CFI.co Winter 2020-2021 by CFI.co

Capital Finance International

Winter 2020-2021

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AS WORLD ECONOMIES CONVERGE

Joe Biden, US President:

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ALSO IN THIS ISSUE // WORLD BANK: BUILDING BACK BETTER // IBM: THOUGHT LEADERSHIP IMF: KNIGHTMARE UNCERTAINTY // PORSCHE: SPORTS CAR’S PLACE IN THE MODERN WORLD UNCDF: WOMEN AS BUILDERS OF INCLUSIVE DIGITAL ECONOMIES // KPMG: INVESTING IN PEOPLE

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First Thoughts As Lenin observed, there are decades when nothing happens, and there are weeks when decades happen. There have been many such weeks in 2020. Covid-19, disrupter of the year, has brought us not only great distress and discomfort, but has also forced us to focus on new ways of working and thinking – both human and artificial. Policy makers have been tested close to the limit, and vaccine research has been conducted at a speed previously unthinkable. We had become accustomed to fiveyear time frames in the move to human testing, and up to ten years for full development. And yet, on December 2, the UK became the first country in the western world to authorise a Covid-19 vaccine. Updated after the US election, Goldman Sachs Research’s optimistic forecast is for a V(accine) shaped recovery, subject to policy makers doing a fair job of replacing private sector income – and stimulus, stimulus, stimulus. The Goldman growth forecasts for 2021 (not too far north of the consensus) are 6 per cent for the UK and the world as a whole and a little lower for the US and the Eurozone. Best performers, according to Goldman, are likely to be India (10 percent) and China (7.5 percent). So, we tip our hats to big pharma. Pfizer saw its development work as a commercial opportunity and, as out-going President Donald Trump was to be reminded – declined government funding and dipped into its personal war chest to the tune of $2bn.

First Thoughts

Its tiny partner, Germany’s BioNTech took advantage of government and EU funding. These companies

are likely to split vaccine sales revenues of $9.8bn in 2021. Moderna research was funded. Johnson & Johnson, and AstraZeneca (in collaboration with Oxford University) are developing their vaccines on a not-for-profit basis. As for the artificial, it was announced on November 30 that UK-based DeepMind’s AlphaFold program had solved the “protein folding problem” – decades ahead of most biologists’ expectations. Without getting into the science, let’s just point out that, according to the journal Nature, “this will change everything”. AlphaFold successfully predicted the shape of several coronavirus proteins soon after the virus was first sequenced. The next step would be to predict which of our existing drugs could be used for therapeutic effect. How long before DeepMind programs can answer such questions? The 10 big pharma companies are teaming up with AI specialists, aware that machine learning is soon going to be a standard. The economies of the industry will change. Rare diseases that are of little interest now – given the limited commercial payback – will be investigated by machines that learn relatively cheaply. For our money, the senior partner is going to be AI and the pharmaceutical industry must ready itself for radical change. The risk of taking the wrong road to advanced machine learning is far more worrying than the likes of coronavirus. We must be ever-vigilant about the Society-AI interface and not wait too long before involving our other secret weapon: the philosopher who considers the ethics of artificial intelligence.

First Thoughts

> Correspondence

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As an avid reader of your publication, I feel obliged to share with you and my fellow readers the eagerness with which I await every article by Otaviano Canuto. While I freely admit that much of his macroeconomic theories go straight over my head, I always feel that I am learning from him. His latest assertions on what we can expect in terms of economic recovery from the pandemic — despite being challenging for the layperson — made more sense than the thousands of opinions I have read and listened to in the past nine months. I almost feel as if I know what to expect; even if this proves to be a false sense of security, I remain grateful to Canuto for his clarifications on such a complicated situation. SARA HORVAT (Split, Croatia) I wonder if Makhtar Diop ever takes the Metro in Washington DC. If he had taken the London Underground, or Madrid Cercanias (I am told), he would have witnessed the insanity of the local authorities cutting back services with the aim of reducing passenger numbers. Obviously, this has had the effect of increasing crowding — a situation in which viruses thrive. How will transport companies around the world be able to implement “new regulations to make transport resilience and safety an integral part of their new normal” when they have suffered a massive reduction in revenues… while being expected to run services in often deserted cities? I envisage many privatised transport companies falling back into the public ambit in the near future. FRANCIS MARTIN (London, UK) Your contributor Mohamed A El-Erian (The Pandemic’s Complex Cocktail, Autumn) seems off his game — or perhaps he plays on a different board altogether. It is rather remarkable that El-Erian should find cause for celebration in the prospect of “generous liquidity conditions” enabled by central banks which, he writes, will “deliver further gains to investors”. Stock markets are about to close the year on a historic high and, quite unperturbed by asset price inflation, El-Erian cheers the wonderful gains that 2021 will undoubtedly deliver, courtesy of central banks that keep shovelling trillions into the already well-lined pockets of the few. It takes no exceptional powers of prescience to predict that the many will eventually be asked to settle the bill for this feast. Admittedly, El-Erian does mention (ever so briefly) the mismatch between asset prices and the real economy, concluding that wealth inequalities may be amplified. Kudos. Now, can we please have some actual insights? Wouldn’t it be more interesting to figure out how monetary policy could be reshaped to serve the interests of that real economy, as opposed to inflating the bubble? Real people — families, entrepreneurs, small businesses — need help. The wealthiest one percent do not. SHELIA TEMPLE (Glasgow, Scotland)

London: Regent Street

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Winter 2020 - 2021 Issue

United Nations Secretary General António Guterres seems to dwell in another world. He and his outfit have been notably mute during the Corona pandemic, relegated to the margins of events and rendered largely irrelevant by politically correct — but singularly ineffectual — mutterings regarding sustainability, and barging through open doors with affirmations of the obvious. I honestly do not think the good man is capable of conceiving a single original thought, approach, or solution. His “Decade of Action” is rhetorically not dissimilar from Boris Johnson’s “Moonshot” or Donald Trump’s MAGA campaign: all smoke, no fire. It’s a pity for the UN. The organisation should have been a font of inspiration and a source of encouragement in these trying times. Instead, it remains solidly behind the curve, wallowing in a discourse unfit for the present times, or the New Normal to come. JOHN DAVIES (Washington, D.C., USA)

I am not a regular reader of your magazine, or a financial expert, so criticising the subject matter of an article in your recent issue could be seen as shooting from the hip, at best, and rude at worst. My apologies in advance, then. My criticism isn’t so much of your publication but its preponderance of stories about wealth. I know, I know, it’s a financial magazine, it says so in the title. But we live in a world increasingly divided not just into “rich” and “poor” strata, but subdivided into categories. One of those categories, which I personally find offensive, is HNWIs: high-net-worth individuals. According to your feature (HNWIs Continually Searching for their Own Little Piece of Paradise, p42), personal net assets of more than $1m (no equivalent given for pounds sterling) qualifies a person as an HNWI. Hooray for them. But a million dollars (or pounds, for that matter) is no longer a benchmark of true wealth. There is an increasing number of ultra-high “earners” (is any great wealth truly earned?) — I’m thinking Bezos, Musk and company — who have obscene amounts of money. More than the national debt of some struggling countries, in some cases. Is there any justification for an individual to possess potentially world-changing amounts of money? These billionaires have the wherewithal to do great things, to unilaterally tackle the problems of pollution, access to potable water etc. Apart from some occasional, moderately generous contributions (no doubt mostly tax dodges and PR stunts), these financial titans spend their time, and their money, looking to improve their personal circumstances and lavish still more luxuries on themselves. I suggest these people take a leaf from the book of former billionaire businessman and philanthropist Chuck Feeney: he gave away almost all his personal wealth, and has lived a frugal but happy lifestyle. I realise I will be a lone voice on this subject, considering your focus and readership, but I confess stories such as the one I refer to stick in my craw. Can I just say, in parting: isn’t it time for a cap on personal wealth? Taxation won’t cut the mustard, as long as there are cunning accountants with ruses to take the sting out of annual returns. These ultra-HNWIs need to be brought down a peg or two. JIM KELLAR (Dover, 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

Director, Operations Marten Mark

Publisher Anthony Michael

COVER STORIES IBM Thought Leadership (18 – 21)

IMF Knightmare Uncertainty (24 – 25)

Cover Story Biden Administration to Leverage Trump Legacy (26 – 31)

World Bank Building Back Better After COVID-19 (34 – 35)

UNCDF Women as Builders of Inclusive Digital Economies (36 – 37)

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T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co Editorial on p16-17, 22-23, 32-33, 100-101, 214 © Project Syndicate 2020

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Porsche Alternative Fuels, an Unbroken Legacy, and a Sports Car’s Place in the Modern World (66 – 67)

KPMG Investing in People, Creating Jobs, Inventing Strategies (146 – 147)

CFI.co | Capital Finance International

Winter 2020-2021 Issue

FULL CONTENTS 14 – 45

As World Economies Converge

Otaviano Canuto Joseph E Stiglitz Paolo Sironi Kristalina Georgieva Geoffrey Okamoto IMF Anatole Kaletsky World Bank Stéphane Hallegatte UNCDF OECD Özlem Taskin Valentina Bellesi Andrew Amoils 46 – 53 Winter 2020 Special: Fighting to Save the

54 – 101

Europe

Nordea Michael Glinski Moonfare 3VC Enrico Santus FLI Global Wolfgang Kröpfl Kommunalkredit Polifarma Naomi Snelling Avelacom Berkeley Energia

102 – 123

CFI.co Awards

Rewarding Global Excellence

124 – 139

Africa

BIAT East Africa Metals

140 – 157

Middle East

IBM Sigrid Kaag Wim Romeijn Christian Bodewig Nandini Harihareswara Lord Waverley Juan Antonio Niño Pulgar

World

Peter Hupfeld Roche Kathrein Privatbank Anthony & Cie International Nicola Marino Michael Flynn Gilbert Frizberg Belvoir Group Julian Jarvis Xavier Vives Victor Buck Services VEON

Porsche Schweiz Pablo Morales SCHUMANN Shahnaz Radjy Svenska Cellulosa Aktiebolaget SCA Crédit Mutuel Asset Management Günther Rabensteiner Julian Jarvis Colliers UniCredit Edith Magyarics Sergi Herrero & Kaan Terzioğlu

PwC Andrew Lee Smith

Jonathan Metcalfe SWAN

Multiply Marketing Consultancy Samia Bouazza Ovais Shabab KPMG Trojan Holding Hamad Salem Al Ameri Kuwait International Bank Raed Jawad Bukhamseen Dawood Al Shezawi 158 – 165 Latin America EY Argentina Sergio Caveggia Jimena Rocío García

166 – 191

North America

Jeffrey Phlegar MacKay Shields Glen K Yelton Invesco Andrew Watson Rob Zochowski Tony Lennox BVI Finance Aidan Garrib Janine Guillot Fitch Ratings Pavilion Global Markets 192 – 213 Asia Pacific Reyaz Mihular La Trobe Financial Gené Teare Crunchbase Sasseur REIT Maria Teresa Ferretti Hossam El-Din Convergence 214 Final Thought CFI.co | Capital Finance International

Esme Stout Matein Khalid Kellogg Insight Elise Donovan Sustainability Accounting Standards Board Mario Choueir

Pilipinas Shell Petroleum Corporation UnionBank of the Philippines Sherzod Khodjaev Joan M Larrea

> Otaviano Canuto:

Role of Quantitative Easing in

Emerging Market Economies “This time was different,” one may say about monetary policy responses to capital outflow shocks by emerging market economies (EME), as pointed out by a recent bulletin of the Bank for International Settlements (BIS).

he pandemic-related financial shock that occurred in March and April led to an exit of close to $100bn from EME (see Canuto 2020a) and it was answered by local monetary authorities in ways different to previous episodes. There was even the use of quantitative easing (QE) in some of them, i.e. the expansion of the central bank balance sheet via acquisition of public or private securities as an additional monetary-financial management tool. Such asset purchase programmes may either aim at simply stabilising asset markets or easing financial conditions (with the term “easing” becoming more applicable in the latter case).

Figure 1: Despite a sharp depreciation and portfolio outflows, rates were cut affressively1 The size of the bubble is proportional to portfolio outflows (USD bn) and is comparable across panels. Accumulated weekly sum of bond

and equity fund flows. 2From 7 Sep 2008 to 7 Dec 2008. 3The end of the commodity price boom and a sharp appreciation of the US dollar tightened financial conditions in EMEs. From 1 Nov 2015 to 7 Feb 2016. 4From 2 Feb 2020 to 10 May 2020.

CFI.co Columnist

In previous financial shocks caused by outbreaks of capital outflow and currency devaluation, typically emerging central banks have been forced to tighten their monetary policies. This time, facing a strong domestic economic slowdown as a result of the health crisis and social distancing associated with Covid-19, the aggressive actions of liquidity provision by central banks in advanced economies facilitated a reaction in the opposite direction. This time, EME central banks cut policy rates. Figure 1 compares interest rate policy reactions to the Covid-19 shock with what happened right after the 2008 global financial crisis and the EME stress period in 2015, when the end of the commodity price boom and a strong appreciation of the US dollar sharply tightened financial conditions. Having inflation expectations reasonably under control, besides the deflationary nature of the Covid-19 impact, policy rates were lowered as shown. In addition to lowering interest rates, relaxing bank reserve requirements, using foreign reserves to dampen the exchange rate volatility, and term repo actions, 18 emerging countries have even launched public bond or private security purchase programs by their central banks (Figure 2). QE has been for the first time used beyond advanced economies. The latest IMF Global Financial Stability Report brought an assessment of the experience with the 14

Source: Aguilar, A. and Cantú, C. (2020). 'Monetary policy response in emerging market economies: why was it different this time?' BIS Bulletin n.32, November 12.

Figure 2: EME Central Bank Policy Actions (number of central banks on y-axis; percent of sample in brackets)

Source: IMF (2020). 'Global Financial Stability Report', October.

extended set of EME monetary policy tools. The report distinguishes three groups of EME where asset purchase programmes were launched. In the cases of Chile, Poland and Hungary, for example, central banks were operating with interest rates already close to their lower bounds. It can be said that they were in a similar position to the advanced economies where QE has become conventional (Canuto, 2020b). India and South Africa, with interest rates well above zero, did QE to improve the functioning of secondary bond markets. A third group stated the intention to relieve interest pressure on government financing in the pandemic. Ghana and Guatemala had their central banks buying primary issuance of their public debt. Other EME resorted to other means of coping CFI.co | Capital Finance International

with the sudden liquidity drought and/or financing needs. Brazil used cash buffers within the central bank’s balance sheet, while Mexico increased its external issuance, and other Latin American countries engaged pension funds. Issuance was also backloaded. According to the IMF's assessment, the impact on domestic financial markets was positive overall. The effects were added to the direct effects of domestic interest cuts, the indirect effects of the Federal Reserve's asset acquisitions, and of an improvement of the global risk appetite from March onward. Arslan et al, in turn, conclude that the actual market impact of asset purchases by

Winter 2020 - 2021 Issue

QEs are more likely to succeed when monetary policy is effectively constrained by its lower bound, inflation expectations are grounded, risks of capital outflows and exchange rate depreciation are deemed low or the domestic absorption capacity of new bond supply is limited (Figure 3, right side). Asset purchase programmes should be aimed at restoring confidence in markets rather than at simply providing monetary stimulus, let alone the monetary financing of fiscal deficits — paradoxically, when they are more quantitative stabilising than “easing”. Otherwise, they tend to lead to perceived risks of “fiscal dominance” — monetary policy captured by the objective of avoiding fiscal bankruptcy, rather than its own stability targets or large-scale monetary easing, which would push bond yields up and exchange rates down. The pandemic global financial shock has sparked the inclusion of QE as a policy tool also available for central banks of EME. Nonetheless, the following caveats are worthy of mention: • Except for when the acquisition of assets by central banks is for monetary financing of primary debt issuance, which is an issue on its own, QE targets are on the yield structures of interest rates. If there are fragilities leading to high basic shortterm interest rates, QE will not deliver much in terms of results. The weight of transactions involving longer-term yields in EME is lower than in advanced economies. • QE should not raise concerns about fiscal dominance, because it would be self-defeating. Capital outflow pressures may exacerbate. • A prolonged stay of central banks as buyers in local currency bond markets may distort market dynamics. A permanent role of the central bank as a market maker, especially in primary markets, will impair the development of the domestic financial market. Consideration should also be given to the effect of asset purchase programmes on possible overvaluation of assets, as well as on collateral availability in the banking system and its impact on the policy rate transmission (Singh and Goel, 2019).

Figure 3 (top): Asset Purchases by Major EM Central Banks

Quantitative easing is now part of the conventional toolbox of EME central banks — but it should not be taken as a magic wand. i

Figure 3 (bottom): Domestic Institutional Investor Base (Assets, % of GDP, latest data available).

Source: IMF (2020). Global Financial Stability Report, October.

Where used, QE relieved stresses in local markets and reduced rates somewhere between 0.2 and 0.6 percentage points. And without being accompanied by devaluation pressures on exchange rates, in several cases it corresponded to twist operations with

purchases of long assets being matched with sales of short ones — and, correspondingly, some sterilisation of monetary impact. The size of asset purchase programmes was not high in most cases (Chile, Indonesia, the Philippines, and Poland were exceptions) and they were short-lived (see Figure 3, top). They functioned as “circuit breakers”, signalling the central banks as buyers of last resort (Arslan et al, 2020). CFI.co | Capital Finance International

Follow him on Twitter: @ocanuto 15

CFI.co Columnist

EME central banks varied widely between countries, pointing to initial conditions and how the measures were designed and communicated.

ABOUT THE AUTHOR Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a visiting public policy fellow at ILAS-Columbia, and principal of the Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil. Otaviano has been a regular columnist for CFI. co for the past seven years.

> Joseph E Stiglitz:

What Yellen Must Do

S President-elect Joe Biden’s decision to appoint Janet Yellen as the next Secretary of the Treasury is good news for America and the world. The United States has survived four years under a mendacious president who has no understanding of, let alone respect for, the rule of law, the principles undergirding democracy and the market economy, or even basic human decency. Not only has Donald Trump spent the weeks 16

since the presidential election spewing lies about non-existent voter fraud; he has also convinced a large majority of his party to embrace these lies, thus revealing the frailty of American democracy. Undoing the damage will not be easy, especially with the COVID-19 pandemic compounding America’s problems. Fortunately, no one is better equipped – in intellect, experience, values, and interpersonal skills – to deal with today’s CFI.co | Capital Finance International

economic challenges than Yellen, whom I first met when she was a graduate student at Yale University in the 1960s. First on the agenda will be recovery from the pandemic. With multiple vaccines in sight, the immediate task is to build a bridge from here to the post-crisis economy. It is too late for a “V-shaped recovery.” Many businesses have gone bankrupt, and many more will do so in the coming weeks

Winter 2020-2021 Issue

and months; household and firm balance sheets are being eviscerated. Worse, headline figures may belie the depth of the crisis. The pandemic has taken a massive toll at the bottom of the income and wealth distribution. Those who have availed themselves of policies to prevent evictions and foreclosures are nonetheless falling deeper into debt, and could soon face a reckoning. The current outlook would have been much better if only we had had a president and Congress that recognised back in May that COVID-19 would not just disappear on its own. Strong initial support programs that needed to be extended were not, resulting in avoidable economic damage that will now be hard to reverse. The devastation of the restaurant and travel industries has received plenty of attention, but this may be merely the tip of the iceberg. Educational institutions, especially many colleges and universities, have been hit badly. And state and local governments constrained by balanced-budget laws now face plummeting revenues. Without federal aid, they will have to make deep cuts to employment and public programs, which will weaken the broader economy. The US desperately needs large rescue programs targeted specifically at the most vulnerable households and sectors. The resulting debt from increased spending should not be viewed as a hindrance, given the enormous cost of doing too little. Besides, with interest rates near zero and likely to stay there for years to come, the costs of servicing new debt are exceedingly low.

Janet Yellen

"First on the agenda will be recovery from the pandemic. With multiple vaccines in sight, the immediate task is to build a bridge from here to the post-crisis economy."

Moreover, many of the necessary recovery programs can be designed to serve multiple goals, by putting the economy on a more sustainable, resilient, and knowledge-based footing. Much will depend on Congress, but the economic case for providing more support is clear, and Yellen is well equipped to articulate it. Much will depend on the global recovery as well. Here, the new administration will have more room to maneuver. There is already strong global support for a massive $500 billion issuance of Special Drawing Rights, the supranational currency

CFI.co | Capital Finance International

overseen by the International Monetary Fund, which would go a long way toward supporting many struggling economies. Trump and Indian Prime Minister Narendra Modi blocked this option. It should now be at the top of the agenda. Moreover, with many countries soon to be unable to meet their debt obligations, a quick and deep restructuring would help enormously. To move that process forward, the Biden administration should state clearly that it is in America’s own national interest to uphold the basic principle of sovereign immunity, as endorsed by the overwhelming majority of United Nations member states in 2015. Debt restructuring is necessary for the global recovery and is the humanitarian thing to do. If there was ever a time when the principle of force majeure should apply, it is now. Restoring multilateralism would help, too. For the past four years, innumerable conflicts between the US and everyone else has cast a pall of uncertainty over the global economy. It should go without saying that uncertainty is bad for business and bad for investment. A return to normalcy on the part of the US – rejoining the Paris climate agreement and the World Health Organization, for example, and re-engaging with the World Trade Organization (and allowing judges to be appointed to its Appellate Body) – would thus go a long way toward restoring confidence. But a return to normalcy must not mean a return to neoliberalism. On trade and many other aspects of the twenty-first-century economic framework, policy agendas need to be revisited and reformed. It is unclear how far Biden will go down this road. But we can at least be confident that the new administration won’t embrace the zero-sum logic that underpinned Trump’s approach to everything. i ABOUT THE AUTHOR Joseph E Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is Chief Economist at the Roosevelt Institute and a former senior vice president and chief economist of the World Bank. His most recent book is People, Power, and Profits: Progressive Capitalism for an Age of Discontent. 17

IBM Thought Leadership Transform Bank Business Models and Client Engagement With Open Hybrid Multicloud by Paolo Sironi

Paolo is the global research leader in Banking and Financial Markets at IBM, Institute of Business Value. IBV is the thought leadership centre of IBM. In this article, Paolo discusses banks' transition to new business architectures based on open hybrid multicoud, to reinvent client engagement on platform economies.

CFI.co | Capital Finance International

Winter 2020-2021 Issue

CFI.co | Capital Finance International

WHAT DO YOU SEE IN THE FUTURE OF BANKS IN THE POST-PANDEMIC WORLD? The COVID-19 pandemic has claimed thousands of lives, stricken many more ill, and devastated entire economies. In response, many financial institutions have safeguarded employees, enabled alternative working models, focused on business continuity and resilience, and learned new ways of serving customers. Yet, the postpandemic economic environment is unexplored terrain. Long after the medical threat has passed, the pandemic will bestow lasting consequences on business and society. Depending on the scale of government assistance, credit defaults could be higher than during the 2008 global financial crisis. Lower interest rates could prevail globally, potentially accelerating compressed net interest margins and impacting a key revenue stream for banks. The new normal for financial services could compel banks to embrace continual reinvention of their business models and solutions. Forwardlooking financial institutions can seize this opportunity to accelerate their migration to a new business architecture, essential to win in the platform economy.

IBM Thought Leadership

This architecture can be built on next-generation customer experiences embedded in customer ecosystems, enabled by AI engagement and digitalized end-to-end journeys. It relies on a data environment transformed with structured and unstructured, open or proprietary data. Advanced analytical tools and AI help manage vast information flows and help banks to contextualize their offers inside non-banking client journeys. This new architecture can be security-rich and compliant with effective risk reduction and more efficient compliance operations. Finally, operations can radically transform to be digital, agile, and intelligent, with modernized applications deployed on open hybrid multicloud environments. They can be designed for virtually

zero risk tolerance, at structurally lower cost, and offer entire new ways of working and serving clients. WHAT IS OPEN HYBRID MULTICLOUD, AND WHY DOES IT MATTER FOR BANKS? Open hybrid multicloud is a foundational environment enabling effective digital transformation that integrates traditional computing platforms with private, public, and managed cloud services. In essence, a hybrid cloud becomes a virtual computing environment that aligns workloads and interfaces with the most appropriate computing platform. All these services need to be managed as though they were designed to behave as a single unified environment. Open hybrid multicloud is a logical solution for banks, because it offers them the needed flexibility while addressing all security and cost concerns. Accelerated digital adaptation and macroeconomic factors have driven structural changes in the banking industry. Banks are rethinking their business models and operations to remain competitive amid economic, industry, and consumer-related shifts. Part of this includes migrating to a new business architecture to better accommodate today’s digital reality, and the shift from output economies (how many products do I sell) towards outcome economies based on platform engagement (how do I help my clients achieve their personal, business and financial goals). In building this new digitally agile architecture, banks are challenged to balance their infrastructure platform need for flexibility to support business model innovation and digital transformation with security and compliance requirements. An open hybrid multicloud environment that offers a mix of public cloud flexibility and private cloud customization is ideally suited for the financial services industry. While the benefits of moving to open hybrid

Evaluating workloads for migration to open hybrid multicloud

CFI.co | Capital Finance International

multicloud are clear, the path - which workloads to move and when and where to move them is a bit muddier. An industry-tailored approach designed to prioritize workflows according to both technical and business criteria can help clear the way with a map toward success. WHAT IS IBM “HOW TO” FOR BANKS TO SUCCESSFULLY MIGRATE TO AN OPEN BUSINESS ARCHITECTURE? Recently, the IBM Institute for Business Value (IBV) published a paper Banking on Open Hybrid Multicloud [link in online version at CFI.co] addressing the key question: “How do I determine what functions sit on which platforms?” The goal, obviously, is for each of the various environments to handle what it does best, with each workload in the right place for reduced risk, increased agility, etc. This requires not only looking at the puzzle from a technical point of view, but also considering the business objectives. An organization has to make decisions about which workloads to prioritize for public cloud, which ones to prioritize for private cloud, and which to leave on a more traditional platform. They also need to separate what can be done — in terms of ease and feasibility — from what should be done from a strategic standpoint. Making these decisions requires an industrytailored approach and framework to evaluate workflows and determine the appropriate operating environment. By evaluating workloads according to industry-specific benchmarks, a bank can align and prioritize each workload with an optimal platform - traditional, private cloud, public cloud, or public cloud - designed to support a workload’s unique requirements. Both operational and business criteria should be considered in workload evaluation: a robust multicriteria evaluation framework can help determine the optimal platform for each workload, with both a business and operational perspective.

This entails evaluating each workload’s requirements related to five critical elements: • Resiliency. Evaluate the volume, stability, and business criticality of the data and transactions involved. • Responsiveness. Consider the latency, response, and service requirements associated with the workloads. • Digital maturity. Evaluate the evolution of the financial institution’s digital transformation from monolithic operations to modular services. Workloads more easily decoupled from other workloads without loss of interoperability are candidates for migration. • Risk, security, and compliance. Gauge the regulatory requirements and security features associated with a workload. These can vary significantly depending on a financial institution’s security posture and geographic and segment regulatory regime. • Business case. Examine expected investment requirements, cost and revenue benefits, and potential impacts on competitive advantage and disruption.

insurance), into platform-driven centers of competence (CoC). These CoCs would integrate lending operations into advisory relationships for families and businesses. The emphasis shifts from distribution channels of lower-margin products to relationship-based services built on client engagement and experience as discussed in my latest book on banking economics “Financial Market Transparency” [link in online version at CFI.co], which provides theory and principles for a new engagement mechanisms that allows banks to remain sustainable and competitive against Bigtech players. The bank of the future will redesign customer proximity not only by using data to personalize their offers (output economy), but also by infusing AI into interactions. The “data-driven bank” will be based on the “data-enabled client.” This model generates new value, understanding how digital relationships can truly create closeness and positive impact even during a crisis such as a pandemic lockdown.

Trusted digital relationships are not only the real asset of financial institutions facing a different normal, but a necessary mechanism to help communities weather the storm, and emerge robust and ready for the future. i ABOUT THE AUTHOR Paolo is the global research leader in banking and financial markets at IBM, Institute for Business Value. He is one of the most respected Fintech voices worldwide, providing business expertise and strategic thinking to a network of executives among financial institutions, startups and regulators. He is a co-host of Breaking Banks Europe Fintech podcast, and celebrated author on quantitative finance, digital transformation and economics theory. Paolo's literature explores the biological underpinnings of financial markets, and how to bolster with technology and business innovation the global economy’s immune system in today’s volatile times.

Paolo’s website: thePSironi.com

Each bank has to make its own individual decisions about how to configure and manage the sub-components of its operations and how much flexibility is built into the open hybrid multicloud set up it deems most advantageous. The evaluation criteria can help guide these decisions, identifying and mitigating real and perceived hurdles. WHAT CAN BANKS ACHIEVE WITH THIS OPEN BUSINESS ARCHITECTURE? A dramatically different normal calls for financial institutions to play a crucial role both in their business operations and in their clients’ lives. They’ll need to step up and guide customers through economic and financial instability. And they’ll need to help those customers navigate and even thrive in an uncertain world. Taken together, the challenges of this next environment point to the need for open business architectures.

IBM Thought Leadership

Until now, client-centric operations have been anchored to products typical of “output economies,” in which customers are those who buy. The next normal might accelerate the transformation to human-centric, service-based platforms, ones that place relationships front and center. These platforms are based upon value-generating interactions that are typical of “outcome economies,” in which customers achieve their goals through seamless experiences. Consider interactions that create transparent banking relationships, directly or digitally augmented, with trust generated through a value exchange between banks and their most precious assets, their clients. Therefore, banking architectures and their corresponding business models could see a dramatic transition. A bank’s purpose could evolve from credit institutions, which provide relevant accessory solutions (payments, investment,

Author: Paolo Sironi

CFI.co | Capital Finance International

> Kristalina Georgieva & Sigrid Kaag:

Keeping the Global Focus on Low-Income Countries

wing to the COVID-19 pandemic, the global economy is suffering its sharpest decline since the Great Depression. But while everybody is hurting, it is the world’s poorest countries that will pay the highest price unless they receive more help. Some 1.5 billion people live in low-income developing countries, struggling to overcome 22

weak public health systems, limited institutional capacity, and, in many cases, high debt levels. All these countries entered the crisis with a limited capability to fight it. They faced a dramatic increase in spending needs just when the pandemic caused a decline in revenues from tourism, remittances, and commodity prices. While actions to protect advanced-economy businesses and workers amounted to some 20% CFI.co | Capital Finance International

of GDP, this support in low-income countries was only about 2%. With as many as 115 million additional people at risk of falling into extreme poverty this year, today’s deep economic decline is threatening to reverse two decades of gains in living standards. The current damage will last for many years to come, as children – especially girls – drop out

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of school, the quality of health services deteriorates, and employment levels remain depressed. This matters for all of us. Insecurity in poor countries translates to instability for the rest of the world. And, more importantly, the COVID-19 crisis will never truly be over until it is defeated everywhere. To that end, international institutions and bilateral donors must help poor countries as they work to create the right economic conditions for recovery at home. The International Monetary Fund continues to provide hands-on technical assistance and training to its members, helping governments handle debt, raise revenues, and manage public finances to ensure effective delivery of vital services, including health. The Netherlands has supported these efforts by contributing to dedicated IMF thematic funds and the Fund’s network of regional capacity-development centers in SubSaharan Africa, the Middle East, and the Caribbean. The critical task now is to help low-income developing countries overcome the current crisis and strengthen resilience for the future. Bilateral donors like the Netherlands supplement IMF lending programs with targeted interventions for health, education, and job creation, as well as through programs that address climate change and greening the economy. We also need to do more to help countries with unsustainable debt burdens. Even before the pandemic, around half of low-income countries were in, or at high risk of, debt distress. Now that many countries have only limited, if any, access to new market financing, they are confronting a terrible trade-off between supporting their people during the pandemic and servicing their debt. Sculpture depicting a Great Depression breadline at the Franklin Delano Roosevelt Memorial, Washington, D.C.

"Insecurity in poor countries translates to instability for the rest of the world. And, more importantly, the COVID-19 crisis will never truly be over until it is defeated everywhere."

The international community has taken some important steps to address this problem. With the support of 13 bilateral donors, including the Netherlands, the IMF has provided one year of debt-service relief of about $500 million to 29 of its poorest members, and is now seeking additional resources to extend this relief beyond April 2022. We have welcomed the extension of the G20’s Debt Service Suspension

CFI.co | Capital Finance International

Initiative, which has already provided the poorest countries with about $5 billion in temporary debt-service relief. The IMF also supports the G20 and Paris Club’s establishment of an ambitious new Common Framework for debt resolution, which combines a standard approach to decision-making among creditors with a case-by-case approach to debt relief. Beyond addressing debt, low-income developing countries need strong international financial support. Since the onset of the pandemic, the IMF has doubled access to emergency financing facilities and provided $11 billion in emergency financing to 47 countries in this group. The IMF remains committed to ensuring sufficient access to such credit in the years to come. To do so, the IMF counts on its wealthiest member countries to support this effort by providing new loan resources for financing concessional lending programs. Since the beginning of the pandemic, the Fund has secured an additional $22 billion, and is now working to mobilise grants to ensure zero-interest lending at these levels, to which the Netherlands will be contributing as well. Many bilateral donors have also bolstered their own programs to support low-income countries. The Netherlands, for example, recently pulled together €500 million ($595 million) to keep existing development efforts afloat, and to fund new ones to help poor countries fight the pandemic. Finally, low-income countries need trade now more than ever. Over the past two decades, global poverty levels fell dramatically as these countries ramped up their participation in international markets. But the pandemic and ongoing trade tensions have jeopardised that progress. An open, stable, and transparent rules-based trading system remains absolutely critical for ensuring global economic stability, inclusive and sustainable growth, and long-term prosperity. i ABOUT THE AUTHORS Kristalina Georgieva is Managing Director of the International Monetary Fund. Sigrid Kaag is Minister for Foreign Trade and Development Cooperation for the Netherlands. 23

> Geoffrey Okamoto, First Deputy Managing Director of the IMF:

Knightmare Uncertainty

The American economist Frank Knight theorised about the difference between risk and uncertainty in his classic book Risk, Uncertainty and Profit. Risk is “a quantity susceptible of measurement.” A precise outcome may not be known, but the probability of a few that are most likely can be calculated. Uncertainty means there is not enough information to even narrow down the possibilities. When a situation is “not susceptible to measurement” economists call it Knightian uncertainty.

f this sounds familiar, it is because we are living in the most unmeasurable of times. All aspects of life have been disrupted by the simple fact that it is harder to quantify the risk of going to work, shopping for groceries, or having a wedding. Despite necessary optimism, there is great uncertainty about treatments for COVID-19 and a vaccine: when they may be available, how effective they will be, how willing people will be to take them. While it will take years to rebuild the economic devastation and restore jobs and growth, the pandemic will have a lasting impact on how we choose to live our lives. The 1920s economic chaos left many Germans traumatised about inflation to this day; Americans who experienced the Great Depression remained frugal throughout their lives. This pandemic could fundamentally change how we view and manage risk and uncertainty, with lasting consequences on investment decisions, business strategies, government policies, and overall economic productivity. Individuals may change their risk perceptions permanently after a sharp and sudden loss of income, leading to higher precautionary saving. In the short term, this may mean less debt, but in the long term it could lead to deeper structural changes, such as less willingness to take on a 30-year mortgage. In many countries, home ownership is low because long-term debt is seen more as a risk than an opportunity. Consumption patterns may change if people whose health is at high risk avoid certain activities. Consumers may decide to hold more essential goods in fear of new lockdowns—good news for toilet paper manufacturers, at least! But what about a young woman who has mulled over a transformational

"High uncertainty makes it harder still to predict the net impact of so many behaviour changes." business idea night after night at her kitchen table, but whose now-heightened aversion to risk means a business is never started, employees are never hired, and products are never launched? High uncertainty makes it harder still to predict the net impact of so many behaviour changes. Companies also face a new set of uncertainties. US carmakers have experienced parts shortages because the Mexican state of Chihuahua, where many suppliers are based, has limited factory attendance to 50 percent of employees. Such disruptions may lead manufacturers to diversify their supply chains or keep more inventory on hand. Employee health is another new operational risk. Will companies decide to rely more on automation as a result? Changing suppliers, keeping more inventory, and needing to invest in more advanced machinery all bear costs for manufacturers often operating on thin profit margins. But raising prices in a recession is also difficult. For goods deemed “essential,” like medical supplies, countries may change regulations or subsidise domestic production, altering the competitive landscape. Similar to households, companies hit by a sharp

drop in revenue may keep higher liquidity buffers. Some changes may be quantifiable once shifts in production stabilise and the impact on earnings becomes clearer, but uncertainty will remain for a long time for many companies. Market volatility, defaults, and evolving regulation will change the landscape for the financial sector. The extreme swings in market conditions and asset prices seen early in the outbreak will change risk management models, with impacts on liquidity and capital buffers held to manage such risks. Regulations may also change, as policymakers seek to prevent a recurrence of the volatility and reduce the need for central bank interventions to preserve market functioning. Moreover, the recession will increase losses. Economic policymakers are confronted with an intricate new puzzle: how to finance higher spending demands amid falling revenue and ballooning debt. Without a solution to the health crisis, governments will be dealing with unmeasurable variables in trying to plan the future. Private sector interventions through guarantees or direct ownership may have lasting and hard-to-quantify implications for competition and private risk-taking, beyond the immediate impact on public sector balance sheets What does all this mean for the IMF? We have been called to action like never before, providing emergency support to a record number of countries within a short time frame. We have introduced new support facilities and expanded the borrowing limits on existing ones. The IMF faces new operational challenges. Many countries have requested financial assistance to

"Market volatility, defaults, and evolving regulation will change the landscape for the financial sector." 24

CFI.co | Capital Finance International

Winter 2020-2021 Issue

Author: Geoffrey Okamoto

weather this storm. Some have challenging debt loads, where sustainability is hard to measure amid elevated uncertainties about growth and trade prospects. And if some countries do need to renegotiate their debts in a post-COVID world, the private sector will have to play a larger role in providing financing assurances to reduce uncertainty, given its increased importance as a creditor. Our members are also asking for policy advice and for help developing the capacity to cope with this severe shock. We must respond while still largely working remotely and unable to travel. Similar operational restrictions have challenged production of one of our key raw materials: timely and accurate country statistics. In fact, one of our core functions, economic surveillance, has had to reinvent itself. Going back to Knight’s concepts, much of our work focuses on measuring and addressing quantifiable risks. We use macroeconomic data to create baseline scenarios and estimate their likelihood. Following the global financial crisis, the approach had already been broadened by developing various scenarios and analysing their probability so as to better understand the risks around numeric forecasts.

The size and simultaneity of the pandemic shock make for extreme Knightian uncertainty and everchanging landscapes. We have had to become more agile in that regard. When the infection was still a suspicious pneumonia outbreak in China, we reached out to epidemiologists to learn how to combine their forecasting models with ours. New sources of big data were incorporated to understand consumer behavior changes where traditional statistics fell short. Even before the pandemic, we had started using military-style simulations to study escalating trade tensions. The approach has proved helpful as we attempt to quantify new risk. Some time ago, I came across an article about how a US epidemiologist teamed up with a German reinsurance company to develop pandemic insurance product. They designed health models and early warning systems, estimated the economic impact for vulnerable industries, and determined how to distribute the risk. The policy became available in late 2018, but potential clients found it too expensive for such an unlikely event. When the catastrophe materialised in early 2020, it was too late to buy insurance. CFI.co | Capital Finance International

This cautionary tale shows how much we need to improve risk assessment and management. Manufacturers, for example, must strike a balance in their supply chains between justin-time (cheaper but inflexible) and just-incase (more resilient but costlier) methods while factoring in trade, logistics, and sanitary conditions. Going back to the old ways seems reckless; erring too much on the resilience side might decrease the productivity of the economic engines. Finding this new equilibrium between risk and resilience when there is so much uncertainty is a challenge we will face far into the future. It will require effort, patience, and innovative thinking. Fundamentally we will need more global cooperation. Everyone will be safe only when each one is safe. Only by working together will we overcome the massive uncertainty and the economic turmoil caused by this mighty microscopic scourge. i

Opinions expressed here are those of the authors they do not necessarily reflect IMF policy. 25

US RECLAIMS LEADERSHIP:

BIDEN ADMINISTRATION TO REPAIR BURNED BRIDGES By Wim Romeijn

“America is back: You can count on us.” That is President Joe Biden’s first post-inauguration message to foreign leaders. The new administration is committed to restoring US leadership and reignite the beacon the world has always looked to for hope, inspiration, and guidance in times of trouble. It aims to do so by reengaging with multilateral bodies, re-affirming old alliances, and revoking isolationist policies..

Cover Story

he goal is fittingly ambitious for a world power called ‘indispensable’ only two decades ago by then-Secretary of State Madeleine Albright, but of late tilting towards ‘incompetence’. Appearing before the House Foreign Affairs Committee in February 2019, Albright branded US dealings with the rest of the world ‘both sad and dangerous’. In her opening statement she even mentioned a ‘complete abdication of responsibility’ before adding a few mitigating circumstances such as the Trump Administration’s successful renegotiation of the trade deal with Canada and Mexico, and the former president’s efforts to find a political way out of the Afghanistan quagmire. However, the US is no longer perceived as part of the solution by its partners. A cornerstone of US 26

foreign policy in the past, the country’s ability to take on difficult challenges and propose concrete solutions to intractable problems has been severely undermined – not least by its mishandling of the Corona Pandemic. A survey conducted by the Pew research Center – a nonpartisan Washington-based thinktank – in thirteen major countries found that 84% of the people queried considered the US had done a ‘poor job’ of dealing with the public health emergency – the worst appraisal, by far, given to any government or supranational entity. The faltering US response to the pandemic, with bluster and brashness at its core, evaporated the last vestiges of respect the country could command on the world stage. Though few foreign leaders dared to say so openly – why taunt a fallen friend? – the pandemic bared CFI.co | Capital Finance International

the US’ inability to build coalitions, contribute expertise, and lead the world out of major crises. MISHAPS Thus, corona became the distasteful cherry on top of a collection of foreign policy mishaps that included withdrawals from the Iran nuclear deal (Joint Comprehensive Plan of Action), the Paris Agreement (United Nations Framework Convention on Climate Change), and the World Health organisation (WHO), amongst others. The US retreat from the global stage allowed newcomers a chance to fill the void. China in particular raised its profile considerably which, in turn, allowed Beijing to avoid public scrutiny of its own dark side – the internment of millions in a vast network of gulags, the belligerent pursuit of extraterritorial ambitions, the ruthless

Winter 2020 - 2021 Issue

that German Chancellor Angela Merkel (78%) and French president Emmanuel Macron (64%) inspired most confidence amongst Europeans. These numbers are not altogether irrelevant. Diplomacy is the subtle art of perception. It rarely involves open displays of hard power, except when a stalemate arises, and a solution needs to be imposed by other means than talking or shooting. As such, the observation that the US has been hypnotised the Make America Great Again mantra – and sleepwalked off the global stage – not only damaged the country’s reputation but led to the self-evident conclusion that Washington can no longer constructively engage and contribute solutions to a host of pressing issues such as climate change, trade disputes, social inequality, and the rise of autocrats and populists – to name but a few. A low point, admittedly arbitrarily chosen, came when a Norwegian university advised its overseas students to return home from countries with ‘poorly developed health services such as the USA’. In Eastern Europe, some pundits gleefully commented on the ‘balkanisation’ of the White House where ‘everybody acts as they please’. In the European Parliament, a German representative sketched the mood: “The shining city on the hill is not as shining as it used to be”. President: Joe Biden

exploitation of weak states, and its opaque tabulating of data on the novel coronavirus which the country still refuses to share. As President Biden settles into his new role as ‘leader of the free world’, he has a great many burned bridges to repair before lending meaning to his honorary title. The incoming administration hopes that global relief over the change of guard in Washington may provide the tailwind needed to kickstart to exercise. The first order of business in the restoration of US global leadership is to get a firm grip on the pandemic and jumpstarting the subsequent economic recovery. A good way to begin is for Washington to lead the push for the equitable distribution of the vaccines becoming available – with an emphasis on ensuring that poor nations receive their fair share. The US is likely to join the 184-nation COVAX initiative that seeks to secure two billion vaccine doses for underprivileged countries. In the days leading up to the changeover, Biden unveiled a $1.9 trillion stimulus package which includes a oneoff $1,400 payment to all but the wealthiest Americans.

Officials of the new administration have signalled that they are eager to work with their European partners to repair ties that were, at best, strained and uncomfortable over the past four years. The job, welcome as it is, entails a lot of work. America’s standing has taken a severe beating as evidenced by the same Pew Research Center study which concluded that never before in recorded history have opinions on the US been so negative. Just before President Donald Trump took office in early 2017, about 85% of people in France, Germany, Spain, and the UK expressed confidence in the US president’s ability to ‘do the right thing’ on the global stage. Just a few months later, only about one in six Europeans (16%) still thought so. WARINESS However, such a high degree of wariness is not unique to President Trump. In fact, he even fared a bit better than George W Bush did near the end of his term in office in 2009. Only slightly more worryingly, 19% of Europeans confessed to a favourable opinion of President Xi Jinping of China whilst 23% were quite happy to entrust world affairs to President Vladimir Putin of Russia. Less surprisingly, the Pew study also discovered CFI.co | Capital Finance International

There is much reason to attribute the past four years, and the bizarre events of January, to a hiccup that may not have done lasting damage. Try as it may, China is singularly unable to capture the world’s imagination as the US still does. For all its imperfections – previously rather endearing, of late a little less so – America is still widely admired, although often begrudgingly so. There are no hordes of huddled masses gathering on China’s borders, clamouring to get in. Instead, many are desperately trying to get out from under Beijing’s iron boot. China’s rather preposterous ambition to take over world leadership are almost universally met with either contempt or outright hostility. OVERREACH Perhaps Chinese diplomats lack the expertise and experience to act with the finesse demanded 27

Cover Story

Other low-hanging fruit that may produce instant results include ending the travel ban targeted at Muslim-majority countries, stopping the mistreatment of immigrant families along the southern border, and restoring the number of refugees and foreign students allowed into the country to the pre-Trump average.

Just before assuming the presidency, Biden promised to temporarily stop the deportation of undocumented people and said he would immediately revoke the travel ban affecting Muslim countries.

The concern over the extreme polarisation of US politics reached an alarming height in January as the world watched in near-stupefaction whilst hordes of rabble-rousers and assorted misfits stormed the Capitol, raided the offices of senators, and occupied the senate floor whilst law enforcement stood by mostly idle, unable to control the crowd. The quasi-coup cost five lives and produced scenes never before seen in the US. Egged on from inside the White House, the multitude brazenly tried to prevent the House and Senate to confirm Biden’s electoral win. Later that night, after the crowd had slowly melted away, and law enforcement regained a semblance of a grip on the situation, both chambers of the US Congress reconvened and finished their job.

in international relations. In Fiji, Chinese diplomats recently turned up uninvited at a reception celebrating Taiwan’s national day and proceeded to beat up a Taiwanese diplomat. After Australia asked for an independent international investigation into the origins of the coronavirus, Beijing retaliated by slapping a punishing 80% tariff on Australian barley exports. And after The Netherlands changed the name of its diplomatic mission in Taiwan to Netherlands Office Taipei, China threatened to block the export of personal protective equipment – at the height of the pandemic’s first wave. China declined to buy Canadian canola after the country arrested a director of tech company Huawei. It also arrested to Canadians academic who were rebranded as ‘spies’ and now serve as bargaining chips. China’s incessant and unsophisticated bullying has denied the country a chance to improve its global standing. In fact, Chinese overreach affords the Biden Administration an opportunity to swiftly reclaim lost ground. The president promised to redirect US foreign policy to previously discarded vectors such as human rights and good governance. Biden also said the US will no longer kowtow to friendly autocrats and turn a blind eye to corruption. The former vice-president is well-versed in the battle against misconduct by government officials. Biden was the driving force behind the high-profile commission that obtained an 85% success rate in persecuting hundreds of current and former government officials for corruption in Guatemala – including a sitting president and vice-president. The commission was disbanded quietly in 2019.

Cover Story

Even whilst in waiting, the Biden Administration has indicated its unwavering commitment to promoting and defending the global rules-based economic order – based on free trade and the rule of law – that the US built some seventy years ago. The idea that all countries benefit when everybody plays by the rules has been under attack by China, which often seems to disdain rules it deems cumbersome or inconvenient, and by the Trump White House which responded in kind to Beijing’s rule-breaking with an America First approach to any and all economic issues. This new combative attitude ignored, and cast aside, carefully constructed dispute settlement mechanisms such as the World Trade Organisation (WTO). IRKED ADMINISTRATIONS Former president Trump had a point insofar that a number of UN bodies, including both the WHO and WTO, seemed to have come under China’s spell and – at least to the untrained eye – appeared slightly tilted in their decisions and policies, irking the US administrations since long before Trump took office. Concluding that the courteous voicing of concerns in these multilateral fora had not yielded any noticeable results, Trump took a more confrontational tack 28

and withdrew funding, jammed procedures, blocked nominations, and, in the case of the WHO, cancelled US membership. Whilst far from subtle, Trump did manage to focus minds and draw attention to the imperfections of a system designed for a world since lost in the mist of times and no longer entirely fit for purpose. Despite howls of righteous indignation heard and reverberating around the world, not everybody was displeased by Trump’s elephantin-china-shop method. The problem was not so much the style or substance of US policy as Washington’s go-it-alone attitude which ignored partners and allies to the point of calculated rudeness. However, the Biden Administration is expected to profit handsomely from the work done by its predecessor. It can easily score points by reframing the same message – drawing attention to systemic imperfections in global governance for example – in a more constructive way and rallying support amongst allies eager, after four years of doghouse confinement, for Washington’s attention. The European Union already proposed an EUUS Agenda for Global Change with four major policy vectors – health response, climate change, security, and trade. Brussels also suggested a ‘transatlantic dialogue’ on Big Tech with a view to finding solutions for fair taxation, minimising market distortions, and defining the responsibilities of online platforms. The EU is eager to reset its relationship with the US after major clashes on trade, technology, and defence. Commission President Ursula von der Leyen said it was ‘time to reconnect’ and design a new transatlantic agenda ‘fit for today’s global landscape’. This summer, the bloc was disappointed that the US had walked out of the negotiations on a digital tax agreement organised by the OECD (Organisation for Economic Cooperation and Development). The commission now prepares an EU-wide digital tax code which it expects to table in June or July. The EU has also expressed a desire to work with the US to reform and revive the World Trade Organisation, now languishing in hibernation, and settle a number of outstanding trade ‘irritants’. Brussels has also signalled its willingness to reward the US’ renewed interest in global affairs with not just an olive branch, but – if necessary – the entire tree. The bloc is convinced that the Biden Administration will move quickly to shore up confidence in its ability to reengage constructively with global affairs, beginning with the EU. Brussels shares a number of longstanding US foreign policy concerns such as the need to contain China and rein in Big Tech. PIPE OF CONTENTION An early litmus test is expected with the conclusion of work on the controversial Nord CFI.co | Capital Finance International

Winter 2020 - 2021 Issue

Stream 2 natural gas pipeline that connects Russia to Germany. The US has consistently opposed the project, arguing that it undermines Europe’s energy security and may be used as a ‘tool’ by Moscow to support its ‘continuing aggression’ against Ukraine. Late last year, Trump signed into law the Protecting Europe’s Energy Security Act which mandates the immediate cessation of all ‘construction-related activity’ and imposes sanctions on companies supplying both vessels and materials to the project. Germany limited its official response to expressions of ‘dismay and anger’ at the extraterritorial reach of the US act and the threat of sanctions. Foreign Minister Heiko Josef Maas rejected US ‘interference’ in his country’s domestic affairs and said that work would proceed as scheduled. Much less certain is if the $11 billion pipeline will ever be put into use. Though the indefinite postponement of the opening of Nord Stream 2 would be a relatively easy and cheap gesture to make, senior associate Kirsten Westphal of the German Institute for International and Security Affairs (Stiftung Wissenschaft un Politik) doubts that Berlin – or indeed Brussels – is willing to cave to US demands, even if only to please President Biden. “US opposition to Nord Stream 2 is largely bipartisan so I do not expect a change in attitude from the new administration. Moreover, plans for the construction of German LNG terminals, to handle imported US natural gas, have all but collapsed after investors showed little interest in providing funds for the project in Wilhelmshaven,” says Westphal. As long as Nord Stream 2 can be contained to its status as a minor ‘irritant’ – which would require the US Senate to refrain from stoking its fires of rhetoric – EU-US relations should have ample room for improvement. Europeans were thrilled by President Biden’s announcement that he would swiftly usher his country back into the Paris climate accord fold and erect the postpandemic US economic recovery effort around his ‘building back better’ philosophy which pointedly includes a full suite of environmental considerations.

Though she defended the more than $3 trillion in stimulus funding released to keep the economy from tanking, she also steered US monetary policy back to its origin by

prioritising the need to pursue full employment. However, Yellen also courted controversy after she claimed that a financial crisis would not again occur ‘in our lifetime’. Asked to explain her sweeping statement, Yellen said that strengthened Fed oversight had made banks ‘much stronger’. However, just after Trump had declined to grand her a second term at the helm of the central bank, she warned that ‘gigantic holes in the system’ could yet spark another major crisis. Through a combination of a more open foreign policy aimed at building partnerships and a vigorous economic recovery, the Biden Administration may propel the US back into its position as a global driver of growth. However, that leaves the question about what to do with fragile global supply chains – aka globalisation – unanswered. When New York Times columnist and three-times Pulitzer Prize winner Thomas Friedman in 1999 celebrated the timely dead of the Cold War geopolitical order, he predicted a tectonic shift from a global system delineated by walls to one built on networks.

Instead of creating many smaller hubs of excellence, globalisation’s vast supply chains coalesced around a few readily identifiable centralised points, allowing both companies and governments to exercise monopolistic power over essential sectors. Examples abound, such as the US Treasury leveraging the world’s reliance on the dollar to turn the global financial system into a sledgehammer with which to crush rogue actors such as North Korea and al Qaeda. That same dominance was employed to stop European companies from trading with Iran after the US pulled the plug on the nuclear deal. Conversely, China uses its considerable power as the premier manufacturer of electronics to build the world’s 5G communications network via a company suspected to take its orders from the state and/or the People’s Liberation Army. Even Japan has threatened to stop the export of specialised chemicals to South Korean electronics manufacturers after that country’s courts criticised Japanese companies for their use of slave labour during the Second World War. Seoul responded by threatening to cut off the supply of heating oil.

ENTRAPPED Though the prophesy proved spot on, the shape it took was unexpected. Rather than ‘liberate’ governments and companies, globalisation trapped them in a web of vulnerabilities. In a replay on a global scale of an experiment first conducted in Europe – the entwinement of economies and the creation of deep interdependencies – countries oceans apart became entrapped in a system that offered the efficiency of economies of scale in return for a diminished ability to set domestic agendas.

A SILVER LINING The globalised economy produces not only a bewildering mesh of friction points, often ruthlessly exploited by those who can, but also a cacophony of threats, accusations, and inuendo. Normally, this scenario resembles a sort of organised chaos that is held in check, and kept from exploding, by a reality reminiscent of MAD – the mutually assured destruction that provided a semblance of normalcy during the Cold War. As long as insults fly and ballistic missiles stay on the ground, all is well.

In the US, but also elsewhere, hawks can rant and rave until they turn blue in the face but must stop short of severing relations with their foe. More to the point, there is no practical way to decouple the economies of the US (or the EU) and China without causing unspeakable chaos and having the proverbial sky fall down.

Such a fairly robust balance of power can, however, be disturbed and become dangerously unhinged when a major player decides to ditch game theory, as happened with the US under Trump. Luckily, most other players agreed, if only tacitly, that the Trump Administration would prove the exception to the rule and be replaced before long – as it has been.

Despite growing pressure to re-shore production, initiated by the Obama Administration, US companies have only haltingly answered the call. Apple has opened two smaller production facilities and is apparently willing to consider additional investments if allowed to return some or all of the $200 billion it holds in overseas accounts without incurring a hefty tax bill. The iconic company has also committed to invest in the development of a stateside supplier base to boost local manufacturing capacity and create, over time, an ecosystem similar to the one it leverages in China. CFI.co | Capital Finance International

President Biden and his administration must now seek to re-join this dissonant concert without causing any major upsets whilst cashing in – as it were – on the fact that his predecessor gave all and sundry a good scare. China is no less eager than the European Union to make up with Washington under revised terms. There is an opportunity for the US to further its agenda considerably and reassert its pre-eminence – not necessarily at the expense of others but as key driver of post-pandemic global change. That is the silver lining left by the outgoing administration. i 29

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NO AUSTERITY With the nomination of former Federal Reserve Chairperson Janet Yellen as his Treasury Secretary, President Biden indicated that he is not about to slow down or choke off a postpandemic economic recovery by tightening fiscal policy. Whilst heading the Fed between 2014 and 2018, Yellen deftly kept the US economy on a trajectory of sustained growth even as she slowly weaned the country off its addiction to quantitative easing, introduced in the aftermath of the 2007 financial crisis.

"President Biden and his administration must now seek to re-join this dissonant concert without causing any major upsets whilst cashing in – as it were – on the fact that his predecessor gave all and sundry a good scare."

> Joe Biden:

Man of Faith Seeks Conciliation in a Divided Nation

e has vowed to ‘restore the soul of America’ and has just been named Time’s Person of the Year. On Inauguration Day, January 20, Washington insider Joe Biden will have reached the pinnacle of a career in national politics that spans almost five decades. Few people are better acquainted with the inner workings of the US government, and the political sphere that surrounds it, than the new president. His arrival at the White House is also a homecoming of sorts for President Biden. He is intimately familiar with the ins and outs of the building after serving eight years as vice-president under Barack Obama. President Biden’s solemn promise to the nation – restoring its soul – is not merely a marketing gimmick. A devout Roman Catholic, the president rarely skips mass and regularly interrupts his schedule for a moment of quiet prayer and reflection. On the morning of Election Day, he attended a service at an unassuming church near his home in Wilmington, Delaware, whilst most members of his campaign team were still fast asleep. Faith has not stopped President Biden from breaking with Catholic doctrine on key issues such as abortion, same-sex marriage, and LGBTQ rights. He gravitates towards a more temperate form of liberation theology which is inspired by concerns over social justice and reform. During his career in politics, President Biden has preferred to build bridges rather than burn them. He usually avoids extremes, welcomes debate, and respects opinions that may not coincide with his own.

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MEET ME HALFWAY Restoring the soul of a highly polarised society requires a willingness to compromise and meet opponents halfway. That disposition is precisely what defined President Biden as a senator and earned him a reputation for reaching out across the aisle to seal deals and expedite the business of government. In all his years in Washington, President Biden has made few enemies. Frequently called naïve for his readiness to focus on the good in people, the president is, however, not a pushover and will stand his ground when challenged in the core of his beliefs. Often compared to Jimmy Carter, who saw his Baptist faith as enriching his presidency, President Biden is comfortable talking about his personal convictions without feeling the need to impose teachings, or pass judgment, on others. During an interview with late-night television host Stephen Colbert in 2015, he described his faith as a ‘place you can go for solace’ rather than a ‘system of beliefs’. Suffering great personal loss – his first wife Neilia and infant daughter Naomi died in a car crash just before Christmas 1972 whilst he lost his son 30

Beau to brain cancer in 2015 – President Biden tapped the strength of his faith to continue. In his autobiographical Promises to Keep, the president reminisces his childhood grounded in the Irish Catholicism that revolves around family and the local parish rather than the edicts from Rome. Briefly considering entry into the seminary to become a priest, President Biden’s education was steeped in the Catholic social teachings that emerged towards the end of the 19th century and included ten principles centred on the common good and human dignity. In a 2007 interview with the Christian Science Monitor, he explained that it is not enough to feed the hungry, but also to address the causes of hunger. The doctrine taught him that abuse of power is a cardinal sin, as is the failure to stop it. It is, however, President Biden’s authenticity in explaining his personal beliefs, and his sincere acceptance of its practical limitations in a secular environment, that stand out and allow him to forge ad hoc coalitions and advance shared agendas. It also helps explain why he refrained from speaking about religion on the campaign trail. In many ways, the new US president represents the polar opposite of the outgoing one. Whereas Trump rarely tolerated dissent amongst those who serve him, and mercilessly dumped anyone questioning his superior wisdom, President Biden has built a career on gathering diverse opinions and mirror them to his own to propose a way forward. If wisdom is the realisation that individual knowledge is per definition limited, President Biden has the makings of a wise man. THIRD TIME LUCKY President Biden first launched a bid for the White House in June 1987. Whilst campaigning, he took one cue too many from British Labour Party leader Neil Kinnock, lifting passages from his speeches and borrowing facts from his life. Slightly embarrassed by the revelations, he bowed out of the electoral race in September and collapsed the following February from a potentially life-threatening brain aneurysm that required extensive surgeries and a seven-month recovery. Twenty years later, in 2008, President Biden put in his second bid only to withdraw after securing only 1% of the delegates in the Iowa Democratic caucuses. After winning the party’s nomination, Barack Obama chose then-Senator Biden as his running mate. Last year, on April 25, President Biden announced his intention to run for a third time, entering a crowded field of 28 Democratic hopefuls and proceeding to knock them out in batches – all the while remembering his father’s sage advice: The measure of a man is not how often he is knocked down, but how quickly he gets up. CFI.co | Capital Finance International

Ignoring the numerous taunts coming out of the White House, President Biden drew his own plan and doggedly stuck to its core message of national healing and decompression whilst appealing for cool heads and common sense to prevail. It was a smart course of action for a man not known for his ability to play to large crowds or serve up oneliners on command. Deftly holding his ground in two presidential debates, President Biden faced down his opponent by either letting him rage uncontrollably or patiently reiterating his own message. Admittedly, President Biden would probably have fared less well against an opponent fielding slightly more gravitas. Also, the Corona Pandemic did deprive Trump of his only trump card – the economy. However, the events of the last few months have shown that the US system of checks and balances works wonderfully well, though subject to momentary hiccups. Even stacked by Trump with conservative judges, the Supreme Court refused to consider the president’s wild claims of fraud. Voters turned out in record numbers and opted for conciliation instead of confrontation. The losing party huffed and puffed a little bit, as the script demanded, but in the end accepted its fate. Political violence did break out when hordes of Trump supporters stormed the Capitol, but order was eventually restored. In the end, the one-term president lost his voice when Twitter suspended his account, saw his coup attempt duly derailed, and had to vacate the White House on the appointed date. Now the real work begins. President Biden must deliver on his promises. The job has been made much easier after Georgia voters awarded the two senate seats still in play to the Democrats in the January 5 runoff election, granting the party a clean sweep majority and control of both the executive and legislative branches of government. It’s now up to the Biden Administration to deliver the goods. i

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> Trump Legacy:

Shouting and Wielding a Big Stick at China Is Here to Stay FIVE DECADES OF FAILURE Slightly less lyrical, perhaps, Pence argued that a country willing to oppress its own people ‘rarely stops there’. In July, then-Foreign Secretary Mike Pompeo was more succinct still, concluding that five decades of engagement with China had been a ‘failure’. Speaking at the Richard Nixon Library in California, Pompeo said that ‘blind engagement’ with China won’t make that country conform to the rules-based order built by ‘free societies’: “We must not continue it. We must not return to it.”

he legacy of the outgoing Trump Administration may not carry universal appreciation, its hawkish take on China wasn’t far off the mark. Early on in his term, Trump dismissed the bipartisan consensus on US policy towards China which he considered too timid in light of that country’s aggressive pursuit of trade advantages. The longstanding policy of constructive engagement, built on the assumption that free trade would pry open a closed society and unleash winds of change, was unceremoniously ditched in favour of a much more confrontational zero-sum approach. Although an overarching diplomatic strategy, including measurable long-term objectives, was never coherently formulated, the new US attitude sprang from a growing list of apparently valid complaints regarding China’s behaviour. In a 2018 landmark speech at the Hudson Institute, a conservative think-tank set up in 1961 by former systems theorists of the RAND Corporation, former-Vice-President Mike Spence delivered a veritable litany of grievances, enumerating some two dozen points of friction.

As prosperity increased, so did China’s confidence in the effectiveness of its own policies. It turned out that taking care of a nation’s material wants does not necessarily lead to a call for more freedom. In fact, the opposite was true: Chinese people, grateful for the opportunity to leave poverty behind, became rather conservative, wishing to avoid any reform that could undermine the nation’s doublequick-time progress. MORE WAYS THAN ONE Authoritarians across the world took note and concluded that the stern lectures on democracy and governance of former colonial powers were not the only pathways to development. Fumbling around the edges of the post-war world order, China showed that precedent is not set in stone and rules could be tweaked to deliver bespoke outcomes. Or, more prosaically, the western emperor’s clothes only appeared magnificent in the eyes of the beholder. Trump – not particularly interested in diplomatic niceties, subtleties, or indeed decorum – introduced a rather novel way of looking at China by focussing merely on the outcomes. Dismissed by most economists as naïve at best, and more likely hopelessly simplistic, Trump’s approach was to look at the ever-widening bilateral trade imbalance and conclude that the US was not getting a fair shake. A tariff wall was duly erected, not paid for by Mexicans but by American industry and consumers. Former US Trade Representative and World Bank President Robert Zoellick surprised many when he – admittedly in a rather roundabout way – sort of praised the Trump Administration for tabling CFI.co | Capital Finance International

Still, it was refreshing to see a departure from what, until the arrival of Trump, had been a largely academic discussion on the US-China mismatch – an exercise that included a survey of ‘domestic pathologies’ in the world’s leading economies to gain a deeper understanding of imbalances and recurring debt and financial crises. Whereas it is an established truth that the balance in goods and services is usually determined by domestic savings rates and investment flows, such considerations did not come into the Trump Administration’s equation at all. In the specific case of China, there was – and is – a good reason for that: The country is not a free market where economic actors may behave according to their own best interests. Instead of being regulated by a hidden hand, China’s economy is managed by an iron fist according to the objectives not of the individual, but of the ruling class – answerable only to itself. TILTED This helps explain China’s impressive domestic savings rate and the fact that households only consume less than 40% of the country’s economic output – a ratio considerably lower than that of any other major economy. In fact, the entire structure of the Chinese economy has been designed to shift income from workers to companies and the state. To truly address its outsized trade surplus, China would have to massively divert income streams from the elite to ordinary people. That is unlikely to happen anytime soon. Whilst this analysis cuts a few corners for brevity’s sake, the core message understood by the Trump White House was that (a) China does not have a free-market economy and (b) the country has good thing going that it is unlikely to relinquish. Hence, the big stick approach. Whilst the Biden Administration is expected to tone down the rhetoric and formulate a more refined China policy, the bipartisan consensus has shifted considerably over the past four years and now revolves around the need to preserve the tough stance and include issues such as the repression of democracy in Hong Kong and the treatment of minorities. The new president has also promised to engage with the European Union and form a common front to deal with China’s assertiveness. Thus, the course set by Trump is not likely to be abandoned and may even be expanded upon. i 31

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Spence’s sweeping indictment ranged from suspicions of interference in US politics to accusations of impeding the free passage of ships in the South China Sea. Topics such as the misappropriation of US intellectual property, dumping, and a long list of other unfair trade practices were also mentioned in what diplomats later described as the first shot fired in a new cold war. Others considered the former-vicepresident’s speech no less significant than the one delivered in March 1946 by Winston Churchill in Fulton, Missouri, where the former British prime minister famously introduced the term ‘iron curtain’.

Ever since China opened up to the world in the 1970s, the consensus was that constructive engagement, quiet diplomacy, and increased prosperity would turn China into a liberal democracy. The only additional element needed was time. However, the course of a juggernaut of 1.3 billion people is not easily changed to a new direction. Whilst the assumptions underlying the consensus were reasonable, China proved them wrong – and by doing so dethroned Bertolt Brecht as well: A sense of morality doesn’t necessarily spring from a full stomach.

the issue and at least prompting the Chinese leadership to think about adjusting their long-term strategy towards the US. Zoellick did deplore the administration’s unilateral approach and failure to work with its allies to develop a more comprehensive initiative.

> Anatole Kaletsky:

Why Biden Can Overcome Political Gridlock

he US election has passed without any big surprises, and the enthusiastic reaction in global financial markets has been exactly what any economics textbook would predict if a predictable, conventional centrist replaced an erratic, extremist populist as US president. Beyond investor psychology, there are several fundamental reasons that justify a Biden rally: the near-certainty of further fiscal stimulus 32

in the short term; the high probability of progrowth Keynesian demand management in the medium term; and the possibility of a global investment boom in new energy and transport technologies in the long term. Yet most investors, economists and political pundits are skeptical about all these possibilities because of the Democrats’ failure to retake control of the Senate. According to CFI.co | Capital Finance International

conventional wisdom, Biden will find himself immediately paralysed because Republicans will follow the same playbook they used to sabotage Barack Obama’s administration. After winning a House majority in 2010, Speaker John Boehner blocked almost all legislation, turning Obama into a lame-duck president for six of his eight years in office. Now the Senate, under GOP control since the 2014 midterm election, will again create gridlock and prevent

Winter 2020-2021 Issue

pandemic relief, block fiscal expansion, and thwart new investment in energy or infrastructure. But this is not the whole story. There are five new features of political dynamics in America that this gloomy conventional wisdom has overlooked. First, a big COVID-19 relief bill is almost certain to pass Congress even before Biden is sworn in. Now that the election is over, the demands for government support from business lobbies will overwhelm Senate Republicans’ obstructionism, while the Democrats must create conditions for a strong economic recovery in the first few months of Biden’s term. Thus, there is every chance of a “quick and dirty” compromise, whereby Republicans agree to a package of slightly above $1 trillion, Democrats accept previously rejected conditions such as immunity for employers from liability for COVID-19, and Trump takes credit for the whole deal. Second, when Biden becomes president, he will find it much easier to maintain public support for government spending and resist pressures for budget consolidation than Obama did after losing the House in 2010. The COVID-19 crisis has transformed public attitudes to government spending and borrowing. But even before the pandemic, voter interest in government debts and deficits was rapidly eroding, because the Trump administration’s policies had clearly demonstrated that deficits did not cause the economic damage that conservative propagandists claimed. Republican efforts to resurrect the obsession with deficits, which served the party well in 2010, will go nowhere until well after the COVID-19 recession is over.

"According to conventional wisdom, Biden will find himself immediately paralysed because Republicans will follow the same playbook they used to sabotage Barack Obama’s administration."

Third, a Republican Senate majority will not be the rock-solid monolith that many commentators suggest. While the Republicans will certainly unite to stop Biden from significantly raising taxes, McConnell will find it difficult to maintain 100% unanimity against a Biden fiscal stimulus plan, especially if the stimulus is delivered mainly through tax cuts for the middle class. A one- or two-seat Senate majority will also be insufficient to block expansionary public spending, especially if the Biden administration is clever about directing government investment at local projects in key senators’ states. In this respect, the Washington tradition of influencing Congressional votes with carefully targeted “pork-barrel spending” will benefit from Biden’s 36-year record in the Senate. Biden starts with Washington CFI.co | Capital Finance International

experience and personal relationships unmatched by any president since Lyndon Johnson. The horse-trading that lies ahead could prove particularly effective in breaking Republican unity, because six of the 20 current GOP senators who will face voters in the 2022 election happen to represent swing states: Florida, Georgia, North Carolina, Ohio, Pennsylvania and Wisconsin. It is far from obvious that Senators who are running for re-election in states that have just voted for Biden, or have come close to doing so, will vote blindly against popular policies such as middle-class tax cuts or government spending in their own states, merely for the sake of party unity and sabotaging Biden. To make matters worse for the Republican leadership, at least three Senators who do not face re-election – Mitt Romney, Barbara Murkowski, and Susan Collins – are longstanding moderates with a record of compromise and crossing party lines. Since McConnell is aware of these challenges to party unity, he is likely to behave less obstructively, at least until the 2022 election, than he has in the past. Fourth, a GOP Senate majority may not even exist. To keep control, Republicans must win at least one of the two Senate seats to be contested in Georgia on January 5. Now that Georgian voters have backed Biden, albeit by a razor-thin margin, it is doubtful they will reverse this decision in two months. Conventional wisdom assumes that Democrats will be less motivated to vote again, because winning the White House will lull them into complacency, while Republicans will be desperate to check the new president. But the opposite is just as likely. Democratic voters may be energised to an even bigger turnout by their unexpected victory, while Republicans may be so disillusioned that they stay at home. A lower Republican turnout is even more likely because Trump will no longer be on the ballot, and many of his fervent supporters may be less interested in voting for more conventional politicians. i ABOUT THE AUTHOR Anatole Kaletsky is Chief Economist and Co-Chairman of Gavekal Dragonomics. A former columnist at the Times of London, the International New York Times and the Financial Times, he is the author of Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis, which anticipated many of the post-crisis transformations of the global economy. His 1985 book, Costs of Default, became an influential primer for Latin American and Asian governments negotiating debt defaults and restructurings with banks and the IMF. 33

> World Bank - Building Back Better After COVID-19:

How Social Protection Can Help Countries Prepare for the Impacts of Climate Change By Christian Bodewig & Stéphane Hallegatte. This article first appeared on World Bank's Development and a Changing Climate blog.

hile the world is still in the midst of dealing with the health and socioeconomic impacts of the COVID-19 (coronavirus) shock, one key lesson is already emerging: Social protection is proving its potential as an emergency instrument to protect affected households. Countries with strong social protection systems, underpinned by inclusive personal identification systems, comprehensive social registries with household information and robust digital payment systems, have been able to ramp up support to their impacted populations faster and more effectively.

"As parts of the world start to anticipate life beyond this crisis, a key question for policymakers will be: How can countries “build back better” and make sure their social protection systems can respond quickly and efficiently to future shocks?"

Madagascar: Cash transfer recipients. Photo: Mohammad Al-Arief / World Bank

As parts of the world start to anticipate life beyond this crisis, a key question for policymakers will be: How can countries “build back better” and make sure their social protection systems can respond quickly and efficiently to future shocks? This could make a significant difference for populations vulnerable to shocks, like that provoked by this pandemic, as well as to the impacts of climate change. SOCIAL PROTECTION CAN HELP PEOPLE ADAPT TO CLIMATE CHANGE Social protection already helps households, communities and economies cope with shocks, making them ideal instruments to help them adapt to climate change. The response to the COVID-19 shock shows how “adaptive” social protection can expand on a temporary basis in response to a shock by expanding to a larger pool of beneficiaries or by providing larger benefits (or both). Shock-prone countries across world have been experimenting with similar approaches to respond to climate shocks. The emerging experience is encouraging: for example, in Fiji, households covered by the Poverty Benefit Scheme have recovered more quickly thanks to exceptional transfers introduced after tropical cyclone Winston. Cash transfers in Niger helped build the resilience of households to climate change through diversifying income sources, 34

Social safety nets: catching people before they fall on hard times. Photo credits: Fernando Moleres

encouraging savings and preventing poor coping decisions when shocks hit. Cash transfer programs have also increasingly been reinforced with “accompanying measures” focused on economic inclusion, human capital formation and climate adaptation. These could include behavior change interventions focused on helping people deal varying weather conditions and diversifying crops, savings interventions to generate a buffer to absorb climate shocks and enable investments in adaptation as well as skills training and coaching to support diversification of livelihoods. These can encourage long-term CFI.co | Capital Finance International

adaptation actions that reduce households’ vulnerability to climate change. Emerging experience from Ethiopia and the Sahel region in Africa suggest significant impacts of such interventions on households’ climate resilience. A focus on early childhood development, nutrition and health interventions can also help raise household and community capability to protect human capital. AND IT CAN HELP COUNTRIES MITIGATE AGAINST CLIMATE CHANGE Over the long term, there is no substitute to decarbonising the world economy in order

Winter 2020-2021 Issue

"Enhance social safety nets by expanding coverage of social protection programs and strengthening delivery systems to make programs scalable and climate shock-responsive."

Burkina Faso: a dying Baobab tree. The Baobab tree is known as ‘the tree of life,’ it provides shade, nourishment and prevents erosion. Baobab trees can live for more than 1,000 years (some up to 2,000 years), but many of the oldest and largest ones are dying, they appear to be victims of climate change. Photo: Amina Semlali / World Bank

to stabilise global temperatures. Experience from Indonesia illustrates how cash transfers can promote both adaptation and mitigation by raising households’ incomes, so they are better able to deal with sudden shocks, but also helping them abandon livelihoods such as logging, which contribute to climate change. Climate-sensitive public works programs can also promote cost-effective reforestation and irrigation or combat soil erosion, and countries like Mexico and China have cash transfer programs that explicitly encourage beneficiaries to engage in ecological conservation practices. Employment programs can also help workers move from carbon-intensive occupations to greener occupations. For example, programs to manage the social and labor impacts from coal mine or gas field closures are critical to facilitate closures and to ensure a “just transition for all”. And experience ranging from Armenia and Ukraine to Ghana shows how social safety nets can help facilitate the politically challenging reforms of energy subsidies by protecting the poor from energy price increases. HOW CAN COUNTRIES “BUILD BACK BETTER”? What will it take to more fully realise the potential of social protection to help communities be better protected from shocks? There are three parts to the answer: First, enhance social safety nets by expanding coverage of social protection programs and strengthening delivery systems to make programs scalable and climate shock-responsive: This entails developing unique and universal identification of individuals, with appropriate oversight and accountability; social registries of poor and vulnerable households; and digital payment mechanisms to swiftly transfer cash to affected households.

Second, coordinate on preparedness: Countries can strengthen early warning systems that help predict droughts and floods, with automatic triggers or pre-arranged solutions to initiate swift cash transfers to affected people. For example, the Kenya Hunger Safety Net program can provide exceptional transfers in anticipation of droughts and floods thanks to strong existing delivery mechanisms and pre-positioned financing. And third, learn from what we are living through: Leveraging social safety nets in response to the COVID-19 shock now will create new “muscle memory”, including delivery mechanisms to help reach affected communities quickly. Making these more robust and learning from this experience will help communities respond to the next shock they face, including that of climate change. There is no vaccine coming for climate change. But by focusing on the social protection that vulnerable communities and people need – whether supporting them to deal with the impacts they are already facing today or helping reduce carbon emissions to put a break on global warming - governments can help their citizens be better prepared for any shocks that come. i ABOUT THE AUTHORS 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 CFI.co | Capital Finance International

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 School of Economics. He is fluent in English, German, and French. Stéphane Hallegatte is the lead economist of the World Bank Climate Change Group. He joined the World Bank in 2012 after 10 years of academic research. His research interests include the economics of natural disasters and risk management, climate change adaptation, urban policy and economics, climate change mitigation, and green growth. Hallegatte was a lead author of the 5th Assessment Report of the Intergovernmental Panel on Climate Change (IPCC). He is the author of dozens of articles published in international journals in multiple disciplines and of several books. He also led several World Bank reports including Shock Waves: Managing the Impacts of Climate Change on Poverty in 2015, Unbreakable: Building the Resilience of the Poor in the Face of Natural Disasters in 2016, and Lifelines: The Resilient Infrastructure Opportunity in 2019. He also led the writing team of the Stern-Stiglitz HighLevel Commission on Carbon Prices. He was the team leader for the World Bank Group Climate Change Action Plan, a large internal coordination exercise to determine and explain how the Group will support countries in their implementation of the Paris Agreement. In 2018, he received the Burtoni Award for his work on the link between climate change adaptation and poverty reduction. Hallegatte holds an engineering degree from the Ecole Polytechnique (Paris) and a PhD in economics from the Ecole des Hautes Etudes en Sciences Sociales (Paris). 35

> UNCDF:

Women as Builders of Inclusive Digital Economies By Nandini Harihareswara Senior Advisor, Inclusive Digitial Economies, UNCDF

he dramatic toll of the COVID-19 pandemic, at times, seemingly defies belief. Yet, every time there is an analysis of the pandemic’s damage — human, societal, economic — a recurring narrative emerges, one that is quite believable. That COVID-19 has wielded particular damage against upon those constituencies traditionally underserved by their communities, country and the global financial ecosystem. The particular impact COVID-19 has unleashed on women, specifically given their precarious place in practically all local and national economies, is a dramatic example. Data from the powerful report published by UN Women, “From Insights to Action: Gender Equality in the Wake of COVID-19,” proves the point. Regarding the 740 million women in the world working in informal economic sectors, they saw their income fell by an astounding 60%. As for women in formal employment, women in Asia and the Pacific were far more likely than men to report drops in employment working time, 50% to 35% respectively, while a quarter of self-employed women in Europe and Central Asia reported job losses. With women representing the vast majority of the world’s domestic workers (80% according to the report), nearly threefourths of those domestic workers have lost their jobs as a result of COVID-19, while women working in “feminised sectors” were nearly 20% more likely to lose their job compared to their male counterparts. At its worst, the pandemic would exacerbate the challenge of global female poverty, with the UN Women report projecting that nearly 250 million women aged 15 will be driven to poverty due to COVID-19, with nearly half of these women living in sub-Saharan Africa alone. For women aged 25 to 34, the global poverty rate will tilt towards women disproportionately over men, with 121 women experiencing poverty for every 100 men. These impacts will almost surely create a multiplier effect relating to the challenges women are more likely to experience, including gender-based violence. Of course, the economic damage will be the most ferocious in the world’s 47 least developed countries (LDCs)—the countries of primary focus for the United Nations Capital Development Fund (UNCDF). As we have observed over the past year, COVID-19 threatens to dramatically

"Inclusive digital economy is an economy that connects individuals, households, and small businesses with financial eco-systems that catalyse participation in the local economy and provide tools to climb out of poverty and manage financial lives." exacerbate the structural challenges that prevent women from achieving financial agency and autonomy: from being more likely to be excluded from economic resources to lack of training driving women to work in the informal sector; from inadequate support and financing for women-led and gender friendly SMEs to the absence of infrastructure and related services that would strengthen women’s economic opportunities; from the digital and energy divide in the LDCs more likely impacting women and girls to local policies, laws and social norms that are discriminatory against women while reflecting a profound lack of women’s leadership in decision-making. UNCDF has actively worked to deploy genderaware responses to the pandemic: prioritising local support mechanisms to protect womenowned enterprises and female entrepreneurs, including direct financing, technical support and credit guarantees; digital finance solutions tailored to women, such as connecting women entrepreneurs and workers through e-commerce, data collection and agriculture chain digitisation; and collaborating with UNDP on a bottom-up gender-responsive strategy and action action for COVID-19 recovery. But the reality is that we cannot choose between deploying both a gender aware response to combat the pandemic on the ground or addressing the structural challenges that pre-dated COVID-19 in impeding women’s economic empowerment. We have to confront both at the same time, in particular because they are inextricably intertwined with each other. And a critical driver of UNCDF’s approach to addressing and reforming these structural challenges involves supporting inclusive digital economies.

EMPOWERMENT THROUGH INCLUSIVE DIGITAL ECONOMIES What are the characteristics of an inclusive digital economy? It is an economy that connects individuals, households, and small businesses with financial eco-systems that catalyse participation in the local economy and provide tools to climb out of poverty and manage financial lives. When it comes to women’s economic empowerment, an inclusive digital economy reduces poverty, increases resilience, and improves economic opportunities for women and girls. UNCDF envisions women as agents of change who can be builders of the digital economy, and who will partner with women and the public and private sectors, leveraging technology and innovation, to help increase women and girl’s digital and financial autonomy. With 20 years of experiencing advancing financial inclusion in the world’s toughest markets, we are implementing a market system development approach to decrease the digital divide for women and girls, use technology to improve women’s economic opportunity, to help to transform women into builders of emerging digital economies. This approach is designed to serve the distinct needs of women and girls throughout their lifecycles: from the educational needs of young, adolescent women, to the household challenges of adolescent girls and adult women, to the realities tied to caring for the infirm, dying of spouses and elder age for older women. The approach is framed around five key goals, realising those goals will change the reality of women’s participation in growing digital economies, foster the wellbeing of their households, and in turn contribute to the inclusive economic development of their countries. First, we aim to decrease the digital divide by increasing the number of women and girls that own a phone, can access to the internet, and have access to energy sources to power digital services. For access to be meaningful women and girls need the capability and autonomy to use it to empower their lives. Second, we are going to work with the private and public sector to increase the number of affordable digital and financial products that address the needs of diverse segments of women. For instance, rentto-own smartphone payment plans, goal-based savings products, digital credit, and biometric bank access points.

"We will leverage technology to increase access to finance for women-owned or managed small to medium enterprises using innovative forms of funding." 36

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Winter 2020-2021 Issue

ABOUT THE AUTHOR Nandini Harihareswara is a Senior Advisor and Lead Focal Point on Gender Equality for the UN Capital Development Fund’s Inclusive Digital Economies division. She formerly worked as the UNCDF Digital Finance Regional Technical Specialist in Zambia and Malawi. She was a founding member of the USAID Digital Development Division in 2011 and served as the Strategy & Operations Chief and Senior Digital Finance Advisor. She began at USAID working as an Investment Officer for the Development Credit Authority Office. She began her career as a Presidential Management Fellow at the US Department of Transportation & the World Bank. She was the architect of the UNCDF Zambia Sprint4Women DFS design competition, and the author of numerous publications focused on finance, technology and international development, most recently a co-author of the recent G20 paper on Advancing Women’s Digital Financial Inclusion. Nandini has an MBA and a Masters in International Trade and Investment Policy from the George Washington University. She also holds a BS in Psychology and a BA in Political Science from the University of California at San Diego.

Author: Nandini Harihareswara

Third, we will leverage technology to increase access to finance for women-owned or managed small to medium enterprises using innovative forms of funding. Women-owned businesses are often part of the ‘informal economy’, this has made it hard for them to receive support during the COVID-19 pandemic. Our work will, therefore, also focus on helping to formalise women-owned businesses. We will also support the public sector to collect and use sex disaggregated data to inform policy decisions increasing women’s digital or financial inclusion; work with public and private sector on the barriers to collecting and using sex disaggregated data for increasing product usage by women; and share learning on policy gender bias and ways in which to address that bias. Finally, we are going to create natural “coalitions of the willing” between public and private sector actors to increase the number of women in the workforce and leadership positions within Digital Economy Ecosystems. INTO THE FUTURE 2020 marked the 25th anniversary year of the Beijing Declaration and Platform for Action — the UN-led agenda for women’s empowerment that UN Women described as the “most visionary agenda for the empowerment of women and girls, everywhere.” While the onset of COVID

took some focus away from this important anniversary, this did not stop UN Women from launching its Generation Equality campaign, a multi-generational campaign to realise women’s rights for an equal future. UNCDF was privileged to be chosen as co-leader of the Economic Justice and Rights Coalition. We will work with fellow coalition members and other partners to contribute to reducing economic inequality between men and women. We bring to the coalition our experience in promoting equitable economic development through “last mile” financing, our considerable reach developed through an on-the-ground presence in 28 developing economies, and our market development approach.

ABOUT UNCDF UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. UNCDF pursues innovative financing solutions through: (1) financial inclusion, which expands the opportunities for individuals, households, and small and mediumsized enterprises to participate in the local economy, while also providing differentiated products for women and men so they can climb out of poverty and manage their financial lives; (2) local development finance, which shows how fiscal decentralisation, innovative municipal finance, and structured project finance can drive public and private funding that underpins local economic expansion, women’s economic empowerment, climate adaptation, and sustainable development; and (3) a least developed countries investment platform that deploys a tailored set of financial instruments to a growing pipeline of impactful projects in the “missing middle.’’

It is a sad coincidence that the pandemic coincided with the 25th anniversary year of the Beijing Declaration and the Generation Equality movement. But it can also serve as a powerful reminder. A reminder that the pervasive and systemic challenges women face cannot be separated from the harms they are experiencing due to the pandemic. This reality defines our approach of supporting inclusive digital economies to advance women’s economic empowerment, as well as embracing the challenge of making this empowerment a universal reality in the years to come. CFI.co | Capital Finance International

> OECD:

Enabling Brazil’s Development Finance Institutions to be Fit for Purpose By Özlem Taskin & Valentina Bellesi

While blended finance is still at a nascent stage in Brazil, Brazilian DFIs are increasingly engaging in blended finance. This article provides highlights of the forthcoming OECD Development Co-operation Working Paper ‘The role of domestic DFIs in using blended finance for sustainable development and climate action – The case of Brazil’.

he Decade of Action for the Sustainable Development Goals (SDGs) is mired in uncertainty as the COVID-19 crisis has widened pre-existing financing gaps for sustainable development. More so, the trillions held in the financial system continue to fuel inequalities, systemic vulnerabilities and unsustainable investments (OECD, 20201).

Blended finance – the strategic use of development finance for the mobilisation of additional, commercial finance towards sustainable development – has emerged as part of the solution to attract private capital and help bridge the SDG financing gaps (OECD, 20182). While many different actors will need to be mobilised to respond to the current crisis and recover along a sustainable and resilient path, development banks and development finance institutions (DFIs) can play a key role in mobilising commercial finance at scale. While momentum on development banks and DFIs from the Global South is increasing, they are to date an underutilised conduit in financing for development. More information and evidence on how these institutions are mobilising commercial finance is needed. The case of Brazil’s DFIs3 is an interesting example given that a multilayered and interlinked system of domestic DFIs is aiming to support the delivery of Brazil’s development objectives.

"Blended finance has emerged as part of the solution to attract private capital and help bridge the SDG financing gaps." While official development finance intervention have leveraged significant volumes of private finance in Brazil over the last years, blended finance remains an underutilised approach by domestic DFIs. OECD-DAC data shows that most private finance mobilised by official development finance targets upper-middle income countries such as Brazil. Over the 2012-2018 period, Brazil attracted a total of USD 5.6 billion of private finance mobilised through official development finance, with significant fluctuations over the years. While in 2012 and 2013, bilateral development finance providers were the most prominent actors in Brazil, multilateral providers have taken centre stage in Brazil since 2014, having mobilised over 70% of total private capital (on average in 201718) in the country.

OECD-DAC data also shows that private finance mobilised in Brazil is strongly concentrated in the energy, and banking and financial services sectors (having each attracted over 32% of the total). Funds mobilised in the banking and financial sector are often on-lend by local financial institutions to local businesses and households with restricted access to finance. This can support the development of domestic financial systems and strengthen the inclusiveness of local financial institutions. Other important recipient sectors are industry, mining and construction (16% of the total), as well as agriculture, forestry and fishing (5%). Across leveraging mechanisms, syndicated loans mobilised over half of private finance in Brazil, followed by simple co-financing schemes (16%) and guarantees (14%). This suggests that guarantees were an underutilised leveraging mechanism in the case of Brazil (relative to average use) and could thus be further explored for future transactions. Experience with the use of guarantees could also be valuable to finance the recovery from the COVID-19 crisis as initial evidence suggests that, globally, demand for guarantees grew since the onset of the crisis. A critical first step to advancing the blended finance agenda in Brazil is a sound understanding of its national system of DFIs and the fundamental parameters that define them.

Source: OECD DAC data on private finance mobilised by official development finance interventions, https://www.oecd.org/dac/financing-sustainable-development/development-finance-standards/mobilisation.htm

CFI.co | Capital Finance International

Winter 2020-2021 Issue

Clear mandates, incentives, capacities and tools in support of the sustainability transition Making blended finance work for Brazil’s DFIs and development priorities

Design blended finance to build markets and serve local needs

in Common, 20205). In order to do so, it is of paramount importance that domestic, regional and international development banks step up action to mobilise and align private resources towards sustainable development and climate action. i OECD (2020), Global Outlook on Financing for Sustainable

Development 2021: A New Way to Invest for People and Planet, OECD Publishing, Paris, https://doi.org/10.1787/e3c30a9a-en.

Promote sharing of good practice approaches and lessons learned

Source: authors

National and sub-national DFIs have several comparative advantages over their international counterparts, such as (i) their proximity to local markets and embeddedness in the policy context, enabling them to act as policy influencers and market facilitators; (ii) ability to provide financing in local currency, with benefits for local capital market development; and (iii) sectoral expertise or geographical focus which can facilitate technological advancements and target local needs. Similar to other emerging economies, Brazil has several domestic DFIs in place, which emerged out of the country’s high decentralisation and the differing development priorities of federal states. Within its national system of DFIs, more than 30 financial institutions exist, operating at national and sub-national levels, with different mandates, governance and regulations. To date, BNDES, Brazil’s national development bank, is the main funding source of many DFIs, but these institutions are increasingly looking to diversify their access to capital as their funding from BNDES is decreasing. Subnational developments banks are naturally smaller than their national counterparts but hold a prominent role in meeting local development needs. Blended finance is still at a nascent stage in Brazil, but domestic DFIs are starting to gain experience. The OECD Development Co-operation Working Paper reveals varied experiences on blending across Brazil’s DFIs. According to a survey conducted for this study among Members of the Brazilian Association of Development (ABDE), only 3 out of the 12 respondents stated to already engage in blending4, but all three employ a range of blended finance instruments (e.g. equity investments, syndicated loans, green bonds and others), which indicates a certain expertise of blended finance in already active institutions. While BNDES and the sub-national development bank of the state of Minas Gerais, BDMG, are already deploying blended finance and using a variety of financial instruments and mechanisms, changes in funding models and mandates have created momentum for these institutions to step up their blended finance efforts and for other DFIs to start engaging in blending.

OECD (2018), Making Blended Finance Work for the

Sustainable Development Goals, OECD Publishing, Paris, https:// doi.org/10.1787/9789264288768-en. The definition for a domestic development finance institution

Shareholders need to establish clear and coherent DFI mandates, incentive systems and capacities for mobilisation and climate action. For Brazil’s DFIs to fully harness their potential to support the needed transition to sustainable development pathways, there remain gaps to integrate climate into underlying development objectives, better align portfolios with the SDGs and the Paris Agreement and scale up efforts to unlock commercial investment. Going forward, the OECD DAC Blended Finance Principles and Guidance can serve as a reference framework when navigating the blended finance space. Mandates, incentive systems and capacities are fundamental parameters that can enable a shift of the business model of a DFI from being sole financer to mobiliser of additional, commercial resources for development interventions. Spurred by the increasing national awareness of the limitations of public finance and the need for more investment in the current crisis context and beyond, development banks across the globe need to make this shift to drive forward progress on sustainable development. To ensure that the application of blended finance by Brazil’s domestic DFIs targets the country’s set development priorities, it is important that DFIs explore the range of blended finance instruments and mechanisms. This includes designing blending to build markets and address local needs, in consultation with local actors. Moreover, Brazil’s DFIs are often demonstrating the business case for commercial investment of e.g. solar and wind power projects. Sharing success stories and lessons learnt in these sectors and others where the business case is not as clear is of crucial importance for blended finance to advance. Brazil’s DFIs can also further leverage on their established partnerships with ABDE, policy makers in Brazil, as well as internationally operating development banks and agencies that can also support the effective deployment of blended finance in Brazil. At the first Finance in Common Summit in November 2020, 450 public development banks across the world have jointly declared their “determination to collectively shift strategies, investment patterns, activities and operating modalities to contribute to the achievement of the SDGs and the objectives of the Paris Agreement, while responding to the Covid-19 crisis” (Finance CFI.co | Capital Finance International

(DFI) in Brazil used in this article and in the underlying report is taken from the Brazilian Association of Development (ABDE), which is composed of the various DFIs across the country. According to ABDE, a DFI is either a public or private financial institution, operating on a national or regional level, with the mission of promoting Brazil’s development. ABDE defines the network of DFIs as “national development system”. This refers to the OECD DAC definition of blended finance.

Finance in Common, 2020, JOINT DECLARATION OF ALL

PUBLIC DEVELOPMENT BANKS IN THE WORLD https:// financeincommon.org/sites/default/files/2020-11/FiCS%20 -%20Joint%20declaration%20of%20all%20Public%20 Development%20Banks.pdf

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

ABOUT THE AUTHORS Özlem Taskin is a Policy Analyst in the Environment and Climate Change Unit at the OECD Development Co-operation Directorate, where she leads the work on green finance and development banks. Her work focuses on promoting green investment and climatecompatible infrastructure in developing countries, and on targeting the catalytic potential of development finance towards climate action. Prior to the OECD, Özlem was a development banker and supported the promotion of renewable energy and energy efficiency in India, Serbia and Turkey through investment operation and policy support. Valentina Bellesi is a Junior Policy Analyst in the Private Finance for Sustainable Development Unit at the OECD Development Co-operation Directorate, working on blended finance and development impact. Prior to this, Valentina worked at the Evaluation department of the Council of Europe Development Bank and as an impact evaluation research assistant at the Institute of Latin American studies. She holds a Master’s Degree in International Development from Sciences Po Paris and a Bachelor in Economics and Finance from Bocconi University.

> Lord Waverley:

A New Chapter for the UK and a Meeting Place for the World With the EU agreement now in place, the United Kingdom has the chance to develop a strategy that addresses the ambitions and goals of the country at large.

he halcyon days of yesteryear have not diminished but do need to be recalibrated. The UK has an historic opportunity to reset trade relations and do trade differently, creating a purposeful strategy for the future. Our new identity in the world should involve power broking, advocating values and working to bring solutions to long standing unresolved issues. GLOBAL BRITAIN Trade today impacts all walks of life so not only does that strategy need to be well defined, delivering benefit to all, but it must also help to deliver a more inclusive, sustainable and greener economy. As a G5 trading nation, a comprehensive trade strategy that incorporates trade policy, trade promotion, investment and trade finance with clear connectivity to climate, development, digital and foreign policy objectives is required. As a sizeable economy on the global stage, the UK has an opportunity to help shape the future of the global trading system to ensure it rises to the challenges and opportunities that confront us. We must harness the opportunities of the digital economy and trade in services, tackling climate change and global finance gaps.

CFI.co Columnist

The agreements that are negotiated in the coming years will play a key role and have a decisive impact on our economy for decades. They present an opportunity for the UK to be a global standard setter and to design a trade strategy that creates an economy that is prosperous, more sustainable, more inclusive and greener, and which is guided by the long-term interests of our citizens and future generations, rather than short-term imperatives. Trade generates losers and winners and demands difficult policy choices. It is important that policy options and trade-offs are discussed inclusively and transparently and that we take proactive steps to mitigate any negative effects. To be successful, Global Britain will need a strategy that is coherent and adds up to the sum of its parts combining our wealth of networks, relationships, and assets: all of which need to hinge together to allow us to capitalise on the opportunities and have real global influence. 40

To be successful means having the right capabilities in all areas. Balanced trade relations will be critical. To be effective on the world stage, the UK needs to be pragmatic and constructively engaged with all nation states. There is an important role to play as a bridge between developed economies and between emerging and frontier markets and developed economies. We must have positive trade relations with all. Good, balanced relations will open doors to new opportunities and so enable us to thrive as an independent trading nation. A VISION Trade policy should deliver a prosperous, more equitable, inclusive and sustainable economy in the UK and globally. It should promote trade for an outward-looking economy in a manner that actively promotes high labour, consumer, and environmental standards. It should be rooted in the day-to-day realities of small and large businesses, farmers, and workers, and reflect the priorities of consumers and be developed based on inclusive, meaningful consultation, transparency, and democratic oversight, openly confronting trade-offs and building consensus. This will help ensure that decision-making is informed and robust, and that our trade policy has the trust and confidence of stakeholders and the wider public. Policy must be joined-up, working to support policy agendas in areas from agriculture and the environment, to innovation, industrial and digital strategy, to foreign affairs and international development. Six objectives could guide the future of Global Britain: 1: Trade strategy that is green, supporting the climate and biodiversity, and reducing waste 2: Trade strategy that promotes economic opportunities and sustainable, high quality jobs in all parts of the UK, and enables communities to adapt to new opportunities and adjust to trade shocks 3: Trade strategy that supports fair and sustainable trade globally, reinvigorating the CFI.co | Capital Finance International

Winter 2020 - 2021 Issue

"Making trade work for everyone will require all voices to be represented at the table with robust consultation and transparency mechanisms to enable everyone into the process." multilateral rules-based system and promoting responsible supply chains 4: Trade strategy that capitalises on the opportunities of the digital economy and promotes digital rights of citizens 5: Trade strategy that secures the confidence of stakeholders and the public, through meaningful consultation, and high levels of transparency and accountability 6: Trade strategy that promotes sustainable investment and finance and helps address the global trade finance gap Much has happened at breakneck pace over the past four years. The agenda has been dominated by the singular goal of leaving the EU, but the opportunity now lies in developing a vision for what comes next. Few would argue with the premise of a ‘Global Britain’ but more work is needed to build a consensus around what this means for the country and to work around any inconsistency in policy. Whilst an open vision as a preferred destination to do business is being promoted, legislation is being passed that will screen investors with UK interests anywhere in the world, with considerable penalties for noncompliance. This may have the effect of investors thinking twice about coming to the UK. This is not the intention.

The UK cannot afford to be single issue driven. These ambiguities require a vision that everyone can buy into and to ensure that trade benefits everyone. For the most part it is about being

Firstly, we need to revisit our trade governance structures to deliver better outcomes from trade. Making trade work for everyone will require all voices to be represented at the table with robust consultation and transparency mechanisms to enable everyone into the process. This will help build consensus on approach and ensure that policies are right from the outset. Ultimately, this will lessen the risk at the latter stages of a trade negotiation when dealing with difficult issues. We have seen situations in the past when not all constituencies are on board. It can be enough to sink the deal, as the EU discovered with the Transatlantic Trade and Investment Partnership in 2018. A governance structure was put in place in 2018 and re-structured in 2020 but there are still scenarios where key voices are not being adequately consulted. Important gaps in strategy remain that need development, principally around trade in services and the environment. Secondly, our minds ought to focus, and quickly, on the development of a comprehensive strategy covering policy, export promotion, investment and trade finance. A strategy that underpins and helps deliver our commitments on sustainability, climate and development as well as dovetailing with broader foreign policy objectives such as human rights and diplomatic relations. It also needs to set out clearly what we are working towards at the multilateral level and how we implement the strategy at bilateral level, spelling out the benefits at national level. Services trade is now 50 percent of global trade but is surprisingly undeveloped in terms of global rules. It starts with getting our own thinking straight. The UK could show real leadership in this area, but this will not be possible before a strategy has been developed. Importantly, a trade strategy needs to contribute to the national ‘levelling up’ agenda to ensure CFI.co | Capital Finance International

We do not need to create a new vision or framework for much of this. Rather we need to implement our commitment to delivering the UN Sustainable Development Goals by 2030. This is the framework to building back stronger and driving the economic recovery in a way that delivers better outcomes, whether by driving economic prosperity or eradicating poverty and inequality. The SDG framework would helpfully provide a roadmap to addressing the structural inequalities for all to see, whether that is the north-south divide, impoverished coastal towns and communities, health and education inequality, the digital divide or our ambition to be a net zero economy by 2050. The SDGs bring all these agendas together under a single internationally recognised framework. Trade therefore should support the implementation of the SDG framework. It would be amiss not to conclude on climate and global governance with G7 and COP26 taking place in the UK this year. Both are important opportunities. COP26 is not only an opportunity to reinforce our commitment to net zero emissions, to help chart a path forward on global challenges and show leadership on the global stage, but also to secure alignment to modernise trade and environment rules to achieve this goal. Such a move would be a huge step forward in removing ambiguities and trade barriers to green goods and services that help protect the environment and deliver a greener economy. G7 and G20 are ideal platforms to rally the major economies of the world to commit to accelerating the digitisation of the global economy and with it bring a new, more inclusive era for trade where more SMEs, communities and economies can benefit from access to global opportunities. i ABOUT THE AUTHOR

CFI.co Columnist

A vision to make the UK the biggest investor in Africa but then reducing the development budget, will play a crucial role in helping build trade capability and relations across the continent. The approach towards China also needs careful balancing. To be a successful trading nation, access to markets with proportional trade relations is needed. Special consideration for the major trade power blocs of EU, US and China is fundamental. Policies and laws are being designed that target restricting access to China, the second largest economy, our 3rd largest export market and a country that is responsible for 20 percent of global trade. This could complicate ties into Asia or to help with agreements at the WTO.

pragmatic and targeted in approach to ensure relations remain constructive, whilst single issues are addressed through appropriate channels. This approach will require nuance and diplomacy, areas in which with political will we excel. Standing back and asking some basic questions would be helpful; what do we want to be as a country, what do we want to achieve in the world with the freedoms we now have, and importantly, how do we deliver success consistently over the long term?

every region and every community benefit with trade with the rest of the world. This may be as a direct benefit, such as specific industries and sectors gaining access to new growth markets, or through increased investment to compensate and mitigate for a loss of market access, investment or jobs. Every trade deal has winners and losers. It is important that those that lose out gain elsewhere to support an economic transition to another part of the economy with additional investment in skills and digital infrastructure. UK coastal towns that have lost out on fishing rights, for example, could benefit from access to new global opportunities.

Lord (JD) Waverley Independent Member House of Lords Twitter: @LordWaverley LinkedIn: linkedin.com/in/ jdwaverley 41

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Winter 2020 -2021 Issue

The Rise — and Rise — of Hotel Residences and Lifestyle Estates Andrew Amoils, of global firm New World Wealth, looks at the growing popularity of hotel residences and lifestyle estates among the wealthy.

riginally a New York phenomenon, the hotel residence trend has started to catch on in major cities and holiday hotspots around the world.

The residences are apartments and villas in existing hotels — which can be purchased and individually owned. Owners can live permanently in a hotel and enjoy the same services as guests: room service, dining, cleaning are all supplied. Residences are ideal for those who travel frequently. Facilities are maintained whether the occupant is there or not. Then there is access to services and facilities, from pool and spa to meeting areas, and security is always excellent. Unsurprisingly, hotel residences sell at a premium when compared with regular apartments. Banyan Tree, the St Regis, the Mandarin Oriental, the Four Seasons, the Conrad Hilton and the Ritz Carlton all provide this elite accommodation option. Other notable examples include the Mandarin Oriental Residences, London, Four Seasons Private Residences in the Seychelles, Florence’s Palazzo Tornabuoni and the Plaza Private Residences in New York. Lifestyle estates is another fast-growing segment of the accommodation and hospitality sector. The US, South Africa, Portugal and Spain are all striving to meet the demand, and estates are increasingly popular in the UAE, New Zealand, Mauritius and Mexico. As with hotel residences, there are good reasons for the popularity of this sector: security is

again a top priority, with an access gate and private security personnel on duty. Facilities and activities are popular, with gyms, swimming pools, golf, horse riding, skiing, tennis, depending on the location. Lifestyle and community are also drawcards, with parks, gathering places, playgrounds and schools nearby. With limited and controlled traffic, estates are also safer for children. Notable examples include the Yellowstone Club in Montana, Fancourt in South Africa, Anahita in Mauritius and the Jumeirah Golf Estates in Dubai. Following the coronavirus outbreak, luxury lifestyle estates could become even more popular as wealthy buyers seek more open space. Some estates offer their residents in-house gyms and sports facility access. i

New World Wealth provides information on the global wealth sector, with a special focus on high growth markets. It is based in Johannesburg, South Africa. For more information, visit: www.newworldwealth.com ABOUT THE AUTHOR Andrew Amoils founded New World Wealth in 2013. He previously worked as a wealth analyst for Progressive Media (now Globaldata) in London. His focus areas include statistical modelling and wealth intelligence gathering. His work has been featured in media outlets including the BBC, The Financial Times, CNN, Fox News, Bloomberg and Forbes.

"Following the coronavirus outbreak, luxury lifestyle estates could become even more popular as wealthy buyers seek more open space." CFI.co | Capital Finance International

CFI.co Columnist

> Juan Antonio Niño Pulgar:

Weathering the Pandemic’s Storm and Growing Stronger by the Day

ctive Capital Reinsurance, Ltd. (ACTIVE RE), domiciled in Barbados, operates with a general insurance and reinsurance license granted by the island’s Financial Services Commission. The company was established in 2007 and specialises in bancassurance and associated products, providing reinsurance 44

coverage for large financial institutions, such as banks and credit organisations not only throughout Latin America but also elsewhere in the world. In 2015, prompted by globalisation, ACTIVE RE adopted a progressive diversification strategy with a view to enhancing the CFI.co | Capital Finance International

company’s global reach and adding to its suite of products and services to better serve existing and new clients. This effort allowed ACTIVE RE to develop a sizeable global portfolio of products and solutions, including the full range of bancassurance in addition to traditional lines of reinsurance such as bonds and surety, property and engineering, general liability,

Winter 2020 - 2021 Issue

maritime, energy, and alternative risk transfer solutions. The company abides by its motto ‘Benefits for All’ and its operational philosophy – ‘put clients first, measure risks twice, and after due diligence, pay claims, always’.

upgrades and investments in human resources and professional skills development in order to field the best analytical tools and create innovative solutions that add tangible value and benefits to the customer proposition.

As of November 2020, ACTIVE RE offers reinsurance products and risk management services to 418 ceding companies and 152 brokers in 110 countries across Europe, Latin America, and the Asia-Pacific and Middle East and North Africa regions. As a matter of course, the company’s operations and processes are derived from strong ethical principles and fully compliant with all relevant international regulations to prevent money laundering and the financing of terrorism.

The Corona Pandemic has not stopped ACTIVE RE’s global expansion and diversification: the twin engines of corporate growth. During the pandemic, the company has welcomed eight new colleagues from Mexico, Lebanon, Argentina, Russia, and Panama to the team. It has proved possible to preserve positive outcomes by the effective control of the cashflow cycle. Other factors that helped ACTIVE RE navigate the health emergency include a conservative approach to underwriting policies, raising the level of its reserve provisions, and a further diversification of the portfolio.

POWERED BY TECH ACTIVE RE’s corporate trajectory unfolds at a time of transcendental societal and economic change which affects the reinsurance industry as well. The company’s strategy and business model underpin its operations and include an emphasis on technology. ACTIVE RE has been an early adopter of new technology which it considers a crucial driver of performance. By prioritising investments in communication, the company has strengthened its global network of more than 50 associates of 13 nationalities, spread over a dozen 12 countries and proficient in 8 languages. This network provides multiple bespoke touchpoints for clients, suppliers, and strategic partners. After being upgraded in June 2018, credit rating agency AM Best earlier this year reaffirmed ACTIVE RE’s Financial Strength Rating of A(Excellent) and the Long-Term Issuer Credit Rating of “a-”. The outlook for these Credit Ratings (ratings) is stable. This represents the apex of an ascending track record that began in 2014 when the company secured its first international investment-grade rating. ACTIVE RE management is justifiably proud to be included in the select group of global companies rated by AM Best and found to possess the strongest possible level of balance sheet capitalisation under the new BCAR model (Best's capital adequacy ratio).

"The Corona Pandemic has not stopped ACTIVE RE's global expansion and diversification: the twin engines of corporate growth."

NO STOPPING ACTIVE RE’s role as a ‘global, specialised, and innovative’ reinsurer entails, amongst others, a sustained effort to preserve and improve its excellent ratings, capitalisation, and financial strength. This includes continuous technology CFI.co | Capital Finance International

In 2020, as the company celebrates its thirteenth anniversary with pandemic that unhinges the future, ACTIVE RE has proved its resilience and staying power with talent, technology, innovation, and diversification – a potent mix that has strengthened the business and enables it to face the years ahead with confidence. The company is determined to serve its growing global clientele with an unwavering commitment, and unequalled dedication, to operational excellence. Present developments around the world have forced ACTIVE RE to raise the bar higher still in 2021. The company is challenging its own objectives and working hard to compile a strong agenda that enables it to unlock new and promising markets such as Africa, forge new distribution channels, and establish connections with world class brokers. The company is also determined to raise its already premium AM Best investment grade rating from the current stable outlook to positive. New lines of business to explore and exploit in the year ahead include maritime, liabilities, sureties, special lines for financial institutions, and satellite and aviation. ACTIVE RE is thankful to its clients for the trust, support, and loyalty shown, and to its strategic allies, distribution channels, retrocessionaires, staff, and employees for being part of an exciting journey which builds on experience and keeps gathering momentum as a result. i ABOUT THE AUTHOR Juan Antonio Niño Pulgar is the Chairman and CEO of Active Capital Reinsurance, Ltd. 45

CFI.co Columnist

Over the last five years, ACTIVE RE has reported a gross annual average premium of $110 million. Between 2007 and 2020, the accumulated total amounts to $931 million which testifies to the high-class financial security offered to clients. These results may be attributed to a well-diversified portfolio and a conservative underwriting policy, as well as the appropriate retention of core business, the cession of balances, and accumulations to first-line retro capabilities.

The company has also managed to check fixed operational expenses by leveraging technology for significant gains in efficiency and expanding distribution channels with the inclusion of MGAs (managing general agents). Despite strict mobility restrictions, ACTIVE RE has continued to conduct business without interruption thanks to an agile and seamless transition of personnel to home offices.

> Winter 2020 Special

Fighting to Save the World

movement has been slowly brewing in corporate boardrooms and government agencies across the globe. Sustainability becomes a hotter topic with every passing year — pun absolutely intended — and most people have at least begun to consider the carbon consequences of their actions, if not actively seek to mitigate them. Scientists have been warning of an impending point-of-no-return regarding climate change, urging every world citizen — from consumers to investors — to act with solidarity and accountability. A host of organisations and initiatives have emerged to give guidance on how to best support the sustainability movement. The Principles for Responsible Investment (PRI) unites international investors under a six-point framework of aspirational and voluntary principles for embedding ESG considerations throughout the investment process. The Global Reporting Initiative (GRI) sets international standards used by private and public enterprises to measure and communicate ESG performance. The UN’s Sustainable Development Goals (SDGs) lay a roadmap towards peace and prosperity for people and planet, with 169 targets and over 5,000 actions spread over 17 goals. The Organisation for Economic Co-operation and Development (OECD) sets guidelines for multinational enterprises, while the UN Global Compact is used to communicate progress. We also have the International Organisation for Standardisation (ISO), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB). The overlap between reporting standards can present a problem for investors, as companies share their commendable, yet often incompatible, sustainability compliance progress. But efforts are under way to simplify the standards while adding concrete metrics to

quantify the impacts of non-financial factors on the long-term sustainable success of businesses. The thought leaders featured over the following pages are cautiously optimistic about the future. They are pushing the sustainability agenda with vigour and vision. They advocate for stronger regulations and collaborative partnerships. They work with investors, corporate boards and government agencies to increase ethical practices and advance the transition to knowledge-based, tech-enhanced, green economies. They present researchbacked arguments for ESG adoption at every level of operations, from the supply chain to the finance industry. The global pandemic has caused unprecedented challenges — loss of life, disruptions in movement and economic activity, healthcare systems struggling to cope — but these ESG champions believe it is also an opportunity to build back better. We’ve got a long way to go, they warn, for Covid has exacerbated economic disparities worldwide and precipitated the first increase in global poverty in more than 20 years. While 2019 ranked as the second warmest year on record, the imposed lockdowns and voluntary quarantines may have resulted in a six percent drop in greenhouse gases for 2020. That’s still short of the goal required to limit global warming. Investments in fossil fuels remain higher than those in solutions to climate change, and the UN is pleading with humanity to end its “war on nature”. As the world begins to recover, people are putting their priorities in order and seeking to build resiliency into their lives. Demand for ESG-integrated investment solutions is on the rise, and shows no signs of abating. Our heroes couldn’t be more pleased. i

CFI.co | Capital Finance International

Winter 2020-2021 Issue

CFI.co | Capital Finance International

> SHEIKHA MOZA BINT NASSER AL-MISSNED CONSORT Dissident’s Daughter, Crusader for Health and Women’s Rights — and Mother of Current Emir of Qatar

When Sheikha Moza Bint Nasser inaugurated WISH 2020 (World Summit For Health) in Doha in November, she did so in her official capacity as president of the Qatar Foundation. Her unofficial role was once described as “the enlightened face of a profoundly conservative regime”. She is the daughter of a prominent Qatari dissident, Nasser bin Abdullah Al-Misned, who — once released from prison — led his extended family into exile in Kuwait. Bint Nasser, born in 1959, lived there from age five to 18. Her family returned to Qatar for her marriage to Sheikh Hamad bin Khalifa Al Thani, who had just been appointed Crown Prince of the Emirate. The couple had five sons and two daughters, and their second son is the current Emir of Qatar. In 1995, Bint Nasser and her husband founded the Qatar Foundation for Education, Science and Community Development (QF) with the aim of supporting Qatar “on its journey from a carbon economy to a knowledge economy, by unlocking human potential”. 48

After seizing power in a bloodless coup in 1995, Sheikh Hamad oversaw an increase in natural gas production — to 77 million tonnes — making it the world’s richest country per-capita, with an average income in excess of $85,000. He realised that the country needed to diversify its economy and invest wisely. Moza Bint Nasser was the perfect figurehead for the foundation, a nonprofit comprising 50 entities. It has partnerships with leading international institutions, and Bint Nasser has proved adept at spearheading national and international development projects. Domestically, Sheikha Moza Bint Nasser serves as chairperson of the QF and courts leading global educational institutions to set up campuses in the emirates Education City. Eight universities — six American, one British and one French — have branch campuses at Education City, including University College London, HEC Paris, and Georgetown. As vice-chair of the Supreme Council of Health from 2009-2014, Sheikha Moza Bint Nasser was responsible for major healthcare reforms. Since 2016, she has been president of Sidra Medicine, CFI.co | Capital Finance International

a training and research hospital that is a leading institution caring for women and children. Internationally, she founded Education Above All (EEA). Its goal is “to contribute to human, social and economic development through the provision of quality education, with a particular focus on those affected by poverty, conflict, and disaster”. The organisation has committed to enrolling 10.4 million schoolchildren worldwide, and has Graça Machel — former first lady of Mozambique and widow of Nelson Mandela — on its Board of Trustees. Also on the board is Koichiro Matsuura, former director-general of UNESCO. As a Special Envoy, Moza Bint Nasser has promoted higher education in Iraq, and is active in addressing youth unemployment in the MENA region. Living in a part of the world where women have been historically and culturally regarded as subservient, she is an active campaigner against domestic violence. Always impeccably turned-out in a style which embraces Middle Eastern and Western fashion, Sheikha Moza Bint Nasser has proven the perfect ambassador for her country as it seeks to raise its global profile.

Winter 2020-2021 Issue

> ANITA MCBAIN HEAD OF EMEA ESG RESEARCH AT CITI Spreading the Gospel of ESG to the Investment World in Clear, Honest and Understandable Terms

Anita McBain is no ordinary asset manager. She’s one of a new breed which believes the industry must focus on the ecological risks of an inter-connected world — and find solutions, fast. As the Covid-19 pandemic began to spread across the globe, McBain was one of the first to warn of the consequences of unsustainable behaviour, financial and non-financial. Head of responsible investments at London-based management firm M&G at the time, she wrote a blistering report on the risks of failing to recognise these dangers. McBain drew attention to the fact that deforestation, generally caused by human population growth, displaced animals which shed viruses due to the stress inflicted upon them — often in or near human settlements. She also maintained that the Covid-19 pandemic was not entirely unexpected. “For years scientists have warned of the spill-over of viruses from animals into humans,” she wrote. “Today we are experiencing the consequences of the inextricable link between human, animal and ecosystem health.” As the world’s population is expected to balloon from 7.8 billion today to 9.8 billion by 2050, the supply of food — often in the form of “wild” meat — will become critical. And it will inevitably lead

to more viruses leaping the species barrier, she believes, unless an integrated global response is devised. Anita McBain has been a champion of ESG criteria for the past 15 years, persuading investors of the need to be socially conscious. A growing number of industry experts believe ESG should be a core principle for all businesses. The pandemic, McBain says, has amplified the need for action. In September, she was recruited to head EMEA ESG research at global investment bank Citi, where she crusades for sustainability. “Globalisation has lifted millions of people out of poverty,” she says, “but there are also downsides. “Competition to meet global demand has resulted in over-exploitation of natural resources and unsustainable practices, with rising population growth and socio-economic trends linking into biodiversity loss, climate change and the emergence of new communicable diseases. “The asset management industry should consider a ‘nexus approach’ to investing, which examines different interactions and links among multiple sectors.” McBain believes investors have a role to play in directing capital towards companies that demonstrate resilience and offer long-term solutions. CFI.co | Capital Finance International

“Responsible investment involves encouraging investee companies, and pushing for the development of consumption and production models that are sustainable over the long term,” she says. At Citi, she is responsible for leading the integration of ESG into the process, advising on climate change and broader sustainability themes. Her award-winning research, Citi believes, will significantly strengthen its ESG presence. Anita McBain earned an MBA at Edinburgh University before going on to post graduate work at Cambridge University, where she studied leadership and sustainable business. Her colleagues describe her as knowledgeable, passionate, engaging and constantly full of ideas. Those who have worked with her believe McBain is a leader who truly understands the link between people, planet and profit. She has a deep knowledge of the issues at stake, which she communicates in a determined, tenacious and engaging manner. Identifying risks and coming up with solutions is her speciality. As one of her former colleagues put it: “She has a motivating and positive voice, one that anyone would be grateful to have on their team.” 49

> CHARLENE CRANNY COMMUNICATIONS AND CAMPAIGNS DIRECTOR AT UKSIF 2020: Tipping-Point Year on the Road to Net-Zero Reality, with a Transition Truly Under Way Future generations will look back on 2020 as a year defined by the Covid-19 crisis, but Charlene Cranny believes it will also mark the tipping point in which “the European transition to net-zero became unstoppable”. Cranny is the communications and campaigns director at the UK Sustainable Investment and Finance Association (UKSIF). UKSIF membership is open to financial firms and stakeholders — such as asset owners, advisers, and civil societies — who are committed to growing a more sustainable economy that works for people and planet as well as prosperity. UKSIF aims to influence public policy, raise industry ambitions and standards, and increase acceptance and demand from investors. Cranny has seen remarkable progress over the past two years. The UK put net-zero targets into legislature, the European Commission proposed a legal framework to become net-zero by 2050, and big commitments were pledged by leaders in the aviation, oil and gas, mining, steel and cement industries. More governments and businesses will continue to come on board, Cranny insists, because the sustainability transition has become inevitable. Nearly 200 countries and over 1,300 organisations — including numerous financial firms — have signed the 2015 Paris Pledge. But now, a new private finance agenda launched by UK COP26 should provide signatories with concrete measures to uphold that promise. “Set against the backdrop of a European climate law and consultation on a renewed sustainable finance strategy — and mobilisation around a green and fair recovery from Covid — now might be a good time for firms to think about their own net-zero transition. Perhaps to announce ahead of the COP26 climate change conference in November next year?” Cranny wrote in an op-ed for the business strategy magazine, Funds Europe. “In any case, the transition to a healthier economy is wonderfully underway. Together, we are building back better.” Responsible investing and green finance will play a huge role in driving that change. Cranny scoffs at any lingering misconceptions that assume ethical investing would compromise returns. “Morgan Stanley compared the performance of 11,000 sustainable and non-sustainable funds over 14 years (2004-2018). They found no statistically significant difference in total returns, but sustainable funds proved lower risk and outperformed in periods of volatility. A quality that held true during the pandemic,” she said. 50

“There are thousands of studies that in aggregate tell the same story. Sustainable investment adds value financially, socially and environmentally.”

“But it doesn't have to be this way. We can redirect capital to healthier, more sustainable companies and projects to protect people, places and prosperity. We still have time. Just.”

She argues the case for ESG integration into the investment decision process of each and every investor — whether they care about sustainability outcomes or not. “Corruption, boycotts, strikes, legal challenges, tighter regulation, droughts, wildfires, failed crops … These all have an often-huge impact on company value and ability to operate,” Cranny warns. “ESG analysis gives a heads-up in a way last quarter’s financial statement cannot. Then, if you are looking for improved ESG outcomes, you’ll engage with at risk companies to rein in those damaging behaviours.

Consumers must also assume some of the responsibility to achieve global sustainability goals. Cranny has served over the past four years as the director of UKSIF’s Good Money Week, an annual awareness campaign that challenges people to think about money in a more responsible manner. The annual event takes place in October, but the resourcerich website is open all season long. Cranny encourages visitors to explore the site to find the most sustainable and ethical solutions for banking, pensions, savings and investments — options that work for people, planet, health and wealth.

“Companies are trawling, drilling, mining, burning, polluting and chopping vast areas of the earth's surface. Wildlife populations are down 60 percent since 1970, 40 percent of plants threatened with extinction and 46 percent of the planet’s trees have been felled. And that's before we even look at carbon emissions or the fair treatment of people and communities.

The campaign has helped move “ethical money stories from niche to normal”. Cranny is a frequent guest on national TV and radio programmes and a regular contributor to newspapers and magazines. While grateful for the shift in public perception, her next personal challenge will be “to see this growing acceptance translate into increased demand and ‘good’ money options becoming the norm”.

CFI.co | Capital Finance International

Winter 2020-2021 Issue

> JANINE GUILLOT SASB CEO Following Personal Passions Into the World of Sustainability Means Contentment for SASB CEO Corporate sustainability has been slowly building for some time, according to Guillot, but recent progress has been truly remarkable. “The huge change in the last five years has been large mainstream investors coming to believe that performance on sustainability issues impacts risk and return. There’s been an increasing focus on how to integrate sustainability considerations into investment decision-making in a rigorous and systematic way across entire portfolios. There’s been a sea of change in the last year, and it’s a result of investors being more vocal about their interests. “As the world rapidly evolves — facing opportunities and challenges from technological innovation to climate change — corporate financial reporting also needs to evolve. We don’t need to replace traditional accounting, but we need expanded information sets to really understand what’s driving corporate value over the long term.

Janine Guillot, CEO of the Sustainability Accounting Standards Board (SASB), has an enduring love of the great outdoors that has stoked and strengthened her passion for sustainability. Guillot graduated from Southern Methodist University in Dallas and began her career as a technical accountant and auditor at Ernst & Whinney, predecessor to one of the world’s largest professional services networks, Ernst & Young. “I’ve always been interested in sustainability, and I am very passionate about sustainable agriculture,” says Guillot. “I serve on the board of the Marin Agricultural Land Trust (MALT), which has put conservation easements on over half the agricultural land in Marin County, California. “Much of that land is now certified organic, and there’s a local, sustainable agricultural community that has survived and thrived because of MALT easements. My work at SASB is also connected to what I’m personally passionate about. I couldn’t be luckier.” Guillot’s career has taken her around the world and afforded her experience of the complementary fields of public accounting, operations, strategy, risk management and finance. She joined SASB in 2015, following leadership roles at Bank of America, Barclays Global Investors and the

California Public Employees' Retirement System. “I originally joined SASB with the belief that disclosure drives improved performance on sustainability issues, which delivers a win for companies, investors and society,” she said. “SASB is a critical piece of market infrastructure to enable sustainable economic growth.” Guillot started as head of SASB’s investor outreach, and launched the Investor Advisor Group (IAG) to unite leading asset owners and managers — now 55 from 12 countries, responsible for $41tn in AUM — in support of sustainability standards that provide a consistent, comparable and reliable metrics for financially-material, decision-useful ESG information. IAG members call for strong sustainability reporting from their portfolio companies, and push for alignment with SASB standards. “Securities regulators in the US and beyond increasingly recognise that the financial implications of business-critical ESG risks and opportunities are relevant to their fundamental objectives: to protect investors, to ensure that markets are fair, efficient, and transparent, and to reduce systemic risk,” Guillot wrote for the online media platform investESG. “Market-based disclosure standards, such as SASB’s, are a key tool to achieve those objectives.” CFI.co | Capital Finance International

“Risk to a long-term investor is more multifaceted than volatility and includes risks that evolve over a very long time, like climate. To effectively deliver long-term returns, you need to manage multiple forms of capital, including human capital and environmental capital. But there is a gap between developing these beliefs and implementing them, and that gap is the availability of data — standardised data that connects sustainability to financial performance.” In November 2020, SASB announced its intention to merge with the International Integrated Reporting Council (IIRC), a global coalition promoting communication about value creation in corporate reporting. The unified organisation, the Value Reporting Foundation, will provide investors and corporate leaders with a comprehensive reporting framework across the full range of enterprise value drivers and standards to advance global sustainability performance. This benefits the work of like-minded organisations, including the Climate Disclosure Standards Board, which has already expressed interest in future collaboration. “Sustainability disclosure is at the top of the agenda for many,” says Guillot, “creating incredible momentum towards simplifying the corporate reporting landscape. By merging two organisations focused on enterprise value creation, we hope to clarify the field. We stand ready to engage with the efforts of the IFRS Foundation, IOSCO, EFRAG, and others working towards global alignment on a corporate reporting system.” Headquartered in London and San Francisco, the Value Reporting Foundation will commence operations in mid-2021, with Guillot at the helm and staff spread across the world. 51

> ROSABETH MOSS KANTER HARVARD A Glowing Academic Career that Defies Attempts at Abbreviation The problem of profiling Rosabeth Moss Kanter, holder of the Ernest L Arbuckle Professorship at Harvard Business School, is trying to fit her accolades into the allotted space. Kanter advises CEOs and senior executives via her consulting group, and was a senior advisor for IBM’s Global Citizenship portfolio from 19992012. She has served on business and non-profit boards, and has authored or co-authored 20 books — many of which have attained bestseller status. The academic has served on commissions, including the Governor’s Council of Economic Advisors and the US Malcolm Baldrige National Quality Award. She is in constant demand as a public speaker, sharing the podium with world leaders at events such as the World Economic Forum in Davos. Before joining the Harvard Business School, Kanter held tenured professorships at Yale and Brandeis universities, and was a Fellow at Harvard Law School, while simultaneously holding a Guggenheim Fellowship. And this is the profiler’s challenge: telling Kanter’s story, however briefly, and regardless of column inches, means getting a quart into a pint pot. And we’re not through yet. Rosabeth Kanter co-founded the universitywide Advanced Leadership Initiative at Harvard, serving as founding chair and director from 2008-2018. Her strategic and practical insights on strategy, innovation and leadership for change have guided corporations, governments, and start-up ventures around the world. Writing has been central to her career. Her latest book is entitled Think Outside the Building: How Advanced Leaders Can Change the World One Smart Innovation at a Time. She is the former chief editor of Harvard Business Review, and has been named in two distinguished “50” lists: the 50 Most Powerful Women in the World (The Times), and the 50 Most Influential Business Thinkers in the World (Thinkers 50). She has also received the Thinkers 50 Lifetime Achievement Award. One of Kanter’s earlier books, MOVE: Putting America's Infrastructure Back in the Lead, became a New York Times Editors’ Choice. Another, The Change Masters, was hailed as one of the most influential business books of the 20th Century by none less than The Financial Times. The literary list doesn’t end there. Confidence: How Winning & Losing Streaks Begin & End 52

was a New York Times and Business Week bestseller. There certainly seems no end in sight for her own winning streak. Men & Women of the Corporation won her the C Wright Mills award for the best book on social issues. It examined the individual and organisational factors in the struggle for women’s equality, and she released a related video, A Tale of ‘O’: On Being Different, which is highly regarded as a tool for diversity training. From identifying the dilemmas and potential problem of globalisation to opening minds and avenues in the corporate world, Kanter has more than made her mark on the world. CFI.co | Capital Finance International

She has received Distinguished Career Awards from the Academy of Management and the American Sociological Association, the World Teleport Association's Intelligent Community Visionary of the Year award, the Pinnacle Award for Lifetime Achievement from the Greater Boston Chamber of Commerce, and many more recognising her thought-leadership and community impact. Rosabeth Moss Kanter was born in Cleveland, Ohio, and describes her childhood as "benign" and herself as “ambitious”. She has no fewer than 24 honorary doctoral degrees in addition to her PhD from the University of Michigan.

Winter 2020-2021 Issue

> SHEILA PATEL CHAIRPERSON, ASSET MANAGEMENT, GOLDMAN SACHS Appreciation of ESG Values Has Increased During Pandemic, says Asset Manager of Goldman Sachs

As a keen angler, Sheila Patel knows that the secret to hooking a big trout is to deliver the fly in a precise and careful manner. So when Covid-19 lobbed a rock into the financial world’s waters, one might have expected a degree of frustration from the recently-installed chairman of Goldman Sachs’ asset management arm. But while many assumed the sudden impact of the pandemic on the world’s markets would shake investors into abandoning social and environmental values, Patel knew better. The champion of ESG and Carbonomics says the pandemic has actually sharpened investor focus. (Carbonomics helps businesses realise the potential of carbon offsets in the US and international emission-trading markets.)

Baby Boomer adoption and focus on flows into ESG funds.” There is debate on whether the purpose of ESG is to drive better returns or better societies, but Sheila Patel believes it can be both. “It’s been a dramatic shift. The pandemic has really given people the time to step back and question what they value most.” Patel joined Goldman Sachs, one of the world’s largest investment banking organisations, in 2003, and was made a partner in 2006. In September 2019, she became chairman of the Wall Street giant’s $1.3tn asset management arm. She had previously worked for Morgan Stanley, leading its trading strategy.

“At the beginning of the crisis, large institutional investors were asking me: ‘Is this the pause for ESG, sustainability and climate?’ Because the crisis was overwhelming. What we found was that people more than ever felt a clear focus on ESG investing, not just from large institutions but from retail too.

She began her career in finance as an analyst at an investment bank in New York. She went on to earn an MBA at Columbia University before climbing the career ladder. In one of her first appraisals, she was advised to focus on client relationships and communication, as these were key to business success.

“Many people think that sustainability is the focus of Millennials and the younger generation, but in fact during the pandemic in Europe there was a 100 percent increase in

Patel believed at the time that her analytical skills were her strength, and discounted that feedback. “As I matured I realised the truth of that early advice,” she says. “Businesses of all kinds are CFI.co | Capital Finance International

about people — your colleagues and your clients — and fostering those relationships and networks is the foundation of any successful career.” Patel is a member of the 100 Women in Finance initiative, and says her role as a partner sponsor of the Asia Women MD’s Network — supporting and advising women to grow and advance in business — is particularly satisfying. “What makes finance evolve is the intersection of people, capital and ideas. Women at all stages of their careers need to drive that evolution.” Her extensive knowledge of portfolio solutions, sustainable finance, emerging growth themes, governance and other key long-term trends, has made her advice to clients indispensable, especially in these unusual times. Since the beginning of the pandemic, large amounts of capital have begun addressing carbonomics, she says. Companies across the world have been responding with ever greater innovation, and investors are taking notice. But how the pandemic changes behaviours, the needs of consumers, and the way we work are trends that need patient monitoring, she believes. As every angler knows, patience is the key to success. 53

> Europe

Steeled by Brexit, European Union Stands Up to Rule Breakers A few diehard optimists, possibly plastered on Kool Aid, have discovered the pandemic’s silver lining: UK households, businesses, and government are too busy adapting to the dreaded new normal to note any impact caused by Brexit. Deal or no deal, so the thinking goes, the end of the 11-month long transition period will be akin to the Y2K anti-climax and barely register in the grand order of all things British.

eanwhile, Secretary of State for International Trade Elizabeth Truss has been working the phones and zooming with counterparts the world over to replace the European Union’s 41 trade agreements (covering 72 countries) that from 1 January 2021 no longer apply to the UK. Truss managed to secure a respectable number of deals, mostly with minor trading partners – plus a select few larger ones such as Canada, South Korea, and Japan – covering just about 8% of the country’s total international trade. However, the intention to forge deeper ties and setting a new gold standard for trade agreements was abandoned early-on as partners declined to renegotiate and insisted on a copy-and-paste – or in legalese ‘mutatis mutandis’ – solution. Truss’ department discovered the supreme convenience of Microsoft Word’s find-and-replace function, inserting ‘UK’ wherever ‘EU’ was found in treaty texts. Only Japan insisted on additional editing, ensuring the UK’s status as an appendage to its own EU trade deal, granting the country any quota not filled by the bloc it had left. From Tonga to Tunisia, Truss hailed each trade agreement rolled over from the EU to the UK as a major triumph of Global Britain and a vindication of Brexit’s borderless wisdom. Throughout, the trade secretary remained the indomitable standard bearer of a buccaneering nation ready to face its world-beating future. CHEERLEADER OUSTED In Europe, eyes rolled, and shoulders shrugged, whilst Britain’s ‘Little Trump’ huffed and puffed – and launched (and quickly abandoned) ‘moonshots’ to bring down the pernicious virus. The prime minister’s fiancée Carrie Symonds, 24 years his junior, stepped up to the plate, laid claim to the executive sceptre, and proceeded to arrange a number of exquisitely choreographed fracas to remove formerly trusted confidants and advisers from her beau's inner circle, seeing them marched out of Nr 10 in the wee hours of the morning carrying the tell-tale cardboard box. The sudden though not entirely unexpected fall of chief Brexit cheerleader Dominic Cummings did not end Prime Minister Boris Johnson’s hardnosed approach to the tortuous negotiations on the UK’s future relationship with the neighbour it spurned. The Kool Aid-powered optimists may, however, be right after all: With a pandemic raging and two recalcitrant member states blocking the approval of its next budget, Brexit has moved down a few notches on the EU’s list of priorities. Though nice to have, a trade deal with the UK is not considered crucial to the bloc’s own

"The sudden though not entirely unexpected fall of chief Brexit cheerleader Dominic Cummings did not end Prime Minister Boris Johnson’s hard-nosed approach to the tortuous negotiations on the UK’s future relationship with the neighbour it spurned." future, given that the preparations for a no-deal outcome have been finished. German carmakers and Italian prosecco producers did, in the end, not press Brussels or their own governments for a comprehensive free trade agreement. In any case, whatever bone thrown over the Channel is unlikely to carry much meat as four years of talks made it abundantly clear that the European Union is unwilling to open its single market to unruly outsiders and – in a similar vein – the UK government doesn’t quite dare to embrace the stand-alone future envisioned by Brexit supporters largely unencumbered by the constraints of reality. With Trump about to vacate the White House, the always distant prospect of a US-UK trade deal has dissipated altogether. TWO BAD HOMBRES Besides, the EU has much bigger fish to fry as it is about to throw the book at Hungary and Poland for undermining the rule of law by tinkering with their independent judiciary. The European Council itches to invoke Article 7 of the Treaty of the EU (TEU) which suspends certain rights of member states found to ‘consistently’ breach the union’s founding values. However, any member state – save for the one being examined – can veto such a move. It requires no powers of prescience to predict that Hungary and Poland will stick up for each other, rendering an Article 7 procedure futile. Both Central European states object to the conditionality of pay outs from Brussels to rule of law safeguards. Reportedly frightfully upset and indignant, Hungary and Poland promptly blocked approval of the EU’s €1 trillion plus budget as well as the €750 billion post-pandemic recovery plan. Though the two countries in July agreed on the proposed changes to the EU funding mechanism, they now argue that the tie between cash and rule of law imposes ‘western liberalism’ on their ‘socially conservative’ societies. Prime Minister Mateusz Morawiecki of Poland even equated the demands made by Brussels to the edicts emanating from Moscow when his country was locked in the Soviet-mandated Comecon – Eastern Bloc.

This did not go down well in Berlin. German Chancellor Angela Merkel bluntly stated that the EU will not be held ‘hostage’ by Warsaw and Budapest but suggested continued engagement to break the deadlock. In a disconcerting echo of Trumpism, Prime Minister Morawiecki proceeded to lose his cool in parliament, threatening to ‘lock up’ members of the opposition for sowing unrest whilst in Hungary, Prime Minister Orban again broadcast his antiSemitic conspiracy theory which holds that Brussels is a mere front for his former benefactor and mentor George Soros who supposedly wants to ‘blackmail’ the country into accepting high levels of immigration. BRUSSELS’ WAY OR THE HIGHWAY Both Morawiecki and Orban seem blissfully unaware that the EU is close to reaching the end of its very long tether. With the possible exception of relative newcomer Slovenia, all member states display a Brexit-steeled resolve not to cave in. Prime Minister Mark Rutte of The Netherlands suggested his country could, in turn, block EU funding with its own veto should Hungary and Poland be given any quarter. Portugal, Spain, Italy, and Greece – all desperate for grants from the EU recovery fund – are livid as well. The Orban-Kaczynski hold-up is ultimately destined to fail. The rules allow for monthly rollovers of the old budget, ensuring that the EU doesn’t run out of money. Pay outs from the recovery fund can easily be retagged as ‘enhanced cooperation agreements’ and proceed as planned with the exclusion of Hungary and Poland. Arguably, the absence of two large net recipients would add to the fund’s credit rating. By now, the EU has amassed considerable experience in dealing with obstructionist member states. Late 2011, the UK vetoed a pact to save the euro via closer economic and fiscal integration. The Eurozone’s then 17 member states, plus 6 others, pressed ahead regardless, opting for a multilateral deal outside the EU legal framework – potentially paving the road for Brexit. And a highway it is. No longer willing to be the punching bag of politicians playing for domestic audiences, and tired of putting up with unreasonable demand from member states that invoke their ‘exceptionalism’, the European Union is slowly gaining the self-confidence to stand up for its values and tell detractors to either get with the programme or drop out. And that is precisely the aim of Brussels’ unwritten and unspoken message to Hungary and Poland: Please pay attention to the UK for you are free to check out anytime – and you can actually leave. i

"Besides, the EU has much bigger fish to fry as it is about to throw the book at Hungary and Poland for undermining the rule of law by tinkering with their independent judiciary." 56

CFI.co | Capital Finance International

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> VEON Works to Bridge the Digital Divide:

Joint Leaders Herrero and Terzioğlu Show the Way

here is often truth in old adages. “Two heads are better than one” is well-known wisdom — but it has rarely been applied to corporate leadership. There are only a handful of examples of companies with two CEOs. VEON, an international telecoms and digital services provider headquartered in Amsterdam, is a successful addition to the list with Kaan Terzioğlu and Sergi Herrero as its coCEOs. This leadership pair is defining the next growth phase of the business, bringing a wealth of complementary skills and experience to the mix. Herrero hails from Facebook, where he served as the company’s Global Director of Payments and Commerce. At Facebook he oversaw the launch and growth of payments and commerce ecosystems for Messenger, WhatsApp and Instagram. He also led the deployment of Charitable Giving and was instrumental in scaling the Facebook Ads payments business and the broader expansion of the platform’s global marketplace. Herrero joined VEON in September 2019 to run the new VEON Ventures division, which is leading the company’s growth ambitions beyond traditional telecoms, with a focus on digital products in adjacent markets like content, AdTech and financial services. His expertise in digital payments made him a perfect match for the new division and, later, an ideal partner for Terzioğlu. Terzioğlu joined VEON with a track record in successfully transforming telecommunication companies into digital operators. He is a passionate believer in the need for the telecoms industry to reinvent itself by putting changing customer needs at its core. At VEON, this means encouraging local leadership teams to deliver 4G services that transform customer experiences to match connected lifestyles.

Sergi Herrero and Kaan Terzioğlu

connectivity services designed around a superior customer experience. “As telecommunications companies, we have massive resources at our disposal to meet the changing needs of our customers” Terzioğlu explains. “It is not just about providing minutes and gigabytes to the end-user. It’s about changing the nature of their relationship with their operators, not least in emerging economies where our ability to promote digital inclusion and individual empowerment brings with it enormous social and economic opportunity.” Nowhere was this relationship more evident than in the role VEON played during the early stages of COVID-19. VEON’s operating companies not only provided emergency connectivity in the immediate aftermath of the outbreak, but sustained livelihoods and lifestyles throughout by providing essential services for home working, online education and e-commerce.

Terzioğlu’s 30 years of experience in telecoms and technology includes global leadership roles at Arthur Anderson and Cisco, as well as 4 years as the CEO of Turkcell, during which he was recognized for his “Outstanding Contribution to the Mobile Industry” by the GSMA, the mobile industry’s leading global organization, which he currently serves as a Board member.

“Ours is a digital services company built around the competitive advantage of large, regulated connectivity networks in multiple markets,” Herrero explains. “To be successful we must listen to our customers — to what they like, dislike and what they lack — and develop the products and resources to match. Follow that rule and there should always be an audience for our services.”

Herrero and Terzioğlu were appointed as VEON’s co-COOs in November 2019 and confirmed as co-CEOs just four months later. Both are determined to continue the company’s evolution from traditional telecoms to a provider of

The company has already claimed a large audience, with more than 200 million customers across 9 markets, spanning three continents. It is one of the world's biggest mobile operators, boasting network coverage over 10% of the

CFI.co | Capital Finance International

world’s population. This footprint is expected to expand further over the coming years as VEON accelerates the roll-out of 4G networks across nations that rank amongst the world’s fastestgrowing in smartphone penetration and digital adoption. Digital financial services represent an immediate growth opportunity for VEON where its plans are already well advanced. “VEON operates in some of the world’s most unbanked nations. In half our markets, more than 50 percent of the adult population has no bank account. Pakistan tops this list, with around 80 percent of men and close to 95 percent of women without basic banking access,” Herrero said. "Bridging this gap by offering access to financial services through a mobile phone goes beyond the convenience benefit and has the potential to change people’s social and financial circumstances profoundly.” And with that comes the opportunity to unlock value in many areas of the economy, as well as to boost sustainability and fair access to resources. “The technologies that we have today can be extremely powerful tools to level and elevate the playing field” Terzioğlu insists. “Opportunities to close the digital gap, to provide customized services to groups with special needs, as well as to improve the efficiency of industries varying from agriculture to manufacturing, are huge when we invest in connectivity and digital services with the right mindset. We not only have the opportunity, but also the responsibility to be a positive force for innovation and betterment in an era of unprecedented technological and social change.” i

Winter 2020-2021 Issue

> Does Anyone Care About the Environment?

Here’s a CEO who Does — and Always Has When Nordea Finance CEO Peter Hupfeld graduated as an environmental engineer in 1998 he, like many of his fellow students, had big dreams of making a difference. “Then I stepped out into reality, and no one really cared about environmental issues,” he says.

upfeld has a background in management consultancy and held executive positions in a Nordic insurance company before joining the largest finance company in the region, Nordea Finance. Since taking on the role in 2015, Hupfeld has driven an ambitious agenda to transform the company into one that is customer-centric, with a Nordic mindset applied to its four local markets. The result has been a steady increase in customer satisfaction scores over the past four years. “I’m really proud of how far we’ve come,” he says, “but we still have work to do.” The finance industry as a whole is noticing a significant shift in customer preferences from ownership towards more sustainable leasing options, and this trend is expected to increase.

“I’m really proud of how far we’ve come,” he says, “but we still have work to do.” “We were part of the first wave of what we call ‘green financing’ across several of our business lines two years ago,” says Hupfeld. “This trend started with larger items like cars and heavy machinery, and is now flowing into smaller items like electrical bicycles and information and communication technology (ICT) circular economies — making greener solutions accessible to a broader range of people and industries.” In addition to his CEO role in Nordea Finance, Hupfeld participates on the board of Leaseurope, a federation bringing together leasing company associations across Europe. “Nordea Finance and the finance industry more broadly have a significant role to play in providing relevant offers for customers and partners looking for more sustainable solutions, and in educating the industries we serve about how they can finance in a greener way.” As more and more companies commit to CSR targets, car fleet financing is an area where companies look to reduce their CO2 emissions.

Nordea Finance CEO: Peter Hupfeld

“A lot of larger and mid-sized corporates are looking to place CO2 restrictions on company cars,” says Hupfeld. “We do the same in Nordea Group. This is where we can offer greener leasing solutions such as hybrids or purely electrical vehicles. “While we can offer greener solutions across the Nordics, local infrastructure and governmental subsidisation also has a big impact on customer preference. In Norway, for example, government subsidies supporting greener options and infrastructure for electric vehicles (Evs) has increased exponentially over recent years. Today, more than half of the new vehicles sold in Norway are EVs. CFI.co | Capital Finance International

“The other Nordic countries have some way to go in comparison, so we need to work closely with our partners, read the trends, try to influence the authorities and go live with products that are locally relevant.” In 2020, Hupfeld’s ambitions to make a difference are a little more pragmatic than they were in 1998. “There’s still a gap between the buzz in society where people or corporates have ambitions to support greener options, and the moment they are willing to pay extra for it. “Greener financing is one way we can help our customers, partners and society more broadly, to close that gap.” i 59

> Uranium Production at Spain’s Salamanca Project:

SDG Champion Berkeley Energia Will Create Jobs, New Skills and Prosperity

erkeley Energia Ltd is the owner of the Salamanca Project which will contribute significantly to sustainable recovery following COVID-19.

The Salamanca project, with a production of 4.4 Mlb of Uranium per year, will be one of the top 10 producers worldwide. It is being developed to the highest international standards, and the company's commitment to health, safety and the environment remains a priority. Since 2012, the Company and Salmanca project has been certified in Sustainable Mining (UNE 22,47080), Environmental Management (ISO 14,001), and more recently in Health and Safety (ISO 45,001) as awarded by AENOR, an independent Spanish government agency. The company is led by Mr Robert Behets (MD), and the in-country team is a highly experienced group of professionals led by Mr Francisco Bellón (COO). The fundamental role in the project’s development is played by a specific department for Environmental Management and Sustainability led by Mrs Lucía García (Manager of Sustainability), ever mindful of the impact of the COVID-19 pandemic and the Sustainable Development Goals (SDGs) of the United Nations. The sustainability strategy is driven by the Programme of Objectives defined in 2020, which strongly contributes to the achievement of the SDGs. Berkeley is working according to the following key focuses: Ecodesign: The choice of transfer mining that minimises the footprint of the project, the closed circuit of industrial water and zero discharge, as well as heap leaching (that does not generate tailings in the form of sludge) are some examples of ecodesign.

Berkeley Energia: The team

Eco-Innovation: The re-use of waste-water and sludge from municipalities for industrial use will minimise the flow of water captured from streams and produce materials for the revegetation of the site. Circular Economy: Concerned with the Life Cycle perspective, the objective is maximum efficiency of resources used. This strategy focuses on responsible consumption, minimising waste, optimising important resources such as water and energy, as well as reducing CO2 emissions. The objective is to minimise the Environmental Footprint of activities. Eco-efficiency: Digitisation of the company contributes to the optimisation of resources, which translates into minimising the environmental impact. Likewise, installing LED lighting and implementing Fleet Control for the optimisation of material movement will help protect the environment while improving economic performance. Sustainable performance: Committed to creating

CFI.co | Capital Finance International

employment in the province of Salamanca, the project will create 500 jobs during construction, and over 1000 direct and indirect jobs in the operational phase – compatible with existing activities (since 2012 the company has allowed neighbours to make temporary use of its land for agricultural activity). Environmental and sustainability training: Berkeley has set up a training centre for staff and local people to be trained in new skills. An interactive space will be created for environmental education and the dissemination of information regarding the importance of sustainability. “At Berkeley we are aiming for progress in creating a sustainable future and, therefore, our business strategy is aligned with the sustainability principles defined by the United Nations," reports Lucía García. Berkeley is committed to continue developing its projects in a safe and sustainable manner. i

Winter 2020-2021 Issue

Electronic Trading Came to the Fore in 2020, and Avelacom is Well-placed to Ease the Transition to Automation Technologies The hold of electronic trading substantially tightened in world’s capital markets in 2020 as participants shifted en masse from voice-trading in response to the Covid-19 pandemic.

velacom, an authorised service provider of connectivity and infrastructure solutions for the world’s exchanges, expects this shift to continue in 2021 and beyond as more firms adapt their trading practices to remote working styles.

The firm owns and operates a global network connecting to 80 liquidity sources. The adaptation of the world markets to the extraordinary stresses of the pandemic reinforces the ever-growing need for low-latency connectivity solutions between the world’s major financial hubs. This is a situation which plays into the hands for Avelacom, thanks to its worldwide connectivity network. Avelacom is renowned for its low latency solutions in particular: it has six-years of experience in building shorter, new and unique paths between various exchanges, ECNs and crypto exchanges. It provides capital markets with the lowest latency infrastructure, market data and connectivity services. Avelacom’s fibre network forms optimal routes to and from the fastest-growing markets, allowing companies to access new connectivity options and IT resources — with better control of Total Cost of Ownership (TCO), but no compromise in data speed. Trading firms looking for arbitrage and diversification opportunities are often sensitive to the cost of roll-out. Reliability and low latency

are of primary importance to make entering these markets practical and beneficial. Avelacom’s expertise and presence across emerging markets in APAC, the Middle East, Eastern Europe and Latin America help make it easier to set-up and explore new trading opportunities. It provides solutions which are asset-neutral and cover all key global markets. It offers the best latencies for the most popular FX triangle of New York-London-Tokyo, with optimal routes to and from the world’s e-FX hub, Singapore. When it comes to equity, Avalacom provides access to new markets, including Istanbul, Riyadh, Tel Aviv, Moscow and Johannesburg. It also offers best-in-market commodity connections between CME, LME, Chinese markets and Brazil, and highspeed access to global cryptocurrency exchanges. The company’s geographic expansion focuses on optimising existing routes. Over the past year, Avelacom set up additional PoPs in data centers including Tokyo, Dublin, Bangkok, Sao Paulo, Ashburn and San Jose. The authorised service provider gives access to the world’s most important exchanges, including the Australian Securities Exchange (ASX), Borsa İstanbul (BIST), Brasil Bolsa Balcao (B3), CME Group, Dubai Gold & Commodities Exchange (DGCX), Johannesburg Stock Exchange (JSE), LMAX, London Metal Exchange (LME), Moscow Exchange (MoEx), Singapore Exchange (SGX), Stock Exchange of Thailand (SET), and the Taiwan Futures Exchange (TAIFEX). i

"Avelacom is renowned for its low latency solutions in particular: it has six-years of experience in building shorter, new and unique paths between various exchanges, ECNs and crypto exchanges." 61

> Victor Buck Services - 20 Years of Experience in Outsourcing Services:

A Strong and Flexible Global Partner for the Financial, Healthcare, Insurance and Telco Industries www.victorbuckservices.com

Since its foundation, Luxembourg-based Victor Buck Services has been providing solutions that allow customers to simplify their communication channels.

he company provides scalable and flexible solutions including outsourced printing, mailing, archiving and scanning. For the past 20 years, it has gained recognition as a strong outsourcing partner, asserting its values and demonstrating its ability to meet customers’ current and future needs. Victor Buck Services, a subsidiary of POST Luxembourg Group, has changed considerably since it was founded in 2000. The company now employs 220 people, and the services in its portfolio have evolved and diversiﬁed over the years. Victor Buck Services has three main areas of expertise in the outsourcing field: Customer Communication Management, to cover a complete value chain of information/data exchange between various entities, companies and their customers; Content Services for managing the entire lifecycle of information, from initial publication to storage and legal archiving; and Document Outsourcing Services, including digital mail rooms enabling companies to freeup internal resources and focus on their core business. CERTIFICATIONS AND EXPERTISE Victor Buck Service holds ISO 27001 certification and PSF accreditation (Professionnels du Secteur Financier). This is the Luxembourg scheme that ensures secure and confidential data processing

CEO: Edith Magyarics

Victor Buck Services customers cover various segments

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Winter 2020-2021 Issue

in the financial sector, subject to the same regulator supervision and scrutiny as banks. Victor Buck Services’ customers include large corporations and companies in the financial sector. Its clients are mainly investment funds, public utilities, telecommunications providers, insurance companies, healthcare providers and other major organisations from public and private sectors. EXPERTISE, INNOVATION & SUSTAINABILITY Victor Buck Services offers its customers a complete value chain solution designed to optimise the management of data over multiple communication channels. “We offer security, and control the dissemination and accessibility of data,” explains Arnaud

Wulgaert, the firm’s COO. “We strive to create long-term value for our customers by constantly improving our understanding of their business environment — and their strengths.” Victor Buck is also an innovator in the field of electronics, and has developed cutting-edge technology that enables the printing of circuits boasting RFID or NFC chips on recyclable paper. Based on recyclable substrates and produced using a low-waste process, this made-in-Luxembourg, environmentally friendly technology is very much part of the company’s CSR initiative. The company’s operations are directed from its head office in Luxembourg and its Singapore subsidiary. It also works with service providers in Australia, Hong Kong and the United Kingdom.

CFI.co | Capital Finance International

The existing model allows it to leverage expertise in digital distribution across the globe, and partner with local entities for physical delivery. ANTICIPATION OF FUTURE NEEDS In an ever-changing and challenging world, Victor Buck Services relies on its agility and integrity to satisfy its customers and continue its expansion. “Our aim is to pre-empt our partners’ requests and anticipate their future needs,” explains CEO Edith Magyarics, “so we can offer them the best possible service quality in very short timescales.” Thanks to the company’s use of top-shelf technology and its exceptional governance, depth of expertise and 24/7 service, Victor Buck Services is confident that its customers enjoy consistently high standards of quality and security — wherever they are in the world. i

> UniCredit:

Driving Social Change Through Banking UniCredit is among the pioneers in the field of social impact banking, using it to drive its commitment to building a more inclusive society.

niCredit’s Social Impact Banking (SIB) provides impact and inclusive finance to foster sustainable developement and social inclusion. It is dedicated to supporting communities in the bank's various markets. SIB offers credit to individuals and businesses that are sometimes under-served or excluded from traditional products and services. It also supports social enterprises that generate benefits for the whole community. “We share our financial expertise to support the development of social companies,” says Laura Penna, Head of Group Social Impact Banking at UniCredit, “supporting them in managing their business to promote long-term sustainability.” UniCredit also aims to connect the various actors in relevant territories to strengthen the contribution to finding a common solution for societal challenges, and grow overall social impact. “This involves engaging partners with whom we share the same vision,” says Penna, “but also our people. UniCredit colleagues — current and former — play an important role here as volunteers sharing knowhow, skills and expertise.” Since its launch in Italy at the end of 2017, the SIB programme has provided some 4,200 loans, including impact finance and microcredit, across 11 UniCredit markets to support social entrepreneurs and initiatives with more than €180m. There are two distinct elements to the Social Impact Banking approach: the combined economic and social impact assessment in the choice of the initiatives to support, and the culture of monitoring and measurement. UniCredit provides a range of relevant business advisory and support services to complement this model. The client remains central at all times, and the bank accompanies them through all phases of business development. UniCredit’s SIB supports micro-enterprises, profit and non-profit social entrepreneurs, and youth and disadvantaged groups through financial and entrepreneurial education programmes. The microcredit model seeks to go beyond the commercial relationship between bank and client. It is based on an ecosystem able to 64

"Our behaviour is guided by our core values of ethics and respect and the principle of always doing the right thing vis-a-vis all our stakeholders." cater to differing customer needs, with partners supporting the customer in defining the business idea and the business plan. The bank provides the necessary financing and its colleagues, part of the UniGens volunteer network, offer specialist assistance for the development of a business in its first 18-24 months. The goal is to provide a tailored microcredit solution, including a range of aspects that are fundamental for business development, from industry relationships to relevant training and skills. The bank also provides impact finance with advantageous conditions and support in terms of training, access to relevant networks and profile building. SOCIAL IMPACT IN ACTION Recent examples of SIB beneficiaries include support for the construction of Neues Wohnen Coburg, an outpatient care and live-in facility in Coburg, Germany, a family-style residential community providing educational support as well as speech and occupational therapy and physiotherapy to young people with mental or physical disabilities. In Italy, the bank recently launched an initiative to support female entrepreneurship with a focus on those companies that provide services of welfare to women and their families. In CEE, impact financing supported the Snow-White Kindergarten project for children from disadvantaged families in Romania, providing them with modern facilities and access to education. In Austria, the bank financed the expansion of the innovative wheelchair manufacturer Klaxon Mobility, that transforms wheelchairs into battery-powered tricycles using their proprietary Klaxon Klick technology. Social Impact Banking is further committed to the support of financial education through various dedicated programmes that have so far reached over 49,200 beneficiaries, including young and disadvantaged people. CFI.co | Capital Finance International

In Italy, this includes the Start Up Your Life initiative dedicated to high school students, and recognised by the Italian Ministry of Education. In 2020, a competition involving 300 schools took place (virtually) and formed part of the events of Italy’s official Financial Education Month. Two winning projects were selected by a panel of experts and the schools each received 13 computers to encourage school digitalisation. In Germany, UniCredit partners with Joblinge to support students and jobseekers. More than 30 financial education initiatives have been delivered across nine other UniCredit markets since the roll-out of SIB outside Italy in 2019. DO THE RIGHT THING! UniCredit’s strong social commitment is a significant part of its business philosophy, and Social Impact Banking has an important role to play. In addition to supporting their communities through SIB, UniCredit provided more than €14bn in state guaranteed loans and more than €36bn in moratoria to help European SMEs and individuals mitigate the Covid-19 emergency in the first nine months of 2020. It has made significant donations across its various markets through UniCredit Foundation to support hospitals and non-profit organisations on the frontlines of the fight against the pandemic. This includes a group-wide employee fundraising initiative in support of three of the Italian hospitals at the heart of the crisis. In just two weeks, more than 3000 donations from employees helped to raise a total of €1,228,000, of which one million euros was contributed by the UniCredit Foundation. “Our behaviour is guided by our core values of ethics and respect and the principle of always doing the right thing vis-a-vis all our stakeholders,” says Penna. “In an era of growing social tensions, further exacerbated by the Covid-19 crisis, we know that banks have an increasingly crucial role, directly — supporting the more fragile social groups and the community at large — and indirectly, helping to drive the transformation towards a more responsible and socially oriented society. “We will continue to play our part here as a good corporate citizen to all our communities, looking beyond economic returns to drive positive social change through banking.” i

Winter 2020-2021 Issue

CFI.co | Capital Finance International

> Q&A with Michael Glinski, CEO of Porsche Schweiz:

Alternative Fuels, an Unbroken Legacy, and a Sports Car’s Place in the Modern World Interview by Tor Svensson, Chairman CFI.co

Porsche: it’s always been a ‘dream’ car. But what does the future hold for the famous marque in the years ahead? CFI.co finds out in discussion with Porsche Schweiz chief executive Michael Glinski. HOW HAS YOUR BACKGROUND HELPED YOU AS THE CEO OF PORSCHE SCHWEIZ? I came of age at Porsche, so to speak. The positions I held at Porsche AG were very helpful to me when I came to Switzerland three years ago. In Stuttgart, I was in charge of sales for the Western Europe region, and before that I was the head of finance at Porsche France. My network at the company is obviously a big help, as is the experience I was able to gain at headquarters and in other markets. I'm now even appreciative of Porsche's culture, its solidarity and team spirit. These values are also at the forefront of my work at Porsche Schweiz. WHAT ARE SOME IMPORTANT MANAGEMENT LESSONS YOU HAVE LEARNED? Porsche has always promoted fair and sportsmanlike behavior, whether internally among its employees or externally with our suppliers and customers. That's a key part of the company character, as well as something I live in my day-to-day work at Porsche Schweiz AG. Another thing I was able to learn at Porsche is to be toleratant of mistakes. That's something I appreciate working from the Swiss market together with Porsche AG, and I try to encourage an open culture of mistakes with my own employees — while insisting that they learn from them. Another very important thing: at Porsche, we never rest on our laurels. All problems bring opportunities, and in every crisis there is a chance to emerge stronger. At Porsche, you learn to always look forward to the next challenge. HOW HAS THE AUTO MARKET CHANGED OVER THE LAST FEW YEARS — IN SWITZERLAND, EUROPE, AND GLOBALLY? The car industry is going through the biggest transformation in its history. It has recently changed more than it had over the previous 50 66

years, and will do so even more in the years to come. The overarching trends are electrification, digitalisation, and connectivity. Honestly, 10 years ago, who could have imagined an electric Porsche? It's not just the product that is undergoing a major change, as electric cars become ever more connected and digitalised. Also changing are the ways in which our customers are buying cars. We started selling our sports cars online in Switzerland this year, because these days consumers expect to be able to make purchases wherever and whenever they want. Cars will not be an exception here. Yet, at the same time, our customers want to experience the Porsche brand more intensively than ever before. Many of them consider the personal interaction with our dealership staff to be one of Porsche's key areas of competence. In the future, we want our customers to be able to move seamlessly between the digital world and Porsche Centers. Throughout all the developments in the past, and all those that will come in the future, something will be unchanged: it will be the customers' eyes, which light up whenever they start the engine of a Porsche — on the left side of the steering wheel, of course. WHAT IS YOUR TAKE ON SMART MOBILITY AND DIGITAL CONVERGENCE? Our vision is clear. We want to be the most successful brand for sporty and exclusive mobility. That's why we're expanding our new mobility services like Porsche Drive premium rentals in Zurich and Geneva, and our vehicle subscription programmes. What we're especially interested in is connecting all of these different opportunities of mobility in one ecosystem, which allows us to offer an exclusive and dynamic mobility experience from a single source. CFI.co | Capital Finance International

CEO of Porsche Schweiz: Michael Glinski

As far as digitalisation and connectivity go, for Porsche it is about concentrating on the right things. We're not going to digitalise everything, only what benefits Porsche customers. Like the first standard-series integration of Apple Music in the Taycan. Or let's take autonomous driving. That feature makes sense for Porsche drivers when they're stuck in traffic or looking for a parking space. But I'm sure most of our customers want to drive over Swiss alpine passes themselves, with their hands on the wheel. Which is why we're interpreting these technologies entirely on our own terms. In the future, customers will be able to drive the ideal line on the racetrack — autonomously, in their own cars. WHAT IS PORSCHE’S ELECTRIC CAR STRATEGY? As of 2025, we expect every second car we sell worldwide to have an electric drive, either fully electric like the Taycan, or partially like the plugin hybrid models of the Cayenne and Panamera. Given that markets in different parts of the world will develop at different speeds, we're going for a mix of efficient combustion-driven cars, dynamic

Winter 2020-2021 Issue

plug-in hybrids, and innovative electric sports cars. We're also studying synthetic fuels, called efuels, because if our cars already out there should be powered in sustainable ways, then synthetic fuels can play an important role. WHICH CAR BRANDS DO YOU CONSIDER PORSCHE’S NEAREST COMPETITORS, AND WHAT ARE SOME POINTS OF DIFFERENTIATION THAT MAKE PORSCHE STAND OUT? We're keeping an eye on the competition, but concentrating on our own product portfolio. We only bring a new model onto the market when we're absolutely convinced we've built a real Porsche. Which means an unmistakable sports car — in its engineering and its design. This was done superbly with the Taycan. As one example, the usual 400-volt architecture for electric cars just didn't seem right for what we wanted in the first all-electric Porsche sports car. Porsche stands for performance, and that has to apply to charging as well. So we were the first manufacturer to double the system architecture to 800 volts. This technology comes from racing,

and it powered us to three overall victories at the 24 Hours of Le Mans. The higher voltage means the system draws lower levels of current for the same performance. That means the wiring can have smaller profiles, which in turn reduces weight and installation space. Moreover, the high-voltage system loses less power, which means a higher continuous output when driving and charging. At high-speed charging stations, the Taycan takes less than 25 minutes to go from five to 80 percent. WHAT DOES THE FUTURE HOLD FOR THE PREMIUM/ LUXURY AUTOMOTIVE INDUSTRY? The key trends of electric mobility, digitalisation and connectivity will continue. But sustainability will play an ever greater role. It has always been a part of our company's strategy, because we want to keep reducing negative effects on the environment while increasing the benefits for society at the same time. We're already well along the way here. The first all-electric Porsche sports car is on the market, and the Macan will be next. CFI.co | Capital Finance International

We're also studying how we can use synthetic fuels to be CO2-neutral with our existing cars. In short, we're increasing the efficiency and sustainability of the various drive systems we already have. As a brand with a nearly unparalleled connection with racing, we can draw on an enormous amount of expertise. Just look at Le Mans or Formula E. You can only win if you can cover more ground than your competitors on a tank of fuel, or a charged battery — that's the essence of efficiency. But aside from decarbonising the use of our products, we also want our production to be CO2-neutral. And, we’ve already come a long way. We've reduced CO2 emissions per car manufactured by more than 75 percent since 2014. Additionally, our site in Stuttgart-Zuffenhausen already is CO2-neutral. Our long-term goal is to become a zero-impact company — one that has no impact on the environment throughout its value chain. That's why we'll be investing more than €15bn over the next five years in electric mobility, sustainable production, and the digital transformation. i 67

> New Solutions to Old Problems?

Fintech Can Change Healthcare By Pablo Morales

Fintech is a term applied to technology-driven disruptions such as mobile money, blockchain, and big data analytics in payment, banking, or insurance services.

iven its digital nature, Fintech has made financial services more inclusive, accessible, and affordable by reaching millions of previously underserved populations such as the unbanked, rural, or informal sectors. This same potential in connectivity, efficiency gains, and expansive thinking can be realised in the healthcare space to transform the ways health services are financed. Healthcare financing is a complex and evolving space with implications for economic development and individual wellbeing. Many nations firmly believe in the importance of transforming their health financing systems to attain strategic objectives such as Universal Health Care in the mid-term and have taken serious steps towards this transformational goal. But the overall results of these efforts are not quite yet as expected. The necessary expansion of services has resulted in increases in out-of-pocket expenditure at a high cost to individuals and their families.

Policymakers in every health system are faced with challenges in key areas of raising revenues, pooling resources, and conducting strategic purchasing of goods and services. Establishing a predictable and sustainable flow of funds while ensuring that the financial burden is fairly shared across society has proven no easy task. Changing this situation requires we all take a different approach and leverage innovative ways to overcome the structural barriers preventing access to healthcare. In this respect, compared to the previous decade, the digitalisation of financial transactions and the spread of mobile phones have created a way to overcome the hurdles in healthcare financing. Mobile money platforms have grown in recent years, particularly in emerging markets, where base-of-the pyramid populations often lack access to basic health services but possess mobile phones. Over two billion people use at least one available mobile money service and there are currently over 900 planned or deployed mobile health products and services.

Over the next few years, the global market for these solutions is expected to exceed $30bn, as stakeholders look to reduce costs, add value, and enhance the reach of health services. The unprecedented connectedness of today’s society, together with an expanding dataprocessing capacity, is creating opportunities for new health financing models in response to funding gaps in current systems. These models are disrupting pre-established structures and reshaping all aspects of financial services. One clear example can be seen in China, with Ant Financial’s mutual aid health insurance platform, Xiang Hu Bao. In less than a year since its launch in October 2018, the platform attracted over 100 million people and aimed to reach another 300 million over the next couple of years. Xiang Hu Bao, which literally means “mutual protection”, provides its participants with a basic health plan against 100 types of critical illness, including thyroid cancer, breast cancer, lung cancer, critical brain injury, and acute myocardial

Fintech for Health

The models integrate financing, healthcare delivery and technology solutions

DIGITAL FINANCIAL SERVICES

DIGITAL SAVINGS Digital saving solution allow individuals to set aside money digitally exclusively for general or target healthcare expenses

CROWDFUNDING Mutual aid: A pool of funds, contributed by all members Donations: A pool of funds collecting digitally for individual requests

INSURTECH

DIGITAL LENDING

Insurtech and digital insurance are providing more choice in insurance offerings – by therapeutic areas and consumer types

Digital lending supported by alternative credit scoring tools enables lending and extends reach to underserved communities

ONLINE

HEALTHCARE DELIVERY CHANNELS

DIGITAL PLATFORMS KEY DIGITAL ENABLERS

OFFLINE

Telehealth services Eprescription

Connect financial solution providers and healthcare suppliers to individuals with healthcare needs. Platforms could be websites, super apps (e.g. Grab, WeChat) or digital health and medical playment platforms

Hospitals GP / Clinics Pharmacies

ANALYTICS

E-WALLET

Use of AI on digital data to assess an individual’s credit risk when no or limited credit history available

Include mobile wallets that enable mobile solutions to transfer and manage money and digital wallets such as AliPay

CFI.co | Capital Finance International

Winter 2020-2021 Issue

infarction. Without the need for upfront payments or premiums, all participants share health risks, and the related medical expenses. It is not a health insurance product, but complements the health insurance offering in the market. In countries with high out-of-pocket (OOP) expenditure, the lack of financial protection forces people to go without treatment — or experience catastrophic expenditure seeking care. This has opened a space for digital saving and lending platforms that can fill this space while national health systems have not yet matured. Two interesting examples are M-TIBA and Arogya Finance. M-TIBA facilitates mobile money transfers between funders, patients, and healthcare providers. The platform directs funds from public and private funders directly to patients into a digital "health wallet" payment app for health services in M-TIBA-approved clinics, for public and private insurance premiums. For the case of Arogya, this social healthcare venture offers loans to cover healthcare needs to the traditionally unbankable, using innovative riskassessment tools. A FINANCIAL JOURNEY These initiatives share important similarities. In all cases, fintech applications borrowed from other dimensions of financial services have been redirected to healthcare services. More importantly, all of these have the potential for scalability and transferability to other countries. These and other evolving developments across savings, lending, and payments platforms have the potential to transform healthcare across the world, by revolutionising and scaling health funding and financing mechanisms for public and private payers. In the short- and mid-term, fintech can bring substantial impacts in the healthcare space. • Expanding the health financing base. Connectivity among digital users strengthens health system resource pooling capabilities enabling risk transferrals among groups. • Increasing financial protection. Inclusive digital finance mechanisms can help reduce individual OOP throughout the patient financial journey. • Supporting data-driven environments. Meaningful data generation will continue to tailor health products and services to patient needs and monitor for improvements. • Fostering innovation in healthcare. Opens opportunity for multiple stakeholder collaboration and increased investment channeled towards the healthcare space. Going forward, as new fintech models are developed and capabilities continue to expand, so will the practical applications of these innovations. Systems continue to integrate, allowing for quicker and more efficient decisions. This opens new avenues for public, private, NGOs and development organizations to explore

Author: Pablo Morales

ideas, pilot solutions, and share their learnings. This enables the collective intelligence required to finally leave old problems behind. WHERE ROCHE IS GOING Roche’s global track record of healthcare funding work, understanding of medical needs for the treatment of NCDs, global footprint, and expanding network puts the firm in a position to contribute to the development, co-creation, and delivery of meaningful funding and financing solutions to expand access to healthcare. It sees fintech developments as key drivers for innovation and as strong contributors, to build the next-gen infrastructure to satisfy future global healthcare needs. The company engages with a broad range of multisectoral stakeholders to foster a global fintech for health network that will: • Drive connection and co-creation between Roche and Fintech players (banks, telecommunications, insurtechs, data start-ups) • Foster a strong and dynamic fintech for the health ecosystem • Accelerate the design and implementation of fintech models and solutions that positively impact patient access to healthcare • Leverage fintech developments to support the advancement of Universal Health Care. CFI.co | Capital Finance International

Roche is partnering with fintechs, healthcare providers, and civil society to launch promising digital mutual aid schemes and crowdfunding platforms as well as explore insurtech models that can address financial shortfalls. Findings from these initiatives will reinforce future developments as Roche continues to pilot and learn while creating access to innovation for patients. i ABOUT THE AUTHOR Pablo Ignacio Morales is a Health Systems Strategy Leader at Roche’s Global Access organization. In his role, Pablo collaborates with public and private stakeholders to support the development of innovative and sustainable models to finance access to healthcare. He is currently exploring the potential of financial technology to strengthen health system funding in low and middleincome countries. His educational background is in Industrial Engineering and holds a Masters in Health Economics from the University of Queensland, Australia. Before joining Roche, he built a career as a Strategic Management consultant working for top consulting firms as E&Y and PwC. Additionally, as a consultant for the Inter-American Development Bank he led the design of national health policy changes in Costa Rica. Pablo Morales is currently a full-time resident in Basel, Switzerland. 69

> Stellar Approach from Moonfare:

Democratising and Digitalising the Private Equity Industry for All Accessibility issues are holding the private equity industry back — but Moonfare is changing that.

rivate equity has traditionally been the preserve of major institutions and billionaires, hurting individual investors and fund managers. For decades, the private equity industry has turned the vast majority of individual investors away. Traditionally, only pension funds and insurance companies, or the very richest of individuals, have been able to stump-up the £10m minimum usually required to invest in a fund. The difficult and time-consuming work of picking a fund presents another obstacle. These barriers to entry deprive individuals access to private equity returns, which have outperformed public market equivalents over the past 20 years, according to Cambridge Associates. Keeping individual investors at arm’s length is also cutting off access to a pool of capital vital to fund managers. Moonfare is putting an end to all that. “In the very beginning, stock markets were not affordable to ordinary people,” says Steffen Pauls, founder and chief executive of Moonfare. “But prices came down so everyone could invest. I see the same development happening in private markets.” To help accelerate the shift, Moonfare secures allocation to private equity funds and splits them into smaller tranches using feeder fund vehicles. This system gives individuals access with investments starting at £50,000.

A RADICAL NOTION Pauls, a serial entrepreneur and former managing director at private equity firm KKR, founded the revolutionary platform in 2016. There had been demand from investors — but little opportunity for them to access private equity. “Private equity companies had tried to launch what they call a ‘retail’ offering, but it did not work out,” he said. “I went to the big wealth management banks, and to my huge surprise I found there was no or little offering for private equity. I decided to do it professionally, and to do it digitally.” 70

Founder & CEO: Steffen Pauls

The company’s pedigree as a prime innovator in the industry was backed up by Series A investment round backed by angel investors — a group largely made up of private equity professionals — indicating that those intimately involved in the market understand the power of Moonfare’s potential to shake up the sector. This wealth of experience has been brought to bear on behalf of investors, with experienced professionals carrying out full due-diligence on each fund before offering access through the platform. “We do our own due diligence, which is really powerful,” says Sam Boughton, Moonfare investor solutions manager. “We are not just a CFI.co | Capital Finance International

brokerage. Every time an investor logs-in they can be confident we have done a 50- or 60-page due-diligence report on each fund. It has gone through the Moonfare Investment Committee, which is formed of people who have been in private equity, often for 20 or 30 years.” THE INVESTOR JOURNEY As well as opening up the best funds for the first time, Moonfare is making the investment process as easy as possible for its clients. New investors can sign up on the platform and invest in a fund in as little as 15 minutes, executing know-your-customer and anti-money laundering requirements — not to mention all of the subscription documents in a digital fashion.

Winter 2020-2021 Issue

Fund access is also offered through selected wealth managers and private banks, broadening access to private equity to investors who may previously have had little opportunity to buy into the asset class. Highly competitive fees cap the offer, with Moonfare typically charging 0.5 percent per year, on an ongoing basis. The platform takes no performance fee or carry, nor is there any commission or fee paid to Moonfare from the fund manager. As a result, the platform is fund-agnostic and faces no pressure to steer investors to any one fund over another. The approach is paying off. Earlier this year, CFI.co named Moonfare the best private equity performance transparency platform of 2020 globally. Soon thereafter, LinkedIn named Moonfare one of the top 10 startups in Germany. GROWTH AHEAD Investors can choose to back individual funds from the curated selection on offer through Moonfare. These have included some of the best private equity funds in the world, from fund managers such as KKR, EQT, Carlyle and Apax. The platform exists to give investors choice and access, so a series of venture capital and

growth-stage funds have also been offered, including those from Vista Equity Partners and Silver Lake.

ideally positioned to expand Moonfare’s offering through wealth managers in the United Kingdom. As the company grows, so will its reach to investors.

Moonfare also conceived its own investment product. The Moonfare Buyout Portfolio enables investors to easily access a portfolio of toptier funds with one ticket and a disruptive fee structure. It makes the Buyout Portfolio one of the most innovative and competitively priced products in the private equity industry. As Moonfare grows, more asset classes are becoming available. More recent offerings include infrastructure private equity funds, representing a long-term investment in the economic recovery, as well as co-investment funds. The same rapid growth trajectory applies to the Berlin-based company’s leadership team. Moonfare has recently appointed Wilson Ng as chief investment officer. Ng brings more than 20 years of experience with him, and until recently headed UBS Wealth Management’s private equity team. Joining him are new investment director Sweta Chattopadhyay, bringing experience at the £30bn UK Railways Pension Scheme RPMI Railpen, and Ed Cotton, whose past work in private banking at Barclays and at Edmond de Rothschild’s private merchant bank makes him CFI.co | Capital Finance International

Since opening to investments in 2018, almost 1,000 clients have invested more than €450m into more than 20 funds via Moonfare. Total AUMs are on track to exceed €500m by the end of the year. Next year, the platform is expected to reach €1bn, a significant milestone in the revolution democratising private equity. But Steffen Pauls has his sights set on an even more significant target: opening up private markets entirely to individual investors. “There is huge, unprecedented value creation in private markets, but 99 percent of people cannot participate,” he says. He hopes that a secondary market, allowing investors to buy and sell without committing to the usual long investment horizons, will inject sufficient liquidity into private equity assets to give ordinary citizens the ability to invest, and give regulators confidence to allow a full opening of the market. “It would really make private equity accessible to the public, to truly democratise it, from the rich, to the affluent, and to everybody,” he says. i 71

> Kathrein Privatbank:

US Election Outcome is a Reason for Fresh Optimism, says Austrian Responsible Investment Specialist

From left: Harald P Holzer Member of the Board Wilhelm Celeda Chairman of the Board Stefan Neubauer Member of the Board

ustrian financial institution Kathrein Privatbank believes that the sustainability mega-trend is still in its infancy, and that more positive performance potential is sequestered there.

There will be on-going support from the European regulatory authorities — and the bank is heartened by the results of the recent US elections. Joe Biden’s success will, it believes, bring more diplomacy, predictability and stability to American domestic and foreign policy. That is good for trade relations with China and Europe, and should help to contain the “protectionist spiral”. Cross-continental cooperation on health via the World Health Organisation — and sustainability, through the Paris Agreement — also stand to benefit. A look at the election platform of the US president-elect clearly shows that attention is being paid to the issues of climate change and the phase-out of fossil fuels and electric mobility. Ambitious goals have been set, and there is massive potential for sustainable companies, as implied by the following points: 72

• A far-reaching ban on fracking and methane • Limits on oil and gas production will be introduced • By 2035, all new cars sold should emit zero emissions • By 2050, the entire economy should be carbon-neutral • A 50 percent reduction of the carbon footprint of all buildings • Some $400bn earmarked for clean energy research • Company commitment to publish the financial risks related to the Climate Exposure Finance Statement.

seals such as the Austrian Ecolabel. Kathrein also offers the possibility of customised sustainable asset management. The selection of companies is always based on the evaluation of key company figures and sustainability criteria.

Another reason for optimism, says Kathrein Privatbank, is that sustainable companies are likely to be granted more favourable financing conditions.

The topic of sustainable investment is receiving a fresh tailwind in the US — the world's largest economy, with the most profitable companies.

Kathrein Privatbank has been focusing on the topic of sustainable investment since 2011. Almost 50 percent of the assets it manages are invested according to sustainable guidelines. Its range of sustainable funds includes pure equity and bond funds, as well as various mixed funds, certified by external sustainable quality CFI.co | Capital Finance International

As much as 70 percent of current energy consumption is still produced from fossil fuels, but there will be a switch to emissions-free energy sources such as nuclear, wind, hydro and solar power. The switch to electromobility is expected to triple the demand for sustainable electricity generation.

Kathrein Privatbank is constantly developing innovative fund concepts. Since August 2020, a new “North Star” — the Kathrein Sustainable EM Local Currency Bond — has been guiding sustainable funds at Kathrein Privatbank. The concept is to invest in emerging market currencies via bonds issued by multinational development banks to pursue attractive — and responsible — returns. i

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> Check Creditworthiness in Seconds:

SCHUMANN Has the Tech to Do It Blocklists, customers with weak creditworthiness, important limit decisions — the economic consequences of the pandemic has made it vital to take a closer look at customers.

his is possible, and easier than ever, thanks to software products from the German company SCHUMANN.

During recent years of steady economic growth, few companies placed such a strong emphasis on reducing risk. This will change dramatically in the current crisis, the firm warns. The best way of dealing with the expected economic developments are the focus of experts around the world. The managing director of SCHUMANN, Martina Städtler-Schumann, is certain: "We need early-warning systems that inform us automatically when customers or suppliers get into economic difficulties." DIGITALISATION IN CREDIT MANAGEMENT The search for new ways of doing things affects all industries, from insurance, through financial services, to industrial and trading companies. The pandemic can be seen as an accelerator of innovation. “This means that right now, we need to question our traditional practices and update them, if necessary, with new investments,", Städtler-Schumann believes. Choosing the right technology is decisive for the success of the operative and strategic digital transformation of processes in credit risk-management. Managing Director: Martina Städtler-Schumann

SOFTWARE MADE IN GERMANY Highly qualified software development and consulting specialists are working on this technology for SCHUMANN, which started in 1997 with just four members of staff. These days, it has more than 160 employees — and continues to grow. The company from Göttingen plays an important global role in credit and surety. This is where the company's history began. "Our first customers were credit insurance companies with whom other companies can insure themselves against default on payments," says Städtler-Schumann, who holds a doctorate in economics. The second large customer base is the financial service providers — mostly leasing and factoring companies. Industry and wholesale is the third group, who evaluate the value or the

creditworthiness of their own customers using SCHUMANN software. MINIMISING RISKS The software delivers an evaluation from which the risk of credit default and recommendations for payment conditions can be determined in seconds. SCHUMANN's customers decide which information should be considered when making the evaluation. There are many interfaces and sources of information from which the data can be evaluated. By combining internal and external data, the software can check the creditworthiness of business partners and monitor them, automatically and online. LIQUIDITY SIMULATION For creditworthiness estimation, balance sheets are often analysed. "But balance sheets from 2019 are CFI.co | Capital Finance International

currently almost useless if you want to investigate the current situation of business partners to predict your own economic development", says StädtlerSchumann. The company has a solution for this: automated simulation of business development on the basis of target figures. She explains: "If a customer, for example, introduces short-time working for his employees or takes out a large loan, this information can be recorded. Our software then automatically provides a new rating. This enables various scenarios for the development of the company to be simulated." The automated evaluation of these scenarios makes balance sheets from 2019 usable once more. It is then possible to predict whether suppliers can reliably deliver, and whether customers can pay their invoices for 2020 and 2021. i 73

> Scaling Europe’s Top-Performing Tech Companies:

A Challenge and a Mission that 3VC Accepts 3VC is a Vienna-based venture capital fund that invests in a hand-picked group of European technology startups with global ambition.

rom seed to growth, 3VC’s entrepreneurial team provides tireless support and access to an international co-investment network of VC partners. 3VC’s portfolio includes category leaders such as Assaia, Authenteq, Kaia Health, Lokalise, PicsArt, and Storyblok. European start-ups have trouble raising smart money from investors who have the bandwidth and connections to help them grow globally. There is a massive deficit of venture capital in Europe, particularly in the GSA and CEE region. An increasing number of European scale-up companies is growing towards global market leadership, fueled mostly by American VCs. Also, there are strong macro-economic benefits for European founders. These include access to the best talent at lower operating costs, meaning investments last longer and create more impact. This is why Roman Scharf and Peter Lasinger founded 3VC in 2017, launching with a threeperson team and a first fund of $50m and bringing Valley-style venture capital to the region. It invests in European tech start-ups with global ambition — at any stage of their journey (Series A and beyond). BUILDING BRIDGES 3VC works with an extensive network of trusted local partners throughout the GSA and CEE regions. It joins or leads investment syndicates with top international investors such as Sequoia Capital, Index Ventures or Floodgate. Scoring an investment from this “glocal” syndicate, European companies are on the global success track. 3VC supports the teams with daily handson advice, the US co-investors contribute proven playbooks and a blitz-scaling attitude, and portfolio companies can attract and retain top talent as sought-after employers. “European founders deserve courageous investors with a more hands-on approach and the ability — as well as intention — to stand by them, to listen, to motivate and to help out,” says Roman Scharf, co-founder and general partner. 74

“We don’t know all the answers, but we know the people who do. We want founders to feel they are not alone. We are here, and through our team, our partners and our allies, we have many ways to make a difference.” FOCUS ON QUALITY, NOT QUANTITY The 3VC team is highly selective in its approach to partnerships, and always optimises for quality instead of quantity. Over the past three years, the fund has invested in just a handful of companies, averaging three to four investments per year. This approach allows 3VC to work closely with founder and executive teams, and be there when help is needed. “Talent is not enough, it’s about exercise and guidance,” says co-founder and general partner Peter Lasinger. “That’s why Roman and I created 3VC: a venture catalyst that unites the best entrepreneurs, resources and supporters in a mission to help create sustainable organisations that drive humanity forward.” ENTREPRENEURIAL AND DIVERSE TEAM Based in the historical East-West-hub of Vienna, 3VC has an entrepreneurial team of driven individuals partnering-up with GSA and CEE tech companies. The region is home to worldclass engineering talent. 3VC works closely with a selected team of venture partners: entrepreneurs and leaders, complementing the core team and supporting 3VC’s portfolio founders with knowledge, experience and a valuable network. A PORTFOLIO OF CATEGORY LEADERS 3VC’s approach to selecting portfolio companies is clear-cut: precise investment criteria in combination with a strong selection process that includes joint due-diligence with top VCs and fund arithmetics to optimise ROI. 3VC is driven by its belief in entrepreneurs with big ideas, and its determination to drive humanity forward — a vision shared by its three stakeholder groups of entrepreneurs, fund investors and partner VCs. It is reflected in a portfolio that includes AI-enabled solutions for airports by Assaia, automated ID verification by CFI.co | Capital Finance International

Authenteq, Digital Therapeutics by Kaia Health, the leading localisation platform Lokalise, the creative photo and video editing platform PicsArt, and the headless CMS by Storyblok. 3VC supports its portfolio companies along the way — all the way — to grow beyond Europe and go global. Two of its portfolio companies, DeepCode and Gamee, have already been acquired by industry leaders. Going forward, 3VC will continue to stand out in the European venture capital ecosystem with its strong entrepreneurial DNA, its high-conviction investment strategy, and an emphasis on focus on quality, not quantity, with a diverse team acting as one.

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“Talent is not enough, it’s about exercise and guidance,” says co-founder and general partner Peter Lasinger. “That’s why Roman and I created 3VC: a venture catalyst that unites the best entrepreneurs, resources and supporters in a mission to help create sustainable organisations that drive humanity forward.” CFI.co | Capital Finance International

PETER LASINGER Peter Lasinger co-founded 3VC (formerly capital300) with Roman Scharf in 2017, raising $50m for the new venture fund. Prior to that, he helped establish and manage Austria’s most active seed fund with $80m under management. Peter has been responsible for several successful transactions and exits. Before going into venture capital, Lasinger was a manager at Accenture’s IT strategy and M&A practice, advising international corporations on strategic technology decisions, governance and sourcing strategies, and supporting large M&A transactions. He has worked for Lufthansa in New York City, establishing online sales, and started a SaaS company during his studies. Peter Lasinger holds a PhD in Business Administration and Information Technology (summa cum laude) from 76

the Vienna University of Business and Economics (WU Wien). He also holds an MSc in Business Administration and Information Technology from the University of Linz (Austria) and the Richard Ivey School of Business (University of Western Ontario, Canada). Lasinger speaks German, English, and basic French. He has established two venture capital funds with a total of more than $130m under management and led 30+ transactions with international coinvestors, including four exits. He holds board and supervisory board positions in several technology companies. ROMAN SCHARF Roman Scharf co-founded capital300 with Peter Lasinger in 2017. He is a serial entrepreneur and CFI.co | Capital Finance International

business “angel”. He is the founder and CEO of Talenthouse Inc, a leading global marketplace connecting brands and creatives (currently valued at $100m and having raised $30m so far). Prior to that, he was co-founder, executive director and president of Jajah Inc, a Voice-overIP company that raised $32m from investors like Sequoia, Intel Ventures and Deutsche Telekom and was sold to Telefonica for $207.6m. Scharf was a partner at Ecotech Software, which was sold to Rockwool International AS. He has worked as a consultant for an Austrian environmental management consultancy and the European Commission. He holds a MSc in business administration from the Vienna University of Business and Economics. The German native speaks fluent English and Russian. i

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> Professor Robert Anthony, Anthony & Cie:

A Specialist in Many Fields with a Passion for All Things Financial and Family Office Anthony & Cie is a multi-family office which orchestrates financial, legal, real estate and tax advice in France.

obert Anthony is the principal partner at Anthony & Cie, which was established in 1978 and is currently based on the French Riviera. He is an independent member of Geneva Group International (GGI), a British Chartered Certified Accountant and a Certified Financial Planner (France). As an international family office, Anthony & Cie manages cross-border strategies for international clients. It is currently active in Europe, Latin America and Africa, thanks to the global alliance of independent professional firms, GGI. It mainly brings its expertise to private individuals and professionals in France. Robert Anthony was formerly Professor of International Tax Law at the Thomas Jefferson School of Law in San Diego, California. He has been a member of the board of Sophia Business Angels for several years. As an independent member of GGI, he chaired a practice group of private equity and international wealth management for four years. Robert Anthony is a member of several associations: ACCA (Association of Chartered Certified Accountants), CNCGP (Chambre Nationale des Conseils en Gestion de Patrimoine), CGPC (Conseil en Gestion de Patrimoine Certifié). Over the years, he has submitted articles to various international journals, and authored a book, International Fiscal Strategy, published by Monitor Press in London. He regularly speaks at international summits and conferences as an expert in tax and family offices. Robert Anthony’s expertise and in-depth knowledge is constantly in demand, and he has delivered lectures at conferences and gatherings around the world. In the past, Robert Anthony has been editor of Europe for Tax Analysts and a member of the committee at the Institute of Directors (Monaco branch). He has been an honorary magistrate in the UK, and chairman of the Association of Combined Youth Clubs under the Royal Patronage of the Princess Royal in the UK. i For further information, please visit antco.com

Principal Partner: Professor Robert Anthony

CFI.co | Capital Finance International

> AI-Powered Precision Medicine:

The Silver Bullet for Equitable Healthcare? By Shahnaz Radjy, Enrico Santus & Nicola Marino

Transformation is never easy. Whole theories exist around facilitating change, focusing on how to get individuals or populations to modify their patterns of behaviour.

ow imagine trying to change not just people, but something like the healthcare system. That is the promise and challenge around artificial intelligence — from what is portrayed in popular culture as a tech and innovationcentric society in Back to the Future’s 2015 to any of the risks of technology misuse represented in the Netflix show Black Mirror — and precision medicine. How do we take innovations from the research lab to the patient, and can Covid-19 somehow provide an example that lights the way?

"AI empowers clinicians to tailor preventative or therapeutic interventions that account for the nuanced — and often unique — features of every human being."

Health professionals are treating the pandemic using trial-and-error based on a one-size-fits-all approach. This is a missed opportunity in this age of big data and high-performance. AI-led computing offers more precise, effective, and affordable solutions. Antonella Santuccione Chadha, CEO of the Women’s Brain Project, says: “The potential for drastic change within the healthcare system is within reach thanks to novel technologies and AI-driven solutions available to propel us from the age of shallow medicine to the era of precision healthcare.”

But these data are the perfect playground for AI, enabling the substitution of the hypothetical average patient with a real individual, based on his or her genetic, epigenetic, geographical and socioeconomic signature.”

Precision medicine can revolutionise how we practise medicine. However, we need to bridge the gap between research labs and patient care — and do so in an intentional manner that paves the way for equity in access to healthcare.

Aided by AI, it can predict the risk of a person developing a disease and estimate the likelihood of success for a specific treatment. This leads to enhanced allocation of resources, a better match between treatments and patients, and improved health outcomes.

WHY WE NEED PRECISION MEDICINE AND AI Which patients develop a more severe outcome than others? Which are more likely to respond to a given treatment? What is the best preventative option for any given patient? For centuries, doctors have made this type of prediction based on experience and a hypothetical “average” patient. However, what is normal for you might not be for someone else. Age, gender and a number of other parameters affect the interpretation of results. Wouldn’t you rather use the details of your specific health profile, rather than a potentially oversimplified average? “Multidimensional datasets reflecting all facets of a person simply cannot be grasped by human minds,” explains Maria Teresa Ferretti, cofounder and CSO at the Women’s Brain Project. 78

In that way, AI empowers clinicians to tailor preventative or therapeutic interventions that account for the nuanced — and often unique — features of every human being. This is called precision medicine.

Covid-19 has proven very difficult to tackle with standard medicine. Rates of mortality, severity, and response to treatment are extremely variable, making it hard to make predictions. The incidence and outcomes of Covid vary according to individual factors, including age, gender, race/ ethnicity, health status, drug use and more. A drug that might be beneficial for one patient might be in dangerous for another.

Epidemiology (COPE), a consortium that developed a symptom-tracker app, a real-time data-capture platform. In a few days, it garnered over three million users. Based on available data, AI applications for a broad range of clinical tasks already exist, including risk prediction and prognosis, diagnosis, and treatment. Other tasks are being addressed for long-term solutions. Among them is the identification of existing drugs that could be effective in addressing proteins targeted by the virus, or the discovery of new chemical compounds that can perform the same task. A study published in The Lancet describes how algorithms identifying interactions between drugs and proteins helped detect Baricitinib, as a useful drug against Covid-19, despite being indicated for arthritis. THE HEALTHCARE SYSTEM, PRECISION MEDICINE, AND AI The recent pandemic has highlighted how delicate our healthcare systems are, with even Switzerland and Germany put to the test. This crisis made it evident that including AI is not optional, but critical to speed-up decisions, avoid mistakes, and optimise resources. However, AI implementation for precision medicine in Covid-19 in is still far from complete. Organisations such as the World Economic Forum have initiatives focused on precision medicine and related governance gaps aiming for a worldwide adoption while addressing inequities.

This is direct evidence of the need to move towards precision medicine. For that, we need three things: data, algorithms, and a supportive healthcare system.

The highly fragmented and diverse healthcare systems, the absence of a protocol to document patient data (leading to inter-operability issues), the ethical constraints such as privacy, and the limitations of AI itself (bias and noninterpretability) still represent a serious challenge to extensive AI adoption. The digital literacy of stakeholders — or lack thereof — should not be underestimated either.

AI APPLICATIONS IN COVID Initiatives collecting multidimensional datasets in the context of Covid-19 started early. One example is the Coronavirus Pandemic

The collaborative approach can be unlocked through Covid-19, and powering the myriad consortia created to tackle the pandemic will continue. It will build on learnings from the past

CFI.co | Capital Finance International

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year to catalyse a mindful and equitable flow of innovation from research labs to hospitals and patient care.

workplace health both at the World Economic Forum in Geneva, Switzerland, and the Vitality Institute in New York, US.

The Women’s Brain Project (WBP) is an international non-profit organisation focused on sex and gender determinants of brain and mental health as a gateway to precision medicine. They have worked with the authors on a scientific version of this article to be published soon. i ABOUT THE AUTHORS Shahnaz Radjy is a member of the Women’s Brain Project executive committee and holds an MBA in Healthcare Management from the EHESP as well as a Bachelor of Arts in Biology from the University of Pennsylvania. She worked for 10 years in chronic disease prevention and

Enrico Santus is a senior data scientist at Bayer. His academic career includes a postdoc at MIT, in the group of Regina Barzilay, and years spent between universities in Asia (Hong Kong and Singapore) and Europe (Italy, UK and Germany), working on topics such as natural language processing in oncology, cardiology and palliative care. He has also worked on fake news detection, sentiment analysis and lexical semantics. He has published numerous papers in top tier conferences and journals, and several of his works were featured in mass media. He has been invited to talk at the White House and is the first author of a factsheet about artificial intelligence

Nicola Marino recently co-founded the innovative startup INTECH — Innovative Training Technologies — engaged in the development of advanced surgical training systems validated by the most important scientific societies. He studied orthopedic techniques at the Università Cattolica in Rome, and is currently pursuing a degree in medicine and surgery at the University of Foggia. He did an internship at the Harvard Medical School and the Dana Farber Cancer Institute in Boston in the laboratory directed by Charlotta Lindvall, MD, PhD. He has published a series of articles in national Italian newspapers and has been appointed by Forbes Italia in its 100 under 30 list.

Author: Shahnaz Radjy

Author: Enrico Santus

Author: Nicola Marino

CFI.co | Capital Finance International

produced by the Harvard Kennedy School Belfer Center for the American Congress.

> Svenska Cellulosa Aktiebolaget SCA:

Growing Forests and Renewable Products to Fight Climate Change

ith 2.6 million hectares of forest in northern Sweden and 50,000 in Estonia and Latvia, SCA is Europe’s largest private forest owner.

SCA, whose head office is located in Sundsvall, was founded in 1929 from the merging of a number of older forest-product 80

companies in northern Sweden, some of them with a history stretching back to the 17th Century. Forests are the core of SCA, and around this unique resource it has built a well-invested industrial value chain with the aim to create the highest possible value. CFI.co | Capital Finance International

Located close to the forest are five large and competitive sawmills — the world’s largest production line for softwood kraft pulp — and two kraftliner mills. Kraft pulp is dark cellulose material commonly used in paper manufacture. Residue streams are used for energy production, in SCA’s own mills and for external customers.

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In the Obbola paper mill outside of the city of Umeå, SCA is investing €700m to increase the production of kraftliner paper for packaging from 450,000 to 725,000 tonnes per annum.

Since the company’s forest land features plenty of good windpower sites, SCA is developing that renewable technology with partners. SCA is involved in all links of the value chain, including the transport of raw material and forest products. “We’re always trying to fine-tune our industrial ecosystem,” says communications officer Björn Lyngfelt, “enhancing the combined value it can bring in, and from, the forest. “We have recently finished and brought into operation a €700m investment in expanding our kraft pulp mill. And right now we are investing another €700m in increasing our production of kraftliner, paper for corrugated packaging. We’re also investing in forest land in the Baltics and are researching liquid biofuels based on forest and forest industry residues.” SEQUESTERING CARBON DIOXIDE Climate change is a focal point in national and European policies. The new European Commission has put up its Green Deal, where combatting climate change is a key focus, and at the top of the agenda. And forests are vitally important to the climate change debate. Sustainable forest management is the core of SCA’s operations. In the Bogrundet forest nursery north of Sundsvall, it produces more than 100 million new trees per annum.

"Sustainable forest management is the core of SCA’s operations. In the Bogrundet forest nursery north of Sundsvall, it produces more than 100 million new trees per annum."

Some want to claim forests for carbon sinks, while others want to bring out the substitution potential from the forest value chain. Renewable raw material from well-managed forests can be substituted for products with a higher carbon footprint, keeping fossil carbon in the ground. The outcome of this debate will have a major impact on European forests and forest owners. Growing forests sequester carbon dioxide from the atmosphere. The difference between forest growth and harvesting and natural losses brings CFI.co | Capital Finance International

a net reduction of carbon dioxide. Harvested timber is used for products and materials that can replace concrete, steel, plastic packaging and even fossil fuels. In this way, fossil carbon remains in the ground. Forestry, production and transport still lead to some carbon dioxide emissions, and SCA strives to keep these to a minimum. POSITIVE CLIMATE EFFECT SCA has developed a model for calculating the climate effects of company’s operations. This model has been adopted by other companies, countries and stakeholders, and comprises all the elements mentioned above. The net sequestration in the SCA forests amounted to 5.4m tonnes of carbon dioxide in 2019. The substitution effect amounts to six million tonnes of carbon dioxide — and the emissions from SCA’s entire value chain amounts to 0.9m tonnes. These figures — the sum of the first two minus the third — provide a record of SCA’s climate benefit: the figure is positive. For 2019, this benefit was 10.5m tonnes of carbon dioxide — corresponding to the emissions from all passenger cars in Sweden. “We believe that working with the full forest value chain brings both the best value-creation over the long term, and the best contribution to society in the form of renewable raw materials and products and in combatting climate change,” says Lyngfelt. SCA has 4,000 employees and its turnover for 2019 stood at SEK19.6bn (€1.92bn). i

For more information, please visit www.sca.com 81

> Crédit Mutuel Asset Management:

Clients’ Trust is Our Finest Reward

ith more than 30 years of expertise in asset management and a complete range of funds combining simplicity with transparency, Crédit Mutuel Asset Management has evolved to take up a sector-leading position. Its funds are primarily based on finding a balance beween the unending search 82

for performance and comprehensive risk management. Crédit Mutuel boasts all the advantages of a “human-scale” structure despite its impressive team of 250 professionals dedicated to asset management. The firm remains agile enough to combine flexibility and responsiveness and build lasting partnerships. CFI.co | Capital Finance International

Its transformation goal was to become fully responsible and provide sustainable finance based on socially responsible investing (SRI) and ESG principles. For more than 15 years, Crédit Mutuel Asset Management has been a committed player in sustainability, with technical skills adapted to its evolution. Attention is paid to risk monitoring, regulatory, financial and operational controls, and its information

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systems feature cutting-edge technological tools, frequently updated standards, and performance attribution. The firm offers service valuation, administrative and the legal management of funds on behalf of external management companies. Its wide range of dedicated, multi-company FCPE funds is based on consistency and expertise. An allocation committee defines the monthly portfolio allocation according to a top-down approach (based on economic analyses) and is enriched by the market experience — and the bottom-up knowledge of the various asset classes. The committee decides on diversifications (management, thematic, commodities, credit), increases or decreases in the respective classes. It is comprised of the heads of management divisions and experts from Crédit Mutuel Asset Management. Weekly rate-management meetings are held to define the main areas of portfolio exposure and drive management dynamics. This provides a detailed review of the markets — interest rates, currencies and credit — carried out jointly by managers and credit analysts. Internal ratings are applied with a rigorous monitoring protocol. Crédit Mutuel Asset Management’s operations are based on fundamental analysis, framed by a structured process. Risks are calibrated to promote performance readability. When it comes to equity management, Crédit Mutuel has the quality of stock-picking at its heart, divided into geographical areas, capitalisation sizes, and themes. The criteria for selection of securities is based on regular contact between its managers and the directors of large companies. Factors under consideration are quality of the company, valuation adapted according to the sector, and evolution of the company. The Multigestion Alliance of strategies optimises the risk/return ratio for clients, with recognized expertise in diversified management and fund assembly. There is a rigorous quantitative and qualitative process for selecting internal and external funds.

"Crédit Mutuel Asset Management’s operations are based on fundamental analysis, framed by a structured process. Risks are calibrated to promote performance readability." CFI.co | Capital Finance International

Profiled management is based on decisions made by the allocation committee. Based on benchmarks, the team selects funds in different asset classes. Multi-strategy management (based on absolute performance) combines different strategies for risk diversification. Structured management is optimised via mathematical models. Hedged or unhedged index funds are evaluated in relation to the underlying currency of the country of the index. Cushion funds are managed using portfolio insurance techniques, offering capital protection for investors. i 83

> Hydropower

and its Prospects

Alternative energy sources, and hydro in particular: CFI.co interviews Wolfgang Kröpfl, CEO of enso GmbH, Gilbert Frizberg, CEO of eHydro500 GmbH, and Günther Rabensteiner, CTO of eHydro500 GmbH. MR KRÖPFL, HOW HAS HYDROPOWER DEVELOPED AS AN ASSET CLASS FOR INVESTORS? Wolfgang Kröpfl: The years after the financial crisis, and especially in the phases of the "Energiewende", were characterised by low electricity prices. Due to the highly subsidised energy transition, massive capacity was fed into the European market at zero cost. Since the old subsidy regime expired, the markets have been showing a price recovery for some time. That has collapsed again in the short-term due to the Covid-19 pandemic. The electricity futures point to a clear recovery. Hydropower is economically competitive without subsidies, and with a lifespan of over 80 to 100 years, it is a stable and sustainable — a real asset. The development and the prospects have induced enso GmbH, with partners, to found eHydro500 GmbH, which acts as the exclusive investment advisor to the NIXDORF Climate Endowment Hydropower Fund, which was set up in Luxembourg. With this impact investment, investors are offered an evergreen fund for longterm investments in this asset class. WHAT ROLE DOES HYDROPOWER PLAY? Gilbert Frizberg: Hydropower contributes 16.4% of global electricity production, and is therefore a mainstay. With a share of 62%, it is the undisputed number one among renewable electricity sources. The marginal costs of hydropower plants are almost zero; that, combined with a life cycle of over 80 to 100 years, makes investing in hydropower attractive. Hydropower has the lowest electricity production costs (LCOE) among renewable energy sources and, along with water storage, also offers the cheapest option for energy storage. Hydropower also has by far the highest efficiency of all power sources. WHAT DO THE PARIS AGREEMENT AND THE EUROPEAN GREEN DEAL MEAN FOR HYDROPOWER? WK: The Paris Agreement’s goal of keeping global warming below 2°C is an essential step towards securing the future. We are directly confronted with long-term changes in environmental conditions, and we notice them in our records of relevant parameters. The steps that are taken with a Green Deal are imperative. In this context, hydropower — as the oldest and most established renewable electricity source — plays a significant role in the transformation 84

of electricity production. After the fossil and nuclear power plants have been shut down, a replacement is needed to offer a stable supply even in "dark times" (no wind and no sun). WHAT DOES THIS MEAN FOR THE FUTURE ENERGY LANDSCAPE? GF: The World Energy Outlook 2019 of the IEA (International Energy Agency) predicts that by 2040 electricity will have overtaken fossil fuels in importance. This means an increase to some 160% by 2040. This is driven on the one hand by the need for replacement capacity from previously fossil-fuel power plants, and on the other by the increasing consumption of increasing electrification (e-mobility, automation and technological change such as IoT and 5G). IRENA studies from 2020 show that in order to achieve the 2050 goals of decarbonisation, hydropower with an additional capacity increase of 850 GW worldwide is necessary. WHAT ARE THE TECHNOLOGICAL ADVANTAGES OF HYDROPOWER? Günther Rabensteiner: Hydropower is technology that is economically capable of supplying a base load and, in connection with water storage, can react flexibly to requirements. Water storage is by far the cheapest form of energy storage in the long run. The good predictability and relative steadiness of the water flow make hydropower a renewable source of electricity that can be easily planned. The production profiles of solar and wind have a low statistical correlation with hydropower, which means that the technologies complement each other. Hydropower is black-start capable, which means that even in a blackout scenario, it can be used to restart the electricity grid. WHO INVESTS IN HYDROPOWER? GF: Hydropower is a suitable asset class for longterm investors because of its lengevity. Past and current crises have clearly shown that hydropower is part of the infrastructure that is relevant to the system. The aim of the fund is to offer institutional and professional investors a stable long-term investment. Hydropower does not lose value over its service life and has a constant production profile that does not decrease in efficiency. From the current perspective, the CFI.co | Capital Finance International

product electricity cannot be substituted and can be sold and traded internationally via the networked markets, regardless of location. WHAT ARE YOU AIMING FOR WITH YOUR NEW CLIMATE ENDOWMENT HYDROPOWER FUND INITIATIVE? WK: The fund strives for an initial target of €500m in AUM. The structure as an evergreen fund leaves room for future expansion. It is important that we achieve a dual goal with the investments: a positive impact and climate sustainability as well as a sustainable stable financial return for investors. WHAT ARE THE CRITERIA FOR THE INVESTMENTS? GR: In addition to economic factors, complexity and sustainability in the social and environmental context must be considered. We base our actions on the UN-ESG goals. We focus on investments in hydropower plants up to 50 MW. With a balanced mix of plants in operation that need upgrading and refurbishment (brownfields) and hydropower plants yet to be built (greenfields), we create cash flows and additional production from the start. In the first phase of the fund, investments will focus on the target region of Europe. A balanced diversification of northern, southern and eastern Europe ensures the balance of the hydrological and macro-economic situation. Seasonal and annual fluctuations in the total production of the portfolio can be balanced out. Regions outside of Europe such as Asia can later be added. We focus on power plants where we, as asset managers, can bring additional value. This happens through our experience in evaluating potentials in the course of the acquisition process, and through our optimisation know-how in refurbishment. WHAT ARE THE CHALLENGES? WK: The main challenges are to be seen in the uniqueness of each hydropower investment, as well as our claim to optimal implementation in the overall context of our impact goals. This includes technical and social, environmental and economic competence. In addition to the experience from the operation of 35 hydropower plants that are currently under our management, we rely on innovative solutions in order to be optimally prepared for

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the challenges of future paradigm shifts in the industry. Storage and the use of complementary technologies at existing locations are just two examples.

With Günther Rabensteiner, long-time technical director of the Austrian Verbund AG (secondlargest hydropower operator in Europe) and Gilbert Frizberg, long-time chairman of the

supervisory board of the Austrian Verbund AG, we have been able to gain market access and transaction competence on an international level, as well as enormous energy market know-how. i

In October, eHydro500 GmbH and its partner, Climate Endowment Group, launched the green Climate Endowment Hydropower Fund in Luxembourg as an investment opportunity. It pledged to invest €500m in equity into a balanced and sustainable mix of greenfield and brownfield hydropower plants in Europe.

The geographically diverse asset allocation results in a balanced risk at portfolio level. Even though hydropower is a predictable energy source, the annual water supply differs around Europe. Due to periodic weather phenomena, these fluctuations are not evenly distributed regionally.

The fund follows dual targets: positive impacts for climate sustainability and stable profitability for investors.

EXPERIENCE enso GmbH has extensive experience in the investment lifecycle. It managed to combine the professional experience gained at 35 plants under management in four regions with the know-how of European Utilities managers in the offshoot company eHydro500 GmbH. eHydro500 bundles specialist knowledge gathered over three decades as Europe’s second-largest hydropower power producer and utility with 10 years of experience in managing an institutional fund.

Clean Power

Hydro500 GmbH, a subsidiary of fund manager enso GmbH, offers investment opportunities into the most efficient renewable energy: hydropower.

Climate change is an undeniable fact, and the protective measures taken by the EU with the Green Deal are inevitable. Efforts towards significant CO2 reduction must be improved to keep track on the 2° global warming target. The use of fossil fuels must be drastically reduced. In addition to increasing energy efficiency, this can only be achieved through increasing electrification and replacement of fossil power plants by power plants with renewable energies are implemented. Hydropower has a significant role to play in this future, as it is predictable, controllable and can store energy by water storage volumes. Recently published studies show that significant increase in hydropower capacities will be required to build up a sustainable mix of renewable power sources for a stable supply of clean electricity. In this context, the International Renewable Energy Agency (IRENA) predicts an additional demand of 850 GW in installed hydropower capacity including pump storage hydropower plants over coming decades — an average annual growth of two percent. The future is without any doubt electric and hydropower is a vital pillar in the future of electricity supply and in the transition to the 2050 goal for decarbonisation and the limitation of global temperature increases as laid-out in the Paris Agreement of 2015. • Hydropower has a lifetime of up to 100 years • Hydropower creates only 1/100 of emissions per kWh compared to the actual European energy mix. • Hydropower has marginal costs near zero and low LCOEs. • Hydropower can store energy by water storage This makes hydropower an attractive asset class for long-term investment. ASSET MANAGEMENT enso GmbH is an established asset manager, with 35 hydropower plants under management in Norway, Austria, Albania and Turkey; enso also provides this service for independent third-party power plant owners. To extend its business lead, enso GmbH founded eHydro500 GmbH with partners outside of the industry.

eHydro500 — as exclusive investment advisor to the fund — is dedicated across the organisation to the UN’s SDG goals and follows the strict rules of IFC performance standard (World Bank). Low-complexity hydropower plants with a capacity of up to 50 MW are in focus. For such plants, the impact on the environment can be kept to a minimum. With a 60-40 mix of Brownfields (plants already in production) and Greenfields (newly built plants), a balanced risk profile and steady cash flow can be achieved. Production from these upgraded and new plants will provide additional energy to the market and reduce the CO2 footprint in Europe. The portfolio creates just 1/100 of CO2 emissions per kWh compared to the current energy mix of Europe. DNSH – Do No Significant Harm — tests, plus impact and sustainability indicators, are the basis for all investment decisions. With the expertise of the management team, hidden potentials can be detected during evaluation, and lifted by refurbishment, upgrade activities or operation optimisation. Targeting storage capabilities helps to improve the utilisation of available waterflow and regulate production by shifting production from daily to seasonal periods results. INVESTMENT REGIONS Hydropower plants generate electricity from the volume of available waterflow and pressure, due to a difference in altitude between water intake and powerhouse. Mountainous regions usually provide ideal conditions, with altitude and plentiful rainfall where warm and moist air currents meet. This determines the target regions of the fund: Scandinavia’s alpine regions, southern and southeastern Europe. CFI.co | Capital Finance International

Günther Rabensteiner is a former member of the board, CTO and COO at Austrian Verbund AG; Gilbert Frizberg is a 15-year veteran of the supervisory board at Verbund AG. The men share their global network and experience on eHydro500 GmbH’s managing board. Within the Climate Endowment Group partnership is an interdisciplinary team of capital market experts, taking care of the risk management, ESG-related issues and impact evaluation in the fund´s portfolio management. PIPELINE The current market environment is an attractive entry point as many smaller asset owners face a liquidity problems due to the combined impact of low electricity prices and the global recession caused by Covid-19. Historically low electricity prices during Covid-19 in Scandinavia have led to a liquidity crunch among some asset owners. Global GDP contraction due to Covid-19 has worsened the liquidity crisis and provides an opportunity to acquire quality assets that were not previously available. Market screening activities led to an identified pipeline of possible investment targets of a total installed capacity of about 550 MW in Scandinavia, south and south-eastern Europe. Deal speed has improved recently, and about a third of the pipeline should be available within six months. i 85

> The Value is in the Solution:

A Firm Protecting the Things that Can Never Be Replaced FLI Global is an environmental services and technologies business focused on the protection of air, land, and water.

ts experienced team, knowledge base, expertise and focused approach — using Cleantech and Greentech integrated solutions — sets the firm apart as a sustainable solutions partner with its clients. “Our particular expertise are in Brownfield and Contaminated Land Remediation, Industrial and Municipal Water and Wastewater Treatment, Semi Modular Precast Concrete Infrastructure, Mining Waste Containment and Engineered Landfill Construction,” says CEO and executive chair Michael Flynn. FLI, born in the 1980s, operates from locations in Ireland, UK, France and China; the headquarters is in Waterford, Ireland. It passed through the millennium and all the excitement of that period, lived through a couple of global economic crashes, left the industrial age, grew through the technological age, and now lives happily in the information age. “We have gained extensive experience and witnessed significant changes in our sectors of operation,” says Flynn. “Adaption to change has become a core part of our evolution as a business.” Data Centre communications infrastructure manufactured off site is now part of our core technology offering, whereas data centres did not exist back in the 80’s – and nor did the technology for high quality off site manufacturing of concrete infrastructure.

"We also have to recognise our limitations — we cannot create water, land or air." and active listening are key components in the process of reconciliation, finding a resolution, making decisions and moving on. The human race and the natural world are inextricably linked and can find a balance that works if we focus on achieving it. “Our ability to reflect, see the other parties position, accept that the status quo is not working, have a willingness to change, agree to compromise and adjust our expectations will help contribute to re-establishing balance in our relationship with nature.” In 2020, there are 7.8 billion people in the world, and this will grow to 9.9 billion by 20501. The natural world has been sending messages of distress for some time now, that are saying it cannot cope and is under severe stress.

“These are messages that we can all understand and interpret: climate change, global warming, melting ice caps, rising sea levels, flooding, food shortages, droughts and disease, more plastics than fish in the sea. Clean air, land and water are finite resources, and we cannot continue to abuse and exploit them and not expect consequences.” The information data base that we as humans have amassed is constantly being analysed and updated. If viewed as a diagnostic dashboard, it can provide indicators of imbalances and shortfalls — and opportunities. Damage to our environment is being registered and recorded as part of this data collection. “We are well on the way to creating advanced devices and computers driven by algorithms that can do many good things to enhance our lives,” says Flynn. “Globalisation has created demand for consumer goods and has exaggerated the imbalances in our global society, fuelled further by the information age.” This has caused several red light warnings that society is not currently acknowledging. As stakeholders in society we have responsibilities to each other and to the natural world, he believes. “We also have to recognise

The core values and character traits in FLI are grounded in teamwork, experience, knowledgesharing, open communication, innovation, adaptability, reliability, flexibility, dependability and respect for staff and clients. The firm supports personal and professional development, embraces technology, and plans for the future through talent development and the strengthening of leadership and management structures. Change is a constant that must be embraced. Society and the natural world are in a long-term relationship of balance and trust, says Flynn: “If one party is dominant then the other is insignificant.” The natural world does not have a voice; it can communicate only through signs. Cracks in the relationship are fuelled by a failure to listen. “In our private lives, or in our business or corporate lives, two-way communication 86

Landfill Mining UK: Residential Development on a former and recently remediated landfill site

CFI.co | Capital Finance International

Winter 2020-2021 Issue

our limitations — we cannot create water, land or air. No App can solve this problem. We have to find a balance in the relationship with nature so that we can extend and re-use the resources that nature has provided.” Population growth will create even greater strains on the natural environment. “The opportunities and potential for continued wealth generation across society are immense,” says Flynn, “but the disparity between human ambition and the limitations of the finite elements of air, land and water must be recognised and addressed so that balance can be restored in our relationship with nature. “Nature sent us its most recent message in the form of the Covid-19 pandemic. We have all been forced to change the way we live and work. Technology has enabled us to adapt and work from home as part of the social distancing process and to stay connected as families and as businesses. The pandemic has also highlighted our vulnerability to an airborne disease that had the power to bring society as we knew it to a halt, despite our advanced technological confidence and our collective belief that we are unstoppable.” The ESG investment community has an important role to play in the building-back process and could be instrumental in shaping the model. “The FLI Global business model is built around the core values of ESG, as these are traits in the company DNA” he adds. “Our sustainable solutions can ensure that the majority of the contaminated soil and water can be cleaned and retained on-site. We avoid the removal of significant quantities of materials to landfill, reducing the carbon impact of transporting materials and helping to ensure that the greenfield land and groundwater can be protected and brownfield land re-used as part of the brownfield first policy in the UK.

“There is a chronic under supply of housing in many countries. The use of brownfield land, promoted over other land uses, allows houses to be constructed on previously developed land. Coupled with the FLI Global off-site residential homes manufacturing capability, it can help reduce the housing shortage in the UK and Ireland and rapidly accelerate delivery.”

New Caledonia: CCD Tank Farm in a Nickel Mine

FLI is heavily involved in the treatment of wastewater, both municipal and industrial. Zero Liquid discharge (ZLD) ensures that all water is returned for re-use, and the solids that are retained are re-used in other process streams. Recycling and re-using process water has to be part of the big industry response to limited water supplies and can be achieved. FLI engineers focus on technologies that improve the quality of wastewater while minimising the carbon footprint of the equipment used. Value engineering is a critical part of providing sustainable solutions, where existing technology can be repurposed or coupled with new technology to improve operating efficiencies. Investment in R&D to develop alternative renewable fuels such as hydrogen, biomethane, wind and solar is hugely important for reducing the world’s dependence on fossil fuels into the future. “There should also be an awareness that the technologies are already available for recycling

CFI.co | Capital Finance International

industrial-process water to potable standard,” says Flynn, “and to bring brownfield land back to greenfield value. And to build off- site. Big industry requires vast amounts of water and the technology exists to treat and recover process water so that growth and expansion can be accommodated without drawing further from our water resources.” Creating integrated solutions is value engineering and performance enhancing. The technology already exists for modular, passive energy homes, rapidly constructed on site with less labour, reducing health and safety risks and accelerating building programs. Continuing investment in off-site construction methods and technologies will be an integral part of the drive to address current and future accommodation needs globally. “Getting drinking water and housing to regions of the world where droughts occur and where our data tells us population growth is going to occur is the collective responsibility of all of us,” he says. A global co-ordinated call to action of all stakeholders is required to solve this challenge. “The collective and co-ordinated worldwide initiatives to fight the Covid-19 pandemic have been extraordinary – and proof that we can work together for the greater good. To protect and enjoy our environment and maintain the continuing development of mankind we have to work in tandem with the natural world, and not to attempt to conquer it. “The FLI Global culture and unique selling point is to offer its clients solution focused action and enhanced efficiencies and performance based on its experience and knowhow. The value is in the solution.” i For more information, please visit fli-group.com Footnotes 1 prb.org/2020-world-population-data-sheet

> Kommunalkredit:

The Importance of Sustainable Infrastructure Increasingly Vital During These Challenging Times In times like these, the importance of sustainable investment in infrastructure is growing.

he demands on infrastructure are constantly changing, from economic and socio-political perspectives. Infrastructure must adapt to these requirements. Public services are in particular focus due to the demand for highperformance digital communication channels for remote working, distance learning and video conferencing. The associated increase in demand for electricity must also be factoredin, and the need for uninterrupted medical care has put the spotlight on the social infrastructure. Kommunalkredit is proud to be more than a bank. It is a point of contact for the full range of topics related to infrastructure, and as a vehicle for investments in an area of vital importance for society. CEO Bernd Fislage believes this is the time to face up to global social and economic challenges. “If we are to emerge from this crisis stronger than before, we must assume great socio-economic responsibility,” he says. “Not only with regard to the current pandemic and its consequences, but also with a view to the EU Green Deal and the respective national climate plans. “Europe has the chance to position itself as a leader in green and sustainable projects. Entrepreneurial foresight and decision-making power are needed to drive forward far-reaching, sustainable and innovative investments in infrastructure. “How should these projects be implemented? In the best case, quickly, cost-effectively, and with a future-orientated approach. Since the financial scope of the public sector is limited, co-operation between the public and private sectors must be intensified. The economic and financial systems have a key role to play.” Kommunalkredit assists the construction and operation of infrastructure facilities by balancing the financing needs of project sponsors and developers with the investors looking for sustainable investment opportunities. 88

Main investment segments are energy and environment, communication and digitalisation, transport, social infrastructure and natural resources. INFRASTRUCTURE AS AN ASSET CLASS As an alternative capital investment, infrastructure investments are largely crisisproof, with stable debt returns, low volatility compared to other asset classes and low default rates. In the current low-interest environment, classic investments without high volatility provide hardly any returns. The construction, maintenance and modernisation of infrastructure and energy projects in the areas of utilities, telecommunications, transport and social infrastructure are high on the agenda. This is true for industrialised and developing countries as a result of the current health crisis and its consequences for the real economy. Great attention is being paid to sustainability and ESG/ SDG criteria in infrastructure investments. In the long run, it is the only way to sustainably shape the future over generations. The bank is financing ecological energy supply for five high-rise building projects on the Vienna Danube Canal. An innovative aspect is that water extracted from the canal is used for heating and cooling systems. “It’s a showcase project for smart, sustainable energy solutions”, says Fislage. LOCAL AND GLOBAL INFRASTRUCTURE TRENDS The bank focuses on sustainable infrastructure projects that support key challenges such as economic growth, strengthening regions, job creation and, above all, climate protection measures. Kommunalkredit is the first financial services provider in Austria to be admitted to the European Clean Hydrogen Alliance established by the EU Commission in 2020. “We believe in hydrogen as a climate-neutral energy carrier with enormous potential,” says CFI.co | Capital Finance International

Winter 2020-2021 Issue

CEO: Bernd Fislage. Photo: © Petra Spiola

"Europe has the chance to position itself as a leader in green and sustainable projects." Fislage, “and we place great emphasis on innovation and sustainability. Which is why it was a logical step for us to join the European Clean Hydrogen Alliance, because the economic and financial system is now called upon to promote economic and sustainable projects that contribute to achieving #mission2030 (the Austrian climate and energy strategy), the Green Deal and climate neutrality as well as committing even further to the 17 SDGs set by the United Nations.” Bernd Fislage has extensive international experience in capital-market, institutional and bank financing of infrastructure, energy and transport projects. His career includes leading roles in regional and global management with Deutsche Bank. He was responsible for Deutsche Bank’s global asset finance and structured finance business (ABS, CRE, illiquid trading) in Germany, Austria and Switzerland. He has previously worked for NatWest Markets and BHF Bank. Bernd Fislage has been a member of the executive board of Kommunalkredit Austria AG since February 2017, and CEO since September 2018. i 89

> Housing

Market Vibrant, Franchise System Strong for the UK’s Belvoir Group

The Belvoir Group is the UK’s largest High Street property management franchise, with over 300 offices across the Belvoir, Northwood, Newton Fallowell and Lovelle brands.

he Belvoir Group’s central office is based in Grantham, Lincolnshire, and the company is on-target to record 24 years of unbroken turnover and profit growth, having come out of lockdown in a stronger position than ever. The property market remains attractive for many buy-to-let landlords and investors, and the resilience of Belvoir’s franchise business model provides opportunities for growth for both parties via existing and new income streams. The continued rollout of financial services across the Belvoir Group is proving to be extremely popular, with franchisees able to grow a business-withina-business by offering mortgages and associated practices to their clients. While many independent agencies have not survived the financial ravages of the pandemic, many of Belvoir’s franchisees have been able to grow their businesses by acquiring competing independent businesses looking to exit the market. Some franchisees within the group are now turning over in excess of £1m per annum. Acquisition remains a key growth strategy for the Belvoir Group and in October, the company announced the successful acquisition of its 100th independent agent.

Following the recent publication of Belvoir’s Q3 rental index — and despite relatively flat rental values for the past three years — Belvoir is predicting that rents will increase in 2021. There is continued tenant demand combined with a shortage of properties. Average length

of tenancies remains high, with 41 percent of tenants choosing to remain in their home for 1924 months — and almost a quarter renting for over two years. “Anyone who is considering entering into property investment would be well advised to contact their local Belvoir office to discuss potential property hotspots in their area,” advises Belvoir CEO, Dorian Gonsalves. “Research from our post-lockdown Q3 rental index reveals significant regional diversity, but investors can benefit from the free property advice of a local expert who will be able to advise on all aspects of their potential investment. This includes best location for investment, anticipated rental yields, tax advice and how to exit the market to the best financial advantage when the time comes.” Belvoir’s Q3 rental index confirms that houses continue to outperform apartments. Many people came out of lockdown determined to find some outdoor space, often favouring more rural areas with a less dense population. “We have made the Belvoir rental index freely available on our website. It is an incredibly valuable resource for landlords and investors who can see at a glance what is happening in England, Scotland, Wales and Northern Ireland. Importantly, they can also zone-in on how the rental market is performing in any particular region.” i

For more information, visit: belvoir.co.uk/pages/rental-index

"Anyone who is considering entering into property investment would be well advised to contact their local Belvoir office to discuss potential property hotspots in their area." 90

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Winter 2020-2021 Issue

> Julian Jarvis:

On Leadership, Business Excellence and iGaming Regulatory Trends Julian Jarvis has over 20 years’ experience working in some of the leading online businesses: America Online and AOL Time Warner, PartyGaming Plc — which he helped take onto the FTSE 100 in 2005.

ow Jarvis is chief executive of Pragmatic Play, a fast-growing multiproduct content provider to the gaming industry, offering innovative, regulated and mobile-focused products, from bingo and virtual sports to casinos. A lawyer by training, Jarvis started out as a barrister in the UK before moving into the world of technology-based businesses. At first, he did that in his capacity as a lawyer, but he moved on to a variety of management roles. “Legal and regulatory issues have always played a key role in the types of businesses I am attracted to,” he says. “There have been great opportunities created at the crossroads where new technology meets emerging regulatory environments — and I enjoy the business and legal challenges that arise. Those who cope well with them can create very valuable businesses in a short period of time.” Having been at the centre of the dotcom boom with the-then internet giant AOL — and later as a pioneer of responsible and regulated online gambling — Julian Jarvis is familiar with the value of good CSR, and offering trusted digital products and services within an appropriately regulated environment. “Online products and services are really all about selling trust,” he says. “Never more so than in the regulated online gambling sector. Increasingly, only brands that pay attention to what customers and regulators are going to need in the future in terms of compliance, privacy and digital experience will be able to build sustainable value over the long term. We work hard at this and I think it pays off.” Among his responsibilities to the Pragmatic Play group and its holding company, Jarvis oversees a team of legal and compliance professionals at the forefront of the issues affecting the online gambling markets. “I have an excellent team whose enthusiasm and expertise adds significant value to the organisation,” he says. “We see

CEO at Pragmatic Play: Julian Jarvis

regulatory compliance as an essential part of our product, not a bolt-on. “It also helps to have a product development and sales teams which are, in my view, the best in the industry. The combination fuels our success.” Aside from internet businesses and online gambling, Jarvis has been founder of a digital CFI.co | Capital Finance International

ledger technology business. He has also been involved in Gibraltar’s DLT ecosystem — another area where new technology meets emerging regulation. Julian Jarvis is a qualified non-executive director and a governor of an independent schools’ group — Prior Park Schools — having co-founded a new secondary school in his adopted home of the past 16 years, Prior Park in Gibraltar. i 91

> From

1919 to 2020, the Varied, Advancing Path of Polifarma Has Kept Pace with Medical Needs

I 92

talian pharmaceutical company Polifarma was founded in Rome in 1919, and is now part of the Final Group, an Italian holding with a strong orientation in the pharmaceutical sector.

Over time, Polifarma has invested in various product sectors, including sanitary, fashion, wine and luxury residences. The company is a valued and reliable partner in the marketing of medicines, offering a range of products for the specific treatment of pathologies in several therapeutic CFI.co | Capital Finance International

areas: cardiology, CNS, gastroenterology, ophthalmology and otolaryngology. The first significant growth of the company, in terms of turnover and employment, took place in the 1980s, thanks to the advent of "large

Winter 2020-2021 Issue

molecules" — ranitidine, ramipril — still widely used for the treatment of chronic pathologies in the gastroenterological and cardiovascular areas. Polifarma has entered into important collaborations with pharmaceutical multinationals for the launch of new molecules that have allowed it to become a leader of specific market segments. Recently, the growth in turnover has been echoed by a progressive growth of the organisation, with new hires of internal employees and REPs. Between the 1990s and the 2000s — following the acquisition of the company by Luisa Angelini — Polifarma consolidated its development. It experienced a further acceleration in growth through new investments that led to a significant increase of the number of scientific collaborators. The great boost to the organisation, under the leadership of Angelini, has produced a hike in company turnover, from €18m in 1999 to €42m in 2008 — an increase of 133 percent. In 2008. Polifarma — like many others in the pharmaceutical sector — faced a period of strong contraction due to the patent expiry of the leading product in the cardiovascular area. The crisis was overcome by the development of a new organisational path. The firm focused on the organisation to respond to the crisis, activating a change management process based on three values: Culture, Responsibility and Participation. It invested in training for employees, involving them at all levels and in all processes. Polifarma also solicited their contribution on strategic issues. It has also worked to increase employees' sense of responsibility towards the business project to provide reassurance and create a real change of mindset. This came before the development of new processes and business models. Polifarma has combined the investment of resources to consolidate the product portfolio through partnerships and acquisitions.

"Over the past five years, the company has undergone a transformation to meet new needs and requirements arising from the advent of Digital Health."

Over the past five years, the company has undergone a transformation to meet new needs and requirements arising from the advent of Digital Health. It was among the first pharmaceutical companies to believe in the digital transformation

CFI.co | Capital Finance International

process — generating a new method of scientific communication. Polifarma implemented an integrated digital ecosystem with high technological and innovative impact that has been exploited for each project and business activity. To ensure proximity to doctors, the firm has developed pathology and product sites that have become comprehensive reference points for doctors — with the authority and quality of scientific sources, and the possibility of using additional services such as training media tutorials and apps. Social media accounts were created and a personalised site was dedicated to Polifarma's REPs, the “Customer Portal”. It is an easy way to interact with doctors in a rapid and personal manner. This website is important as it allows the REPs to collect a continuous feedback from doctors. In 2020, in response to the spread of the pandemic, Polifarma implemented the portal by adding a calling system that allowed the doctor to be supported even remotely. This system has allowed the firm to link with doctors in a complex period with no face-to-face visits at hospitals or private practices. This has strengthened social networks as communication tools. A new business unit was dedicated to hospitals and private clinics as an additional communications channel with doctors. This boosted the presence of Polifarma in hospitals and clinics, and has allowed us to introduce PneoHsafe (known to the public as Sanispira), a line of advanced technology endo-nasal filters useful as a support in various therapeutic areas (otolaryngology, basic medicine, allergology). PneoHsafe has been launched in Italy and various foreign markets. The line includes Sanispira Viruses and Bacteria, Sanispira Allergy, Sanispira SweetDreams. Polifarma pledges to continue to develop new projects through digital assets, implementing educational programmes for pharmacists as new players in the healthcare world. Plans include developing e-commerce plans, drive-to-store, social communication and new advanced digital health and therapeutics, as well as AI. The company is also activating a strategic action towards internationalisation. i 93

TOGETHER LET’S REVERSE THE CURRENT TREND MAKING THE WORLD BETTER PLACE FOR ALL

#RESPONSIBLEFINANCE

creditmutuel-am.eu Crédit Mutuel Asset Management, société de gestion d’actifs agréée par l’AMF sous le numéro GP 97-138 - Société anonyme au capital de 3 871 680 euros. Siège social et bureaux Paris : 4, rue Gaillon 75002 Paris -Bureaux Strasbourg : 4, rue Frédéric-Guillaume Raiffeisen 67000 Strasbourg - RCS Paris 388 555 021 – Code APE 6630Z - TVA Intracommunautaire : FR 70 388 555 021 Crédit Mutuel Asset Management est une entité de Crédit Mutuel Alliance Fédérale - Crédit photo : contrastwerkstatt, Sergei Akulich.

Winter 2020-2021 Issue

> Pragmatic Play:

The Name Itself Reveals Philosophy of iGaming’s Champion As one of iGaming’s top providers, Pragmatic Play has transformed from a slot studio in a congested market to an instantly recognisable brand that works with some of the biggest household names within the online casino industry.

ith a multi-product offering and a commitment to player protection, Pragmatic Play has carved a proud place in one of the world’s most competitive sectors.

From its early days as a slot supplier, the company portfolio has expanded to include live casino, bingo games and virtual sports. It grew quickly, finding success with landmark games that developed a core fanbase. This expansion was also fuelled by a targeted regulated-markets strategy, which saw Pragmatic Play gain global gaming licences and make a mark in high-growth jurisdictions. Growing swiftly through regulated markets, and establishing third-party partnerships, the firm has introduced games of varying volatilities. It has partnered with well-known brands, and uses industry-acclaimed mechanics to maintain consistent quality, and reach people of all tastes and demographics. While becoming the leading slot producer in the industry remains a key goal, Pragmatic Play also focuses on diversification. The addition of popular Live Casino games in 2019 offered operator partners and players a different opportunity. Players can enjoy roulette and blackjack on their devices, rather than physically visiting a casino — and the supplier’s partners have been able to venture into alternative revenue streams. The same is true for virtual sports and bingo. By expanding beyond its staple business vertical, Pragmatic Play was able to bring innovative products to market. Its partners have benefitted from gaining proven titles through their existing relationship, cutting down on integration times and preserving a strong business link. FOSTERING PLAYER PROTECTION In an industry with differing regulations and a widespread focus on legislation, Pragmatic Play has player protection at its core. When entering new markets, the dedicated compliance team ensures all products hit the highest standard, as underscored by the company’s collection of licences and certifications across the world.

Pragmatic Play’s Headquarters in Malta

Player protection is a widely discussed topic in the iGaming community as well as wider governmental circles — and something that is recognised as vital to the industry. By enabling players to have secure, safe play-sessions, iGaming remains an enjoyable experience and one that will gain repeat players. LONG-TERM PARTNERSHIPS With so many content options for operators, providers need to stand out. By understanding customer needs, going above and beyond with CFI.co | Capital Finance International

customer service and paying attention to detail when servicing, Pragmatic Play does just that. From innovations such as a single APIintegration to dedicated account management services, Pragmatic Play’s aim is to turn single vertical partners into long-standing, multivertical accounts. The company retains partners at an impressive rate, regardless of geography, while increasing the attractiveness of its growing offering. i 95

> Colliers:

Ireland’s Slow Recovery Contains Some Real Reasons for Optimism By Michele McGarry

Ireland’s recovery will be slow, as second-wave Covid restrictions are imposed and government employment support is moderated.

espite low volumes of transactions and international travel restrictions in 2020, big-ticket sales happening on and off the market give grounds for some optimism. But travel restrictions will continue to impact transaction volumes. This is evident when considering the fact that the volume of capital from overseas buyers was some 70 percent of the total in 2019. What is encouraging is the continued appetite from buyers to deploy capital in Irish real estate. It is heartening to see new entrants looking at a country that is now an established player in the global capital markets. Investment spend this year (depending on the outcome of deals currently being transacted) could comfortably exceed €2.5bn in 2020. Impressive, but a dramatic drop from the €7.5bn spent in 2019.

Figure 1: GDP Forecasts for 2020/2021. Source: Oxford Economics, 20th September 2020.

Buyers are seeking core and core-plus opportunities, with a primary focus on Dublin. Many buyers are looking outside Dublin for opportunities as they seek more value. Offices, logistics and PRS are the main drivers at the moment. However once the retail, food and beverage, and the hospitality sectors are stabilised in 2021, renewed interest is expected in these sectors. They haven’t gone away. On sub-€10m deals there appears to be a waitand-see approach from buyers, which is likely to continue in 2021. Hopes for the initial Irish V-shaped recovery are fading, according to the latest purchasing manager indices. The Irish composite PMI fell to 46.9 in September, consistent with economic contraction. The services sector (45.8), especially transport, tourism & leisure, continues to struggle. Manufacturing (50.0) has slowed due to supply chain disruption and reduced exports attributed to Covid and Brexit, but aggravated by renewed weakness in the Eurozone (50.4). The latest “flash” PMI estimate in October shows further Eurozone weakness (49.4).

Figure 2: Percent of TWSS recipients (Percent of total recipients between 12 March & 31 August, 2020). Source: CSO

Irish business, financial, and related professional services, as well as the TMT sectors, are less impacted, but are also shedding jobs as

Despite closure of the TWSS, the Live Register fell modestly in September to 211,492. This stability suggests that many of the 300,000

government support is reduced. The TWSS (Temporary Wage Subsidy Scheme) ended in August and was replaced by the EWSS (Employment Wage Subsidy Scheme) targeted at businesses whose turnovers are expected to remain down.

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workers supported by the TWSS may be finding support in the EWSS (data not yet available). The Irish government also announced a €17.8bn budget in mid-October which assumes no UK/EU trade deal and no widely available vaccine in 2021. This includes a €3.4bn recovery fund with measures to prevent further job losses, support businesses forced to shut due to Covid restrictions, further Brexit support,

Winter 2020-2021 Issue

"Buyers are seeking core and core-plus opportunities, with a primary focus on Dublin. Many buyers are looking outside Dublin for opportunities as they seek more value." reductions in VAT for hospitality, support for tourism businesses and live entertainment. The corporate rate of taxation remains unchanged at 12.5 percent, despite ongoing EU pressure for EU-wide corporate tax harmonisation. Additional government support may also be forthcoming should the European Recovery Fund disbursement amounting to €1.5bn in EU grants, along with €90m in loan guarantees over the next few years. Despite weaknesses in the Irish trajectory, Irish annual GDP is forecast to recover to its 2019 level in 2021, although the most impacted sectors will lag behind. After a fairly dismal Q2 (The Covid Quarter), investment activity accelerated in Q3, up by 63 percent to €700m, compared with €430m in Q2. Despite on-going worries about the economic, viral waves, Brexit, and a tightening of finance, Ireland continues to attract considerable crossborder investment — led by European capital, especially German, which accounted for 75 percent of total Irish investment. Local private investors remain focused on sub-€10m deals — but are hesitating until the economic recovery path becomes clearer. Specialised funds,

Author: Michele McGarry

property companies and institutional investors driven by investment mandates are all actively seeking opportunities in the €20m-plus range. Demand remains strong across the private rental, office and logistics sectors, with further substantial volumes of capital forecast to be

deployed by year end. There are new market entrants, primarily European, which further boost confidence. Ireland remains an important target for global capital. i ABOUT THE AUTHOR Michele McGarry is an acknowledged capital markets expert with extensive experience in the Irish commercial investment market across all sectors: retail, retail parks, shopping centers, office, multi-family and leisure. She represents a variety of international investors (including funds, property companies & private equity clients) and domestic high-net-worth clients on property acquisition and disposals throughout Ireland. She holds a BSc (Hons) in Estate Management Surveying University of Glamorgan. She is a member of Colliers International EMEA Investment Team. ABOUT COLLIERS Colliers International is a leading diversified professional services and investment management company that work collaboratively to provide expert advice and maximize the value of property for real estate occupiers, owners and investors.

Figure 3: Quartelry investment spend. Source: Colliers International

CFI.co | Capital Finance International

Why an Elite Sports Mindset Can Be Good for Business by Naomi Snelling

From a humble market stall to sports fame and business success, UK rugby legend Nick Baxter is now helping businesses into the ‘premier league’.

f you ask Nick Baxter about denier — a unit of measure for the linear mass density of fibres — he’ll have a better grasp of the subject than the average rugby player.

The former England player and Worcester Warriors star used to help out at his parents’ weekend market stall in Oldbury, where the stock was mainly tights. “I can still remember the blue tarpaulin. The rain used to drip through, and we’d all be wrapped up in our coats, with flasks, and they used to send me out ... I just had to walk up to people and ask if they wanted to buy tights.” It was a chance encounter with rugby that catapulted him into the sports world. “When I was 18, I went with a friend to watch him play and they were a player down, so I went on as a sub.” He was a natural — he scored three tries — but “I didn’t know what to do with the ball. I dropped it down American football-style”. Just 18 months later, Baxter got his first English student’s cap against France. His zero-to-hero rise is well documented, but less often recounted is the amount of work he had to put in. While he was at university, studying business and economics, coach Phil Maynard rang to invite him to play for Kings Norton — which back then was languishing in the 16th tier. “So I had to cycle four miles to Derby train station, then I’d get a train from Derby to New Street Birmingham, then a train to Longbridge, and then I’d thumb a lift to Kings Norton rugby club. Often one of the boys would drive past and give me a lift.” He did that for another two years. Then, in his third year of university, Baxter was signed to Worcester. Not everyone was as keen on the sport as he was. “People tried to talk me out of it. The careers advisor told me I needed to focus on a proper job. I knew I wanted to work in business one day, but I also knew that I needed to be a rugby player first. It was inside me. “And the year I graduated, 1996, that was the year they made the game professional. I played until I was 31 — and then retired to take up a business career. I had five knee operations in the end. I had a dodgy back, a dodgy shoulder, dodgy wrists.” 98

He branched out into kickboxing for a while, and now does weights and cycling to stay in shape. When he isn’t keeping fit, he’s busy running Baxter Williams, a recruiting and employee engagement business. “At Baxter Williams, we’re selective about who we work with. We work with organisations that treat their people very well; we’re often taking people out of safe, secure jobs, so it’s crucial that we partner with firms who are taking real care of their employees. “We get into the skin of your business and what makes you tick. If there are issues, we tell you, and we help you make it better. We’re operating at a level where we have to act with integrity. It’s not just transactional.” Baxter credits his elite sports background as a key inspiration. “I know that the difference between success and no success is an organisation’s culture,” he says. “I've got an Engage and Grow programme with one of my associates, KarrieAnn Fox, and we go into organisations using NLP and other methods. “We get into the hearts and minds of senior leaders to help them turn their businesses CFI.co | Capital Finance International

around. We create a more engaged workforce by increasing communication and buy-in from people, which in turn increases efficiency and productivity and boosts retention rates. You're more creative and you're more innovative when you've got the right culture.” Baxter is inspired by people who give employees the chance to show what they can do. Many managers are guarded; they don't like to share success. They don't like competition, they don’t like to delegate, and they don't like feedback. So, what makes a good leader? “Giving autonomy, trust and belief,” he says. “For me, Phil Maynard was great. He was an old-school coach — my way or the highway — but he really trusted in me. “The second figure who really stands out for me is Peter Brooks. He was the first guy to sign me up after I finished playing rugby. And if you'd seen my dog-eared CV or the state of my suit when I went for my interview, you’d be horrified. “I hadn't spoken to him for years, but I reached out to him recently and thanked him for giving me that opportunity. He saw something in me and made me territory manager, for which I'll always be grateful. That was the start of my business career.”

Winter 2020-2021 Issue

"At Baxter Williams, we’re selective about who we work with. We work with organisations that treat their people very well; we’re often taking people out of safe, secure jobs,

It was ex-Australia rugby coach Duncan Hall who said something Baxter has never forgotten. “He said to me: ‘Listen, Nick, you get so het up trying to win the game on your own, you’re so busy trying to do every everyone else's job — but these are all professionals. They’re all specialists in their area. All you need to do is control the controllables.’ And that statement has stuck with me.

taking real care of their employees."

“I’m just saying you have to know what motivates you and appreciate your aspirations

partner with firms who are

“It may sound cheesy but there’s a saying I love: aim for the Moon. And if you miss it, at least you're up there with the stars.” i

“I use it with my guys, especially now in 2020. When you've got uncertainty and you've got craziness, just put into perspective: what can you control? What can you influence? How can you do it? When can you do it? Then do it. “It’s really interesting to understand what motivates people. Not everybody can be a CEO, otherwise we'd have no bin men, and I don't mean that in a rude way. I've done those jobs in my time… at university, I had a job where I worked eight hours straight slicing out-ofdate cartons of milk into a vat, so I understand there's a requirement for these jobs.

so it’s crucial that we

are. My aspirations are to be the best version of myself, and I set my targets quite high.

CFI.co | Capital Finance International

Author: Naomi Snelling

> Xavier Vives:

European Banking’s Moment of Merger Truth

he days when bankers could pay 3% interest on their customers’ deposits, lend at 6%, and make it to the golf course by 3 p.m. (the “3-6-3 rule”) are long gone. While some bankers remain oblivious to the looming threats to their business, the fact is that banks are now in dire straits, judging by their dismal valuations (in terms of price-to-book ratios) and low current and expected future profitability. 100

In the pre-pandemic world, low interest rates, fintech competitors, and rising regulatory compliance costs were among the greatest threats to the industry. Since the 2008-09 financial crisis, Europe’s banking industry, in particular, has been saddled with excess capacity and low profitability. And now, COVID-19 has made matters worse, eliminating any hope that interest rates will rise anytime soon. CFI.co | Capital Finance International

According to Andrea Enria, the chair of the European Central Bank’s Supervisory Board, non-performing loans could reach €1.4 trillion ($1.7 trillion) in the eurozone as a result of the current crisis. Moreover, COVID-19 has accelerated the process of digitalization, which has put even more pressure on traditional banking. Customers and banks have discovered that they can operate remotely with ease, and this has made

Autumn 2020 Issue

But as CaixaBank’s past experience with absorbing failed savings banks shows, it takes a lot of managerial resources to achieve the hopedfor synergies after a merger. And, as the case of TSB and Banco Sabadell in the United Kingdom illustrates, information-technology integration can pose difficulties. Indeed, Sabadell entered into merger talks – unsuccessful so far – with BBVA. Meanwhile, the talks between UBS and Credit Suisse have an important global dimension, because the two firms are trying to build an entity capable of competing with the US giants in wealth management and investment banking. Across the board, European corporations have come to depend increasingly on US banking behemoths like JPMorgan Chase, Bank of America, and Citibank, leaving European institutions farther behind. In fact, the eurozone’s five largest banks – BNP Paribas, Crédit Agricole, Santander, Société Générale, and Deutsche Bank – now have a combined valuation below that of JPMorgan alone. As a result, European regulators, worried that banks’ low profitability may deplete their capital and lead them to take on too much risk, are looking favorably at bank consolidations. The ECB, for example, is willing to make allowances in terms of capital and the accounting treatment of badwill (the difference between the book value and the market value of an entity when the former is larger). It is also increasingly willing to permit mergers to result in banks that may be “too big to fail.” After all, the sector’s current configuration is not sustainable, and the alternative of letting troubled medium-sized banks fail is costlier. Of course, European regulators would prefer cross-border mergers to domestic ones in the interest of fostering market integration and diversification and boosting European banks’ international competitiveness without raising antitrust concerns. Unlike in the United States, retail banking in the European Union remains unintegrated. If one looks at the dominant players within EU countries, one typically finds different domestic banks, whereas in the US the same large banks are present across many different states.

European bank branch networks appear even more overextended than they already did. They will need to be cut to size much sooner than anticipated. Banks should be investing heavily in technology to shift their operations from the mainframe to the cloud, or else they will struggle to compete with fintech start-ups, let alone the Big Tech platforms that are making inroads into financial

services. Cost reduction is now the name of the game.

That said, there are larger obstacles to crossborder mergers in the EU, where one must navigate different languages and cultures. Although single bank supervision in the eurozone favors cross-border mergers, bankruptcy and consumer-protection rules are not homogenous across member countries, and a common European deposit-insurance scheme has yet to be established. i

In Europe, the most expedient way to cut costs is through domestic mergers that reduce overlaps in branch networks and consolidate the back office. Ideally, the resulting merged entity will be able to improve profitability and its capital position. This is the rationale behind the merger between Spain’s CaixaBank and the state-rescued Bankia.

ABOUT THE AUTHOR Xavier Vives, Professor of Economics and Finance at IESE Business School, is a former lead independent director of CaixaBank and the coauthor (with Elena Carletti, Stijn Claessens, and Antonio Fatás) of the report The Bank Business Model in the Post-Covid-19 World.

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ANNOUNCING

AWARDS 2020 WINTER 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

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

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

Winter 2020-2021 Issue

> AMAZON: MOST DISRUPTIVE RETAIL OPERATIONS GLOBAL 2020

In Lockdown 2020, one of our most frequent visitors has been the delivery man for serial innovator Amazon. And we are pleased to see him: usually in good time, with the products we ordered and on the understanding that if things go wrong, they are quickly put right. If we signed up for Amazon Prime that would be a two-day service with other benefits too. Founded in 1994 by Jeff Bezos – now the world’s richest man – Amazon is the biggest brand around. It started with books, challenging

publishers, and booksellers to change or risk disappearing. It worked very nicely with the stock price increasing five-fold a couple of years after the 1997 IPO. It has been tough on brick and mortar grocery stores, but Amazon is more of a corrector than a killer. Target and Walmart are catching up, even if it did cost them billions. Casualties include Toys R Us who mentioned Amazon in their bankruptcy papers: saying that they just could not compete. During recent years, Amazon has acquired Wholefoods,

entered the healthcare industry with Berkshire Hathaway and JP Morgan, and given traditional retailers countless sleepless nights. Amazon’s strategy was always to build its model efficiently before worrying about short-term profits, and it is now able to grow fast and acquire market share in the blink of an eye. And Q3 profits were at a record $6.3 billion this year. Without question, the judging panel names Amazon winner of the 2020 award: Most Disruptive Retail Operations Global.

> NATWEST: BEST MORTGAGE PROVIDER UK 2020

Established in 1968, following the merger of the National Provincial Bank and Westminster Bank, the NatWest became a member of the Royal Bank of Scotland (RBS) group twenty years ago. The RBS Group was renamed the NatWest Group this year and is led by CEO Alison Rose. NatWest is celebrated for its mortgage offerings and related activities in this critical field. It is an attractive destination for first-time buyers and NatWest offers high loan-to-value (LTV) mortgages (although it is

not presently going as high as 95 percent). Customers can take advantage of cash back mortgages at LTV levels that can be higher than much of the competition). Mortgagors are encouraged to aim for energy efficiency and get a discount for going green. In 2021, the UK is hosting the UN Climate Change Conference (COP26) in Glasgow and NatWest is the banking sponsor. NatWest aims to be the leading bank to address climate change and is committed to becoming climate positive

by 2025. NatWest is to be congratulated on using a simple and easily navigated website to communicate with existing and potential clients regarding mortgages. The site is currently offering reassurance to clients that risk falling behind on their mortgages after the coronavirus pandemic payments holiday. The judging panel finds its tone of voice to be pleasant, kind, and sympathetic and is very pleased to congratulate NatWest on its 2020 award Best Mortgage Provider UK.

> CRÉDIT MUTUEL ASSET MANAGEMENT: MOST RESPONSIBLE FUND MANAGER FRANCE 2020

Crédit Mutuel Asset Management serves as the responsible steward of €60bn in group-level assets. The firm is the asset management subsidiary of Credit Mutuel Alliance Fédérale. Over the past two years, it has developed the sturdy tech backbone to support strict customer focus and provide easy access to its services. Crédit Mutuel AM caters to institutions, asset managers, private enterprises, individuals, employee savings schemes and associations. It has cultivated a supportive corporate culture with paths for career growth and mobility. Employees are trained in all levels of the investment process,

and ESG concerns are embedded throughout the professional development programme. Crédit Mutuel AM engages with stakeholders to promote financial inclusion and sustainable growth, and is committed to reducing the group’s environment impact. Its CSR approach, based on co-operative and mutualist principles, drives the group’s customer commitments and ESG targets. The firm applies risk controls on assets and encourages communication from members and customers. The current range includes socially responsible investment funds, which provide financing to a cross-sector range CFI.co | Capital Finance International

of companies and public entities striving to advance sustainable development. There are also green bond and solidarity fund options. Green bonds support the energy transition and projects with high environmental benefits, while solidarity funds channel investment income into social, humanitarian or environmental projects. The firm’s governance strategy has proven successful and will continue to map the course for the future. The CFI.co judging panel approves, and presents Crédit Mutuel Asset Management with the 2020 award for Most Responsible Fund Manager (France). 103

> CEDACRI SPA: BEST BANKING IT OUTSOURCING SERVICES ITALY 2020

To stay ahead of the technology curve, financial institutions must either invest in constant IT upgrades — or find a trustworthy outsourcing partner. Cedacri SpA is an Italian IT outsourcing services specialist, the head of Cedacri Group which boasts a 44-year history of tech innovation in the banking sector. Over the past seven years, Cedacri has invested over €230m in R&D for systems, applications and technologies. Through a process of continuous investment in innovation, Cedacri has developed a portfolio of services underpinned by advanced technology, comprehensive

regulatory standards, and an understanding of market trends and client needs. From 2019 to 2020, Cedacri group expanded its workforce from 1,600 employees to 2,400. to serve the needs of 200 clients — almost of whom are banking institutions. Cedacri has achieved its original mandate of improving IT services and establishing economies of scale by pooling technologies, systems and structures. And It allows Banks and financial companies that use its services to obtain significant savings in management IT costs. Clients can choose integrated core

banking solution covering all the core activities of financial institutions, advanced regulatory suite for the comprehensive management of regulatory compliance aspects, management of all the IT infrastructure components and Cloud Services, Software solutions, system integration and application management, business process as a service solutions to allow financial institutions to rationalise their operational processes. The CFI.co judging panel presents Cedacri SpA with the 2020 Best Banking IT Outsourcing Services (Italy) award.

> KOMMUNALKREDIT AUSTRIA AG: BEST ESG INFRASTRUCTURE FINANCE EUROPE 2020

Specialist bank Kommunalkredit Austria AG connects infrastructure with investment via funds focused on energy, environment, communications, digitalisation, transport, and natural resources. Sustainability principles are applied throughout the company’s daily operations and stakeholder collaborations. Kommunalkredit’s commitment to ESG performance is a cornerstone of its corporate culture. The goal is to facilitate the development of projects that bring community benefits, improve quality of life — and generate healthy returns. Kommunalkredit has remained steadfast during these challenging times, and its commitment to sustainable development has proven profitable, bringing consistent growth.

Year-on-year EBIT increased by 25 percent, while the cost-income ratio dropped to 59.8 percent. Contrary to market trends during the pandemic, Kommunalkredit achieved a rating upgrade from DBRS Morningstar, with a stable outlook and a boost in its long- and short-term ratings. Kommunalkredit takes an “originate and collaborate” approach to infrastructure fund management, drawing on a well-established network of associated syndicates and institutional investors. It makes investments in parallel with the fund to present itself as a strong partner with aligned interests. Kommunalkredit’s most recent investment deals have benefited communities and contribute towards the UN’s Social

Development Goals by creating jobs, advancing the transition to clean energy and improving rural communications. Kommunalkredit became the first Austrian financial institution to be admitted to the European Clean Hydrogen Alliance, which was established by the EU Commission earlier this year. This accomplishment underlines the bank’s focus on sustainable infrastructure projects that support key challenges such as economic growth, strengthening regions, job creation and, above all, climate protection measures. The CFI.co judging panel presents Kommunalkredit Austria AG, a repeat programme winner, with the 2020 award for Best ESG Infrastructure Finance (Europe).

> PRAGMATIC PLAY LIMITED: MOST RESPONSIBLE IGAMING CONTENT PROVIDER EUROPE 2020

Pragmatic Play believes the online gaming sector must strive for higher standards. The company is a B2B provider with a product portfolio of digital games including slots, live casino, bingo and more. It works with online gaming operators, resellers and platform providers across major regulated markets worldwide. Pragmatic Play can customise games according to client needs, and integration is a breeze with its easy-to-use API (application programming interface). Although Pragmatic Play has limited contact with the end 104

user, it is committed to promoting responsible gaming habits. The company is certified and licensed in 20 jurisdictions and fully compliant with all regulatory requirements. All Pragmatic Play games come with player protection software and are reviewed by independent auditors to certify their randomness and fairness. Pragmatic Play forges partnerships to help online gaming companies grow within a burgeoning industry, focusing on sustainability and data protection. The digital stewardship of users’ personal data is CFI.co | Capital Finance International

of paramount importance, and privacy protection is integrated in the system’s design. Pragmatic Play supports the GambleAware programme which promotes responsible gaming, and was part of a cross-industry initiative to encourage safer gambling in the UK and Ireland. Pragmatic Play has a proactive CSR strategy that is driven by teams in eight countries. The CFI.co judging panel recognises Pragmatic Play with the 2020 award for Most Responsible iGaming Content Provider (Europe).

Winter 2020-2021 Issue

> COMMERZBANK: BEST UNIVERSAL BANKING SERVICES GERMANY 2020 Commerzbank, presently led by CEO Martin Zielke, and headquartered in Frankfurt am Main was established 150 years ago. It has the second largest balance sheet of the German banks. This is a world class player with a substantially wider variety of services than its competitors. It is a leading provider of capital markets products and provides finance for 30 percent of the country’s foreign trade. This is a highly respected corporate banking market leader with around 70,000 clients. Commerzbank has 800 branches in its network and around 11.6 million private and SME customers. The bank’s digital strategy is convincing but, according to the judging panel, it operates with a human touch too: hands-on advisers ensure

outstanding personal services. Third quarter results for 2020 show stable revenues despite the Covid-19 challenges. In October it was announced that EIB Group securitisation would allow Commerzbank to lend up to 500m euros to SMEs on favourable terms – to help soften the economic effect of the pandemic. Operating expenses are continuing to fall according to plan. In September, the bank named Manfred Knof, retail head of Deutsche Bank as successor (1 Jan 2021) to Zielke. Commerzbank is a member of the Cash Group and 15 percent of its shares are held by the Federal Republic. CFI. co once again names Commerzbank, this time as 2020 winner of the award Best Universal Banking Services Germany.

> SCHUMANN: BEST EQUAL OPPORTUNITY TECH EMPLOYER EUROPE 2020 From its German headquarters, SCHUMANN has over the past two decades partnered with leading cross-industry companies to deliver innovative and reliable risk-management solutions. The company takes a customer-centric approach to software development, engineering comprehensive consultancy capabilities for clients across the industrial, trading, financial services, credit, surety and reinsurance sectors. SCHUMANN has assembled a top-notch team and has confidence that the members act in the best interests of the customer and the company. Staff are selected for their professional skills, learning aptitude and personality fit. The firm gives them the autonomy in the decision-making process, and supports their growth with professional development. Its topflight IT specialists keep a focus on application development, and SCHUMANN’s close-knit team

has a strong social element. There are organised sporting events to support team-building and out-of-hours fun. Diverse educational and professional backgrounds allow team members to collaborate on projects, promoting a continuous exchange of knowledge and experience. The crossover between projects leads to efficient customer service, as well as a more competent and engaged workforce. SCHUMANN promises equal opportunities to all its employees, providing them with the resources to develop their skillsets and the room to grow within the company. The company has invested time and resources to foster a corporate culture with a strong spirit of collaboration, and the CFI.co judges believe the firm’s initiatives are hitting the mark. The panel announces SCHUMANN as 2020’s Best Equal Opportunity Tech Employer (Europe).

> FLI GLOBAL LTD: BEST ENVIRONMENTAL SOLUTIONS PARTNER EUROPE 2020 FLI Global is more than an environmental solutions provider: it helps to reframe uncertainty and change as opportunities for growth and evolution leveraging its entrepreneurial roots and resilience as it transitions to being a global organisation. The company considers sustainability from a broad perspective encompassing environmental as well as social issues, such as remediating brownfield land,thereby creating new land and new opportunities to build homes on previously used land in a true circular economy re-use of a valuable resource, where land is remediated, made safe, brought back to new land value and repurposed. It partners with clients to develop innovative solutions that deliver reductions in carbon footprint and cost, protect ecosystems and promote circular economies in water re-use and land re-use while protecting our environment through creative solutions and value engineering. FLI Global’s network includes headquarters and two offices in Ireland, six offices in the UK (its biggest market), two offices in France and a new office in Shanghai China. While these are FLI Global’s core markets, it works with private and public sector clients from around the world on a project by project basis. FLI Global gravitates towards geographies and organisations that prioritise sustainability, operate to

high environmental standards and who share the FLI Global view that the environment belongs to us all and it is our collective responsibility to protect it for the next generation. FLI clients are focused on achieving and exceeding the three core objectives of ESG regulatory requirements when it comes to responsible investing and development within their business sectors. The FLI Group was founded in 1987 by Michael Flynn, the entrepreneur, project manager and mentor who remains a majority shareholder and is the Executive Chairman of FLI Global. The company has moved beyond its original focus — geosynthetic engineering solutions for engineered landfills and mining — through a process of organic growth and strategic acquisitions. The scope has expanded to include specialist environmental services and technologies in the sectors of water, waste, wastewater, offsite precast concrete modular design and manufacturing in a range of sectors, gelatin recovery, zero leakage discharge, renewable energy and contaminated land remediation and regeneration. Positive stakeholder feedback and a healthy stream of repeat business suggest that FLI Global has cracked the formula for sustainable and profitable partnerships. The CFI.co judging panel recognises the contributions of FLI Global with the 2020 Best Environmental Solutions Partner (Europe) award. CFI.co | Capital Finance International

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> ASTON MARTIN LAGONDA: BEST ESG MANUFACTURING STRATEGY UNITED KINGDOM 2020

James Bond drove one: what more do you need to know? Since Bond’s DB5, and way before that, Aston Martin was known for creating sportsters that smack of prestige, with just a hint of intrigue. The company — Aston Martin Lagonda, today — created a British motoring icon, a luxury brand, but moved forward with a conscience. The firm has implemented a strategy prioritising sustainable practices across its operations and throughout its supply chain. Comprehensive ESG commitments fuel the company’s

sustainable growth plans. Its much anticipated DBX model started production in July, and orders are stacking up for the brand’s first SUV —assembled at the repurposed St Athan Royal Air Force hangars in Wales. The facility is one of three Aston Martin Lagonda production plants in the UK — and all measure-up to scrutiny on an environmental level. The company publishes the Responsible Procurement Guide detailing its social, environmental, and ethical responsibilities; suppliers are expected to

follow the Aston Martin lead. The first in its hybrid line, the Rapide E, was unveiled at the Monaco ePrix in May 2019. The company sees hybrid hydrogen technology as the future for zero-emissions performance cars. The CFI.co judging panel knows this contender well and is pleased that its consistent and responsible progress has not diminished the untamed charm of its vehicles. The panel declares Aston Martin Lagonda a repeat winner, taking the 2020 award for Best ESG Manufacturing Strategy (UK).

> ROKEL COMMERCIAL BANK: BEST BANK GOVERNANCE SIERRA LEONE 2020

Rokel Commercial Bank serves as the principal gateway to finance and business in Sierra Leone. It creates opportunities not only for its stakeholders, but for the nation as well. Rokel’s corporate mission has become even more relevant as the country’s economy suffers the devastating effects of the Corona Pandemic. A testament to its institutional strength and resilience, the bank has deftly navigated these choppy waters, keeping its nationwide branch network up and running whilst fully meeting the operational targets set before the healthcare emergency

erupted. By doggedly standing by its customers, Rokel has earned the appreciation of the nation and improved its already sizeable market share. Customer acquisition surpassed expectations by a considerable margin. The results may be ascribed to the bank’s solid governance structure. Rokel Commercial Bank offers accountholders a comprehensive suite of modern banking products through various distribution channels, including a state-of-the-art device independent mobile platform. To extend its reach, the bank maintains a network of correspondents that

covers the world’s main financial centres and allows customers easy access to cross-border financial services. The CFI.co judging panel appreciates Rokel’s drive to further develop Sierra Leone’s budding financial services industry through innovation and dedication to operational excellence and client satisfaction. The bank has raised the bar considerably and, by so doing, provides a welcome competitive edge to the sector. The judges are pleased to offer Rokel Commercial Bank the 2020 Best Bank Governance Sierra Leone Award.

> EAST AFRICA METALS INC: MOST RESPONSIBLE MINER AFRICA 2020

Legend has it that EAM’s Adyabo gold project sits on the site of the legendary mines of King Solomon, and EAM management looks to the ArabianNubian Shield as a highly prospective region for exploration. Over the past 15 years, Vancouverbased East Africa Metals (EAM) has made significant prospecting discoveries in Tanzania and Ethiopia. EAM founder and CEO Andrew Smith refers to that moment of discovery as a feeling of spine-tingling excitement. News of a discovery is likely to cause a similar reaction 106

in community stakeholders, considering the profit-sharing scheme established with villages in Tanzania. EAM connects with community leaders at the start of exploration projects to co-create initiatives that address local needs. The company knows the value of corporate social responsibility, and focuses the brunt of its efforts towards reforestation and encouraging women’s education and entrepreneurship. It has built schools and established a co-op for female entrepreneurs, and engages with shareholders CFI.co | Capital Finance International

to spread the word on the importance of CSR. EAM understands that it is a guest in the countries where it operates, and its committed CSR plan seeks to preserve natural spaces while advancing socio-economic progress. The company has been honoured with a Tanzanian Presidential Citation for contributions made to local communities. The CFI.co judging panel presents East Africa Metals with another honour — the 2020 award for Most Responsible Miner (Africa).

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> MULTIPLY MARKETING CONSULTANCY: BEST DIGITAL COMMUNICATOR GCC 2020 Multiply Marketing Consultancy adheres to the “think global, act local” mindset; it cares about its clients, its people, communities and the planet. From its Abu Dhabi headquarters, Multiply has extended its reach into seven international markets — Egypt, Lebanon, Pakistan, France, the UK, the US and Asia Pacific. It has established active investment partnerships with international companies to source efficient storytelling, research and design technologies. The highlights of its investment portfolio include a mobile advertising platform powered by machine learning, using language-analysis software with target-audience adjustments and analytical technology to track eye movement and emotion. Multiply executes content campaigns for clients that aim to optimise their digital presence and maximise returns on investment. Within a matter of months it

helped to boost the social media presence of a certain client, pushing up account impressions by 320 percent, engagement by 137 percent, and followers by 236 percent. A tight-knit team of marketing professionals, creatives and researchers collaborate to ensure client content is relevant and useful. Multiply recruits life-long learners with a playful streak and a desire to build human connections. It creates content that is often contagiously fun — as evidenced by the many Multiply posts that have gone viral — but strikes a more serious tone when the situation calls for it. It has undertaken projects to highlight Covid-19 initiatives and to campaign against food waste. The CFI.co judging panel is pleased to present Multiply Marketing Consultancy with the 2020 award for Best Digital Communicator (GCC).

> LINKLEASE: MOST INNOVATIVE SME EQUIPMENT LEASING SOLUTIONS UAE 2020 Linklease, the Middle East’s leading equipment leasing company for SMEs, has earned an enviable reputation in its six-year history. From the Dubai headquarters, a leadership team with 25 years of SME financing experience works with regional companies to facilitate the procurement of equipment, and with investors seeking global fixed income opportunities. Linklease provides new and used equipment and sale and leaseback agreements, along with equipment management services. The company’s innovative outlook has served it well. As the UAE went into lockdown, Linklease took proactive steps to draft new agreements to help struggling customers to weather the storm. Systems were put in place to help maintain business continuity, and the agile response ensured that no clients defaulted on

their agreements. The firm’s strong financial standing has enabled it to capitalise on the few silver-lining investment opportunities to come from Covid-19. Linklease was able to offer employment to selected recruits at a time when many companies were forced to downsize. It bought back equipment from hard-hit customers and bridged a widening gap in SME financing. Businesses have begun to see the benefits of leasing, and Linklease operations are booming. The company performs due diligence checks to ensure it maintains its zero-default streak, and is opening new operations in the SubSaharan region of Africa. The CFI.co judging panel congratulates Linklease on claiming the award for Most Innovative SME Equipment Leasing Solutions (UAE) — for the second consecutive year.

> ACTIVE CAPITAL REINSURANCE LTD: BEST SPECIALISED REINSURANCE SOLUTIONS GLOBAL 2020 & BEST REINSURER EMERGING MARKETS 2020 Active Capital Reinsurance Ltd (Active Re) boasts a 13-year history of significant business growth — and this year has proved a pinnacle in that trajectory thanks to a continued focus on diversification and risk-controlled expansion. The firm has a growing global portfolio, operating in 104 countries in Latin America, Europe, Asia Pacific and the MENA region. It has headquarters in Barbados, offices in Miami and Madrid, and representatives in nine countries. Innovation fuels the company’s development and diversification. Active Re specialises in bancassurance and affinity products, but the offering has been incrementally augmented to tap into new markets and lines of business. The firm defines talent, technology, innovation and diversification as its key strengths. It has invested in its staff and revamped

its technological platform to add levels of automation that bring cost and efficiency savings. A suite of in-house reinsurance applications provides an adaptable system that reduces administrative tasks and allows the team to focus on clients. The Active Re portfolio has evolved and diversified to include more focus on the property and surety classes. It has moved beyond pure facultative reinsurance with versatile treaty reinsurance, and has forged partnerships to increase distribution channels. Active Re has been given an excellent investment grade rating by AM Best — and some well-deserved recognition from the CFI. co judging panel. The judges declare Active Re as the 2020 winner of two awards: Best Specialised Reinsurance Solutions (Global) and Best Reinsurer (Emerging Markets). CFI.co | Capital Finance International

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> ANTHONY & CIE: BEST WEALTH MANAGEMENT SERVICES FRANCE 2020

Over the past four decades, Anthony & Cie has proven that risk can be reconciled with opportunity. The multi-family office offers a suite of services that includes wealth planning, real estate and administration, and cross-border wealth strategy. The firm has Anglo origins, established in London in 1978, but has called the Côte d’Azur home for more than 30 years. Anthony & Cie works with French residents as well as non-residents with local interests, such as foreign family offices. It has assembled a multinational, multilingual team

of accountants, legal and tax advisors, financial analysts and administrative managers to provide clients with targeted advice. Founder Robert Anthony is a chartered certified accountant who previously taught international tax law in California. As principal and founder, Anthony leads from the front with a vigilant team ready to strike preemptively to hedge risk and seize opportunities. Client interests serve as the firm’s guiding star, and it regularly reviews and fine-tunes portfolios. Anthony & Cie has an aversion to inappropriate

speculation and a fondness for diversification. It strives to set a benchmark of exemplary business ethics and prizes retrospection as a tool for continuous improvement. The firm has positioned itself at the cutting edge of its field for legislation, relationships and knowledge. It has never been content with stasis, and the CFI.co judging panel watches with interest the firm’s evolution. The judges announce Anthony & Cie as winner of the 2020 award for Best Wealth Management Services (France).

> ABA - INVEST IN AUSTRIA: BEST DESTINATION FOR INVESTMENT IN INNOVATION EUROPE 2020

A gateway to both west and east, and with an exceptionally rich cultural heritage, Austria has long exerted an irresistible pull on innovators, disruptors, out-of-the-box thinkers, and others determined to leave their mark on human progress. Today, Austria is one of Europe’s most attractive start-up hotspots with a highly dynamic and creative scene of budding entrepreneurs pushing boundaries, envelopes, and the limits of convention. ABA – Invest in Austria is the national investment promotion department of the Austrian Business Agency (ABA) owned by the Federal Ministry for Digital and Economic Affairs. With its three departments, ABA – Invest in Austria, ABA

– Work in Austria und Location Austria, Austria’s business promotion agency promotes Austria abroad as a business and research location, an attractive labour market for skilled workers and a location for international film productions. By rolling out the red carpet for businesses of all sizes to leverage Austria’s ensemble of competitive advantages, ABA has stoked the fires of innovation. Agile and efficient, the agency was set up by the state to provide a single touchpoint for those considering Austria as their next business destination. The agency offers its services free of charge and helps clients make full use of the country’s peerless

facilities: From tapping its vast pool of highly educated and motivated professionals to rallying its network of early-stage investors, incubators, accelerators, angels, and venture capitalists. ABA fits seamlessly in a national ecosystem that fosters innovation and attracts those businesses seeking a welcoming and inspiring home. The agency is nimble yet sustains a vast network that plugs into all major economic actors. The panel has been following ABA for some years and wishes to recognise its superior approach to investment promotion by confirming the 2020 Best Destination for Investment in Innovation Europe Award.

> 3VC: BEST VC TECHNOLOGY FIRM CEE 2020

Just three years after its launch, 3VC — formerly capital300 — is proving the case for Central Eastern Europe (CEE) as a challenger to Silicon Valley’s long reign as the world’s hottest tech incubator. The firm was founded by entrepreneurs who are passionate about technology and seasoned in start-up experiences. 3VC launched with a threeperson team and a first fund of $50m USD. It now has a passionate team of diverse talent from the CEE and GSA (Germany, Switzerland and Austria) regions, noted for gender balance, 108

business-friendly governments and skilled STEM (science, technology, engineering and mathematics) graduates. 3VC seeks out gamechanging ideas that drive humanity forward, then connects entrepreneurs with growth capital and knowledge. The firm unites three groups of like-minded stakeholders — European founders, global VCs and regional fund investors — with the goal of advancing the start-up ecosystem and generating positive returns. 3VC aims to be a catalyst for change and partners CFI.co | Capital Finance International

with forward-thinking organisations. It works only with top-tier funds and takes a qualityover-quantity approach to portfolio investments, primarily focusing on opportunities at Series A and growth stages. Short maturity terms have permitted two exits and several up rounds so far. 3VC won’t submit to a single label; it is an advocate and ambassador, entrepreneur and investor. The CFI.co judging panel announces 3VC as winner of the 2020 award for Best VC Technology Firm (CEE).

Winter 2020-2021 Issue

> AALTO CAPITAL: BEST M&A SOLUTIONS PARTNER EUROPE 2020 Aalto Capital is an independent investment banking advisory firm with regional expertise and global reach through a network of offices in London, Munich, Helsinki, Stockholm, Zurich and New York. A collaborative partner network extends coverage to the whole of Europe, Russia, Asia, the Middle East and the US. Aalto Capital has recruited seasoned professionals with vast experience on the buying and selling sides of private equity. The firm focuses on raising growth capital for established companies rather than start-ups. Aalto Capital is a trusted advisor on corporate finance, capital markets and M&As. One of the firm’s first M&A deals paired a US business with a UK firm to form one of the world’s largest eSports companies, which registers 350 million views per

month. It has been active in real estate — including the sale of a magazine’s headquarters in London’s Covent Garden — and plans to develop this line of the business. The customer-focused firm is currently targeting business services and has completed a number of transactions in the fintech sector. It also finds the tech opportunities in the Nordic markets of increasing interest. Clients appreciate the firm’s cross-border expertise, solutions-oriented approach and cando attitude. Aalto Capital reports that none of its 40-person workforce was put on furlough during the pandemic — and the firm is now hiring. The CFI.co judging panel recognises a strong growth trajectory, and declares Aalto Capital winner of the 2020 award for Best M&A Solutions Partner (Europe).

> KATHREIN PRIVATBANK: BEST PRIVATE BANKING SOLUTIONS AUSTRIA 2020 Inserted into Raiffeisen Bank International, part of one of Austria’s largest banking groups, Kathrein Privatbank enjoys the benefits of scale whilst remaining true to its roots as the traditional and highly exclusive private bank envisioned by its founder Carl Kathrein in 1924. Discrete, independent, and agile, Kathrein Privatbank is counted amongst the leading private banks of the German-speaking world. The bank draws its custom from high networth entrepreneurs, family offices, and private foundations. As an integral part of its services palette, Kathrein Privatbank maintains a finely meshed experts’ network to source individually tailored solutions to legal and fiscal matters, including those that stretch across multiple jurisdictions. The private bank, housed in a Viennese fin de siècle building as understated as stately, is justifiably proud of its reputation for cultivating an exceptionally close bond with its customers in

order to ensure excellence in the delivery of both bespoke services and outcomes that dovetails with the exacting demands placed upon the institution. At this level of distinction, flukes are not tolerated, and superior performance must match consistency in its provision. Kathrein Privatbank’s proprietary quantitative investment style is defined as a rigorously methodical approach to asset allocation and seeks to unearth opportunities through analytical craftsmanship as opposed to the opportunistic perusal of possibilities. The judging panel values the bank’s relentless pursuit of operational perfection, a hallmark of Kathrein Privatbank since its inception. The judges also note the bank’s exemplary commitment to integrity and confidentiality. The judging panel is therefore pleased to offer Kathrein Privatbank the 2020 Best Private Banking Solutions Austria Award.

> POLIFARMA SPA: BEST HEALTHCARE CORPORATE STRATEGY ITALY 2020 Polifarma celebrated its centenary in 2019 with the slogan, “a hundred years spent in the future”. The company’s commitment to specialized skills and the search for innovative, effective solutions have seen it become a benchmark of excellence in the Italian pharmaceutical sector. Polifarma’s story has been a personal and ethical one, leading up to its acquisition by Luisa Angelini 21 years ago. In the 2000s, pharmaceutical companies were hard-hit by the explosion of generic drugs on the market and – faced with the loss of a product patent – Polifarma realized it needed a new corporate strategy. Turnover had plummeted from €40m to €18m – but the company had prepared for this. It acquired Polifarma Benessere, an OTC and cosmetic company, cementing its presence in the sector. Since 2010, it has released 10 new products and projects and trebled turnover to €55m. It has identified digitalisation as a strategic key to the future of healthcare and developed

a digital revolution program thanks to a cultural change management that has led to the engagement of the whole company in a future-orientated strategic plan. Moreover, its strengthened ophthalmology offering now accounts for 42% of turnover. This was made possible by a flexible internal organizational structure in which every employee knows his role and feels valued. Polifarma this year inaugurated its Hospital Business Unit, targeting private clinics and hospital markets and strengthened the Foreign Business Unit in order to broaden its presence in the international markets. CEO Dr. Andrea Bracci has been appointed vice-president of the pharmaceutical section of the Lazio regional industrial and business organization and member of the Digital Transformation Group, in recognition of his service. The CFI.co judges name Polifarma SpA as winner of the 2020 award for Best Healthcare Corporate Strategy (Italy). CFI.co | Capital Finance International

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> DEEPMIND: MOST INNOVATIVE AI RESEARCH TEAM GLOBAL 2020

Working closely with Google, and acquired by Alphabet Inc. in 2015, DeepMind believes that many fundamental scientific questions, can be answered through the problem-solving systems of artificial general intelligence. The DeepMind research team, in collaboration with Moorfields Eye Hospital, has made much progress in the understanding of eye disease. The company is helping to improve Google products which now benefit from the DeepMind voice synthesiser WaveNet. A few years ago, DeepMind’s AlphaZero taught itself mastery of chess, shogi (the Chinese version) and Go and beat world champions. The chess community

acknowledged that this development was unlike any earlier chess playing engine. According to Garry Kasparov, AlphaZero plays “with a very dynamic style much like my own”. AlphaGo is probably the most powerful Go player in history. There have been hundreds of peer-reviewed papers in top journals that show the wonderfully innovative solutions of this winner. DeepMind is concerned that AI initiatives should proceed safely and ethically, behaving reliably and in ways that we want. After the acquisition, the company established an artificial intelligence ethics board. DeepMind, along with Amazon, Google, Facebook, IBM and Microsoft, is a

founding member of the Partnership on AI (which considers the society-AI interface). DeepMind scholarships support smart underrepresented students and address geographic as well as social imbalances. DeepMind announced on 30 November this year, that its AlphaFold programme had solved the “protein folding problem”. This will fundamentally change biological research, unlocking protein that cause disease. According to Nature magazine: “It will change everything.” The CFI.co judging panel is pleased to recognise DeepMind as the Most Innovative AI Research Team Global 2020.

> UNIONBANK OF THE PHILIPPINES: BEST UNIVERSAL BANK & BEST DIGITAL CUSTOMER EXPERIENCE PHILIPPINES 2020

UnionBank of the Philippines is reaping the benefits of its digital focus and agile operations: retail banking profit doubled in 2019, resources hit a five-year high, and net income increased by 104 percent year-on-year. Listed on the Philippine Stock Exchange in 1992, UnionBank has harnessed the power of technology to get closer to customers. It urges them to imagine a new banking reality, where services are embedded in the fabric of daily life. It has one of the leanest branch networks in the region, with concentrated

back-office operations and hundreds of paperless branches, including 50 fully digital branches as well as thousands of ATMs and remittance centres through partnership agreements. UnionBank’s self-service kiosks and online banking services keep Filipinos on top of their finances. New digital accounts surged during the lockdown period, and UnionBank implemented relief measures for consumer debt and facilitated online NGO donations. The bank also introduced a retail loan platform supported by video KYC that

reduced processing times. UnionBank pushes fintech boundaries to reach underserved and unbanked communities, and supports SMEs with the financing and digital tools. The bank could fill an armoire with the awards it has accumulated over the past decade. The CFI.co judging panel sees the merits of that recognition, as the bank has spared no expense in the overhaul of its operations. The panel adds its own acknowledgement: dual awards for Best Universal Bank & Best Digital Customer Experience (Philippines 2020).

> SASSEUR REIT: BEST COMMERCIAL REIT ASIA 2020

Singapore’s Sasseur was the first outlet mall REIT (real estate investment trust) to be publicly listed in Asia. The Sasseur Group is a leading developer with a 31-year history of distributing fashion products and operating malls in China. Sasseur REIT operates under the Monetary Authority of Singapore to manage commercial real estate assets (outlet malls) in the People’s Republic of China, a market projected to become the world’s largest within the next decade. Sasseur REIT expects to see a boom in consumer spending as China’s rising middle class engages in some 110

high-end retail therapy. There are four outlet malls included in the REIT portfolio, each in the suburbs of high-growth cities — with more in the pipeline. Sasseur REIT’s business model combines art, commerce and activities to create an ambience and elevate the shopping experience. An entrusted management agreement ensures an alignment of interests for the tenants and the REIT, promoting shared success and taking sales commission from tenants’ rent. Mutually beneficial relationships — and more than 90 percent occupancy — CFI.co | Capital Finance International

have historically delivered for shareholders, and tenants and investors work together in an inclusive environment. Sasseur REIT properties transcend the image of traditional shopping malls and are recognised as lifestyle centres offering a range of retail, cultural, tourism and entertainment activities. The properties are replete with modern architecture, high-class amenities and sculpted green spaces. The CFI. co judging panel announces Sasseur REIT as winner of the 2020 Best Commercial REIT (Asia) award.

Winter 2020-2021 Issue

> ARA ASSET MANAGEMENT: BEST SUSTAINABLE REIT FUND MANAGER ASIA-PACIFIC 2020 Singapore-based ARA Asset Management employs a forward-looking strategy to power a fully diversified suite of investment funds, including listed and unlisted real estate investment trusts (REITs), private real estate equity and credit funds, and infrastructure funds. The asset manager maintains a presence in 28 countries, spanning 4 continents. Its dedicated teams not only provide local expertise but also professional real estate management services. On behalf of a private fund, ARA Asset Management just completed the acquisition of Tower II of the landmark Parc 1 office complex in Seoul, South Korea, cementing its long-standing partnership with local partner NH Investment and Securities in what was hailed as the country’s biggest real estate transaction so far this year. Over its 18-year history, ARA Asset Management has established an unmatched reputation for strong corporate governance and

integrity. This has attracted some of the world’s largest pension funds, sovereign wealth funds, and family offices to the company. ARA Asset Management now has over USD$82 billion in assets under management. The firm was an early adopter of comprehensive environmental, social, and governance (ESG) standards which were incorporated into its decision-making and operational processes. The CFI.co judging panel also appreciates that ARA Asset Management prioritises good corporate citizenship as a key contributor to its performance and a differentiator that helps the company preserve and expand its leading edge. The judges agree that such a thorough approach to business sustainability ensures consistently superior outcomes for all stakeholders. The judging panel declares ARA Asset Management winner of the 2020 Best Sustainable REIT Fund Manager Asia-Pacific Award.

> DFNN: BEST IT CORPORATE GOVERNANCE PHILIPPINES 2020 As the world becomes more tech dependent, innovative IT solutions are vital for a competitive edge. In the Philippines, DFNN has solidified its position as a leader in the field over the past two decades. Its executive team has domain expertise in financial services, regulatory compliance, software development, systems integration and turn-key digital implementations. DFNN’s governance code reflects its core values of integrity, teamwork, service and something the locals call malasakit. The Filipino word loosely translates to “empathy” and underscores the company’s commitment to stakeholder engagement and community focus. DFNN incorporates stakeholder concerns into the decision-making process and has a dedicated team to focus on corporate governance. The company, which is traded on the Philippine Stock Exchange,

uses the UN’s Sustainable Development Goals (SDGs) as a guideline for continuous improvement. Over the past three years, it has made steady advances in the number of SDG recommendations completed, from 107 in 2017 to 161 last year. It has adopted environmental sustainability measures that are designed to deliver maximum growth for the company and its stakeholders — and ensure the responsible use of natural resources. DFNN recognises the fragile interdependence that exists between business and society. It seeks to establish stakeholder relationships that bring mutual benefit, and supports community development via education, healthcare and livelihood programmes. The CFI.co judging panel is pleased to present DFNN with the 2020 award for Best IT Corporate Governance (Philippines).

> VARUN BEVERAGES LTD: BEST FMCG CORPORATE GOVERNANCE INDIA 2020 Varun Beverages is one the world’s largest PepsiCo franchisees outside the US. The Indian company, which forms part of the diversified business conglomerate RJ Corp, has consolidated its PepsiCo engagement into a business empire with near-complete national coverage (excluding the states of Ladakh, Andhra Pradesh and Jammu and Kashmir), as well as franchisee rights in Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe. Over the past decade, Varun has seen its share of PepsiCo beverage sales (by volume) in India increase from 24 percent (in 2011) to over 80 percent. The growth-driven company is supported by a leadership team with decades of combined industry expertise and degrees from reputed universities. Varun’s founding chairman, Ravi Kant Jaipuria, has been praised for his entrepreneurial leadership and business acumen. He was

named by PepsiCo as the International Bottler of the Year in 1997 — the only Indian to have ever received this honour. Varun’s manufacturing network includes 31 domestic and six international plants, with two in Nepal and one in each of its other markets. High standards and strong governance ensure operational efficiencies throughout the network. Varun aims to please its consumers and its staff, and the company regularly ranks as a preferred employer. It fosters relationships rooted in respect and provides employees with ample opportunities for growth. It seeks to create long-term value for all stakeholders through operational excellence and socio-environmental responsibility. Varun Beverages is a repeat winner of the CFI.co awards programme, claiming the title of Best FMCG Corporate Governance (India) for the second consecutive year. CFI.co | Capital Finance International

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> PILIPINAS SHELL PETROLEUM CORPORATION: BEST ENERGY CORPORATE GOVERNANCE PHILIPPINES 2020

Pilipinas Shell has been powering the lives of Filipinos for over 100 years. Starting as the Asiatic Petroleum Company (Philippine Islands), Ltd in 1914 selling cased kerosene, and subsequent corporate transformations thereafter, the Company’s businesses were eventually consolidated into Pilipinas Shell Petroleum Corporation, and since then has proven itself as a trusted partner in nationbuilding, a good neighbor and continues to strive as a world-class investment case. It credits its consistent record of solid financial performance to a comprehensive governance code, and strong and fit for purpose corporate structure that is guided by its core values of honesty, integrity and respect for people. All employees are guided by the Company’s Code of Conduct – doing things the right way without

taking shortcuts. This has been the Company’s guiding principle in having a well-built integrity culture. Pilipinas Shell cites its success from its people. It attracts and retains diverse worldclass talents with compelling and impactful career opportunities across the world. The employees’ dedication, creativity and resilience have sustained and made the Company an established corporate leader in the Philippines. Pilipinas Shell strives to be a good neighbour and contributes to community wellbeing through the Pilipinas Shell Foundation, Inc. (“PSFI”), its non-profit arm. PSFI championed the Philippines’ Movement Against Malaria health program that decreased the malaria deaths in the Philippines by 97% over the course of 20 years. The foundation invests in education and healthcare, brings power to off-grid communities

and engages with environmental partners. Pilipinas Shell is taking the necessary steps to lead in this era of energy transition, by reducing the carbon footprint in its existing assets, and introducing cleaner competitive products. The Company has recently updated its retail stations with greener features such as the installation of solar panels and Eco Bricks (bricks made from recycled Shell lubricants containers) and will soon launch its industrial-scale solar farm that is considered as one of the largest in Southeast Asia this year. The CFI.co judging panel approves of the Company’s adaptive business approach and long-term commitment as a partner in nation building. The judges present Pilipinas Shell Petroleum Corporation with the 2020 award for Best Energy Corporate Governance (Philippines).

Krungthai Bank (KTB) is a majority state-owned enterprise bank on a threefold mission: to facilitate sustainable economic growth, boost financial inclusion, and enhance quality of life in Thailand. The bank’s 54-year legacy of stability has contributed to the development of the country’s business landscape. In 1989, it became the first state enterprise to float shares on the Stock Exchange of Thailand. The bank unites five ecosystems — government, education, payments, healthcare and mass transit — by combining next-level fintech

solutions with strong tech infrastructure. It creates positive social impacts with products, services and support programmes addressing the needs of more than 40 million people. KTB clients can apply for student loans, streamline hospital visits and make contactless payments. The bank has collaborated with the government to develop digital platforms to register, screen and deliver relief measures during the coronavirus pandemic. It implemented measures to mitigate the financial hardship experienced by individual and corporate

clients, such as loan “payment holidays” at the beginning of the crisis, and reductions in interest rates, fees and penalties from August onwards. The CFI.co judging panel has praised KTB in past awards programmes for its steadfast advancement of the Thailand 4.0 strategy, which aims to build a cashless society while reducing social inequalities and narrowing the income gap. The judges applaud the bank’s swift crisis response and declare Krungthai Bank as winner of the 2020 award for Best Social Impact Bank (Thailand).

La Trobe Financial Asset Management is a premium non-bank wealth manager and credit specialist. It views the prudent stewardship of client assets as a sacrosanct fiduciary duty, and counts its people and reputation as its greatest assets. The Australian firm’s account managers forge lasting relationships with clients and tailor strategies to fit their needs. Over the past 68 years, La Trobe Financial has served over 180,000 clients and covered $18.4bn ($26bn AUD) of institutional and retail investment mandates. Clients place their trust and

investments with La Trobe Financial — it has AUM of $7.8bn ($11bn AUD). While interest rates may fluctuate, clients’ original capital investments are mortgage-secured. In addition to wealth management, La Trobe Financial offers insurance services, as well as property loans and fixed-interest and investment-grade credit. It has also opened new areas in retail and industrial investing. This diverse range of services and funding solutions is put together by a workforce of more than 400 employees. The La Trobe Financial team serves the needs

of global clients from its headquarters in Melbourne, with offices in Sydney, Shanghai and Hong Kong. Blackstone, the world’s leading investment firm with $584bn in AUM, holds an 80 percent stake in the company. La Trobe Financial president and CEO Greg O'Neill, who was awarded the Medal of the Order of Australia in 2019, holds the remaining 20 percent share. The CFI.co judging panel declares La Trobe Financial Asset Management winner of the 2020 award for Best Investment Management Team (Australia).

> KRUNGTHAI BANK: BEST SOCIAL IMPACT BANK THAILAND 2020

> LA TROBE FINANCIAL ASSET MANAGEMENT LIMITED: BEST INVESTMENT MANAGEMENT TEAM AUSTRALIA 2020

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Winter 2020-2021 Issue

> THE WASHINGTON POST: MOST INNOVATIVE NEWS OUTLET GLOBAL 2020 Founded in 1877, the Post has won 69 Pulitzer prizes, just trailing behind the New York Times. In 1950, the term McCarthyism was first coined in an unfavourable Post editorial cartoon. In the late 60s, Editor-in-chief Ben Bradlee encouraged the forensic reporting of the Pentagon Papers and Watergate scandals. Considered to be left-leaning, the Post is occasionally referred to as “Pravada of the Potomac” – but significantly, these cries come from both ends of the political spectrum. Truth be told, right- as well as left-wing editorial views are often to be found within its pages. Recent critics have included Bernie Sanders as well as Donald Trump. The judging panel points to the paper’s keenness to implement technical innovations, and experiment bravely in the new media environment.

Its transition to a technology-first media company is to be applauded. Jeff Bezos (who is a hands-off proprietor by all accounts), acquired the paper seven years ago and has encouraged speedy adaption to the new age. Digital-only subscriber numbers soared, and the company has powered into the software space. Its in-house publishing platform, Arc, has proved attractive to the Los Angeles Times, the New Zealand Herald and others. Sites running on Arc have more than 200 million readers worldwide. Happily, this innovation provided a financial boost to hold back the decline in readership of the print journal. The Washington Post out-innovates its competition and CFI.co confirms this repeat winner as recipient of the 2020 award for Most Innovative News Outlet Global.

> RETAIL OPPORTUNITY INVESTMENTS CORP.: BEST RETAIL REIT U.S. 2020 Retail Opportunity Investments Corp. (ROIC), is a U.S., Nasdaq-listed REIT (real estate investment trust) that owns and operates a 10 million square foot portfolio of necessity-based retail properties, anchored by supermarkets and drugstores, located in densely-populated markets along the U.S. West Coast. ROIC is a member of the S&P SmallCap 600 Index and has investmentgrade corporate debt ratings from Moody's Investor Services, Standard & Poor’s, and Fitch Ratings, Inc. ROIC is led by a team with over 25 years experience of operating exclusively in the grocery-anchored shopping center sector on the U.S. West Coast. This expertise, combined with ROIC’s strategic vision and resilient spirit, has propelled the company’s long-

term success, including its best-in-class historical occupancy levels. ROIC bolsters its resiliency with a corporate culture that has been consistently marked by the care it exhibits for its employees, tenants, and customers, as well as the communities ROIC serves and the planet at large. Notably, ROIC’s initiatives today are ESG-focused, underlining the growing importance of sustainable performance. Additionally, as part of ROIC’s strategy of developing a broad and diverse investor base, its management team regularly travels to Europe, engaging both European institutional and retail investors alike. The CFI.co judging panel presents ROIC with its 2020 award for Best Retail REIT (U.S.).

> MRV ENGENHARIA: BEST ESG RESPONSIBLE DEVELOPMENT LEADERSHIP BRAZIL 2020 Over the past four decades, MRV Engenharia has built over 400,000 high-quality, low-cost homes, housing more than a million people. The Brazilian construction company is dedicated to creating accessible housing for low-income families. MRV is the largest residential developer in Latin America, with a presence in 160 cities and 22 states. One in every 150 Brazilians call an MRV property home, and the company helps firsttime buyers claim government subsidies to facilitate their dream of home ownership. It targets sustainability throughout its project portfolio, achieving high levels of ISO certification and industry recognition. MRV has taken a stance on climate action; over the past decade, it has planted nearly 1.5 million trees in green spaces and public areas. It aims to set an industry benchmark by prioritising people and

planet, citing its large market capitalisation and expansive operations as advantages in making positive community impacts. It follows-through on a commitment to transparency, with annual reports highlighting progress towards the UN’s 17 Sustainable Development Goals, focusing on the eight where it can best contribute. It established the MRV Institute 10 years ago and invests one percent of annual income to support education, culture and sports programmes. The company has opened 170 schools, combatting illiteracy and benefiting employees. MRV is proud of its accomplishments and energised by future possibilities. The CFI.co judging panel unanimously declares MRV Engenharia as winner of the 2020 award for Best ESG Responsible Development Leadership (Brazil). CFI.co | Capital Finance International

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> ICBC DUBAI: BEST INTERNATIONAL BANK BOND ISSUER EMEA 2020

The Industrial and Commercial Bank of China (ICBC) has distinguished itself with 36-years of steady progress and innovation. The group serves millions of clients, corporate and individual, via a global network including more than 400 branches and subsidiaries across 49 countries. ICBC has been active in the Middle East since 2008, and its DIFC operation in Dubai is a crucial part of that five-branch regional network. It is a reliable regional issuer of medium-term notes (MTNs) and certificates of deposit (CDs). Highlights

from recent activity include a $1bn MTN with three-year and five-year $500m tranches that has been twice oversubscribed, and an $8bn CD programme that has seen a 71 percent increase from 2019 to 2020. ICBC Dubai collaborates with regional governments, sovereign institutions and corporate partners to drive strategic infrastructure investment, economic diversification and green development. In 2020, ICBC Dubai acted as co-manager on the Samba Bank bond issuance, as joint lead manager on

the Emirates NBD PJSC senior unsecured bond issuance, and in a passive role on the Dubai Islamic Bank sukuk issuance. ICBC Dubai is ever alert for opportunities to support economic development and strengthen relationships within the GCC region. It focuses on providing financial services that serve the real economy. The CFI. co judging panel presents ICBC Dubai (DIFC) Branch, a repeat programme winner, with the 2020 award for Best International Bank Bond Issuer (EMEA).

> KUWAIT INTERNATIONAL BANK: FASTEST GROWING ISLAMIC BANK AND BEST SHARIA-COMPLIANT BANK MENA 2020

BANK FOR LIFE

The publicly quoted Kuwait International Bank (KIB) was incorporated in 1973 and has been operating according to Islamic principles for the past 13 years. KIB offers a comprehensive suite of Sharia-compliant services and products coupled with digital advances. KIB has introduced services that free clients from making in-person visits, and updated its queue booking app, in part for customer convenience but also as a safety measure during the pandemic. Over the past eight months, KIB

has launched a live chat function on its website and seven new services via its contact centre. Another major milestone was the launch of the 89 Mall branch, which was designed to traverse the boundaries between the digital and physical to provide full self-service solutions across most operational levels. This addition complements the first digitally focused branch at the E-mall. The ATMs in these branches are reminiscent of smartphones, allowing customers to navigate by swiping and tapping instead of inserting a

card. Staff roam the open-plan branches with iPads to answer client questions. The bank has also launched a mobile app feature allowing digital registration with the Kuwait clearing company to receive direct-deposit dividends in their accounts instead of having to come in and pick up a cheque. The CFI.co judging panel presents Kuwait International Bank — a repeat programme winner — with the 2020 awards for Fastest Growing Islamic Bank and Best ShariaCompliant Bank (MENA).

> TROJAN HOLDING: MOST INNOVATIVE INFRASTRUCTURE LEADERSHIP UAE 2020

Trojan Holding was launched in 2012 as a onestop-shop for construction projects in the UAE and beyond. The eight subsidiaries in the Trojan Holding portfolio are industry-leading companies which work seamlessly together to offer turnkey solutions for even the most challenging projects. The group accomplishes this with a dedicated workforce of more than 22,500 multinationals. Trojan Holding, one of the fastest-growing construction firms in the UAE, lists that skilled team as its greatest competitive advantage. It invests considerable 114

resources in recruiting and retaining the best people, providing them with the encouragement, support and stimulus for continued professional development. The Abu Dhabi-based company’s support for its employees fuels the company’s upward trajectory. Trojan Holding has built an impressive portfolio of property developments, including educational and medical facilities, luxury resorts and business hotels, mass housing complexes, industrial projects and government buildings. Its crowning achievements include Mira Oasis and Mudon, CFI.co | Capital Finance International

two exclusive residential developments in Dubai, as well as villas of Ain Al Faydah and Al Falah. Trojan Holding has completed a dozen infrastructure projects in the UAE — on time and within budget — and has nearly as many under way. The company is looking forward to expanding its reach abroad and bringing in more business for regional suppliers and vendors. The CFI.co judging panel announces Trojan Holding as winner of the 2020 award for Most Innovative Infrastructure Leadership (UAE).

Winter 2020-2021 Issue

> SUSTAINABILITY ACCOUNTING STANDARDS BOARD:

OUTSTANDING CONTRIBUTION TO ESG RESPONSIBLE TRANSPARENCY GLOBAL 2020 The Sustainability Accounting Standards Board (SASB) believes that what gets measured gets managed. Responsible investing and transparent reporting go hand-in-hand, so the San Francisco non-profit has developed — with the support of donors and the input of companies, industry associations and institutional investors — a set of industry-specific standards that are used by companies and investors worldwide to track and communicate ESG performance. SASB standards are tailored for 77 industries across 11 sectors, helping companies to understand the sustainability issues most likely to affect their bottom line. SASB holds financial materiality as its north star to fine-tune industry metrics under the rubrics of environment, human capital, social capital, business model and innovation, leadership and governance. The standards provide a roadmap to manage

environmental and social issues and generate benefit for company, shareholders and society. Hundreds of companies use SASB solutions to identify and quantify the financially material sustainability information that guides development and decisionmaking. The standards are supported by 170 institutional investors in 19 countries, representing investor support of $55tn. The non-profit has a resilient business model that consists of philanthropic donations, market-support grants and income from products, membership fees and licensing agreements. SASB also offers a credential-conferring course on the Fundamentals of Sustainability Accounting. For its evidence-based research and solid stakeholder engagement, the CFI.co judging panel presents SASB with the 2020 global award for Outstanding Contribution to ESG Responsible Transparency.

> PAVILION GLOBAL MARKETS: BEST TRANSITION MANAGEMENT TEAM NORTH AMERICA 2020 Pavilion Global Markets (PGM) recently celebrated its 50th anniversary and attributes its enduring success to a steadfast intention to create a credible and sustainable business. PGM is an agency and institutional-only focused firm with a strong and stable team offering three specialised services: portfolio transition management, global research, and an equity execution platform covering 50 international markets. The Canadian firm has begun to make inroads into the Middle East. PGM has visited the region to research market opportunities and establish new customer relationships. The firm assists institutional investors and financial intermediaries to streamline their portfolio structures, transition between investment managers, alter asset allocations and rebalance their portfolios. Transition management benefits clients through lower commission rates and a well-planned execution strategy. It is a core part of

the firm and represents about a quarter of PGM’s business. The transition management business is supported by PGM’s global trading that operates 24-hours during the working week and successfully deals in all asset classes. To satisfy complex trading needs and achieve best execution for our clients, we use a combination of cutting-edge technology and sophisticated trading algorithms. Over the past 12 months, Pavilion Global Markets (PGM) has achieved growth in the transition management business line with a revenue increase and important reputational advances. It has also advanced its digital transition plan in response to Covid-19 to strengthen remote working capabilities. The CFI.co judging panel declares PGM — a repeat programme winner — as the Best Transition Management Team (North America) for 2020.

> ABBOTT CAPITAL MANAGEMENT: BEST PRIVATE EQUITY PORTFOLIO MANAGER UNITED STATES 2020 Abbott Capital Management has earned a reputation as a trusted partner of institutional investors, and a skilled manager of private equity portfolios. Founded in 1986, the firm provides value-added services for the construction and management of high-conviction private equity portfolios. The independent company was founded by Stan Pratt and Ray Held, and their approach was quickly embraced by corporations and private pension funds. Abbott Capital credits its success — and the successful outcomes achieved on behalf of its clients — to intellectual honesty, fact-based qualitative and quantitative analyses and a disciplined due-diligence process. To these traits it adds a wealth of industry expertise and a strong alignment with its clients. Abbott Capital has shown its commitment to informed decision-making and

accountability for the assets under its charge. It has been entrusted with the management of more than $9bn in private equity assets by institutions and their beneficiaries worldwide. Clients benefit from a legacy more than three decades in the making, where close relationships with institutional investors have built its solid reputation. Abbott Capital sources and invests with premier venture capital and private equity firms which enables their clients to reach their long-term investment goals. Clientcentricity is a key tenet for Abbott Capital, and the firm is committed to developing its diverse teams of professionals with inclusion and collaboration skills. The CFI.co judging panel presents Abbott Capital Management with the 2020 award for Best Private Equity Portfolio Manager (United States). CFI.co | Capital Finance International

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> VICTOR BUCK SERVICES: BEST BUSINESS PROCESS OUTSOURCING SERVICES LUXEMBOURG 2020

The global financial industry continues to consolidate to an ever-smaller handful of multitalented players. Victor Buck Services began as a Luxembourg print shop 20 years ago and has evolved into a specialist global network also offering physical delivery solutions in Europe and Asia. Its offer covers every aspect of data processing, from creation, translation and distribution through to archival and disposal. Data is collected and compiled

in a compatible format for use across various client systems. Victor Buck Services customers include large companies in the financial sector, mainly investment funds, but also public utilities, telecommunications providers, insurance companies, healthcare providers, and other major organisations from the public and private sectors. Security and control of the dissemination and accessibility of data are key in an increasingly connected

world. The firm pledges to create longterm value for its customers, by constantly improving their understanding of their business environment and their strengths. Victor Buck Services responds proactively to changing market trends and customer needs. The CFI.co judging panel presents Victor Buck Services with the 2020 award for Best Business Process Outsourcing Services (Luxembourg).

> SUEZ UK: BEST SUSTAINABLE MANAGEMENT SOLUTIONS UNITED KINGDOM 2020

There’s an air of optimism in the offices of SUEZ recycling and recovery UK. SUEZ Group is a worldwide leader of sustainable water and waste solutions with a 150-year history and a presence on five continents. UK operations are spread across over 300 facilities specialising in energy-from-waste and water treatment solutions. In the UK, the SUEZ team — more than 5,000 professionals from diverse backgrounds — are a key asset in advancing the circular economy movement and partners with clients to close loops in production and operational processes for the

efficient and sustainable management of resources. The company collaborates with international research centres and pioneering start-ups to foster innovation and sustainable growth. SUEZ sees circular economies as the norm of the future, as they have been proven to create true social value and environmental benefits. The company has developed innovative technologies to purify water and to transform waste into valuable secondary raw materials. It supports climate action with

a product portfolio that can reduce clients’ greenhouse gas emissions by optimising energy consumption and expanding the use of renewables. It provides digital tools to maximise resource management and collaboration among treatment facilities. Customers trust SUEZ to advance their sustainability agenda, because this company practices what it preaches. It prioritises sustainability at every level and leads by example. The CFI.co judging panel presents SUEZ recycling and recovery UK with the 2020 award for Best Sustainable Management Solutions.

> ECCELSA AVIATION: BEST PRIVATE AVIATION TERMINAL OPERATOR EUROPE 2020

Eccelsa Aviation considers itself privileged to call the Mediterranean island of Sardinia home — and it does everything within its power to make the travellers who pass through its terminal feel just as special. The handling company has operated a private and business aviation terminal at Olbia Costa Smeralda Airport since 2003. Eccelsa Aviation wins people over with its willingness to accommodate individual requests and its attention to detail in service delivery. Travellers are escorted between aircraft and terminal in a sleek, recently renewed fleet 116

of cars. Porter service takes care of luggage, and complimentary valet parking is available. Visitors can sample the region’s wines and culinary specialities in the terminal, while Eccelsa’s catering service takes airline food to fine-dining level. Concierge services connect travellers with indulgences such as Italian sportscar rentals, chartered yachts and islandhopping by helicopter. Eccelsa Aviation tempts visitors with premium shopping opportunities for Italian fashion, eyewear and jewellery. Passengers can even peruse personalised CFI.co | Capital Finance International

corporate jets at the terminal’s Bombardier boutique. Eccelsa Aviation has designed the terminal for passengers and crew, dedicating a lounge and outdoor space for each and providing a snooze room for crew to relax and reboot. A team of certified technicians is on-hand to carry out maintenance checks or routine repairs. The CFI.co judging panel is pleased to present Eccelsa Aviation — a repeat winner in the awards programme — with the 2020 award for Best Private Aviation Terminal Operator (Europe).

Winter 2020-2021 Issue

> PAVILION GLOBAL MARKETS: BEST GLOBAL PORTFOLIO STRATEGY TEAM NORTH AMERICA 2020 Pavilion Global Markets (PGM) traces its origins to 1968 and has an unchanged goal: to deliver best execution trading to its institutional clients. In 2020, the Canadian firm’s service suite includes equity execution, transition management and global macro research. The portfolio strategy team is a cornerstone of PGM operations and produces detailed, laser-sharp reports on targeted topics. These dossiers are excellent tools for client engagement and provide actionable insights for institutional investors, plan sponsors, sector analysts and quantitative fund managers. The aim is for integrated analysis over a medium-term horizon of nine to 12 months. PGM crunches numbers, then digs deeper to uncover investment opportunities — and risks. It explores the

impacts of macro events on asset classes (equities, fixed income, commodities and currencies) across a wide range of developed and emerging market economies. Research notes are published throughout the week and unshared material is collated into a Friday publication entitled Out of Focus. PGM has created upwards of 10,000 charts which are updated in real time and widely recognised as reliable reference tools. They also offers bespoke research services, which have proven useful for pension funds. As an independent organisation, PGM is not afraid to challenge the consensus. The CFI.co judging panel declares Pavilion Global Markets winner of the 2020 award for Best Global Portfolio Strategy Team (North America).

> FITCH RATINGS: BEST CREDIT SERVICES GLOBAL 2020 A leading global provider of credit ratings, commentary and research for global capital markets, Fitch Ratings is considered by many the tiebreaker amongst the major credit agencies. Often the first to spot the potential for trouble or, indeed, early signs of improvement, Fitch Ratings deploys 106 years of institutional experience – and its deep knowledge of markets and their protagonists – to consistently hit the right note when documenting the fundamentals of credit. Fitch is renowned for providing thorough analysis, independent perspective, transparent methodology and ongoing surveillance. One of the top statistical ratings organisations recognised by the US Securities and Exchange Commission, and with dual headquarters in New York and London, Fitch Ratings canvasses global markets with a vast network that ensures an on-the-ground presence in thirty countries and teams roaming every region of the world. The company and its more than 1,500 expert analysts, which bring diverse viewpoints together to render objective and forward-looking assessments, regularly rate over 20,000 entities,

ranging from sovereigns to businesses and investment products, amongst others. Fitch has extensive emerging market coverage spanning entities across all the major asset classes. It rates local currency bonds in more countries than any other credit rating agency. Fitch Ratings acknowledges that both its longevity and success are owed to a consistent investment in people and the prioritising of ongoing skill development, as well as a transparent and inclusive human resources policy that sets out clear career paths. The CFI.co judging panel is, of course, aware that the ratings industry has perhaps received more than its fair share of criticism in years past. Yet, without credit rating agencies money would simply stop flowing and economic life would come to a standstill. Moreover, Fitch Ratings possesses a number of key differentiators – people, processes, and presence – that, together, push the iconic company up a few crucial notches. The judges unanimously agree to declare Fitch Ratings winner of the 2020 Best Credit Services Global Award.

> VEON: BEST INTERNATIONAL TELECOMS SERVICES PARTNER GLOBAL 2020 Amsterdam-based VEON operates globally through brand partnerships to connect and technologically empower more than 200 million customers across nine markets spanning three continents. Russia is VEON’s largest market, and its massive size and sophisticated development offer impressive opportunities. VEON considers Pakistan, Ukraine, Kazakhstan and Uzbekistan to be high-growth markets in the “sweet-spot of rapid services adoption”. The company has established a dominant presence in early-stage markets — such as Bangladesh and Algeria — with highly favourable long-term demographics. Despite divergent revenue streams because of global lockdowns, VEON has managed to bring 4G subscription to 73 million customers — and generate quarterly Group revenues of some $2bn. It rolled out countryspecific plans in response to the pandemic, offering free access to emergency hotlines, healthcare websites and educational platforms. VEON has provided free data-

roaming for stranded citizens and perks for frontline workers. It has also contributed more than $3.5m to support Covid-19 programmes. The company invests in best-in-class technology and network infrastructure to provide customers in developing countries with the connectivity needed for individual empowerment and opportunity, often overcoming physical and socioeconomic barriers with offerings like digital financial services. It deploys predictive, cognitive technologies and big data analytics to anticipate, and meet, evolving customer demands. VEON is not so much client-centric as customer-obsessed. Business operations are aligned with its core values of entrepreneurism, transparency, collaboration and innovation. For helping communities and governments to bridge the digital divide towards more inclusive prosperity, the CFI.co judging panel presents VEON with the 2020 global award for Best International Telecoms Services Partner. CFI.co | Capital Finance International

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> AL HILAL LIFE: BEST LIFE INSURANCE PROVIDER MIDDLE EAST 2020

Al Hilal Life began as a mission-driven startup over a decade ago. Today it protects and preserves the financial security of thousands of individual and business clients across the Gulf. Al Hilal Life has yet again achieved positive financial results despite a challenging year due to the covid-19 pandemic and the overall market conditions. The company has launched an innovative suite of insurance and savings solutions to help customers weather any storm. It offers several savings and protection plans, as well as a selective range of corporate

insurance solutions. The plans from Al Hilal Takaful (100% subsidiary of Al Hilal Life) are vetted by a Shariah supervisory board to ensure compliance with Islamic principles. Al Hilal Life has entered the first stage of a digital overhaul, affording convenient and secure access for online product purchases apart from a fully enabled digital customer touch point. In the next phase, which will begin at the end of Q2 2021, customers will gain access to a new digital signatures feature. From offices in Bahrain and Kuwait, Al Hilal Life has made

strides in accomplishing its goal of becoming the benchmark for excellence in service among financial protection and savings providers across the Middle East. The company has registered on the radar of the CFI.co judging panel in past award programmes for its sage leadership, collaborative team and ethical operations. The judges have also been impressed by the company’s financial strength and prosperous shareholder relationships. Al Hilal Life wins the 2020 award for Best Life Insurance Provider (Middle East).

> ICBC DUBAI: MOST INNOVATIVE INTERNATIONAL BANK EMEA 2020

Since its 1984 launch, the Industrial and Commercial Bank of China (ICBC) has established a strong global presence with 400 branches and subsidiaries in 49 international markets. The financial giant planted roots in the Dubai International Financial Centre (DIFC) seven years ago, with the inauguration of ICBC Dubai (DIFC) Branch. It has become the leading Chinese bank in the region through steadfast adherence to core values of integrity, humanity, prudence, innovation and excellence. ICBC Dubai’s product portfolio covers a broad area of

financial business, including private, investment and e-banking, as well as deposit acceptance and loans and investments. It supports regional socio-economic development by investing in key business areas and infrastructure projects. ICBC Dubai (DIFC) Branch prioritises projects that advance the transition towards clean energy and green economies. It has facilitated the world’s largest solar project, Mohamed bin Rashid Solar Park, which combines power generation and photovoltaic technology. The project, which has set record low energy costs for consumers,

will feature a 900-megawatt capacity upon completion. ICBC Dubai (DIFC) Branch has embraced technology to stay connected and go contactless. It organises digital events to introduce services to prospective clients, forums to help GCC investors seize opportunities in Chinese financial markets, and cloud-based models of interaction for internal team-building. The CFI.co judging panel recognises the pioneering achievements of ICBC Dubai (DIFC) Branch once more, with the 2020 award for Most Innovative International Bank (EMEA).

> TROJAN HOLDING: BEST MASS HOUSING CONSTRUCTION SOLUTIONS GCC 2020

Trojan Holding is a regional construction powerhouse that delivers quality products and services by embedding cost-control functions and flexibility into the business model. It aims to become one of the world’s leading construction companies, and ranks as one of the fastestgrowing in the UAE and the Gulf Cooperation Council (GCC) region. Trojan Holding, launched in 2012, is Abu Dhabi-based and has a workforce of 22,500 multinational professionals, interest in eight subsidiaries, and assets valued at over $204.2m. The holding company differentiates 118

itself from the competition as a veritable onestop operation with little need for outsourcing. Client satisfaction is the foundational pillar and unifying focus of daily operations. The firm focuses on advancing company, community and nation through efficient and agile business practices. Others would do well to emulate the crisis management skills that Trojan Holdings has exhibited during the pandemic. The company counts its staff as its main asset, and is proud to have maintained a full complement of workers and a pipeline of projects in motion. It recruits CFI.co | Capital Finance International

top talent to tackle developmental challenges and make concrete impacts in communities. Some of its noteworthy accomplishments include the Al Samha project (250 villas spread over 520,000 square metres of land), Water’s Edge (contract value of $353.9m), Emirati Housing Development (3,000 villas in Jebel Hafeet, Al Ain) and The Palm Tower (contract value of $222.9m). The CFI.co judging panel declares Trojan Holding winner of the Best Mass Housing Construction Solutions (GCC) award for 2020.

Winter 2020-2021 Issue

> UNION IRON & STEEL: BEST SUSTAINABLE STEEL MANUFACTURER GCC 2020 Steel gives form and stability to roads, bridges and skyrises. Union Iron & Steel (UIS) was established in 2006 to fulfil the growing need for steel in the Gulf Cooperation Council (GCC) region. The UIS plant boasts a strategic location in the Abu Dhabi Industrial Zone with cutting-edge facilities capable of producing 350,000 tonnes per year of locally made, high-quality steel reinforcement bar, or rebar. UIS products are certified by the UK’s Certification Authority for Reinforcing Steels as well as Dubai Central Laboratory. UIS differentiates itself from the competition with agile adaptation to client needs, proactive internal management and a focus on sustainable governance. UIS optimises resources across its operations, from raw material usage to manufacturing processes. The company aims for maximum efficiency and full capacity, with machines

running around the clock and an impressive economy of scale. It recruits motivated candidates and invests in comprehensive personnel training. Employee safety is of paramount importance at all times, and workplace wellbeing has been paid extra attention throughout the pandemic. UIS promotes knowledge sharing among its people as well as its peers, encouraging an open exchange of experience and expertise for the betterment of the region. The company’s collaborative mindset and market adaptability have seen it through a tough year and left it well-positioned to respond to an evolving customer portfolio. Its next move will be to search for capital investments to fuel diversification plans. The CFI.co judging panel presents Union Iron & Steel with the 2020 award for Best Sustainable Steel Manufacturer (GCC).

> CAMARCO: BEST CORPORATE COMMUNICATION ADVISORY UK 2020 Camarco is a British employee-owned advisory whose Partners have on average more than 20 years’ experience focusing on the financial services, energy, industrial, consumer, real estate and media sectors. The firm has attracted top talent from day one, including senior management from FTI Consulting and Citigate. Sector-focused teams work together for Camarco clients, which include a number of FTSE 100 and some of the world’s most prestigious companies. An engagement committee conducts due diligence on prospective partners. Camarco is never pressured to meet new client quotas: it follows an organic growth strategy and is quick to decline an offer if the ethics don’t align. Clients that “fit” are won over with transparent communication, professional service and a personal touch. They benefit from the firm’s long standing affiliation

with US-based Stanton Public Relations and Marketing. The two companies share a similar work culture and mindset, and their long-standing relationship is fortified by a sixmonth employee-swap programme. Camarco’s business is mainly based on retained contracts, which are supplemented by project fees, both of which have grown impressively, with total annual turnover of some £7m for the past three years. Camarco earns the loyalty of its clients and has assembled a crack team of specialists to look after them. Despite the challenges of the pandemic, Camarco has retained its complete client roster and kept all staff on payroll. The firm invests in its team members to ensure their security, opportunity to contribute, and room to grow. The CFI.co judging panel declares Camarco winner of the 2020 award for Best Corporate Communication Advisory (UK).

> IDFC FIRST BANK: MOST TRANSFORMED NEW BANK INDIA 2020 A new player has emerged in the Indian banking sector. IDFC FIRST Bank was born from the merger of two financial institutions with strong legacies. The 2018 merger paired IDFC Bank — which brought a banking license and infrastructure financing experience to the deal — with Capital First, which had proven to be a retail growth machine. The combined network comprises 523 branches and 509 ATMs across the country. The newly formed entity took immediate steps to address structural issues and reported tremendous progress with the diversification of loans and deposits as well as increases in net interest margin and core pre-provision operating profit. IDFC FIRST Bank made proactive provisions for legacy infrastructure and troubled accounts. It turned up the focus

on lending to MSMEs, entrepreneurs, rural customers and consumers. All these efforts have contributed to customer confidence and strong inflows: retail deposits have grown by 157 percent (FY 20) and show no signs of stopping — even in the face of the pandemic. IDFC FIRST Bank registered an uptick during the “Covid quarter” (Q4FY20), and the same trend appears to be continuing into the 20-21 fiscal year. IDFC FIRST Bank has implemented strong corporate governance policies aligned with international best practice and focused on transparent client engagement. The CFI.co judging panel recognises the highgrowth performance and prospects of IDFC FIRST Bank with the 2020 award for Most Transformed New Bank (India). CFI.co | Capital Finance International

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> INVESTMENT HOUSE:

BEST INVESTMENT BANKING SOLUTIONS (MIDDLE EAST) AND BEST ASSET MANAGEMENT (QATAR) 2020

Investment House celebrates its 20th anniversary this year, and is proud to be recognised as one of the fastest-growing investment banks in the Middle East. Investment House was acquired by a consortium of Qatari businessmen in late 2018, and that injection of capital and new blood has helped the firm to outpace the competition. It provides clients with a suite of effective services and a mindset that seeks to maximise value and minimise risk. Investment House is an innovative partner

with an offering split between investment banking (stocks and capital markets, M&A, IPOs, real estate, private equity and financial advisory) and asset management (creation and maintenance of investment funds and portfolios, financial planning and global market trading). Investment House’s solutions and services were engineered to guide clients towards long-term prosperity. It has assembled a talented global team and distinguishes itself with a multitude of products launched

over the past year — and a healthy pipeline of new ones for 2021. It has developed a range of logistics solutions, mainly focusing on transport, and launched 10 new funds over the past 12 months. The CFI.co judging panel is heartened to see a company responding to pandemic challenges with intelligence, agility and flair. The judges declare Investment House as winner of the 2020 dual awards for Best Investment Banking Solutions (Middle East) and Best Asset Management (Qatar).

> BVI FINANCE: BEST OFFSHORE FINANCIAL SERVICES PROVIDER GLOBAL 2020

With over 350,000 active companies on its register, BVI Finance represents the financial services industry of the British Virgin Islands (BVI). The platform promotes the Caribbean archipelago globally through trade events and conferences, amongst others. Enjoying a solid and long-standing reputation for regulatory innovation and excellence, the BVI boasts a business-friendly climate with a full ensemble of expert services offered by highly experienced professional practitioners. As such, the BVI offers the convenience of a ‘one-stop-shop’ unmatched by other international financial centres (IFCs). BVI Finance emphasises the key

role – not always recognised – of IFCs as purveyors of expertise on the near frictionfree cross-border flow of investments. As the world struggles to emerge from the Corona Pandemic, well-established and reputable IFCs such as the British Virgin Island can provide a resilient and trusted foundation on which to build and rebuild businesses that seek to grow and diversify. BVI Finance has been particularly active in Asia. About 40% of the companies registered in the islands are located in China, including Hong Kong and Macau. Over threequarters of the companies included in Asia’s bellwether Hang Seng Index have direct links to the BVI.

BVI Finance has done a stellar job in drawing global attention to the Caribbean jurisdiction and its competitive advantages such as its legal system based on English common law, a regulatory framework that meets the highest international standards, and tax neutrality. The CFI.co judging panel agrees that, as the post-pandemic recovery gathers steam, companies will need to unlock growth opportunities whilst mitigating risk. A trustworthy IFC such as the one found in the BVI can help – and work wonders. The judges declare BVI Finance winner of the 2020 Best Offshore Financial Services Provider Global Award.

> ATLAS MARA BANK ZAMBIA: BEST COMMERCIAL BANK ZAMBIA 2020

Atlas Mara is a financial services group listed on the London Stock Exchange with presence in seven sub-Saharan countries. Atlas Mara Zambia joined the group as an amalgamation of Finance Bank Zambia and African Banking Corporation Zambia in 2016. Atlas Mara Zambia is a fullservice commercial bank with a network of 65 branches, 23 agencies and 176 ATMs across the country. It ranks among the top Zambian banks for revenue and branch footprint, pairing global experience and local insights to drive innovation 120

and financial inclusion. Atlas Mara Zambia is a reliable financial partner for individuals and families, corporates and SMEs, governments and non-profit agencies. Digital banking services are extended through the wallet app, with interest-free salary advances, emergency loans, and a suite of payments, transfers and top-ups. The digital group savings scheme — a form of “village banking”, where deposits and withdrawals come from a communal pot — has proven particularly popular with women. CFI.co | Capital Finance International

Atlas Mara Zambia supports government initiatives and helps with the procurement and distribution of subsidies for low-income farmers. It has delivered 100,000 solar power kits to off-grid areas, bringing major community benefits to rural schools and hospitals. It also partners with non-profits to increase financial literacy and support at-risk youth. The CFI.co judging panel declares Atlas Mara Bank Zambia winner of the 2020 award for Best Commercial Bank (Zambia).

Winter 2020-2021 Issue

> IMAGE NATION: OUTSTANDING CONTRIBUTION TO REGIONAL MEDIA UAE 2020 Watch out, Hollywood: the Abu Dhabi media and entertinament industry is on the rise. Image Nation Abu Dhabi, the award winning film and television studio continues to lead Abu Dhabi's move from a resource-based to a knowledgebased economy, with media and entertainment being a major focus of the future ecosystem. Image Nation was launched in 2008, and its productions have been circulating the globe ever since. It has premiered content at over 450 film festivals worldwide and claimed some of the industry’s highest accolades, including two Academy Awards, a BAFTA and an Emmy. The company creates barrier-breaking, cross-cultural content and was the first company in the UAE to feature productions on global streaming service Netflix. Image Nation has helped to solidify Abu Dhabi’s status as a regional creative hub for content and is preparing the next generation of storytellers to carry the torch. The company established the AFS (Arab Film Studio) to guide and mentor young enthusiasts, offering workshops, educational programmes and internships to gain hands-on experience and build a professional portfolio of work samples. Image Nation benefits from a diverse team of dedicated personnel with good gender balance. It creates world-class films,

TV series and documentaries, as well as multi-media campaigns for commercial and government entities. In collaboration with efforts from across Abu Dhabi, Image Nation was a major component in keeping over $100m of productions continuing in the UAE throughout the pandemic — making the UAE one of a handful of countries in the world able to keep productions going throughout lockdown. This included an international feature film and the region’s first Arab soap opera. It released two local feature films in 2020. Bloodline, the region’s first Arabic-language vampire thriller, is currently streaming on MBC’s leading platform Shahid, while the international film festival favourite Scales, which won the Club Verona award for most innovative film at Venice international Film festival, was released in Saudi Arabian cinemas in November 2020. Image Nation has announced new productions to include the first Emirati feature length animation, Catsaway, as well as an animated children’s TV series based around the regional fruit dates. The CFI.co judging panel recognises Image Nation as a repeat winner in the awards programme, this time taking the 2020 laurels for Outstanding Contribution to Regional Media (UAE).

> HAMRAA INSURANCE: BEST INSURANCE COMPANY IRAQ 2020 Hamraa Insurance extends a reassuring hand during trying times with reliable, modern and accessible insurance solutions fine-tuned for different segments of Iraqi society. The company benefits from a strong governance structure and a seasoned team of professionals at the helm. It has become the country’s leading health insurer through a process of continuous improvement over the past two decades. Hamraa Insurance is a company with strong values that is listed on the Iraq Stock Exchange and works in close collaboration with the world’s largest reinsurers. In addition to healthcare cover, the company offers policies for automobiles, cargo transport, life, travel, energy, property and accidents. Hamraa representatives assist clients — individual, NGO or corporate — to select a policy

that best fits their needs. The team is committed to making the claims procedure as quick and painless as possible. Hamraa Insurance is a diligent and well-positioned partner, capable of safeguarding client interests regardless of the circumstances — even in an environment as challenging and inconsistent as Iraq’s. Hamraa Insurance participates in the Frontier Alliance Party initiative to unite insurers in conflict zones and provide them with the heft required to negotiate better terms with re-insurers. The company stays ahead of the competition with a diverse range of products and services that provide peace-of-mind and keep pace with evolving customer needs. The CFI.co judging panel announces Hamraa Insurance winner of the 2020 Best Insurance Company (Iraq) award.

> INSURANCE CORPORATION OF AFGHANISTAN: BEST INSURANCE COMPANY AFGHANISTAN 2020 The Insurance Corporation of Afghanistan (ICA) has for more than a decade been the largest in the country’s sector. ICA continues to operate at peak performance despite the challenges of the pandemic and political unrest. Net revenues have doubled over the past two years. Employee Benefits (Health, Group Personal Accidents & Life) has become ICA’s champion product, recently redefined and realigned to suit the needs of international NGOs. The overhaul has allowed ICA to gain a foothold in that market, serving a sizable growing population. The company is continuously investing in top-tier IT infrastructure and is currently upgrading its health insurance software, streamlining it’s TPA arm Interhealth Asia (IHA). Employers can select from a range of coverage plans that will be tailor-made to suit coverage and budgetary requirements. To support the growth, ICA has expanded the

health insurance team and placed patient coordinators at hospitals to offer unmatched quality standards. But healthcare coverage represents only a fraction of ICA’s product portfolio. It also provides unrivalled insurance and risk management solutions to suit various commercial lines through supporting leading corporation that drives the economy offering numerous solutions such as Property, Political Violence, Engineering, Liabilities and Motor fleet insurance. ICA also initiated The Frontier Alliance to leverage its relationship to create mutual value for alliance members operating in Frontier zones. ICA aims to extend its reach with a new subsidiary in Uzbekistan and fuels growth with continuous improvement of products and services. The CFI.co judging panel presents ICA, a repeat programme winner, with the 2020 award for Best Insurance Company (Afghanistan). CFI.co | Capital Finance International

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> SWAN: BEST INSURANCE & SAVINGS PLANS MAURITIUS 2020

As a leading non-banking financial solutions provider in Mauritius, SWAN crafts products and services that meet the evolving needs of its clients. Founded in 1855, the group underwent a rebranding exercise in 2015 and now operates via its listed companies: Swan General Ltd and Swan Life Ltd. The CFI.co judging panel is pleased to present SWAN with the 2020 award for Best Insurance & Savings Plans (Mauritius). Indeed, through a comprehensive package of insurance policies and investment plans, it protects clients and their possessions,

provides for their future by ensuring they progress towards prosperity. SWAN individual plans cover life, health, home, car, travel, among others, while corporate covers encompass a number of risks that companies usually face. SWAN encourages clients to actualise their dreams by setting up savings provisions today to secure tomorrow’s educational objectives and retirement goals. The group aims to accompany clients throughout life’s important milestones. SWAN individual and business loans have been designed to help clients achieve personal

ambitions, like buying a home or a car. For entrepreneurs, they may help in launching a start-up or taking an existing company to the next level. Thanks to a broad range of wealth management services, SWAN provides its clients with tailored advice, thus ensuring peace of mind and prosperity. The group empowers its workforce with extensive onboarding training and continuous professional development to increase engagement and competence. The team also spares no effort to stay abreast of market trends and client expectations.

Berkeley Energia Plc is a mining company with a world-class uranium project that will help deliver low carbon energy. The company says the Salamanca Project near Madrid will guarantee Spain and the European Union an internal supply of four million pounds of uranium a year. That equates to 10 percent of Europe’s total consumption, or more than 30 percent of the energy generated in Spain. The firm started developing its projects in Spain in 2012 with sustainability as a main pillar. The company has achieved ISO 14,001 and a certificate from a Spanish government body for sustainable

mining systems — UNE 22470-80 — making it the first in the country. The focus is on the environment and CSR, and all activities are carried out according to best practice to maintain sustainability. Berkeley Energia is developing a project to re-use sewage water and waste from local villages for the industrial process and to create topsoil for rehabilitation purposes. It also works hand-in-hand with local communities to create jobs. A training centre has been set up to teach new skills. The company works with schools, pharmacies and retirement homes and observes strict

guidelines and policies on health & safety, environment & sustainability, ethics, use of water, social & community, etc. It has acquired 600 hectares of local land — but allows local farmers to continue using it. The company strives to comply with the UN's Sustainable Development Goals — and is in-line with 14 of the 17. The CFI judges believe that nuclear industry run to the highest standards has a part to play in delivering zero carbon targets declare Berkeley Energia Plc winner of the 2020 award for Outstanding Contribution to Sustainable Mining (Europe).

Walmart has become the largest retailer in the world by giving customers what they are looking for at low, low prices. It is also the largest private employer, and as of mid-July 2020 had taken on 400,000 extra staff in response to heightened sales demand during lockdown and as a bridge between jobs to help people working in heavily hit industries. In partnership with Apple’s Siri, the firm makes online shopping easier with Walmart Voice Order. The company’s e-commerce business has been developing well and in 2019, when

Walmart acquired a majority stake in India’s Flipkart, the division saw growth of 40 percent. Selling from brick and mortar facilities can also improve online customer experience. The notion of physical stores acting in online fulfilment is new to retail and worthy of note. Another recent innovation is Walmart2World, a money transfer service that drives down prices further. To empower staff, more than 200 Walmart academies offer a path to career advancement and have attracted tens of thousands of associates. Walmart harnesses

cutting edge technology to free manager’s time to better focus on finding solutions and helping employees meet their goals. Customer preferences and demands are changing and Walmart shop services are adapting in the best way possible. Operating in a highly competitive space, the company was established by Sam Walmart in 1962 and has its corporate headquarters in Arkansas. The CFI.co judging panel recognises Walmart as the 2020 winner of the award Most Innovative Retailer United States.

> BERKELEY ENERGIA PLC: OUTSTANDING CONTRIBUTION TO SUSTAINABLE MINING EUROPE 2020

> WALMART: MOST INNOVATIVE RETAILER UNITED STATES 2020

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> Africa

Pan-African Free Trade Agreement Set to Deliver on Promise Africa does not suffer a lack of economic communities and free trade agreements. From the 5-member Arab Maghreb Union along the continent’s northern edge to the 16-strong Southern African Development Community covering its southern latitudes, the map of Africa is dotted with – if not blotted by – multilateral arrangements purportedly seeking to foster trade and cooperation.

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ost, though by no means all, of these regional agreements have failed to transcend the good intentions they sprang from. More often than not, implementation has been patchy at best as evidenced by the long queues of trucks, often stretching over many kilometres, at both sides of border crossings all over the continent. TRUCKERS’ GRIEF After twelve years as a long-haul driver, South African trucker Costa Mathalisa no longer plies lucrative international routes: “Cross-border travel is a problem from start to finish,” he surmises. Mathalisa lived his worst experiences in Zambia and Zimbabwe where he felt ‘arrested’ even before crossing the border: “When you get to Zimbabwe, the first thing they want is money. They check your truck for anything they can fine you for. If there is no problem, they’ll create one. They’ll even fine you for having a dirty truck and complaining will only invite additional trouble.” The Corona Pandemic has only added to the truckers’ woes. Queues of up to ten kilometres have formed at Botswana’s Tlokweng checkpoint on the border with South Africa. Here, it takes up to five days for truckers to be cleared and admitted into the country. Zambian driver Amon Phiri tells of hundreds of truckers sharing a single lavatory and having no access to clean water and food whilst stranded. Rashi, a Mombasa-based trucker, had to wait two weeks before reaching the processing centre at the Ugandan border by which time his covid-19 certificate had expired: “The experience was not pleasant as I had to be tested again, spending more money and time at the border.” The plight of African truck drivers may improve as the African Continental Free Trade Area (AfCFTA) enters into force, albeit tentatively, on January 1, 2021. AfCFTA Secretary-General Wamkele Mene expressed hope that the swift implementation of the free trade agreement may help ameliorate the economic consequences of the Corona Pandemic. Mene echoed the World Trade Organisation’s maxim that free trade spurs economic growth and said that AfCFTA is but the first step of a much longer road that will eventually lead to the establishment of a continental customs union. RED TAPE However, the first step is to increase the share of intra-regional trade which currently amounts to just 15 percent of overall exports – far below that of Europe (67%), Asia (58%), and North America (31%). High tariffs and cumbersome red tape have been identified as the main culprits and obstacles. Though intra-African trade has been increasing steadily, it remains centred on agricultural commodities. Most micro-, smalland medium-sized enterprises are unable to expand outside their home market since the 126

"[China] maintains no less than 40 bilateral trade agreements with African countries which propelled trade volumes from barely $10 billion in 2000 to $220 billion at its 2014 peak." barriers to cross-border trade are practically insurmountable to all but the largest businesses. MSMEs, responsible for around 80 percent of all jobs and contributing 50 percent of GDP, stand to gain most from the proper implementation of AfCFTA. According to a World Bank estimate, free trade has the potential to lift 30 million people from extreme poverty and 68 million from moderate poverty. The bank emphasises that free trade is not a stand-alone solution but only delivers on its promise when accompanied by strong governance structures and improved access to financing, amongst others. The countries along Africa’s eastern seaboard have already made progress in streamlining regional trade by installing 25 one-stop border checkpoints, both unifying and simplifying customs procedures. The case of the 21-member state Common Market for Eastern and Southern Africa (COMESA) is illustrative of the difficulties in removing obstacles to trade. Though formed in 1998 as the successor to an earlier preferential trade area and dressed up with all the accoutrements of fully featured trading bloc, COMESA has failed to noticeably boost regional trade. Member states such as Ethiopia and the DRC declined to opt into the market’s free trade provisions altogether, rendering their membership essentially pointless, whilst others implemented the rules sketchily. MIRED IN DIVERSITY African leaders are full of praise for AfCFTA whilst academics churn out reams of paper on the agreement’s pitfalls and possibilities, urging the adoption of countless add-ons to broaden its reach and ensure an equitable implementation – all the while weaving a complex regulatory web capable of strangling the initiative before its gets off the ground. However, the perfectionists do have an important point often missed by outsiders: Africa’s rich diversity and regional disparities are at least equal to – and possibly greater than – those found in the European Union, widely considered the gold standard of economic integration. Pan Africanism is at least as old as the idea of a unified Europe. It was the continent’s answer to the threat of post-colonial balkanisation, CFI.co | Capital Finance International

championed by leaders such as Ghana’s Kwame Nkrumah and Tanzania’s Julius Nyerere who argued that Africans shared both a common history and a shared destiny. In the 2000s, the idea gained renewed currency after South African President Thabo Mbeki warned his peers that they should shun the ‘atomistic nation state’ and replace ‘zero-sum sovereignty’ with interdependence. Coming hot on the heels of Africa’s admirable success in containing the spread of the coronavirus through close cooperation, the successful implementation of AfCFTA would firmly establish the continent’s credentials as ‘home to the future’. The International Monetary Fund (IMF) described the agreement, now signed by 54 of Africa’s 55 countries (outlier Eritrea has since asked to join), as a ‘potential economic game changer’. Both local and regional investors stand to benefit from the convergence of legal and regulatory frameworks, bringing in muchneeded cash for capital expenditures. CHINA’S CHOICE In the background, China has been playing a pivotal role in brokering the continent-wide deal. The country maintains no less than 40 bilateral trade agreements with African countries which propelled trade volumes from barely $10 billion in 2000 to $220 billion at its 2014 peak. According to the John Hopkins University’s China-Africa Research Initiative, the trade flows settled around the $150-billion mark in later years. However, the Brookings Institution’s Africa Growth Initiative sounded a note of caution, reminding that ‘symbolism’ now needs to be matched by tangible results. In their most recent report on Africa, the initiative’s researchers conclude that difficulties in following through on commitments may stem from the ‘vast economic disparity’ that exists amongst African countries. The IMF points to an infrastructure unable to cope with expanded trade volumes lest the continent’s mostly dilapidated road and rail links receive major upgrades. The fund also fears that lingering civil unrest, ingrained corruption, and excessive bureaucracy may hamper the sustained growth of intra-regional trade. However, the prize to be had is tempting: An integrated market of 1.3 billion consumers and with a combined GDP expected to hit the $6 trillion-mark before the decade is out. Moreover, by 2040 Africa is expected to boast a larger (and younger) working population than China and India – combined. The main criteria needed for Africa to prosper seem to have aligned: A competitive labour force eager and able to adapt to new technology, a degree of political stability unthinkable but a decade ago, and the settlement – precarious or otherwise – of localised conflict. As China ages and the Southeast Asian Tigers mature, Africa could easily slip into the frontline of global manufacturing. i

Best Insurance Company in Afghanistan ( Two years in a row )

Insurance Corporation of Afghanistan Add: Hakim Naser Khusraw Balkhi Building, Sarsabzi Square, Taimani, Kabul Aghanistan PH: +93 729 62 66 66 E-mail: info@icaaf.com Web: www.icaaf.com

Winter 2020-2021 Issue

> BIAT:

Taking Decisive Steps to Counter Uncertainty Has Lent

Strength to Tunisian Society and Economy

The International Arab Bank of Tunisia (Banque Internationale Arabe de Tunisie, or BIAT) was founded in 1976 and has emerged as a key player in the country.

t has subsidiaries in the fields of insurance, asset management, private equity, stock market intermediation and advisory services. The bank has 205 branches across Tunisia and more than 2,000 employees, serving individual and corporate customers that include SMEs, large corporations and institutions. BIAT undertook a series of support measures during the Covid-19 health crisis; chief among them was the Moltazimoun initiative. This offered solutions for clients facing difficulties caused by the pandemic, as well as support for the wider community, to cope with the economic and social repercussions. Under the initiative, BIAT allocated $182.2m in additional credit to meet corporate clients’ financing needs for dayto-day operations. The decision-making process was adjusted to become more decentralised, and to simplify and streamline the provision of funds. BIAT has undertaken studies of specific client requirements and adapted its support accordingly. The bank encourages clients to remotely contact customer advisers and business managers, who are available to provide advice and support. BIAT has closely followed the evolution of the Covid epidemic and complied with guidelines and instructions from government and health authorities. It has activated its resilience plan with a system that ensures the continuity and stability of activities and transactions as well as the security of its customers and employees. All BIAT branches were kept open, and support services were continually operational. BIAT has put preventative measures in place to ensure the health security of its customers and employees, and advised clients on minimising movement and employing remote tools.

"BIAT has undertaken studies of specific client requirements and adapted its support accordingly." MEASURES PUT IN PLACE TO SUPPORT EMPLOYEES: • Regular disinfection of ATMs. • A sterilisation operation was carried out at the bank's six-storey, 1,000-employee head office. • Small teams have been implemented as part of BIAT's business continuity plan, cutting the number of employees physically present at the head office by 70 percent. This was made possible by remote working tools and did not affect the normal functioning of the bank. • Buses were provided to ensure employee transport in Greater Tunis. • Hydro-alcoholic distributors have been installed for hygiene in all common areas of the agencies and the head office. • Gloves and protective masks have been made available to all staff in the sales network. • Limits to internal and external meetings, and events and gatherings have been suspended. • There are 14-day self-isolation measures for employees who have travelled abroad. • Awareness-raising campaign via video, posters, and meetings with specialist doctors. • Reorganisation of sales activity in branches, and the provision of remote tools. MEASURES PUT IN PLACE TO SECURE AND SUPPORT CLIENTS • BIAT has limited the number of customers present in branches, and enforced minimum distancing between them. Specific reception areas were established to limit groupings. • More than 260 ATMs are available throughout Tunisia, as well as three self-service spaces in Tunis, Sfax and Monastir accessible at extended hours.

• The Biatnet app allows customers remote access to their accounts, including card transactions, transfers and statements. • A customer relations centre, open six days a week, is there to provide assistance. • BIAT offers free ATM withdrawals to customers of all local banks and post offices to participate in the national effort to fight Covid. ALLOCATION OF EARNINGS FOR FISCAL YEAR 2019 BIAT has decided to allocate its 2019 profit to reserves. This decision was motivated by measures from the Central Bank of Tunisia to buffer the economy. MEASURES PUT IN PLACE TO SUPPORT SOCIETY/ COMMUNITY BIAT participated in the national effort to fight coronavirus, and made a $6.6m donation for the benefit of the support fund to the Ministry of Health, and organised support actions through its foundation. Beyond this financial contribution to the 1818 fund, BIAT endowed its foundation with additional scope to engage in targeted support actions. These revolve mainly around: • Acquisition of medical equipment to strengthen and improve the reception capacity of hospitals (such as assisted breathing equipment and PPE. • The purchase and mobilisation of non-medical equipment necessary for the provision of health services such as logistics. • Participation in awareness-raising and prevention actions for citizens through the bank's commercial spaces to ensure communication on health measures and the promotion of remote tools. A committee has been set up to support and monitor the implementation of all of these actions according to developing needs. i

"BIAT has put preventative measures in place to ensure the health security of its customers and employees, and advised clients on minimising movement and employing remote tools." CFI.co | Capital Finance International

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> PwC:

South Africa Has an Unprecedented Opportunity to Capitalise on the Rapidly Developing Global Hydrogen Economy By Jonathan Metcalfe South Market Lead for Hydrogen and Economist in PwC’s Strategy& division

Hydrogen can be a game changer for the South African economy. Opportunities exist for South Africa to partake in the global hydrogen economy but will depend largely on investments in renewable energy generation, as well as the development of a clear hydrogen strategy.

ll over the world, interest in hydrogen as a vector for clean energy is growing, as industries and governments investigate and implement national decarbonisation strategies. With the rapid growth in renewable electricity and falling costs of wind and solar power, the opportunity to produce zero carbon hydrogen has caught the attention of global energy players. With the world increasingly turning towards countries that have optimal renewable energy resources to provide the clean energy of the future, South Africa is in an extraordinary position to revolutionise its own economy and supply green hydrogen to the world.

PwC South Africa recently issued its inaugural ‘Unlocking South Africa’s hydrogen potential’ report released today.

"The outlook for the global energy sector will see wind, solar and hydro accounting for an everincreasing proportion of our energy needs." as its primary source of energy, hydrogen offers an unparalleled solution for the transport, storage and efficient utilisation of clean energy. In the past few decades, the world has already seen the massive growth in both renewable energy technology and implementation. As the pace on innovation has accelerated and the benefits from economies of scale were realised, the landed cost of renewable energy has tumbled. In many cases, renewables are on par or cheaper as compared to their carbon intensive counterparts.

The outlook for the global energy sector will see wind, solar and hydro accounting for an everincreasing proportion of our energy needs. It is estimated that by 2050, 85% of global electricity production will be sourced from renewables. As the world moves towards renewables as its primary energy source, production will become increasingly geographically constrained, necessitating increased cross-border transportation and storage of green energy. With the impracticality of long-distance electricity transmission and the prohibitive cost of large scale battery storage, it just so happens that the best option for the transport, storage and efficient utilisation of clean energy lies with the same element that makes up 75% of the mass of the universe; hydrogen. Hydrogen is exceptionally energy dense per

unit of weight and is no more difficult to store Unlocking South Africa’s Hydrogen Potential – Key takeaways and transport than liquified natural gas (LNG).

HYDROGEN IS CRITICAL TO ACHIEVING GLOBAL DECARBONISATION As the world becomes more reliant on renewables

Hydrogen is critical to achieving global decarbonisation

“As the world becomes more reliant on renewables as its primary source of energy, Hydrogen offers an unparalleled solution for the transport, storage and efficient utilisation of clean energy”

The time is now

“Hydrogen is receiving an unprecedented level of international traction as the cost of renewables decline and carbon emissions are increasingly penalised”

SA has the competitive Hydrogen means Investing in Hydrogen Regulation is key for advantage to produce more than just is necessary to diversify SA to successfully capitalise and export green energy Fuel Cells the SA economy

“South Africa has world class renewable potential that can be leveraged to supply clean energy to the world and transform the domestic economy”

“Hydrogen has the ability to revolutionise the entire energy space. For South Africa, focussing on Fuel Cells alone is missing the bigger opportunity”

Key takeaways: Unlocking South Africa’s Hydrogen Potential. Strategy&

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Through its direct combustion, its use in fuel-

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“As part of SA’s economic recovery plan, the country needs to develop new competitive industries in the global markets. Hydrogen can fulfil that role and in a complementary manner to other initiatives and sectors”

“Coherent government policy will be necessary to support the pace of hydrogen development and correctly incentivise the move towards fully Green hydrogen”

Hydrogen is critical to achieving global decarbonisation

SA has the competitive advantage to produce and export green energy

The time is now

Hydrogen means more than just Fuel Cells

Investing in Hydrogen is necessary Regulation is key for SA to to diversify the SA economy Wintersuccessfully 2020-2021capitalise Issue

2020

100% 80% Percentage 60% of the market

In the coming decades, Hydrogen will play an ever increasing role in the global energy mix as an efficient carrier of energy

Solids Liquids Gases

40% 20% 1850

1900

1950

2000

2050

2100

The Global Energy Transition: Hydrogen is critical to achieving global decarbonisation. Strategy&

cells and its use as an industrial feedstock, it can decarbonise a greater range of sectors than renewable electrical energy alone. Hydrogen can be produced in collaboration with renewable energy almost anywhere in the world. Importantly, in the context of global climate change, the use of hydrogen that is produced from renewable energy produces no carbon emissions. THE TIME IS NOW Hydrogen is receiving an unprecedented level of international traction as the cost of renewables decline and carbon emissions are increasingly penalised.

Source: ‘The Geography of Transport Systems’ 5th Edition (Jean-Paul Rodrigue) 2020

Blue hydrogen is produced from the same carbon intensive feedstocks as with grey but is twinned with some type of carbon capture technology, thus vastly increasing the green credentials of the final hydrogen gas. Blue hydrogen allows companies or countries who have previously invested into grey hydrogen production to elongate the lifespan of their assets and allow for the continued utilisation of already identified fossil fuel resources.

Global momentum is growing across the hydrogen industry, with few sectors likely to remain untouched by this upcoming energy revolution. At the beginning of 2020, the global hydrogen project pipeline, across grey, blue and green projects stood at $95 billion. The carbon abatement of the blue and green hydrogen projects in this pipeline will be large enough to offset the annual carbon emissions of Nigeria.

Where most investor attention is being focused is on green hydrogen. This production method utilises electricity generated through renewable energy (wind, solar or hydro) and splits pure water through an electrolysis process into hydrogen and oxygen molecules. As the cost of renewable energy and electrolysis technology has plummeted in recent years, green hydrogen is ever increasingly reaching parity with its more carbon intensive counterparts. In countries with high renewable energy potential such as Saudi Arabia, Australia and Chile, green hydrogen has already become the preferred investment choice.

Progress has been seen with the launching of national policies and government funding initiatives, including national hydrogen roadmaps, building upon the momentum of existing pilot programmes. Strategic memorandums of understanding (MoUs) between hydrogen countries that are ideally suited to the production of hydrogen and countries who have aggressive decarbonisation targets and want to use hydrogen are clear signs of the traction in the market.

As South Africa has world leading solar and wind resources, these early mover green hydrogen producing countries have important implications for the future of the South African economy. If the South African can properly leverage these resources and combine it with a fertile investor and regulatory environment, South Africa could transition to an exporter of green energy to the world alongside decarbonising large sectors of its own economy.

SOUTH AFRICA HAS THE COMPETITIVE ADVANTAGE TO PRODUCE AND EXPORT GREEN ENERGY Hydrogen is categorised into three broad types; grey, blue and green. Classified as such based on the quantity of carbon that is emitted in their production and the production process itself. Grey hydrogen is produced from natural gas (through steam methane-reforming) or from the gasification of Coal. Although grey hydrogen still accounts for most of the global hydrogen supply, its relative high carbon intensity has seen a decline of its popularity.

HYDROGEN MEANS MORE THAN JUST FUEL CELLS For the past decade or so, hydrogen development in South Africa has been largely driven through the initiatives of the mining sector. There have been projects from some of the country’s largest PGM miners such as Anglo American Platinum’s fuel cell electric vehicle (FCEV) mining truck at Mogalakwena mine or Impala Platinum’s FCEV forklift fleet at the Springs refinery. These pilot schemes have been heavily focused on the use of PGMs in the catalyst plates of fuel cells. Although these projects are a good start to bring hydrogen CFI.co | Capital Finance International

technology into the transportation space, the focus of their application is quite narrow. There exists a far larger opportunity to leverage the unique properties of hydrogen to revolutionise how we think about energy. When looking at what hydrogen can do, it is easiest to break it down into the four pillars of the hydrogen economy: Transportation - Across both the road and rail sectors, fuel cell technology can provide unparalleled performance for vehicles. These FCEVs can outperform their fossil fuels and battery counterparts through better power to weight efficiencies, faster refuelling times and significantly longer ranges. Across the aviation and shipping industries, hydrogens ability to produce carbon neutral fuels that can run through existing traditionally carbon intensive technologies such as diesel engine and jet turbines, makes it unmatched in its ability to decarbonise the transport sectors. Building heat and power - In countries that have existing natural gas networks, hydrogen offers a simple decarbonisation alternative. If green or blue hydrogen is blended into these gas grids, then the largest carbon emission in the household (heating and power) can be entirely offset. Pilot schemes that aim to transition existing natural gas grids over to running on 100% hydrogen are already underway in Northern Europe. In areas where access to power or reliability of power are problematic, Hydrogen solutions are already being used to provide an alternative to carbon intensive diesel generators. Fuel cells are already widely used in the Southern Africa telecommunication infrastructure for off-grid power. Industrial heat and feedstock - Perhaps the most compelling future area for hydrogen is in its use for both industrial heat and in chemical feedstocks. Either combusted on its own, or in combination with oxygen, hydrogen can produce extremely high temperatures. If green hydrogen is utilised for this purpose, then offers perhaps 131

the only plausible decarbonisation alternative for large scale industrial heat users. Hydrogen is already widely used at the feedstock for the production of fertiliser (ammonia) and in the production of liquid fuels. Currently the vast majority of the hydrogen used in these processes is sourced from natural gas or coal. If the hydrogen needed for these processes were to be sourced from renewable energy, via electrolysis, this would fully green these fuels and feedstocks. As it currently stands green hydrogen is the only plausible option to decarbonise industrial feedstock. Energy sector - One of the key issues facing the renewable energy sector is how best to efficiently store the energy created in order to achieve smooth supply and maximise asset utilisation. Currently, there is limited capacity to hold energy within grid systems and the massive cost involved with battery storage at scale makes it a poor option. Hydrogen can help solve the intermittent supply issues associated with renewable energy by utilising electrolysis to convert excess electricity into hydrogen during times of oversupply. This hydrogen can then be utilised to generate power through either fuel-cell or direct combustion in gas turbines when it is needed. INVESTING IN HYDROGEN IS NECESSARY TO DIVERSIFY THE SOUTH AFRICAN ECONOMY Traditionally, South Africa has been a net importer of energy, especially in the liquid fuels and gaseous sector - development of the hydrogen production sector will be pivotal in cementing South Africa’s position as a net exporter of clean energy and major earner of foreign currency to our economy, but also to secure clean domestic energy supply that is de-risked from supply chain disruptions and currency devaluation. One of the key issues for South Africa’s energy sector is that as a country we are reliant on energy imports, specifically in the liquid fuels and gaseous space. Development of the South African industrial economy has been hamstrung by the slow development of much needed infrastructure development such as the delay on LNG import terminals and required supporting infrastructure to enable industrial development. Naturally, this is an extremely volatile situation as the economy and households are subject to any supply chain disruptions, market changes, and the impact of currency devaluation. World energy production is becoming increasingly geographically constrained, necessitating the need for cross-border transportation of storage of energy. Being able to leverage our world-leading renewable power potential, South Africa will be well positioned to secure its own domestic supply of energy that will anchor economic growth, but more importantly become a net exporter of energy in the form Hydrogen enabled chemicals, fuels and products to high demand markets in Europe and Asia. The large renewables investment needed to generate sufficient quantities of 132

Author: Jonathan Metcalfe

Hydrogen for export will bring South Africa’s landed cost of energy down and a portion of this capacity can be used to support our domestic grid, relieving the load on state utility, potentially at a lower cost to consumers. Furthermore, development of a new hydrogen export industry will create numerous jobs along the value chain and enhance the specialised skills pool in the country. Regulation is key for South Africa to successfully capitalise Progress is being made in the South African hydrogen space, with the first government led hydrogen roadmap under development and the Green Hydrogen Atlas-Africa initiative highlighting South Africa’s potential to the global community. However, in order to fully realise the benefits of the hydrogen economy the following steps need to be taken: • Finalise the South Africa Hydrogen strategy and roadmap – where to play, how to start, how we support and incentivise (Currently under development) • Clear Ministerial direction around which government department will champion hydrogen (e.g. Energy or Trade and Industry) • Assesses the need for regulation in enabling a competitive market (regulatory hurdles need to minimised and processes streamlined) • Incentivise early investment and just transition CFI.co | Capital Finance International

from red, to blue, to green Hydrogen (e.g. sector specific Special Economic Zones, tax credits, policy certainty) • Fast tracking of renewable energy licensing used for hydrogen production • Review and strategy for local content and local skills development • Signing of collaboration agreements between hydrogen producers, off takers and technology players (similar to the Japan-Australia and Germany-Morocco MoUs signed in recent years) If South Africa commits to a certain, transparent, stable and accountable policy environment for hydrogen, the country can reap the significant rewards on offer. The country stands in an unprecedented position to benefit from the global energy transition and transform itself in one of the green energy majors of the world. i ABOUT THE AUTHOR Jonathan Metcalfe is South Market Lead for hydrogen and an economist in PwC’s Strategy& division. Jonathan’s has a core focus on the development of South Africa’s hydrogen economy. Jonathan has extensive experience in mining and resources, particularly in cost optimisation, market entry strategy and infrastructure development. Jonathan is an economist by training and has considerable knowledge in financial and risk modelling.

Winter 2020-2021 Issue

> International Explorer’s Passion, Ability and

Concern for Community Win Accolades from All Sides East Africa Metals president and CEO Andrew Lee Smith is a professional geologist with 30 years of experience exploring, developing, and operating African and North American base and precious metals mining projects.

e holds an Honours BSc in Earth Sciences from the University of Waterloo and is a member of the Association of Professional Engineers and Geoscientists of British Columbia. Smith received the Mining Entrepreneur of the Year Award in 1994 from the Quebec Prospectors Association for his role in the development of the Beaufor and Sleeping Giant mines. He was named Outstanding Alumnus of 2009 by the Science Faculty of the University of Waterloo for his contributions to international mineral exploration. Smith is a member of the Institute of Corporate Directors and achieved the ICD.D accreditation — the only professional designation for Canadian directors recognised nationally and internationally. This is a man with exploration and discovery at the heart of his career. During his first-year geology course, Smith was inspired by Dr Alan Morgan, and his professional passion was ignited. The Universtiy of Waterloo later came to recognise Smith as one of the most successful alumni. In 2009, he received the Faculty of Science Distinguished Alumni Award. After graduating from the Earth Sciences programme, Smith moved to Quebec to work for Aurizon Mines. Over the next decade, the geologist assisted in bringing two gold mines into operation. In 1994, Smith received the Mining Entrepreneur of the Year Award from the Quebec Prospectors Association. Later that year, Aurizon transferred Smith to Vancouver to take an executive role as vice- president of exploration. The experience gained in his role as vice-president of an Canadian public company prepared Smith for success in the world of entrepreneurship. In 2000, he formed True North Gems Inc, a publicly traded Canadian junior resource company focused on the exploration and development of North American gemstone projects. True North has discovered and explored coloured stone prospects, including Yukon emeralds, Baffin Island sapphires, and the Fiskenaesset Ruby deposit on the south-west coast of Greenland. The quality of stones in the properties controlled by True North are among the best in the world.

President and CEO: Andrew Lee Smith

One of Smith’s most significant accomplishments is the negotiation and signing of an agreement with Kaska Dene, First Nation of the Yukon. The True North agreement has been called a major milestone and a landmark agreement in First Nation relations in Canada, the first time in Canadian history that a corporation has recognised the unresolved rights of First Nations to resources from their traditional territories. In 2004, Smith formed Canaco Resources Inc, a Canadian junior resource company focused on gold exploration in Tanzania. In September 2009, Canaco was pleased to announce a major gold discovery in the region. Smith has made notable contributions to Canadian and international mining for his discovery. CFI.co | Capital Finance International

Smith believes in giving back to the community. In each of his exploration activities, he has involved graduate students, many of whom have gone on to complete degrees. Through the companies he has founded, he has struck unique agreements for profit-sharing with the indigenous people. He has built schools and brought clean water for communities around his company’s gold mines in Africa. Barry Warner, chair of the Department of Earth and Environmental Sciences, sums Smith thus: “He is a passionate and gifted geologist. He is a wise and entrepreneurial businessman. He is a caring and unassuming individual. We are extremely proud to count him among our own.” i 133

> East Africa Metals:

Prospecting for Precious Metal, Uncovering Wealth of Trust in Fostering Personal Relationships East Africa Metals was formed by a merger of Canaco Resources and Tigray Resource in 2013.

his was a re-alignment of the company’s position in Africa that flowed from the decision to expand the area of interest to include the Arabian Nubian Shield in the hope to follow-up the discovery of the one-million-ounce Magambazi discovery in Tanzania in 2009, with more, successful exploration in Ethiopia’s northern Tigray region. In 2004, a group of colleagues formed EAM’s the parent company, Canaco Resources. with a business plan to make “quick and cheap” discoveries of gold and base metals. To fulfill this mandate, EAM management identified advanced, drill-ready exploration projects that created an opportunity to move a project through the valuecreative discovery phase. Success would add significant value to a project — and to EAM’s assets — as resources were defined through a capital- intensive programme of diamond drilling.

“As we look back to the achievements of the past seven years in Ethiopia, we are confident of continued success going forward.” Project Resources (Au + Aueqv Metal ounces) Project Adyabo Project Harvest Project Handeni Project

Category

Au + Aueqv ounces

Indicated

446,000

Inferred

551,000

Indicated

469,000

Inferred

426,000

Indicated

721,000

Inferred

292,000

The current Global Project Resources discovered by EAM (inclusive).

Initially, EAM management implemented the busines plan with a focus on Alaska and Mexico, but it was not until a visit to Tanzania in 2005 that management recognised the opportunity for discovery in under-explored regions of the country. EAM engaged in research with academic institutions and experts that led to the acquisition of the Magambazi property, in a previously unexplored part of Tanzania. It was far removed from the traditional gold- producing region of the Lake Victoria greenstone belt. Success came quickly when the first hole drilled on the property returned 53 metres grading 4.32 grams of gold per tonne in 2009. The discovery in Ethiopia in 2011 took a little longer. It was the fourth drill hole that returned 73.80 metres of 3.80 percent copper, 1.30 grams per tonne gold and 14 grams per tonne silver — including 36.45 metres of 6.01 percent copper, 1.69 grams per tonne gold, 19 grams per tonne silver and 1.31 percent zinc. EAM has been successful in accumulating gold and copper resources on three projects in Ethiopia and one in Tanzania. To date, it has achieved low discovery costs of $30/ounce ($11/ounce in Ethiopia, $60/ounce in Tanzania) compared to the global average of $147/ounce. 134

Tambuk, Harvest and Magambazi mining licenses, East Africa’s assets now include four, fully permitted gold and base metal mining projects in Africa.

In recent months, EAM has completed its business plan by getting all four projects approved for mining, and signing agreements with development companies on three of the four projects: Mato Bula, Da Tambuk and Magambazi. Mine development programmes are slated to begin in early 2021. EAM will retain 30 percent interest in the projects that will provide cash flow that will fund EAM’s future exploration elsewhere.

“Over the past seven years, East Africa has been able to advance our projects from discovery through to advanced development phase at a pace that is seldom seen in emerging resource sectors,” he said.

EAM chief executive Andrew Lee Smith said that with the formal approval of the Mato Bula, Da

“The performance of the exploration programmes designed and implemented by EAM are notable,

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established through the collaborative approach, fostered trust and understanding on both sides.” DENIS DILIP - GEOLOGIST Denis Dillip is a mineral exploration geologist with over 20 years of experience in the mining industry. He graduated from the University of Dar es Salaam with a BSc Honours degree in Geology. Dillip started his career with Anglo Gold Ashanti (Geita Gold Mine) as a mine geologist. He later joined a regional exploration team where he worked as project geologist, managing two operations, Mkurumu and Njoge, located in eastern Tanzania. Dillip joined East Africa Metals (TSX-V-EAM), again in the role of project geologist, and later served as chief geologist and president of Canaco Tanzania Limited, a Tanzanian subsidiary of East Africa Metals, for over 14 years. Dillip has been recognised for successful exploration programmes and the discovery of a one-million-ounce gold deposit located in under-explored and non-traditional exploration terrain of Tanzania's Proterozoic Belt. Under his management and leadership, East Africa Metals (through its subsidiary) was overall winner of the 2012 Presidential Award for best CSR practices and community relations among mineral, oil and gas exploration companies in Tanzania. In 2013, Dillip was the invited speaker on CSR matters for the Mining Business Investment Forum in Kenya. The interactive forum attracted over 200 delegates from the East African region, including South Sudan, Eritrea, Ethiopia, Djibouti, Tanzania, Rwanda, Sudan and Uganda. Denis Dillip (second from left)

not only due to short time-frame, but also by the low discovery cost of US$30/ounce. This metric speaks not only to the tremendous mineral endowment of Ethiopia, but also to skill and experience our technical staff have applied to the highly prospective, under-explored geological environments in Ethiopia and Tanzania. “As we look back to the achievements of the past decade in Ethiopia and Tanzania, we are confident of continued success going forward.”

Throughout EAM’s exploration in Africa, the company has been aware of its obligations to local communities. In developing a strategy for CSR, EAM management and the Board of Directors confirmed support for a mandate that would focus on the education of women and reforestation. “Most importantly, engagements by EAM management with these local communities were instrumental in identifying needs and establishing co-operative working relationships.” said Smith. “The personal relationships CFI.co | Capital Finance International

Dillip serves as a director on numerous boards in mining companies; he is also a member of the Tanzania Geological Society and of the Tanzania Chamber of Mines. In 2014, Denis Dillip was nominated by Choiseul 200 Africa Economic Leader of Tomorrow, which identifies and ranks African leaders under the age of 40. i For more information, please visit: www.eastafricametals.com/about/#management 135

> SWAN’s Way in Mauritius:

Historic Insurance Provider Delivers Modern Day Financial Services

rom humble beginnings, SWAN has matured to become a leading nonbanking financial services provider in Mauritius.

Over its 165-year history, the Indian Ocean-based insurance company has partnered with global entities and served generations of Mauritians. It 136

has consistently expanded its array of services designed to ensure full financial security for its clients.

century ago. Housing and multipurpose loans are also available to provide clients with the helping hand they need to actualise their dreams.

Given its drive to innovate, the company is continuously adjusting itself to meet new expectations. Comprehensive education plans and retirement plans were launched almost half a

By putting people at the centre of its activities, SWAN aims at providing its policyholders with the peace of mind they deserve. Its endeavour stems from the strong belief that it is only when

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Winter 2020-2021 Issue

people are protected and their future is provided for that they can make real progress towards a more prosperous life. This philosophy, referred to as the Pyramid of Prosperity, rallies all employees around the same objective.

"By putting people at the centre of its activities, SWAN aims at providing its policyholders with the peace of mind they deserve."

Over the years, Swan Wealth Managers Ltd — SWAN’s investment management arm — has become a benchmark in asset and fund management. It provides advisory services to the largest companies and institutions in Mauritius and the Indian Ocean region. With AUM of $1.5bn, Swan Wealth is one of the largest local asset and wealth managers. It designs investment products to meet the needs of seasoned and new investors, taking full advantage of its affiliation with global financial institutions such as BlackRock, Schroders, JP Morgan, and Euroclear. In addition to its investment management activities, Swan Wealth Managers is a licensed CIS (Collective Investment Schemes) Manager. It currently has three CIS under the Swan Global Funds umbrella: the Foreign Equity Fund, the CFI.co | Capital Finance International

Emerging Markets Equity Fund, and the Swan Income Fund, launched in 2008, 2018, and 2019 respectively. Swan Wealth Managers serves the retail and High Net Worth segments as well as large corporate and institutional investors. Thanks to its expertise and innovative products, it can craft tailor-made solutions and strategies taking into consideration different investment profiles. The panoply of mutual and exchange traded funds, equities, fixed income and other structured solutions provide possibilities for various investment objectives and risk profiles. The staff have the experience, expertise, insights and indepth understanding of financial markets to create bespoke solutions, taking into consideration clients' aspirations and market conditions. Through Swan Wealth Managers, clients have access to more than 400 international fund houses across the globe, covering themes, geographies and styles. 137

Chief Investment Officer: Nitish Benimadhu

With a solid track record, SWAN’s wealth and asset management arm has proven itself wellversed in the intricacies of risk management. This forms an essential component of the job. On the back of this ingrained flair for risk management, Swan Wealth Managers has devised multi-asset strategies incorporating equities, fixed income and alternative investments to track high returns — and effectively mitigate risk. SWAN’s primary objective is to ensure that its clients progress towards prosperity throughout their journey. Swan Securities Ltd, the investment dealing arm of SWAN, was established in 1989, the year the Stock Exchange of Mauritius was launched. Over the past three decades, the company has garnered deep experience and is now one of the most prominent investment dealers on the island. Quality research, regular roadshows and high-level service delivery to local and foreign institutional clients have earned it a solid reputation in the sector. With its skilled staff, Swan Securities Ltd provides its clients with professional advice and a wide range of trading and research services. Besides its impressive potential in terms of product development, SWAN has embarked 138

on an ambitious digital transformation with the aim of enhancing client experience. In 2018, the first version of mySWAN, a mobile app, was unveiled. It has consistently evolved and has now reached version 3.0, enabling policy subscription and claims management on a portfolio of five covers. Further improvements will be brought to the organisation’s digital ecosystem over coming months. NITISH BENIMADHU AT THE HELM: A CIO WHOSE INVESTMENT STRATEGY HOLDS THE ORGANISATION ON ITS COURSE Chief investment officer Nitish Benimadhu heads the non-insurance cluster of the SWAN group (capital markets) as well as the loans and property segments.

asset management, investments and insurance matters. He is a board director of several Swan subsidiaries and a member of the SWAN Investment Committee and Risk Committee. The CIO is involved in the International Steering Committee and oversees the company’s investment strategy in Mauritius and abroad — including the group’s ambitious initiatives it hopes to deploy on the African continent. Nitish Benimadhu holds directorship positions in some leading organisations and companies. He is the chair of the Central Depository & Settlement Company and vice-chair of the Stock Exchange of Mauritius.

He joined the group in 2005, has consistently proven his worth — and shown the value of the experience he has accumulated, by sharing it.

He also serves on the board of directors of Constance Hotels Services, Moka City Ltd and Oficea Company, among others. Nitish Benimadhu is regularly invited to give lectures on economics and finance at the University of Mauritius.

This seasoned professional has become recognised by his peers and clients for the top-notch advice and insights he provides on

He holds an honours degree in Economics and a Masters of Arts in Economics from Canada’s University of Ottawa. i

CFI.co | Capital Finance International

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· State-of-the-art dedicated Business Executive Terminal · Gateway to Costa Smeralda and Sardinia since 1963 * · 3 km from the Marina of Olbia and 25 km from Porto Cervo · Complete under the wing services for aircraft up to A340 and B747 · Tailored passenger services · Full plannig for crew stay(s) at preferential rates · Hangarage recovery · Maintenance service in cooperation with Meridiana Maintenance · Slot- and PPR-free landing and take-off ** · Great value-for-money services and easy payment methods · Award-winning professional and experienced multi-language staff However, you can forget about all of them. In fact, what you’ll really appreciate is how you will feel. And that’s all the difference between simply landing and truly arriving. So whatever your reason for visiting Sardinia, keep in mind you are always welcome to

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> Middle East

Biden in Bind Over Kushner Legacy The girl can’t help it. She’s a looker – no argument required – and that may have been why she landed in jail. Early December, Egyptian authorities arrested social media influencer Salma al-Shimi as she was posing for the camera wearing a white tunic and sporting a serpent crown with the Saqqara ruins as a backdrop, evoking – sensually though far from indecently – the era of pharaohs when Egypt stood at the very pinnacle of civilisation.

Jared Kushner

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hat was a very long time ago, not just in years but in mores as well. Egypt’s otherwise well-respected Ministry of Antiquities raised a complaint against Shimi for disrespecting the nation’s heritage. Both the model and her photographer were promptly arrested, adding to the number of people detained for crimes against ‘public morals’ in a crackdown aimed to show that the government will not tolerate liberal mores any more than it does Islamic extremism. Egypt is in a bind of sorts after US PresidentElect Joe Biden signalled a change in his country’s attitude to foreign leaders who take a slightly less rigorous approach to democracy and human rights. President Donald Trump’s ‘favourite dictator’, Egyptian President Abdel Fattah al-Sisi has already run afoul of the incoming administration after ordering the arrest of three prominent human rights advocates after they hosted a meeting with thirteen Western ambassadors and diplomats to explain their work. The three are being held on trumped-up charges of broadcasting fake news, funding terrorism, and undermining state security. Incoming Secretary of State Tony Blinken, a former human rights advocate, tweeted just before his nomination that ‘meeting with diplomats is not a crime’ and has since said that he will take a ‘firm stand’ against abuses not just in Egypt, but in Saudi Arabia, India, and China as well. LITTLE TO FEAR Egypt receives an estimated $1.4 billion in aid every year, mostly to buy US-made military hardware. After the 2012 coup that brought President Sisi to power, the Obama Administration suspended arms sales for two years. However, the Egyptian strongman now believes that his government has perhaps less to fear from Biden that the president-elect’s words imply. It was duly noted in Cairo that human rights activists failed to elicit a response from Biden on the arrests. Officials in transition team said that such a statement would not be possible in light of other ‘demands and priorities’. The comment, perhaps more of a slip of the tongue, also resonated in Riyadh and calmed fears that the change of the guard in the US might disturb the kingdom’s excellent relations with Washington. After the murder of journalist Jamal Khashoggi by Saudi agents in Istanbul,

"Kushner’s rather unexpected yet formidable legacy in structuring a peace deal that eluded all diplomats who came before him, represents the Trump Administration’s greatest foreign policy accomplishment." Biden publicly called Saudi Arabia a ‘pariah’ state. Later, he added that ‘America would not check its values at the door to sell arms or buy oil’. However, Crown Prince Mohammed bin Salman seems quite unperturbed and may simply call Biden’s bluff in the full realisation that the president-elect tends towards pragmatism even at the expense of lofty principles. The kingdom’s ace in the hole is its rapprochement with Israel brokered by, of all people, President Trump’s son-in-law Jared Kushner who – though widely ridiculed and dismissed as an intellectual lightweight – somehow succeeded where generations of veteran diplomats failed miserably. Kushner may have weaselled his way into Harvard University and failed at many of his business ventures, he also possesses more than just a facsimile of capability and has periodically shown flashes of effectiveness, possibly even genius. Discrete, soft-spoken, and with impeccable manners, but with no experience in foreign policy, Kushner was put in charge of the Trump Administration’s Middle East Peace Plan. In one of his rare interviews, Kushner said that he had read ‘about 25 books’ on the Middle East over a three-year period. He set about excitedly and rather naively, spoke with all leaders, side-lined the Palestinians, and contacted the Saudi crown prince via WhatsApp to ask for a meeting. With beginner’s luck or otherwise, Kushner managed to formalise the relationship between Israel and the United Arab Emirates with mutual diplomatic recognition and a peace agreement. Bahrain soon joined, as did Sudan after some gentle prodding, and others such as Oman expressing an interest in following suit.

MISSION IMPOSSIBLE However, Kushner’s greatest triumph as White House envoy to the Middle East was yet to come. Late November, he orchestrated a meeting in Riyadh between Israeli Prime Minister Benjamin Netanyahu and Saudi Crown Prince Mohammed bin Salman to discuss cooperation in the containment of Iran, expanded trade, and the future establishment of diplomatic relations. Both leaders agreed that a full normalisation cannot progress as long as King Salman is alive. The Saudi monarch is adamant that recognition of Israel can only follow on the establishment of a Palestinian state. His, however, son is more open to warming ties with Israel. Kushner’s rather unexpected yet formidable legacy in structuring a peace deal that eluded all diplomats who came before him, represents the Trump Administration’s greatest foreign policy accomplishment. It also poses a challenge to the new US president who must avoid upsetting the apple cart so carefully balanced by Kushner. Throwing a spanner into the works by sanctioning Saudi Arabia, or even Egypt, for their more flexible interpretation of human rights will likely backfire and accomplish the opposite outcome from the one intended. Kushner has shown that shuttle diplomacy can yield positive results when conducted pragmatically and discreetly as he did: Shunning the limelight, ignoring the intractable, and appealing to common sense – all without ever raising one’s voice or losing one’s composure. Quite the accomplishment for a young man not versed in the art of high diplomacy but in the rather unrefined exploitation of urban slums. Kushner may have missed his calling. i

"Egypt receives an estimated $1.4 billion in aid every year, mostly to buy US-made military hardware." 142

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> Multiply Marketing Consultancy:

Always Prepared, Armed with the Latest Tech, Determined to Be the Best “Abu Dhabi residents. International specialists. Critical thinkers. Problem solvers. Marketing connoisseurs. Trained to get straight to your point.”

traight to the point, indeed. With these words, Multiply Marketing Consultancy encapsulates the core of what it does, and where it does it. The Abu Dhabi-based multicultural and multidiscipline agency has offices across the world — in France, Lebanon, Egypt, and South East Asia, in addition to partnerships in the USA and the UK. Teams of marketing, creative, social, digital, web, research, and OOH media professionals work in unison to transform the way the world sees their clients. Multiply Marketing Consultancy’s purpose in a word is “empower”: • Empowering clients to engage on an emotional level with their consumers • Empowering brands to be human-centric through their communications • Empowering employees to always “up their game” — with a culture that fosters entrepreneurship and values learning. GLOBAL PARTNERSHIPS In line with ambitious growth strategies, Multiply Marketing Consultancy’s management has been investing in organic expansions, extending the company’s reach to international markets. The data-centric agency has also been creating tieups with leading companies worldwide that are at the forefront of the new digital age. The consultancy is particularly focused on data analytics, and in acquiring or creating solutions.

"To initiate an authentic connection between brands and consumers, Multiply Marketing Consultancy adopts a brand story-telling strategy." With this expanding partnership network, Multiply Marketing Consultancy offers clients expertise and services that span the spectrum. SERVICES THAT ENRICH HUMAN EXPERIENCES The consultancy works on developing brands, assets, systems, experiences and initiatives based on strategic insights and creativity. The aim is ultimately to foster growth and distinction for their clients. Using database marketing to generate personalised communications, and market insights to ensure all messaging resonates with a specific target audience, the firm enables brands to connect, engage and inspire. The company’s roster of services is expansive, covering clients’ communication and marketing needs. MARKETING & PR For those in the industry, understanding the brand and its equity is the key to going forward. Brand positioning, defining the target and determining

the best suited communication channels are the crucial starting points. This allows the agency to develop a holistic communication plan and triangulate on ideas, solutions, and strategies. Necessary PR messaging and activations are based on lead nurturing and the brand’s core needs and aims. Multiply Marketing Consultancy also uses the latest martech tools to create new ways for consumers to experience a brand. DIGITAL MEDIA The agency facilitates clientele presence in the digital realm by identifying challenges and providing meaningful insights and digital solutions that meet business goals and deliver micro-moments. The aim is to design a digital plan and vision for each brand, with focused deliverables, clear road-mapping, and the latest digital technologies on-hand. End consumers gain the opportunity to experience a brand through AR, VR and immersive technology. OOH MEDIA & MEDIA BUYING Multiply Marketing Consultancy’s outdoor media assets extend across Abu Dhabi, allowing the company to provide clients with exclusive targeting opportunities. The media department boasts a fine track record in media planning and buying for private and government clients. BRANDING & DESIGN To initiate an authentic connection between brands and consumers, Multiply Marketing Consultancy adopts a brand story-telling strategy. Its experienced design team has been

"In line with ambitious growth strategies, Multiply Marketing Consultancy’s management has been investing in organic expansions, extending the company’s reach to international markets." CFI.co | Capital Finance International

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bringing brands to life for almost two decades, using trend-setting designs to engage with target audiences across a variety of media and channels. MARKETING RESEARCH The agency’s objective is to connect brands with consumers. To understand consumer needs and emotions, the consultancy’s research department uses everything from microdata and market insights to statistical techniques, churn rates, and the latest practices and methods of neuromarketing. The company then develops the optimal strategy to grab consumers’ attention, in addition to implementing the ideal methods to entice them into engaging with the brand. SOCIAL MEDIA Multiply Marketing Consultancy’s social media team ensures clients aren’t just present in the virtual realm, they are prominent. Audiences are targeted across the most crucial touch points with content that drives engagement while meeting clients’ business goals. The team handles social media strategy, social listening, social media management, content curation and more. EVENTS Multiply Marketing Consultancy’s expertise in event management goes back to the days of the first cityscape in Dubai and Abu Dhabi, adding numerous events and exhibitions to the company name over the years. The agency supports clients with continuously innovative and creative solutions and services such as MR and Experiential Marketing, ensuring events don’t just go the extra mile, but beyond all expectations. NEUROMARKETING Multiply Marketing Consultancy incorporates neuromarketing techniques to study consumers' unconscious sensorimotor, cognitive and emotional responses to various stimuli. Everything from EEG and eye-tracking to emotion-analysing tools and software is used to test packaging, content, design, videos, websites and all other

advertisements. In effect, this is marketing to the brain itself to instigate the utmost impact. With a team of neuromarketers, behavioral analysts and other multidisciplinary researchers on board, Multiply Marketing Consultancy stays up-to-speed on consumer psychological and behavioral research, guaranteeing data and science help guide strategy. STANDOUT & AWARD-WINNING WORK Over the years, Multiply Marketing Consultancy has garnered attention and accolades from peers in the industry and beyond. The recognition received is always used as the next starting point, which in itself ensures the company is continuously pushing the envelope and the boundaries of innovation and creativity. Some of the consultancy’s standout work includes rebranding and creative execution for ADIO, and the rebranding of Al Ain Zoo, a 50-year-old institution, to name just a couple. The Disgraceful Art Show, an award-winning initiative #FoodNotTrash was inspired by The Year of Giving, which was declared by His Highness Sheikh Khalifa bin Zayed Al Nahyan, president of the United Arab Emirates. The initiative’s aim was to raise awareness about food waste, and to educate the public on its implications, encouraging them to take action and make a difference. THE WAY FORWARD Multiply Marketing Consultancy’s two decades of experience and knowledge servicing local clients, combined with its access to the latest design trends, martech and international standards, has been a key driver in successfully delivering client communication objectives. The company’s partnerships and acquisitions include New Yorkbased Yieldmo, one of the fastest growing digital marketing companies in North America. The company is always primed and ready to meet any challenge, and solve any communication need. i

> Founder, MD, Champion of Corporate Culture:

Samia is the Leader for All Reasons As founder and managing director of Multiply Marketing Consultancy, Samia Bouazza brings a track record of delivering intelligent marketing, brand-positioning solutions, and strategies to her clients.

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nder her leadership, Multiply Marketing Consultancy has grown from a local boutique agency into an award-winning global

communication and research firm specialising in strategic marketing, branding, creative campaigns, social and digital media, and market research. CFI.co | Capital Finance International

A business leader and active board member, Bouazza has been focused on accelerating the digitalisation of companies and processes to ensure they are optimised, scalable, efficient

Winter 2020-2021 Issue

Founder & Managing Director: Samia Bouazza

"A business leader and active board member, Bouazza has been focused on accelerating the digitalisation of companies and processes to ensure they are optimised, scalable, efficient and lean." and lean. This is most evident in her ambition for Multiply Marketing Consultancy. She and her team have decided on a mandate to invest in disruptive marketing technologies that complement the firm’s existing services and ensure a constant edge in the market. Bouazza recently announced Multiply Marketing Consultancy’s latest investment in Yieldmo, one of the fastest-growing martech (marketing technology) companies in North America. This adds to the company’s global network of investments and partnerships, and its recent expansion into new digital industries in the US and UK. Samia Bouazza’s plans for her consultancy’s growth have also been organic,

with the company retaining some of the region’s largest names in real estate and consumer goods. Multiply’s corporate culture is of the highest importance to Bouazza. She values intellectual growth, an attribute she ensures is valued and shared throughout the organisation. Each person — herself included — dedicates 16 percent of their working week to learning and development. She is personally involved in the agency’s publications on leadership, character-building and optimising cognitive performance. Samia Bouazza is also an advocate for making time to give back to society, making sure to CFI.co | Capital Finance International

pinpoint and support a social cause every year. In her most recent initiative, she worked with her multi-disciplinary team to create a programme that supports a cause close to her heart — the character development of young women. She was hands-on in delivering the programme to groups in Lebanon and the UAE. Previously, her team produced #FoodNotTrash, an award-winning digital campaign that raised awareness of food waste, and cemented the firm’s reputation as a premier digital communication group. Bouazza also serves on the board of MEPRA, Viola Communications, as well as on one of the Life Bioscience’s programmes and a private Swiss clinic for longevity. i 145

> Q&A with Ovais Shabab, Head of Financial Services at KPMG:

Investing in People, Creating Jobs, Inventing Strategies — it’s a World of Possibilities for KPMG Network KPMG is a global network of independent member firms offering audit, tax and advisory services, operating in 147 countries. Here, the firm’s head of financial services, Ovais Shabab, fields questions from CFI.co What sets KPMG's professional services apart in KSA? KPMG in Saudi Arabia has a unique value proposition in its tailored offerings that leverage local experience and expertise and its global network. KPMG is the lead auditor for nine of 11 Tadawullisted banks, and has deep knowledge of the Kingdom’s financial sector. We also have strong relations with the regulators and the of support finance companies, asset-management firms, fintechs, and the insurance industry. With our solution-based approach, our advisory services are well-received by our stakeholders and clients. What is your track record of Saudization? Saudization is a policy implemented by KSA’s Ministry of Labour and Social Development requiring Saudi companies and enterprises to fill their workforces, to a certain level, with Saudi nationals. KPMG plans to create more than 700 jobs over the next five years for Saudi nationals, inline with the Kingdom's policy. Currently, our localisation rate stands at 42 percent and is rapidly moving towards our 60 percent target. At KPMG, our capital is human capital — and that’s why we continue to invest in our people. Ultimately, they will make the difference when we address the challenges of our clients as a firm. Our learning and development efforts range from LEAP, the leadership programme for young talent across all functions, the SOCPA programme for our audit team, and the TAX Academy. We have a dedicated team to provide our people with relevant upskilling programmes to stay ahead of the curve — all strong efforts to support Saudization. What is your outlook on the Saudi banking sector's performance in Q4 2020? We foresee that Q4 of 2020 is likely to be a nexus of several divergent themes, given the macro-economic developments that have taken place this year. In the grand scheme of things, the closure would depend on the continued tenacity and resilience of the sector founded on measures taken by the Saudi Central Bank 146

"The lending space in the Saudi banking sector has seen continued growth in mortgage financing throughout the pandemic." and individual banks. We have observed multiple efforts towards customers’ endurance at the back of a strong capital base and funding structure of the industry. As such, we do not foresee a different proposition for the rest of the year. Will the new five percent real estate transaction tax help to drive growth in the bank's mortgage business in coming quarters? The lending space in the Saudi banking sector has seen continued growth in mortgage financing throughout the pandemic. It’s a reflection of the housing demand in the Kingdom, and testament to government support measures. The implementation of real estate transaction tax (RETT) have essentially been welcomed by retail property buyers as a step-down of the tax rate from 15 percent back to five, being a non-claimable component of the purchase cost in general. If these past trends are representative for the last quarter, then, coupled with the introduction of RETT and the sale drives witnessed each yearend, it is quite likely that the overall banking sector will end FY 2020 without major impact on profitability. KPMG's Q3 2020 Banking Pulse report states that the process of loss quantification continues to be a challenge for banks. How can they overcome it? The overall net profitability of Saudi banks declined six percent for the year-to-date period from FY 2019 due to higher expected credit losses of SAR12bn — a period-on-period increase of 41 percent. At present, the process of loss quantification continues to be a challenge for banks in the absence of "days past due (dpd) backstops" for facilities subject to payment holiday and useful qualitative information of borrowers in general. This translates into a continued need for judgmental overlays to cater for data gaps and therefore, the overall expected credit loss governance process is ever more important. CFI.co | Capital Finance International

Do you foresee more potential banking mergers in Saudi Arabia? If so, why? The M&A space in the banking sector is moving towards the creation of the largest lender in Saudi Arabia, with a formal agreement between National Commercial Bank and Samba Financial Group (SAMBA). This bodes well for the merging entities and the sector in general. The entities can leverage on the experience of Saudi British Bank and Alawwal Bank and focus on cost and revenue synergies. With significant investments in technology and people already made by Saudi banks in recent past, cultural and infrastructural integration will be a priority. Timely and effective stakeholder engagement, as well as premerger planning, remain the key for reaping all anticipated post-merger synergies. Are Saudi banks ready to embed ESG into their business strategies? What are the possible benefits of such a move? A key element gathering swift momentum in the banking sector is ESG: three central factors in measuring the sustainability and societal impact of a business. The immediate health and economic crises pushed the sustainability agenda to the back-burner. However, KPMG's view suggests that ESG will increasingly become central to the economic equation globally, and Saudi Arabia will be no exception in the postCOVID world. While the pandemic may have slowed progress, banks across the globe continue to embrace the ESG agenda. New products and models are constantly developed, tested and commercialised. Retail banks are creating unique, sustainable banking and investing products and services. The bottom line is that banks can no longer afford to overlook ESG, and must embrace it to avoid constrained growth and increased regulatory and public scrutiny. How does the VAT increase to 15 percent impact banks? The recent increase in the value-added tax (VAT) rate from five to 15 percent has introduced some complexities to the tax considerations of the banking sector. Given the mixture of taxable and exempt supplies that banks provide, the increased VAT rate will lead to

Winter 2020-2021 Issue

Head of Financial Services: Ovais Shabab

deductibility challenges on operational and capital expenditure relating to exempt supplies. In addition to managing the impact of VAT on fee-based services, banks face the challenge of managing a 10 percent increase in VAT incurred on their purchases. Tax technology solutions will be needed more than ever before to minimise risk while taking into account competitiveness, profitability, and cashflows.

Acquiring the necessary skills and experience remains a challenge, because as a professional environment tax is relatively new (but developing) in Saudi Arabia. But it is evolving rapidly and presents a major challenge in terms of keeping up-to-date. Technology can definitely play a role, but it also depends on the banks’ capacity to use and manage technologies well, from people and operating model perspectives.

How do you rate Saudi banks in terms of deploying tax technology solutions post-VAT increase? Unless it is a foreign bank with a fair degree of non-zakat obligations (zakat obliges individuals to donate a certain proportion of wealth each year to charitable causes), we haven’t seen a lot of tax-specific technologies in the banking environment — as compared with the more widely implemented product and accounting technologies such as product management and analysis tools. If the bank has corporate income tax obligations, we have seen some use of consolidation type accounting tools.

Banks require a target operating model for tax — an end-to-end model to run taxes before technology is introduced. From a governance perspective, it is wise to have a voice at boardlevel to ensure the needs of the tax team are not ignored. Even if there are robust accounting systems in place, taxation brings a different dynamic. It is not technology first, but rather the other way around; first your operating model, then your people, then the compatible technology. Currently, for banks in Saudi Arabia, tax target operating models are at early stages of development. With more changes to the tax environment, including the prospect of e-invoicing, the need for a strong tax operating model to support the management of tax risk is becoming ever more urgent. i

On the indirect tax side, we know that some banks have bought indirect tax solutions. This appears to be inconsistent in terms of effectiveness — managing VAT can result in complex calculations. On top of that, there are challenges with the completeness and accuracy data that many businesses face. To improve in this space, we anticipate that banks will continue to employ senior tax professionals to manage the entire tax environment.

in various sectors and having distinguished complexities. During his association with KPMG he has worked on various audit and advisory engagements such as due diligence, business restructuring, compliance & internal controls reviews and accounting advisory projects. Professional and Industry Experience Ovais epitomizes a wealth of assurance and advisory experience in the financial services sector, amassed over 20 years of his association with various KPMG offices. During his 15+ years with the Saudi practice, he has led successful engagement delivery to some of our flagship Audit clients. His sound credentials have enabled him to advise and successfully collaborate with prominent regulatory bodies in KSA, including SAMA, SOCPA, and CMA. For all engagements, Ovais remains responsible for Presentation to the BODs, Audit Committees and Senior Level Executives for communicating the Audit Plan and Results of our audit; and liaison with the Senior Management throughout the year to understand key developments and issues; suggesting solutions and improvements in the business processes.

ABOUT OVAIS SHABAB Over 22 years working in KPMG offices in Kingdom of Saudi Arabia, UAE and Pakistan, Ovais has gained significant experience of multilocations and multi-cultural environments. He is currently managing a portfolio of clients involved CFI.co | Capital Finance International

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> The Pandemic Will Reshape Globalisation, Not Reverse It By Otaviano Canuto

The pandemic is accelerating history, and some of its recent trends are being sped-up.

he pandemic will not reverse globalisation, but it will reshape it. Here we take a bird’s eye view on global trade during the pandemic, relate it to previous trends, and guess how global value chain managers and governments’ trade policymakers are likely to react. World trade had a deep dive during the first months of the pandemic. Mandatory or recommended lockdowns and travel restrictions disrupted economic activities before being scaled back in the second half of the year. The latest WTO trade forecast pointed to a 9.2 percent drop in the volume of world merchandise trade in 2020, followed by a 7.2 percent increase in 2021. Merchandise trade is still below its previous trajectory (Figure 1).

Figure 1: World merchandise trading volume, 2000-2021*. Source: WTO. *2020-21: October forecasts

Commercial services trade declined even more, dropping 30 percent in the second quarter and 18 percent for the year to September. This is in contrast with previous global recessions when merchandise trade was at the forefront. This crisis is different. The unusually large drop is probably related to social distancing measures and travel restrictions, which curb the delivery of services that involve physical proximity to users. Less spending on services, particularly in travel-related sectors, may have also left consumers with unspent income that could be redirected toward the purchase of goods. This may partly explain the relatively small decline in merchandise trade in the first half of 2020.

Figure 2: Prices of commodities, January 2014-August 2020. Source: IMF

Countries were impacted by the trade slump, but to different degrees. Besides China as a first-in, first-out case, the fact is that trade reduction in Asia was smaller than elsewhere. Countercyclical fiscal and monetary policies in other regions helped to sustain relatively high levels of consumption, with Asian countries being major producers and exporters of goods for which demand remained strong, including electronics and medical supplies. Last April, we approached the “perfect storm” that Covid-19 brought to developing economies. They were facing other shocks from abroad, too (finance, remittances, tourism, and commodities). The March financial impact was partially reverted because of policies adopted by central banks in advanced and emerging market economies. Tourism went downhill, remittances less so. In the case of primary commodities, prices — other than metals — fell in the second quarter 148

Figure 3: Global trade volume as a percentage of GDP*. *Trade is the sum of exports and imports of goods and services measured as a share of gross domestic product. Source: World Bank

of 2020. The price of fuels declined most, around 50 percent year-on-year, and they have partially recovered since then. Food prices were down three percent over the same period, while prices for agricultural raw materials dropped 13 percent. In contrast, prices for metals rose six percent in the same quarter (Figure 2). CFI.co | Capital Finance International

The partial reopening of economies in the second half of the year led to higher levels of mobility and oil consumption, and the price of fuel started to rise. Strong price increases were recorded between May and August 2020 for food (five percent), agricultural raw materials (five percent), metals (19 percent) and fuels (40 percent).

Winter 2020-2021 Issue

Trade and GDP partially rebounded in the third quarter of 2020 in many countries, following the relaxation of social distancing measures. However, trade growth is expected to slow beyond the fourth quarter, as new waves of contamination have led to a partial return to confinement measures or behaviour choice. World trade volumes have lagged GDP growth since the 2000s, a trend accentuated after the onset of the global financial crisis. There are some transitional, and potentially reversible, factors behind this. The weak recovery of fixed investments in advanced economies after the global financial crisis (GFC) suppressed an important source of trade volume, given the higher-than-average cross-border exchanges that characterise fixed investment goods. Some structural trends have also been at play. The golden era of Globalisation 2.0, associated with the rise of global value chains, had peaked by 2008. Global trade stagnated as a share of GDP and foreign direct investment fell in the 2010s (Figure 3). The era reflected the combination of two major events. Trade opening measures integrated areas with cheap labour into global markets: China and others in Asia, but also Eastern Europe and Mexico. Technological breakthroughs on transport (containers, for instance) and information and communication technologies allowed a fragmentation of production processes and their geographical dispersion. Cost minimisation could be made by spreading value chains globally and trading intermediate goods across borders. After steadily increasing between the mid-1980s and the mid-2000s, the trade elasticity to GDP lost height. The world’s exports-to-GDP ratio seems to have approached some plateau (or a “peak trade”). Since 2008, world trade has been rising slower than GDP at around 0.8:1, leading to a slight fall in the share of exports in global GDP. Even if transitional post-GFC factors were partially reversed, the presence of a long-term trajectory of trade elasticity displaying a slowdown prior to the recent pattern would suggest no automatic return to the heyday. Some structural trends can be pointed out. First, as manufacturing started to become more automated, advantages from locating production where workers were cheapest started to shrink in some of the previously disperse GVCs. This is neither a sectoral uniform nor immediate process, but overall recent technological trends point in that direction. Digitalisation has been sped-up by Covid, and tends to give additional push. In any case, the first major wave of vertical and spatial fragmentation of industrial production has completed, while services have not stepped-up to the plate with the same intensity. The major wave of trade-cum-structural transformation has been followed by China’s rebalancing: going up the ladder in GVCs, while 149

Figure 4: Non-COVID-19-related import-restrictive measures continue to rise. Source: World Trade Organization (2020). "Report on G-20 Trade Measures", 30 October.

gradually lifting the domestic consumption ratio in GDP and moving toward higher GDP shares of services. As China’s middle class grew, it consumed more domestically. Its share of world exports stopped rising in 2015, while imports continued to grow. Advanced countries are also becoming services economies. While both the GVCs’ rise and growthcum-structural transformation — especially in China — were taking place, with corresponding impacts on the landscape of foreign trade. Advanced economies maintained a steady evolution toward becoming services economies, a trend maintained after the GFC. The state of current technological trajectories, as well as rising shares of services throughout would imply an anti-trade bias, given a still lower tradepropensity of services – with a few exceptions, such as tourism. Additionally, rising trade-restrictive, tax-cumsubsidy policy measures adopted in some key sectors by some countries may also have become more significant (Figure 4). In the 2010s, no major and deeper multilateral trade deals were implemented, the UK voted to leave the EU, and the US renegotiated existing trade treaties and relationships. GLOBALISATION RESHAPED The COVID-19 crisis brought an additional series of — temporary or not — trade restrictions. Many countries reacted in the early phase of the pandemic by tightening trade restrictions on exports of some medical and food products. By mid-April 2020, more than 80 countries had imposed export bans on medical devices and personal protective equipment used to curb the spread of Covid-19. Figure 4 also shows some progress has been made in trade-facilitating measures easing restraints on international trade, as governments reckon the advantages of relying on foreign supply and demand as a complement rather than counting on self-reliance. There was also the trade pact recently agreed between members of the Regional Comprehensive Economic Partnership (RCEP): China, Japan, Korea, Australia, the ASEAN countries, and New Zealand. RCEP reduces trade 150

tariffs for goods, expands market access for some services and unifies rules of origin within the block. However, some of the distorted barriers to trade introduced around the world over the past two years are still in place. A revival of discussions about unforeseen — or underestimated — potential costs and risks of the international fragmentation of production. There are voices claiming that trade dependency should be diminished, including repatriating production, as a potential way of reducing risk. Such retrenchment of trade would also create substantial efficiency costs, if it goes going beyond what we described as structural factors. THE GVC PERSPECTIVE Supply disruptions for everything from auto parts and consumer electronics to protective equipment during the pandemic have highlighted risks from concentrating too much production and sourcing in a small number of distant low-cost locations and overreliance on just-in-time inventory management. Rising tariffs, restrictions on market access, and other manifestations of geopolitical frictions may also lead some companies to revisit their supply chains. In some cases, there might come a view that it pays off to adopt more regional, “multilocal” sourcing and manufacturing footprints, as well as to keep higher “safety stocks” in inventory — even if these options entail higher costs. The types of change will vary by industrial sector, as firms will have to consider a trade-off between resilience and efficiency/costs. There is the previous trend that we alluded to in some segments toward putting production in locations closer to customers, especially when the adoption of advanced Industry 4.0 manufacturing systems is capable of offsetting higher labor costs. Medical equipment, biopharmaceutical products, semiconductors, and consumer electronics, for instance, are likely candidates to also be subject to geopolitical and government pressures. Ultimately the consequence of COVID will be a higher profile to be attributed to those considerations. GEOPOLITICAL FRICTIONS Governments are likely to put greater emphasis on domestic production to reduce the risk of CFI.co | Capital Finance International

future supply shocks, particularly of medical supplies and equipment. Germany has expressed interest in localising more supply chains, and South Korea is exploring measures to encourage reshoring of manufacturing. This will not necessarily translate into full neglect of broader gains from globalisation, but it will selectively reinforce a search for higher selfreliance. The pandemic is prompting some governments to place further controls on trade in medical and agricultural goods. Given the revealed costs — failures — of unilateral trade policies in the style followed by President Trump in the US, they are not likely to return in President-elect Biden’s turn. But there may plurilateral efforts to broaden the agenda of trade restrictions as a quid-pro-quo in negotiations about rules and standards. On the technology front, a potential decoupling of the US and Chinese sectors — which could make devices and IT systems in both markets no longer interoperable — might have even repercussions. China, in turn, has issued signals of a search for more self-reliance by talking about “dual circulation” and ensuring higher diversity of sources of commodity imports. Again, the Covid crisis did not create such frictions — but it has given ground to an increase of their profile. CLIMATE CHANGE AGENDA The future of trade is being redefined in other ways. The pandemic has had a positive spillover effect on the climate change agenda. “Green recovery” is the buzzword. As part of its European Green Deal strategy to slash emissions, the European Commission is considering pressing ahead with a proposal to impose a carbon tax on imports. This tax could redefine global competitiveness in a range of industries, particularly if accompanied by the US. By intensifying geopolitical and economic forces already at work, the pandemic’s disruptive impact on international trade will leave a lasting mark. The pandemic is accelerating history, in that some recent trends are being sped-up. The pandemic will not reverse globalisation, but it will reshape it. i

Winter 2020-2021 Issue

> Trojan Holding’s Hamad Salem Al Ameri:

A Man Who Loves to Build Eng Hamad Al Ameri is a man of ambition who has paved a strong path in the construction industry, developing a highly regarded reputation for delivering projects of the utmost quality, in a timely manner.

graduate in engineering from the American University of Dubai, Al Ameri also earned an MBA from the Canadian University in the emirate. He rose from the ranks and currently holds managerial and director roles in such key industries as as real estate development and contracting; international investments and finance; government, non-profit, and public institutions. In addition to oil, energy and utilities sectors. In 2009, Al Ameri founded Trojan Holding in the UAE, with small trailers on site doubling as offices. Today, the holding company boasts several business verticals with more than 25,000 employees. In addition to his role as Vice Chairman of the Board and Managing Director of Trojan Holding, Al Ameri sits on the board of several companies in the region. Al Ameri is renowned for improving efficiencies and streamlining processes within the corporate group and for the consolidation of resources among related companies to attain economies of scale and optimum productivity. Setting up the group as a one-stop shop, he employs a huge technical team to work on every element of a building, be it large or small, delivering everything on time and in-house. This contractor has an impressive global footprint, covering countries in the GCC region and Europe. Always ready for fresh challenges, Al Ameri is nevertheless selective, bidding only on the right developments, at the right time, and in the right places. He places much focus on sustainability within host communities, and puts effort into the protection of the environment, and the conservation of resources. Al Ameri is a big supporter of Abu Dhabi’s 2030 Vision through direct contribution to the emirate’s social and human development and the creation of a sustainable, knowledgebased nation. As part of a personal mission, he launched Trojan Young Engineers (TYE), a CSR initiative enabling young engineering students to gain hands-on experience of working in the industry through a rich programme including construction site tours. To date, four cycles of TYE have been successfully launched, with more to come.

Managing Director: Eng Hamad Al Ameri

His hard work, insight and ambition have resulted in an illustrious professional path for the construction expert both regionally CFI.co | Capital Finance International

and globally. A path that is sure to point to further horizons, perhaps exceeding his own expectations. i 151

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Winter 2020-2021 Issue

A New Era for Kuwait International Bank:

Architecting the Future of Technology-based Banking Digital renaissance in the global banking sector was well underway prior to the COVID-19 pandemic. In fact, most retail banks had embarked upon some form of transformation journey to provide more efficient banking services.

owever, lockdowns forced banks to drastically accelerate the pace of change. Within weeks – and sometimes days – they had to act fast and become creative. The banks needed to find new ways to handle processes remotely, and harness digital tools to compensate for branch, office and call centre closures. Suddenly, the impossible became possible and digital was the New Normal. As lockdowns extended, the very nature of the customer-bank relationship changed. The way that banks do business changed. A FUTURE REIMAGINED As the economic impact began to emerge, Kuwait International Bank (KIB) leveraged innovative strategies and updated its business model to stay ahead of the curve. The bank completed a months-long exercise to develop a comprehensive and ambitious plan for radical digital transformation. Aggressive targets were set as KIB’s transformation quickly went from being a good strategy to a critical method of delivering undisrupted services. This digitallyfocused shift involved the rolling out a complete new suite of technological innovations and solutions. Internal processes were streamlined to adapt to the digital change, eventually resulting a more sophisticated, dynamic, convenient and user-friendly banking experience. TURNING A THREAT INTO AN IMPETUS FOR INNOVATION AND RAPID TRANSFORMATION To confront the challenges and emerging risks posed by coronavirus, KIB made it a priority to revamp its core digital infrastructure. The move towards digital made it possible to offer a safe, secure, and friendly banking experience – for the time of the pandemic and beyond. It became clear that the paradigm shift towards digital banking more important than ever before. Since COVID-19 fundamentally altered the landscape, the transformation strategies KIB undertook went beyond changing the way work is done. Over the past eight months, the bank has introduced a suite of services geared towards delivering improved functionality, greater convenience and an elevated banking experience in line with the latest technologies of the worldwide financial sector. This includes the addition of live chat on the website, new

Vice Chairman and Chief Executive Officer: Raed Jawad Bukhamseen

application services on digital channels, new appointment booking systems, as well as increased limits on digital transactions and services. DEEPER CUSTOMER ENGAGEMENT One of KIB’s core values is delivery of the highest standards of banking experience. Branches introduced casual consultation points, via a ‘device desk’, to enable easy access to general information and speedy assistance through allocated tablets and laptops. Private consultations with staff will take place within bespoke rooms for a more one-on-one feel. The Bank opted for core technology transformations across every touch point and customer interaction, from the branches to mobile app and online banking platform to the contact centre. To support its digital transformation strategy, the bank introduced a major upgrade to its mobile banking application and launched a completely revamped website. In addition to the acceleration of its digital trends, a key milestone for KIB was the launch of a new branch model, CFI.co | Capital Finance International

equipped with advanced concepts and unique designs, including a range of digital devices and interactive screens tailored to suit a more sophisticated and tech-savvy generation with dynamic needs and ever-higher expectations. Amongst newly introduced features, staff roam the open-plan branches with iPads to answer client questions. A mobile app feature allows digital registration with the Kuwait Clearing Company to receive direct-deposit dividends in their accounts instead of having to pick up a cheque in person. The improved functionality of the bank’s digital tools will enable KIB to serve customers better and meet their ever-changing needs in line with the latest technologies. Amidst the fundamental shifts in the financial services industry, KIB remains committed to exploring new services and solutions across all channels and touchpoints, both physical and digital, to better serve customers. The Bank is looking to launch a wide-ranging suite of new services in coming months, living up to its claim to be a “Bank for life”. i 153

> Trojan Holding:

One of the Fastest-growing Construction Firms in the UAE

ince its creation in 2012, Trojan Holding LLC has grown to become one of the top five construction groups in the region, with a firm commitment to quality work and timely delivery. The Abu Dhabi-based company has created a cohesive construction entity with a solid financial standing and competitive edge. Employing over 25,000 personnel across eight subsidiaries, the holding company delivers high quality, on schedule turnkey solutions, with a one-stop-shop service and a huge technical team capable of working on every aspect of a building, no matter the size or complexity. And as the company grows and expands its business, it remains dedicated to maintaining, training and growing a diverse, multi-national workforce, in addition to adhering to the highest standards of health and safety and environmental regulations. SUBSIDIARIES Trojan Holding companies are currently involved in the construction of high-rise towers, educational facilities, medical facilities, luxury resorts, business hotels, a mass housing development (complete city), government buildings and industrial projects in the UAE and across international markets. The subsidiaries work individually and in tandem to deliver the utmost quality in all projects they undertake. TROJAN GENERAL CONTRACTING Since its launch in 2009, Trojan General Contracting has executed a diverse and farreaching portfolio of major construction projects in all sectors of real estate and infrastructure. Today, the company encompasses an array of plants and state-of-the-art equipment, as well as a team of more than 5,200 experts and labourers. NATIONAL PROJECTS & CONSTRUCTION Established in 2003, National Projects & Construction (NPC) provides unsurpassed contracting services to property developers in the UAE, with a variety of projects to its name ranging from commercial spaces to personal villas. Today, NPC is a main contractor with operations spanning building and infrastructure construction, as well as mechanical and electrical services. ROYAL ADVANCE Royal Advance was established as an independent MEP Contractor to carry out the MEP packages for the group. With a workforce of over 3,000 labourers and professional engineers,

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Yas Waters Edge

Royal Advance has successfully executed MEP works for numerous projects such as Highland Resort Villas, Danet Mall, Holiday Inn, and more. REEM EMIRATES ALUMINUM Since its formation in 2006, Reem Emirates Aluminum has been contributing to the UAE’s industrial sector through the provision of sustainable façade solutions, continuously delivering the highest levels of quality in products and services.

such as warehouses, factories, workshops, showrooms, cold stores, offices, staff/labour accommodations, bus stations, metro stations and residential buildings. PHOENIX TIMBER Phoenix was founded to provide creative and cost-effective design and construction, with exceptional and customised solutions delivered from their wood manufacturing facilities to clients with the help of a team of highly qualified and passionate professionals.

HITECH CONCRETE PRODUCTS As a leader in the field of Precast Concrete Products, masonry blocks and the paving stones industry in the United Arab Emirates, Hitech Concrete Products offers a full product and service package with the ability to design, detail, manufacture and install a diverse range of precast concrete needs.

REEM READYMIX Reem Readymix is a leading supplier of all types of ready-mix concrete and cement-based plastering materials. Using the latest technology and equipment, the company’s expert personnel provides concrete-related services, from production to final product placing.

AL MAHA MODULAR INDUSTRIES Reputed as one of the most reliable construction companies in the UAE, Al Maha Modular Industries specialises in fast and accurate solutions for all kinds of industrial constructions of pre-engineered and hot-rolled steel,

ICONIC DEVELOPMENTS Trojan’s extensive in-house expertise and commitment to quality and timely delivery have ensured the company could secure some of the most iconic developments both regionally and globally. Examples include Nation Towers in Abu

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Winter 2020-2021 Issue

Dhabi, 17 Icon Bay at Dubai Creek Harbour by Emaar, Waters Edge by Aldar, and Madinat Al Arab infrastructure works for Nakheel. Trojan has additionally landed several hospitality projects, including Rove La Mer in Dubai, and The Local Hotel in Chechnya, Russia. Trojan has also been awarded projects in the Kingdom of Saudi Arabia, such as the Security Forces Medical Center for the Ministry of Interior and the new headquarters building for SABIC. TROJAN YOUNG ENGINEERS: A TROJAN HOLDING INITIATIVE Trojan Holding is a big supporter of Abu Dhabi’s 2030 Vision through direct contribution to the emirate’s social and human development and the creation of a sustainable, knowledge-based nation. Trojan Young Engineers (TYE) is a CSR initiative launched by the firm to host engineering students from various universities to spend one full day with Trojan’s inhouse engineers. Students are encouraged to view the day-to-day activities of a construction firm, thus gaining insight into management and construction sites and come to know how their careers will progress once they’ve completed university. Trojan Holding’s Managing Director, Eng Hamad has been running the programme-rich initiative as part of his personal mission to give back to the community and provide a platform for students to step into the practical world and become aware of the skills of international and local engineers. The initiative completed its fourth cycle this year, going digital to accommodate the circumstances of 2020. LOOKING AHEAD Trojan plans to retain its dominant position in hospitality, housing and high-rise projects in Dubai and Abu Dhabi, and the company is working hard to establish a presence in Europe, in addition to implementing expansion plans into neighbouring GCC countries. Trojan is also planning to diversify into such sectors as oil, gas, and energy, as well as enhancing its portfolio with new projects in the social infrastructure sector. In its current field of construction and infrastructure, technology is a big driver at the present time, with the UAE being one of the most advanced countries in terms of adopting new technologies and robotics. Trojan, as an industry leader, has embraced new technologies and adapted them across the board, firm in its belief that there is great potential for technology to play a bigger role across the construction sector, including design, planning, and management, with the greatest potential found in the field of robotics. In addition to technology, Trojan always seeks to promote sustainability within its communities and focuses on the protection of the environment and the conservation of resources.

The Palm Tower

As a full-service turnkey contracting company, Trojan provides clients with the ability to execute virtually any type of construction project, and the best evidence of its success is the long list of repeat clients who invite Trojan to work with them. There is no better recommendation. i 155

> Sparkling Dubai:

Tourism and Business Hub — and the Perfect Events Venue CFI.co’s Chairman Tor Svensson puts questions to Dawood Al Shezawi, AIM organiser and CEO of Strategic, one of the world’s leading exhibition, conference and event organisers.

he Strategic group operates across sectors to facilitate a healthy ecosystem for investment promotion, start-ups, real estate, wood and woodworking equipment, and environment tech. Since its establishment in 2000, the company has operated to international standards, underpinned by strong, clear business principles and ethical values. More than 25 million visitors are expected at its crowning event, AIM (Annual Investment Meeting) Expo 2021-2022, to be held in Dubai in March. It’s seen as one of the most important business events on the global calendar. WHAT ARE YOUR EXPECTATIONS FOR EXPO 20212022? It will be the greatest show in Dubai and in the UAE, a showcase of innovation, a celebration of human brilliance, bringing together the highest talents from over 190 countries. More than 25 million visitors are expected, 70 percent of them from overseas. It is the world's largest meeting place, with pavilions dedicated to countries offering opportunities for investment, networking, creating partnerships and meaningful relationships. It’s become an amazing way to enrich one’s cultural experiences and gain a wealth of knowledge. The Expo will create job opportunities in sectors such as tourism, construction, ICT, marketing and logistics. It will generate opportunities, and highlight UAE as a preferred investment destination. It also contributes to the country’s economic, cultural, and social initiatives. HOW HAS THE PANDEMIC INFLUENCED DUBAI? The pandemic has been an enormous challenge, not just for Dubai but for every city and country. But on the other hand, it has also become a great opportunity for Dubai to prove its resilience and its generosity. It has made strides to improve the lives of its people and support them during the trying 156

AIM organiser and CEO of Strategic: Dawood Al Shezawi

times by implementing beneficial initiatives for individuals, families and businesses. It has launched several measures to address the challenges and adapt to the demands of the pandemic. We have also seen the utilisation of innovative technologies and AI in the healthcare, finance and real estate sectors, for faster and easier transactions and for improving the business environment. The pandemic has given the city the time to explore, understand, and work quickly to ensure a strong post-COVID recovery. The challenges ahead remain vast, but these will continue to catalyse the Dubai government and business leaders to work together to leverage new CFI.co | Capital Finance International

technologies and opportunities to build a more sustainable and diverse economy. WHAT SETS DUBAI APART FROM OTHER VENUES? Dubai is one of the most influential cities and is a world-class tourist destination. It’s home to landmarks such as the Burj Khalifa. It also has the Dubai Mall — the world’s biggest — and many other attractions. It’s multicultural and diverse, has a large expat community, and welcomes millions of tourists each year; 16 million in 2019. Even during the pandemic, Dubai saw 417,000 visitors July-September 2020. The city is a leading financial hub, also for infrastructure, healthcare, AI, fintech and many other sectors. Dubai sets itself apart with constant growth; it’s the perfect venue.

Winter 2020-2021 Issue

UAE: Dubai

WHAT LIVE EVENTS OR CONFERENCES DO YOU HAVE COMING UP? We hold the International Property Show (IPS) physically, from March 23-25 at the Dubai World Trade Centre. IPS attracts thousands of visitors across the globe every year and the numbers are expected to grow for this 17th edition. We’re excited and keen to offer a world-class event for the global real estate community. We’ll use the powerful combination of live and the virtual environments to offer a more dynamic platform for the global audience. The Annual Investment Meeting will hold its Hybrid Edition on the same dates. We will offer both physical and virtual activities. WoodShow Global will also have a series of Hybrid Editions this year; we have Cairo WoodShow from February 18 to 21, Dubai WoodShow from March 9 to 11 and Gabon WoodShow from June 10 to 12. Any virtual events or conferences in the pipeline? The Annual Investment Meeting will be having its series of digital regional focus editions to generate opportunities in specific regions of the world and highlight their economic potential. The first edition is the AIM EURASIA 2021 which will be held in February 9-10. AIM Africa will be held in June, AIM Latin America in September and AIM Investment Network in October. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF VIRTUAL CONFERENCES? During these times they have helped to realise the full potential and flexibility of the event industry. Holding virtual conferences is an excellent option

to connect and continue business transactions, despite the limitations caused by the health crisis. Another huge benefit is that virtual events have no geographical limitations, eliminating travel costs for participants. The number of attendees and the opportunity for more exposure grow exponentially. Virtual events also maximise opportunities for networking, building solid partnerships and collaborations among governments, among businesses and organisations. The format provides a wide range of metrics that will help organisers plan for future events, such as the engagement rate of activities, live polling response rates, deals closed, attendee satisfaction and retention, website visits, generated revenues. These KPIs are a lot easier to track when your event is online. On the other hand, going virtual can be challenging for those who do not have access to fast internet. For those who prefer interpersonal connections for high-stake meetings, joining a virtual conference could be seen as a setback. WHAT BUSINESS AND LEADERSHIP LESSONS HAVE YOU LEARNED OVER YOUR CAREER? One of the most important things is that successful long-term business relationships stem from integrity. Professionalism, honesty and practising the right business etiquette — all the time — are crucial to trust and reputation in the industry. Commitment and passion will also go a long way. No matter what hindrances you encounter, CFI.co | Capital Finance International

if you stay committed and if you’re passionate about what you do, nothing can stop you. And as a leader, your passion inculcates new energy in your team, which serves as their motivation to work harder and perform better. As an entrepreneur, it’s important to embrace change as part of the growth process. Especially during these times where technological advancements are crucial for survival. You need to be open-minded and be willing to keep learning and cultivating your knowledge to stay abreast of the latest trends and innovations. It is not a skill you can learn in a day but we learn through our challenges. WHAT ARE YOUR EXPECTATIONS AND HOPES FOR 2021? The pandemic has changed lives around the world, how we work and live. For sure, the use of innovative technologies will continue to rise and expand. I expect 2021 to be a much better year where businesses find more innovative, sustainable and flexible ways to an economic recovery. We have proven our resilience; we’ve found new ways to do business through smarter solutions. As the global situation improves, I am optimistic that we will be able to hold physical exhibitions and conferences as well as hybrid editions. We’ll bring excitement to our audiences through our state-of-the-art activities, and continue to explore possibilities. We stay true to our commitment to deliver world-class events and create rewarding opportunities for everyone. No matter what it takes. i 157

> Latin America

Peruvian Mystery: Numbers Look Fine Yet Feeling Ill Investors seemed remarkably unperturbed as three presidents swirled through the revolving doors of the House of Pizarro in swift succession, edging Peru closer to anarchy as throngs of angry people flooded downtown Lima to express their discontent with politicians and their gravy train. Whilst the country burned through presidents, investors eagerly snapped up $1 billion worth of century bonds issued at a 3.23% coupon rate and adorned with a BBB+ sign of approval from Fitch Ratings. The country also issued $2 billion in 40-year bonds at a 2.78% yield.

t the Finance Ministry, José Olivares, head of the public debt department, revealed that investors were able to distinguish between current ‘political events’ and the country’s institutional strength: “When they talk about Peru bonds, they say it’s a risk-free asset.” Mr Olivares noted that his country’s century bond boasted a significantly lower yield than those issued by Mexico (4.2%) and Argentina (7.92%). The latter one, placed in 2017, enjoyed but a brief life and was included in the $65 billion restructuring of the country’s national debt. According to Mr Olivares, investors pledged in excess of $15 billion to the late-November bond sale, beating expectations and solidifying Peru’s status as the premier emerging market safe haven. Though the country has defaulted eight times on its financial obligations since independence (1821), analysts are confident such troubles are unlikely to recur given the modest debt-to- GDP ratio which is set to reach 35% by year’s end after taking into account pandemic-related emergency spending.

Though Peru’s public healthcare system has struggled to keep up, with some hospitals running out of oxygen and others unable to cope with the influx of covid-19 patients, the country was financially better prepared to meet the emergency than most of its peers. Thanks to robust foreign currency reserves and a low level of indebtedness, the government was able to decree a comprehensive package of economic and social support measures equal to 13% of GDP. However, just a tiny fraction of the proceeds of the recent commodities boom that propelled Peru to the top of the regional growth league was invested in public healthcare. Moreover, the lockdown decreed in early March failed to take into account Peru’s outsized informal economy. Many day labourers fell through the cracks and were forced to ignore the rules in order to generate an income. Though it crippled the economy, the lockdown failed to contain the spread of the virus. BIG SPENDER A study commissioned jointly by the Organisation for Economic Cooperation and Development (OECD) and the World Bank found that Peru went into the pandemic with only 3 intensive care beds per 100,000 people, compared to more than 18 in Argentina, Brazil, and Uruguay. At the start of the Corona Pandemic, the nationwide stock of ventilators amounted to just 40 units whereas medical authorities asked for at least 540. As of September, Peru ranked sixth worldwide for the number of covid-19 cases and was the second (after San Marino) to cross the threshold of 1,000 corona-deaths per million inhabitants. The rise in the number of excess deaths, too, was amongst the highest in the world with 94,200 recorded between March and October – 133% more than statistics would have predicted for the period. 160

"A deficient legal framework, and failing budgetary oversight, causes Peru to spend more than most of its peers in the region on treatments." Critics blame Peru’s relatively poor performance in dealing with the health emergency on the mismanagement of a system broken by two decades of underfunding. Spending on social services, including public healthcare, has been slashed to 9.4% of GDP – less than half the South American average. A deficient legal framework, and failing budgetary oversight, causes Peru to spend more than most of its peers in the region on treatments. Numbers compiled by the Pan American Health Organisation show that a year’s treatment of AIDS patients costs Peru $3,832 whilst Brazil disburses only $182 for generic medication that provide the exact same level of care. A Peruvian professor of Economics at Rutgers University, Roberto Chang, concludes that apart from the finance ministry and central bank, the country’s institutions have proved incapable of dealing with the viral outbreak. Prof Chang attributes the failure to red tape, procedural ambiguities, and operational inefficiencies that clogged up procurement process and stopped hospitals from getting the support they needed. BIG RECIPIENT Displaying and embarrassing disconnect between the House of Pizarro (historical revisionism has not yet visited Peru’s presidential palace) and the nation, President Martín Vizcarra in July delivered a defiant speech in which he denied any wrongdoing and refused to apologise for his mishandling of the crisis, blaming local authorities for any mistakes instead. In early November, Mr Vizcarra was impeached by parliament and removed from office for ‘permanent moral incompetency’. A scandal had been brewing since the office of the comptroller general discovered that Mr Pizcarra, whilst head of the Moquegua regional government, received $1.2 million in illicit payments from a contractor in charge of building a new hospital. This first revelation of administrative impropriety was soon followed by a veritable avalanche of other charges, culminating in Mr Vizcarra’s removal from office. However, his successor Manuel Arturo Merino lasted only five days and had to vacate the presidency in a hurry after a CFI.co | Capital Finance International

wave of popular protest against the politicians’ job carrousel inundated Lima and threatened to escalate. Author of more than 25 books and former World Bank official Francisco Sagasti was handed the reins of power as caretaker president and promptly got embroiled in a scandal of his own after he replaced the chief of national police with a relatively junior officer, leading to the instant early retirement of 17 commanders passed over for promotion and the destabilisation of the incoming administration. BIG SILVER LINING Though the street protests have subsided, their size and intensity demonstrated the almost universal contempt in which the country’s political class is held by voters. Almost half of Peru’s 130 members of congress are under investigation for corruption or fraud. However, they enjoy parliamentary immunity and cannot be prosecuted. Paradoxically, the politicians’ greed has been amplified by the country’s economic success. Since 2000, Peru’s GDP has almost quadrupled on the back of strong Chinese demand for commodities such as copper. With 21 candidates now jockeying for position in the April presidential election, Peru is unlikely to revisit the relative political calm of the early 2000s which set the stage for the growth spurt that followed. Worryingly, none of the ‘pre-candidates’ seem to support the current economic model as criticism is cheap and populism, well, popular – and wins votes. The younger generation, yanking the chains of the establishment, have little to no memory of the 1980s and 1990s when Maoist guerrillas ran amok, and economic crises followed in quick succession – and without let down. All that notwithstanding, and quite miraculously, Peru’s macroeconomic numbers and performance are holding up exceptionally well. The country, though devastated by the pandemic, stands a good chance of emerging buoyant next year with growth rates hugging the double digits before long. Investors seem unburdened by doubt and remain bullish on Peru, even more so than on neighbouring Chile which also suffered more than most on account of the Corona Pandemic and experienced its own winter of discontent. i

The Two Sides of Capital Flows into Brazil By Otaviano Canuto

There was a significant inflow of funds in Brazil's external financial account in October and November for investments in both stocks and fixed income instruments.

he bulk of the recent inflow has come in a passive way, and it did not include much volume on the side of active investors. For the wave to unfold in the availability of external resources to finance investments in the country, progress and confidence in the domestic fiscal and regulatory agenda will be relevant. FDI in Brazil this year remains weak (Chart 1) but there was a significant inflow of funds in the external financial account in October and November for investments in stocks and fixed income instruments. The portfolio investment account for the year remains in the red (Chart 2). The substantial departure in March and April, reflecting the tremendous shock that Covid-19 brought to the global financial markets, has not yet been fully offset by inflows since June. But for some, the recent figures gave rise to a feeling that the improvement in international financial conditions was sufficient to guarantee tranquility on the external front. The external inflow was an important factor for Brazil’s equity index (Ibovespa) to register an increase of 17.73 percent in November, which reduced the fall in 2020 to 4.35 percent. In dollars, due to the appreciation of the real in the month, the appreciation was almost 25 percent, placing the Brazilian stock exchange as the best performing of emerging economies and the three largest Wall Street indices (S&P 500, Nasdaq and Dow Jones). It is also worth noting that the share of foreign investors holding domestic public debt securities rose from 9.44 percent to 9.79 percent in October.

Chart 1: FDI monthly flows 2020 (USD $ billion). Source: Central Bank of Brazil

Chart 2: Portfolio investment - net flows 2020 (USD $ billion). Source: Central Bank of Brazil

What now? Could those who drew so much attention to the need for advances on the domestic policy side be exaggerating? Wouldn’t the approval of reforms to facilitate compliance with the public spending ceiling be a precondition for relying on foreign financial resources in the recovery of Brazilian economic growth? The truth is that capital flows to emerging economies respond to external, more general, and domestic, country-specific factors and impulses. They are always the combined result of both, which implies recognising that, at the limit, domestic factors make each country 162

Chart 3: Cross-border flows have surged in two of the past three weeks. Weekly foreign investor flows to local emerging markets (USD $ billion). Source: Institute of International Finance. © FT

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unique. In the current Brazilian scenario, it is not possible to fully rely on the evolution of international financial conditions. Let's look outside. News of effective vaccines with lower logistical requirements has fuelled optimism about the future of the global economy. The appetite for taking risks has increased, particularly given the prospect of prolonged low rates of return in low-risk applications. The US election outcome also contributed to this. Then, in November, there was a rush towards assets in emerging economies, accompanied by another for stocks and debt securities in the US. In the case of emerging markets, there is a clear return to the situation prior to the Covid-19 financial shock and the capital flight in March. Emerging stock funds attracted nearly $14bn in the second and third weeks of November, while $22bn moved to buy stocks of those countries in the same month. Debt securities from those countries were also acquired with intensity (Chart 3). The appetite for risk and the prospect of improvement in the global economy were manifested in a portfolio rotation, with a stronger demand for energy and financial services in relation to assets already valued in Wall Street. The Brazilian stock exchange as a destination

benefited from the fact that it has banks, Vale and Petrobrás as main stocks. There is also a forecast that the dollar will gradually devalue against other currencies. This tends to raise dividends and interest earned in local currencies with emerging assets in dollars, and facilitates the payment of debt commitments abroad by governments and companies in these countries. Just remember the hardships of some — like Argentina and Turkey in 2018 — in times of dollar appreciation. The possibility that, at some point, the Federal Reserve will be urged to raise interest rates and/ or undo its quantitative easing (QE) remains. The simple conjecture could generate a new “taper tantrum” like that of 2013, when the mere announcement by the Fed that it was planning to exit QE caused a huge outflow of capital from emerging countries with current account deficits, including Brazil at the time. In any case, this is not likely any time soon. How about the country-specific side in the Brazilian case? First of all, it should be noted that the bulk of the recent inflow has come in a passive way, that is, as a component of funds that seek exposure to emerging assets in general. In this a group, Brazil occupies a significant position despite recent changes recent in indices. As an increasing volume of CFI.co | Capital Finance International

resources in the global financial markets has been driven by exchange traded funds (ETFs), in relative terms, lower quality assets (lower-rated sovereign bonds, less liquid stock markets) undergo more positive and negative impacts than the others in situations of increase or decrease in the size of ETFs. The recent inflow of capital in Brazil did not include considerable volume on the side of active investors, those who look directly at specific assets. For these, country-specific domestic determinants weigh more. For the ongoing positive wave to unfold in the availability of external resources to finance investments in the country, progress and confidence in the domestic fiscal and regulatory agenda will be relevant. Public-private partnerships, as fiscal space for public investments, will continue to be tight in the coming years. As the inflow of funds is no longer obtained by offering high interest premiums on the public debt, its full return will have to occur for exposure to assets of another nature. Many think that the Brazilian economy is at a crossroad, with possible positive or negative trajectories in the interaction between risk premiums, interest, public debt and GDP. Capital inflows or outflows will respectively reinforce positive and negative trajectories. And the homework will make a difference. i 163

> EY Argentina:

Argentina Amends Promotional Tax System for Knowledge-Based Firms By Sergio Caveggia and Jimena Rocío García

ith technology disrupting business models in various sectors of the global economy, Argentina has finally introduced tax incentives for knowledge-based industries.

Law number 27,506 was first published in the Official Bulletin on June 10, 2019, and established the promotional regime for the knowledge-based economy. But the regime was suspended by the government this January, with the intention of introducing amendments. In February, a bill to do that was submitted to the Chamber of Deputies. According to the submission letter, the main goal was to divide benefits according to the size of each local company and the level of maturity of each production sector, while continuing to promote and accompany the development of large companies for the good of the country. On October 26, Congress enacted Law No. 27,570, which imposed new qualification requirements and modified certain benefits. The regime will be in force until December 31, 2029. Government representatives said the amendments were aimed at building a new and progressive tax system that promotes quality employment, technological development and export of added value. In this sense, the changes seem to strengthen opportunities for entrepreneurs, support the export development of small knowledge-related services companies and contribute to territorial and gender equality. While the new law finally provides a legal framework that removes uncertainty for these industries, it is not certain that it was worth the wait. Have the reforms really improved the capacity of the knowledge-based industries to generate employment, federal economic development and foreign exchange reserves? The new law does not modify the activities that were originally subject to promotion. Those are: (i) software and IT and digital services; (ii) audiovisual production and post-production, including digital formats; (iii) biotechnology, bioeconomy, biology, biochemistry, microbiology, bioinformatics, molecular biology, neurotechnology and genetic engineering, geoengineering, and their trials and analyses; (iv) geological and prospective studies, and services related to electronics and communications; 164

(v) professional services, insofar as they constitute export services; (vi) nanotechnology and nanoscience; (vii) aerospace and satellite industry, space technologies; (viii) engineering for the nuclear industry; (ix) manufacturing, finetuning, maintenance and introduction of goods and services aimed at production automation solutions, including feedback cycles from physical to digital processes and vice-versa, characterised at all times by the use of industry 4.0 technologies such as AI, robotics and industrial internet, Internet of Things, sensors, additive manufacturing, and augmented and virtual reality. It also comprises engineering, exact and natural sciences, agricultural sciences and medical science activities related to research and experimental development tasks. Under the amended regime, professional services qualifying as exports include legal, accounting, management, public relations, audit, tax and legal advisory, translation and interpretation services, human resources, advertising, design, engineering and architectural services. REGISTRATION REQUIREMENTS Companies intending to enjoy the tax benefits shall be required to prove that: • 70 percent of their total billing in the past year arises from promoted activities. The professional services must meet this requirement to the extent of their export • the promoted activities are performed intensively to incorporate the knowledge arising from scientific and technological progress made in their products, services or production processes, so as to add value and innovation, under the terms and the scope set by regulations and along with the documentation or requirements for this purpose. This last item in particular seems to refer to the technological processes or activities promoted within a company that are incorporated to final products or services, but do not generate any revenue in themselves. It is clear that the administrative order will have to determine how to articulate the benefits in these cases, as many domestic companies could incorporate part of their activities into this system. The law also sets forth that those interested in applying for the promotion shall meet two of three requirements in relation to the promoted activity: (i) provide evidence of continued CFI.co | Capital Finance International

improvements in the quality of their services, products or processes, or through a well-known quality standard; or (ii) prove the disbursements made in (a) training a percentage of their payroll employees, or (b) research and development as a percentage of total billing; or (iii) prove the export of goods or services arising from promoted activities or their development and intensive application as a percentage of total billing. These requirements were included in the first version of the law. The new bill breaks down the percentages to be applied based on the definition of micro-, small- and medium-sized or large enterprises. As to the training ratio applicable to employees assigned to promoted tasks, microenterprises must disburse at least three percent of total salaries, SMEs at least five percent, and large enterprises, eight. As to the research and development ratio, microenterprises shall prove disbursements for at least one percent of total billing and SMEs two percent, while three percent was set for large enterprises. The requirement related to the exports of goods and services breaks down the percentages as follows: four percent in the case of micro enterprises, 10 percent for SMEsm or 13 percent for big enterprises SELF-DEVELOPMENT The new law excludes the self-development activity from the promotion system, which cannot be calculated as part of the billing percentage required to have a promoted activity. The law defines self-development as that carried out by an artificial person for its own benefit or for companies that are related from the corporate

Winter 2020-2021 Issue

and/or economic perspective, in all cases in the capacity of final user. This is not irrelevant. It could be interpreted that, if the service beneficiary were not the “final user” of the process or product outsourced by the local company, the activity would not qualify as self-development and could be computed within the billing percentage required, as the product or service would be marketed in turn by the foreign company to its customers or final users. BENEFIT STABILITY According to the original law, beneficiaries enjoyed tax stability in relation to the promoted activities and during its effective term. Tax stability implies that the total domestic tax burden of beneficiaries will not be increased upon their request to join the system. The text amended indicates now that “[…] The parties subject to the system […] shall receive stable benefits in relation to their promoted activity or activities as from the date of registration with the registry […] during its effective term […].” The difference is that, based on the new text, taxes could be levied on a specific industry or activity, and tax stability would not be affected to the extent that the benefits originally granted are not amended. This will generate uncertainty when defining the direct investment, as the business models that will be built will eventually reflect an increase in the expected profitability of the model itself because of such uncertainty. The tax credit certificate granted by the system for 70 percent of employer contributions will be subject to a tax quota to be determined by the enforcement authority. How the tax stability benefit is granted to beneficiaries and the tax quota to be defined by the enforcement authority at its own discretion should be clarified. TAX BENEFITS Besides the stability for the taxpayers, companies within the knowledge-based regime will receive the following benefits: • A 60 percent reduction in the income tax rate for micro and small enterprises, a 40 percent reduction for medium-sized enterprises and a 20 percent reduction for big enterprises, applicable on the income originated in the promoted activities (which, considering the current general rate of 30 percent, would result in effective income tax rates of 12 percent, 18 percent and 24 percent, respectively) • A tax credit bond that equals 70 percent of the amount payable as Social Security contributions on employees working in the promoted activities (80 percent if those employees are female employees, professionals graduated in engineering and/or exact or natural sciences, people with disabilities and other specific groups) and applies to up to 3,745 employees (and to new hires for promoted activities that increase the total headcount).

The tax credit bond may be used to offset federal taxes, except income tax (only exporters of services or goods originated in the promoted activities will be allowed to offset income tax) and is not transferable. System beneficiaries performing exports in relation to promoted activities will not be subject to VAT withholdings or additional withholdings. Nor shall the additional withholdings made abroad be computed towards income tax, and those charges may only be deducted if the resulting income is the consideration for the promoted activities and is classified as Argentinesource income. Finally, the law sets forth the creation of the Trust Fund for the Promotion of Knowledge-Based Economy (FONPEC, in Spanish). The resources of that fund will arise, among other sources, from the contribution of system beneficiaries of up to four percent of the total amount of benefits received.

Author: Sergio Caveggia

Under this new scenario, and while Covid-19 is still impacting the world, companies doing business in Argentina have a new tool to develop a growing strategy — if knowledge and technology are key drivers of their business models. i 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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> North America

Landlords Stuttering as Commercial Rent Recovery Rates Drop Hal Lawson, CEO of Tractor Supply Company, is betting the kitchen sink on a hybrid post-pandemic new normal that includes optional visits to the office – which will likely be ‘amenitised’ with all sorts of cutesy add-ons to lure workers away from the comforts of home. Tractor Supply Co’s over 1,800 retail outlets are ready to meet the expected surge in orders for homely office necessities, just as they anticipated the jump in demand for backyard poultry. The company sold more than 11 million chicken since March.

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awson is firmly in the camp of Microsoft founder Bill Gates who repeatedly expressed his conviction that ‘on the other side’, business will be conducted differently. Gates predicted that workrelated travel is set to return to just half of its pre-pandemic volume. He also expects time spent in the office to shrink by 30 percent or more. CEOs and investors have been clogging up internet servers with countless videoconferences in an attempt to figure out what the new normal will look like. It’s an imponderable. Meanwhile at the Tractor Supply Co, Lawson is preparing for ‘pet humanisation’. In a call with investors, he argued that since people are going to spend more time with their animals, they will likely buy more toys, snacks, beds, crates, and ‘those sorts of things’ for furry and feathery creatures, adding to the retailer’s bottom line. Elsewhere in the market, this hybrid scenario is causing considerably less excitement. After falling off a cliff in March, commercial real estate is in the dumps and unlikely to emerge any time soon. Not only did the sector suffer a major shortfall in cashflow as rent arrears accumulated, the shift in business culture detected by Gates and others does not portend well for its immediate future. DEMAND DESTRUCTION Subsectors such as warehouses and datacentres are holding up nicely, but demand for office and retail space has plummeted as tenants downsized, folded, stopped paying, or filed for bankruptcy. Moreover, demand destruction has significantly boosted the bargaining power of leaseholders who argue, not unreasonably, that landlords should say ‘thank you’ whenever they are thrown a few dollars. The sector now faces a major quandary, if not a conundrum: Whilst brick-and-mortar businesses are dropping like flies and Main Streets are being shuttered from sea to shining sea, commercial property owners and managers need to face reality and actively support whatever retailers are left by slashing – more likely decimating – rents for whomever does not depend on footfall for their sales. A growing number of major retailers are looking to renegotiate contracts and pay rent as a percentage of sales, making it a variable expense rather than one set in stone. Most landlords are resisting the move as it makes predicting

emerge any time soon."

have moved online. A report by management consultancy McKinsey showed that consumers are gravitating towards new forms of shopping such as mobile apps and click-and-collect. According to Target CEO Brian Cornell, there are plenty of profit veins to be explored in ‘new normal retail’. In particular, buy-online-pickupin-store (BOPIS) which spiked over social distancing concerns: “Same-day delivery option that rely on store assets and inventory cut out 40 percent of the cost compared to online order fulfilment.”

future revenue streams more difficult. Ami Ziff who manages retail rentals for Time Equities is willing to consider restructuring deals in order to avoid court battles but warns that he must also mind his company’s own bottom line: “If we gave everyone free rent, I would go out of business.”

Target reported a remarkable third quarter that exceeded analyst expectations. Cornell remains pretty upbeat and expects to end the year on a high note thanks to the timely implementation of changes to the in-store and online shopping experience.

Miami property manager Bal Harbour Shops is not willing to talk and has taken its defaulting renters straight to court, including high-end retailer Saks Fifth Avenue for failing to pay $1.8 million. Saks promptly countersued alleging defamation and breach of contract and of fiduciary duty. In the most acrimonious court battle over rent arrears, Simon Property sued casual fashion retailer Gap for accruing a debt of $66 million. Gap immediately countersued seeking relief which, in turn, sparked yet another lawsuit from Simon Property, the biggest US mall owner, claiming that the retailer was taking ‘opportunistic advantage’ of the corona scare to avoid paying rent.

The McKinsey Retail Reimagined study detected a decrease in brand loyalty with up to 40 percent of respondents stating that they tried new retailers and different, mostly less expensive, brands. Online holiday sales volumes are forecast to rise by at least 19 percent over last year.

"After falling off a cliff in March, commercial real estate is in the dumps and unlikely to

In New York, the mismatch between demand and supply of commercial space has already led to a sharp decline in rents with average asks falling below $700 per square foot along Manhattan’s 16 major retail corridors for the first time since 2011. Meanwhile, the number of area leases available hit a record 235. NO FESTIVE CHEER Absent a relief package such as the one that tided households and small businesses over the first wave of the Corona Pandemic, consumer spending and sentiment are facing serious headwinds. Retailers have few reasons to cheer the festive season. A survey commissioned by JP Morgan of credit and debit card spending showed a large decline with the biggest drops registered in states where the rate of infection is highest. Black Friday, Cyber Monday, Singles Day, and other such blockbuster shopping events

Groceries, the last bastion of brick-and-mortar, is also moving online with 39 percent of shoppers queried by McKinsey reporting that they had purchased products online not considered before such as groceries. For local retailers, the main bottleneck for shipping groceries has been finding, and adhering to, delivery timeslots. Generation Z and Millennials have contributed most to the rapid rise of online shopping with Baby Boomers trailing and the Silent Generation apparently not even bothering. Online orders now represent around 10 percent of larger grocery stores and chains, up from 7 percent just a few months ago. Industry watchers expect this segment to grow by a third or more next year as shopping habits change, Main Streets become deserted (and depressing), and customers become accustomed to the convenience of online grocery shopping. Thus, the good times have ended for commercial real estate funds, managers, and developers. The sector is in for upheaval and ready for disruption and a change to its core business model. Some brick-and-mortar retailers such as Target have shown that storefronts are still featured in the new normal. However, how they operate, and are paid for, remain mystifying imponderables. i

"Generation Z and Millennials have contributed most to the rapid rise of online shopping with Baby Boomers trailing and the Silent Generation apparently not even bothering." 168

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Winter 2020-2021 Issue

> Jeffrey Phlegar:

A CEO with a Full Plate, an Open Mind — and a Commitment to ESG Integration MacKay Shields chairman and chief executive Jeffrey Phlegar leads development and execution of the firm’s strategic direction — and holds overall responsibility for the boutique’s $144bn global business.

n his capacity as steward to the portfolios entrusted to his care, Phlegar believes that “through our actions as investment managers and citizens, we have a responsibility to contribute to the well-being of the communities in which we operate, live, and serve”.

Phlegar is also a member of New York Life boutique Candriam’s Belgium board of directors, and a member of the management committee of New York Life Investment Management. Phlegar explains that “ESG and sustainability factors, including climaterelated matters, can have a material impact on the long-term risk and return profile of investment portfolios and as such – consistent with our fiduciary duty to act in the best interest of our clients – should receive appropriate consideration in research, portfolio construction, and risk management.”

MacKay’s key value pillars of integrity, respect, development, equality and service guide its commitments to clients, employees, and communities. “Our recognition of the importance of ESG considerations in the way we live, conduct our business, and how we both assess and manage risk in client portfolios are natural extensions of these key value pillars,” says Phlegar.

MacKay’s investment teams have always emphasized a bottom-up research-driven assessment of both risk and return. The consideration of ESG-related risks and opportunities, alongside more traditional factors, is a natural extension of the MacKay approach. Phlegar concludes: “Our investment teams are responsible for assessing and managing ESG related risks. We do not outsource that responsibility. We own it. MacKay’s 2020 highly favourable PRI rating is indicative of that commitment.” i

Since joining MacKay Shields in 2011, Phlegar has focused on incorporating ESG and sustainability into investment processes as part of MacKay’s risk management and long-term value-creation philosophies. He has additional responsibilities as vicechairman of the parent company’s affiliate, New York Life Investment International.

Please refer to company disclosure on page 143.

Chairman and CEO: Jeffrey Phlegar

OUR VALUES, OUR COMMITMENT INTEGRITY

RESPECT

DEVELOPMENT

EQUALITY

SERVICE

gaining and maintaining trust is paramount

acknowledging and respecting the importance of relationships is vital

providing opportunities for growth

diversity among individuals fosters the best ideas for our clients

active involvement in making differences in our communities

Our Commitment to Our Clients CFI.co | Capital Finance International

Our Commitment to Our Employees 169

> MacKay Shields:

Proprietary Research Means Precise, Accurate Information on Risks and Potential Profits

ew York-based MacKay Shields specialises in fixed income and less efficient segments of the global equity markets, where its research and portfolio construction techniques have generated attractive outcomes for clients.

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The firm has 80 investment professionals and manages $144bn in AUM across independent investment teams: Global Fixed Income, High Yield, MacKay Municipal Managers, Convertibles, Leveraged Loans, Systematic Equity and Fundamental Equity. CFI.co | Capital Finance International

The firm is wholly owned by New York Life Insurance Company, and has offices in Dublin, London, Princeton, and Los Angeles. “We believe the responsibility for understanding ESG and sustainable investment considerations

Oversight Winter 2020-2021 Issue

INTEGRATION

Enhance ESG integration within investment teams and across the firm

INFORMATION SHARING

TOOLS

Share information Keep current with new and ideas on ESG and existing third party research, trends and ESG products and tools to developments support internal efforts

TRAINING

Offer ESG training and education

"Exclusionary investment approaches cannot be the principal basis on which to promote and advance ESG and sustainability best-practice. We aim to assess an issuer’s awareness and management of what we view to be financially material ESG issues." cannot be outsourced and should instead be fully owned by MacKay Shields and our investment teams,” says CEO Jeffrey Phlegar. “The consideration of environment, social, and governance factors should be naturally integrated into each team’s portfolio management practices.” Top-down and bottom-up proprietary research has long been the core of MacKay Shields’ investment teams in assessing risk and return at the security and portfolio levels. The consideration of ESG-related risks and opportunities has been a natural evolution and extension for each MacKay Shields investment team. This is an integral component of sound fundamental research, and central to MacKay’s approach. “Maintaining a constructive dialogue with issuers and market participants is the best path to achieving long-term value for our clients,” says company president Janelle Woodward. “Exclusionary investment approaches cannot be the principal basis on which to promote and advance ESG and sustainability best-practice. We aim to assess an issuer’s awareness and management of what we view to be financially material ESG issues.” What most distinguishes MacKay is its proprietary ESG research and the asset class specialisation of its individual teams. Third-party research is available, but the quality and depth of such data sometimes lacks consistency. Proprietary

"The consideration of ESG factors should be naturally integrated into each team’s portfolio management practices."

research and deep asset class knowledge are key to understanding ESG issues at the issuer level. This is particularly important in asset classes such as municipal bonds with thousands of individual issuers, where no substantive thirdparty ESG vendor data is available, or high yield - where a large number of US issuers are private with limited public information available on ESGrelated concerns. “We regularly compare our own ESG ratings against those of a prominent service provider,” says High Yield Team MD Won Choi. “They are often aligned, but there are times when notable deviations occur because of the additional insight we have gained through our research and analysis of the company.” The implementation of an integrated ESG approach can be challenging for some — and a powerful advantage for MacKay’s specialists with deep asset class expertise. MacKay Shields’ investing framework is united through its Responsible Investment Advisory Committee, comprised of senior members across the firm, including investment professionals. The firm’s commitment to responsible investing is evident from its growing reputation for disciplined, ESG-focused investment research. It has earned a favourable rating for its PRI Strategy & Governance module, and intends to continue knowledge-sharing research and collaboration with clients and partners. i

Note to European Investors: This information is intended for the use of professional and qualifying investors (as defined in the Alternative Investment Fund Manager’s Directive) only. This information has been provided by MacKay Shields UK LLP, 200 Aldersgate Street, 13th Floor, London EC1A 4HD, which is authorised and regulated by the UK Financial Conduct Authority (FRN594166) and/or MacKay Shields Europe Investment Management Limited, Hamilton House, 28 Fitzwilliam Place, Dublin 2 Ireland, which is authorised and regulated by the Central Bank of Ireland. Please refer to important disclosures at mackayshields.com/images/pdf/IMPORTANT-DISCLOSURES.pdf

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> OECD:

Advancing the Global Agenda on Blended Finance and Sustainable Development Impact By Esme Stout

n its efforts to implement the 2030 Agenda for Sustainable Development and the Addis Ababa Action Agenda, the international development community has been working to promote the mobilisation of financial resources beyond official development assistance, across both the public and private sectors. However, progress is slow and uneven. According to the UN, a USD 2.5 trillion financing gap for the Sustainable Development Goals (SDGs) persists. This is further complicated by the unprecedented consequences of COVID-19, which risk widening that gap and reversing hardwon gains made towards the SDGs. One year into the ‘Decade of Delivery’, this heightened sense of urgency compels development actors to work harder than ever. The OECD advocates a threestep approach to fulfilling the 2030 Agenda, centred upon (i) the mobilisation of greater resources, (ii) ensuring every penny is aligned and compatible with the SDGs, and (iii) reaching consensus on standards, frameworks and tools to effectively measure and manage the impact of investments on sustainable development. The OECD Development Assistance Committee (DAC) is committed to moving the needle on this agenda, both in times of crisis and beyond. In November 2020, the OECD, together with the United Nations Development Programme (UNDP) and French Presidency of the G7, formally launched a framework to better align finance to the SDGs. Likewise, earlier this year, the DAC committed to continuing work on emerging themes related to blended finance and impact . To this end, a new Community of Practice on Private Finance for Sustainable Development (CoP-PF4SD) facilitates dialogue between the public and private sectors on a work programme centred upon blended finance and impact. More broadly, this process constitutes part of an overall drive to ‘build forward greener’ post-COVID-19.

In just under a year, the Community of Practice has achieved landmark progress on its two main objectives: the adoption of the Blended Finance Principles Guidance and considerable work towards the forthcoming Impact Standards for Sustainable Development. In order to help investors operationalise the 2017 Blended Finance Principles, the DAC adopted the Guidance in September this year. This detailed document builds on years of 172

"Today, impact is a crowded landscape that remains characterised by sweeping disparity between actors." detailed research and consultations with donors, development finance institutions (DFIs) and civil society organisations (CSOs), on how to push capital more effectively into SDG-aligned programmes, projects and markets. Another key to liberating the potential of blended finance for sustainable development is to improve the measurement and management of the impact of investments. Today, impact is a crowded landscape that remains characterised by sweeping disparity between actors. Altogether, donors do not receive ODA-equivalent levels of transparency and accountability concerning their investments made with the private sector. A consensus is emerging on the critical need for a DAC-specific response to the impact challenge. The OECD is therefore developing Impact Standards for Financing Sustainable Development (IS-FSD), which will be presented to the DAC for adoption in the first quarter of 2021. Drafted in collaboration with the UNDP, a fellow member of the Impact Management Project, the Impact Standards seek to provide a common framework for donors and their private sector partners to manage the impact of their investments. This includes helping them optimise their positive contribution towards the SDGs, promoting impact integrity, and avoid “impact washing”. Grouped around impact strategy, management, transparency, and governance, the Impact Standards are contextualised within the broader impact ecosystem populated by existing initiatives such as IFC’s Operating Principles for Impact Management (OPIM) and the Impact Management Project (IMP). The Standards are also accompanied by detailed guidance on implementation, identifying what success looks like according to different governance arrangements and resource availabilities. Ultimately, the Standards constitute a best practice guide and self-assessment tool, and CFI.co | Capital Finance International

as such will be made freely available following adoption for subscription on a voluntary basis. In recognition of the current disparity in impact measurement and management processes, as well as to facilitate uptake amongst donors, new players and the private sector, subscription to the Standards will not entail any reporting requirements to the OECD. Rather, the aim is to facilitate the sharing of best practices through forums such as the CoP-PF4SD in order to improve collective performance of the DAC and beyond. The OECD is committed to the idea of broad applicability. This desire to provide a framework applicable to all organisations with a desire to demonstrate public accountability regarding impact, is further reflected in the wide-ranging consultation process used to inform the Standards. Now in the sixth round, the Standards incorporate a wealth of insights provided by a variety of relevant stakeholders both within and outside the CoP-PF4SD. As well as donors, this process involved DFIs, private sector representatives, and CSOs, as well as impact measurement and management experts. In February 2021, the OECD will be celebrating the first anniversary of the establishment of the Community of Practice. Beyond this and throughout 2021, we look forward to continuing to debate the Community’s work on blended finance and impact, to officially launch the Blended Finance Overarching Guidance, and discuss the forthcoming Impact Standards for Financing Sustainable Development. i

References available online at CFI.co. ABOUT THE AUTHOR Esme Stout is a Junior Policy Analyst working in the Private Finance for Sustainable Development Team at the OECD, where she primarily works issues relating to the measurement and management of impact. Prior to this, she worked for the UK Foreign, Commonwealth and Development Office in Paris and Brussels. Esme holds a Master’s Degree in International Security from Sciences Po Paris and a Bachelor in History from Oxford University.

Winter 2020-2021 Issue

> Head of ESG Client Strategies, North America at Invesco - Glen K Yelton:

ESG is Important for the Planet and For Us Glen K Yelton is a leader in ESG with more than 20 years of experience in sustainable investing.

elton joined Invesco in 2019 as head of ESG client strategies for North America, and is currently based in Atlanta. He works with product teams to identify new opportunities in ESG, and contributes to building ESG strategies. Yelton works in a 13-member team led by Cathrine de Coninck-Lopez, global head of ESG for Invesco. Previously, Yelton has served as the director of ESG and impact investing on OppenheimerFunds’ SNW Investment Team. SNW was an independent firm acquired by Oppenheimer that focused on building and managing customised and tax-efficient fixed income portfolios. In this role, Yelton led a team directly supporting Oppenheimer’s ESG and investment strategies. Prior to joining the SNW team in 2015, Yelton managed the ESG research programme at IW Financial, a global ESG data and ratings firm. During his tenure, the firm developed and deployed several innovative data and ratings solutions. Before that, he oversaw ESG data collection at American Values Investments. Yelton has also provided competitive intelligence research for a variety of Fortune 100 clients across several industries, and served as an interrogator for the US Army and graduated from East Tennessee State University. Invesco recently launched Invesco ESGintel, where its ESG team partnered with Invesco’s Technology, Strategy Innovation and Planning team to create a proprietary ESG ratings tool. The tool provides comprehensive coverage of ESG insights, metrics, data points and direction of change on over 8,000 companies. ESGintel takes a sector materiality focus to select indicators to ensure a targeted focus on the issues that matter most for sustainable valuecreation and risk management. This provides a holistic view on how a company’s value chain is impacted by ESG issues. Invesco is committed to ESG investing as it recognises that ESG matters greatly to clients, communities and stakeholders. “It also matters to us,” says Yelton. “By 2023, our goal is to have 70 percent of our global assets to be ESG integrated and 10 percent of our AUM to be dedicated to ESG strategies.”

Head of ESG Client Strategies: Glen K Yelton

For Invesco, ESG investing is an essential part of the solution for a sustainable future and an important agent of change in driving a holistic perspective on the investment industry’s role. CFI.co | Capital Finance International

“Invesco’s commitment goes beyond delivering elements of ESG at a functional level,” says Yelton. “It goes to the heart of the way we are working with our clients to realise the value they seek.” i 173

ESG in Company DNA Makes Responsible Investment as Obvious as ABC for Invesco For more than 30 years, Invesco has demonstrated its commitment to responsible investing by actively encouraging ESG practices across every area of its business.

t applies ESG concepts to the products it offers, its investment processes, and its corporate behavior. Invesco’s approach focuses on integrating ESG risk and opportunity factors into investment decisions, differentiated by asset classes and decentralised by local investment centres. This integration extends to engagement and active ownership. Invesco’s support for responsible investment comprises the following elements: Diverse Commitments to ESG Due to Invesco's diversity, its investment strategies and styles vary in their approach to implementation. This is underpinned by external research and a global team of experts with the capacity to manage ESG solutions depending on client need. Engaged Investors Invesco sees engagement as an opportunity for continual improvement. Dialogue with investment companies is a core part of its investment process and one of the most powerful mechanisms for mitigating risk, enhancing return potential and having a positive impact on society and the environment.

“We have taken a lead investor role with one company in 2020 as part of Climate Action 100+ and are involved in several collaborative engagements,” says Glen K Yelton, head of Invesco ESG client strategies for North America. Proxy Voting Invesco’s patented proxy voting portal facilitates investment-led voting decisions. This proprietary tool encourages knowledge collaboration, leverages multiple sources of research and enables investors to focus on long-term shareholder value. GLOBAL COMMITMENT TO ESG INVESTING ESG is a strategic competitive differentiator that helps Invesco clients to get more out of life. “We ensure that we’re doing what’s right for our clients,” says Yelton, “as well as our shareholders, employees and the communities in which we operate.” 174

"As an investor in global equities, corporate and sovereign fixed income, real assets and multiasset strategies, Invesco recognises the differences between asset classes and geographies, and applies ESG principles accordingly." The depth of the innovative strategies provides opportunities to deliver sustainable, long-term performance to clients. Invesco globally formalised its commitment in 2013 when it became a signatory of the UNsponsored Principles for Responsible Investment (PRI). “We were proud to be awarded an A+ rating in 2020 for our overall approach to responsible investment for the fourth consecutive year,” Yelton says. The PRI carries out the annual assessment based on how a signatory has progressed year-on-year and relative to peers. The rating demonstrates the firm’s efforts in terms of ESG integration, active ownership, investor collaboration and transparency. As an investor in global equities, corporate and sovereign fixed income, real assets and multi-asset strategies, Invesco recognises the differences between asset classes and geographies, and applies ESG principles accordingly. Teams incorporating ESG into their investment process consider it as part of the evaluation of ideas, company dialogue and portfolio monitoring. Assessment of ESG aspects is incorporated into the wider investment process as part of a holistic consideration of risk and opportunity. ESG aspects are considered along with other economic drivers when evaluating the attractiveness of an investment. “Our fund managers have absolute discretion in taking a view on any given ESG risk or opportunity,” says Yelton. “The core aspects to our ESG philosophy include materiality, ESG momentum and engagement.” CFI.co | Capital Finance International

Materiality refers to consideration of ESG issues on a risk-adjusted basis and in an economic context. ESG aspects are not seen as constraints, aside from certain restrictions driven by legal obligations in certain territories — such as Invesco’s non-investment policy in controversial weapons in EMEA. The concept of ESG momentum, or improving ESG performance over time, is a constant focus. Companies that improve their ESG practices tend to enjoy favorable financial performance in the longer term. Dialogue with portfolio companies is a core part of the investment process at Invesco’s fundamental teams. “We often participate in board-level dialogue and are instrumental in giving shareholder views on management, corporate strategy, transparency, and capital allocation as well as wider ESG aspects,” says Yelton. “The starting point for our company level ESG research is the analysts and portfolio managers, who will look at a variety of factors. These will differ per asset class, sector, geography and company and will typically be one component of an overall investment view.” Should the portfolio managers and analysts wish for more detailed ESG information, Invesco’s global team can provide proprietary analysis. Crucially, while there is global centralised support, decisions are ultimately made by investment managers and analysts — the experts who best know their asset classes and sectors. ESG investing is key to a sustainable future, driving a holistic perspective on the investment

Winter 2020-2021 Issue

Source: 2020 Assessment Report for Invesco Ltd., PRI. *Direct and Active Ownership Modules.

industry’s role in creating value. “Our commitment goes far beyond deliver elements of ESG at a functional level,” says Yelton, “it goes to the heart of being a trusted partner.” Diversity of thought means the firm’s ESG implementation is not generic. The global ESG team sets standards and provides specialist insights on research, engagement, voting, integration, tools, client and product solutions. Invesco’s investment officers and teams leverage this to tailor ESG approaches relevant to asset classes and investment styles. INVESCO ESGintel Invesco ESGintel is a proprietary tool built by the global ESG research team in collaboration

with the Technology Strategy Innovation and Planning (SIP) team, providing insights, metrics, data points and direction of change. ESGintel provides users with an internal rating, a rating trend, and a rank in GICS sectors. A sector-materiality focus to select indicators ensures a targeted focus on the most vital issues for sustainable value-creation and risk management. This provides a holistic view on how a company’s value chain is impacted in different ways by various ESG topics. These data points are then classified by sector or regional relative performance at the indicator level. Machine learning algorithms and extrapolations ensure broad coverage in CFI.co | Capital Finance International

the absence of coverage data, using a process by which statistical proxies are created in place of missing data and an estimated ESG score is assigned to an indicator. Ratings on a scale of one to five are calculated at the overall company, topic and indicator levels to facilitate a focus on higher risk company-specific issues. In addition to the individual rating, the momentum highlights the changes to the rating over time. ESGintel has been developed with a focus on materiality, allowing Invesco to compare companies on the most important ESG indicators. Invesco ESGintel is housed in a proprietary platform available to Invesco employees. i 175

> Matein Khalid:

A Random Walk Down Silicon Valley's Pre-IPO Deal Flow This article reflects my views and mine alone

020 was a spectacular year for investing in late stage technology unicorns and I am proud to have led significant investor syndicates from the Gulf for Elon Musk's SpaceX, the e-learning marketplace Udemy and Swedish fintech Klarna Bank. The secondary markets for the world's most successful, most coveted, fastest growing and most disruptive technology companies have now come of age and offer extraordinary opportunities for wealth creation for the select few GCC family offices and institutional investors who have the intellectual bandwidth and Silicon Valley networks to access, analyse and design private investments in this elite constellation of unicorns and decacorns. 176

The pandemic has accelerated the world's adoption of New Age technologies and thrust the history of digitalisation fast forward. The IPO market for the world's hottest technology companies is white hot, as the sixfold rise in cloud software data warehouse startup Snowflake's current market cap attests since its penultimate private market funding round. The Airbnb IPO next week will see the birth of the world's preeminent home rental sharing colossus at a $35 billion valuation on NASDAQ. Food delivery firm DoorDash will also go public at a $32 billion valuation next week. I know one lucky investor in the UAE whose $10 million stake in Airbnb when CFI.co | Capital Finance International

it was valued at a mere $1 billion in 2012 is now worth at least $350 million at the IPO offer price. Financial fairytales on this fabulous scale can only happen in Silicon Valley. This is the reason why I am obsessed with the deal flow, deal makers and deal narrators in technology's Mount Olympus that straddles San Francisco Bay. Inspired by the Amazon IPO in 1997, I went deal hunting on Sand Hill Road, the home turf of the world's leading venture capitalists, this journey will resume as soon as a vaccine makes it safe to fly from Dubai to San Francisco to revisit my familiar haunts in San Fran and the Valley (Silicon - and Napa!).

Winter 2020-2021 Issue

Ventures, Tiger Global, Tencent Holding, DST, Sequoia and Silver Lake?

by incumbent networks with whom a pre-existing relationship is mission critical.

Who would have thought that Flipkart founder Binny Bansal would grab e-commerce market share from Amazon, recruit Walmart as a strategic partner and morph into an Indian billionaire? I was thrilled to meet Ritesh Agarwal, a Marwari kid from Orissa with big dreams who founded Oyo Hotels and is now India's youngest self made billionaire at 26. This was only possible because both Binny and Ritesh were smart enough to plug into the Silicon Valley venture finance grid at an earlier stage in their careers.

A credible global exchange for private market technology deal flow simply does not exist and price discovery is often a matter of trial and error permutations. These asymmetries in information and access mean naïve investors can and will be skinned alive by the cognoscenti as the poor lambs who purchased private shares at a 30% premium on EquityZen and other such online retail platforms will find out the hard way to their bitter regret. In this treacherous minefield, price is often a variable of an irrational seller such as an employee with large tax liabilities or a divorce settlement and a buyer clueless about the real corporate valuation metrics in the private market netherworld of the global tech village.

Who would have thought that the Millennial/ Gen-Z generation, the biggest and richest in human history, will enable Robinhood to amass 15 million online brokerage accounts, more than the incumbent Big Four combined? There are few industries more ripe for large scale technological disruption than education, as the pandemic and soaring cost for private schools/ universities demonstrate. Global education is a $6.3 trillion industry alone and economists estimate the $200 billion edutech unicorns could be worth $800 billion in the next five years. This was the strategic rationale for our investor syndicate in Udemy, an e-learning marketplace with a footprint in 190 countries, 55 million students, 70% revenue growth and an exponential growth treasure trove of user generated content in 65 languages. Udemy's IPO in 2021 will be a Wall Street and global finance sensation. The pandemic has disrupted the careers of hundreds of million young people around the world for whom e-learning is not a luxury but a lifeboat for survival in a Darwinian global job market. As a client of various UAE retail banks since the 1990's, I have personally experienced the nightmare that visiting a bank branch or executing a complex transaction entails. Being charged some of the highest banking fees on earth for the privilege of less than mediocre service only adds insult to injury. Luckily the fintech revolution will turn conventional banking models just about as anachronistic as brontosaurus, the horse carriage and black & white TV. The value of a select few fintechs I track in California will rise 10 to 20 fold in the next decade. California, USA: San Jose City

Entire industries are being reinvented by the sheer ferment of the fourth Industrial Revolution. The global mania for electric vehicles, cloud infrastructure and artificial intelligence assets provides myriad opportunities to hunt for triple baggers in the late stage or even pre-IPO deal flow I encounter in the Valley. Industries like finance and education are being disrupted beyond recognition by the likes of PayPal, Square, Sofi, Udemy and Coursera. Who would have thought that a startup founded by a Malayalam math teacher from an unknown Kerala village named Byju would metastasise into a $12 billion e-learning colossus that raised money at 27 times revenues with a VC list that included Mark Zuckerberg, Naspers

In a world with 6 billion internet users, with satellite access and 5G now a reality, 50 billion smart devices, fintech unicorns have the potential to achieve valuations comparable to mega banks like J.P. Morgan and BNP Paribas on the stock exchange. That much, at least, is certain. My deal hunting focus in Silicon Valley is on special situations or pre-IPO investment opportunities in proven hyper growth technology businesses that are pioneers in their respective industries. This necessitates the ability to access founders, venture capitalists, growth fund managers and C-suite executives across the tech investing spectrum. The private capital markets in technology are opaque, fragmented, difficult to access and driven CFI.co | Capital Finance International

Technology funds often sell stakes in companies at attractive levels due to partnership disputes or the need to raise new capital. Executing a successful transaction often necessitates a plethora of relationships with angels, VCs, growth fund managers, investment banks, board power brokers, founders and C-suite executives. It often means dealing with a volatile cast of characters and an even more volatile private market driven by a seismic pace of change. I simply adore this great game of finding Silicon Valley's next big gorilla. Yet while I love the sheer intellectual thrill of playing the gorilla game in Silicon Valley's preIPO market, I never forget the Roman philosopher Cicero's advice from two millennia ago - not to know history is to forever remain a child. i ABOUT THE AUTHOR Matein Khalid is the Chief Investment Officer & Partner at Asas Capital in the DIFC, he is responsible for global investment strategies, merchant banking and the development of the multi-family office investment platform. He advises ultra-high net worth royal and family offices in the UAE on global equities markets and foreign exchange. He liaises with the world’s leading asset managers, hedge funds and investment banks in the design and implementation of multiasset class portfolios. He also acts as the Chief Economist for Asas Capital and advices the firm’s clients on real time financial markets decision making. He has worked in Wall Street money center banks, securities firms and hedge funds in New York, London, Chicago and Geneva. In addition, he has been an advisor for royal family investment offices in the Gulf for 10 years. Khalid has four degrees in finance, economics, banking and international relations from the Wharton School, University of Pennsylvania. He serves on the board of Advisory Council of the School of Business Administration at the American University of Sharjah and has taught MBA level courses in commercial/investment banking at the American University of Sharjah and British University in Dubai. He writes the Global Investing columns for Khaleej Times, Gulf Business, Oman Economic Review and the Property Chronicle in the UK. 177

> Building

the Bridge Between Non-financial and Mandatory Reporting By Rethinking Capital co-founder Andrew Watson and Rob Zochowski, Program Director, Impact Weighted Accounts Initiative at Harvard Business School

BP CEO Bernard Looney's courageous announcement that BP will transition to becoming a green energy pioneer shows the need for a new supporting logic for a standard measurement system. If BP is prepared to publicly commit to do the right thing, as society wants it to, then the logic must evidence and incentivise BP's investments made to transition, otherwise it must have an inherent flaw. Rethinking Capital and the Impact-Weighted Accounts Initiative at Harvard Business School have developed a normative accounting approach for intangibles and impact to provide this logic. It is designed to increment non-financial reporting and act as a bridge between non-financial and mandatory reporting. CODIFYING BP'S LOGIC Codified through the lens of intangibles and impact, what is BP doing in its decisions to transition? • Mitigating risk to reputation by decisions to do the right thing, and to break free from the association of its reputation with legacy Big Oil • Recognising a constructive obligation to reduce its emissions to conform with social norms • Investing to mitigate this liability and to strengthen its social licence • Properly discharging the fiduciary and other duties of decision-makers to manage assets, liabilities and risks. Before moving on, please read this logic again. Does it make sense? If so, then reverse this logic by placing 'not' before each of these four statements. It then becomes clear that decisionmakers deciding not to transition are at risk of not properly discharging their fiduciary and other duties. Non-financial reporting may find a solution to apply this logic into a standard measurement system through the growing number of alignment initiatives, committing to reach common standards during 2021, but this is a very crowded area with competing philosophies which may prove hard to reconcile. Rather than yet another framework, would it not make more sense to first determine the extent to which technical accounting and the double-entry system could be applied? Current accounting practice will damn BP for doing the right thing by treating its investments into making the transition as an expense on the Income Statement or investments into depreciating equipment and therefore a deterrent to BP's management. 178

"Neoclassical economics and its dated orthodoxies, including the now discredited law of scarcity, misdirect capital and incentivise the wrong kind of growth; it's no surprise that the effects include systemic climate and social inequity." There is another way for accounting to fairly show BP's decision logic. But finding it means first understanding how capitalism got into this mess in the first place and why accounting practice has lost its way. ROOT CAUSE ANALYSIS Why is the world systematically unfair? “We've gone back to the root cause,” says Robert McGarvey, co-founder of Rethinking Capital and author of Futuromics: A Guide to Thriving in Capitalism's Third Wave: ”We believe that systemic inequity is a consequence of the historic paradigm shift from an industrial to an intangible economy and the failure of economic theory and its derivative systems to adapt to the commercial reality. By derivative systems we include accounting, auditing and reporting each of which take their lead from economic theory. Neoclassical economics and its dated orthodoxies, including the now discredited law of scarcity, misdirect capital and incentivise the wrong kind of growth; it's no surprise that the effects include systemic climate and social inequity.” The intangible economy already exists but has yet to be secured into rules, systems and norms. Specifically, the Balance Sheet has lost its relevance as the primary resource for management and other stakeholder decision-making. Without the Balance Sheet, decision-making has instead focused on the Income Statement and the shortterm. Rethinking Capital believes that this has led to a belief system that is quite literally upside down, rewarding and incentivising bad behaviours whilst giving no credit for and often punishing good ones. Imagine the chaos if that approach was applied to disciplining children or a pet. THE PRACTICE OF ACCOUNTING IN 2020 Current accounting practice will treat BP's investments as costs on the Income Statement or short-term depreciating assets, reducing Balance Sheet equity and profitability. This is both illogical and plainly unfair. BP is investing into its reputation and into its social license, thereby mitigating a strategic risk, and into an asset. CFI.co | Capital Finance International

Current accounting practice has not kept up with the change in the economy and does not recognise intangibles as accounting grade assets. Analyst consensus is that between 30-40% of SG&A is not really SG&A but could instead be classified as investments into intangible assets. Deductive logic says therefore that accounting practice is showing a substantially unfairly negative view of assets, equity and profitability. Globally it is estimated that more than $108 trillion of intangible value not properly recognised on Balance Sheets. A Rethinking Capital analysis of Bayer AG identified over €129 billion of undisclosed equity in just one division alone, illustrating a point of view that although an eyewateringly large number, even $108 trillion materially understates the true scale of the intangible economy. Current accounting practice is also failing to properly recognise intangible liabilities, including climate risk, on Balance Sheets and arguably not properly applying IAS37 (the International Accounting Standard on Provisions, Contingent Liabilities & Contingent Assets). IAS37's logic is simple: If a liability ('the potential for future economic outflows as a result of past events') exists, then one of three actions must be taken. If the liability is remote (according to the Cambridge Online dictionary the probability of Martians landing on Earth is remote) then the entity does nothing. It the liability is possible, it must disclose a contingent liability in a note including details of the financial exposure. If probable, it must recognise a provision as an entry in the financial statements. In giving their respective true and fair view statements, directors and auditors appear to be concluding that liability for climate risk is either remote or incalculable. It is surely near impossible to credibly reach a conclusion that climate risk is a remote liability for Big Oil. It also seems very hard to conclude that the liability is incalculable. Do the largest carbon

Winter 2020-2021 Issue

emitters not have internal scenario analyses that could be disclosed? Could comparables not be applied? Big Tobacco would be a fair comparable, having paid out nearly $300 billion in settlements. Unlike climate risk where there is no choice but to breathe, the Big Tobacco was able to successfully argue that punitive damages settlements should be mitigated by the user's choice to smoke. In which case $300 billion would be on the low side for Big Oil. This current accounting practice of not properly accounting for intangible liabilities, is therefore showing a material unfairly positive view of liabilities, equity and profitability. If, for whatever reason, the practice of accounting is not fairly showing the assets and liabilities of an organisation, what can be done? The answer from the accounting profession and audit firms has been to call for Standards change. But in fact, when read in detail, the principles-based International Accounting Standards on intangible assets and liabilities are actually a very good place to start. THE MOST SIMPLE CORRECTIVE ACTION Concluding that the problem is not the Standards but the practice of accounting and realising that accounting practice is steadfastly refusing to show a fair view of the intangible assets and liabilities of an organisation forces us to rethink. A promising solution is provided by the concept of normative accounting. Normative accounting has been theorised in academic literature since the 1950s representing:

Digging deeply into IAS37, we concluded that the IWAI's annual climate impact costs could be properly recognised as a contingent liability on the Balance Sheet. And that the definition of an 'Asset' under the IASB Conceptual Framework ('a resource controlled by the entity… from which there is potential for future economic benefits') could treat transition costs as investments into BP's reputation and social license on the Balance Sheet. Further model-matching established how to apply IAS38 and impact measurement to determine the boundaries of the firm. The outcome is believed to be the first framework that incorporates impact into traditional accounting. And the first to apply existing GAAP, to update double-entry bookkeeping and be informed by existing International Accounting Standards and the IASB Conceptual Framework. The result is to properly recognise and show the current value of all intangible assets and liabilities. This is a leap for impact measurement and has created a methodology that can be applied to represent other impact costs as liabilities, including product costs and a living wage, areas where the IWAI has focused its energy. The elegant logic of the framework is that investments made to reduce climate and social equity will increase Balance Sheet equity, and decisions that increase climate and social inequity will reduce Balance Sheet equity.

'theories of accounting, based on deductive reasoning or logic that prescribe the accounting procedures that should be followed rather observing or describing those that are followed in practice'.

WHAT NEXT? The ambition is to create a standard for normative accounting of intangibles and impact. There is a long way to go.

As all value is subjective from the perspective of each stakeholder, normative accounting enables multiple alternative fair views to be shown.

The framework is being tested with companies. Encouragingly, it is already being described as 'logical',' intuitive', 'familiar' and 'common sense'.

Having established BP's decision logic, normative accounting treatment has many clues in existing accounting standards.

Resistance to a technical accounting solution is expected. Resisting though means having to explain why the logic is wrong. i

Author: Andrew Watson

Author: Robert Zochowski

CFI.co | Capital Finance International

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> Kellogg Insight:

Immigrants to US ‘Create more Jobs than they Take’ Based on the research of Pierre Azoulay, Benjamin F Jones, J Daniel Kim & Javier Miranda

A new study finds that immigrants are far more likely to found companies — both large and small — than native-born Americans.

ew topics divide Americans and policymakers as starkly as immigration. One argument of those opposed is that adding immigrants to the labour pool will worsen employment opportunities and wages for native-born Americans. “The idea is that immigrants come to your community and they take jobs,” says Ben Jones, a professor of strategy at Kellogg. “That could mean that people already in the community could have more trouble finding a job or, by having to compete with immigrants for jobs, could get paid a lower wage.” The logic is straightforward. Yet curiously, the economic data have not generally borne this out. Previous studies have not found lower local wages after influxes of immigration. In fact, regions of the US that have historically seen more immigration have actually experienced higher gains in per-capita income. “They seem to be the outperformers,” says Jones. SO WHAT IS GOING ON? Jones and his colleagues wondered if economists and policymakers had been focusing too much on immigrants as employees in the labour pool — and not enough on the role they also play as job creators: entrepreneurs who might start and grow lucrative companies, ultimately employing large numbers of people. The conspicuously high number of immigrant founders in Silicon Valley, including prominent examples such as Sergei Brin and Elon Musk, suggests the potential importance of this view. “We know already that immigrants tend to be entrepreneurial,” says Jones. So in a new study, Jones and his colleagues — Pierre Azoulay, of MIT, Daniel Kim, of University of Pennsylvania, and Javier Miranda, of the US Census Bureau — took a more comprehensive look at how immigration shapes the economy. They analysed immigrants’ contributions as employees and founders, focusing on the number and the sizes of companies that immigrants start. “The question from a job-creation point of view isn’t just ‘Has someone started a business?’” says Jones. “A critical piece is, ‘Is it a tiny business or a big business?’ Because if it just employs a few people, that’s not going to have a huge jobcreation effect. But if we’re talking about Tesla or Google, if we’re talking about large companies

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"They analysed immigrants’ contributions as employees and founders, focusing on the number and the sizes of companies that immigrants start." that grow to be large employers, then obviously the job-creation effect can be very strong.” Their analyses revealed that immigrants do start companies at higher levels than native-born Americans — and that this is true for companies small and large. This led the researchers to an intriguing conclusion: “Immigrants actually create more jobs than they take,” says Jones. QUANTIFYING WHO BECOMES A FOUNDER In order to get a more complete picture of how immigration affects the economy, researchers needed to quantify the rate at which immigrants and US-born workers start companies. “Take all the immigrants in the economy,” says Jones. “What fraction of them start a business? Then do the same thing for all the native-born workers in the United States. What fraction of them start a business?” To find out, they analysed three datasets. The first drew from the US Census Bureau’s Longitudinal Business Database, which included information on every new business founded between 2005 and 2010 that lasted at least five years — for a total of 1.02 million firms. For each new business, the researchers used W-2 records from the firms’ founding year to determine which people were part of the founding team, and Census demographic records to classify each of those individuals as either USborn or immigrant. This enabled the researchers to calculate the rates at which workers in the database became founders. “That dataset is especially powerful because it’s every single observation of every worker in every new business,” says Jones. However, despite its comprehensive nature, the first dataset only included recently founded businesses. To account for more mature companies, the researchers also analysed a CFI.co | Capital Finance International

representative sample of 200,000 firms from the US Census Survey of Business Owners. “Ironically, the result is exactly the opposite of the usual narrative. It seems like immigrants actually improve the economic outcomes for native-born workers, ” says Jones. DOES THE H-1B VISA PROGRAM HURT AMERICAN WORKERS? Here you’re seeing a cross-section of all the businesses in the economy. Again, the survey used founders’ nation of origin as logged in the Census data to determine whether they were an immigrant or US-born. And then, using estimates of the total number of immigrants and US-born workers in the economy, they calculated the rate of entrepreneurship for each group. Finally, the researchers performed the same analysis for the 2017 Fortune 500, which represented the 500 largest firms in the United States. “This last approach allows us to really focus in on the very largest businesses in the economy. And, of course, these businesses are especially important,” says Jones, “because they employ so many people. One very large company employs far more people than a large number of relatively small companies. So we went through all the Fortune 500 companies using teams of research assistants, who traced back to the origin of the company to see who the founders were and whether they were US-born or immigrants.” The researchers were able to track down this information for 449 firms, 96 of which had at least one immigrant founder. IMMIGRANTS ARE MORE LIKELY TO FOUND FIRMS OF ALL SIZES Despite the differences in the three datasets, researchers saw a remarkably stable pattern across all of them: immigrants founded firms at a higher rate than native-born Americans. “Looking at any of those datasets, immigrants are overrepresented among the founders compared to how many immigrants there are in the population, either today or at the time (of their company’s founding),” says Jones. For instance, 0.83 percent of immigrants in the workforce between 2005–2010 started a firm,

Winter 2020 - 2021 Issue

while just 0.46 percent of US-born ones did. The survey data, which also take into account older and more stable firms, found that 7.25 percent of immigrants were entrepreneurs, compared with about four percent of native-born individuals. In both these cases, says Jones, “the rate of founding businesses is 80 percent higher among the non-US-born than among the US-born”. The same general trend was also borne out among Fortune 500 firms. Critically, the researchers also found that immigrants founded firms of all sizes at a higher rate than those born in the US: small firms, large ones, and everything in between. This is important because it suggests that that the net influence of immigrants on the economy is to increase the demand for labour, ultimately pushing up overall wages. Jones points out that if immigrants behaved exactly like American-born founders — founding firms of the same sizes at the same rates — they would help to grow the scale of the economy, but not actually impact income per person or wages for the typical American-born worker. While there would be more businesses and more jobs created, there would be proportionately more workers to fill them, resulting in no change to the actual demand for labour. But because immigrants are more entrepreneurial than American-born workers in both the number and the success of the companies they start, their presence in the country actually increases the demand for labour, to the benefit of workers.

IMPROVING ECONOMIC OUTCOMES Overall, the researchers conclude, the evidence is clear: immigrants create more jobs than they take. “Ironically, the result is exactly the opposite of the usual narrative,” says Jones. “It seems like immigrants actually improve the economic outcomes for native-born workers.” So why are immigrants so much more entrepreneurial? The research doesn’t explicitly unravel the answers to this question, but Jones raises several potential factors. For one, recent immigration policy prioritises highly talented workers. “It’s much easier to get a green card in this country if you are extremely skilled and qualified,” says Jones. More broadly, however, he points to the qualities that might lead an individual to move to another country. “Who would choose to emigrate? What is the personality type or the skill type that encourages someone to cross the world? “People who are willing to pick up and move to another country — into the unknown — are risk-takers. And there are empirical studies that indicate this. They are going to be masters of their own destiny. And that is a personality trait of entrepreneurs.” Ultimately, he says, what is clear is that economic arguments people use against immigration “appear flatly wrong — immigrants are powerful job creators”.

These findings were extremely robust, holding even when researchers accounted for all plausible estimates of the number of immigrants (including undocumented immigrants) in the US at a given time.

This research could bolster the efforts of many in the business and policy communities who see great economic advantages from immigrants. Still, Jones is not confident that even a study of this size and comprehensiveness will change the tune of the most ardent opponents of immigration.

JOBS THAT PAY BETTER The researchers also looked at the quality of the companies and jobs created by immigrants. First, they analysed how innovative their firms were as measured by the number of patents granted to them.

“Getting the economics right can change the debate,” he says, “but to the extent that noneconomic perspectives dominate thinking in swathes of the electorate, and their political representatives, immigration-policy reform will continue to be a challenge.” i

“Not only do these immigrant firms create more jobs, they are also much more inventive. They’re more likely to have patents than US-founder firms,” says Jones.

This article first appeared in Kellogg Insight.

Then the researchers looked at the wages paid out by firms started between 2005 and 2010 with immigrant versus American-born founders. “You might think immigrant firms have a lot of jobs, but are they good jobs? Are they good-paying jobs? It turns out, if anything, the immigrant-founded firms pay somewhat higher wages than the native-founded firms,” says Jones. CFI.co | Capital Finance International

FEATURED FACULTY Benjamin F Jones; Gordon and Llura Gund Family Professor of Entrepreneurship; Professor of Strategy; Faculty Director, Kellogg Innovation and Entrepreneurship Initiative (KIEI). ABOUT THE AUTHOR Jessica Love is editor-in-chief of Kellogg Insight.

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> From

Slavery Days to Inclusive Paradigms, the World is Still Mired in a Battle for Balance by Tony Lennox

A Dutch man o’ war sailed into Jamestown harbour in the Virginia colony in August 1619, and among the provisions desperately needed by the English settlers were, according to the ship’s manifest, “twenty and odd negroes” from Angola. These were the first black African slaves to be unloaded in the King’s American colonies.

ore than a year later, a ship called the Mayflower landed a bedraggled group of thankful pilgrims on Plymouth Rock. On November 26 each year, the US celebrates the survival of these white men, women and children in a harsh new world.

"Nowhere is the diversity spotlight more focused than in Silicon Valley,

While the coming of the Pilgrim Fathers has become a compelling symbol of a nation founded on the principle of freedom, the landing of the captured Africans — whose destiny was to work as slaves on Virginia’s early tobacco plantations — has been largely ignored by history.

California, fulcrum of

In turbulent 2020, the US has struggled to know how best to celebrate the 400th anniversary of the arrival of the pilgrims on Plymouth Rock. The country’s history isn’t as clean, simple or righteous as it once appeared.

per cent of the population of the US can trace its history back to Africa, yet — the election of a black woman to the second-highest position in the land notwithstanding — the Anglo-Saxon Protestant descendants of those early settlers still form a hierarchy which dominates politics, industry and commerce. People are asking: Why is Corporate America so white?

In an age when a smart phone can capture every trivial or significant moment, video images in May 2020 of the death of an African-American man on the streets of Minneapolis during his arrest by white police officers spread around the globe. The death of George Floyd was just one of a series of incidents involving white policemen and unarmed black citizens, but the distressing intensity of the footage seemed to mark a crucial moment in time, perhaps even a turning point. The legacy of the slave trade, and the years of institutional racism it spawned, is beginning to be universally acknowledged — and the shockwaves are surging through Western society. In November 2020, the world witnessed one of the most divisive presidential elections ever contested. America appeared divided as never before — but the narrow victory of Democrat candidate Joe Biden, and his black, female running-mate, Kamala Harris, is seen as a cause for hope among the country’s minorities. It is conceivable that Harris could become the 47th president of the United States in due course — a prospect more significant than the victory of Barack Obama in 2008, say her supporters. Questions which were unthinkable only a few decades ago, are now being asked. More than 13 182

a world-leading tech industry."

Nowhere is the diversity spotlight more focused than in Silicon Valley, California, fulcrum of a world-leading tech industry. The diversity conundrum isn’t only being studied by black activists. There is a school of thought that believes the dependence upon a single strand of expertise — a young, white elite educated in the same colleges and universities — could actually be harmful to the sector’s future success.

automatically go on the defensive, or they just don’t want to have the conversation.” Miley is convinced that simply paying lip service to diversity will ultimately damage American business in general, and the tech industry in particular. “If you don’t have people from diverse backgrounds working on your products you’re going to get very narrowly focused products that may not do things very well,” he says. “Diverse teams have better outcomes.” That belief is borne out by research carried out by Scott Page, an associate director at the Centre for the Study of Complex Systems at the University of Michigan. He conducted a series of problemsolving experiments with different teams. He found that teams comprising what appeared to be the “best” individuals did not do well. “They were getting beaten by randomly-picked teams,” he says. “The so-called expert performers were getting stumped, while the randomly-picked teams always had new strategies to try.” Science writer Carl Zimmer uses the “ketchup metaphor” to illustrate the power of diversity. In much of the US, ketchup is kept in the refrigerator. If you’re making a sandwich and run out of ketchup most Americans look elsewhere in the fridge for alternatives. In many other countries, ketchup is kept in a cupboard — and people will seek alternatives there. The range of solutions is greater when people with different experiences are working on the same problem.

Leslie Miley, a black Silicon Valley software engineer, made headlines in 2015 when he quit his job at Twitter, voicing his frustration with the company’s overwhelmingly white workforce, and its resistance to change. Since his very public departure, Miley has become a vocal advocate for change.

“If a scientist is looking at a problem, he looks at a range of approaches based on his training,” says Zimmer. “Scientists who are stuck on a problem need to talk to someone who ‘keeps the ketchup somewhere else’. Sometimes the profitable thing is also the morally correct thing.”

“People (in the tech industry) so want to believe in a meritocracy,” he says. “They want to believe it’s about how good you are, how smart you are, how hard you work. I’d like to believe that too, but when you don’t give everybody a fair opportunity to get through the door, it’s not a meritocracy.

An opposing theory is that people from the same background collaborate more easily. Profit-driven businesses want early success, and according to those fighting for greater diversity in the workforce, many bosses privately see diversity as something that harms profitability.

“The moment you say ‘diversity’, a lot of people think you’re calling them a racist or a bigot. They

Leslie Miley says diverse teams can cause friction initially, “but we should all be trying to

CFI.co | Capital Finance International

Winter 2020-2021 Issue

get better, and if that means we’re uncomfortable for a while, then so be it”. In a report to the World Economic Forum, Vijay Eswaran, the Malaysian executive chairman of the QI Group, said: “If we look at the most innovative, disruptive and prosperous urban centres in the world — New York, Dubai, London and Singapore — they have one thing in common: they are all international melting pots with a high concentration of immigrants. Research shows that there is a direct correlation between highly skilled immigration and an increase in the level of innovation and economic performance. “There is substantial research to show that diversity brings many advantages to an organisation — increased profitability and creativity, stronger governance and better problem-solving abilities. Employees with diverse backgrounds bring to bear their own perspectives, ideas and experiences, helping to create organisations that are resilient and effective, and will outperform organisations that do not invest in diversity.” The Boston Consulting Group (BCG), an organisation which promotes innovative business strategies, published a study in 2018 which confirmed that increasing diversity of leadership teams in particular appeared to lead to more and better innovation, and improved financial performance. BCG surveyed employees at more than 1,700 companies in eight countries (Austria, Brazil, China, France, Germany, India, Switzerland and the US) across a range of industries. The survey looked at perceptions of diversity at management level across gender, age, nation of origin, career path, industry background and education. As many as 75 per cent of respondents said that diversity was gaining momentum in their organisations. Innovation revenue was 19 per cent higher in companies with above-average leadership diversity. On the face of it, Silicon Valley would appear to be heeding the advice. Since 2014 there has been a conscious push for greater diversity in what was, until then, an almost wholly white workforce. Microsoft, for instance, is pushing ahead with an ambitious programme. In 2019, black employees made up just 4.7 percent of the workforce. By the autumn of 2020, Microsoft claimed that there had been significant positive movement. But 80 percent of partners and executives at Microsoft are white, and white employees still account for the majority of managerial and director positions. These statistics mirror those of other Silicon Valley tech giants.

Tobacco plantation

Lindsay-Rae McIntyre, Microsoft’s chief diversity officer, says: “We know where we want to be in terms of progress towards diversity and inclusion, and we will work harder to be even better.” 183

All the tech giants now routinely report detailed demographics information on workforces. Tech firms in the Valley have responded to criticism by introducing diversity training for all levels, including senior teams, as standard procedure. In July, Airbnb pledged that, by the end of 2021, 20 percent of its board of directors would be people of colour. But pro-diversity statements and donations to black causes don’t go far enough to tackle the problem, say critics, and there is a fear that big business is just tinkering at the edges. As if to highlight the problem, Facebook’s release of diversity statistics show that in 2014 its minority workforce in the US stood at two percent. Five years later, it had grown — to just 3.7 percent. Since the publication of diversity statistics became the norm in Silicon Valley, some firms have even reported declines in the number of employees from ethnic minorities.

She pointed out that people of colour make up 10 percent of the EU population, and while the EU was committed to diversity in all areas of society its parliament of 705 MEPs contained only 24 black or Asian members. A draft bill which stipulates equal treatment for all EU citizens in social matters has been on ice since 2008, having been consistently blocked by a number of member states. Ursula von der Leyen, president of the EU Commission, responded to the protests. “People are raising their voices, eager to be heard,” she said. “It is time we did more than listen. It is time we talked about racism openly and honestly.” In the 2019 European Parliament elections, only five percent of those elected were from ethnic minorities — a figure that has dropped since Brexit, as the UK returned a comparatively high number of MEPs from ethnic minorities.

The US Census Bureau predicts that over the next 30 years, the population of the US will shift from being majority white. But in 2020, it is still the case; 70 percent of directorships on Fortune 500 boards are held by white men, and many campaigners are calling for positive discrimination strategies.

One of those British MEPs, Syed Kamall, the son of a Guyanese immigrant to the UK, was chairman of the European Conservative group in the EU Parliament before Brexit. “There is complacency in Brussels,” he says, “that by having 27 different, mostly white, countries, the EU is by definition diverse.”

Since 2017, Facebook has applied the “Rooney Rule”, a policy adopted by the US National Football League that requires teams to consider minority candidates for coaching- and operationslevel roles. When hiring managers, the company will include at least one candidate per vacancy who is a member of an under-represented group. Amazon will apply the rule to its own board of director vacancies, as will Pinterest, Patreon and Checkr. Ironically, in the football world the Rooney Rule stands accused of being largely ineffective, and in some instances it has even had contradictory effects, with coaches of colour being interviewed merely to tick a box.

There are those in the EU hierarchy who believe that by failing to confront the problem of diversity in government, a white elite governing class is being created which, over time, will become divorced from the people it represents.

The EU and UK can hardly take the moral high ground. The Black Lives Matter protests, sparked by the death of George Floyd, quickly led to popular protests in Britain, France and Germany in the spring of 2020. While some insist there is no diversity problem in European cities, Mararitis Schinas, the EU commissioner for promoting the European way of life, admitted that EU countries were by no means free of discrimination and violence, and said greater official action was required. 184

trying to use you to make their brand look better. Tokenism is diversity on a superficial level without the inclusion part.” She believes that overt racism in the workplace has been all but eliminated, but that racist micro-aggressions are still prevalent, and must be tackled. In 1970, when the US was celebrating the 350th anniversary of the arrival of the Pilgrim Fathers on Plymouth Rock, Wamsutta James, a descendant of the original Wampanoag people of Massachusets, had intended to deliver a speech describing the sorrowful legacy of white settlement on his people. The organisers of the celebrations withdrew his invitation to speak. In 2020 the “one-dimensional version of the Mayflower voyage” was relegated to a side show. The organisers, far from glossing over the impact of the event, pledged to consider the arrival of the Pilgrim Fathers from multiple angles — including an exploration of the experiences of those impacted by “the ruthless consequences of colonisation”. The Mayflower400 website said this anniversary would “face up to these difficult truths.” There is a sense that attitudes are changing across the Western world, and while there may be some way to go, events such as the death of George Floyd, the election of Kamala Harris, and the open acknowledgement of a diversity problem in places like Silicon Valley are causing a tectonic shift. Hopeful signs, perhaps. i

As if to highlight the distance still to be travelled, in November 2020 Birmingham City Council published a diversity report on its workforce. Birmingham is England’s second-largest city with a racially balanced population of 1.1 million people, but the council leadership is still predominantly white and male. The council has agreed to implement the Rooney Rule as part of its effort to more accurately represent the city’s ethnic make-up. Writer and diversity campaigner Nova Reid, who was included in the Top 100 Black British Women list in 2019, spends much of her time helping businesses change their cultures. She warns against tokenism in the drive towards true diversity. “I witness a lot of attempts to be diverse that are falling short,” she says. “You can intuitively sense when someone is authentically trying to engage with you, and those who are CFI.co | Capital Finance International

Author: Tony Lennox

Winter 2020-2021 Issue

Pavilion Global Markets:

Global Recognition in Two Niche Services, Transition Management and Global Portfolio Strategy Pavilion Global Markets Ltd was founded in Canada more than 50 years ago as an institutional, agency-only broker-dealer.

or over half a century, Pavilion Global Markets (PGM) has provided expertise in execution and advice to institutional clients worldwide. It has continually evolved to meet the needs of its client base. Most recently, it has added a temporary asset management service to complement its core services. “As a private, employee-owned firm, we are committed to serving our clients first,” says CEO Patrick Belland, “and we focus on providing expertise in a few select services.” The company remains true to this mission, focusing on global securities execution, transition management and global portfolio strategy. “We serve over 200 institutional clients worldwide,” says Belland, “with a continued concentration in these core value-add offerings.” PGM prides itself in providing a comprehensive offering. “We emphasise excellence in client service,” says Mario Choueiri, Head, Global Transition Management. “By working with our clients from the initial stage of global portfolio advice through to implementation, we provide a confidential experience helping clients to meet their goals.” Mario Choueiri has been with PGM for over 15 years, and has guided the firm’s expansion into the US. PGM has been providing transition management services for over two decades, with the expansion into the US market now in its seventh year. PGM focuses on rigorous project management, coupled with unparalleled client communication. The success of the business has been driven by commitment and dedication to client goals. “We are free of the most notable conflicts that challenge providers of these services,” Choueiri says, “and we always provide full transparency on our pricing and trade execution.”

Aidan Garrib, Head, Global Macro Strategy and Research for PGM, adds: “The opportunity to provide a differentiated global portfolio strategy service motivated our team to provide custom-work above and beyond that of most institutions. Client investment needs have become broader and more complex, driving the need for deeper, and truly global, advice. Those needs vary widely and we work to provide relevant and meaningful research.”

Head, Global Transition Management: Mario Choueiri

Head, Global Macro Strategy and Research: Aidan Garrib

“By combining our services and working together, we are able to meet the demands of our clients and help them to meet their investment objectives and implementation needs.”

recognition comes from teamwork and client satisfaction. ”

Patrick Belland again: “Under the leadership of Mario Choueiri and Aidan Garrib, we will continue to focus on offering a unique client experience that remains fully transparent and conflict-free.” Belland has been with the company for 28 years and has led it through many changes and challenges. “Respect and communication are the foundation of our culture,” he says. “As a leader, I strive to ensure that employees are included and engaged in our overall mission, making sure that CFI.co | Capital Finance International

“By retaining and encouraging employee ownership, we strengthen that level of commitment and sense of worth throughout the company. Having employees bring ideas forward and lead new initiatives creates a broad sense of leadership.” “Communication, respect and recognition provide the opportunity for everyone to be a leader.” The business aims to grow as a global leader in a niche market by remaining client-centric, truly global, and focused on its areas of expertise. i 185

> Kellogg Insight:

White Americans Overestimate Racial Progress. But Certain Attempts to Remedy That Could Backfire. Based on the research of Ivuoma Ngozi Onyeador, Natalie M Daumeyer, Julian M Rucker, Ajua Duker, Michael W Kraus & Jennifer A Richeson

Researchers hoped that having white participants read about racism would help them grasp the true extent of racial gaps in wealth and income. They were wrong.

conomic inequality between black and white Americans is a defining feature of the US: the average black family earns just 60 percent of what the average white family earns, and has a tenth the net worth — statistics that have scarcely budged since the 1960s. Despite this disparity, research shows that white Americans are largely unaware of it. So, how do you correct the misperception that everyone is on an equal footing? Research from Ivuoma Onyeador, an assistant professor of management and organisations at the Kellogg School, and colleagues, suggests it’s no small feat. White Americans have highly inaccurate perceptions of economic equality — and difficulty changing those views, even when they are reminded of the persistence of discrimination. The researchers found that their assessments of overall racial progress did change after reading about racism, but did not make their estimates of present-day economic inequality more accurate. White participants who read about prejudice were actually more optimistic about past equality than white participants who read about an unrelated topic. As the researchers write, “the logic appears to be: if there has not been too much progress and contemporary society is largely fair, then the past must not have been as bad as I thought”. To Onyeador, this unexpected outcome reveals how invested many white Americans are in a national narrative of continual racial progress. As a result, it’s difficult for them to recognize the challenges that remain. “These perceptions are very wrong, and we need them to be more accurate in order to garner support for policy interventions,” she says. The finding also suggests how easily efforts to raise awareness about racism can backfire: “Even though we were able to shift perceptions of progress,” Onyeador notes, “there was an unexpected consequence of doing so.”

ESTIMATING RACIAL ECONOMIC EQUALITY Onyeador and her co-authors —Natalie M. 186

"The researchers found that their assessments of overall racial progress did change after reading about racism, but did not make their estimates of present-day economic inequality more accurate." Daumeyer, Julian M Rucker, Ajua Duker, Michael W. Kraus, and Jennifer A. Richeson, all of Yale University — knew going into the study that whites tend to be uninformed about the extent of racial income inequality in the United States. These researchers’ previous work had shown that white Americans overestimate the degree of equality in income (as measured by wages) and wealth (as measured by the value of all assets, including savings, homes, and cars). The researchers also knew that learning more about historical and structural racism has been shown to make white Americans more alert to discrimination and racial disparities. “We were wondering if exposing people to the idea that discrimination has been pervasive would help them be more accurate in their perceptions of racial economic equality — in the past, in the present, and particularly in terms of racial progress over time,” Onyeador says. The researchers recruited a group of nearly 700 white online participants. They were divided into two groups: one read a news article about the history and persistence of racial discrimination in American life, the control group read about left-handedness. Participants in both groups answered questions about past and present racial economic equality in the United States. Participants estimated, from $0 to $200, how much the average black family earned for every $100 earned by the average white family in both 1963 and 2016. They also estimated the average wealth accumulated by black families relative to white families in those same years. Participants rated from one to seven how much overall racial progress had been made in the US, with one indicating very little progress and seven indicating a great deal of progress. CFI.co | Capital Finance International

The researchers began their analysis by calculating how accurately participants estimated wealth and income equality. They also calculated participants’ estimates of progress by subtracting estimates of wealth and income equality in 1963 from estimates of wealth and income equality in 2016. When looking at both groups’ responses, the researchers found that the estimates of income and wealth equality were wildly inaccurate. Participants overestimated the degree of income inequality in the past (incomes estimated to be less equal than they actually were), but they significantly underestimated it in the present. Their overall perceptions of progress between 1963 and 2016 were way off, with participants believing that far more progress toward income equality had been made than was accurate. For wealth equality, perceptions were also notably skewed, but in a different way. Participants estimated that in 1963, a typical black family accumulated around $39 for every $100 of wealth accumulated by a white family. In reality, it was just $5. Estimates of the present day were also highly inflated: participants estimated that black families accumulated $73 for every $100 accumulated by white families; it was just $10. The magnitude of these misperceptions was striking. “In social psychology, we’re usually dealing with smaller effects — but people are really wrong about this,” Onyeador says. “It’s not only quite surprising, but it is sobering.” PAST, NOT THE PRESENT Next, the researchers examined whether those assessments differed depending on which group the participants were in — that is, whether they had read the article about racism versus the one about left-handednes.

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"Participants who read about racism also produced more accurate estimates of wealth and income equality than those who read about left-handedness." They did. Participants who read about racism gave lower ratings on the one-to-seven scale of progress — an average of 4.66, as compared with 5.41 among participants who read about left-handedness. Participants who read about racism also produced more accurate estimates of wealth and income equality than those who read about lefthandedness. While both groups overestimated the extent of progress toward wealth and income equality, participants who read about racism did so by a smaller margin. When the researchers looked more closely at these figures, they found something surprising. They had calculated participants’ estimates of progress toward equality by subtracting 1963 estimates from 2016 estimates. They did this with the hypothesis that reading the article about racism was likely to affect participants’ estimates of equality in the present. It turned out, however, that reading about racism didn’t affect participants’ beliefs about the present — it only affected their beliefs about the past. And not in the way one might expect. Those who read about racism estimated more equality in 1963 than participants who read about left-handedness. “We definitely did not expect that,” Onyeador says. NEW STUDY, SAME UNEXPECTED FINDING The result of the first study was so surprising that Onyeador and her colleagues conducted a similar, larger study next. They recruited a fresh group of 845 white participants. This time, they were randomly assigned to one of three groups: one group read an article focused on explicit racial bias, one about implicit racial bias, and the control group did not read an article.

Yet, when asked to do the same assessments as in the first study, the very same trends emerged: reading about racism — whether implicit or explicit — influenced participants’ assessments of overall racial progress. But it did not improve the accuracy of their estimates of wealth and income equality today. Rather, it changed how they viewed the past, shifting their views about the degree of equality in 1963. OVERESTIMATING RACIAL PROGRESS Onyeador says there are a few possible explanations for the paradoxical findings, although more research is needed. Many Americans hold dear a national narrative of continual triumph over injustice — “essentially, linear racial progress, unending from slavery through Jim Crow to our first black president,” Onyeador explains. When faced with evidence that not enough progress has been made, white Americans “have to decide how to integrate the idea (of lack of progress)”. “We were hoping they would integrate it by acknowledging that the present is less equal than they thought, but instead they revised their estimates of the past.” It’s clear to Onyeador that just reading about racism wasn’t sufficient. And although this approach didn’t work, it’s still essential to find one that does. “It’s really important that people have an accurate sense of how vast the inequality is if we hope to garner support for interventions designed to address that inequality.” i

This article first appeared in Kellogg Insight. FEATURED FACULTY Ivuoma Ngozi Onyeador, assistant professor of Management and Organisations. ABOUT THE AUTHOR Susie Allen is a freelance writer based in Chicago.

The idea was to see if white Americans might better internalise an article about implicit bias, a type of racism more commonly discussed and accepted today, as compared with explicit racism, which white Americans tend to associate with the past. CFI.co | Capital Finance International

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> Sustainability Accounting Standards Board:

A Turning Point

By Janine Guillot CEO of the Sustainability Accounting Standards Board Foundation

s a society, our growth tends to be proportional to the scale and scope of the challenges we face. Over the past year, those challenges have mushroomed to a dispiriting degree. However, we have many opportunities to think critically about the important interconnections between business, capital markets, and broader society—and adapt accordingly. Even as we mourn our personal and collective losses, we see that perhaps the greatest tragedy would be a failure to build a more resilient socioeconomic future. Events such as climate change, the COVID-19 pandemic, and protests for racial justice are reshaping society. This confluence of social upheaval and environmental peril has ushered in the dawn of an economic “new world order” in which the fundamental role of business in society has been called into question. A THEORY OF CHANGE It’s not only governments and civil society who are calling on companies to reconsider how— and for whom—they create value. Large, global institutional investors have increasingly joined this chorus. But they need comparable, reliable information on how companies are addressing sustainability issues. The Sustainability Accounting Standards Board (SASB) fills this need. SASB Standards identify the subset of environmental, social, and governance issues most relevant to financial performance in each of 77 industries. By enabling companies and investors to measure, manage, and communicate key risks and opportunities related to their environmental and social impacts, SASB Standards help unlock a future in which resilience to manage social and environmental challenges is built into business models. After all, transparency leads to accountability, accountability drives innovation, and innovation is key to resilience. When investors readily can identify and direct financial capital to forwardlooking companies with future-fit strategies, markets will be more resilient and better poised to meet the needs of society. MARKET MOMENTUM Global challenges have intensified the need for improved sustainability information, and as a result, global forces are driving incredible progress. In 2020, the world’s largest investors, the world’s largest companies, and key regulators recognised the need for improved sustainability disclosure. For example, SASB’s Investor 188

CEO: Janine Guillot. Photo: Spencer Aldworth Brown

Advisory Group—55 global institutional investors with US$41tn in public and private assets under management—asked companies around the world to include SASB-based disclosures in their communications with investors. Similar interest in SASB-aligned disclosure was expressed by the Investment Company Institute, the UK’s HM Treasury-led Asset Management Taskforce, the CEOs of Canada’s eight largest pension fund managers, and many other individual asset managers, including two of the world’s largest. CFI.co | Capital Finance International

Meanwhile, the world’s top CEOs emphasised the importance of sustainability disclosure through the World Economic Forum’s (WEF) International Business Council (IBC) recommendations. Significant regulatory developments included the European Union revisiting its Non-Financial Reporting Directive (NFRD), regulatory proposals in Canada, Taiwan, and the UK encouraging use of SASB Standards, and governments around the world taking steps to mandate disclosure in accordance with the recommendations of

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Jeff Hales: SASB Standards Board Chair. Photo: Reese Nanavati

the Task Force on Climate-related Financial Disclosure (TCFD). A SHARED VISION For many years, progress on sustainability disclosure has been held up by a misperception that there are too many “competing” standard setters and framework providers for sustainability disclosure. In 2020, the five major players in sustainability disclosure aligned on a common language and shared vision for a comprehensive corporate reporting system. The “group of five”— CDP, the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), and SASB—published a shared vision of the future in our Statement of Intent to Work Together Towards Comprehensive Corporate Reporting. Meanwhile, key global players including the IFRS Foundation and the International Organisation of Securities Commissions (IOSCO) announced their interest in leading progress toward a comprehensive corporate reporting system. The IFRS Foundation, which oversees the development of international financial reporting standards, has proposed to establish a Sustainability Standards

Board—an effort that could build upon existing initiatives such as TCFD, SASB, and other collaborating organisations. LOOKING AHEAD Although much progress has been made, more work remains. In 2021, we are poised to build on the market momentum and make meaningful progress toward a global system of sustainability disclosure that helps boost resilience against future threats. At SASB, we’re taking important steps to bring this future to life. In November, we announced our intent to merge with the International Integrated Reporting Council (IIRC), thus forming the Value Reporting Foundation (VRF). By formalising the practical alignment between two organisations focused on enterprise value creation and communication to providers of financial capital, we hope to clarify and simplify the field. The VRF stands ready to engage with the efforts of the IFRS Foundation and others working toward global alignment on a corporate reporting system. Meanwhile, governments in many parts of the world are not waiting on markets to lead. CFI.co | Capital Finance International

The European Commission will be launching a revised NFRD and begin implementing a renewed sustainable finance strategy in the coming months. The incoming administration of President-elect Joe Biden has stated that climate disclosure will be a priority, setting the stage for the US—as the world’s largest capital market— to play a leading role. A potential “quick win” would be for the US to follow the lead of the UK’s Financial Reporting Council, which recently encouraged companies to voluntarily use the TCFD Recommendations and SASB Standards. Corporate transparency may seem like an incremental solution. In reality, it’s a powerful lever of change for a more sustainable and just world. Progress on sustainability disclosure brings us closer to progress on sustainability performance. When investors can compare companies and direct capital to those best managing business-critical sustainability issues, the interests of capital markets and those of society will be brought into closer alignment. In the face of a difficult present and an uncertain future, it’s not just the shot in the arm our markets need today, it’s the preventative measure we’ll be grateful for tomorrow. i 189

British Virgin Islands Rise to Top of Financial Services Industry with Aplomb Borne of Resilience As the voice of the British Virgin Islands (BVI) financial services industry, BVI Finance and its CEO Elise Donovan, are responsible for championing, promoting and educating audiences around the world about the attributes and advantages of the BVI as a leading International Finance Centre.

ince her taking up the post as CEO of BVI Finance in2019, Donovan has played a pivotal role in expanding and deepening the BVI’s financial services footprint in key cities around world, most notably in Asia and Africa. In partnership with the BVI Government, BVI Finance has built strategic relationships with stakeholders in the public and private sectors and participated in major international conferences, events and forums. Restricted by the ‘lockdown’ conditions during 2020, BVI Finance has adapted in typical BVI style and utilized video platforms to engage with stakeholders virtually across a number of jurisdictions including in the Middle East and Asia. When asked about the BVI’s reputation as a leading international financial centre, Donovan said: “The BVI Business Company has long been the cornerstone of the financial services industry in the BVI. Designed over 35 years ago, this was the first of its kind (offshore business company) that was innovative, practical and versatile underpinned by a robust and secure legal framework. It has been much emulated but never bettered. The financial services industry has grown around the BVI Company and today the BVI is home to the world’s top financial and professional services providers.” Donovan has a wealth of knowledge and expertise and her passion for the BVI and Financial Services is clear, having previously served as the BVI Government’s Asia and Europe representative , Director of the BVI International Affairs Secretariat, Executive Director of the BVI International Finance Centre (the forerunner to BVI Finance) and a member of the BVI’s Tax Information Exchange Agreement Negotiating Team with countries such as China, the United Kingdom, France, Australia, New Zealand and Canada. Reflecting on the news that the BVI Finance was awarded ‘Best Offshore Financial Services Provider- Global 2020’, Donovan noted that it was due to the BVI’s resilience and constant drive to adapt and innovate to meet the needs of clients and the changing global regulatory

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CEO: Elise Donovan

landscape. The BVI for example was one of the first IFCs to introduce a FinTech Regulatory “Sandbox”, which provides financial institutions with the digital infrastructure to test new products and services. “The BVI’s reputation comes from our thorough approach to meeting and often exceeding international standards whilst keeping a sharp focus on the needs of those businesses and CFI.co | Capital Finance International

individuals who do business in the BVI. We try and stay ahead of emergent trends and this is why the BVI is held in such esteem today.” When asked about the future of BVI Finance, Donovan was emphatic: “The BVI will continue to go from strength to strength. We have navigated the challenges of operating in a complex and fast changing landscape and we will continue to evolve in the future.” i

Winter 2020-2021 Issue

Credit Where It’s Due:

Fitch Wrote the Book on This One www.fitchratings.com

Fitch Ratings has been creating value for global markets and challenging conventional thinking since 1923, when it invented its now-familiar AAA to D ratings scale.

s a division of Fitch Group, the firm is dedicated to providing credit ratings and independent, forward-looking credit opinions. Fitch Ratings offers global perspectives shaped by local market experience and credit market expertise. In an era of volatility and technological transformation, Fitch remains committed to providing transparency and insights to empower clients to make better-informed decisions. The additional context and perspective have helped investors to fund growth and make important judgments with greater confidence. Global interconnectedness and the current speed of change mean Fitch experts are in constant demand. The company has more than 4,000 employees drawing on the experience of some 20,000 entities, including sovereigns, businesses and investment products. Fitch’s ability to view things from all angles, simplify complex issues, and provide consistent, transparent intelligence gives it the edge in a highly competitive market. GLOBAL ENTERPRISE AND INDUSTRY EXPERIENCE Behind Fitch’s offerings stands a global enterprise focused on credit market needs. It is backed by sector and regional specialists with profound experience and world-class insight. • More than 4,000 employees in over 30 countries, including 1,600 analysts • Coverage of 200 countries • 45 offices worldwide with more than half in emerging and growth markets.

Fitch Ratings is distinguished by broad sector expertise that has been developed and honed by 100 years of industry and analytical experience. Fitch’s rigorous analysis has led to the creation of market-leading tools, methodologies, indices, and analytical products to help investors manage risk and grow their businesses. ESG, FITCH IN CHINA AND MORE In response to the pandemic, Fitch last year published 1,100 reports and commentaries that distinguish it from its competitors with their insight. From timely assessments of Australian bushfires and flooding in China to global lockdowns and vaccine developments, Fitch has been providing market participants with unmatched analysis and evaluation. Fitch Group strives to expand its offering beyond credit ratings and research, market solutions and services, training and professional development. As the importance of ESG concerns became increasingly apparent, Fitch was the first agency to systematically publish opinions on the relevance of ESG to individual credit ratings. Fitch’s in-depth database — covering more than 150,000 related data points on 10,750 entities and transactions — remains unmatched. In a bold move last year, Fitch Ratings entered China's credit-rating market as part of the country’s partial trade deal with the US. "We’re confident that market participants will continue to value our independent analysis, transparent methodologies and rigorous ratings process in line with international best-practice," said Danny Chen, chief executive of Fitch Bohua. i

"As the importance of ESG concerns became increasingly apparent, Fitch was the first agency to systematically publish opinions on the relevance of ESG to individual credit ratings." 191

> Asia Pacific

Comprehensive Partnership: Just a Tentative First Step Its name leaves something to be desired, and its reach is modest, but after almost a decade of negotiation, the Regional Comprehensive Economic Partnership (RCEP) was finally signed mid-November during a virtual ceremony hosted by Prime Minister Nguyen Xuan Phuc of Vietnam. The RCEP expands on the 10-member Association of Southeast Asian Nations (ASEAN) and includes Australia, China, Japan, New Zealand, and South Korea as well, setting the stage for what one day may become the world’s largest single market.

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or now, RCEP combines a mishmash of regional and bilateral arrangements into a single and more coherent agreement that, perhaps wisely, trades ambition for realism. Economists guestimate that RCEP may add just about 0.2 percent to global GDP and some $186 billion to the economic output of the bloc’s member states – akin to a drop in a $26+ trillion bucket. As free trade deals go, the comprehensive partnership does not break any new ground. However, RCEP does address ASEAN’s notoriously misaligned of rules of origin which have now been streamlined and unified across the region. The new agreement eliminates 90 percent of tariffs in most product categories with the notable exceptions of agricultural produce and ecommerce. As such, the signing of the deal is of a more symbolical than practical value since RCEP merely replaces a number of smaller free trade agreements. Also, the partnership barely reduces the complexity of cross-border trade with, for example, Japan’s tariffs schedule still running 1,334 pages.

RCEP excludes most of the service sector and also fails to set common product standards. Absent, too, are rules on labour, environmental protection, state aid, and investments. The limited scope of the partnership largely reflects the wishes of China which for years pushed hard for a ‘low-quality’ deal against attempts by Australia and Japan to include more ‘intangibles’. GENERAL GLEE In January 2017, General Jin Yi’nan of the People’s Liberation Army celebrated the premature death of the US-sponsored Trans-Pacific Partnership (TPP) in a video recording that instantly went viral, thanking President Donald Trump for handing China a ‘great gift’ during his first week in office: “TPP was meant to contain China economically. They collaborated to target China. Now Trump says he will exit TPP. What a wonderful gift.” Things got even better for Beijing late last year when India suddenly pulled out of the negotiations, arguing that a tsunami of cheap imports was likely to hurt domestic manufacturers. New Delhi was also disappointed that RCEP would not cover the services sector in which the country enjoys a distinct advantage. Without India as a counterweight, China could – and did – take the lead of the partnership, shaping the deal largely in its own image.

"The new agreement eliminates 90 percent of tariffs in most product categories with the notable exceptions of agricultural produce and ecommerce." With Australia and Japan forced to accept a ‘TPP-lite’ deal, Canberra’s and Tokyo’s hopes are now pinned on the US, and the incoming Biden Administration. Both Australia and Japan would like the US to re-engage and rethink TPP, including – as was originally the case – the countries of Latin America’s western seaboard. The original initiative, now without US participation, still exists and has been clumsily renamed to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – a name about as long as its meaning is short. ASIA ABHORS A VACUUM TOO The gleeful on-camera remarks of General Yi’nan predated the Trump Administration’s undoing of its predecessor’s Asian pivot. As the US drifted into MAGA isolationism and started picking fights with allies and partners, Beijing detected the vacuum and quickly moved to fill it. By pushing for a slim deal – albeit it one with clear rules of origins but weak dispute settlement provisions and little else in the way of embellishment – China is now able to rebuild supply chains rattled by the pandemic – and redirect them. This could prove helpful should the US target the country with trade sanctions at some point in the future. Though originally an ASEAN initiative, China has quietly taken the lead on RCEP although Beijing goes through all the required diplomatic motions to keep up appearances. Given its rather shallow nature, explained in part by the region’s enormous diversity, the comprehensive partnership is best seen as a tentative first step on a (very) long road to the formation of a true free trade area – or a roadmap that allows member states to progress at their own speed. Undeniably, RCEP is remarkable for binding together the economies of China, South Korea, and Japan – Asia’s industrial and technological powerhouses. The three are already

exploring ways to reach a tripartite free trade agreement with added bells and whistles. RCEP is also hailed as a triumph of the region’s ‘quiet diplomacy’ which requires disputes to be settled far away from cameras and microphones with losers saving face and winners repressing smirks. Sensitive issues are dealt with behind closed doors in order to spare the public the otherwise inevitable grandstanding of their leaders. The result of this dedication to fine etiquette and impeccable manners is a trade deal that was written largely without any meaningful input from ‘below’. RCEP ignores many of today’s most pressing issues such as environmental degradation, climate change, labour practices, or human rights: It is, in a word, a 20th century trade deal dressed up as the way of the future. Whilst the partnership represents a major steppingstone, it is far from comprehensive. HURRAY FOR NAUGHT Chinese state media, always happy to inflate minor accomplishments into breakthrough events, were quick to draw comparisons with the European Union and happily concluded that RCEP is, of course, far superior in size, scope, coherence, and ambition. Before long, the United Kingdom is expected to apply for associate membership. Quite a few Brexit supporters are excited to join a club without political dimensions or the pretension to become a federal superstate suffering from a democratic deficit. They should feel right at home in RCEP, although the UK may want to tone down its laudable rhetoric on China’s outright takeover of Hong Kong. Any complaints London may wish to express should be dealt with discretely in order not to ruffle any feathers – or disturb fig leaves. i

"Though originally an ASEAN initiative, China has quietly taken the lead on RCEP although Beijing goes through all the required diplomatic motions to keep up appearances." 194

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> History and Future:

Two Things Pilipinas Shell Takes Into Account in All of its Dealings Pilipinas Shell Petroleum Corporation traces its roots back to 1914, when the Asiatic Petroleum Company (Philippine Islands) Ltd was established and has since then established itself as a leader in corporate governance.

Pilipinas Shell Petroleum Corporation’s Management Team

pinas Shell (PSPC), 55 percent owned by the Royal Dutch Shell Group (RDS), has grown to become one of the leading, and most responsible, oil marketing businesses in the Philippines. The Company’s mission is to power progress for the Filipino people by providing more, and cleaner, energy solutions. Its stated values are honesty, integrity, and respect for people. Pilipinas Shell is at the forefront of innovation and presents a world-class case for investment. It caters to the country’s energy requirements through world-class standards and processes, cutting edge technology/services, and innovative and superior fuel- related products. It has a wholesale commercial offering with targeted customer value propositions, and prides itself on continuing to prepare for energy transition by focusing on low carbon operations and readiness for future developments. PSPC is aligned with and shall contribute to RDS’s ambition of becoming a net-zero emission energy business by 2050. It is reducing its carbon footprint in its current assets with solar panels, power-saving lighting fixtures, energy equipment and green landscaping in retail stations; and construction of an industrial-scale solar farm at the Tabangao (Luzon island) facility. Its products and initiatives include Bitufresh Air bitumen solution for road construction which

works to cut specific particulates, equivalent of planting an average of 16 trees every year and a Carbon-sink Management Programme — planting 90,000 trees in Quezon, Philippines to compensate for greenhouse gas emissions. CORPORATE GOVERNANCE AND SUSTAINABILITY “We aim to continue being a role model for world-class corporate governance and conduct business in an open and transparent manner, consistent with our existing corporate governance standards,” the Company says. It is committed to overall business sustainability and has adopted its own Revised Manual of Corporate Governance, which requires regular review for continuous improvement and compliance with regulatory and statutory developments. PSPC assesses corporate governance on the basis of achieving overall business sustainability. Corporate governance structures are instituted and maintained to create value for Pilipinas Shell — while providing accountability and control systems commensurate with risk. The organisation also adheres to strict health, safety, security and environment (HSSE) standards and maintains a relentless focus on responsible performance. Through the concept of Goal Zero — with particular focus on personal, process and transport safety, PSPC seeks to CFI.co | Capital Finance International

achieve “no harm and no leaks” across all of its operations. These standards apply to all aspects of its activities, from the design of facilities to decommissioning of former sites. Pilipinas Shell provides a comprehensive, accurate and timely report of its financial condition/ results, business operations, material facts or events and is known to adhere on exceptional ESG standards as reported in its Annual Sustainability Report. A TRUSTED COMPANY The Company strives to be a good neighbour and contributes to community well-being through the Pilipinas Shell Foundation, Inc. This non-profit arm champions the Movement Against Malaria health programme that has cut malaria deaths in the Philippines by 97 percent over the past 20 years. PSFI implements programmes designed to build capacities to promote self-reliance, and develop the potential of its beneficiaries, both individuals and communities. PSPC attracts and retains diverse talent with compelling and impactful career opportunities around the world. It has a network of 1,135 retail service stations. The fastest-growing segment of its non-fuel business has a network of 148 Shell Select convenience stores, 70 of which have Shell Select deli2go café formats, and 391 Shell Helix Oil Change+ lube bays. i 195

> Interview with Reyaz Mihular, Chairman – KPMG MESA:

Middle East & South Asia Gear-Up for ‘a Vastly Different Future’

Interview with Reyaz Mihular

The KPMG network has a long-established reach in the Middle East & South Asia (MESA) region, with member firm presence in 14 countries and territories including Saudi Arabia, UAE, Qatar, Kuwait, Oman, Bahrain, Egypt, Jordan, Lebanon, Pakistan, Sri Lanka, Bangladesh and Maldives.

cross the region, its clientele includes public and private sector organisations spread across a range of industries. MESA is recognised as one of the fastest-growing regions in the KPMG network. With its regional talent pool of more than 8,000 professionals and associates, new hitech offices in Riyadh, Dubai, Muscat, Cairo and Beirut and capabilities in the new technology space, the KPMG network is optimistic. Reyaz Mihular, chairman of KPMG MESA, says these are exciting times for those who can see beyond the current challenges to the opportunities that are unfolding. “Stable market conditions often lead to complacency,” he said, “whereas turbulent times bring out the best in organisations and individuals as they become more agile, efficient and innovative. “The changing C-suite agenda in the MESA region mirrors a global trend with emphasis on key priorities such as digital acceleration, a shifting risk agenda and a new working reality.” DIGITAL ACCELERATION At a global level, many CEOs perceive the pandemic to have accelerated the creation of

"Environmental and climatechange risk ranked within the top five priorities highlighted by CEOs." a seamless digital customer experience, along with new digital business models and revenue streams. “In the MESA region, we are seeing numerous brick-and-mortar businesses rapidly expanding online e-commerce presence, switching to contactless modes of operation and fast-tracking digitalisation initiatives which were in the pipeline,” said Mihular. “The challenge going forward is to focus efforts to areas that generate most value and mitigate exposure to emerging threats such as cybersecurity.” SHIFTING RISK AGENDA Mihular says talent risk has become the most significant factor affecting the growth of businesses, followed by increased supply chain risk and that of a return to territorialism. Nearly three-quarters of respondents to a KPMG survey believed that remote working had widened

their talent pool. Around two-thirds intend to rethink their global supply chain approach — given the disruptive impact of the pandemic — and in responding to changing customer needs. “Environmental and climate-change risk ranked within the top five priorities highlighted by CEOs,” says Mihular. “This emphasis reflects our focus, where KPMG IMPACT was launched to bring global expertise towards building a more sustainable and resilient future. In MESA, there is also emphasis on other risk areas such as ‘regulatory risk’ and ‘operational risk’ which are gaining prominence.” NEW WORKING REALITY According to Mihular, many CEOs are considering a future where employees continue to work from home. “We are likely to see more organisations widening their potential talent pool on one hand, providing impetus for increased collaboration, and downsizing office space or moving more towards shared workspaces on the other. “Interestingly, over three-quarters of respondents indicated that they intend to continue to build on the digital collaboration and communication tools that are being used as a result of the

CEOs see the pandemic as an opportunity to rethink the way we work and communicate. Source: KPMG 2020 CEO Outlook COVID-19 Special Edition, KPMG International.

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In light of the pandemic, CEOs believe that purpose is more powerful and relevant than ever. Source: KPMG 2020 CEO Outlook COVID-19 Special Edition, KPMG International.

pandemic. The recent KPMG All-Partner Conference, a two-day virtual event brought together almost 11,000 leaders from nearly 150 countries. This is long term thinking and shows that the new reality could be quite different to the way organisations operated just 12 months ago.” Nearly four in five CEOs felt a stronger emotional connection to their organisation’s purpose since the crisis began. These trends are also reflected in a recent global KPMG people survey, where responses from the MESA region showed a significant upward movement in the categories of engagement, trust and growth. “Considering wider ESG aspects, over 70 percent of CEOs have indicated that they want to lock-in climate change gains made as a result of the pandemic, with 65 percent saying managing climate-related risks will play a part in whether they keep their jobs or not over the next five years.

Many of them have long-term thinking and were quick to spot the opportunities and realign their organisations to respond as the pandemic unfolded. While sales in retail stores plunged, e-commerce surged and many of these business leaders had businesses which were aligned to meet this surge. Their resilience helped keep thousands employed. Many of them ploughed back a part of their wealth to help those impacted by the pandemic and towards advancing healthcare as well as research and development to help address a multitude of issues. “The world has been through turbulence in the past, and what history has shown is that human resolve triumphed and overcame other such adversities, emerging much stronger. While there maybe recalibration and realignment needed, we are very likely to see a more advanced and progressive world in the years ahead.” i

The full KPMG CEO Outlook report can be accessed at www.kpmg.com/ceooutlook

ABOUT REYAZ MIHULAR Reyaz Mihular is the chairman of the KPMG Middle East & South Asia (“MESA”) region and represents the MESA region on the Europe, Middle East & Africa (“EMA”) Board of the KPMG network. In his 40+ years with KPMG, he held many leadership positions including as the MESA region’s chief operating officer and as a member of KPMG’s Global Corporate Finance Board. He also holds the role of Managing Partner for the KPMG member firm in Sri Lanka. Reyaz was a Board Member of the International Accounting Standards Committee and subsequently a Member of the Standards Advisory Council of the International Accounting Standards Board and a Board Member of the International Ethics Standards Board for Accountants.

“The journey towards the new reality isn’t going to be an easy one, and there will certainly be many challenges that need to be overcome. At the time of the survey, around a third of CEOs around the world were less confident about prospects for long-term global economic growth than they were at the start of the year. “Nearly four in 10 have had their health, or the health of one of their family members, affected by Covid-19 — and over half had changed their strategic response to the pandemic as a result,” said Mihular. “There will invariably be a need to build confidence and heal the damages that the pandemic has caused. With the measures taken both at macro-level and at organisational level, I expect to see a considerable improvement in market conditions by the second half of 2021.” Why have some global and regional business leaders been able to steer their organisations and personal fortunes better than others? “I think it’s to do with their attitude to begin with.

Reyaz Mihular, Chairman – KPMG MESA

CFI.co | Capital Finance International

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> La Trobe Financial:

Experienced Hands, Unblemished Record

stablished in 1952 and with $11bn in AUM, La Trobe Financial is one of Australia’s leading non-bank financial institutions specialising in funding and investment solutions. The firm’s performance record in times of volatility and low rates has proven popular with investors for almost seven decades. La Trobe

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Financial is 80 percent owned by Blackstone, one of the world’s leading investment firms with AUM of more than $584bn. Blackstone is recognised for its expertise in credit and property with a relentless focus on investment discipline. La Trobe Financial is a proven and trusted partner for institutional and retail investors, CFI.co | Capital Finance International

operating Australia's largest retail credit fund with AU$5bn in AUM and 50,000 retail investors. Chris Andrews, chief investment officer and deputy CEO, says La Trobe has built a reservoir of trust with investors. “We have genuine conviction in the resilience of our strategies through market cycles,” he said. “We’ve been able to draw from

Winter 2020-2021 Issue

CEO and President: Greg O’Neill OAM

these experiences and have continued to grow the La Trobe Financial business through the Covid-19 pandemic”. At the helm is a seasoned economist, La Trobe Financial CEO and president Greg O’Neill OAM. O’Neill has an enviable CV with previous positions at computer firm NCR Australia, Security Permanent Building Society, and Advance Bank (Australia). O’Neill is a fellow of the Australian Institute of Company Directors, a life fellow of the Australasian Institute of Banking and Finance, and a past member of the International Committee of the Mortgage Bankers Association of America.

“Over the past five years, La Trobe Financial has delivered more than $596 million in interest income to investors in the Credit Fund.” CFI.co | Capital Finance International

He is a past chair of the National Basketball League and of the Melbourne Tigers Basketball Club (2006-2009 — during his tenure, the club competed in four finals, winning two National Championships). He is currently an ambassador for Basketball Australia’s elite programme, and chairman of the Australian Basketball Players Association. In 2019 Greg O’Neill was awarded the Medal of the Order of Australia (OAM) for service to business and to basketball. 199

Chief Investment Officer and deputy CEO: Chris Andrews

Chris Andrews talks with CFI.co about the firm’s growth — even during the pandemic. WHAT DIFFERENTIATES YOU FROM YOUR COMPETITION? Our approach has been refined over seven decades of continuous operation and a variety of economic cycles. We have serviced institutional and retail mandates exceeding $28bn and covering more than 180,000 individual loan assets. Throughout this period, we have delivered targeted returns to all of our portfolio investors, whether institutional or in our pooled retail offerings, without loss of a single cent of capital or interest. This is an unprecedented track record of consistent performance for our investors. Our industrial strength credit assessment process, highly conservative LVR maxima and careful portfolio construction disciplines are hallmarks of our investment programme. We combine these with our innovative co-investment model to deliver market-leading diversification and buffer portfolios against times of market stress. 200

At an organisational level, we have built a highly diversified funding and capital model — the most diversified in the sector and a key differentiator to others in our space. We manage $4bn under institutional mandates, which include three of the Australia’s Big Four banks and three household-name global banks. These are complemented by a market-leading residential mortgage backed securities (RMBS) programme for global institutional investors. Our award-winning credit fund holds $5bn in AUM for over 50,000 investors, who range from sophisticated fund managers, family offices and finance houses right through to everyday investors. It holds the highest ratings in the sector from Australia’s independent fund ratings houses and has developed an enviable reputation for consistency — especially during times of market volatility. Over the past five years, La Trobe Financial has delivered more than $596m in interest income to investors in the credit fund. CFI.co | Capital Finance International

WHAT TO YOUR MIND ARE THE KEY REASONS FOR YOUR SUCCESS? Our disciplined investment philosophy is the main one. Our rigorous credit assessment process targets a portfolio of granular exposures, highly diversified by geography and sector and with strictly controlled loan to value ratios. Our role as a fund manager is not to be all things to all people, but to be clearly focused and deliver with distinction. Our team is driven by the need for consistency and repeatability of performance. Since its establishment in 1952, La Trobe Financial has ensured it remains grounded during times of volatility. Our investment style is built around delivering performance throughout the economic cycle. We have conviction that our chosen asset class and rigorous investment disciplines will continue to deliver outsized returns for investors. When you have been in the market for almost seven decades, you develop a certain realism about the inevitability of the cycle. We have retained a very disciplined investment program over a long period of time that favours fundamentals over fashion. i

Winter 2020-2021 Issue

RepRisk, Apex Partner to Provide ESG Risk Data to Private Markets ESG data science firm RepRisk and financial services provider Apex Group have entered into a strategic partnership to expand access to material ESG risk data for private market participants.

epRisk’s environmental, social and corporate governance (ESG) risk dataset, combined with Apex’s company disclosure-based ESG ratings, offers a 360-degree view of private company holdings.

independent, single-source ESG solution. “We help investors to collect, verify and evaluate data on their portfolio companies,” he said, “and benchmark the quality and performance of that data to produce quantitative and comparable analysis.

RepRisk combines machine learning with human intelligence to identify and assess ESG risks; Apex manages the independent collection of data for investors from their underlying portfolio investments to deliver real time ESG analyses via a secure online platform.

“This partnership can play a role in influencing significant behavioral change, drive capital flows, and support our clients as they look to improve their ESG performance.”

Apex’s ESG rating and advisory portal now includes RepRisk Analytics Reports and Cases Data on private companies. The firms hope to close the gap for underserved private companies by delivering a global, independent ESG tool. Apex’s ESG offering is part of its single-source solution model delivering services across the full value chain. “Apex is a very exciting partnership for RepRisk, and one we are especially wellsuited for,” said Alexandra Mihailescu Cichon, executive vice-president of sales and marketing at RepRisk. “RepRisk is the only ESG provider to systematically cover private companies. “While our dataset grows every day, it currently includes more than 120,000 private companies worldwide, in every sector and market. RepRisk looks at what the world says about a company, not what a company says about itself. In combination with Apex’s analysis on company disclosures and reporting, we’re able to provide a holistic picture of a company’s ESG profile.” Andy Pitts-Tucker, managing director of Apex ESG ratings and advisory, says the new platform was established to satisfy demand from private markets for greater transparency through an

RepRisk offers qualitative research, quantitative risk analytics, and proprietary metrics for more than 150,000 public and private companies across sectors and around the world, serving leading financial institutions and corporates in ESG integration and risk management. The firm was founded in 1998 and is headquartered in Switzerland. It is a pioneer in ESG data science that leverages the combination of AI and machine learning with human intelligence to systematically analyse public information and identify material ESG risks. Its flagship product, the RepRisk ESG Risk Platform, is the world’s largest and most comprehensive due-diligence database on ESG and business conduct risks. The expertise is available in 20 languages with coverage of 150,000 public and private companies and 40,000 infrastructure projects. Apex Group Ltd, established in Bermuda in 2003, has 45 offices and 4,000 employees worldwide. It delivers a range of services to asset managers, capital markets, private clients and family offices. The group has improved and evolved its capabilities to offer a single-source solution. i 201

> UnionBank of the Philippines:

Steadfast, Agile and Ready for Whatever Life Brings: a Bank Behind its People

Plaza Branch

Eve the Robot Ambassador

UnionBank Online

The ARK by UnionBank

nionBank of the Philippines has won recognition for its industryleading digitalisation efforts and commitment to improving the lives of its customers through technology and innovation. Awards underscore UnionBank's success in maximising the potential of technology to better serve its customers. It is driven by the goal of promoting a new reality for banking, where “services are embedded in the fabric of daily life”. Of note is UnionBank's unique infrastructure, which has resulted in one of the leanest branch networks in the region, powered by concentrated back-office operations and hundreds of paperless branches. It includes 50 fully digital branches, thousands of ATMs and partner remittance centres, and a wealth of self-service kiosks and online banking platforms. 202

The bank saw new digital accounts opened even during March and April, the height of the lockdown period in the Philippines this year. It successfully implemented measures for consumer debt-relief and the facilitation of donations during the same period. The bank also introduced a retail loan platform, supported by video KYC, that reduced processing times. UnionBank pushes fintech boundaries to reach underserved and unbanked communities, and supports SMEs with the financing and digital tools.

disruption,” said UnionBank president and CEO Edwin R Bautista. “UnionBankers kept the faith in that digital transformation, and believed in what we can achieve together. Today, they are leading the charge.

UnionBank of the Philippines is reaping the benefits of its digital focus and agile operations: retail banking profits doubled in 2019, resources hit a five-year high, and net income increased by 104 percent year-onyear.

With a challenge as massive as Covid-19, technology has proven to be the correct instrument — but not the answer in itself, Bautista believes. “Ultimately, it is our UnionBank DNA that is pulling us through,” he said. “We remain steadfast in our commitment to ‘Tech Up, Pilipinas’ and enable inclusive prosperity to fuel sustained growth, making sure that no one gets left behind.” i

“We began to pursue digital transformation four years ago in order to survive the winds of CFI.co | Capital Finance International

“Despite the developments, our purpose remains unchanged: to elevate lives and fulfill dreams. Our greater purpose is to extend digital banking to the mass market and the unbanked so they too can withstand disruption during troubled times.”

Winter 2020-2021 Issue

IPOs, Unicorns and a Growing Need to Evaluate the Emerging Trends in Public Markets By Gené Teare at Crunchbase

Initial public offering markets have opened up for high-growth tech companies — but most of those filing have been revenue-losing tech companies.

hat makes this a good time to analyse recent private and public valuations of unicorn companies that have exited via the public markets.

The 2020 IPO cohort of exiting unicorns offered a 117 percent increase between the last known valuation for a company and its valuation upon going public — the highest jump in five-years. (The second largest year is 2018, when we saw 58 percent growth.) The median date for the last private valuations was around two years prior to their IPO. The concern that these companies do not have high growth rates moving forward was not supported by the IPO pricings — and many traded higher than their IPO price on the first day of going public. This jump in first-day trading is causing a heated discussion on a “broken IPO process” for 2020. It is worth noting that the unicorn phenomenon is fairly recent — 2015 was branded the “year of the unicorn”. • Between 2005 and 2010, there were 14 new unicorns created in total, of which 12 have exited • From 2011 through 2013, there were 47 new unicorns, of which 35 have exited • Since 2014, 789 new unicorns have been recorded; of those, 172 have exited. Unicorn formation peaked in 2018 with 172 new entities making the grade; 2019 wasn’t far behind. Crunchbase has 630 private active unicorns on its board, which have collectively raised more than $450bn and are valued at just under $2tn. That’s close to the current market cap of Apple. In total, 220 unicorns have exited via either an IPO or M&A. Technology companies have steered away from public markets in recent years, creating an ongoing discussion on growth and value creation.

Companies are able to raise ever-larger private funding rounds without the scrutiny of being public companies. The concern is that by the time these highly valued companies go public, growth will have slowed and retail investors will not benefit as they had previously. But companies must eventually go public or “get acquired” to return value to investors. For unicorns, going public is the 2-to-1 preferred avenue. Venture capitalist Tomasz Tunguz, of Redpoint Ventures, noted a shift during 2019 in favor of the public markets valuing high-growth companies at better multiples. Prior to that, venture and private-equity investors had given private companies a better multiple. This encouraged companies to stay private for longer and raise funding for growth from these sources. “In 2017 and 2018, the median high-growth private company raised at a higher forward ARR multiple than in the public markets,” he wrote. “Starting in 2019 and continuing in 2020, the public markets value these companies with better multiples. “This is a critical shift. It means raising capital in the public markets is now less expensive than in the private markets.” Tunguz clarifies that this is true for companies growing at a rate above 50 percent. And 2020 is the year of the IPO, with 364 already on the US stock market, most of them since 2000. With traditional IPOs, direct listings — and the largest ever number of new SPACs listed this year — there are many ways to go public. “Stay private longer” has earned its own acronym — SPL — and that’s becoming a dirty threeletter word among Silicon Valley investors. i 203

> Sasseur REIT:

Unique EMA Model Aligns Interests of All Stakeholders

ingapore Exchange-listed Sasseur REIT is the first retail outlet mall real estate investment trust listed in Asia.

It offers investors the opportunity to invest in the fast-growing sector in the People’s Republic of China through its initial portfolio of four mall assets strategically located in the fast-growing cities of Chongqing, Bishan, Kunming and Hefei, with a net lettable area of 312,844 square meters. Sasseur Cayman Holding Ltd, the REIT’s sponsor, is a leading premium outlet group ranked among China’s top 500 service companies. With 13 outlet malls in 12 major cities, Sasseur is recognised for the integration of art, aesthetics, operational excellence and prudent capital management. China’s retail outlet industry has remained resilient in the face of the pandemic. Sasseur REIT has bounced back from temporary closures early in 2020, with sales from July to September nearing pre-Covid levels. The rise of China’s middle class — Sasseur REIT’s main customers — and government policies to encourage domestic consumption have contributed to the performance of the REIT, and to the continued growth of the sector. Sasseur’s malls stand out because of their unique “A x (1 + N) x DT” Super Outlet business model, where A = arts, 1 = outlet business, N = lifestyle activities and DT = data technology. Sasseur combines art, commerce and other activities to position its malls as lifestyle centres that offer an attractive range of retail, cultural, tourism and entertainment activities. Unlike many traditional retail-related REITs, Sasseur — through its entrusted management agreement ("EMA") — does not collect a fixed rent from the majority of its tenants. Instead, it pegs the rent to tenant sales, which aligns the interests of mall owner, entrusted manager, tenants and REIT unit-holders. Based on the EMA, the REIT’s income comprises a fixed component, which grows at three percent annually according to contract, and a variable component that is pegged to sales. The fixed component provides income stability while the variable component allows investors to enjoy upside derived from commercial activity. With several projects in the pipeline, Sasseur REIT's manager intends to acquire highquality outlet malls with good investment characteristics in China, or other parts of Asia and the world. i 204

CFI.co | Capital Finance International

Winter 2020-2021 Issue

> Silver Lining to the COVID-19 Cloud:

Learning a Patient-Centric Approach By Shahnaz Radjy & Maria Teresa Ferretti

id you know that nearly 17 percent of the Swiss population suffers from one or more mental disorders? Or that more than 150,000 of its citizens are living with dementia — with 30,000 more develop it each year? That’s a new sufferer every 18 minutes, and about two-thirds of the people affected by dementia are women. What has become clear is that this pandemic is not just about physical health. It has put brain and mental health in the spotlight, too. That’s where the Women’s Brain Project comes in, and the reason why this year’s International Forum on Women’s Brain and Mental Health was deemed a significant milestone on the path of sex- and gender-orientated precision medicine as well as another step toward the realisation of the first Institute of Sex and Gender Precision Medicine in Switzerland. THE IMPACT ON COVID-19 ON BRAIN AND MENTAL HEALTH The WBP Forum highlighted sex and gender differences in healthcare, and the importance of brain and mental health as the world struggles with lockdowns and quarantines. “While our brains are wired to connect and belong, the need to be disconnected and often in isolation due to the pandemic is taking a significant toll in terms of sustained stress, which causes inflammation, a diminished immune response, and a greater susceptibility to other diseases,” said professor Eliot Sorel, chair of the Access to Care Committee, American Psychiatric Association. “This may lead to an exacerbation of preexisting mental disorders and new incidences of depression and anxiety, above all in the female population as they play a major caregiving role.” Combining perspectives for greater insights More than 200 people around the world registered for the WBP Forum held virtually in September, uniting scientists, academics, patients, caregivers, and policymakers, including Signe Ratso, European Commission Deputy Director General for Research and Innovation, and Dr Kaveeta Vasisht, Associate Commissioner for Women’s Health at the US Food and Drug Administration. Over the course of the two days, speakers discussed youth suicide, maternal mental health, and sex and gender differences in dementia and Alzheimer's disease, in addition to calls

to action for better migraine policies, lifestyle interventions, and new technologies for brain and mental health. THE ROLE OF TECHNOLOGY Almost every panel included references to developing technologies and their potential positive impact on brain and mental health across the board. From apps for young people at risk of suicide to opportunities to detect postpartum depression or dementia, the way forward is to build on AI-powered solutions. Since 2016, WBP has been leading efforts to study sex and gender differences in mental and brain diseases, with novel technology developments to foster diversity in precision medicine. AI is a great source of insights for scientific research and precision medicine, but it relies on large dataset bias, mainly European, and is based on white men. One of WBP’s objectives is to break the biases in precision medicine and to promote differentiated data to make clinical trials, drugs development, and health outcomes non-discriminatory. As summarised by Dr Lukas Engelberger, Health Counsellor of the City of Basel: “I am sure that gender-specific medicine will become ever more important in the future. If women receive more targeted and efficient medical treatment, fewer resources will be wasted and costs will be reduced. This is important to all of us.” Sustainability is not often discussed in healthcare, but it was the cornerstone of WBP’s co-founder and CEO, Dr Antonella Santuccione Chadha — winning this year’s World Sustainability Award a week prior to the WBP Forum. CFI.co | Capital Finance International

LOOKING TO THE FUTURE: A THREE-PRONGED APPROACH Raising awareness is key, but so is having a solutions-oriented approach. That’s why WBP is spearheading initiatives to translate the insights of this year’s forum into action. It launched the Swiss edition of the global Be Brain Powerful campaign, with the support of partners and sponsors. Available in English, German, Italian, and French, the campaign is built around the seven pillars of brain health. Individuals can sign up to a 30-Day Brain Health Challenge via the Geras Solutions app or email, and while the primary focus is on women’s brain health, a majority of the challenges are relevant to both genders. The WBP Hackathon will launch early 2021 and its focus is to bring together technology and healthcare experts — along with anyone interested in sex and gender, mental health and the role of technology — and take apart biased algorithms to find ways to rebuild them. By hosting a regulatory roundtable, WBP is working with policy-focused organisations to better understand and catalyse ways in which sex and gender differences can be integrated in to research guidelines and requirements, including an emphasis on sex and gender disaggregated data, clinical trials and more. As the world struggles to identify what the New Normal is, or will be, organisations like the Women’s Brain Project are also reshaping reality with the goal of leveraging precision medicine to offer a more effective, equitable, affordable healthcare to all. i 205

> Sherzod Khodjaev, Deputy Minister for Energy, Republic of Uzbekistan:

Uzbek-Afghan Power Sector at Nexus of Effort to Bring Light, Peace After Decades of Strife There are few countries in the world today where people suffer as much as our close neighbour, Afghanistan.

he coalition forces led by the US moved into the country almost two decades ago, and it is still far from stable. According to the Global Peace Index, Afghanistan has replaced Syria as the world’s least peaceful country with over 50 percent of its population living below the poverty line. In a recent Gallup study, a staggering 85 percent of Afghan respondents said their lives were the worst on the planet — and not a single person described their life as “thriving”. This is an appalling reality that needs to be addressed, and changed. Beyond the purely humanitarian reasons to help the Afghan people, there are economic and security reasons to do so. As Uzbek President Shavkat Mirziyoyev said at a conference in Tashkent: “Secure Afghanistan means a secure Uzbekistan, [and a] prosperous and stable South and Central Asia.” Uzbekistan has strived to establish a dialogue with Afghan political and economic leaders, and has provided humanitarian help to the people. Even the Taliban have praised our role in the quiet diplomacy pushing for peace through the Doha negotiations. In the power sector, Uzbekistan has been exporting electricity to Afghanistan since 2002, through difficult years, as part of its overall socioeconomic support. In the early years, based on the technical capabilities of the overhead networks, up to 62.4 million kWh of electricity was supplied in accordance with annual direct contracts with Da Afghanistan Breshna Sherkat (DABS). Electricity is supplied from Uzbekistan’s Hairaton substation to the trans-shipment base substation in Afghanistan via an overhead network. In 2009, construction of the Naimobod 1.2 substation — with a capacity of 220 kW and high-voltage overhead grids up to 250 MW — was completed. Today Afghanistan is supplied with two billion kW/h of electricity per year, with a capacity of up to 450 MW. To continue trade and economic relations in the electric power industry, JSC National Electric 206

Photo courtesy of Ministry of Energy of Uzbekistan, Press-service

Grids of Uzbekistan and DABS have agreed the terms of a 10-year power purchase agreement and a contract for the construction of a power transmission line. The length of the line is 245.6 km, of which 45 km will pass through the Surakhandarya region of Uzbekistan, and 200.6 km through Afghan territory. Part of it — Surkhon-Puli-Khumri — with a capacity of 500 kV is being carried out in Uzbekistan and metal foundation supports have been installed at 127 pickets. Uzbekistan is very grateful for support from the Asia Development Bank in this project, which is not limited to construction of the power CFI.co | Capital Finance International

line. It includes an upgrade of the distribution network in Kabul and the installation of a smart metering system in the capital to enhance DABS revenues. Uzbekistan currently has a nationwide programme to install smart metering, so considerable expertise has been developed. Clearly, one of the main concerns is the security of workers and staff. Despite the overall strong rapport established with the Afghan side, there is a need to ensure the safety for all workers on this construction project. To achieve this, Uzbekistan tries to engage Afghan companies where possible, turning locals into stakeholders and building trust among anti-government factions and warlords.

Winter 2020-2021 Issue

Photo courtesy of Ministry of Energy of Uzbekistan, Press-service

The Covid-19 pandemic has hit Afghanistan in the midst of a long and hard political transition. This country’s future remains very uncertain and unclear. Problems that have been slightly alleviated can intensify and flare up any time. If human suffering persists, the political and economic situation will deteriorate more quickly. Mainly thanks to strong agricultural growth, Afghanistan’s economy grew by 3.9 per cent in 2019. But, unsurprisingly, the economy is shrinking rapidly in 2020 due to the pandemic. Wheat production continues to support some agricultural growth, but industry and services’ output is being heavily impacted by lockdowns and border closures.

insurgency could again take Afghanistan into turmoil, bring suffering for Afghan people, and a terrorist threat to the world. Efforts to bring peace and respite for the Afghan people must not stop. Uzbekistan is trying to set an example and are doing what it can to ensure stability and security in the region. If other countries join our efforts, we will be that much closer to achieving our goals. i

The Covid crisis will have a long-term impact on Afghanistan’s economy. Even without the pandemic, the country’s return to any kind of normality would have taken many years. With the whole world experiencing an economic downturn, Afghanistan is being hit twice. It is not obvious how much international help was going to be committed to this country in the first place, but as we head into the pandemic’s second wave — with added pressure on the world’s economy, lower revenues and shrinking grants — Afghan prospects appear even more grim.

Photo courtesy of Ministry of Energy of Uzbekistan, Press-service

There are many countries keen to influence Kabul, with a strong interest in preserving the political, economic, and security gains achieved since 2001. A repeat of the Taliban CFI.co | Capital Finance International

Deputy Minister for Energy: Sherzod Khodjaev

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> Be a People Person:

Networking is the Path to Business Success by Naomi Snelling

If it’s not what you know but who you know, networking is de rigueur for business people and entrepreneurs.

e all do it, but some do it better, and more mindfully, than others. Some do it without even trying. So what, exactly, is networking? And how has it evolved over the crazy year that has seen us become pros at Zoom and all things remote? There’s an African proverb: “If you want to go fast, go alone. If you want to go far, go with others.” It seems to sum up the power of networking as a long-term tool for growing a business and a brand — in ways that you may not even envisage at the outset. Humans have always been tribal. We feel instinctively drawn to certain people — and to certain brands. Marketing experts tell us this is driven by an alignment of core values. Values resonate, or represent an aspiration. There’s always some deep and meaningful explanation to which reviews and research results can attest. This preference for what feels right also influences our choice of networking group, and the way we approach it. Marina Gask, a long-time member of networking group Sister Snog, believes that the friendships that are forged become the deepest drivers of ongoing success, support and collaboration. Gask is a copywriter, press consultant and co-founder of new online platform, audreyonline.co.uk. She admits that before her experience with Sister Snog she found networking very hit-and-miss — but all that changed when she joined the group. “I’ve made some of my deepest friendships through Sister Snog,” she says, “one of whom is now my business partner. I came into it as a freelance journalist looking for other ways to generate income streams. And since then, I've ‘become’ a business, offering copywriting, blog coaching, business writing and press consultancy. I've had a ton of work through referrals from Sister Snog, and worked directly for some of the members. “And it's not just the work, it's the sharing of business practice, knowledge, contacts and events. It has really built my confidence, being around other businesswomen from completely different sectors to my own. Sharing challenges and solutions together is incredibly powerful.” Jackie Barrie, author of The Little Fish Guide to Networking, advises an open mind. “Simply use 208

Rod Lloyd with Keir Starmer

CFI.co | Capital Finance International

Winter 2020-2021 Issue

Low Cost Vans: Rod Lloyd CEO and Lorraine Kitchen HR Manager. Photo: Ryan Mcnamara

networking events as the chance to meet new people and have fun,” he advises. “Your goal is to get people to know, like, and trust you. Later, once they understand what you can offer, they will be happy to refer you. “Meanwhile, you get the joy of doing the same for them, because that’s what friends do for each other. I can trace over 90 percent of new enquiries back to someone I met somewhere, sometime.” Anyone who has dipped a toe into the world of sales will have heard the “people buy people” phrase at some point. It’s a cliché, but there’s truth in it. “Everybody asks me: How do you know so many people?” says businessman Rod Lloyd, director of British vehicle hire company Low Cost Vans. “It’s simple, really. I talk to a lot of people. I always remember people’s names and I always follow things up. “When you meet a group of people for the first time you might be a bit on edge, and you don’t take in their names when they first introduce themselves. I’ve trained myself to go round in a circle and ‘clock’ the names and remember a specific detail — for example, red sweater = John — and it helps me to register each person’s name. When I’m talking to that person a few minutes or an hour later, I make a point of using their name. Invariably they won’t remember (mine), so I remind them, and then they never forget it.”

Lloyd also scrutinises the guest list before a black-tie event and highlights those he intends to connect with, entering with a conscious goal. He believes that getting to know people is a key weapon in developing a word-of-mouth marketing strategy. Barrie agrees. “It’s the best kind of networking and marketing there is, because other people do your selling for you. Having a word-of-mouth strategy is like turning yourself into a magnet that attracts enquiries from friends, and friends of friends,” she says. The media-driven world needs shiny nuggets of expertise to keep its momentum, and networking can be the perfect opportunity to position yourself as an expert in your field. Victoria McLean, CEO and founder of career consultancy firm City CV, grew her business from scratch by networking. “As a start-up founder, I didn’t have a big advertising budget,” she says, “or any advertising budget, actually. I’ve built a community of around 500-plus professionals on LinkedIn by optimising my profile and sharing and posting useful articles and blogs about all aspects of career development and the changing nature of work. “I’m regularly asked to comment on career issues by the media — everyone from Cosmo to the City financial press. I’ve also been invited to run CFI.co | Capital Finance International

webinars, host discussion panels, and speak at business events across Europe and in Australia. Networking is also how I keep myself up-to-date and motivated. “I get really inspired by having a diverse group of people around me. Currently, it’s mostly Zoom calls and online events, but networking has been essential to building my business, and it’s proving just as essential to ensuring we continue to grow and support people.” The six degrees of separation principle fascinates Rod Lloyd. “I was talking about it recently and realised that — if I really needed to — I could make one phone call and gain a direct line of communication to a former US president.” Porter Gale, former vice-president of marketing at Virgin America and author of Network Is Your Net Worth, argues that in the age of tech, it’s not even six degrees of separation — it’s more like three. As technology ushers in an era of increased innovation and collaboration, contacts and partnerships are brought closer, and there is increased access via online platforms. Networking has evolved from transactional to transformational. It’s about taking control of your own course, following your most authentic passions, and making meaningful connections — which can in turn increase your happiness and productivity. i 209

> Exclusive Interview with IBM:

Leading in a Hybrid World CFI.co’s Chairman Tor Svensson interviews Hossam El-Din

HOW DO YOU DEFINE A HYBRID CLOUD PLATFORM AND HOW IS IT DRIVING CLIENT'S DIGITAL TRANSFORMATION? Hybrid cloud is IT infrastructure that connects at least one public cloud and at least one private cloud, and provides orchestration, management and application portability between them to create a single, flexible, optimal cloud infrastructure for running a company’s computing workloads. It is designed to help a company achieve its technical and business objectives more effectively and cost-efficiently than public cloud or private cloud alone. In fact, according to one recent study, companies derive up to 2.5x the value from hybrid cloud than from a singlecloud, single-vendor approach. In simple terms, companies rarely start from scratch. They have complex and unique workloads and apps. They have messaging, data and transactional systems, all integrated into their operational and security systems. Hybrid cloud is about meeting them where they are at in terms of the IT infrastructure choices they have made and the various places where they will do computing; whether it is in a public cloud, a private cloud, or on premises. Relying on only one infrastructure like one public cloud locks you in, and perhaps more importantly, it locks you into only one company’s innovation. And talking to our customers, we know that what they need is to be able to move faster and differentiate through technology and new business platforms. They want to be able to build more collaborative cultures and they need solutions that give them the flexibility to build and deploy any app or workload, anywhere - to which open source can be the answer. Open source is at the heart of hybrid cloud environments, which helps prevent customers from vendor lock-in. This is why IBM has been making significant investments to help accelerate innovation by offering a nextgeneration hybrid cloud platform built on open source technology. WHAT MAKES IBM'S HYBRID CLOUD APPROACH UNIQUE? Joining forces with Red Hat is, undeniably, a game changer. Through open source solutions like Red Hat OpenShift, we are providing customers with the unique ability to build mission-critical applications once and run them anywhere, making it easier to develop and deploy containers in virtually any cloud. With more than 20 years of leadership in open source communities, IBM puts open source technologies at the foundation of its services — incorporating Red Hat technologies reaffirms that. 210

"Today, IBM is the number one hybrid cloud platform company." Today, IBM is the number one hybrid cloud platform company. Our cloud business is much more comprehensive than any other cloud provider because it includes capabilities others don’t have and reflects the actual cloud buying patterns of enterprise clients. Our cloud business includes both as a service — infrastructure, software, platform and process — and hardware, software and services that enable enterprise clients to design, build, operate and integrate private, public and hybrid clouds. The point is that the overall enterprise cloud marketplace is not defined by what providers are trying to sell, but by what clients are buying. Enterprises need a holistic set of technologies and capabilities to run mission critical workloads on the cloud, as well as deep industry expertise that can transform operations and help accelerate their digital transformation. This is especially true today as the pandemic has created an urgent need for businesses to shift many of their operations and offerings to the cloud. WE KEEP HEARING THE TERM INDUSTRY-SPECIFIC CLOUDS. WHAT CAN YOU TELL US ABOUT IT AND WHY ARE COMPANIES SHIFTING TO INDUSTRY-SPECIFIC CLOUDS? Working with clients, IBM has seen that a 'one-cloud-fits-all' approach doesn't work and that hybrid cloud is the next major shift in the evolution of enterprise IT. This is especially more critical when it comes to clients in highly regulated industries, including financial services, healthcare, insurance, telco and more, as there are also unique regulatory and compliance, security and data protection requirements to consider. To address such needs, IBM announced the world’s first public cloud for the financial services industry - IBM Cloud for Financial Services -to help address the requirements of financial services institutions for regulatory compliance, security and resiliency. This was done in collaboration with Bank of America. And today, we are seeing several global banks, including BNP Paribas join a growing ecosystem of financial institutions and technology providers that will adopt IBM Cloud for financial services CFI.co | Capital Finance International

in order to leverage those unique and leading security capabilities. In the energy sector, Schlumberger, IBM and Red Hat are collaborating to build a hybrid cloud system that makes energy exploration data and analytics available worldwide in an easy-tomanage package. Red Hat's OpenShift container environment will help Schlumberger deploy this advanced toolkit to partners, clients and resellers around the world. At IBM, we believe that every client journey to cloud is unique, with efforts focused on specialized application tasks, workloads, security and compliance requirements, along with specific industry and customer needs. IBM's hybrid cloud approach is at the epicenter of this swift and massive transformation. It allows organizations the flexibility to balance the need to keep some workloads on-premise or in a private cloud while also taking advantage of the speed and flexibility of the public cloud. DO YOU THINK THE PANDEMIC INFLUENCED JOURNEYS TO THE CLOUD? There is no doubt that this pandemic is a powerful force of disruption and an unprecedented tragedy, but it has been a critical turning point. Transformation journeys that were going to last a few years are now being compacted into months. In response to the challenges presented by COVID-19, governments and business were under immense pressure to innovate and digitally transform. And with most companies only 20 percent along their cloud journey, business continuity and maintaining operations were some of the key issues organizations had to face, especially with the sudden shift of workforce from on-site to remote work. So if there is anything the COVID-19 pandemic has taught us, it is the critical importance of technology solutions that enable speed, flexibility, insight, and innovation. So to answer your question, yes. This global crisis was and still is a catalyst for many companies to accelerate their move to cloud. And we now, more than ever, understand the importance of being able to operate anywhere and having an IT architecture that can take full advantage of applications and data no matter where they reside. IN YOUR OPINION, DO YOU THINK THE SKILLS GAP IS WIDENING AS TECHNOLOGY ADVANCES? In general, digital transformation continues to disrupt and transform industries. So, it is no wonder that many traditional skills are becoming obsolete in the face of modern technology. While

Hossam Seif El-Din

certain hard skills may lose importance over time, other types of skills are likely to evolve because of technological disruptions, such automation, AI and machine learning. For decades automation has touched most industries – from the factory floor to banking transactions and oil refineries. However, intelligent automation enables change at a whole new level. AI and automation, or intelligent automation, are altering the way humans and machines interact, in terms of how data is analysed, decisions are made, and tasks and activities within a workflow or system are performed. These technologies are already changing how every job is performed, eliminating repetitive tasks but increasing the need for creative thinkers. In fact, IBM believes that 100% of jobs will eventually change due to artificial intelligence. So, the priority right now is to help people around the world prepare for these jobs and to reskill existing workforce in order to remain relevant and be able to benefit more from the prosperity that new technology creates. In fact, IBM has been working closely with government and private entities, such as The Ministry of Education in the UAE, Abu Dhabi School of Government, Saudi Arabia Ministry of Communications and Information Technology and GEMS Education to make IBM’s Digital-Nation available to their communities and ecosystem. IBM Digital-Nation is a cloud-based online self-paced learning and innovation platform designed to deliver advanced knowledge and skills in key emerging technologies, such as artificial intelligence (AI),

blockchain, cloud, coding, Internet of Things (IoT), quantum computing, data science and analytics, and cybersecurity. IBM also recently opened up Open P-TECH for several of our countries across the Middle East and Africa. It is a free digital education experience platform that is designed to equip young people and educators with foundational knowledge about emerging technology and professional skills. i ABOUT THE HOSSAM EL-DIN Hossam Seif El-Din is the General Manager of IBM in the Middle East and Pakistan and the Vice President of Enterprise & Commercial for IBM Middle East and Africa. In his dual capacity, Hossam is focused on formulating and executing IBM's strategy across the region, and responsible for expanding the company's footprint, offerings and services and developing high-performance local teams. IBM IN THE MIDDLE EAST IBM has been operating in the Middle East since 1947, when it installed the first computer in the region over 70 years ago. It has been playing a vital role in shaping the region’s information technology landscape. Today, IBM is a leading cloud platform and AI solutions company and is continuously transforming its business to address the emerging needs of businesses and societies and help customers and partners accelerate their digital transformation journeys. 211

> Convergence:

Blended Finance is a Valid Path to Expanding Your Investible Universe By Joan M Larrea Chief Executive Officer, Convergence

Blended finance offers institutional investors a risk-calibrated path toward investing for impact in new markets.

t’s not surprising that many people avoid investing in frontier and developing markets: weak institutions, poor infrastructure, high transaction costs and potentially insufficient risk-adjusted returns are dissuasive for anyone unfamiliar with the terrain. Yet institutional investors are taking a fresh look at the investment potential available in developing countries, through blended finance — the strategic use of catalytic capital from public or philanthropic sources to increase private investment in the Sustainable Development Goals (SDGs).

Figure 1: Top commercial investors in blended finance (2014-2019).

Blending is a form of financial engineering that offers investors a way to engage in riskier markets and strategies without straying from their mandate. Convergence’s recent report on trends, challenges and opportunities shows top private investors are engaging in blended finance. In 2018, Blackrock, the world’s largest asset manager, joined the Climate Finance Partnership, an initiative with governments and philanthropists to develop a flagship $500m blended private infrastructure equity fund for climate infrastructure projects and companies in emerging markets. JP Morgan Chase launched its $100bn development finance institution in January that seeks to galvanise private capital toward the SDGs, partly by “connecting philanthropic or concessional funds with private capital to spur investment through blended finance models”. Convergence, with a membership of over 200 public, private and philanthropic institutions, is witnessing this activity front and centre, with members like Credit Suisse, FirstRand, BNP Paribas and Bank of America / BofA Securities (formerly Bank of America Merrill Lynch) looking at blended approaches.

Figure 2: Financial commitments from commercial investors to blended finance transactions, by organisation type.

Percent of financial commitments. Source: Convergence , The State of Blended Finance 2020

As indicated in The State of Blended Finance 2020, commercial investors such as banks and other financial institutions which do not selfidentify as impact investors, represent only 27 percent of financial commitments into blended finance transactions launched between 20172019. Development impact and blended finance can scale if more institutional investors consider the pool of blended bankable deals available for private investment. And, there’s reason to do so.

EXPANDING THE IMPACTFUL INVESTIBLE UNIVERSE For those seeking to invest on market terms, an investment structure requiring a blend of concessional and commercial capital may come off as a deal not worth doing, or unbankable. But, in the normal course of business, do we discard transactions with low but positive expected returns on equity? No, because anyone who has sat through a Finance 101 course knows that the first adjustment to try is leverage.

"Blending is a form of financial engineering that offers investors a way to engage in riskier markets and strategies without straying from their mandate." 212

CFI.co | Capital Finance International

Winter 2020-2021 Issue

Debt providers accept lower returns and forego upside returns in exchange for the downside protection and comfort that the transaction can deliver a given cash stream. The presence of debt reduces the amount of equity in the transaction so that any upside returns are spread across fewer dollars of equity and, presto, the equity IRR moves into an acceptable range. Conversely, from the lender’s vantage point, a transaction with uncertain cashflow or insufficient cashflow to service the proposed debt moves back into acceptable range if more equity is introduced, as equity can wait for its payout when cash is tight. This tug of objectives between equity and debt eventually delivers a transaction where risks and rewards are closely calibrated and properly allocated. Blended finance transactions introduce a third form of capital, offered as grants, low-priced guarantees, or other instruments, provided by a party with the objective of obtaining social and environmental returns. Just as an equity investor needs to deliver security and seniority to a lender, investors seeking concessional money in a transaction for the purposes of making it investible must demonstrate that the transaction will deliver impact. That’s the quid pro quo of engaging in blended finance. There’s more: commercial investors report an unexpected benefit of stepping across the aisle to do business with parties focused not on profits but on accelerating progress toward the SDGs. The experience can change how investment decisions are made in other parts of the commercial investors’ portfolios. One could argue that through blended finance, commercial investors looking to transition their portfolios towards long-term sustainability and impact gain the tools to do so by engaging with developmentminded partners. Let’s not miss a trick just because it wasn’t covered in Finance 101. Blended finance should be seriously considered by investors eager to expand their investible universe, to teeup transactions with tiered returns that, because of their inherent characteristics, also march us closer to a more sustainable and inclusive future. i 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 213

> Jim O’Neill:

A No-Brainer for the G20

We may soon witness the bargain of the century. G20 leaders, representing the world’s largest economies, will discuss COVID-19 this month at a virtual summit, where they will have a chance to secure a return on investment that would make even the legendary investor Warren Buffett blush.

ith less than one-tenth of one percentage point of global GDP, the international community can vastly expand access to life-saving COVID-19 tests, treatments, and vaccines (once they are available), thereby putting the global economy back on track to longterm growth and stability.

Final Thought

Investing now to ensure that effective diagnostics, therapeutic drugs, and vaccines are developed and distributed to people around the world is not only the right thing to do; it is also the smart thing to do. Enlightened self-interest dictates that we should be underwriting future demand for goods and services, so that global trade and growth can bounce back. This should be an easy call for G20 leaders. But just in case policymakers have failed to recognise the returns that are on offer, here are the facts. Throughout the 1980s and 1990s, the world economy averaged annual economic growth of around 3.3%, and that rate increased to 3.7% over the past two decades, owing to the rise of China and the other BRIC economies (Brazil, Russia, and India). In the 2020s and 2030s, however, growth will have to be driven by a new group of predominantly low-income countries that are striving to climb the ladder to middle- and high-income status. Back in 2005, my Goldman Sachs colleagues and I identified a set of countries that could become globally important economies in the twenty-first century. We called them the “Next Eleven” (N-11): Bangladesh, Egypt, Indonesia, 214

"With an aggregate GDP of around $6.5 trillion – more than twice that of India – the N-11 already matters immensely to all of us in the global economy." Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey, and Vietnam. With an aggregate GDP of around $6.5 trillion – more than twice that of India – the N-11 already matters immensely to all of us in the global economy. Moreover, the latest projections show that if these up-and-coming economies do not reach their potential, the average annual global growth rate will start heading back to the 3.3% range. As COVID-19 continues to disrupt these key economies, this undesirable outcome is becoming more likely. In fact, we have reached a pivotal moment. The G20 must move fast to ensure that all countries have access to the medical tools and other resources needed to manage the pandemic and bring it to a swift conclusion. Only the governments of G20 member states have the capacity to deliver on the scale that the situation demands. Fortunately, there is already a clear path forward. The Access to COVID-19 Tools (ACT) Accelerator, which was created in April, offers a roadmap for ending the crisis through global cooperation. CFI.co | Capital Finance International

In the space of just six months, the ACT Accelerator’s partners have compiled the world’s largest portfolio of candidate vaccines, tests, and treatments, and have developed an advancepurchasing system to get these critical items to the places where they are most needed. But to continue rolling out rapid testing, evaluating new treatments, and ensuring access to vaccines as soon as they are licensed, the ACT Accelerator will need a total of $38 billion – including $4.5 billion urgently. The investment case for plugging these funding gaps is the most clear-cut that I have ever seen in my career. Compared to the $12 trillionplus that G20 countries have already spent on mitigating the pandemic’s consequences, the amount needed to ensure the ACT Accelerator’s work is trivial. The International Monetary Fund estimates that if medical solutions could be made available faster and on a wider scale than its baseline forecast projects, the resulting cumulative increase in global income would reach almost $9 trillion by the end of 2025. For developed countries, this shouldn’t even be a choice. G20 leaders can either act now to promote growth in the economies of tomorrow, or they can do nothing as their export markets shrink, leaving them even more dependent on their own sluggish domestic growth. i ABOUT THE AUTHOR Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK Treasury Minister, is Chair of Chatham House.