CFI.co Summer 2020 by CFI.co

Capital Finance International

Summer 2020

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AS WORLD ECONOMIES CONVERGE

Rishi Sunak, Chancellor of the Exchequer:

RECOVERY

ALSO IN THIS ISSUE // IMF: EUROPE AND THE GLOBAL RECOVERY IN 2021 // UNCTAD: COVID-19 & GLOBAL INVESTMENT OECD: VISION FOR LATIN AMERICA // INTERVIEW WITH WORLD BANK VICE PRESIDENT FOR EUROPE AND CENTRAL ASIA ASIAN DEVELOPMENT BANK: URBAN TRANSPORT // HARVARD BUSINESS SCHOOL: HUMILITY AND PROSPERITY

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First Thoughts Our sympathy goes out for those lives taken or put in jeopardy during the coronavirus crisis. We wonder, as summer moves towards a “new normal”, whether de-escalation may result in more pain later — but we appreciate the need to protect and rebuild economies. Many governments have reacted positively to the financial burdens of fighting an enemy we do not fully understand. In this issue, we focus on the UK chancellor’s robust early response to Covid-19 and his consistently strong fiscal leadership. We are aware that many UK companies are more likely to survive and prosper because of that support. We also know that a tough job lies ahead. Economic recovery will not be sustainable unless we pay close attention to the UN Social Development Goals (SDGs). The achievement of these goals is not only a moral imperative, it is the road to economic recovery. The business case for the SDGs is overwhelming, with commercial opportunities estimated at $12tn each year. Companies that do not take the SDGs into account are likely to fail, and perhaps rightly so.

First Thoughts

Equality is at the heart of the SDGs, but sadly, it took the murder of George Floyd to concentrate our minds on the evils of systemic racism. This is unacceptable in our social, economic, and political landscape, and should be removed without further delay. Congratulations to recent graduate Kennedy Mitchum, who persuaded Merriam-Webster to expand its dictionary definition of racism to take the “systemic” qualifier into account.

Google’s Ginny Clarke, an expert on diversity recruitment, talks with Nicholas Pearce of Kellogg School of Management (inside pages). She tells of the great disparities in the way people of colour experience their workplaces. The article characterises racism as COVID 1619 (in reference to the year that 20 African slaves were transported to the British colony of Virginia). The disease of racism has been untamed for over 400 years and, we ask, where is the vaccine? Business leaders considering a meaningful response to the injustices inflicted on black communities — injustices which hold back all of us — should consider the advice given by Clarke and Pearce. Future generations are likely to look with distaste at this period of our history, unless we can clean up our act, fast. How is it that a privileged few can lord it over great swathes of humanity, when ultimately this is in no one’s best interest? How can we accept discrimination based on skin colour when this is not only hateful and absurd, but limits our chances of success as a society by ignoring so much talent? Six-year-old Gianna Floyd, sitting on the shoulders of former NBA player Stephen Jackson, proclaimed: “Daddy changed the world”. At that time, she was unaware of the circumstances of her father’s death but she had heard people chanting his name. Knowing about that unspeakable crime in Minneapolis — and what went before it — we should each play our part to ensure that Gianna never comes to doubt the claim that she made.

First Thoughts

> Correspondence

“ “

PWC’s 2018 report on the contribution of the indigenous business sector to the Australian economy points out that, despite discrimination and other difficulties hampering meaningful participation, Aboriginal business has grown significantly during recent years. Further, the consulting firm maintains that the development of a robust indigenous economy is “essential for realising self-determining futures, facilitating sustainable and independent communities, and closing the gap”. We need to be flying the flag for indigenous business — literally. I fully support Cheree Toka’s campaign to have the Aboriginal flag permanently displayed on Harbour Bridge. It’s about time this was agreed, and worrying that it is still being debated. MARY ROSE (Sydney, Australia)

What a pleasure to see a human face put to the Crown Prince of Dubai, Hamdan bin Mohammed bin Rashid Al Maktoum, in your spring issue. Labouring under such an unwieldy name, it is understandably hard for the man to be more than a foreign princeling for those of us in the West – especially as he tends to have “walk-on parts” in dry and drab news reports, with little reference to him other than as a billionaire playboy. Kudos to CFI.co, then, for giving us a more dynamic profile of the man I am pleased to call by his nifty, two-syllable nickname: Fazza it shall be. No disrespect, here; this is not akin to referring to Queen Elizabeth II as “the old baked bean”. It’s a snappy moniker for a man with a dashing and exotic lifestyle, with falconry, wildlife photography and equestrianism in the “hobbies” column. It’s also one he seems to be at ease with, as it is widely used on his Instagram account. Titles can cause an unnecessary distance between people and personage, and they can be misleading. A touch of humility on the part of royalty is always to be welcomed in a divisive and divided world, and does nothing to diminish grace or social standing. GERRY MASON (Swansea, UK)

In the wake of the George Floyd murder, it’s good to hear that our city is considering budget cuts of $250m to allow investment in jobs, services and healing for the black community and

Summer 2020 Issue

others that have been left behind. A wry smile is permitted on hearing that the police budget is likely to take the biggest hit (upwards of $125m) but our quarrel is only with the bad cops – who must be rooted out of public service. My friends in the LAPD are as outraged over these crimes as anyone, but none of us should be ashamed of being American. We should be ashamed of the bad apples in our barrel, and do something about it. We are rightly being criticised for allowing inequalities in our society to remain, and must no longer expect patience from African Americans. None of us should be patient now. ELIZABETH BERGSON (Los Angeles, United States)

“ “

Your astute columnist, Tor Svensson, adds a welcome, and slightly left-field, observation to the spring issue by recognising the value and potential of the city of Manchester, as well as its heritage as northern go-getter. The resilience of the city, its people and its business community frequently goes unsung – something those of us in the north of England have become inured to over the years – but at last the statistics seem to stack in our favour and merit some prominent column inches. To read that Manchester edges out London – and major EU cities including Zurich, Paris and Copenhagen – as the Best Business City in Europe is more than heartening. It verges on the unbelievable for some. Overjoyed though I was to see recognition for its innovation-centred growth businesses and its worth as “an investment city”, I immediately began to wonder whether these appraisals will do anything to improve domestic perceptions of Manchester’s status. Not to bang too loudly on the gong, but it’s time for government, investors and entrepreneurs to cast an eye to the north and show some faith in the city’s burgeoning reputation. JAMES DONNELLY (Sale, UK)

Without UK government support, the business I have been building over the past 12 years would have gone to the wall during the early stages of lockdown. The job retention scheme, VAT deferral, low-risk loans and grants were promptly announced and have proven easy to access. By furloughing most of our staff (which was unavoidable), we have been able to work on a digital business strategy that is already showing promise. I expect to bring all our people back onto payroll during the latter part of the year. In contrast, my business contacts in southern Europe are not faring so well, sometimes feeling they are being attacked and likely to be vulnerable for some time. Although I was a passionate Remain supporter up to the referendum, I soon became reconciled to Brexit. Frankly, my positioning is hardening. The EU-UK talks this year have made little progress, but there seems now to be a German-inspired resolve to seal a deal in October. I hope this happens, but whether it does or not we should not look for an extension. We can take care of ourselves whether we have a deal or not. HAROLD GRIFFITHS (Maidstone, UK)

> Editorial Team

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

Columnists

Otaviano Canuto Evan Harvey Tor Svensson Lord Waverley Ian Fletcher

Distribution Manager William Adam

Subscriptions Maggie Arts

Commercial Director John Mann

COVER STORIES Kristalina Georgieva Managing Director of the IMF Europe and the Global Recovery in 2021 (16 – 17)

World Bank Vice President for Europe and Central Asia Interview with Anna Bjerde (20 – 21)

UNCTAD COVID-19 & Global Investment (24 – 25)

Cover Story The Safest Pair of Hands for Mission Impossible (34 – 39)

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 p22-23, 28-29, 158-159, 194-195, 198 © Project Syndicate 2020

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

OECD

DISCUSSION PAPER

A New Development Vision for Latin America (158 – 159)

Harvard Business School Accounting as a Force for Humility and Prosperity (178 – 179)

Asian Development Bank Urban Transport Can Rebuild to Create a Greener Future (196 – 197)

INSTITUTIONAL CFI.co | Capital Finance International

Summer 2020 Issue

FULL CONTENTS 14 – 39

As World Economies Converge

Kristalina Georgieva IMF Otaviano Canuto Anna Bjerde Lord Waverley Nouriel Roubini UNCTAD James Zhan David Cameron Ellen Johnson Sirleaf 40 – 47 Summer 2020 Special: Women in Fintech

48 – 91

Europe

Matt Christensen Stamen Yanev TRUMPF Ralph Hamers CANPACK Group Exim Bank Sergio Ermotti

Naomi Snelling Tor Svensson Brunello Rosa Anshula Kant Donald P Kaberuka

and Venture Capital

BAWAG Group InvestBulgaria Agency (IBA) Rubrics Asset Management Snap-It App C2FO Graham Bright European Investment Bank

92 – 111

CFI.co Awards

Rewarding Global Excellence

112 – 133

Africa

World Bank Zainab Usman Bank One Ltd Convergence PwC Africa

134 – 147

Middle East

Tony Lennox BlueRock CORDET Antonella Santuccione Chadha Nanopool Jabra Andrew McDowell

Christian Bodewig Ugo Gentilini Penny Williams EQDOM KwaZulu-Natal Joint Municipal Pension/Provident Funds Ladé A Araba Absa Bank Seychelles Dion Shango

Fidelity United Gulf Insurance Group-Kuwait Abu Dhabi Global Market Richard Teng KelloggInsight

148 – 159

Latin America

EY Aby Lijtszain Mario Pezzini

160 – 179

North America

Sergio Caveggia Traxion Sebastián Nieto Parra

Pavilion Global Markets Ltd. Bermuda Stock Exchange (BSX) Roland Andy Burrows Paul Scope Stephen Weinstein Éliane Ubalijoro Harvard Business School Impact-Weighted Accounts 180 – 197 Asia Pacific Royal Brunei UBX Jason Agnew Andrés Velasco Bambang Susantono Mohamed A El-Erian 198 Final Thought

CFI.co | Capital Finance International

Jimena Rocío García Development Bank of Minas Gerais (BDMG) Juan Vázquez Zamora

GoldenTree Bermuda Business Development Agency Christian Novak Robert Zochowski

Yelo Asian Development Bank

> Cometh

the Hour, Cometh the Woman — and Here Are Both By Naomi Snelling

“A global crisis like no other needs a global response like no other” — the world spotlight is on Kristalina Georgieva, managing director of the International Monetary Fund.

ideo call with 189 countries anyone? The world’s Lender of Last Resort has never been more in demand.

Bulgarian economist and former CEO of the World Bank, Kristalina Georgieva, took the helm at the IMF in September 2019. She now finds herself in one of the hottest seats in the world’s biggest financial crisis since the Great Depression of the 1930s. Georgieva is responsible for making policy and taking actions that — for better, for worse; for richer, for poorer — will affect everyone in the world. And with developing countries desperate for urgent help, she has had to make those decisions fast. Her swift escalation of the IMF’s lending budget has been a lifeline to those countries under organisation’s umbrella, especially those she terms “low-income members”.

"If there is one lesson from this crisis, it’s that our society is only as strong as its weakest member. This should be our compass to a more resilient postpandemic world." Kristalina Georgieva support, countries, businesses and institutions need to use the Great Pause as a watershed moment to a more climate-friendly mindset and way of life.

Georgieva’s response so far reads like a textbook tick-box of excellence in crisis handling. At the outset, she clearly outlined the scale and impact of the pandemic, and the measures being taken to buffer against it. Acknowledging the need for early decisive action, she doubled the IMF’s emergency, rapid-disbursement capacity to meet expected demand of some $100bn. She described the IMF’s fiscal response measures as the means to get “immediate, here and now” support to countries and people in desperate need. In April, Georgieva said that “103 countries have approached us for emergency financing, and our executive board will have considered about half of these requests by the end of the month”. She also announced the swift reformation of the IMF’s Catastrophe Containment and Relief Trust, “to help 29 of our poorest and most vulnerable members through rapid debt-service relief”, and gave details on on-going work with donors to increase IMF debt-relief resources by $1.4bn.

Opportunities and mobility: Education and access to financial services and technology are key factors of intergenerational mobility. (change in persistence/change in elasticity).

Source: IMF Staff estimates. Note: Bars represent associations between a 1-standard deviation increase in each variable and education

Georgieva has also made it clear that a twopronged recovery is needed: along with fiscal 14

persistence (purple) and income elasticity (orange). Negative values reflect an increase in intergenerational mobility. Solid bars denote significance at 1 and 5 percent levels; shaded pars at 10 percent. Hollow bars are not significant.

CFI.co | Capital Finance International

Summer 2020 Issue

Addressing the Petersberg Climate Dialogue XI on April 29, she said: “If this recovery is to be sustainable — if our world is to become more resilient — we must do everything in our power to promote a green recovery.” In between co-ordinating global financial measures, Georgieva did find time to wade in with the unprompted suggestion that the UK should extend its Brexit transition deadline. That ruffled a few feathers, but the UK’s categorical refusal of any extension means that Britain will officially conclude the transition – with or without a deal – on December 31, 2020. Her hope for more economic stability for the European bloc is hardly surprising; she has, after all, been named European of the Year and Commissioner of the Year (2010) by European Voice for her leadership in the EU’s humanitarian response to crises.

It could almost be said that Georgieva’s tenacity, attitude and experience in top roles at the World Bank and the EU have destined her for this defining moment. Right now, there are several hands on the Great Reset button, but Georgieva is the ER doctor holding the defibrillator and calling, “stand clear” as the IMF pumps liquidity into national economic ecosystems. An example of Georgieva’s inspirational quotes is this tweet: “If there is one lesson from this crisis, it’s that our society is only as strong as its weakest member. This should be our compass to a more resilient post-pandemic world.” In her blog, she wrote: “This is a moment that tests our humanity. It must be met with solidarity. There is much uncertainty about the shape of our future. But we can also embrace this crisis as an opportunity to craft a different and better future together.” CFI.co | Capital Finance International

Georgieva has handled the global financial crisis exceptionally well, but for her leadership to go down in history she needs to heed calls for the IMF to act as decisively on fraud and corruption as it has on the challenges presented by the pandemic. Perhaps it’s time for an emergency track-andtrace for corruption, international fraud and money laundering: a quarantine for those who have stolen money from developing economies, and a renewed drive to eliminate tax havens. i

Author: Namoi Snellings

> Kristalina Georgieva, Managing Director of the IMF:

Europe and the Global Recovery in 2021

We are at a point in our history where it is paramount to concentrate on what this crisis entails, what are the risks and opportunities a recovery will present to us, and how to bring the world together. These will be the three points on which I will concentrate.

et me start with the crisis. We labelled it a crisis like no other, for multiple reasons. First, because it is truly global, and we have not had a global crisis like this before. By the end of 2020, 170 countries will have lower per capita incomes than at the beginning of the year—when as recently as January we projected positive growth for 160 countries. This a stunning reversal of fortunes. Second, the nature of the crisis means it is hitting the service sector especially hard, rather than a larger hit to manufacturing as often experienced. This time, what we see is a dramatic blow to tourism, hospitality, and travel. What it means is that we have had unemployment at the somewhat lower-skilled end of the spectrum, with the likelihood for elevated joblessness for these workers for quite some time. Third, it is unique also in terms of the enormity of the response. And I want to praise you for that—praise Italy and all the countries that in a short time vastly increased fiscal measures: 10 trillion dollars up to now, with one third of this coming from the European Union. And there has been a massive injection of liquidity and easing of conditions by major central banks, again, with the European Central Bank forcefully doing its job. Why is this important? Because, as the economists among us remember, the definition of depression is a significant reduction in output, lasting several years. Now, with these exceptional measures, we have put a floor under the world economy, and therefore, we are reducing dramatically the risks of scarring and the longevity of this crisis. Policy actions have also had some positive spill over effects for emerging markets. In March,

"Together, the whole world—including the EU and the IMF—faces a clear question. How will history judge our response to this crisis?" emerging markets were basically shut out of access to bond issuance, creating tremendous concern about a potentially severe impact. In April and May, however, because of the scale of measures taken, primarily by advanced economies, but also by many emerging markets economies, the enormous injection of liquidity meant that emerging markets with good fundamentals could return and issue bonds. These critical financial lifelines can help countries stabilize at a time when economies are at a standstill. It is especially important to recognize that there are categories of countries that are in a very dire place. These are emerging markets with weak fundamentals and high debt levels, and lowincome and fragile countries. And this is where the attention of the IMF is now concentrated. In a short time, in six weeks, we have provided financial support to 68 countries that are desperately in need of buffers against the crisis. Never in the history of the IMF have we done so much in such a short period of time. And as you mentioned, we have also taken action to provide debt relief to our poorest members, as well as the so-called G20 debt service suspension initiative, which is intended to help provide space to respond to the crisis for 73 vulnerable countries.

How should we think about the recovery? We know that we ought to pay attention to how we use the enormous injection of stimulus so that we give the economy a chance to recover and grow. And here is an unusual message to the membership from the IMF Managing Director: please spend as much as you need. But spend carefully and keep your receipts: we do not want accountability to be lost. And we must be careful not to withdraw the stimulus too fast if we want to ensure the recovery maintains momentum. We know that digital is a big winner in this crisis—and some experts say the pandemic has accelerated the digital transformation by two or three years. This gives us a chance to build on this transformation for the future. We know we are in a more risk-prone environment. As one critical example, climate change is real. We may have put it on the back burner during this crisis, but it is still with us. I tell everyone—if you do not like the pandemic, you are not going to like the climate crisis when it comes. So, there is action to take towards a greener economy. And we know there are ways in which we must address inequality. This was done well after the Second World War, and after this current crisis we must renew our commitment in a similar way. Together, the whole world—including the EU and the IMF—faces a clear question. How will history judge our response to this crisis? Will history say we presided over the great reversal that brought more poverty, more fragmentation, and less trade?

"Europe must take this chance and help European businesses to stay alongside their peers in the digital space—because if this moment is missed, Europe will miss out on future growth opportunities." 16

CFI.co | Capital Finance International

Summer 2020 Issue

Or will history say we marshalled a great reset, and a great renewal on a massive scale? Here, the European Union has championed a strong sense of solidarity and a strong sense that the recovery is coming. As a former budget commissioner, I believe this is a key moment when the European dream is becoming reality because Europe is standing together to put forward a fiscal support package of the magnitude required to help countries cope with the pandemic and its economic fallout. This is money that Europe will get from markets based on its strength, and that it will distribute to member states on the basis of their needs. And I want to say clearly – it is not just about the money. It is a chance for Europe to restart its convergence engine, which has been stalling since the global financial crisis. It is a chance for Europe to exercise leadership. And it is a chance not to be missed. So how do I envisage the recovery for Europe? First, I see that Europe must take a very bold step to overcome the gap that has grown in digital. European citizens and businesses have been falling behind and this cannot continue. We know what Europe needs to do—it needs to invest in digital skills and infrastructure, to adopt a ‘digital first’ attitude in everything, including digital government as has been done in Estonia. Europe must take this chance and help European businesses to stay alongside their peers in the digital space—because if this moment is missed, Europe will miss out on future growth opportunities. Secondly, it is a unique chance for Europe to continue its pre-pandemic path towards lowcarbon, climate-resilient growth. This can foster job rich growth. We will have lots of low-skilled workers in need of jobs, so we must invest in labourintensive programs that are also green—such as reforestation, insulating buildings, and urban renewal. These can help absorb part of the labour surplus. These investments would also help us build the businesses of tomorrow. I have been asked—why shouldn’t countries go back to the dirty industries of the pre-pandemic era? My answer is that we should not rebuild the economy of yesterday when we can build the economy of tomorrow. Third, Europe has been backpedalling in terms of inequality and poverty eradication After the Global Financial Crisis, the world strengthened the resilience of the banking

Managing Director of the International Monetary Fund: Kristalina Georgieva

system in such a way that it is much better positioned to withstand the current crisis. Today, we must strengthen the resilience of the people by investing in human capital or Europe will miss a great opportunity. One of the most dramatic reversals in European history has been how Europe started slipping back in education. Investing in education does not bring immediate benefits. But without radical reform and investment in education systems, no country can CFI.co | Capital Finance International

hope to compete effectively in the economy of tomorrow. i

Source: Excerpts of remarks by IMF Managing Director Kristalina Georgieva to Italy’s National Consultation on June 13, 2020: “Italy, Europe and the Global Recovery in 2021”. See URL link: https://www.imf.org/en/News/ Articles/2020/06/13/sp061320-Italy-Europeand-the-Global-Recovery-in-2021 Edited by CFI.co’s Tor Svensson 17

> Otaviano Canuto:

Coronavirus, Crude Oil Woes, and Perfect Storm for Some Economies In a previous article, we highlighted how developing economies have faced simultaneous shocks from their external environment, as pandemic and recession curves have unfolded abroad.

n addition to financial shocks, there have been declines in remittances, tourism receipts, and commodity prices. The combination of these shocks with the hardships related to flattening domestic infection curves has configured what we have called a perfect storm for developing countries, brought by COVID-19. Recent World Bank and United Nations World Tourism Organisation reports have given us a view of how serious these shocks have been. We assess here the falls in remittances, tourism receipts, and commodity prices, particularly in oil markets. REMITTANCES, FOREIGN CAPITAL AND AID FLOWS On April 22, the World Bank published its Migration and Development Brief 32. The World Bank estimates that in 2019 there were 272m international migrants — including 26m refugees.

Chart 1: Remittances, foreign capital and aid flows. Source: World Bank, Migration and Development Brief 32, April 2020

CFI.co Columnist

Foreign workers are often the first to lose their jobs in times of crisis, and remittance flows around the world sent by migrants to their home countries are forecast to shrink by more than $100bn this year. The global economic lockdown, which has provoked steep job losses across the world, is expected to lead to a 20 percent decline in remittance flows to low- and middle-income nations. That equals a fall from a record $554bn last year to $445bn in 2020. Last year, remittances amounted to about 8.9 percent of GDP in poorer countries. For the first time, they overtook foreign direct investment (FDI) as a source of money inflows to low- and middle-income countries (Chart 1). FDI is expected to decline by even more than remittances, reflecting local recessions and disruption of international trade. The World Bank report estimates that FDI into low- and middle-income countries could fall by more than 35 percent. Private portfolio flows through stock and bond markets could shrink by over 80 percent, while official development assistance (ODA) will maintain its steady evolution. 18

Chart 2: International tourism receipts, world (real change, %). Source: UNWTO (e) estimate

Among remittance-dependent countries, vulnerable to the ongoing decline, there are fragile states including Somalia, Haiti, and South Sudan, as well as small island nations such as Tonga, with remittances accounting for more than a third of GDP in some countries. Larger countries, including India, Pakistan, Egypt, Nigeria, Mexico, and the Philippines, will also be hit because remittances have become a major source of external financing for them. Migrant remittances are a fundamental source of income of poor households in many countries CFI.co | Capital Finance International

and the drop in flows this year will increase poverty. Remittances to Europe and central Asia are expected to fall most, crashing about 28 percent this year, while remittances to subSaharan Africa are forecast to diminish 23.1 percent. All regions will face steep declines. INTERNATIONAL TOURISM RECEIPTS On March 26, the United Nations World Tourism Organisation (UNWTO, 2020) announced estimates of decline of 20 to 30 percent in 2020 of international tourist arrivals, compared to 2019 figures. This would translate into a loss

Summer 2020 Issue

All crude oil benchmarks have seen sharp falls, with some briefly dropping to negative levels—as we saw on April 20, the day buyers were paid to accept oil! New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) crude oil front-month futures prices fell below zero — at one point, trading at minus $40.32 per barrel — and remained there for part of the following trading day. It was the first time the price for the WTI futures contract fell below zero since trading began in 1983 (Chart 4, obtained from Richter, 2020).

Chart 3: Current drop in oil demand outpaces previous global recessions.

Source: World Bank, Commodity Market Outlook, April 2020. Data for 2020 is based on IEA estimates.

Chart 4: The day you were paid to buy oil. May 2020 West Texas Intermediate futures contract.

Source: U.S. Energy Information Administration based on data fromCME Group and Bloomberg, L.P.

of international tourism receipts of between $300bn to $450bn, almost one third of the $1.5tn generated in 2019 (Chart 2). According to World Bank data, low- and middle-income countries recorded over $420bn of international tourism receipts as exports last year and will be heavily affected by the decline in 2020. COMMODITY PRICES The World Bank’s April Commodity Markets Outlook pictured how the global economic shock of the pandemic has driven most commodity prices down, and is expected to result in substantially lower prices over 2020. Because of the halt in economic activities, the world’s commodity markets are likely to continue to be downbeat for months to come. Commoditydependent emerging market and developing economies will be among the most vulnerable to the economic impacts of the pandemic.

Most food commodity prices have declined in response to mitigation measures to contain the spread of COVID-19, even though part of that price decline can be attributed to the previous record production for some grains, and favorable weather conditions in key producing regions. Rice prices are the only major exception, as they rose after announcements of export restrictions by some East Asian producers. The greatest impact of the outbreak of COVID-19 has been on the crude oil market, as two-thirds of oil is used for transport. According to the World Bank report, because of travel restrictions and declining demand, crude oil demand is expected to be almost 10 percent lower this year than in 2019. That will be more than twice as much as any previous fall (Chart 3). Crude oil prices are forecast to average $35 a barrel in 2020, reflecting the unprecedented collapse in oil demand. Brent crude oil prices have declined 70 percent from their January peak. The large production cut by OPEC and other oil producers failed to lift prices in April. Natural rubber and platinum are also heavily used by the transportation industry, and their prices have tumbled. CFI.co | Capital Finance International

The inability of some market participants to take physical delivery meant they had to settle the May 2020 WTI contract financially by selling the contract to another market participant. As a result, owners of the May 2020 WTI futures contract most likely had to sell at lower prices to exit their contracts and avoid physical settlement obligations. In this extreme market situation, several participants had to sell at negative prices — that is, pay the other party to take over the contract before expiration. That was obviously an extraordinary and temporary state of things, but it was an omen regarding how bad the picture remains in oil markets. BOTTOM LINE Given the magnitude of the multiple negative shocks that COVID-19 has brought to developing countries, including domestic coronavirus infection and recession curves, international support will be needed as developing country governments see their revenues drop, their access to financial markets dry up, and remittancedependent poor households are impacted. i

* This article first appeared at the Policy Center for the New South. ABOUT THE AUTHOR Otaviano Canuto, based in Washington DC, is a senior fellow at the Policy Center for the New South, a non-resident senior fellow at Brookings Institution, and principal of the Centre for Macroeconomics and Development. He is a former vicepresident and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vicepresident 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. 19

CFI.co Columnist

Energy is most affected, agriculture least. Most metal prices fell in the first quarter of 2020, reflecting the collapse in global industrial demand because of the COVID-19 pandemic. Although average declines in metals prices are — for now, at least — less severe than in the global financial crisis, the sudden economic stops have taken a toll on industrial commodities such as copper and zinc, and metal prices overall are expected to fall this year. The deceleration of economic growth in China — which accounts for

half of global metal demand — has weighed on industrial metal prices.

The WTI front-month futures contract was for May 2020 delivery, and contracts were set to expire on April 21, 2020. Market participants that hold WTI futures contracts to expiration must take physical delivery of the crude oil in Cushing, Oklahoma. As a result of the extreme demand shock, excess imported and domestically-produced crude oil has been placed into storage. The increased demand for storage has placed significant upward pressure on crudeoil storage costs.

> World Bank Vice President for Europe and Central Asia:

Interview with Anna Bjerde

Exclusive interview by Tor Svensson

CONGRATULATIONS WITH YOUR MAYDAY PROMOTION AS WORLD BANK VICE PRESIDENT FOR EUROPE AND CENTRAL ASIA. ARE YOU EXCITED TO LEAD THE WORLD BANK’S STRATEGIC, ANALYTICAL, OPERATIONAL AND KNOWLEDGE WORK IN THE REGION? Thank you! I am delighted to be returning to a region that I have spent a significant part of my World Bank career working on—notwithstanding the unprecedented and painful period that the world currently finds itself in. This is the fourth time I have worked in the Europe and Central Asia region. I first worked here in the early 1990s, then again in the late 1990s, and again about five years ago. It’s a region that is very, very close to my heart. In this role I am working very closely with governments in the region, as well as partners, to help our clients achieve strong development outcomes, with an immediate focus on addressing the health, social and economic impacts of the COVID-19 pandemic. WHAT IS THE WORLD BANK DOING IN ECA IN RESPONSE TO THE COVID-19 PANDEMIC? The COVID-19 pandemic has left many countries battling severe health, social and economic impacts. We have seen a huge upsurge in demand for our support in the region. In the short-term, we are providing fast-track financing and policy tools to help protect people’s lives and livelihoods. In some cases, we have also restructured existing projects to quickly redirect financial resources to help countries mitigate this crisis. This has already benefited the Kyrgyz Republic, Tajikistan, Bosnia and Herzegovina, Moldova, Uzbekistan, Turkey, Georgia, and North Macedonia, and we are currently preparing support to several other countries in the region. The fast-track financing is already paying for medical equipment, including test kits, respirators and ventilators, and strengthening the capacity of health systems, including training for health care workers. We have also focused on supporting social protection measures to protect the most vulnerable people, including those who have lost livelihoods and jobs. Going forward, we will continue to provide support to vulnerable groups affected by the economic impacts of the crisis, as well as assisting governments in the design and implementation of appropriate policy measures for economic recovery, ensuring our complete arsenal of financial resources, knowledge and policy expertise is used for maximum impact and strong country outcomes. WHAT PERSONAL EXPERIENCE AND PERSPECTIVE DO YOU BRING TO THIS CHALLENGE? Over a decade ago, as a technical specialist with the World Bank, I worked with clients as 20

"The goal is to preserve financial stability, ensure financial integrity and broader access to finance, improve financial infrastructure, and enable better access to finance for businesses and households." the Financial Crisis was unravelling growth and prosperity around the world. That crisis spurred a significant increase in the World Bank’s assistance to countries, at both low and middleincome levels, and saw an overall increase in our support to countries. With the COVID-19 pandemic, we are looking at a much more complex crisis, comprising both demand and supply shocks: what began as a health crisis has quickly become an economic and financial crisis. In my experience, it is important to focus on helping countries as they come under severe fiscal pressures, while also ensuring targeted support to people and households vulnerable to losing their livelihoods, access to health, education and basic services. YOU HAVE WORKED IN LEADERSHIP POSITIONS ALL OVER THE WORLD. WHAT ARE SOME OF THE SIMILARITIES AND DIFFERENCES BETWEEN GEOGRAPHIES WHEN IT COMES TO ECONOMIC AND SUSTAINABLE DEVELOPMENT YOU CAN POINT TO? In the Middle East and North Africa region, where I worked previously, almost half the total population is under 24 years of age. By contrast, the Europe and Central Asia region has a significant aging population. This means different labor market policies, social protection schemes, and education and building of skills. But there are also many similar challenges across geographies. For example, the need to improve the business and regulatory environment for greater private sector investments and FDI, as well as the need to manage natural resources sustainably. I am especially concerned, however, about the deterioration in learning globally. The World Bank launched a Learning Poverty indicator last year that showed half of ten-year old children around the world can’t read and comprehend a relatively simple story. Many social and economic challenges transcend geographical boundaries. HOW CAN YOU HELP PUSH FOR INCLUSIVE GROWTH IN YOUR NEW REGION? This year – for the first time in over two decades – the extreme poverty rate will rise, reversing a trend that has lifted nearly a half billion people out of extreme poverty since 2010. Growth and CFI.co | Capital Finance International

poverty projections are now highly volatile and differ greatly across countries. Although we expect poverty rates to start to decrease again in 2021, recovery to pre-crisis levels might take longer. In addition to the World Bank Group’s rapid emergency response to save lives, our efforts are focused on helping client countries revive their economies. We remain committed to supporting reforms across the region and staying the course on critical issues such as developing human capital, addressing gender issues, promoting good governance and debt sustainability, and combatting climate change. WHAT AREAS OF EUROPE AND CENTRAL ASIA WILL YOU SUPPORT WITH WORLD BANK FINANCE AND WHAT INDUSTRY SECTORS DO YOU WORK IN? We work with over 20 client countries in the Europe and Central Asia region. Our support is broad, yet also prioritizes countries’ main development goals. For example, we are actively engaged in promoting human development, including health and education, building more responsible institutions, increasing private investment, improving service delivery, upgrading critical infrastructure, protecting the environment, and empowering marginalized groups. In addition to financing, the World Bank also provides technical assistance based on our global experience and facilitates sharing of knowledge and best practices among countries. WHAT ARE YOU DOING TO SUPPORT THE BANKING SECTOR? We are supporting client countries in implementing reforms focused on financial sector development. The goal is to preserve financial stability, ensure financial integrity and broader access to finance, improve financial infrastructure, and enable better access to finance for businesses and households. We are also supporting reforms in regulation and supervision, crisis management, recovery and resolution, and financial integrity. Our support to financial sector development has increased significantly to help countries with their COVID-19 crisis response.

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COULD YOU GIVE SOME EXAMPLES OF DISRUPTIVE AND INNOVATIVE TECHNOLOGY WHICH CAN CONTRIBUTE TO SOCIO-ECONOMIC DEVELOPMENT AND LEAP FROGGING? Disruptive technologies are unlocking innovative solutions to a myriad of complex development challenges. In Europe and Central Asia, Estonia has become a digital powerhouse and was one of the first countries to adopt a national Artificial Intelligence (AI) strategy. Blockchain technologies are also widespread in ECA. Estonia, Georgia, and Ukraine have experimented with blockchain to set up land and real estate registries. In the battle against COVID-19, digital technologies are keeping businesses, governments and schools connected. In Turkey, for example, we are helping the government provide safe schooling through distance education to around 18 million students during the pandemic. In Kosovo, the government is investing in training youth to work online. And in Georgia, Moldova, and Armenia, we are helping governments define policies, regulations, and investment programs to close the broadband access gap, through innovative measures that crowd-in private investment. HOW CAN YOUR REGION RECOVER FROM THE PANDEMIC ECONOMIC OUTFALL? The COVID-19 pandemic is occurring at an already fragile time for the region. Our recent regional economic update forecasts that growth could rebound in 2021, but the speed of recovery will depend on countries’ ability to contain the pandemic and implement policies to support economic recovery. As many countries in the region are closely integrated into global and regional value chains, and rely heavily on trade, tourism and remittances, much also depends on how soon the rest of the world opens back up and recovers. In the interim, support to the private sector is critical. As I mentioned earlier, SMEs could benefit significantly from targeted government subsidies, business credits, tax cuts, or tax payment deferrals.

World Bank Vice President, Europe and Central Asia: Anna Bjerde

WHAT ARE YOU DOING TO SUPPORT SME FINANCE? We know that limited access to finance for small and medium enterprises (SMEs) is a persistent constraint for business growth and competitiveness. Ensuring greater access to affordable finance for SMEs has become even more critical during the COVID-19 crisis. We are currently preparing emergency response projects in Croatia, Georgia, the Kyrgyz Republic, North Macedonia and Turkey, which will facilitate financing from domestic banks to viable businesses that face temporary liquidity constraints and or had to shut down to follow social distancing guidelines. Maintaining access to finance for SMEs is essential to reduce job losses, prevent firm closures and bankruptcies, and soften the impact of the COVID-19 crisis on economies.

HOW IS THE WORLD BANK INVESTING IN NEW ENERGY INFRASTRUCTURE? We are supporting client countries with both energy transition and energy security. A key priority is continuing reforms of energy utilities to enable efficiency and reliability in service delivery. We are also supporting the scale-up of renewable energy resources, as well as improving energy efficiency in buildings. In Ukraine, for instance, we have helped with the reform of the electricity and gas industries, and also the reform of energy subsidies, while ensuring that the poor and vulnerable are protected. In Uzbekistan, together with IFC, we are helping the government attract private investment in renewable energy as part of a broader reform of the energy sector. CFI.co | Capital Finance International

We are already seeing many countries take bold steps to arrest the spread of the virus and contain the economic fallout. The right policy decisions now can help minimize the human and economic costs of the pandemic and prepare for a faster recovery. Decisive policy measures that invest in health systems and provide safety nets for people, especially the most vulnerable, are absolutely critical. i ABOUT ANNA BJERDE Vice President, Europe and Central Asia, World Bank Anna Bjerde became World Bank Vice President for Europe and Central Asia on May 1st, 2020. In this position, Anna leads the World Bank’s strategic, analytical, operational and knowledge work in the region. Anna has over 25 years of experience working in development in Africa, the Middle East, Europe and Central Asia, Latin America and the Caribbean, East Asia, and South Asia. Anna is a recognized leader in economic development, with a specific interest in inclusive growth and sustainable development. 21

> Nouriel Roubini and Brunello Rosa:

Europe’s Non-Hamiltonian Muddle

his past week, the European Commission unveiled a plan to help European countries manage the Great Depression-scale shock from COVID-19. Building on a recent FrancoGerman proposal, the Commission is calling for a €750 billion ($834 billion) recovery fund (€500 billion of which would be distributed as grants, and €250 billion as loans). The money issued through this so-called “Next Generation EU” plan will flow through European Union programs, in order to achieve the Commission’s goals, including its green and digital economy agenda. The Commission will raise funds in the market by issuing long-term 22

bonds, and their efforts will be backed by a suggested increase in new taxes, such as those on greenhouse-gas emissions, digital services, and other areas of supranational commerce. Though we are among the few commentators who anticipated that the EU would offer a plan much larger than what most market participants and pundits expected, we also would advise European policymakers to remain realistic about what can be achieved at the moment. Celebrations of the EU’s long-awaited “Hamiltonian moment” of debt mutualisation are premature. As matters stand, the EU is still an incomplete transfer union in which resources (human, CFI.co | Capital Finance International

physical, financial) so far move from the periphery to the center – which is to say, to the United Kingdom or Germany. Ironically, one of these poles of attraction, the UK, has decided to leave the EU, ostensibly to end the flow of migrants into its economy. With Brexit, which officially occurred on January 31, the EU has already literally begun to disintegrate. Optimists believe that, with the UK out, a more cohesive EU can finally emerge. But this prediction seems too rosy. After all, the UK wasn’t so much a hurdle to integration as an excuse for other reluctant member states to avoid closer ties. For example, the UK hasn’t been the one blocking the European Deposit Insurance Scheme, which

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southern countries (including Italy, Spain, and Greece) remains so deep that it is frankly difficult to imagine any long-term solution being adopted. A recent ruling by Germany’s own constitutional court sent a powerful signal to European institutions about what to expect on the road ahead. Though the decision eventually will be overruled by the European Court of Justice and ignored by the European Central Bank, the ECB nonetheless faces political limits to its actions. Germany will either have to offer a partial EU fiscal backstop with its own taxpayers’ money or allow EU institutions to provide a sufficient mutual backstop (starting with the eurozone budget) for the entire monetary union. If the proposed EU recovery fund were capable of revitalising the eurozone budget – particularly its never-agreed stabilisation function – that by itself would represent a significant achievement. In signing on to a joint plan with France, Germany presumably realised that it could not simply say “nein” to both a monetary and a fiscal backstop (that is, the budding fiscal and transfer union). Both are needed for the euro to survive. But even with backstops in place, critical questions would remain unresolved, not least the sustainability of Italy’s surging public debt. Italy would have to make massive strides to restore growth and competitiveness now that its comparative advantage in tourism has been so severely compromised.

is needed to complete the eurozone banking union; that honor falls to Germany. With the rise of populist parties across Europe, it has long been clear that the next major crisis would constitute an existential threat to the EU. The EU now must demonstrate that it is up to the challenge of completing its integration process. Otherwise, it could confront a “Jeffersonian moment” that returns it to some form of confederation with only limited shared sovereignty.

proposal has its merits, Alexander Hamilton would be unsatisfied – and rightly so. For starters, the envisaged bond issuance would not come with a “joint and several guarantee,” and thus would not constitute genuine debt mutualisation. Financier George Soros’s proposal for EU perpetual bonds, or Consols, would alleviate this problem, but it would not solve it. And, in any case, if the funds do not become available by this summer, it may already be too late for hard-hit countries such as Italy, Greece, and Spain, which will be facing a dreadful tourist season on top of it all.

Facing the abyss, France and Germany have devised a plan to mitigate the pandemic’s devastating economic fallout. But while their

More to the point, the distrust between the EU’s “frugal four” (Austria, Denmark, the Netherlands, and Sweden) and the allegedly “profligate” CFI.co | Capital Finance International

Overall, although any common European approach to the COVID-19 crisis is a step in the right direction (and certainly better than no action), there is little reason to expect the EU to break from its long tradition of merely muddling through. If European leaders can prevent an immediate breakdown of the EU and euro projects, they at least will have averted the enormous economic, social, and political costs that would come from further rapid disintegration. But a net response that reflects the old inertia will leave Europe unequipped for the post-COVID world, where other major continental economies – the United States, China, and India – will make the most important geo-strategic and economic decisions. i ABOUT THE AUTHORS 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. Brunello Rosa, CEO and Head of Research at Rosa & Roubini Associates, is a visiting professor at Bocconi University. 23

> UNCTAD:

COVID-19 Has Hurt Global Investment but the Recovery Offers the Chance to Build a More Sustainable Economy By Dr James Zhan

he crisis caused by the COVID-19 pandemic has severely impacted investment and trade flows, but it arrives on top of existing challenges to the system of international production and trade. Flows of cross-border investment in physical productive assets stopped growing in the 2010s, the growth of trade slowed down, and GVC trade declined. The 2010s were only the quiet before the storm however. The new industrial revolution (robotics, digitisation, additive manufacturing), growing economic nationalism and the sustainability imperative are all shaping economic development as we move into the 2020s. The UNCTAD World Investment Report 2020 discusses these trends and proposes how actions aimed at recovery from the pandemic, both by governments and business, can help establish a more sustainable economy, especially in developing countries that have been hardest hit by the crisis. The COVID-19 pandemic has created not just a health crisis but an economic crisis, pushing the global economy into recession and millions of people into unemployment. But as governments and businesses look beyond the global lockdown, recovery from the pandemic presents opportunities, not least the chance to put sustainability, including human health, at the heart of future business strategies and investment decisions. UNCTAD’s World Investment Report, which this year celebrates 30 years as the leading authority on global investment trends and analysis, forecasts the dramatic impact of the pandemic on global foreign direct investment (FDI) by multinationals. It estimates the fall to be as much as 40 per cent in 2020, bringing FDI to below $1 trillion for the first time since 2005. FDI is projected to decrease by a further 5-10 per cent in 2021. A gradual recovery can only be expected starting 2022. The significant fall in investment flows, caused by the pandemic, will make the task of channeling private sector funds to sustainabilityrelated sectors, especially those relevant to the UN’s Sustainable Development Goals (SDGs), harder. This situation is even more pronounced in developing countries where the hit to investment has been greater. Fragile health care systems in developing countries could come 24

Figure 1: FTSE funds performance - environmental opportunities versus others, 2003-2020 (Billions of dollards). Source: FTSE-Russell.

under additional stress due to the pandemic. There is a risk that progress made on sustainable development and investment in the last few years could be undone. However, investing in sustainability, including the SDGs, is not just about mobilizing funds and channeling them to priority sectors. It is also about integrating good environmental, social and governance (ESG) practices in business operations to ensure positive investment impact. Global capital markets are instrumental in this process, supporting not only good corporate governance, but providing a platform for sustainable finance. ESG-themed funds and indices, including some focused on the SDGs, are increasingly becoming a focus of investor interest and company reporting. UNCTAD estimates that the total value of private sustainability-dedicated bonds and funds is now between $1.2 trillion and $1.3 trillion.1 It consists mainly of green bonds (nearly $260 billion), sustainability-themed equity funds (about $900 billion) and social bonds ($50 billion), plus COVID-19 response bonds ($55 billion). Nevertheless, given that more than 90 per cent of sustainability funds are concentrated in developed countries, sustainability financing CFI.co | Capital Finance International

largely bypasses developing countries, in particular the poorest countries among them. The pandemic has expedited the issuance of bonds focused on relief issues and SDG 3 (Good health and wellbeing) as well as other SDGs. These COVID-19 response bonds fund a range of activities, from supporting the transition of production lines to health care materials, to providing bridging finance for SMEs struggling with the effects of national lockdowns, to raising money for the development and distribution of a COVID-19 vaccine, along the lines of the “vaccine bond” first issued in 2006 by the International Financing Facility for Immunization (see infographic). The use of social and sustainability bonds in response to the COVID-19 crisis has increased focus on the potential applications of these financial instruments and has elevated their status and scale closer to that of green bonds. When the pandemic subsides, the remarkable momentum that has built up behind social bonds and the lessons learned regarding their issuance and use of proceeds should be channeled to focus on financing sustainabilityrelated investments, including in SDG relevant sectors.

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COVID-19 pandemic response bonds (use of proceeds).

Source: UNCTAD, based on ustainalytics and IFC.

Meanwhile, the surge in sustainable indice and funds, including mutual funds and exchangetraded funds, is making equity markets more aligned with sustainable development. Sustainability equity index data are also reinforcing the view of many that sustainability issues are material to the performance of industries in the long run. A well established example is the FTSE Russell’s Environmental Opportunities index. Since the launch of the SDGs in 2015, the index has significantly outperformed not only its benchmark global allcompanies index, but especially the fossil fuels index. The index’s consistent outperformance indicates that investors are recognizing the materiality of sustainability in the new policy context established by the SDGs (see Figure 1). Over the next 10 years capital markets can be expected to further develop and strengthen their sustainability-related activities. One key challenge, however, will be identifying and promoting a pipeline of projects and companies to respond to the growing demand and interest in sustainability-related investments and emerging and frontier markets. Towards this end, a related challenge will be to improve the quality and credibility of sustainability-themed financial products. Investment promotion efforts in most countries are not specifically targeted at attracting

investment in sustainability-related or SDGrelevant sectors. To the extent that incentives or other promotional measures that focus on specific sustainability targets or SDG sectors are in place, they often leave out core sectors, such as health, education, ecosystems and biodiversity, water and sanitation, and climate change adaptation. The recovery from the pandemic should therefore focus on more systematic efforts to mainstream sustainability and the SDGs into the overall investment policy framework of countries and to embed sustainability strategies into investment promotion schemes. The pandemic once again proves that failure to act on sustainability can be costly in every aspect, and the prompt response of capital markets to the urgent need to fight the pandemic has demonstrated the importance of sustainability financing in addressing global challenges. Any recovery plan from the pandemic should therefore take sustainability into full account as a long-term solution to current environmental, social and health problems and as an opportunity for investment and growth, for both governments and business. The UNCTAD World Investment Report has been bringing contemporary investment issues, including in developing markets, to the attention of a global audience for 30 years. It is now leading CFI.co | Capital Finance International

the charge to reorient investment towards a sustainable future and embed sustainability and the SDGs across the entire investor landscape. Recovery from COVID-19 could in fact present an opportunity to accelerate this transition. i 1 The lack of consistent definitions makes it difficult to estimate the global asset size of sustainability-aligned investment. According to the IMF’s 2019 Global Financial Sustainability Report, estimates of the global assets of sustainability investment as of 2018 range from $3 trillion (JP Morgan) to $30.7 trillion (GSIA). For analytical purposes, UNCTAD groups the variety of sustainable investments into two groups according to their contributions to sustainable development: responsible investment (the vast majority) and sustainability-dedicated investment (focused on funds targeting ESG or SDG-related themes or sectors, such as clean energy, clean technology, sustainable agriculture and food security).

ABOUT THE AUTHOR Dr James Zhan is senior director of investment and enterprise at the United Nations Conference on Trade and Development and lead editor of the World Investment Report. 25

> Anshula Kant, MD and CFO the World Bank Group:

Power of Capital Markets in the Battle Against COVID-19

Managing Director and World Bank Group CFO Anshula Kant reflects on the crisis engulfing the world, and the opportunities we have to build back.

can’t remember a time in my life when a single event has mobilised the entire world, with health care workers, governments, the private sector and multilateral development banks all focused on the same problem.

We are also collaborating with other MDBs and bilateral agencies to increase co-financing for operations so projects can quickly expand, and our partner institutions have also made commitments of between $70 and $80bn.

Each organisation, each sector has a role to play – including capital markets. But how exactly can bond issuers and investors help?

The International Bank for Reconstruction and Development (IBRD), the original member of the World Bank Group, is one of the largest global bond issuers, offering safe, liquid, and high-quality investments to direct global savings to critical use. It has been pioneering capital markets for over 70 years, and the franchise we have created provides a platform for innovation and leadership. We use the triple-A-rated credit quality of IBRD and, recently, the International Development Association (our fund for the poorest countries) to build and deepen capital markets and scale up impact as we raise awareness of global issues such as gender equality, access to clean water and ocean resources, food loss and waste, and health and nutrition. Our dialogue with investors, transparency on how we use bond proceeds, and engagement on global issues are particularly important now.

The pandemic has cost lives and disrupted livelihoods on an unimaginable scale. As governments begin to slowly reopen their economies and societies, the effects of the crisis will linger, especially for poor and vulnerable people. Countries’ financing needs are rising dramatically for both the short and medium term, first to tackle the health emergency and then to start working toward a sustainable recovery. Many developing countries rely heavily on revenue sources such as remittances, commodity exports, and tourism and are likely to be disproportionately affected by an anticipated global recession. Tax revenues are falling as well, while these countries’ access to financial markets will be sharply curtailed. Even before the crisis, capital markets were critical for strengthening outcomes for countries and their people. As access to these markets deteriorates for many, the multilateral development banks (MDBs) provide an essential service. These institutions maintain long-term country engagements and can act swiftly to make funds available. MDBs can be one of the few resources countries can tap into, especially during market volatility. As the pandemic continues to unfold, the World Bank Group is acting fast and decisively to help countries respond and get their development progress back on track: we have pledged to make available up to $160bn over 15 months. We are assisting over 100 countries to set up emergency health operations, protect households, save jobs and businesses, and get money to people most in need. Our assistance will also include support to address the medium- to long-term social and economic repercussions of the pandemic. 26

Over two days in April, IBRD raised $15bn from global investors. This included the largest-ever US dollar-denominated bond to be issued by a supranational, as well as benchmark issuances in British pound, Euro, and Swedish krone through our Sustainable Development Bonds. We have since followed up with another $4bn benchmark issuance. Our ability to tap capital markets during difficult times demonstrates the interest investors have in supporting sustainable programmes that strengthen countries’ capacities to fight the pandemic. But this wasn’t easy. We laid the groundwork with investors over years. This time we reached out to explain the World Bank’s health programme, and how we are helping countries strengthen their response and health systems during the pandemic. We expanded the dialogue with existing investors and welcomed new ones. CFI.co | Capital Finance International

MD and CFO the World Bank Group: Anshula Kant

Since the crisis began, there has been increased interest in ESG investing. Globally, we see a variety of approaches, ranging from “COVID response” bonds to social and sustainable bonds that are embedded within an issuer’s existing issuance framework. Many investors are taking a holistic approach, connecting their investments to impact and progress on the Sustainable Development Goals (SDGs). As of mid-May, investors have supported more than $65bn in COVID-related issuance1. The benefit of such bonds is the transparency and disclosure on use and allocation of proceeds, so investors can seek return alongside impact. Communication with investors and other market stakeholders remains key as the focus steadily shifts to impact and sustainability. The pandemic has crystalised the opportunity for sustainable investment to benefit everyone. Issuers and investors can lead the way, but the focus must be on transparency. Issuers should be aware that investors are assessing the risks and opportunities of their investments through the lens of ESG and/or the SDGs. Issuers should explain how they are using investors’ funds to make a positive difference for society. And investors must look at their entire portfolio to see how they can use the power of investment to contribute to sustainable development, and demand transparency from issuers so that they can make informed decisions. The pandemic is still in its emergency phase in much of the world. But countries are already recognising that it will be imperative not just to recover, but to build back stronger. By connecting CFI.co | Capital Finance International

investments to sustainability goals and by ensuring transparency, issuers and investors can help in the fight against the pandemic and shape a more resilient and sustainable future for all. i 1 According to the FT (May 15, 2020): ft.com/ content/03dbe400-1bea-4475-bda7-2fbc1d9ce062

ABOUT THE AUTHOR Anshula Kant was appointed managing director and chief financial officer of the World Bank Group in October 2019. She is responsible for financial and risk management of the group. Among other key management duties, her work includes oversight of financial reporting, risk management and mobilisation of IDA and other financial resources. Through her work at the State Bank of India (SBI), Kant gained more than 35 years of experience in the financial industry. As CFO of SBI, she managed $38bn of revenues and total assets of $500bn. Most recently, she served as SBI managing director from September 2018 to August 2019. With direct responsibility for SBI’s Risk, Compliance, and Stressed Asset Portfolio, she led the creation of investment opportunities while empowering risk management throughout the bank. Anshula Kant earned her Bachelor’s degree with honours in Economics from Lady Shri Ram College for Women, and completed her Master’s in Economics from Delhi School of Economics. 27

> David Cameron, Ellen Johnson Sirleaf and Donald P Kaberuka:

Firm Priorities for Fragile States

o country has been spared the impact of COVID-19. But some – the world’s most “fragile states” – face a particularly difficult set of challenges. Before the pandemic arrived, Yemen, Sudan, Haiti, Sierra Leone, Myanmar, Afghanistan, Venezuela, and other struggling countries were already beset by poverty, conflict, corruption, and poor governance. Now, these factors leave them especially ill-equipped to deal with the COVID-19 crisis. 28

What any country needs to withstand a pandemic is precisely what fragile states lack: a government with the institutional capacity to devise and deliver a comprehensive plan of action, effective police to enforce rules, social programs to deliver money and supplies, and health services to care for the infected. A lack of state capacity is immediately evident in the domain of public health. Whereas Europe has 4,000 intensive care beds per million people, CFI.co | Capital Finance International

many parts of Africa have just five per million. Mali has just three ventilators for the entire country. An effective response also requires trust in government. But, in addition to scarce capacity, governments in most fragile states lack popular legitimacy. In countries recovering from conflict or riven by corruption, many people will be unwilling to follow even a government that proves capable of leading.

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Council on State Fragility, this has not been the case. In recent weeks, Sudan, South Sudan, Somalia, and Yemen have all had infection and mortality rates rivaling those in more developed countries that were hit by the coronavirus first. Worse, the economic impact of the pandemic will surely fall harder on fragile states, not just as a result of internal lockdowns, but because of what is happening overseas. Trade with countries like China has declined massively, revenue from remittances has tumbled, commodity prices and oil revenues have plummeted, and deficits are ballooning. Because fragile states rely on imports for much of their food, there is now increasing talk of “hunger” and even “famine.” We should know by now that poor countries’ problems tend to become the world’s problems, whether in the form of mass migration, organised crime, terrorism, or economic spillovers. Given that half the world’s poor will live in fragile states by 2030, these problems will escalate further. That is why the Council on State Fragility has made it a top priority to draw attention to the unique challenges these countries face. Comprising former world leaders, ministers, diplomats, business figures, academics, and heads of development organisations, the council will combine cutting-edge research with detailed policy knowledge to influence the global and national decision-makers who will determine how fragile states fare through this crisis and tackle their broader and deeper challenges. Decentralisation, adaptability, and the savvy use of data will be key. For example, there is ample evidence to suggest that “smart containment” of local outbreaks is often more appropriate than countrywide lockdowns. Such insights could prove critical in fragile states. But we must act fast before the acute phase of the pandemic in the West ends, and the sense of urgency there wanes.

A strong private sector is also a necessary component of effective, resilient states. People must be able to work to support their families, and governments must generate tax revenues to help those who cannot. Yet fragile states typically lack the formal economy through which to meet these needs. Earlier in the crisis, there were hopes that some fragile states would escape the worst of COVID-19’s health impact, owing to their youth and isolation. But, from our perspective as the co-chairs of the new

We offer five recommendations. First, social protection must be made simple and fast. Sometimes, that will mean universal eligibility rather than precise targeting. Mobile-phone networks should be used to gather evidence on current needs, and to distribute small, regular (albeit time-limited) payments. Second, more domestic food production should be encouraged. Sierra Leone, for example, used to grow rice, but it has becoming increasingly dependent on imports over the last decades. More broadly, Africa has 60% of the world’s unused arable land. CFI.co | Capital Finance International

Efforts to produce staple crops locally can and must be scaled up quickly and substantially. Third, whenever a vaccine becomes available, the international community must ensure that fragile states are not priced out of the market by richer countries. When the threat is a contagious pathogen, no country is safe unless all are. We must encourage and accelerate the production of multiple vaccines to ensure rapid, widespread distribution. Fourth, businesses in fragile states need direct support. As the best developmentfinance institutions know, small companies in poorer countries are often overlooked, and tend to suffer from the perverse effects of broader targets and rules (because it is easier to hit a target by investing in big projects in big countries). But it is precisely these smaller enterprises that merit greater investment. Finally, the G20 should do more to support heavily indebted fragile states that are being forced to choose between paying their foreign creditors and saving their people. Countries receiving bilateral development assistance are scheduled to repay about $40 billion to public and private creditors this year alone. To forestall that fiscal blow, we call on all G20 members to commit to debt moratoriums, not just until next year, but rather for the duration of the crisis. Moreover, it is essential that all fragile states secure emergency funding to support efforts to curb COVID-19 and mitigate its economic impact – including countries that are not ordinarily eligible for funding from the World Bank or the International Monetary Fund. COVID-19 will deepen existing wounds in all of the world’s fragile states. But with swift global action, we can mitigate the pandemic’s worst effects. If there is one thing we have learned from this crisis, it is that lives and livelihoods will be saved if we can move faster than the virus. i ABOUT THE AUTHORS David Cameron is a former prime minister of the United Kingdom. Ellen Johnson Sirleaf, a Nobel Peace Prize laureate, is a former president of Liberia. Donald P Kaberuka, a former president of the African Development Bank, is Special Envoy of the African Union’s Peace Fund.

> Lord Waverley:

Making the Case for Emerging Markets The world awaits what emerges from post-Covid traumas. States will be required to consider how to balance budgets, how to derive income from which aspects of the economy to pay for essential services. There will be those who will dig in their heels and advocate an insular approach, others who will wish to kickstart economies by driving advantage of what remains of globalisation. This centre ground will become sought-after, as supply chain sources will be challenged by the option to secure non-historic marketplaces or to entrench nationally. Both are plausible.

ovid-19 has been a Litmus test for the strength of many frontier and emerging markets, with economic struggles highlighting structural frailty. Many developed-status nations tentatively believe they are approaching a recovery stage, while others urge caution over a second spike. Economies such as China and Europe are beginning the process of starting economic recovery. However, many of the emerging markets will suffer, disproportionately affected by their negative import and export marketplaces due to commodity-based economies.

CFI.co Columnist

A lack of international investments, caused by a lack of economic surplus, will lead to a system of increased borrowing against national debt, which will in turn affect emerging markets due to large contract-based employment systems and a lack of international stimulus. This does not bode well, and will haunt all nations in whichever economic category they find themselves, with the potential effect of the redrawing also of geo-strategic and geo-political relationships. The impact on import and export markets cannot be understated, highlighting a greater issue within the current international system. A large proportion of those nations do not currently raise enough foreign currency through trade and exports or raise sufficient funds internally through taxation to pay off their debts. Debts that have usually been incurred by Tier1 nations “supporting” massive infrastructure projects but outsourcing the construction to foreign organisations. This will be exacerbated due to many not having the banking systems to issue enough bonds in their local currency in order to pay off borrowing. While there are exceptions to this for nations 30

such as South Korea and the BRIC countries that have deep international ties with Tier-1 nations, states such as Peru or Kenya will be challenged by not having the strength of currency to support internal economic development. This will lead to borrowing against their own currencies which will lead to a cycle of circulating debt. A complicating factor for those markets might also be increased resentment towards globalisation. Already international organisations are facing coercion from governments to exit foreign manufacturing markets to support their own struggling economies, resulting in the international system becoming more introspective. The growing trade hostilities between China and the United States, and the impact this is having on foreign relations, is evidence of this. Both are fuelling hostilities and threatening sanctions while emerging market economies are suffering. Bluster from the West will not keep the world order as it was with more of an alignment to the East. Many of the larger consulting and money firms are already reacting to how the impacts of tensions are dramatically reducing share values on Wall Street. The potential for a breakdown of relations will have an adverse impact on trading value, threatening the economies of many emerging, markets such as Pakistan and central African nations, that rely heavily on American and Chinese infrastructure investment. While the potential for the economic growth of emerging markets has been foremost in our minds over the past decade, the idea that nations such as Turkey, Azerbaijan and others can engage with Tier-1 nations on an mutually beneficial and equal footing is at risk of fading. Historically it has been assumed that, with CFI.co | Capital Finance International

Summer 2020 Issue

the growth of manufacturing capabilities of Tier-2 nations, their economies will naturally strengthen and grow in-line with an increasingly global consumer base. This analysis has been conducted in the past based upon GDP purchasing parity due to financial crashes that increased isolationist tendencies of developed economies. It was anticipated that China, India and Brazil would be responsible for over 50 percent of the world’s economic growth, whereas the Eurozone was predicted to contribute less than one percent. Emphasis was being made on proposed significant advances that they would be making — but those advances have been eroded over the past two years, which have in turn damaged this modelling. While manufacturing is often outsourced from Tier-1 nations that benefit emerging markets, any potential stagnation in the international economy will disproportionately affect Tier2 nations, and severely limit their ability to develop sustainably, leading to boom-or-bust economic policies. Sustainable investment in these nations is crucial, not only for generating rewards for conglomerates, but with the added benefit for a more integrated global economy. With the right support, emerging markets should be able to adapt more quickly to the pandemic as they can benefit from the experience and scientific resources of Tier-1 nations. Access to this knowledge can help arm developing organisations with the best business practise to assist full recovery. While such co-operation is preferable, with the concentration of expertise centred within western Europe and the US, addressing this imbalance is crucial. While this is beneficial for Tier-1 economies, many organisations have now learned that to function in an increasingly volatile international market, diversity of supply — and not concentrating the sourcing or manufacturing of a product from within a single geographical location — is preferable. Companies have learned to “atomise” their supply chains and so drive-down manufacturing costs and increase efficiency resulting from multi-tier supply change reconfigurations.

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This new-found sustainably will also allow for local development through increased regional wages and the development of a stronger local consumer-based economy. Supporting Tier-2 consumers through investment will also be beneficial for the consumer in Tier-1 nations as increased competitiveness in the global system encourages innovation and drives down prices for commodities and services. Emerging markets will grow at a rapid rate. Ethiopia, for example, recently shared the view that the country has colossal potential for export — but requires investment to increase the valueadded possibilities. This is good for all parties concerned. Investment in the technology sector is particularly viable as developing nations will be able to capitalise on the benefits of current trends without being associated with heavy research and development costs. With increased support from businesses working internationally, governments will become more connected, and develop their capacity for closer co-operation centred around development and trade. That can only be a good thing. Support for emerging and frontier markets with their low production costs, flexible working practices and the opportunity to establish in a rapidly growing consumer market that is currently undersaturated have the potential to reap rewards. Any organisations that are internationally minded, but adhere to the saturated established markets, will miss out on the next generation-defining investment opportunities. Exceptional times require innovative change, which requires unorthodox solutions to challenges. What is lacking is the pragmatic co-operation of governments and multipliers to provide access to the requisite information. The potential for reward is high. The effective bridging of the gap between knowledge and action will have the power to unlock the potential. I wish decision makers well as they grapple with the challenge ahead. i ABOUT THE AUTHOR Lord (JD) Waverley Member House of Lords, London

CFI.co Columnist

Diversification of global supply will however carry the risks of increased logistics costs. An increasingly volatile international system and the problems of concentration outweigh the logistical challenges of atomisation. A take-away from 2020 is that diversification in supply chain management and the implementation of a more global approach to business will not only assist recovery, but have the effect of better protecting future business interests. Modern advances in technology will significantly reduce the frictional distance

between nations, thus providing the platform to bridge the gap between developed and developing nations.

Founder SupplyFinder.com Strategic Advisor SmarterContracts. co.uk jd@lordwaverley.com 31

Enjoy electric. The new EQC.

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Join us in the fully electric era. With the first member of the Mercedes-Benz EQ family. www.mercedes-benz.ch/EQC

A B C D E F G

EQC, 408 HP (300 kW), 26,3 kWh/100 km (fuel equivalent: 2,4 l/100 km), 0 g CO /km (average of all new models sold: 174 g CO2/km), CO2 emissions fro CFI.co | Capital Finance International 2

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om fuel and/or electricity consumption: 34 g/km, energy efficiency category: A. CFI.co | Capital Finance International

Summer 2020 Issue

RISHI SUNAK:

THE SAFEST PAIR OF HANDS FOR

MISSION IMPOSSIBLE

By Naomi Snelling

The Tory chancellor who’s splashing the cash, Rishi Sunak, is widely regarded as the man for the moment. But how far will he go, and can he pull off the Herculean feat of leading the UK to prosperity in the wake of the most devastating economic setback since records began?

Cover Story

f Britons didn’t take much notice when a new chancellor was catapulted into the cabinet in February this year, they do now. Rishi Sunak, a 39-year-old former hedge fund manager, came to the second-mostpowerful political job in the UK after Sajid Javid’s dramatic flounce from office. Just a few weeks later, he has become a fixture on TV and radio — and a household name. He was already a household name in India, thanks to his marriage in 2009 to Akshata Murthy, daughter of Indian Tech billionaire NR Narayana Murthy, co-founder of IT giant Infosys. As the MP for Richmond in Yorkshire, Sunak was fondly (if perhaps patronisingly) dubbed “the Maharaja of the Dales”. Since becoming the Coronavirus Chancellor, he’s more likely to be known as “Dishy Rishi”, having become one of Britain’s Quarantine Crushes. Apparently this 34

new state of affairs says something about the politics of a despairing populace faced with someone who has an air of competence. Eye rolls aside, he’s certainly more of a sparkly-eyed pandemic pin-up than the governor of New York, Andrew Cuomo, for whom New Yorkers have been going gooey-eyed. Tipped as a prime minister-in-waiting from the moment he entered the house five years ago, Sunak has found himself unexpectedly responsible for far more than he could have envisaged — but his suave and confident manner and calm optimism has scarcely wavered. Whether calmly and coolly fielding questions or announcing a series of schemes and programmes aimed at securing the UK’s financial future — the overall sense has been of a man who grasps the enormity of the situation, understands business, and is in control. CFI.co | Capital Finance International

“For the first time in our history, our government is going to pay people’s wages,” he announced in a briefing on March 20. “We want to look back on this time and remember how we thought first of others and acted with decency.” From this first speech onwards, the general consensus from all sides has been that Sunak seems to know what he’s doing. The measures seem the right ones, and he has been praised for his leadership skills – appearing calm, clear and effective amid the chaos. But subtle signs of strain are starting to show as the pressure mounts for him to perform economic miracles. As of early June, his governmentfunded furlough scheme which launched him to almost rock-star fame has drained the coffers of billions, prompting a reassessment of the exit route as fears grow that the 8.9 million Britons

Summer 2020 Issue

In Sunak’s defence, he couldn’t have expected that the measures would cost as much as they did. In the first two months of Covid, the deficit went from roughly £50bn to £337bn. Confronted with a recession that is likely to be the worst in 300 years, the tricky part for Rishi Sunak is predicting one of two outcomes: #1 If and when they ease the lockdown, the economy makes a V-shaped recovery and he doesn’t have to do much in the way of intervention. The tax receipts will go up as businesses get back on track and narrow the deficit. #2 will be keeping the Chancellor awake at night: the economy does not recover in a significant way, public borrowing continues apace, and “things go south quickly”, says Bham. To date, Sunak’s arsenal of economic packages has included at least 10 recovery schemes aimed at separate sections of the economy. These include the Coronavirus Job Retention Scheme, (CJRS), announced on March 1, which brought us another Word Of The Year: furlough. This lifeline was immediately grasped by employers of all shapes and sizes when it became available on April 20 — to an extent that would have been hard to predict.

Chancellor of the Exchequer: Rishi Sunak

currently furloughed could become addicted to their new status. It is, after all, easier to freeze the economy than to defrost it. Back in February, the Bank of England was quietly whispering to industry leaders that they should gird up their loins for an anticipated two percent drop in GDP. In reality, the drop is greater than anyone could have predicted. Government borrowing rose to £62bn in April, the highest monthly figure on record, after heavy spending to shore up the economy in the wake of the pandemic. The deficit between government spending and tax income is now so huge that to the untrained ear it has become akin to Monopoly money. It makes the sums talked about during Brexit seem like pocket change.

In many ways, Britain’s exit from the EU — of which Sunak was a firm supporter from the start — is likely to prove to be the saving of the economy. Without answering to anyone else, Britain can print as much money as it deems necessary, and inflate its way out of the debt — even if this refinancing programme is spread across generations — a luxury that others in the EU are unlikely to be able to enjoy. PROBLEM OF UNPRECEDENTED SCALE Economic recovery will be anything but plain sailing. If there is one word that sums up everything about the pandemic and its economic devastation it’s “unprecedented”, which has been used an unprecedented number of times during recent months. “March’s GDP contracted by 5.8 percent but that was only taking into account two weeks of actual lockdown,” says Zeb Bham, co-founder of FX firm Privalgo. “Extrapolate two weeks of March into April to June and you’re looking at contraction figures of up to 20 percent. That’s where the grey hairs are coming from.” CFI.co | Capital Finance International

Business bodies and organisations gushed with praise for the Future Fund, although eyebrows were raised when it was deluged with applications exceeding its original £250m budget on the first day. But while this marks its success for some, others believe it has failed to protect the businesses that really needed the support. Stephen Page, CEO of Startup Funding Club, said Venture Capital firms hoovered up the money to protect existing portfolio companies and it failed to serve the 99 percent of “true” startups that are pre-VC. “The most vulnerable companies will miss out and many will fail as a result, their innovation and job creation potential lost from the economy,” he said. Project Birch, announced a few weeks later, is aimed at saving strategically important companies, as pressure mounts to provide funds in return for an equity stake. “Aviation, aerospace and steel firms are among those facing acute problems,” says Zeb Bham. “Jaguar Land Rover and Virgin are in talks right 35

Cover Story

But Sunak is no stranger to juggling with vast sums of money. Widely believed to be one of the richest MPs in Parliament, he amassed personal wealth throughout his hedge fund career working in California, India and Britain for investment firms including Goldman Sachs. He later launched his own investment firm. And it is precisely his acute financial sense and hedge fund background that has caused many

forecasters to be cautiously hopeful, even if they are crossing their fingers, legs and toes.

To date, Sunak’s survival and recovery portfolio includes much-lauded headline funds such as the Future Fund. Aimed at innovative and life sciences companies which are pre-revenue or pre-profit and unable to access other government business support, the Future Fund offers loans from £125k to £5m. Firms applying must have raised at least £250k in equity investment from third-party investors in the past five years, and must have been incorporated on or before December 31, 2019. The doors are currently open until the end of September.

now. It’s a lot of money and it begs the question of whether or not Sunak sees himself as the new Margaret Thatcher. “It’s estimated that government backed loans have amassed £40bn in the first two months of bailout measures alone, and forecast to reach a total of £100bn. I believe that Project Birch could be a good thing if they can reform the British Business Bank to provide more long-term growth orientated funding rather than just shortterm bailouts. “It should be said that the British Business Bank plays a central role in all of Sunak’s schemes, but it needs reforming and it’s certainly not set up to handle something on this scale in its current form. It is centralised, politicised, distant from business and short-termist; keeping in mind that its commercial success must come from growing with its borrowers rather than profiting from them.” Other funds announced by Sunak include the Covid19 Corporate Finance Facility (CCFF); Coronavirus Business Interruption Loan Scheme, (CBILS); Coronavirus Large Business Interruption Loan Scheme (CLBILS); Bounce Back Loan Scheme (BBLS); Self-Employment Income Support Scheme; Small Business Grants Fund, (SBGF) and Retail, Hospitality and Leisure Grant Fund, (RHLGF); Hardship Grants Scheme as well as the Local Authority Discretionary Fund. He has also announced a funding programme for charities, a time-to-pay delay on VAT and tax and new sick pay terms for SMEs.

Cover Story

Phew. This alphabet soup represents lots of late nights for Sunak and his policy planners at the Treasury; an impressive feat of war-room planning. Working round the clock, yet still calm and collected in briefings, Sunak has definitely been earning his salary and going the extra furlong (or furlough). The schemes have not been perfect — nothing organised so quickly ever could be — but they have done the job and have certainly had massive take up. Right now, many of these support schemes are keeping businesses and employees afloat artificially and it remains to be seen what happens when that support is taken away. It’s a remarkable paradox for a Conservative Chancellor to be overseeing such a remarkable programme of part-nationalisation of a large part of the British economy, even on a temporary basis. Right now, one in five working Britons is being paid from central government coffers. The scale and rapid introduction of Rishi’s job retention scheme was widely regarded as a positive intervention, delivered with confidence and clarity. Now he’s faced with the monumental task of successfully weaning employers and employees off the furlough scheme — and the rise or fall of the British economy depends on whether the 36

strategies he opts for are successful or not. In recent weeks, details of his exit plans have been slowly emerging, with new regulations for the furlough scheme being drip-fed to the media. Since redundancy requires 45 days’ notice, as this issue of CFI.co goes to press, thousands of Britons are likely to be receiving their redundancy notices, and to avert widespread unemployment. Rishi Sunak’s focus will have to be on how to re-direct these people — ideally into the tech or green economy. WINNERS AND LOSERS In a recession, winners and losers become more starkly polarised, and what quickly became clear was that so-called pivoting was effortless for some and impossible for others. Rob Mitchell, formerly at the Economist and The Financial Times, and now CEO of thinktank Longitude points out that alongside the obvious winners and losers “... the more important nuance is how prepared and resilient a company was, going into the crisis. “Within retail, which has clearly been hit hard, there’s a big difference between those companies that were further along their digital transformation. Adaptability is also key — from small restaurants repositioning themselves as retailers to education providers shifting to online delivery. Balance sheets clearly matter too, Mitchell believes, and those companies with a war chest to draw on have been better able to weather the storm than those that are more financially leveraged. “And finally,” says Mitchell, “the crisis highlights the importance of brand. Companies that customers trust are more likely to survive because they have brand equity. Customers will stay with them and be loyal, whereas those companies who evidently care less about their customers will struggle.” When it comes to brand, Sunak is certainly going to be pushing brand Britain. As industry sectors like aviation juddered to a halt and governments across the world instinctively started to retreat to protectionist language and regulations, global trade took a monumental nosedive. As trust and trade start to go hand in hand, some economic experts predict Britain will forge a fairly dramatic upturn in trade with its commonwealth countries and the gulf states, notably Saudi Arabia and Oman. All things considered, the huge challenges Rishi faces are mirrored by equally huge opportunities — instead of retraction and protectionism, this crisis is a chance for Britain to capitalise on its innovation cred and its trading expertise. If the Chancellor can go straight from raiding the Magic Money Tree to pulling digital innovation and AI rabbits from hats, Britain could become CFI.co | Capital Finance International

Summer 2020 Issue

a more prominent economic world player than ever before. Russ Lidstone, CEO of The Creative Engagement Group, says it’s crucial that Sunak doesn’t embrace protectionism. “This is a global economic challenge and the way out of it lies in global co-operation. He should use this crisis as a catalyst for change in society and business. “For example, he is going to have to support innovation. The next few years and our recovery will be all about innovation — in order to compete as we see greater Pacific centring and Asia achieves 50 percent global GDP. This may mean investment in infrastructure perhaps more than people in a post-COVID and AI world, but now will be the time to be bold. “Sunak and DCMS need to take swift action to support the UK’s creative industries and prevent key culture critical symbols such as theatres and film companies failing. In terms of contribution the creative industries have received little consideration in the discourse surrounding the crisis, but as an industry that is a global leader and generates over £100bn GVA – it is hugely important economically and culturally. It is an industry heavily reliant on freelance talent as well.” WE’RE NOT IN KANSAS, TOTO The pandemic Lockdown has been called The Great Pause, and it has certainly sent shockwaves throughout the world and world economies. And as the re-set button is pressed, it’s unlikely to be a case of same old, same old. Britain’s relationship with many of its key trading partners has been brought into sharp focus — with the biggest question of all being how reliant the UK and other counties should be on the manufacturing output of just one or two countries, such as China. Tensions around relations between UK and China have heightened during the crisis, which spawned a wave of conspiracy theories and crystallised genuine concern over the role of Huawei.

Mohammed Al Duaij, CEO of Kuwait’s Alea Global Group, told CFI magazine that in comparison with other countries, the UK has taken serious economic actions in parallel with the health actions from the beginning, encouraging the CFI.co | Capital Finance International

“In Kuwait, which is a rich but small country, up to this moment we do not have any serial action from the government to support the private sector,” he said. “I think the UK is always in the radar of foreign investment and in the meantime taking into account Brexit it should attract foreign investment more on governmental and private sector by incentives such as tax exemptions, residency, low interest and long maturity loans.” Henry Humphreys, partner at Humphreys Law, points out that as well as bringing trading relations under the spotlight, the crisis has been a catalyst for transitions that have been stirring for years — such as the shift to remote working and WFH, and it has also revved-up the race to go green. “Manufacturing has shifted to China over recent decades,” he said, “and even before the pandemic there was a growing nervousness with the volume of data and knowhow going to that side. “Over the last 20 years or so, an unbelievable level of personal data found its way to the west coast of the US which has caused a lot of concern. So there is a will to re-shore the data — and anyone who can provide tech that allows you to dictate when people have access to your data will be doing really well.” TIMES ARE A-CHANGIN’ Economies are always expanding or contracting, and the seismic shift represented by the pandemic makes it difficult to predict how consumer demand will drive market forces once lockdown is eased. Matthew Lesh, head of research at the Adam Smith Institute, said the economy is not a machine that can be turned on and off. “We don’t know in advance which jobs and companies are going to be useful in future,” he pointed out. “Rishi needs to let companies find their own way. He should be hesitant about bailing companies out; government is not traditionally good at picking winners, and now it sounds like they want to prop-up the losers. “It’s hard to do politically, but very important to do economically.” Meanwhile, the devolved governments of Scotland and Wales have been noticeably beating their own drums in response to the challenge. In Wales, where lockdown restrictions have been tighter than in England, Sophie Howe, Wales’ Future Generations Commissioner, said: “Our pre-Covid 19 economy prioritised economic growth, forced many people into poverty, and in turn created an unhealthy population that is 37

Cover Story

UK Prime Minister Boris Johnson faces pressure from the Trump administration and from MPs to issue a ban on Huawei, and essentially remove it from the UK’s telecoms infrastructure. But telecoms giant Vodafone has issued a warning that any ban would derail the UK from its plan to emerge as a leader in 5G technology. With the pandemic demonstrating that connectivity and a stronger telecoms infrastructure is more important than ever, Sunak could be faced with some of the most politically divisive choices of his career.

private sector to keep their employees by supporting their remuneration packages and other actions.

particularly susceptible to global crises such as pandemics.” Howe has called on Welsh ministers to “show political courage with a focus on quality of life over GDP, as the country begins the rebuilding process while restrictions remain in place to stem the spread of COVID-19”. Among her recommendations is a multimillion-pound stimulus package to support the decarbonisation of Wales’ housing stock — putting money into low-carbon, affordable housing, and launching a national retrofitting programme to improve energy efficiency in existing homes. As well as ramping-up investment in the low-carbon economy, Howe is pushing for Welsh Government to invest in re-skilling, and employing those who have lost jobs and income in the green economy. MAY THE FORCE BE WITH HIM… Famous for his self-effacing charm and for not “working” the tearooms of Westminster, Britain’s Chancellor is privately described as easy-going and even goofy. He has joked with predecessor Sajid Javid about Star Wars and more recently praised Javid’s aim to boost education funding. With economic miracles to perform, right now, nothing could be further from Rishi Sunak’s mind than his political pin-up status. He finds himself between business pressing for a swift release from Lockdown and a PM whose natural libertarian outlook has been cauterized by his own ITU experience with Covid-19. Rishi Sunak goes to sleep each night knowing that he is ultimately the man whose financial acuity, intellect and decisive action will decide the economic fate of Britain. To paraphrase his sci-fi hero, may the force be with him. i

UK GOVERNMENT BACKED SCHEMES & FUNDS

Covid19 Corporate Finance Facility (CCFF) Launched: March 17 Who is it for? Helps 'larger firms'...through purchase of their short-term debt. Coronavirus Job Retention Scheme (CJRS) Launched: April 20 (backdated to March) Who is it for? Businesses, charities, public authorities, recruitment agencies: - Employers who have enrolled for PAYE online - have a UK bank account - created a PAYE payroll scheme before 19 March Claims portal opened 20 April. Pays 80 percent (reducing to 70 percent) of furloughed employee salary Coronavirus Large Business Interruption Loan Scheme (CLBILS) Launched: April 20 Who is it for? Businesses with group turnover of more than £45m Maximum term three years, minimum term three months. Commercial interest rates apply. From May 26, max loan size available rose from £50m to £200m. Coronavirus Business Interruption Loan Scheme (CBILS) Launched: March 23 Who is it for? UK-based SMEs. Government-backed guarantee to lender to turn a no credit decision into a yes. More attractive terms. Govt will cover first six months of interest payments. Borrower remains 100 percent liable for the debt. Lender can provide up to £5m. Must have sound borrowing proposal but insufficient security to meet a lender's normal requirements. Must be in eligible industrial sector. Bounce Back Loan Scheme BBLS Launched: April 27 Who is it for? For smallest businesses established before 1 March 2020. Borrow between £2k and 25 percent of turnover up to a maximum of £50k. No repayments due for first 12 months Government will pay fees Fixed interest rate of 2.5 percent. One loan per business / six-year loan. You can only get it if you don't already have a CBILS, CLBILS, CCFF.

Cover Story

Future Fund Launched: May 20 Who is it for? Innovative and life sciences companies who are pre-revenue or pre-profit and unable to access other government business support from eg, CBILS. A pot of £500m set aside for loans from £125k to £5m. Open until end of September 2020 Subject to at least match funding from private investors Must have raised at least 250k in equity investment from third-party investors in the last five years Companies must have been incorporated on or before 31 Dec 2019 Self-Employment Income Support Scheme Grants for self-employed or member of a partnership adversely affected by pandemic. Hardship Grants Scheme A pot of £500m offering cash grants of up to £25,000 for smallest businesses eg sole traders. Dispensed by local authorities to provide council tax relief to the vulnerable and households.

Author: Naomi Snelling

Business rates holiday for this year Retail, Hospitalities, and Leisure sectors. CFI.co | Capital Finance International

Summer 2020 Issue

COMMENTS FROM INDUSTRY LEADERS ON THE FUTURE FUND Michael Moore, Director General of the British Private Equity and Venture Capital Association (BVCA): “The Future Fund is hugely significant and very welcome. For many venture capital-backed businesses it will build the bridge from today’s severe challenges to the period of recovery, enabling them to survive then thrive. “The post-COVID economy is likely to look very different to today’s. The global leadership of venture capital-backed companies in the digital, high technology and life science parts of the UK economy will be critical to the UK’s success and this government support will help them to do that. “We anticipate strong demand for this funding and we will continue to work with the government to ensure that there is enough to achieve the objective of sustaining this strategically-important sector.” Charlotte Crosswell, CEO of Innovate Finance: “The Future Fund is a welcome step to support our start-up and scale-up economy, and a much-needed intervention from Government to back high-growth businesses. Many FinTech companies have been unable to access the other loan schemes available, so this will provide vital funds to firms in the sector. “The UK has a reputation as a global FinTech leader and we must make sure this remains the case. We have seen some incredible transformation of financial services from the FinTech sector over the last decade and it will play a key role in our country’s economic recovery. In addition, the opportunity to export more of these products and services to overseas markets will showcase the unique innovation the UK has built and the role Fintech can play.” Julian David, CEO of TechUK: “The Future Fund is a strong statement of intent from the UK Government on the value of innovative companies and their importance, not only now, but for the strategic interests of the UK’s economic future. “I’m pleased to see that the Government has worked to expand the scope of the scheme to make it more inclusive and accessible. It is crucial that as we rebuild our economy and look to the future, we ensure everyone is able to benefit equally. TechUK will continue to work with Government, our members and the tech community to ensure we build a future ready for what comes next.”

Irene Graham, CEO of the ScaleUp Institute: The Future Fund is an important initiative and takes us another step forward in meeting CFI.co | Capital Finance International

Jenny Tooth OBE, CEO of UK Business Angels Association (UKBAA): “UK Business Angels Association congratulates the Government for bringing this important initiative so rapidly into the market. The Future Fund responds to the needs of innovating growth focused businesses that may have had investment from angel investors in their early growth stages and now have the capability to benefit from the support of a Convertible Loan alongside VC investment. This will bring vital further finance to enable them to address the impact of the Covid 19 crisis and ensure their continuing ability to build and scale their business.” “We recognise that many equity backed small businesses right across the UK are developing vital innovative products and services and that have the capacity to help the growth of our economy in the months ahead as we emerge into economic recovery. Yet many of these businesses need further support and investment to withstand the impact of the Covid-19 crisis to ensure that they can survive and successfully continue to build and commercialise their innovations. UKBAA acknowledges the importance of the new Future Fund offering a vital new £250m of support through a Convertible Loan Note, alongside matching VC or other relevant third party investors to enable these innovating businesses to successfully survive and lay the foundations for further significant growth”. Erin Platts, Head of EMEA and President of the UK Branch, Silicon Valley Bank: “We see the Future Fund as a very positive step in supporting the UK’s Innovation Economy. It is great news that the Fund has moved swiftly to implementation and from today innovation companies and their investors will be able to apply to access the funds they need to help them through this period and support their growth plans. The Future Fund is one way to protect the UK’s thriving innovation and life sciences industries to help maintain our place as one of the most attractive and successful tech hubs globally. The Future Fund will provide valuable investment to extend runway for UK start-ups and scale-ups, allowing them to continue to operate, preserve and create jobs and build the technologies of the next decade and beyond. We are also pleased to see inclusion and diversity efforts being front of mind as part of the fund’s process, something we greatly welcome and support. We will continue to assist and partner with UK innovation companies and their investors through this initiative and other government programmes.” 39

Cover Story

Gerard Grech, CEO of Tech Nation: “We are delighted to see that the Future Fund is now open for applications and are grateful for HMT’s work over the past few weeks to ensure that as many businesses as possible can access the liquidity they need. This is an important step to provide investment to pre-profit, pre-revenue businesses with a cash injection to get them through these challenging times.”

the needs of the UK’s scaleups at this time, who employ 3.5m people across all industry sectors and regions. We welcome the streamlined and investor-led process which will enable swift execution, getting money out as quickly as possible across the country. This is part of a suite of financial solutions needed for scaleups and we welcome the fact the Government will continue to keep it under review as its take-up develops.”

> Summer 2020 Special

Women in Fintech and Venture Capital: Changing, Challenging and Disrupting

he Forbes Global 100 VC Midas list — if you know anyone on it, that’s a name to drop in any conversation about venture capital.

But if you really want to cause a lull, and possibly an awed gasp or two, mention Shanghai’s Jenny Lee. Only 11 of the glorious 100 in the Midas list are women — and Lee is not only one of them, she holds the highest-ever female ranking of number 10. The other female entrepreneurs we feature in the following pages are no less impressive, and equally gasp-worthy. They form a sisterhood of the unsung and underestimated, women who have done it for themselves — and others. From the story of Lee, a self-described geek (but more accurately a queen of disruption) to Hadiyah Mujhid, whose movement to help black American students found itself the unwitting “beneficiary” of George Floyd’s death, CFI.co editorial staff have uncovered an enthralling and inspiring mix of talent, drive and innovation. Heed the words of Ambareen Musa, founder and CEO of financial aggregator marketplace Souqalmal, who

sees the future of fintech shining so bright she should be wearing a welding mask. Meet Seedcamp co-founder Reshma Sohoni, who brings life lessons from three cultures and three continents to the boardroom. She migrated to the US from her native India, moved to France to pursue an MBA and now calls London home. Her experience of being an outsider tempered her mettle — and gave her courage and inspiration, rather than cowing her. Who else, who else? Cristina Junqueira, for one, the founder of Brazil’s Nubank, a classic disruptor, and the rarer of the unicorn genders (yes, we’re talking a $1bn company valuation). And let’s not forget the co-founder and COO of Nova Credit, Nicky Goulimis, another world traveller who has used her experience to forge a business based on the needs unbanked migrants. From Cambridge University to a post with Ethiopia’s Ministry of Agriculture is an alluring introduction to her story — but an introduction is all it is. Read on to learn more about her, and her sisters in success. i

CFI.co | Capital Finance International

Summer 2020 Issue

CFI.co | Capital Finance International

> CRISTINA JUNQUEIRA NUBANK CO-FOUNDER Brazil's Wonder Woman of Fintech When the first Nubank card transaction was made in Brazil on April 1, 2014, you wouldn’t have been a fool for failing to anticipate the swift growth of the neobank (one that operates exclusively online). Nor would you have been alone in not realising how that development would transform the complacent world of banking — in Brazil, and elsewhere. Nubank was founded in 2013 by Cristina Junqueira, Colombian David Vélez and American Edward Wible. Based in São Paulo, it proved so disruptive that by 2018 it had achieved “unicorn” status, with a valuation of over $1bn. Junqueira was born in the former coffee capital of Riberão Preto, and moved to Rio de Janeiro with her family as an infant. She received a traditional education before moving to São Paulo to study industrial engineering at the city’s prestigious university, USP. After graduating, she worked as an associate consultant at the Boston Consulting Group while completing her Masters degree in economic and financial modelling. In 2007, Junqueira was selected for the One-Year Accelerated Programme at the Kellogg School of Management in the US. On returning to Brazil a year later, still only 24, she was immediately hired by the president of Unibanco, then the largest private banking group in the country. She was chosen to head the SME credit sector with a team of 20 — all older than she was. The following year, Unibanco merged with Brazil’s second-largest private bank, Itaú, to form a financial giant. Junqueira’s vertiginous rise continued apace. In 2012, she was appointed portfolio manager for the Itaúcard but left, disillusioned, when her proposals for commissionfree credit cards and direct communication for clients were ignored. While contemplating her next step, she met David Vélez, who was working for American venture capital behemoth Sequoia Capital. He was increasingly frustrated by Brazil’s incompetent, over-charging banking system. He didn’t know the industry, but Junqueira did — and she shared his evaluation of it. "I worked for the largest incumbent bank in Brazil for five years,” she told Fortune magazine, “and I was just done making rich people richer. I was trying to make a lot of changes to make consumers' lives better, and failing miserably at it. And at some point I was like, ‘you know what? I’m done’." She and Vélez decided to give digital banking a shot. Her banking expertise was complemented 42

by his experience in the world of venture capital, and the technical knowhow of third co-founder Edward Wible. Their series A financing round coincided with Cristina’s first pregnancy (she affectionately refers to her daughter Alice and Nubank as “twins”). In her seventh month, heavily pregnant, she travelled to California to meet putative investors. The day before giving birth, she signed a deal from her hospital bed. One day after, and she was back on the phone, apologising to contacts for any delay in getting back to them. The founders chose the name Nubank for two reasons: firstly, “nu” sounds like “new”, but also because in Portuguese it means “nude” — and they wanted to be a transparent organisation. That, and its policy of treating customers like human beings, has proven a winning formula. The company enjoys an NPS rating of +87 (Itaú’s is +14, and considered acceptable). CFI.co | Capital Finance International

Nubank is the world’s largest digital banking startup, with 12m customers, and it recently became the world’s first and only company with a female founder to reach a valuation above $10bn. Junqueira modestly attributes this to the size of the Brazilian domestic market and the fact that there were 60m unbanked adults at the time. Inclusivity is important to Nubank, and the co-founders are justifiably proud of the fact that of the bank’s 2,000-plus employees, over 40 percent are women and 30 percent identify as LGBT. The modest mother-of-two has no nanny, despite her workload, and — not yet 40 — shows the verve and vision that suggests more great things are yet to come. Citing Wonder Woman and Margaret Thatcher as inspirations, Cristina Junqueira is clear: “I want my daughters to grow up in a world where they can dream of being whoever they want to be — and you can’t dream of what you can’t see.”

Summer 2020 Issue

> RESHMA SOHONI CO-FOUNDER AND MANAGING PARTNER OF VC FIRM SEEDCAMP An Identity and an Ambition Forged Through a Lifetime of Migration — and Adaptation Seedcamp has built a sector-agnostic portfolio of smart products and brilliant founders, backing more than 330 new enterprises. Financial, property and health tech companies feature prominently in the Seedcamp portfolio, and Sohoni predicts personalised health-tech to be the breakthrough development. “Every industry is getting disrupted and reconstituted for the better,” she said in an interview with Sifted. “Our thesis is that if we invest at the intersection of society, health and finance, we will be investing wisely.” As a recognised industry thought-leader and member of the UK’s Digital Economy Council, Sohoni advises the UK government on technology and start-up policies. She calls for better support systems for working parents, likening the lack of government support to a levied penalty on parenthood. “Taxes, poor childcare policies and a lack of high-quality nurseries … essentially handcuff one parent to (the) home,” she said. “When you add up all of the costs for childcare, you can essentially end up paying to work — even if you’re a two-income working couple.

Reshma Sohoni migrated to the US from India at the age of 10, moved to France to pursue an MBA at INSEAD, and now calls London home. She says she feels “as Indian as American, and as American as European”. She understands a foreigner’s plight after years of travel, and can empathise with the struggles of entrepreneurs. Sohoni also understands the disclipline, initiative and perseverance required to break through barriers and succeed. “I’ve been fortunate enough that over my career I’ve been in leadership and decision-making roles,” she told The Fintech Times. “So, it’s really built up a ‘muscle’ where I can make fast decisions on limited information – and I can do this with conviction.”

“Our origin story, as with many things disruptive, has to do with frustration,” she explained. “It has to do with envisioning a 10- to 20-year opportunity.” Seedcamp is a pre-series A fund that’s focused on — but not limited to — supporting European start-ups with strong leadership teams, impactful tech ideas and high growth potential. Seedcamp brings more than just capital to the table; it introduces companies to investors with sector-specific experience and long-term vision. It has created an ecosystem where founders can as easily find mental health support as mentorship and networking opportunities.

In 2007, Sohoni and Saul Klein co-founded Seedcamp, a UK venture capitalist firm with a portfolio including unicorns (start-ups valued at more than $1bn) such as Revolut, TransferWise and UiPath. Seedcamp-backed companies have, by May this year, secured more than $4bn in follow-on funding.

Over the past decade, Sohoni and the Seedcamp crew have cultivated relationships with some founders with world-changing potential. “Day-to-day, I work with our team and our companies on wide-ranging topics that help push them from those difficult early days into being household names,” she says. “I love the process of building something from nothing, which takes nothing short of excellence.

When Sohoni first crossed paths with Klein, she found that they shared a common mission to shift mindsets and boost support for start-ups in Europe.

“At Seedcamp, we get to do that over and over again, across many different sectors. It’s exciting to see hard work and game-changing connections come together.” CFI.co | Capital Finance International

“On top of that, companies don’t put maternity policies in place early enough. They don’t consider handovers properly. All in, the sheer cost of childcare is so daunting it is no wonder one parent often drops out of the typical workforce.” Sohoni speaks from experience, as the mother to two young boys born some five years apart. She took three months of maternity leave for her first child, but was working online almost immediately. For baby number two, she took six months of fully paid maternity leave, and rarely logged-in online or went into the office. There are benefits and trade-offs to each approach, she now recognises, and mothers are often forced to choose between nurturing family or advancing professional ambitions. “Being one of the very few women founders of a top-tier VC fund, it is a difficult feeling to accept,” she admits. “And not even the most empathetic man or father can attest to the experience of it. Essentially you feel lapped in a marathon, and it is very difficult to come back from.” There may never be a “right time” for working women to have kids, but Seedcamp — where working mothers make up 40 percent of the team — offers some flexible and practical options. 43

> HADIYAH MUJHID CEO AND FOUNDER OF HBCU.VC George Floyd’s Death Brought in Flood of VC Offers for Black Founders in US

Hadiyah Mujhid is CEO and founder of HBCU.vc, a not-for-profit organisation that helps African American and Hispanic students become technology entrepreneurs and access venture capital. The acronym — Historically Black Colleges and Universities — nails literal and figurative colours to the mast. HBCU.vc came to life because Mujhid had recognised a lack of opportunities for black entrepreneurs seeking venture capital funding. The year 2019 was a big one for HBCU.vc, and its budget increased from $200,000 to $500,000. The team doubled to six full-timers and three part-timers, but things started to fall apart as the world went into lockdown. Mujhid even met with her colleagues to forewarn them of a probable shutdown because of a lack of funds.

is driven by natural curiosity and a love of problem-solving. Her motto is “stay curious and keep learning, whatever your age and situation”. She has spoken at conferences and has been featured in Black Enterprise, Crunchbase and Entrepreneur Magazine. The problem facing black entrepreneurs in the US is that investors place funds in their own networks and recipients do the same. They are predominately white, and this can result in people of colour being locked-out. Not much more than one percent of VC-backed companies have black founders. Blacks are generally poorly represented, even in “goahead” companies such as Google, Facebook, and Twitter. Mujhid points out: “So many organisations cite diversity as a core value but fail to understand that the composition of their decision room works against this.”

with TechStars to offer start-up weekends for HBCUs. Mujhid earned her first degree (in computer sciences) from the University of Maryland East Shore, which historically is a place of learning for black students. She went on to study for her MBA at Drexel. Lockheed Marten offered her a job as a software engineer upon graduation, and she spent 10 years working on aerospace projects. Although coming from a low-income family, she often describes herself as privileged — essentially for being able to follow her interests. Lockheed was not a purpose-driven career choice — that would come later — but she got her start after an interview with a fellow African American, which was a rather unusual situation for both parties.

George Floyd’s death changed all that. Since his murder there has been a sudden rush of VCs eager to invest in black founders. Mujhid asks, “Why did it take this tragedy to bring them in?” The short-term future of HBCU.vc is now assured and there is a growing group of donors. The hope is that the trend will endure, and the support turn out to be meaningful and substantial. Mujhid’s passion is to create economic opportunities for her community, and she 44

HBCU.vc students can be paired with a VC mentor, internships are possible, and they can act as investors in their own college communities. A one-year HBCU.vc programme helps them to identify investment opportunities, conduct research, and make real funding decisions. Mujhid does not expect applicants to have any experience in VC or start-ups, but rather a natural curiosity and passion to learn about the tech industry. In 2019, HBCU.vc launched a partnership CFI.co | Capital Finance International

After a few pay cheques and the accumulated savings of a frugal lifestyle, Mujhid was able to finance the purchase of a home and over the years ended up with a further three rental properties. After Lockheed she cashed out and moved to the West Coast — and the rest is history, or at least her story. Many white VCs pay lip service to the needs of future black entrepreneurs. Hadiyah Mujhid and HBCU.vc are expecting much more.

Summer 2020 Issue

> AMBAREEN MUSA FOUNDER & CEO OF SOUQALMAL From Mauritius with Love for Fintech, and lots of Ambition Souqalmal raised $10m during its latest series B funding round with the help of three major investors: GoCompare Group (a listed UK aggregator with scalability experience), RTF (Ryiad Taqnia Fund, a lead investor with a Saudi market advantage) and UAE Exchange (a financial services provider with a customer base of 15m). Faisal Galaria, the chief strategy and investments officer of GoCompare, commented on the companies’ shared customer-centric focus and drive to save users time and money. RTF’s Ivo Detelinov called Souqalmal “an ambitious, sharply focused, and very efficient organisation”. Promoth Manghat, UAE Exchange CEO, praised Musa for her contagious energy and dubbed her the “new economy leader”. As a regular guest writer for Entrepreneur Middle East, Musa shares advice for those in the start-up and scale-up stages of business. She talks about her mistakes so others can avoid making them, and advises founders to recruit a good crew, and entrust them with responsibility. “The hardest part was to trust someone else with what I believed was the core of my business,” she wrote. “In the early stages, a lot of the growth revolves around the founder, but trying to do it all alone was not necessary.” She encourages entrepreneurs to seek a cofounder, someone with a similar vision to share the burden, and urges them not to underestimate the funding process. Above all, she says to trust those “gut feelings” that tingle and twitch when something isn’t right.

Ambareen Musa, founder and CEO of financial aggregator marketplace Souqalmal, sees a glowing future for fintech — and she believes in striking while the iron is hot. “The opportunity for fintech is absolutely massive,” she told Forbes magazine. “It’s only at the start, we’re extremely nascent at the moment, and as regulations get better, as customer adoption gets better, and as even the technology gets further and further, I think we have an opportunity that cannot be missed.” Mauritian Musa is an entrepreneur with an international background. She studied in Australia, graduating with a business degree and launching her first start-up shortly after. Musa moved to London in 2004 and worked for GE’s financial arm, GE Money, covering various positions in marketing, financial literacy, customer advocacy and e-commerce. She is

credited as the force behind the UK’s first online financial literacy initiative, moneybasics.co.uk. She moved to the UAE in 2008 and consulted for Bain & Company Middle East on financial services projects. Musa was surprised to find no single comparison website for financial services in the region. Within four years, she had assembled a team and attracted the funding to bring Souqalmal to life. Souqalmal has been hailed as a market influencer and champion of financial inclusion and education. It’s the largest financial aggregator marketplace in the region, boasting more than 3,200 retail banking, telecoms, insurance and education products from providers across the UAE and Saudi Arabia. The company arms consumers with a transparent marketplace and unbiased data to enable commitment-free comparison shopping of financial and insurance products in the MENA region. CFI.co | Capital Finance International

Since its 2012 inception, the aptly named company — which means “money market” in Arabic — has diversified its service offering and expanded its market presence in accordance with a strategic growth plan. Its insurance business division registered 800 percent growth from 2018 to 2019, while efficiencies in marketing and service delivery have cut customer acquisition costs by 80 percent. It has introduced three new insurance verticals (travel, yacht and bike) to its growing list of comparison services. “We’re on track to building a successful business, one that’s built to last,” she said. “Whether it’s a new service, a new geographic expansion, or a new project that’s set to shake things up in the industry — there’s always something exciting brewing at Souqalmal.” Musa serves on the UN Secretary-General’s Digital Financing Task Force to promote the Sustainable Development Goals. 45

> NICKY GOULIMIS COO AND CO-FOUNDER OF NOVA CREDIT Enabling Access to Credit for Migrants The co-founder and COO of Nova Credit, Nicky Goulimis, knows from personal experience the challenges that migrants face in adoptive countries and cultures. Goulimis was born in Greece and migrated to the UK with her family as a child. Her formative years were spent in Britain, where she witnessed her father’s battle to establish a software company. It was a crucial awakening to the hurdles that come with migration and bureaucracy. But the experience did nothing to soothe her itchy feet, and her travelling days were just beginning. After graduating from Cambridge University (English literature and management studies), she took a post with Ethiopia’s Ministry of Agriculture, working on financial access initiative for smallholder farmers. In 2014, after a stint as a consultant with Bain & Co, working with retail banks, she continued learning and travelling, signing up for (and completing) an MBA from Stanford University in the US. Here again, Goulimis found the sort of issues which confront migrants: she was forced to begin her financial life anew. Credit access is a major obstacle for non-American citizens, and she was turned down for credit cards — despite an excellent record in the UK. To help others in her situation, she founded Nova Credit with Misha Esipov and Loek Jonssen — also international students at Stanford — who were inspired by a class project on the hurdles of migration. The US is home to 46m migrants, with an estimated 10m having arrived in the past five years. The Nova Credit team had spotted a trend worth pursuing on behalf of those with no access to a valid credit history from their home countries. Nova Credit is a platform which enables immigrants to transport credit histories wherever they roam. And Goulimis’ greatest sense of accomplishment comes from knowing that Nova Credit provides a real solution. She revels in accounts by platform users of finally meeting with success over trivial but taxing challenges such as rental deposits, loans or credit access. The company is expanding to New York — and further afield. There are plans for international offices, and Nova Credit’s supported countries already include the UK, Australia, Brazil, Canada, India, Mexico and South Korea. The goal is to have a large presence in all major migrant hubs, including London. Nicky Goulimis has been driven by the belief that financial health should be universal, and accessible to anyone, anywhere in the world. Nova Credit is the method and the mission in achieving that goal. 46

CFI.co | Capital Finance International

Summer 2020 Issue

> JENNY LEE MANAGING PARTNER OF GGV CAPITAL ‘Geek’ Mentality Coupled with Passion for Disruption Makes a Neat Niche The Forbes Global 100 VC Midas list ranks the world’s best dealmakers in hi-tech and life science venture capital investors. Jenny Lee has made it to number 10 — the highest-ever female ranking. The managing partner of GGV Capital, Shanghai, is consistently recognised among the world’s top 100 venture capitalists of either sex, and focuses on innovative tech, robotics and AI start-ups. Lee describes herself as “a geek” who is always on the lookout for disruptive technology and passion in the entrepreneurs with whom she works. The Cornell University and Kellogg School of Management graduate has helped 10 early-stage companies to go public over the past 15 years, and she has been involved in a good number of M&A exits. She established the first GGV office in China and reopened its Singapore presence just last year. There are three general partners of GGV in China and another three in the US, but the company’s focus is not on countries but on sectors, and seeking out talent. Lee’s view is that there are important insights to be gained from all cultures. Her strong experience in operations and finance situate her well to support board members and entrepreneurs in China. She received Business China’s Young Achiever award for developing relationships between that country and Singapore through technology and investment. She is a board member of eHang Technology, Keep, Kingsoft WPS, niu.com, Phononic, Xiaozhan (education), 51zhangdan (finance) and UC Web, until it was acquired by Alibaba. E-commerce is important to GGV. In 2003, it was attracted by the charisma and vision of Jack Ma and became an early investor in Alibaba. At the time there were less than 10m internet users in a Chinese population of more than a billion. The challenge was to get more people online, and purchasing. In the past 17 years, GGV has invested in e-commerce companies in China and the US — but it has pursued an interesting trend: “nononline” expansion. With labour costs rising, enterprise services are increasingly important in both countries. GGV is helping SMEs adapt to outsourcing and software solutions. There is also a social interest focus at GVV, which includes gaming, and an understanding of how traditional business can change and prosper through online opportunities. Frontier tech interests for Lee and GVV include transport disruptions and autonomous driving. Twenty years ago, Lee — who trained as an electrical engineer — worked on the design, build and testing of drones. Industrial automation, or

robotics, is getting a big push from the Chinese government, and GVV is active in the concierge and hospitality sectors. Artificial intelligence interests at GVV are less about hardware and more about the potential of machine learning. The company is interested in finance applications such as the detection and reduction of credit card fraud. Lee characterises herself as “always curious” about coming trends, and credits herself with an ability to suspend disbelief when talking to founders. Her company’s Discovery Fund invests in 20 to 30 early-stage businesses each year. For later rounds, GVV is prepared to write cheques of CFI.co | Capital Finance International

up to $50m. Typically it looks to be lead investor with board representation. When not investing, Lee enjoys travelling the world and living in the wilds. Travel for her is not just about meeting people, it’s about the majesty of nature, and gaining a better understanding of our planet. She maintains the perspective that there can never be an entity that is too big to fail. There will always be a place for start-ups to engage the market, focus, make a difference, bring change, and disrupt. Wherever the founders of nascent business can be found, Jenny Lee will be there too, ready to listen. 47

> Europe

Germany to Support Derailed EU Economies Looking to score without breaking a sweat, European politicians of almost every ideological persuasion will sometimes turn on Brussels, assigning blame to the union for every conceivable domestic ill and castigating it for their own failings. Unable to put up a meaningful defence to the barrage of accusations and criticism, the EU plods doggedly on, convinced that a Europe of individual — and bickering — nation states stands no chance in a world steered by superpowers.

oomsayers never tire of predicting the EU’s imminent demise and the “colonisation” of the old continent by China or the United States, both of whom could do without a third wheel. After their first dissonant response to the corona pandemic, the 27 remaining member states of the union seem to have belatedly agreed to co-ordinate their efforts in avoiding a second coming of the virus, rebuilding the economy, and staving off outside bargain hunters. The EU is, of course, famous for finding compromise solutions at the eleventh hour and kicking the proverbial can down the road in case differences cannot be bridged. In June, the European Commission rediscovered its sense of purpose and unveiled the outlines of an ambitious and costly plan to repair the economic and financial damage caused by extended lockdowns. The initiative is necessary but potentially divisive, as was shown in May when the so-called Frugal Four, led by Dutch Finance Minister Wopke Hoekstra, staged a revolt of sorts by refusing to consider any form of debt and/or risk-pooling. Hoekstra did so rather bluntly, offending southern member states such as Italy, Spain, and Portugal and, in the process, exposing an unstable fault line. In the end, German Chancellor Angela Merkel had to intervene. Much to the Frugal Four’s surprise, she came down on the side of the southern have-nots. After Merkel had properly admonished Dutch Prime Minister Mark Rutte, who was told to stop throwing a childish tantrum, the chancellor indicated that her country would support the issuance of shared debt by the European Commission, backed by future member state remittances. Merkel reiterated that Germany would not lack solidarity with Italy, Spain, and other countries whose economies have been derailed. The repositioning of Germany, previously vehemently opposed to any form of debt and risk-sharing, is nothing short of revolutionary. It was, however, inevitable and expected. Until recently, a discrete backer of the Frugal Four (Austria, Denmark, Sweden, and The Netherlands) and the Hanseatic League 2.0 — another informal grouping of fiscally prudent countries — the German government has repowered the Berlin-Paris axis in its conviction that nothing good will result from an experiment in European brinkmanship. Perhaps fooled by the country’s rather stern attitude to debt, displayed during the Greek banking crisis of 2015, and its almost obsessive dedication to fiscal rectitude, the Frugals may have overlooked the single-most important consideration of German foreign policy: the constitutionally mandated commitment to further European unity. Berlin considers anything or anyone threatening the integration of Europe as inimical to its interests. This also helps to explain why the British were unable 50

"The repositioning of Germany, previously vehemently opposed to any form of debt and risk-sharing, is nothing short of revolutionary." to enlist German support during their exit negotiations. The countless appeals made by London went unanswered, with Merkel repeatedly showing a slight annoyance at the UK’s inability to understand her diplomatically awkward position. Apart from foreign policy considerations, Germany is more aware than most that its exportorientated economic model needs healthy markets to prosper. Not even Germany can afford to let the economies of Spain and Italy founder. The troubles experienced by Greece five years ago are mere pinpricks compared to the potentially devasting consequences — financial, economic, and political — of large Mediterranean markets crushed under the weight of debt and/or austerity. The European Union has been designed in such a way that, once joined, no member state can leave the collective embrace without inflicting severe damage on its economy and society. By condemning former enemies France and Germany to mutual dependency, war was made impossible. Although most Europeans now think of war as an outlandish affliction to which they are immune, the absence of armed conflict is still a relative novelty on a continent scarred by centuries of strife. Voting for Brexit, the British may have considered the European Union merely as a common market with a few added, and undesirable, embellishments. Most continental nations know better and realise its importance, although they are often reluctant to admit their dependence on a project that ultimately seeks to supplant the sovereign nation state. That nation state was briefly revived after the scope of the pandemic became clear, and panic set in. Each EU member state invoked its own sovereign prerogatives in the face of the threat to public health, and formulated a bespoke response without consulting or informing Brussels. The European Commission, the executive branch of the union, was ignored by most, if not all, member states as borders closed and states dipped into their reserves to offer direct support to businesses — both big no-no’s, expressly forbidden under European treaties. It took the EC the better part of two months to reassert its authority and convince member CFI.co | Capital Finance International

states of the need for a co-ordinated response to the emergency. Paradoxically, the pandemic may yet strengthen European co-operation and integration. Eurobonds will at long last see the light of day, albeit under a different name, and that will allow the union to deploy its fiscal heft for the first time by leveraging future income from member states’ remittances to raise additional cash on global capital markets. The commission is also exploring the idea of introducing a limited number of direct EU taxes. In this vein, the French government has suggested a tax on big tech firms, while others propose additional levies on polluters to help green the continent while adding a revenue stream to assist weaker member states. The plight of Spain and Italy, and the prospect of yet another decade lost to a recession, has been central to Brussels and Berlin. However, the Frugal Four may yet have some life left. Eastern Europe, home to recalcitrant member states such as Hungary and Poland, is not altogether happy that relatively prosperous Mediterranean countries command all the attention. The Visegrád Group, which also includes the Czech Republic and Slovakia, has been observed drawing closer to the Frugal Four and their hangers-on (Finland, Slovenia, and the three Baltic republics) to form a mighty bloc of smaller nations that together have the voting power to stop the Berlin-Paris axis from steamrolling the opposition. Aware of the brewing unrest, German and French diplomats are increasingly concerned over the growing rift that pits the EU’s constituent parts against each other and may either cause lasting damage or result in an ineffectual policy that leaves two of the union’s largest economies mired in recession. Inter-EU diplomacy has arguably never been more complex and challenging. The departure of the UK has emboldened the Dutch to assume the mantle of contrarian troublemaker in Europe. The Netherlands is now the fifthlargest economy of the bloc and The Hague no longer feels the need to blindly follow Germany — certainly not after that country ditched its commitment to prudent financial management. Listening to The Hague, it would appear that the Germans have gone off the deep end. The disillusionment is palpable, as is the resolve not to follow their example. However, diplomacy is not usually counted as a Dutch strength and The Hague will find it difficult, if not impossible, to keep its fellow frugals in line once Germany and France start applying the pressure. The good news, of course, is that the monetary firepower displayed by the European Central Bank will soon get company in the form of large-scale fiscal interventions to prop-up the sagging and broken economies of the struggling member states. Give a little, take a little is how the European Union works. i

We combine long-term thinking with innovative action. For a prosperous future.

BLKB. The future-orientated bank. blkb.ch

> Redefining Activism:

Why ESG is Good – But No Longer Enough Matt Christensen, head of impact strategy and responsible investment at global asset manager AXA IM, talks to CFI.co about hard knocks, motivation and worthy ambitions.

hen I was a kid, I loved to sprint – after all, who doesn’t want to finish first? Later, as a cross-country runner, I learned the value of pacing and the importance of seeing the big picture when aiming for the finish line. The further away your goal, the more important a robust methodology becomes. True to human nature, when considering whether to take an ESG approach to investing, business professionals – and their respective institutions – often won’t see the benefit of integrating sustainability unless they have experienced failure when focused on the short-term. For me, that revelation came during the first major financial crisis of my career, nearly two decades ago, when the dot-com bubble burst. After riding a wave of success and rapid expansion, I was suddenly forced to shut-down a business and make people – including myself – redundant. My next job provided a deep dive into the stillnew field of responsible investment. It soon occurred to me that the previous failure could have been mitigated had we properly considered ESG factors as part of the business model. It forced me to consider the value of a business beyond pure shareholder-based metrics. I learned that a raft of new factors had to be considered. In the investment world, this shift to long-term thinking is starting to happen on a broader scale. Over the past decade, we have witnessed the mainstreaming of sustainability across all asset classes and a growing number of investors who are incorporating ESG criteria into portfolio management. They are already convinced of the wider value of integrating these factors into their decision-making, and are refocusing on sustainability and responsibility. The market is witnessing a transition from the practice of excluding investments that don’t meet ESG criteria, to an active integration of 52

investments that do. While this is a definite sign of progress in our industry, it still isn’t enough. REDEFINING ACTIVISM The next frontier must see the investment community redefine activism, and what it means to be an active manager. We must be proactive to ensure that investments seek to achieve positive impact while fulfilling our fiduciary duty, which as asset managers must be to maximise returns for our clients while we better incorporate the needs of society more broadly. The term “activism” can elicit polar responses. The first group might associate the term with the activism of initiatives such as climate, or social NGOs. The other group might associate the word with the short-term activism of financial services firms – often acting not in the long-term interests of the company. Activism is a loaded term, and its meaning depends upon who is wielding it. But there is an opportunity for a new role for activism in financial services that must be encouraged – activism that drives a constructive dialogue. This will facilitate a less limited and more sustainable, long-term form of capitalism. This new wave of activism is growing, driven by investor demand for the asset management industry to consider impact beyond financial returns and the need for managers to demonstrate their active approach. In private markets, we have focused our entire strategy within the equity asset class on an integrated approach which incorporates ESG due-diligence with investing aligned with the UN’s Sustainable Development Goals (SDGs). This mindset is consistent with market rate returns that demonstrate long-term results with a focus on specific health, financial inclusion and climate metrics. Across fixed income, we see growth in sustainable active management, driven by CFI.co | Capital Finance International

demand for proof that loans have been used to achieve the SDG advancements they were aimed at. This also drives policy and industrywide commitments. In the summer of 2019, the International Capital Market Association updated its guidelines to require green bonds to have greater disclosure and transparency – and the industry is awaiting the European Commission’s publication of its green bond standards. The green bond market is growing, and there are many that exemplify sustainable active management. At AXA IM, we are also calling for transition bonds, where issuers in some challenged industries don’t have enough assets to come to market with a green bond, but want to become greener. We see a huge opportunity to deliver real impact for companies trying to become more sustainable.

Summer 2020 Issue

Head of Impact Strategy and Responsible Investment: Matt Christensen

This is driving a change of mindset in the industry, but we need to see this approach taken in the public equity space as well. As pressure is mounting on active managers to differentiate and be more explicit in their ESG activity, there is likely to be a shift to more highly concentrated portfolios with high active share. This will mean more explicit correlation between voting and engagement – to hold companies to account with regard to the impact they are having on their employees, our communities, and our environment. This evolution is where ESG and SDG begin to overlap, from a heightened sense of active ownership and long-term engagement. THE JOURNEY TO IMPACT In our own journey to active ownership, we have made incremental adjustments to our

voting and engagement. Our strategy is not just about retaining an asset that ticks an ESG box, but hold it to account if it’s not taking the right approach to issues such as diversity and inclusion, climate change, biodiversity and our ambitions around SDG 13: to strengthen resilience and adaptive capacity to climaterelated hazards and natural disasters in all countries. AXA IM is committed to achieving 100 percent ESG integration in open-ended portfolios by the end of 2021. We believe that our commitment to sustainability must extend beyond our investment approach and be truly integrated in how we manage our own business. How companies are contributing to meeting the SDGs is fast becoming a market expectation. Our core ambition is to incorporate and follow ESG criteria across all aspects of our business, not just our investment teams. Over the past CFI.co | Capital Finance International

10 years, we have committed to reducing our own carbon footprint and becoming more environmentally friendly. We are also developing innovative and pragmatic impact-investment funds and policies. We measure our activity and hold ourselves accountable, and we’re working to create better tools, not just for our business but for the market overall. The journey to a “better tomorrow” requires boldness and accountability. We must rethink our duty as fiduciaries and practice a new kind of activism – not just within the confines of our investments, but also within the philosophy and practices of our own businesses. The financial services industry needs to wake up and realise that positive and negative screenings are no longer enough to ensure a healthy future for our global community and the world we live in. Slow and steady wins the race – and thoughtful, long-term effort leads to success. i 53

ICONIC TIMEPIECES With classic Scandinavian timepieces and timeless men’s accessories, Georg Jensen prides itself on having designs that every gentleman will truly appreciate. 54

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W W W.G E O R GJ E N S E N .CO M

Summer 2020 Issue

> BAWAG Group:

Austrian Front-runner Bank Applies Compassion During Coronavirus Crisis

With 2.5 million customers, BAWAG PSK is one of Austria’s largest banks, operating under a recognised national brand.

AWAG Group AG is the listed holding company of BAWAG PSK, headquartered in Vienna, Austria, with the main brands and subsidiaries easybank, easyleasing and start:bausparkasse in Austria. In Germany, BAWAG Group operates under the Südwestbank, BFL Leasing GmbH, Health Coevo AG and start:bausparkasse brands and subsidiaries with Zahnärztekasse AG in Switzerland. BAWAG Group applies a simple, low-risk, efficient and transparent business model focused on Austria, Germany and developed markets. The bank serves retail, small businesses and corporate customers, offering comprehensive products covering savings, payment, lending, leasing, investment, building society, factoring and insurance. BAWAG PSK products and services are available through online and offline channels. Delivering simple, transparent and best-in-class products and services that meet its customers’ needs is the consistent strategy across all business units. RECENT DEVELOPMENTS After a record year in 2019, with a profit before tax of €604m (up 6% vs. previous year) and a Cost-income ratio of 42.7%, BAWAG Group entered into the coronavirus crisis from a position of strength, having transformed the business over the years to be able to withstand economic downturns. The group is working closely with various governmental bodies to tackle this public health crisis, supporting customers and the real economy, and protecting the franchise. The managing board waived any potential bonuses for 2020, having already waived all

"BAWAG Group applies a simple, low-risk, efficient and transparent business model focused on Austria, Germany and developed markets." bonuses for 2019. A special rewards-programme for front-line employees working in the branches has been instituted. It has not tapped into any government furlough, employee subsidy or special assistance programmes as the group considers that these are earmarked for those most in need. SHARE BUYBACK A share buyback of €400m was completed in Q4 of 2019, the first of its kind in Europe. On October 18, 2019, the European Central Bank approved a share buyback of up to €400m, which was then executed as a voluntary partial tender offer. In total, 10,857,763 shares were bought back and cancelled, equivalent to some 11 percent of the company’s shares outstanding at that time — a milestone across European banks. BAWAG Group’s business model is based on the strategic pillars: Core Market Growth • Foundation is Austria, with a focus on developed markets • Focus markets: DACH region, Western Europe and the US • Growth into current account market share entitlement of up to 20 percent in Austria, across core retail products • Growth drivers: partnerships and platforms, CFI.co | Capital Finance International

enhancing digital engagement, and pursuing earnings-accretive M&A, meeting the group RoTCE target of more than 15 percent Focus on Customer-centricity • Build multi-channel and multi-brand franchise from branches-to-partners-to-brokersto-platforms-to-digital products across the entire retail & SME franchise • Physical network focused on high-touch and high quality advisory • Leverage technology to simplify processes and reduce complexity • Enhance analytical capabilities to improve customer experience • New retail partnerships and lending platforms to provide 24/7 customer access Efficiency Drive via Operational Excellence • BAWAG Group's DNA is to focus on the things that can be controlled: the “self-help” approach to banking • Simplify, standardise, and automate online and offline product offerings • Create frictionless processes: wing-to-wing digitalisation focus across the bank • Continuous optimisation of processes, footprint, and technology infrastructure • Embrace various forms of technological change that will transform banking Secure Risk Profile • Maintaining strong capital position, stable retail deposits and low risk profiles • Focus on mature, developed and sustainable markets • Apply conservative and disciplined underwriting in markets the group understands best • Maintain fortress balance sheet • Proactively manage and mitigate non-financial risk. i 55

> Recycling Our Love of Two Wheels:

Will the Lockdown Bike Boom Last? By Tony Lennox

“B

old actions, which would have been almost unthinkable before this pandemic, are now a logical necessity. I just can’t see any realistic alternative to putting in place effective measures to enable mass cycling.”

So said Steve Garidis, the executive director of the UK’s Bicycle Association, as the Covid-19 pandemic gripped Britain in March 2020. He was applauding the government’s pledge to 56

stump-up £2bn for a package of post-corona measures to get Britain biking — ushering in a new “golden age of cycling”, according to Prime Minister Boris Johnson.

saddle. The previously under-represented trade of bicycle mechanic was also given a boost as thousands of people retrieved old bone-shakers from their garden sheds for repair.

Halfords, Britain’s biggest cycle retailer, has reported an extraordinary increase in trade, with the sale of bicycles and related equipment rising by 500 percent on the same time last year. Many independent bike store owners struggled to keep up with demand as lockdown Britain took to the

There has also been a parallel boom in the sale of static bikes, exercise bikes and indoor cycling machines. London-based Sigma Sports reports that sales in this area have risen by 977 percent during lockdown. Some machines even come with VR screens which allow the rider to

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Summer 2020 Issue

(virtually) cycle through Alpine scenery or across Arizona’s Painted Desert, among other exotic routes. Lockdown produced disagreeable sensations for some: isolation, loneliness, fear, panic and depression. For others, the near-empty roads, peace and quiet, and positive effect on the environment pointed to an opportunity for a different way of life. Many believe a social turning point has been reached. Is society really prepared to go back to how it was before? Boris Johnson was reacting to this question when he produced his raft of proposals, including the establishment of a cycling and walking inspectorate which could compel local councils to adopt cycle- and pedestrian-friendly strategies. There is also talk of pop-up cycle routes, vouchers for bicycle repairs, government subsidies for the purchase of bicycles and electric bikes, and the adoption of French-style zebra crossings at side road junctions to give priority to walkers and cyclists. Many businesses are introducing cycle-to-work schemes, which give employees tax benefits for swapping cars and public transport for two wheels. Back-to-bike enthusiasm is blossoming around the world; in France, 400 miles of new cycle path have been created (and christened “corona cycle-ways”). The current craze isn’t strictly a new phenomenon. In the early 1970s, the OPEC oil crisis collided with a growing hippie culture which saw the automobile as an ecological evil. As a result, millions of bicycles were sold across the US, and many states introduced legislation to convert some urban roads into cycle routes. There was a real sense that a watershed had been reached, and ambitious schemes to turn the US into a “new Netherlands” were confidently pursued. Steve Jobs, the founder of the Apple empire, was an enthusiastic supporter of the trend. He said that the computer was “the most remarkable tool we’ve ever come up with… the equivalent of a bicycle for our minds”. That cycling revolution peaked in the mid-70s, then evaporated as oil prices returned to normal. Americans went back to their automobiles.

"Halfords, Britain’s biggest cycle retailer, has reported an extraordinary increase in trade, with the sale of bicycles and related equipment rising by 500 percent on the same time last year." CFI.co | Capital Finance International

The last time Britain experienced a golden age of the push-bike it was more closely connected to the fact that hardly anyone could afford a car. A bike was the affordable options for getting to work. Has the country really taken the first steps towards an age of mass-cycling? Or will the biking boom stimulated by the coronavirus similarly vanish as memories of lockdown and isolation fade? Of course, recession could prompt a return of cycle use — for the original cost-related reasons… i 57

> From Law to Luring Investment:

One Man’s Determination to Demonstrate Benefits of an Unsung EU Destination Stamen Yanev, CEO of InvestBulgaria Agency (IBA) since January 2015, began his career as an attorney-at-law, specialising in the area of M&A and investments.

BA is a government organisation established to attract foreign investment. The goal was to assist project set-up and to ensure successful project development that would lead to employment, exports, and knowledge-transfer in Bulgaria.

“All parts produced for the automotive industry are exported, and 90 percent of the cars in Europe use parts produced in Bulgaria.” There are 250 automotive sector companies in the country, with 65,000 employees. Last year, investments were made in areas of high unemployment, mainly in northern Bulgarian destinations such as Lovech, Botevgrad, Pleven and Rousse.

“We help potential and existing investors explore the investment opportunities in Bulgaria and carry out greenfield investment projects,” said Yanev. “Our agency reports directly to the Bulgarian Ministry of Economy. As a government institution, we have direct access to all Bulgarian government and local institutions to facilitate the entry and development of business in the country.” InvestBulgaria Agency’s services are provided free-of-charge. The firm offers detailed information about Bulgaria as a business destination and offers full information assistance. Also included in its services are site identification and selection, and support with applications for investment incentives. The agency links clients with suppliers and prospective partners, and directly liaises with central and local government, branch chambers, and NGOs. IBA’s team has been recognised for its consistent dedication, and 2019 was a dynamic and productive year in attracting investment. Positive developments were implemented under the Investment Promotion Act (IPA) and 31 projects providing 2,858 new jobs were certified.

Helping to attract investment is the fact that Bulgaria is an EU country. “The tax regime, combined with the availability of skilled labor and the lowest operating costs in Europe, ranks us among the top destinations for business and investments,” says Yanev. CEO: Stamen Yanev

Investments are focused on the manufacturing, IT, mechanical engineering, electronics, chemistry, storage and warehousing sectors. The certification process has led to an expansion of business in Bulgaria, including attracting car giant Volkswagen to the country – underscoring the trust that investors increasingly have in the country’s business environment, says Yanev. “This gave us a confidence that time when not only car parts, but whole vehicles, will be produced in Bulgaria is coming,” he says. “In the past year we have recorded a huge growth in exports, which is mainly the result of realised production by foreign investors in Bulgaria.

The InvestBulgaria Agency was unanimously chosen as a regional World Association of Investment Promotion Agencies (WAIPA) director for Eastern Europe. Yanev’s professional trajectory developed via some of the world’s major international universities and consulting companies. He received a Master's degree in Law (cum laude) from the Sofia University “St Kliment Ohridski”. Yanev specialised in European and English law at the University of Cambridge, and European Law at the ASSER College Europe (Netherlands), the University College London (UK), the European University Institute (Italy). i

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Summer 2020 Issue

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> BlueRock:

Lasting Value — in Terms of Investments and Firm’s Policies and Management

outique real estate investment house BlueRock was founded in 2010 with just a handful of assets; today it has more than €1.2bn in AUM.

BlueRock is located in the heart of Zurich, and caters to the needs of high-net-worth individuals, family offices and institutional clients. Besides providing access to off-market properties, it accompanies investors throughout the process — from the very start. 60

Investment is possible across two funds and several joint-venture vehicles on a deal-by-deal basis. The company pursues commercial and residential strategies within Europe, with a strong focus on German real estate markets. Over the past few years, European real estate markets have seen phenomenal growth and rates of return. The steady uplift of valuations led the company to develop concise investment guidelines for its clientele. A strong focus CFI.co | Capital Finance International

is placed on maintaining the excellent relationships it has with all stakeholders in the value chain. BlueRock co-founder and managing partner Ronny Pifko believes that a key element in the company’s success has been collaboration with local experts in all transactions. It provides access to some unique properties and assures the ready identification of hidden values and potential issues.

Summer 2020 Issue

The company focuses on A- and B-locations in German markets, offering a formidable riskreturn ratio for investors. Each investment undergoes a thorough due-diligence process, assuring value-add potential and security. Emphasis is also placed on good micro-locations, along with purchasing multiples that reasonably allow for future appreciation. BlueRock faces no liquidity pressure and processes just a few select investments each year. This has allowed some outstanding returns and attracted a steady client base. Digitalisation complements BlueRock’s firm investment guidelines, and remains a key focus for the company’s future. In 2020, BlueRock group has invested in new software to build on strong client relationships and reporting processes. In the real estate market, where many investments are highly illiquid, the fast and reliable provision of information is something often overlooked. BlueRock group emphasises digital solutions that allow for the complete integration of all its investments into existing portfolios of family offices and banks. This allows for the investor or wealth manager to keeping a clear overview of investments and monitor any changes — while preventing outflows of assets. Feedback has been consistently positive, and Pifko has seen confirmation of his belief that keeping up with the latest digital developments is crucial. Having grown rapidly, and organically, the company is increasing its focus to provide fresh investment solutions across the Berlin residential property market. The company has a long track record here, covering more than €200m in deal volume. Legislation — such as the newly implemented rent cap and the Milieu Schutz protection — have disrupted the investment environment. Interesting opportunities for the mid-long term have arisen, with new developments at a low and a consistent demand for housing. The company is set to acquire assets below market value, unlocking potential value in conversions, such as the building out an attic floor. Again, emphasis is on selecting respected local third-service providers with excellent knowledge of the market. With current property valuations still at pre-COVID levels, the company focuses on enhancing the value-chain. The strategy is projected to earn an internal rate of return of 2025 percent at central Berlin locations.

"The steady uplift of valuations led the company to develop concise investment guidelines for its clientele. A strong focus is placed on maintaining the excellent relationships it has with all stakeholders in the value chain." CFI.co | Capital Finance International

BlueRock Group has surged ahead, and shows no sign of slowing down. Recent investments in technology and human capital — BlueRock recently hired Lukas Müller as director of business development — have set the company firmly on track for future growth. The investment platform and current set up allow for a confident glimpse into the future, despite a challenging economic environment. i 61

> Putting ‘Adventure’ in Corporate Venture:

Winding Path that Leads to Industry 4.0 Revolution TRUMPF, family owned and founded nearly a century ago, is synonymous with innovation and a key contributor to the Industry 4.0 revolution.

RUMPF Venture is the corporate venture capital arm of the TRUMPF group, and deploys a team with diverse backgrounds in engineering, physics, and finance. Managing director Dieter Kraft combines many years of experience in venture capital and business excellence, leading TRUMPF Venture as a fair partner and investor.

relationships, rooted in technical expertise and market savvy, generating added value for its customers.

The company brings more to the table than just capital; it is an investor with an expansive network, deep domain expertise and proven skills in scalability. It has a pioneering spirit, and promotes developments that challenge existing business models.

For a first fund of €40m, TRUMPF typically makes an initial contribution of €500,00 to €2m initially, establishing itself as a stable partner through future investment rounds.

This shapes concepts — such as Industry 4.0 — from the very start, and provides key impetus. TRUMPF supports promising start-ups keen to play a key part in shaping the industry of the future. Funded start-ups benefit from its investor 62

TRUMPF invests internationally, ideally in investor consortiums, with a focus on early stage financing — its sweet spot is series A — as lead and co-investor.

In addition to a strategic fit, a risk-adjusted return on the capital provided is important. TRUMPF Venture strives for a minority interest, enabling start-ups to develop and grow. TRUMPF looks for high-tech companies with complementary market and technology CFI.co | Capital Finance International

values. The criteria for an investment include an outstanding team, a business model that incorporates groundbreaking technology, and business innovations characterised by sophisticated selling points — ideally with initial turnover. Additional requisites for investments are an experienced management team, scalability, and potential for sustainable growth and added value. With its network connections and industrial production experience, TRUMPF can help company founders to get started on the market, and to grow. TRUMPF focuses on start-ups that will shape the industry of the future. It is happy to work on joint investments, providing expertise in technical due diligence and assisting the start-up team to overcome technical obstacles on the path to becoming a great scaling company. i

Summer 2020 Issue

WORLD INVESTMENT FORUM 2020 INVESTING

SUSTAINABLE

DEVELOPMENT

6–10 December Abu Dhabi, United Arab Emirates

A global summit to chart the course for the post-crisis era Follow

worldinvestmentforum.unctad.org for event updates

For further information, contact wif@unctad.org CFI.co | Capital Finance International

> Rubrics Asset Management:

Core Values and Transparency Help Maintain Investor Confidence During Pandemic Rubrics Asset Management is an independent boutique investment manager, specialising in providing actively managed fixed-income strategies for institutional and private clients.

ince its inception in 2001 as part of a wealth management business, Rubrics has developed a process and delivered a track record based on the core principles of capital preservation and medium- to long-term return focus. Rubrics’ portfolios are not constrained by benchmarks, which enables the investment to focus on areas of the global fixed-income universe that offer the most attractive riskadjusted returns. Each of the products was developed within a risk framework designed to control volatility and limit drawdowns over time, delivering robust returns across a variety of market conditions. The investment team places a strong emphasis on macro considerations as the ultimate drivers of risk and performance across each of the funds. Unlike bulkier, more benchmark-orientated strategies, Rubrics has demonstrated flexibility and conviction to position portfolios in line with the firms’ broader view and risk appetite. This has enabled the funds to deliver strong relative performance over time, particularly on a riskadjusted basis. Rubrics’ products cover the broad fixed-income universe, including worldwide government, credit and emerging markets debt, with each fund housed within an Irish UCITS umbrella. Hoping to build on this success, Rubrics has launched an Irish Collective Asset Management Vehicle (ICAV) and authorised a new fund to capitalise on higher yielding opportunities in the corporate fixed-income space. The fund is authorised as an Alternative Investment Fund (AIF), and is aimed at professional investors. Rubrics prides itself on its ability to deliver an investment experience that differentiates itself from other (often larger) asset managers and ETF providers. In keeping with the investment philosophy of capital preservation and strong performance across the investment cycle, Rubrics Global Fixed Income UCITS Fund was a top performer in its peer group throughout the period of volatility caused by COVID-19, while other key investment offerings (Rubric's Global Credit UCITS Fund and Emerging Markets Fixed 64

CIO: Steven O'Hanlon

155

145 Rubrics Global Fixed Income UCITS Fund 135

Vanguard Total Bond Market ETF

125

115

105

10 Year Performance: Rubrics Global Fixed Income UCITS Fund vs Passive Fixed Income Strategy

Income UCITS Fund) delivered similarly strong relative performance throughout a challenging period. Also valuable during the pandemic, and fundamental to Rubrics’ wider offering, is its CFI.co | Capital Finance International

ability to remain accessible to clients to share market and macro insights, and to provide transparency on product performance and positioning. This strategy helped the company to maintain the investor confidence it has earned during a period of extreme market volatility. i

Summer 2020 Issue

Norton Goes Into Administration but Gets Lifeline From Indian Firm By Liam Walsh

The sun appears to have set on British motorcycle manufacturer Norton, which recently went into administration – but a silver lining has appeared for fans of the classic marque.

he brand appears to have been saved from complete collapse by Indian firm TVS Motor, which has stepped in with a £16m deal to bring Norton under new ownership.

TVS joint managing director Sudarshal Venu has said the intention is to retain the Norton name, and restore the company’s damaged reputation.

Garner accused of “inexcusable conduct”. He failed to show up at one recent Ombudsman’s hearing, and the investigation with the Pensions Regulator is ongoing. An unsavoury scenario has emerged of investors shifting retirement savings from conventional schemes to the Norton fund, with tax-free lump sums dangled as a lure. The lump sums never manifested, and unhappy savers found themselves locked into the scheme until their places were “bought” by other customers.

"An unsavoury scenario has emerged of investors shifting retirement savings from conventional schemes to the Norton fund, with tax-free lump sums dangled as a lure."

That may take some doing, and “damaged” is perhaps too mild an adjective. Norton, 122 years old and twice previously brought back from the grave in the past, nosedived into administration with some finality earlier this year as the company’s pensions schemes folded. It left 228 people without retirement savings, and some £14m was lost in the process. TVS Motor is India’s third-largest motorcycle manufacturer, behind Royal Enfield and Bajaj, and the country is one of the world’s biggest two-wheeled consumers. It is just the latest of Asian takeovers of famous British marques, with Jaguar Land Rover recently becoming part of Indian giant Tata Motors. The company has said it will invest in modern Norton models whose names have historical status – Commando and Dominator – as well as the new V4 RR. Discussions between TVS and the accountancy firm acting as Norton’s administrator, BDO, have reportedly taken place. TVS is listed in India with a market value of $1.4bn. Norton CEO Stuart Garner has been investigated by authorities over his position as trustee of the pension scheme. In May 2019, the Pensions Ombudsman wanted to interview him for allegedly using pensions funds to buy Norton shares. That conflict of interest saw CFI.co | Capital Finance International

A company called T12 Administration had been entrusted with the day-to-day administration of the Norton scheme. In a development which was somehow in keeping with the firm’s demise, it turned out that T12 was run by two men, Andrew Meeson and Peter Bradley, both of whom had convictions for fraud. (Garner claimed to be unaware of the pair’s criminal records.) Motorcycle industry publications have featured reports of Norton owners visiting the Leicestershire factory only to find their prized machines, left there for warranty repairs, inexplicably stripped to the frame, and problems had been building like clouds on the horizon for some time. The Leicestershire District Council is also reportedly out-of-pocket – to the tune of £31,180 – for unpaid business rates for the year ending March 31. A Freedom of Information request revealed that a hotel with links to Garner owed more than £60,000 in business rates. North West Leicestershire District Council chief executive Bev Smith expressed disappointment that the company had gone into administration – but added that the council would employ “the normal recovery processes” for the debt. i 65

> CORDET

Lending a Hand, Even in the Most Trying Times: Hallmark of an ‘All-Weather’ Attitude DIRECT DEALING ON THE RISE While the lending market has traditionally been dominated by banks, direct lending deals are growing swiftly across Northern Europe with 2019 seeing an all-time record of 484 European deals, a 13% increase from 2018. At the heart of this market is alternative credit specialist CORDET. Founded in 2013 to fill the financing gap left by banks and traditional credit providers facing increased regulation following the financial crisis, CORDET is a specialist credit manager, focusing on direct lending to smaller mid-market companies. This typically includes firms with annual revenues lower than €250m and EBITDA of €2m-€15m, who are based mainly in the UK and Ireland, the Nordics, DACH, and Benelux. The companies that CORDET supports are niche market leaders that focus on megatrends, such as technological change, the ageing population, or climate change. Most of its financings are event-driven, and funds are used for the purpose of acquisitions, growth capital, restructurings, refinancings or add-on investments.

"The companies that CORDET supports are niche market leaders that focus on megatrends, such as technological change, the ageing population, or climate change." banks’ appetite for lending has decreased significantly — creating an opportunity for “allweather” investors to step in and take a lead on financing. “The COVID-19 crisis has accelerated the retrenchment of banks from the smaller midmarket,” says Jakob Lindquist, Co-Managing partner and founder at CORDET. “This provides increased investment opportunities for a direct lending investor like CORDET, which benefits from long-term committed capital.” Strong performing businesses seeking capital to drive growth and value creation, need an investor that can provide structuring flexibility and react quickly to time-sensitive projects. In contrast to many lenders who have chosen to focus solely on their existing portfolios in the current challenging environment, CORDET has secured four new

deals in the 10 weeks from April to June while continuing to support existing borrowers through the pandemic. SUSTAINABLE INVESTING THROUGH THE CORDET CIRCLE OF COMPETENCE For institutional investors, CORDET offers bespoke, income-focused credit investment solutions with exposure to sustainable borrowers with low structural risk. The emphasis is on capital preservation and delivering attractive risk-adjusted returns, while minimising defaults. In order to do so, CORDET sticks to its circle of competence – investing in Northern European lower mid-market businesses in industries where CORDET has prior experience (Business Services, Consumer, Financials, Healthcare and Industrials). A primary focus is on ESG, which plays an integral part in every credit approval process. As a signatory to the UN’s Principles for Responsible Investment (UNPRI), CORDET is committed to ESG principles and is in the top five percent of managers to gain, and maintain, a UNPRI A+ rating.

Continuation of investment strategy for Fund II

WEATHERING THE CORONAVIRUS STORM The current COVID-19 crisis has emphasised the growing need lower mid-market companies have for alternative solutions like CORDET. Traditional

Product:

Secured, privately negotiated senior loans to the smaller middlemarket in Northern Europe

Target Borrowers:

ü ü ü ü

Sweet Spot:

€2-15m EBITDA €5-30m Tickets

Event driven financings:

ü Acquisitions ü Growth capital ü Add-ons

Sectors:

ü Business services ü Consumer ü Financials

Supporting niche leaders favoured by mega trends:

Earnings visibility Contractual revenues Leading market position High barriers to entry

Technological Change

ü ü ü ü

Target credit markets

Office locations

Experienced management team Committed ownership structure Attractive valuation Limited refinancing risk Stockholm

London

ü Restructurings ü Refinancings

Luxembourg

ü Healthcare ü Industrials

Increased networks

Urbanisation & immigration

Fund II: Continuation of investment strategy

With Northern Europe a key region, CORDET has a long-established presence in these core markets including Stockholm and London. Strengthened by in-depth regional industry understanding,

CFI.co | Capital Finance International

Aging population

Climate change

Summer 2020 Issue

CORDET: Selected transactions

"The risk team — headed by CCO John Sealy — gets involved in investments from an early stage, which allows potential opportunities to be independently challenged to ensure a robust approval process." and strong on-the-ground local origination capabilities, CORDET seeks to establish lasting relationships with owners, management teams and advisers. EXPERIENCED TEAM Alongside focusing on investor relationships, the CORDET team draws on hands-on restructuring experience from the past to protect investors’ capital. “The high degree of experience in the CORDET team, which spans well over 25 years in many cases, is invaluable in assessing the current investment environment,” says Magnus Lindquist, Co-Managing partner at CORDET. CORDET has four partners; alongside Jakob and Magnus Lindquist are investment professionals Christian Ovesen, head of investor relations, and Chris Birt, who is the COO. Both joined CORDET with significant experience in leveraged finance and bring origination expertise as well as

extensive relationships with financial sponsors, intermediaries, and banks. CORDET’s staff are grouped into teams: Investment, Risk, Finance & Operations, and the Investment & Credit Committee (ICC). There are 17 dedicated professionals in all, averaging 20 years of specialist industry and finance experience. The team places a lot of emphasis on its independence. The risk team — headed by CCO John Sealy — gets involved in investments from an early stage, which allows potential opportunities to be independently challenged to ensure a robust approval process. Final investment decisions are taken by the ICC, which benefits from multi-cycle experience and an aggregate of over 170 years of formal credit and underwriting expertise.

CFI.co | Capital Finance International

As a testament to CORDET’s growing reputation and brand, the team was able to successfully complete 28 transactions across 16 borrowers within Fund I with a gross debt value in excess of €650m. CORDET is currently investing from Fund II and has so far completed 10 transactions with a gross debt value of €205m. The team coinvests with investors. OUTLOOK: SET FAIR While the global outlook remains uncertain as the world continues to grapple with COVID-19 and the economic fallout, Jakob Lindquist sees reasons to be positive. “The agility and flexibility of CORDET, coupled with our extensive experience means we are perfectly positioned to inject capital where it can be put to good use for the benefit of the businesses involved and investors.” i

> Money

for Nothing

From a mere medium of exchange, money has turned into a pixie dust that, sprinkled liberally, brings economies to bloom and wards off evil thoughts and spirits.

he idea that coin is just a more refined and convenient form of barter no longer has much currency. Likewise, the notion that money has a price is rather old school.

Just 50-odd years ago, double-digit interest rates were considered normal. It was the cost of Keynesian largesse to be settled once an economy had regained the ability to sustain its own forward motion. Since then, however, money has lost most of its value. Whilst the buying power of cash remained largely unchanged, its yield decreased to almost zero and sometimes dipped below that floor. The sudden, universal, and forceful impact of the corona pandemic has shredded the rulebook that framed economic science – a pursuit that even in the best of times fails to offer the comfort of certainty. Economists have been alternately hailed and exposed as masters of a dark art who provide a bespoke roadmap to the rabbit hole that unlocks a magical wonderland where everything seems possible though nothing is real. Imagine a world where governments can spend at will because their central bank provides unlimited credit. It is what US Federal Reserve Chairman Jerome H Powell clarified in May during a video conference with lawmakers: there is essentially no limit to the financial fire power of the central bank. In that universe, austerity becomes an exercise in masochism. Money – its creation, application, and regulation – has apparently transcended economic theory. The Institute of International Finance, a trade group of banks charged with mapping systemic risk, has calculated that the global volume of debt is set to rise from $255tn to $325tn during the course of the year. Classicists who dare express concern over this level of indebtedness, are booed off the stage and denied a platform. A new taboo has been instituted as well: the ‘W-word’ is not to be mentioned. Anyone deriving lessons from the Weimar Era must be silenced. As the outward symptom of an underlying affliction and the canary in the coal mine, inflation is only of interest to historians who – as a class – must be confined to their ivory tower whilst the ‘money boys’ work their magic. Yet, this new wonderland where trillions may be spent without much thought is also a potentially dangerous place. Much like the virus doing the 68

rounds, it is both novel and uncharted. There are no case studies to provide meaningful guidance. Common sense fails as well. The recent rally of the stock market illustrates that profit and revenue are no longer determinants of price. Strangely, there is some comfort to be had from the first rule of economics – one of the few still standing – which holds that the value of any given product or service is determined by what a fool is willing to pay for it. Buyers, not sellers, set the price. Here’s another timeless wisdom. Asked how he went bankrupt, Ernest Hemingway summarised: “Two ways. Gradually, then suddenly.” Europe is, arguably, the most interesting place to watch the unfolding of the Corona Recession and the response of both individual countries and the supranational European Union. Whilst the Americans may enjoy their exceptionalism as controllers of the global mint, and China can revert to its command economy, Europe must break new ground. And it has. The corona pandemic seems to have broken the opposition to a fiscal transfer union. Prior to the outbreak, a few frugal countries in northern Europe with holier-than-thou attitudes to state finance, tried and succeeded in proving the venerable John Maynard Keynes (18831946) wrong. In the midst of an economic downtuewrn, they doggedly stuck to austerity. Expenses were ruthlessly slashed and labour costs curtailed. Consumers got told to forget about instant gratification: No Porsche Cayenne for you because that thing needs to be exported with credit provided by our banks using your money. Following that, budgets swung into black and debts were paid down or swapped for paper carrying a negative interest rate, turning a liability into an asset. Even so, the unholy urge to expand the holdings of such a lucrative asset was repressed. Other EU member states failed to see the logic of this approach and kept up their spending levels even after one of them – Greece – overdosed on the financial Kool-Aid. The pandemic currently lashing the union has exposed a curious paradox: on the one hand, all actors turned open the spending taps as far as the spigot goes whilst on the other hand, some of yesteryears big spenders now clamour for access to the hard-won excess CFI.co | Capital Finance International

Summer 2020 Issue

savings of their more frugal fellow EU members who must – so they say – show true solidarity. This may have been the last stand of the classicists, that seemingly out-of-touch and slightly esoteric bunch of economists insisting on a strict adherence to common sense. Earlier in May, Germany agreed to a French proposal that introduces eurobonds in a roundabout way and opens the gates to a future of debt and risk mutualisation. It is hard to overstate the revolutionary nature of this plan hatched by one of the continent’s least popular presidents and green-lighted by a chancellor ready to depart office. The Dutch, probably the stingiest of the frugal, have been shell-shocked into submission and no longer offer resistance other than a rearguard fight to limit the damage. The Austrians, Danes, and Swedes mumble objections but realise full well the futility of opposing the Germans who, again, succumbed to the supposed moral superiority of the French. After three quarters of a century, Paris still somehow manages to subtly invoke history to trump Berlin. Gradually, then suddenly: Europe has embarked on a novel course through wonderland and seeks to prove John Maynard Keynes right after all. A recession is fought by a spending splurge. It worked in the past and should do so again. The novelty concerns both the size and scope of the exercise and the fact that old rules regarding the cost of money and the setting of prices no longer seem to fully apply. What happens to Keynesianism when exposed to New Monetary Theory (NMT) is anybody’s guess. The lure of NMT is powerful indeed: ‘money for nothing’ (the free chicks have been scrapped at the request of #metoo) until all resources are fully deployed and inflation kicks in. The trouble for Europe is that the continent’s main economies have delegated their prerogative to print money to the European Central Bank. This is not a scenario considered by new monetary theorists. In order for NMT to work and provide future bliss for all, the present currency union must be expanded to include a tightly integrated fiscal vector so that the Eurozone becomes one and its central bank can rule without taking into account disparate and often opposing opinions on the management of monetary affairs. Germany’s apparent capitulation to France heralds the dawn of a new era for Europe. It also introduces an added layer of uncertainty. Whilst there is broad agreement that the economic rubble left by the pandemic requires a large financial bazooka to clear, the long-term consequences of smothering economies in pixie dust are unknown. Money for nothing is, perhaps, the white rabbit’s latest incantation. i 69

Pioneering sustainable bonds.

Green. Red. And Blue. 70

Over a decade ago, we collaborated with The World Bank in developing their first Green Bond. That collaboration started mainstream Fixed Income portfolios for Green Finance. Since then a lot has happened. Our latest contribution was earlier this year. Daimler chose us as their advisor for a Green Financing Framework to accelerate their shift to a zero-emission fleet. But Green is not the only way. We also advise on and arrange Red and Blue Bonds. Red Bonds address social issues like Affordable Housing and Diabetes treatments. And the Blue Bonds finance the protection of sensitive marine environments, water quality, and clean water supply. There’s a lot more to be done. And the opportunity to build the world as it should be is greater than ever. Read more about our work at SEBGroup.com

CFI.co | Capital Finance International

Summer 2020 Issue

> Ralph Hamers:

Understated Efficiency in Minding the Bottom Line On Monday, 2 November, Ralph Hamers (53) will take the exclusive side entrance of UBS Group’s imposing head office on Zürich’s Paradeplatz to enter a world that quietly exudes wealth, privilege, and power. The Dutchman, recently whisked to the uppermost echelon of the Swiss banking group, will take the oak-panelled elevator reserved for the privileged few to his vast CEO office suite.

pon arrival, Hamers may expect a culture shock: Until 30 June, he headed ING Groep which enjoys a slightly less settled reputation than his new employer does. Both innovative and slightly contrarian, the Dutch financial group in the 1980s pioneered discounted sovereign debt swaps and launched a new trade that was later refined and formalised as the Brady Plan, named after then-US Treasury Secretary Nicholas Brady, who adopted ING’s feat in financial engineering as his own.

His appointment as Ermotti’s successor took most market watchers by surprise. Hamers’s name did not feature on anyone’s shortlist. He was reportedly handpicked UBS Chairman Axel Weber who had established a good rapport with the Dutchman in the European Banking Group, a forum of high-level bankers. Both men also sit on the board of the Institute of International Finance, the finance industry’s global trade association. Messrs Weber and Hamers coincide in their dim view on the loose monetary policy pursued by the European Central Bank (ECB) and have – curiously enough in light of their disapproval – also voiced criticism on the central bank’s apparent inability to end the era of negative interest rates. These, of course, depress the profit margins of financial services providers.

Under Hamers’s leadership, ING Group may no longer have pushed the envelope, but the organisation did continue to display its innovative streak. The bank was quickly streamlined to a much more agile, modern, and – gasp – ‘hip’ financial services provider. With that, profit margins widened considerably.

Notwithstanding the somewhat inimical monetary environment, Hamers managed to double the ING Groep’s profits in six years’ time. He did so by thoroughly revamping the bank’s core retail business and moving it online. This allowed the bank to downsize its branch network in the Benelux whilst improving overall customer satisfaction. ING also moved into new markets as an online-only bank, significantly reducing the cost of setting up shop and gaining market share.

Ruthless in shedding bulk and successful in restructuring the corporate behemoth into a nimble fintech platform, Hamers’s six-year stint as CEO was, however, not entirely without controversy. In 2018, Hamers stood at the centre of a political firestorm over a salary increase proposed by the group’s board of directors which would have upped his annual take-home pay to about €3 million – an amount considered absurd by most in The Netherlands. As soon as customers started to close their accounts in disgust and droves, Hamers announced his rejection of the board’s proposed remuneration scheme and intention to forego any future salary increases. At UBS Group, where his predecessor Sergio Ermotti was paid in excess of €11 million last year, Hamers will be tasked with infusing some of his fintech magic into an organisation that suffers from both static revenues and high costs. Preparing the executive changeover, the Swiss financial group’s main concern was to ensure a smooth transition. The bank’s board had cast a wary eye on the boardroom wars at Credit Suisse, just across Paradeplatz, and the soap opera

Ralph Hamers

surrounding the aborted transfer of Andrea Orcel to Banco Santander which got slapped with a €100 million lawsuit for breach of contract by the flamboyant Italian investment banker and former chief of the UBS investment banking unit. Who better than a comparatively understated Dutchman to ensure not just a seamless change of the guard but also the discreet efficiency that UBS Group longs for? Suffering from a mild form of ‘flygskam’, Hamers avoids airline travel and prefers his BMW hybrid for moving about within Europe. CFI.co | Capital Finance International

Returning to its slightly rebellious and contrarian roots, and on the suggestion of its CEO, ING Groep ditched formality – replacing suits and ties with more casual attire – up to and including sneakers. Hamers would like banks to take a cue from tech companies and embrace their more modern and relaxed approach to business. Frank, direct, and fearless in expressing his opinions as befits a Dutchman, Hamers will now have to deal with the über-rich and family offices that may not warm so easily to his style. He will also find that monochrome suits, ties, and Oxford shoes remain much de rigueur in Zürich. However, minding the bottom line is what ultimately counts – and that is a skill Hamers has mastered better than most. i 71

> Snap-It App:

App For Plumbers, By Plumbers “Don’t chase the money”, the old saying goes, “solve a problem – and the riches will follow.” Anybody who has lived in London would know about problems with plumbing — repairs are time-consuming and expensive.

ne reason for the delays is getting the (right) spare parts to the client. Parking. Taking off again (losing the prepaid parking slot). Getting stuck in traffic. Queuing up at the point of distribution. Is the part available? Returning to the impatient client. Parking space taken. Client yelling: “I have waited all day! Where have you been?”. You get the picture. Young, award-winning London entrepreneur to the rescue. Viktor Muhhin (“Vik”, 34) set out to match this problem with an app. Qualified as apprentice plumber and now running multiple service teams, he has the experience and appreciates the challenge. Naturally competitive, he dived into the fray of app developers and created Snap-It: a retailer and a market place technology that enables tradesmen to do more by selling materials directly to tradesmen and delivering them from on-boarded partner stores throughout London.

Team: Snap-It London office

The start-up got initial seed funding of £363k from reputable and successful angel investors such as Jack Beaman (founder of Syft), Matt Smith (professional footballer, Millwall FC), and Alex Macdonald (velocity.black). Adam Blair (ex Funding Circle, SeedLegals) continue to support the venture with outstanding success. With the assistance of angel investors, and by taking a pay cut as well as investing his last savings, Vik set out to solve a problem: how to save time for plumbers who are always late. His new company has an ethos, beautiful in its simplicity — allow plumbers to buy time. The technology and the ecosystem his young team of seven is developing is more complicated. The tech team is headed up by the Finnish whiz kid Timo Tuominen (Nokia, lead developer MoneyCorp), who is focused on the app’s ease of use and smooth backend integration for the multiple users: customers, plumbers, drivers, inventory holders, administrators, and managers. The app is integrating client service with conveyer belt part dissemination from large suppliers while also allowing small independent suppliers to grow their sales. The logistics part of the app has unique proprietary algorithms that exploit the idle time of Uber, fleets and couriers and utilises geofencing for the nearest transport solution, e.g. from an airport drop-off where the expenses can be passed on. 72

"I invested in Viktor’s business because I think he’s solving a real world problem I’ve had experience with myself. I love both his plan and his team." Matt Smith Streamlining the process of sourcing, procurement and delivering (by contactless drop off) the spare parts creates value by enabling the plumber to boost the number of billable hours. Other major advantages include more costeffective customer services and transparency. Lower fuel costs and reduced traffic congestion add to the carbon neutrality and environmental benefits for London. Snap-It Limited (snap-it.app) is already an agile technology company with a proven track record of customer satisfaction at each part of the vertically integrated B2B2C supply chain. CFI.co | Capital Finance International

Turnover is on a trajectory of doubling every 12 months. Openminded and driven by nature, not resting on his laurels, Vik has set his mind set on growth. He is in the process of expanding into Birmingham (the UK’s second-largest city), and then we take Manhattan. Vik’s expansion path includes widening his catalogue trade to include boiler parts and electrical parts. In addition to scaling sales, he sees opportunities for system cost savings when consolidating the purchasing power of independent operators and suppliers through new buyer groups with better bargaining clout. The fund is seeking £1.5m by issuing new equity at a company valuation of £5m. No wonder investors are queuing up. Guided by the past value creating growth as well as the drive of the principal, this company is set to go places and solve problems. i

Summer 2020 Issue

Successful traders don't follow the pack, they time their trades perfectly and possess strong trading psychology. Do you have what it takes?

FxPro.co.uk

Risk Warning: Trading CFDs involves significant risk of loss. FxPro UK Limited is authorised and regulated by the Financial Conduct Authority (registration no. 509956). FxPro Financial Services Limited is authorised and regulated by the Cyprus Securities and Exchange Commission (licence no. 078/07) and authorised by the Financial Services Board (‘FSB’) (authorisation no. 45052) CFI.co | Capital Finance International

CFI.co | Capital Finance International

Summer 2020 Issue

> Women's Brain Project on COVID-19:

Sex and Gender Differences Paving the Way for Precision Medicine By Antonella Santuccione Chadha

On February 10, an executive committee member of the Women’s Brain Project (WBP) travelled to China, taking medical aid and scientific knowledge to help in the first COVID-19 outbreak.

hile she was not able to reach Wuhan, during her time in China she acted as a source of scientific information for the team of scientists working mostly pro bono at WBP.

When the first data became available from the affected Chinese populations, it appeared that more men than women were affected and dying from COVID-19.

"When the first data became available from the affected Chinese populations, it appeared that more men than women were affected and dying from COVID-19."

This observation was of particular importance, because WBP studies the impact of sex (DNAbased) and gender (culture-based) factors on diseases, with a special focus on brain and mental health.

Second, myriad diseases differ between men and women in terms of prevalence and incidence, symptoms, the way the disease is diagnosed, the way it progresses over time, and the way it responds to treatment.

When infection spread to the home country of two WBP co-founders, Italy, data began to show that the sex and gender differences observed in the Chinese population also applied to Italy. By mid-May 2020, it was confirmed worldwide that women face the COVID19 infection with fewer complications and mortalities, despite comprising the majority of the front line healthcare workforce.

Although it is not always discussed, nearly every aspect of modern medicine confronts such differences. The good news is that although sex and gender differences are not yet part of the public discourse across the board, more scientific evidence has been gained that such differences have major implications in the way we understand and study diseases, develop medical treatments, and design technology for medical applications.

A similar situation occurred in the SARS and MERS epidemics, but the reason why fewer women are dying due to this type of viral infection is unknown. It is hypothesised that the main reason might be that the “abnormal” immune response which is stronger in men and leads to a pro-inflammatory cascade which attacks the body of the affected patient. Other speculation includes smoking habit (more frequent in men) and men’s reported tendency to poorer hygiene measures. But the real truth is that we do not know yet. We have not learned from previous epidemics. Is this perhaps because in medicine such differences are not important? Quite the opposite. Our work at the Women’s Brain Project shows that these differences play a major and crucial role. First, sex and gender differences play a role in the trajectory and management of disease.

these aspects must be reflected in the study of drugs and the design of clinical trials. If we wish to advance drug development in the field of brain and mental health, we must embrace approaches based on precision medicine — as we are doing for the drugs under development for Alzheimer’s. This means relying on pre-selected patients, based on testing positive to specific biomarkers of the disease, such as amyloid or tau. In this regard, some of the latest scientific evidence shows that women might have more tau protein deposits per same level of tau in certain brain regions. The most important take-away of all this is that we have to move from the concept of one-sizefits-all in medicine to precision medicine. Out of the COVID-19 tragedy, we have an opportunity to transform the healthcare system. By including factors such as sex and gender, genomic and proteomics, the microbiome, ethnicity, and the socio-economic status of patients in our analyses, we will be able to achieve precision medicine.

These differences also matter in terms of care for patients. This particularly true for brain and mental disease.

This will pave the way to embrace medicine that doesn’t treat a non-existent average persona, but according to their specific characteristics.

For Alzheimer’s Disease, migraine, depression, multiple sclerosis and certain brain tumours, the majority of patients are women. Parkinson’s, Amyotrophic lateral sclerosis (ALS), and midlife stroke are more predominant in men.

The result will be a more sustainable healthcare system, reduced costs, less waste, making drugs act better with fewer side effects, and achieving a better adherence to the treatment, because the drugs will work better.

To analyse and characterise sex- and genderbased differences in such conditions is of extreme importance for the assessment of benefit and risk in treatment and intervention. This is particularly true for neurology and psychiatry, where one of the greatest unmet medical needs persists.

The WBP mission is to carry out research and advocate for sex and gender differences as a key factor to achieving precision medicine.

Coming back to Alzheimer's Disease, we see that women are not only experiencing the disease more frequently, but they display a faster cognitive decline than men, with more brain atrophy. To bring successful drugs to the market, CFI.co | Capital Finance International

This requires a systematic and meaningful analysis of sex differences in baseline patient’s characteristic, progression of the disease, and clinical outcomes — even when using digital of fluid biomarkers. We need to increase awareness of such differences and characteristics in the scientific community, the technology industry, among policymakers, and in the general 75

Antonella Chadha at the World Health Summit in Berlin.

public. We need to implement solutions such as explainable algorithms in data analysis (sometimes also referred to as explainable AI) and drug development to detect biases in systems and consequently implement mitigation strategies. The strength of WBP lies also in taking precision medicine beyond the scientific community and healthcare specialists; in fact, we recently had the privilege to introduce Julius Baer managers and select clients to our work with few dedicated webinars. Finally, we need to incorporate key ethical considerations during every stage of technological development, ensuring that the systems maximise the wellbeing and the health of the population. Only then, to quote Eric Topol, can we move from shallow medicine to precision medicine. The good news is that World Economic Forum has an initiative on precision medicine that identifies key challenges, along with recommendations for its broad adoption. Certain specialties, such as oncology, are more advanced than neuroscience 76

in implementing this approach, so we can learn from them. What this means is that there are pioneers within the healthcare system, and a shift is happening. At WBP, we continue to catalyse multi-stakeholder dialogue and collaborations towards the goal of replacing shallow medicine with precision medicine for brain and mental health and are thrilled to have a growing group of supporters such as Biogen, Eli Lilly, Roche, and MCM. Precision medicine will be at the core of our International Women’s Brain and Mental Health Forum taking place virtually on 19-20 September this year, and an integral part of the Sex & Gender Precision Medicine Institute we are in the process of establishing. The Institute will work with corporates, academic institutions, policymakers, healthcare professionals, regulators, patients, and caregivers to proactively contribute to the evidence-base, novel technologies, and advocacy around precision medicine for brain and mental health. Anyone interested in improving health and care is welcome to be a part of it. With brain and mental health at the forefront of many people’s minds after the COVID-19 CFI.co | Capital Finance International

lockdowns and the realisation that physical health is not the only key aspect of wellbeing to invest in, we believe that the time for this transformation is now. Our latest webinars about COVID-19, mothers and families, and children show that there is a thirst for shared knowledge and a collaborative design of the “new normal”. That is why we invite people to join not only our project or initiative, but the WBP movement that is building like an inevitable wave of change. Don’t hesitate to get in touch. Change is never easy, but it is often worthwhile. i ABOUT THE AUTHOR Dr Antonella Santuccione Chadha is the co-founder and CEO of the Women’s Brain Project. She was elected Top Woman in Business Switzerland in 2019, and will give the keynote at the World Sustainability Forum in September 2020 as one of the shortlisted candidates for their Sustainability Awards. To find out more: follow @womensbrainpro on Twitter or visit www.womensbrainproject.com

Summer 2020 Issue

CFI.co | Capital Finance International

> Carmakers

Running on Fumes

French car manufacturer Renault can be bought for a mere €5.7bn, a trifling sum in an environment defined by trillions gushing from central banks and state coffers to troubled businesses. Even before the pandemic hit, the company was suffering. Last year, profits slumped 99 percent to a paltry €19m. This year, Renault needs billions in state-backed loans just to survive.

n 2019, the company’s almost 181,000 workers pushed over 4.1 million cars through the assembly lines. The Groupe Renault is active in 128 countries and attained a turnover just north of €55 billion, awarding the company the ninth place on the global ranking of carmakers. However, investors have fallen out of love with Renault as they did with the entire automotive sector, except for newcomers such as Tesla which saw its market capitalisation almost quadruple over the past twelve months. In that same period, Renault shares have lost 75 percent of their value. The company’s management has now formally suspended its forward guidance to investors, arguing that the future is uncertain whilst admitting that it looks bleak. Renault’s acting CEO Clotilde Delbos put it this way: “Visibility for 2020 remains limited due to expected volatility in demand, notably in Europe.” In a tell-tale move, Renault abruptly exited the Chinese market by ending its alliance with stateowned car manufacturer Dongfeng. The company reportedly lost €200m on its China bet after failing to charm buyers. The annual production capacity of 110,000 vehicles dedicated to the joint venture was never fully used and churned out only 19,000 cars last year. Meanwhile, contributions from Japanese carmaker Nissan, in which Renault holds a controlling stake, dropped by 85 percent. In Q4 2019, annual operating profits fell to €440 million, down 83 percent from a year before. In another setback for Renault, a proposed merger with Fiat Chrysler Automobiles (FCA) was blocked by the French government over synergy fears and possible job losses resulting from increased economies of scale. That argument sounds particularly hollow after Prime Minister Edouard Philippe early this year showed considerable excitement over a possible merger between FCA and PSA (Peugeot, Citroën, 78

"Investors have fallen out of love with Renault as they did with the entire automotive sector, except for newcomers such as Tesla." Opel, and Vauxhall) which would create the world’s fourth-largest carmaker. The tentative marriage proposal is expected to deliver up to €3.7b in savings without layoffs or the need to close any production facilities. That pleases Prime Minister Philippe who has repeatedly vowed to protect the country’s ‘industrial heartland’. However, as the push to consolidation gathers speed, Renault may well become the spinster of the car industry. Without a partner to embrace during the lean years ahead, the company will find it increasingly difficult to hold on to its market share. Renault management announced in April that it will renew efforts to further develop the shaky alliance with Nissan. However, the Japanese car manufacturer faces issues of its own and for now offers cold comfort. Dipping into the red and still reeling over the arrest and subsequent flight of alliance CEO Carlos Ghosn in 2018, Nissan is looking for ways to streamline its production facilities, attract investors, and return to profit. According to French media, the Mitsubishi conglomerate mulls acquiring a 10 percent stake in Renault. In the car industry’s equivalence of a Gordian knot, Mitsubishi maintains a 20 percent interest in the eponymous carmaker which, in turn, is 34 percent owned by Nissan Motors that is, for its part 44 percent owned by Renault. To make this scene yet more interesting, Nissan owns 15 percent of the French carmaker’s share capital. The French state also has a 15 percent stake in Renault and a 12 percent interest in the PSA group. CFI.co | Capital Finance International

Summer 2020 Issue

The government of France is very much aware that Renault’s pitiful market capitalisation extends an open invitation to Chinese car manufacturers to gobble up one of the country’s industrial crown jewels. It is not about to let this happen. With the backing of their government, Chinese companies are looking for additional ways to buy into Europe, putting EU governments on edge and sparking a rebirth of economic nationalism. The BAIC Group (Beijing Automotive Industry Holding Company) already owns 5 percent of German truck and luxury car manufacturer Daimler and has announced its intention to double that stake in order to gain a seat on the company’s board and pass its rival Geely which maintains a 9.69 percent interest. In 2010, Hangzhou-based Geely surprised markets by taking over Volvo Cars from Ford which at the time was offloading its niche brands, including Jaguar and Land Rover. Geely also owns 8 percent of truck maker Volvo AB. With car production falling off a cliff almost as soon as the first covid-19 cases popped up in Europe and North America, industry watchers expect a delayed rebound. It is likely to take years, if not a decade, for production volumes to reach pre-corona levels. Consolidation, however, will not be long in coming but may be affected by increased levels of protectionism. According to Axel Schmidt, an automotive industry consultant cited in The New York Times, former competitors will likely team up to deal with the new normal. He points to the successful collaboration between Volkswagen and Ford for the development of autonomous driving software and associated electronics as a model for cooperation. This year was supposed to see the global automotive industry turn the longanticipated 100 million car mile marker. The turn came but headed in the opposite direction with production and sales volumes expected to retreat by well over 25 percent. Discounting China, the first to be hit by the novel virus and the first to emerge from the pandemic, the decline would be greater still. The almost unprecedented rise in unemployment numbers as an expression of the sharp Corona Recession will undoubtedly cause prospective buyers to postpone purchases and keep their old clunker on the road for a little while longer. Consumer and business confidence plunged to near-record lows in March and stayed there in April, showing no signs of recovering any time soon. In France, statisticians attached to the ISEE Business

School registered the steepest decline in confidence since measurements began in 1980. In Germany, consumers haven’t been this pessimistic in over four decades. The European Commission’s own gauge of morale in the 27-member bloc last month dropped to -22.7, down from -11.6 in March. For the automotive industry, the question ‘how long’ takes precedence over ‘what’s next’ and is increasingly accompanied by an existentialist undertone. The difference between a V-, U-, or L-shaped recession may turn into a matter of life and death for some of the more isolated car manufacturers such as Renault. In a recent report on the global automotive industry, the World Economic Forum (WEF) calls for a review of outdated legislation that it has identified as the main stumbling block for technological progress. In its assessment, the WEF notes that crises usually also bring opportunities to break with old habits and experiment with new ways. The development of selfdriving cars, the WEF suggests, may be accelerated if lawmakers manage to keep up with the dynamics of technological progress. The forum calls for a global standard for registering and certifying selfdriving vehicles. As it happens, Renault has invested heavily in its EZ line-up of all-electric concept cars. The company’s EZ-Ultimo urban transporter, unveiled at the 2018 Paris Motor Show, resembles a motor yacht on wheels and comes equipped with lounge chairs, lamp shades, and other old-world creature comforts. Last year, a slimmed down version of the vehicle received permission for trial runs as a conveyor of the well-heeled between Paris airports and luxury hotels. A consensus is building around the notion that to survive the pandemic and prosper in later years, carmakers need to break the mould and reinvent the future. Manufacturers did not actually need a novel virus to be reminded of the fundamental change coming to their industry. If anything, the pandemic may speed up the dawning of a new era in individual and collective mobility. The considerable resources required for adaptive processes cannot be supplied by states. The aid now being dispensed is only meant to secure jobs and ensure the shortterm survival of the car industry. Once the pandemic starts to recede into history, carmakers must intensify cooperation and work towards attaining even larger economies of scale than those forged in earlier years. Renault’s job is to find a partner. i 79

> CANPACK Group:

Poland-based Packaging Manufacturer Expands Globally, Enters US Market

ennsylvania’s Lackawanna County is heading back to the future thanks in part to a $366 million investment by a Polish manufacturer of packaging products – the area’s largest financial commitment in over a half century. Once one of the leading industrial capitals in America, this lush valley nestled along the Lackawanna River took on a welcome new shine after CANPACK Group of Poland announced plans to build the 80

company’s first US manufacturing facility near Scranton – a proud city enjoying a cultural renaissance and where the county’s newest Medical School calls home. Covering a surface equal to about eleven soccer fields and bringing more than 400 high quality jobs to the area, CANPACK Group’s state-ofthe-art plant is slated to start the production of aluminium cans by the end of next year. CFI.co | Capital Finance International

Pennsylvania Governor Tom Wolf is excited that a previously abandoned brownfield site returns to productive use: “CANPACK Group is known throughout the world for its manufacturing strength, and we are thrilled that the company has chosen Pennsylvania for its entry into North America.” Governor Wolf called the investment in Lackawanna County ‘historic’ and emphasised

Summer 2020 Issue

the company’s dedication to the pursuit of excellence in corporate citizenship. Earlier this year, CANPACK Group joined the United Nations Global Compact, a business framework underpinned by a set of ten sustainability principles. Signatories commit to proactively support and further the UN’s global development goals. “By thinking and acting in a sustainable manner, we recognise our responsibility as an employer, packaging manufacturer, member of local community, and business partner. Our three pillars of sustainable development – care, sustain, recycle – clearly define the direction of CANPACK’s activities and reflect the expectations of all company’s stakeholders,” assures Group CEO Roberto Villaquiran who joined the company last year to accelerate growth, broach new markets, and boost innovation. With well over thirty years’ worth of experience in the packaging industry, Mr Villaquiran is particularly thrilled with his company’s first foray into the US: “Our customers are amongst the largest beverage producers in the world. In order to be their partner, we need to be here, in the United States.” In a way, the vast facility being erected in Lackawanna County represents a novel experience for the company. At the brownfield site, in Olyphant Borough just to the northeast of Scranton, a long-vacated industrial complex had to be demolished to make way for the new plant. GLOBAL EXPANSION CANPACK Group usually develops greenfield sites such as the 65,000m2 industrial plot it acquired in Tocancipá, just north of the Colombian capital city Bogotá, where the company late last year inaugurated a plant capable of churning out up to 1.3 billion aluminium beverage cans annually.

CANPACK Group: US Facility

"CANPACK Group is known throughout the world for its manufacturing strength, and we are thrilled that the company has chosen Pennsylvania for its entry into North America." CFI.co | Capital Finance International

Though the initial plan called for a production volume of 1.3 billion cans a year, capacity will be scaled up to 1.9 billion within months of the official opening to accommodate the exceptionally strong demand. The Colombian facility was the first of its kind to offer customers bespoke sizes besides the 330ml and 355ml industry standards. The company moves and acts in tandem with its customers. The brand-new plant in Colombia was built to supply AB InBev, the world’s largest brewer. “The decision to speed up expansion into the South American market was founded upon the strong and 81

trust-based relationship CANPACK Group has established with AB InBev,” says Peter F Giorgi, CEO of the group’s parent company Giorgi Global Holdings. With operations spanning five continents, CANPACK Group maintains 28 manufacturing facilities, employs nearly 8,000 people, and markets its products in over 100 countries. In its corporate trajectory of thirty years, the company has come to lead the beverage packaging sector in Central and Eastern Europe before striking out further afield. Building on its success, the group has expanded progressively into Western Europe, Africa, Asia, and Latin America, attaining a global footprint in the process and gaining economies of scale that drive both growth and profits. CANPACK Group believes it is now the fourth largest manufacturer of aluminium cans in the world with an installed annual production capacity that exceeds 26 billion units. The group also produces some 18 billion bottle closures and around 700 million pieces of metal containers for the food industries in addition to 2 billion pieces of glass packaging a year. This dynamic approach to business has allowed CANPACK Group to significantly broaden its geographical footprint which, in turn, minimises the company’s exposure to economic downturns whilst adding to both corporate resilience and sustainability. “That is very important to us and to our customers,” says Mr Villaquiran: “Care, sustain, and recycle are keys to delivering on sustainability and meeting the expectations of all stakeholders.” In Poland, its home market, CANPACK Group has helped to create and maintain a recycling chain that is considered amongst the most efficient in Europe and manages to reclaim and re-use up to 80 percent of packaging materials employed. 82

In the US, CANPACK Group’s new facility will also boast an onsite Center of Excellence comprised of an operations and customer experience center to showcase the company’s research and development efforts, lithographic expertise, accomplishments, and capabilities, and – crucially – how these translate into a tangible value proposition. VALUE PROPOSITION Recognising that packaging is where the product meets the consumers’ eye, CANPACK Group has been pushing the envelope with solutions that are not just in tune with environmental considerations, but also connect with consumers in a meaningful way, enhancing and energising their experience with products that stand out. Analysts agree that the use of metal conveys a premium feel to packaging and addresses consumer concerns over recycling. The company offers beverage containers in twenty different sizes and finishes. CANPACK Group has also pioneered a number of technologies that improve the design and printing possibilities, support efficiencies along the production process as well as enable to significantly lower the packaging’s environmental impact. The outlay is expected to pay off handsomely as the global light metal packaging market is set for strong and sustained growth according to a recent industry insiders report. The group’s customers have been quite receptive to the company’s continued robust growth. CEO Villaquiran explains that since 2017, his company has either opened new factories, or expanded existing ones, at a clip of two per year. Industry insiders expect CANPACK Group to keep up its present growth rate for the foreseeable future. i

Summer 2020 Issue

> C2FO:

Cash Flow During Times of Crisis — or Expansion

C2FO’s stated mission is to deliver a future where every company, anywhere in the world, has the capital it needs to grow.

n these turbulent times it is concentrating on helping businesses to survive — but in some cases, managing surprising spikes in demand.

There are plenty of obvious reasons why businesses, small or large, need regular cash flow: to pay salaries and bills, to buy inventory, to drive growth. For many SMEs, though, the economic meltdown caused by the coronavirus pandemic has been a time of enormous stress in terms of liquidity. In a recent C2FO survey, 75 percent of SMEs in the US stated that they lacked sufficient cash for the next six months. In Europe, 40 percent of SMEs report a liquidity shortage, especially in sectors such as hospitality, retail and construction. Fortunately, many governments and central banks have launched job-protection schemes and lending programmes directed to businesses. But these won’t last forever, nor reach all the SMEs in time. Even for companies with a healthy flow of orders, there is still the challenge of long payment terms of 60, 90, or 120 days — and of late payments. With liquidity scarce and precious, many companies have rushed to ask their customers for faster payment of outstanding

"Thanks to quick and close collaboration, many C2FO buyers have introduced or retained invoice discounting programmes available to suppliers, sometimes tapping into third-party funding." invoices. Early payment discounts have been around for decades but online, on-demand and easy-to-use platforms have made them an attractive alternative to traditional funding sources, including borrowing. C2FO runs more than 250 early payment programmes for large corporates (including 25 of the world’s 100 largest companies) which spend trillions with suppliers — many of them SMEs — every year. The strain on supply chains and the increased need for cash mirror the spread of Covid-19 across the globe. Demand from suppliers in China exploded in the run-up to the Chinese New Year. As the virus spread to to EMEA and the Americas, SME demands for accelerated payment increased more than tenfold. Thanks to quick and close collaboration, many C2FO buyers have introduced or retained invoice discounting programmes available to suppliers, CFI.co | Capital Finance International

sometimes tapping into third-party funding. By accelerating receivables through the C2FO platform, thousands of SMEs providing goods and services to supermarkets have been able to keep up with increased demand and hire more personnel. Pulling forward existing invoices has allowed other SMEs to cover fixed costs during the temporary shutdown. With new liquidity, a few companies were able to rapidly switch their production line: from cleaning supplies to disinfectant products, from children’s clothing to personal protective equipment. With the flexibility to use early payment as needed, at discounts that they determine, SMEs can take control of their cash flow. And there are advantages for their customers. Buyers can increase EBITDA, gross margin, and earn a better return on short-term cash. However, the main modern drivers are supply chain health and continuity. As everyone knows, good suppliers are hard to find — and harder to replace. C2FO believes that working capital is as important to commerce as water is to life. Freeing cash trapped between receivables and payables benefits everyone, ensuring greater liquidity for companies around the world. i 83

> Nanopool

NP Liquid Glass Coating: A Game Changer DIETER SCHWINDT: COATINGS THAT HELP HUMANITY The world is filled with wonder. However, it often lacks people who recognise the potential hidden in ordinary phenomena that to most observers seem rather unremarkable. When such a crucial event meets the eye of a visionary, a big story may develop. This is what happened in 2001 when Dieter Schwindt noted how water droplets rolled over 84

porous stone without penetrating its surface – and started wondering. Mr Schwindt not only asked the right question; he also realised that the answer held the key to great opportunity.

quartz sands, these surface finishing products are environmentally friendly and repel both dirt and microorganisms such as bacteria, viruses, and algae, amongst others.

Pondering the question and turning to research for the answer, Mr Schwindt’s observation provided the foundation for a company that has gained global recognition for its ultra-thin coatings. Based on silicon dioxide (SiO2) extracted from

To this day, Nanopool, the company founded by Dieter Schwindt, is run as an independent family business. The second generation now in charge adheres to the founder’s philosophy: quality above all.

CFI.co | Capital Finance International

Summer 2020 Issue

Managing Director Sascha Schwindt brims with energy as he explains that the company seeks to do its bit – and more – towards tackling contemporary societal challenges such as reducing greenhouse gas emissions, saving scarce water, and helping protect against viruses – and pandemics. “The lines of communication between management and employees are short as can be expected in a family setting. This allows us to respond quickly, flexibly, and decisively to any demand or change in market dynamics.” Sascha Schwindt adds that speed and flexibility do not detract from quality. The Schwindt family has invested considerably in interdisciplinary research, and initiated numerous clinical studies, to ensure the safety of the company’s products. After twenty years in the business, founder Dieter Schwindt still gets excited when given a chance to explain his personal drive: “For us, the focus is on people and the environment. This is what inspires the Nanopool team to come up with innovations.” Dieter Schwindt is particularly vexed about the wastage of fresh water: “Just look what happens each and every day when we fill buckets with precious drinking water and then proceed to add detergents, instantly transforming the content into wastewater. Considering what some people in some places need to do in order to access drinking water, our treatment of it constitutes no less than an absurdity.” Dieter Schwindt has a most remarkable solution: Nanopool’s SiO2 coating which then leads to a state where a damp cloth is enough to clean the surface. Innovative coatings can also help reduce the accumulation of plastic waste. The company developed a cheap and environmentally harmless coating that gives paper and cardboard strong repellent properties, allowing for a much more widespread use of these biodegradable packaging materials.

Photo: Raphael Maas

"Decentralised and with low manufacturing costs, any bespoke solution can be easily implemented to meet any of mankind’s challenges."

To prove his point, Mr Schwindt points to an egg carton coated with the protective NP Liquid Glass his company developed. The ultra-thin layer, invisible to the naked eye, prevents the material from absorbing liquids and odours. Nevertheless, the carton remains fully biodegradable. “Our coating is based on sand which is simply returned to its natural cycle. Now, isn’t that a fantastic innovation?” Dieter Schwindt is, however, quick to attribute Nanopool’s remarkable breakthroughs to the passion and visionary thinking that permeates the family business and its interdisciplinary team of professionals and scientists. CFI.co | Capital Finance International

WHY ARE SOME INNOVATIONS MORE RELEVANT THAN OTHERS? In 2007, at the launch of the first iPhone, Steve Jobs unveiled more than just a new mobile phone: He confronted the industry with a paradigm shift in technology. Until then, the standard of mobile hardware had been miniscule keyboards and tiny mechanical buttons that controlled the functionality of the device’s applications. The arrival of the touchscreen revolutionised the business. Suddenly, the hardware was unshackled and could now be easily adapted to every conceivable need. Users quickly discovered that their mobile device could help overcome almost any problem, meet any challenge, and answer any question – whatever the issue: There’s an app for that. Thus, hardware and software became seamlessly integrated to offer users precise functions tailored to their individual requirements, even as those needs change over time – or overnight. Applying the same technological – and philosophical – flexibility outside the digital realm was long considered a (pipe) dream. But even those dreams sometimes come true as was proved in 2001 by a German family-owned company which developed ‘NP Liquid Glass’, an ultra-thin protective coating that prevents dirt and microorganisms from adhering to a treated surface. The technology pioneered by this company is based on silicon dioxide SiO2, found in quartz sand. Silicon dioxide-based coatings are not only cost-effective, they are also completely harmless to humans, animals, and the environment. So, what does all of this have to do with smartphones? Nanopool Managing Director Sascha Schwindt explains: “Our basic product, or product matrix, is comparable to a smartphone which can, in its default factory state, perform many basic functions such as placing calls, sending text messages, taking pictures, and surf the internet. It is no different with our product matrix which imparts repellent properties to a wide variety of surfaces and protects them naturally against the adhesion of undesirable substances and organisms. This protective layer is 500 times thinner than a single human hair. It may be applied to both organic and inorganic surfaces and does not change their appearance, feel, or breathability.” Mr Schwindt emphasises that just this basic product matrix can solve an ‘unbelievable’ number of problems with contamination by dirt or microorganisms. To return to the 85

original smartphone analogy: Nanopool’s Liquid Glass can be customised to meet the specific requirements of any industry or sector just as easily as an app can change the functionality of a mobile device. “The possibilities are almost infinite. Decentralised and with low manufacturing costs, any bespoke solution can be easily implemented to meet any of mankind’s challenges,” says Sascha Schwindt. To combat drug-resistant germs, NP Liquid Glass offers simple and effective protection, even without add-on ingredients. Both the UK’s National Health Service (NHS) and the German ‘Land of Ideas’ initiative have recognised Nanopool’s Liquid Glass as a valuable tool to prevent hospital-acquired infections. Given the acute shortage of antibiotics, the effective prevention of infections has become a top priority for healthcare professionals. Likewise, NP Liquid Glass offers protection against airborne viruses. Sprayed on surfaces of daily use, like clothing, facemasks, or hands, the solution significantly lowers the adherence of viruses such as the novel coronavirus. With the addition of an active virus-fighting agent – an ‘antiviral app’ – NP Liquid Glass has an even more targeted effect. Inexpensive, easy to apply, and effective, such a coating offers a solution when and where personal protective equipment and disinfectants are unavailable in the quantities required. As such, NP Liquid Glass can easily and cheaply upgrade casual garments to protective clothing. In places where resources are scarce, the advantages of NP Liquid Glass are high and plentiful. The product may be used to protect crops in an environmentally friendly way. Even without additional active ingredients, the product is already being used to shield crops such as potatoes, tomatoes, cereals, hemp, and grapes. An ultra-thin NP Liquid Glass coating repels fungi, mould, and pests such as mites and lice so that the plant may concentrate all its energy on growing. By embedding active ‘apps’ such as UVprotection, specific regional challenges may easily be addressed. “The natural protection offered by NP Liquid Glass means that the environment and people benefit equally from improved yields and bountiful harvests.” Sascha Schwindt explains that even larger pests such as termites lose their appetite as was demonstrated during a field experiment in India. Two pieces of wood, identical in size, were buried near a termite colony in an area southeast of Mumbai. After nine months, a period that included a drought and a monsoon, the pieces were recovered. The one coated with NP Liquid Glass had been completely ignored by the termites and emerged in pristine condition, whilst the untreated piece of wood had been three-quarters devoured. Without employing toxic 86

Virus protect

Plant Packaging protect protect

Textile protect

wood protect

stone protect

office protect

Germ protect

Skin protect

ADD MORE FUNCTIONS compounds or altering its natural characteristics, NP Liquid Glass was able to preserve the wood, offering a long-awaited, and highly effective, solution to every region plagued by termites. Just in the United States, termites cause well over $5 billion in property damage annually. Worldwide, the economic losses attributed to termites exceed $40 billion per year. NP LIQUID GLASS: TOO GOOD TO BE TRUE? A resounding ‘no’ is Sascha Schwindt’s answer: “It is true that we sometimes find it hard to believe the amazing properties of our innovative coatings. However, any and all doubts are dispelled in all the studies, reports, and tests that were conducted. These unfailingly confirm both the effectiveness of the product and its harmless nature.” Nanopool’s innovative product matrix is not only eco-friendly, it actually helps protect the environment as well: “That’s a bit like the cherry CFI.co | Capital Finance International

on the cake. Wherever dirt, microorganisms, and pests are kept at bay without the use of toxic substances, potentially harmful chemicals need not be employed. There is no more need to use cleaners at all: after coating the surface, a damp cloth is enough to keep it clean. Our coatings are highly repellent so that tiny particles merely sit on treated surfaces, without adhering to them. Thus, they may be swept away almost effortlessly,” concludes Sascha Schwindt. Nanopool’s future plans include reaching out to yet more people and communities that may not be able – or willing – to implement other complex, toxic, and/or expensive solutions. Mr Schwindt is pleased that a number of entities have already recognised the value of innovative NP Liquid Glass as a driver of sustainability. He is particularly delighted of securing a win for Nanopool in this year’s CFI.co Sustainability Awards Programme. The company is the recipient of the 2020 Best Green Alternative Innovation Europe Award. i

Summer 2020 Issue

Trade Finance at Euro Exim Bank:

Knowing What the Customer Wants and Delivering By Graham Bright Head of Operations and Compliance at Euro Exim Bank

Euro Exim Bank Ltd (EEB) is one of the fastest growing international financial institutions. Established in 2015, the bank is headquartered in St. Lucia, West Indies. It also has a representative office in London, along with a network of highly qualified agents, affiliates, and partners in 23 countries serving import and export businesses across the globe.

EB deals exclusively with registered payments accurately and effectively, without the corporates and clients based in active hassle of multiple routing. On-demand liquidity markets such as UAE, Malaysia, services (ODL) bring clients unlimited, low-cost Indonesia, Vietnam, Thailand, China, access to liquidity with the help of the XRP digital Africa and India. It assists importers of asset. This digital asset provides guaranteed sourced frozen food, garments, sewing machines, exchange rates and immutability with frictionless plastic piping, ceramics, transfer and settlement. plumbing accessories, "The bank is now pulses, raw metals, The bank provides automobiles, among thought leadership establishing offices in other products to trade articles for international with these markets. publications, participates Singapore, Dubai and in global conferences Chennai. The idea is to The bank is now including GTR, TXF, establishing offices take maximum advantage Caribbean Association of in Singapore, Dubai Banks, Ripple and other of the rise in trade and Chennai. The idea key financial gatherings, is to take maximum more recently, has between the Middle East and advantage of the rise extended its video, in trade between the digital and social media and Far East." Middle East and Far output. East. This initiative will also help build sales and provide vital services in Africa and the Indian Internationally recognised for trade finance subcontinent. activity, EEB is confident of retaining its esteemed position for many years to come. EEB’s international team has immense The bank’s regional experience, innovative knowledge and experience in trade finance and trade platform, superior account services, SWIFT messaging for transmission of complex international expansion, and trade digitalisation instruments, courtesy of its extensive network (with blockchain & AI capabilities) are key to of contacts and counterparties with renewed positioning itself as a leading trade finance concentration in emerging markets. facilitator. EEB provides letters of credit and standby letters of credit, along with performance bonds and bank guarantees, from St. Lucia. The bank is also planning to expand its platforms based on foreign exchange service, the introduction of tradeable digital assets and merchant accounts. This is one of the first regulated banks to have implemented the latest payment technology, following collaboration with RippleNet and xCurrent. Through the latter, EEB tracks real-time CFI.co | Capital Finance International

According to CEO, Kaushik Punjani, “Building a business takes years, and relies on solid foundations. In the current uncertain economic climate, firms must be realistic in profit and investment outlook, exercise pragmatic management, hire professionals, release the unproductive, listen and learn constantly from peers and competition, understand value and contribution (not just expenditure) and ultimately work out what customers want and keep delivering it. i 87

> Jabra:

Good Sounds, Sound Ethics and Fine Design Communications and sound solutions leader Jabra, proudly part of the GN Group, has been bringing sound to people’s lives for over 150 years.

t is in the business of helping you to hear what you want to hear — from letting the “right” sound in to filtering disruptive noise out. But its products are packed with intuitive features which do much more than that. They’re the result of thousands of hours of research and meticulous engineering, from the only company in the world with consumer, professional and medical grade sound, all under one roof. Jabra creates intelligent headsets and communications software that allow professionals to work more productively, and produces wireless headphones and earbuds for increased enjoyment of calls, music, and media. Jabra also pioneers video conferencing solutions for more inclusive meetings, and which let you keep up with meetings while working from wherever. IT STARTS WITH GREAT SOUND Proudly part of GN Group, Jabra has been bringing sound to people’s lives for over 150 years; from the very first telegraph cables linking the West to East to the first Bluetooth headsets. Products are designed and engineered with the customer in mind, using intelligent technology and finished with premium materials. Great sound isn’t the only reason people buy Jabra headsets, but it’s a good place to start: thoughtfully designed, purposefully engineered, and expertly built. Sustainability is a consideration in everything Jabra does. Through its products, it aims to help you connect with the world — without the need for polluting and unsustainable air travel. The company takes responsibility for actively addressing environmental and social issues in all operations and across its value chain. It builds on a long history of innovation, and a strong culture of compliance and business ethics. Jabra strictly follows the UN Guiding Principles of Responsible Business, and GN has been a signatory to the UN Global Compact since 2010. Jabra was ranked in the top 77th percentile by EcoVadis, scoring above average in all categories: environment, labor and 88

human rights, business ethics and sustainable procurement. Several Jabra headsets are TCO-certified, the most comprehensive sustainability endorsement CFI.co | Capital Finance International

for IT products. As part of GN Store Nord, Jabra has implemented policies covering all key sustainability and ESG areas. The company continuously adds and updates policies in line with legislative or strategic changes. i

Summer 2020 Issue

> UBS Group CEO Sergio Ermotti:

The Man to Call in Troubled Times Named the most successful manager of a publicly traded Swiss company, parting UBS Group CEO Sergio Ermotti (60) deftly steered the country’s largest banking institution for nine choppy years. His was a ride that included the aftermath of a rogue trader affair which caused the resignation of his predecessor (and a loss of $2.3 billion), the tail end of the Great Recession, and now a pandemic. Along the way, Ermotti also had to contend with the unwinding of the Libor Scandal with UBS ultimately agreeing to pay US, UK, and Swiss regulators a grand total of $1.5 billion for its role in the manipulation of the benchmark interest rate.

hough an investment banker at heart, Ermotti pivoted UBS away from more risk endeavours to concentrate on wealth management, stemming the steady client outflow that had long plagued the bank. The strategy worked like a charm – particularly on the ultra-high net worth individuals and large family offices UBS sought to engage. Pre-tax profits swelled as did the bank’s share price.

Still, as a testament to his ability to weather successive storms, the UBS chief last year managed to extract a 10 percent increase in pre-tax profits at both the retail bank and the asset management division – boosting overall group profit to $1.4 billion – whilst revenues retreated slightly to $7.5 billion. However, analysts would like to see a performance improvement at the all-important wealth management unit which has suffered from sizeable withdrawals and a customerdriven shift to lower margin assets.

However, Ermotti last year suffered his own ‘annus horribilis’ with investment banking languishing everywhere but in the United States as all remained eerily quiet on the mergers and acquisitions front and capital markets languished in a mind-numbing, and profiteating, limbo. Not usually fazed easily, Ermotti nonetheless put UBS on an immediate crash diet, freezing new hires and delaying the implementation of IT projects for a cost saving of some $300 million – about 5 percent of total annual corporate expenses. A S1bn share buyback programme was put on ice as well. To top off the dismal year, a French court imposed a €4.5 billion (€3.7bn Group CEO: Sergio Ermotti in fines plus €800m in damages) on UBS for helping clients evade taxes. Whilst the More a crisis manager than a CEO on lengthy appeals process works its way through cruise control, Ermotti has displayed a the justice system, the bank has already set aside commendable awareness of changing global a €500 million litigation provision. The ruling dynamics, positioning and repositioning cast a shadow over Ermotti’s tenure at UBS. his bank to avoid headwinds and maintain the vast organisation on an even keel. That Still, after a most dreadful 2019, Ermotti could, was no mean feat. The current pandemic and did, say that UBS remained one of a select has caused a dramatic increase in market few European banks with share prices trading volatility which, Ermotti said during a call above tangible book value – even after the stock with analysts, makes it rather difficult to see price had dropped an unwarranted 29 percent how things will develop for the remainder of in 2018. the year. CFI.co | Capital Finance International

Using his lofty perch to voice his personal opinions on a range of topics, Ermotti periodically caused raised eyebrows such as when he lashed out in a surprisingly emotional manner at financial regulators trying to limit executive pay. He went as far as to suggest that their crusade is fuelled by ‘envy and frustration’. Ermotti also repeatedly wondered out loud why bankers are being targeted for scrutiny whilst executives in sectors such as private equity and tech are not: “People made a choice to do good for society while also getting their desired level of compensation.” He went on to suggest that executives in the financial sector would ‘do something else’ should their pay fail to measure up to their talent. Though tipped as the ideal successor of UBS Group Chairman Axel Weber, Ermotti in March announced that he had joined the board of insurer Swiss Re and will succeed Chairman Walter Kielholz as of next year. His contract with Swiss Re does not allow for dual chairmanships. i 89

> European Investment Bank:

A United Europe Can Emerge Stronger From the Pandemic By Andrew McDowell Vice President of the European Investment Bank

The most marked economic impact of the COVID-19 crisis is on small businesses, which find themselves with insufficient resources to fight for survival.

hey need co-ordinated relief, and a collaborative international effort is the obvious way to face the problem. Each EU member state faces a similar problem. None can face coronavirus alone. Only a pan-European plan, which complements national initiaitives, can put economies on the path to recovery. This is why the EU Council endorsed the European Investment Bank Group plan for EU member states to create a €25bn guarantee fund that enables us to mobilise up to €200bn in funding for distressed sectors, as part of the wider €520bn package of EU crisis response measures agreed in April. The €25bn guarantee fund will be financed by EU member states according to the size of their shareholding in the European Investment Bank. It is limited to addressing the Covid-19 shock, but forms a bridge between the periods of crisis and recovery. With the benefit of a counterguarantee from this fund, the EIB Group — the European Investment Bank and its specialist small business subsidiary, the European Investment Fund — will unlock financing to the real economy by ramping-up guarantees to local lenders, national promotional institutions and other financial intermediaries. These guarantees will allow liquidity to be passed on to small businesses, which have seen their markets dry up. The products to be rolled out under the guarantee fund will probably be dominated by guarantees on portfolios of SME loans originated by local lenders, as well as other forms of risk-sharing on new and existing corporate loan portolios. Some of these will provide regulatory capital relief. Other products will also be considered, including participations in asset-backed securitisations to free lending capacity, as well as equity investments in venture capital and private equity funds supporting innovative firms. This fund should also allow the European Investment Bank to counter-guarantee some national guarantee schemes already in place, sharing across the EU the risk of these schemes and increasing their impact. 90

"By pooling credit risk all across the European Union, the overall average cost of the fund could be reduced, compared to national schemes." It is expected that the fund’s supported financing will be split as follows: • At least 65 percent: loans and guarantees for SMEs (companies with up to 249 employees). • Up to 28 percent: loans and guarantees for non-SME companies, of which up to five percent can be used for public sector companies and entities active in the area of health or healthresearch or providing essential services related to the health crisis. Some additional restrictions will apply to companies above 3000 employees, to make sure that we focus our efforts mainly on SMEs. • Up to seven percent can be allocated to venture and growth capital (through the EIF) and venture debt for SMEs and mid-caps (companies with up to 2999 employees). The European Investment Bank Group has years of experience in the products involved in this guarantee fund, and through existing network of hundreds of counterparts can quickly channel financing to the markets and sectors most in need. I see four key advantages to supplementing — at the EU level — the many national guarantee schemes that have been rolled out. Firstly, as with the Covid-19 health crisis, we need a co-ordinated approach to managing the economic crisis. No country will recover alone. Even the largest is influenced by what happens in terms of overall EU demand, intra-EU trade, intra-EU value chains, overall EU market confidence and financial market loops. Austria, for example, has contained the spread of COVID-19 well and economic shutdowns CFI.co | Capital Finance International

are gradually easing there, but aftershocks to the otherwise healthy economy continue to reverberate. Austrian GDP is set contract by six percent and unemployment is already at 12. Small businesses make up 99.6 percent of Austrian companies, and they find themselves with limited resources to fight for survival, despite Austria’s forceful national response. Imagine what the situation is in countries where resources to respond to the crisis have been more limited and where the spread of the virus has been more intense. Everyone needs help. We need a co-ordinated approach to managing the economic crisis. Even the largest European economies are influenced by what happens in terms of overall EU demand, intra-EU trade, intra-EU value chains, overall EU market confidence and financial market loops. A study by the European Central Bank shows that a one percent symmetrical decline in the GDP of each member state brings, after the initial mechanical effect, an additional 0.6-0.8 percent decline in euro-area GDP growth, due to the direct and indirect spillovers in trade. The European Investment Bank’s own data shows that 40 percent of economic growth and growth in jobs from the operations we finance comes from cross-border spill-overs. Secondly, by pooling credit risk all across the European Union, the overall average cost of the fund could be reduced, compared to national schemes. Thirdly, the use of the European Investment Bank also means that guarantee schemes — and their SME and corporate beneficiaries — benefit from the bank’s AAA rating, even in financially weaker member states which lack fiscal space and a top credit rating. This can help to level the playing field for businesses across Europe during the crisis and recovery. Finally, Europe’s venture capital and innovation ecosystems are trans-national by nature. No individual member state has adequate incentives to fully protect them. Therefore, there’s a need for a pan-European perspective and policy instrument. The broad product mix being

Summer 2020 Issue

Vice President: Andrew McDowell

proposed will ensure that in every country we will find a way to complement national schemes to best effect. The economic and financial dynamics immediately ahead of us are approaching a tipping point. We have little time to put in place measures to safeguard the European economy from this unprecedented shock. By responding to this crisis with a spirit of solidarity and enlightened self-interest, we can start to strengthen confidence among markets and citizens in Europe’s capacity to weather the storm. Together, Europe can emerge from this crisis even stronger. i

ABOUT THE AUTHOR Andrew McDowell is one of the eight Vice Presidents of the EIB who, together with President Werner Hoyer, form the Management Committee that runs the bank on a day-to-day basis.

activities with the goal of building a sustainable battery value chain in Europe.

Vice President McDowell has oversight of the Bank’s treasury, economics and evaluation functions, as well as lending operations in energy and the bioeconomy. He was the Vice President responsible for the development of the EIB’s new Energy Lending Policy that has committed the EIB to become the first major multilateral financing institution to end support for unabated fossil-fuel energy projects. He has also been an active participant in the European Battery Alliance, helping to align EIB’s financing

Prior to joining the EIB in 2016, Andrew was Chief Economic Adviser to Irish Prime Minister Enda Kenny from 2011, co-ordinating the policies that supported Ireland’s recovery from the economic crisis and sovereign bail-out, and Chief Economist of Forfas (from 2000), Ireland’s industrial policy advisory body. He took undergraduate and post-graduate studies in business, economics, finance and international relations from University College Dublin and John Hopkins University.

CFI.co | Capital Finance International

He is also responsible for institutional relations with 10 European and 14 Asian countries.

ANNOUNCING

AWARDS 2020 SUMMER 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.

Summer 2020 Issue

> LOCKHEED MARTIN: MOST INNOVATIVE NEXT-GEN TECHNOLOGY SOLUTIONS GLOBAL 2020

The Lockheed Martin legacy stretches back more than 100 years, demonstrating relentless resolve to overcome obstacles and take aviation to new technical heights. The company started out as a personal project in a repurposed church and a fledgling business in a garage. Now the Lockheed Martin network has international offices in 10 countries, facilitating partnerships and uniting top minds in pursuit of innovative excellence. At the “Lighthouse” — a 50,000-square-foot test centre and laboratory — skilled scientists and engineers collaborate to develop technological breakthroughs that are transforming the world. Lockheed

Martin builds AI systems and autonomous machines that are deployed for increased national security and successful mission outcomes. It creates hypersonic solutions and multi-domain operational systems. Lockheed Martin launched the world’s first weather satellite in 1975 and continues to generate weather forecasts and warnings that are crucial to the global economy. The latest generation of weather satellites boast longer life spans, higher imaging resolution and a new lightning detection capability. Lockheed Martin is considered a pioneer of GPS (Global Positioning Systems) and recently joined the

GPS Innovation Alliance, the US organisation that advocates the technology’s benefits and seeks to modernise the network. The group established Lockheed Martin Ventures to direct capital to companies developing disruptive tech in its core markets, investing more than $100m in start-up companies since 2007. Investee benefits go beyond an infusion of funds: founders enjoy access to the Lockheed Martin network of contacts and repository of knowledge. The CFI.co judging panel recognises industry titan Lockheed Martin with the 2020 award Most Innovative Next-Gen Technology Solutions (Global).

> AXA IM: BEST ESG GLOBAL ASSET MANAGER FRANCE 2020

AXA Investment Managers (AXA IM) has established investment centres in 20 locations worldwide, including four of the world’s most active and influential financial hubs — Paris, London, Frankfurt and Hong Kong. The company employs more than 750 investment professionals and is responsible for €804bn in assets under management. It seeks to create a better tomorrow by investing today — with critical consideration of ESG factors. AXA IM has identified six issues expected to affect long-term investors: climate change, biodiversity, human capital and diversity management, public health, data privacy and corporate governance. AXA IM actively monitors ESG risks and was among the first asset

managers to put in place a blanket exclusion for companies which derive more than 30% of revenues from coal. ESG scores are integral to the investment decision-making process, and a useful tool for identifying potential risks. AXA IM has crafted its own scoring system to compare assets and drive data-backed decision making. There is a dedicated team tasked with monitoring and mentoring portfolio investees on their progress, and proactively engages to encourage change on issues such as climate change and correct course before investorimpacting problems arise. It has worked with 200 companies to address ESG concerns and strengthen contributions towards the UN’s

sustainable development goals. Their most recent innovation has been to lead the creation of a new asset class, the Transition Bonds, helping carbon intensive businesses join the drive to a low-carbon world. Responsible investing is the cornerstone of AXA IM’s purpose, and the firm is committed to growing and preserving clients’ wealth while positively affecting people and planet. Its current offering includes 99 ESGintegrated open funds, 19 sustainable open funds and four impact investment open funds. The CFI.co judging panel recognises AXA IM as a leader of responsible investing and presents it with the 2020 award for Best ESG Global Asset Manager (France).

> BAWAG GROUP AG: BEST BANKING GROUP GOVERNANCE DACH 2020

With a legacy that stretches back to 1883, BAWAG’s banking operations are rooted in a bedrock of expertise and ethics. The bank is one of Austria’s most respected brands, with a deserved reputation for customer-centricity, operational excellence and a strong capital position. BAWAG Group is a Vienna-based financial services holding company with subsidiaries in Austria, Germany and Switzerland; the principle of these, BAWAG PSK, serves 2.5m customers. Other subsidiaries offer a range of financial services, including insurance, investment and credit solutions. BAWAG measures business success

not only by the balance sheet, but also by its commitment to corporate social responsibility (CSR). In 2019, its employees completed nearly 20,000 training days and the group introduced three advanced development programmes. It also organised 170 free educational events to increase consumers’ financial literacy. BAWAG has increased sustainable investment four-fold, raised €200,000 for social projects and set CSR milestones in product implementation processes which target ecological and social criteria. The group upped its green energy consumption figure to 97 percent and its proportion of female managers CFI.co | Capital Finance International

to 34 percent. BAWAG has cultivated a corporate culture of respect and dedication, embracing technology to simplify finances, enhance customer experience, increase efficiency, and trim costs. The bank is driving expansion efforts with the launch of digital initiatives, such as e-banking and point-of-sale consumer links, and welcomes strategically selected partners and acquisitions. The CFI.co judging panel congratulates the group on a record year, with profits up by six percent at €604m, and declares BAWAG Group AG as the winner of the 2020 award for Best Banking Group Governance (DACH). 93

> TOTAL EREN: MOST INNOVATIVE RENEWABLE ENERGY SOLUTIONS GLOBAL 2020

Energy production from renewable sources such as solar, wind and hydro addresses urgent global challenges and advances sustainable development goals. Over a billion people are estimated to live in "energy poverty" - having limited or no access to electricity - and more than 80 percent of them live in rural areas. French Independent Power Producer (“IPP”) Total Eren forges longterm partnerships with local teams around the world to develop renewable energy projects that meet growing demands with a sustainable and economically viable supply. Founded in 2012, Total Eren serves as the dedicated renewables arm of the EREN Groupe, an innovator of

natural resource efficiency. Since its launch, the company has established a global network of renewable energy powerplants with a gross production capacity upwards of 2.8 GW - and it plans to push that to 5 GW by 2022 with projects under development. Total, the major energy company, invested in Total Eren in 2017 and, since then, has increased in direct and indirect stake to 30% in aggregate. The company is also supported by top ranked financial investors: Bpifrance, Next World Group, Tikehau and FFP. Everyday, Total Eren demonstrates the agility of a project developer, the vision of an investor, and the expertise of an operator. lt selects partners

whose interests align with the company's ethos and objectives. lt specialises in greenfield investments and maintains control over assets through majority holdings or co-management agreements. The team at Total Eren boasts a cross-industry collection of skills and experience that leads to quick and competent project management, in-depth risk assessments and step-by-step development. Total Eren's project portfolio spans five continents, with a presence in Eastern Europe, Central Asia, Asia Pacific, Latin America and Africa. The CFl.co judging panel presents Total Eren with the 2020 award for Most lnnovative Renewable Energy Solutions (Global).

> JM FINN: BEST WEALTH MANAGEMENT ADVISORY FIRM UK 2020

Since its launch in 1945, JM Finn has helped families enjoy stability and prosperity over generations. Long tenures and low staff turnover have led to enduring relationships based on trust and dedication. The firm takes a holistic approach to wealth management and actively engages with clients to learn their goals, retirement plans and inheritance considerations. It inspires younger generations to plan for the future, now, and takes its message on the road. The firm takes part in conferences

and sponsors events, such as an art fair in Battersea, to engage with the community and attract new clients. JM Finn spreads the wealth management gospel through these outreach efforts — and provides a practical introduction through its accessible investment products. The firm’s wealth managers are basking in the pride of a job well done for 2019, which ended on a strong note. Net profits were up by five percent, funds by 14. New members were welcomed to the wealth planning team and a

new office was opened, adding Winchester to the network that covers London, Bristol, Leeds, Bury St Edmunds and Cardiff. Wealth management is not just for the very wealthy, and JM Finn delights in creating bespoke portfolios. Lower investment thresholds and a secure IT portal encourage new players to enter the game — and JM Finn is there to guide the journey. The CFI.co judging panel is pleased to present it with the 2020 award for Best Wealth Management Advisory Firm (UK).

> RAINMAKER WORLDWIDE INC.: BEST COMMUNITY IMPACT WATER SOLUTIONS GLOBAL 2020

The global water crisis is alarming, and worsening: aquifers are running dry, water tables becoming polluted, well water often unsafe to drink. International company Rainmaker Worldwide has assumed a champion’s role with technology that converts waste into an asset through heat exchange and resource recovery and reuse. It has water-to-water and air-to-water products, delivered within 90 days and operational in two weeks. The air-to-water model generates water by heating and cooling air to form and collect condensation. The 94

water-to-water model produces safe, clean water from multi-input feeds — seawater, polluted water and even sewage — using a vapour-selective membrane-distillation process. The closed-loop systems reuse water and promote the circular economy from residential to industrial level. Rainmaker’s modular and scalable units feature energy-optimising algorithms and a networked real-time control system. The energy-agnostic units allow users to control their carbon footprint by choosing solar, wind, grid or diesel power sources. CFI.co | Capital Finance International

Rainmaker invites participation from distributors, NGOs and investors worldwide wishing to be part of the solution. Rainmaker Worldwide has a Dutch heritage and its stocks are listed on the US OTC (over the counter) market under the symbol RAKR. It honours a mantra of “do well and do good” with positive SDG contributions and attractive shareholder performance. The CFI.co judging panel presents Rainmaker Worldwide with the 2020 award for Best Community Impact Water Solutions (Global).

Summer 2020 Issue

> CORDET: BEST ALTERNATIVE CREDIT INVESTOR UNITED KINGDOM 2020 Founded in 2013, CORDET is a specialist credit manager focusing on senior secured direct lending to smaller mid-market companies (typically companies with annual revenues lower than €250 million and EBITDA between €2 and €15 million) within Northern Europe. CORDET has made a number of positive developments both on the fundraising and investing front, both of which have already been widely recognised by the investor community. In April 2019 CORDET was a finalist for the "Best European Direct Lending Fund" by Creditflux. In addition, CORDET was runner up for the "Best Fund Manager" by Growth Finance in September 2019. CORDET was able to successfully raise c.€400 million in its Fund I and segregated managed accounts. Fund I completed 28 transactions with a gross debt value of c.€650m. CORDET is currently actively fundraising and investing from Fund II and has completed 10 transactions with a gross debt value of c.€205m. CORDET sees a role for itself in financing gaps left by those banks and traditional credit providers that have moved away from the European credit markets. As a UNPRI signatory, CORDET has also maintained strong focus on the environmental,

social and corporate governance. As a result, for a second year in a row, CORDET were awarded a UNPRI “A+” rating for responsible strategy and governance, placing them in the top 5% of all participants in the fixed income and credit space. The firm seeks out longstanding relationships and is highly selective, concluding a relatively small number of investments each year compared to the number of invitations received. Trust and credit rigour are critical in the selection process and the CORDET team must believe wholeheartedly in the people with whom they are going to be doing business. CORDET boasts an impressive team of finance, risk and investment professionals from a broad mix of European countries. The team co-invest with CORDET’s investors and together own the firm. The CORDET management style is progressive and nurturing with twice-weekly round table meetings where everyone can have a say. Testimonials characterise CORDET professionals as talented, dependable, diligent, nimble, helpful, and commercially minded. The CFI.co judging panel is pleased to name CORDET as winner of the 2020 award for Best Alternative Credit Investor (United Kingdom).

> TRUMPF VENTURE: BEST TECHNOLOGY INVESTMENT PARTNER GERMANY 2020 TRUMPF Venture brings more to the table than just capital; it’s an investor with an expansive network, deep domain expertise and proven skills in scalability. It is the corporate venture capital arm of TRUMPF group, a production pioneer and global market leader in industrial tools, lasers and electronics. TRUMPF was founded nearly a century ago as a mechanical workshop, and has become a key contributor to the Industry 4.0 revolution. TRUMPF Venture serves as the group’s talent scout, identifying start-ups with bright ideas and crack teams, candidates with the spirit, speed and can-do attitude to make them truly disruptive. It backs promising prospects with an initial investment ticket starting at €500,000, with total investments reaching €5m. Funded start-ups

are brought into the TRUMPF fold, connected to industry experts to expand the technology or improve the business model. TRUMPF Venture deploys a team with diverse backgrounds — engineering, physics and finance, just to name just a few — so funded start-ups benefit from investor relationships rooted in technical know-how and market savvy. TRUMPF Venture launched a €40m fund in 2016 to invest in start-ups, incorporating and partnering with 10 to 15 companies in the fund portfolio. TRUMPF Venture is a strategic long-term partner that helps tech-orientated startups to accelerate and grow their business. The CFI.co judging panel declares TRUMPF Venture as the 2020 winner of the award for Best Technology Investment Partner (Germany).

> TOLEDO CAPITAL AG: BEST WEALTH MANAGEMENT SERVICES SWITZERLAND 2020 At Toledo Capital, investment advisors are not seduced by short-term speculation. They play the long game, with stable diversification strategies for the preservation and transmission of multi-generational wealth. The firm strategically leverages sectoral trends and helps clients to navigate through shortterm market volatility. The boutique multi-family office was founded in the international finance hub of Zurich to serve high-net-worth individuals and families around the globe. Clients’ preferences and objectives set the course for the firm’s investment strategies. Toledo Capital creates tailored investment profiles with carefully calculated riskreturn ratios and ad-hoc reporting on portfolio performance. The firm allocates financial and human resources to the personalised creation of each client’s monthly portfolio performance report.

Its independent status ensures that Toledo Capital is neither biased nor limited by bank policies, ensuring its ability to provide clients with proper focus and attention. Toledo Capital’s advisors use their financial expertise to ascertain and meet clients’ individual needs, resulting in investment solutions that aim to provide optimal returns adjusted to a client’s risk parameters. Toledo Capital promotes diversification across various asset classes, jurisdictions and currencies to create a balanced portfolio that combines higher risk opportunities with moderate investments that offer a lower risk profile and stable, predictable returns. The CFI.co jury praises the firm’s client-focused approach and breadth of scope, and names Toledo Capital AG as the winner of the 2020 award for Best Wealth Management Services (Switzerland). CFI.co | Capital Finance International

> BERMUDA BUSINESS DEVELOPMENT AGENCY (BDA): BEST DIRECT INVESTMENT PARTNER NORTH AMERICA 2020

Bermuda is rightly famous for having pink sand beaches and more golf courses than you can shake a putter at, but it’s just as highly regarded as an international financial centre. The Bermuda archipelago covers just 32 square kilometres and can be reached by direct flights from New York, London and Toronto — easy access for international businesses. Over the past seven years, Bermuda Business Development Agency (BDA) has promoted and encouraged inward direct investments that have strengthened the economy as well as the island’s businessfriendly reputation and gold-standard regulatory framework. The agency serves as a facilitator

and first point of contact for those interested in setting-up, re-domiciling or expanding business operations. The BDA stresses the ease of doing business in Bermuda, with a favourable tax system and a collaborative relationship between government and industry. Bermuda boasts one of the world’s highest GDPs per capita, with international business and tourism serving as the key drivers of the economy. Island residents enjoy world-class infrastructure, including excellent transport and telecommunications. The island’s location in the North Atlantic makes it an ideal time zone for serving global markets. Bermuda BDA engages with the global

community — and blue-chip companies in particular — to promote the island’s advantages. It understands what industries need and liaises with the government and independent financial services to advocate mutually beneficial solutions. In 2019, the BDA assisted 31 new corporate arrivals and collaborated on the advancement of seven legislative acts to support a broad range of existing industries and open avenues for future diversification. The CFI.co judging panel presents Bermuda Business Development Agency with the 2020 award for Best Direct Investment Partner (North America).

> OCTA INVESTAMA BERJANGKA: BEST CLIENT FUND SECURITY INDONESIA 2020

Octa Investama Berjangka operates according to the rule that while customer needs may vary, its passion for quality never does. Traders are quick to join and reluctant to part with Octa Investama Berjangka, the leading local provider of online trading services in Indonesia. Octa installed a local server in Indonesia to ensure clients enjoy the fastest trade executions possible. Octa’s MetaTrader4 platform can be reached via its web portal and mobile app, giving clients access to a range of investment instruments, including currency pairs, precious metals, energy and

indices. Clients are wowed by the broker’s mix of competitive conditions, including floating spreads starting at one pip and lucrative rebates of $5 per lot. Account funds are in US dollars, and low minimum requirements for deposits and withdrawals facilitate the easy movement of money. Octa Investama Berjangka gives the option of a fixed rupiah-dollar exchange — and guarantees it will undercut the bank rate. Clients appreciate Octa’s streamlined verification process and commitment to transparency. Investments are overseen by

state authorities and regulatory bodies, such as the Commodity Futures Trading Authority, the Indonesia Commodity and Derivatives Exchange, and the Indonesia Clearing House. The broker offers a negative-balance protection guarantee that gives peace-of-mind in times of turmoil. The CFI.co judging panel recognises a solid protection strategy for investments through superior technologies and government safeguards. The judges present Octa Investama Berjangka with the 2020 award for Best Client Fund Security (Indonesia).

> GOLDENTREE ASSET MANAGEMENT: BEST CREDIT ASSET MANAGER UNITED STATES 2020

Two decades of good governance and strong strategy have made GoldenTree one of the world’s most trusted independent asset managers. The firm has maintained a global presence since its inception in 2000, investing in international markets and establishing a global network that stretches from its New York headquarters to offices in London, Singapore, Sydney, Tokyo and Dublin. GoldenTree Asset Management focuses on credit investment opportunities and is responsible for a capital base of more than $30bn in AUM. The employee-owned firm attracts top96

tier professionals and encourages them to pursue a path to partnership. There are 27 partners and over 50 investment professionals with an average of 17 years' experience in the 250-person global team. GoldenTree team members are seasoned experts who focus on delivering superior portfolio performance for clients. The firm offers a diverse product line that targets a mix of high yield bonds, leveraged loans, distressed debt, structured products, emerging markets, private equity and credit-themed equities. The key to GoldenTree’s success lies in consistent risk CFI.co | Capital Finance International

control and maintaining a steady safety margin. It starts with a deep-dive analysis of an issuer’s enterprise value and capital structure, followed by an identification of catalysts to drive returns. The company performs relative value analyses to direct continuous re-underwriting of portfolios. The strict alignment of interests in fund structures helps the firm to achieve its aim of outperforming the market across sectors and cycles. The CFI. co judging panel congratulates GoldenTree Asset Management as winner of the 2020 award for Best Credit Asset Manager (United States).

Summer 2020 Issue

> CFI DUBAI (CREDIT FINANCIER INVEST): BEST ONLINE FINANCIAL TRADING SERVICES MIDDLE EAST 2020 CFI (Credit Financier Invest) is a brokerage with a 20-year legacy in the Middle East and a growing global presence. The firm established its first office in Lebanon, and the network now includes entities in London, Mauritius, Amman, Larnaca and Dubai. CFI Dubai serves the needs of private and institutional clients from offices in the Emirates Financial Towers in the heart of the Dubai International Financial Centre (DIFC). CFI launched the Dubai operation in 2017 and entrusted the firm to a leadership team with a 30year track record of trading expertise. CFI Dubai has become one of the largest and most preferred brokers of the region by earning clients’ trust through the consistent delivery of superior service. Each client is assigned an experienced manager to provide dedicated one-on-one

customer care. CFI Dubai aims to elevate traders’ skills: it offers customised advisory service, publishes market insights and hosts webinars and seminars. Regulated by the Dubai Financial Services Authority (DFSA), the firm offers professional and personalised services that cater to client needs — and prides itself on exceeding clients’ expectations. CFI Dubai empowers clients with an impressive range of trading instruments and a well-connected and hitech infrastructure to speculate on CFDs (contracts for difference) across asset classes, including forex, commodities and indices. The CFI.co judging panel notes the firm’s competitive spreads and analytical capabilities, and declares CFI Dubai as the winner of the 2020 award for Best Online Financial Trading Services (Middle East) award.

> YELO BANK: MOST INNOVATIVE CORPORATE REBRANDING STRATEGY AZERBAIJAN 2020 Yelo Bank is a new brand, which presents a ‘breath of fresh air’ for the people and business community of Azerbaijan. At the end of 2019, Nikoil Bank started an initiative to rebrand and restructure operations under this new brand name and its motto – brighter banking. Everything about the rebranding feels cheery, from the sunny simplicity of the logo to the stylised form of the English greeting, hello. The tone of voice of the new brand mirrors the bank’s core corporate values: put the customer first, find solutions, keep it simple, serve with heart and work with smile. The rebranding is more than an aesthetic once-over; it sets the course for a fresh approach to finance and corporate culture, Yelo Bank shook up staffing, tightened operational costs and boosted technology capacity. It aims to position itself as the preferred financial partner of Azerbaijanis, whether entrepreneur or individual. The bank offers business, cash, mortgage and home repair loans as well as credit cards featuring a mix of savings and

cash-back schemes. Clients can open fixed-term deposit accounts (6 to 36 months) and receive the monthly accrued interest on a convenient card. Clients can send or receive money while at home or abroad through the bank system and affiliated money transfer companies. Yelo collaborates with merchants to present clients with pages of cash-back shopping options. Yelo Bank believes that fintech will act as an economic equaliser and enabler, helping people to achieve more while improving the banking experience. It pays special attention to the needs of the business community as it continues to develop its digital capacity. Many businesses have already set up payment clearing accounts for the easy settlement of monthly bills, such as phone, internet, utilities, tuition, and insurance. The CFI.co judging panel applauds the business-friendly and customeroriented approach, and declares Yelo Bank as the 2020 winner of the award for Most Innovative Corporate Rebranding Strategy (Azerbaijan).

> FAIR-FINANCE: MOST SOCIALLY RESPONSIBLE PENSION FUND CENTRAL EUROPE 2020 fair-finance is an Austrian pension fund which modestly opts for the lower case in its official title, but holds an elevated role in its sector. Employers in the country make compulsory contributions to worker provident funds called vorsorgekassen - and fair-finance is one of the select few entrusted to safeguard those payments. Over the past decade, fair-finance has executed a sustainable investment strategy. lt uses a trifocal lens to steer investments towards opportunities with economic, environmental and social benefits, and levers asset allocation to influence the capital market. In 2016, the special real estate fund "fair-finance real estate" became the first Austrian real estate fund to earn Ecolabel certification, and 2020 fair-finance has earned Gold Certificate status from the ÖGUT (Austrian Society for Environment and Technology) for the sustainable investment portfolio 2019. fair-finance first published annual sustainability

report, highlighting key financial and non-financial figures won the ASRA 2019 (Austrian Sustainability Reporting Award) at the very first submission. lt has a customer advisory board with employer and employee representatives, and a profit-sharing scheme. In partnership with Senat der Wirtschaft (the Economic Senate), fair-finance has launched the first Austrian Social Entrepreneurship fund to invest in business cases with social impact. The fund is expected to provide social entrepreneurs with €5-€10m over the next six to eight years. fair-finance's portfolio focuses on microfinance, private debt, energy storage technology, reforestation, elderly care, real estate and social business - and enabled savings of 17,908 tonnes of C02 in 2019. The CFl.co judging panel is pleased to present fair-finance, a repeat winner in the awards programme, with the 2020 award for Most Socially Responsible Pension Fund (Central Europe). CFI.co | Capital Finance International

> CREDIT SUISSE SECURITIES (JAPAN) LIMITED: BEST INVESTMENT RESEARCH TEAM JAPAN 2020

The relationship between subsidiaries and parent companies allows for a sharing of resources, responsibilities and rewards. Over the past 160 years, Credit Suisse has earned a reputation as one of the world's leading financial institutions. This is in large part due to the strength of its global network — and Credit Suisse Securities (Japan) Limited is an integral member of that team. Credit Suisse Securities pulls from a 61-year legacy of local expertise and innovation in the country’s financial markets, starting with the honour of sole underwriter of Japan’s first post-war foreign bond. The

company has developed a suite of services, running the gamut of stocks and bonds, corporate advisory and private banking, financing and alternatives. Clients can seek investment advice at branches in Tokyo, Osaka and Nagoya, or chart their own investment strategies utilising the comprehensive research material that the company publishes on a weekly, monthly and yearly basis. The group established an in-house think tank to provide an overview of long-term economic development and the research team at Credit Suisse Securities plays a crucial role in the

analysis of local market data. The CFI.co judging panel has recognised the company’s contributions to investor self-education in past award programmes, specifically relating to AIenhanced and data-driven research results. As the digital revolution surges forward, Credit Suisse Securities continues to harness advances that help clients shepherd their investments wisely — whatever the market conditions. The judges declare Credit Suisse Securities (Japan) Limited as the 2020 winner of the award Best Investment Research Team (Japan).

> BLUEROCK GROUP: BEST BOUTIQUE REAL ESTATE INVESTMENT SOLUTIONS DACH 2020

As befitting of a boutique Swiss real-estate investment house, BlueRock Group holds itself to exacting standards. It deploys specialist teams in Zurich, Berlin, Frankfurt and Manchester to craft investment opportunities and manage diversified property portfolios, with Germany, Scandinavia and Switzerland as its target markets. Over the past decade, the group has developed the network and refined the expertise to close even the most difficult deal. BlueRock has rigorous market

research and due diligence processes to ensure minimal risk and fair returns. The group plays the long game to create sustainable value that endures. It manages two real-estate funds with more than €850m AUM, which allow investors to select properties on a deal-by-deal basis. It is also engaged in various joint ventures with well-known parties. BlueRock transactions have exceeded €1.2bn since its inception in 2010, and investors can track the performance of the group through its

transparent and thorough quarterly reports. Clients require a minimum investment of €250,000 to put themselves in line for the attractive returns and liquidity these funds tend to yield. The group’s steadfast insistence on quality over quantity speaks volumes for its risk management and attention to detail. The CFI.co judging panel unanimously names BlueRock Group as the winner of the 2020 award for Best Boutique Real Estate Investment Solutions (DACH).

> OctaFX: BEST CFD BROKER ASIA PACIFIC 2020

Over the past decade, OctaFX has developed of suite of trading services boasting tight spread levels, a robust digital platform and a strong partnership programme. The broker is registered in Saint-Vincent and the Grenadines in the southern Caribbean, in full compliance with governmental regulations and in touch with global client needs in retail, professional and legal sectors. OctaFX has identified the AsiaPacific region as a priority and underscores that with a customer support team fluent in Bengali, Chinese, English, Hindi, Indonesian, 98

Malay, Portuguese, Spanish, Thai, Vietnamese and Urdu. OctaFX keeps trader costs low by slashing commissions on deposits and withdrawals. Trading conditions are always favourable, with swift executions and next to no slippage. The company bets on the long game, and invests in employee care with a focus on professional development and corporate culture. An in-house IT department develops solutions that not only tick customer boxes but lower operational expenses and increase budget control for the broker. OctaFX makes its CFI.co | Capital Finance International

intentions clear through a mission statement that promises flexibility, responsiveness and responsibility. A sound set of risk management policies, mitigation measures and internal controls ensure the sustainability of the business. OctaFX studies its competition, checks the pulse of market trends — and puts skin in the game by investing its own capital. The CFI.co judging panel considered customer satisfaction as the final proof, with feedback making OctaFX the obvious choice for the 2020 award for Best CFD Broker (Asia Pacific).

Summer 2020 Issue

> GRUPO TRAXION: BEST INTEGRATED LOGISTICS SOLUTIONS MEXICO 2020 As would be expected of a logistics leader, Grupo Traxion has a sharp eye for detail. Over the past eight years, the Mexican company has developed a broad portfolio of services to ensure the unimpeded, hassle-free flow of people and product – throughout the country and beyond its borders. The family-owned business has executed a growth strategy rooted in strong management and long-term vision. Its wheelhouse of services and expertise includes cargo, logistics, personnel transport, and international ferries for cross-border travel. Traxion group has acquired some of the best Mexican logistics companies and integrated them into its full-service operation. The acquisition strategy was a regional industry first, as was Traxion’s inclusion on the Mexican Stock

Exchange as a land transport company. Its IPO cemented the group’s status as a consolidated link between the worlds of finance and national logistics. Traxion also serves as an investment platform and contributes to the economic development of the logistics industry through venture capital deals. Since its launch, the group has seen a rapid growth trajectory at a compounded increase of 30 percent. It started operations with a fleet of 200 trucks — and now has more than 8,000. Traxion has has consistently achieved 20% margins through shrewd management of a strong and diversified balance sheet. The CFI.co judging panel sees in Grupo Traxion a first-choice tactical partner — and presents it with the 2020 award for Best Integrated Logistics Solutions (Mexico).

> BANCO DE DESENVOLVIMENTO DE MINAS GERAIS: BEST SOCIO-ECONOMIC IMPACT BANK BRAZIL 2020 Minas Gerais, one of the largest states of Brazil, also boasts the country’s third-highest GDP. Banco de Desenvolvimento de Minas Gerais (BDMG) is the trade development bank that facilitates the region’s economic, social and environmental progress. Over the past 58 years, BDMG has established a tradition of economic stimulation and socioenvironmental responsibility, supporting SMEs with preferential credit offers and promoting cultural and citizenship initiatives across the state. It identifies projects that have the power to improve quality of life for the people of Minas Gerais, and transforms those initiatives into reality. In 1988, the bank launched the non-profit entity, BDMG Cultural, to promote the region’s artistic and historical heritage. Another non-profit entity, INDEC (the BDMG Employee Citizenship Institute), supports disadvantaged communities in the

areas of education, health, nutrition and the environment. In 2013, BDMG introduced its socio-environmental responsibility policy, providing a clear framework for aligning corporate conduct with the UN’s Sustainable Development Goals. BDMG supports platforms for partnerships and collaborates with development bodies around the world. It is preparing to issue green bonds in partnership with the Inter-American Development Bank, and serves as official structurer in regional public-private partnership models. A techdriven evolution has been underway at BDMG, as evidenced by the streamlining of internal processes and the strengthening of digital channels. Tailored credit offers are available via a rapid-response digital application. Sufficient reasons for the CFI.co judging panel to present BDMG with the 2020 award for Best Socio-Economic Impact Bank (Brazil).

> UBX: BEST DIGITAL COMMUNITY IMPACT INITIATIVE SOUTHEAST ASIA 2020 A digital revolution is underway in the Filipino finance market, with fintech champion UBX leading the charge. UBX serves as the fintech arm of local giant Union Bank of the Philippines (UnionBank), operating as a separate entity to manage tech initiatives, build platforms and make investments in fintechs. The UBX moniker is a clever representation of that mission statement: UnionBank to the power of x. It creates opportunities through collaborative partnerships and the application of innovative technology. The UBX line-up features UnionBankincubated solutions such as the i2i and platforms such as BUX, Sentro and SeekCap. BUX is an embedded eCommerce platform helping to grease e-commerce wheels. Sentro provides tools to build online stores in minutes. Blockchainbased i2i targets underbanked rural populations by connecting them to financial institutions

across the country. The breakthrough solution has enabled citizens in hard-to-reach areas to access the government’s Covid-19 stimulus payments. As a fintech, UBX is not constrained by traditional banking regulations and encourages out-of-thebox thinking to incorporate financial services into B2B, logistics and financial services ecosystems. The tactic has been proven to boost financial inclusion and promote growth. UBX launched QLabs, where a talented tech team with blockchain and full-stack development capabilities helps companies on their own digital transformation journeys embed financial services into their consumers’ daily lives. UBX has just celebrated its first anniversary, and the CFI.co judging panel is pleased to add another candle to the cake. UBX wins the 2020 award for Best Digital Community Impact Initiative (Southeast Asia). CFI.co | Capital Finance International

> FIDELITY UNITED: BEST INSURANCE BROKER SERVICES PLATFORM GCC 2020

For the past two years, Fidelity United has focused on making its new brand identity a first-choice insurance solution for the Gulf Cooperation Council (GCC). Fidelity United is building on a 44-year legacy, and the new identity pays homage to a partnership between United lnsurance Company and Lebanese insurer Fidelity Assurance and Reinsurance. The bond underscores a shared ambition for regional dominance. Fidelity United is headquartered in The Opus Tower, Dubai, with offices in Abu Dhabi, Fujairah, Sharjah and Ras Al Khaimah. A sustainable operational model ensured a confident start, and Fidelity United has developed an intuitive platform to support brokers and partners. No matter how complex the risk, Fidelity United is there to provide bestspoken solutions and unified brand experience to its clients. Besides offering standard insurance

packages for all corporate and individuals, its approach begins by listening to the client's needs and responding by tailored solutions. Exceptional customers service and product development has been recognized by its partners and associates which, undeniably, is affirming that Fidelity United has a leading role in the UAE market. Served by a passionate and highly skilled team, Fidelity United takes pride in reflecting its core values of transparency and responsibility towards its clients, partners and associates. Identifying new trends and technologies, and having a strong understanding of the insurance industry in the region, the company has built a specific, user friendly platform for the Brokers providing explicit human and digital capabilities, enabling them to experience a seamless and effective process from quote to bind, which

proved successful during the implementation of their Business Continuity Plan on 100% smart working model. The successful foundation of the Broker management unit for Fidelity United is based on scrutinized focus and effects of digitalization, combined with the technical skills of the Market Underwriters’ relationship with Brokers and a strong and responsive operations structure to support the servicing of business. The company applies practical risk-management and ensures that its sound business ethics elevate service standards. Clients recognize the professionalism and responsiveness shown by the Fidelity United team, which aims for major regional growth over the next five years. The CFl. co judging panel congratulates Fidelity United, the 2020 winner of the award for Best lnsurance Broker Services Platform (GCC).

> THIRDWAY AFRICA: BEST ESG MERCHANT BANKING TEAM AFRICA 2020

ThirdWay Africa is the results-driven merchant bank challenging traditional investment models. It combines financial expertise with development thought-leadership to create multi-stakeholder collaboration across the private sector, civil society and government agencies. It unites groups on common ground, rooted in the mission statement of “businesses, communities and ecosystems thriving together”. ThirdWay Africa brings together groups sometimes hampered by conflicting agendas to normalise commercial capital sources, reduce risks, and enhance the appeal of investment opportunities across the African continent.

From its headquarters in London and office in Maputo, ThirdWay Africa cultivates profitable potential throughout Indian Ocean Africa. Its corporate and public advisory services prioritise sustainable development goals. It offers impact consulting and helps companies to connect with development institutions. Thirdway also designs asset management strategies that seek steady returns along with measurable social and environmental impacts. ThirdWay Africa was established in 2014 by a seasoned team with a combined 75 years of financial experience and a quarter century of expertise in agribusiness, forestry and renewable energy

development. Sustainability is the cornerstone of the ThirdWay mandate, based on the ironclad conviction that noteworthy environmental, social and governance performance leads to long-term value creation for all stakeholders. ThirdWay Africa serves as a bridge between the public and private sectors by promoting a new investing paradigm which aims to ensure that risks stay down and returns go up. In recognition of its short-term commercial successes and far-reaching development contributions, the CFI.co judging panel declares ThirdWay Africa as the 2020 winner of the award for Best ESG Merchant Banking Team (Africa).

> CIMB BANK PHILIPPINES: BEST DIGITAL BANKING SOLUTIONS PHILIPPINES 2020

CIMB Bank Philippines (PH) has been in operation for less than two years, but has already brought more than 2.3m customers on-board. All signs point to the bank reaching halfway to its target of five million in the near future. Customers have been flocking to CIMB for the convenience of its all-digital, mobile-first banking platform. It expands on a product line of savings accounts and loans by incorporating growth partners and enablers into its digital platform. Customers 100

can digitally make cash deposits all through the CIMB Bank PH App or choose to physically cashin by visiting over 8,000 partner outlets. The app allows customers to pay bills, make transfers, top-up mobile phones, manage debit cards and request cash withdrawals. CIMB Bank PH has the lean and agile nature of a digital bank, and savings in operational costs are passed on to customers in the form of best-in-market interest rates and zero fees on transactions, transfers CFI.co | Capital Finance International

or withdrawals. As the newest member of the CIMB Group, a leading ASEAN banking group with a presence in 16 global markets, CIMB Bank PH has proven itself a powerhouse of financial inclusion and digitalisation. The bank’s robust security measures — a one-device-peraccount policy, biometric log-in and mobile PIN transaction validation — helped CIMB Bank PH to take the 2020 CFI.co award for Best Digital Banking Solutions (Philippines).

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> RUBRICS ASSET MANAGEMENT: BEST FIXED INCOME FUND MANAGER IRELAND 2020 Rubrics Asset Management believes passive investment approaches — such as the benchmark-orientated portfolios that have served investors well in bull markets — have run their course. Over the past two decades, the firm has developed a diverse line-up of actively managed, risk-adjusted portfolios to suit a range of investor profiles. Rubrics serves institutional and private investors from its Dublin headquarters and London offices, including asset managers, fund-offunds, high-net-worth individuals, charities and endowments. Fixed income strategies are Rubrics’ speciality, and its active management approach allows the firm to respond swiftly to minimise downsides and seize fleeting opportunities. Authorised and regulated by the Central Bank of Ireland and the UK Financial Conduct Authority, Rubrics Asset Management is an open-ended variable

capital umbrella investment company offering investors five EU UCITS (Undertakings for Collective Investment in Transferable Securities) with segregated liability and a base currency in US dollars. Rubrics Asset Management gives foreign investors access to Indian national debt through two fixed income funds. It structures the credit allocation of its global and emerging markets fixed income funds to maximise risk-adjusted returns. Its global credit fund features a mix of highquality credit with low-duration terms, with a focus on capital preservation. The firm has assembled a skilled team with complementary backgrounds in fintech, business development and compliance to monitor market trends and execute portfolio strategies. The CFI.co judging panel is pleased to present Rubrics Asset Management with the 2020 award for Best Fixed Income Fund Manager (Ireland).

> ATLAS INFRASTRUCTURE (UK) LTD: BEST CLIMATE IMPACT RESPONSIBLE INVESTOR UK 2020 Five partners banded together three years ago to form investment firm ATLAS — with a rigorous and intelligent focus on sustainability. From offices in London and Sydney, ATLAS Infrastructure builds resilience into its business model and investment portfolios by targeting long-term infrastructure projects, and by supporting climate change action around the world. ATLAS understands that ESG factors will influence cashflow over time, and factors that into its proprietary methodology. It forecasts three possible climate change policy scenarios, and the economic transitions associated with each. ATLAS considers first how an asset would fare in a “Base Case”, using a range of forecasts including those from the International Energy Agency and the Intergovernmental Panel on

Climate Change. It then looks at the expected returns and risks for the asset in “Fast Transition” or “Delayed Action” scenarios. Investment fund Global Infrastructure Partners (GIP) is the majority shareholder of ATLAS, and the firm is proud to report that partners and staff claim a considerable portion of its equity. ATLAS team members hail from diverse sectors and geographies, bringing a breadth of experience that helps to avoid analytical and portfolio bias. The firm weighs every investment decision with an eye on the longterm interests of the business, its investors, and the environment at large. The CFI.co judging panel is pleased to present ATLAS Infrastructure with the 2020 award for Best Climate Impact Responsible Investor (UK).

> UBS: BEST BANK SUSTAINABILITY LEADERSHIP GLOBAL 2020 UBS is a constant cheerleader for the UN’s Sustainable development Goals (SDGs). The bank does all possible to enable clients, collaborators, policymakers, and peers to make informed decisions on the path towards their achievement, realising that efforts towards economic recovery post-pandemic must take the goals into account. UBS offers clients a range of opportunities for impact investing, enabling them to make a difference – while still enjoying favourable returns. The bank focuses its sustainability efforts on finance, philanthropy, and community engagement, as well as establishing a business model for sustainable growth, responsible stewardship of resources, and expansive social contribution. The CFI.co judging panel confirms the exemplary UBS support extended to host communities. These include a social enterprise that allows cocoa

farmers to stake their claim in the industry, an academy to prepare underprivileged students for university, and a non-profit programme that trains, equips, and pays locals to administer basic healthcare. The bank’s sustainability report for last year was published in March. Core sustainable investments rose to 13,5 percent of invested assets, hitting its target three years ahead of schedule. Carbon-related assets were reduced by more than 40 percent. A sizable chunk of client assets has been directed into impact investments according to SDGs. Greenhouse gas emissions are reducing nicely, and the firm occupies a leadership position on the Dow Jones Sustainability Indices. UBS has an important role in the sustainable future, and the panel applauds its efforts. Named last year too, UBS is the 2020 winner of the award Best Bank Sustainability Leadership (Global). CFI.co | Capital Finance International

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> LIECHTENSTEIN BANKERS ASSOCIATION: OUTSTANDING CONTRIBUTION TO GOOD BANK GOVERNANCE LIECHTENSTEIN 2020

Tiny Liechtenstein boasts one of the world’s highest GDPs per capita. The country’s corporate-friendly tax schemes and skilled labour force have fostered a thriving financial centre. The Liechtenstein Bankers Association (LBA) serves as the unifying voice of those financial institutions, and charts a course for their shared success with a future-orientated roadmap. Stability, quality and sustainability are cornerstones of the LBA mission. The association has started to regularly assess its sustainability performance, measuring operational practices and financial products against internally set and internationally

recognised ESG metrics. The LBA takes a proactive approach to shaping the financial centre through sound governance measures and impactful social programmes. A combination of due diligence and strong cybersecurity presents a front against fraudulent and criminal activity. The association is a proud supporter of the Liechtenstein FAST (Fight Against Slavery and Trafficking) Initiative, which addresses those suffering from modern-day slavery. The LBA prioritises lifelong learning, and both LBA and its member banks provide their employees with continuous training to ensure professional skills

— and client advisory services — remain sharp and relevant. Education is a core pillar of its social outreach efforts, with targeted youth engagement to increase financial literacy and prevent the accumulation of unnecessary debt. As the LBA celebrated its 50-year anniversary last year, it organised the flagship Liechtenstein Bankers Day, uniting thought-leaders of sustainable finance to discuss the future of financial ecosystems. The CFI.co judging panel presents the Liechtenstein Bankers Association — a repeat winner — with the 2020 award for Outstanding Contribution to Good Bank Governance (Liechtenstein).

> MOONFARE: BEST PRIVATE EQUITY PERFORMANCE TRANSPARENCY PLATFORM GLOBAL 2020

The mission statement of Moonfare is to democratise private equity (PE). The Berlinbased firm accomplishes this by offering a digital solution with a fair cost and lower minimums. Participation in top-tier funds is often blocked by high buy-in hurdles, but Moonfare provides individuals with the opportunity to get in on high-performing funds with a minimum investment of €100,000. Over the firm’s two-year history, it has proven that PE investments are not limited to the domain of institutions, but are accessible to

retail clients and to private individuals as well. Moonfare has attracted hundreds of investors and surpassed 300 AuM in May. It expects that figure to hit €1bn by 2021. New clients appreciate Moonfare’s easy digital onboarding, where KYC (know your client) and AML (antimoney laundering) documentation can be completed within minutes, and subscriptions are confirmed with an e-signature. Unlike traditional PE investments, where hold periods typically last five or more years, Moonfare gives clients the option to sell fund subscriptions

after a year. Moonfare traverses borders with a digital investment platform that offers secure and seamless regulatory compliance throughout Europe and Asia. Moonfare has built an 80-person, 12-nationality team, brimming with experience and energy. The team continuously monitors fund performance to target ROIs of at least 18 percent. For its innovation, discipline and agility, the CFI.co judging panel declares Moonfare as the 2020 winner of the global award for Best Private Equity Performance Transparency Platform.

> ASCENTIAL: BEST GLOBAL DIGITAL GROWTH SOLUTIONS UK 2020

Ascential started out over 130 years ago as EMAP, a British newspaper group; now it reigns supreme as a specialist information, data and analytics company, operating from more than 30 offices around the world. It helps brands and e-commerce platforms to thrive in a digital economy. It has a demonstrated talent for strategic growth, constantly strengthening its geographic and technological coverage. The company was an early adopter of e-commerce and has made substantial investments to solidify its presence. In 2012, Ascential 102

invested £37m in a transformation programme to develop world-class sales and marketing platforms with strong product and content creation. Ascential deploys global teams, with hundreds of analysts from China to the US. It has assembled experts to scale-up the processing of big data and has served the top 10 merchants on Amazon over the past four years, boosting turnover from £300m to tens of billions. Ascential is the only company in the world that can show real-time trading across eight platforms. It’s a meticulously controlled CFI.co | Capital Finance International

organisation with a strong tech infrastructure and a knack for innovation. It often beats competitors to market — and helps its clients to do the same. The global pandemic has pushed the company to execute 10 years of market transition strategies in just 10 weeks. Not a problem for this responsive and techcompetent company — and new launches are anticipated by September. The CFI.co judging panel congratulates Ascential, winner of the 2020 award for Best Global Digital Growth Solutions (UK).

Summer 2020 Issue

> ROYAL BRUNEI AIRLINES: BEST FLAG CARRIER FINANCIAL MANAGEMENT TEAM SOUTHEAST ASIA 2020 Brunei Darussalam is a hidden gem of peace and prosperity on the island of Borneo. The tiny nation boasts one of the highest percapita GDPs and some of the world’s most productive oil and gas operations. Royal Brunei Airlines invites tourists to experience all the country has to offer, including its famous golden-domed mosques and biodiverse rainforest reserves. The airline offers regularly scheduled flights across Asia, the Middle East, Australia, and the UK. There are more than 30 destinations in its network, including London, Dubai, Tokyo and Melbourne, while code-sharing and interline agreements add more destinations. This boutique airline has become a wellknown name in the tourism industry. Royal Brunei Airlines, a wholly owned government airline, is a 4 star Skytrax and 5 star APEX rated airline known for its service and warm Bruneian hospitality. The business features a

solid finance structure and consistently hits its performance objectives. Significantly, Royal Brunei Airlines also supports the productivity and growth goals of numerous companies across a broad range of industries. The CFI.co judging panel was impressed by the financial management skills that are underpinning this airline’s progress. These are trying times for tourism, with embargos on international travel threatening many players, but Royal Brunei Airlines has proven a competent captain despite the turbulence. When health and safety measures grounded 95 percent of its international flights, Royal Brunei got creative and started booking private chartered flights. For its ingenuity, perseverance and impressive financial nous, the CFI.co judging panel presents Royal Brunei Airlines with the 2020 award Best Flag Carrier Financial Management Team (Southeast Asia).

> XM: MOST RELIABLE BROKER GLOBAL 2020 / MOST TRANSPARENT BROKER GLOBAL 2020 The CFI.co judging panel congratulates XM on its 10th year of trading, pointing out that longevity is an indication of the intention and wherewithal to properly care for clients at all times. The broker provides quality products and services and is constantly refining practices to ensure a rapid, effective, and sensitive response whenever that should be needed. The technology, strong cashflow and necessary resources onhand allow super-fast withdrawals by clients. Trades are executed at a dazzlingly fast speed and, on principle, XM has never given a requote. There are no hidden costs and full transparency. Broker and client funds are held at tier-one banks and XM is proud that it always exceeds minimum capital ratios

(which is a barrier to entry for small and new brokers). XM is a trusted and reliable broker whose professionalism is widely recognised. CFI.co has made multiple awards to XM, having had the opportunity to measure the broker’s progress over many years. The panel is impressed and believes that XM is set for much more success, because it has created a comforting and secure environment for clients. The broker keeps faith with its mission to respond to global market demands and approach client investment goals with an open mind. XM has been a CFI.co winner for each of the past three years and for 2020 receives awards of Most Reliable Broker and Most Transparent Broker (Global)

> GN AUDIO: BEST INTELLIGENT AUDIO SOLUTIONS EUROPE 2020 GN set out 150 years ago to transform international communication. GN pushes the boundaries of technology to deliver personalised audio solutions best described as industry breakthroughs. It develops devices that receive and transmit audio, but recognise and adapt to the user’s environment. It finds audio adaptability to be an exciting new trend and has developed products that allow users to test hearing and fine-tune playback to individual preferences. GN pursues the global mandate of “making life sound better”. The Danish company has fuelled growth through strategic acquisitions and an in-house R&D department led by some of the industry’s smartest scientists. The GN Group claims the unique distinction of being a leader of consumer, professional, and medicalgrade audio markets under one roof. GN Audio, under the brand name Jabra, serves

professionals and consumers, while GN Hearing develops medical-grade audio solutions. Jabra has assembled a team of audio tech experts with bold ideas that challenge the limitations of human hearing, and lay the groundwork for the future of intelligent audio. As one of its technology advancements, Jabra has collaborated with extreme sports promotor Red Bull Media House to create a cordless mic that uses both clever engineering as well as extractive algorithms to mute the wind noise of extreme sports. Jabra revenues have nearly doubled over the past five years, and about 10 percent of that total goes to fund four R&D centres in Denmark, the US, the Netherlands and China. The CFI.co judging panel recognises a sound business structure in all senses, and announces GN Audio (Jabra) as winner of the 2020 award for Best Intelligent Audio Solutions (Europe). CFI.co | Capital Finance International

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> SEB GROUP: MOST ESG RESPONSIBLE BANKING GROUP NORDICS 2020

Nordic financial services company SEB Group has been supporting ambitious entrepreneurs since 1856, through good times and bad. SEB has earned a reputation for exemplary sustainability standards and a sensitivity to socio-ecological issues. The group seeks to reduce environmental impacts throughout its stakeholder network, and advocates for policies that push corporate entities and private citizens worldwide to go cleaner and greener. As a member of regional banking associations, and as a signatory of the UN’s Environment Programme Finance Initiative, SEB

is able to engage with thought-leaders and policy makers. The group’s commitment to outstanding corporate responsibility, transparency and accountability is evident throughout its policies and product line-up. Green innovation is shaping product development, and SEB has launched a suite of financing, investment, payment and asset management solutions to meet the demands of the most conscientious consumers and investors. A sustainability team of 30 professionals develops solutions that contribute to healthier ecosystems, including green bonds

and mortgages, sustainable development bonds and health impact bonds. The group has proven to be more than a fair-weather friend in the trying times of the coronavirus pandemic, and has leveraged its solid capital and liquidity position to tailor relief assistance to the needs of its customers and society at large. For its dedication to protecting people and planet as well as profits, the CFI.co judging panel declares the SEB Group the 2020 winner of the Most ESG Responsible Banking Group (Nordics) award.

> EAGLE TECHNOLOGY AS: BEST SUSTAINABLE TECHNOLOGY VALUE CREATION EUROPE 2020 TECHNOLOGY Eagle Technology forms part of a group legacy stretching back 94 years. The Eagle group fosters a corporate culture that urges employees to be curious and courageous enough to challenge established patterns. It calls for innovation, customer-centricity and responsibility. Eagle Technology joined the group in 2015, establishing headquarters, sales and project management in Norway and engineering and manufacturing facilities in Bosnia, where they stepped up the business with a brand new highend factory in 2019. Eagle Technology sources the brightest and most inspired engineers to develop next-generation solutions promoting the

circular economy and client satisfaction. Water treatment, vacuum pumps, biotechnology and liquid separation systems for the process and food industry and refrigeration systems are some of its specialties, along with manufacturing of induction thermal desorption units, designed for the processing of oil-contaminated drilling waste. Engineering and production are of the highest quality. Pricing is globally competitive, with ownership or licensing schemes for intercompany or external partners. Eagle Technology seeks to create long-term value and cultivates mutually beneficial relationships with employees, corporate partners, customers, communities, suppliers

and shareholders. It prioritises environmental conservation and develops products that convert waste into a resource. Clients trust Eagle Technology with the design, documentation and production of solutions for offshore, marine and land-based industries. Eagle AS and its seven subsidiaries uphold and advance the principles of the UN Global Compact. The group invests in companies with clean energy and environmentally friendly solutions and has an annual turnover in 2018 of about €50m. The CFI.co judging panel presents Eagle Technology AS with the 2020 award for Best Sustainable Technology Value Creation (Europe).

Learn Capital's mission and purpose are neatly encapsulated in the company title. The US venture capital firm invests in dynamic entrepreneurs seeking to transform the global education sector. In 2010, Learn Capital's founders hypothesized that the confluence of tech trends in mobility, broadband, and cloud computing could radically expand the scope and access of quality learning for the world's population, and they created a venture firm to pursue this mission. Today Learn Capital has regional headquarters in San Francisco's Bay Area, i.e. Silicon Valley and America's West Coast, but its support is global, and the firm aims to bolster innovative learning experiences, platforms and services to individuals from every type of background, on nearly every continent. Its team has invested in 110 companies throughout the world, helped in part by a worldwide network of sourcing partners

and a founding team of investing partners with extensive expertise in both learning science and hyper-growth startups. Learn Capital is known for companies that have achieved high scale like Coursera, the world's largest network of premier higher education experiences, and Udemy, the world's largest peer-to-peer network for sharing knowledge and skills Select examples of its work from dozens of other emerging companies include Armenia's SoloLearn — the world's largest mobile social platform for coders — and Croatia's Photomath, where learners can take a picture of any math problem and it will be taught to them by the app, without any need for expensive tutors which are out of reach for most students in the world. Photomath has been downloaded more than 100 million times is one of the top educational apps on all smartphone platforms. In the technical skills realm, Learn

Capital has invested in Andela, which has bases in Nigeria, Kenya, Uganda, Rwanda, Egypt and Ghana. Andela has created the first software development cluster in Africa, building remote engineering teams and providing talented individuals with broad access to skill building experiences at no upfront cost to themselves. Learn Capital emphasizes value of sustainability and inclusion, and it is working towards a 50/50 gender balance among its founding teams. In the wake of the recent global dislocation from the 2020 pandemic, education technology is now accelerating at an unprecedented rate and the signs point to a potential for massive growth. The CFI.co judges were impressed, to say the least, and had no hesitation in conferring on Learn Capital the 2020 award for Most Innovative Global EdTech Investor (United States).

> LEARN CAPITAL: MOST INNOVATIVE GLOBAL EDTECH INVESTOR UNITED STATES 2020

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Summer 2020 Issue

> NANOPOOL: BEST GREEN ALTERNATIVE INNOVATION EUROPE 2020 Nanopool GmbH, established in 2002, is an innovative nano-technology company working in the field of ultra-thin layers and specialised surface coatings. Consider the possibilities of spraying almost anything with a coating so fine that it is impermeable, and nothing can stick to it. NP Liquid Glass coatings are suitable for hard and soft surfaces without any alteration of their look or feel. Applications include protective barriers against germs, dirt and viruses. Solutions can be delivered on-site and Nanopool’s low-cost technology means that it can operate in almost all economic regions. NP Liquid Glass represents a revolutionary breakthrough for the packaging industry as governments worldwide begin to adopt more stringent plastic bans. And it doesn’t get much greener than a plan for treating plants with protective layers that add to their wellbeing and allow growers to dispense with harmful pesticides. These silicon dioxide-based coatings represent

an invisible protective coating that is 500 times thinner than a human hair. Nanopool has been cooperating with academia and institutions – including the NHS – since its inception and is bringing to market interesting, cost-effective and efficient solutions. Nanopool is resolutely a family business that shows commendable responsibility to its customers, employees and partners. The company joined the UN Global Compact Network last year and champions the SDGs. In 2009, Nanopool created the NP Academy to teach ways of working with nanotechnology products. The company currently operates in the Americas, Asia, Australia and Europe and expects to be visible in Africa soon. The CFI.co judging panel commends Nanopool and expects further promising developments to unfold. Without hesitation, the company is named 2020 winner of the award Best Green Alternative Innovation (Europe).

> EURO EXIM BANK: BEST GLOBAL TRADE SERVICES BANK 2020 Euro Exim Bank gives businesses a leg-up in the global trade game with a suite of services backed by blockchain. It was launched in 2015 and is a trusted partner of import and export businesses. Euro Exim has a Class-A international banking licence that allows it to support enterprises around the world, regardless of industry. The licence is granted by the Financial Services Regulatory Authority of St Lucia, where Euro Exim has its headquarters. The bank has a representative office in London, and plans to expand the global network with branches in Singapore, Chennai and Dubai within the next 12 months. Its service offering covers corporate bank accounts, pre-paid credit cards, letters of credit, trade credit lines, wire transfers, bank

guarantees — everything needed for truly global operations. Euro Exim became the first regulated bank in the world to officially partner with Ripple, the tech company responsible for the XRP cryptocurrency, ODL (on-demand liquidity) and xCurrent solutions. Through this partnership, Euro Exim clients enjoy rapid, frictionless crossborder transactions in 80 countries, with low cost and high auditability. The bank expects peers to follow its lead in using blockchain to unburden global trade from the paper-based system and its inherent problems of bureaucracy and fraud. The CFI.co judging panel agrees on the benefits of blockchain, and presents repeat winner Euro Exim Bank with the 2020 award for Best Global Trade Services Bank.

> C2FO: BEST SME WORKING CAPITAL INNOVATOR UK 2020 C2FO, the world's first working capital marketplace, was established to counter hinderances to the economic stability and business continuity that a healthy supply chain provides. Money spent at retailers and other large enterprises takes a while to trickle down into the pockets of the suppliers, often SMEs, that drive the global supply chain. C2FO, founded in 2008, has developed a win-win solution that enables suppliers to ask for early payment of their payable invoices at a small discount of their choice, if they want to. Large companies usually have the liquidity to promptly settle invoices, but suppliers nonetheless often have to wait up to 90 days for payment. But with C2FO, suppliers typically see payments made and bank accounts credited by the next business day. C2FO estimates the balance of outstanding invoices worldwide stands at $40tn. Delayed

payments represent a huge challenge for smaller businesses - or can even cause their downfall. Of the UK's million-plus suppliers, 93 percent are SMEs, and 70 percent of those are micro-enterprises. C2FO convinced big-name buyers to support supply chains - while getting better returns on their cash than from the bank. Feedback has been overwhelmingly positive, and the client list has grown to include big-hitters such as Amazon, Costco, Siemens, Air France, Philips, Hewlett-Packard, Danone, Ford and Walmart. Since its launch, C2FO has generated more than $130bn in working capital flow volume, and accelerated payments by a collective 1.1bn days. For a company that has brought control to cash flows, the CFl.co judging panel presents C2FO with the 2020 award for Best SME Working Capital Innovator (UK). CFI.co | Capital Finance International

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> NORDEA LIFE FINLAND: MOST SUSTAINABLE ASSURANCE NORDICS 2020

The Nordea family tree has roots stretching back to the 1800s, and has grown into one of the most respected financial services brands of the Nordics. Nordea Life Finland is one of the group’s subsidiaries, specialising in financial services and insurance solutions over the past 28 years. Nordea Life Finland upholds the group’s reputation for exemplary ESG leadership and weighs sustainability concerns in all its decisionmaking processes. The company considers all the people its operations touch — employees, customers and communities — and articulates its commitment to uplifting stakeholders in

comprehensive governance policies targeting long-term sustainability performance, responsible investment, supplier expectations, tax compliance and financial crime prevention. Nordea Life Finland is a repeat winner in CFI.co awards programmes, and the judging panel is pleased to witness the company’s continued improvements. Its recent annual report detailed another successful year, with an increase in premium income and a strong solvency position that exceeds almost twice the solvency requirement. Last year proved profitable for its Globe Basket investments, which seek positive socio-

environmental impacts and attractive returns. Investment baskets, which can be linked with individual pension, endowment or capital redemption plans, showed good returns for equity and fixed income investments across markets throughout 2019. After assessment in the first quarter of 2020, Nordea Life Finland was awarded six-star recognition by the EFQM (European Foundation for Quality Management), a recognition of excellence. The CFI.co judges have no hesitation in presenting Nordea Life Finland with the 2020 award for the Most Sustainable Assurance (Nordics).

> BANK ONE LTD: BEST CORPORATE BANK INDIAN OCEAN 2020 & BEST INTERNATIONAL BANKING SERVICES INDIAN OCEAN 2020

Mauritius-based Bank One aims for excellence in customer experience, creates value in every relationship, contributes to community development and rewards employees for outstanding performance. Bank One's stakeholder network includes regulators, who praise the bank for its compliance and oversight, shareholders who celebrate objectives met and dreams achieved and valued partners who choose Bank One as a reliable institution both locally and internationally. Bank One has a team of 411 professionals, who are at the cornerstone of the bank’s strategy and who work across 10 branches and six business lines — corporate, international, private, retail, treasury, and e-commerce — to serve

around 50,000 customers. The bank follows a customer-centric business model, taking the role of partner and guide. Bank One has developed a spectrum of corporate and international banking solutions to facilitate the flow of commerce and stimulate growth. International Banking remains the mainstay of Bank One. In pursuance of its diversification strategy, it has been able to acquire new geographies under its portfolio. Through its International Banking segment, Bank One has also introduced several new valueadded products into its suite, in response to customers’ demands and the requirements of a dynamic market environment. The business line is actively pursuing other mandates with several

business partners; the setting up of a desk to deal with financial institutions forms part of its strategy and is now a reality. On the other hand, corporate banking has been growing year on year at Bank One despite challenges and uncertainties prevailing in the local and international contexts and has been able to further diversify its deposit sources, with several new names added to its customer base during the last financial year. The CFI.co judging panel, impressed by the bank's performance in challenging times, presents Bank One — a repeat CFI.co winner — with a 2020 dual award for Best Corporate Bank & Best International Banking Services (Indian Ocean).

> AFGHANISTAN INTERNATIONAL BANK CJSC: BEST CORPORATE GOVERNANCE AFGHANISTAN 2020

As the world reels from the effects of the C100 M62 Y0 Bank K20 sees its pandemic, Afghanistan International continued success as a boon — and the natural result of more than a decade of solid corporate governance. AIB has earned its reputation as a safe haven through international best practice, sound risk management and comprehensive security measures. Exacting standards qualify the bank as a clearing house for US dollars and pounds sterling. Its status has led to a substantial increase in deposits, despite subdued investment activity. The bank has 106

cultivated a small loan book and remains in constant contact with customers to ensure any potential problems are dealt with preemptively. AIB has new headquarters in Kabul City — where its updated IT security system has achieved ISO 27001 certification and transformed the modern facility into a digital fortress. The building has been granted visitation approval by the World Bank and the British and US Embassies. AIB was founded with the mission to drive economic and social development in Afghanistan. It CFI.co | Capital Finance International

achieves that end with the personal, business and Islamic banking services it provides, and by collaborating with communities to support orphanages, women's organisations and food distribution projects. The CFI.co judging panel has followed AIB’s progress over the years, conferring several awards in recognition of its exemplary ethical framework. The judges continue to find cause for acknowledgement, and present Afghanistan International Bank CJSC with the 2020 award for Best Corporate Governance (Afghanistan).

Summer 2020 Issue

> DORCHESTER WEALTH MANAGEMENT: BEST INVESTMENT MANAGEMENT TEAM CANADA 2020 Since its inception, Dorchester Wealth Management has followed the sound strategy of investing in high quality companies with attractive valuations. The firm has established a rewarding corporate culture that simplifies recruitment and results in low turnover of an engaged workforce. The team of 21 partners and professionals boasts more than 300 years of cumulative investment management experience. The depth and breadth of the firm’s expertise, and a clientdriven focus, contribute to its reputation as a safe haven among investors across North America and overseas. Approximately seventyfive percent of Dorchester’s private clients trust all their investment assets to the team’s skilled management. Dorchester Wealth Management serves clients from offices in Montreal and Toronto, managing assets with a market value exceeding $1.1 billion. A multifaceted team conducts primary research as well as

quantitative and technical analysis to give clients an in-depth understanding of market risks and opportunities. Portfolio managers provide timely and professional assistance, ensuring a rapid response to any concerns. Dorchester Wealth Management was an early adopter of digitalisation standards, and is now enjoying the benefits of that pre-emptive planning. A robust remote working system has allowed the firm to protect stakeholders during the current crisis with a seamless continuation of services. Dorchester Wealth Management has capitalised on market volatility to adjust portfolios for a conservative risk profile targeting companies with strong balance sheets and solid long-term growth potential. The CFI.co judging panel understands the importance of proper planning to safeguard client assets, and presents Dorchester Wealth Management with the 2020 award for Best Investment Management Team (Canada).

> ABSA BANK (SEYCHELLES): MOST RESPONSIBLE BANK SEYCHELLES 2020 The Seychelles archipelago — 115 islands nestling off the east coast of Africa — boasts some of the world’s most spectacular landscapes, flora and fauna. The main attraction for African financial services group Absa, however, was the republic’s status as a world-class financial centre. Absa Bank (Seychelles) forms a crucial link in the group’s coverage of the African continent, with a presence in 12 countries. Absa Bank acts as an agent of positive change at community and continental levels. It makes big promises — and delivers on them by creating meaningful opportunities. Absa was one of the first Seychelles banks to introduce digital services, with a robust and convenient platform. The bank has deep local roots and a profound understanding of its citizens’ needs. It partners

with Seychelles organisations to help beneficial programmes, offering tools and sponsorship for promising projects. As a Strategic Partner Associate of the World Economic Forum, Absa is a regular participant at the annual meeting in Davos. It has used the platform to call for the adoption of stakeholder capitalism, and encourages corporations to act as “trustees of society”. Absa Bank pledges the courage and passion needed to shape a better society, and drives innovation in pursuit of solutions to pressing global challenges. Its stakeholder relationships are built on trust, and backed by environmental accountability and inter-generational sustainability. The CFI.co judging panel is impressed, and presents Absa Bank with the 2020 award for Most Responsible Bank (Seychelles).

> MASHREQ BANK: BEST SMART RETAIL BANK MIDDLE EAST 2020 With 50 years behind it, Mashreq Bank is as old as the UAE itself. It has grown in tandem with the nation, fuelled by innovation and ingenuity. Mashreq Bank has played a crucial role in the transformation of Dubai from a sleepy hub for pearl divers to the international centre for finance and technology that it is today. Mashreq is a pioneer of the Middle Eastern finance world, and was the first bank in the region to install ATMs, issue credit cards and introduce chatbots. Mashreq Bank has stayed ahead of the competition by upgrading its online offering in tune with client expectations. It has made significant tech investments over the past five years to create a secure digital ecosystem that keeps clients and team members connected with real-time financial access. It uses blockchain technology to streamline the opening of new

accounts, and harnesses AI and machine learning to achieve more efficient processing times and lower transaction costs. In 2017, Mashreq Bank launched Neo, the first full-service digital bank in the Middle East, and two years later it followed up with NeoBiz, which tailors digital services for the SME and start-up sectors. Last year, it reported that branch traffic had fallen by more than half, with three-quarters of all new business brought on-board digitally. A full 97 percent of retail transactions are conducted through its hi-tech platforms. This strong rate of engagement will allow Mashreq to shutter half the branches in its network this year. It’s a bold move which will freeup funds for more digital development. The CFI.co judging panel is impressed with this foresight, and presents Mashreq Bank with the 2020 award for Best Smart Retail Bank (Middle East). CFI.co | Capital Finance International

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> ABU DHABI GLOBAL MARKET: BEST INTERNATIONAL FINANCIAL CENTRE EMEA 2020

In the short span of five years, Abu Dhabi Global Market (ADGM) has earned a reputation as an innovative, responsive and business-friendly international financial centre (IFC). Some of the world’s top businesses call the free zone home, and ADGM listens attentively to understand and anticipate their needs. Its jurisdiction stretches across the 114-hectare island of Al Maryah, where a collection of residences, restaurants and retail shops allow a healthy work-life balance. ADGM collaborates with regional and international partners to achieve

global and regional breakthroughs, including the world’s first digital courtroom, and the first Virtual Asset Regulatory Framework. ADGM introduced digital and fintech “regulatory sandboxes” to give entrepreneurs a safe space to experiment, and recently became the first jurisdiction in the MENA region to apply British common law. Three divisions — the Registration Authority, the Financial Services Regulatory Authority and ADGM Courts — have together elevated ADGM’s status as a leading IFC with a regulatory, judicial and dispute

resolution system that upholds international best-practice. ADGM has benefited from its enviable geographic location to open new avenues into China to increase collaboration, connectivity and shared economic growth. The CFI.co judging panel congratulates ADGM on accomplishing in a few short years what others have struggled to do in a lifetime. The judges present Abu Dhabi Global Market, a repeat CFI.co winner, with the 2020 award for Best International Financial Centre (EMEA).

> METITO, HASSAN ALLAM JV (AL MAHSAMMA AGRICULTURAL DRAINAGE RECYCLING AND REUSE PLANT): BEST RECYCLING AND REUSE WATER PROJECT GLOBAL 2020

Al Mahsamma Agricultural Drainage Recycling and Reuse Plant has come to the panel’s attention for being the largest of its kind worldwide, with a daily capacity of one million cubic metres. The plant will support the natural ecology of Al Temsah Lake which has been impacted by wastewater disposal in previous years. Al Mahsamma plant will also contribute to regional development goals, irrigating 70,000 acres of land, creating sustainable urban communities and new job opportunities. The USD100 million has been developed under the supervision of the Armed Forces Engineering Authority by the JV Metito,

Hassan Allam. Metito, a multinational global provider of intelligent water management and alternative energy solutions; Hassan Allam Construction, Egypt’s leading engineering, construction and infrastructure company. The JV scope of work for this flagship project includes the engineering, construction, operations (EC&O), commissioning and O&M for a period of five years. The JV represents a powerful pairing, delivering a benchmark project which was inaugurated in Egypt in April 2020. Al Mahsamma forms part of Egypt’s progressive and multi-pronged approach to ensuring the

country’s water security through wastewater treatment, desalination, and the preservation of natural water resources, which resonates with a few of the UN’s Sustainable Development Goals including ‘Clean Water and Sanitation’ (SDG 6) and ‘Sustainable Cities and Communities’ (SDG 11). This was yet another testament to the importance of this project and why the CFI. co judges, are presenting the Metito, Hassan Allam JV (Al Mahsamma Agricultural Drainage Recycling and Reuse Plant) with the 2020 award Best Recycling and Reuse Water Project (Global).

> EQDOM MAROC: BEST INCLUSIVE CONSUMER FINANCE NORTH AFRICA 2020

Over the past 45 years, Eqdom Maroc has earned a reputation as a pioneer of inclusivity in consumer finance. It is a longstanding and trusted financial partner to Moroccans from all walks of life, including civil servants, pensioners and entrepreneurs. The company solidified its position as a consumer finance specialist by filling a gap created by the onerous credit requirements of traditional banks, which tend to focus more on balance sheets and business plans than on people and potential. The sector has good liquidity and high growth, and empowering 108

clients is the cornerstone of the Eqdom ethos. It puts their needs and development at the centre of operations. The company’s two key business lines are personal and vehicle loans. Recent initiatives underline Eqdom’s determination to provide value-added services that promote financial inclusivity. It has extended car loans to people without a banking history – or even an account. It has mobilised a strategic network of branches to connect with rural communities and finance utility vehicle purchases for farmers. It goes beyond consumer credit solutions to support CFI.co | Capital Finance International

financial education across Morocco. The scope and range of its services continue to expand, with a dedicated workforce of more than 300 employees. Half the team is concentrated at the Casablanca headquarters, with the other members spread across the branch network. Eqdom Maroc earns kudos for team diversity and company-wide gender parity, even at senior management level. The CFI.co judging panel applauds the company’s forward momentum, and declares Eqdom Maroc as the 2020 winner of the award for Best Inclusive Consumer Finance (North Africa).

Summer 2020 Issue

> BERMUDA STOCK EXCHANGE: BEST OFFSHORE SECURITIES EXCHANGE CARIBBEAN & NORTH ATLANTIC REGION 2020 Tourists are smitten by the famous pinkhued beaches, but savvy investors know Bermuda is more than a vacation hotspot – it’s a world class offshore financial centre. Investors don’t have to be residents to invest in Bermuda Stock Exchange (BSX) publicly listed securities. It offers retail stocks, bonds, and mutual funds. Novice investors gain confidence with a detailed dossier on investment basics, and are directed to local brokers who can open a path to owing a share of Bermuda. The archipelago boasts one of the highest GNPs per capita worldwide and is one of the top three centres for insurance and reinsurance alongside London and New York, and world leader in the issuance of insurance-linked securities. A fully electronic exchange since 1993, the BSX has contributed to the local economy with

infrastructure to centralise the market in a well-founded system with robust domestic and international activity. The Exchange is regulated by the Bermuda Monetary Authority and is an accredited member and sits on the Board of the World Federation of Exchanges. BSX lists and trades stocks of publicly listed companies across financial services, consumer good, insurance, media, real estate, transport and utilities. Investors praise the exchange for its efficiency and speed in the clearing and settlement of trades. The burgeoning BSX is proud of its track record of maintaining and solid and dependable market platform for local and global customers. The CFI.co judging panel declares Bermuda as the winner of the 2020 award for Best Offshore Securities Exchange (Caribbean & North Atlantic Region).

> GULF INSURANCE GROUP KUWAIT: MOST INNOVATIVE INSURANCE SOLUTIONS PROVIDER MENA 2020 Early adopters of digitalisation measures are enjoying a ROI in the form of uninterrupted operations during these challenging times. Gulf Insurance Group Kuwait (GIG-Kuwait) is one of those early adopters — and essential service providers — whose tech investments have inoculated their companies against business disruption. GIG-Kuwait is one of the country’s greatest digital pioneers, pushing the industry to implement tech capabilities that enhance the customer experience and improve operational efficiency. Digitalisation is beginning to take root in Kuwait, and GIG-Kuwait has done much to pave the way. The company formed in 2007, and within a year it had become the first in the country to sell insurance products online. Customers can buy or renew policies through the

GIG-Kuwait website or app. Patients and medical providers can process claims through an online platform and connect to a 24/7 call centre for personalised assistance. Digital archival has cut the company’s paper consumption while making the audit and approval of claims more efficient. A comprehensive client database supports the management of customer relationships and the customisation of coverage. GIG-Kuwait added another pioneering moment to the list in 2015 as the first Kuwaiti company to upgrade to the current ISO 27001 international IT security standard. For a digital strategy that has outpaced the competition, the CFI.co judging panel names GIG-Kuwait as the winner of the 2020 award for Most Innovative Insurance Solutions Provider (MENA).

> KWAZULU-NATAL JOINT MUNICIPAL PENSION/PROVIDENT FUNDS: BEST PENSION FUND LEADERSHIP SOUTH AFRICA 2020 KwaZulu-Natal Joint Municipal Pension/ Provident Funds (NJMPF) has been providing retirement benefits for workers in South Africa’s KwaZulu-Natal Province for 78 years. NJMPF offers employers and employees two defined-benefit retirement funds, which provide monthly and lump-sum benefits based on salary and service history. It also offers a defined-contribution provident fund, which pays out lump sums upon retirement, resignation, illness or death. Former CFO Bonginkosi Mkhize took the helm as CEO last year, managing assets of $1.2bn for some 21,000 current members and 9,000 pensioners. The insights Mkhize gained in his previous role made for a smooth leadership transition — one underpinned by an implicit commitment to strong corporate governance. Exemplary governance is a cornerstone of NJMPF, and its compliance handbook goes well

beyond national treasury requirements. It maintains close relationships with regulators, and its audits are consistently clean. It engages with members in meaningful ways, and demonstrates strong community commitment. ESG criteria are a key consideration in aligning operations with responsible investing principles. NJMPF has incorporated impact investing into its portfolio to target attractive returns and community gains. The CFI.co judging panel has followed NJMPF for some years, and applauds its innovative efficiencies and economies. Mkhize brings a democratic leadership style to the C-suite, and is committed to fostering a co-operative and cohesive work culture that encourages participation, and rewards performance. The judges declare NJMPF as the 2020 winner of the award for Best Pension Fund Leadership (South Africa). CFI.co | Capital Finance International

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> GROWTH HOLDINGS: OUTSTANDING REAL ESTATE VALUE-CREATION LEADERSHIP GLOBAL 2020

Growth Holdings partners with industry-leader Tesla, and other innovators and disruptors, to offer homebuyers next-generation tech features that not only enhance energy efficiency and reduce environmental impact, but also promote healthy living without sacrificing either style or comfort. The latest addition to the Growth Holdings portfolio is The Canyon Collection in Las Vegas: Custom-built residences that raise smart and sustainable to the next level and redefine luxury living. Uniquely, Growth Holdings homes help sustain the health and well-being of their occupants without any input beyond their presence. The company is the first to develop intuitive high-tech homes that get to

know the occupants, learn from them through passive observation, and use the resulting data to anticipate needs and shape a welcoming, wholesome, and relaxed domestic atmosphere. This remarkable breakthrough in home technology is the work of Lebanese-born Philippe Ziade who completed a dual degree in civil and mechanical engineering. His vision of bundling disparate strands of budding home technology into a seamlessly integrated single system has allowed his company to leap ahead of the competition with a value proposition unequalled anywhere. Today, Mr Ziade chairs the board of Growth Holdings. The corporation now represents a network of 24 companies that act in concert to cover all aspects of real

estate industry, from design, development, and marketing to investment, building, and management. Growth Holdings companies work in harmony to execute bespoke projects from concept to delivery within a 13-month timeframe. Prices start at around $2m. Tesla energy solutions are a standard fixture and clients may opt for a Tesla vehicle with onboard systems that complement the home environment and add a mobility vector to further enhance the experience. The CFI.co judging panel recognises Growth Holdings, a company at the forefront of collaborative innovation and disruption, as the winner of the 2020 Global Outstanding Real Estate Value-Creation Leadership Award.

BLKB (Basellandschaftliche Kantonalbank) is Switzerland's most future-orientated bank. Six years ago, it changed its own investment offering to a completely sustainable product range. Three years ago, it fostered the approach by establishing a set of guiding principles to anchor its operations on an overall bank level and implementing it in its core business strategy. Majority owned by the canton of BaselLandschaft, BLKB is the largest bank in the region, offering a range of ESG-benchmarked credit, investment and advisory services. It fosters a culture of continuous learning with ongoing vocational training for staff and a sponsorship programme for apprenticeships and university internships. As a forward-looking

employer, BLKB offers contemporary work models which allows the staff more flexibility in the organization of working hours and locations. This simplifies the compatibility of work and private life, such as caring for children or relatives, and supports a balanced work-life balance for every employee. BLKB has made steady advances to curb its carbon emissions, and achieved CO2neutrality in 2019. It accomplished this by recruiting a company specialising in greenhouse emissions calculation to pinpoint compensation targets, then gave employees the vote on which socio-ecological initiatives to support. Two international projects were selected: establishing safe water supply in Rwanda and protecting

forests in Zimbabwe. As the bank states, CO2 recognises no national borders. BLKB ensures its carbon-neutral status will continue through partnership in a local climate-protection project that aims to build up nutrient-rich, carbonsequestering humus in the region's agricultural lands. The improved soil quality will boost the resilience of regional agriculture production for years to come. BLKB is a role model of good governance, with full accountability and transparency across its operations. The bank pledges end-to-end sustainability for products, people and practices. The CFI.co judging panel is pleased to present BLKB with the 2020 award for Best Regional Sustainability Bank (Switzerland).

> BLKB: BEST REGIONAL SUSTAINABILITY BANK SWITZERLAND 2020

> IBM: OUTSTANDING WORKFORCE TRAINING GLOBAL 2020 With today’s rapid advances in tech, skills can become obsolete before they have been mastered. IBM, one of the most respected names in IT innovation, published a study last September predicting the need to retrain up to 120m workers in the world's 12 largest economies. Why? Advances in AI and intelligent automation. Some 5,670 global executives in 48 countries participated in the study — and only 41 percent of the CEOs canvassed expressed confidence in having the right mix of people, skills and resources to achieve targets. IBM encourages 110

modern professionals to sharpen their skills through a process of life-long learning. The company has created libraries of educational content, including courses that confer industryrecognised certification, podcasts, blog posts, articles, videos and tutorials. It partners with Global Training Providers to provide learning programmes that boost employee engagement and retention as well as productivity, efficiency and cost savings. Individual learners can seek training through approved providers, or create an IBM learner profile and begin a personalised CFI.co | Capital Finance International

learning journey. A subscription service opens up the catalogue for those who wish to explore content as interests or projects dictate — at a discounted rate. In March 2020, in response to the Covid-19 crisis, IBM announced it would be offering many of its educational programmes free-of-charge, enabling people around the world to future-proof their careers and emerge from the quarantine with in-demand skills. The CFI.co judging panel is pleased to present IBM, a repeat winner, with the 2020 global award for Outstanding Workforce Training.

Summer 2020 Issue

> CATALYST PARTNERS: BEST SME GROWTH INVESTMENT PARTNER MENA 2020 Founded in 2012, Catalyst Partners has forged a reputation as a truly innovative investment house. It partners with companies to help set strategic goals and channel capital for targeted growth. The aim is to be a one-stopshop for SMEs and family business across the MENA region. The firm co-creates a vision and sets targets for transformation. Catalyst Partners monitors companies’ progress and fosters their development through capacitybuilding workshops in governance, accounting and strategic planning — crucial elements for SMEs seeking growth. An in-house investment banking team tailor capital-raising and financial advisory services to fuel the growth of its incubated partners and clients from a spectrum of industries. Catalyst Partners created an investment vehicle to support the agricultural industry, and a leasing programme

to provide debt instruments to SMEs. The firm is driven by a dedicated team with decades of expertise in corporate finance, management consultancy and auditing. The team takes a holistic approach to helping partners to identify opportunities and develop their potential. Despite the slowing of global markets during the pandemic, Catalyst Partners has maintained positive momentum, and remote working has unlocked unexpected reserves of energy and efficiency. Catalyst anticipates an IPO launch within the next three years. The CFI.co judging panel commends Catalyst Partners, a repeat winner in the awards programme, for its steadfast mission to nurture entrepreneurial growth throughout the MENA region. The judges declare Catalyst Partners the winner of the 2020 award for Best SME Growth Investment Partner (MENA).

> TAVISTOCK WEALTH: BEST INVESTMENT FUND MANAGER UK 2020 Tavistock Investments is a purpose-driven UK financial services group with a rapid-paced growth trajectory. Founded in 2014, the firm has enjoyed a quick growth spurt fuelled by a decisive acquisition strategy and advisors with in-depth knowledge of target investment industries. Protection is a core tenet at Tavistock: it is committed to protecting advisors, the network and its clients. It deploys a team of 200 inhouse advisors as well as other independent financial advisors to serve more than 10,000 investors. Its client base consists of mainly retirees, or people close to retirement, who are seeking investment solutions that give peace of mind. As such, Tavistock Wealth the fund management division of the group, apply actively managed cautious risk measures to fund management by currency hedging and volatility controlling the funds they offer. Tavistock Wealth offers 10 investment portfolios, with simple, competitively priced annual

management fees, managed by expert hands. They reduce risk by currency hedging most of the overseas exposure back to pounds Sterling. They have launched three actively managed funds; the ACUMEN Capital Protection Portfolio, ACUMEN Income-Protection Portfolio and ACUMEN ESG Protection Portfolio with a mechanism to lock in market highs while limiting the lows. The protection portfolios are underpinned by Morgan Stanley, contractually guaranteeing the funds at 90 percent of the highest portfolio (NAV) value for the Capital Protection Portfolio & ESG Protection Portfolio and 85% protection for the Income-Protection Portfolio — with the level of protection increasing alongside any new portfolio highs. The CFI.co judging panel applauds the approach, which offers inoculation against market volatility for the capital preservation of clients. The judges present Tavistock Wealth with the 2020 Best Investment Fund Manager (UK) award.

> SMART DUBAI: BEST SMART CITY INNOVATION IMPACT GLOBAL 2020 Smart Dubai takes a holistic approach to digital development, and it sets the bar high. The government department designs and delivers integrated cross-sector services, gearing innovation to the goal of creating the smartest and happiest city on Earth. Smart Dubai’s AI lab, established in partnership with IBM, turns the city into a testbed of innovation and solidifies its reputation as a global technology hub. The department aims for a seamless and secure experience for residents and visitors, and collaborates with public and private entities to harness the power of technology and data science. It unites government departments and industry leaders in a consolidated blockchainbased ecosystem, and has implemented 24 use-cases – situations in which a product or service could practically be employed – across

eight industry sectors. Smart Dubai is pushing for the city to become paperless by 2021, phasing out government paper transactions in favour of a blockchain-powered system. Over the past two years, it’s an initiative that has resulted in significant savings: an estimated $197m in costs and millions of hours in labour — not to mention tens of thousands of trees. One of its apps, DubaiNow, puts over 120 city services from more than 30 government and private sector entities in the palm of a hand, with health and justice now included. Smart Dubai provides support to start-ups and entrepreneurs by hosting an annual global blockchain challenge, and it participates in accelerator programmes. The CFI.co judging panel declares Smart Dubai as the 2020 winner of the award for Best Smart City Innovation Impact (Global). CFI.co | Capital Finance International

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> Africa

Moody’s May Have Jumped the Gun on South Africa Widely considered a bellwether for emerging market sentiment, South Africa’s rand has been on a dizzying rollercoaster ride, seesawing on currency markets as traders try to match fact with perception and decipher the country’s true predicament. On 11 June, the rand suffered its biggest single-day decline (-3.8 percent) in four years. The next day, the currency clawed back as markets realised that the South African Reserve Bank was having no trouble raising cash at knock-down interest rates. At the start of the corona pandemic, the currency lost nine percent in value against the US dollar, only to stage a 13-percent rally in the weeks that followed. The cost of credit default swaps, essentially an insurance premium to cover debt default risk, retreated to its pre-corona low after registering a spike in early April following Moody’s downgrade of the country’s sovereign credit rating. Though no longer investment-grade, South African bonds remain a favourite amongst both local and overseas investors. It is as if the descent into junk territory never happened. In fact, the country is currently paying less to borrow than at any time in the five years preceding the downgrade. In Paris, Société Générale strategist Jason Daw is not at all worried about South Africa’s increasingly perilous fiscal position and expects a fairly strong post-pandemic recovery to sustain the rand. Mr Daw even recommends investors an ‘overweight’ position in rand-denominated instruments. The weekly debt auctions of the National Treasury continue to attract considerable interest with fresh bond issues oversubscribed by an average of 40 percent. Yields have moved lower as the pace of inflation slowed due to low oil prices and repressed demand.

South Africa: Cape Town

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n its latest analysis, published early June, the Organisation for Economic Cooperation and Development (OECD) noted that South Africa may benefit more than initially expected from the fiscal and monetary stimulus initiatives of Europe and the United States. A quick recovery in China is also likely to sustain demand for South Africa’s commodities. The OECD report concludes that the country should not experience too many difficulties in sourcing the funds needed to support households during the lockdown period and businesses in hard-hit sectors such as tourism. The organisation recommends South Africa engage with multilateral lenders and implement the broad economic reforms already considered before the viral outbreak. Slowly emerging from an exceptionally strict lockdown, South Africa faces a 5.5 percent contraction of its GDP. The OECD expects activity to pick up significantly next year but warns that continued shortfalls in the supply of electric power may dampen growth whilst a bloated bureaucracy and complex tax legislation discourage investment. The organisation calls on the South African government to improve the business climate and put the state finances on a more sustainable footing by streamlining its own apparatus and shedding loss-making state-owned enterprises. The World Bank is a bit more pessimistic in its outlook and forecasts South Africa’s GDP to shrink by 7.1 percent this year – this would constitute the largest decline in economic activity in over a century. Most predictions exclude the possibility of a second wave of corona infections. Should one occur, all bets are off and the precipice beckons. Even with the current outbreak, this year’s fiscal deficit is expected to reach 14.4 percent of GDP whilst public debt will likely balloon to 81 percent of the domestic product. Any attempt to consolidate state expenditure depends to a large degree on the successful renegotiation of the generous 2018 public sector wage agreement. So far, this has proved elusive. Finance Minister Tito Mboweni has failed to convince trade unions of the need to amend the agreement which includes significant annual increases. Mboweni now needs to shave R160bn ($9.4bn) off the public sector wage bill over the next three years. However, the country’s largest unions argue that the 2018 deal is binding and have taken their case to the Labour Court for arbitration. Professor Phillipe Burger, vice-chancellor for Poverty, Inequality, and Economic Development at Cape Town’s University of the Free State, suggests that South Africa must improve it sovereign credit rating as a matter of the utmost urgency if the country is to attract the investment volumes needed to shape its future. In his policy paper Future South Africa Vision, Burger argues that society needs to reimagine what the country can look like in 15 to 20 years: “We must look beyond present-day problems and work towards a high-growth, green, urban, and investmentdriven tomorrow. To do that, the country needs to 114

"The financial damage wrought by the corona pandemic is expected to spark congress into action as its lethargic approach to crucial policy issues can no longer be sustained without risking a complete meltdown." properly address its current issues and ditch the junk-status mindset that many have fallen into.” Burger is worried that the downward shift in investments registered over the past years will prevent the nation from tapping its potential for growth. “To grow the economy effectively, government must provide room for the private sector to invest in high growth industries and reduce the red tape and policy uncertainty. Government and private sector must together identify and address the stumbling blocks. In exchange, the private sector must commit to their investment targets for economic growth and job creation.” The professor posits that before the corona outbreak, South Africa’s malaise was mainly caused by a lack in consumer and business confidence: “This ‘junk status vision’ originates from our dilapidated infrastructure and insolvent state-owned enterprises. What we need most is a sense of optimism and confidence in our collective ability to build a better country.” Economic growth has been difficult to sustain over the past five years. South Africa’s GDP has barely moved and political infighting prevented a national accord on a reform package. Pushed close to the edge by the pandemic, South Africa has appealed to the International Monetary Fund (IMF) for support – a first in the country’s history. The National Treasury has also applied for emergency financing at the Chineseled New Development Bank, the World Bank, and the African Development Bank. The Ramaphosa Administration has asked the IMF for $4.2bn in emergency support. According to Lumkile Mondi, a lecturer in Economics at the Johannesburg Witwatersrand University, the move was prompted by more than just financial considerations: “The ruling African National Congress has always held that going cap in hand to the IMF was out of the question since it is seen to undermine the country’s sovereignty. In the years following the end of apartheid, it was decided to put the house in order without prodding from the IMF or other multilaterals. That article of faith has now been ditched.” Ramaphosa hopes that the appeal to the IMF may shock the ANC into action. Inheriting an economy broken by international sanctions, the ANC initially moved quickly and effectively to put South Africa on a sustainable CFI.co | Capital Finance International

footing. In 2007, the country recorded its first post-apartheid budget surplus. At the time, public debt represented just 26 percent of GDP. However, the call of riches proved too luring to ignore and over the following decade the performance of South Africa’s fiscal accounts deteriorated steadily whilst the state wage bill increased by at least 40 percent in real terms. Though the administration of Ramaphosa advocates forcefully for structural adjustments to the economy, and a return to the prosperous times of before, it has not been able to get congress on board. After 26 years in power, the ANC has become a political arena with periodic fights between disparate factions vying for a turn at the depleted trough. As a result, little gets done in the way of governing. However, the financial damage wrought by the corona pandemic is expected to spark congress into action as its lethargic approach to crucial policy issues can no longer be sustained without risking a complete meltdown. The National Treasury expects a $17bn drop in tax revenue as a direct result of the lockdown. Moreover, Ramaphosa has indicated that the crisis currently unfolding is too serious to waste. As current head of the 53-member African Union, he said that the pandemic must strengthen the collective resolve to ‘forge a new economy in a new reality’. That message resounds throughout the continent. In Nigeria, the government managed to leverage the pandemic to scrap costly fuel subsidies, arguing that it needs the $2bn spent annually on providing cheap fuel for fighting covid-19. Nigeria has also pushed through long-awaited changes to its exchange rate mechanism and implemented policies to wean the country off its dependency on oil exports. Taking an early and proactive approach to the pandemic, Nigeria secured a $3.4bn IMF credit facility and tapped into other sources of relatively cheap credit. This boosted investor confidence even as oil prices plummeted. The yield on the benchmark 2047 dollar-denominated bonds dropped from 13.2 percent in March to 9.1 percent two months later. Though Nigeria’s underlying fundamentals remain weak, the country has managed to outperform other Sub-Saharan emerging markets during the first and crucial phase of the pandemic, leading analysts to believe that its economy can escape relatively unscathed and bounce back quickly. Nigeria is also helped by the modest size of its public debt which now stands at 34.8 percent of GDP. Investor confidence has been bolstered by the IMF’s stamp of approval, the elimination of fuel subsidies, and the unification of the niara exchange rate. South Africa is paying attention and hopes to emulate the example set by the continent’s biggest economy. i

Summer 2020 Issue

> Film Review: Contagion Directed by Steven Soderbergh

Bats, Pigs, an Illicit Tryst and a World of Hurt We Have Come to Know Only Too Well Review by Tony Lennox

he world is still searching for the full facts concerning the origins of the 2020 coronavirus outbreak, though it is entirely possible that scriptwriters around the world are already working on the first drafts of screenplays which will tell the whole story.

Contagion’s fictional virus, MEV-1 — considerably more infectious and lethal than Covid-19 — kills around 70 million across the world. And, given those circumstances, it is justifiable for the script to include scenes of panicked Americans blocking freeways with heavily-loaded cars as they attempt to flee the cities.

When Scott Z Burns sat down to write the script for the film Contagion in 2009, there hadn’t been a flu pandemic for 90 years. He felt obliged to stick to the possibilities, and created something which he hoped would describe the effects of such an event on today’s world.

While such depictions are reminiscent of countless other disaster movies, they have not been mirrored in the actual response to Covid-19. There has, however, been a degree of low-level panic, and even xenophobia directed at Asian communities in the West. As in most Hollywood disaster fictions, the common herd behaves brutishly, selfishly and stupidly, exposing the fragility of civilisation. During the real pandemic of 2020, there has, with the exception of panicbuying and the spread of misinformation on social media, mostly been order, common sense, obedience to new rules, and an upsurge in neighbourly care and compassion.

So just how prophetically accurate was Contagion, given our experience of Covid-19? And has the truth turned out to be any stranger than Burns’ fiction? On its release in September 2011, Contagion — a film about a deadly flu virus spawned in a Chinese city — initially did well at the box office, but was soon eclipsed by the re-release of a popular Disney animation, The Lion King. Six months later, Contagion was released on DVD and Blu-ray — where it remained, together with countless other movies about societal breakdown and apocalypse — until 2020.

mention of social distancing in the film — visionary scriptwriting, given that the phrase was practically unknown nine years ago.

American video-on-demand service HBO Now reported that in March, at the height of the pandemic in the US, Contagion was the most-viewed title for two straight weeks. Rolling Stone magazine called the it “the flashback movie of the moment”.

Also accurate is the film’s depiction of the rapid rise of conspiracy theories, and stereotypical US military assumptions that the pandemic was some kind of terrorist attack. “Can someone weaponise the flu?” asks an American general at one point.

Director Steven Soderbergh’s film attracted plenty of comment on review websites. “Soderbergh must kick himself for not anticipating the fetish for toilet paper,” noted one wise-after-the-event critic. Another added: “This isn’t worst-case scenario cinema; it’s eerily realistic.”

The film describes the speedy spread of the virus from a Hong Kong casino to snowy Minnesota, and several points in between. Sweaty and dizzy business traveller Gwyneth Paltrow — in surely her shortest film appearance ever; her character is dead within 12 minutes — leaves deadly traces wherever she goes.

Watching Contagion against the backdrop of a real pandemic certainly gives the film fresh appeal. It is no longer just a carefully constructed piece of Hollywood science fiction. There are parallels aplenty between the real and the imagined pandemics — and few assumptions are wide of the mark.

Contagion also shows authorities eager to avoid general panic. There is a reference to the swine flu outbreak which, a few years earlier, had “freaked everybody out”. “All we did was get healthy people scared,” says an official who questions the need to warn the public.

“Pig-bat, bat-pig… Somewhere in the world the wrong pig met up with the wrong bat,” says the character played by actress Jennifer Ehle, a scientist trying to track the source of the virus. The heroes of the film, and of the real world, are the medical boffins, who move quickly — perhaps too quickly — to produce a vaccine.

The film scores highly for little things that today have a compelling resonance: a close-up of the bowl of bar snacks into which the doomed Gwyneth has just dipped her fingers; the handrails and door knobs touched by the sweaty palms of virus victims.

Procedures are correctly described, including mention of the R rate, the metric by which the spread of the virus is gauged. It was a detail that surely went way over the heads of 2011 audiences. There’s also the

Contagion doesn’t confront the issue of the world economy, concentrating instead on social breakdown. There are inevitable scenes of people behaving badly, smashing their way into pharmacies for a “cure” being promoted by a dishonest blogger (played by Jude Law with a dodgy Australian accent). CFI.co | Capital Finance International

Being fiction, Contagion is allowed to wallow in a bit of preaching. The audience is invited to judge Paltrow’s married mother-of-two character for speeding the spread of the virus by hooking up with an ex for an illicit tryst. The film’s final analysis is that the whole terrible pandemic can be blamed on the wickedness of society. Workmen in bulldozers are shown smashing down trees in a virgin forest and disturbing a bat roost. One bat seeks shelter in the eaves of a commercial pig farm — bat-pig, pig-bat, remember? — and the rest is movie history. One scene which must have touched a nerve with many 2020 viewers showed a man talking to epidemic intelligence officer Kate Winslet, complaining that his wife makes him take off his clothes in the garage. “Then she leaves out a bucket of warm water and soap. And then she douses everything in hand sanitiser after I leave. I mean, she’s overreacting, right?” Winslet replies: “Not really… and stop touching your face.”

Contagion has been rightly praised for getting the flu pandemic story “about right”. Its deviation from the facts, as we now know them to be, isn’t significant. Its thoughtful description of the spread of a virus looks frighteningly accurate even if some liberties were taken. It was the author Mark Twain who coined the phrase “truth is stranger than fiction”. But the second half of his quotation is rarely mentioned: “It is because fiction is obliged to stick to possibilities; truth isn’t.” In this case, at least, the truth and the fiction have come in neck-and-neck. i 115

> World Bank on COVID-19 in Africa:

Can Safety Nets Ease Social and Economic Impacts? By Christian Bodewig, Ugo Gentilini, Zainab Usman and Penny Williams

Across the world, governments have geared up to respond to the socio-economic shock of the coronavirus pandemic.

arly action in countries hard-hit by the crisis range from economic stimulus packages and the lowering of interest rates to social safety nets for millions of people. From China to the UK, Morocco to South Africa, more than 190 countries have introduced various forms of social protection. The aim is to compensate workers for lost income from lockdown and the broader economic downturn, and mitigate adverse impacts on the poor and vulnerable sectors of society. COVID-19 is expected to trigger the first recession in Sub-Saharan Africa in 25 years. In a region where roughly eight in 10 people are engaged in low-wage informal employment, many households are at risk. Sickness will deprive individuals of earnings and can lead to impoverishing payments for medical treatment, but the effect is felt more widely across the general population. Social distancing measures curtail economic activity and disrupt supply chains; remittances from abroad dry up. Informal sector workers and self-employed people in cities, such as market vendors, are initially the worst affected. There is discontent at the hardships already being faced by the urban poor from the government-imposed lockdown in some of Africa’s megacities. Policymakers, too, can leverage social protection programmes in response to the shock. They can help households to avoid hunger and protect them while respecting stay-at-home orders to prevent the spread of the virus. By putting cash into poor people’s pockets, social protection can help sustain local economic activities especially in essential sectors such as nutrition. A mix of cash and services such as financial literacy, microbusiness development, life skills training and coaching can support households and help with the return to work, accelerating a wider economic recovery. Many countries in Africa can build on solid foundations. Sub-Saharan Africa has seen a significant expansion of social protection over

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"The COVID-19 crisis is driving innovation in service delivery by promoting electronic rather than inperson payments." the past two decades. More than 45 countries now have safety net programmes to address chronic poverty and help households to diversify their livelihoods and invest in children’s health and education. Owing to fiscal and capacity constraints, social safety net programmes often cover only a small proportion of the poor, and are concentrated in rural areas where chronic poverty is worst. And yet, social safety nets are a critical tool for governments across Africa to mitigate the social impact of the pandemic. Social safety nets can flex in response to a shock – horizontally, by reaching more households, and vertically, by increasing cash transfer amounts. Mauritania, Kenya and Ethiopia have shock response programmes that can expand when triggered by droughts. And where food markets stop functioning, governments can consider direct food support instead of cash transfers. But with its impact on urban areas, its social distancing imperative and its scale and rapid onset, the COVID-19 shock is unlike any other African countries have seen in recent years. It necessitates rapid innovation in the design and delivery of social safety nets. Governments need to expand coverage to population groups who do not typically qualify for cash transfers but are now pushed into poverty. COVID-19 shock response cash transfers can “piggy-back” on existing beneficiary registries and payment systems, but should be designed and communicated as separate from regular safety nets, time-bound with a clear exit strategy. The Togolese government has introduced for a limited duration Novissi, a coronavirus cash CFI.co | Capital Finance International

Summer 2020 Issue

transfer programme for those worst affected, with a larger benefit for women. Reaching informal workers will often require extending beneficiary registries by enrolling households in novel ways: drawing on registries of mobile phone providers, trader associations, and other reliable databases. While the urgency of the response puts a premium on speed and coverage over accuracy, emergency registries can later be reassessed as countries enhance their social protection systems post-crisis to make them more responsive for future shocks. Digital technologies can help expand coverage of social safety nets and safeguard beneficiaries in line with social distancing requirements. The COVID-19 crisis is driving innovation in service delivery by promoting electronic rather than inperson payments, and leveraging big data for targeting and expanding communications through radio and short-message services. Africa has around 400 million registered mobile accounts, the highest number of in the world, and about 160 million unbanked adults who own mobile phones. In many countries, governments can transfer cash to mobile accounts quickly and effectively. Where digital payments are not possible in the short term, administrators of cash transfer programmes can stagger physical payments and adjust frequencies to reduce crowds and provide handwashing facilities where payments take place. Realising the potential of social safety nets to cushion the pandemic’s economic and social impacts will require reprioritising public expenditure towards social protection. This has often been under-funded, relative to other activities across the continent. Development financing can also help, including efforts underway for debt relief for the poorest countries to create fiscal space for increased public spending. Social safety nets to save lives and protect livelihoods from the COVID-19 shock, and are a good investment. i ABOUT THE AUTHORS Christian Bodewig Lead Economist, Social Protection and Jobs, Africa Christian Bodewig is a Lead Economist and Program Manager of the Sahel Adaptive Social Protection Program at the World Bank which supports programs to help protect poor and vulnerable households from the impact of climate change. He has worked on social protection, education and health issues in the West Africa, the European Union, Vietnam and the Western Balkans. Christian is the co-author of the 2018 World Bank study "Growing United: Upgrading Europe's Convergence Machine" as well as the 2014 Vietnam Development Report and has published on education, skills, social protection and labor market issues in Europe and Asia. He holds degrees in economics and political economy from University College London and the London CFI.co | Capital Finance International

School of Economics. He is fluent in English, German, and French. Ugo Gentilini Senior Economist, Social Protection and Jobs Global Practice, World Bank Ugo Gentilini is the global lead for social assistance at the World Bank. His work encompasses the analytics and practice of social protection systems across regions and country income groups. Over the past 20 years, he has authored dozens of publications on empirical and operational matters related to safety nets. He holds a PhD in Economics and produces a weekly social protection newsletter reaching thousands on practitioners. Zainab Usman Public Sector Specialist Zainab Usman is currently at the Office of the Chief Economist, Africa Region, as a Public Sector Specialist. She joined the World Bank in 2016 as a Young Professional in the Social, Urban, Rural and Resilience (SURR) and later the Energy and Extractives (EEX) Global Practices. Her interests are in the governance and institutions around natural resources management, energy sector reforms and economic policy in Africa as well as south-south economic relations. She holds a PhD in International Development from the University of Oxford. Penny Williams Senior Social Protection Specialist Penny is a Senior Social Protection Specialist with the World Bank. She has been at the World Bank for fifteen years in a variety of roles, including as adviser at the Executive Board, Senior Country Officer and Senior Social Protection Specialist in the Social Protection global practice. She has led or been a key member of social protection operations, as well as provided operational advice across the Europe and Central Asia and Africa regions. Prior to joining the World Bank, Penny worked at the Department for International Development, the United Kingdom’s aid agency, and also with NGOs, including in Southern Africa. 117

> EQDOM, subsidiary of SOCIETE GENERALE GROUP:

Inclusivity, Fintech Power and Agility Provides Competitive Edge to Moroccan Consumer Credit Provider Consumer credit, carefully designed and fairly implemented, has the power to transform lives, promote financial inclusion, boost social mobility, and increase the resilience of households. In Morocco, home to one of Africa’s most buoyant and vibrant economies, the rise of a of a strong middle class is widely considered key to the country’s future.

t is at this junction, where business acumen meets social expediency, that consumer finance powerhouse Eqdom proves its value. A pioneer and leader of the sector, Eqdom’s corporate trajectory spans 45 years. The company has been a disruptor long before the term became fashionable. As such, Eqdom has received CFI.co’s 2020 award for Best Inclusive Consumer Finance North Africa, which recognised its 45-year history as a pioneer of inclusivity, and its financial partnership with Moroccans from all walks of life, and acknowledged the company’s bold moves to fill the gaps created by the credit requirements of traditional banks. In a sector with good liquidity and high growth, empowering clients remains a cornerstone of the company ethos. With innovation as a core value of the company, Eqdom has established a reputation, both solid and well-earned, for detecting and leveraging new industry trends and dynamically adapting its suite of products to match shifts in consumer demand. By erecting its business around the needs – and aspirations – of its customers, Eqdom inspires levels of client loyalty and trust that have become industry benchmarks. The recently concluded rebranding exercise is but the outward sign of a much deeper corporate transformation that addressed all aspects – human, technological, and organisational – of the business. Whilst keeping its celebrated customer centricity, including the human touch to all front office operations, Eqdom has completed its offer by a new customer digital channel, designed with the best standards in terms of customer experience, that marks a turn in the way of addressing customer needs. Customer relations have been streamlined 118

with the implementation of a fully digitised management platform that significantly speeds up decision-making processes, thus reducing response times – adding to the overall efficiency of internal as well as customer-facing operations. This data-driven approach to consumer finance not only benefits all stakeholders, but also reaffirms Eqdom’s corporate mission statement which emphasises the company’s dedication to the well-being of its customers. Not just a set of hollow phrases or a generic set of good intentions, the mission is enshrined in the company’s CFI.co | Capital Finance International

DNA and explains its corporate longevity and health: “To accompany and support customers in achieving their goals, moving their projects forward, and manage unforeseen events.” Thanks to a corporate structure that features built-in flexibility, Eqdom was able to adapt with remarkable nimbleness to the market upheavals caused by the corona pandemic. The company kept its network of branches open throughout the lockdown in order to stand by its customers throughout the emergency – and provide relief. The company’s agility immediately proved its worth by allowing back office staff to

Summer 2020 Issue

Eqdom: Dynamic Team

"Now available everywhere in the country 24/7, Eqdom’s new digital platform gives the company a truly nationwide footprint, reaching out to new customers whilst offering added convenience to existing ones." telecommute, thus reducing health risks whilst ensuring the continuity of operations. Front office processes were swiftly strengthened in order to provide quick, accurate, and prompt answers to queries from concerned customers. Moreover, Eqdom arranged hassle-free payment holidays to distressed clients. In a sense, the pandemic has served as a massive stress test for the company – one that it passed with flying colours. In fact, the distinguished leader of Morocco’s non-banking financial services sector offers solid and incontestable proof that continuous corporate transformation is not only possible, necessary, and feasible but adds to institutional resilience as well. The company’s multichannel digital platform was designed around the core concept of remote

interaction. The philosophy employed effectively detaches corporate operations from any physical infrastructure and thereby allows customers to connect instantly to a fully featured online service centre by means of any internet-enabled computer or mobile device.

By embracing technological progress without letting go of the human dimension, or losing sight of its corporate mission, Eqdom proves that transformation can promote financial inclusiveness when implemented thoughtfully – and with the customers’ best interests at its core.

Now available everywhere in the country 24/7, Eqdom’s new digital platform gives the company a truly nationwide footprint, reaching out to new customers whilst offering added convenience to existing ones. Users of the system may apply for credit with just a few clicks, taps, or swipes and can expect an immediate response. Nonetheless, Eqdom customers are not ‘talking’ to a machine and can at all times and stages request human assistance to clarify doubts, receive guidance, or supply additional information.

Last but not least, it is interesting to highlight that Eqdom extends inclusion to its board of executives, which consists of a young and dynamic team from diverse professional backgrounds in perfect gender parity. This enhances Eqdom’s distinction as a looking-forward company that values competence, commitment and diversity. Also reflected in its overall staff headcount, 5050 male-female ratio: the company sees this positive position as leverage for more effective and inclusive performance. i

CFI.co | Capital Finance International

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> Bank One Ltd:

From Africa, for Africa, With a Wealth of Regional Understanding In its 12 years of existence, Mauritian-based Bank One has built a strong reputation — regionally, and way beyond its borders.

everaging the strength of a highly qualified team with decades of combined African experience, Bank One has firmly established its footprint on the continent, and mastered the complexity of its main markets. Along with coverage of new geographies in 2019 come enhanced valueadded products to fulfil the needs of customers and meet rapidly changing market dynamics. ONSHORE AND OFFSHORE PRESENCE Bank One is uniquely positioned as a strong and reliable banking partner “from Africa, for Africa”. Its two shareholders, Mauritian conglomerate CIEL Ltd and Kenya-based I&M Holdings, have an extended presence onshore that provides access to key African markets. From I&M’s extended branch network across East Africa to CIEL’s high potential and successful expansion in Madagascar, Bank One has fully embraced the opportunities arising from those markets. Over the years, it has built strong capabilities to facilitate investment and support regional trade across Africa while serving the needs of customers onshore and offshore. Bank One is considered today as the only Mauritian bank which can boast such a footprint across Africa and the Indian Ocean Region. Its onshore and offshore presence is a fundamental part of its exclusive value proposition, and the strong African credentials which enables it to create differentiated value for its clients. Bank One’s international strategy has been pivotal to its success over recent years. “Our robust Trade Services proposition targets top-tier SubSaharan Africa Financial Institutions,” says Head of International Banking Carl Chirwa, “where we see excellent opportunity to create sustainable value and build long-lasting relationships with the commercial banks across the continent. “Over the years, we have expanded our international banking team capabilities with a focus on strengthening our expertise in financial institutions, trade finance and relationships with Africa-focused DFIs. In 2018, I joined as a seasoned banker from Africa to oversee our International Banking activities and a Head of

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Bank One: Head Office

CFI.co | Capital Finance International

Summer 2020 Issue

"Over the years, we have expanded our international banking team capabilities with a focus on strengthening our expertise in financial institutions, trade finance and relationships with Africafocused DFIs." Carl Chirwa banking platform as a “hub-and-spoke” to safely springboard into Africa. Geopolitical, regulatory, legal, tax and operating environments differ widely across the 54 countries that make up the African continent. Bank One accompanies foreign investors to help them navigate these challenges through its thought leadership and trusted advisor status. The bank promotes intra-Africa trade and facilitates economic growth in the region by providing trade and project finance to large corporates, and foreign currency solutions to financial institutions. THE AFRICAN CONTINENTAL FREE TRADE AREA Bringing together countries with a combined population of more than one billion people — and a combined GDP of more than $3.4tn — the Africa Continental Free Trade Area (AfCFTA) will be the world's largest free-trade area allowing the free movement of business travellers, goods and investments. Collectively, Africa needs to take crucial steps to boost trade, such as fostering skills for entrepreneurship and providing more access to credit and capital. Discussions at the recent World Economic Forum on Africa highlighted the need for business and political leaders to facilitate continental joint ventures to build strong production and manufacturing networks.

Head of International Banking: Carl Chirwa

Financial Institutions, who also comes from Africa, was recruited a year later. “Our real market insights and team diversity have been greatly beneficial as we set out to grow our international business coverage in Africa and beyond.” STRONG AFRICAN CREDENTIALS In the last quarter of 2019 and the first quarter of 2020, Bank One won significant Lead Arranger mandates totalling $100m from Central Banks in Sub-Saharan Africa. Bank One was able to structure and arrange short-term syndicated currency swap facilities to allow Central Banks in the region to enhance hard currency positions and support international trade transactions.

Bank One has gained enviable expertise in consistently executing transactions while adding value to banks in the Sub-Saharan Africa region. “As a result, our services are well-appreciated by the markets,” says Chirwa, “and we are considered a trusted and reliable partner.” SUPPORTING ECONOMIC GROWTH Mauritius remains Sub-Saharan Africa’s preferred international financial centre, and the last investment-grade country in the region with the mandate to attract Foreign Direct Investment and Trade Flows into Africa. Bank One takes advantage of the strong offshore credentials of the Mauritian jurisdiction and encourages global investors to use its transaction CFI.co | Capital Finance International

Intra-Africa trade has been historically low, and intra-African exports were 16.6 percent of total exports in 2017, compared with 68 percent in Europe and 59 percent in Asia. This points to significant untapped potential. “As the African Union steps up on the implementation of the Action Plan on Boosting Intra-African Trade (BIAT),” says Chirwa, “we believe the newly created giant African market will be the next growth engine for the continent. “Bank One is uniquely positioned to be at the forefront of this journey by facilitating crossborder payments and enabling trade financing and investment into Africa. We stand ready to support international investors, African Financial Institutions and regional corporates that will be taking centre-stage as the AfCFTA deepens and strengthens African trade over the coming months and years.” i 121

> KwaZulu-Natal Joint Municipal Pension/Provident Funds:

Challenges and Transformation for South African Fund as it Navigates the Future for All its Stakeholders

outh Africa’s most awarded Retirement Fund, the KwaZulu-Natal Joint Municipal Pension/Provident Funds (NJMPF) proudly announced on the 1st of July 2019 that former Chief Financial Officer (CFO) of the NJMPF, Mr. Bonginkosi Mkhize is the Fund’s first black Chief Executive Officer/Principal Officer. Most African countries are developing countries, and South Africa, with its history of challenges

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and triumphs has needed to transform. The NJMPF has taken a historic move of transformation which has marked change in the organisation’s culture and future. This was a positive announcement and the organisation needed to reassure its stakeholders that their retirement benefit monies remain in good hands and the handover was without incident. The Fund has undergone many changes over the years including the composition of its Board of Trustees (BoT). Some of the changes were CFI.co | Capital Finance International

due to the evolving political environment in the country with the introduction of a democratic South Africa in 1994. The Trustees did not represent the members they represented fairly. The demographics have gradually changed over time and now the BoT is fully integrated from a racial and gender point of view. The NJMPF has been providing retirement benefits for municipal employees in the Province of KwaZulu-Natal, South Africa for over 70

Summer 2020 Issue

years. The former CFO Bonginkosi Mkhize took the helm as CEO last year in 2019, managing assets of U$D 1.2bn with a membership of 31,000 which includes current members, pensioners and dependents or beneficiaries. The beneficiaries consist of widows, widowers, and children. The Fund’s active membership base is spread throughout the Province of KwaZuluNatal (KZN), South Africa and incorporates members in urban cities as well as semi-rural areas. The insights Mkhize gained in his previous role made for a smooth leadership transition — one underpinned by an implicit commitment to strong corporate governance. His vision for the NJMPF under the converging economy and rapid development of technologies - is advanced technology facilities, lower administration fees and speedier conduction of business. Just as information technology and systems allow for the optimal performance in administration operating platforms. The NJMPF values are entrenched in assisting members and providing support where it is possible – which makes it vital for the Fund to have a healthy relationship with its membership. The robust Financial Literacy Programme is evidence of this and it continues as an ongoing project. The NJMPF understands that providing timely and succinct communication is key in upholding the Fund’s mission of providing superior retirement services. The other exciting venture the Fund is embarking on in 2020 is the Going Green project. The Going Green project forms part of a bigger project of sustainable investing. Sustainable investing is about investing in progress and recognising that companies solving the world’s biggest challenges can be best positioned to grow. It is about pioneering better ways of doing business and creating the momentum to encourage more and more people to opt into the future we are working to create. Through the combination of traditional investment approaches with Environmental, Social and Governance (ESG) insights, investors ranging from global institutions to individuals are taking a sustainable approach to pursuing their investment goals. Climate change is already a measurable global reality and along with other developing countries, South Africa is especially vulnerable to its impacts.

"Recognition is growing about the urgent need to make a ‘just transition’ to a lower carbon economy as well as achieve the Sustainable Development Goals (SDGs) to improve the lives of growing populations." CFI.co | Capital Finance International

Globally, climate change is recognised as a real and potentially destabilising threat to economies and the well-being of people, particularly the most vulnerable. Recognition is growing about the urgent need to make a ‘just transition’ to a lower carbon economy as well as achieve the Sustainable Development Goals (SDGs) to improve the lives of growing populations. The Going Green project acts as an introduction to getting members actively involved in sustainable living which includes growing vegetables from home or getting involved in recycling projects. The NJMPF imagines that if 30,000 of its members and families are active participants in sustainability projects, it will help to make a difference in alleviating some of the problems 123

we have in the world. The Board of Trustees have also put the task of finding alternative and sustainable ways of investing to the NJMPF Management and Fund asset managers.

mainly in IsiZulu and targets IsiZulu speaking and understanding audiences in South Africa. The station broadcasts nationwide and streams to the world.

In the past the NJMPF has provided its members with financial education by working with organisations such as South African Revenue Services (SARS), National Credit Regulator (NCR), Will section of attorney practice, the Pension Fund Adjudicator (PFA) and Financial Sector Conduct Authority (FSCA) to name a few.

Over the years the NJMPF has evolved methods used to communicate, inform, educate, and increase participation and access to knowledge for its membership. The NJMPF, has been addressing issues of Communication, Stakeholder Engagement and Education – not all at once – but rather as the landscape allowed. The focus of the NJMPF’s communication strategy is to assign information to all stakeholders about the Fund and the benefits that derive, in an efficient and timely manner, in a language the stakeholder understands. KwaZulu-Natal is populated by Zulu speaking people of about 78% compared to 13% English speaking people. The audio option is made available in both English and isiZulu, the Funds videos are also in both languages as are newsletters and some circulars.

To accommodate those who cannot or are hard of hearing the NJMPF has introduced sign language enhancements in most of the visual video communication. Audio newsletters have been made available to accommodate not only the members with disabilities but rather those who are unable or don’t like to read - especially financial jargon that might be a challenge to understand. The newsletters are voiced by a household name in KZN South Africa - Vicky Masuku - a retired radio personality from the Ukhozi FM radio station. Ukhozi FM is one of the biggest radio stations on the planet and the largest in Africa with its listenership in constant excess of 7.7 million over the past decade. Ukhozi FM broadcasts 124

As the membership of the NJMPF continues to grow and change, it creates a demand for different types of communication mediums to be used. This demand is based on diversity in demographics within the municipal sector which includes Age, Education, Location, and Income. Based on the demographics, appropriate ways of CFI.co | Capital Finance International

communicating have been introduced to meet the needs of different types of stakeholders with whom the Fund engages - this includes the NJMPF Mobile Application, website which we piloted the introduction of an audio section to it, newsletter (sent electronically and via post), factsheets, brochures, booklets and our presence on Facebook and Twitter. A new project in 2019/2020 revolves around voice recognition software, voice recording of all incoming and outgoing calls, online surveys, barcoded forms, and web chat. i

CEO/Principal Officer: Bonginkosi Mkhize

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> Convergence:

How Blended Finance Could Help Finance Kenya’s “Big Four Agenda” By Ladé A Araba Managing Director, Africa, Convergence

Kenya’s aspiration to become an industrialising middle income country is encapsulated in its Vision 2030, which is aligned with the UN Sustainable Development Goals (SDGs).

he Vision, now in phase III of implementation (MTP3), comprises four pillars known as The Big Four Agenda: i) Achieving food security; ii) Providing affordable housing for all; iii) Becoming a manufacturing powerhouse; and iv) Providing universal healthcare coverage. This agenda currently requires funding of about $20 billion, thus demanding greater volumes of financing given Kenya’s 2018-19 fiscal deficit of $6 billion. As the nation’s resource mobilisation efforts intensify, especially with response to the global health crisis, blended finance offers a path to close the funding gap and assist with economic reconstruction for long-term inclusive and sustainable development. Blended finance solutions leverage concessional capital from public and philanthropic sources to de-risk transactions to attract private investment. As a financing approach, Blended Finance can help improve the commercial viability of deals to attract a diverse range of private investors, and offer asset owners and asset managers the chance to create larger deals, and scale interventions to achieve development at scale. Based on the Development Initiatives review of Kenya’s 2019-20 budget, it’s evident financing falls short across key sectors. For instance, 57% of the financing required to achieve universal health coverage (UHC) has been allocated to the health policy program, while 77% of financing has been allocated for early and basic education. Affordable housing faces a funding gap of $44 million, while manufacturing has only received 12% of the amount required. Overcoming the financing deficit will require addressing the risk-reward tension in development finance, and blended finance as an approach is intended to do that effectively. With that said, with Kenya’s capital market deepening–local pension assets

"Blended finance solutions leverage concessional capital from public and philanthropic sources to de-risk transactions to attract private investment." were valued at $11.5 billion (or 13% of GDP) in 2019–the domestic capital markets are also capable of pushing private capital toward development projects. Convergence data proves Kenya, at a global level, remains the leading destination for blended finance transactions. Over $13 billion has been invested across 77 deals in Kenya, with a majority of generalist funds investing in multiple sectors, followed by transactions in energy, financial services, agriculture, and health. While Kenya sees the highest number of transactions, the average deal size remains small when compared to other African countries and other regions. At Convergence, we see three distinct benefits of leveraging blended finance to serve Kenya’s Big Four Agenda. 1. Blended Finance approaches can help create larger deal sizes that are better aligned with institutional investor mandates and risk-return profiles In 2018, Convergence awarded a design funding grant to Total Impact Capital to develop the Strengthening Health through Invoice Financing Technology (SHIFT) program. SHIFT leverages the 2017 Asset Backed Securities Law to securitise the receivables of pharmaceutical distributors to issue investment grade-rated senior notes, in

addition to mezzanine notes, in the local capital markets. The program seeks to increase the volume of financing available to the pharmaceutical sector by engaging local institutional capital. In recent years, amongst domestic institutional investors, there has been increasing awareness that investors can preserve their capital and provide consistent income while also investing in the advancement of critical development and sustainability targets to support Kenya’s development agenda. This improved investor sensibility creates space for blended finance solutions that can create returns for both the investor and society. 2. Blended finance approaches can stretch limited public funds further, while freeing up capital for critical social and humanitarian interventions While leverage ratios in historical blended transactions vary by sector and region, based on our data, funds achieve the greatest average leverage of 4x. Budget allocations to the Big 4 through blended structures can help catalyse a higher percentage of capital from other sources, easing the burden placed on the public purse. For instance, limited public funding could be assigned to fund pre-investment stage project preparation as a means to nurture a pipeline of bankable projects for investors. These modest funds could ultimately originate transactions that raise private investment at an order of magnitude

"Kenya’s landmark $40 million green bond issuance in 2019is both a fixed income security and a blended finance transaction, with credit enhancement provided by the donor funded GuarantCo." 126

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Summer 2020 Issue

Nairobi, Kenya: Parklands. Photo: Paulstern Madegwa

far above what the funding could have achieved in a single intervention. 3. Blended finance approaches are often comparable with structured finance products that are familiar to private investors Investors are comfortable with structures and instruments they understand and can measure. Structured finance; which reallocates risk to match investors’ risk-return profiles, includes instruments comparable with those created by blended finance approaches. For instance, Kenya’s landmark $40 million green bond issuance in 2019 is both a fixed income security and a blended finance transaction, with credit enhancement provided by the donor funded GuarantCo. Listed on the Nairobi Securities Exchange, there are plans to list the bond on the London Stock Exchange in the future to attract international investors, including those who incorporate environmental, social, and governance (ESG) guidelines in their investment strategies, or who have impact mandates. This structure can be replicated, scaled, and utilised across the sectors that underpin Kenya’s Big Four Agenda.

Author: Ladé A Araba

There is growing potential to address investor risk aversion and pull private investment towards the Big Four Agenda by creating investable opportunities that CFI.co | Capital Finance International

match the commercial mandates and constraints facing investors. Leveraging concessional capital strategically through blended finance to create bankable projects and commercially attractive transactions should be strongly considered to help Kenya close the funding gap towards achieving Vision 2030. i ABOUT THE AUTHOR Ladé Araba is a seasoned development finance professional and leads the development and implementation of Convergence’s regional strategy for Africa, including engagement with investors and deal sponsors looking to create and invest in blended finance transactions in Africa. Ladé frequently provides thought leadership in extending the field of blended finance in the region. ABOUT CONVERGENCE Convergence is the global network for blended finance. We generate blended finance data, intelligence, and deal flow to increase private sector investment in developing countries, and accelerate advances in the field through our Design Funding Program to achieve development at scale. Convergence’s global membership includes over 200 public, private, and philanthropic investors as well as sponsors of transactions and funds. To learn more, visit: www.convergence.finance 127

> Absa Bank Seychelles:

A Pioneering Force Changing the Financial Landscape

bsa Bank (Seychelles) Limited is part of Absa Group Limited, an African financial services group that aims to be the pride of the continent. Formerly known as Barclays Bank (Seychelles) Limited, the Bank has operated in Seychelles for over 60 years. The Bank rebranded to Absa on 10 February 2020. Absa is a truly African brand, inspired by 128

the people we serve. We are determined to be a group that is respected globally and that Africa can be proud of.

creating opportunities for our customers to make their possibilities real and in supporting them every step of the way.

We are making strides in becoming a digitallyled bank” for instance. It’s a journey we are on already and will keep innovating. We believe in possibilities, in the actions of people who always find a way to get things done. We believe in

Additionally, with the underlying improvements in technological capabilities and connectivity and the proliferation of mobile devices, we know there are exciting times ahead for the digital transformation of the market.

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We believe we have a role to play and intend to leverage digital technology to expand reach and access of financial services but also provide affordable services. We have a stake in creating inclusive growth in Seychelles and in delivering financial services in a socially and environmentally responsible manner. Opportunity and success can only be enabled through all people being treated equitably, having good health, and having access to education and income opportunities. Recognising the link of our sustainability to that of the communities where we operate, we bring together distinct yet complementary strategies and implementation activities that generate direct and indirect economic, social and environmental impacts across the market that will play a positive role in bringing people’s possibilities to life. We’re also turning banking on its head in Seychelles with our range of Absa Vertical Cards. The cards are designer cards that are packed with advanced functionality, including contactless tap. For our small-to-medium-size businesses, our soon-to-launch MySMETool will allow customers to carry out business functions online. The tool will enable them to able to simplify their planning and cash-flow management, easily interact with financial institutions and get real-time updates on their business, enabling growth. Absa Bank Seychelles also recently introduced Chat Bot through WhatsApp, making us the first bank in the country to use WhatsApp, putting a virtual banking assistant in the palm of customers’ hands. We have what we call ‘The Absa Chat Bot’ that is on call 24/7, 365 days a year so that our customers can receive answers to their questions in real time and at their own convenience. Fingerprint and facial recognition has also made banking more convenient for our customers. If their mobile device has this capability, then biometric access gives them an added layer of convenience and security. It lets customers open our banking app with a smile or a touch to pay bills, transact, buy airtime and much more, even when travelling. We also have a long-standing commitment of being a force for good within the communities in which we operate, extending impactful and solutions-based initiatives across the country, either through colleague programmes or through local partners. Absa Bank Seychelles currently has nine branches and 21 ATMs across the country.

"We are making strides in becoming a digitally-led bank. It’s a journey we are on already and we will keep innovating. We believe in possibilities, in the actions of people who always find a way to get things done." CFI.co | Capital Finance International

Absa Bank (Seychelles) Limited is regulated by the Central Bank of Seychelles. ABOUT ABSA GROUP LIMITED Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups. 129

"Absa Bank Seychelles also recently introduced Chat Bot through WhatsApp, making us the first bank in the country to use WhatsApp." Absa Group offers an integrated set of products and services across personal and business banking, corporate and investment banking, wealth and investment management and insurance. Absa Group has a presence in 12 countries in Africa. The Group’s registered head office is in Johannesburg, South Africa, and it owns majority stakes in banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, South Africa (Absa Bank), Tanzania (Absa Bank Tanzania and National Bank of Commerce), Uganda and Zambia. The Group also has representative offices in Namibia and Nigeria, as well as insurance operations in Botswana, Kenya, Mozambique, South Africa, Tanzania and Zambia, and an International Representative Office in London and New York. CAREER HIGHLIGHTS OF ABSA MANAGING DIRECTOR Johan Marthinus VAN SCHALKWYK, Managing Director of the Bank since 13 August 2015, has served in several senior roles in his banking career. He began his banking career in 1974 and held various executive positions at both NedBank and Standard bank in South Africa. His experience covered multiple areas in banking, ranging from being responsible for product environments, operations, project management and customer channels. Johan joined Absa in 2013 as the Managing Executive for customer channels and was amongst others responsible for managing and optimising the Barclays South Africa branch network and ATM footprint which resulted in significant cost savings, productivity enhancements and revenue generating opportunities for the bank. Prior to joining Absa, Johan was the Head of Card Division, and later the Head of Retail Banking Business Operations for Standard Bank in South Africa. He was also a non-executive director on Bankserv’s Board of Directors where he served on multiple strategic executive planning and management committees. He is a vastly experienced Executive in Banking and holds a B. Com (honours) in Business and Administration, and a B. Com in Business Economics and Industrial Psychology. i 130

Managing Director: Johan Marthinus Van Schalkwyk

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> PwC Africa:

Africa’s Finance Leaders Take Steps to Ensure the Safety of Workers By Dion Shango, CEO for PwC Africa

As lockdown regulations are eased all over the world, business leaders are recognising that they have a critical role to play in the safety, health and stability of their employees and customers.

hile business leaders implement new policies and processes to bring employees back into the workplace and engage with their customers, they are realising the physical workplace and customer experience will no longer be the same as it was prior to the global COVID-19 pandemic. Many companies have weathered the immediate crisis by implementing safety measures, transitioning to remote work and other new ways of working, and considering what they need to survive and thrive moving forward. Since March 2020, PwC has been tracking sentiment and priorities among finance leaders about the COVID-19 pandemic. We surveyed 989 CFOs from 23 countries during June 2020, including 41 CFOs from nine countries in subSaharan Africa (SSA). This survey is the fifth in a rolling series. We continue to add territories and companies to offer a robust view of how the crisis is affecting people and businesses worldwide.

Question: What impact do you expect on your company's revenue and/or profits this year as a result of COVID-19? Africa vs All Territories.

Source: PwC, COVID-19 CFO Pulse, June 2020. Base: Global - 989. Africa - 41.

When we initially commenced with our survey, almost half of CFOs were concerned about the impact of the COVID-19 pandemic on their business. At that time, many companies were in the early stages of crisis response, not yet thinking about strategies and plans for recovery. Currently, most lockdowns have been lifted around the world as leaders of nations and companies accept that economies will reopen and ultimately operate alongside a virus that remains a constant threat. The pandemic took hold in some African countries as late as May, while others were already in lockdown by late March. Whichever phase they find themselves in, the economic fallout of the pandemic is still widespread, and the stabilisation waves of countries’ responses is likely to be long. The World Bank projects that economic growth in SSA will contract to between -2.1 percent and -5.1 percent, which will result in the region’s first recession in the last 25 years. Decline in revenue is the reality for most businesses. CFOs’ expectations of a decrease align with their concerns about the global

economic downturn and financial impact, and with key economic indicators. Against this backdrop, 34 percent percent of African CFOs (compared to 20 percent globally) expect a reduction in revenue this year of 25 percent or more. Many African countries implemented containment measures to flatten the infection curve due to capacity concerns of their healthcare systems. These containment measures, however, have tended to deepen the economic recession curve at the same time, putting pressure on businesses to generate revenue and/or profits in the immediate future. COST CONTAINMENT A HIGH PRIORITY As companies settle into stabilisation, cost containment is a favoured strategy among CFOs, with 90 percent of African CFOs (compared to 81 percent globally) implementing cost containment measures and 66 percent (compared to 56 percent globally) either deferring or cancelling planned investments. Other cost alleviation actions, such as changing financing plans, CFI.co | Capital Finance International

adjusting guidance and changing M&A strategy, remain on the table for a minority of respondents. It is notable that fewer CFOs today than in past CFO Pulse Surveys said they would consider cancelling or deferring investments in R&D. This is positive, given survey respondents’ belief in the importance of developing new products and services. Similarly, with an eye towards what measures will be needed to succeed in the post-crisis world, only seven percent of African CFOs are considering deferring or cancelling investments in digital transformation. Only 11 percent of African business leaders say they are likely to cut investments in customer experience and notably none are targeting cybersecurity or privacy. COMMUNITY FOCUS AND SOCIAL ENGAGEMENT Many companies have already responded to the needs of local communities affected by the pandemic, and the measures taken to manage it. It is positive to note that more than half of African respondents (56 percent) say their companies have increased community and societal efforts 131

need to step up efforts and initiatives in this area to ensure that their technology investments continue to benefit the company and that the resilience they created is built to last. Africa’s finance leaders are shifting their focus to a more prolonged recovery period. Ensuring a safe workplace is a priority as economies all over the world reopen. Stabilising supply chains also remains critical to ongoing business continuity. As new recovery milestones are reached, we will continue to monitor how business leaders react and respond. i

Question: Changes in which of the following will be most important to rebuilding or enhancing your revenue streams?

Source: PwC, COVID-19 CFO Pulse, June 2020. Base: Global - 989. Africa - 41.

"Companies are being judged on the character they’re demonstrating right now, and their actions or inaction today are sure to count for or against them in the future." with financial or other contributions to nonprofits, or pro bono goods and services. It is increasingly clear that corporate responsibility programmes are being recognised as fundamental. In these difficult times, it is important for companies to engage their people in determining consequential community impacts and being part of the solution, such as retraining the unemployed or creating new job opportunities. Business leaders will also want to think about how to share their story around these efforts, including how their companies invested in employees and communities and innovated during the crisis. Companies are being judged on the character they’re demonstrating right now, and their actions or inaction today are sure to count for or against them in the future. COVID-19 AND NEW WAYS OF WORKING Most CFOs (Africa 76 percent; global 75 percent) are making plans to change workplace safety measures and requirements. Not all staff, however, will be returning to physical work sites. More than half of CFOs (Africa 68 percent; global 50 percent) indicated that they will take steps to accelerate automation and new ways of working. In Africa, 63 percent (compared to 52 percent globally) of CFOs stated they would consider making remote working a permanent feature for roles that allow it. In addition, 83 percent of African finance leaders (compared to 74 percent globally) said they were “very confident” in their companies’ 132

ability to provide a safe working environment, and 78 percent (Global 79 percent) were also “very confident” of meeting customers’ safety expectations. To sustain these gains, businesses will also need to consider the tools, behaviours and incentives that will enable employees to be productive, collaborative and creative — and invest in areas that have the most impact.

ABOUT THE AUTHOR PwC’s Africa region extends across three market areas: Southern Africa, East Africa and West Africa. Dion Shango was appointed as PwC’s new Africa CEO in 2019, following an election process in which some 400 PwC Africa partners across the continent participated. Since being admitted to the partnership in 2008, Shango has led engagements on complex and multinational businesses and has serviced a number of large listed clients, mostly within the mining industry. He has extensive experience reporting under IFRS and of financial reporting in the mining industry. He has also enjoyed exposure to other sectors and industries throughout his career, by virtue of being involved in the audits of companies and organisations such as the South African Reserve Bank, Vodacom, and Montecasino. In recent years, Dion Shango’s client base has included Exxaro Resources Limited, Harmony Gold Mining Company Limited and Sasol Oil.

A RENEWED FOCUS ON INNOVATION Along with decisions about cutting investments, African CFOs are evaluating the other changes they’ve made to help manage the crisis. Many cite work flexibility (Africa: 78 percent; global: 75 percent), technology investment (Africa: 71 percent; global 58 percent) and better resiliency and agility (Africa: 80 percent; global: 65 percent) as crisis-driven developments that will improve their companies in the long run. Around the world the pandemic has underscored the need for new skills, including empathetic leadership, resilience and agility, collaboration and digital skills, and technical and trade skills such as design, manufacturing, and cyber and supply chain management. Many companies will find there is much work still to be done. According to our 23rd Annual Global CEO Survey, 2020 (conducted prior to the coronavirus crisis in September and October 2019), only 20 percent of global CEOs felt their programmes were very effective at reducing skills gaps and mismatches. Among African CEOs, that figure was 15 percent. Many leaders will clearly CFI.co | Capital Finance International

Author: Dion Shango

Summer 2020 Issue

Music Soothes the Isolated Breast:

Thanks, Cyberspace! By Tony Lennox

The Victorian poet Robert Browning once said: “Who hears music feels his solitude peopled at once.” And he didn’t even have YouTube or Spotify.

ll over the planet, millions of people in enforced isolation have turned to the internet for music to bring solace, comfort and entertainment during the coronavirus pandemic of 2020. Music was the lockdown theme for many — from videos of Italians crooning to each other from their lonely balconies, to social media clips of families singing together in solitary confinement. Internet use soared during the lockdown, and a good deal of that was the search for music to help pass the time. A word has even been coined to describe the phenomenon: quarantunes — upbeat music to help you through weeks of separation from friends and family. Nearly 40 percent of 16- to 64-year-olds reported greater use of online music streaming services during the quarantine period, according to a survey by the New York-based social media agency We Are Social. The New Musical Express newspaper collated a “Top Ten” list of the most popular singles downloaded during lockdown. These titles appear to suggest a need for songs which described the moment. Topping the charts was Gerry and the Pacemakers’ 1960s version of the Rodgers and Hammerstein classic You’ll Never Walk Alone, which has become the anthem of support for the NHS. Other songs in the list included the 1980 single Don’t Stand So Close to Me, by The Police. In the post-Savile age, the song describing a male teacher’s infatuation with a schoolgirl drew some criticism. But in lockdown Britain, it rattled hardly any cages for its controversial lyrics, becoming instead a popular social distancing wisecrack. Also in the top 10 was Reach by S Club 7 and the REM hits Everybody Hurts and It’s the End of the World as We Know It. Inevitably, John Lennon’s Imagine also made the cut. More upbeat tracks included David Bowie’s Let’s Dance. A rash of spoof music videos by enthusiastic amateur comedians appeared on YouTube every day, with the lyrics to classic songs adjusted CFI.co | Capital Finance International

to take account of the pandemic, including (the Bee Gees’) Stayin’ Inside, (Bonny Tyler’s) Holding Out for a Haircut and (the Rolling Stones’) I Can’t Get No Sanitiser. Even Queen’s abiding anthem Bohemian Rhapsody was parodied: “Is this a sore throat, is this just allergies…?” But while some were creatively comical, many other social media users found comfort in connecting with others through music. Platforms like the conferencing app Zoom not only brought workers and business users together, they also provided a place for sociallydistanced citizens, from primary school children to isolated grandparents, to meet and make music in a virtual world. It is estimated that the net worth of Eric Yuan, the man who founded Zoom, the Silicon Valleybased business, in 2011, has soared by more than $4bn since the coronavirus began its spread. Yuan says that his original desire was to create a platform where people could have fun — and communal singing and playing were the most popular trends on social media, with singers and musicians from schools, churches and the NHS getting together in cyberspace to belt out tunes guaranteed to release the endorphins. There was a huge uptake of video-sharing platforms like TikTok, a social video app which allows users to share short videos. It was the world’s most downloaded application between January and March 2020. Within a matter of weeks, TikTok reportedly ballooned to the same size as YouTube and Netflix. More than 315m downloads were registered in the first three months of 2020, up from 187m in the same period last year. Some 60m users in the US alone were spending an average of 45 minutes a day on the app. TikTok’s parent company, ByteDance, reported revenue in April of $78m — 10 times the amount for the same month in 2019. Robert Browning would have been baffled by the notion of a magically connected 21st century world, but he would surely have applauded a technology with which music defeated solitude. i 133

> Middle East

Saudi Arabia Poised to Seize the Post-Corona Moment For the first time in living memory, the Saudi government has embarked on a major austerity drive.

Saudi Arabia: Ryiadh

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n early June, state workers saw their generous cost-of-living allowance abruptly cancelled. Capital expenditure on iconic megaprojects has been put on hold as well. In a move illustrative of the sense of urgency felt in Riyadh, the value-added tax rate was tripled to 15 percent. The kingdom introduced VAT just two years ago in a first attempt to address the fiscal deficit that had been on track to reach almost $50bn (6.5 percent of GDP) this year – before the Corona Pandemic struck.

"Middle East sovereign wealth funds boast an estimated $2tn in assets — funds essentially put aside for a rainy day."

The recent drop in oil prices has pulled total government revenue down by 22 percent over the first three months of the year, forcing deep cuts in allocations for the Vision 2030 programme. Emergency policy initiatives to fight the spread of coronavirus have also curbed the pace and scale of the economic reforms introduced by Crown Prince Mohammed bin Salman.

is seen as inappropriate given the troubled times. Though supported by most of the club’s fans, the proposed takeover is questioned over a possible conflict of interest. Prince Abdullah bin Mosaad, a prominent member of the royal family, already owns Sheffield United. The Premier League must now decide if Saudi business practices could cause a conflict with its rules on club ownership.

According to Finance Minister Mohammed alJadaan, the austerity measures are necessary to maintain financial and economic stability over medium to long term and overcome the “unprecedented crisis with the least damage possible”. In April, the Saudi Arabia Monetary Authority (SAMA) reported a $24.7bn drop in its foreign reserve assets — the sharpest decline in over two decades. The kingdom’s central bank tried to limit the damage by shifting $40bn to the Public Investment Fund (PIF). The one-off transaction enabled the Saudi sovereign wealth fund to snap up shares on the cheap at the world’s major stock exchanges.

PIF investments in Q1 2020 were generally well-timed and allowed the fund to maximise its exposure to the recent bull market that saw major indices gaining up to 40 percent in barely 10 weeks. However, the strategy may yet backfire as markets slowly come to grips with the full extent of the pandemic, and optimism is replaced by realism.

SAMA has repeatedly reiterated its commitment to maintaining the Saudi riyal’s peg to the US dollar, and has demonstrated the kingdom’s continued financial strength by raising billions in new debt. Based on the domestic money supply, it is estimated that the central bank needs about $300bn to maintain the currency peg, putting considerable pressure on the kingdom’s $450bn reserves, mostly held in US Treasury Notes. Finance Minister Al-Jadaan said that he intends to cover the persistent fiscal deficit with a mix of expenditure cutbacks, new borrowing, and dipping into those reserves. Market watchers keep their eyes trained on the size of the $300bn Public Investment Fund, which has been designated as the main conduit for the diversification of the Saudi economy. In the first quarter of the year, the fund acquired $500m stakes in each of Facebook, Walt Disney, and Marriott International. PIF invested similarly significant amounts in Cisco Systems, Bank of America, and Citigroup stock. In a sign that they are willing to take on risk, the Saudis bought a $714m stake in aircraft manufacturer Boeing and $450m in cruise operator Carnival — two companies hit particularly hard by the corona pandemic. However, an attempt to acquire UK Premier League club Newcastle United for $365m has raised considerable objections domestically and 136

The Saudi sovereign wealth fund has been an exception in the region. Other public investment funds are mostly sitting tight with a wait-and-see attitude. Much bolder than most, the PIF is seen taking a considered gamble on the kingdom’s pool of capital which is becoming increasingly limited as the world moves away from hydrocarbons. The recent oil spat with Russia over production volumes has added to the financial woes facing Minister Al-Jadaan, depressing oil revenues by more than $24bn so far this year. To balance the budget, Saudi Arabia needs oil prices to hover around the $70 a barrel mark, a level that seems unattainable for the foreseeable future. With a relatively young and restless population, recently exposed to the slightly more liberal rule of Crown Prince Mohammed, the budgetary restraints introduced in the wake of the pandemic may upset an already precarious societal, if not political, balance. The prince’s ambitious and far-reaching reform programme has whetted the appetites of the young and will prove hard to roll back. Suddenly, the kingdom’s future looks much less promising than it did just a few short months ago. “Saudi Arabia is facing the hardest time it has ever been through and certainly the most difficult period of Mohammed bin Salman’s tenure,” says Michael Stephens, of the London-based Royal United Services Institute for Defence and Security Studies. The government is aware that the austerity measures unveiled in May will be felt most by those least able to afford them. However, Minister Al-Jadaan emphasised that the government CFI.co | Capital Finance International

faces a set of difficult choices and can no longer postpone changes to the welfare state. This may undermine the social/political covenant that has allowed the kingdom’s rulers to maintain their position largely unopposed, in return for lavish benefits bestowed on the population. The austerity measures have by no means completely disassembled the famed Saudi welfare state. Its largesse is still unequalled. At the outbreak of the pandemic, the government paid for the repatriation of its subjects and quarantined the returnees at luxury hotels, with all expenses paid. It also covered 60 percent of the salaries of private sector workers, suspended layoffs, offered interest-free loans to households, and slashed utility bills. Gulf analyst Karen Young, of the American Enterprise Institute, wonders if the Saudi government has perhaps failed to adjust its operating philosophy — and expenditure — to leaner times ahead: “At current spending levels, the kingdom will run out of money in three to five years.” Young says that the day of reckoning may be pushed back a few years by aggressive public borrowing. With a current debt-to-GDP ratio of barely 30 percent, there is some room for growth before a hard limit is reached. Meanwhile, the government hopes to foment a new form of “fiscal nationalism” that has Saudis pay, albeit modestly, for the privilege of being part of a generous nation. Cautious optimism is, however, not misplaced. Middle East sovereign wealth funds boast an estimated $2tn in assets — funds essentially put aside for a rainy day. As it starts pouring, these pools of cash may be deployed to boost economic diversification, offer solace to populations, and experiment with novel business models. The International Monetary Fund (IMF) forecasts Saudi Arabia’s GDP to contract by a relatively modest six or seven percent this year. Other Gulf Co-operation Council (GCC) member states will also see their economies shrink, but may expect a strong rebound in 2021. Most regional banks are well capitalised, although reluctant to pass on the emergency support funds released by central banks. Ultimately, the pandemic is likely to accelerate transformations put in place long before the viral outbreak. The era of limitless spending may have come to an early close, but that does not imply that the money has run out. In his statements, Saudi Finance Minister Al-Jadaan emphasises that most austerity measures are temporary in nature. and will likely be reversed as soon as the pandemic has abated and oil prices return to their previous level. Business as usual may have been disrupted by the pandemic, but new opportunities will arise before long. Few regions are better poised to seize the post-corona moment than the financial powerhouses and innovators of the Middle East. i

Summer 2020 Issue

> Fidelity by Name and United by Nature:

A Company That Is ‘There’ For Its Clients

o matter how complex the risk, UAE’s insurance company Fidelity United is there to provide best-in-class solutions and unified brand experience.

It begins by listening to corporate and individual clients’ needs and responding with tailored solutions. The firm has been recognised by partners and associates for its exceptional customer service and product development. This underscores Fidelity United’s leading role in the UAE market. Served by a passionate and skilled team, the company takes pride in reflecting its core values of transparency and responsibility. With the slogan “#BeConfident” taken to heart by all within Fidelity United, there is company wide commitment to achieving superior and sustainable profitable growth. It adopts effective risk management practices and always operates in an ethical and professional manner. The Fidelity United business model empowers stakeholders, optimises company performance and innovation, and capitalises on the passion, knowledge and expertise of its employees. CEO Bilal Adhami is a seasoned insurance professional with over 25 years of experience in the Middle East region and beyond. He joined the company as CEO in 2018, and his direction for Fidelity United brought in major transformation of digitalisation, in line with his vision of broker empowerment. Through his expertise of defining, directing, and expanding insurance operations, the company underwent a restructure in underwriting, operations, distribution and other channels. It works diligently and uncovers new ways to drive profitability and increase market share. This has marked a positive swing in financial results for Fidelity United. Adhami’s strategic and hands-on leadership has improved the performance of organisations, teams, and P&L (top and bottom lines), despite industry challenges. Bilal Adhami began his insurance career at the ground level with AXA Insurance, and advanced to a variety of roles with multinational players such as AIG, where he held the roles of Regional Personal Lines Manager, COO of AIG Egypt, and Managing Director of AIG Saudi Arabia. He was also Head of International Business, Inward

CEO: Bilal Adhami

Facultative Reinsurance, and Commercial Lines for Oman Insurance. Fidelity United believes that the success of a company is impacted by the sustainability and lasting relationships it has with its partners and clients. The evolution of Fidelity United’s strategy two years ago within the Broker Management Unit comes from a carefully laid three-pillar platform. The first pillar is the implementation of digitalisation and creating a roadmap to design its user-friendly online portals, tools and resources. As an insurance company, developing the broker relationships in line with digitalisation was a priority. “We now have successfully empowered our partners with online tools and broker portals,” said Bilal Adhami, “allowing them to gain access to our products, benefits and issue policies, with the ease of digital tools.” The portals enable the brokers to issue policies through a secure payment gateway, making for spontaneous client service. “The portals were designed keeping insights and gaining feedback from our brokers,” Adhami explained. CFI.co | Capital Finance International

The second pillar entails the services of professionals in the Broker Relationship Unit, known as Market Underwriters, who extend support to Fidelity United's partners. They are equipped with market and technical skills and enabled with specialised underwriting authorities to close deals brought in by brokers. The third pillar constitutes of an in-house operations team, the backbone of the business, whose members are aligned with the company vision of customer-centricity. The groundwork is carried out to ensure a seamless, smooth and structure of service to the Fidelity United's brokers in record time. “Fidelity United’s award for Best Insurance Broker Services Platform - GCC 2020 symbolises one of the milestones achieved during our transformation over the past two years,” says Adhami. “Another would be the successful implementation of our robust business continuity plan that has been a result of the agility of our business model, and the dedicated support towards our brokers to ensure zero defect and business as usual, no matter the circumstances. i 137

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Gulf Insurance Group-Kuwait:

A History of Firsts and a Booming ‘GIG’ Economy for Leader in Insurance Gulf Insurance Group-Kuwait (GIG-Kuwait) is the country’s largest insurance company in terms of gross written premiums and retained premiums in the life, health and auto insurance sectors, with a paid-up capital of KD18m ($58.4).

he group aims always to be the market leader and innovator in terms of innovation, technological services, and key strengths. Its flexible infrastructure has enabled 80 percent of its staff to operate remotely during the COVID-19 pandemic. GIG-Kuwait is the first insurance company in the region to issue various insurance policies online, and to provide online health claims approval systems and services for the sale and renewal of policies through smartphone apps (iOS and Android). It has a 24/7 Contact Centre and mobile apps to serve the biggest market share in Kuwait, focusing on advanced technology platforms. The company has been certified for BS 7799 / ISO 27001 in IT security since 2005, and upgraded to become the first company in the country to get ISO 27001:2013. GIG-Kuwait uses an advanced customer relationship system connected with social media and messaging platforms. It was the first insurance company in Kuwait to implement motor claim process using WhatsApp by having the customers send photos of damage. The company is currently implementing of the stateof-the-art core insurance application Beyontech and was the first insurance

"GIG-Kuwait uses an advanced customer relationship system connected with social media and messaging platforms." company in Kuwait to implement use of the Omnichannel digital form. The Gulf Life Insurance Company was established at the end of 2007 as a subsidiary of Gulf Insurance Group. In 2014, Gulf Life Insurance Company changed its name to Gulf Insurance and Reinsurance Company. The licence was modified to practise health / life insurance and general insurance business. In 2017, GIRI transformed the brand name to Gulf Insurance Group-Kuwait. This change was in collaboration with all Gulf Insurance Group subsidiaries, for a unified and streamlined identity. As of December 2017, the company operates with paid-up capital of KD18m ($58.4), up from KD15m ($48.7) in 2016. GIG-Kuwait offers a variety of products and services for various types of conventional insurance: automotive, marine, property, medical, life, travel and casualty. i

"GIG-Kuwait offers a variety of products and services for various types of conventional insurance: automotive, marine, property, medical, life, travel and casualty." 139

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Building a Thriving Business Ecosystem at the Intersection of Global Growth Markets Abu Dhabi Global Market (ADGM) is a leading International Financial Centre sitting at the intersection of Middle Eastern, African, South-East Asian and Chinese markets — a region brimming with investment opportunities.

stablished in 2015, ADGM comprises three authorities: the Registration Authority (RA), the Financial Services Authority (FSRA), and the ADGM Courts. It facilitates the growth and development of Abu Dhabi’s economy and sustainability. Since its inception, ADGM has provided a progressive platform to financial and nonfinancial entities looking to operate, pursue and expand their business in Abu Dhabi and the wider MENA region. Anchored by a robust commitment to Abu Dhabi’s position as a preferred investment destination, ADGM aligns its endeavours with international standards and best practices while catering to market demand. With its global connections, ADGM is an internationally recognised business hub that continuously attracts international investors and pioneering entities, champions leading initiatives, and facilitates local and global financial collaborations.

"Anchored by a robust commitment to Abu Dhabi’s position as a preferred investment destination, ADGM aligns its endeavours with international standards and best practices while catering to market demand." first fully digital courtroom and the introduction of the eCourts platform, transforming the delivery of legal solutions. ADGM REGISTRATION AUTHORITY The ADGM RA is an independent authority responsible for the registration and administration of legal entities, real property interests, data protection and charges created over companies’ assets. As one of the core pillars of ADGM, the registrar's main functions under companies and commercial licensing regulations include:

ADGM COURTS ADGM Courts has been fully operational since May 2016 as part of Abu Dhabi’s vision to create and develop a common law court unlike any before it. Its regulations and supporting rules enshrine ADGM's legal framework of the direct application of English common law — a first for the region — comprised of a Court of First Instance and a Court of Appeal that handle civil and commercial disputes.

Registration of ADGM establishments, business names and maintenance of register, postincorporation documentation; changes in business name particulars, and changes in directors, officers, shareholders and share capital. It is responsible for the enforcement of ADGM company regulations, the cancellation of commercial licenses, prosecution and the strike-off, dissolution or restoration of ADGM establishments.

ADGM Courts was the first in the MENA region to enact a comprehensive framework for third-party litigation funding. The funding rules provide parties and funders with greater certainty on the enforceability of funding arrangements. ADGM’s legislative framework directly applies the English common law, allowing ADGM Courts to draw on a well-established set of precedents.

The ADGM RA is a leader in customer service efficiency, offering a digital-by-default one-stopshop for more than 340 online solutions for applicants and licensees through its dedicated Online Registry Solution Portal.

With innovation embedded at the core of its business formulation, ADGM Courts has introduced several global firsts in its short period of operations, including the launch of world’s

ADGM FINANCIAL SERVICES REGULATORY AUTHORITY The ADGM FSRA advocates for a progressive, robust, and thriving financial services environment. Its primary function is to maintain the integrity of the financial hub, placing ADGM’S registered entities at the forefront of financial protection and stability. CFI.co | Capital Finance International

The FSRA’s fundamental beliefs focus on fair, efficient, and transparent practices that meet the dynamic and growing needs of the Abu Dhabi economy, and benchmark against global markets and international best-practice. Offering the highest level of regulatory transparency and engagement, the FSRA practices an open and progressive approach in its regulatory operations, through public consultations, engagement on introduction, and the amendment of rules and policies. ADGM’s concerted focus on fostering growth and entrepreneurship turned the FSRA into a leader for a robust regulatory framework, recognised as best-in-class globally. FSRA is a recognised leader in innovative regulatory work. Its 2018 comprehensive framework to regulate its virtual asset activities, including those by exchanges, custodians and other intermediaries, was a regional first. Licensing of digital banks, work on bank recovery and resolution rules, as well as introduction of the region’s first digital sandbox in 2019 set a high watermark for regulators across the MENA region and beyond. ADGM ARBITRATION CENTRE The ADGM Arbitration Centre (ADGMAC) is a state-of-the-art hearing facility established to effectively reshape the regional dispute resolution landscape through alternative solutions. The ADGMAC is open to all who seek a modern and business-friendly venue with exceptional support facilities for arbitration hearings or mediations, regardless of which institution parties choose to administer their arbitration. 141

ADGM ACADEMY Delivering world-class financial education and literacy, the ADGM Academy was established to reinforce talent within the financial sector and drive the establishment of a knowledge-based economy in the UAE and beyond. ADGM Academy provides world-class financial research and training services to equip future generations with the necessary skills to navigate the ever-changing financial sector, as well as aid organisations looking for bespoke courses tailored to develop their workforce. The courses and certificates available include qualifications in banking, finance, leadership and sustainability. SUSTAINABLE FINANCE ADGM has been pioneering sustainable finance efforts in the MENA region for the last two years. In November 2018, it unveiled its plan to strengthen Abu Dhabi as a global centre for sustainable finance at the IIF MENA Financial Summit. The ambition first took shape during Abu Dhabi Sustainability Week in January 2019, when ADGM successfully hosted the inaugural Abu Dhabi Sustainable Finance Forum (ADSFF). The forum served as a platform to launch the Abu Dhabi Sustainable Finance Declaration and the Abu Dhabi Sustainable Finance Agenda promoting the UN Agenda for Sustainable Development. The second edition of ADSFF witnessed the publishing of the UAE’s first set of Guiding Principles on Sustainable Finance, which serves as a catalyst in the implementation of the UAE’s

sustainability priorities. In addition, the number of signatories on the declaration reached 36 public and private-sector entities, with an additional 11 entities signing the declaration, pledging greater transparency and accountability in their operations to support sustainable development and climate change objectives. The signatories include Central Bank of the UAE, Mubadala Group, the Ministry of Energy and Industry, the Ministry of Climate Change and Environment, the Abu Dhabi Exchange, Dubai Financial Market, Nasdaq Dubai, and some of the nation’s biggest banks such as First Abu Dhabi Bank, Abu Dhabi Commercial Bank, and Abu Dhabi Financial Group. BELT AND ROAD INITIATIVE ADGM is uniquely positioned as a gateway into the multi-billion-dollar Belt and Road initiative thanks to partnership agreements signed with state-owned Chinese entities and the opening of the first ADGM international representative office in Beijing. In 2019, ADGM has announced collaborations and ties with the Beijing Municipal Bureau of Local Financial Regulation, the National Development and Reform Commission (NDRC) of China, the China National Nuclear Corporation (CNNC), the Everbright Group, the Hainan FreeTrade Zone, OneConnect Financial Technology, the Jiangsu government, the Hong Kong Monetary Authority, the UAE-China Industrial Co-operation Demonstration Zone, the Shanghai Stock Exchange, the Asian Financial Co-operation Association and Guo-Tai Jun-An Securities. i

Richard Teng:

Propelling ADGM’s Status as Leader in Progressive Technologies The Chief Executive of the Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority, Richard Teng, began his career with the international financial centre in 2015.

e was instrumental in the launch of ADGM that same year, and prior to joining the ADGM management team he held senior positions in leading financial organisations in Asia. He was the Chief Regulatory Officer of the Singapore Exchange, as well as Director of Corporate Finance at the Monetary Authority of Singapore. As the CEO of the Financial Services Regulatory Authority (FSRA), Teng oversees ADGM’s banking, insurance and capital market sectors with integrated prudential and conduct supervisory responsibilities. 142

The FSRA, one of ADGM’s independent authorities, advocates a progressive financial services environment, while maintaining financial stability and upholding trust. The FSRA has advanced the global positioning of ADGM and Abu Dhabi through a growing number of cross-border partnerships to strengthen cooperation. The financial centre has signed agreements with 45 like-minded regulators and 32 Fintech entities across the globe, in addition to Multilateral Memorandum of Understanding (MMOU) signatories with the International Organisation of Securities Commissions CFI.co | Capital Finance International

and International Association of Insurance Supervisors. Spearheading numerous initiatives in digital and financial services, Teng has led the ADGM FSRA to introduce several first-of-their-kind, stateof-the-art frameworks and offerings to develop the region’s financial landscape and promote sustainability across all sectors of the economy. In 2018, the FSRA launched the MENA’s first framework to effectively regulate virtual asset activities, including those undertaken by exchanges, custodians and other intermediaries in ADGM.

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CEO: Richard Teng

In 2019, the FSRA introduced the ADGM Digital Lab, the region’s first digital sandbox, allowing financial institutions and FinTech innovators to come together to experiment on products and solutions in a digital platform environment. The Digital Lab builds and improves on the hugely successful regulatory sandbox launched in 2016. FSRA also issued guidances to facilitate licensing of digital banks and promoting standards for safe and robust application programme interfaces to accelerate the adoption of financial innovations.

innovative business models, which is made increasingly evident through the FSRA’s various achievements in the FinTech landscape.

Teng has played a significant role in propelling ADGM’s stature as a leading facilitator to support

As part of ADGM’s ongoing endeavours to promote an international marketplace, Teng has been

In 2017, the FSRA launched FinTech AD, a flagship initiative and largest Fintech event in MENA that provides a collaborative platform for global thought leaders, policy makers, founders, innovators, financial institutions and investors to deep dive into issues that shape the digital economy of the UAE.

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instrumental to the progression of the IFC’s Belt and Road efforts. ADGM has established close cooperation with top Chinese financial institutions and enterprises and is the only regulator from the MENA region to be approved by the People’s Bank of China to operate in the world’s second largest economy. The FSRA aims to continue on a path of greater innovation and collaboration. With digital innovation, it is reshaping the local, regional and global regulatory landscape to create a vibrant and robust environment that constantly attracts new investment, talent and opportunity to Abu Dhabi. i 143

The COVID-19 Crisis Reveals How Short-Term, Shareholder-First Thinking Still Rules the Day Based on insights from José Maria Liberti

From questionable buybacks to overly restrictive M&A clauses, a recent pledge to consider other stakeholders is ringing hollow.

ne of the few bright spots in the COVID-19 pandemic has been seeing the many ways that businesses are stepping up and chipping in to help support their communities.

For José Liberti, a clinical professor of finance at the Kellogg School, stories about clothing manufacturers making masks or distilleries making hand sanitizer are absolutely heartening. But are they evidence of a kinder, gentler capitalism at work? Liberti doesn’t think so. Eight months ago, the influential Business Roundtable, which includes the heads of some of the largest global corporations, pledged to redefine the purpose of a corporation away from principally serving shareholders and toward serving all stakeholders, including customers, employees, suppliers, and communities. In Liberti’s view, this wasn’t so much a pivot as an acknowledgement that, ultimately, shareholders will benefit when other stakeholders are also served. The idea being that those other stakeholders will continue to maintain society’s support of capitalism if they see the benefit of it. “Many social issues such as income inequality, the cost of medical care, and gun violence erode confidence in the economic and political system,” he says. By addressing these issues and reducing the risk of systemic changes that would negatively impact a firm’s value, corporations were committing to taking a longterm view. But as the pandemic pushes even the largest, wealthiest firms to the breaking point, he continues, “some of their behaviour makes me question whether they truly had a long-term view in the first place.” QUESTIONABLE SHARE BUYBACKS One such behaviour, which has received some attention in the media, is share buybacks: when companies buy back their own stock with accumulated cash in order to return money to shareholders by lifting stock prices.

“People are selfish,” he says. “If you care about all stakeholders, why would you exclude a pandemic from your MAE?” says. “Are companies using excess cash above what they need to operate or are they using operating cash?” Buying back shares, he explains, can be a sensible way for companies to return excess cash to shareholders when there are no other (potentially more profitable) projects to pursue, or when a firm has reason to want to play it safe and avoid risky R&D expenditures. But it is “very clear that some of these companies are using any cash flow available to buy back shares instead of saving it for a downturn or negative shock,” he says. Some companies were even issuing cheap debt in order to buy back shares. Liberti adds that many of these buybacks are primarily done to prop up share prices, increase earnings-per-share measures, or otherwise benefit executives and shareholders. “The best example is American Airlines,” says Liberti. The company filed for bankruptcy in 2011 and within a few years was profitable again. Very profitable. But despite the airline industry being notoriously boom-and-bust, the firm didn’t put away nearly enough money in its rainy-day fund to weather today’s crisis. Instead, “American spent their positive cash flows on buybacks,” says Liberti—to the tune of $12.4bn since 2014. And American is not alone. Together, major airlines have spent 96 percent of free cash flows on buybacks during the past decade. Now, they want a bailout.

Liberti is quick to clarify that there’s nothing inherently wrong with this. “The issue is when and how you conduct a buyback of shares,” he 144

It isn’t entirely clear yet whether they will get one: at least some of the $25 billion dollars in CFI.co | Capital Finance International

payroll assistance that has been allocated to the airlines in the CARES Act may come in the form of low-interest loans rather than grants. But if they do, Liberti says, it will represent a transfer of wealth to investors from taxpayers. And if they don’t, employee layoffs will be massive. Either way, Liberti points out, the industry’s reckless eagerness to prop up share prices over the years is hardly consistent with the stakeholder view that its CEOs have pledged to uphold. MEANINGLESS “MATERIAL ADVERSE EFFECT” CLAUSES A less discussed but equally telling drama is currently unfolding in the mergers-andacquisitions market. Most purchase agreements include material adverse effect (MAE) clauses—clauses that offer buyers an “escape hatch” from a deal should the transaction be affected by an event outside of their control. And on the surface, it would seem as though a global pandemic would certainly fit the bill, offering a solid excuse for sidestepping a deal that no longer makes economic or strategic sense. But surprisingly, that’s not the case, says Liberti. The way these clauses are written, negative effects from an event can only scuttle a deal if the acquisition or newly merged company would be disproportionately affected in relation to other companies in the industry. And, of course, this is exceedingly difficult to argue today, when whole industries are getting walloped, and it is not yet clear what the longterm financial impact on any given company will be. For example, 1-800-Flowers, which had agreed to purchase a division from Bed Bath & Beyond, stated that COVID-19 left the company without the resources to close the deal and integrate the business by the agreed-upon date. Bed Bath & Beyond responded with a lawsuit, arguing that because the global pandemic affected everyone, it wasn’t an adverse effect. And given the difficulty of proving disproportionate impact, Bed Bath & Beyond will likely win its case. “Courts have been reluctant to accept the claim of an MAE to terminate an agreement,” Liberti says.

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So what does this rather obscure clause have to do with corporations taking a stakeholder view? The whole point of an MAE is to ensure the long-term financial performance of the newly merged company, Liberti explains. If a buyer can no longer capitalise on the transaction and put the new company on firm footing, its suppliers, customers, and employees—old and new—will suffer the consequences. So when one party in the deal is still aggressively pushing forward, that signals that it might be putting the financial interests of a select group of executives and shareholders above everyone else’s. The current insistence on proving disproportionate impact, he says, “makes me question, ‘What do you care about?’” He would like to see less restrictive MAEs, which would allow firms more wiggle room to ensure that transactions truly create long-term value for all parties. But if anything, the trend is moving in the opposite direction, with MAEs getting more stringent over time, explicitly excluding a wide range of events from weather conditions to acts of war. The latest batch of MAE clauses now exclude COVID-19 by name. “People are selfish,” he says. “If you care about all stakeholders, why would you exclude a pandemic from your MAE?” In his view, these MAEs point to the short-term thinking that remains pervasive in some global corporations. “Short-termism is one of the main issues in stock markets,” he says. “If managers were properly incentivised to take a long-term view, they should have no interest in making decisions that are harmful to employees, consumers, and society.” i FEATURED FACULTY José Maria Liberti Joseph Jr and Carole Levy Chair in Entrepreneurship; Clinical Professor of Finance. ABOUT THE WRITER Jessica Love is the editor in chief of Kellogg Insight.

José Maria Liberti

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> Book Review: A Journal of the Plague Year by Daniel Defoe

Stark Parallels Between Modern Angst and London’s Plague Years Review by Tony Lennox

s the 2020 pandemic held the world in its lethal grip, the most popular film being downloaded in homes across Britain was the 2011 thriller Contagion – a movie about a deadly virus.

It’s a peculiar quirk of human nature in troubled times to seek out fictional representations of what is being experienced in reality. As the population hunkered down in isolation, the search was for dystopian fiction and zombie apocalypse movies rather than happy escapism. In 1720, Daniel Defoe was writing Moll Flanders — a scandalous romp of a novel, and a follow-up to his hugely successful Robinson Crusoe — when rumours circulated in London of new outbreaks of bubonic plague in Poland and France. Memories of the city’s own notorious Great Plague of 1665 were still fresh. Defoe himself had been five years old and living in London’s Cripplegate at the time. There was fear in the air. These were the early days of newspapers: London’s journals and pamphlets were full of lurid speculation and fake news. Defoe’s publisher sensed an opportunity. Defoe, a writer, journalist, merchant and sometime spy, put aside Moll Flanders and knocked out A Journal of the Plague Year to catch the prevailing mood, and maybe make a killing. Defoe always needed money. He’d spent time in Newgate debtors’ prison in the late 1600s and was even placed in the pillory for seditious libel at one point. When he died, aged 70 in 1731, he was said to be “hiding from his creditors”. Like any good journalist, Defoe was a keen observer of human behaviour, picking up on details to shine a light on the subjects he covered. He was a prolific commentator, writing a weekly journal in which he covered a range of subjects, including his thoughts on government, religion, birth control, education for women, the creation of a central Bank of England, and even flying machines.

A Journal of the Plague Year may have been a speculative attempt to cash-in on a nation’s anxieties, but it is seen today — in the words of the author Anthony Burgess, who wrote the introduction to the Penguin Classics edition — as “the most reliable and comprehensive account of the Great Plague that we possess”. Defoe was the son of a butcher, born and raised in London’s East End. Brought up in the Puritan faith, he considered himself an outsider, though had pretentions to nobility, upgrading his surname from Foe by adding a flamboyant “De”; he even possessed a carriage with his coat of arms on its doors.

Today Defoe is seen as the father of journalism, though in his own times he was often judged to be a common hack, lacking in integrity, who “sold his pen” to whichever political party was in office. He was scorned by contemporary writers, though Alexander Pope was grudgingly admiring of Robinson Crusoe. Jonathan Swift was not so complimentary, regarding Defoe with contempt: “One of these authors, the fellow that was pilloried, I have forgot his name, is indeed so grave, sententious, dogmatical a rogue that there is no enduring him.”

A Journal of the Plague Year was published in 1722. It is written as an eye-witness account of the year bubonic plague devastated London, though Defoe presumably had few personal memories of events. Some scholars believe the account is based on the journals of Defoe’s uncle, Henry Foe. The book’s narrator, simply described as “H.F.”, is a saddler, and Henry Foe was one such. The description of everyday life during the plague is so vividly recalled, however, that Defoe must have studied original source material. Even though Defoe was an accomplished novelist by the time the book was published, it is considered unlikely to have been pure invention. Defoe’s plague book does not pretend to be anything other than a fiction. The Diary of Samuel Pepys, which includes a contemporaneous report of the plague year, was probably a more accurate account, but Defoe, who was fascinated by the events of 1665, clearly carried out careful research, maybe even talking to those who lived through it. His journal smacks of first-person honesty. The book is a mixture of good journalistic craft — accurately listing numbers of the dead, the price of bread and other commodities — and the incessant, gruesome ebb and flow of the “distemper” in the capital’s streets and boroughs. It also contains many vivid and shocking anecdotes of forlorn shrieks from upper casements, deserted streets, wild-eyed and naked men rambling and raving, the looting of homes, even the theft of clothes stripped from plague victims as they lay dying. Defoe recounts grim stories of nurses smothering or starving their charges to death. Watchmen surveyed the homes of those infected and isolated, CFI.co | Capital Finance International

their doors daubed with a red cross. Many of these watchmen were “saucy and insolent”, uncaring of those unfortunates essentially condemned to death. Defoe’s narrator recounts a number of such watchmen beaten, killed and dumped in the Thames, saying that as far as he knew, no-one was ever brought to justice for these “murthers” and, he adds, in all conscience, why should they be? Defoe’s novel also tells of citizens frightened out of their wits by the rantings of soothsayers and astrologers, for whom he has nothing but contempt. These scoundrels were predicting God’s judgement and doom upon the city, pointing to the heavens and seeing, in the random shapes of clouds, visions of avenging angels with swords bearing down on London. And a reader in 2020 could see parallels with Defoe’s descriptions: people informing on their neighbours, others deliberately spreading the disease, hoarding goods or making a dash for the relative safety of the countryside, taking the pestilence with them. Defoe recounts how fearful country folk met fleeing Londoners with pitchforks, in similar fashion to Snowdonia farmers confronting day-trippers from English cities during the coronavirus lockdown. Defoe also describes the many quack cures being promoted; one can easily imagine a Trump-like character suggesting a mixture of vinegar and garlic as a defence against the plague. Tobacco smoke was also thought to keep the distemper at bay. The Great Plague of London claimed more than 100,000 lives – almost a quarter of the city’s population. The disease, with its painful “bubos” which caused “insufferable agonies and torments”, spread rapidly. It created panic, hysteria and brought out the very worst of human behaviour, but Defoe also describes the courage of those who came to the aid of the stricken. Defoe’s tale puts coronavirus into perspective, and modern readers might take comfort from the fact that despite the plague, and the Great Fire which destroyed the heart of the city a year later, London recovered — and thrived. Above all, the modern reader will recognise — despite the 17th century language — the keenest of insights into human behaviour in times of dread and distress. He sums up the horror of the plague with these words: “I recommend it to the charity of all good people to look back, and reflect duly upon the terrors of the time; and whoever does so will see, that it is not an ordinary strength that could support it; it was not like appearing in the head of an army, or charging a body of horse in the field; but it was charging Death itself on his pale horse; to stay indeed was to die, and it could be esteemed nothing less.” i 147

> Latin America

Praise for Argentina’s Decisive Response to Pandemic Argentina has defaulted on its public debt — again. It is familiar with the script that follows, and unlikely to be intimidated by creditors.

Argentina: Buenos Aires

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n fact, it is blazing a trail for other countries grappling with debt loads that have suddenly become unsustainable after the coronavirus pandemic unhinged economies, disrupted cross-border trade, and ushered in a yet-to-be-defined new normal. President Alberto Ángel Fernández, barely seven months in office, has received considerable praise for his government’s decisive response to the pandemic. He managed to unite the nation by clearly indicating that its needs trump those of bondholders. Late May, both Fitch and S&P downgraded three tranches of the country’s sovereign bonds to “D” after a $500m payment was missed and negotiations on the partial restructuring of the public debt all but collapsed. Pushed over the edge for the ninth time since its founding in 1816, Argentina’s default script is well rehearsed and contains few surprises. Downtown Buenos Aires was duly plastered with posters featuring the silhouette of a vulture and demanding a break with the International Monetary Fund (IMF) and an immediate end to “debt bondage”. The placards change, but the message stays the same. It is a message that is slightly inappropriate, as the fund has turned into Argentina’s prime cheerleader. The prospect of a debt default no longer causes anxiety or fear. Few countries are more experienced in dealing with economic shocks than Argentina. In 2001, the country staged the world’s largest sovereign debt default when it suspended payment on the $132bn owed to foreign banks and investors. Since then, notwithstanding its poor record, Argentina’s debt stock has ballooned to a staggering $414bn, equal to 93 percent of GDP, proving that it takes two to tango. Over the past decade, private investors looking for yield have showered Argentina with funds. In 2017, not even a year after the country ended a long court battle with a group of private equity funds refusing to accept a settlement on the 2002 default, Argentina managed to issue a $2.75bn 100-year bond, carrying a juicy 7.9 percent coupon. Eager buyers placed orders worth almost $10bn, raising some eyebrows among analysts mindful of the country’s poor credit record. They had a point: the 100-year bond now trades for 37 cents on the dollar. Argentina’s present troubles stem, to a considerable degree, from its government’s prudent approach to the pandemic. Entering a strictly enforced lockdown early on, the country managed to limit the spread of the virus and avoid a major outbreak. While the approach yielded better-than-expected results, it also paralysed an shaky economy that had been put on IMF life-support in September 2018. In a surprise move, at the time interpreted as a motion of confidence, the fund arranged credit facilities worth $57.1bn for Argentina – the largest bailout package in IMF history. 150

"The prospect of a debt default no longer causes anxiety or fear." The government of president Fernández now says it needs to refinance at least $65bn in short-term debt to put the economy on a more sustainable footing. Some major investors seem to agree. BlackRock and a few other bondholders have indicated that they recognise the need for debt restructuring, given the extraordinary circumstances. Nobel laureates Joseph Stiglitz and Edmund Phelps have joined a group of prestigious economists calling for a constructive approach. They argue that the Argentine government acted responsibly by shielding its citizens from the virus and it economic consequences. French economist Thomas Piketty pointed out that private investors were fully aware of the risks when they bought into high-yield Argentine bonds. Argentina has proposed to reduce coupon payouts, introduce a three-year grace period, and push maturities back by up to a decade. However, three major groups of creditors rejected the plan outright. While recognising that a consensus may prove hard to reach, Economy Minister Martín Guzmán remains hopeful that an agreement can be negotiated. Talks are ongoing, but a considerable gap remains with the government demanding a $500m reduction in annual debt servicing costs. Should an agreement prove elusive, Argentina’s major corporations may be locked out of the global capital market and forced into default as well. Guzmán fears that the damage may already have been done, and says that post-corona credit will be scarce, with bondholders reluctant to engage unless the government comes up with a major fiscal and administrative reform package. However, the “new normal” points in the opposite direction. Argentina is no exception to the global trend that sees states assume a more proactive role in the management of the economy. Still, Argentina seems poised to recover relatively quickly. In the 2000s and while shut out of capital markets, the country staged a remarkable economic recovery. It may well do so again. This lesson from recent history is not entirely lost on its creditors, either, and helps Guzmán navigate the brink. Though slightly less indebted and with a much more robust domestic industrial base, Brazil is likely to discover that a lack of national unity and political resolve may undermine attempts to kick-start the sluggish economy. The shenanigans of president Jair Bolsonaro do not inspire confidence. Although he has consistently CFI.co | Capital Finance International

prioritised the economy and refused to order a national lockdown, the country’s GDP is expected to shrink by almost 13 percent in the second quarter. Analysts predict Brazil will register a six percent economic contraction over the full year, putting a premature end to the return to growth initiated in 2017. Facing the sharpest economic recession in its history, Brazil seems singularly ill-equipped to meet the challenge. The pandemic fractured the political landscape and deteriorated the relationship between the federal government and the powerful states. Governors have stepped up as the president squandered his authority and standing by consistently downplaying the pandemic and displaying indifference to the suffering of Brazilians. After he assumed control of the country in January 2019, Bolsonaro promised to implement a vast programme of structural fiscal reform that was to transform Brazil into a global economic powerhouse and an engine of growth. However, the quest to Make Brazil Great got off to a slow start as the divided federal congress declined to fast-track approval of key measures, and the economy responded only hesitantly to the dawning of the new era. The pandemic has now derailed the Bolsonaro administration’s entire agenda. With political strife nearing an all-time high, congress is unlikely to support any of the president’s initiatives, postponing yet again the promised renaissance of an overregulated economy marred by pervasive corruption, social inequality, and capricious rule. Foreign investors cast a wary eye on the rising tensions between the president and his widely respected and powerful economy minister, who is considered a lone voice of reason in the cabinet. Minister Paulo Guedes has grown frustrated with the president’s repeated interventions and apparent disregard for fiscal prudency. Though both agree that the Brazilian economy faces collapse unless the state-ordered lockdowns end, Guedes emphasises the need to immediately bring down the fiscal deficit — which is expected to reach 8.7 percent of GDP by year’s end. Guedes also resists attempts to bridge the spending gap with freshly minted money, fearing a return of inflation. In a curious turn of events, Brazil now finds itself on the periphery of global events as the country becomes the focal point of the pandemic and the Bolsonaro administration loses control of the crisis, unable to forge a degree of national unity or a coherent response to the emergency. Meanwhile, Argentina, long the enfant terrible of the continent, is displaying a level of maturity that holds promise. As a result of getting his priorities straight, president Fernández enjoys the backing of the IMF, even as he stopped some debt payments. Whatever shape the new normal takes, good governance will probably carry the post-corona recovery. i

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BDMG, the Minas Gerais State Development Bank, connects Brazil to the world. For 58 years, we have been providing financial services to both the public and private sectors and contributing to the country’s economic and social prosperity. But this successful track record is only the basis of a new cycle. Acting as a regional platform, deeply connected with the global development agenda, we are currently the Brazilian subnational Bank with the most significant volume of partnerships with multilateral development institutions. Under these agreements, the Bank raised about US$500 million in recent years, which were pivotal to the funding of projects with high socio-economic impacts on the ground. In this new cycle, BDMG’s approach will be closely aligned with the Sustainable Development Goals (SDGs), attentive to best practices, and open to creating value on a global scale. After all, the frontiers of the future are built by all of us. BDMG.MG.GOV.BR

BDMG. NEW IDEAS FOR DEVELOPMENT.

CFI.co | Capital Finance International

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> EY on COVID-19 Pandemic:

An Opportunity for Reinvention of Family Enterprises By Sergio Caveggia and Jimena Rocío García

Family businesses and SMEs face great challenges, as well as personal and financial losses, in these turbulent times.

n the flip side of the coin, the COVID-19 pandemic can also be seen as an opportunity to rethink business models and working practices. Family businesses values and special characteristics that distinguish them from other enterprises. Cohesion during the crisis is vital to sustaining what the family has built. They can emerge stronger — both as families and as organisations. Research shows that 70 percent of family businesses fail to last through the third generation. But in Argentina, these enterprises have for many years supported a large part of the local economy. From the point of view of relationships, this crisis is changing roles. Older family members had to stay at home to protect themselves and younger ones have had to take over the company obligations. Some, who used to undertake other ventures, are returning to seek a place at the core of the business. This can cause strain, but with an effort to communicate and work together, family bonds and business can remain strong. Virtual meetings are an option to regularly discuss day-to-day challenges along with family-related issues. This crisis could be the moment to evaluate the transition to the next generation. Do current family leaders need to remain longer than planned to steward the family business? Or should they make room for fresh ideas and untapped energy? The pandemic is an opportunity to teach future generations about core values and principles. It should be considered to what extent transition plans need to be put in motion, or on standby. In the field of technology and communications, family enterprises were already undergoing certain changes related to digital and technological functions. However, they are now facing an unexpected situation that is forcing them to speed up the processes. The crisis can also be an opportunity for family businesses to plan for sustained future development. This could be seen as an opportunity to review governance structures and policies. Sometimes, there is a logical resistance

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to planning for business families, which may even come from the family members themselves with the motive of not hurting anyone's feelings. But actions that might have seemed radical before quickly become insufficient to meet the current challenges. It is a great opportunity to consider the protection of the family: to revisit any policies that have set in place, the shareholders agreements, the corporate structure, the existence of pacts regarding family employment. The family can start thinking about the creation of formal documents to govern the relationships or create a single Family Office. The partnership with trusted advisors is important at this point. Last but not least, founders may find an opportunity to revisit the strategy for the company, and how will the enterprise prioritises the needs of stakeholders. Recent surveys indicate that companies have reduced or shifted operating expenses to preserve cash, have cut dividends (or plan to), or are raising cash through new debt or equity. Amid the strain of COVID-19, it’s wise to challenge business as usual and rethink company’s offerings. By transforming products into services, companies can better satisfy shifting customer demands. To avoid higher purchasing costs, customers are trending away from product ownership and more toward services bought as and when needed. Over 90 percent of technology companies are embracing subscription or consumption business models. In automotive, customers now have the option to subscribe to a car brand, providing them access to various models from that original equipment manufacturer rather than putting thousands of dollars toward a car at one time. Even in agriculture, farmers can now use livestock health tracking devices without purchasing them outright. Although many companies have started moving toward subscription models, only 55 percent of them believe that they are ready for that transition. CFI.co | Capital Finance International

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Everything stems from the family business strategy if they consider adapting this approach. There are certain crucial areas of consideration: the business strategy, the go-to-market approach, the technology enablement, and the accounting and finance challenges. Our recent experience in assisting family offices shows that, in inflexion moments as the one we are current undergoing, a holistic approach aimed at overseeing these different aspects and consequences. A careful analysis of the legal, tax and labor consequences of changes in the operating and business models is a key priority. Families and family enterprises are resilient. Multi-generational family enterprises have faced difficult times in the past and, by working together, family-owned businesses will overcome the COVID-19 pandemic as well. The last six months have forced them to step outside the comfort zone and consider unusual solutions. Each family needs to find its own response to the new reality after COVID-19. If the family enterprises focus on what they know, who they are, and the type of family business and values they want to preserve, the pandemic will certainly be a transformative opportunity. i

Author: Sergio Caveggia

ABOUT THE AUTHORS Sergio Caveggia is a tax partner currently in charge of Transaction Tax area in Argentina. He joined EY Argentina in 1994 and has developed expertise over 24 years in international taxation and merger and acquisition matters. Sergio is also focus on servicing clients in the Private Client Services (PCS) area. He is highly experienced in inbound and outbound investments, buy side, sell side and restructuring services within the Transaction Tax area. Sergio has served in a variety of industries and has also been involved in many due diligence procedures performed in the past 20 years. He has given lectures in national universities and is a frequent speaker in tax seminars. He has also written several articles dealing with Argentina tax issues. He is a Certified Public Accountant who graduated from University of Belgrano in Argentina. He obtained his Tax Specialist’s Degree at the University of Belgrano and has a postgraduate certificate in Business and Management from Universidad Catolica Argentina (UCA). He is also member of the Professional Council of Economic Sciences of Buenos Aires and the Argentina Fiscal Association.

Author: Jimena Rocío García

industries. She also participated in the coordination of many cross-border engagements, dealing with foreign labor and social security legislation matters on each transaction. Jimena participates in numerous seminars related to payroll taxes and labor law matters. Jimena is a Lawyer graduated in 2010 from UNLAM (Universidad de La Matanza). She is enrolled in the Bar Association of the City of Buenos Aires.

Jimena Garcia is a Manager currently working in the International Tax and Transaction Services (ITTS) and Private Client Services (PCS) areas in Argentina. She joined the firm in 2014. She has extensive experience in social security & labor law buy-side and sell-side due diligence services in numerous companies in different CFI.co | Capital Finance International

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> Development Bank of Minas Gerais (BDMG):

Reference Point in Creation of Green Economy The Development Bank of Minas Gerais (BDMG) was founded in 1962 and its main shareholder is the government of the State of Minas Gerais, Brazil.

ith a portfolio of more than 22,000 public and private clients, BDMG is present in the main regional economic chains, from agriculture, industry and commerce to technological innovation and renewable energy. Its CEO, Sergio Gusmão Suchodolski, is vice-president of the Brazilian Development Association and former director of the New Development Bank. BDMG's activities are connected to the UN’s 2030 Agenda for Sustainable Development Goals, being one of the five Brazilian banking institutions which are signatories to the Global Compact. This strategic north allows the bank to be a reference point in the financing of the green economy, and to work continuously in expanding its capacity of measuring the impact of the projects for society. In 2019, BDMG offered R$1.3bn ($252m) in credit to companies of all sizes and municipalities, stimulating the creation of 22,600 jobs and the addition of R$974.6m ($189m) to the economy of Minas Gerais, the Brazilian state with the third-highest GDP. With a regional performance and a global vision, BDMG is a partner of several multilateral development organisations, including IDB and EIB. In its focus, the constant search for the diversification of funding and attraction of resources aimed at the financing of sustainable development. In this context, and in line with the 2030 Agenda, the bank has steadily increased the availability of credit for initiatives related to clean energy, innovation and infrastructure, in addition to expanding specific programmes and lines for the valorisation of female entrepreneurship and for obtaining working capital by micro and small enterprises. At the same time, BDMG seeks to incorporate the trends of digital transformation to modernise its business model. In 2012, it was the first Brazilian public bank to have a 100 percent digital platform for easy service, without bureaucracy to the micro and small entrepreneur. In 2020, these advantages were extended to the state's municipalities, allowing greater agility in procedures of the contracted operations, aimed at sanitation works, renovation of public buildings (as health posts and schools),

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BDMG: Executive Board

CEO: Sergio Gusmão Suchodolski. Photo by Marcus Desimoni

BDMG: Headquarters

acquisition of machinery and equipment, urban mobility projects and energy efficiency.

culture. It promotes awards, and publishes notices that attract the participation of artists and projects that contribute to the strengthening of the culture of the state of Minas Gerais. In addition, it maintains an active programme in its art gallery. CSR is also integrated into the reality of BDMG. Its Employee Citizenship Institute (INDEC) technically and financially supports populations in situation of economic and social vulnerability. Projects are developed in areas of education, sports, culture, professionalisation, health and social assistance. i

Innovation is also present in BDMG through Hubble, which is a multisectoral hub based in the bank, the result of a partnership with LM Ventures and Olé Consignado Bank. Start-ups use technology intensively in an environment of exchange and connection: an opportunity for these entrepreneurs to grow, invest and bring new solutions, especially to the financial market. Focused on promoting development for more than 30 years, BDMG Cultural Institute encourages development through art and CFI.co | Capital Finance International

Learn more in its Sustainability Report: bdmg.mg.gov.br/report

Summer 2020 Issue

> Aby Lijtszain:

Founded First Company at Age of 20 — and Hasn’t Looked Back Leading Mexican ground transport company Traxion offers a one-stop solution for cargo and logistics as well as contracted personnel and student transportation services.

hrough these two complementary operating segments, it provides domestic and international transportation in a highly fragmented market. With a disciplined and targeted acquisition strategy and organic growth, it has built a platform with seven key brands. The man behind all this is Traxion co-founder and executive president Aby Lijtszain, a distinguished Mexican entrepreneur with more than two decades of industry experience in the country. In 1998, at the age of 20, he executed his first acquisition and founded Transportes LIPU, which today is the largest student and personnel transportation company in the country. Some years later, and with a vision of integrating a highly fragmented sector, he founded Traxion. It is a story of proven growth; Traxion assembles large and highly recognised companies from the sector with a fleet of more than 8,100 power units and more than 15,000 employees. Traxion is the first publicly-traded company of the industry. In just eight years, Traxion has evolved into the largest mobility and logistics company in Mexico, and consolidated as the pivot between the logistics and transportation industries, and the financial sector in the country, establishing the first such investment platform in Mexico. Lijtszain has also executed and successfully integrated more than 15 M&A transactions and founded and sponsored several companies including a vehicle leasing firm aimed to government institutions, diverse advertising and marketing businesses, and a security company. He holds a Bachelor’s degree in Public Accounting from Instituto Tecnologico Autonomo de México (ITAM) and earned a degree in Business Consulting from the same institution. Through its diversified fleet of trucks, trailers and buses, as well as rigorous maintenance and replacement programs, Traxion is able to provide superior service throughout all of Mexico and arrange for forwarding service to the United States.

Co-founder and Executive President: Aby Lijtszain

Its cargo and logistics segment provides domestic and international freight transportation services throughout the country and abroad. “In addition to the 5,488 student and personnel transportation units, we operate one of the largest truck fleets in Mexico, which during 1Q20, consisted of an average of 2,130 power units,” says Lijtszain, “plus an average of 618 units of last-mile fleet. We operate one of the youngest fleets in the industry, with an average age of 4.4 years, compared with an industry average of 16.8 years, according to the Communications and Transportation Ministry of Mexico. “We provide service offerings through our subsidiaries, including MyM, Egoba, Grupo CFI.co | Capital Finance International

SID, AFN, Bisonte, Redpack and LIPU. We maintain a degree of centralisation amongst multiple subsidiaries by promoting shared usage of terminals, maintenance facilities and a centralised procurement system, among others.” This centralisation helps to generate efficiencies while allowing the flexibility to provide competitive pricing and boost profitability. The streamlining of operations has been achieved by a combination of effective management and the deployment of new technologies, and Lijtszain is not done yet. “I see enormous opportunities to use disruptive technology to increase our market share even further. We have a five-year investment plan which is already giving us a return.” i 155

> Traxion:

Mexican Logistics and Transport Titan that United a Fragmented Industry

ince its foundation in 2011, Traxion has evolved to become the largest and most important mobility and logistics enterprise in Mexico.

It was created with three main pillars in mind: diversification, discipline, and innovation. The idea was to consolidate a highly fragmented industry dominated mainly by family-owned and -operated companies, through an institutional platform. In September 2017 Traxion conducted its IPO, listing its shares in the Mexican Stock Exchange, 156

and raising funds to fuel its growth plans. Traxion has not only grown, it has managed to improve its margins and profitability. Challenge has always been part of its history, and its seasoned management team, deep industry expertise and rock-solid business model have enabled the group to successfully navigate rough waters. Mexico’s multi-billion-dollar transport and logistics industry accounts for six percent of the nation’s GDP, and that contribution is growing. Determined to realise the full potential of the country’s CFI.co | Capital Finance International

key strategic location at the crossroads of two continents, successive Mexican governments have funded and encouraged outside investment in a number of multimodal corridors. While still works-in-progress, these corridors will ultimately create an interlocking network of roads and railways linking Mexico’s ports to its inland industrial parks and free trade zones, and Mexican transportation and logistics specialist Traxion is in pole position to benefit as the new roadmap takes shape. The relentless surge in cross-border trade has

Summer 2020 Issue

organisation with 15,300 employees serving over 1,000 customers, and generating annual consolidated revenues of more than $600m. “The idea behind Traxion was to create a one-stop shop for ground transportation and logistics that could meet all our customers’ requirements,” Lijtszain explains. “I chose the best companies in each market and integrated them into our platform.” The strategy has been an undisputed success. The modest fleet of trucks that Traxion started with now numbers over 8,000, and by Lijtszain’s calculation, the company has grown 28-fold since its inception in 2011. “We are three times the size of our nearest competitor and we are the only company in the sector listed on the Mexican Stock Exchange with institutional investors as shareholders, and the highest governance and sustainability guidelines” he says.

boosted interest and investment in Mexico’s air and maritime transport sectors, of which road transport remains the most lucrative. Last year it represented over 90 percent of the industry’s total value, and Grupo Traxion is the fastest-growing and most dominant player. While the industry as a whole has been increasing at a CAGR above six percent over recent years, that growth is nothing compared to the pace at which Grupo Traxion has been expanding its market share. Since it was founded eight years ago by executive president Aby Lijtszain, Traxion’s acquisition strategy has seen the company blossom into an

Today, Traxion is the one-stop shop that Lijtszain had in mind when he set out. The best-in-class companies that he successfully targeted for acquisition include Grupo Sid, a leading national transport and logistics company with an excellent 35-year track record and solid customer base. “Last-mile” specialists Redpack, whose fleet of 618 light units offers a range services from nextday delivery to less-than-truckload freight services. That allows its clients to truck-share and book as much or as little space as they need to transport their goods to every major city in the country. It also acquired other long-established brands such as EGOBA, the absolute leader in border transfer trucking. Traxion is today one of Mexico’s most diversified transport companies, as well as its largest. By CFI.co | Capital Finance International

2018, According to the IMF, Mexico’s percapita income was about $20,600, putting it ahead of Argentina. Yet car ownership in Mexico remains relatively low, and the vast majority of its blue-collar workforce rely on public transport or company buses to get to and from their workplace. Through its LIPU subsidiary’s centralised platform, Traxion provides personnel transportation not just to the large corporations who have historically been the main sponsors of company buses, but also to small companies grouped together in industrial parks and corporate hubs — as well as to resorts and hotels. With the largest and most modern fleet in Mexico which presently amount to more than 5,400 buses, LIPU also gets students to schools and universities across the country. Lijtszain continues to look for growth opportunities and in 2017 successfully completed a $220m IPO listing on the Mexican Stock Exchange. Since then, the group has spent a further $370m on a combination of strategic acquisitions and organic growth. Traxion has also managed to increase productivity in its cargo operation where kilometer volume increased more than 21 percent since its IPO, and average revenue per kilometer improved by 10 percent in 2018 and six percent in 2019. It provides contracted student, personnel and tourism transportation services to companies and private schools, primarily on a contracted or dedicated basis. It operates the largest bus and van fleet in Mexico, with an average of 5,488 units in 1Q20, and its service offering in this segment is provided through its subsidiary LIPU. i 157

> Mario Pezzini, Sebastián Nieto Parra and Juan Vázquez Zamora:

A New Development Vision for Latin America

he wave of popular protests that shook Latin America in late 2019 marked a turning point not only in the politics of the countries involved, but also in terms of understanding the region’s long-term development. The COVID-19 crisis is already affecting living standards and transforming public perceptions and expectations in ways that are still difficult fully to comprehend, much 158

less address. Only by rethinking national social contracts and initiating broad processes of dialogue can policymakers hope to tackle rising discontent and act collectively. Several key questions must be addressed. What obstacles are stalling the region’s development? Are public institutions equipped to respond appropriately to citizens’ new aspirations and CFI.co | Capital Finance International

national concerns? And how can citizens be empowered to advance their evolving demands effectively and keep governments accountable? The protests across the region took many observers by surprise, because Latin America’s socioeconomic situation has improved in the last decade. But the region is now facing three major “development traps” – a set of vicious cycles

Summer 2020 Issue

that are preventing countries from advancing to greater prosperity. The first trap is institutional. A combination of rising aspirations and increasing popular mistrust and discontent regarding public institutions has undermined “tax morale” – people are less willing to pay taxes. Low tax morale in turn makes it difficult for governments to finance better public services and thus respond to new social demands. In 2018, for example, just 25% of Latin Americans trusted their national governments, down from 39% in 2006 and only 42% were satisfied with health-care services (versus 57% in 2006). Perhaps most strikingly, 53% of the region’s population felt justified in not paying their taxes in 2016. The second trap is one of social vulnerability. Latin America’s macroeconomic progress over the last decade has led to the expansion of a “vulnerable middle class” comprising around 40% of the region’s population. Although people in this group – who earn between $5.50 and $13 per day – are no longer in extreme poverty, they generally have informal jobs, low and unstable incomes, and no social protection. This often prevents them from pursuing better and more stable employment, leaving them – and their families – at constant risk of slipping back into poverty. Finally, many Latin American countries also face a low-productivity trap. They specialize in unsophisticated primary-sector exports and hence struggle to participate in the highervalue-added segments of global value chains and generate quality jobs. Dependence on commodity exports creates few linkages with the domestic economy, leaving many sectors uncompetitive or technologically backward. Since the 1950s, for example, Latin America’s labor productivity, relative to the European Union, has fallen from 78% to less than 40%. In addition to these long-standing structural challenges, Latin American policymakers also must consider the impact of new media and communication technologies. In an increasingly interconnected world, even citizens who are equally well-off materially are more sensitive to wellbeing comparisons with their national and international peers – in terms of age group or gender, for example.

"Latin America needs participatory strategies that empower citizens at all stages of the policymaking process."

Sectoral administrative measures are necessary but insufficient to address Latin America’s development traps. The region needs a new start. Breaking the dynamic of spiraling frustrations demands nothing less than renewing the foundations of national social pacts, and ensuring that ordinary people’s voices are heard through a process of public deliberation. This will take time, and CFI.co | Capital Finance International

each country will need to find its own way of turning a new development vision into an effective national strategy. Nonetheless, we would suggest three starting points. First, Latin American countries need metrics that capture the multidimensional aspects of citizens’ wellbeing, and thus go beyond traditional macroeconomic indicators such as gross domestic product and the Gini index of income distribution. This is a critical step toward broader-based and more effective policymaking. To take it, national statistics offices and economic ministries should promote the measurement and pursuit of wellbeing as core policy objectives in official government documents, plans, and budget reports. Second, while policy responses usually are sector-specific, the issues they seek to tackle are not. As a result, citizens may regard government policies as being disconnected from socioeconomic realities. Instead, Latin America needs strong national development strategies that support coordination among sectors and across levels of government, and contain a clear and explicit policy mix and policymaking sequence. Creating mechanisms to monitor and evaluate implementation of these strategies will be crucial. Last but not least, Latin America needs participatory strategies that empower citizens at all stages of the policymaking process. National strategies should involve a broad range of actors and draw on a variety of knowledge and viewpoints. Moreover, they need to be place-based, reflecting subnational differences and mobilizing local resources for development. Although Latin America has a long development journey ahead of it, the region’s policymakers must now respond urgently to citizens’ demands. By moving quickly to tackle the causes of popular frustration, governments can bolster wellbeing, trust, and long-term prosperity. i ABOUT THE AUTHORS Mario Pezzini is Director of the OECD Development Centre and Special Adviser to the OECD Secretary-General on Development. Sebastián Nieto Parra is an economist at the OECD Development Centre. Juan Vázquez Zamora is an economist at the OECD Development Centre.

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> North America

Modern Monetary Theory Shows a Way Out of Recession Early in June, the Business Cycle Dating Committee of the National Bureau of Economic Research formally declared a recession — the first since 2009. The US economy reached its apex in February and all but imploded in the weeks and months that followed, bringing the longest expansion on record to an end. However, shortly after the committee announced its verdict, early signs of a quick turnaround emboldened investors already primed for a comeback. On June 9, the S&P 500 swung back to black and recouped all of the losses accumulated during the first three weeks of March. It was a strong and sustained rally that saw the index rise by 44 percent in little more than two months.

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he US market seems to downplay the effect of the corona pandemic on businesses and consumers, trusting the Federal Reserve to tackle the recession with a shock-and-awe display of its firepower. Fed chair Jerome H Powell left little room for doubt when he declared that the wherewithal of the system of central banks is, essentially, without limit. That was Powell’s “whatever-it-takes” moment, and it did the trick: investor confidence soared. In June, most news was upbeat: oil prices briefly peaked north of the $40 mark and the haemorrhaging of jobs was stopped — after around 40m workers had filed for unemployment benefits. Even airline stocks regained their lost lustre. Boeing staged a modest rebound as investors took heart from a significant uptick in domestic business and leisure travel. In the second week of the month, the Transport Security Administration reported that almost half a million travellers passed its airport checkpoints each day, just 17 percent of the normal volume for the time of the year, but up from the April 14 low of 90,000 (four percent). Shares of American Airlines gained an astonishing 90 percent over a 10-day period, while United Airlines (up 70 percent) and Delta Air Lines (up 45 percent) also showed unexpected gains. Most carriers resuscitated their hastily slimmeddown networks, with plans to add extra flights to domestic holiday destinations in Florida, Montana, and Wyoming. Resorts in and around the Glacier National Park in Montana report strong bookings for July and August, and expected occupancy rates bordering 80 percent. As markets shrugged off concerns, pundits were left puzzled. The Bureau of Labour Statistics surprised all and sundry with the news that 2.5 million people went back to work in May. Analysts sounded a cautionary note, warning that the upswing merely expressed the heightened volatility of the market — which may easily be spooked back into bear country. They also expressed fear that a second coming of the corona virus may stop any recovery dead in its tracks. Unspoken, but still a major behavioural driver, is the conviction among investors that President Donald Trump may yet pull a trick or two to secure re-election. The markets have largely dismissed his more outrageous statements, comments and tweets, concentrating instead on the actual policy initiatives and actions of the Fed. The encouraging news on the economy is considered a sign that the damage wrought by the pandemic may not have been quite as devastating as expected. Hopes of a V-shaped recession have been rekindled. There now exists broad agreement that the unprecedented stimulus package has managed to avoid, or significantly lessen, a sharp drop in consumer spending. The US federal government

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"Politicians, and even some of the more traditional economists, have trouble understanding the concept of money and explaining its actual working to voters or readers." has so far injected well over $3tn into the economy, and is considering a supplementary plan to keep the nation on life support. However, the good news has strengthened Republican lawmakers’ conviction that it is too early, and perhaps unnecessary, to expand the existing support package. Businesses in the food and beverage sector created more than half of the 2.5 million jobs added in May, with about three-quarters of the establishments receiving federal aid under the Paycheck Protection Programme. Last month, the healthcare industry hired an estimated 250,000 workers. The remarkable rebound is being ascribed to the different aid programmes kicking in, after a slow start in April when the agencies and main street banks charged with the disbursement of federal monies were overwhelmed by the sudden surge in demand. With the backlog cleared, money is flowing smoothly to the intended recipients. Trump Administration officials and Republican representatives and senators were quick to declare victory, and mission accomplished. House Speaker Nancy Pelosi (D-CA) rained on the Republicans’ parade by reminding that the pandemic had caused over 100,000 deaths and left some 25m Americans jobless. “The May numbers show that decisive action by Congress can and does make a big difference,” she said. “Now is not the time to take the foot off the gas.” Pelosi has a point: real-time data from various sources fail to show a correlation between the relaxation of lockdown measures and a pickup in business activity. States that moved early to lift stay-in-place orders, such as Texas and Georgia, registered no more job gains than those that kept restrictions largely in place. Moreover, the finances of state and local authorities have taken a severe hit, which caused the loss of half a million civil service jobs. Education was particularly hard-hit, with over 310,000 teachers and support personnel shed from the payroll. Local tax revenue has evaporated, forcing deep and painful budget CFI.co | Capital Finance International

cuts unless the federal government steps in with support. Trump held out some hope when he mentioned that his administration was ready to do more “if we want”. The president is said to favour indirect forms of aid, such as tax cuts for businesses and investors. Republicans, and some Democrats, seem increasingly worried about rising debt levels and plead for a more measured response to the economic malaise. They cling to the notion, made fashionable by Ronald Reagan and Margaret Thatcher in the 1980s, that governments’ only sources of cash are taxes or borrowing. This apparently reasonable logic is still in vogue and led to the “deficit myth” which has become a staple of US conservatives and European liberals alike. It holds that deficits are per definition wrong, and draw on the earnings of future generations. Though the myth invites great one-liners and soundbites, it entirely ignores the monetary power of governments that issue their own currency. As Fed chairman Jerome Powell noted, there is no limit to this power other than inflation and the availability of labour and material resources. In the face of the trillions in new money being created and spent by the US federal government, the deficit myth and austerity, its direct descendant, serve no purpose — if they ever did. Modern Monetary Theory (MMT) helps explain that only actual limits matter; the balance at the end of the fiscal year does not. Rather than some exotic or esoteric fringe theory, MMT merely describes the actual role of money, and does so without the inclusion of moral values or considerations. It shows a way out of the Corona Recession and offers solutions that may ease the economic and social pain. Politicians, and even some of the more traditional economists, have trouble understanding the concept of money and explaining its actual working to voters or readers. This may cut short the major interventions that have weaved the safety nets currently supporting the world’s major economies. Fed chairman Powell cautioned against too much optimism and offered a grim assessment at the close of the central bank’s June policy meeting: “This is the biggest economic shock in the US and the world, really, in living memory. We went from the lowest level of unemployment in 50 years to the highest level in close to 90 years, and we did it in two months.” Powell promised that the Fed would do “whatever we can, for as long as it takes” to support the economy. He said that he and his colleagues could not envision an increase in borrowing costs for this year or the next. “We are not even thinking about raising rates.” He also said that May’s encouraging job report merely underlines the present uncertainty, and the inability to make accurate predictions. i

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Summer 2020 Issue

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> Pavilion Global Markets Ltd.

Transition Management and the Pandemic: When to Act in Periods of Higher Market Volatility While it’s understandable to be squeamish about transitioning assets during periods of high volatility, it can be an ideal environment in which to engage a transition management provider.

o provide the necessary transparency to help asset owners become more comfortable, transition management (TM) providers will require an effective technology platform giving access to liquidity, and providing the ability to monitor execution/venue quality (best ex) and customisation to stay relevant and competitive. A frequently asked question from asset owners, regardless of the market environment: “When is the best time to effect a portfolio rebalance, or deal with changes to my asset manager line-up?” The increased volatility in global markets brought on by the Covid-19 pandemic has highlighted the need to ask more questions of TM providers and focus on specific criteria when selecting which one may be best-suited to navigate this turbulent environment. For example, there is increased opportunity cost in delaying moving to the desired structure or new higher performing manager, thus how does the opportunity cost compare to the higher transaction cost? How does the TM provider demonstrate in a transparent fashion best execution? What are all the fees captured by the TM provider including but not limited to rebates over and above client disclosed and negotiated commissions? Both empirical evidence and market data have confirmed the volatile nature of global markets since March 2020, relative to preceding months. Aside from what is clearly evident to the casual observer, there has been a dramatic downturn in median quote size and a striking uptick in spreads and volatility in all regions, particularly in EMEA and APAC. These factors have led to an increase in trading costs, which can take years of investment performance to overcome. It is important to note that an increase in volatility generally goes hand-in-hand with an 164

"We continue to see a greater focus on venue analysis and selection, as well as customisation of trading algorithms in order to mitigate the higher spread / increased vol environment on clients’ executions." increase in volumes. When the VIX peaked at 80, volumes nearly doubled in the US, Europe and Asia. In the US, average daily volumes rose 69 percent to 15 billion, far surpassing the previous monthly record of 12 billion. In a global cost review for Q1 performed by Virtu, trading costs in all regions increased due to the volatility associated with the pandemic, reaching levels not seen since the Global Financial Crisis of 2008. Even with the VIX subsiding a little in April, when compared to the previous year, intraday volatility remains multiples higher. The lower quote size, higher spread, and higher intraday volatility all led to higher execution costs. Compounding this is the myriad of venue options, trying to understand where the volumes are going, and where the best sources of liquidity are to effectively manage execution costs. In the public equity market, there has been a proliferation of new trading venues leading to a fragmentation of the market. High frequency trading (HFT) has the ability to exploit this — to the detriment of client orders, if one’s execution CFI.co | Capital Finance International

Summer 2020 Issue

Pavilion Global Markets: Buyback blackout periods and vol. spikes. Shaded areas = US recessions. Data via Bloomberg.

capabilities and technology do not keep pace. Given that spreads more than tripled for S&P 500 symbols in March 2020 against the same period last year, technology is critical in sourcing the various venues to find liquidity via smart order routing. In addition, one must consider the fact that many brokers and/or TM providers operate their own, or have a financial stake in, certain dark pools that may be dominated by HFT. It is incumbent on these providers to demonstrate that any preferential routing of orders to these venues is to the client’s benefit, and not motivated by other financial considerations. While this has always been important, the increased volatility of the moment exacerbates it. As a result of all these factors, we continue to see a greater focus on venue analysis and selection, as well as customisation of trading algorithms in order to mitigate the higher spread / increased vol environment on clients’ executions, to bridge the liquidity gap caused by market fragmentation, as well as to help manage risk. As more and more clients are expressing concern about transitioning / rebalancing in the current market environment, Pavilion Global Markets is seeing a demand for transparency across the entire trading process to help clients better understand the liquidity sourcing preferences, and gain greater insight into how brokers / TM providers are managing their orders and controlling risk. One way of providing this transparency is the use of venue analysis tools to help shed light on whether a provider’s liquidity venue is being given undue preference, or if a venue is causing too much information leakage.

Canada: Montreal

Customisation of trading algorithms via venue selection, and even real-time venuemonitoring, will become key. Firms such as Clearpool in the US allow for customisation CFI.co | Capital Finance International

of algorithms “on the fly” to direct orders to achieve best execution. Information leakage is avoided by better venue prioritisation and avoidance of any undesirable venues. To keep pace, technology needs to be customisable, and flexible enough to handle the increasing granularity of the data (from milli- to microsecond, or even finer executions). Without such technology, providers will be unable to compete on a best-execution basis in the future. Bottom line: with news of rising Covid-19 cases, and the economic implications of such news changing intra-day, volatility will likely remain elevated, with markets seeing spikes for a period of time to come. That said, this period of greater volatility can also be an effective environment in which to transition. Asset owners should choose a TM provider that has an effective technology platform providing them access to liquidity, and allowing them to monitor execution/venue quality. The platform must also be easily customised to stay relevant and competitive. This will assist in navigating markets, managing risk and minimising execution costs. Transparency remains key. i

PAVILION GLOBAL MARKETS - BEST TRANSITION MANAGEMENT TEAM NORTH AMERICA 2019 Pavilion Global Markets is an established player in international capital markets, offering securities trading, global macro research and transition management services to institutional investors. For over half a century, Pavilion Global Markets has provided expertise in execution and advice to institutional clients worldwide. We bring industry-recognized capabilities to the table – including specialized investment research and analysis, a top-ranking global trading desk and state-of-the-art technology – to help our institutional clients worldwide excel in the capital markets. 165

> Bermuda Stock Exchange (BSX):

Electronic Exchange Takes an Island to Leading Status for Global Listings Launched in 1971 as a purely domestic exchange, the Bermuda Stock Exchange (BSX) is now the world’s preeminent fully-electronic offshore securities exchange.

t made steady progress after its launch; by 1993 it had transitioned to an electronic platform and opened to international listings. As of Q2 2020, BSX had over 1000 listed securities, including investment funds, debt- and insurance-related securities, and SMEs. The BSX’s recent growth is due in large part to its innovative and commercial approach, which includes offering listed issuers speed to market, often in as little as two weeks. The firm also operates a mezzanine listing facility, which provides development-stage companies with an opportunity to list — and subsequently raise capital — on an internationally recognised exchange at an earlier stage than a traditional IPO. The majority of issuers are Bermuda-based, but there are others from North America, the UK, Europe and Asia. The BSX has also seen increased interest from global capital markets as an exchange platform for the listing of international debt instruments, especially from Latin and South America. While the BSX has focused on organic growth and development, it has also pursued its electronic exchange environment and the development of its domestic capital market. This has earned international recognition to ensure appropriate regulation and recognition in support of future development. The BSX is a full member and sits on the Board of the World Federation of Exchanges. It is an affiliate member of the International Organisation of Securities Commissions, a US Securities and Exchange Commission-designated Offshore Securities Market, and a UK Financial Conduct Authority designated Investment Exchange.

with combined nominal value of $38.1bn, or 85 percent of global issuance at the end of Q2 2020. Recent market volatility has proven ILS to be a non-correlated asset class which continues to grow in scope and geographic diversity. It is increasingly viewed as an attractive investment for institutional investor portfolios. ILS has been deemed a sustainable investment in accordance with the United Nations’ Sustainable Development Goals (SDGs) as it helps private and public organisations to build resistance to natural disasters and climate change. At year end 2019, Miami International Holdings (MIH), owner and operator of three fullyelectronic US securities exchanges, obtained a controlling interest in the BSX. Since its founding in 2012, MIH and its Exchange Group have been generating technological innovation. Electronic exchanges have challenged legacy trading platforms, and this partnership will provide additional support to the evolving global re-insurance risk market through innovative products on a global scale, with a view to the futures market. A pragmatic commercial approach has created an operational, technical, and regulatory infrastructure focused on clients’ needs. This is the result of a collaborative effort between the island’s private and public sectors. The model ensures jurisdictional policies remain in-line with — or ahead of — market developments. It keeps Bermuda’s regulatory oversight at prudent levels, while maintaining support and appreciation for the entrepreneurial spirit that drives innovation. i

In 2009, the Bermuda Monetary Authority introduced the Special Purpose Insurance (SPI) class which enabled the collateralisation of insurance products — catastrophe bonds and Insurance Linked Securities (ILS). The BSX is the world’s leading ILS exchange: 470 listings 166

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“This Is What It Means to Be Black in America and Black in Corporate America” As the American nation reckons with structural racism, a Kellogg professor and a Google diversity recruiter discuss what credible leadership looks like for business leaders. Ginny Clarke serves as the head of leadership staffing at Google and is an expert on diversity recruitment. She’s also a Kellogg alumna. She spoke with Nicholas Pearce, a clinical associate professor at Kellogg, who also serves as a pastor and consultant.

ecent killings of unarmed black citizens by police have prompted widespread outrage and calls for change — and not just to the criminal justice system. Business leaders are also being asked to take bold action to dismantle racism, and in particular anti-black racism, in America. So what might that look like in practice? Clarke and Pearce pinpoint the deep-rooted barriers that keep organisations from achieving true diversity and equity. And they discuss how leaders must use this moment to reflect, to learn, and to make real strides toward racial justice going forward. Clarke: I think diversity, equity, and inclusion (DEI) has become an office or a function or a centre of excellence in most organisations. But my concern is, a lot of these programmes are not embedded. And the cynic in me, having done this work now for 25 years, says it can become a bit of a dumping ground for everything that senior leaders don’t necessarily want to have to deal with. “Here, fix this. We don’t have representation here. You fix this for us. Fill the supply of underrepresented talent.” When in fact those aren’t the root-cause issues that are getting in the way of having representation. Because when you look at the engagement surveys at Google and at other companies, you see great disparities in the way that people of colour are experiencing the organisation. My concern around the DEI efforts is that those people leading them — great, successful competent individuals in those chief diversity officer roles — don’t necessarily have the authority to impact change. Pearce: So you are arguing to an extent that perhaps these roles as they are currently constituted are being set up to fail, which I think is one of the factors that has led CEOs to look at those roles as expendable in the COVID moment, when the organisation is trying to focus on their most pressing basic needs for survival and for solvency.

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"The chief diversity officer cannot be employed simply to be the conscience of the CEO." Yet I think there’s a pretty significant miscalculation on these leaders’ parts, because none of the reasons why diversity and inclusion mattered before COVID have gone away. Without diversity, inclusion, and equity efforts, you stand to receive quite a bit of backlash from your customers, backlash from your employees. You will suffer from less innovation. You will suffer from less thoughtful decision-making processes. You will have less customer insight. Your diverse talent will ultimately be alienated. Now let’s add to that what some people are calling the COVID 1619 pandemic, right? So if we think about COVID-19 as the novel coronavirus, the COVID 1619 pandemic is referring to racism as a pandemic that has been running in the American background and in the foreground for 400 years. And so now after centuries of state-sanctioned black suffering, now in the wake of the executions of Ahmaud Arbery in South Georgia, and Breonna Taylor in Louisville, Kentucky, and George Floyd in Minneapolis, Minnesota, cries for justice have turned to demands for justice. And those have turned to outrage and widespread protests across the country and around the world. Now companies are thinking, “We better do something. So let’s go get those diversity folks whom we didn’t really value that highly and get them to craft a message or plan something, or help us put an ad campaign together, help us to make a social media post for Blackout Tuesday.” How do you make sense now of not just diversity in the COVID-19 moment, but diversity and CFI.co | Capital Finance International

inclusion in the COVID 1619 pandemic? What does credible leadership look like? Clarke: I think credible leaders look like they’re having some of those difficult conversations that they’ve simply not had before. And I’ve had people say, “What should I be doing?” And I almost feel like it’s a bit of a cop out, but I try to offer something: “You know what, go educate yourself on Black History in this country; go learn what the year 1619 means. And go watch something like 13th by Ava DuVernay to understand mass incarceration and the historical references and implications of Jim Crow.” To me, that’s the stuff that a credible leader needs to do before they just try to say, “What should I be saying to the external market.” There’s got to be a real, genuine sentiment here. Pearce: I agree that this is a raw moment. It is a difficult moment. I have also received many phone calls and emails, mostly from white colleagues or white clients of my consulting company, that are looking for some absolution of their guilt. And in many cases, what I have found is that they have not taken the time to educate themselves about the issues. But when you say what credible leaders should be doing is learning and educating themselves and watching 13th, it’s hard for me because a lot of people will study the issue to death and do nothing about it. And people will say, “Well, as long as I lead with empathy and issue a heartfelt statement that conveys my deep, deep hurt and pain, then I have done my job.” And the reality is that is not at all the totality of the job. The job of leaders is to first connect, but then lead. Writing an email or a letter conveying your thoughts and prayers is an initial act of leadership, but that is something that anyone can do. What leaders must do, in my opinion, is to take stock of the social, political, organisational, economic, and other sources of capital at their disposal and deploy it in ways that are just. Which is why I would think that this moment is

Summer 2020 Issue

"You want to talk about hearing and understanding? Understand what it looks like for me to come into organisations and have people assume that I’m not as smart as my resume would show." not so much a diversity-and-inclusion issue, as much as it is a moral-leadership issue. Which gets back to your point about CEOs wrongly outsourcing a lot of this to chief diversity officers. I’m not saying that the chief diversity officer has no role. What I am saying is that the chief diversity officer cannot be employed simply to be the conscience of the CEO. Clarke: And there’s an individual level of awareness that each of us needs to come to grips with. And it means facing your own biases. Facing your own fears, your own trauma, your own angst, all of that stuff. Everybody’s bringing their baggage and beliefs. Black people included! Everybody needs to come clean with themselves in this moment and really get deep down and real. Have a conversation with yourself about what you believe, and stop hiding behind the corporate culture and that little veil of protection that you think keeps you absolved. Stop living in the denial that this isn’t your problem. It is. It’s everyone’s problem. And we each need to come clean with ourselves on a very profound level before we’re going to go out into the world and try to create a systemic change. Pearce: I love that. A lot of my students sign up for my diversity class because they want to learn the how-tos. They want to learn how to build stronger organisations, how to build a diversity strategy, how to leverage diverse talent—how to, how to, how to. And where I start them is not giving them the how-tos. I start them with the opportunity to first examine who they are as individuals. Because each of us brings, as you said, baggage. Each of us brings life experiences. Each of us brings a number of social identities to the table. And a lot of us are suppressing the true self by not coming to terms with who we are. A lot of us are hiding behind the mask, sending a representative of ourselves to work every day. And I think that first being able to own the fact that each of us has a diversity story of some sort, each of us has things we are afraid of, things that we are perhaps ashamed of, things that we are joyous about, things that we are saddened by. And by being able to engage in the radical act of self-acceptance and self-disclosure in a safe environment, that positions us to then have conversations about, “How do I navigate interactions in such a way that I am building an inclusive environment?”

for. Chase, Prudential, JLL, Spencer Stewart, all of these big organisations: there is a quiet — and sometimes not-so-quiet — expectation that I had to show up in a certain way in order to be successful in that organisation. And there are aspects of “who Ginny Clarke is” that simply have not been welcome. Let’s just call that what it is. Do you know the toll that that’s taken on me? Thank God that God made me resilient, that I am the descendant of slaves who were extremely resilient. It’s my resilience that has allowed me to live in both worlds, but it’s taken a toll. And thank God I’m able to go into my meditative space to fortify myself during these most difficult times, because this is what I don’t think a lot of people understand and appreciate. This is what it means to be black in America and black in corporate America. You want to talk about hearing and understanding? Understand what it looks like for me to come into organisations and have people assume that I’m not as smart as my resume would show. Or, because I show up as highly competent, which I am, somehow that makes them uncomfortable because of their incompetence in certain areas. And that becomes my problem. And I thereby get held back because I make other people uncomfortable. This is what we need to be talking about, because that is what leaders need to understand: that they have been complicit in allowing people to treat me and others as though we were “less-than” because we made them feel uncomfortable. That’s their stuff. It’s like, “you need to come clean with you and your insecurities because you’re imposing them on me. I’ve dealt with mine in order to show up in this environment year after year after year. What are you going to do?” i

Ginny Clarke

Nicholas Pearce

Clarke: In my 35-year career, I have had to assimilate to work in the companies that I work CFI.co | Capital Finance International

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> GoldenTree:

Governance and Experience Equate to Winning Formula for Investment Firm that Boasts the Golden Touch Asset management firm GoldenTree’s strong governance structure has been key to its success throughout its 20-year history.

oldenTree is, and has always been, entirely employee-owned, with many of its 27 partners promoted internally. This ownership structure provides a strong alignment of interest with investors, and ensures a disciplined approach to capital raising. The governance at GoldenTree is further exemplified by its executive committee, comprised of nine partners from across the firm. These members have worked together for an average of 13 years and meet regularly to formulate business strategy, discuss corporate governance, and review key areas of business from a management company and fund perspective. Founding Partner & Chief Investment Officer: Steven A Tananbaum

GoldenTree is one of the largest independent asset managers focused on credit, with more than $30bn in assets under management. It has been managing assets on behalf of investors for two decades, celebrating its 20th year in business in 2020. It specialises in opportunities in sectors such as high yield bonds, leveraged loans,

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distressed debt, structured products, emerging markets, private equity and credit-themed equities. GoldenTree has invested globally since its inception in the US in 2000, and it established

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Summer 2020 Issue

GOLDENTREE BY THE NUMBERS 20-YEAR TRACK RECORD OF SUCCESS In 2000, GoldenTree was founded – based 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.

Partner & President: Christopher Hayward

Partner: Pierre de Chillaz

Partner & Head of North American Bonds and Loans: Lee Kruter

Partner, Head of Structured Products & Chair of Risk Committee: Joseph Naggar

15 YEARS OF GLOBAL PRESENCE GoldenTree expanded its global footprint with the opening of its European office in 2005. Over the past decade, GoldenTree has become an established and respected participant in European credit markets. It offers local expertise in corporate credit, structured products, trading, restructuring, sourcing and business development.

OVER $30BN IN AUM GoldenTree is one of the largest independent asset managers focused on global credit markets. With expertise across areas such as corporate, structured, distressed and emerging markets, it is able to analyse a broad universe of opportunities.

PARTNERS PROMOTED FROM WITHIN GoldenTree is owned by its employees and offers a clear path to partnership. This culture allows the firm to attract and retain some of the world’s most talented investment and business professionals.

Partner & Global Head of Restructurings and Turnarounds: Ted S Lodge

Partner & Head of Business Development and Strategy: Kathy Sutherland

AN EXPERIENCED TEAM GoldenTree has one of the most experienced investment teams in the industry, led by an executive committee with an average of 26 years of deep involvement in the investment field. OVER 250 EMPLOYEES WORLDWIDE GoldenTree is headquartered in New York City with offices in London, Singapore, Sydney, Tokyo and Dublin. GoldenTree has had a physical presence in Europe for many years, and opened an office in London in 2005. More than 20 languages are spoken across the firm. OVER 50 CUSTOMISED ACCOUNTS GoldenTree is able to provide solutions to investors and offer customised accounts with individualised return profiles.

Partner & Head of Trading: Deeb Salem

Partner: Steven Shapiro

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Investor AUM breakdown is as of February 29, 2020. Excludes CLO vehicles assets under management. Endowment & Foundation also includes Private Bank. Asset Manager also includes Financial Advisor, RIA and Outsourced CIO. Other includes Commercial Bank, Corporate Treasury, Investment Bank and Sovereign Nation.

"GoldenTree is one of the largest independent asset managers focused on credit, with more than $30bn in assets under management. It has been managing assets on behalf of investors for two decades, celebrating its 20th year in business in 2020. It specialises in opportunities in sectors such as high yield bonds, leveraged loans, distressed debt, structured products, emerging markets, private equity and credit-themed equities." a presence in Europe in 2005. Today its global footprint includes offices in New York, London, Singapore, Sydney, Tokyo and Dublin. GoldenTree is supported by a diverse capital base of institutional investors, including leading public and corporate pensions, endowments, foundations, insurance companies and sovereign wealth funds. GoldenTree continues to experience growth in its investor base due to its diverse platform and consistent performance. 172

GoldenTree is primarily focused on institutional clients, which make up more than 90 percent of the firm’s AUM. Its largest investor categories are public and corporate pensions, which collectively make up over more than half the AUM total. GoldenTree was founded on the principles of fundamental value investing, with a focus on safety margins and a “total return” approach. The firm’s investments are designed to preserve CFI.co | Capital Finance International

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. The company’s breadth and depth of expertise, strong governance structure and adherence to core principles allows it to navigate market cycles and deliver attractive results. i

Summer 2020 Issue

> Proud to be Part of Bermuda:

Top Team Members of the BDA CFI.co meets the team at the Bermuda Business Development Agency: Roland Andy Burrows (CEO), Paul Scope (BDA chair and chair of Willis Towers Watson) and Stephen Weinstein (BDA deputy chair and EVP and Group General Counsel, RenaissanceRe Holdings Ltd) ROLAND ANDY BURROWS As CEO of the Bermuda Business Development Agency (BDA), Roland Andy Burrows advocates for the world-leading financial jurisdiction of Bermuda.

“The continued support of all our stakeholders is critical,” he says. “We benefit from the fact that the intellectual capital in Bermuda, and the BDA itself, is exceptional. We have a team of dedicated and qualified professionals, in addition to a network of world-leading stakeholders and a board comprising industry experts who volunteer their time and efforts.”

He wants to encourage further inward direct investment and growth, representing the interests of the public and private sectors.

PAUL SCOPE Chair of the BDA board and chairman of Willis Towers Watson, Paul Scope, arrived in Bermuda more than three decades ago. He has been a board member of the BDA since its inception in 2013.

Burrows joined Bermuda’s independent economic development public-private partnership in December 2018, after a stint as chief investment officer for the Bermuda Tourism Authority and 25 years in the financial services sector. Roland Andy Burrows

His time is spent driving plans to advance the island’s traditional and emerging industries. While Bermuda itself is of modest size, its appeal, connectivity and international profile is great, and offers global businesses an ideal base. In support of the government’s drive to diversify the economy, the agency now proactively targets and attracts new business to the island from key international markets. “We focus on the technology sector in addition to our historic focus areas of re-insurance and risk solutions, investment funds, asset management, trusts and private clients, family offices and infrastructure investments,” he says. “Working closely with the business community, government and the Bermuda Monetary Authority, the BDA fulfils a unique role in facilitating an understanding of the needs and challenges that exist.

Paul Scope

“From a professional standpoint, having arrived in 1983, I have seen first-hand the impressive development of Bermuda’s insurance and reinsurance market,” Scope says, “including its leadership in captive insurance and the ILS sector, whose global capacity Bermuda continues to dominate. While the cultivation of the global re-insurance market is without doubt a signature achievement, it is just one part of a highly diversified business ecosystem that continues to set Bermuda apart. Being across the breadth and quality of the jurisdiction as a whole is what makes the BDA’s work so valuable.” STEPHEN WEINSTEIN Stephen Weinstein, deputy chair of the BDA and EVP and Group General Counsel of RenaissanceRe, has been a Bermuda resident for nearly 20 years.

“We are able to leverage these insights to ensure Bermuda maintains its competitive edge over other international markets, and that as a jurisdiction we can resolve issues, respond to commercial trends and adapt to change expeditiously.”

“When it comes to responding to market dislocations with new capital, innovative ideas and speed to market, there is simply nothing in the world comparable to Bermuda,” he says. “I strongly believe the work of the BDA helps to ensure Bermuda remains the best jurisdiction in the world from which to match global risks and capital, with our unique blend of entrepreneurial innovation and fit for purpose regulatory oversight.

Andy Burrows sees the BDA’s achievements in assisting companies to set up — with a concierge service to streamline the process — advocating for the jurisdiction and progressing the island’s legislative framework as shared successes.

“Speaking from personal experience, supporting the BDA’s mission comes easily. I am a passionate believer in Bermuda’s value proposition to the global economy, and I’m proud to call the island home.” i

Stephen Weinstein

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> Bermuda Retains Global Relevance

in an Era of Change Thanks to its Position, Policies and Legislation

For decades, global businesses and investors have valued Bermuda for its political stability, robust and transparent regulatory environment, and its efficient capital regime.

Bermuda: Royal Naval Dockyard

t is underpinned by a 400-year-old English common law legal system, a businessfocused culture and sophisticated infrastructure. It also has an enviable geographical location: Bermuda is just 90-minutes from New York and six hours from London. These factors have seen the Island develop into a blue-chip jurisdiction in the world of international commerce and investment.

funds, asset managers, family offices, trusts and other private client structures. Bermuda is also a popular domicile for companies listing on major stock exchanges, including the Nasdaq and the HKEX.

The nimble, strategic and open-minded approach of the island’s government and regulators has allowed the island to swiftly adapt to the needs of business, maintaining Bermuda’s relevance in an era of fast-paced political, socio-economic and technological change.

FINTECH IN BERMUDA In 2018, Bermuda became one of the first countries in the world to pass comprehensive legislation and regulations governing initial coin offerings (ICOs) and digital asset businesses. Modelled on laws already in place for insurance and investment funds in Bermuda, the Companies and Limited Liability Company (Initial Coin Offering) Act 2018 and the Digital Asset Business Act 2018 (DABA) — together with the more recently introduced Digital Asset Issuance Act 2020 — have been developed to attract quality start-up businesses.

INTERNATIONAL BUSINESS IN BERMUDA Bermuda’s growth has been propelled by its cultivation and dominance of the global insurance and re-insurance market. The Bermuda reinsurance market is comprised of over 1,200 insurers, holding total assets in excess of $800bn. Gross premiums written by the Bermuda market in 2019 totaled some $150bn. When it comes to re-insurance, Bermuda is top of the class. The island plays an essential role in the global risk-transfer industry. • Bermuda is the world’s biggest captive insurance domicile • It is the world’s single most important property and catastrophe (P&C) insurance market • It is the global leader in the burgeoning Insurance-Linked Securities (ILS) market • It enjoys full equivalency with the EU Solvency II regime for EU insurers, and is also one of only three jurisdictions to be granted Reciprocal Status by the National Association of Insurance Commissioners (NAIC) in the US.

The island is now also rapidly evolving into a global leader in emerging technology sectors, including fintech and insurtech.

Last summer, Bermuda’s proactive approach in this area caught the attention of the US Securities & Exchange Commission (SEC). SEC commissioner Hester Peirce commented that “Bermuda is one of the only jurisdictions to address the (digital) custody question in detail." INSURTECH DEVELOPMENTS Recent amendments to insurance legislation have paved the way for the island’s independent financial regulator, the Bermuda Monetary Authority (BMA), to create two innovation initiatives: an insurance regulatory sandbox and an innovation hub. The purpose here is to facilitate and promote the development of technological innovation in the insurance sector.

The Bermuda market also has a proud track record of claims management: it has paid out more than $200bn to settle US insured losses over the past two decades.

The regulatory sandbox creates a live environment where new technologies can be tested by a licensed insurer or insurance intermediary to a limited number of clients in a controlled way.

While Bermuda’s re-insurance market is the jewel in the island’s crown, the business ecosystem is highly diversified. The island has long been a premier jurisdiction for investment

The innovation hub is open to other industry participants who want to receive regulatory guidance on standards and expectations related to new insurance technologies; it can be used

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by companies that ultimately intend to apply to gain access to the regulatory sandbox once their concept is sufficiently developed. Participation has several benefits, one of the most valuable being the insight provided by the BMA from the outset. It provides real-time feedback on regulatory compliance, which ultimately facilitates speed to market for these tech developers. GLOBAL COMPLIANCE LEADER With regulatory scrutiny on the rise across the world, the Bermuda Government, the BMA, and the Registrar of Companies (ROC) work hard to ensure the country remains at the forefront of regulatory and legislative developments. In January and February 2020, there have already been two stand-out achievements. In January, Bermuda was recognised as a global leader in the fight against financial crime by the Caribbean Financial Action Task Force’s (CFATF) mutual evaluation report (MER), which was subject to stringent review prior to approval by the global standards setting body, the Financial Action Task Force (FATF). Of the approximately 100 MERs published by the FATF up to January 31, 2020, Bermuda ranks first overall against the technical compliance requirements, and is one of only two jurisdictions (the other being the UK) with an assessed high level of effectiveness in relation to its risk assessment and domestic coordination mechanisms. In February, Bermuda was placed on the EU’s white list of fully co-operative tax jurisdictions after implementing legislation to address EU requirements around economic substance, specifically in the area of collective investment funds. These developments represent no small feat. They serve not only to reinforce the island’s globally respected reputation, but also continue to give Bermuda a competitive edge over other jurisdictions. BUSINESS DEVELOPMENT Helping to support established sectors and develop emerging industries is the Bermuda Business Development Agency (BDA), an independent public-private unit established in 2013. The agency serves to safeguard and enhance Bermuda’s world-leading business platform. It also offers a concierge service that acts as a single point of contact for new business, streamlining everything from networking with industry leaders to immigration applications and purchasing real estate. The BDA directly connects prospective investors and international businesses with its network of contacts in industry, the government and the regulators, as well as professional service providers. i 175

> Reimaging Leadership Post COVID-19:

Dreaming Health, Social and Planetary Equity Into Being By Éliane Ubalijoro and Christian Novak

To achieve a limitless mindset-based leadership, a leader not only needs to be a visionary, a good strategist, focused on executing and delivering results, possess diverse experience and background, and have a reasonable level of technical knowledge, but s/he also needs to possess key personal qualities. An effective leader is constantly and conscientiously acting with high standards of ethics, care, kindness, consideration, and empathy.

o navigate the current pandemic, we need leadership that supports sciencebased decision making and leverages the best in all of us. This requires fostering trust and care and appropriate governance. In environments with generalised flawed leadership, lacking appropriate oversight and "checks and balances," employees and populations are limited in the actions they can take, most of which are ineffectual. Jacinda Ardern has proven to be an effective leader, operating in a country with solid governance. With New Zealand declaring a current win against the virus on April 25, 2020, the country is set to start lifting restrictions on movement. Ardern has been effective at communicating with her constituents to ensure predictability and understanding, while never underestimating the threat or the need to sooth societal anxieties. Empathetically concerned with children's capacity to cope with the crisis, she announced that the Easter Bunny and the Tooth Fairy are considered essential workers. At the same time, she has ensured that effective science testing and monitoring COVID-19 has been driven by fact-based decision making. Her government's effective measures to curtail the contagious virus have resulted in minimising the numbers of deaths as well as the stress to the healthcare system. New Zealand has leveraged all data using a systems approach to contain the risks related to the pandemic. Regarding governance, New Zealand has historically had one of the lowest levels of corruption in the world. The 2019 Corruption Perceptions Index ranks the country first out of 180 countries, a placing it also held for seven consecutive years from 2007-2013. What is needed today is for all leaders to reimage how to value and promote health equity in our policies, eliminate environmental factors that promote zoonoses (diseases jumping from wild animals to human hosts), and design economies that do not ask us to reopen businesses while sacrificing the health of the most vulnerable. 176

"The greatest threat to positive societal reset is not the challenges of the present but a stagnant mindset of impossibility; and our perceived limits of what is possible, a major stumbling block in attempting a societal reset, need to be confronted." Tolu Oni1 Professor Tolu Oni (2020) asks the following questions in her recent article on COVID-19 induced re-imagination: • What if contribution to health became the primary performance indicator of urban infrastructure development? • What if incentives such as tax breaks were aligned with disease burden attributable to manufacturing, transport and trade? • What if a surge of impact investment deployed post-pandemic prioritised health goals over short term returns? (Tolu Oni, 2020) Oni (2020) goes on to discuss the need to face the paradoxes of conflicting paradigms of economy, ecology, and health. How do we privilege systems that consider health and the environment at the same level as the economy? If we are to successfully rethink our economies, and our educational, and environmental policies for an interconnected world where planetary health is important, we need to value natural capital and all the benefits we get from nature. We need to ensure that the financial costs and rewards related to caring for humanity are linked to our interdependence with all life forms on earth, not divided by borders and differing GDPs that viruses mock. We need to find a way to solve the practical challenges we face today while imagining a tomorrow that is not dualistic CFI.co | Capital Finance International

but embraces ecology, health, and economy in a oneness we cannot yet imagine. WHY ETHICS, CARE, AND KINDNESS ARE CRUCIAL FOR ACHIEVING EFFECTIVE LEADERSHIP Effective leadership for humanity needs to factor in how kind we are to the planet. To change how we relate to the planet, we need to change our priorities. We need to change whose interests we put first. In this new world order, shareholders do not come first, clients do not come first, playing politics does not come first, the personal desires and intentions of high-ranking public servants, senior managers, board members or shareholders also do not come first. All stakeholders come first. These stakeholders include all the people who are affected by how our institutions work, such as employees who work in a committed and productive manner towards defined objectives and endorse effective "good person" leaders. We also have to take into consideration how our actions impact the planet, such as how we affect its capacity to regenerate resources essential to all life, how we promote clean air, keep our waterways free of plastics that are killing biodiversity, maintain soils rich in friendly microbial life that promote the flourishing of our food systems, and work with plant root systems to prevent mudslides and flooding. Only leaders that possess both "hard" and "soft" qualities can embrace the needed limitless mindset to determine the most appropriate objectives and strategies, and guide individuals towards delivering successfully the objectives, satisfying the expectations of all the stakeholders and the needs of populations. In the current pandemic health crisis, which has affected the lives of everyone everywhere, the leaders that present acts of consideration and empathy are the most highly appreciated by employees, clients, and populations, positively affecting their performance, commitment, and satisfaction. The public celebration of such leaders' actions, and the degree of disappointment toward self-serving actions taken by other leaders, are of a magnitude that leads to the following question:

Summer 2020 Issue

"It is not a crisis of the planet. It is not a crisis of the environment. It is a crisis of humanity. The planet will be there after we are gone, but we won't be there any 2 more to see it" If we do not change how we relate to the planet WHY ARE MOST LEADERS NOT EFFECTIVE "GOOD PERSON" LEADERS? In both the private sector and in the public sector, the hiring or appointment process of leaders is flawed overall. In addition, the governance that applies to the oversight of the leaders' actions is also generally defective. The recruitment and selection process of leaders rarely contemplates the assessment and consideration of the candidates' personal qualities that are crucial for effective leadership. Furthermore, in many cases the preferred candidates are actually those that are insensitive, unethical, and/or insecure, many of which feel free to take actions for personal benefits, including favors from others with power. How is this possible? The answer is simply that in such cases the hiring or appointment process and the overall governance are also led by defective leaders that lack personal qualities (and normally also the necessary experience and knowledge). WHAT CAN BE DONE? In his 2019 book, Trailblazer: The Power of Business as the Greatest Platform for Change, Marc Beniof, CEO of Salesforce, states: "The tough times are when values and culture matter most." During this crisis, Salesforces and its Ohana – its deep-seated support system – has demonstrated this belief by caring for the homeless and working hard to increase healthcare system's access to PPE. What we need today are more leaders that not only focus on strategy and profit but genuinely live and scale values and cultures that bring health, the environment, and the planet to the center of all they do. The planet urgently needs all leaders to become values centered. We need leaders focused on sustainability of natural resources and care for people. We therefore encourage organisations and governments to identify what are the most important aspirational ethical shared values of their stakeholders and work to embed these in all their daily activities. We appeal to all institutions to consistently apply these to measure character not just competence. These values need to become foundational to all hiring, appointment, development, compensation, and oversight. With this process, we will consciously and dependably nurture leadership for Good and promote leaders that empower over those that hoard power. Only then will we be able to heal ourselves and the wounding of Mother Nature. i CFI.co | Capital Finance International

1 Tolu Oni (2020). Coronavirus (COVID-19)induced re-imagination: 7 things we knew, but "could do nothing about"…until we could…and did [link online] 2 Andre Hoffmann (2017). Quote from Introducing the Hoffmann Centre for Sustainable Resource Economy [link online]

This work was originally published in “Leadership for the Greater Good: Reflections on the 2020 Pandemic,” a blog published by the International Leadership Association (www.ila-net.org). ABOUT THE AUTHORS Éliane Ubalijoro PhD is the Deputy Executive Director for Programs at Global Open Data in Agriculture and Nutrition (GODAN). She is a fellow of the African Academy of Sciences. She is a member of Rwanda's Presidential Advisory Council and National Council for Science and Technology. Eliane has been an advisor for six cohorts of McGill's International Master's in Health Leadership. She is on the Board of the International Leadership Association.

Christian Novak is a Professor of Practice at McGill University - Institute for the Study of International Development (ISID), where his work focuses on development financing. Christian is also Managing Partner of FMA - Frontier Markets Advisors, a Canadian firm that provides advisory services to organisations involved in development financing and impact investing. His previous experience includes senior leadership roles in investment banks and in a regional development finance institution.

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> Harvard Business School Impact-Weighted Accounts

Accounting as a Force for Humility and Prosperity

By Robert Zochowski

Amid the immeasurable human tragedy and losses from the COVID-19 pandemic, there are innumerable lessons to be learned.

hile it may seem callous to derive such lessons from the disaster so early, finding meaning has been added as a sixth critical step in the grieving process. Thus, I shall propose two lessons for developed economies and how we might act on those lessons using a new measure of accounting.

The first lesson is a reassessment of humanity’s pre-eminence relative to the natural world. Over the course of 20th century, we effectively tamed infectious disease with the discovery of antibiotics and vaccines which resulted in huge decreases in infant and child morality and increases in life expectancy. We invented flight, put a man on the moon, and built the means of communicating instantaneously with all corners of the world. This is not to disregard the devastating effect of HIV and AIDS globally, however, even there human ingenuity produced medications that transformed it from an acute fatal disease into a chronic managed long-term disease. Even amid expert warnings about rising antibiotic resistance, climate change, pollution, and potential pandemics, there was always a confidence in the power of human ingenuity to come up with solutions for all of these challenges. Nature, it seemed, had been conquered. The COVID pandemic has caused a dramatic reckoning with that thinking. In less than four months, an unheard of disease has spread all around the world, effectively halted huge segments of our economy, placed billions under lock-down, sickened millions, and killed hundreds of thousands. No facet of our prior life is untouched. Across developed countries, panicked shoppers watched as staples like toilet paper and flour were emptied from shelves for weeks and powerful businesses were forced to shutter entire operating segments. Humanity is now left with a profoundly greater understanding for the fragility of our economies, our livelihoods, our health, and way of life. We have learned how dismissals of threats that seem disconnected from our lives, such as a disease emerging on another continent, can 178

"Instead of viewing labour as expendable and an expense and taxation as something to be minimised or avoided, this pandemic exposes the critical role that workers and the government play in societal stability." have devastating consequences. The decades of warnings of climate scientists about the devastating effects presented by climate change are now more salient; perhaps now we will begin to seriously consider the direct impacts that we are having on our natural world and listen to the experts instead of treating our environment as a great commons to be exploited. One of the biggest challenges to enacting climate action is that the environmental damage and impacts on human health from climate change are not intuitively understood by business leaders and investors. Therefore, a system is needed to effectively communicate the complexity of language and measurement of climate change issues to the business community. That is the power of impact-weighted accounts, which seek to convert organisational impacts into monetary terms. In this way, the negative externalities of corporations or investors today are translated from an esoteric measure into a real monetary cost that is being imposed on others. Further, these impacts can be compared between organisations and the degree of the “free meal” enjoyed by the actors and true cost of production becomes apparent. In this way, armed with the newfound knowledge of our own fragility, we may foster a greater respect for the natural world. The second lesson is on interdependence within society. Critiques of late capitalism have remarked at the unequal accrual of benefits to owners of capital versus labor leading to starkly bi-furcating inequality and standards of living among the lower and upper classes. American capitalism, in particular, has been deemed particularly ruthless and cruel given its lack of a social safety net CFI.co | Capital Finance International

and guarantee of healthcare amid historically unprecedented economic wealth. Indeed, it is not that these are unaffordable programmes; rather, as a society, we do not care to solve these challenges given the bias toward individualism and myth of the self-made person. In this paradigm, those who are wealthy are revered as the smartest or most talented and, implicitly, the poor are so through their own fault for not taking advantage of the opportunities available. This trope of the lazy poor underpins the debate about expansion of social programs: if the successful worked for theirs, why should they give up any to help others? Little acknowledgement is given to the innumerable idiosyncratic factors that contribute to success including educational and economic opportunities, changing demographics, globalisation, and luck. This pandemic has laid bare the fallacy of this belief system. Seemingly overnight truckers, grocery store, delivery, and other front line and supply chain workers, many of whom are paid at or below the living wage, became hailed as heroes and essential. The true systemic interdependencies and benefits that accrue to those at the top of society became starkly clear. When it comes down to it, rich or poor, we all need to eat and few grow enough of their own food to survive on their own for long. Everyone benefits from a stable society and robust civic institutions that promote strong public health and educational systems which guarantee an ample supply of talented labor, functioning courts and laws that ensure the enforceability of contracts, and roads and bridges which reduce the cost of logistics. Instead of viewing labour as expendable and an expense and taxation as something to be minimised or avoided, this pandemic exposes the critical role that workers and the government play in societal stability. Here too, impactweighted accounts have the potential to provide transparency. In the future, it will be possible to quantify in monetary terms the amount excess value

Summer 2020 Issue

extracted from workers by paying below a living wage, not providing benefits, or the underinvestment in a business’s licence to operate by underpayment of tax. This lesson was abundantly clear to cruise operators who were left out of two US stimulus packages because they domiciled for tax and labour avoidance in offshore jurisdictions, resulting in paltry tax payments on billions in revenue. The dialogue around accumulation of wealth and responsibility to pay a just share of that back to society could be profoundly changed. Investors would receive an impact-weighted performance report from investment managers which will show not only their financial returns, but the degree to which those returns added to, or were at the expence of the environment, workers, the government, or society. The result will be clear illustration of the extent to which decisions and investments are extractive of and dependent on others and with it the utter disproval of the myth of individualism. i ABOUT THE AUTHOR Robert Zochowski is the Program Director and Senior Researcher for The Impact Weighted Accounts Project, the Social Impact Collaboratory, and the Project on Impact Investments at Harvard Business School. Previously, Rob was a Vice President at Goldman Sachs where he had roles in Investment Product Innovation, Strategy & Development, Alternative Investment Strategies, and Private Wealth Management. Rob has consulted with the National MS Society and the World Wildlife Fund and was a 2019 Three Cairns Climate Fellow focused on mitigating the environmental effects of charcoal use in Mozambique. Rob received his MBA from Columbia Business School in the Executive Program where he concentrated on Social Enterprise and Impact Investing, graduating Deans Honors with Distinction (top 10%). He was featured in Poets and Quants annual 100 Best & Brightest Executive MBAs list. Rob is the 2019 recipient of the Carson Family Changemaker Award which recognises commitment to the field of social enterprise. Rob earned his Bachelor’s Degree in Economics from Georgetown University where he graduated Magna Cum Laude.

Harvard Business School

Author: Robert Zochowski

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> Asia Pacific

Japan Opens the Money Spigot Once upon a time, Japan was thought to pose a threat to the economic hegemony of the industrialised countries of the West.

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urrent US criticism of Chinese trade practices and currency manipulation echo the acerbic disputes between Washington and Tokyo of the 1980s and 1990s. At the time, Japan’s outsized current-account surplus caused much indignation in the US and Europe. The overseas expansion of the country’s large corporations — backed by the productivity of their workers and a domestic market all but closed to foreign competition — raised serious concerns. It ultimately led to negotiations that forced Japan into a series of concessions which in due course re-established a trade equilibrium. Thanks to its purchases of overseas assets, the country managed to sustain a consistent and robust surplus on its current account, resulting in a net international investment position (NIIP) of an estimated $2.8tn — by far the largest in the world. Japan’s remarkable NIIP helps explain why its public debt, bordering 230 percent of GDP, is not considered problematic. The corona pandemic has prompted the Bank of Japan to significantly expand the monetary stimulus measures in place while the government unveiled fiscal support initiatives worth in excess of $1tn. The total of the economic support packages announced now amounts to a staggering $2.2tn — some 40 percent of GDP. This has given a new impetus and dimension to “Abenomics”, the three-pronged economic policy introduced by Prime Minister Shinzo Abe in 2013 to jolt the country out of economic lethargy and the liquidity trap. The third vector, structural reform, has been suspended for the duration. Though it managed to contain the viral outbreak without imposing a general lockdown, the Japanese economy — the world’s third-largest — has taken a severe hit. GDP is expected to shrink by up to 22 percent in the second quarter for an overall decline of five percent for 2020, as forecast by the International Monetary Fund. Japan faces a unique set of challenges with an economy that has been in suspended animation for the better part of two decades. Just as the curse of stagflation seemed to have been lifted, the pandemic struck, with devastating consequences for the country’s exports. However, domestic business activity has now almost returned to pre-corona levels with Google’s Covid-19 Community Mobility Report showing the movement of people in big cities at around 80 percent of levels registered in January and February. Already in the second half of May, consumer spending increased sharply as the state of emergency was lifted in 35 of the country’s 47 prefectures. Both department stores and izakaya, the pubs visited after-hours by office workers, registered strong demand. Government accounts are another story altogether. Abe had two extra budgets approved

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"MMT economists argue that with little to no inflation, central banks in most major countries should inject fresh cash into sluggish economies. In fact, long before Milton Friedman unleashed his monetary theories, and his Chicago Boy disciples, most central banks were charged not with limiting inflation, but with ensuring near-full employment." to deal with the pandemic. This derailed the stated goal of turning the fiscal deficit into a surplus by 2025. Finance Minister Taro Aso called his country’s fiscal situation “extremely severe”, but insisted that the original timeline to end deficit spending remains in place. However, officials at the ministry said that a primary fiscal surplus in five years’ time is, “realistically speaking”, unattainable. Market watchers fear that the huge extra outlays will still not be enough to prevent a return of deflation, possibly prompting the Bank of Japan to add yet more monetary stimuli. Analysts expect core consumer prices, which exclude volatile fresh food but include energy, to fall by 0.5 percent during the current fiscal year which ends in March 2021. For the following year, a modest 0.3 percent rise is being forecast. In a sense, Japan struggles with an economic situation and outlook not dissimilar from the one faced by Europe. There too, years of quantitative easing have failed to spur inflation to any noticeable degree. The spectre of deflation lurks in the shadows even as central bank money spigots flood economies with trillions to stimulate demand. Neither the Bank of Japan nor the European Central Bank (ECB) have been unable to reach their two percent inflation target, and they are unlikely to succeed any time soon. By now the Bank of Japan’s balance sheet has ballooned to $6.2tn. The ECB’s consolidated balance sheet stands at about $5.2tn. Economists expect the Japanese economy to rebound during the second semester, but not by enough to make up for lost ground. The case of Japan, soon to be mirrored in Europe, seems to prove the central tenet of Modern Monetary Theory (MMT), which holds that deficits and money supply do not really matter as long as an economy has not deployed all available labour and material resources. Inflation will only appear after organic growth has exhausted supplies. Further expansion would cause excess demand and lead to rising prices or, conversely, a reduction of buying power. MMT economists argue that with little to no inflation, central banks in most major countries should inject fresh cash into sluggish economies. In fact, long before Milton Friedman unleashed his monetary theories, and his Chicago Boy CFI.co | Capital Finance International

disciples, most central banks were charged not with limiting inflation, but with ensuring nearfull employment. MMT challenges conventional beliefs about the way states interact with legal tender. Most of those beliefs stem from the gold standard era — now long gone. Economists point out that under today’s fiat currency system, used by almost all sovereign countries, a government can essentially issue as much money as it needs. As the sole issuer of currency, the state cannot go broke. In the MMT textbook, public debt merely represents money injected into the economy and not yet taxed out of it. MMT advocates consider Japan a pioneer — and a shining example. The country’s central bank has not stopped jacking up the narrow money supply for close to 20 years. It has done so to keep unemployment levels down and ensure demand stability. MMT proponents do not advocate spending for spending’s sake, but for mechanisms that guarantee jobs and income. Modern monetary theory seeks to fight economic downturns with job creation. Of course, in the real world, issuers of fiat currency enjoy monetary freedom only to the extent that they possess actual and meaningful seigniorage — the ability to tax within their domain. This explains why countries such as Zimbabwe or Venezuela are unable to print money without almost immediately sparking inflation, leading to hyperinflation or a complete loss of confidence in currency as a means of exchange (and not as sometimes thought, a very high rate of inflation). With untold trillions in overseas assets and a healthy current account surplus, Japan has all the fundamentals in place to leave the pandemic behind and plod merrily along, albeit largely unremarkably. Stagflation is likely to continue to be a defining characteristic of the country´s economy, as it may well become a fixture in Europe. In the years before corona, growth throughout the EU had been just about as anaemic as in Japan. Though the pandemic changed everything, it remains highly unlikely that these mature economies will rebound with a vengeance. They will come back, but they will do so slowly, and carefully. i

Summer 2020 Issue

> Review (TV Series): Dirty Money

Looking for Distraction? Lower Yourself Into the Stream Review by Liam Walsh

ideo streaming services are having their moment in the sun – in direct proportion to the burgeoning number of viewers denied access to the shiny thing in the sky courtesy of lockdown.

With an incarcerated population increasingly drawn to laptop screens for relief, Netflix, Amazon Prime, Disney+, Hulu, and the surprisingly expensive YouTube TV have pushed some of their better quality through more swiftly than they would perhaps have liked. While Hollywood blockbusters, series, specials and international TV shows draw most of the attention, documentaries are getting a look-in as viewers riffle greedily through content in search of distraction. Even the free-to-view version of YouTube is upping its game with recent offerings, including a general release of an appalling, knife-in-theback surprise from one-time people’s hero Michael Moore. His Planet of the Humans is a jumbled, disconnected, inconsistent and outdated diatribe against all that is right and just in the world of sustainability and alternative energy, and it has rightly knocked from beneath him whatever public pillar he was counting on to support his amorphous bulk. But enough about Moore. Netflix – no favouratism here, simply the streaming service that this reviewer subscribes to – is providing more interesting fodder on the topics of environment, business and finance. While much of the content is not new, the messages and issues are surprisingly perennial, and the delivery often artful and gripping. Season Two of Dirty Money is a case in point. The Netflix original TV series covers corporate corruption, securities fraud, and creative accounting in all their shameful glory. The first batch of hour-long episodes began streaming in 2018, and the show's executive producers include Oscar-winning filmmaker Alex Gibney. Each episode focuses on an example of corporate corruption, with interviews with key players. The second season premiered this March, and while there is a sense of elastic stretching – ‘twas ever thus with series that have no fixed end-point – it provides an entertaining watch for those who feel they should be imbibing something more intellectually stimulating than Walking Dead, 72 Dangerous Animals: Latin America, or the

LBGTQ-friendly remake of the early ‘80s soap Dynasty. Each Dirty Money episode showcases the vision of a different director, tackling issues as disparate as the luxurious excesses of former Malaysian Prime Minister Najib Razak, a satisfying pot-shot at Trump-puppy Jared Kushner, the universal, ubiquitous and unpunished worlds of money laundering and illegal mining, the legislated abuse of America’s elderly, and the amoral use of toxic chemicals in modern manufacture. CFI.co | Capital Finance International

Good news and heartwarming viewing all round, then, but someone had to take a pin to the more noxious bubbles from the capitalist stew perking away unnoticed on the back-burner. While the content makes for often unpalatable fare, the ugly facts hung out to air are grimly fascinating for the barefaced bravado and heartlessness of the perpetrators. Accountability is the one thing shown to be most lacking, but the increased transparency afforded by this series should go some way to elevating public awareness of the many wrongs routinely committed in the pursuit of profit. i 183

> Royal Brunei:

A Royal Experience from the Abode of Peace, Gateway to a Magical Kingdom The Sultanate of Brunei is located in the green heart of Borneo and is known as The Abode of Peace, a place of tranquility, hospitality and embodies uniquely Bruneian values. oyal Brunei Airlines embodies the same values, in every flight and to every destination, a gateway to Borneo and beyond. It was established in 1974 as an independent corporation, wholly owned by the government of Brunei Darussalam. Its mission was to connect the nation to the world from its Bandar Seri Begawan hub.

The maiden flight of Royal Brunei Airlines took off, bound for Singapore, on May 14, 1975. Since then, the national flag carrier has grown in leaps and bounds, gathering awards and accolades and achieving a four-star airline ranking. Flying Royal Brunei (RB) is a long way from the dreaded economy class of many airlines. The full-service carrier offering affordable fares year-round, with free meals, baggage allowance and entertainment included. RB is constantly transforming to make sure it is well positioned for the future. A general rise in disposable income has opened up new opportunities for the company — and Brunei’s fast-growing tourism industry.

The Empire Brunei

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ROYAL BRUNEI FLEET The modern, fuel-efficient fleet features 787 Dreamliner and A320 Neo aircraft, all with in-flight entertainment. Traditional Bruneian warmth shines through with onboard care and hospitality for passengers. A one-stop service centre in Brunei International Airport provides travel-related services such as reservations, ticketing and booking of tour packages. An RB loyalty programme, Royal Skies, offers warm service, a personal touch and attractive rewards for frequent travelers. Membership is free and members are able to enjoy their rewards quickly, as redemption begins from just 5,000 air miles. Members may earn miles on every Royal Brunei Airlines' flight and put themselves in line for a host of benefits and privileges, including free flights and seat upgrades. Miles can also be awarded by Royal Skies partners. RB UPGRADES Passengers can upgrade to Business Class and experience top-notch features, services and entertainment. Those with eligible tickets can make a request for an upgrade. TRAVEL INSURANCE A sense of security for those boarding its aircraft is of utmost importance to Royal Brunei Airlines. Travel insurance can be purchased at the time of purchasing flights. The policy provides coverage for instances such as (but not limited to) emergency medical treatment, cancellation or shortening a trip, as well as coverage for the loss or delay of baggage.

EXTRA BAGGAGE ALLOWANCE RB allows passengers to “travel smart” — online, and at Royal Brunei's ticketing offices, up to four hours before departure. ROYAL BRUNEI HOLIDAYS ONLINE With a few clicks, RB's online guests can get their holiday products — flights, accommodation, tours and transport in Brunei and RB destinations — with instant confirmation, eliminating the hassle of ploughing through disparate websites. CEO CHAND HAS LEARNED THE ROPES, FROM GRADUATE TRAINEE TO TOP JOB Royal Brunei Airlines CEO Karam Chand has close to 30 years' experience in international and domestic airlines in full service, hybrid and low-cost models.

He was tasked with looking after the airline’s short-haul international business for a fleet of fourteen aircraft. Prior to joining RB, Karam Chand was the chief executive of Our Airline, the National Carrier for the Republic of Nauru, based in Brisbane and operating under an Australian Air Operators certificate. Chand is a fellow of the Institute of Travel & Tourism UK and Fellow of the Australian Institute of Management. He holds a Masters degree in Air Transport Management from Cranfield University, and has honed his skills with programmes at IATA, the Australian Institute of Management, Virgin Australia, and an executive programme in Strategy from Stanford University. i

He has expertise in corporate strategy, network and fleet planning, revenue management, airline operations and risk management. Before his appointment as chief executive in 2016, he held the role of chief commercial and planning officer at Royal Brunei. Chand started his career with Fiji Airways as a graduate trainee in 1988. He held roles in government affairs, scheduling, market planning and strategic planning, reporting to the CEO. He then joined Virgin Australia as a founding member in 2000, and has held various executive roles in the commercial division. His career at Virgin Australia culminated with the post of head of the Commercial-International division, a position he held from 2005 to 2009. CEO: Karam Chand

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> UBX:

Exponential Opportunities for Businesses and People Through Digital Transformation In 2018, two years after taking the bold step to digital transformation, Union Bank of the Philippines (UnionBank) spun off its fintech and corporate venture capital arm: UBX.

BX is predicated on a future where financial services are invisible, seamlessly embedded into the experiences and activities that truly matter to businesses and people. It leverages compelling ecosystems and data to explore new possibilities — making financial services more instinctive and accessible. The company continues to build and invest in open platforms, as well as in technologies that allow others to innovate, adding value whether they collaborate or compete. The impact of financial inclusion can unlock the potential of businesses and people. The first year of UBX has seen the commercial launch of four ventures, namely i2i, Sentro, Bux and SeekCap — with more than 60,000 clients on-board. The digital platforms of UBX have provided its clients much needed access to technology, and have created marketplaces that would otherwise have been impossible during the Covid pandemic. i2i was created to bring digital transformation to unbanked and remote communities. UBX has partnered with the Rural Bankers Association of the Philippines (RBAP) and has expanded to include thrift and savings banks, co-operatives and non-banking financial institutions such as remittance centres to make digital fund transfers possible. President and CEO of UBX Philippines: John Januszczak

A mobile ATM service has also been made available for basic transactions such as cash withdrawal and balance inquiry. It is now recognised as the largest financial network in the Philippines. SeekCap was created to support the MSMEs (micro, small, and medium enterprises) that make up the majority of businesses in the Philippines. It is a unique digital platform that includes lenders such as Progressive Bank, UnionBank, EON SME Credit Card, and Esquire Financing Inc. SeekCap can offer companies legitimate sources of credit without the inconvenience of a traditional loan application. To support online vendors, UBX developed Bux and Sentro. Bux is an end-to-end payment 188

gateway for e-commerce that can be directly embedded onto the seller’s platform for a seamless transition from the product page. Sentro, on the other hand, is a straightforward online shop builder. It creates an instant e-commerce ready website for budding virtual entrepreneurs. Sentro protects both seller and buyer from fraudulent transactions, and can facilitate the logistics and delivery of products. In addition to Bux and Unionbank, other payment venues for Sentro transactions can be accessed through 7-11 branches or via Dragonpay. i2i, SeekCap, Bux and Sentro have furnished businesses and clients with the vital tools to ride CFI.co | Capital Finance International

out the coronavirus crisis. UBX has exceeded all expectations, and has been recognised by several industry awards. For UBX, financial inclusion means opening its doors to any company wanting to venture into the fintech area. QLab, a one-stop-shop for web, mobile, and platforms design and development, is UBX’s technology service consultancy provider. It co-creates solutions for businesses, powered by a team equipped with full-stack development capabilities and end-to-end and services. UBX will continue to have the first-mover advantage in the fintech industry by offering products and services that use innovative digital platforms and technologies. i

We bring the world to your doorstep

Afghanistan’s Best Corporate Governance CFI.co Awards 2020

Development of trade infrastructure in Afghanistan has been driving strong annual growth in international trade. The first air corridor to the country was inaugurated in June 2017, and the proliferation of these routes has opened up trade opportunities across Asia, Europe and the Gulf. In addition, the establishment of the Lapis Lazuli land-and-sea route in 2018 connects Afghanistan to the European and Balkan markets via the Caspian and Black Sea ports. The route has seen over 50,000 tonnes of shipments to and from Afghanistan in the first half of 2020. Afghanistan Export Data (Millions US$)

Thanks to our uncompromising adherence to the highest international standards of compliance, we are currently the only bank in Afghanistan that is able to offer to our clients the ability to receive and make international transfers to any counterparty in any country in the world including the USA, UAE, India, Pakistan, China, Russia, Turkey, the United Kingdom, and all locations in Europe, CIS, and Asia.

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Because of an unique array of direct correspondent bank relationships, AIB is able to process transfers faster and more efficiently than any other bank. This translates to savings and peace of mind for our customers – so that they can think less about banking and more about their businesses.

To learn more about our bank and services, please contact: joseph.carasso@aib.af

> Yelo:

Brighter Banking for the People and Business Community of Azerbaijan Known from ancient times as the Land of Fire, Azerbaijan is a country at the nexus of Asia and Europe, bounded by Caucasus Mountains from the north and Caspian Sea in the east.

zerbaijan is rapidly transforming from an oil producing country into a prominent oil and gas exporter, transportation corridor and a producer of fine and diverse agricultural goods. Massive investments in infrastructure and education have created attractive opportunities for developing various export-oriented industries. The fast-changing economic environment makes it vital for financial institutions to be flexible and ready for change. At the end of 2019, Nikoil Bank — one of the oldest banks in Azerbaijan — underwent a transformation and emerged with a new name and brand: Yelo. Its slogan is “brighter banking”, and Yelo Bank represents a refreshing break from the norm in the Azerbaijani banking market. The stylised spelling of the English word yellow and the brighter banking concept symbolise a vibrant, innovative approach to banking services. Yellow is also the main colour chosen for the new corporate identity of the bank. As a brand identity, Yelo is all about creating a visual world that feels as relatable as it does aspirational: approachability, appreciating the value of customers and speaking with them on a plane of mutual respect. Rebranding is more than just a change of name and corporate style. It involves deep transformation within the bank to build a new customer service model, a fresh corporate culture, boosted technological capacity and enhanced human capital. Also important in the rebranding process was to build the new brand’s tone of voice to mirror its core values: • Put customers first • Serve with heart • Find solutions • Keep it simple • Work with a smile. MISSION AND VISION Yelo Bank is committed to its mission to

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contribute to the success of communities through digital ecosystems. The vision is to help the people of Azerbaijan to achieve more by refreshing their banking experience. Customer expectations, the global trend of digitalisation and increasing competition by internet giants have put pressure on the industry. Yelo chooses to follow and ride that trend and put the bank in a leading position for digital and conventional banking services for the people and SMEs of Azerbaijan. KEY DRIVERS FOR SUCCESS People are the key driver of the business, and a determined and agile professional team, united around management, was the first pillar of the strategy implementation. Innovative technologies, carefully selected, adapted to business needs and developed to the point of excellence is the second. The creation of a best-in-class customer experience to ensure critical mass of demand for CFI.co | Capital Finance International

Summer 2020 Issue

the bank’s products — and the digital ecosystem — is the third pillar. Customer satisfaction feeds future self-propelling growth. With a 26-year presence in Azerbaijani market, the bank has a great growth potential in retail, micro and SME segments. Yelo offers a full range of financial services to individuals, households and businesses. It strives to make all products simpler to understand, easy to approach and use, at to comprise everything the client needs. This year, Yelo will introduce a new online banking service, internet banking for businesses and other innovative products. Brighter banking and new corporate style has started to appear in the revised design of Yelo branches, which offer a new customer service model. Yelo appreciates the time of its customers and a current need for social distancing. The new branch concept has service zones for different transactions to make the customer service easy, fast, secure and friendly.

The bright modern design, with personal messaging throughout each branch, is aimed at a relaxed, positive and enjoyable experience for customers. The bank is renovating its new head office, which will welcome the Yelo team by the end of this year. The main goal is to make the Yelo community happy and productive. Nikoloz Shurgaia, chairman of the board and CEO, said Yelo Bank is not just a new name, or a new colour. “It is a symbol of transformation, the work which has been going on for four years and which resulted in the bank’s move to a qualitatively higher level,” he said. “This became possible thanks to the dedication of the whole team. We are grateful to all members, and to the shareholders for their unwavering support.” Shurgaia emphasises the input of Marina Kulishova, chairman of the board, in the transformation process. “The importance of her insightful support and inspiration to us throughout the rebranding process cannot be overstated,” he said. CFI.co | Capital Finance International

He also expressed gratitude to the Winkreative agency which developed the rebranding concept. The London- and Zurich-based company has dynamism and an enviable track record working for some of the world’s most prominent brands. “They did a great job for Yelo Bank,” said Shurgaia. “The Wink team understood the spirit of the bank, the idea behind the changes, and how the bank should position itself. It has reflected these in the new brand and corporate identity.” The Yelo team is continuously transforming to provide the best possible service, inspired by the significance of the changes. “Brighter Banking is our new customer service model, built on the wholehearted contribution of each team member and a great teamwork,” said Shurgaia. “With our dedication, Yelo will be a symbol of a modern brand, a beloved choice of the people and businesses in Azerbaijan.” i 191

> Mumbai:

Striving, Thriving and Modern… yet Timeless Mumbai is a mix of temples, contradictions, tradition and modernity. Jason Agnew discovers the secrets of this enigmatic city.

ndia’s “City of Dreams” — once Bombay, now Mumbai, always amazing — is practically a living definition of extremes.

Millionaires (crorepatis) can leave their luxury apartments and get a shoe-shine for 12p – but a cup of espresso can cost you more than the taxi fare from the airport. The city has mushroomed in the seven decades during which it has become known as the business and entertainment capital of independent India. Its elegant Victorian centre, with stunning Gothic and art deco architecture, now shares space with rows of top-end high-rise buildings and sprawling shanty town slums that house the rural population which has flocked to the city. Some will make it, the rest will join the legions of dhobiwallahs (laundrymen and -women), streetfood vendors, or beggars. Mumbai moves at a furious pace. Crossing the road is not for the faint-hearted, the pavements are often occupied by various forms of commerce, but it is seldom overwhelming. Thronged thoroughfares give way to charming traffic-free lanes, narrow and lined with elegant balconied two-storey buildings and little wadi (hamlets), oases of serenity in the heart of the city. Here is a random selection of some of the places that make Mumbai a place like no other. MUSEUM: DR BHAU DAJI LAD (MUSEUM OF MUMBAI) The city´s oldest museum opened in 1872 as the V&A. It was renamed after the Mumbai physician and sheriff who raised most of the funds to open it, and showcases the cultural heritage and history of the city. It traces its evolution from a group of Koli fishing villages on seven swampy islands to the bustling megalopolis that it is today. Its High Victorian interior with tiled floor, Corinthian columns and gilded ceiling mouldings houses an impressive collection of 19th century fine and decorative arts, maps, clay models, photographs, clothing, and headwear. It all gives a fascinating perspective on the rampant growth and industrialisation of one of the world´s major urban centres.

Dr Babasaheb Ambedkar Rd. Station: Byculla. Open 10am to 6pm. Entrance 100 rupees (£1.20) 192

"Crossing the road is not for the fainthearted, the pavements are often occupied by various forms of commerce, but it is seldom overwhelming." MANI BHAVAN This elegant townhouse in Old Bombay is where Mahatma Gandhi stayed whenever he was in the city between 1917 and 1934. The lovingly curated exhibitions include the room where he slept and worked, complete with mattress and two spinning wheels. Gandhi, for whom spinning was so symbolic, learnt the craft here while developing his philosophy of satyagraha (Sanskrit: freedom through truth), often translated as non-violent protest. There is a photographic record of his life, press cuttings of important events – including his assassination on January 30, 1948 – 28-tableaux of clay figurines depicting his life, a collection of his letters to statesmen and a tribute from Einstein. On the terrace is a plaque marking the spot where he was arrested in his tent in 1932 after launching the Civil Disobedience campaign that ultimately led to Indian independence.

19 Laburnum Road. Station: Grant Road. Open 9:30am to 6pm. Voluntary donation appreciated. WALKING: GIRGAON CHOWPATTY AND MARINE DRIVE Five minutes from the Mani Bhavan house, Mumbai meets the Arabian Sea in a spectacular fashion. Marine Drive is a 3.6-kilometre-long, C-shaped avenue that runs parallel to Back Bay. Lined by art deco mansions, five-star hotels and office blocks, it is known as the “Queen´s necklace” as it resembles a string of pearls when lit up at night. CFI.co | Capital Finance International

Girgaon Chowpatty beach at the north end of the curve has been described as Mumbai´s public living room, where people from all over the city come to its wide expanse to escape the overwhelming claustrophobia of its streets. Mumbaikars of all walks of life come here to enjoy the carnival atmosphere, the street food (bhel puri, vada pav etc) or a pleasant evening stroll in the fresh seaside breeze. Children flying kites during the festival of Makar Sankranti (to the Sun God) in January or the Ganesh Chaturthi (to honour the elephantheaded god locally known as Ganpati) in September when throngs of devotees immerse their idols in the sea.

Station: Charni Road. SIGHTS: HAJI ALI DARGAH MOSQUE Dramatically located on an islet linked to the mainland by a 500-metre causeway, the mosque was constructed in 1431 of the same Makrana marble as the Taj Mahal to house the tomb of Ali Shah Bukhari. Legend has it that the extremely wealthy merchant had given up all his worldly goods and embarked on a pilgrimage to Mecca. He died on the trip and was buried at sea, but his body floated back to Mumbai, coming to rest upon some rocks. This is where his shine was built. Check the tides and take some smalldenomination notes to pay the person who looks after your shoes while you are inside. Back on the mainland, given the heat and pollution, you can refresh yourself at the Haji Ali Juice Bar with a fresh pomegranate (anar) juice or a delicious rose falooda lassi (yogurt drink). WHERE TO STAY: THE TAJ MAHAL PALACE HOTEL How many hotels top the list of tourist attractions in the world´s great metropoles? The Taj (as it is known by all) stands so imperiously on the Mumbai waterfront next to the Gateway of India that it is a landmark in its own right, and easily the most prestigious hotel in India. Boasting 560 rooms and 44 suites serviced by 1,600 staff and 35 butlers, 11 restaurants and bars, this is the home-from-home of presidents, film stars and royalty. Even if you don’t stay, have a drink at the Harbour Bar, with its spectacular views of the Gateway of India. Prices roughly equate with those in London. Rooms start from £130 in the adjacent Tower: suites start at £500.

Summer 2020 Issue

Mumbai, India: Queen's Necklace

WHERE TO EAT Mumbai is the city of a million hawkers and there is street food everywhere (with varying degrees of hygiene). One gem is Bademiya, just behind the Taj, which is open till 4am and does a great chicken tikka roll, served in a roti of sublime texture and topped with fried onion. They also serve delicious curries.

Bademiya, Tulloch Rd, Apollo Bunder, Colaba, £1.50 for a tikka roll. Open 5pm-4am. SAMRAT You should “go veggie” at least once in Mumbai and this self-proclaimed foodie paradise is a great place to start. Its website claims that “the food that we create is not only delicious and appetising, but is visually pleasing as well”; this is undoubtedly true, and its elegant airconditioned dining room and attentive waiters make this a splendidly old-fashioned experience. The Gujarati thali, or mixed plate, is the main draw, with three vegetable dishes, dal, unlimited pullao rice and roti, butterscotch milk and water, all for less than £4 for lunch or £5 for dinner.

Prem Court Building, Ground Floor, Jamshedji Tata Road, Churchgate. Open 12 noon to 11pm. GYMKHANA 91 The Gymkhana 91 owner once lived in Fulham, London, but came back to Mumbai to recreate the style of the traditional gymkhana – nothing to

do with horses; it was a gentlemen’s club – with neo-gothic style walls and cane-backed Raj-era chairs, but with a modern menu of Indian and Asian cuisine. This former textile mill offers lots of space and light, and there is a great terrace and a bar serving signature cocktails.

Raghuvanshi Mills, Lower Parel, Station: Lower Parel. Open 11:30am to 1:30 am. BAR: GEOFFREY’S This charming wood panelled English pub is situated on iconic Marine Drive and is a favourite of expats and upwardly mobile locals. Its international comfort food selection includes the highly recommended Focacccia chilli cheese toast – a twist on a Bombay irani café classic. Check out the excellent gin cocktail menu and the Gin Cooler, which is made with fresh watermelon juice and just a dash of elderflower.

Marine Plaza Hotel, 29 Marine Drive, Churchgate. Station: Churchgate. Open: 12:30pm to 1:30am. BAR: WOODSIDE INN A good range of Gateway craft beers, and during Happy Hour (4pm-8pm) you get two drinks for the price of one. Frequented by Indian businessmen knocking back single malts, ex-pats and (later in the evening) by the happening people of Colaba.

Indian Mercantile Mansion, Woodhouse Road, Colaba. CFI.co | Capital Finance International

ICE CREAM PARLOUR: BONO BOUTIQUE ICE CREAM You will be invited to, “Come and try our cheeky flavours”. Blue Cheese Honey works surprisingly well as does Dark Chocolate and Sea Salt. But Pondicherry Vanilla would suit the more conservative. Chef Alyssa Chesson obtained a diploma in Patisserie at Le Cordon Bleu in London and gives a nod to her time there with her Milk Chocolate Bacon.

Savia Building, Rebello Road, Bandstand, Bandra West. Open: 11am – 11pm. SHOPPING: FABINDIA This modern department store sells ethically sourced, traditional Indian silk and cotton clothing and homeware.

Jeroo Building, 137 Mahatma Gandhi Rd, Kala Ghoda. Open 10am to 8pm. EXCURSION: ELEPHANTA ISLAND An hour from the Gateway of India, the temple caves of Elephanta Island (Gharapuri) have UNESCO World Heritage status. Dedicated to the god Shiva, this complex of halls, pillars and shrines was carved out of the rock between 450 and 750 AD. Unique.

Ferries every 30 minutes from 9am to 3:30 pm; £2 return. Cave entrance fee: £5. i 193

> Andrés Velasco:

Preventing an Emerging-Market Meltdown

n his novel Chronicle of a Death Foretold, Gabriel García Márquez describes a tragedy that everyone anticipates but no one will stop. The same is true of the perilous plight of emerging markets today: the international community could prevent imminent macroeconomic disaster, but seemingly lacks the will to do so.

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For emerging and developing countries, COVID-19 represents five shocks, not one. To the initial health shock, add a sharp drop in commodity prices, a massive contraction in export volumes (the World Trade Organization expects global trade to decline by as much as one-third in 2020), loss of remittances, and unprecedented capital outflows in March. And although the latter were partly reversed CFI.co | Capital Finance International

in April and early May as a result of record bond issuance by emerging-market governments, this was less an indicator of stability than the equivalent of households drawing on their credit lines to have cash on hand during the coming storm. The upshot is that many emerging markets will soon experience deep recessions and massive

Summer 2020 Issue

fiscal packages totaling one-tenth of GDP or more – to strengthen health systems, pay furloughed workers’ wages, and support firms – were unthinkable a year ago; today, they are commonplace. Other countries need to do the same or more, but lack the money. The International Monetary Fund estimates that emerging markets will need $2.5 trillion in financing, which it calls “a lower-end estimate for which their own reserves and domestic resources would not be sufficient.” Where can the money come from? Only a subset of emerging markets retain access to capital markets, and no one can be sure for how long – especially if more countries run into debt-service trouble, as Argentina, Ecuador, Lebanon, the Maldives, Pakistan, Rwanda, and Zambia already have. Nor can emerging markets engage in central-bank financing on any substantial scale: their currencies would risk depreciating even further, destabilizing the domestic economy. Faced with this new reality, the international community has reached for an old tool: debt forbearance. The G20 has agreed to grant a moratorium on official bilateral debt-service payments for the world’s 76 poorest economies, while the Institute of International Finance, the global financial-industry body, has recommended that private creditors voluntarily grant debt relief to the same group of countries. Several independent initiatives have proposed a temporary debt standstill for all emerging and developing countries. To be sure, poor countries should not be servicing debt owed to rich creditors during a health emergency. But debt forbearance is insufficient to prevent a developing-world depression, and could even misfire. For starters, some of the debt-relief proposals involve a coordinated suspension of interest payments, but leave the deferral of amortizations to the goodwill of individual creditors. Under such a scheme, a country that has $100 of debt coming due, with an interest rate of 5%, could see its debt-service burden fall only from $105 to $100.

job losses, which risk pushing tens of millions of people back into poverty. The debt shock of the early 1980s caused a “lost decade” for Latin America. COVID-19 could cause a lost decade for the developing world. Advanced economies have been throwing unprecedented sums of money at the pandemic:

What emerging markets need is new funding, not just help with old debts. To mitigate the pandemic’s economic fallout, these countries’ governments will need to run deficits, as will private-sector firms that must keep paying wages while sales and productivity are sharply down. So, unless households save a lot (which is highly unlikely), an emerging market that adopts strong anti-virus policies will have an external payments gap that must be financed with fresh hardcurrency resources. The IMF can lend at most $1 trillion, or only 40% of what the Fund itself estimates the developing world needs. The multilateral development banks have useful advice to offer but limited firepower. CFI.co | Capital Finance International

And the US Federal Reserve has entered into swap agreements with only four emerging markets: South Korea, Singapore, Brazil, and Mexico. The Fed’s repo lines are in principle available to all, but they require US Treasuries as collateral, and thus have been used sparingly. That leaves large emerging markets like Turkey, South Africa, Nigeria, and Indonesia, several Latin American countries, and many smaller economies in Africa and Asia with no secure access to dollar liquidity in an emergency. That is the bad news. The good news is that the world’s major central banks are creating unprecedented volumes of hard-currency liquidity that could be channeled to emerging markets. But, because leading central banks cannot realistically be expected to take the risks of dozens of emerging markets onto their balance sheets, an intermediary is needed. One option would be for the IMF to borrow and in turn lend the funds to emerging and developing countries, as the G20 Eminent Persons Group on Global Financial Governance (of which I was a member) proposed two years ago. Alternatively, the Fund, along with the World Bank and the regional development banks, could establish a special-purpose vehicle (SPV) that would issue bonds to be purchased by leading central banks – as former Colombian finance minister Mauricio Cárdenas recently suggested. This alternative is more expeditious and politically feasible than the apparently defunct plan for a new issue of IMF Special Drawing Rights. Whereas the central banks themselves could decide whether to purchase the SPV-issued bonds, an SDR issue larger than $600 billion would require US congressional approval. Moreover, SDRs would be allocated in proportion to each country’s IMF quota, thus necessitating a time-consuming process in which larger and richer economies donated their SDRs to needy countries. Major central banks have strong non-altruistic reasons to collaborate in such a scheme. Not only must all countries be safe for any to be safe, but massive economic contagion is also likely. Emerging markets today account for more than two-fifths of global GDP measured at market exchange rates, and nearly three-fifths after adjusting for differences in purchasing power. If these economies crash, then rich-country citizens will also be the victims of an economic catastrophe long foretold and clearly avoidable. i ABOUT THE AUTHOR Andrés Velasco, a former presidential candidate and finance minister of Chile, is Dean of the School of Public Policy at the London School of Economics and Political Science. He is the author of numerous books and papers on international economics and development, and has served on the faculty at Harvard, Columbia, and New York Universities. 195

> Asian Development Bank:

Urban Transport Can Rebuild to Create a Greener Future By Bambang Susantono

COVID-19 has resulted in drastic changes in travel behaviour. Society must now address how to better manage the mobility of people and goods for the postpandemic period.

he coronavirus pandemic has highlighted the interconnected nature of life in the 21st century, with the virus reaching nearly all corners of the globe in a matter of weeks.

Drastic behavioural and lifestyle changes have been adopted on a global scale almost overnight, shifting the way we work and live, redefining our transportation needs, and posing a new and complex array of challenges. Transport was perceived as a major risk in the spread of the virus. Now it will have to support different needs of the population throughout the various stages of recovery, while containing the risk of a resurgence of the disease. This raises a fundamental question: how will society manage the mobility of people and goods during the pandemic recovery and postpandemic period? A NEW LIFE DURING LOCKDOWN Mobility restrictions in response to COVID-19 have resulted in drastic changes. Lockdowns across the globe have forced millions of workers to work from home, and schools to shift to e-learning. With the closure of bricks and mortar shops and restaurants during the containment period, consumers flocked to online shopping and food delivery, even in developing countries where the penetration rate for online services was traditionally low. Before the pandemic, transport contributed to about 23 percent of global carbon emissions. Road traffic and aviation are the main contributors of emissions from transport, respectively accounting for 72 percent and 11 percent of the transport sector greenhouse gas emissions. Although drastic lockdown measures around the world have brought world economies to their knees, satellites have recorded compelling data on how the concentrations of carbon dioxide and air pollutants have fallen drastically, bringing clear blue skies to many cities. 196

"Beijing’s rapid resurgence of traffic holds an important lesson — there is only a short window of opportunity for cities to implement lowcarbon alternatives." In Manila, where my organisation, the Asian Development Bank, is headquartered, traffic plunged 80 percent overnight after the lockdown was declared on 15 March. Elsewhere, in New York City, one of the US cities worst affected by the virus, a 35 percent reduction in traffic levels was reported in March. This resulted in about 50 percent fall in carbon monoxide emissions, which come primarily from traffic, and a corresponding five to 10 percent drop in CO2 levels. Similar trends have been observed in northern Italy, Spain, and the UK. Public transport is a more efficient, affordable — and, in many cases, green — way to travel. But under pandemic conditions, there are naturally concerns about physical proximity while riding public transport. As the lockdown deepened across the People’s Republic of China, demand on buses and subways fell by about half in March–April 2020 compared to the same period in 2019, while walking and cycling showed a 25 percent increase. CHALLENGES OF REOPENING Initial trends in cities that have reopened show drops in public transport use, although this varies depending on available mobility options. As the experience of developing Asia shows, the poor suffer most as they more often lack access to transport. If walking or cycling are not options, then their choice is to continue using public transport or not to travel. In the case of Beijing, analyses suggest that traffic levels have increased steadily since initial dips in February 2020, while public transport use has CFI.co | Capital Finance International

dropped by half. By early April 2020, congestion exceeded the same period in 2019. This trend is a cause for concern since if it continues and is seen on a wider scale, it could set back decades of effort in promoting sustainable development and more efficient urban mobility systems. On the positive side, Beijing has seen a 25 percent increase in cycling, while cycle-sharing schemes have shown a 33 percent increase. Beijing’s rapid resurgence of traffic holds an important lesson — there is only a short window of opportunity for cities to implement low-carbon alternatives that lock-in the improved air quality conditions that were gained during the movement restrictions at the peak of the pandemic. There is no doubt that some rebound to old ways of working, learning and leisure will be seen after the containment period. However, the postpandemic era affords the opportunity to maintain and develop new practices. RESTORING PUBLIC CONFIDENCE The pandemic has also highlighted the need for more robust transport system that is green, and resilient to future disasters. Technological advances, big data, AI, digitalisation, automation, and renewables and electric power can potentially offer fresh innovations to tackle changing needs, giving rise to smarter transportation. Two key challenges lie ahead. The first is how to address capacity on public transport to maintain safe distancing requirements. The second is how best to regain public confidence in public transport, especially given that the poor in developing countries often do not have the option of switching to private transport. More effort is needed to reassure public transport users of safety. The confidence of passengers on public transport should be restored through protective measures such as cleaning, thermal scanning, tracking and face covering. Further study to explore how protective and preventive measures can be stepped up to allow relaxation of safe distancing requirements and mitigate capacity challenges.

Summer 2020 Issue

Tokyo, Japan: An almost empty business district in Tokyo after Tokyo governor advice people to stay home to prevent against the spread of coronavirus in Tokyo, March 29, 2020. Photo: Richard Atrero de Guzman / ADB

A possible future trend may be the consolidation of services and rationalisation of routes to better serve the emerging demand patterns and practices. As countries enter the recovery phase, further preventive and precautionary operating measures and advanced technology should be implemented to enable contactless processes and facilitate agile response. Demand management measures can facilitate crowd control in bus and train stations and airports. As a complementary measure, non-motorised transport capacity could be expanded to absorb spillover demand from public transport, as has been seen in China. Mass public transport is the lifeblood of many economies. Government policies and financial support are essential to enable public transport operators to stay viable and continue to support the sustainable movement of passengers and goods. DELIVERING GREENER INFRASTRUCTURE More sustainable design and construction methods, early warning systems and disaster response plans need to be put in place to enhance governments’ readiness for future disasters. In most cases, existing narrow streetscapes in densely populated urban areas are not adequate to meet safe distancing requirements. To promote more use of non-motorised transport, infrastructure will need to be re-configured to comply with new requirements. Many European cities have already embarked on ambitious expansion plans to promote walking and cycling. There has been a reallocation of existing public spaces and road space, retrofitting them

with semi-permanent or permanent structures to enhance safely distanced walking and cycling. Berlin was one of the first cities to substantially expand its cycle networks in mid-March. Popup bicycle lanes have even cropped up in less expected locations in Asia and South America. In the wake of the COVID-19 experience, Manila has announced plans to make bicycle lanes a permanent feature on some of its busiest roads, while Bogota is expanding its existing bicycle lanes. But obviously across developing countries, this trend is still nowhere near its potential in terms of scale. TOWARDS A NEW NORMAL Transport planners, operators and policymakers must now face how to respond to a new normal. There has never been a more pressing time to rethink and reimagine options to address problems, and to link these with long-term sustainable objectives.

Minister of Transportation of Indonesia, and Deputy Minister for Infrastructure and Regional Development at the Office of Co-ordinating Ministry for Economic Affairs. ABOUT THE ASIAN DEVELOPMENT BANK The Asian Development Bank was founded in 1966 as a financial institution that would be Asian in character and foster economic growth and cooperation in one of the poorest regions in the world. ADB assists its members, and partners, by providing loans, technical assistance, grants, and equity investments to promote social and economic development. Under its new long-term Strategy 2030, ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific region, while sustaining its efforts to eradicate extreme poverty. ADB is composed of 68 members, 49 of which are from Asia and Pacific.

There is an opportunity for public transport to play an important role in promoting a better balance. It can achieve this through more active promotion of clean vehicles, the provision of quality travel alternatives in public transport, and promotion of walking and cycling to enhance overall health and wellbeing. Our actions today will impact the environment and quality of life for future decades to come. i ABOUT THE AUTHOR Bambang Susantono is vice-president for Knowledge Management and Sustainable Development at the Asian Development Bank. Previously, he was the Acting Minister and ViceCFI.co | Capital Finance International

Author: Bambang Susantono

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> Mohamed A El-Erian:

Navigating Deglobalisation Having already been buffeted by two big shocks in the last ten years, the global economy’s highly interconnected wiring is suffering a third because of the COVID-19 pandemic. Globalisation thus faces a three-strikes-and-out situation that could well result in a gradual but rather prolonged delinking of trade and investment, which would add to the secular headwinds already facing the global economy.

ppeals to recommit to the current globalization process are almost certain to fall on deaf ears – particularly because this latest shock will be driven simultaneously by governments, companies, and households in developed countries. Those keen to preserve globalisation in the longer term would instead be better advised to focus on minimising the disruption caused by the coming period of deglobalisation and laying the groundwork for a more sustainable process thereafter. For starters, it is already clear that many firms will look to strike a more risk-averse balance between efficiency and resilience as they emerge from the damaging pandemic shock. The corporate world’s multi-decade romance with cost-effective global supply chains and just-intime inventory management will give way to a more localised approach involving the reshoring of certain activities.

Final Thought

This inclination will be reinforced by government mandates to secure safer inputs for sectors deemed to be of national-security interest. We are already seeing such requirements in the United States for energy generation, telecommunications, health-care materials, and pharmaceuticals. It is only a matter of time until this trend spreads to other sectors and countries. The aftermath of the current crisis-management phase is also likely to feature an intensified blame game, adding a geopolitical impetus to deglobalisation. Already, the US is complaining that China didn’t do enough to contain the spread of the virus and inform other countries of its severity. Some US politicians have even called for China to pay reparations as a result. And many in America and elsewhere perceive China’s initial COVID-19 response as yet another example of the country failing to live up to its international responsibilities. Moreover, the worsening geopolitical situation will likely intensify the weaponisation of economic-policy tools that accelerated during the recent China-US trade war – the second 198

"It is already clear that many firms will look to strike a more risk-averse balance between efficiency and resilience as they emerge from the damaging pandemic shock." recent blow to the globalisation process. That in turn will confirm many multinational companies’ fears that they can no longer rely on two key operating assumptions: the ever closer integration and interconnectedness of global production, consumption, and investment flows; and the orderly and relatively predictable resolution of trade and investment conflicts through multilateral institutions applying the rule of law. Today’s anti-China rhetoric will also give fresh momentum to the first pushback against globalisation that emerged a decade ago. With some segments of the population feeling alienated and marginalised by the process, the anti-establishment backlash gave rise in some places to more extreme political movements that have scored some surprising successes, not least Brexit. Such developments greatly weakened global policy collaboration, as has been starkly evident in the world’s uncoordinated approach to containing COVID-19. This is not an ideal time for the world economy to undergo secular deglobalisation. Most countries, and virtually all segments of their economies (companies, governments, and households), will emerge from the crisis with higher levels of debt. Absent a major round of debt restructuring, developing countries in particular will find their ability to service this debt hampered by high levels of unemployment, lost income, more sluggish economic activity, and, perhaps, less dynamic consumption. Against this background, those who appreciate the power of cross-border interconnectivity to unleash win-win economic opportunities and CFI.co | Capital Finance International

reduce the risk of major military conflicts will be inclined to defend the pre-pandemic status quo. But this approach is unlikely to gain traction at a time when governments have become more inward-looking as they battle the pandemic’s direct and indirect damage, companies are still reeling from disruptions to their global supply chains and markets, and households have a heightened sense of economic insecurity. Rather than fight an unwinnable war of principle, advocates of globalisation should adopt a more pragmatic approach that focuses on two priorities. First, they should find ways to manage an orderly and gradual process of partial deglobalisation, including avoiding a descent into self-feeding disruptions that result in unnecessary pain and suffering for many. Second, they should start putting in place a firmer foundation to relaunch a more inclusive and sustainable process of globalisation in which the private sector will inevitably play a bigger design and implementation role. To revert to the baseball analogy, this third strike against globalisation has sent it back to the dugout for now. But, as in baseball, there will be another at-bat. The challenge now is to use the time on the bench to understand the situation better and come back stronger. i ABOUT THE AUTHOR Mohamed A El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He is President Elect of Queens’ College (Cambridge University), senior adviser at Gramercy, and Part-time Practice Professor at the Wharton School at the University of Pennsylvania. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

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