large and delivering steady returns for investors over the past 20 years. Orbian understands that supply chain finance greases the wheels of global commerce and has a developed a trade finance platform to streamline connections between suppliers, corporate buyers and funding providers. It works with businesses to custom-create scalable supply chain finance programmes to accommodate working capital and cash flow goals. To date, Orbian has processed five million transactions and $240bn in trade finance — while maintaining an error-free transactional record. It has achieved a 100 percent integration success rate across all major Enterprise Resource Planning systems and proprietary A/P systems. Supplier onboarding is a simple web-based process

with documentation specialists on-hand to support thousands of suppliers across the 53 countries where it currently operates. Orbian broadens the potential investor pool by giving suppliers access to multi-bank and source-agnostic funding. Flexible funding structures allow suppliers to use excess cash to fund the finance programme. Orbian invests a portion of annual revenues into the development of staff skills and enhancement of the customer experience. The company fuels growth through a process of continuous innovation, which includes regular upgrades to its state-of-the-art platform. Over the past year, Orbian has introduced new tools allowing for greater regional control over trade finance. The CFI.co judging panel presents Orbian, a repeat programme winner, with the 2022 global award for Most Innovative Trade Finance Solutions.

> AL FOZAN HOLDING COMPANY: BEST DIVERSIFIED HOLDINGS GOVERNANCE GCC 2022 Al Fozan Holding Company is a thirdgeneration family-owned conglomerate serving communities across Saudi Arabia and the Gulf Cooperation Council (GCC) region for more than 60 years. It aims to build a brighter future for every person that its operations impact by creating value through intelligence, experience and creativity. The company is engaged in four key sectors — manufacturing, retail, real estate and trading — with a mix of investments in other vital areas. Al Fozan strives to create synergies between clients and sector experts, increasing return on investment through strong governance support and collaboration in the sustainable development of the sector. Investees in the Al Fozan portfolio, a diverse combination of mature enterprises and emergent start-ups, are united by a common set of rules and governance structures. Al

Fozan owns 30 companies, and a central committee provides governance checklists regarding sustainability, hiring and conflict resolution, among other policies and procedures. Al Fozan guides the growth of portfolio companies through participation in board meetings, succession planning and corporate accountability. It stays ahead of the curve by hiring economic consultants to predict trends and restructuring development plans in accordance. It works with the Saudi ministry of social affairs to establish ESG benchmarks. It’s making strides towards gender empowerment, with succession plans to fast-track qualified female candidates to the executive suite. The CFI.co judging panel unanimously selects Al Fozan Holding Company, a repeat programme winner, as the 2022 winner in the award category for Best Diversified Holdings Governance (GCC).

> OMNIA HOLDINGS: BEST SUSTAINABLE DIVERSIFIED CHEMICALS GROUP AFRICA 2022 Omnia Holdings was founded 70 years ago, starting in the ammonia value chain and evolving into a diversified operation with a range of specialist solutions for agriculture, mining and chemical industries. The company aims to contribute to a better world through its products and practices. It pursues sustainable economic growth through diversification, technology and innovation, seeking to boost agricultural productivity and resilience. A solid governance structure, proactive stakeholder engagement and collaborative partnerships accelerate progress on the SDGs, which act as guideposts for social responsibility and environmental stewardship. Omnia strives to achieve zero-harm positive impacts, starting with its own people. The group prioritises the safety, wellbeing and development of its workforce and has launched an employeeshare scheme enabling workers to benefit from

the value they help generate. Omnia invests in the communities where it operates, supporting social initiatives in the areas of education, employment and food security. In 2021, Omnia dedicated 1.5 percent of net profit after tax into community social investment programmes. The group celebrates ESG milestones — improvements in greenhouse gas emissions, carbon credits, renewable energy production, oil recycling and mining practices — and uses them as the springboard and inspiration for further action. Omnia has benefited from the disciplined leadership and strategic alignment of businesses, achieving increased margins, prudent cash management and operational efficiencies that have allowed a significant reduction in debt. The CFI.co judging panel announces Omnia Holdings as the winner in the 2022 award category for Best Sustainable Diversified Chemicals Group (Africa). CFI.co | Capital Finance International

111

> BANQUE SAUDI FRANSI: BEST BANKING CUSTOMER EXPERIENCE SAUDI ARABIA 2022

Banque Saudi Fransi (BSF) deploys a workforce of 3,227 professionals to go the extra mile for clients. Over the past 45 years, the bank has sought to get as close as possible to its customers. It has established digital channels to supplement a nationwide network with 84 branches, 536ATMs and 45,031 point-of-sale devices. BSF has been running a customer experience programme called “Ask Once” since 2020. The programme, just as its name suggests, ensures that clients’ concerns come front and centre. They only need to ask once,

and the BSF team mobilises to resolve problems and offer guidance. It has collected 150,000 customer feedback forms since the launch of the programme, which is rooted on the five pillars of listening, action, governance, training and culture. The bank seeks feedback across the organisation, focusing not only on customers but also bank departments, employees and colleagues. This includes measuring work environments and processes, as the bank has found happy employees to deliver the best results. BSF takes swift action to address any

challenges clients might encounter, charting a custom course for each circumstance. The entire organisation gets behind the programme, starting with a dedicated Ask Once committee that’s supported by the bank’s top leadership. Initial and ongoing training encourages consistent on-brand customer care. BSF fosters a culture of honesty, simplicity and humility — where ideas come before egos. The CFI.co jury presents Banque Saudi Fransi with the 2022 Best Banking Customer Experience (Saudi Arabia) award.

> APPLIED SCIENCE PRIVATE UNIVERSITY: BEST UNIVERSITY INTERNATIONALISATION STRATEGY MIDDLE EAST 2022

Over the past three decades, Applied Science Private University (ASU) has expanded its campus, curriculum and collaborations to provide the most relevant and real-world educational experiences. ASU is home to a diverse student body, including 53 nationalities. The university was granted five stars in the QS rating category for internationalisation in 2022. ASU aims to advance research and bring collaborators together in academic publications. It offers research grants that are tailored to national priorities and international standards. ASU has established working relationships with University College London, Queen’s University and the University of Sydney — the latter of which ASU is collaborating with to establish a first-of-its-kind

public health research centre. ASU has earned top quality assurance certificates from national accreditation bodies, and several faculties meet the strict eligibility requirements for international accreditation. The nursing faculty is accredited by an organisation recognised by the US Department of Education. The faculty of engineering and technology is ABETaccredited. The business school is taking steps to finalise AACSB accreditation and will soon become one of only five percent of institutions worldwide holding this distinction. The marketing programme became the first in Jordan and the Middle East to receive IIMP accreditation. Also the following international accreditations have been achieved by these different faculties: ACPE

- Faculty of Pharmacy, ACEN - Faculty of Nursing, ABET - Faculty of Information Technology Computer Science, HCE`RES - Faculty of Law, AACSB - faculty of business - Initial Approval, QS 5 stars - University level and finally 5 stars in online learnings by QS in addition to the national accreditation for quality assurance at the university level as well as for all its faculties. In 2019, ASU established an international relations office to promote exchange programmes, experience sharing and partnerships among universities. The CFI.co judging panel announces Applied Science Private University as the winner and claiming the 2022 award for Best University Internationalisation Strategy (Middle East).

> BOURSA KUWAIT: OUTSTANDING CONTRIBUTION TO THE SDGS GCC 2021

The UN’s Sustainable Development Goals (SDGs) provide a universal framework to meet urgent environmental, social and economic challenges. Boursa Kuwait is rising to the challenge by focusing on four key areas: people, community, education and environment. The recently privatized operator of Kuwait’s national stock exchange has been instrumental in the diversification of Kuwait’s economy and development of its capital market — which was recently upgraded from Frontier to Emerging market in the world’s top three indices. Boursa Kuwait is an equal-opportunity employer that participates in global initiatives 112

to support women’s empowerment. It provides ongoing professional development to employees and promotes internship opportunities through university partnerships. In 2020, employees benefited from over 2,000 training hours via a partnership with LinkedIn Learning. Boursa Kuwait also continued to develop content for its free digital education portal to increase financial literacy and understanding of financial markets. The company engages in a broad range of social impact initiatives to create long-term benefits for the population, from strategic partnerships to improve children’s hospital experiences to CFI.co | Capital Finance International

employee volunteerism. Boursa Kuwait is working to reduce its carbon footprint, and efficiency upgrades have resulted in a consumption reduction of over a million kilowatts of energy and 85,000 gallons of water during 2020. The bourse’s threephased “Align, Create and Integrate” approach to corporate sustainability seeks alignment with international standards and business objectives as well as a measurable return on investments for the company and its stakeholders. The CFI.co judging panel presents repeat programme winner Boursa Kuwait with the 2021 Outstanding Contribution to the SDGs (GCC) award.

Spring 2022 Issue

> PwC MIDDLE EAST: BEST BUSINESS & TAX SERVICES PROVIDER MIDDLE EAST 2021 PwC Middle East has a clear vision for accelerating regional transformation. Over the past four decades, PwC Middle East has fuelled organic growth by focusing on solving problems and building trust within society. A refreshed global strategy, The New Equation, calls for humanled and tech-powered solutions that deliver sustained outcomes and reallife results. The company puts people at the top of the agenda, starting with its own team. PwC invests in the recruitment and retention of top talent and has pledged to create 6,000 new jobs over the next five years. The company employs 7,000 people in 12 Middle Eastern countries. Flexible, remote working structures encourage employees to think in terms of performance and value delivery. It has established tax and

transfer pricing centres of excellence in Jordan and Egypt that contribute to socio-economic development — and serve as a pipeline to regional talent pools. PwC Middle East offers a range of professional services: assurance and audit, consulting, deals, entrepreneurial and private business, tax and legal. Digital transformation investments have increased automation and reduced inefficiencies. PwC Middle East stays on top of regulatory developments and shares insights through regular publications. It aims to become the bridge between authorities and the clients, building trust with every interaction. The CFI.co judging panel presents PwC Middle East — a repeat programme winner — with the 2022 award for Best Business & Tax Services Provider (Middle East).

> ALISTITHMAR CAPITAL: BEST ASSET MANAGER MIDDLE EAST 2022 Alistithmar Capital has been serving Saudi financial markets since 2008. The closed joint stock company operates with paid-up capital of $66.7m (250 million Saudi riyals). It focuses on three main areas: brokerage, asset management, and investment banking. An influx of fresh leadership in 2017 has resulted in exponential growth, delivery and performance enhancements and superior customer service. The equity asset management products at Alistithmar Capital has consistently outperformed their respective benchmarks in the past three years, also ranking in the top quartile against their respective peers. Alistithmar Capital provides clients with exceptional value, as evident by the growth of their asset under management, which also outpaced the industry growth rate. The company aims to maintain its leading position in the Saudi Financial Services industry by

continuing to deliver superior performance and continually improve it costumer experience. Alistithmar Capital has implemented numerous initiatives to build cohesion and collaboration between its teams such as daily committees meetings to facilitate dynamic decisionmaking. The company attribute a lot of its success to its employees who are a mix of highly motivated young professionals and seasoned experts, all sharing common traits of high work ethics and uncompromising diligence. Digital integration across multiple platforms is bringing the company closer than ever to its clients. Alistithmar Capital works to wow clients, putting their interests as top priority and operating with honesty, integrity and transparency. The CFI.co judging panel presents Alistithmar Capital with the 2022 Best Asset Manager (Middle East) award.

> BOURSA KUWAIT: BEST DIGITAL TRANSFORMATION STRATEGY GCC 2021 Boursa Kuwait is a trading pioneer that can trace its roots back to the first stock exchange in the GCC, and one of the oldest in the Middle East. The company was established in April 2014 and assumed responsibility for the operation of the Kuwait stock exchange on April 25. On October 5, Boursa Kuwait was awarded the exchange license by the Capital Markets Authority for the independent operation of the exchange. On September 14, 2020, Boursa Kuwait was listed on the “Premier” Market. Boursa Kuwait launched its newly upgraded electronic ecosystem in December 2020, which included a newly-redesigned website and a suite of applications for smartphones, watches and tablets. The website has been developed from the ground up using a bespoke Content Management System (CMS), designed to make the vital information that market participants rely on easier to find, while introducing several new features, including an enhanced version of MarketWatch, while the stock screeners option allows

users to focus on what matters most to them. Investors can also keep up with the new calendar and company announcements, as well as access sophisticated charts and reports that assist in the decision-making process. In addition to the website, applications for iOS, iPadOS, WatchOS and Android phones and tablets were also developed. Boursa Kuwait follows ISO 27001 standards for information and cybersecurity, applying internal controls to ensure confidentiality, integrity and availability, while also testing against vulnerability and DDoS attacks. All these steps contributed to a seamless continuation of business during the pandemic, with web-based portals launched for brokerage firms and secure connections to the VPN for remote-work employees. The CFI.co jury unanimously voted for Boursa Kuwait, a repeat programme winner, in the 2021 category of Best Digital Transformation Strategy (GCC). CFI.co | Capital Finance International

113

> PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA): BEST ECONOMIC ZONE PROMOTION SOUTH EAST ASIA 2022

The Philippines has some of the most concentrated natural resources in the world — and the Philippine Economic Zone Authority (PEZA) is publicising that fact to attract foreign development investments. PEZA acts as a catalyst for sustainable development in the Philippines, focusing on manufacturing, tourism and industrial exporters as well as land and building developers. It provides a complete service to investors, assisting with business registration, tax incentives and operational support. PEZA has undertaken a 25-year transformation strategy to accelerate the industrialisation of

the country. Sustainability is a non-negotiable criterion for new and existing development, as environmental responsibility plays a critical role in decision making. PEZA looks to the future with lessons learned from the past. Previously the Philippines had centred around the extraction of raw materials, but now PEZA is building the infrastructure and workforce to claim more of the processing market. PEZA is training the people and developing the resources needed for this shift, which is expected to expound on benefits and improve margins. The transition will help to make the Philippines a more self-

reliant and resource-generating country — and establish it as a major player in the global supply chain. PEZA intends to halt the “brain drain” of the country’s best talent by implementing inclusive policies to ensure smaller players — including SMEs, farmers and fisheries — aren’t overlooked. It is improving urban infrastructure, so workers have easy access to housing and facilities. PEZA is an integral part of the Philippines effort to lift the economic prospects for citizens. The CFI.co judging panel presents PEZA with the 2022 award for Best Economic Zone Promotion (South East Asia).

> OCTA INVESTAMA BERJANGKA: MOST TRANSPARENT BROKER INDONESIA 2022

Octa Investama Berjangka is a futures brokerage company based in Indonesia helping investors to build wealth in a transparent and secure trading environment. The company fuels growth with a client-centric, data-driven approach to development. Upon identity verification, clients may begin trading in 27 currency pairs, gold, silver and indices on Octa’s MetaTrader4 platform. Clients can access the platform through the web portal and mobile app, or use offline channels to seek additional assistance. The broker is headquartered in Jakarta, and

clients can call to speak with a specialist or schedule an appointment for any in-person queries. Client accounts within the Octa system are sacrosanct and untouchable. Accounts are monitored by the government, and Octa coordinates closely with Indonesian regulatory agencies — BAPPEBTI, ICDX, ICH — to ensure all operations remain above board. Clients can easily review Octa’s certificates and licenses, which are prominently displayed on its official website. The company looks after clients and community. It provides clients with negative

balance protection to ensure they won't incur any debt towards the brokerage in cases where the trade ends with loss. It offers Shariacompliant accounts with competitive trading conditions. The company conducts ongoing CSR activities to support communities in Indonesia. It helped fund the construction of a school library and sponsored the distribution of festive meals during Ramadan and Eid al-Adha last year. The CFI.co jury presents Octa Investama Berjangka with the 2022 Most Transparent Broker (Indonesia) award.

> AmInvest: BEST INVESTMENT FUND MANAGER MALAYSIA 2022

Digital and fintech disruptions are moving the market, and AmInvest is keeping pace with strategic investments in tech infrastructure and human capital. AmInvest, the brand name for AmFunds Management Berhad Berhad and AmIslamic Funds Management Sdn Bhd leverages on decades of industry experience to help investors optimise their investments. The company offers conventional and Shariah-compliant retirement funds across asset classes and geographical exposures — nearly 100 in total — in addition to managing exchange traded funds and private retirement schemes. AmInvest evaluates many 114

factors when making investment decisions, with increasing consideration for ESG performance. AmInvest sees the pandemic as the catalyst that quickened the digitalisation transition, forcing organisations and individuals to become more versatile and digitally adept. The company has experienced a boom in digital onboarding. Despite working remotely, AmInvest’s fund managers carried on with business as normal, following a consistent investment philosophy that reflects the company’s mission and vision. Over the past few years, AmInvest has applied institutional investing expertise to better serve CFI.co | Capital Finance International

retail clients. It has invested its resources to expand distribution channel from traditional public-agency channels to an online platform with open architecture facilitating industry-leading partnerships. AmInvest places a priority on developing home-grown talent and complements the team through external recruitment. It has some 200 professionals staff, many of whom have made a career at the company, starting as analysts, and climbing ranks over the years. The CFI.co judging panel congratulates AmInvest, winner of the 2022 Best Investment Fund Manager (Malaysia) award.

Spring 2022 Issue

> BCPG PUBLIC COMPANY LIMITED: BEST CLEAN ENERGY COMMUNITY SOLUTIONS SOUTH EAST ASIA 2022 BCPG Public Company Limited (BCPG) markets itself as a “greenergy” icon. BCPG is among Asia-Pacific’s leading companies in renewable energy with solar power, hydropower and wind power businesses in Thailand, Japan, Taiwan, Laos, Vietnam and the Philippines. It aims to democratise energy for consumers, moving away from centralised management to a digitally enhanced, partner-powered model. BCPG first registered on the CFI.co radar in 2018, two years after the company’s IPO launch, for its burgeoning efforts to create communities of green-energy “prosumers” — households generating and trading renewable energy on a peer-to-peer platform. The Thai company pioneered the first and largest peer-to-peer energy trading project in South East Asia, the T77 Community in Bangkok, where solar panels on rooftops allow buildings to produce energy for their own consumption or for sharing. It has gone to the next level as smart lifestyle creator

by developing CMU Smart City Clean Energy at Chiang Mai University, the role model of smart city equipped with innovative facilities, e.g. smart grid, energy storage systems, EV charging stations and carbon trading platform. The project has acquired regulatory approval and achieved first phase of commercialisation in November 2021. BCPG has been in the solar game for over a decade and began diversifying the portfolio in 2017. Apart from green power plants and energy storage systems, BCPG is now developing a crossborder transmission line to transmit electricity from Laos to Vietnam and will significantly expand capacity of wind energy production through a 600MW wind energy project, ASEAN’s largest wind farm, which is expected to commence commercialisation in 2025. The CFI.co judging panel presents BCPG — a repeat programme winner — with the 2022 award for Best Clean Energy Community Solutions (South East Asia).

> CRC CREDIT BUREAU LTD: BEST CREDIT BUREAU NIGERIA 2022 Lagos-based CRC Credit Bureau has developed a range of fresh initiatives to deal with the effects of the Covid-19 pandemic in Nigeria. The data collection agency was incorporated in 2006 and has evolved the product line-up to enable partners to gain deeper customer understanding, conduct more targeted marketing campaigns and support informed decision-making. The latest CRC initiative is designed to offer a clearer picture of those seeking loans in the aftermath of the economic damage inflicted by the pandemic, especially the country’s hard-hit SMEs. CRC Credit Bureau gives partners a 360-view of their customers, pulling from financial records as well as social media channels to understand how the pandemic has impacted them. Advanced data analysis is being utilised to identify

customers with responsible repayment histories so that terms can be renewed or restructured. The company is also implementing recovery plans that seek to build IT capacity and digital awareness. It has set up a financial education centre where companies are given IT training in soft skills, credit evaluation and tracing, among other subjects. CRC hopes that stronger technical services will allow businesses in Nigeria to upscale more rapidly after the upheaval of Covid-19. The company is also running a number of internet seminars covering payment, digital and open banking systems. CRC Credit Bureau was accredited by the Chartered Institute of Bankers of Nigeria in 2021. The CFI.co judging panel presents repeat programme winner CRC Credit Bureau with the 2022 Best Credit Bureau (Nigeria) award.

> ICBC DUBAI (DIFC) BRANCH: MOST INNOVATIVE INTERNATIONAL BANK EMEA 2021 Industrial and Commercial Bank of China Limited (ICBC) has a 38-year history of continuous innovation to best support the socio-economic development of the communities where it operates. It now serves some eight million global corporate and 650 million retail clients through a robust domestic and international network. ICBC Dubai (DIFC) Branch anchors the group’s Middle Eastern network, which includes five regional branches. It provides clients with deposit and credit accounts as well as investment advisory, asset management and custody arrangement services. The bank’s enviable location in the Dubai International Financial Centre (DIFC) — an important financial hub for markets in the Middle East, Africa and South Asia — underscores its potential as catalyst and connector. It collaborates with governments, sovereign institutions and corporate clients

to fuel infrastructure investments, economic diversification and green development across the GCC region. The bank’s diversified business structure and client-centric focus have allowed it to adapt with evolving times and stay ahead of trends. It drives innovation to pursue high-quality development and seize opportunities amid uncertainties. The group continues to roll-out increasingly intelligent services to meet modern banking needs. ICBC has built an integrated biosphere driven by an API open platform and financial cloud technology. It has introduced functionalities that support smart cities and rural financial inclusion. The CFI.co judging panel has recognised the bank in previous awards programmes and this year is no exception: ICBC Dubai (DIFC) Branch takes the 2021 award for Most Innovative International Bank (EMEA). CFI.co | Capital Finance International

115

> Africa

Malaria: an Age-Old Killer that Still Stalks the World By Brendan Filipovski

Some claim that malaria has ended the lives of half of all the humans who have ever lived. Sumer suffered from it, and Rome was routinely ravaged. In the 20th century alone, the disease killed between 150 and 300 million people.

116

CFI.co | Capital Finance International

owadays, it is rare in the developed world, largely confined to returning travellers. But in the developing world and especially Sub-Saharan Africa (SSA), the human and economic impact remains enormous. The advent of a new malaria vaccine has the potential to transform the region. The UN’s Sustainable Development Goal 3.3, the ending of the malaria epidemic by 2030, may be in reach. Malaria infects over 200m people each year and kills around 500,000. Most of these are children in SSA, including 260,000 deaths in those under the age of five — one death every two minutes. One study found that in a typical village in Senegal, children were infected by malaria every four to six weeks. Deaths of young children are devastating to families and communities on a personal level. But there is also the loss of human and economic potential. Then there are the health and economic costs from those who survive, but have debilitated immune systems from repeated infections. Estimates for the direct and indirect economic cost of malaria in Africa range from $2bn to $12bn per year. Compare this to the $61bn Africa received in Official Development Assistance in 2019. Another estimate says that malaria reduces Africa’s economic growth by up to 1.3 percent per year. This is more than a third of the 3.5 percent GDP growth rate SSA averaged over the 10 years to 2019. This economic impact would be huge for any region, but for Africa — with its lower levels of development and higher rates of poverty — the impact is compounded. Who can get treatment when there is no money? What happens when a family can no longer look after its crops or livestock? On October 6, 2021, the WHO approved the firstever vaccine for malaria. And on December 2, the Global Alliance for Vaccines and Immunisation (known as Gavi) approved $155.7m to rollout the vaccine to eligible countries in SSA for 2022-2025. “I never thought there would be a vaccine in my lifetime, but now we have a chance,” says Anthony Nsiah-Asare, director general of Ghana Health Service. The vaccine is called RTS-S with the trade name Mosquirix. It has a 36 percent efficacy rate against infection and 50 percent efficacy against severe malaria in the first year; it lasts for around four years. It requires four doses and can be taken by infants. Gavi hopes to add the vaccine to the routine vaccination program for infants in eligible SSA countries. Modelling from a study in 2014 found that 30 million doses in SSA would prevent 4.3 million cases and 22,000 deaths in children under five years. 118

"Deaths of young children are devastating to families and communities on a personal level. But there is also the loss of human and economic potential. Then there are the health and economic costs from those who survive, but have debilitated immune systems from repeated infections." Efficacy of 36 percent seems low, and the WHO had set a 75 percent efficacy target for a malaria vaccine by 2030. So why have the WHO and Gavi embraced RTS-S? Because there are no alternatives. 36 percent is better than zero. By employing the vaccine, thousands of lives can be saved compared to the counterfactual. Insecticide-treated bed nets have an efficacy of 20 percent, but they are harder to distribute and only protect those sleeping under it. Quinine is no longer widely used because of its side effects. Drugs like chloroquine and artemisinin are preferred, but many strains of malaria have become resistant. Another 24 vaccines have been developed in recent years, but RTS-S is the only one that has made it through all the phases of human testing. Developing a vaccine is no easy task. It has taken 31 years for RTS-S to move from the sketch pad to WHO approval. The cost is over $750m. The research was led by GlaxoSmithKline; the Bill & Melinda Gates Foundation also contributed. Malaria evolved in Africa thousands of years ago, the first effective treatment was not discovered until after the Europeans had taken the disease to South America. The Europeans saw indigenous people treat fevers with bark from the cinchona tree. From this bark, quinine was developed. And it was not even until 1897 that mosquitos were discovered to be the main vector of the parasite that causes the disease. Later in the 20th Century, it was discovered that in fact there are six different parasites, from the plasmodium genus, that can cause malaria. Some can stay dormant in the body for years. Influenza is another disease with a long history, and one which is equally elusive. Vaccines for influenza strains are often around only the 40 percent level. RTS-S is the best we have right now. And when augmented with bed-nets and drugs, it represents another key victory in humanity’s ongoing battle with malaria. It is unlikely to be the last malaria vaccine developed. R21/Matrix-M is showing promise CFI.co | Capital Finance International

with an efficacy of 77 percent in a phase 2B study last year. It must go through phase three trials before seeking approval. Then there is the potential of an RNA vaccine. BioNTech-Pfizer has reportedly turned its attention to malaria and hopes to begin clinical trials by the end of 2022. The eradication of malaria may soon be possible. In the 1950s and 60s, attention turned to management rather than eradication. But SDG 3.3 now offers a realistic hope. RTS-S may also pave the way for vaccines for other Neglected Tropical Diseases (NTDs). RTS-S was the first vaccine for a parasitic disease. Many of the WHO’s 20 NTDs are also parasitic diseases. Malaria used to be on the NTD list. With 1.7 billion people suffering from NTDs there are some 200 thousand deaths per year. This includes dengue fever, Human African Trypanosomiasis (African sleeping sickness), and schistosomiasis (snail fever). All the NTDs are long-term, chronic conditions, resulting in poor health and, in some cases, disfigurement. While mortality rates are low, they impose a high economic cost on countries because of the number of people they incapacitate — 19 million disability-adjusted lives lost per year. The reduction of NTDs by 2030 is among the goals of SDG 3.3, along with ending of the malaria epidemic. Some NTDs can be treated with drugs, but they are relatively expensive. Unlike a vaccine which is preventative, many of the drugs must be used with every bout of infection. None has a vaccine, although some are in development. Billions more are spent on malaria, HIV and tuberculosis than on NTDs. But advances in fighting malaria will continue to have positive spillovers — even if it is just the transfer of funding. RTS-S is the first salvo against malaria. Its impact will be immediate in terms of lives saved and potential protected. But its bigger impact may be as a harbinger for a new wave of vaccines to fight malaria, NTDs, and other elusive and endemic parasitic diseases. i

Spring 2022 Issue

> Seelan Gobalsamy, CEO of Omnia Holdings:

Putting Sustainability at the Heart of His Turnaround Strategy Contact: www.omnia.co.za

mnia Group is an international, diversified, sustainable group of businesses which are recognised for leading the change from chemicals to green chemicals, biotech, and biomolecular solutions, offering network-created, innovative technologies that protect life.

Omnia aims to advance its position, continuing to embrace new technologies and significantly lowering our business’ environmental impact. Our emphasis is on elevating our position as a sustainable, customer centric, market-leading business with a highly motivated and responsive workforce.

We chatted to the CEO of Omnia Holdings, Seelan Gobalsamy, about turning a business around, leadership during turbulent times, environmental impact and the importance of all stakeholders for business sustainability.

The bigger impact we have is ensuring that our customers reduce their impact through sustainability initiatives. Member of the Omnia Group, BME has led the field in the way it incorporates used oil in its explosives, BME promotes the circular economy for oil by annually collecting and recycling over 25 million litres of used oil from its customers, businesses and community gatherers, preventing the contamination of water and soil resources.

Omnia embarked on a broad turnaround strategy in 2019 to improve the Group’s financial position, overall performance and competitive market positioning. What is your advice to other leaders who are turning a business around? When challenging times arise, there is sufficient foresight and inherent resilience to focus and turn the situation around with a robust and disciplined execution plan. However, this is not always the case. If a business is on a downward trajectory and its leadership does not take immediate, corrective and decisive action, a collapse is most likely looming. Resilience is more important than ever in our dynamic and unpredictable business environment. However, I believe that every crisis brings an opportunity to adapt and change course. While the Covid-19 pandemic may have spurred widespread disruption, it also created opportunities for leaders to reconsider what is required for their organisations’ future fitness. It is critical to make the difficult decisions and put the business on a renewed path as soon as possible. Getting stakeholder buy in is critical, the alignment of these stakeholders is critical for a turnaround plan. Global events have caused major disruptions to supply chains. How is Omnia’s sustainability agenda integrated in its strategy? The business has adopted a holistic approach to safety; environmental, social and governance (ESG), and precision technology. By developing local suppliers through Omnia’s supplier selection processes, setting prerequisites for recycled materials, and through stringent quality standards, the business has reduced its carbon footprint, while aligning with its sustainability and environmental agenda. We are building resilience with investments in renewable energy across our business. A large investment has been made in our plant at our Sasolburg factory, which will ultimately further reduce our reliance on the electricity

Similarly on the agricultural front, Omnia has addressed food security through its innovative agriculture offering. Through the provision of ‘feet on the farm’ advisory and access to a suite of agricultural technologies (DigiAg™, OmniPrecise®, OmniZone™, OmniRiskIQ™), Omnia Nutriology optimises farming practices, reduces farming risk, and enables precision farming - leading to increased yields and enhanced nutrient and water efficiency.

CEO: Seelan Gobalsamy

grid. Equally, the effectiveness of our supply chain practices have directly contributed to the reduction of our carbon footprint. In the past year, Omnia switched from single-use plastic liners to recycled plastic. We also diversified our transport utilisation to include rail transport into the SADC region. We emphasise social development through strategic sourcing and supplier development initiatives. By remaining close to our supplier base and their supply chains we can meet our environmental and social commitments. We maintain strict compliance and governance to ensure procurement best practices. These practices de-risk the business, increase local sourcing, reduce our environmental footprint – as well as that of our customers - and promote supplier enterprise development. Can you share some successes Omnia has had in its impact on the environment? Between 2020 and 2021, Omnia’s GHG emissions reduced by more than 363 091 tonnes. This reduction is equivalent to the annual emissions of about 79,000 vehicles. By FY2027, CFI.co | Capital Finance International

What is a key business philosophy you have to ensure a sustainable business? People are the core of a business. The impact that any business makes is determined by its people. Leadership that creates a value-based culture, that continuously does what is right is critical to the sustainability goals of the business. Purpose-driven leadership is crucial, as this kind of leadership motivates, inspires, recognises and rewards employees – the very people who devote themselves to driving the business’s goals forward. Effective leaders consider diverse points of view, identities and professional backgrounds as crucial to advancing creativity and critical thinking in the business. These provide the business with fresh perspectives that incubate new or more compelling ideas and ultimately advance the business, its people and economies. Key to harnessing these perspectives is ensuring employees feel empowered to raise their voices and put their ideas forward. From a wider perspective, I am particularly passionate about the immense potential for African business leaders to be changemakers. They contribute towards building world-class businesses and are well placed to leverage opportunities that can strengthen the continent’s competitiveness and empower its people. i 119

> Société Générale Congo:

Innovation in Congo Puts Societe Generale in Leadership Position

ociété Générale Congo launched in April 2012 as a subsidiary of leading European financial services provider Société Générale Group. It has since become one of the main players in the country’s banking sector. 120

Managing director and CEO Alain Calmels has been with Société Générale Congo since 2019. He is in charge of supervising the client services division (grouped back offices) and relations with social partners, banks and regulators. He and Société Générale Congo’s team of professionals CFI.co | Capital Finance International

combine expertise and individual dedication to offer tailor-made, relevant and optimised solutions — adapted to individual client needs. The Societe Generale network includes five branches in the main cities of Brazzaville and Pointe Noire. “We

Spring 2022 Issue

Congolese market, with an impressive product portfolio: current and classic savings accounts, term deposit, personal, vehicle, and back-to-school loans, as well as personal-loan real estate and overdraft insurance For professionals and companies, Société Générale Congo offers spot credit, overdraft facilities, discounting, vehicle loans, investment credit, term deposit and leasing (Sogelease). INTERNATIONAL OPERATIONS For importers, Société Générale Congo offers international transfer, documentary credit, documentary remittance, guarantees and SBLC. For the export side, it provides documentary credit with confirmation and documentary remittance — managed inhouse by the expert team.

provide a comprehensive range of universal products and insurance, remote, and daily banking services for corporate, professional, and individual clients,” says Calmels.

Transfers and management of export flows are speciality services, with advantageous conditions on transactions between XAF and foreign currency.

Société Générale Congo addresses all local and international economic actors and sectors of the

Prior to his appointment, CEO Calmels was deputy managing director of Societe Generale CFI.co | Capital Finance International

Banque de Polynesie, and previously worked in the positions of secretary-general, senior inspector, and deputy inspector. He achieved a Master of Public Affairs degree cum laude, and is bilingual in English and French. He graduated from the Faculty of Business, Economics and Law at the University of Queensland, Brisbane, and was awarded the dean’s recommendation for his part in the university’s Honours Exchange Programme. i

Managing Director & CEO: Alain Calmels

121

> Greenbacks for a Green Future:

It’s the Cost of Decarbonisation By Otaviano Canuto

Accelerating the transition toward low- or zero-carbon emissions is necessary to keep global warming at theoretically safe levels.

hat will probably bring price shocks associated with rising metal prices, energy costs, and carbon taxes — what has been called “greenflation”. Greening the economy will also require public spending and redistributive policies. MOVING TO DECARBONISATION In the wake of the COP26 Climate Change Conference in Glasgow, the International Energy Agency has updated the CO2 emissions scenarios in its World Energy Outlook, taking into account the most recent pledges. Despite a steeper decline in emissions, the world would still be far from reaching the dreamed-of net-zero scenario by 2050 (Figure 1). According to the IEA, if all Glasgow commitments are met, global warming will be bound to 1.8 degrees above pre-industrial levels by 2100. That would be a substantial decrease from the 2.7 degrees which pre-COP policies would have been expected to lead to — but far from the levels promised in the 2015 Paris Agreement.

Figure 1: CO2 emissions in World Energy Outlook scenarios over time, 2000-2050.

Estimates by Climate Action Tracker (CAT) suggest that current pledges for 2030 will not deliver the reductions necessary to push long-term effects unless further revisions are made. Figure 2 shows that, while the continuation of current policies would imply a 2.7 degree increase in global mean temperatures, the full implementation of nationally determined contributions (NDCs) — efforts by each country to reduce national emissions and adapt to the impacts of climate change — up to 2030 would lead to more warming by the end of the century. Climate Action Tracker’s pledges-andtargets scenario reflects all NDCs and submitted or binding long-term targets, including the netzero targets of the US and China. The optimistic scenario of 1.8 degrees requires faster reductions in the coming decade. Agriculture, forestry, and land-use correspond to about 20 percent of total greenhouse gas emissions, and forest cover can help remove CO2 from the atmosphere. Preventing deforestation can play a significant role in lowering CO2 emissions, and can even provide a net sink. METAL PRICE SHOCKS Supplies of renewable energy and biomass need to rise to meet global primary energy needs, and the trajectory towards decarbonisation will 122

Figure 2: Impacts on temperature estimates.

bring a sharp increase in the demand for metals, including copper, nickel, cobalt, and lithium. IEA (2021b) predicts that lithium and cobalt consumption will need to increase more than sixfold to meet battery needs.

significant surge in demand during the energy transition. Demand for raw materials used in existing clean-energy technologies, such as solar panels and wind turbines, is expected to increase.

Figure 3 shows how many minerals used in green technologies will go through a

Such an increase in demand will face a slowmotion supply response. Copper, nickel, and

CFI.co | Capital Finance International

Spring 2022 Issue

them. Supply conditions have also deteriorated because of the drop in investment in oil wells, natural gas centres, and coal mines.

Figure 3: Times compared to 2020 level, demand for minerals in 2040.

Figure 4: Green premia - cost of zero carbon alternatives vs

In 2021, the lack of investment was one of the causes of the spike in the prices of the three energy commodities. Oil surpassed $81 a barrel after OPEC and allies such as Russia, part of the OPEC+ alliance, at a meeting last year, resisted calls to increase production. Unlike what has been seen since 2015, when oil and gas prices changed levels, this time US gas and shale oil were not ready to close the gap. The trajectory of fossil fuel prices will not be steady. Public policy measures seen as favourable to the energy transition already place a price burden on fossil fuels. Such policy measures include a tax on carbon, elimination of remaining subsidies, mandatory transparency and sanctions on financial assets, and future bans on internal combustion engines.

prices will also have to be among the factors influencing people's behaviours and lifestyles. Transitioning away from fossil fuels and carbonintensive production and consumption implies a wide-ranging switch to emissions-neutral alternatives in all sectors. Policymakers can stimulate this transition by raising the implicit cost of emissions. The road to decarbonisation may entail higher costs along the way. GREENING THE ECONOMY The decarbonisation trajectory will also have consequences for public accounts. Necessary public expenditure on infrastructure to enable the transition will be required. Transitioning to a net-zero emissions economy will necessitate investment flows towards mass deployment of green electricity and electricity storage. The trend will be one of increases in public debt, though in this case without intertemporal injustice, as future generations will benefit.

traditional fuels.

cobalt mines are investment-intensive and take on average of more than a decade from discovery to production, according to the IEA. Lithium is often extracted from mineral sources and brine through salt water pumped from the ground. This reduces lead times to about five years. There will also be the challenge of ramping-up production without going against social and environmental safeguards. The combination of increasing demand and slower changes in supply could cause the prices of these metals to skyrocket. According to International Monetary Fund projections, if mining were to satisfy consumption in the IEA's net-zero emissions scenario, prices could reach historic highs (Boer et al, 2021). The price of lithium could rise from $6,000 a metric tonne to about $15,000 this decade. The production value of the four metals could increase up to six times to $12tn in two decades, according to the IMF. ENERGY-COST SHOCKS There may have to be a switch to more expensive non-carbon energy alternatives if they are to replace conventional fossil fuels. Green premia — costs of clean technology/ price of carbon-emitting alternative — will have to be paid. Figure 4 illustrates this in the case of transport fuels. The good news about such replacement is that the evolution towards cleaner technologies with declining costs is happening. The bad news is the presence of obstacles to such investments — particularly in the case of green infrastructure in lagging countries. Fossil fuels have also provoked price shocks. The expectation has been that their prices will fall as the transition pushes down demand for

We have experienced the first energy shock of the green economy era. Or the last energy shock of the fossil fuel era. In 2021, oil, coal, and gas prices rose 95 percent. This year's strong economic recovery has been confronted by oil stocks at levels six percent lower than usual, as well as gas stocks in Europe at just 86 percent of previous levels, and below 50 percent in the case of coal in China and India. At the same time, besides green premia still paid to replace carbon-emitting technologies with clean alternatives, existing stocks of investments in renewable energy have been shown to be insufficient to serve as a full alternative. The year's energy shock reflected climatic phenomena — low wind in Europe, droughts affecting hydroelectric production in Latin America, floods in Asia affecting coal delivery — but also that investments in renewable energy are evolving below what is necessary for the transition. Higher input prices in energy production and use, as well as accelerated spending on climate change mitigation, will be tolls on the decarbonisation route. ROAD TO DECARBONISATION The road ahead will demand a significant change in the relative prices of goods and services to reflect their carbon-intensity. Gaspar and Parry propose that, at the international level, measures be taken to reach a carbon price equal to or greater than $75 per tonne by 2030. Such a carbon price may be established and charged explicitly and/or indirectly through regulations or limits on use. Decarbonisation will be negligible if the price of carbon remains that of a “free good” from Nature. Carbon CFI.co | Capital Finance International

Decarbonisation could have regressive income impacts. 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. Compensating expenditures for regressive carbon pricing impacts will be demanded. It will be important to ensure income-transfer mechanisms to mitigate the regressive impacts. Workers will have to move 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 created in large enough numbers in dynamic activities. It is known that the production of electric cars requires less labour than that of combustion engine vehicles. There will also be accelerated obsolescence of existing stocks of machinery and equipment, buildings, and vehicles, and intangible assets associated with carbon-intensive activities. The counterpart will have to be accelerated investment in new assets to replace them. BOTTOM LINE What about GDP? On the one hand, there will be capital destruction, in addition to relative price shocks and the transitional impacts of reduction of potential growth. If the need for higher investment rates in GDP accompanying decarbonisation collides with supply capacity limits, consumption will have to adapt downwards. High metal prices, carbon taxes, and accelerated obsolescence of capital associated with fossil fuels: these are tolls to be paid. “Greenflation” will be a price worth paying. And cleaner technologies will offer opportunities to increase productivity. i 123

> Middle East

All Aboard the GCC Railway — First Stop: the Regional Economy By Brendan Filipovski

The Gulf Cooperation Council — under pressure from diplomatic tensions with Qatar and the impact of the pandemic — is getting back on-track.

124

CFI.co | Capital Finance International

Spring 2022 Issue

CFI.co | Capital Finance International

125

econciliation with Qatar was marked by the signing of the AlUla Declaration in January last year. And with the waning of the pandemic, attention can now return to the economy — and a megaproject which can literally and symbolically unite the region: the GCC Railway.

The Arabian Peninsula has had a love-hate relationship with railways. The Ottoman Empire, in its last gasps, completed the Hejaz line from Damascus to Medina in the early 1900s. Soon after, TE Lawrence and Bedouins were blowing up sections of it. Today, Saudi Arabia has the largest sections of heavy rail on the Peninsula. It has a north-south line between Riyadh and Jordan, the Riyadh-Dammam line to the Arabian Gulf, and the high-speed Haramain line linking Medina and Mecca. But the main connections between Saudi Arabia and the GCC countries are still by road. Back in 2004, a feasibility study into a GCC Railway was commissioned. And in 2009, at the 30th GCC Summit, the project was approved. The plan is to link the six GCC countries with 2,177km of track. It will stretch from Kuwait City (145km) down through Saudi Arabia (695km) to the UAE (684km) and then to Muscat in Oman (306km). There will be side connections, or a loop, to Bahrain (64km) and Qatar (283km). Each country bears the financial responsibility for its own sections, although Saudi Arabia and the GCC will probably help out. Oman is also planning to extend a line from Muscat to Al Duqm and Salalah on the Arabian Gulf. The UAE has already built additional freight lines from Shah and Habshan to Ruwais, and is planning more, including linking to the key regional port of Jebel Ali — one of the world’s biggest ports. The UAE intends to build a high-speed passenger service from Abu Dhabi to Dubai and Fujairah. Qatar and Iran have discussed the possibility of a road and rail tunnel. The railway could even, one day, reach the Mediterranean Sea at Haifa Bay in Israel. This assumes Israel continues plans to build rail connections to Jordan and upgrades the Jezreel Valley line to handle freight. Haifa operates as a trucking hub for freight into the Arabian peninsula. A railway line could never fully replace the Straits of Hormuz or the Suez Canal, but it would provide an important strategic alternative. The GCC Railway was originally slated for completion in 2018 — but it has been delayed by a series of unfortunate events. In 2014, the price of oil more than halved, putting fiscal pressure on the GCC. It fell further still during the pandemic. In 2017, diplomatic pressure — that ended with the AlUla Declaration — was put on Qatar. The pandemic has added to the woes, pushing government debt to record levels. 126

"The plan is to link the six GCC countries with 2,177km of track. It will stretch from Kuwait City (145km) down through Saudi Arabia (695km) to the UAE (684km) and then to Muscat in Oman (306km). There will be side connections, or a loop, to Bahrain (64km) and Qatar (283km). Each country bears the financial responsibility for its own sections, although Saudi Arabia and the GCC will probably help out." Megaprojects are never straightforward. Some critics have questioned the railway’s technical feasibility, pointing to the problems of shifting sand, narrow coastal strips, rocky outcrops, and high temperatures. This is where Saudi Arabia’s experience could prove vital. And the project is starting to gain momentum. The links between Saudi Arabia, the UAE, and Oman are expected to be finished by 2023. Those to Bahrain, Kuwait, and Qatar could be completed by 2025. The long-awaited Gulf Railways Authority was agreed-to at the 42nd Gulf Cooperation Council summit in December 2021. And in January this year, GCC transport and communications ministers agreed to a timetable. The authority is crucial in co-ordinating the projects and ensuring technical harmony and safety. The railway will be mixed-use, freight and passenger. Sections will allow for high-speed electric trains, but most will be diesel. There will be a mix of double- and single-track. Tunnels are expected to be high enough to allow for the double-stacking of containers. The most obvious benefit will be the boost to intra-regional trade. Intra-GCC exports are relatively small by global standards — which makes sense, given that oil and gas are the region’s major exports. But intra-regional exports are slowly growing (four percent of the total for 2005, six percent in 2012, and eight in 2019). That would be boosted by the railway, which is expected to carry up to 29 million tonnes of freight each year. The railway would be a logical continuation from the advent of the GGC customs union in 2003 and common market in 2008. Increases in trade and efficiency could be realised through larger supply chains, eliminating duplication CFI.co | Capital Finance International

and enabling greater economies of scale. The petrochemical industry is a key candidate. There is also the hope that greater economic integration between the regions will foster greater economic diversification, particularly in nonhydrocarbon industries. It could link the free-trade zones in the region and encourage manufacturing growth. Dubai could make steel, aluminium, and building materials more accessible throughout the region. The railway should also spur urban development. High-speed rail in other countries has led to the growth of commuter cities and corridors. All this points to the need for economic strategies. The economic benefit of the GCC railway alone may be hard to justify, but as part of a wider economic plan for the region, it could be invaluable. Savings of up to 30 percent are possible by replacing road transport with rail for bulk solids and liquids and containers. But perhaps the greatest benefit would be the social and economic integration of the GCC countries. Having been founded with such a vision in 1981, there has been recent turbulence. The AlUla Declaration marks a turning point — but imagine the impact on the region’s labour market, companies, and ideas when an estimated eight million passengers are travelling by rail in 2050. There are potential benefits for the environment. Rail uses 60 to 80 percent less energy than road transport with 70 to 80 percent less carbon dioxide emissions. Nay-sayers may cast doubt on the project, but if the UAE can send a probe to Mars — and it did — surely the railway can be built. And when the first freight and passenger trains travel the completed line, it will signal a new era of cooperation and prosperity for the GCC. The sky’s the limit with rails to guide you. i

Spring 2022 Issue

CFI.co | Capital Finance International

127

> Water in the Desert:

A Challenge that TANQIA has Taken to Heart

ANQIA, the UAE’s first privately owned wastewater collection and treatment utility, does not lack of vision.

The state-of-the-art wastewater collection and treatment system (WWCTS) in Fujairah strives to drive down costs, promote sustainability, and accommodate future demand with renewable energy. Water supply across the Gulf Region depends on two sources: seawater, through desalination, and underground aquifers. Ground water declines and salinity is rising due to over-pumping and seawater ingress. The UAE’s supply relies predominately on desalination and the recharging of underground wells. Recent UAE government policy calls for maximising recycled wastewater to substitute higher-value desalinated and underground water. TANQIA is a regulated utility, developed by the Elwan Group, with the mandate to design, finance, construct, operate, maintain, and expand the WWCTS to meet forecast demand. Executive Chairman: Ibrahim Elwan

The greenfield wastewater system was implemented in two phases. Construction commenced in 2005 commercial operation began in 2009. Phases I and II comprise two trains of 8,000 m3/day (2 x 8,000 m3/day) and 179 km of wastewater collection network (WWCN) with 29 pumping stations. Since TANQIA began operations in 2009 at a 16-hectare site south of Qidfaa, north of Fujairah’s capital, the utility has blazed a trail as the Middle East’s first privately held WWCT utility. It has set industry benchmarks to drive down the cost of wastewater services and expand its treatment capacities. HIGHEST QUALITY, LOWEST COST Demand forecast for wastewater services in the 92 square kilometre concession area guides the utility’s investment strategy. Population growth projections predict average annual growth of 5.2 percent for the duration of the concession period. The actual rate of population growth has accelerated to about eight percent. There was also a sustained rise in per-capita water consumption, from 174 litres in 2002 to 379 litres in 2021. TANQIA’s strategy is to gradually increase tariffs to meet operational and maintenance costs. The utility is an environmentally conscious firm whose emphasis is to extract valuable resources for “economic recycling” — an important element in cost reduction — with the smallest environmental footprint possible. 128

STRATEGY TARGETS ACHIEVED When GoF and TANQIA executed the concession area, the WWCN covered just 179 km; the network has since expanded to 546 km. The service-coverage ratio had increased to 87 percent of the population in the concession area by 2021. The remaining 13 percent remains unconnected because of government plans to use the area for a commercial city centre. Wastewater generated continues to be evacuated by Fujairah municipality for treatment. This strategy was implemented with the support of the government and municipality of Fujairah, and the government of Abu Dhabi TANQIA is expanding its services to meet demand. The annual rate of population growth was forecast at five percent. Actual growth was nine percent during the execution of phases I and II, making the construction of Expansion I necessary. TANQIA intensified its maintenance, concentrating on preventative replacement of critical components of wastewater treatment plant. As WWCN was to be financed by one-time, non-refundable connection charges for property owners, TANQIA broadened coverage to meet demand. REVISED EXPANSION I TANQIA relied on Revised Expansion I investments to achieve sustainability and greater reliance on renewable energy, as well as CFI.co | Capital Finance International

the treatment of sludge for reuse. Phases I and II reduced the consumption of conventional energy. These measures reduced operation and maintenance costs. Sludge treatment generates revenues from surrounding industries. The firefighting and fire alarm system of the WWTP and Revised Expansion I will be upgraded to comply with guidelines. Revised Expansion I will also entail works and fittings for the administration building, and the pipeline network to supply effluent to the Etihad Water and Electricity (EWE) distribution network through the effluent-balancing tank near the WWTP site. The balance will ensure unrestricted irrigation, in compliance with World Health Organisation standards. The electromechanical (E&M) works in Revised Expansion I include the supply and erection of equipment for the four new trains, and the addition of two belt presses for sludge dewatering of the new Mohamed Bin Zaid (MBZ) city concession area. It will also provide a new pumping station for the balancing tank. Additional work entails the supply and erection of the polishing plant’s E&M to upgrade effluent quality. PROGRESS Construction of Revised Expansion I is advanced, and the contract for civil and electromechanical works is 50 percent complete. Completion of Stage I is expected by the end of this year.

Spring 2022 Issue

Stage II, adding an extra 16,000 m3/day, is due for completion by July 31 next year. Revised Expansion I will increase ITC of WWTP from the 16,000 m3/d in place to 46,000 m3/d. AN EXPANDING NETWORK TANQIA’s greenfield WWTS comprised a wastewater treatment plant processing 16,000 m3/day, composed of two trains, 179 km of WWCN, and 29 pumping stations. This system provides services to 4,725 properties. The number of properties connected increased from 4,725 to 8,352 over the same period. This represents 20,330 accounts connected to the WWCN, while the population served by TANQIA’s wastewater services increased from 37,187 to 124,300, an average annual increase of eight percent. Peak wastewater generation for treatment reached 27,000 m3/d, despite the fact that the ITC had been at 16,000 m3/day since 2009 — and the deficit will persist until Revised Expansion I is completed. Analysis of water consumption data in the concession area shows that peak volume of wastewater generation increased at an average annual rate of 9.7 percent for 2002–2021, at about 27,000 m3/day in December 2021. The unprecedented growth in water consumption and generation of wastewater requires urgent

investment to increase the ITC of the WWTP, coupled with systematic and gradual adjustment in water and wastewater tariffs to encourage conservation and the introduction of water-saving devices. TANQIA-SIYANA — a company fully-owned by the Elwan Group — operates the WWCTS, and has managed to maintain the increase in inflow of 27,000 m3/d through its intensive maintenance and replacement programme for the existing ITC of 16,000 m3/d. Shortage of ITC reduces the chances of generating effluent at the standards agreed upon under the concession agreement. INTEGRATION AND CIRCULARITY The network connection will be created to provide wastewater services to Stage I of the new MBZ city, adding another 46.5km to completed internal WWCN. Construction of the pipeline network and MBZ pump station was completed in December 2018. The hydraulic, cost-effective strategy for connecting the city to TANQIA’s network required two pipelines, each 400mm in diameter and 11.25km in length. TANQIA will provide 1.3 billion gallons of highquality effluent for EWE, once the distribution network is completed. TANQIA makes a significant environmental contribution, substituting highquality effluent for desalinated and underground water. Revised Expansion I of the WWCT System CFI.co | Capital Finance International

will produce tertiary treated effluent, suitable for restricted irrigation and industrial uses. For unrestricted irrigation and special industrial uses, the effluent will have to be further treated. EWE’s effluent balance tank will include a distribution network to deliver water to MBZ city and farms in the northern area of the emirate. TANQIA insisted on having a polishing plant to make the effluent suitable for unrestricted irrigation. This decision was made by TANQIA following the recommendations and standards of the WHO, and supportive data on the experience of California regarding unrestricted irrigation. GREEN ENERGY PROJECTS TANQIA explored several energy-efficient and green energy projects in conjunction with Revised Expansion I to boost sustainability and provide energy- and cost-saving opportunities. TANQIA believes that utility-led innovation is key to enabling an era of sustainable wastewater. To foster a culture of innovation, TANQIA is articulating new values, investing in new processes, and seeking broad stakeholder engagement. The solar energy project about to be implemented in Fujairah is an example of its movement towards sustainability. SOLAR ENERGY TANQIA’s solar initiative is comprised of two 129

stages. Stage 1 is a 422kWp rooftop solar PV system that is expected to cover more than 56 percent of annual building energy requirements. Stage 2 is a 6.17 MWp solar farm that is expected to cover 107 percent of average annual energy requirements of WWTP in its entirety. In other words, it covers 30 percent of WWTP’s energy requirements during the sunshine period, and allows for the generation of revenues by exchanging cheap power from the remaining 70 percent to other industries during off-peak periods.

reduction of CO2 emissions, some of them successfully implemented prior to ratification of the Paris Agreement. Others were implemented after ratification, and contribute to emission reductions.

Work on Stage 1 is expected to start by Q4 this year, and work on Stage 2 by Q2 2023. Once completed, the new additions are expected to deliver gains by reducing operational cost. TANQIA’s green energy project will reduce the carbon footprint by about 6,061 tonnes of CO2 each year. Such a reduction in greenhouse gases is equivalent to that of 1,543 cars driven for a full year, or those generated annually by the electricity consumption of 1,209 homes. This is a reduction in carbon footprint of 224,791 tonnes of carbon dioxide over 32 years — until 2052, the end of the concession period.

A POLISHED APPROACH TANQIA explores and pursues projects beyond the UAE’s borders. The conditions that TANQIA has insisted on is testament to the firm’s continued emphasis on quality, efficiency, and sustainability. This revolves around protection of the environment through pursual of least-cost as a priority, including efforts on a number of sustainability initiatives.

TREATMENT OF DIGESTED SLUDGE The government of Fujairah agreed to dispose of sludge generated by the treatment process at designated landfill sites. Recently, however, an initiative by the UAE Minister of Infrastructure and Petroleum, his excellency Sohail Bin Mohamed Al Mazroui, called for sludge to be reused as fertilizer or as a substitute for fossil fuels in combustion processes.

In projects across the Middle East and the Mediterranean countries of the EU, TANQIA has insisted that no effluent would be discharged into

The polishing process targets viruses, bacteria, and parasites, and involves the removal of suspended solids, biological oxygen demand and other traces of pollutants that may be left after secondary treatment. TANQIA’s principled approach provides opportunities for reuse of the polished effluent for economic purposes. The major impediment to Gulf Region countries achieving this goal is the price of water and wastewater services. Wastewater tariffs, as set by most Middle Eastern governments, are subsidised. There is scope for the economic reuse of polished tertiary treated effluent that complies with the most stringent standards. TANQIA has been working on a solution that reduces the cost of polishing effluent, and the cost of treatment. This will require more data collection, examining the quality of output and energy use per gallon of water, to determine the commercial potential. i

70,000 Savings prior Paris Accord 60,000 50,000

Carbon Dioxide [t/a]

TANQIA’s dedication to the environment continues with the installation of the PV solar farm with a generating capacity of 24.7 MW. Electricity demand escalates in tandem with wastewater generation. The utility maintains its commitment to being environmentally friendly in all its operations, helping to fulfil the UAE’s obligations under the Paris Accord.

By the end of 2020, a total of 52,879 tonnes of carbon dioxide had been saved. Measures identified as having the most important impact on TANQIA’s climate protection efforts are part of Revised Expansion I. By the end of 2052, 1.56 million tonnes of CO2 will have been saved.

deserts, rivers, lakes and seas unless it had been treated up to the tertiary stage, and that it would be polished.

Savings as Part of Expansion I Savings beyond Expansion I

40,000 30,000 20,000 10,000 0

Graph 1: Total Annual Carbon Dioxide Savings [t/a]

Both disposal paths require further sludge treatment, involving a final drying process. Available technologies are being reviewed in terms of cost-benefit. A further option would be sludge incineration, which would addresses the issue of trace substances of emerging concern (TSECs) — micropollutants such as heavy metals, microplastics, pharmaceuticals, and hormones. Dried sludge could be sold to cement and steel factories as a source of energy, substituting for fossil fuel sources. UAE’S COMMITMENT TO THE PARIS ACCORD TANQIA identified measures to reduce its environmental and carbon footprint well before ratification of the Paris Accord. Graph I provides an overview of the carbon dioxide savings already implemented, or scheduled for implementation. Thirteen measures were identified for the 130

Year

Phase Implementation prior PARIS AGREEMENT

Measure Use of treated effluent Heating of digester with biogas Replacement of electrical lights by solar lights

Implementation since Ratification of PARIS AGREEMENT

Replacement of electric heaters by solar heaters Replacement of conventional AC by hybrid AC Implementation of more efficient sludge dewatering reducing Discharge amount Implementation of fine-bubble aeration system replacing mammoth rotors Implementation of de-nitrification process

Implementation during REVISED EXPANSION I

Replacement of sand filtration by disc-filtration Implementation of UV-disinfection as replacement of chlorination Implementation of PV-plant Provision of treated effluent to EWE for reuse

Implementation after REVISED EXPANSION I

Implementation of sludge drying process

Table 1

CFI.co | Capital Finance International

Spring 2022 Issue

> Deloitte GCC Powers of Construction:

‘Building a Sustainable Future’ By Damian Regan Deloitte Middle East Sustainability Reporting & Assurance Leader

he Deloitte GCC Powers of Construction publication which was recently published, included an annual ‘pulse’ survey of Chief Executives from the construction industry within the Middle East (The Construction Industry Survey: The Chief Executives View). The publication provides insights into market sentiments on a range of issues affecting construction across the region, against a backdrop of two key themes: the on-going Covid-19 pandemic and increased awareness and action with regards climate change. It has been more than 18 months since the pandemic took hold the world over. Over this time, few sectors and industries globally have been left untouched by the economic upheaval and disruption left in its wake. The GCC projects market has unfortunately been no exception. In 2020, total contract awards dropped 35% to just $69bn, and falling oil prices and lower government spending precipitated a dramatic slowdown in capital expenditure. As a result, last year was the worst for the market in nearly two decades. In a market of traditionally intense competition and price-sensitivity, rising labor and material costs, supply chain disruption and Covid-19 related working regulations, financial pressure has intensified on contractors and employers alike. Whilst project costs have increased, opportunities to pass these costs along the supply chain are limited in the current economy. In many respects, the full effects of the pandemic and its impact on projects has yet to be seen, as projects have been delayed, rescheduled or cancelled. New Covid-19 variants can (and are) arising at any time leading to ever-changing restrictions in many jurisdictions. Indeed, Covid-19 is expected to remain a major issue affecting the Middle East and global markets until at least 2022/2023 and given the uncertainty, many parties whose works will continue to be affected are holding off from pursuing their claims in formal proceedings until the effects of the pandemic have come to an end and can be quantified. One theme however is becoming abundantly clear, and that is climate change. In the year of COP26, continued scientific evidence of the rate of climate change underlines the urgency with which world leaders are being urged to act towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change: the commitments to limit global warming to 1.5 degrees compared to pre-industrial temperatures.

Author: Damian Regan

The built environment is a huge contributor to our Carbon Footprint in terms of embodied carbon and carbon generated through building lifecycle energy consumption. This realisation is having a significant effect on the tendering of new projects. The Construction Industry Survey as outlined in the 2021 Deloitte GCC Powers of Construction publication identified a significant number of tenders either required sustainable materials, sustainable constructions methods and/or were for projects that were themselves designated as ‘Sustainable’ in design. Increasingly, it is not only the construction projects themselves that are being reviewed under sustainability criteria; but the constructions companies themselves are expected to be ‘sustainable’ in their strategies and operations. Going forward, as Cynthia Corby, the Deloitte Middle East Construction Industry leader stated, “For many governments, lenders and institutional investors the impetus is clear – in the not too distant future, only those projects with clear sustainability objectives will be fundable as institutional investors seek out these investment opportunities to align with their own sustainability goals.” Immediately prior to the COP26 climate conference, several Middle Eastern countries have pledged to “Net Zero” and to decarbonise their economies, including Saudi Arabia, the United Arab Emirates and Bahrain. The target time frames presented are between 2050 and 2060 and involve significant investment in infrastructure and capital projects and therefore present opportunities for companies working within these economies. To assist countries in the Middle East to meet their decarbonisation and other sustainability CFI.co | Capital Finance International

development goals, a step change is needed in relation to the delivery of built environment assets. Specific to the construction industry there is a strong sentiment that government intervention in the form of legislation or financial incentives are essential, to drive a greener industry and ensure national and global climate change targets are met. In a highly fragmented industry such as construction, it is difficult to argue against that point of view. Governments and Authorities should implement more robust standards and building codes to drive change at a national and global level. Current local codes and standards for highly efficient buildings in the region lag a long way behind the standards of most Northern European nations, and yet the energy consumption, due to high cooling loads in the Middle East region, is not reducing. Renewable energy investment is not the total solution; we must reduce consumption through improved building design, thermal efficiency, robust detailing, and quality of delivered product. However, from an industry perspective, reliance cannot be solely placed on Government intervention to drive progress. Change and innovation will need to be driven from within the construction industry. Key to that will be how well the entire supply chain encompassing consultants, designers, contractors, and suppliers can collaborate and work towards common goals. The construction industry in the Middle East has the potential to significantly help the world’s battle against climate change, its more efficient use of resources and the overall reduction in pollution. It can also bring about important and lasting social improvements, through the development of a local support ecosystem of businesses supporting construction. In a world slowly emerging from the pandemic, it can also work to help COP26 achieve its ambitions and in turn, create a sustainable future across the Middle East region. i

Link to publication in the online version at CFI.co. ABOUT THE AUTHOR Damian is currently based in Dubai, UAE, having spent the last four years working across the Middle East and over 20 years in London, UK. He has worked within International Accountancy firms during his career and assists clients understand their impact and contribution with regards the environment and society. In particular, he assists them in effectively communicating and reporting their sustainability goals, results and impacts. He also works with industry bodies and regulators to help develop standards of sustainable practices, reporting and assurance. 131

> Making Expo 2020 Deeply Personal:

How Accenture Helped Put the Visitor at the Heart of the World's Greatest Show By Angelo Lorusso Managing Director and Accenture's Client Account Lead for Expo 2020

When we first started working with Expo and Etisalat Digital over six years ago, they had bold and ambitious plans for what they wanted Dubai's Expo to be. Now that it's all over, we can say without argument that Expo2020 has lived up to those goals despite a global pandemic. It has been a privilege to be the Digital Services Partner of what ended up being a global mega-event. However, for Accenture, the key to success was not the scale, although that was impressive, but the personal experience that each visitor had.

ur role as a Premier Partner was all about creating one of the smartest and most connected places on Earth, but not just for the sake of it. The intelligence and connectivity had to be in service of a bigger goal: the Visitor Experience. Expo, Etisalat and Accenture worked out from the beginning that an individual personal experience for each visitor should be the golden thread that tied everything else together. So we set out from day one to put the visitor at the heart of our thinking.

When Accenture started to work with Expo2020, it had a straightforward plan that was right for that time, but two factors combined to cause significant disruption. Firstly, the pace of technology innovation was accelerating, significantly giving the potential to better understand and serve visitors. And secondly, what those visitors wanted and expected changed considerably over the years, not just because of the impact but also because of how they consumed services from other providers like Netflix, Airbnb and Google. Today, with Expo now in the rearview mirror, we can see that the event proved an ideal platform to use the latest innovations and solutions to address many of the global challenges the world will face in a post-COVID era, such as the future of work, energy transition and social change all of which aligns strongly with Expo2020's core themes of Sustainability, Mobility and Opportunity. From an Accenture perspective bringing Expo to life was a living example of our purpose in action – delivering on the promise of technology and human ingenuity. To deliver the value that Expo was looking for required a truly One Accenture approach bringing together our expertise as a global leader in Strategy and Consulting, Interactive, Technology and Operations across more than 40 industries, all powered by the world's largest network of Advanced Technology and Intelligent Operations centers. 132

Author: Angelo Lorusso

CFI.co | Capital Finance International

Spring 2022 Issue

"Our integrated intelligent systems for Expo teams, nations, vendors and suppliers – delivered end-to-end and integrated solutions, driving real connections." Helping the Expo bring its story to millions worldwide, Accenture developed Expo 2020's visitor-facing digital channels, including Expo 2020's official mobile app, virtual assistant, website, physical and digital Expo 2020 Map, as well as back end platforms as CRM, campaign management and customer profiling. The suite of digital channels leveraged Artificial Intelligence (AI), NeuroLinguistic Processing (NLP), and advanced analytics to ensure every individual's accessible and relevant experience. Delivering a personalised experience to millions of visitors meant integrating over a dozen applications, systems and platforms from multiple vendors to create a straightforward ticket-purchasing journey and access control. Our unified approach consolidated the various systems to optimise the end user's experience. As a result, visitors benefited from a one-stop destination – a simple yet powerful, efficient, fast, and accessible cross-channel platform in the palm of their hands. Our integrated intelligent systems for Expo teams, nations, vendors and suppliers – delivered end-to-end and integrated solutions, driving real connections. These intelligent systems supported various Expo teams from employee to participants and from visitors to partners to achieve their goals using resilient, reliable, and secure applications. For example, the Participant Portal, developed for Expo 2020, was a onestop-shop for the more than 190+ participating countries and partners to submit their Pavilion designs, themes and content on an interactive platform that integrated authorisation, supply chain management and workforce licensing functions. We also integrated and stage-managed the myriad components and applications behind the scenes, underpinned by our Services Delivery Platform (SDP). The SDP integrated data from more than 80 different applications, including third-party solutions and government authorities, orchestrating the digital journey for participants and visitors.

Dubai: Downtown

Amal – an AI-powered Visitor Assistant developed in collaboration with Smart Dubai – helped gather information on shows and attractions and give live feedback throughout the six months of the Expo. Offering services on multiple platforms, including the Expo 2020 website and the mobile app, Amal processed and analysed volumes of information to answer visitors' questions accurately and fast. The platform was designed to learn and automatically develop and improve offered services to visitors. Finally, as a Premier Partner, Accenture had the opportunity to create and run a dedicated venue at the heart of Expo 2020 Dubai, which we called The Accenture Exchange, designed to show our clients and employees the best of what Accenture could offer and how we used it to help Expo. At the Exchange, we had some of Accenture's most powerful, cutting-edge and engaging innovations for the duration of the Expo. As an immersive environment, the space showcased Accenture's innovative demos in artificial intelligence (AI), blockchain, cloud, quantum computing, machine learning and, in the later months, the Metaverse. Demos included information security and customer relations solutions, e-ticketing technologies, AIpowered virtual assistants, geolocation services, and more. Over the six-month event, the Accenture Exchange hosted more than 1000 clients for events covering key areas such as sustainability, energy, health, travel and tourism, and global payments. As I look back now at the six months that Expo was open and the six years we worked with Expo 2020 and Etisalat Digital to create the world's most successful Expo, I am full of pride for what our One Accenture team achieved. We learned many things over that time, but more than anything, we learned that when you work in true partnership with your clients and partners and focus on putting the customer at the heart of everything, then nothing is impossible. I believe what we achieved at Expo 2020 will be the blueprint for future events, and not just other Expos, for years and that truly shows Accenture on its best day. i

Our tailored services delivered via the Expo 2020 mobile app (which we developed) helped visitors pre-book specific time slots or reserve entrance timings as part of a smart queue management system. In addition, users could manage their bookings, send and share tickets, participate in a referral program and retrieve lost tickets. CFI.co | Capital Finance International

133

Virtually at Work, Physically at Home: VR Tech Ups the Ante By Yogesh Patel

he work-from-home movement may soon take the leap from temporary necessity to selling point.

Facebook’s $3bn acquisition of Oculus in 2014 spawned a virtual office space for employees working from home. The Facebook / Meta VR flagship, Quest 2, released the Horizon Workrooms programme, a space for teams to remotely connect and collaborate. 134

Virtual reality (VR) and the broader XR (extended reality), have been in development for some time. The first iteration of virtual-world building looked wildly different to modern renditions. In 1962, film-maker Morton Heilig created the Sensorama: a theatre experience with moving 3D images, peripheral visuals, binaural sounds and even air currents. Six years later, the first head-mounted display system was created by Ivan Sutherland — but CFI.co | Capital Finance International

it was so heavy it needed to be suspended from the ceiling. Whether you’re into slicing to the Beat Saber or diffusing explosives in Keep Talking and Nobody Explodes, gamers have dominated the market. According to CCS Insight, a market researcher focusing on mobile and wireless tech, 70 percent of dedicated VR system owners have bought a game to suit.

Spring 2022 Issue

The alternative? A $38 monthly subscription to NBA League Pass and a $400 system. Music concerts have also begun to show up in the VR space. Travis Scott, a multi-Grammy award-winning artist, launched the first concert on Fortnite. Astronomical drew in 27 million viewers and helped catapult Scott’s album to top spot. Other musicians are now incorporating VR into their concerts, bringing the camera onto the stage and allowing the “virtual fan experience”. But VR and XR are not for everyone. Some users have reported motion sickness and injuries from falling into or tripping over objects in the room — and that’s before we get onto privacy and security issues. Data selling and farming take on a new life when companies have access to eye-movement metrics and our unconscious responses to visual cues. The potential uses for XR go beyond the world of gaming and entertainment. Companies are using VR to train and onboard new employees. Last April, the European Union Aviation Safety Agency approved the use of VR flight simulation as a training device. Walmart in 2018 announced its use of virtual training to assist employees with new technology, empathy, and customer service and compliance. “The great thing about VR is its ability to make learning experiential,” said Andy Trainor, the senior director of Walmart US Academies. “When you watch a module through the headset, your brain feels like you actually experienced a situation.” This is the true strength of VR. It is hands-on practice in a cheaper and more detailed form. The ceiling for this technology is world-changing. While it’s currently limited to games, the term “home office” may soon take on a whole new meaning. i

Gaming companies, from Sony and their PlayStation VR to Valve and their Valve Index, still rank among the highest investors. But this is set to change; recent developments have pushed matters into territory that could significantly change work and play. Meta has recently partnered with the NBA League Pass to offer members the chance to “be” courtside at an NBA game — while in their

own homes. The game between the Golden State Warriors and the Houston Rockets in January pitted two top teams against one another, with the winner headed to the Western Conference Finals. The game was a thriller, featuring a jaw-dropping 40-point performance from MVP candidate Steph Curry. To watch that live from the stands would normally set you back around $1,200. CFI.co | Capital Finance International

Author: Yogesh Patel

135

Digital Transformation Shapes the Future of AUB

igital transformation is set to have a profound impact on the future of global banking networks such as Ahli United Bank.

Ahli United Bank (AUB) was created in May 2000 out of a merger between Al-Ahli Commercial Bank and United Bank of Kuwait. In addition to its base of operations in the heart of the Arabian Gulf in Bahrain, the Bank boasts a robust banking network covering the UK, UAE, Egypt, 136

Kuwait, Iraq, Libya, and Oman. In addition, AUB owns the leading insurance providers Al Hilal Life and Al Hilal Takaful. AUB provides the full suite of retail, corporate, treasury, investment, private banking, wealth management, Islamic banking, as well as conventional and Takaful life insurance products and services with an enhanced Shari’a compliant business contribution.

(core markets) with minimum targeted 10% potential market share to be achieved through mergers, acquisitions and organic growth. AUB also aims to acquire complementary banking and regulated financial services companies in secondary markets, enjoying strong crossborder business flows with Gulf countries or with economic structures similar to the Gulf countries.

The Bank aims to acquire banks and regulated financial services companies in the Gulf countries

As part of its international expansion objectives, AUB maintains a UK presence as a non-regional

CFI.co | Capital Finance International

Spring 2022 Issue

accelerated its digital transformation strategy, designed to improve the operational efficiency of the bank, and enhance the services it provides to retail customers, private banking clients, small and medium- sized companies, and larger multinational corporates and financial institutions. AUB has transformed its services to meet the changing needs of all these customers and to compete with fintech companies. As AUB faces such competition, it is critical for the bank to transform digitally to grow and evolve its business. AUB recognizes and understands the shifting needs of their customers. This understanding of what the bank’s customers need is the strongest basis on which to build and implement the most effective digital transformation strategy. Digital transformation around the advice, service, and products AUB provides must be based on its understanding and responding to the changing and specific needs of its customers and clients. AUB has drawn up a strategy, designed to move the bank forward into the future by improving efficiency, enhancing customer satisfaction and gaining a competitive edge by equipping AUB Group with fully digital banking capabilities (“AZ” Concept) as well as inculcating broad-based data driven culture capabilities (“Organized Actionable Data”). In recent years, AUB has been at the forefront of digital transformation. The Bank’s relentless push towards the adoption of FinTech services has won it the recognition of leading industry publications. On the financial front, the Bank has performed remarkably well even in the face of financial downturns, as manifest in the multiple accolades it has won for financial performance, growth, and digital innovation. Among the latest wins, AUB has been named Best Global Network Bank – GCC 2021 by the CFI.co Awards Programme. AUB was recognised as the Best Global Network Bank – GCC 2021 based on its achievements, innovations, and performance over the last 12-month period.

banking arm to profitably complement regional expansion and support commercial, private and investment banking activities and explore a complementary PBWM focused Swiss banking platform to increase OECD footprint. AUB also maintains a reputation as a premier pan GulfMiddle Eastern retail/corporate/private bank with focus on sustainable & responsible banking. One of AUB’s key objectives is to entrench prudent and disciplined risk and cost management

culture involving standardized policies and methodologies, scalable infrastructure, and stringent risk /cost/benefit analysis in all decision-making processes supported by a strong data analytics and human resource base. DIGITAL TRANSFORMATION The banking industry has been transforming over the past few years to meet the rapidly changing digital needs of its customers. AUB is one of these global banking networks that has CFI.co | Capital Finance International

AUB’s GCC network is a well-managed business model supported by its continued focus on delivery of core earnings, and a robust risk management system. Its intelligent spend strategy has paid off amply in the form of resilience against current market volatility. The recognition from CFI.co, a pioneering financial publication with high reporting standards, comes as recognition of a devoted team. AUB continues to reap the benefits of its customer-focussed approach as well as implementation of digital solutions that truly empower its clientele. This award marks the latest addition to a long string of recent accolades the Bank has garnered from leading industry bodies. 137

> ICBC Dubai (DIFC) Branch:

Innovate to Differentiate Innovation is a key element written in ICBC’s core value - “integrity, humanity, prudence, innovation and excellence”. Awarded as the Most Innovative International Bank EMEA 2021 by CFI.co, ICBC Dubai (DIFC) Branch has always adhered to the culture of innovation and continuously innovated in major projects supporting local society’s development, its financial products and services serving real economy, new platforms of client engagement and cultural integration, etc. Through its continuous endeavors and stable development, ICBC Dubai (DIFC) Branch has developed into the leading Chinese bank in the region, possessing an excellent customer base, a diversified business structure, strong innovation capabilities and market competitiveness.

CBC Dubai (DIFC) Branch has continually innovated since its establishment in the region in 2008. Fully focused and committed, the bank has improved the lives of many along with bettering financial services through various aspects such as technology empowerment, accelerating digital transformation, and extending service connotations in a local and regional scale. Innovation is an essential factor to build the banks vision of a world-class globally competitve modern financial enterprise that values excellent services to clients and also continously contributes to society. That is why ICBC Dubai (DIFC) Branch continually looks for opportunities which help deliver its ambition to be a grand bridge connecting the region with China. Not faltering in its commitment to the region during the global pandemic, ICBC Dubai (DIFC) Branch continued to work extensively with corporates and governments to support development in key areas such as infrastructure, power and water, as well as oil and gas. Regardless of industry, the firms who have rebounded more quickly from the global pandemic are those who have embraced innovation that relates to colleague engagement, client relationship building and digital transformation agendas. The rescheduled Dubai Expo 2020 took place and China had one of the largest foreign pavillions with ICBC being the official partner for the site. ICBC was able to use the space to help showcase the banks story and highlight its many achievements at the “world’s largest show” that attracted the most visitors in

138

"Not faltering in its commitment to the region during the global pandemic, ICBC Dubai (DIFC) Branch continued to work extensively with corporates and governments to support development in key areas such as infrastructure, power and water, as well as oil and gas." history of the event. Using engaging videos and interactive activities, the bank was able to engage with dignitaries, businesses, residents and tourists that have come to visit the Expo 2020 site. Recognising the importance of the Belt & Road Initiative and the rise of green finance, ICBC Dubai (DIFC) Branch was able to hold two large scale forums designed to share best practice across industries. The experience and agreements the bank has entered into, suggests that ICBC Dubaai (DIFC) Branch and the industry will see increasing opportunities for new energy, clean energy transformation and wind power project financing. CFI.co | Capital Finance International

Dubai: Gate Building

ICBC Dubai (DIFC) Branch has also developed a ‘trinity’ approach for compliance, credit and liquidity. The bank focuses on the “management of personnel, assets, defense lines and bottom lines”, and continously enhancing enterprise risk management based on the path of “active prevention, smart control and comprehensive management”. Innovation can also be demonstrated in terms of the bank’s commitment to be a grand bridge

Spring 2022 Issue

between China and the Middle East and North Africa. On one side, it is about providing a pathway for Chinese-funded enterprises to grow their international business and ICBC Dubai (DIFC) Branch has certainly done this during challenging macro-economic times for those leading companies. ICBC Dubai (DIFC) Dubai has also seized local opportunities, working with leading regional companies to help them expand and run their businesses.

Clients have been supported with a broad range of value adding services such as supporting the financial needs of the UAE and wider region, providing a comprehensive international trade, overseas financing against domestic support, project finance, clearance and settlements, and bond issuance. ICBC Dubai (DIFC) Branch believes that innovation is at its core value, therefore it CFI.co | Capital Finance International

constantly enhances its innovative capabilities, promotes financial, instrumental and business innovations, adopts transformative technologies and supports the economic development through reforms to inject new vitality into local and global development. i

For more information, visit www.icbc-ltd.com 139

> Applied Science Private University (ASU)

Forging its Own Path and Earning Global Respect: Jordan’s Pioneer in World of Private Universities

he Applied Science Private University (ASU) is a true educational pioneer — the first private university in AmmanJordan when it was founded in 1989.

Over the past three decades, ASU has evolved into a hub of knowledge, innovation and discovery that attracts scholars from around the world. It has grown, too, and is one of the largest private universities in Jordan. Built on the principles of diversity, inclusiveness, and excellence in education, research, and community service, ASU is a vibrant learning community. It is home to more than 6,500 local and international students and 240 faculty members, originating from 56 countries. “ASU is best known for the quality of its programmes of study, supported by well-equipped laboratories, up-to-date curricula and state-of-theart facilities,” says ASU president Iman Albasheti. Bolstered by its strong foundation and track record, ASU recently adopted a new vision and mission that form the blueprint for shaping its future directions and priorities. ASU has embraced internationalisation, sustainability, and innovation as the main support pillars of its ongoing pursuit of excellence. VISION AND MISSION "Our vision is to be renowned internationally for excellence in teaching and learning, applied scientific research, sustainable development and community services," says Albasheti. “Our mission is to embed creativity, entrepreneurship, and continuous development in the fields of education, scientific research, human resources, and university and community environment. In addition, we are dedicated to preparing a generation of graduates that matches national and international standards to serve their communities.” ASU has been recognised locally and globally for its educational excellence and the quality of its services. It has partnered with universities in Europe, the US, Australia, and the Arab region, resulting in 110 joint research publications and 133 inbound and outbound students’ mobility. (Student mobility is the number of students from a given country studying abroad, expressed as a percentage of total tertiary enrolment in that country.) ASU recently joined the Erasmus+ programme as a partner with European universities, with more than 180 inbound and outbound student and staff mobilities. 140

Main Awards Golden Status (University Level)

Description First Private university in Jordan to be awarded by the Jordanian Accreditation and Quality Assurance Commission for Higher Education Institutions (AQACHEI)

5 Star QS Ratings (University Level)

First private university in Jordan to obtain 5-Star in the overall ratings, and 5-Star for each category of the QS Stars Ratings System

5 Star QS Ratings (Online Learning)

First private university in Jordan to obtain 5-Star in the online learning by QS Stars Ratings System

ASIC Premier Institution (University Level)

Awarded the Premier Institution status in 2022, by Accreditation Service for International Schools, Colleges & Universities (ASIC), an Independent international educational agency based in the United Kingdom.

THE Impact Rankings (2021)

ASU shared the First place amongst the private higher education institutions in Jordan in the Times Higher Education Impact Rankings

THE Arab Universities Rankings (2021)

ASU obtained first place amongst Jordanian private institutions in the Times Higher Education for Citation, Society, and International Outlook metrics.

SCImago Institutions Rankings (2021)

ASU is classified as a Q1 university (first Quartile) among the institutes of higher education in Jordan in year 2021. The university has been boosting its investments in research and innovation thus classified as one of the top 5 institutes in Jordan (4th place)

CFI.co Awards

For the third consecutive year ASU a repeat program winner, with the 2021 award for Most Innovative Community Impact Research University (Middle East).

ESQR Award

ESQR (European Society for Quality Research), ASU received the ESQR Quality Achievement Award for year 2021

ABET Accreditation (Engineering)

All Engineering programs accredited by ABET (Accreditation Board for Engineering & Technology),

ABET Accreditation (Computer Science)

Computer Science program at the Faculty of Information Technology has also obtained full accreditation by ABET

ACPE Accreditation (Pharmacy)

ACPE (Accreditation Council for Pharmacy Education) is recognized by the US Department of Education. The Pharmacy Program is the first among the private universities in Jordan and the middle-east to be certified by the ACPE

ACEN Accreditation

ACEN (Accreditation Commission for Education in Nursing) is specialized accreditation for all levels of nursing education and transition-to-practice programs located in the United States, U.S. Nursing at ASU is privileged to be the first amongst the private institutions in Jordan to receive the ACEN accreditation

IIMP Accreditation

IIMP (International Institute of Marketing Professionals). The Faculty of Business at ASU is one of the first faculties in Jordan and the middle-east to obtain the IIMP certification for all its marketing programs

AACSB Accreditation (Eligibility Status)

AACSB (Association to Advance Collegiate Schools of Business). The Faculty of Business is a member of AACSB and has also been granted Eligibility Status in preparation for the accreditation by the AACSB.

Hcéres Accreditation

Hcéres (High Council for the evaluation of Research and Higher Education). The Faculty of Law is the first faculty in Jordan and the 5th in the Middle-East to obtain the French accreditation by Hcéres.

ASU is an active member of the International Association of Universities, the Association of Arab Universities, UNIMED Mediterranean CFI.co | Capital Finance International

University Union. It is a signatory of the United Nation Sustainable Development Goals accord. i

Spring 2022 Issue

CFI.co | Capital Finance International

141

DIGITAL TRANSFORMATION OF RETAIL AND PRIVATE BANKING The challenge of understanding the needs of customers is that they can be so varied. This is particularly true in retail banking, where AUB has been driving digital transformation across the business. This is done through multiple initiatives to cater for their customers’ diverse requirements. For example, AUB opened its first digital branch in Kuwait, became the first bank in Bahrain to provide video and WhatsApp banking, launched a VIVR (visual interactive voice response) offering, and initiated the implementation of digital onboarding for savings accounts. The digital transformation developments have taken on greater relevance during the pandemic. But they also represent the future of retail banking where multiple needs are met through a digital offering. The same is true for private banking, but what is interesting about wealthier customers is how different their needs become from on generation to the next. Recognising these differences, and responding and innovating accordingly, is very important when pursuing digital transformation in this business, which is traditionally characterised by the frequently high level of human service between a bank and its customers. One important area in private banking where enhanced data analytics is transforming the customer experience and empowering their decisions is in investment and wealth management. The main power in any private bank’s value proposition is the advisory service it provides to clients. Much of the power behind that is data and the analytics applied to it. 142

Through digital solutions, customers can see this analysis at any given point, and with automated notifications alerting them to any material changes in the performance of their investment portfolio, they are much more in control. However, this is not only about managing short to medium- term financial goals. Customers are also able to think, plan and invest for the long term, thanks to digital enhancements. Protecting wealth for the next generation is a key priority. AUB’s clients want to understand what is likely to happen in the future and how that could potentially impact their investments and net wealth. Data analytics can provide some of the answers, which is of great value to the bank’s customers. DIGITAL TRANSFORMATION OF CORPORATE BANKING AND TREASURY One of the most technologically advanced areas within AUB has been its corporate banking business and treasury operations. Annual investment in these areas has been rising in recent years and continues to grow to keep pace with technological advancement and client demands. AUB’s corporate banking services include corporate, trade and property finance, corporate banking, and Shari’a compliant banking products. Its treasury business covers money market and foreign exchange services, hedging and trading solutions, structured and Shari’a compliant treasury products. In both businesses, the nature of client demand is shifting rapidly, requiring an equally fast response from the bank. Innovating speed is never CFI.co | Capital Finance International

easy, which is why AUB has been increasing its investment in, and partnerships with, innovative start-ups and technology platforms. Buying or investing in a ready-built technology solution is often the most efficient approach. However, AUB would also build some of these solutions, especially if their uses rely on highly sensitive proprietary data or technology infrastructure. AUB has been developing such solutions while also moving towards being a more sophisticated, data-led adviser to its corporate clients, supported by the provision of technology platforms and digital applications that securely enable them to transact and analyse their own data. Much of the finance function in companies today is automated, where technologies like artificial intelligence and machine learning are used, for example, to forecast cashflows and expected sales revenues. In addition, financial data and information is commoditised, so everybody has the same market and pricing visibility. AUB continues to innovate its market-leading digital cash management solution called B2B. This desktop and mobile solution can be customised to suit different accounting systems and enable efficient management of payments online. Banking is becoming more and more like utility. What differentiates one bank from another is the customer experience and access to data provided by the bank. The ability clients possess to utilise their own data will help them define their future. i

Spring 2022 Issue

> Time

to Take Responsibility For the Mess — and Cut Our Consumption By Jason Agnew

UN Sustainable Development Goal 12: Responsible consumption and production.

ith just over 7.9 billion on the planet — set to rise to 9.6 billion by 2050 — there is enormous pressure on the Earth’s resources.

Human beings´ consumption patterns have changed a good deal in the last century, and have been accompanied by environmental degradation that is endangering the very systems on which our future development — indeed, our very survival — depends. Not only is intensive farming and agriculture harming the ecosystem on which we depend but, to add insult to injury, an estimated one third of all food produced — 1.3 billion tonnes, worth around $1tn — ends up rotting in the bins of consumers and retailers or spoiling due to poor transportation or harvesting practices. With countries such as China and India experiencing massive economic growth and altering their consumption patterns, imitating Western conspicuous consumption. It has been estimated that three planets would be required to provide the resources needed to sustain current lifestyles. Land degradation, declining soil fertility, unsustainable water use, overfishing and marine environment degradation are all lessening the ability of the natural resource base to supply food. In August 2021, the government of the southeastern Spanish region of Murcia had to remove 4.5 tonnes of dead fish from the Mar Menor (a large lagoon) due to anoxia, or lack of oxygen, caused by nutrients used in agriculture. From cod in the cool waters around the UK and Iceland to swordfish and bluefin tuna in the warmer Mediterranean and wild salmon on the west coast of the US, overfishing has left many species so depleted that they are in danger of disappearing. Krill, small shrimp, have been intensively fished in recent decades. The knockon effect is that seals, penguins, squid, and large fish are struggling to find food. The food sector accounts for around 30 percent of the world’s total energy consumption and around 22 percent of total greenhouse gas emissions. Cattle are the greatest agricultural source of emissions worldwide. A single cow will belch or fart about 100kg of methane in a year. Methane from cattle is shorter lived than carbon dioxide — but 28 times more potent in warming

the atmosphere. That fillet steak comes with an ecological price. This is not as clear-cut as it seems, however. Improved breeding, genetics, and nutrition have increased the efficiency of livestock production in the US. In the 1970s, 140 million head of cattle were needed to meet demand. Today just 90 million, producing more meat, are required. India has the world’s largest cattle population but, understandably, the lowest beef consumption. As a result, cows live longer and emit more methane over their lifetime. Energy consumption is one area that the developed world has addressed head-on. The reliance on King Coal has diminished greatly as governments have looked to improve air quality and reduce CO2 emissions. This has been offset by the increase in fossil fuel consumption in the developing world.

future, for a profound, systemic shift to a more sustainable economy that works for both people and the planet”. It uses the slogan, Build Back Better, subsequently employed by Joe Biden and Boris Johnson. The outset of the pandemic led some experts to proclaim that there would be a great reduction in inequality, but this has proven to be false. The world´s billionaires have doubled their wealth in the past two years, and there is no reason to suggest that Covid-19 will have a positive influence on environmental outcomes. All countries consider economic growth via GDP as a mark of their success. People have become accustomed to buying products that have travelled long distances to reach the shelves in their local supermarket. In the UK coffee has overtaken tea as the preferred hot drink — but shipping constraints and container shortages together with adverse weather in Brazil have led to the price reaching a record high.

Having said that, Australia has the highest percapita energy consumption from coal. The four highest average consumers of energy from coal, oil and gas per person are the US, Australia, Germany, and the UK.

Rising inflation worldwide, fuelled predominantly by energy prices, might well lead to more responsible consumption. It could equally lead to increased poverty, and recession.

The UN claims that the current Covid-19 pandemic “offers an opportunity to develop recovery plans that build a more sustainable

The balancing act between living standards and environmental sustainability is as precarious as ever. i

CFI.co | Capital Finance International

143

> Spring Reads:

Three Business Books on the CFI.co Radar Naomi Snelling buries herself in some inspiring works that bring meaning — and more — to corporate life. DEEP PURPOSE: THE HEART AND SOUL OF HIGHPERFORMANCE COMPANIES BY RANJAY GULATI A wave of books about corporate purpose has broken over 2022, and this pithy offering from Ranjay Gulati serves up useful advice on charting a principled corporate course. Aimed at business leaders, entrepreneurs, and heads of organisations, Deep Purpose gets to the core of issues facing business: the need to connect with employees and stakeholders to create a sense of belonging. A cutesy set of ethical values just won’t cut it. Many businesses have dabbled in sustainability policies without truly aiming to lower their carbon footprint; some demonstrate a similarly tenuous grasp on “purpose”. For measurable results, businesses need to embrace deep purpose — as opposed to convenient purpose, or purpose-as-disguise. This, says Gulati, is where the magic is, and it’s rooted in the concept of a wider measurement of “success”. When an organisation is rooted in meaningful purpose, it is possible to have your cake and eat it too. You get to outstrip your competition while helping humanity. Far from being a fluffy indulgence, the art and science of creating that purpose is what sets great companies apart from the pack. Gulati’s book details the steps of the journey, packed with practical examples. It’s a pragmatic guide that goes beyond the adoption of purposeful words to the making of ideals and goals to drive a business. Most of the case studies are American, but the concepts and analyses can be applied to businesses anywhere. Gulati’s own sense of discovery and transformation shines through, making his book an inspirational read. One not to miss.

THE POWER OF REGRET: HOW LOOKING BACKWARD MOVES US FORWARD BY DANIEL H PINK Like all Daniel Pink’s insightful books, this one is delivered with empathy and clarity. In characteristic straight-from-the-hip style, Pink illuminates the significance of regret. By showing us how to get our heads around this complex emotion, he allows us to use it as a momentum driver, and a force for good. Regret is a universal human emotion, complete with a range of processing and response 144

styles. Essentially, regret can be resolved or reframed. One of the tools elaborated in the book is projecting forwards: helping to reframe a situation with an understanding of whether or not your choices will matter.

way they do, then this book is for you. Packed with relatable and moving stories, Braun’s gripping work is an accessible and insightful read that focuses on the unconscious human processes that operate in team working environments.

Many of us have regrets that play on our minds, and this book helps us to examine that. Past mistakes should not paralyse us or stop us from moving forward: recognising, acknowledging, and processing regret is the key habit to adopt.

With case studies and anecdotes, Braun shows how psychoanalytic techniques can be applied to professional as well as personal environments.

ALL THAT WE ARE BY GABRIELLA BRAUN If you’ve ever wondered why people behave the CFI.co | Capital Finance International

This book is a great choice for anyone wanting to understand more about relationship dynamics — and a must-read for anyone interested in psychology. i

Spring 2022 Issue

> QNB ALAHLI:

Covering All of a Country’s Financial Needs — but Never Losing that Personal Touch

Chief Executive Officer and Board Member: Mohamed Bedeir

NB ALAHLI, established in April 1978, is the second-largest private bank in Egypt, and one of the country’s leading financial institutions.

The full-service bank is organised around several diversified business lines, serving corporate, individual, professional and SME clients through a range of products. It has established subsidiaries in specialised fields: QNB ALAHLI Leasing (founded in 1997), QNB ALAHLI Life Insurance Company (established 2003), and QNB ALAHLI Factoring Company (2012). This diversification has perfectly positioned QNB ALAHLI to cover Egypt’s financial and banking needs. “QNB ALAHLI is keen to employ its resources to support the economy by consistently expanding the financial services coverage and promoting financial inclusion,” says CEO Mohamed Bedeir. The bank provides services to more than 1,300,000 clients, served by 6,900 banking

professionals and dynamic teams supported by multinational platform with a network of 231 branches covering all the Egyptian governorates. An expansive network of 872 ATMs and 62,000 point-of-sale machines serve clients nationwide. A customer-service call-centre operates around the clock, seven days a week. Great importance has been given to corporate social responsibility. The bank’s understanding of the interconnected relationship between societal development and organisational success has driven it to participate in charity projects in accordance with QNB group values, goals, and principles. QNB ALAHLI has maintained its “major player” status in the domestic market, with sound asset quality and cost ratios. It has achieved impressive growth in loan and deposit portfolios, market share, and returns. QNB ALAHLI provides dedicated products for corporate banking, financial advisory, project-, structured-, and trade financing, cash management, and foreign exchange. It has CFI.co | Capital Finance International

established strong bonds with its corporate customers, from midcaps and SMEs to multinational subsidiaries. On the SME side, QNB ALAHLI’s unique business model, supported by dedicated business lines, offers specialised programmes and services for smaller enterprises, including consulting and financing. QNB ALAHLI was the first large bank to achieve its CBE target: 25 percent as per the Central Bank of Egypt definition. When it comes to retail, QNB ALAHLI has capitalised on its leading position as a pioneer in the development and industrialisation of banking services. It has adapted a market segmentation approach to structure products to meet diverse requirements — with a personalised approach and innovative payment solutions. “It’s worth mentioning that QNB ALAHLI won 15 awards for 2021,” notes the proud chief executive. i 145

> Latin America

Crossroads and Cross-Hairs: Costa Rica Targets Growth By Brendan Filipovski

Costa Rica is at a crossroads. After decades of strong growth, it has become the most recent member of the OECD.

t is also seen as a champion of sustainable growth — but, of course, Covid-19 has disrupted progress. GDP fell 4.1 percent in 2021; government revenue is down, while health and other expenses are rising; poverty has increased. Costa Rica has a reputation as one of the most politically and economically stable countries in Latin America. It is an upper-middle-income country, with positive net migration. There is universal healthcare, and its beaches and rainforests draw thousands of tourists each year. From 1990 to 2019, Costa Rica averaged annual GDP growth of 4.3 percent and an unemployment rate of 6.7 percent. Per-capita GDP increased from $1,831 to $12,694. Then the pandemic hit. GDP fell by -4.1 percent while unemployment increased to 17.4 percent. The national poverty rate increased from 23.9 percent in 2019 to 30 percent in 2020. While GDP did recover in 2021 — to 3.9 percent annual growth — unemployment and poverty rates remain elevated. The pandemic has also increased pressure on public finances, with less tax revenue and more health and stimulus expenditure. The primary fiscal balance fell to -3.9 percent of GDP in 2020. Public debt began to creep up after the 200809 Global Financial Crisis, when Costa Rica experienced its first recession since 1982. General government debt, as a percentage of GDP, increased from 24 percent in 2008 to 35.1 percent by 2013. It has continued to rise. In addition to the increased outlays from the automatic stabilisers and a decrease in tax revenue, mandated expenditure for health and education has been a factor. The pressure on public finances caught the eye of the rating agencies, which began downgrading Costa Rica. The three main agencies have Costa Rica at below investment grade. This has increased the government’s interest expenses and put more pressure on public finances. In 2020, general government interest payments were 4.8 percent of GDP, the third-highest in Latin America. Now, with the impact of Covid, gross public debt is up to 71.2 percent of GDP. In March 2021, Costa Rica and the IMF agreed to a three-year, $1.778bn extended arrangement under the EFF to provide Costa Rica with breathing space to implement reforms and turn its economy around. The last time that Costa Rica faced a problem with debt was back in 1980-81. The decadeslong import-substitution experiment was on its last legs. Rather than creating national champions, it created inefficient, state-owned entities and stifling bureaucracy. The country was reliant on coffee, sugar, beef and bananas for foreign income. 148

"The government is also building its sustainable development agenda; 66 percent of Costa Rica’s installed electricity capacity is provided by hydro, but solar, wind, and geothermal generation is increasing." Faced with rising oil prices, a global recession and a decline in its terms of trade, the country was swamped by stagflation; the current account deficit reached -15.9 percent of GDP. But Costa Rica emerged a phoenix from this crisis. It removed its trade protections, privatised its SOEs, moved from a fixed exchange rate to a crawling peg, and signed regional and international free-trade agreements. The crawling peg tended to undervalue the local currency which encouraged growth in tourism and exports. Tourism and trade liberalisation encouraged growth in the service industry — now the dominant sector by value added (68.5 percent in 2020). In the 1990s, Costa Rica also created freetrade zones, each focused on specific industries such as electronics and pharmaceuticals. FDI and exports boomed. Electronics has been a particular success story. Intel set-up production in the country in 1998. This pushed up wages, and created an incentive to study relevant degrees in engineering and IT. It also demonstrated Cota Rica’s suitability for the electronics sector. These spill-over effects helped to create an electronic manufacturing cluster, which includes companies like Samtec, Bourns, Panduit, Electrotechnik, Huber+Suhnern and Noxtak.

productivity and fostering gender balance in the labour force. In October 2020, a national dialogue began between businesses and civil society. Improving people’s lives and government finances were the key themes. The 2022 budget seeks to increase revenue by removing more tax exemptions, targeting a 0.1 percent primary surplus. Costa Rica has seen a rapid increase in its public sector over the last 15 years; public sector payroll accounts for around of half of government revenue — more than double the OECD average. The new law will address this by creating a single pay-scale for all departments and eliminating other salary components. To improve productivity, the government has committed to digitalise and streamline procedures to remove red tape from the wheels of business. This includes the digitalisation of licences and permits, and making it easier to start a company. The female participation rate is just over 50 percent — around 20 percentage points below the OECD average. There is also a large informal sector. The government is looking to address this by improving access to childcare and by changing the tax mix.

The growth in services, tourism, and manufacturing helped diversify the economy. Costa Rica is no longer dependent on coffee, sugar, and bananas. It has enjoyed close to four decades of prosperity; life expectancy is now over 80 years. Migrants flocked to the country — nine percent of the population was born overseas — and the poverty rate declined.

The government is also building its sustainable development agenda; 66 percent of Costa Rica’s installed electricity capacity is provided by hydro, but solar, wind, and geothermal generation is increasing. Costa Rica has worked hard to move from deforestation to reforestation. It is a pioneer in high-resolution mapping of the life-support provided by natural resource.

Now the country has an opportunity to rise again — and the early signs are promising.

Costa Rica’s progress in sustainable development was rewarded with the Champion of the Earth award from the UN in 2019. Its ranking in the Planetary Pressure Adjusted Human Development Index in 2020 is 37 places higher than its standard HDI ranking.

In 2018, the government introduced fiscal reforms. This included converting sales tax to a broader-based VAT, the introduction of a 15 percent capital gains tax, and a new tax bracket for high-income earners. The reforms are expected to increase government revenue by 1.5 percent of GDP per year. During the pandemic, the government provided temporary subsidies to about 700,000 people. Now it is turning its attention to fixing the fiscal imbalance, public-sector reforms, improving CFI.co | Capital Finance International

Costa Rica has been a model of reforms and growth since its debt crisis in the early 1980s. The 2008-09 global financial crisis put pressure on public finances, and now the pandemic has brought them to the fore. But rather than precipitating a new crisis, the government — with the IMF — is looking to take the country into a more inclusive era of growth. i

Spring 2022 Issue

> IMF:

How Empowering Women Supports Economic Growth

International Women’s Day, first recognised by the United Nations in 1977, grew from early 1900s labor movements for better working conditions and women’s right to work. Now, as the continuing pandemic puts female roles in the labor market again in flux, attention to gender has never been more urgent.

Image: Canva / Anadabgd Getty Images Signature / Wordfoto

MF research has consistently underscored the benefits of equality, including greater productivity and financial stability. To mark this International Women’s Day, we present a roundup of our most recent blogs, podcasts, and research on gender. • Why jobs are plentiful while workers are scarce: Prolonged school closures and scarcity of childcare services put an extra burden on mothers of young children, pushing many to leave the labor force — the so-called “she-cession.” A new IMF staff research paper estimates that the excess employment contraction for mothers of children younger than 5 compared with other women accounted for around 16 percent of the total employment gap in the United States versus pre-pandemic levels. • Gendered Taxes: How does tax policy affect gender equality? New IMF research considers implicit and explicit gender biases and corrective taxation, looking at household taxation, capital and wealth taxes, as well as consumption taxes. • Tackling legal impediments to women’s economic empowerment: Laws can often perpetuate gender norms that limit women’s economic participation. In a recent working paper, staff outline the different types of legal barriers to women’s economic empowerment, and elaborate on how reforms, such as parental leave can effectively promote gender equality and incentivise women to participate in the workforce. • Unleashing women and girls’ human capital:

a game changer for Africa: Across most of subSaharan Africa, females fall behind males in human capital and related measures. As part of F&D ’s special feature on Africa, World Bank economists highlight how investments in women and girls unlock the region’s potential and spur recovery. • Diane Coyle on making economics better: The British economist speaks on how a lack of diversity within the profession is holding it back. Economists need to start working with other disciplines if they are to live up to the influence they have in public policy and help deliver solutions to the complex challenges the world is now facing. • How domestic violence threatens economic development : It’s called the “shadow pandemic” — an increase in physical, sexual and emotional abuse of women and girls amid the lockdowns and societal turmoil. New IMF staff research shows how such violence imperils economic development in sub-Saharan Africa. An increase in violence against women by 1 percentage can reduce economic activities by up to 8 percent, an estimate derived from satellite data on nighttime lights. • Jayati Ghosh on unpaid care work: The professor of economics at the University of Massachusetts Amherst discusses how our notion of productivity is skewed because gross domestic product measures fail to capture unpaid work, primarily by women, caring for children, the elderly and other populations. • Advancing gender equality through climate CFI.co | Capital Finance International

action: When climate adaptation intervention ignores gender inequalities — including reduced access to education and employment — it only encourages new types of exclusion. Anne-Marie Trevelyan, the United Kingdom’s international champion on adaptation and resilience for the COP26 presidency, writes for F&D on why women and girls are more vulnerable to the effects of climate change and pay a higher price. • Lisa D. Cook on how racism and sexism hurt us all. The professor of economics and international relations at Michigan State University, recently nominated to serve on the Federal Reserve Board of Governors, speaks about her studies of how violence affects innovation and economic growth. Cook, known for her ground-breaking research on how racism, sexism and violence impact economies, made her mark as a black woman economist in a field dominated by white men. • COVID-19: The Mom’s Emergency: IMF estimates confirm the outsized impact of the pandemic on working mothers. Data from three countries — the United States, the United Kingdom, and Spain — shows that women with young children have suffered larger job losses than other women and men. For more on how the IMF is working in support of women’s empowerment, see our gender page and proposed gender strategy. i

Links on source below - Source blogs.imf.org/2022/03/07/how-empowering-womensupports-economic-growth 149

> Words About Birds:

Feathered Friends Spark a Tourism Boom By Tony Lennox

The world’s in a flap about birdwatching, with ‘avitourism’ emerging as a fledgling travel sector.

here was a time when being a birdwatcher was the social equivalent of standing at the end of a railway platform with a notebook and anorak, jotting down train numbers.

Until the 1980s, birdwatching was often the preserve of solitary middle-aged men hiding in damp undergrowth, binoculars and cameras in hand, looking shifty enough to arouse the suspicions of “normal folk”. The image of birdwatching as a haven for anoraks was hard to shift — especially because of “twitchers”, a subset of birdwatchers who go to extraordinary lengths to tick-off rare sightings. In 2021, five British men were fined for breaking Covid restrictions, having travelled hundreds of miles to spot a confused northern mockingbird, a native of North America blown off course by Atlantic gales. Police were alerted by locals, alarmed by a throng of men in camouflage gear skulking about in the undergrowth. Thanks to a growing awareness of the natural environment — and mainstream media’s discovery of the pulling power of Nature — birdwatching has become not just acceptable, but cool. Today’s birding enthusiasts are likely to be young, urban, and sociable, using online networks and databases to keep track of each other’s checklists — and keen to visit exotic places to seek out exotic species. Television programmes like the BBC’s Springwatch, fronted by the famously grumpy comedian Bill Oddie, brought the hobby to the attention of new generations. Oddie’s own obsession was nurtured in the bleak and often bird-less suburbs of his native Birmingham. These days “avitourism” is a booming international business, with three million international birdwatching trips organised every year. The birdwatching bug is deeply entrenched in the British Isles, with the highest number of birdwatchers in Europe, but other nations are catching up. The hobby is big business in the Netherlands, Germany, and Sweden, with more than a third of European tour operators offering birding excursions. The creation of this eco-tourism sector has boosted the economies of countries in the developing world blessed with a variety of bird 150

The avocet, iconic emblem of the RSPB, was extinct as a native British bird by the 1960s, but is now breeding successfully at several sites around the UK coast.

species. In the past two decades, avitourism has emerged as the biggest eco-tourism niche, helping to preserve natural habitats and creating jobs. Countries in the Southern Hemisphere have discovered that the birding industry can be a lucrative alternative to other, less environmentally friendly ventures. Tour operators from Africa, Asia, and South America regularly flock to Birdfair, an annual event held at Rutland Water in the English Midlands, to tempt British birdwatchers to new destinations. Britain’s Royal Society for the Protection of Birds (RSPB) boasts more than a million members, making it by far the largest wildlife conservation charity in Europe. In the 1980s, Britain’s bird tables attracted an average of only 18 bird species. Today, increasingly extravagant garden feeding stations support 130 species. A third CFI.co | Capital Finance International

of UK householders regularly feed garden birds, spending almost £250m every year on wild bird food. It is estimated that more than six million UK residents are birdwatchers, with a growing band of celebrity birders including Sir Paul McCartney, Mick Jagger, Jarvis Cocker, Damon Albarn, Joanna Lumley, Vic Reeves, Bill Bailey, Rory McGrath and Sean Bean. The RSPB manages more than 200 nature reserves across the UK, and runs the annual Big Garden Birdwatch, the world’s largest citizen-science project. Enthusiasts have helped to rescue many species on the brink of extinction, including the red kite and the avocet, a rare wading bird — and the emblem of the RSPB. i

Spring 2022 Issue

CFI.co | Capital Finance International

151

152

CFI.co | Capital Finance International

Spring 2022 Issue

> Infinity Asset Management

Diversity and Strategy: Two Key Factors That Have Driven the Infinity Group to Success It was 25 years ago, in São Paulo, Brazil, that Infinity Asset Management, and the Infinity Group, started as a brokerage firm.

CEO: David Fernandez

t became a licensed fund manager and investment company in 1999, and today prides itself on its tailor-made solutions. A lot of its flexibility, says CEO David Fernandez, is down to a strong and diverse

team.

The firm took action during the pandemic’s upheaval, bringing in new professionals to compose a high-performance, cross-functional team. Throughout its 25 years, the Infinity Group has achieved impressive performances thanks to its resilience and consistent management strategies.

“We recruit a large spectrum of skilled individuals: professionals with extensive knowhow in the financial market,” he says. “We also develop young talent. Since the beginning of our journey, we have collected several awards with our fixedincome strategy, an important benefit for all kinds of investors seeking a diversified portfolio and steady and reliable returns.”

The company policy is one of partnership, providing opportunities for employees through meritocracy and preserving professional talents. “This reinforces the commitment to securing the interests of clients and the success of the business,” Fernandez believes.

The Infinity team seeks asymmetries in the domestic and offshore fixed-income markets, using liquid strategies: interest-rate markets and federal government bonds — “always seeking to preserve our investors´ capital”.

Investment committees, monthly newsletters, and weekly economic reports drive the investment process at Infinity, with periodic media updates and a tireless drive to decipher the challenges of the world. Cutting-edge research practices validate and execute the firm’s investment principles.

“We are specialists in the derivatives market (without leverage),” adds Fernandez, “and we don´t use debt strategies in our portfolios.”

“ESG criteria have become the core of our strategy, so we are in the process of launching CFI.co | Capital Finance International

our first ESG fund, focusing on carbon-offsets land, reforestation, clean energy projects, water recovery and treatment. “We have, and share, a commitment for excellence. We do our utmost to answer the most intricate questions in investment strategy, management, and corporate philosophy.” Investment strategies include fixed income, equities, and hedge funds. Infinity takes a topdown approach to balance diversification across its funds. “In addition to the management of liquid funds, we create tailor-made equity structures for organisational and fiscal optimisation, succession planning, governance and asset security.” Despite recent market instability, Infinity’s results speak for themselves: a two-year return from three of its fixed-income funds. “We enable the achievement and refinement of the financial life goals our clients,” says Fernandez. i 153

> Kellogg Insight on SPACs:

A Lack of Understanding Could Cost You a Lot of Money By Phillip Braun

A Kellogg professor on why these investment vehicles can be losing propositions for casual investors.

pecial purpose acquisition companies (SPACs) — which are listed investment vehicles for taking private companies public via mergers, as an alternative to traditional IPOs — have exploded in volume and popularity over the past two years. In 2020, 248 SPACs were listed on public exchanges for an average listing size of $336m and a total amount of capital raised of $83bn. In contrast, in 2021, 613 SPACs were listed at an average listing value of $265m and gross proceeds of $162bn. Currently, 575 listed SPACs are looking for target companies with which to merge. In 2021, 312 mergers were announced and 199 mergers were completed at a gross value of more than $450bn. All this activity is attracting investor attention, but many of them fail to understand that SPACs are very complicated investment vehicles that mostly benefit everyone involved in the merger deal — except retail investors themselves. It is imperative that investors understand the finances behind SPACs. LIFE OF A SPAC SPACs are exchange-listed shell companies with the sole purpose of targeting and merging with a private operating company, whereby the target becomes listed. The rationale for SPACs is that they offer private companies a quicker, easier, and more certain way to become publicly traded than a traditional IPO. The lifecycle of a SPAC is straightforward: It is incorporated, listed on an exchange, looks for a target with which to merge, and negotiates a merger deal, which is then voted upon by the SPAC shareholders. If approved, the SPAC then merges with the target company. Once a SPAC closes its merger, the target company is listed, replacing the SPAC shell company on the stock market. Note that, once listed, the SPAC has two years to merge with a target or it must be liquidated. At the start of its life, the SPAC conducts an IPO by selling units at $10 each. A unit consists of one share of stock in the SPAC and typically a fraction of a warrant, which grants the owner the right to purchase a SPAC share at $11.50 after the SPAC merges with its target. After its listing, the SPAC simply holds the cash received from its IPO in a trust account.

154

"The complex details of SPACs can put unwitting investors at risk. Naïve investors lose because of three main issues with SPACs: misaligned incentives, dilution of shareholder value, and the cost of the SPAC listing." The trust cannot be drawn until closing its merger with a target company, except in very specific conditions. After a merger deal is approved, if the SPAC shareholders do not think the merger will create value, they can redeem their shares from the SPAC for $10, if they wish, while keeping their warrants. ISSUES WITH SPACs The complex details of SPACs can put unwitting investors at risk. Naïve investors lose because of three main issues with SPACs: misaligned incentives, dilution of shareholder value, and the cost of the SPAC listing. Each SPAC has a founder who manages the SPAC from its inception through the completion of the merger. The SPAC founder receives 20 percent of the outstanding shares of the listed SPAC for a minimal cost as compensation for creating and managing the SPAC. Importantly, these founder shares are different than the listed shares sold to investors in that founder shares cannot be traded until a merger is consummated. Because their shares do not pay off unless a merger closes, SPAC founders have a strong incentive to merge with a target — even if it is a losing proposition — with the inherent costs of the SPAC being passed on to those shareholders who do not redeem their shares. A majority of shareholders will vote for a merger, yet redeem or sell their shares. In a recent study, the median redemption rate for institutional investment managers was 73 percent, while an additional 25 percent sold their shares, for a total divestment rate of 98 percent pre-merger. Some have claimed that listing via a SPAC is cheaper than a traditional IPO. Another new study calculated that the median cost of a SPAC listing was 14.6 percent of the post-merger target market capitalisation, compared with the cost of a traditional IPO of 3.2 percent. CFI.co | Capital Finance International

The reason that the founder and the target company accept this is because they do not bear the costs of a SPAC listing; rather, the costs are borne by those investors who do not redeem their shares. Often, to complete a merger, it is necessary for the founder to raise additional capital by selling shares to new shareholders post-IPO. One study found that these new shareholders bought in at a median discount of 5.5 percent to the original $10.00 value of a SPAC share, and in 37 percent of SPACs, at a 10 percent discount or more. Again, these costs are passed on to nonredeeming shareholders. The bottom line is that because of the misaligned incentives, founders often pay a premium for their merger target by providing sweeteners for the target company, and pushing the costs to non-redeeming shareholders. This premium covers the cost of the original SPAC listing and incentives to ensure a merger occurs. But here is where unwitting investors can really feel the pinch: after a merger closes, when the founder shares start trading and the warrants can be exercised, the non-redeeming shareholders often have their positions devalued. Research shows that this devaluation averages 25.2 percent, from the SPAC share price of $10 to an average of $7.48. BUYER BEWARE Only if the founders purchase a target at a discount to its true value will any surplus be created for the unaware SPAC shareholders who do not redeem their shares. Typically, because of the incentives embedded in SPACs, the opposite holds true, causing the founders to acquire the target at a premium, reducing the value for the imprudent investors. Studies have shown post-merger share prices of listed targets ultimately fall over time, with

Spring 2022 Issue

"SPACs are convoluted and complex, with structures that essentially hide their embedded costs and can ensnare unknowledgeable investors." the post-merger returns to non-redeeming shareholders underperforming the market by a median of 49.3 percent for mergers occurring in a 2019–2020 sample through November 2021, whereas the returns to SPAC founders was a positive 198 percent, and the average returns to the new investors who helped finance the merger underperformed by eight percent. For investors who redeemed their shares premerger, returns averaged 11.6 percent, due mostly to the value of the warrants. Of course, a minority of SPACs do make money, which has been shown to be related to the quality of the SPAC founder and the investment bank that underwrote the IPO. SPACs are convoluted and complex, with structures that essentially hide their embedded costs and can ensnare unknowledgeable investors. Overall, typical retail investors should avoid investing in SPACs unless they can spend the necessary time to understand the finances behind them; if not, the best advice is to avoid investing in SPACs. i

This article originally appeared in Forbes. ABOUT THE WRITER Professor Phillip A Braun specialises in the study of the interaction of the macroeconomy with financial markets. He is the author of a number of articles, most recently a series of papers studying Islamic economics, as well as an online columnist for Forbes. Prof. Braun joined the Kellogg School of Management as a Clinical Professor of Finance after spending four years across town at the University of Chicago and ten years working and teaching in Asia. When in Asia Professor Braun was a Senior Member of the Policy Advisory Group to the Prime Minister of Thailand and Managing Director of Corporate Finance for Southeast Asia for CLSA. Prior to those assignments Professor Braun was a Principal at A.T. Kearney, an Associate Professor at Kellogg and an economist with Ronald Reagan's Council of Economic Advisers.

155

> North America

AMLO’s ‘Fourth Transformation’ May Burn Up Mexico’s Renewables Future By Brendan Filipovski

Mexican President Andrés Manuel López Obrador, “AMLO” for short, is a big LA Dodgers fan. He may even catch a game when he goes to LA for the ninth Summit of the Americas in June.

President of Mexico: Andrés Manuel López Obrador

156

CFI.co | Capital Finance International

Spring 2022 Issue

CFI.co | Capital Finance International

157

ut the real ballgame will be in the Summit’s meeting rooms, where Mexico and the US will discuss AMLO’s “fourth transformation” of the Mexican energy industry.

The third time was the charm for López Obrador. His bids for election fell short in 2006 and 2012, but he became president in 2018 — with a landslide victory — after forming the MORENA party. He’s on a mission to revive Mexico after what he sees as the “long neoliberal nightmare” of recent decades. He wants to restore Mexico’s “energy sovereignty”. The template for this fourth transformation comes from the nationalisation of the energy industry to create the state oil company Petroleos Mexicanos (PEMEX) and the public electricity utility Comisión Federal de Electricidad (CFE). Critics argue that this “energy sovereignty” will increase costs, stymie the development of renewable energy, and could land Mexico in trouble with respect to its commitments under the USMCA trade agreement. López Obrador has underlined his commitment to the policy by introducing a bill for constitutional reform to build on changes in regulation and enforcement. The reforms would represent a reversal of the decades long-trend in liberalisation of the energy sector — and a dramatic U-turn of the 201415 reforms under former president Enrique Peña Nieto. Liberalisation was embraced as a solution to corruption and inefficiency in PEMEX, and the failure of CFE to meet electricity demand. The constitutional reforms are being debated by Congress and are expected to be voted on this September. While López Obrador’s coalition is not likely to get the numbers in Congress or Senate for the changes, the threat of the constitutional changes has had a major impact on foreign investment. Born in the south-eastern state of Tabasco, López Obrador aligned himself with the Left by joining the PRI in 1976. He later moved across to a breakaway left-wing faction, which became the PRD in 1989. In 1996, he was injured while protesting with local indigenous people against pollution from PEMEX oil wells. In 2000, AMLO was elected mayor of Mexico City, the head of government of the federal district. During his tenure, he worked to help poorer citizens through financial assistance programmes and increased investment in health services and education. He did so without piling up debt, and left office with an 85 percent approval rating. This marked him as being on the conservative left. After his second failed presidential run, López Obrador stepped away from PRD and formed MORENA. Many see echoes of Lázaro Cárdenas’ career here. Cárdenas served as Mexican president between 1934 and 1940 and is one of 158

"Mexican oil is high in sulphur content, which results in higher emissions. CFE’s power plants tend to have higher emissions than those of private producers." Mexico’s most popular presidents. He introduced land reforms in favour of indigenous farmers and gave workers the right to strike. He also nationalised the oil industry, creating PEMEX in 1938. Mexico’s electricity industry was nationalised in 1960. Now López Obrador wants to restore PEMEX and CFE to their former glories — that “energy sovereignty”. He also plans to nationalise the lithium industry. The proposed constitutional reforms would strengthen PEMEX and CFE by removing the independence of the energy regulator Comisión Reguladora de Energía (CRE), eliminating the upstream oil and gas regulator Comisión Nacional de Hidrocarburos (CNH), and giving CFE control over Centro Nacional de Control de Energía (CENACE), the operator of the electricity distribution system and wholesale market. This would give PEMEX and CFE veto over foreign energy and exploration permits and investment. All existing contracts would have to be renegotiated. CFE would be guaranteed a 56 percent share of electricity generation, regardless of the cost of its plants and the lower cost of the 34 private sector plants. It would also be able to dictate terms to private operators. The government has seized over 20 fuel storage terminals and closed 17 others, many of them American owned. To replace the US fuel imports, AMLO is building an $8bn oil refinery in his home state of Tabasco. He is also investing a further $3bn to modernise six smaller refineries, and recently paid $596m for a controlling interest in the Texan Deer Park refinery. The Federal Economic Competition Commission (Comisión Federal de Competencia Económica) has recommended that Congress and the Senate reject the reforms. Critics agree, and argue that energy sovereignty will have adverse impacts. Electricity costs are forecast to increase by as much as 52.5 percent by the US National Renewable Energy Laboratory (NREL). This would hurt the economic competitiveness of Mexican companies and cost the government an extra $3.5bn in annual subsidies if AMLO honours his promise to keep consumer prices unchanged. The government is expected to forego $13bn in revenue from permits. The reforms are also expected to stymie the development of renewable energy. Private CFI.co | Capital Finance International

investment in the area has already been spooked. Investment in wind energy is this year expected to fall to $900m from $1.5bn billion in 2021, and $5bn in 2018. Any shortfall is unlikely to be made up by the government, which is focusing on oil and electricity from fossil fuels. This is bad news for Mexico’s environment and local and US companies relying on a growing renewable sector to reduce emissions. Mexican oil is high in sulphur content, which results in higher emissions. CFE’s power plants tend to have higher emissions than those of private producers. Mexico is already the world’s 13th largest emitter of greenhouse gases — and NREL estimates that the reforms could raise emissions by 65 percent. The country has reneged on its 2024 and 2030 Paris Agreement clean energy targets, and the reforms are hampering the US-Mexico trade relationship. They potentially violate chapters 14 and 22 of the USMCA trade agreement. Chapter 14 protects investors, while 22 covers the governance of state-owned companies and market neutrality. In short, Mexico cannot discriminate against US or Canadian energy companies, impose trade barriers, or seize private property. At the North American Leaders Summit in November, talks between the US and Mexico were seen as constructive. There have been recent signs that AMLO may be willing to compromise on his reforms. One of his top aides has been in discussions with the private sector and opposition parties. But a lot of damage has already been done, and outcomes are not yet clear. The Summit of the Americas presents another opportunity for US President Joseph Biden and López Obrador to discuss the reforms. AMLO may restore PEMEX and CFE to their former glory, but even that may fall short of expectations. How long will it be before the progressive Left grows restless over falling investment in renewable energy, and conservatives baulk at increased energy costs and inefficiencies? The US will not stand by and suffer the violation of the USMCA. AMLO’s conservatism may yet win out over his idealism. i

Spring 2022 Issue

> Alimentation Couche-Tard:

ACT Demonstrates How to Create a Diverse and Inclusive Organisation From one store to one world: Canadian group ensuring fairness and equitable conditions for all employees.

limentation Couche-Tard (ACT) is a Canadian multinational operator of convenience stores — and it all began with a single store in Canada some 40 years ago.

In 2022, the company is a world leader in convenience and mobility. It now has 14,200 stores and 124,000 team members from 26 countries and territories, representing many cultures, races, genders, and minority groups. ACT’s diverse workforce reflects the communities of its team members — and the company works to advance equitable representation, opportunities, and pay as that workforce grows. Over recent years, ACT has been on a mission to increase diversity and inclusion across the organisation — a journey that is embraced at all levels, from store employees to top management. The company strives to be an inclusive and attractive employer, providing a work environment where people feel safe, respected, and able to develop their full potential.

ACT’s diversity and inclusion efforts began in earnest in 2018 with its first business resource group, the Women’s Council. It was formed to create “winning conditions” for female employees. In March 2020, chief executive Brian Hannasch signed the CEO Action pledge, a coalition of leaders working to advance fairness and inclusion in the workplace. By signing-up for this commitment, Hannasch positioned ACT to become the first convenience store retailer to join the movement, and demonstrate the company’s commitment. From there, the company began bold conversations across the organisation to listen, learn, and take meaningful action. This included training across the business on unconscious bias, and sharing experiences throughout the network with town halls, internal communications, surveys, and personal conversations with top leadership, including ACT’s chief people officer, Ina Strand. “We are turning courageous conversations into action to drive change and build a more inclusive CFI.co | Capital Finance International

workplace that reflects the diversity of our team members and customers,” she says. “As an ally of our under-represented groups, I am proud of our recent progress to better understand diverse populations and develop opportunities and pathways to a more equitable workplace.” Over the past two years, the framework for meaningful action expanded to include several employee-led business resource groups (BRGs) highlighting the benefits of diverse perspectives. The BRGs represent racial and cultural groups, the LGBTQ+ community, and team members with disabilities. ACT has committed to creating pipelines to bring more diverse groups higher into its management structure. This has included internal training programmes for managers, directors, and emerging leaders, as well as industry and minority training programmes exploring ways that underrepresented groups can gain crucial tools and education to advance their careers and grow together with the company. i 159

> Shared

Values Take Kickstart Management from Zero to Hero

eed-stage venture capital firm Kickstart started life in the 2008 recession — and has to date raised more than $345m in follow-on capital. It boasts a portfolio of 100+ active companies, has $148m in capital under management. Kickstart has also placed some 400 employees at 90 Utah businesses — and people are important in this US company; founder and managing partner Gavin Christensen describes them as the Kickstart secret sauce. The use of first names emphasises the close-knit nature of the firm, committed to acting on shared core values. GAVIN Gavin Christensen is the founding visionary at Kickstart Seed Fund. In 2008, he recognised the need for leadership and seed-stage capital in the region He launched Kickstart to fill this gap. Starting such an enterprise away from the coasts, and in the midst of the Great Recession was not easy. But challenge can bring benefit, and setting up the business has given Gavin a deep understanding of what it’s like to pursue a vision for the future that few others share. Yet. His guidance to founders is borne of first-hand experience and a desire to build not just a fund, but an entire ecosystem. Kickstart is now the most active investor in Utah and has expanded to the rest of the Mountain West. Before Kickstart, Gavin was an analyst, associate, and principal at vSpring Capital (now Signal Peak). Away from his desk, Gavin can be found spending time with his family, multitasking while riding his Onewheel electric skateboard, finetuning his VR gaming skills, and playing tennis. CURT Curt is a consultant-turned-CEO-turned-Nike exec. This wealth of experience makes him a tremendous resource to the Kickstart portfolio in the areas of executive leadership, strategy, and executive coaching. “Supporting others in their growth, development, and success is the most gratifying thing in life,” he says. He has ample opportunity to achieve this — he sits on the boards of 14 companies. As an investor, his focus is on healthcare, health tech, consumerism, the gig economy, and marketplace companies. Curt earned his MBA with honours from Harvard Business School and his BA in Economics from

160

Weber State University, where he graduated summa cum laude. Curt is crazy about cycling, skiing, photography, and collecting rare and antiquarian books. DALTON Dalton is “a technological optimist” who loves his role in venture capital. He gets to meet and support a wide array of extraordinarily talented entrepreneurs. Dalton’s roots with Kickstart go back to the very beginning, when he helped to launch the fund. He later performed a similar role at Kickstart’s student-run Campus Founders Fund (CFF). Dalton also assisted in founding Mexico’s first early-stage tech fund. He earned his MBA from The Wharton School, his MA in International Studies from the Lauder Institute, University of Pennsylvania, and his BA in Finance from the University of Utah, where he graduated summa cum laude. He is CFI.co | Capital Finance International

a member of the Kauffman Fellows Society, and his superpower is his openness to new ideas, people and possibilities. “I wish I could live far into the future to see what we are building,” he muses. ALEX Alex runs all things finance: reporting, cash management, budgeting, and the structuring of transactions from an administrative and accounting perspective to ensure compliance with limited partnership agreements. He loves working with entrepreneurs, helping with diligence on a new company, and leading deals. Alex is CPA-licensed and earned his Masters of Professional Accountancy and BS in Accounting from the University of Utah. When not ensuring the seamless administration of the fund, he loves playing with his twin boys, attending his daughter’s dance concerts, and enjoying a good show with his wife. i

Spring 2022 Issue

NYSE:FRT

Over 50 years of leadership in real estate. We own, operate and develop award-winning retail environments and mixed-use neighborhoods in the US' most desirable markets.

$1.3

$400

13.6

$37.5

invested in LEED certified buildings

Green Bond for LEED certified projects

of onsite solar capacity

in onsite solar arrays

billion

million

Pike & Rose | North Bethesda, MD LEED for Neighborhood Development-certified project

federalrealty.com CFI.co | Capital Finance International

161

> Kickstart Seed Fund:

From Recession to a Rich Seam of Co-operation and Success Seed fund firm’s birth in troubled times didn’t slow its development one bit.

ickstart Seed Fund was founded in 2008. Yes, 2008 — and despite the recession, the company closed its first fund of $8m.

The seed-stage venture capital firm is based in Salt Lake City, Utah, and, as the name implies, its mission is to get the best companies in Utah and the Mountain West up and running. It provides smart capital and expert guidance within a connected community. Since raising that first fund in 2008, Kickstart has invested in 60 companies. With the support of local universities, angel investors, entrepreneurs, and venture capital funds, Kickstart first focused on investing in promising and scrappy entrepreneurs. Years of diligence paid off, and today, Kickstart has raised more than $345m in follow-on capital. It boasts a portfolio of 100+ active companies, has $148m in capital under management. Kickstart has also placed some 400 employees at 90 Utah businesses. Because Kickstart was the first seed fund in Utah, the company knows what it’s like to be a pioneer, starting something before others understand the vision. That has made the firm willing to lead investments in promising teams. The team has the expertise and experience to grow start-ups and recruit top talent. “We work alongside their community of visionaries that are committed to moving the whole ecosystem together,” says founder and managing partner Gavin Christensen. “It’s the network effect at its full potential.” Raising venture capital is more than swapping shares for money; it’s inviting the right investors to complement your team. The goal? To support the best entrepreneurs in the wild west and provide expert connections for hyper-growth companies. The partnership between Kickstart and earlystage companies in Utah has contributed to unprecedented economic growth for the state. Kickstart’s success in identifying the best and brightest entrepreneurs is evident in its portfolio. Since 2008, the company has invested in some 162

"Today, Kickstart’s portfolio is made up of 150+ active portfolio companies, with $311m in assets under management, and $2.7bn total capital raised." of Utah’s most recognisable brands, including Podium, Stance, Lucid, and Cotopaxi. As an entrepreneur's partner from start-up to launch, many of the founders from earlier funds have returned to become investors in subsequent funds. Today, Kickstart’s portfolio is made up of 150+ active portfolio companies, with $311m in assets under management, and $2.7bn total capital raised. Traditionally, venture capital firms add value primarily through capital and one-on-one interactions such as board meetings. Kickstart goes beyond this. Through a community platform called Kickstart Collective, Kickstart shares knowledge across its networks to portfolio companies with events, resources, and connections. In partnership with entrepreneurs, Kickstart’s podcast, Perfect Pitch, offers a glimpse into the minds of investors and entrepreneurs, throughout a start-up journey. It offers a concise, quick and tactical guide to help listeners through their daily challenges. Through the community platform, Kickstart believes that companies learn best from one other, and strives to form deep connections across the Kickstart family. Kickstart’s secret sauce is its team, and the shared core values they are committed to meet each day. 1. All in. “We believe in aligned, focused, persistent effort over time,” says Christensen. CFI.co | Capital Finance International

“Success in seed ventures doesn't happen overnight. When we invest in a company we are also investing in the founders and partneringup for the journey. Usually, there will be bumps and setbacks along the way. We are patient and supportive as companies navigate their way to success.” 2. Collaboration. “We win as a team,” stresses Christensen. “We hire and invest in the best, and need each other to be our best. It doesn’t matter if the spotlight is on us or not, we each have an important role. We work together through the good times and hard times.”

Spring 2022 Issue

3. Integrity. “We choose to behave ethically and with professionalism. We play a long-term game because we know it's the right thing to do and good for business.” 4. Humility. “It's not all about us. Regardless of our success, we serve entrepreneurs and invest other people’s money.” 5. Curiosity. Kickstart has a voracious appetite for learning — “about technology, the world, and ourselves”. As technology, industries, political environments and the world change, “we keep learning so we can be our best and back the best”.

6. Responsibility. “We are helping to build an ecosystem as well as a fund,” says Christensen. “If not us, then who?” 7. Courage. “We value results over comfort. In seeking for the outlier, we recognise that failure is part of the price.” 8. Fun. “We enjoy the journey and the struggle of building something special with humour and gratitude.” In addition to its main fund, Kickstart has the student-run Campus Founders Fund. It consists CFI.co | Capital Finance International

of eight venture partners and two scouts investing in 11 universities in Utah, Colorado, New Mexico, and Arizona. The student venture partners meet with student-run companies seeking funding.

“The Campus Founders Team spends time conducting due diligence on these companies,” says Christensen, “and invest in the best.” Many Campus Founders Fund-backed companies go on to be successful companies backed by Kickstart Fund, Simple Citizen, Pura, Blerp, Hallo, Recyclops, and Campfire among them. i For more information, visit kickstartfund.com 163

Australia’s Best Investment Management Team In today’s economic climate, it is important to know that your money is in good hands with an experienced team that has a solid track record of performance.

2020 BEST INVESTMENT MANAGEMENT TEAM

WINNER AUSTRALIA

To invest with the best investment management team visit www.latrobefinancial.com or contact the team directly +613 8610 2800 or investorservices@latrobefinancial.com.au

Over 7 decades’ experience of

164

La Trobe Financial Services Pty Limited ACN 006 479 527 Australian Credit Licence 392385. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213. To view our Awards and Ratings the Awards and Ratings page on our website. CFI.co please | Capitalvisit Finance International

Spring 2022 Issue

> GoldenTree

Governance and Experience: Winning Combination for Any Investment Firm Asset management firm GoldenTree understands that — and its governance structure has been key to two decades of sustained success.

oldenTree, founded in 2000 by Steve Tananbaum, is one of the largest independent asset managers focused on credit.

The employee-owned firm manages nearly $47bn for institutional leading public and corporate pensions, endowments, foundations, insurance companies and sovereign wealth funds. Its 250 employees, speaking 25 languages, are spread across offices in New York, West Palm Beach, Charlotte, London, Singapore, Sydney, Tokyo and Dublin. GoldenTree specialises in global credit markets. It has 24 partners and deep employee commitment to the strategies that have created a perfect alignment of investment interests. Governance at GoldenTree is exemplified by its executive committee, comprised of eight partners from across the firm. They have worked together for an average of 15 years and meet regularly to formulate business strategy, discuss corporate governance, and review key areas of business from a management company and fund perspective. GoldenTree specialises in opportunities across the credit universe: high-yield bonds, leveraged loans, distressed debt, structured products, emerging markets, private equity, private credit and credit-themed equities. Founding Partner & CIO: Steven Tananbaum

GoldenTree by the Numbers In 2000, GoldenTree was founded on the principles of fundamental value-investing — with a focus on a margin of safety and a “total return” approach. The investment process has been successfully executed across market cycles for two decades. GoldenTree expanded its global footprint with the opening of its European office in 2005. Over the past decade, it has gained recognition and respect in the European credit markets, with local expertise in corporate credit, structured products, trading, restructuring, sourcing, and business development. GoldenTree has expertise across corporate, structured, distressed, private credit and emerging markets, enabling the Firm to analyse a broad universe of opportunities.

As GoldenTree is owned by its employees, there is a clear path to partnership, and promotion from within. This culture enables the firm to attract and retain some of the world’s most talented investment and business professionals. GoldenTree has one of the most experienced investment teams in the industry, led by an executive committee with 29 years of experience. SOLUTIONS GoldenTree provides solutions to investors and offers customised accounts with individualised return profiles. It has been investing globally since its inception, and is established a presence in Europe’s financial world. GoldenTree is supported by a diverse capital base of institutional investors — a base that is CFI.co | Capital Finance International

growing, thanks to consistent performance. The primary focus is on institutional clients, who make up more than 90 percent of the firm’s AUM. Its largest investor categories are public and corporate pensions, which collectively amount to over half the AUM total. GoldenTree’s investments are designed to preserve and grow investors’ capital with a value-based approach. With a challenging environment ahead, as the world responds to the coronavirus pandemic, GoldenTree’s dedication to its investors and employees is paramount. GoldenTree’s breadth and depth of expertise, strong governance structure and adherence to core principles allow the Firm to navigate market cycles and deliver attractive results. i 165

> Setting

the Standard for Sustainability and Advancing the ESG Agenda

ccountAbility is an expert Sustainability / ESG consulting and standards firm that provides objective counsel to CEOs and boards on how to improve their business performance. The firm has a centred purpose – to innovate and advance the global Sustainability / ESG agenda by improving the practices, performance, and impact of organisations – and works globally with businesses, investors, governments, and multilateral organisations on ESG matters out of its offices in New York, London, Dubai, and Riyadh. “We focus on delivering practical, effective, and enduring results that enable our clients to succeed,” says AccountAbility CEO, Sunil (Sunny) Misser.

Formed in 1995 in London, UK, as The Institute for Ethical and Social Accountability for England and Wales – an international professional body committed to strengthening social responsibility and ethical behaviour of the business community and non-profit organisations. AccountAbility was one of the earliest thought leaders to focus on pioneering Sustainability and ESG thinking and practice over 25 years ago. The questions that increasingly dominate headlines, CEO agendas, boardrooms, and proxy battles today: Materiality, Inclusivity, Responsiveness, and Impact are, in fact, the four foundational AccountAbility Principles that serve as the backbone of the firm’s AA1000 Series of Standards and Advisory Services.

AccountAbility's Unique ESG Value Proposition

I had finally decided to atone for my sins,” jokes Misser, who built and grew PwC’s sustainability practice and has elevated AccountAbility’s legacy of sustainability thought leadership to the premier echelon of “white shoe” client service with the practical ESG content knowledge, business acumen, and industry experience that the market needs. “In my 30 years in the consulting business, the awareness of Sustainability / ESG matters (risks and returns) in the C-Suite has never been higher.” AccountAbility’s Advisory and Standards Boards have also transformed to reflect the stakeholders that are now driving the ESG Agenda, including the likes of former “Fortune 50 CEOs”, Top Regulators & Standards Setters, and G7 Ministerial Heads.

Driven by the foresight to fill a gap in the market that he had identified – as the “One-Stop Shop for all things Sustainability”, Misser joined in 2010 with 14 years of experience as a Global Managing Partner and Chief Strategy Officer with PricewaterhouseCoopers and a mission to recalibrate AccountAbility’s direction to focus on market relevance and profitable growth, underpinned by a “client-first” culture.

In today’s rapidly shifting landscape of frameworks and standards, AccountAbility’s AA1000 Series of Standards have remained uniquely accessible, easy-to-use, and adaptable for organisations of any type, industry, geography, size, or maturity level. They are made freely available as a public good and are reviewed and updated regularly in consultation with thousands of international stakeholders to maintain rigor, relevance and usefulness.

“After multiple years of consulting in Financial Services, Oil and Gas, and Investment Banking,

The AA1000 Assurance Standard (now v3) is the oldest standard for the assurance of non-

financial information and is used by assurance providers globally. The AA1000 Stakeholder Engagement Standard (most recently revised in 2015) is the most widely used framework for guiding inclusive and meaningful stakeholder engagement. The World Economic Forum (WEF) recognises AccountAbility as a “Framework Developer” within the ESG Ecosystem, which speaks to the company’s principles-based approach not only in the design of its Standards, which stand out amongst highly technical and compliance-driven peers, but also in its Advisory Services, which have earned the firm accolades, including top-five placement in the annual Financial Times rankings of Leading Management Consultants for five consecutive years (2018-2022) and our very own “Best ESG Strategy Development Partner – Global 2021” Award. Misser credits the firm’s success to its clients and people, who are fundamental to AccountAbility’s “Client-People-Firm” philosophy. He firmly believes that clients are “the epicentre of the firm’s existence. We measure our success in terms of our impact on the performance of our clients, people, and the firm,” he says, “and if you focus on your clients and your people, the rest will follow.”

"The AccountAbility team had the competencies and expertise to spot areas of opportunity we did not even know existed to further align our organisation toward achieving our collective sustainability goals." ESG Strategy and Reporting Team Lead, Saudi Aramco

166

CFI.co | Capital Finance International

Spring 2022 Issue

"We find significant value in having our organisation's sustainability performance data centralised in AccountAbility's capable hands, where the knowledge transfer is seamless, and the support we receive is consistent and reliable." Sustainability Officer, The International Monetary Fund (IMF)

and the firm’s Head of Middle East & Asia. “A day in the life of an AccountAbility consultant is not an easy one – the standards are high, a growing firm has growing demands, and, above all, the Client always comes first. AccountAbility is a place with tremendous opportunities for driven professionals, where hard work, dedication, and performance are rewarded, and good people are deeply appreciated.”

AccountAbility's "Client-People-Firm" Philosophy

Inspired by their CEO, who actively engages with his clients and people on everything from debating the latest market developments to sharing jokes and exchanging his doggie photos (AA is an “animal friendly” workplace), the AccountAbility team exudes a contagious spirit of collaboration, dedication, and excitement for their work, which they take very seriously, showing up at their offices or, better yet, at their client sites – ready to deliver work for clients with whom they have built genuine, trusted, and longlasting relationships. AccountAbility’s high bar for new joiners means nearly everyone at the firm holds a graduate degree in sustainability or a related business field, with experience in a technical discipline or

a proven track record in Management Consulting. Peter Mulcahy, a Senior Manager in Advisory Services says he “left Ernst & Young’s Financial Services Business Consulting practice after 7 years, in search for a career with more personal meaning, a client impact, and professional growth opportunities. AccountAbility provides exactly that as a focused, quickly growing company that serves some of the best and biggest clients in the world.” “I feel extremely fortunate to have built my career at AccountAbility,” says Daniel (Sherpa) Metzger, who joined from JPMorgan Chase with a master’s degree from Columbia University in Sustainability Management as an Associate in 2015 and now serves as an Associate Director

The company is on track to more than double in size in the coming year and extend its geographic focus beyond North America, Europe, and the Middle East, with the opening of a new office in Seoul, South Korea to serve Asian clients. The firm is also presently in the process of transitioning to become a Public Benefit Corporation (“PBC”), that will provide greater flexibility and benefits previously unavailable under the not-for-profit structure, without compromising the integrity of their mission, which will be further enhanced through partnerships, growth, and access to capital. “ESG is an idea whose time has come,” says Misser, though it seems the same is true for AccountAbility, whose legacy of contribution to the industry and fortified focus on client service have laid the foundation for a brighter future ahead. i

For more information, visit AccountAbility.org, follow them at @AAInsights, or contact their team at communications@accountability.org.

AccountAbility's Subject Matter Expertise

CFI.co | Capital Finance International

167

> Kellogg Insight:

Can Distance Change a Consumer’s Perception of a Given Product…? By Susie Allen Based on research of Xing-Yu (Marcos) Chu, Chun-Tuan Chang, and Angela Y Lee (Mechthild Esser Nemmers Professor of Marketing)

The Kellogg Institute finds that how far we stand from a product changes our perception of it.

ander through a department store and you’ll probably see a rich array of product displays: fancy purses on high shelves, watches inside deep glass cabinets, khakis neatly folded on tables, hoodies hanging on easily browsable racks. These placements are not an accident. Retailers give a lot of thought to where they display products in their stores — and for good reason. Previous research has shown, for instance, that customers respond more favourably to premium brands when their logos are positioned high up above the customer. But is it distance or height that has this effect on customers? Will those premium watches kept deep inside the glass cabinet still benefit from perceptions of prestige even when they are at eye level? A new paper by Angela Lee, a professor of marketing at the Kellogg School, and co-authors Xing-Yu (Marcos) Chu of Nanjing University and Chun-Tuan Chang of National Sun Yatsen University, finds that premium brands do indeed benefit from distance from the consumer. Popular brands — those associated with accessibility, value, and warmth — are perceived most favourably from up close. More broadly, the findings reveal that there’s no single, ideal distance between consumers and products: the right distance depends on the image the brand conveys. Designers of window displays, product placements, and ads should take note. “Effective use of spatial distance is not a onesize-fits-all strategy,” Lee says. IMAGE AFFECTS PERCEPTION Researchers devised an experiment involving a print ad for a fictitious brand of chocolate. Study participants (128 students from an executive education program in Taiwan) were told the brand was either premium or popular. Then, they were asked to place an image of a box of chocolates anywhere within a mock ad for the brand, which featured a model near the edge of its frame. 168

"The findings reveal that there’s no single, ideal distance between consumers and products: the right distance depends on the image the brand conveys." The two brand images yielded different designs. Participants who believed the chocolate was from a popular brand placed the box nearer to the model than those who believed the chocolate was from a premium brand. However, the researchers didn’t have a baseline to which they could compare their results, so they weren’t sure whether participants were swayed by the premium brand image, the popular brand image, or both. In their next experiment, they studied the two brand types separately. In the premium-brand experiment, 179 participants were asked to look at a photo of a handbag and a mannequin and estimate the distance between them. Half of the participants learned the handbag was from a premium brand; for the remaining participants, the handbag brand was described as high quality, but not premium. The researchers used an identical setup for the popular brand experiment, asking 174 participants to estimate the distance between a mannequin and either a popular or unpopular brand of handbag. Participants believed the premium handbag was farther from the mannequin than the nonpremium handbag, and the popular handbag was closer to the mannequin than the unpopular handbag. (In actuality, all four distances were identical.) To Lee and her co-authors, these results suggested that each brand image had its own distinct relationship to horizontal distance. “Whereas a premium brand image elongated the perceived distance between the product and the model,” they write, “a popular brand image shrank the perceived distance.” CFI.co | Capital Finance International

CLOSE AND POPULAR In another experiment, the researchers looked at the question the other way around, asking participants to infer a product’s brand image while standing at different distances from it. In the first part of the experiment, 120 participants were randomly assigned to stand either three or five feet from a premium leather backpack. Then, they were asked to rate its prestige, as well as how much they liked it. Participants who stood five feet from the premium backpack viewed it as more prestigious and liked it more than those who stood three feet from it, the researchers discovered, further reinforcing the association between distance and luxury. The opposite pattern emerged in the second part of the experiment, which used an identical setup but a slightly different product, a trendy canvas backpack. This time, 80 participants viewed the backpack more favourably overall — and saw it as more popular — when viewing it from a distance of three feet. Taken together, these experiments reveal that “the association between image and distance that people have is not just one-way”, says Lee. “When we see something far away, we see it as luxurious. And by the same association, when see something luxurious, we also think it’s farther away. That really shows how ingrained this association is.” A REAL-WORLD TEST For their final experiment, the researchers wanted to see how the relationship between distance and brand image would play out in a real-world setting. So they partnered with an e-commerce site in China for a field experiment. They hired a professional web designer to create four versions of an email ad touting a new brand of home fragrance diffuser. “We tried to make it as real as possible,” Lee says. Half the ads promoted the diffuser as a premium product with the tagline “Luxurious lifestyle, prestigious choice”, while the other half portrayed

Spring 2022 Issue

it as the popular choice with the tagline “cozy lifestyle, popular choice”. Half the ads showed the diffuser close to the model, and the other half showed it far from the model. This created four ad types: (1) premium/close; (2) premium/ far; (3) popular/close; (4) popular/far. The email ad included an invitation to claim a $5 coupon for the product. In their analysis, the researchers focused on the percentage of consumers who claimed the coupon, rather than actual sale numbers, which were too small to produce reliable data. As the researchers expected based on their previous studies, the premium/far ad outperformed the premium/close ad, with three percent of recipients claiming the coupon, as opposed to 1.43 percent. The popular/close ad beat the popular/far ad by a similar margin. This suggests that the relationship between distance and brand image can have a meaningful impact on consumers in the wild. “This is actual behaviour,” says Lee. LESSONS LEARNED While the experiments don’t show exactly why consumers associate distance with luxury and popularity with proximity, Lee has a few theories. “We use a lot of physical attributes to describe emotions and abstract concepts,” she notes — think of the phrases “warm relationship” or “distant relative.” Such connections can also flow in the other direction, with physical attributes unconsciously eliciting emotional associations — height, for example, often makes people or products seem more impressive. This close linkage between physical and emotional traits may explain why different products feel better from different distances. Whatever its origins, the relationship between distance and brand image is one that marketers can leverage in ads, window displays, or store designs. By putting more distance between customers and luxury brands, and less distance between customers and brands with mass appeal, marketers can maximize the value of those brands — and probably boost how much customers will pay for them. The key is knowing what type of brand image you have and making the most of it. Lee adds: “It really has to match the strategy of the brand.” i

This article first appeared in Kellogg Insight. ABOUT THE WRITER Susie Allen is a freelance writer from Chicago.

169

> Asia Pacific

ASEAN: an Acronym of Fading Importance, or a Vital Regional Organisation in 2022? By Brendan Filipovski

By the numbers, the Association of South East Asian Nations (ASEAN) bears weight: it represents 662 million people and 3.5 percent of global GDP.

Vietnam: Ho Chi Minh

170

CFI.co | Capital Finance International

Spring 2022 Issue

CFI.co | Capital Finance International

171

ut outsiders are once again questioning its relevance. There is pressure on all sides, from Myanmar and China-US tensions to the RCEP and CPTPP. (RCEP consolidates Asian production bases and markets for maximum efficiency; CPTPP focuses on combining production bases from many countries in the Americas, Europe and Asia.) ASEAN was born in 1967, as the Vietnam war raged. The US founded the South East Asian Treaty Organisation (SEATO) in 1954, but it gained little traction.

There were tensions between nations. Malaysia and Singapore were newly independent, and feelings were still raw. In Indonesia, Suharto had succeeded Sukarno, with CIA support. Sukarno had tried to destabilise Malaysia — the “Konfrontasi” — and the Philippines was still eying parts of Malaysian Sabah. But by 1967, these tensions were dissipating in the face of external pressure. Reconciliation between the nations was bearing fruit, and the possibility for something stronger was congealing. In August of that year, foreign ministers from Indonesia, Malaysia, Philippines, Singapore, and Thailand signed the ASEAN declaration. It consisted of five simple points, but the central message was that the region did not intend to be dominated by foreign powers. It was no grand vision, more a statement of unity and co-operation centred around cultural and economic ties. When such an organisation survives, it is usually because it takes on new meaning over time. It evolves. In its first eight years, it was not clear if ASEAN had a strong purpose. There was not even a permanent secretariat. Thailand and the Philippines were getting drawn into the Vietnam war, sending in troops and allowing US bases on their soil. With the fall of Saigon in 1975 and the rise of the Khmer Rouge in Kampuchea (now Cambodia), ASEAN’s importance grew. The first summit was held, and the leaders of the nations met. A new ASEAN was fleshed out. The centrality of consensus decision-making was cemented, as was a policy of pragmatism towards the world’s greater powers. The Treaty of Amity and Cooperation in South East Asia (TAC) was signed, and a permanent secretariat was established in Indonesia. The TAC set out many of the key points associated with ASEAN in 2022: mutual respect, noninterference in each other’s internal affairs, peaceful settlement of differences, and regional resilience. Its first real test was the Vietnamese invasion of Cambodia to remove Pol Pot from power in 1978. ASEAN condemned the invasion and marshalled international support against it. It acted in unity and gained a groundswell of confidence — and 172

"ASEAN may no longer be the driving force of free trade in the region, but given members’ proximity to one other, the FTA remains a cornerstone." ensured that the Khmer Rouge kept its seat in the UN as a government in exile. The invasion brought the Khmer Rouge to account for its atrocities, but at the time, ASEAN saw an illegal invasion. From there, the organisation flourished economically and culturally, engaging with regional powers. Vietnam joined in 1995, Laos and Myanmar in 1997, and Cambodia in 1999. The ASEAN Free Trade Agreement was signed in 1992. It reinforced the region’s economic growth, which has been seriously interrupted only by the 1997 Asian Economic Crisis, the 2008 Global Financial Crisis, and now the pandemic. In 1994, the ASEAN Regional Forum was formed to spur security dialogue in the Indo-Pacific region. This was complemented by the formation of the ASEAN Plus Three forum in 1997: ASEAN plus China, Japan, and South Korea. It was expanded with the ASEAN Plus Six in 2004, with the addition of Australia, India, and New Zealand, and the involvement of Russia and the US in 2005. Global attention is now focused on Asia. Barak Obama famously pivoted towards the region, while Donald Trump and Joe Biden made it a policy focus, albeit in their own idiosyncratic ASEAN FTA

CPTPP

Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam

Brunei Malaysia Singapore Vietnam Australia Japan New Zealand Canada Chile Mexico Peru

RCEP Brunei Cambodia Indonesia Laos Malaysia Myanmar Philippines Singapore Thailand Vietnam Australia Japan New Zealand China India South Korea

Table 1: Current members of each FTA — note the overlap.

CFI.co | Capital Finance International

ways. But with this greater focus and proliferation of free trade agreements (FTAs) in the region, is ASEAN still relevant? The ASEAN FTA has been dwarfed by the 2018 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the 2020 Regional Comprehensive Economic Partnership (RCEP) 2020. Table 1 shows the current members of each FTA — note the overlap. ASEAN may no longer be the driving force of free trade in the region, but given members’ proximity to one other, the FTA remains a cornerstone. This is backed by data which show that the largest exports in 2020 were intra-ASEAN — 21.3 percent of the total, followed by those to China: 15.7 percent. China leads imports, with 23.5 percent, followed by intra-ASEAN: 21.2 percent. In terms of infrastructure and integration, huge potential remains among ASEAN members. Myanmar presents the latest challenge. Many would like to see ASEAN put more pressure on the military junta. It has, however, stuck to its TAC policy of non-interference. Behind the scenes, it has put pressure on Myanmar, whose political leaders were excluded from the October 2021 ASEAN Summit. ASEAN is following its charter — and showing flexibility. If it took a more direct role in Myanmar, it would be morphing into a new type of organisation. ASEAN is still relevant here. ASEAN remains engaged with China and the other big powers on a range of issues. It has struggled with developments in the South China Sea. But while consensus has proved difficult, ASEAN remains vital if the goal is continued dialogue with China and the major world powers. These and similar challenges underline the relevance of the organisation. ASEAN was born from internal and external pressure, and nothing has changed. Its principles of cultural and economic support, consensus, and noninterference remain the bedrock. And its policy to engage with the bigger powers without choosing permanent sides adds to that. Perhaps the lack of military conflict between members is the ultimate sign of relevancy. ASEAN would only lose importance if its members turned against it. i

Spring 2022 Issue

> IMF:

Economic Indicators Signal Diminished Growth Momentum at Start of Year By Tryggvi Gudmundsson

he economic recovery continues, though the pace of the recovery has slowed. Notably, our global forecast was lowered in January to a still-healthy 4.4 percent expansion this year. This was down from an October projection of 4.9 percent, amid reduced growth prospects for the United States and China, the two largest economies. Meanwhile, inflation has been higher than expected in many economies, while financial markets remain volatile as geopolitical tensions have increased. High-frequency economic indicators offer evidence that the growth momentum has slowed going into 2022 — in line with expectations of a weak start to the year, owing to the spread of the highly contagious Omicron variant and persistent supply-chain disruptions. In this respect, we project activity to pick up in the second quarter of the year as the variant’s impact fades.

"We note that advanced economies have experienced pandemic strains and mismatches between supply and demand that have continued to boost inflation and weigh on the recovery." Recent weakening: Survey-based measures of activity for some of the world's largest economies are indicating weaker momentum.

As the Chart of the Week shows, composite gauges of manufacturing and service sector activity in many Group of Twenty economies highlight the recent softening. In some economies, the purchasing managers’ index indicated a slower pace of expansion in January compared with the prior two months. A few PMI gauges, including Australia and Spain, even swung below 50 — the threshold signaling a contraction — although the declining effect of the Omicron variant will hopefully mean that the dip is short-lived. In our recent report to the G20 , we examine these developments for G20 advanced and emerging market economies. We note that advanced economies have experienced pandemic strains and mismatches between supply and demand that have continued to boost inflation and weigh on the recovery.

(composite purchasing managers' indexes, seasonally adjusted, index> 50=expansion). Sources: Haver Analytics and IMF staff

calculations. Note: Reading of 50 signals no change from prior month. Readings above 50 indicate improvement, lower readings signal deterioration. ESP is a permanent invitee.

Temporarily reduced mobility as a result of the rapid spread of the Omicron variant has put a damper on service sector activity, including in the euro area, Japan, and the United Kingdom. Continued supply disruptions have also weighed on activity in the euro area and United Kingdom. And while the recovery has been strong in the United States, the virus has dented consumer sentiment somewhat. In emerging economies, pandemic curbs and reduced policy support are weighing on activity. In addition to the PMI declines, some other recent data point to softer momentum, such as lower industrial production in Brazil. In China, tighter mobility restrictions have resulted in weaker-than-expected retail sales, CFI.co | Capital Finance International

while a decline in real estate investment and tighter travel restrictions have also represented headwinds. Meanwhile, inflation has been higher than expected in many economies, while financial markets remain volatile and geopolitical tensions have increased. Obstacles such as these, combined with reduced growth momentum, show why the world needs strong international cooperation to end the pandemic, navigate monetary tightening and shift focus to fiscal sustainability. i Source blogs.imf.org/2022/02/24/economic-indicators-signaldiminished-growth-momentum-at-start-of-year 173

> PEZA at 27:

Milestones, Challenges, and Preparing for What Lies Ahead

he Philippine Economic Zone Authority (PEZA) recently celebrated its 27th anniversary by sharing some of its landmark developments over the years.

PEZA is the top investment promotion agency in the Philippines, established since 1995 by virtue of Republic Act No. 7916 and became a successor of the earlier EPZA. PEZA brings about investment to the country and create special economic zones, both vertical and horizontal, that will become economic drivers in creating smart towns, cities and new metropolitan areas in every region, with the economic zones as the economic umbrella and driver towards total development. The authority, its key stakeholders and partners promote the Philippines as an Asian investment haven. “As we traverse the few days of the Duterte administration, we proudly look back at what we have accomplished so far, but still, I can’t help but be more excited with what the next years have in store for PEZA,” said Director General Charito “Ching” Plaza. “Whatever may be thrown our way, PEZA will remain as stalwart, as devoted, and as committed to excellent public service.” The PEZA Chief noted, "PEZA had 27 wonderful years and we are ready for 27 years and more dedicated to growing, improving, and fighting together." MILESTONES Former Director General for Finance and Administration Justo Porfirio Ll. Yusingco said that "when PEZA took over EPZA (Export Processing Zone Authority), it expanded the number of economic zones. We have multiplied the number of our locator companies to more than 4000 registered with us." To date, PEZA has now 416 economic zones nationwide, hosting 4,661 enterprises across sectors including manufacturing and IT-BPO. Yusingco said that a major accomplishment was reversing the authority’s financial situation. “When PEZA took over, we had P2.8bn ($54m) in arrears because of the loans that EPZA 174

incurred to put up the economic zones. So far, we are doing well. We are now in the black.” According to Plaza, PEZA continues to remit 50 percent of its revenues to the national government. “Since PEZA started, we have already contributed P9.9bn ($190m)to the national coffers, almost half of which was remitted during the Duterte administration. “During the early onset of the pandemic, we increased our dividends to the government, to aid social amelioration programmes.” PEZA’s locator companies have accumulated P4.04tn in the last 27 years, with about P807.8bn generated in the past six years. The export revenues of locator companies in the zones reached $933.8bn since 1995, $300.6bn of which was generated during the current administration. Exports from PEZA economic zones comprised 17 percent of the total GDP of the Philippines, or $63.1bn in 2021. CHALLENGES In the past three years, PEZA and its stakeholders faced a moratorium on the creation of new economic zones in Metro Manila, a change in the tax regime, and the effects of the pandemic. Philippine senator Imee Marcos said supply chains had challenged everyone stating that “now, we have to think of new ways of doing business.” PEZA remains steadfast in its mandate to make the country perform at its best. “We must not rest on our laurels,” says Plaza, adding that the duty was “to serve our fellow Filipinos”. Former senator Bam Aquino said: “I hope in the next administration, you will find an economic policy and framework that recognises the worldclass effort that our ecozones provide.” For January to December 2021 performance data, PEZA reported PhP 69.301 billion of approved investments, US$ 63.061 billion of export income, and a total of 1,782,913 million workers in its registered ecozones. Its employment increased by 13.9 percent, or 217,700 new jobs generated last year. The projected annual export sales are $2.138bn with 35,245 direct employment jobs in the 249 new projects. CFI.co | Capital Finance International

Spring 2022 Issue

INVESTMENT PERFORMANCE Plaza explained that PEZA remains committed and hopeful of attracting more local and foreign investments this year. The Director General attributed the decrease in investments to the effects of the pandemic and affected everyone on a global scale. She also shared, “On the domestic front, the Philippine Statistics Authority (PSA) reported that the country's GDP shrank at 9.5 percent in 2020, the first annual contraction since 1998. Despite the ongoing pandemic and other economic challenges, investors continue to give their trust and confidence to PEZA for providing them business assistance, relief, and COVID-related expenses which are deductible to their income taxes. “Everyone is trying to survive and is learning how to live and work under this new normal.” PERFORMANCE INDICATORS In line with the changing times and guided by the agency's worldview of "Thinking global and acting local", PEZA under the leadership of Director General Plaza established the Transformation Road Map (TRM). The PEZA Chief emphasised, "We aim to promote the creation and development of more world-class economic zones in every province in the country through the four goals of our TRM." The four goals are: 1. To fully industrialise the Philippines and contribute to the global supply chain, 2. To transform the Philippines into a self-reliant, self-sustaining, and resource-generating country 3. To maximise the manufacturing capability, create a digitalised and export-driven economy, 4. To make the Philippines an investment destination in Asia. To realise these goals, we have come up with new projects under the TRM's three main objectives: First is to promote the creation and development of different types of economic zones in every province in the country. Second, we aim to improve the overall competitiveness of the country, and third, to realise a fully-industrialised Philippines, PEZA is committed to transforming the Filipino workforce into multi-skilled, multi-knowledge, and world-class workers. In terms of sector, the manufacturing industry generated a total of PhP 25.509 billion of investments while the I.T. industry investments amounted to PhP 7.322 billion last year. Japan remains the agency’s top investor at 21.72 percent. Total approved investments from 1995 to 2021 stand at P728.3bn ($13.9bn). The majority of its investments are from South Korea, India, Hong Kong, and China. “We also gained investments from western countries such as Germany, Austria, the United States of America, Denmark, France, and Canada,” added the PEZA chief. During the first quarter (January to March) of 2022, the total approved economic zone investment amounted to PHP 8.141 billion with export income of US$ 10.575 billion. These investments came from 29 new and expansion projects with projected annual export sales of US$ 232.454 million and expected job generation of 3,168 direct employment.

Director General: Charito Plaza

PEZA is often-cited, not only locally but also worldwide, for best practice among economic zones worldwide. PEZA is grateful from the commendations of the US Department of State and the IFC World Bank. i 175

> Kellogg Insight:

Five Research-Backed Strategies to Build an Ethical Work Culture By Susie Allen

An annual training session just isn’t going to cut it...

or most of us, work has a central but circumscribed role in our lives: it’s how we earn a living and where we learn new skills. We don’t usually think of the office as a place where we can grow

ethically. That’s a mistake, according to Maryam Kouchaki, a professor of management and organisations at the Kellogg School who studies moral decisionmaking. After all, “a lot of our time is spent at work,” Kouchaki says. “Especially in the US, we have created a culture where work is a significant part of our identity. It’s naïve to assume that who you are at work and who you are at home can be separate.” In fact, work is one of the areas where we are most likely to encounter moral dilemmas and temptations to behave unethically. Should you overstate your role in a successful project when performance-review time rolls around? Stretch the truth to make an important sale? Fudge an expense report? While there’s been lots of research — some of it by Kouchaki herself — on how individuals can navigate moral issues on the job, she believes ethical conduct is not just an individual responsibility. Organisations also have an important role to play. In a new paper, she and Isaac H Smith, of Brigham Young University, argue that workplaces can and should be the site of ongoing and structured ethical learning. They propose that companies take a broad and holistic view of ethics training that goes far beyond a single annual session. “It’s important to think about how to do things more systematically, such that it really helps organisations and societies,” Kouchaki says. They write that companies should seek to become “moral laboratories” — a phrase they chose very deliberately, Kouchaki explains. “With laboratories and experiments, you have to be patient and persistent and test different things,” she says. “It comes with an assumption that it’s acceptable to fail and learn from that.” So how can organisations successfully transform into the engines of moral growth Kouchaki and Smith envision? After reviewing studies in 176

"Building an ethical culture doesn’t just mean telling employees what not to do." psychology and organisational behaviour, they developed several recommendations. 1. INTEGRATE ETHICS INTO CORPORATE CULTURE Rather than treating ethics as a discrete topic, companies should strive to integrate it into every aspect of their culture, formal and informal. Drawing on the work of business ethics scholars, Kouchaki and Smith suggest including ethicsrelated questions in job interviews, outlining the company’s values during onboarding, offering job-specific ethics training, and making ethical conduct a regular part of performance reviews. Building an ethical culture doesn’t just mean telling employees what not to do. Companies can offer awards for employees who demonstrate integrity, or create gratitude boards where employees can anonymously praise and thank one another. These measures can foster an environment where positive, pro-social behaviour, rather than cut-throat competition, predominates. All of this requires the full-throated endorsement of the C-suite, Kouchaki and Smith point out. Research shows that leaders are essential in creating and maintaining an ethical culture. Ethical leadership — that is, leaders who behave ethically and promote ethical behaviour on their teams — has been shown to decrease deviance and increase helping behaviour among employees. 2. CULTIVATE AN ENVIRONMENT WHERE LEARNING FROM FAILURE IS ALLOWED For employees to grow morally, they must feel they can admit mistakes. That requires a psychologically safe environment where risk-taking and asking for help aren’t taboo. Leaders, Kouchaki and Smith write, can cultivate psychological safety by admitting their own missteps, regularly soliciting feedback from across the organisation, and proactively reminding employees that ethics is a learning process. CFI.co | Capital Finance International

Companies must also respond to small ethical lapses in ways that promote learning rather than embarrassment. Research shows that transgressors are more likely to avoid unethical behaviour in the future if they feel guilt (a sense of having caused harm to others) rather than shame (a sense that one will be negatively viewed by others). This means encouraging employees who have made mistakes to focus on who was harmed and how they might have behaved differently — but not criticising who they are as people. These measures allow the entire organisation to grow. “When you create a psychologically safe environment, people are going to be willing to ask questions and reflect and learn as a group — so you learn not just from your own judgment, but from other people’s,” Kouchaki says. 3. PROMOTE HUMILITY Most of us assume we would do the right thing in an ethically challenging situation. But that belief is often the problem: moral overconfidence is associated with an inability to admit one’s own mistakes. Simply raising employees’ awareness of the natural human tendency toward hubris can help. “It is important to help workers understand that unethical workplace behaviour is not simply the result of a few bad apples, but that all of us are susceptible to moral failures,” Kouchaki and Smith write. Ethics training, often narrowly focused on the “dos and don’ts”, can be broadened to include information on the types of situations where people are most likely to go astray — and the types of justifications that are commonly used when committing infractions. Training can provide employees with clear, practical heuristics to guide them through tempting situations, such as the publicity test (“Would I feel comfortable if my reason for this decision appeared on the front page of the newspaper?”), the “generalisability test” (“What would happen if everyone behaved this way?”), and the mirror test (“When I look in the mirror, will I be proud of myself after making this decision?”). 4. ENCOURAGE REFLECTION, EARLY AND OFTEN Reflection has been shown to improve learning,

Spring 2022 Issue

especially when combined with regular feedback. Kouchaki and Smith suggest that organisations create as many opportunities as possible for ethical reflection. “This gives an opportunity to learn from successes as well as failures,” Kouchaki says. Many companies already have regular “postmortem” meetings when important projects end. Organisations can add a standard set of ethics questions to these meetings: Was this project and process consistent with our values? Did we cross any lines? Was anyone harmed? Some companies also have project “pre-mortems” — an ideal opportunity to discuss ethical challenges in advance. 5. GIVE BACK Organisations should give employees opportunities to engage in concrete opportunities for moral growth, such as volunteer work. Research shows that giving workers the chance to serve others has many positive effects: overcoming selfishness, developing greater social responsibility, and promoting an outward focus. Kouchaki and Smith cite the example of Salesforce, where employees are given seven paid days each year to engage in volunteer work, and are encouraged to donate their expertise to non-profits on their own time. Such experiences and opportunities don’t just help with ethical learning — they can even promote psychological flourishing. DOING RIGHT AND DOING GOOD Why should companies bother to expend so much time and energy on ethics? There’s a pragmatic case — evidence that more-ethical companies have happier employees and do better in the market, Kouchaki points out — but she also believes it’s simply the right thing to do. “Companies have ethical responsibilities toward their stakeholders, which includes employees and society,” she says. Fortunately, organisations don’t have to work it out alone. “This paper is our attempt to think-through what we know from the research literature and apply it to organisations,” Kouchaki says. And theirs is far from the only such paper. “There’s lots of work that can guide companies in their attempts to become more ethical.” i

This article first appeared in Kellogg Insight. ABOUT THE WRITER Susie Allen is a freelance writer from Chicago.

177

> IMF

Should Monetary Finance Remain Taboo? By Itai Agur, Damien Capelle, Giovanni Dell’Ariccia, and Damiano Sandri

In exceptional times, monetary finance may provide helpful policy support but there are risks.

he severe economic challenges posed by the global financial crisis, and more recently the pandemic, sparked a debate on whether central banks should expand their unconventional monetary policy toolkit to include monetary finance — the financing of government via money creation. Monetary finance is often associated with Milton Friedman’s metaphor of a helicopter dropping money from the sky. Reflecting on the role of monetary policy during the Great Depression, the Nobel laureate argued that a permanent increase in the monetary base could stimulate aggregate demand even in a severe liquidity trap, that is when interest rates are at zero and prices are stagnant or declining. This increase could be transferred to households via tax cuts or other forms of government support. The 1970s struggle to contain inflation, and the many catastrophic episodes during which monetary policy became hostage to a country’s fiscal needs, however, made monetary finance taboo. Central banks’ success in lowering inflation was built on asserting their independence from fiscal authorities. The idea of financing fiscal deficits via money creation thus came to be seen as a mortal threat to central bank independence. Should monetary finance remain taboo? Or are there merits to recent calls for using this tool during times of severe crises? In a recent paper, we review the arguments in favor of and against monetary finance and provide some suggestive empirical evidence about the effects on inflation. FOR AND AGAINST Proponents of monetary finance argue that it has a stronger effect on aggregate demand than a debt-financed fiscal stimulus. Because there is no increase in public debt, monetary finance does not need to be paid for with future tax hikes, making consumers more likely to spend. Monetary finance may also prevent self-fulfilling runs on government debt. If investors suddenly lose confidence in debt sustainability, the central bank may avert a default by partially monetising debt. Importantly, if the central bank commits to this strategy — and does not abuse its power to

178

"We find that a monetary expansion has modest effects on inflation in countries with strong central bank independence, low initial inflation, and small fiscal deficits." monetise debt outside of self-fulfilling runs — investors are unlikely to lose confidence in the first place, without requiring the central bank to intervene. But even advocates of monetary finance will point out that there are very serious risks. The primary concern is that it may pave the way to fiscal dominance whereby monetary policy decisions are made subordinate to the fiscal needs of the government. The resulting loss of confidence in the central bank’s ability to keep inflation low and stable could lead to hyperinflation, as happened for example in the well-known case of Zimbabwe in 2007-08. INFLATION RISKS We use two empirical approaches to provide a preliminary assessment of the inflationary risks. First, we analyse the association between the monetary base and inflation across several countries back to the 1950s. We find that a monetary expansion has modest effects on inflation in countries with strong central bank independence, low initial inflation, and small fiscal deficits. But the effects are much stronger if central bank independence is weak, inflation is high, and fiscal deficits are large. The analysis also detects considerable non-linear effects. While small expansions of the monetary base are associated with modest increases in inflation, large monetary expansions can have much stronger effects on inflation. Second, we examine whether unconventional monetary policy (UMP) announcements in response to the start of the COVID-19 CFI.co | Capital Finance International

Image: Sorbetto/Istock by Getty Images

pandemic in 2020 led to an increase in inflation expectations. The sample includes 49 advanced economies and emerging markets and developing economies (EMDEs) during the period between March and December 2020. Most countries embarked on asset purchases in secondary markets within the framework of quantitative easing (QE) programs. QE increases the monetary base, but unlike monetary finance, it is temporary as the central bank is expected to eventually unwind the assets it purchased. However, in several EMDEs, UMP programs included components of direct government financing through the purchase of government bonds in primary markets and the extension of loans and grants to the government, often with the explicit goal of providing fiscal support. These programs resemble forms of monetary finance. As the chart shows, we do not find evidence of systematic effects of UMP announcements on inflation expectations, even when we focus on direct government financing (DGF) programs in EMDEs. In interpreting these findings, it is important to note that these operations were relatively modest in size and were likely perceived as one-off interventions. Based on the review of the conceptual arguments in favor of and against monetary finance and considering our empirical findings, we see merit in further exploring the conditions under which monetary finance may or may not be appropriate in exceptional circumstances. However, possible experimentation with this tool should be modest and limited to countries with credible monetary

Spring 2022 Issue

Inflation and monetary base expansions: Prices increase much faster in countries with weak central bank independence. (percentage point change in inflation after a 10 percent increase in the monetary base). Sources: IMF International Financial Statistics and authors'

calculations; Penn World Tables; Garriga (2016); and Mauro et al. (2013). Note: High and low independence correspond respectively to the 75th and 25th percentiles of the central bank independence index from Garriga (2016). Shading shows 90 percent confidence intervals.

Inflation expectations unaffected: Unconventional monetary policy announcements, including direct government financing, had no systematic effects on inflation expectations during the pandemic. (Inflation forecast for 2020 before and after program announcements).

Sources: Consensus Economics; IMF, World Economic Outlook; IMF COVID-19 policies tracker; Yale COVID-19 financial responses tracker; ESRB COVID-19 measure tracker; IMF October 2020 GFSR Chapter 2; IMF Monetary and Financial Statistics; Cerutti and Helbing (2021 ); and author calculations.

frameworks, low inflation, and sustainable fiscal positions. Most importantly, possible monetary finance operations should be decided exclusively and independently by central banks with the sole goal of ensuring economic stability. This is admittedly a difficult standard to achieve. A difficulty seen by some as sufficient reason to ban monetary finance altogether. Indeed, in this context, CFI.co | Capital Finance International

departures from central bank independence can be very dangerous. History abounds with examples where the use of monetary finance under inappropriate circumstances had devastating effects on economies and livelihoods. i Source blogs.imf.org/2022/02/22/should-monetary-financeremain-taboo 179

> Brain Capital:

An Emerging Investment Opportunity By Antonella Santuccione Chadha MD Harris Eyre MD, PhD Paweł Świeboda. The original version of this article was published in the Psychiatric Times on 23 February 2022.

To solve existential brain challenges spanning neurology, mental health, psychiatry education, workforce development, and neuroscience, we need a fresh approach to technologies and investing. We need a new investment opportunity: Brain Capital.

e believe that in the 21st century, there are no brains without capital, and no capital without brains: cognitive development and brain health will require ever-growing investment while seizing market opportunities will have to take the latter into account. Therefore, a novel approach to building Brain Capital and mitigating global brain health challenges is critical both to ensuring and improving societal health and for economic growth and prosperity. Brain Capital has the potential to introduce a paradigm shift to our understanding and agency in brain health. We define Brain Capital as neuroscience-inspired technologies that integrate and optimise for mental health, brain health, education, diversity, and positive psychology – including resilience, wisdom, and creativity. BRAIN CAPITAL TECHNOLOGY OVERVIEW Human societies continue to be affected by brain challenges, from mental health disorders to learning disabilities, the impact of long COVID, the effect of a global conflict, and disparities in access to health and education. According to the World Health Organization (WHO), in the first year of the COVID-19 pandemic, global prevalence of anxiety and depression increased by a massive 25%. Young people and women were hardest hit. The ongoing invasion of Ukraine highlights that women and children are often disproportionately affected in times of conflict. Moreover, the traumatic experience of war is amplified in the case of those suffering from brain disease and/or mental illness (e.g., dementia, anxiety). Brain health is central to wellbeing and a productive society. Without it, human communities cannot sustain themselves economically or socially. IT’S TIME TO RETHINK BRAIN HEALTH “The Women’s Brain Project brings together experts from various disciplines who work with patients and caregivers towards the implementation of sex and gender in precision medicine, from basic science to novel technologies. We need to bring precision approaches to brain and mental diseases as well as prevention and diagnosis. The shallow approach does not work any longer.

180

Neuroscience, neurology, and psychiatry need to merge and transform their framework as the field of oncology did.” - Dr Maria Teresa Ferretti, Chief Scientific Officer and Co-Founder of the Women’s Brain Project. Furthermore, deeply comprehending the human brain will make new achievements possible, stemming from a better understanding of mental processes such as creativity and innovation. We need new ways to move the needle on these unprecedented challenges and opportunities. Brain Capital is one possible solution, a new investment category placing a premium on technological healthcare innovations that improve brain health and brain skills. It constitutes a promising new opportunity within ESG – Environmental, Social, and Governance – investing. CFI.co | Capital Finance International

Global brain challenges are worsening. Our economies and societies are becoming more turbulent. Dependence on personal technologies is accelerating, with citizens struggling to keep up with unlimited access to massive amounts of information and data, adding to increasing stress and anxiety. There also have been positive developments: knowledge-intensive economic activity; neuroscience breakthroughs; and developments such as cognitive immunology. There are major new policy initiatives such as the WHO’s Intersectoral Global Action Plan on Epilepsy and other Neurological Disorders, as well as new, large-scale public-private partnerships aimed at tackling global brain health issues (e.g., Healthy Brains Global Initiative, Davos Alzheimer’s Collaborative). In some ways, we are therefore already living in

Spring 2022 Issue

a brain economy — a neuroscience-inspired, knowledge economy. Still, there are substantial limitations in our current system of innovation and investing to tackle these brain challenges. Approaches to screening, diagnosis, and treatment of brain and mental health disorders are not optimised, relying on a “shallow approach”. The concept of one-size-fits-all in psychiatry and neurology has been insufficient to cure and treat brain and mental disorders. This is because there are substantial limitations in our current understanding of brain pathology and sex and gender differences related to them. It is time to address this unmet need by precise investments. Frontier neurology technologies aim to improve access, screening, prevention, diagnosis, prognosis, and treatment. Concurrently, there is an increasing convergence of these types of solutions as experts, systems, and payers attempt to simplify workflows and minimise fragmentation of new products and services. SUSTAINING BRAIN HEALTH To put brain health front and centre and integrate it as an investment opportunity into existing frameworks will require the support of diverse stakeholders working together. Health, venture capital, and philanthropy are three examples of such key sectors. “ESG approaches have driven positive business and societal value; however, they are incomplete. Incorporating Brain Capital into ESG frameworks would provide a more comprehensive, robust approach to create long-term positive impacts for the economy, the environment, and all stakeholders.” - Mark Faulkenberg, Managing Director of Investment Management at Boomtown Accelerators. Such an approach would allow us to leverage the financial markets to develop Brain Capital technologies and opportunities, reduce brain

challenges, and send a signal for more investment in venture capital-type vehicles to fund the scaling of neuroscience-backed solutions. What’s more, Brain Capital technology and investment will advance neuroscience and bring high-value, durable benefits to our global community. That’s why we invite you to consider this Brain Capital framework as you innovate, invest, and tackle social challenges – because as Peter Drucker put it, the best way to predict the future is to create it. i ABOUT THE AUTHORS Antonella Santuccione Chadha MD is a medical doctor with expertise in clinical pathology, neuroscience and psychiatric disorders. She is head of stakeholder engagement for Alzheimer’s disease at Biogen until end of April 2022. In May, she will be appointed as the chief medical officer at Rejuveron, a company focused to identify and support scientific discoveries in the field of ageing. In 2016 she co-founded the non-profit organisation “Women’s Brain Project” which is addressing the influence of sex and gender on mental and brain diseases. Since then, she acts the pro bono CEO of the organisation. Harris Eyre MD, PhD is co-lead of the OECDPRODEO Institute Neuroscience-inspired Policy Initiative (NIPI). He is Senior Fellow for Brain Capital with the Meadows Mental Health Policy Institute. He is an Instructor for Brain Capital with the Global Brain Health Institute (GBHI) at the University of California at San Francisco and Trinity College Dublin. Paweł Świeboda is Director General of the Human Brain Project and CEO of EBRAINS AISBL. In this capacity, he manages one of the largest global research programmes in the area of brain science. He is also in charge of building a Research Infrastructure EBRAINS for the study of the brain. In his previous role, he was Deputy Head and Head of Research at the European Political Strategy Centre (formerly EPSC, now IDEA) of the European Commission. CFI.co | Capital Finance International

Author: Antonella Santuccione Chadha

Author: Harris Eyre

Author: Paweł Świeboda

181

> Jim O’Neill:

Will Sanctioning Russia Upend the Monetary System? The savage fighting in Ukraine has led many to wonder whether Russian President Vladimir Putin’s supposed strategic brilliance is all that it was chalked up to be. Though Putin anticipated that NATO wouldn’t respond militarily to his war, he seems to have underestimated the West’s capacity for solidarity. The United States and its allies and partners have already implemented unprecedently severe economic and financial sanctions against Putin’s regime, and the decision to block Russia’s central bank from international financial markets (effectively freezing the country’s foreign-exchange reserves) is arguably a masterstroke.

rue, Russia has diversified its reserves away from the dollar in recent years. But judging by the scale of the international response and its immediate impact on the Russian economy, this strategy appears to have been insufficient to maintain access to the financing it needs. Even Switzerland has announced that it will participate in the new sanctions regime by freezing Russian assets. Unless Russia has considerable reserves held in Chinese renminbi or currencies issued by other countries that still support it, the squeeze on its economy will be unavoidable.

Final Thought

Whatever Russia’s response, the question now is what these moves by the West – and by almost all the world’s financial centers – will mean for future monetary affairs and the international monetary system. Are we witnessing a further consolidation of US power through the dollar-dominated system, or will this episode set the stage for the kind of monetary and financial fragmentation that some analysts have long anticipated? Having written about the future of the dollar myself, I cannot recall a previous policy announcement that raised the global monetary stakes as much as this one has. The immediate effect of the Russia sanctions has been to highlight the US’ continued dominance. But it also may force many emerging economies to reconsider the textbook approach to building up foreign-exchange reserves to protect against economic crises. The need for such selfinsurance was the big lesson from the 199798 Asian financial crisis. But now that Russia’s central bank has lost the ability to convert its foreign currencies into rubles, the strategy would appear to come with some new risks.

"Are we witnessing a further consolidation of US power through the dollar-dominated system, or will this episode set the stage for the kind of monetary and financial fragmentation that some analysts have long anticipated?" This is particularly true for countries whose aspirations might run afoul of the Western democratic world’s prevailing norms – as threatening and then invading a smaller neighbor obviously does. It doesn’t take a deep thinker to appreciate that China must be alarmed and displeased by the audacity of both Russia’s war and the Western reaction to it. If China were to pursue military action against Taiwan, it, too, could expect to lose much of its access to the global financial system.

current system is to expand the role of special drawing rights, the International Monetary Fund’s reserve asset. This makes sense when one considers what internationalising the renminbi would entail. Because China would need to allow much greater freedom in the offshore use of its currency, it would have to give up its ability to maintain capital controls. So far, it has been unwilling to do this. Yet, without capital-account liberalisation, no other country – not even one as financially desperate as Russia – would want to hold its reserves in renminbi. Second, even if a major power like China were to respond to today’s changing circumstances by pursuing major financial reforms, it would still have to offer credible assurances regarding the safety and liquidity of reserves held outside Western currencies. Otherwise, why would anyone take the risk?

One can see why escaping this deep dependency on the Western-controlled currency system might now become a top priority for some countries. If renminbi, rubles, Indian rupees, and other currencies were more convertible for other countries, a fundamentally different international monetary system could emerge – one in which the kinds of sanctions being imposed on Russia would not be so effective. But this scenario remains unlikely, for two related reasons.

Again, China seems unlikely to pursue any reforms that would require radical changes to its own economic and regulatory model. If China did bite the bullet and open its financial system, structural changes in the global monetary order would almost certainly follow. But, even in that case, the changes would not happen in time to spare Russia the consequences of its president’s appalling behavior. i

First, there is a reason why China has not done more to elevate the renminbi as an international currency. At the many conferences on the global monetary order that I have attended, the message from Chinese scholars has long been clear: Their preferred method for improving the

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.

"China seems unlikely to pursue any reforms that would require radical changes to its own economic and regulatory model." 182

CFI.co | Capital Finance International

Spring 2022 Issue

CFI.co | Capital Finance International

183

The first of its kind

THE NEW MASERATI MC20 - A TRUE OBJECT OF DESIRE Discover more on maserati.ch

MC20: Fuel consumption (l/100 km): combined 11.5 - CO2 emissions (g/km): combined 261 - Efficiency class: G The stated energy values correspond to the WLTP standards. CO2 target value 118 g/km, average CO2 emissions 169 g/km.

CFI.co Spring 2022

Articles inside

Final Thought