CFI.co Winter 2021-2022 by CFI.co

Capital Finance International

Winter 2021-2022

£9.95 // €14.95 // $15.95

AS WORLD ECONOMIES CONVERGE

Chancellor of Germany Angela Merkel:

END OF AN ERA

ALSO IN THIS ISSUE // IFC: AFTER GLASGOW // UNCDF: INNOVATION & POWER OF VALUE CHAINS IBM: BANKS AND FINTECH ON PLATFORM ECONOMIES // IMF: WIDENING GAPS IN THE GLOBAL RECOVERY NASDAQ: LANGUAGE LOCKS AND BUILDING BLOCKS // OECD: PLUGGING THE SDG FINANCING GAP

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CHRONOMAT

The Cinema Squad Charlize Theron Brad Pitt Adam Driver

First Thoughts

recovery would depend on the achievement of the UN’s Sustainable Development Goals. We still do.

This is the seventh successive quarterly issue of our magazine to open with comments regarding the Covid-19 pandemic.

In the next issue, blind fear had evaporated (to some extent) and we were encouraged by the substantial financial boost as governments — those that could afford to do so — worked hard to repair derailed economies.

Going to press in Summer 2020 we partly regained our pre-pandemic composure and marvelled at the response of UK Chancellor Rishi Sunak (and featured him on the front cover). We took the view that the road to a truly sustainable economic

By Winter we were enthusing over the prospects of a vaccine-based recovery, and in Spring this year warned against post-pandemic protectionism, expressing the hope for more economic integration and interdependence. For some, the

feeling was that — while we would have much to do afterwards — we were going to beat Covid-19 quite soon. This wasn’t to be the case, and we still believe that protectionism rarely, if ever, works. The Summer issue spoke of the IMF’s renewed optimism for the global economic outlook, but MD Kristalina Georgieva, referring to vaccine inequality, warned of splitting the world into two. The decision — in rich countries — was when we should have a booster. Elsewhere, too few had received even a single dose. There is still disgraceful inequality. We are not saying that a fully vaccinated world would have guaranteed

protection against Omicron (or anything that may follow); the point is that inequality in any area is immoral — and bad for business.

But in early December, the Fed’s Jerome Powell declared that he wants to retire that buzzword because it suggests inflation will be “shortlived” — whereas it may indeed be persistent.

In late November, South Africa did a sterling job of identifying Omicron and promptly warned the world of this highly mutated strain of the virus. The nation now feels punished for this outstanding achievement, and UN Secretary-General Guterres agrees, characterising the resulting bans as “travel apartheid”. However, the countries that closed their doors so hastily can perhaps

be forgiven. The principle we suggest here is different. Travel bans are minimally efficient, but do provide a short window for scientists to figure out what we are up against and, hopefully, further protect the world and its economy. But it would be folly of the first order to discourage the reporting of dangerous situations for fear of potential economic losses. Countries that suffer in this way because of honest reporting must surely be compensated. Might a financial gesture from those nations that put up the “no entry” signs be appropriate…? 9

First Thoughts

In the most recent issue of CFI.co, Autumn 2021, we were concerned about inflationary pressures that had been building up since we moved out of lockdown. A holy chorus assured us that all this inflation business was “transitory”.

Relax a little though, because Powell agrees that once the pandemic subsides, we’ll return to something closer to two percent inflation on an annual basis. But Omicron may contribute to the persistence.

> Correspondence

“

I must say that — among my husband’s apparently unending supply of (generally rather boring) business and finance magazines — I actually manage to enjoy reading CFI.co when it appears each season. Why? Well, for a start, it usually contains little surprises. I enjoy the well-written profiles of the people behind the news, the catholic, small c, spread of your attention, and your general trend of publicising — and supporting — businesses and individuals who prioritise sustainability, ecology, and protection of the environment. I like the oddball humour which randomly appears in some of your headlines and stories (is it too much to describe CFI. co as mildly countercultural?) and the often “leftfield” choice of subjects. There seems to be an overriding theme — perhaps driven, as in most things, by a desire for profit and acceptance with a wider group of consumers — that is laudable, regardless of the motivation of the individual companies featured. I fear, however, that you are ploughing a lonely furrow. Not many of your competitors seem as adamant in recognition of the fact that NOW is the time for change. Nor do most magazines seem to have a horizon beyond a sunlit story of “success”, nor to appreciate that the media have a key role in pressing corporate and financial leaders to advance positive, protectionist practices for our planet: our only home, our only hope. Money and profit will always plays a part — I am not naïve to this, although my (financial adviser) better half infers as much — and I find some comfort in your subtle, but noticeable, optimism and positive encouragement. Keep it up. SARAH MILES (London, England)

““

It was with great interest that I read your article on UniCredit and their laudable social initiatives. I believe that this particular entity has always placed great importance on giving back. It is easy to be cynical in the times in which we live but Ms Penna demonstrates a refreshing attitude, and I will continue to take a keen interest in the firm’s sustainable products. GUGLIELMO FRANCESCHINI (Milan, Italy) While your writers made some very good points about Britain's relationship with Africa, I couldn´t help feeling that when it comes to the promise, many western countries have missed the boat, which departed some time ago laden with Chinese executives and members of the Party. This might well be just desserts for former colonial powers who, upon withdrawal, decided to turn their backs on their former colonies, like lovers spurned. Could we not have made amends by investing in mutually beneficial projects, calling the bluff of the Mugabes of this world, and repairing some of the damage caused over previous centuries? When will we learn to look at Africa in an appropriate way? ROLAND LEIGHTON-JAMES (Cape Town, South Africa)

“ “ “

Winter 2021-2022 Issue

I respect the quasi-responsible stance that CFI.co takes on most issues, but I’m afraid there are chinks in your new “woke” armour. Your writers and contributors are correct in their identification of the most pressing problems we collectively face, and ESG criteria, carbon-cutting initiatives, environmental protection, and social aid are undoubtedly pragmatic solutions. But I find it hard to disregard the fact that when all is said and done, you (and other magazines of the same ilk) are nonetheless urging the financial and economic juggernaut on — just in a more socially acceptable guise. I know that it is naïve to expect that the capitalist machine should be entirely decommissioned, but converting it to run on green fuel, so to speak, will do little to change the outcome. What we need is a shift to a less entitled, less demanding, less wasteful way of life — and one not purely fuelled by loans, buoyed by excess, and driven by a desire for ever-rising standards of living. Is it not possible for us to lower our expectations, demand and consume less in individual terms? I think it is — but it is unlikely that we will find a path to that utopia in the pages of business magazines. Perhaps I am wasting my breath. I am a businessman, and a consumer, and a realist — but I recognise, as do many others, that it’s time for a global, collective change in lifestyle and ambition. We can’t keep on doing what we have been doing for centuries and expect a more wholesome outcome in mere decades. Please give this perspective some thought, and some coverage. TIM PHILLIPS (Johannesburg, South Africa) On November 28, the World Health Organisation (WHO) pointed out that travel bans targeting Africa were “attacks on global solidarity”. Unfortunately, there is no global solidarity in the battle against Covid-19. Africa is a victim of vaccine inequality, and the continent is now being punished for its speed and transparency in informing the world of a new variant. At the time of writing, there is no way of knowing the seriousness of the threat posed by Omicron, but it is abundantly clear that considered and thoughtful responses to our common problems would be more helpful than knee-jerk reactions. Travel restrictions may slightly reduce the spread, but what of the livelihoods of communities and individuals in the countries most affected? CFI.co is to be congratulated for its oft-expressed sentiment that rich countries should deal fairly with Africa. The Covid situation is just one example of the wider world consistently failing to do so. KAYLA MOOKETSI (Gabarone, Botswana) I am thrilled and proud that Barbados has become the world’s newest republic, with Dame Sandra Mason as head-of-state and Mia Mottley as prime minister. There was a big party in the capital, Bridgetown, on the evening of November 29, with Prince Charles and (our other national hero) Rihanna in attendance. What a shame that Queen Elizabeth II could not be here too — and we are so happy to remain in the Commonwealth that is so close to her heart. Our economy has been badly hit by Covid-19, with fewer tourists visiting our shores and worries about rising prices. However, given our new status in the world, we are expecting to start showing the true potential of Barbados. May I gently take CFI.co to task for so seldom focusing on the business, finance, and economic stories from the Caribbean? We have much to share with those ready to listen. AALICIA GRIFFITH (Bridgetown, Barbados)

> Editorial Team

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

Columnists

Otaviano Canuto Evan Harvey Tor Svensson Lord Waverley

Production Director Jackie Chapman

COVER STORIES IFC After Glasgow (14)

UNCDF Innovation & Power of Value Chains (16 – 17)

IBM Banks & Fintech on Platform Economies (22 – 23)

Distribution Manager William Adam

Subscriptions Maggie Arts

Commercial Director John Mann

Director, Operations Marten Mark

Publisher Anthony Michael

Capital Finance International Meridien House 69 - 71 Clarendon Road Watford WD17 1DS United Kingdom T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co Editorial on p26-27, 30-31, 40-41, 46-47, 136-137, 206 © Project Syndicate 2021

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

IMF Widening Gaps in the Global Recovery (24 – 25)

Nasdaq Language Locks & Building Blocks (28 – 29)

Cover Story Lessons on Longevity (32 – 39)

OECD

Plugging the SDG Financing Gap DISCUSSION PAPER (50 – 51)

CFI.co | Capital Finance International

Winter 2021-2022 Issue

FULL CONTENTS 14 – 55

As World Economies Converge IFC Otaviano Canuto IMF Brunello Rosa Mohamed A El-Erian Jason Agnew Tor Svensson Ibu Raden Siliwanti

Emmanuel B Nyirinkindi Paolo Sironi Gita Gopinath Evan Harvey Wim Romeijn Lord Waverley OECD Mads Pedersen

UNCDF IBM Nouriel Roubini Nasdaq Hans-Werner Sinn Jeffrey D Sachs Haje Schütte Human Edge

56 – 63

Winter 2021 Special: This World Wouldn't be Nothing Without a Woman or a Girl…

64 – 97

Europe

Brendan Filipovski Laura Penna Bernd Fislage Alfred Kammer CBRE Fondo Pensione Nazionale Karl Fredrik-Staubo

Lars Grinde UniCredit BLKB Orange Capital Partners David Casas Alarcón SaarLB Golar

98 – 117

CFI.co Awards Rewarding Global Excellence

118 – 137

Africa

Societe Generale Guinée Catherine Pattillo Bank One Nouriel Roubini

138 – 157

Middle East

stc Talal Ghandour Qatar Insurance Company

Norvestor Advisory Kommunalkredit Brahms Group Tony Lennox L Catterton AUM Asset Management Ltd.

Andrew Chimphondah Abebe Aemro Selassie Barrick Gold Colin Coleman

Luc Eyraud Tanger Med Zones Italtile BIAT

Abdullah Al-Othman Metito New World Wealth

Geidea Ahli United Bank Andrew Amoils

158 – 171

Latin America

Maximiliano Appendino EY Argentina Yogesh Patel

172 – 185

North America LIVV Sachin Waikar

Fausto Ribeiro Sergio Caveggia Suzie Allen

Banco do Brasil Jimena Rocío García

Tobias Adrian PGM Global Inc

Rhoda Weeks-Brown Fitch Ratings

186 – 205

Asia Pacific

206

Final Thought

MTR Corporation YLG Group Aibek Kaiyp Julia Estefania-Flores OCHA Asian Development Bank

Herbert Hui Women's Brain Project Jusan Bank Siddharth Kothari Veronica Gabaldon Bambang Susantono

CFI.co | Capital Finance International

Tipa Nawawattanasub Shahnaz Radjy Pragyan Deb Nour Tawk Kareem Elbayar Chunghwa Telecom

> IFC:

After Glasgow, Four Steps to Keep Us On Track By Emmanuel B Nyirinkindi Vice President of Cross-Cutting Solutions

he UN Climate Conference in Glasgow saw a flurry of commitments and proposals to limit temperature rises to 1.5°C. While there was concrete headway on several fronts, COP26 also underscored the enormity of the task still ahead. Four clear signposts can continue the momentum and accelerate the critical transition to net zero. FIRST, ACCESS TO ENERGY IS A MUST Decarbonisation will only be effective if it addresses development needs. Around the world, an estimated 800 million people still live in the dark without access to electricity. While much of the focus is on decarbonising larger middleincome countries, the private sector can provide affordable electricity to energy in-poor countries. This can be done through a combination of gridbased and off-grid renewables. However, many technologies – including solar – still require government subsidies to become viable. One of the solutions is to combine more public and private capital to achieve scale – and make a difference for families and communities, women and youth. This is something the new Global Energy Alliance for People and Planet (GEAPP),which was announced at COP26, will aim to do. We are very happy to be part of this Alliance. SECOND, THE TRANSITION FROM COAL NEEDS TO BE FAIR Many countries pledged in Glasgow to phase out coal. This is critical, and it’s becoming progressively cheaper to replace coal-fired power plants with utility-scale renewable projects. However, jobs and livelihoods will inevitably be lost in the process. The good news is that the transition to renewables will bring about millions of new jobs. It is vital the public and private sectors, together with communities, join forces to ensure workers transfer their skills to low-carbon businesses. As development finance institutions, we need to maximise private sector participation in renewable energy, invest in transmission and distribution, and mobilise private capital for the significant capital expenditures and efficiency improvements needed in that sector. THIRD, WE NEED ALL THE PRIVATE CAPITAL WE CAN MOBILISE At COP26, 450 insurers, banks, and pension funds representing 40 percent of the world’s financial assets pledged to align their financing with netzero. How do we make sure such finance can be directed to climate projects in the developing world? Building on its recent experience with mobilisation platforms, IFC 14

Author: Emmanuel B Nyirinkindi

announced two major initiatives during COP26. One is a $2 billion fund with Amundi – Europe’s largest asset manager – to build the bond market and promote a green recovery in developing countries. The other is a $3 billion portfolio of Paris-aligned loans created with Allianz and the Hong Kong Monetary Authority to scale up climate-responsible financing for private companies in emerging markets. Platforms likes these help minimise risks for investors, and build capacity in local markets to make green, sustainable investments. FOURTH, CARBON MARKETS ARE CRUCIAL Another key area that’s expected to unlock significant financing for climate mitigation and adaptation is carbon pricing. At COP26, nearly 200 countries finally agreed on the Article 6 rules of the Paris Agreement for international cooperation through carbon markets. Policymakers can play an important role in designing carbon pricing systems that send the right signals to the market and raise money for initiatives like reforestation or research and development. On the other hand, businesses can establish voluntary carbon prices to anticipate new carbon regulations. We need to look at increasing investment opportunities in carbon projects, monetising carbon credits, and establishing and managing carbon facilities for private companies. CFI.co | Capital Finance International

THE BOTTOM LINE Climate change is a threat. But it also presents an opportunity to change course, and is one of the greatest commercial opportunities we may see in our lifetime. Under the World Bank Group’s new Climate Change Action Plan for the next four years, IFC is committed to aligning its operations with the objectives of the Paris Agreement, and taking climate into account in every decision and transaction that it makes. Such actions help countries and private sector clients maximise the impact of climate finance, aiming for measurable improvements in adaptation and resilience, and measurable reductions in greenhousegas emissions. This is how IFC will continue creating opportunities for economic growth and transformation in developing countries that will advance a green future. i ABOUT THE AUTHOR Emmanuel B Nyirinkindi is IFC’s Vice President of Cross-Cutting Solutions. He is responsible for overseeing cross-cutting services globally, including public-private partnerships and corporate finance, global Upstream programs to proactively create new investible opportunities and markets, sustainability and gender solutions, climate, as well as IFC’s Western Europe and Tokyo teams to enhance client and business delivery. His leadership ensures that climate, gender, and E&S best practices are embedded throughout IFC’s operational work.

Winter 2021-2022 Issue

A BRIEF HISTORY OF TIME GETS A NEW CHAPTER

“I have wondered about time all my life.” - Professor Stephen Hawking

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

CFI.co | Capital Finance International

> UNCDF:

How Innovation Can Unlock the Commercial and Development Power of Value Chains

n December 10th 2006, Professor uhammad Yunus received the Nobel Peace Prize. In his acceptance speech, he offered this observation: “I am in favor of strengthening the freedom of the market. At the same time, I am very unhappy about the conceptual restrictions imposed on the players in the market. This originates from the assumption that entrepreneurs are one-dimensional human beings, who are dedicated to one mission in their business lives − to maximise profit. This interpretation of capitalism insulates the entrepreneurs from all political, emotional, social, spiritual, environmental dimensions of their lives. This was done perhaps as a reasonable simplification, but it stripped away the very essentials of human life.” This is a remarkable meditation on capitalism, on global finance, and on the free market. Professor Yunus is explicitly stating that this is not what we would think of as free market capitalism; when the players in the market are restricted to delivering value solely on the basis of return on investment and profit. This is the very antithesis of free market capitalism. And it is the antithesis because investors in a truly free market who are truly interested in pursuing impact and ROI should be incentivised and enabled to leverage their capital to deliver on both commercial and development returns. Market players should be positioned and empowered to deliver gains for both shareholders and stakeholders. And, perhaps most importantly, all of the actors in such a free market system should be motivated and encouraged to leverage the commercial and the development power of their capital to support a global financial architecture that avoids financing market failures, not one that directly finances them. So, how can we achieve this kind of free market capitalism? Well, of course, it requires providing the right incentives to market players. But, as we all know, a financial architecture is not only made up of actors. It is also made up of systems. As market players require incentives to deliver on commercial returns and development impact, the systems in these markets require innovations — innovations that can unlock and support commercial and development potential. And a critical example of a system where the power of innovation can unlock commercial and development potential is value chains. Building value chains that support inclusivity and resilience, as well as performance, implies the need for the right mix of financing instruments. Such finance instruments must work to build 16

"We rely directly on blended finance solutions to capitalise SMEs that represent the backbone of most value chains." inclusion and resilience, as well as contribute to the localisation of the Sustainable Development Goals. They must also serve to sustain peace, especially in fragile and last mile contexts, where building resilience and poverty reduction by empowering women and youth need to be holistically addressed. The promising news is that UNCDF’s expertise has demonstrated that our innovative finance solutions can indeed make value chains more inclusive by bringing together a wide array of actors and linkages, more resilient by strengthening their shock-responsiveness and exposure to natural hazards, and more impactful by enabling greater access for last mile communities. One concrete method is to clearly and effectively identify projects within value chains that possess strong potential to deliver both financial and development returns. We often hear that there is a hunger for projects that can deliver on the double-bottom line. But identifying such projects, particularly in an environment where standards are still widely debated, has been a very real challenge. UNCDF has responded to this challenge by developing and utilising its Dual Key system — this is our multi-factor assessment to determine whether a prospective project will receive financial support from UNCDF with the goal of unlocking further finance, specifically based on whether such a project is proven to deliver financial impact in the form of sustainability and follow-on investment potential; as well as whether it will deliver development impact in the form of local economic development, women’s economic empowerment, food security and ESG considerations. From inception through 2020, 110 projects completed the Dual Key process to reach ready stage for financing. Between 2018- 2020, UNCDF committed and disbursed a sum of $9.1 million in financing to support implementation of the programme in participating countries. By the end of 2020, a total of $21 million in cumulative additional capital was unlocked from various private and public sector sources — financing funneled to the companies that make their value chains more profitable and more resilient. CFI.co | Capital Finance International

Another concrete method is digitalisation. Digitalisation of finance has revolutionised access to capital for MSMEs. This includes risk assessment through alternative credit scoring, leveraging digital data, digital verification of collateral, structuring of investment offerings and access to capital in the form of mobile money. Besides strengthening access to capital and services for actors within value chains, these innovations facilitate the structuring of blended finance transactions, which catalyse capital flows towards investments that would otherwise be overlooked. Given that blended finance transactions require indications of development and commercial impact, digitalisation can make these enterprises better positioned for blended finance in the future by strengthening both the development impact and commercial viability of the actors that undergird these value chains. A powerful example of UNCDF’s work in this space involves agriculture value chain linkages. Overall, our solutions look to leverage digital channels to connect farmers and enterprises to input suppliers and agricultural processors. This also includes digitising agricultural last mile procurement and communications with women smallholder farmers. This is demonstrated in our supporting value chain traceability for farmers in Uganda; providing a digital marketplace and advancing E-KYC for farmers in Tanzania; piloting digital credit products for dairy farmers in Nepal — among many other examples. Finally, we rely directly on blended finance solutions to capitalise SMEs that represent the backbone of most value chains. Through the work of our investment experts within our Least Developed Country Investment Platform, or LDC-IP, we actively source investment opportunities for two affiliated blended finance funds. One is the BRIDGE Facility, which is our dedicated financing facility for the LDCs that provides catalytic loans and guarantees. [With 28 transactions in the facility comprising 25 loans and 3 guarantees, the BRIDGE Facility will be featured by UNCDF at the upcoming Fifth United Nations Conference on the Least Developed Countries-LDC5-in January.] The other is a thirdparty managed fund called the BUILD Fund, which is designed to attract commercial capital to finance SMEs in LDC markets. The BUILD Fund relies on an investment layer capitalised by concessional capital from governments and philanthropic organisations, which insulates commercial investors from early losses. An important point to emphasise is that in all of these workstreams, our work supports delivery of

Winter 2021-2022 Issue

sustainable development at the level of the real economy — from smallholder farmers, to clean energy SMEs, to women-led businesses and so on. Strengthening value chains through innovative finance is surely one of the most direct ways to enhance resilience and is precisely where the success of the SDG agenda and the future of economic resilience will be decided. In citing Professor Yunus’s remarks on how a profitdominated capitalism has been stripped of the very essentials of human life, this speak to the powerful moment that the world has arrived at: a moment where we have everything we need to ensure that capitalism can in fact support human essentials. There are more assets and more wealth in global capital markets than ever before. There are more actors interested in impact investment, spanning the public, private and multilateral spaces than ever before. And we have more innovative finance tools on tap than ever before, and even more coming online. There is no reason why any investor or any system — including value chains — cannot also be a driver of human, capital and sustainable development. Let us make the choice to make our markets truly free. And let us encourage everyone else to do the same. i ABOUT UNCDF The UN Capital Development Fund makes public and private finance work for the world’s 46 least developed countries (LDCs). 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’s financing models work through three channels: (1) inclusive digital economies, which 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; (2) local development finance, which capacitates localities through fiscal decentralisation, innovative municipal finance, and structured project finance to drive local economic expansion and sustainable development; and (3) investment finance, which provides catalytic financial structuring, de-risking, and capital deployment to drive SDG impact and domestic resource mobilisation.

> Otaviano Canuto:

Supply Chain Disruptions and Bottlenecks

Dampen the Global Economic Recovery

The scarcity of inputs and goods has been felt all over the world because of disruption to global value chains.

actory closures in China at the beginning of 2020, lockdowns in many countries, congestion in logistics networks, capacity constraints in the face of sudden increases in demand and labour shortages have combined, to overall negative effect. Higher freight prices and unprecedented delays in parcel delivery times have become widespread. Figure 1, from Moody’s Credit Outlook report of October 18, shows global manufacturing suppliers’ delivery times as measured by the Purchasing Managers’ Index (PMI), and container shipping rates as measured by the Harper Petersen Charter Rates Index.

Figure 1: Supply chain disruptions and bottlenecks are continuing. Source: Moody's (2021). Credit outlook, October 18.

PMI data are inverted by subtracting data from 100; increasing (decreasing) PMI data indicate faster (slower) delivery times. Container shipping rates are monthly averages of weekly data. Global supply chain disruptions have been at historic highs and shipping and logistics constraints are not yet abating. These disruptions have consequences for inflation and GDP. In the US, the Federal Reserve’s “beige book” released recently pointed to a slowdown in the pace of GDP growth in the third quarter of 2021.

CFI.co Columnist

In the meantime, inflation has risen. The consumer price index that serves as the main reference for US monetary policy showed an increase of 4.4 percent in the past 12 months, above the rate that serves as a reference of the average pursued by the Fed.

Figure 2: Global headline CPI inflation. Source: JP Morgan (2021). Global Development Watch, Octover 16.

Inflation has been a global phenomenon, with different intensities and multiple determinants. Several emerging-market and developing countries have faced rising commodity prices without simultaneous capital inflows or nominal exchange rate appreciation, which has translated into higher prices of consumer baskets. JP Morgan has estimated an acceleration in global consumer prices to close to an annual rate of five percent in the third quarter, negatively impacting household purchasing power and consumer goods spending, before moderating this quarter (Figure 2). Supply disruptions have been a major factor, particularly in advanced 18

Figure 3: Energy prices. Source: Itaú. Macro scenario - global, October 15.

economies. However, scarcity of imported inputs has also impacted manufacturing activity in emerging market and developing CFI.co | Capital Finance International

economies. Brazilian automakers were forced to halt production lines because of the lack of semiconductors.

Winter 2021-2022 Issue

regions, aggravating the disruption of value chains, with global repercussions. It has become clear that there is a need to strengthen the provision of renewable energy to avoid tightness of supply relative to energy demand. The system must be made less vulnerable to shocks from accidents and maintenance problems. Droughts that have put at risk hydroelectric production in Brazil, and floods in Asia are hampering coal delivery.

Figure 4: Percentage of retirees in the US population and the baby boomer retirement fund.

Source: Gostein, S (2021). COVID caused more than 3 million Americans to retire early, a new Fed analysis finds, Market Watch, October 25.

Supply chains in the US have also been affected by an unexpected shrinkage in the workforce because of the pandemic. According to Miguel Faria e Castro of the Federal Reserve Bank of St Louis, more than half of the 5.25 million people who left the workforce since the beginning of the pandemic (until the second quarter of 2021) corresponded with some three million excess retirements during the pandemic (Figure 4). The author suggests two major reasons: greater health risks for older people and enrichment resulting from the appreciation of financial assets that has reflected monetary policy during the pandemic. The pace of the US economic recovery and the attempted rebuilding of value chains has had to deal with labour shortages. Nominal wage increases have grown (Figure 5).

Figure 5: US Wage growth - overall unweighted. 3-month moving average of median wage growth, hourly data.

Source: Federal Reserve Bank of Atlanta (2021). Wage growth tracker, October 31.

The inflationary scenario has started to change as value chain disruptions and supply constraints will take some time to fix. The difference in rates of return between nominal five-year Treasury bonds and those protected against inflation in the same period rose in recent weeks from levels of around 2.5 to almost three percent per year (Figure 6). While this partly reflects a greater perception of risks stemming from errors in inflation forecasts, it suggests that investors expect higher inflation to persist.

Figure 3: Difference in yields between 5-year inflation-protected and nominal Treasury notes.

Source: New York Times (2021). The bond market says inflation will last. You should be listening, October 26.

On the demand side, there have been significant changes in composition and volume since 2020. The substitution of consumption of contactintensive services has led to an explosion in demand for semiconductors. At the same time, fiscal support packages have enabled families to maintain their disposable income. In September, consumers in the US were able to use their

accumulated savings to keep shopping at a pace above the increase in personal incomes. A mismatch between demand and supply can also be found in the energy price shocks (Figure 3), showing how the road to decarbonisation will be bumpy. Low gas stocks in Europe, restrictions on the availability of coal in China and India, and capacity limits in the production of shale oil in the US have all been faced while there is still an insufficient alternative supply of renewable energy. In China, energy shortfalls have led to temporary stoppages in industrial production in some CFI.co | Capital Finance International

“But the fundamental productive capacity of our economy as it existed just before COVID — and, thus, the ability to satisfy that demand without inflation — remains largely as it was, and the factors that are disrupting it appear to be transitory.” Looked at purely in that light, constraining demand now to bring it into line with a transiently interrupted supply would be premature. Given the lags with which monetary policy acts, we could easily find that demand is damping just 19

CFI.co Columnist

It’s essential to understand that the delays in delivery since 2020 have two aspects: supply and demand. On the supply side, complexity, density, and geographic distribution of value chains make final delivery highly vulnerable to blockages at any link.

The tug-of-war between hawks and doves over how the Fed should proceed with monetary policy will become more dramatic. Inflation is always a matter of mismatch between demand and supply. Randal K Quarles, one of the Fed's Board of Governors, expressed it thus: “The fundamental dilemma that we face at the Fed right now is this: Demand, augmented by unprecedented fiscal stimulus, has been outstripping a temporarily disrupted supply, leading to high inflation.

as supply is increasing, leading us to undershoot the inflation target. In the worst case, we could depress the incentives for supply to return, leading to an extended period of sluggish activity and unnecessarily low employment. “I am among those who see a good chance that inflation will remain above two percent next year,” said Quarles, “but I am not quite ready to conclude that this ‘transitory’ period is already too long … Therefore, we will remain outcomebased, waiting to see further improvements in employment and the evolution of inflation pressures in coming months.” The Fed “soap-opera plot” pits those who favour a wait-and-see attitude — moving on to the tapering this year and likely small rises at the end of next year — and those who think the Fed is already behind on the policy reorientation. I lean in favour of more time to see if supply-chain constraints unwind, because inflation rates a bit higher than two percent a year in 2022 are in line with the Fed’s new average inflation-targeting framework. We must keep in sight the fact that some sort of financial adjustment is bound to happen as interest rates rise. The US “big balance sheet economy” has been on a growth path dependent on the continuity of low real interest rates, as well as stretched price-earnings ratios of stocks and high corporate debt. Periodic episodes of downward adjustment of asset prices have been countervailed with lax monetary policies. If “wait-and-see” proves to be the appropriate response, laxity of monetary policy — as a way to avoid asset price adjustments — seems to be temporarily exhausted. There is another polarised plot between those who attribute partial responsibility for value-chain disruptions to governments, and those who point to such disruptions precisely as an argument in favour of less globalisation. But that will be a subject for another day. i

CFI.co Columnist

This story first appeared at Policy Centre for the New South. ABOUT THE AUTHOR Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a visiting public policy fellow at ILAS-Columbia, and principal of the Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil. Otaviano has been a regular columnist for CFI.co for the past ten years. Follow him on Twitter: @ocanuto 20

THE GOLD STANDARD IN SUSTAINABILITY Long before ESG became a market mantra, its governing principle – sustainability – was already an integral part of the way Barrick does business, deeply embedded in our organisational DNA.

Powered at all levels by Barrick’s partnership philosophy and a close relationship with all stakeholders, from investors to host communities, our ESG strategy ranges widely from the support of local development through care for the environment to the protection of human rights. At every point it has the same objective: to make Barrick the industry leader in sustainability as well as value creation.

dPA 6467

Delivering the future www.barrick.com | NYSE : GOLD • TSX : ABX

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

> Paolo Sironi:

Banks and Fintech on Platform Economies Today it is clear: digital platforms are "eating the world", transforming the experiences of consumption of goods and services, and the ways of socialising. Did you take an Uber to go to work? You booked it on a digital platform. During a coffee break, did you read about my latest literature on LinkedIn? You found it on a social media platform. Was it delivered to your doorsteps by Amazon Prime in less than 24 hours? You ordered it on an e-commerce platform.

oday it is clear: digital platforms are "eating the world", transforming the experiences of consumption of goods and services, and the ways of socialising. Did you take an Uber to go to work? You booked it on a digital platform. During a coffee break, did you read about my latest literature on LinkedIn? You found it on a social media platform. Was it delivered to your doorsteps by Amazon Prime in less than 24 hours? You ordered it on an e-commerce platform.

IBM Thought Leadership

The advent of “platform economies” is a tsunami for the traditional business culture. Sustainable business performance is no longer based on linear relationships between manufacturers, distributors, and consumers with the logic of incremental production of costs and value. Instead, the main economic levers lie in the ability of new business models to engage users continuously, and usher in a new era of “hyper-personalisation” and “hypercontextualisation”. Digital platforms can transform entire industrial sectors mainly because they favour the transition from an economy centred on "outputs" (products) to an economy centred on "outcomes" (results). In platform economies, “assets” (products) do not disappear but become peripheral from the point of view of generating value. They focus on the contextualisation of user experiences at affordable prices, removing frictions in consumption and user interactions. Bank business models must also evolve on outcome economies. This existential transformation is driven by the evaporation of interest rate margins in the intermediation of credit products due to the impact of the monetary and economic conditions in which banks operate globally, and the soaring cost of capital. Also, fee income is contracting because of the increased transparency on costs and conflicts of interest, and the progressive commoditisation of financial products that impacts the embedded fees. In this complex business environment, digital technology enables the entry of specialised providers that can chip away at banking activities that do not require access to a large balance sheet, such as payments and wealth management. Similarly, 22

Banking Reinvention Quadrant (BRQ), which is the center piece of latest bestseller “Banks and Fintech on Platform Economies” (see figure 1). The compass is the theory of “Financial Market Transparency” to guide inclusive transformation in the best interest of clients. Lower BRQ spaces are occupied by “traditional banking” and “digital banking”, represented by recent attempts to digitise financial services yet remaining anchored to “output economies” (linear value chains made of distribution channels of products). They could not succeed. Between 2015 and 2018 almost 1 trillion dollar was spent in digital transformations but mainly chrysalises were created, and not many butterflies. Only by differentiating the investments in the key drivers that define competitive market power (i.e., information and communication), banks and fintech can attain higher business value spaces on the BRQ dominated by Contextual Banking (i.e., invisible) and Conscious Banking (i.e., visible) platform strategies. They must learn how to compete on platform economies.

Author: Paolo Sironi

digital platforms can interject themselves between banks and customers, collecting most rents and potentially monopolising access to valuable data. As a result, banks risk losing their position as “first point of contact” for financial services and could be reduced to be merely upstream suppliers of maturity transformation services that have no direct customer access, particularly in retail operations. THE BANKING REINVENTION QUADRANT In the dark of the new digital, financial and economic normal, only a crisp and clear vision can guide all stakeholders in the transformation effort of the banking industry. Also the regulators need to be aligned on the new digital strategies that will ferry the whole industry to more sustainable shores. What is needed is a business map, and a compass to guide the navigation. The map is the CFI.co | Capital Finance International

HOW DO BANKS AND FINTECH COMPETE ON PLATFORM ECONOMIES? Financial institutions exert market power when they excel in information and communication, that means investing in differentiative core banking and interfaces. On the BRQ, that corresponds to calibrating the intensity of the Information Quotient (IQ, y-axis) and the Communication Quotient (CQ, x-axis). The Information Quotient is the “technology” axis and represents the trusted intensity in the use of data and insights on open banking platforms, transforming client engagement out of products and services, into the participation of enriched user ecosystems by eliminating engagement frictions in adjacent industries (e.g., digital payments on food delivery apps). Sliding along this axis represents the level of openness in the use of internal and external data, shifting from traditional core banking to hybrid cloud architectures to scale the participation of partners and complementors. The Communication Quotient is the “business” axis and represents the trusted intensity in the use of Artificial Intelligence

(AI), supporting digital or human relationships and decision-making, and digital interfaces powered by more intelligent analytics (e.g., AI-driven instant credit approval). Conscious Banking and Contextual Banking platform strategies share business critical information through cloud-based, open finance platforms, and enrich the communication with clients with transparent, robust, and explicable artificial intelligence solutions. That is why they unlock most of the attainable business value on the BRQ. HOW TO UNLOCK BUSINESS VALUE WITH CONTEXTUAL AND CONSCIOUS BANKING? Already, some well-informed institutions are enriching traditional offers with financial and non-financial services according to the prevailing regulatory frameworks, developing platforms that interact with non-banking ecosystems. They are competing with first attempts of Contextual Banking platform strategies (e.g., DBS Bank marketplaces, State Bank of India YONO). On the other hand, other well-informed institutions are investing to preserve the integrated provision of financial services for the most communication-intensive activities. They are refreshing digital “merchant banking” models and “trusted advisory” relationships, tailoring new solutions to engage clients with more complex needs. Fintech innovation allows previously separate banking verticals to be re-bundled into stand-alone containers of services. The re-emergence of merchant bank services and holistic financial advice is consistent with the long-held view in the literature that relationship banking can survive competition by increasing relation intensity. They are competing with first attempts of Conscious Banking platform strategies (e.g., UBS wealth management, Envestnet advisory platform). Ultimately, it is the opportunity to eliminate frictions in user interactions that makes banking contextualised to become invisible, and unlock “new” value. Instead, it is the need to demonstrate value - that clients are transparently asked to pay for accessing the platform - that makes banking conscious to remain sustainably visible, and unlock “hidden” value. i

ABOUT THE AUTHOR Paolo Sironi is the global research leader in banking and financial markets at IBM Consulting, the Institute for Business Value. He is one of the most respected fintech voices worldwide, providing business expertise and strategic thinking to a network of executives among financial institutions, start-ups, and regulators. He is a former quantitative risk manager and startup entrepreneur. Paolo’s literature explores the biological underpinnings of financial markets, and how technology and business innovation can bolster the global economy’s immune system in today’s volatile times. Visit Paolo's website thePSironi.com for more information. CFI.co | Capital Finance International

IBM Thought Leadership

More insights about how banks and fintech can navigate the Banking Reinvention Quadrant can be learned by reading Paolo Sironi’s bestseller “Banks and Fintech on Platform Economies: Contextual and Conscious Banking”, Wiley (2021).

> IMF

Drawing Further Apart: Widening Gaps in the Global Recovery By Gita Gopinath

The global economic recovery continues, but with a widening gap between advanced economies and many emerging market and developing economies. Our latest global growth forecast of 6 percent for 2021 is unchanged from the previous outlook, but the composition has changed.

rowth prospects for advanced economies this year have improved by 0.5 percentage point, but this is offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia. For 2022, we project global growth of 4.9 percent, up from our previous forecast of 4.4 percent. But again, underlying this is a sizeable upgrade for advanced economies, and a more modest one for emerging market and developing economies.

We estimate the pandemic has reduced per capita incomes in advanced economies by 2.8 percent a year, relative to pre-pandemic trends over 20202022, compared with an annual per capita loss of 6.3 percent a year for emerging market and developing economies (excluding China).

Lopsided Recoveries: The divergence between countries is deepening, driven by differences in vaccine availability and policy support (graph shows percentage points). Sources: IMF, World Economic Outlook; and IMF staff calculations. Note: Revisions show the

difference between projections in July 2021 WEO and April WEO. Positive number indicates growth has been revised up.

These revisions reflect to an important extent differences in pandemic developments as the delta variant takes over. Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies, and a tiny fraction in low-income developing countries. Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades. Divergences in policy support are a second source of the deepening divide. We are seeing continued sizable fiscal support in advanced economies with $4.6 trillion of announced pandemic related measures available in 2021 and beyond. The upward global growth revision for 2022 largely reflects anticipated additional fiscal support in the United States and from the Next Generation European Union funds.

Two-track Pandemic: Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies and just 1 percent in low-income developing countries. (vaccine courses as a percent of the population, as of July 19, 2021). Sources: Haver Analytics; Our World in Data; Airfinity; and IMF staff calculations. Note: Two doses generally

On the other hand, in emerging market and developing economies most measures expired in 2020 and they are looking to rebuild fiscal buffers. Some emerging markets like Brazil, Hungary, Mexico, Russia, and Turkey, have also begun raising monetary policy rates to head off upward price pressures. Commodity exporters have benefited from higher-than-anticipated commodity prices. 24

assumed for a full course of vaccination, except for J&J and CanSino.

INFLATION CONCERNS Aftershocks from the upheaval of last year pose unique policy challenges. Pent-up demand and supply chain bottlenecks are putting upward pressure on prices. Nonetheless, in most advanced economies inflation is expected to CFI.co | Capital Finance International

subside to pre-pandemic ranges in 2022 for the following reasons: First, a significant fraction of the abnormally high inflation readings is transitory, resulting from pandemic affected sectors such as travel and

Winter 2021-2022 Issue

restructuring for countries where debt is already unsustainable. The other major shared challenge is to reduce carbon emissions and slow the rise in global temperatures to avoid catastrophic health and economic outcomes. A multipronged strategy with carbon pricing as its centerpiece will be needed. Revenue from carbon pricing mechanisms should be used to fund compensatory transfers to those hurt by the energy transition. In parallel, a green infrastructure push and subsidies for research into green technologies are needed to hasten the move to lower carbon dependence. So far, only 18 percent of recovery spending has been on lowcarbon activities.

Rising Headline Inflation but Pressures Transitory: Pent-up demand and supply chain bottlenecks are putting upward pressure on prices, but inflation is expected to subside to pre-pandemic ranges in most advanced economies. (consumer price inflation; percent, year-overyear, median). Sources: IMF Global Data Source; IMF STA CPI-Database; and IMF staff calculations.

hospitality, and from comparison with last year’s abnormally low readings such as for commodity prices. Second, overall employment rates remain well below pre-pandemic levels in most countries and while there has been rapid wage growth in some sectors, overall wage growth remains within normal ranges. As health metrics improve and exceptional income support measures expire, hiring difficulties in certain sectors are expected to abate and ease wage pressures. Third, long-term inflation expectations (as measured by surveys and market-based measures) remain well-anchored, and factors such as automation that have lowered the sensitivity of prices to changes in labor market slack likely have intensified through the pandemic. This assessment is, however, subject to significant uncertainty given the uncharted nature of this recovery. More persistent supply disruptions and sharply rising housing prices are some of the factors that could lead to persistently high inflation. Further, inflation is expected to remain elevated into 2022 in some emerging market and developing economies, related in part to continued food price pressures and currency depreciations — creating yet another divide. While more widespread vaccine access could improve the outlook, risks on balance are tilted to the downside. The emergence of highly infectious virus variants could derail the recovery and wipe out $4.5 trillion cumulatively from global GDP by 2025. Financial conditions could also tighten abruptly amid stretched asset valuations, if there is a sudden reassessment of the monetary policy outlook, especially in the United States. It is also possible that stimulus spending in the United States could prove weaker than expected. A worsening pandemic and tightening financial conditions would inflict a double hit on emerging market and developing economies and severely set back their recoveries.

POLICIES TO ARREST DIVERGENCES AND IMPROVE PROSPECTS Multilateral action is needed to ensure rapid, worldwide access to vaccines, diagnostics, and therapeutics. This would save countless lives, prevent new variants from emerging, and add trillions of dollars to global economic growth. IMF staff’s recent proposal to end the pandemic, endorsed by the World Health Organization, World Bank, and World Trade Organization, sets a goal of vaccinating at least 40 percent of the population in every country by the end of 2021 and at least 60 percent by mid-2022, alongside ensuring adequate diagnostics and therapeutics at a price of $50 billion. To achieve these targets, at least 1 billion vaccine doses should be shared in 2021 by countries with surplus vaccines, and vaccine manufacturers should prioritise deliveries to low- and lower-middle income countries. It is important to remove trade restrictions on vaccine inputs and finished vaccines and make additional investment in regional vaccine capacity to ensure sufficient production. It is essential to also make available upfront grant financing of around $25 billion for diagnostics, therapeutics, and vaccine preparedness for low-income developing countries. A related priority is to ensure that financially constrained economies maintain access to international liquidity. Major central banks should clearly communicate their outlook for monetary policy and ensure that inflation fears do not trigger rapid tightening of financial conditions. A general allocation of Special Drawing Rights (SDR) equivalent to $650 billion ($250 billion to emerging market and developing economies), as proposed by the IMF, should be completed quickly so as to provide liquidity buffers for countries and help them address their essential spending needs. The impact can be further magnified if rich nations voluntarily channel their SDRs to emerging market and developing economies. Finally, greater action is needed to ensure that the G20 Common Framework successfully delivers on debt CFI.co | Capital Finance International

NATIONAL LEVEL POLICIES NEEDED TO REINFORCE MULTILATERAL EFFORTS FOR SECURING THE RECOVERY Policy efforts at the national level should continue to be tailored to the stage of the pandemic: • First, to escape the acute crisis by prioritising health spending, including for vaccinations, and targeted support for affected households and firms; • Next, to secure the recovery with more emphasis on broader fiscal and monetary support, depending on available space, including remedial measures to reverse the loss in education, and supporting the reallocation of labor and capital to growing sectors through targeted hiring subsidies and efficient bankruptcy resolution mechanisms; and • Finally, to invest in the future, by advancing long-term goals of boosting productive capacity, accelerating the transition to lower carbon dependence, harnessing the benefits of digitalisation, and ensuring the gains are equitably shared. • Fiscal actions should be nested within a credible medium-term fiscal framework to ensure debt remains sustainable. For many countries this will involve improving tax capacity, increasing tax progressivity, and eliminating wasteful expenditures. Low-income developing countries will also need strong international support. Central banks should avoid prematurely tightening policies when faced with transitory inflation pressures but should be prepared to move quickly if inflation expectations show signs of deanchoring. Emerging markets should also prepare for possibly tighter external financial conditions by lengthening debt maturities where possible and limiting the buildup of unhedged foreign currency debt. The recovery is not assured until the pandemic is beaten back globally. Concerted, well-directed policy actions at the multilateral and national levels can make the difference between a future where all economies experience durable recoveries or one where divergences intensify, the poor get poorer, and social unrest and geopolitical tensions grow. i Source blogs.imf.org/2021/07/27/drawing-further-apartwidening-gaps-in-the-global-recovery 25

> Nouriel Roubini, Brunello Rosa:

Why Italy's Presidential Election Matters

n January 2022, the Italian parliament (together with regional representatives) will cast secret ballots to elect the country’s next president, and its choice will have much wider implications than most people realise. In fact, we have identified the Italian presidential election as one of the three votes that could determine the fate of the European Union in the coming years – the other two being the German federal election 26

held in September and the French presidential and parliamentary elections next April and June, respectively. It is generally believed that the Italian president performs only a ceremonial role (like the German president). In fact, although the Italian constitution establishes the Republic as a parliamentary democracy – with the government dependent on the confidence of CFI.co | Capital Finance International

the elected legislature – that system obtains only during periods of relative “tranquility.” When the political system is dominated by well-functioning parties that are capable of securing a solid majority in parliament, the president’s role is relatively marginal. But in “turbulent” periods, when the political system is weak and incapable of delivering viable solutions, the president becomes a deus ex machina.

Winter 2021-2022 Issue

army and as the head of the governing body of the judiciary. Owing to these roles, it has long been recognised that there are two lines of command in Italy. The first is headed by the prime minister, who exercises power through government ministers and the wider political system. The prime minister is formally in charge of domestic affairs and has the greatest impact on people’s daily lives. Political legitimacy is key to the functioning of this office. The second line of command is more institutional (and implicit) than political. The president is responsible for Italy’s relationship with Europe (including its adherence to EU treaties and rules) and with allies like the United States. The president wields influence through the technocratic structures of the Ministry of Economy and Finance, particularly the all-powerful Accounting Office (Ragioneria Generale dello Stato) and the Bank of Italy. On past occasions when the Italian political system seemed to veer toward populist anti-European positions, it was the president who reassured allies of the country’s ongoing commitment to international agreements. Italy’s next presidential election is coming at a crucial moment. Approved to receive nearly €200 billion ($225 billion) in conditional grants and cheap loans from the €750 billion Next Generation EU fund, Italy will be embarking on an ambitious program of reform between 2022 and 2026. By showing that intra-EU redistribution can be carried out efficiently and effectively, Italy could fundamentally change EU politics, setting the stage for a permanent redistribution mechanism and the creation of a fiscal union. The policy implications would be profound. The EU would have greater means to tie fiscal support to national structural reforms, with the aim of increasing the bloc’s growth potential. At the same time, monetary policy would come to play a relatively smaller role, with the European Central Bank focusing its attention almost exclusively on controlling inflation, rather than on pursuing backdoor measures to share risk in the absence of a common Treasury. Mario Draghi

The two most important tools at the president’s disposal are the power to appoint the prime minister and approve the prime minister’s cabinet; and the power to dissolve parliament after having “heard” the speakers of the two chambers. Moreover, as the signer of virtually all laws and decrees, the Italian president also has the power to send legislation back to parliament. The president also serves as commander in chief of the

But if Italy proves unable to spend the EU funds effectively, Next Generation EU will be remembered as a one-off exercise. Providing economic stimulus will continue to be a task for national-level fiscal policymakers and the ECB. It is therefore crucial that Italy succeed in making its economy more competitive and more efficient. This outcome is far from assured, given its relatively poor past track record of deploying EU funds. The European Commission’s approval of Italy’s recovery plan owes much to the fact

that former ECB President Mario Draghi is now Italy’s prime minister. The question, then, is how best to ensure that Draghi will continue to play a leading role in implementing the reform agenda. There are two schools of thought. The first considers Draghi well-placed to continue serving as prime minister at least until the end of the current parliament in February 2023. That would allow him to oversee the initial implementation of the plan while centrist parties maneuver to provide a political platform that would furnish him with a new majority in the next general election. He would have at least until 2023 – and perhaps until 2028 – to implement the Next Generation EU agenda. The second school of thought thinks it would be better for Draghi to become president. From the top of the second chain of command, he would be able to oversee many elements of the reform plan for the next seven years, ensuring that Italy adheres to EU treaties – in letter and in spirit – even if a new Euroskeptical government were to gain power in 2023. The first option seems easier, because the current government will remain unaffected by the 2022 presidential election; but it could run into trouble the following year, because there is no guarantee that Draghi would return as prime minister. The second scenario would depend on Draghi winning the secret ballot for the presidency, which also cannot be guaranteed; but it would lock in his presence as head of state for the next seven years. In our view, that seems preferable. Italy remains the weakest link in the eurozone, which means that Italian policymaking and the decision-makers behind it will be key to the EU’s survival and prosperity in the coming years. If populist parties were to return to power with debt and deficit levels already so high, Italy’s membership in the eurozone could be cast into doubt, auguring all kinds of market disruptions. Far from a pro forma ritual, the upcoming Italian presidential vote could not be more consequential. i ABOUT THE AUTHOR Nouriel Roubini, Professor of Economics at New York University's Stern School of Business and Chairman of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com. Brunello Rosa, CEO of Rosa & Roubini Associates, is a visiting professor at Bocconi University. 27

> Evan Harvey, Nasdaq:

Language Locks and Building Blocks

anguage has been an inhibitor to the progress of sustainable business. Rather than putting a trendy new name on an essentially new business practice, a series of conflicting, complementary, and confusing labels has come into practice. Because this era is still nascent, and the social and environmental impacts of business tradition are actively being re-examined, there has been little time for alignment and consensus on the applicability of certain words and labels. Many well-meaning stakeholders tend to think of sustainability, responsibility, ESG, green, impact (and even broader terms like purpose and culture) as essentially the same thing, or at least variations on the same idea. The willful misuse of language and labels has also been a significant obstruction. Some take advantage of sustainability terminology to pitch wholly unsustainable products or amplify otherwise benign services. And for this practice, we have a perfectly serviceable and wellunderstood label: greenwashing. Growing concerns over greenwashing have attracted some regulatory action. The US SEC issued a public Risk Alert (The Division of Examinations’ Review of ESG Investing, April 2021) and also sent letters to individual firms demanding more transparency on their use of ‘ESG’ in fund construction, classification, and marketing. The impulse to go green, even artificially so, is understandable.

CFI.co Columnist

“Trillions of dollars have poured into sustainable investment strategies in recent years and regulators have taken little action to ensure funds are marketed accurately, partly because of the lack of agreement on what 'sustainable', 'green' and 'greenwashing' mean.” (Reuters, 04 Nov 2021)

"ESG itself is not really a word but an acronym, and like most acronyms it has no organic or independent meaning." If the terminology that we associate with sustainability is not universally understood or accepted – or trusted – then certain downstream effects become untenable. Recent COP26 goals reiterate a sense of urgency: we must get to global net zero by 2050, generate $100B (US) in climate financing every year, or the consequences are too dire to contemplate. A widening wealth gap and narrowed path to capital access warps social, political, and economic efficiency; it also undermines our faith in institutions and trust in economies. The theme of the 2022 World Economic Forum meeting in Davos is “Working Together, Restoring Trust.” How can we hope to overcome such intractable barriers? Let’s start by defining our terms. ESG itself is not really a word but an acronym, and like most acronyms it has no organic or independent meaning. It is literally the sum of its parts—built upon every possible scrap of environmental, social, or governance data—and easily conflated with other imprecise terms (corporate sustainability or social responsibility). Yet language is hierarchical, as Noam Chomsky famously opined, and we can better understand related ideas by outing their signifiers into order and context.

• Culture is an unorganised, organic collection of norms, ethics, values and aspirations that drive organisational health and productivity. It is empowered by leadership but really nourished by the entire value chain: employees, customers, clients, suppliers. Culture is sometimes confused with brand, which is commercial and inorganic. • Purpose is the modus operandi of culture, the machinery by which cultural ideals are transformed into real business outcomes. It is organised, outcome-oriented, and measurable. Purpose is an evolving concept in the corporate space, but it is often confused with mission, which is also commercial and arguably inorganic. 85% of Fortune 500 companies publish a mission statement, but less than a quarter issue a purpose statement. (Purpose_ Brand, 2020) • Sustainability is a choice within purpose: to strategically maximise certain values (which the IIRC once enumerated as capitals: financial, manufactured, intellectual, human, social, and natural) in order to persevere and prosper. It is a directional shift from chasing short-term cents to modelling longterm dollars, yet also dependent on practical measurement. • ESG is that practical measurement. It is a tactic, a data-driven discipline that measures, values, and incentivises specific performance indicators across the environmental, social, and governance space. It can be the proof point for everything above, the metrical validation of our cultural, purposeful, and sustainable hypotheses. This hierarchy isn’t meant to downgrade sustainability or ESG, nor to elevate culture and purpose to undeserved status. But it should demonstrate how these concepts are different,

"Trillions of dollars have poured into sustainable investment strategies in recent years and regulators have taken little action to ensure funds are marketed accurately, partly because of the lack of agreement on what 'sustainable', 'green' and 'greenwashing' mean." 28

CFI.co | Capital Finance International

Winter 2021-2022 Issue

where they connect, and why performance in one area likely has a reciprocal or subsidiary relationship with another. Before I exhaust your indulgence, let me put all this theory into a more practical form. My company is currently embarked on a project that not only touches upon all these terms but is strategically driven by them. Nasdaq relaunched its corporate foundation in 2020, coupled with a new business unit called Purpose. Both were intended to demonstrate our commitment to certain values and aspirations inherent in our culture: equity, access, fairness, transparency. To leverage our experience and natural reach, we examined the capital markets and searched for ways to make them better – and fixed our purpose “to champion inclusive growth and prosperity.” But even though culturally appropriate and purposefully stated, it’s difficult to turn “champion inclusive growth and prosperity” into a program, a series of action steps, or even a defined outcome. We engaged with two prominent research partners – Commonwealth and the Financial Security Program at the Aspen Institute – to put our purpose to the test. Could we better understand inclusive growth and, better yet, overcome key barriers to prosperity? The resulting report did so, but also helped us to identify “meaningful steps toward a more just and sustainable capital market system.” The concept of sustainability not only drove our operation as a (somewhat modestly sized) public company, but now was applied to our economic and market stewardship. The responsibility we bear for preserving economic opportunity for future generations was put front and center. Thus, the agenda was set, but we still needed to refine our project into specific targets: • Resources. One cannot invest what one does not have, and financial insecurity is a foundational hindrance to market participation. • Actionable Knowledge. Everyone deserves to know what investing means and how it operates, without being overwhelmed by unnecessary information or unattainable expectations. • Market Access. Individuals who want to invest must also have the access and applicable products to do so. • Investor Identity. Those with resources, knowledge, and market access must also be able to see themselves—and be seen by family, peers, and society—as investors.

The project is just underway and more precise measurements of its impact will come in time. Some of those results may shift our course or reallocate resources to maximise impact. We use the rigor and logic of data to drive our decision-making, make the business more sustainable, measure the positive impact of our purpose and represent our corporate culture. i 29

CFI.co Columnist

Our success in achieving these targets can be measured in the language and data of ESG: diversity training, investor education, community investment, product availability and credit availability, to name just a few.

> Mohamed A El-Erian:

The Inflation Catch-Up Game

nflation is now on the front page of newspapers around the world, and for good reason. Prices of more and more goods and services are increasing in a manner not seen for decades. This inflationary spike, accompanied by actual and feared supply shortages, is fueling both consumer and producer anxiety. By also threatening to worsen 30

inequality and derail a much-needed sustained and inclusive economic recovery from the COVID-19 pandemic, it is also becoming a hot political issue. For their part, policymakers at central banks in the United Kingdom and the United States have started to move away from the narrative of CFI.co | Capital Finance International

“transitory” inflation. (The cognitive transition at the European Central Bank is less pronounced, which makes sense, given that the inflation dynamics there are less pronounced.) But the pivot is far from complete and not nearly quick enough, particularly at the US Federal Reserve, the world’s most powerful and systemically important monetary institution. Delays in Congress

Winter 2021-2022 Issue

"But inflation will nonetheless be much more pronounced than top Fed officials had thought when they repeatedly dismissed increasing price pressures as a temporary phenomenon." approving measures to increase productivity and enhance labor-force participation are not helping, either. The reasons for the rise in inflation are well known. Buoyant demand is encountering inadequate supply – a result of disrupted transportation and supply chains, labor shortages, and an energy squeeze. While notable, this price surge does not herald a return to a 1970s scenario of double-digit inflation rates. Rigid cost-price indexing is rarer these days. Initial conditions regarding the formation of inflationary expectations are a lot less unstable. And central banks’ credibility is much higher, although it is currently facing its severest test in decades. But inflation will nonetheless be much more pronounced than top Fed officials had thought when they repeatedly dismissed increasing price pressures as a temporary phenomenon. Even today, their inflation forecasts – despite having been revised up several times already – still underestimate what lies ahead. Survey-based inflation expectations compiled by the New York Federal Reserve have risen above 4% on both a one- and three-year time horizon. Knock-on cost-push inflation tendencies are broadening. Quit rates among US workers are at record highs as employees feel more comfortable leaving their jobs to seek better-paying positions or strike a better worklife balance. There is more talk of labor strikes. And all of this is exacerbated by consumers and firms bringing forward future demand, mainly in response to concerns about product shortages and rising prices.

"Central banks in the United Kingdom and the United States have started to move away from the narrative of 'transitory' inflation."

The current bout of inflation is part of a general structural change in the global macroeconomic paradigm. We have gone from a situation of deficient aggregate demand to one in which demand is fine overall. Notably, US retail sales increased by a higher-than-expected 13.9% year on year in September, indicating that there are still quite a few pockets of pentup purchasing power being translated into effective demand. Of course, this is not to say that there are no issues regarding the composition of demand that must be addressed. Inequality, not just CFI.co | Capital Finance International

of income and wealth but also of opportunity, remains an urgent concern. Higher and more persistent inflation underscores such concerns, because its implications are multifaceted – economic, financial, institutional, political, and social. Those effects will prove increasingly uneven in their impact, hitting the poor especially hard. Globally, the fallout from the inflationary surge risks knocking some lower-income developing countries off a secular path of economic convergence. All this makes it even more important for the Fed and Congress to act promptly to ensure that the current inflationary phase does not end up unnecessarily undermining economic growth, increasing inequality, and fueling financial instability. A marked reduction in monetary stimulus, still operating in hyperemergency mode, is needed, notwithstanding the unlucky timing that governs the shift to the Fed’s new policy framework. And US lawmakers can assist by moving more forcefully on supplyenhancing initiatives, for both capital and labor, that fall squarely in their domain. That means passing measures to modernise infrastructure, boost productivity, and increase labor-force participation. Policymakers should also strengthen prudential regulation and supervision of the financial sector, especially the non-bank system. And, given the greater pressures on corporate profit margins and the superior ability of large firms to navigate supply disruptions, they will need to keep a close eye on firm concentration. It is good news that, after initially and persistently misreading US inflation dynamics, more Fed officials are now starting to come to grips with the situation. The Fed would be well advised to catch up even faster. Otherwise, it will end up in the midst of a blame game that will further erode policy credibility and undermine its political standing. i ABOUT THE AUTHOR Mohamed A El-Erian, President of Queens’ College, University of Cambridge, is Professor at the Wharton School, University of Pennsylvania, and the author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse, Random House, 2016. 31

ANGELA MERKEL:

LESSONS ON LONGEVITY FROM GERMANY’S IRON MUM By Wim Romeijn

Almost two months to the day after the September 26 federal election in Germany, a three-party coalition was unveiled, tasked with ushering in the post-Merkel era with social democrat Olaf Scholz (63) at the helm as chancellor (see next article). With the SPD (Sozialdemokratische Partei Deutschlands) at its core, the coalition rests on a solid majority in the Bundestag thanks to the support of the Greens (Die Grünen) and the business-friendly FDP (Freie Demokratische Partei). All three coalition parties booked solid gains at the polls with the Greens almost doubling their presence in the federal parliament, becoming kingmakers as a result.

“T

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he new government has placed the greening of the economy, Europe’s largest, at the core of its mission, promising to set aside two per cent of the German territory for wind energy generation and pledging to source 80 percent of the country’s electricity from renewables by 2030. Germany is to become carbon-neutral by 2045. The ‘traffic-light’ coalition – so named for the parties’ traditional colours – also wants to fully digitise the public administration, legalise cannabis, build 400,000 houses annually, and lower the voting age to sixteen, amongst others. The political deal that binds the three parties together comprises some 177 pages – 52,000 words in total or, as The Economist dryly noted, “a shade more than The Great Gatsby”. With a moderately leftish slant, the new German cabinet is set to tackle the issues 32

that the outgoing government of Chancellor Angela Merkel was either unable or unwilling to address. Though far from revolutionary, the centre of gravity of German politics has shifted in tune with the times towards a more proactive implementation of the full suite of progressive good intentions, often mentioned by politicians but seldom acted upon. The Merkel formula for longevity at the top includes discretion and modesty, a supple bending to the winds of change, the avoidance of controversy, and – most importantly – the noticeable absence of a grand vision. These elements seem, however, largely absent in the new coalition, leading some pundits to predict a much livelier, and possibly less stable, political scene. On November 22, just a few days before the unveiling of the tripartite coalition, Angela Merkel celebrated sixteen years as chancellor CFI.co | Capital Finance International

of Germany. Helmut Kohl served slightly longer, by just about three weeks (1982-1998), although Otto von Bismarck still holds the record for longest-serving chancellor with 22 years and 262 days in office (1867–1890) – an accomplishment virtually impossible to equal. During the latter part of the Merkel Era, the German chancellor also was, arguably, the last remaining adult on the global stage, being thrust into the role of leader of the free world and solving, though perhaps not quite by design, the post-modern version of the age-old ‘German Question’ – more of a conundrum facing a nation too small for a global superpower yet too much of a hegemon in its own neighbourhood. By eschewing grandstanding and even grandiloquence, Merkel deftly – or by fortunate accident – manoeuvred Germany into a pivotal position within the European Union and, from there, onto the world stage – stepping on very

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few toes along the way. Alone amongst her peers, she always kept her cool even as US President Donald Trump called her “stupid” and a Russian “stooge” in 2019. The closest Merkel came to blowing her top was in 2013 over allegations that US intelligence agencies had hacked her mobile phone to listen in on high-level conversations. In a terse call with then-President Obama, Merkel voiced her exasperation and reminded him that such practices were “completely unacceptable”. According to news weekly Der Spiegel, the chancellor was said to be ‘livid’ over the breach of trust between allies and demanded an immediate tightening of security measures surrounding her office and cabinet.

UNCOMFORTABLE For someone visibly uncomfortable speaking in public – a great communicator she is not – and

When the Chancery refuses to pick up the phone – as it did after the Russian annexation of the Crimea in 2014 – Moscow suffers an immediate funk. Even President Xi Jinping of China eagerly taps into his usually well-hidden reservoir of tact when palavering with the German chancellor. The Chinese president realises full well that Merkel speaks for Europe and without her approving nod the stalled EU-China Comprehensive Agreement on Investment is unlikely to ever materialise. In a sense, Merkel has been the ideal leader of Germany: unprepossessing, understated, and disinclined – or at least reluctant – to wield (soft) power whilst still willing to be swayed by solid argument – or, indeed, public opinion. As such, Merkel followed the well-worn yet timehonoured advice of Theodore Roosevelt, the 26th US president, whose Big Stick ideology (‘speak softly and carry a big stick; you will go far’ – originally a West African proverb) pointedly included amongst its five essential elements provisions to act justly towards other nations; to allow a defeated adversary to save face; and, crucially, to never bluff. The difference is, of course, Germany’s well-justified aversion of applied hard power. Perhaps Merkel also took a leaf out of US President William Howard Taft’s (successor to Theodore Roosevelt) ill-fated Dollar Diplomacy CFI.co | Capital Finance International

by leveraging Germany’s economic might to further the country’s broader interests. However, contrary to the Taft Administration, Merkel’s government managed to make the approach into a relative success on the back of Germany’s financial hegemony in the European Union which it effectively serves as fiscal anchor and monetary adjudicator. However, Germany’s ‘sado-monetarism’ – derived from collective memory of the interbellum chaos handed down over successive generations – has also saddled the country with an unenviable legacy of underspending on public infrastructure, a severely stressed pension system, a rigid and outdated public sector unfit for (digital) purpose, and a population grown tired of endless austerity. BROWN COAL A former environmental minister under Chancellor Helmut Kohl, Merkel curiously has a somewhat iffy record on fighting climate change. Her snap decision to shut down the country’s nuclear industry after the 2011 Fukushima disaster, has pushed Germany towards greater dependency on natural gas imported from Russia and locally-mined lignite (‘brown coal’) – the most polluting, because least energy efficient, type of coal. Although the federal government has promised to close all lignite mines by 2038 and has earmarked €15bn for the redevelopment of the scarred earth left behind and the retraining of thousands of miners, communities affected by the closings complain that a comprehensive future vision seems to be missing. 33

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However, not even Russian president Vladimir Putin managed to faze the German lady. Merkel kept her poise and apparently remained unimpressed during a 2007 meeting at Putin’s Sochi country estate when the host called his black Labrador, Koni into the room. Of course, it had not escaped the former KGB lieutenantcolonel that his guest had been bitten by a dog in 1995 and did not feel particularly comfortable in their presence. Regarding the incident, Mrs Merkel later remarked: “I understand why he had to do this – to prove he’s a man afraid of his own weakness; Russia has nothing, no successful politics or economy. All they have is this.”

clearly reluctant to engage in the dark art of geopolitics, Merkel has accomplished the almost impossible: to make Berlin a global powerbroker.

That is a complaint heard more often when considering the Merkel Era: Although in her sixteen years at the helm, Merkel has deftly weathered several crises and kept her country on an even keel. She has done so by forging consensus and has shown a certain degree of complacency. Moreover, her reluctance to wield power in Europe has prevented the EU from dealing with many of its structural deficiencies. Merkel is, in fact, a master in kicking the can down the road. To “merkel” (merklen) has quite literally become a byword for inaction. In present-day Germany, there is little to no debate about the future as if most Germans are quite content to leave things as they are, placing their trust in the chancellor to manage whatever crisis comes along without much affecting their lives or livelihoods. After all those years in power the Christian Democrat CDU/CSU seems to have run out of ideas as became abundantly clear earlier this year during the lacklustre election campaign which sorely lacked substance and was more of a horse race than a presentation of ideas and visions. Part of the problem is that, unwittingly or otherwise, Merkel has cast her party in her own image, ditching ideology and programmatic platforms for ethics and reaction. Whilst admirable in principle, the Merkel approach also makes for boring politics with voters slowly becoming apathetic.

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Berlin-based author Konstantin Richter tried to decipher the Merkel Enigma in his novel The Chancellor and concluded that the aversion to ideology stems from her experiences of East Germany: “She witnessed ideology collapse and its believers turn in non-believers almost overnight.” She also freely admits drawing inspiration from her Lutheran faith which not only provides her with an inner compass but also deprives her of preconceptions. Her message to voters was one of calm confidence that, until recently, used to be the preserve of the British: ‘I shall handle such dramas as cross my desk calmly and rationally and without anything so distracting as a project.’ INSCRUTABLE Growing up in East Germany, a paranoid society characterised by mass surveillance, Merkel acquired the virtues of ambiguity and patience early on. Der Spiegel called her as inscrutable as “sphinxes, divas, and queens.” She tries not to antagonise her opponents to avoid polarisation. In this, she has been remarkably successful. In Europe, Germany is the most centrist country – by far. As a result, it has largely been spared the increasingly acerbic public discourse prevalent elsewhere on the continent. Merkel is about to leave the Chancery on a decidedly high note with an approval rating of around 80 percent. Though many Germans appreciate her steady hand and serene demeanour, most also clamour for change, albeit softly for fear they may get too much of it. 34

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Whenever she did face a choice, Merkel carefully considered the available options – and public opinion – before taking a decision which was never to be looked back on. Thus, it was with the refugee crisis of 2015 when she opened the country’s borders to an estimated 1.2 million war refugees from Syria and elsewhere. It was the preferred option even if it indirectly fuelled the rise of the far-right AfD (Alternative für Deutschland) for few Germans would have stomached border guards using force to turn back desperate masses of people. Demographics also went into the equation. With its ageing population, Germany desperately needs immigrants to keep its factories humming. In fact, an estimated 400,000 newcomers have since found gainful employment. Although the influx threatened to alienate the CDU’s more conservative sister party CSU, Merkel’s repeated assurances since that “there can and shall not be another year like 2015” prevented a lasting rift. The move also cemented Germany’s reputation for being fearless in the face of great challenges. Earlier, the reunification with East Germany imposed an estimated €2 trillion surcharge on the country’s taxpayers which scarcely caused a societal ripple. CONCERNS In Europe, the change of guard in Berlin causes some concern. Chancellor Merkel was much appreciated for her coolness and showered with words of praise – and a standing ovation –during her last European Council summit at the Egmont Palace in Brussel – number 107 by most counts. Council President Charles Michel declared Merkel a “monument” for her “extreme sobriety and simplicity” as well as the “shining light and compass” of the European project. Not everybody was enamoured of Merkel’s legacy in Europe. A former British member of the European Parliament (MEP), Andrew Duff, expressed a dissenting view: “She prioritised EU unity over reform, leaving the union more disunited than ever, with one man overboard.” However, Duff is in a minority of (almost) one. Most MEPs valued Mrs Merkel’s steadfast refusal to throw her country’s weight around during the Brexit negotiations, leaving the entire process in the hands of the European Commission and its chief negotiator Michel Barnier. Increasingly frantic calls for help from the British prime minister went unanswered in Berlin or were met with kind but hollow words of understanding and commiseration.

Just before leaving office, Chancellor Merkel warned that European leaders and lawmakers itching for a fight with Poland over its loose interpretation of the rule of law are courting disaster. She is concerned that the belligerent attitude in Brussels and Warsaw may result in a geopolitical setback for the union with Warsaw becoming both more authoritarian and susceptible to outside influence. During her last council summit, Merkel pleaded for renewed patience with Poland. However, she met stiff opposition from Dutch Prime Minister Mark Rutte who believes the EU’s core values are at stake. He demands swift and strong reprisals against member states that are undermining the rule of law such as Poland and Hungary. Formerly the closest of allies and still good buddies when it comes to battling the supposed fiscal profligacy of ‘Club Med’ member states, Merkel and Rutte – eleven years in power as prime minister of The Netherlands – have drifted apart on a number of core issues, including migration and the issuance of eurobonds, or the need to financially assist the bloc’s southern member states in the wake of the Corona Pandemic. GRAND ALLIANCES Rutte, quite temperamental whenever events deviate from his “normal”, is essentially the polar opposite of the German chancellor who prefers listening to talking and patience to attitude. This helps explain why, since Brexit, The Netherlands and France have drawn considerably closer than before. President Emmanuel Macron of France, likewise without a ‘mute’ button, needs allies if he is to stand a chance of stepping in the chancellor’s shoes. Rutte has so far been the only friend to join Macron as the Élysée Palace seeks to elevate its EU profile. Little noted, France’s recently concluded comprehensive treaty with Italy presages a Europe of three major powers. The FrancoItalian tie-up is modelled on the 1963 Élysée Treaty which cemented the axis that has since set the tone in Europe – and defined its centre of gravity. For the then French president Charles de Gaulle, the hastily arranged treaty was a way to bring Germany into France’s orbit – and keep it there. As such, the Élysée Treaty was essentially about limiting the outsized post-war role of the US in Europe. The yet unnamed Paris-Rome treaty is meant to put a gentle check on German power. Italy and France woke up to the possibilities of their cooperation only last year during the caustic discussions about the financing of postpandemic recovery and growth plans. Acting in CFI.co | Capital Finance International

unison and much to their own surprise, Paris and Rome managed to override Germany’s instinctive opposition to common debt instruments. Much to the chagrin of the bloc’s pennypinchers, united in the informal Hanseatic League 2.0, Merkel dropped her veto on the issuance of EU bonds in recognition of the need to hold the union together and encourage a measure of continent-wide solidarity. Whilst the hapless Rutte was busy wagging his righteous finger at the supposedly lazy, womanising, and wine-guzzling Southerners – fighting a hopeless rear guard battle he could not possibly win – Merkel remained the lone voice of reason, ultimately opting for a pragmatic approach over an ideologically-inspired one. HOTHEADS In a world of hotheads and cynical wannabe potentates, Merkel’s Germany stood apart, but not aloof, as the last bastion of decency – a testament, and crown, to the country’s remarkable return to the epicentre of civilisation. Alone amongst world leaders, Merkel could speak with authority – and be believed. In a six-country survey conducted only months before she was due to leave office, polling site YouGov found that the German Chancellor enjoyed almost universal respect and admiration with ratings varying between +61 (Spain) and +15 (UK). Of all world leaders, only US President Joe Biden, possibly benefitting from a “not Trump” boost, came anywhere close to Merkel’s popularity. Contemporaries such as UK Prime Minister Boris Johnson, and Presidents Xi Jinping of China and Vladimir Putin of Russia were stuck on negative ratings in all six countries with Xi in a dead heat with Putin for the title of least admired world leader. Under Merkel, Germany has managed to ditch its reputation as a land of humourless and unhappy people. According to the Pew Research Center, Germans are now only bested by the Dutch and Swedes on economic optimism. In its most recent overview of EU public opinion, Pew surveyors also found that most Europeans consider the amount of influence Germany enjoys over the union just about right with only the Greeks, Italians, and Spanish dissenting and wishing for the Germans to tone down. LEARNING ON THE JOB Chancellor Merkel got the message to lower her voice during the Greek debt crisis of the early 2010s which almost triggered the collapse of the euro. At the time, she, and her rather tactless finance minister Wolfgang Schäuble, were demanding tough austerity and deep fiscal and labour reforms as the only way out of the banking crisis. This insistence on fiscal rectitude earned Mr Schäuble the moniker “Ayatollah of Finance”. In 2012, Schäuble publicly clashed with the then IMF President Christine Lagarde over 35

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In a farewell interview published in the Süddeutsche Zeitung, Merkel expressed concern over the increased difficulty in reaching compromise between EU member states over thorny issues such as immigration and the rule of law amid growing nationalism: It’s getting harder and harder and I’m quite worried.” Merkel also

noted that compromise-building is “essential” in democracy. She said that her defence of the euro and the preservation of freedom of movement across the Schengen Area were amongst the most important tasks she set for her government.

Angela Merkel

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allowing Greece more time to implement painful reforms and spending cuts with the German flatly refusing to consider any concessions. After photoshopped images and caricatures appeared in the Greek press of both Merkel and Schäuble in Nazi uniform, complete with swastikas and “toothbrush” moustaches, the chancellor found room to back down and rein in her finance minister – and get the EU, including its more recalcitrant member states, to accept a massive third bailout package for Greece. It proved a watershed moment that would reverberate all the way to the current Corona Pandemic and the severe economic damage it wrought amongst the less financially resilient EU member states. Instead of demanding the affected countries to become “more German” – as she had initially told Greece – Merkel almost immediately backed calls for a generously-sized €750bn recovery fund (“Next Generation EU” fund) and even agreed to allow the European Commission to raise part of the necessary cash through bond issues. She justified her novel stance – a volte face of note – by citing the need to bring Europe out of the crisis “united and in solidarity.” 36

10 LESSONS ON POWER FROM ANGELA MERKEL • • • • • • • • • •

Listen attentively Speak softly Respect opponents Seek compromise Exercise patience Don’t panic Unite Understand Wield only soft power Keep to ethical values

LEGACY That is the legacy Chancellor Merkel leaves Europe: a philosophy to paste over differences, a willingness to compromise, and a determination to stick to the original idea of a United Europe as defined in the preamble of the 1957 Treaty of Rome which founded the European Economic Community (precursor to the EU), created the Common Market, and moreover bluntly stated that the entire project entails forging “an ever-closer union among the CFI.co | Capital Finance International

peoples of Europe” – a phrase as simple as often misread or misunderstood. Merkel, growing up east of the Berlin Wall and in a fractured continent, ultimately understood that what her peers are eager to confine to history books: the acute, present, and continued need to promote European unity through pragmatism, a pooling of sovereignty, and a commitment to common institutions and values. She admirably managed to place Germany at the very centre of this ambitious pursuit without causing undue offense or stepping on long nationalist toes – an accomplishment of note that may yet earn her a place alongside Otto von Bismarck who, after all, only shaped a nation out of disparate statelets and principalities whilst Angela Merkel managed to keep an entire continent together – a contingent of 27 likewise dissimilar nations – during a financial meltdown of note and an almost unprecedented pandemic. Germany’s new chancellor Olaf Scholz has big shoes to fill. i

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> Olaf Scholz:

Pragmatic, Experienced, Sensible, and Slightly Awkward By Wim Romeijn

Credited with reviving the politically moribund SPD (Sozialdemokratische Partei Deutschlands), and boasting a CV brimming with public administration experience, Olaf Scholz was, until quite recently, considered somewhat of an oddball by the social democrat rank and file for his robotlike body language and speech – which earned him the nickname ‘scholz-o-mat’. Then again, flamboyant showmen are not usually elected to high office in Germany.

olling at barely 15 percent in spring, the SPD staged a comeback of note, claiming 25.7 percent of the popular vote, on the back of Scholz’ robust reputation as level-headed leader and his carefully crafted public image as the only man capable of following in the footsteps of Angela Merkel. A statesman in the making, Scholz served as minister of finance and vice-chancellor since 2018 in the Grand Coalition – the alliance between the centre left SPD and Merkel’s Christian-democrat CDU/CSU. His pro-business credentials are firmly established but initially caused some unease in the party. In 2019, Scholz lost out for the SPD chairmanship to eventual co-chairs Saskia Esken and Norbert Walter-Borjans who moved the party further towards the left, alienating a significant cohort of voters who only returned to the fold after the co-chairs surprisingly nominated Mr Scholz as the SPD’s candidate for chancellor. Scholz received wide acclaim for his resolute response to the Corona Pandemic. Since the health crisis began, he has steadfastly maintained that Germany can deal with its financial fallout. As finance minister, Olaf Scholz authorised €400bn in new debt, scrapping the controversial Schwarze Null (“Black Zero”) policy, constitutionally anchored, that mandates the federal government to maintain a fiscal surplus. Scholz assured concerned Germans that the country can easily afford the added burden and will be able to grow its way out of debt: “We managed to do that after the 2008/9 financial crisis and will be able to do so again.” His largesse does have limits. Scholz promises to reinstate the constitutional debt break in 2023 and is opposed to permanently loosening EU fiscal rules as desired by France and Italy.

On Europe, Scholz wholeheartedly agrees with French President Emmanuel Macron on the need to strengthen the continent’s sovereignty as it relates to defence, industrial policy, and climate action. As chancellor, Scholz is expected to be slightly less understanding and patient than his predecessor and will likely urge Poland in a more forceful way to end its simmering conflict with the EU over the rule of law. On the equally controversial Nord Stream 2 pipeline, Scholz has been less clear, merely stating that it is “not needed” but also stressing the importance of finishing its construction. Foreign policy, a non-issue in the election campaign and during the coalition talks that followed, is likely to present Chancellor Scholz with his greatest challenges. Although both the SDP and the Greens feature a pronounced antiAmerican streak, Germany needs to improve relations with Washington in order not to be squeezed should the rivalry between the US and China turn ugly – or uglier. The Greens may be able to help. Their leader, Annalena Baercock, is set to become the country’s new foreign minister. Though the party is vehemently opposed to any increase in defence spending, including meeting the two percent NATO norm, it does agree with the US on CFI.co | Capital Finance International

several important issues such as the geopolitical implications of Nord Stream 2 and the need to curtail both Russia and China. Baercock is much in favour of turning up the pressure on Russia and is also expected to follow the US confrontational policy towards China. She sees the Nord Stream 2 pipeline as a “treacherous plan” of President Putin to gain additional leverage in Europe and wants the project shut down. Baercock also stated that the EU should cut off funds to countries such as Hungary and Poland that fail to abide by European laws, standards, and values. However, Olaf Scholz still represents and embodies German continuity – not big change. Though accents and priorities shift, the new government does not stand for revolution but for dependability and competence in public administration. In a sense, Scholz is a bore – a quality of note, and one much underappreciated, for someone managing the levers of power. He fits the words Winston Churchill had for his successor, the unprepossessing Clement Attlee: “He is a modest man and has much to be modest about.” Nonetheless, in 2004 British academics and political historians named Mr Attlee the most successful British prime minister of the 20th century. i 37

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He also repeatedly stated that SPD pragmatism will ensure that policies aimed at limiting climate change will not undermine the country’s economy or prosperity: “The Greens have some good ideas but those can only be implemented with the SPD’s help.” His personal leitmotiv: “pragmatic, but oriented towards the future”.

Angela Merkel and Olaf Scholz

> Caught Between a Rock and a Hard Place:

German Chancellor Olaf Scholz Courted by East and West By Wim Romeijn

In a diplomatic tour de force of note, the US government managed to impress on its partners and allies in NATO and the European Union the clear and present danger of a Russian spring offensive against Ukraine. All duly expressed grave concern regarding the recent deployment of Russian troops and hardware in the vicinity of the border.

n December 7, Presidents Joe Biden and Vladimir Putin met for a twohour-long online summit to discuss their souring relations and escalating tensions. The talks went nowhere and were afterwards described as “frank, intensive, and robust” which constitute a diplomatic euphemism for an exchange of threats and hard words. Though Moscow vehemently denies any intention to move on Ukraine, the US and the EU are already busy issuing warnings and devising sanctions in case the Kremlin decides to embark on a military adventure. Usually suspicious of American intelligence assessments, even Germany now seems convinced that Russia possibly has malicious designs on Ukraine’s territorial integrity. Berlin is key in any pre- and post-conflict scenario as the most resilient and valuable conduit available to the Kremlin – usually the only channel that stays open after Russia has strayed from the straight and narrow.

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GREEN LIMITS TO PATIENCE Russian brinkmanship is likely to pose the first foreign policy test for German Chancellor Olaf Scholz and his “traffic light” coalition of greens, liberals, and social democrats. The Greens in particular show an eagerness to depart from the policy of patience and engagement favoured by former Chancellor Angela Merkel whose backchannel dealings with President Vladimir Putin usually managed to keep the Russian strongman in check. Just before the virtual summit, Biden had asked Berlin to prevent the Nord Stream 2 natural gas pipeline from becoming operational as part of a much broader sanctions package being prepared. Other possible punitive measures include stopping the trade in Russian bonds on the secondary market and shutting the country out of the Swift global payment system. 38

Whilst Putin was seen to be unimpressed, much less intimidated, by Biden’s warnings, he was loath to offend Merkel in the past and will most likely continue to pay considerable attention to the mood in the German capital. Both the US and Russia are actively courting the new administration of Scholz with US National Security Advisor Jake Sullivan suggesting that Washington and Berlin are now in full agreement over the need to shut down the controversial gas pipeline in case of war. Sullivan found a rather unlikely ally in Annalena Baerbock, Germany’s new foreign affairs minister, who as co-leader of the Green Party has long advocated for increased pressure on Russia. Firebrand Left Party (Die Linke) leader Oskar Lafontaine predicts a “catastrophe” with Baerbock at the helm of the country’s foreign policy. In an interview with the conservative Die Welt newspaper, Lafontaine expressed fear that “she will uncritically follow the US’s confrontational policy towards Russia and China.” During the election campaign, Baerbock called Nord Stream 2 a “treacherous plan” on the part of Putin to gain and exert influence on Europe. PUBLIC OPINION That view is, however, not shared by most Germans. Whilst plotting a course between superpowers, Scholz will have to keep an eye on German public opinion which does not favour any confrontation with Russia and is, overall, sceptical of US intentions. Most Germans fail to see the need for a tougher stance to rein in Moscow’s geopolitical ambitions and place their trust in their country’s soft power – essentially its economic heft – to carry the day. According to John Lough, author and an associate fellow at Chatham House’s Russia and Eurasia Programme, German public officials – and, indeed, the wider public – often do not realise that they are burdened by history when facing Russia. CFI.co | Capital Finance International

"Whilst critical of the Russia 2014 annexation of the Crimean Peninsula and that country’s covert involvement in the ongoing conflict in eastern Ukraine, Scholz was careful to leave the door open for dialogue."

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Olaf Scholz

In his book Germany’s Russia Problem, Lough argues that “Germany’s historically conditioned reflexes have distorted its views of Russia and continue to inhibit its behaviour.” He concludes that “fear, sentimentality, and guilt” have left Berlin “deluded” about Russia’s real intentions such as a structural weakening of the country’s transatlantic links and the gradual undermining of both NATO and the EU.

REBUFFED Whilst critical of the Russia 2014 annexation of the Crimean Peninsula and that country’s covert involvement in the ongoing conflict in eastern Ukraine, Scholz was careful to leave the door open for dialogue. He steers clear of any talk of sanctions. The new German chancellor has little room for manoeuvring should the situation escalate and may yet have to take a stance if he indeed desires the EU to speak with one voice. CFI.co | Capital Finance International

Just last June, both France and Germany pushed gently for a reopening of a dialogue between Brussels and Moscow but were promptly and brusquely rebuffed by nearly all other member states. The mood is Europe is not one of reconciliation or engagement with Putin. Whilst Chancellor Scholz realises that his country sits squarely at the centre of any policy initiative or response regarding Russia, he will likely discover before long that fence-sitting is not an option should Russian troops move on Ukraine. Before that happens, if it ever does, his best option would likely be to insist on agency for Kyiv and the Ukrainian government of President Volodymyr Zelensky. So far, all talk has been about Ukraine without involving that country. This rather peculiar state of affairs virtually guarantees that any compromise struck to avoid conflict now is unlikely to “stick” and put out the fire definitively. i 39

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However, in his writings, Lough is much less decisive when it comes to suggesting concrete policy alternatives. There are, in fact, few to speak of. Since 1969, German relations with Russia (then Soviet Union) have been guided by the principles of Ostpolitik, originally formulated by West German Chancellor Willy Brandt (1969 - 1974) – “Wandel durch Annäherung” (Change through Rapprochement). Brandt’s successors up to and including Merkel have left this approach largely unchanged.

In December, Scholz reiterated the need for a new EU-wide Ostpolitik based on the principle that “Europe speaks with one voice.” He also emphasised the importance of adhering to the criteria established by the Helsinki Commission and the Organisation for Security and Cooperation in Europe (OSCE) which include a commitment to the idea that borders must not be moved by force, adding that Russia had “already violated this.”

> Hans-Werner Sinn:

The End of Free Money

lthough the US Federal Reserve is now thinking about tapering its monthly asset purchases in light of increasing inflation figures, European Central Bank President Christine Lagarde continues to insist that no sustained inflation risk exists. The currently measured inflation, she says, is a temporary problem that will disappear 40

once supply bottlenecks are overcome, so the ECB will not be changing its policies. It is like a coachman who refuses to tighten the reins when his horses are bolting, because they will eventually tire themselves out.

stability under all circumstances. There is no provision for the possibility of letting prices run hot for a while. And, unlike the Fed, the ECB cannot legally seek to balance the goal of price stability with other monetary-policy objectives.

Never mind that, according to the Treaty of Maastricht, the ECB is obliged to ensure price

The current supply bottlenecks owe much to the quarantine measures in ports – particularly,

CFI.co | Capital Finance International

Winter 2021-2022 Issue

to shortages even of local timber and other building materials produced in Europe. Hence, in a fall 2021 Ifo Institute survey, 70% of German manufacturers reported difficulties sourcing upstream products. For comparison, the highest that figure ever reached in 30 previous years of surveys was 20%. Ifo reckons that supply bottlenecks will cost Germany around €40 billion ($45 billion) of value added – equivalent to 1.15% of its GDP – in 2021. The supply bottlenecks have obviously been unamenable to the huge stimulus and rescue packages that the European governments implemented during the COVID-19 crisis. The German federal government, for example, enacted programs amounting to roughly 10% of German GDP if spread out over two years, and the European Union enacted additional programs amounting to 4.5% of EU GDP over two years. These programs were largely financed by new government debt, which in turn was immediately monetised by the ECB and thus was issued at ultra-low interest rates. Never before has Europe experienced stimulus programs on such a massive scale. But given the supply bottlenecks, policymakers were effectively slamming on the gas with the hand brake still on. The result was a particular form of economic overheating that economists call stagflation. Inflation rates today are very high not only in the United States, where they stand at 6.2%, but also in Europe. As of October 2021, prices in the eurozone overall had increased 4.1% year on year; in Germany, the continent’s largest economy, prices were up 4.5%. And as if this wasn’t bad enough, the German Federal Statistical Office has just announced that annual industrial producer prices were up 18.4% in October. That is the highest increase since 1951, shortly after the Federal Republic of Germany was founded, exceeding even the peak monthly price increase during the 1970s oil crises (14.6% in June 1974).

but not exclusively, in China. Arriving ships cannot unload their cargo and therefore also cannot be loaded with the intermediate products that Europe’s economy must be able to supply to its customers. Freight rates for international maritime transport have increased eightfold since 2019. But the bottlenecks also reflect the domestically imposed lockdowns in European economies last winter and spring, which led

In contrast to the index for consumer goods, which measures only the prices of final products, industrial producer prices capture all intermediate stages of production. They therefore have a certain prognostic significance for consumer prices, even though the final products won’t show such extreme spikes. (Unlike the latter, they are not affected by changes in value-added taxes such as those occurring in Germany.) These new inflation figures are so extreme that the ECB’s position looks like willful denial. Germany is currently experiencing CFI.co | Capital Finance International

the strongest inflation in a lifetime. And the situation is not much better in other European countries. In September, France reported an 11.6% annual increase in industrial producer prices, and that figure stood at 15.6% in Italy, 18.1% in Finland, 21.4% in the Netherlands, and 23.6% in Spain. Worse, these increases do not look like a temporary phenomenon. Even though the supply bottlenecks will likely be overcome by next summer, trade unions will by then have increased their wage demands to account for this year’s inflation figures. That will trigger a spiral of rising prices and wages that may continue for several years. Purchases of consumer durables will be pulled forward, further accelerating inflation. Moreover, even when the first inflation wave starts to ebb, perhaps as early as next autumn, new dangers will loom. If the ECB hesitates to follow the US Federal Reserve’s foreseeable interest-rate hikes, the euro will depreciate, boosting import prices further. The baby-boom generation’s transition to retirement implies many additional consumers who no longer support production and therefore create an inflationary demand overhang. On the cost side, the phaseout of all fossil fuels – and of nuclear power plants in Germany – will be a major driver of price growth. It requires little imagination to see how Europe could end up back in a 1970s-like environment of stubborn inflation, which could last for the remainder of the decade and beyond. Given these circumstances, European economies and the ECB must be given a clear signal to stop any further monetised debt binges. If policymakers want to siphon money from the economy for their aims, they should have to cut other expenditures by a comparable amount. If the rollback via interest rates no longer works because the ECB doesn’t play ball, it will be replaced by a direct crowding-out mechanism via the prices for goods. Either way, today’s inflationary surge marks the end of the pipe dream of resources created from nothing. The good life financed by the euro system’s printing press is over once and for all. i ABOUT THE AUTHOR Hans-Werner Sinn, Professor Emeritus of Economics at the University of Munich, is a former president of the Ifo Institute for Economic Research and serves on the German economy ministry’s Advisory Council. He is the author, most recently, of The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs, Oxford University Press, 2014. 41

Winter 2021-2022 Issue

> Urban Challenges that Can, and Must, Be Overcome By Jason Agnew

SDG 11’s goal is to make cities “inclusive, safe, resilient and sustainable” — a tough nut to crack...

ince 2007, more than half the world’s population has been living in cities — and that is projected to rise to 60 per cent by 2030.

Metropolitan areas are important for economic growth, contributing about 60 percent of global GDP. They also account for about 70 percent of global carbon emissions and over 60 percent of resource-use. Urbanisation has led to new levels of prosperity — and unprecedented squalor. Cities such as Mumbai and Manila have grown so rapidly that infrastructure could not keep up. The pandemic created many problems, but also presented some perspective on the unchained proliferation of urban expansion. People working from home have discovered that they prefer it and, in many cases, are more productive. Will this enable remote working for all, or will the allure of urban life prove too powerful? Rapid urbanisation means a growing number of slum dwellers living with inadequate waste collection and sanitation, transport issues, and worsening air pollution in unplanned urban sprawl. The impact of Covid-19 has hit poor and densely populated areas hardest. One billion people live in informal settlements and slums worldwide, where overcrowding makes social distancing and self-isolation unfeasible. In India, there was an exodus of millions of city street-dwellers who were forced back to their villages. The little money they had earned in the city often supported their rural relatives. Grim as it may be to live homeless and poor in a slum, urban life still represents hope to many. These are issues which will eventually affect every one of us. Inequality can lead to unrest and insecurity, pollution damages health and affects productivity. Natural disasters have the potential to disrupt things still further. The cost of poorly planned urbanisation can be seen in the slums, the tangles of traffic, spewed emissions and sprawling suburbs all over the world. By acting sustainably, we choose to build cities where all citizens have a decent quality of life, and form a part of the productive dynamic: shared prosperity, social stability and a protected environment. Medellín, Colombia, is considered an international benchmark for urban transformation and social

innovation. Once the murder capital of the world, with high high levels of poverty, inequality and social exclusion, in just two decades, Medellín has transformed itself. It has been named the world’s most innovative city and won the Lee Kuan Yew World City Prize in 2016 for its sustainable urban design. This was done by connecting the poorest areas, often on the hills, to the city centre. The mayor, Sergio Fajardo, CFI.co | Capital Finance International

was elected on a campaign of connectivity and inclusivity — and he turned buzz words into action. People move to cities for work, and to support their families. They should be entitled to expect decent housing, green spaces and access to public transport. Governmental indifference and corruption stand in the way of that entitlement. i 43

> Lord Waverley

UK and Turkey: What Lies Ahead? Time to reinvigorate trading alliance between the countries.

urkey is an important trading partner for the UK — and a prime example of a relationship of strategic interest.

does not cover services, for example, which account for 19 percent of the UK’s trade with Turkey.

Turkey is a member of NATO, politically and strategically critical to Britain’s interests, with shared concerns of migration, regional instability, and defence.

We should be looking to blend the UK’s expertise in investment and finance with Turkey’s agricultural, manufacturing and textile industries. There must also be a focus on investment, subsidies, labour, sustainable development, and climate change.

Brexit has presented the UK with the opportunity to deepen pivotal relationships. Turkey commands influence beyond its frontiers, with Istanbul ranking alongside London, Dubai, Mumbai, Singapore or São Paulo as a regional hub. It is a central corridor of the Silk Road with ease-ofaccess to the Turkic countries of Central Asia and positive relation-building potential in the Middle East. This provides ideal access to EU, Middle Eastern, African, and central Asian markets — all of which feel more than comfortable partnering with Turkey. Having called on ministers and agencies, my visits to Turkey indicate a favourable view of the UK and Europe — so there’s everything to play for. The country has a population of 83 million, with a large pool of skilled and cost-competitive labour with production diversification potential. The UKTurkey trade agreement is ratified and reflects the importance that both sides place on the alliance.

CFI.co Columnist

Deeper economic co-operation can now be pursued, and this should not be regarded lightly in the negotiations to come. The UK ranks second only to Germany among Turkey’s trade partners. The country’s commercial partners see an entrepreneurial trading nation with half of its citizens aged under 30, and a high national standard of education and technical skills. Its economy has recently proved capable of economic growth rates of more than five percent. While our bilateral relationship is long-standing, the FTA is unfinished business — and signals the start of a new relationship, and more negotiation. Talks on a more comprehensive free trade deal next year have already begun. This will have the potential to develop new areas to strengthen commercial co-operation. The current agreement 44

An open, comprehensive free trade agreement will be an essential part of the important wider relationship. We already have the UK government committing to undertake public consultation on future proposals. These will come under close scrutiny in Westminster. Following the COP26 climate summit in Glasgow, focus on the transition to a green economy is centre-stage. The private sector can make a major contribution here. New agenda can promote sustainable strategies and the creation of new business and investment opportunities between the UK and Turkey. There has been significant progress in renewable energy infrastructure, product standards, and compatibility of industries to EU norms. The UK’s newly released export plan commits to safeguarding the environment, fostering highvalue jobs in a low-carbon economy, and fuelling technological innovations that can be exported around the world. A section entitled Modernising Trade presents a vision of “enhanced EDG that will allow for longer-term financing for clean growth sector exporters”. Growth for SMEs, however, depends on accessing export finance. UK industry can make an impact by providing world-leading solutions and products — free from European rules. Employment, innovation, and trade rebalancing require capital. The UK’s internal market should be allowed to grow without over-reliance on financing from banks. Failure to raise capital for green projects has just begun to be addressed. While it is essential that green bonds are raised, the mechanism as to how the money will find its way down for such projects is crucial. CFI.co | Capital Finance International

Winter 2021-2022 Issue

Opportunities and challenges exist with the restructuring of supply chains, and present new windows of opportunity for Turkey and the UK to strengthen common positions in global supply chains and trade corridors. We already share interconnected value chains and investments, common initiatives that can be taken to reduce the future shocks. Turkey is perfectly geographically positioned to realise bilateral co-operation — taking account of increased container transportation costs from China, and presenting real opportunities to closer, and more reliable, sources. Turkey has the resources and infrastructure to take part in new investment and production networks, depending on the transformation in global value chains. Developments in information and communication technologies, lower transport costs, and a decrease in tariff and non-tariff barriers to trade and investments lag the rise in global value chains. Coronavirus-driven contraction has weakened supply and demand, while creating fluctuations in financial markets. The IMF reports that global economy is expected to narrow 4.4 percent this year, with the UN Trade and Development Agency (UNCTAD) forecasting a 30 to 40 percent decrease in global FDI. These fault lines have impacted the functioning of global value chains, creating ruptures in the model of high interdependence between companies and their overseas suppliers. China’s role as a major supplier is being questioned, with producers in the US and the EU tending to bring suppliers to domestic (or nearby) regions and to increase localisation and diversification. Turkey has the potential to become one of the alternative suppliers. Turkey should be encouraged to provide the necessary economic and structural fundamentals to become a global centre of attraction. Removing uncertainties in the currency, interest, and inflation cycles that adversely affect economic stability would be a step in the right direction. This would be further stimulated with a sound monetary policy to achieve economic growth and safeguard jobs. Turkey remains a good bet for FDI, especially as a manufacturing base for the low-carbon products that we will need in coming years. i

CFI.co Columnist

ABOUT THE AUTHOR Lord (JD) Waverley Independent Member House of Lords Twitter: @LordWaverley LinkedIn: linkedin.com/in/ jdwaverley 45

> Jeffrey D Sachs:

Time to Overhaul the Global Financial System

t last month’s COP26 climate summit, hundreds of financial institutions declared that they would put trillions of dollars to work to finance solutions to climate change. Yet a major barrier stands in the way: The world’s financial system actually impedes the flow of finance to developing countries, creating a financial death trap for many. 46

Economic development depends on investments in three main kinds of capital: human capital (health and education), infrastructure (power, digital, transport, and urban), and businesses. Poorer countries have lower levels per person of each kind of capital, and therefore also have the potential to grow rapidly by investing in a balanced way across them. These days, that growth can and CFI.co | Capital Finance International

should be green and digital, avoiding the highpollution growth of the past. Global bond markets and banking systems should provide sufficient funds for the high-growth “catchup” phase of sustainable development, yet this doesn’t happen. The flow of funds from global bond markets and banks to developing countries remains

Winter 2021-2022 Issue

countries just because they are poor. Yet these perceived high risks are exaggerated, and often become a self-fulfilling prophecy. When a government floats bonds to finance public investments, it generally counts on the ability to refinance some or all of the bonds as they fall due, provided that the long-term trajectory of its debt relative to government revenues is acceptable. If the government suddenly finds itself unable to refinance the debts falling due, it likely will be pushed into default – not out of bad faith or because of long-term insolvency, but for lack of cash on hand. This is what happens to far too many developingcountry governments. International lenders (or rating agencies) come to believe, often for an arbitrary reason, that Country X has become uncreditworthy. This perception results in a “sudden stop” of new lending to the government. Without access to refinancing, the government is forced into a default, thus “justifying” the preceding fears. The government then usually turns to the International Monetary Fund for emergency financing. The restoration of the government’s global financial reputation typically takes years or even decades. Rich-country governments that borrow internationally in their own currencies do not face the same risk of a sudden stop, because their own central banks act as lenders of last resort. Lending to the United States government is considered safe in no small part because the Federal Reserve can buy Treasury bonds in the open market, ensuring in effect that the government can roll over debts falling due. The same is true for eurozone countries, assuming that the European Central Bank acts as the lender of last resort. When the ECB briefly failed to play that role in the immediate aftermath of the 2008 financial crisis, several eurozone countries (including Greece, Ireland, and Portugal) temporarily lost access to international capital markets. After that debacle – a near-death experience for the eurozone – the ECB stepped up its lender-of-last-resort function, engaged in quantitative easing through massive purchases of eurozone bonds, and thereby eased borrowing conditions for the affected countries. Rich countries thus generally borrow in their own currencies, at low cost, and with little risk of illiquidity, except at moments of exceptional policy mismanagement (such as by the US government in 2008, and by the ECB soon thereafter). Lowand lower-middle-income countries, by contrast, borrow in foreign currencies (mainly dollars and euros), pay exceptionally high interest rates, and suffer sudden stops. small, costly to the borrowers, and unstable. Developing-country borrowers pay interest charges that are often 5-10% higher per year than the borrowing costs paid by rich countries. Developing country borrowers as a group are regarded as high risk. The bond rating agencies assign lower ratings by mechanical formula to

For example, Ghana’s debt-to-GDP ratio (83.5%) is far lower than Greece’s (206.7%) or Portugal’s (130.8%), yet Moody’s rates the creditworthiness of Ghana’s government bonds at B3, several notches below those of Greece (Ba3) and Portugal (Baa2). Ghana pays around 9% on ten-year borrowing, whereas Greece and Portugal pay just 1.3% and 0.4%, respectively. CFI.co | Capital Finance International

The major credit-rating agencies (Fitch, Moody’s, and S&P Global) assign investment-grade ratings to most rich countries and to many upper-middleincome countries, but assign sub-investment-grade ratings to nearly all lower-middle-income countries and to all low-income countries. Moody’s, for example, currently assigns an investment grade to just two lower-middle-income countries (Indonesia and the Philippines). Trillions of dollars in pension, insurance, bank, and other investment funds are channeled by law, regulation, or internal practice away from sub-investment-grade securities. Once lost, an investment-grade sovereign rating is extremely hard to recover unless the government enjoys the backing of a major central bank. During the 2010s, 20 governments – including Barbados, Brazil, Greece, Tunisia, and Turkey – were downgraded to below-investment grade. Out of the five that have since recovered their investment-grade rating, four are in the EU (Hungary, Ireland, Portugal, and Slovenia), and none are in Latin America, Africa, or Asia (the fifth is Russia). An overhaul of the global financial system is therefore urgent and long overdue. Developing countries with good growth prospects and vital development needs should be able to borrow reliably on decent market terms. To this end, the G20 and the IMF should devise a new and improved credit-rating system that accounts for each country’s growth prospects and long-term debt sustainability. Banking regulations, such as those of the Bank for International Settlements, should then be revised according to the improved credit-rating system to facilitate more bank lending to developing countries. To help end the sudden stops, the G20 and the IMF should use their financial firepower to support a liquid secondary market in developing-country sovereign bonds. The Fed, ECB, and other key central banks should establish currency swap lines with central banks in low-income and lowermiddle-income countries. The World Bank and other development finance institutions also should greatly increase their grants and concessional loans to developing countries, especially the poorest. Last but not least, if rich countries and regions, including several US states, stopped sponsoring money laundering and tax havens, developing countries would have more revenues to fund investments in sustainable development. i ABOUT THE AUTHOR Jeffrey D Sachs, University Professor at Columbia University, is Director of the Center for Sustainable Development at Columbia University and President of the UN Sustainable Development Solutions Network. He has served as adviser to three UN Secretaries-General, and currently serves as an SDG Advocate under Secretary-General António Guterres. His books include The End of Poverty, Common Wealth, The Age of Sustainable Development, Building the New American Economy, A New Foreign Policy: Beyond American Exceptionalism, and, most recently, The Ages of Globalization. 47

> Tor Svensson, Chairman CFI.co:

Could a Crackdown on Rates Kill the Golden Goose? Let’s start with the good news: The world economy has never been larger. It is growing, too, and that trend is expected— by the IMF, among others — to continue. Billions of people have been lifted out of absolute poverty over the past few decades, especially in emerging economies. Think about all those burgeoning skyscraper cities.

lobal GDP has grown to $100tn. Go back a few years, to 2006, say, and it was half that. So, the global economy has doubled over the past 15 years. That has continued this year, growing 5.9 percent; it is expected (by the IMF, again) to grow 4.9 percent in 2022. This year, the US took the lead with 7.8 percent growth (outperforming global growth) with the EU following both the US and the world at five percent. The main stock markets are at all-time highs, with profits surging, exceeding analysts’ expectations. Unemployment is low, at 4.2 percent in the US and 6.7 percent in the EU. The US, with its large market, strong growth, low unemployment, innovation, and advanced capital markets, is the golden goose of the global economy. The pandemic hardly dented the continuous global economic growth train (Figure 1), and nor did the 2008 financial crisis. One reason for that is financial and fiscal support from governments in the developed world.

Figure 1: Global gross domestic product (GDP) at current prices from 1985 to 2026 (in billion U.S. dollars). Source: Statista 2021.

CFI.co Columnist

In 2008, the US nationalised (but avoided that emotive word) large parts of the financial services industry — think AIG, Fannie Mae and Freddie Mac — and bailed-out the banking system with more than $1tn in credit. The Fed has continued to boost market liquidity with unprecedented initiatives (and amounts), including quantitative easing (QE) and support for low interest rates — around zero in support of the golden goose economy. The Fed does more than just support the financial services industry. Other industry verticals (autos and cruise liners) are assisted by buying-up commercial paper, including junk bonds. The pandemic accelerated the printing of money. Over the past two years, the Fed has printed more money than it did in the century prior. The fiscal shortfall from budget deficits and trillion-dollar stimulus packages requires that the Fed buy-up the treasury paper (T-bills, T-notes and T-bonds) issued to finance the gap between the government spending and tax income. 48

Figure 2: United States Wages and Salaries Growth. Source: tradingeconomics.com | US Bureau of Economic Analysis

This is a simultaneous combination of exceptionally high levels of expansionary fiscal and monetary policy. Now to the bad news: Inflation As the US discovered, the outsourcing of manufacture has its price. The dependency on long supply lines and exposure to bottlenecks were laid bare when emerging economies lockeddown. CFI.co | Capital Finance International

When the US economy started to resurface, there was a sudden perception of shortage. Surging demand and limited supply meant pricing power to the businesses in sales. After the pandemic, with profits foregone, there was some catching up to do. The pursuit of profits drives price increases. The equity capital markets are delighted to report profit-margin expansion. Increased consolidation — many of “the little guys” were wiped out during the pandemic

Winter 2021-2022 Issue

The US dominates the international financial markets, and no player exists in a vacuum. The EU — the world’s second-largest economic unit — is interconnected, and follows suit as best it can, albeit at a slower pace and with less transparency. One major difference is that the US is the biggest debtor nation, while the EU is an international net creditor. The US is running a massive budget deficit, which in turn supports a massive trade deficit. On the capital balance this creates a massive demand for assets such as T-bills and real estate — and helps to explain the surging US equity market as foreign demand piles-up for technology growth stocks. Some inflation, and expectations, can be good for equities. Prices and sales go up; profit margins improve. But inflation is poison for the bond market. And a declining bond market can spill back into the stock market. Figure 3: US Annual Inflation Rates.

Source: US Labor Department. Note: *For 2021, the most recent monthly inflation data (12-month based) is displayed in the chart.

"The environmental impact of global warming also plays a part. Droughts in the US are causing inflation on essentials such as wheat and corn. In Latin America, droughts are hitting coffee production. Check the bill for your Starbucks latte." — and strong market position (think Pfizer and Gillette) can limit competition and cause monopolistic and oligopolistic pricing power. That translates into inflation for goods and services. The environmental impact of global warming also plays a part. Droughts in the US are causing inflation on essentials such as wheat and corn. In Latin America, droughts are hitting coffee production. Check the bill for your Starbucks latte.

But that can cause the economy to stall, kill the bond market, and raise the budget deficit because of higher interest expenses. In addition to inflation at the supermarket checkout, there is also wage and asset inflation. Wages in the US went up 4.8 percent in November

The Fed’s money-printing has inflated asset prices, in particular equity and real estate. Inflation is even found in alternative assets, such fine art, vintage cars, wines, and precious stones. The asset-rich have become even richer, and this has added to the burden of inequality. The extreme asset-price inflation over the past 12 years has the characteristics of a bubble.

Financing government debt in the US and Europe (particularly Italy and Spain) will become unsustainable at certain levels. Elevated government bond yields will cause capital losses in the banking system’s holdings that could easily wipe out the Tier 1 capital in many banks. Anchoring inflation expectations is no small feat for the central banks as consumers experience rising prices. With US elections coming up, the Fed isn’t changing policy. It appears resigned to the fact that inflation was not transitory, after all. The upcoming crackdown on inflation may well burst the bubble — and kill the golden goose. i ABOUT THE AUTHOR Tor Svensson is the Founder-Chairman of Capital Finance International (CFI.co), which supports the UN SDGs. Tor is senior adviser to a UN recognised NGO.

The house price index in the US has risen a whopping 20 percent over the past year. Renters and first-time buyers have a hard time seeing the low inflation numbers measured by the official Consumer Price Index (CPI), which is supposed to capture residential living costs (Figure 2).

CFI.co Columnist

Psychology — remember toilet paper shortages? — and expectations are important. Consumers are smart, but not always rational. Part of the Fed’s job is to keep inflation expectations in check. One way to achieve that is to underreport actual inflation. Another is to squeeze it out by raising interest rates.

2021, as measured by the total private average hourly earnings of all employees. Salary growth has been amazingly consistent for years (Figure 2). If the salary and CPI data are correct, US workers have enjoyed a substantial real-wage increase for several years.

Higher bond yields are an investment substitute for equities. Corporates have long issued commercial paper at low interest rates. Bond buyers have accepted negative real-interest rates. What happens to businesses that must suddenly pay interest reflecting new inflation expectations, plus credit spreads?

Inflation in the US was 6.2 percent for the 12 months ending November 2021 (Figure 3). This is up dramatically compared to previous years — in some of which the Fed was fearing deflation — and boosting the economy just short of the target of two percent inflation per annum. CFI.co | Capital Finance International

> OECD:

Plugging the SDG Financing Gap By Haje Schütte and Ibu Raden Siliwanti. Contributing authors: Felicia Rodriguez, Wiwien Apriliani (Indonesian G20 DWG Team), Rolf Schwarz, Tomas Hos and Paul Horrocks

Ensuring Blended Finance can mobilise private finance, particularly in the Least Developed Countries and towardsFigure Social Sectors, will require a systemic and 1: Amounts mobilised from the private sector: main trends USD billion transformational approach.

ven before the arrival of COVID-19, the SDG financing gap was significant. The private sector is an important contributor to SDG delivery and has increasingly been mobilised with the support of blended finance approaches. Blended finance has been defined as the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries. In 2018-19, official development finance mobilised nearly $50bn of private sector finance for development. However, this amount is not enough. In particular, in countries where development finance flows, especially ODA, become a critical source to finance social services, the current share falls short from commitments. The impacts of the COVID-19 pandemic on developing countries are increasing financing needs while reducing available resources. Without swift global action, years of progress made towards SDG targets could be undone. Blended finance has an important role in unlocking and channelling commercial finance towards sustainable development. Commercial capital is key as there is a lot available and channelling just one percent of total global financial assets (estimated at $382tn), could bridge the existing SDG financing gap, at $2.5tn annually. Essentially, blended finance allows for financial returns to investors while addressing investment barriers by improving the risk-return profile of investments. Blended finance operates as a market-building instrument that provides a bridge from reliance on development financing towards commercial finance, critical to ensuring SDG compliant sectors and markets get adequate financing for them to develop.

Historical trend 5.5 7.8

15.3

19.4

22.7

27.7

35.4

40.1

By financial instrument, 2018-19 average 4.8

49.0 46.4

10%

17.1

INSTITUTIO INVESTING SDGS

14.0

35%

29%

2.0

6.5

2012 2013 2014 2015 2016 2017 2018 2019

Top sectors, 2018-19 average Banking and business services 11.2

Industry, mining and construction 3.6

Agriculture, forestry and fishing

1.9

Water and sanitation

1.5

UMICs Other LICs

8.3

Transport and storage

By income group, 2018-19 average 16.3

Energy

4.0

13%

LMICs LDCs

18.6

16.1

0.1

A Joint4.6Discussion Paper from M (12%)

Meggin Thwing Eastman, Paul Horroc By region, 2018-19 average Europe USD 7.6 billion (16%)

December 2018

Asia and Oceania USD 15.0 billion 31%

Latin America and the Caribbean USD 9.2 billion (19%)

Unallocated or unspecified USD 3.1 billion (6%) Guarantees

Syndicated loans

Africa USD 13.8 billion (28%) Shares in CIVs

Direct investment in companies and SPVs

Credit lines

Simple co-financing

Figure 1: Amounts mobilised from the private sector - main trends (USD billion). Note: The percentage of private finance mobilised for

BLENDED FINANCE NEEDS TO GROW AND BE REDIRECTED TO THE COUNTRIES AND SECTORS MOST IN NEED Despite the volumes mobilised the direction of the financing has been skewed towards middle-income countries and commercial sectors (like banking, finance, and energy). While Less Developed Countries (LDCs) are disproportionately affected by the COVID-19 crisis, they continue to receive the lowest share (despite a modest increase in overall volume) of private finance mobilised by official development finance interventions. 50

Source: (2021). the LDCs isOECD calculated as share of country-allocable private mobilisation. Source: OECD (2021). Note: The percentage of private finance mobilised for the LDCs is calculated as share of countryallocable private mobilisation.

From a very low base, the mobilisation trends are positive with private finance mobilised for LDCs and other LICs increasing from $3.8bn in 2018 to $4.6bn in 2019. The share of LDCs and other LICs private finance mobilised increased from 7.5 percent to 12 percent as shown in Figure 1. However, the financing remains far below what is needed, as the SDGs are often the widest in the LDCs. This is despite the fact that the LDCs are home to over one billion people, about 14% of the world population across CFI.co | Capital Finance International

46 countries. Furthermore, the vast majority of financial resources mobilised, $16.3bn, targeted the banking and business services with only $1.5bn mobilised in the water and sanitation sector. Building back better from the pandemic requires a multilateral and multifaceted response that advances a transformational and systemic approach. It needs to include innovative financial

Figure 2: Private finance mobilised in the LDCs: main sectors and recipients, 2018-19 average USD billion By sector

493 479

389 380 358

Guarantees Shares in CIVs Credit lines

Cambodia

145 132

Senegal

178

Mozambique

Benin

Myanmar

Mauritania

Angola

232

Bangladesh

Agriculture, forestry and construction 21%

Water supply and & sanitation 10% Banking and financial services 15%

592

Guinea

Other sectors 10% Communications 4% Agriculture, forestry and fishing 6% Transport and USD storage 4.6 bn 7%

Uganda

Energy 27%

Top LDC recipients

Syndicated loans Direct investment (…) Simple co-financing

Figure 2: Private finance mobilised in the LDCs - main sectors and recipients, 2018-19 average $billions. Source: OECD (2021).

Source: OECD (2021).

tools and risk-mitigation instruments, that link that to policy actions, like coordinated engagement between the private sector, local governments, and multilateral development banks (MDBs) and development finance institutions (DFIs). Appropriate coordination and the effective use of blended finance mechanisms could ensure that funds are directed towards projects that are aligned with the SDGs, particularly those in the social sector that are often excluded by private investors or cast aside in favour of opportunities that are more commercial. As the recent OECD– UNCDF Report highlighted, Blended Finance has the potential, among other purposes, to leverage digital technologies; finance small and mediumsized enterprises in the “missing middle” (gap); and address market failures that prevent the LDCs from financing their development needs and reaching the most vulnerable. In response to the economic and financial reverberations, the short-term approach has been shoring up development finance portfolios. The general risk aversion of DFIs makes it particularly challenging for them to attract even more riskaverse commercial investors into LDCs and exploring new investable opportunities in the near term as long as the pandemic is ongoing. In the medium- to long-term, blended finance can play a critical role in the COVID-19 recovery by stimulating economic recovery and increasing resilience to future shocks, both financial and social. Meeting the significant sustainable investment needs in the LDCs post-COVID-19 will require a strategic assessment of how blended finance can be deployed at scale. Overall, this could mean moving away from a focus on individual transactions towards the greater use of blended finance funds and facilities. A portfolio approach could also help to create larger deals, to increase diversification (in turn, reducing risks), and make assessment and approval processes more costeffective. DFIs and MDBs may need to revise their risk–return threshold in order that greater risks and, ultimately, volumes of blended finance can be directed to the LDCs and social sectors. In order for funds to reach where they are needed most, there must be coordination between

governments and other relevant stakeholders, in particular DFIs, in the LDCs who can help direct funds to the sectors most in need. Especially in social sectors, where investors tend to be risk-averse, the role of DFIs can help to build investors’ confidence and mitigate or reduce the risk. Understanding local capacity for deployment and ensuring a local perspective is crucial to the success of the investment and project’s impact. Therefore, developing countries themselves must be empowered to have a stronger role in diverting blended finance to social sectors and the LDCs. Social projects are likely to be closer to government actors, require more consultation and greater understanding of social needs on the ground. Moreover, for projects to receive local currency financing, local ownership will be critical. Local pension funds and other local sources of finance should invest in these social sectors, which are often critical for delivering the SDGs particularly in the context of the LDCs. Local DFIs and other financial actors in the LDCs can help in developing the blended financing structures necessary to deliver social projects. To ensure the transition towards the more effective use of Blended Finance, a systemic and transformational approach is needed. Without significant change, the required volumes of Blended Finance will not be achieved, and the private finance mobilised will not be directed to the LDCs and social sectors. THE ROLE OF THE G20 The G20 is well positioned to advance global efforts towards a more equitable and sustainable recovery from the economic shocks of the pandemic. The group has committed, under the Financing for Sustainable Development Framework endorsed in 2020 under the Saudi Arabian Presidency, to mobilising all sources of finance, including blended and private sector financing towards the alignment and impact of the SDGs. As part of the G20 Development Working Group (DWG) work under the Italian G20 Presidency in 2021, G20 members have further advanced awareness about innovative finance instruments. The Presidency produced a stock take report on how to scale up green, social and sustainability bonds to finance climate related activities and SDG-related projects in developing countries. In parallel, the G20 CFI.co | Capital Finance International

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Sustainable Finance Working Group has worked on reporting and regulations for private finance mobilised towards climate finance and could look at GSS bonds in the future. Greater synergies could be found between these two areas of work, as blended finance mechanisms are used in the issuance of green and other thematic bonds, and lead to the mobilisation of new private finance. Importantly, blended finance can play a key role in supporting the LDCs to mobilise resources for the medium to long-term recovery. For blended finance to be an effective instrument for the COVID-19 recovery, the wide range of actors involved (donors, DFIs, multilateral development banks, impact and commercial investors, local financial institutions, national and local governments, etc.) should focus on supporting the institutional capacity of countries and building pipeline projects that linked to national development priorities. This includes job creation, SME-development, an emphasis on gender equality, support health systems, and target sectors that are critical for inclusive, resilient and sustainable development. In summary, four key areas for further work are: 1. Use blended finance strategically to develop sustainable domestic market systems and build the capacity of local capital market actors. 2. Design innovative structures that target the hardest to reach and most underserved areas 3. Improve impact management and measurement, and promote transparency 4. Bring blended finance to (large) scale through systemic and transformational approaches Indonesia assumed the G20 Presidency on 1 December 2021, and will hold the G20 presidency throughout 2022. Indonesia has already confirmed its plans to develop G20 Principles on Scaling-up Private and Blended Finance in the G20 DWG. The OECD will support Indonesia in producing practical and actionable guidance for developing countries on how to scale up the use of private and blended finance, building on existing work. This has the potential to address some of the coordination barriers and lack of transparency around deals that have marred blended finance mechanisms in the past. The OECD and Indonesia will work in tandem to identify gaps and challenges faced by developing countries and the LDCs, and identify what capacity would be needed to allow blended finance to support the local economy and local capital markets. i References available online. ABOUT THE AUTHORS Haje Schütte is Senior Counsellor & Head of Financing for Sustainable Development Division of the OECD Development Co-operation Directorate. His work focuses on how to address the dual challenges at the core of the 2030 Agenda, i.e. mobilising unprecedented volumes of resources, and leaving no-one behind. Ibu Raden Siliwanti is the Director for Multilateral Funding (Cooperation Bappenas/Indonesian, G20 DWG Team, Ministry of National Development Planning/Bappenas). 51

> Moving

Forward with What Matters, and Finding Comfort in Consumerism By Mads Pedersen Managing Partner & CIO of Human Edge

n a world of uncertainty, it’s reassuring to have a few reliable forces to fall back on; one such is the willingness of the US consumer to spend. Especially — but not exclusively — when they have money.

And now they do. The supercharged recovery and its super-easy monetary policy have led to a surge in US consumer income and wealth across housing and equities. US retail sales are up 23 percent compared to pre-Covid figures. US equity markets have returned more than 75 percent over the past three years (see Figure 3) and as shown in Figure 1, US housing and the consumer in general are supported by mortgage rates close to a 10-year low. It is difficult to see the US consumer slowing down sharply, even if the current or the next variant of coronavirus should eventually lead to a lockdown. Consumers have by now got used to the lifestyle of “pandemic-independent on-line spending”. With growth driven by the demand side of an economy, this is important, particularly now that European and Asian politicians have again started tinkering with the idea of closing borders and locking-down some citizens. As reflected in the recent relative and absolute pricing of emerging market and European equities, these political decisions are not good for local equity markets. It is of primary importance that the two main drivers of the global recovery, the Chinese and the US economies, keep humming. For all their differences, we think Biden and Xi understand

"Consumers have by now got used to the lifestyle of 'pandemic-independent online spending'." that it is also in their own interest — and will now be working towards this goal. With an ongoing pandemic and a record rally in risky assets, there several reasons for markets to be nervous, and there is always the risk that this nervousness will lead to a self-reinforcing market panic. Such a panic has the potential to take the US and the global economy down with it. One would think that politicians and policy makers would communicate clearly and carefully. Powell still found it appropriate to state that coronavirus leads to future uncertainty with regards to the up- and downsides of inflation. This seems an excuse for not meeting his target. This was done at a market-rattling session in the US Congress in November, where he stated that inflation is not transitory — and that he would be in favour of the FOMC discussing wrapping-up the asset purchase programme a few months earlier. This kind of open-ended statement from the Fed Chair is too laissez-faire for the liking of many. The Fed’s credibility would have been better served by describing the whole situation as it is expected to play out. If equities dive and Covid leads to global panic, the Fed will ease. If there is no market panic, there will be further, and clear, information on the changes in tapering.

Figure 1: US Mortgage rates remain close to a ten-year low and will continue to support consumption.

CFI.co | Capital Finance International

It would then leave it to the FOMC, as the policysetting unit, to decide whether it thinks inflation is transitory. Maybe the result will be the same, and maybe the Fed will hike twice next year, as it is currently priced in the market. Only time will tell. US retail sales are among the most important drivers of the global economy and market and feed directly into the algorithms. This part is still as strong as it can be. Together with the continued strength of profit-recovery, this is the primary reasons why our algorithms are still holding up — and why we remain fully invested in equities. These strong profits also serve as an explanation why US equities trade at a lower P/E than at the beginning of the year. Along with an accommodating monetary policy, it is the reason why defaults on high-yield bonds are not expected to move up significantly. We are thus maintaining our long-held equity and high-yield positions, with their US biases. For those who have not already established a position in global growth and technology stocks, a good option is to buy into this via sustainable investing. EXPOSURE AND RISK There is comfort for some in buying on a dip or a relative under-performance — and emerging market or European (EMU) equities might be considered. This is not our approach. There is nothing in the current cyclical situation or in the political development or environment in Europe which is encouraging us to buy either EMU or UK equities, despite their under-performance relative to global and US peers.

on Covid, but we note that on this point he is more economically friendly and market supportive. He has made it clear that for the time being there will be no US lockdown to counter the new Covid variant.Winter One possible 2021-2022 Issue Figure 2: Global equity markets return over recent 3-years

Figure 2: Global equity markets return over recent 3-years.

The EMU index has regained its high correlation to emerging markets and Chinese equities. This is no surprise given the role Asia and China play in the demand for EMU companies, from LVMH, Hermes and Kirin, to Daimler and BMW. Although it is not surprising, it is not a very welcome correlation.

technological upgrade of the global economy in two main ways.

The lack of focus on the important topics in Europe is illustrated by the fact that France and the UK, both claiming global importance, spend a considerable part of their government’s time quarrelling over fishing rights.

But the one thing everyone can agree on — from Tokyo, through Beijing, to Berlin, Paris, London, and Washington — is that it is easier to push through the fiscal policy response within a “Build Back Better” political framework. With Green Transition terminologies, these things are likely to be the core of a fiscal response if the next round of the pandemic really strikes.

This is a topic which has been with us for the better part of this writer’s life and, independently of its importance for some people, it seems to reflect the increase in populism. Not exactly something that is needed in the face of increased Covid cases, and not something that persuades us to buy more of the under-performing EMU or UK equities. Instead, we primarily hold on to our US equity positions. The key reason continues to be that the US is more of a growth- and transition-friendly country than any in Europe. It is also friendlier towards capitalism than either Europe or Asia. We do not know the precise reasons for Biden’s latest comments on Covid, but we note that on this point he is more economically friendly and market supportive. He has made it clear that there will be no immediate US lockdown to counter the new variant. One possible reason is that another lockdown in the US would play into the hands of the Republicans and Trump, which is obviously not in the interest of the Biden administration ahead of next year’s midterm elections. Whatever the reason for Biden's politics, and whatever the view one has on the virus, vaccinations, and quarantines, we think that these recurring mutations will support the case for a

The direct effect will be that more businesses will see incentives to improve their ability to operate and sell via digital networks.

The focus on, and funding of, the green transition should be supportive for what we in broad terms call sustainable investments (including ESG and SRI). And this has apparently been the case. Towards the end of 2020, we introduced the upgraded version of our investment process for Sustainable Investments and the associated Sustainability Matrix. Since then, there has been some controversy over such investments. As more companies have made claims to be offering sustainable solutions, authorities have started looking at the strategies behind them. At least one major fund management firm has had an outright scandal, a crisis of confidence, and an associated severe correction in its equity price. At the same time, a number of regulators have guided the topic, and both governments and the ECB have claimed to be providing funding. This has now reached a point where building what used to be considered run-of-the-mill infrastructure, such as gas-fired power plants, are sometimes categorised as “green investments” with the right terminology. While these investments are needed, it would suit public institutions to set the bar higher — and the EU commission to secure the forthcoming rules CFI.co | Capital Finance International

and regulations for sustainable investment. Still, this should not detract from the fact that ESG and SRI investment have out-performed recently and are still very much needed. A transition to a less polluting version of the global economy is an imperative, and there are strong moral arguments for a fairer and a more functional version of the global economy. If you believe in education and hard work, there is a string human and economic potential broadening the opportunities to level the business playing field. In the process, we need increasing transparency, accountability and governance of resources. That is the SG in ESG and Socially Responsible in SRI. Direct-impact investments remain an interesting area in pursuit of these goals, but these investments are best suited for private markets. Liquid markets are perfectly suited for ESG and SRI investing This can be both in the form of exclusion (not doing as much damage as before) and in terms of ESG leadership across industries and sectors. i ABOUT HUMAN EDGE The Swiss investment management firm’s aspiration is to improve the experience of investing by capturing the upside of markets while systematically managing the downside. ABOUT THE AUTHOR Prior to Human Edge, Mads was Group Managing Director at UBS, where he headed the Global Asset Allocation team and developed new risk and asset management methodologies for the $100+ billion mandate business and advisory book out of $2 trillion. Prior to joining UBS, Mads was Head of Global Asset Allocation at Barclays and Head of Macro & Asset Allocation at Danske Bank Asset Management. The CEO, CIO and co-founder continues to pursue his entrepreneurial vision of providing superior investment solutions. 53

> Permanent

Output Losses at the Pandemic’s Door By Otaviano Canuto

In the World Economic Outlook published in October, the International Monetary Fund (IMF) lowered its forecast for global economic growth to 5.9 percent for the year, but maintained a prediction of 4.9 percent for 2022.

t also emphasised the divergence in the pace and extent of economic recovery in different countries.

Two factors in this divergence are the pace and extent of vaccination programmes in different countries: the Great Vaccination Divide. The report shows a positive correlation between vaccination rates and upward revisions in country growth projections since April. The second factor corresponds with national differences in the fiscal space available for recovery support via public policies. The IMF referred to “lasting imprints” of divergent recoveries, with emerging and developing economies suffering deeper medium-term damage. Most countries are now forecast to have lower GDP in 2024 than projected in January 2020. The exceptions are the US and emerging countries in Eastern Europe, for which higher GDP is expected (Figure 1).

Figure 1: Output losses relative to pre-pandemic trend, 2024. Note: EMs = emerging market economies; LAC = Latin America & the

Caribbean; SSA = Sub-Saharan Africa; EMDEs = emerging market and developing economies; ME&CA = Middle East & Central Asia; CHN = China; AEs = advanced economies. Source: IMF (2021), World Economic Outlook, October.

The divergence in economic recoveries is also shown in labour markets and in the levels of utilisation of productive capacity. The IMF projects higher job losses relative to prepandemic trends through 2024 in emerging and developing economies. It is necessary to distinguish the permanent output loss and any consequences of the pandemic for future GDP trajectories. Comparing projections with actual figures shows a definite loss. Even if one hypothetically supposes an exact return of the economy to its starting point, with a return to the growth rate prior to the pandemic, all the GDP not generated during the crisis would be permanently lost. This is different from crises associated with industrial or financial cycles because, in those cases, some period of above-normal or trend growth will have occurred previously. In the pandemic there has been only the loss side. There is also a high probability that “scarring” prevents a complete return to prior GDP levels. In the case of a recovery in the form of an “inverted square root” (Figure 2 – see Canuto, 2020), the permanent loss of GDP would include the differences between GDP levels projected before and after, even assuming a return to a potential growth rate. 54

Figure 2: Recovery in inverted square root form.

Long-term unemployment leads to skills erosion. The quality and quantity of hours in human capital formation is being negatively impacted. The pandemic will leave other scars, as discussed by Diggle and Bartholomew (2021). Financial support from the public sector has made it possible for “zombie” companies to survive — firms incapable of generating returns or meeting debt services in the New Normal. Public support prevented the demise of otherwise viable companies, but the side-effect of maintaining zombies is an impediment to the improved reallocation of resources. Strong negative shocks also have persistent impacts on the beliefs and moods of companies CFI.co | Capital Finance International

and businesses, leading them to greater levels of risk aversion in financial and budgetary decisions. It is not by chance that, historically, savings go up during pandemics. On the other hand, Covid has had a positive productivity shock in sectors where there was some business reluctance to accelerate digitalisation and automation, as revealed recent surveys of corporate managers. Certainly, the challenges in terms of the need to retrain the workforce have increased. The WEO report included an upgrade to the medium-term scenario for the US economy, which may be taken as including a favourable assessment of the effects of the Biden

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administration's fiscal programme. The feasibility of political approval was certainly driven by the crisis. This could arguably be included among the positive shocks. Scars, of varying depth in different countries, will limit the extent to which the recovery will bring economies closer to their pre-pandemic trajectories. The shorter the recovery, the greater the permanent loss of GDP arising from differences between projected GDP before and after. This is bad news for emerging and developing economies that, according to the IMF report, are on the downside of the “divergence of recoveries”. What about the growth trends after the pandemic, with scarring effects taken into account? Is there

any reason to expect growth to change up or down as a lasting consequence of the pandemic? Here, there is a danger that national economic policies will focus on risk prevention and lead to a retreat from the productive integration across borders that marked globalisation in the previous decades. This was already subject to pressure before the pandemic. The primacy of efficiency and cost minimisation could give way to security against the risk of shocks and supply chain resilience. The supply disruptions that have marked the recovery thus far could be used as a justification. It remains to be seen how far the demarcation lines of what will be considered “strategic” will be extended. But moving towards closing of CFI.co | Capital Finance International

markets tends to negatively affect the future evolution of productivity. And one cannot lose sight of the result that accompanied globalisation, in terms of global poverty reduction and more equality between national per-capita incomes. One must also consider as a possible positive consequence of the pandemic the strengthening — apparently the case in many countries — of domestic political support for the pursuit of sustainable and inclusive growth. For now, however, there are permanent losses of GDP. i

This story first appeared at Policy Centre for the New South. 55

> Winter 2021 Special

This World Wouldn't be Nothing Without a Woman or a Girl…

ncreased gender equality is balancing entrepreneurial make-up. While a quick glance around will tell you that many businesses are still male-run, female leadership is becoming the norm — across industries, sectors, and disciplines. This is important: female entrepreneurship may actually improve a national economy, according to experts, and a change in hierarchical structure has brought more of women into the fold. Working without a “boss” leads to equality, and empowerment — for both sexes. According to the World Bank’s Gender Data Portal, around a third of businesses worldwide are female-run. That share is higher still in specific regions. In East African and Pacific nations, Latin America and the Caribbean, it is closer to a 50-50 split. It’s encouraging to note that the proportion of women in top leadership positions is greater at newly registered firms. The biggest gain has been recorded in Nigeria, where start-ups are 17 percent more likely to be owned by women (compared with all existing firms). In all regions other than North America, however, women are less likely to have access to a bank account or services that encourage entrepreneurship. In contrast, only a quarter of American entrepreneurs are women. Full financial inclusion is a problem for women in Sub-Saharan Africa, and the disparity is at its worst in the MENA region, where 60 percent of women are unbanked.

In this series of features, CFI.co looks at six successful female entrepreneurs from around the world who have taken charge of their lives. They are at the top of their game and competing at the highest level. Their stories will provide inspiration to all entrepreneurs and shatter any outdated stereotypes. Dolly Parton — net worth $600m — is anything but the dumb blonde she sang about way back in 1967. She has taken control of her career, leveraged it, and invested wisely. Nigerian billionaire Folorunsho Alakija was introduced to the ways of the entrepreneur at age seven — and has never looked back. With annual earnings of some $625m, Denise Coates re-mortgaged her way out of the dotcom bubble and set up Bet365 — initially working out of a portacabin in a car park. Jenny Just, the only girl in a family of five children, cut her chops in the pits of the Chicago Options Exchange. Her entrepreneurial journey has focused on harnessing technology to make financial processes easier, more efficient, and less deafening. Thai Lee, born in Bangkok, picked up an MBA from Harvard, got some experience with major corporates, and went on to create IT giant SHI International — which now boasts $11.1bn in sales and has Boeing and AT&T on its customer roster. And we also meet Colombian actress and America’s Got Talent judge Sofia Vergara who founded Latin World Entertainment in 1994. Her business interests now straddle showbiz, furniture, fragrances, and apparel. i

CFI.co | Capital Finance International

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CFI.co | Capital Finance International

> DOLLY PARTON AMERICAN SINGER-SONGWRITER ‘Queen of Country’ Has a Magical Career Spanning Half a Century Dolly Parton has established a thriving, and inspiring, music business empire. She grew up poor in the Appalachian Mountains of rural Tennessee; she’s now worth an estimated $600m. She sang in church and performed on local television as a child. She debuted at the Grand Ole Opry in Nashville as a teen, and moved to the state capital immediately after her high school graduation. Along with her mentor and uncle, Bill Owens, Parton signed with her first record label in 1965. The pair soon struck out and founded their own publishing company. This gave the-then 20-yearold a stake in the business — and control over her publishing rights. Parton has released 25 chart-topping hits and nearly 100 albums and songs that have ended up in the country music top 10. She has retained the publishing rights for most of her catalogue, from her debut album (Hello, I’m Dolly) through 2020’s holiday album (A Holly Dolly Christmas). “My songs are like my children,” Parton says. “I expect them to support me when I'm old.” Some songs have supported her better than others. Parton wrote and recorded I Will Always Love You in the ‘70s as a farewell to her longtime business partner Porter Wagoner. Elvis Presley wanted to cover it, but insisted on half the publishing rights. Parton gave that a hard pass, but later allowed Whitney Houston to cover the track for the movie The Bodyguard. Royalties brought in $10m in the 1990s alone. Parton counts earnings from a few silver-screen successes, including 1980s classics Nine to Five and Steel Magnolias. She put some of that money into the Dollywood theme park, a 150-acre property in Pigeon Forge, Tennessee, which attracts 4.5 million visitors annually and employs 3,000 people. Parton, now 75, has a fresh following of millennials on her social media channels — and new music, television and film projects. She collaborated with Netflix screenwriters in the film adaptation of Julie Murphy’s novel Dumplin’, inspired by the “Queen of Country” herself. Parton was thrilled with collaboration, effectively becoming a “fairy godmother to the movie”. She let the producers use six previously released songs (including her smash hit Jolene) and added six new ones to the soundtrack. A new Netflix series, Dolly Parton's Heartstrings, premiered in 2019, featuring one-hour episodes inspired by her songs. Her 2020 Christmas album hit number one on Billboard’s country and holiday album charts. 58

Parton has earned her Queen of Country title — but she could equally be known as the queen of kindness. Her non-profit, the Dollywood Foundation, has donated millions to support education around the world since its launch in the late 1980s. Parton is particularly proud of the foundation’s Imagination Library programme, where families can sign up their children to receive a free book each month until their fifth birthday. The programme pays tribute to her illiterate father, Robert Lee Parton, and was founded as a community outreach project in 1995. It now serves over a million children worldwide. Each year, the foundation also funds five $15,000 CFI.co | Capital Finance International

scholarships for university-bound graduates from each of Sevier County’s secondary schools. In 2016, it raised $9m to support residents affected by forest fires. Parton raised another million for an Appalachian hospital and cancer centre in 2007, and she has provided funding for women’s healthcare services since 2010. She donated $1m to the children’s hospital at Vanderbilt University seven years later. Most recently, Parton donated yet another million to Vanderbilt University Medical Centre to support Covid-19 research, which played a vital role in the development of the Moderna vaccine — now affectionately known as the “Dolly vaccine” in some circles.

Winter 2021-2022 Issue

> JENNY JUST US ENTREPRENEUR AND FINTECH DISRUPTOR The Deck Should Be Stacked — with Tech US entrepreneur and fintech disruptor Jenny Just believes that girls should be taught to play poker. It’s a game that demonstrates strategy and risk-taking — two elements vital for business success. Growing up as a middle child surrounded by four brothers, Just quickly learned to stand up for herself. “I was always the odd one out,” she says. “I had to figure things out for myself.” She left the University of Michigan in her early 20s with a business degree and plunged straight into the old-school trading pits of the Chicago Options Exchange. There were so few women on the floor that there wasn’t even a female bathroom. “I literally didn’t know what my job was on my first day,” she says. “I put on my jacket and walked on to the floor. There’s nothing like learning in that type of environment. You’d have to watch old movies to see what it was like then. It was people screaming and yelling. The movies get it right. It was like a crazy sporting event.” Today, according to Forbes’ estimate, Just is worth a cool $1.5bn. She is recognised as a pioneer in finance and options trading, and as a champion of business-changing technology. In a career spanning more than 20 years she and husband Matt Hulsizer — who she met in that frenetic Chicago trading environment — have launched and acquired several organisations. They have built industry-leading companies, including PEAK6 Capital Management, Apex Fintech Solutions, and OptionsHouse. They have acquired and transformed a raft of other financial businesses, building a reputation for open collaboration, creating environments where ideas are shared and pressure-tested, and fostering a culture which believes new possibilities are always right in front of you. Jenny Just learned her craft in finance with the options traders O’Connor & Associates, but her entrepreneurial instincts drew her to explore other opportunities. She and Hulsizer developed a vision. They would embrace technology and use it to simplify processes and improve performance.

Just realised that the future lay in bringing together those who understood the fundamentals of business and those who understood the tech. Today’s technologies are accessible, she says, and can support faster growth than was historically possible.

They took risks and made some mistakes in the early days. “We failed quickly and failed small,” she admits. “We were a little too big for our shoes.” But she quickly earned a reputation for identifying problems which others had overlooked… and for finding solutions. It was in large part thanks to using available technology in smarter ways.

Business advantage comes from understanding the tech, she believes, and those who “learn the code” will lose the fear traditionally associated with it. “It’s about being able to talk the language of tech,” she says. “There’s a lot of low-hanging fruit. Business school kids must be given the opportunity to understand all the tech that goes along with it.” CFI.co | Capital Finance International

The financial sector, she says, needs to work harder to keep up. Customers’ expectations are high, and businesses that lag behind the tech curve may not survive. Jenny Just champions women in the traditionally male-dominated finance world. Her businesses are helping to pave the way for female talent in the sector, creating internships where women can learn to trade and sharpen their programming skills. And pick up a poker skill, of course: it doesn’t matter what hand you’re dealt — it’s how you play it. 59

> FOLORUNSHO ALAKIJA NIGERIAN BUSINESSWOMAN Businesswoman, Billionaire, Philanthropist: the Success Story of a Nigerian Powerhouse

The life story of oil baroness, fashion supremo and philanthropist Folorunsho Alakija is one of remarkable vision and resilience. Often dubbed Nigeria’s richest woman, Alakija is the vice-chair of Famfa Oil. Her net worth was estimated at $1bn by Forbes in 2020, placing her 20th on the list of Africa’s billionaires. In 2014 she was named the richest woman of African descent — a title previously held by Oprah Winfrey — and she is widely regarded as one of the most powerful women in Africa. Her name may be hard to remember, but Folorunsho Alakija’s ability to establish businesses and overcome adversity are impossible to forget — as is her devotion to Christianity. “Never mind those who tell you to leave God out of your business,” she says. “Your business is God’s business.” Alakija’s faith is remarkable when you consider she was born in 1951 in Ikorodu, Lagos, into the upper-middle-class Ogbara family — and raised in a polygamous Muslim home where her father had eight wives and 52 children. The Ogbaras were an entrepreneurial family involved in the textile industry. Although the seven-year-old Alakija was sent to Wales to complete her primary education, whenever she came home to Nigeria she would spend time in her mother’s fashion shop — where her love for fashion and fabrics was born. 60

She and her siblings absorbed basic business principles and a good work ethic; they were taught to open shops early, handle customers well, and manage finances with care. After completing her secondary school education in Nigeria, Alakija wanted to study law. Like most men of his generation, Alakija’s father, LA Ogbara, was more focused on the education of his sons than his daughters. She had to find her own way to financial independence. She worked as a secretary for a series of banking institutions, but soon tired of being passed over for promotion. Alakija quit — and headed to London to study fashion promotion. In 1986, she returned to Nigeria to set up her own fashion business, Supreme Stitches. She won a design competition and became an overnight sensation — then went on to make her fortune designing and making high-end clothes for Nigeria’s rich and famous. Supreme Stitches became an influential brand and a national franchise, changing its name in 2022 to Rose of Sharon House of Fashion. It’s now the Rose of Sharon Group, comprising two print media companies and a real estate enterprise. Not many business owners swerve from fashion to petroleum, and Alakija’s venture into the oil business was a surprise move. But she was quick to adapt. CFI.co | Capital Finance International

Her new company, Famfa Oil Ltd, gained a prospecting license in 1993. She headed the company, but when a joint venture with a larger enterprise proved successful the Nigerian government tried to seize 40 percent of the profits. With resilience, courage, and persistence, Alakija ultimately gained victory in the courts. Famfa Oil is one of the highestearning Nigerian companies in the sector, with Chevron and Petrobras as partners. She is equally at home addressing the Commonwealth and Investment Council Advisory Board as she is delivering motivational seminars. Alakija has racked-up an impressive list of awards, titles and achievements, including six honorary degrees and a fellowship at the Yaba College of Technology. She became the first female chancellor in Osun State University, and Nigeria’s first female chancellor, in 2016. She sits on the Commonwealth and Investment Council Advisory Board and the Advisory board of the Centre for African Studies at Harvard. She’s chief matron of the NGO Africa’s Young Entrepreneurs, an acclaimed public speaker, and the author of several books. Happily married to her lawyer husband, Modupe Alakija — the chairman of Famfa Oil — and with four children, Folorunsho Alakija example shows that women can indeed have it all.

Winter 2021-2022 Issue

> DENISE COATES CEO OF BET365 ‘Quiet Queen of Online Betting’ Who Keeps Out of the Spotlight

British business leader Denise Coates is the highestearning woman in Britain — testament to the fact that the odds can sometimes be beaten. Easily able to pass unnoticed in public, Coates’s net worth was recently estimated by Forbes to be $12.2bn. Not a bad for a business that started out from a portacabin carpark. The founder and joint chief executive of online gambling empire Bet365 inherited her father’s provincial racing shops in the late 1990s and convinced her family to take a punt on internet gambling. When the dot.com bubble burst, Coates mortgaged the betting shops to secure a £15m loan to shore-up the family empire. The company has never had to answer to outside investors, and the publicity-shy 51-year-old takes home an annual salary of £469m — more than business titans such as Elon Musk. Bet365 is everywhere to be seen, with commercials and billboards across Europe and into Latin America. Coates, by contrast, remains barely visible. Dubbed “the quiet queen of online betting”, she has always avoided the limelight. "I really don't enjoy the attention,” she said in her first-

ever interview. “The public side does not come naturally to me... I'm not saying I'm a shrinking violet, I'm not. I've been bossy all my life. It's just that I very much enjoy actually running the business," Moving Bet365 online opened an international market which quickly outran traditional gambling shops. Perhaps drawing on insight from her firstclass degree in econometrics, Coates pressed for the development of betting software and a focus on “in-play” betting. Now, most of Bet365’s revenue comes from bets made during events. Critics of the industry say that Coates’s salary is obscene — and built on addiction and misery. Earlier this year, the British tabloids went into a frenzy when details emerged of her plans to build a £90m “glass palace” in Cheshire for her five children, four of whom are adopted. There was criticism, too, of her plans to create what The Daily Mail termed “an impregnable fortress” by buying up adjacent farmland. But Coates’s loyal fanbase believes she deserves to be rewarded for her entrepreneurial drive, vision, and tenacity — in the same way that other business titans have been. Coates’s fellow executives at Bet365 include her husband, childhood sweetheart Richard CFI.co | Capital Finance International

Smith, her father, Peter, and her brother, John. The business employs 3,500 people in Stoke — one of the UK’s most deprived areas — and the family’s dedication to the city makes the Coates’ reputation almost unassailable. On the day the news of her jaw-dropping salary broke, the city’s daily newspaper, The Stoke Sentinel, ran a story about profits and new jobs. Coates pays tribute to gratitude as a powerful force. “The more grateful we feel, the more things we receive to feel grateful for,” she said. “The more loved we feel, the more love we receive. The more beautiful we feel, the more attractive we become.” And Coates is not just about receiving; she is also focused on giving back via the Denise Coates Foundation. It “provides funding to charities that will use the resources to enrich the lives of those that they exist to support”. Last year, the foundation awarded £3.6m to 23 charities, 22 of which received more than £20,000. Rumoured increases in regulation may mean that Coates cannot remain as hidden as she has so far been. But whatever changes are on the horizon, with more than £50bn in bets staked on Bet365 last year, any dent in Denise Coates’s salary packet isn’t likely to rock her world. 61

> THAI LEE THAI-BORN KOREAN AMERICAN BUSINESSWOMAN Avoiding All the Spotlights

You may not have heard of Thai Lee, but Google her name and it becomes clear that news of her — in business circles, at least — swirls high and settles in calm, lofty locations: Forbes, Bloomberg, CRN, Leaders’ League. This Thaiborn Korean American entrepreneur is more hurricane than whirlwind, albeit one that approaches with a gentle and self-effacing manner. Armed with an MBA from Harvard and an all-comers determination to prove her company’s worth through the tech it provides, Lee co-founded SHI (with Leo KoGuan) in 1989. Lee and her (now ex-) husband bought a software reseller — the SHI predecessor — for less than $1m. The company born of that corporate union and headquartered in Somerset, New Jersey, now has customers in the non-profit, private, and public sectors. And it’s worth $11.1 bn in sales alone. 62

Lee may not be a household name, but those in financial and business circles will certainly be aware of her. SHI has around 20,000 customers — including AT&T, Johnson & Johnson, and Boeing. And yet Lee herself remains almost invisible to all but the most inquisitive eye. She drives herself to work, one Forbes article remarked, and parks “in the middle of the lot, even when there are spaces open up front… There's no executive assistant at the door keeping interruptions away; she doesn't have one. Lee keeps her own calendar, books her own travel and does her own filing…” Thai Lee has stormed through the financial and business ranks to find her name, and her company, in several of those “Top 10 / 20 / 50” rankings, and a rich list or two. She famously (and modestly) attributes her business success to management tactics; she believes in a tenet that Chinese whitegoods giant Haier also CFI.co | Capital Finance International

cleaves to: empowered employees with the autonomy to deal with customers. It seems to have worked — for SHI and Haier — and Lee’s employees and clients have served her well in return: retention in both areas is high. Now 62, Lee was born in Bangkok, grew up in South Korea, and moved to the US at high school age. After Harvard, she worked at Procter & Gamble and American Express before co-founding SHI. In 2018, she joined the board of PureTech Health, a bio-pharma company and affiliate of Sonde Health, which develops voicebased diagnostic technology. Lee was recently ranked the eighth-richest selfmade woman in the US (Forbes, again) with an estimated worth of some $4bn. She is known to donate time and money to educational charities and cancer research societies.

Winter 2021-2022 Issue

> SOFIA VERGARA COLOMBIAN ACTRESS The Woman with the World at Her Feet It’s easy to be distracted, if not captivated, by Sofia Vergara’s beauty and acting prowess — but there’s more to the Colombian actress than meets the eye. And let’s be honest: the eye already has a fair bit to meet. Surely someone this gorgeous couldn’t — shouldn’t — have any hidden talents? Vergara may not need them, but she certainly has them. The actress, model and entrepreneur, famously “discovered” on a beach by a photographer, seems to have it all — and that includes an almost uncanny talent for business. What, you didn’t know? Go figure, and don’t let it get to you; and most likely her average fan is equally oblivious. But that talent is there, and it’s helped her to build an empire. Well, empire may be putting it a bit strongly. Let’s talk it down a bit, see how we go… She leveraged her embryonic celebrity status to co-found talent-management firm Latin World Entertainment back in 1994. She has an underwear company, EBY, co-founded by Renata Black and specialising in seamless unmentionables. See? Not all that impressive. But some say EBY undies should be revered as art. (“The most comfortable I’ve ever worn” — Women’s Health Mag; “…have me hooked on their second-skin feel” InStyle.) Oh, and that Latin World Entertainment thing? Now one of the world’s most-powerful Hispanic media marketing companies. Vergara’s business ventures (along with her acting career, claro) have given her a nine-figure bank balance. So, yes: empire’s fair enough. Vergara’s best known for her role in the ABC television show Modern Family, and as a judge on America’s Got Talent. She was born in the Barranquilla, on Colombia’s Caribbean coast, the country’s “Golden Gate”, modern and prosperous. Or drab backwater, depending on who you listen to. Vergara’s onscreen debut came in a Pepsi commercial (Latin American markets only) before treading the catwalk as a model, then starring in a Mexican telenovela. She’s happily married to the American actor Joe Manganiello. This is her second marriage; the first, to Joe Gonzalez, was over in a couple of years. But hey, he was her high school sweetheart, and they tied the knot when she was

just 18. (Can you believe she’s 49 now…?) She was engaged to Nick Loeb for a while. For her acting career, Sofia Vergara has been nominated for Emmy, Golden Globe and SAG awards. She campaigns for human rights. The picture seemed intent on getting rosier, but just as we were starting to dislike the woman on general CFI.co | Capital Finance International

principles, it was discovered that she has had her fair share of hardship. Her brother was murdered in a kidnap attempt; she is a cancer survivor. Vergara has topped the Forbes highest-paid female actor list for seven consecutive years. Her empire includes furniture collections, fragrances and apparel. She’s said to be uncomfortable talking about her wealth. 63

> Europe

Squabbles and Rows Marring EU Ascension for Western Balkans By Brendan Filipovski

Family dynamics can be difficult. At the EU-Western Balkans summit held in Brdo, Slovenia, commission president Ursula von der Leyen said: “Western Balkans belong to the European Union. We want them in the European Union. We are one European family.”

ut the six Western Balkan countries may feel like distant relatives at a wedding feast — or those still waiting for an invitation. The EU has not expanded since 2013 — and has somehow managed to lose a member. It’s not easy, when all current members must be in agreement. In the lead-up to the most recent summit, there was intense behind-the-scenes lobbying. Two years ago, France and the Netherlands blocked ascension talks with Albania and North Macedonia. Other EU members express solidarity with the region and believe that enlargement is essential for the Western Balkans — and the EU. It could be a boon to trade. Nearby states, including Italy, Greece, Bulgaria, Romania, Slovenia, Croatia and Austria stand to benefit. These countries have trade and investment links to the Western Balkans. More than half of Croatian exports go to the region, with Germany is the largest single exporter. Trade in goods with the EU was worth €50bn in 2020 — 84 percent growth over the past 10 years. But some European countries fear a new wave of migrant workers, corruption, and organised crime. Some also see the potential for Hungaryand Poland-style culture clashes, with challenges to EU solidarity. Former Soviet-bloc states, now EU members, have come a long way since the demise of the Iron Curtain. Croatia and Slovenia have also prospered since the collapse of Yugoslavia. While the EU cannot claim all the credit, it does deserve some. Compare the trajectories of Poland and Ukraine, or Slovenia and North Macedonia. Many non-EU countries look enviously at their neighbours. While Ukraine, Georgia and Armenia are perhaps too far on the geographical fringes, the Western Balkans would seem to have a good case for EU membership. If the goal of this latest European project is to bring peace and stability, the Western Balkans is a worthy target — perhaps second only to the Franco-German relationship. The Western Balkans could claim to have a stronger European identity than many member countries. For over a thousand years, the Balkans were at the heart of the Roman and Byzantine empires. Emperor Constantine was born in what is today Serbia. The Via Egnatia, which connected Rome and Constantinople, passes through Italy, Albania, North Macedonia, Greece and Turkey. Then there is simple geography; just ask any truck driver or holidaymaker about their trips from Western and Central Europe to Greece. “The EU is only complete once all the Western Balkan states have joined the bloc,” Austrian 66

"The Western Balkans should not let themselves get stuck in a holding pattern. It would be wise to concentrate on furthering integration — something that the EU has actively encouraged, and the region is embracing." chancellor Sebastian Kurz said on a visit to Serbia. But the EU again decided not to set a target date for the ascension of the Western Balkans at the October summit. Albania and North Macedonia were especially keen to see a positive hint. Both have pro-EU leaders who have staked some of their political capital on prospects of ascension. North Macedonian Prime Minister Zoran Zaev and his socialist party braved nationalist backlash when they agreed — with Greece — on a name-change for the country in 2018. Goodbye FYROM, hello North Macedonia. And now Bulgaria is blocking North Macedonia’s hopes. Both countries are locked in disagreement over shared history and the definition of the Macedonian language. Bulgaria is vetoing any ascension talks for North Macedonia. Some Bulgarian scholars — including members of the Bulgarian Academy of Sciences — argue that Macedonian is not a distinct language and instead is a standardised version of a Bulgarian dialect. Both countries agreed to jointly address such issues in the 2017 friendship treaty. Similar cooperative agreements have previously been made between France and Germany, and Germany and Poland. There is a distinct lack of friendship between the two countries now, and EU pressure is yet to force a reconciliation. Albania, meanwhile, waits for a resolution or a decoupling of its candidacy from North Macedonia. The EU prefers group admissions. Montenegro opened ascension negotiations in 2012, Serbia in 2013. Bosnia Herzegovina remains a potential candidate and is trying to address issues of democratic practise, human rights, and rule-of-law to qualify. Agreement on the status of Kosovo remains a challenge. Recent tensions centre on whether Serbian-registered cars need temporary licence plates when entering Kosovo (as Kosovar cars do when entering Serbia). Montenegro would seem ripe for EU ascension. There is strong public support for membership and no potential vetoes ahead. Even the fine CFI.co | Capital Finance International

details are being addressed: all 33 ascension chapters have been screened, and many have been provisionally closed. But the EU continues to point to the potential for corruption and organised crime. The EU has learned that it has the most leverage during ascension negotiations. Then there is the issue of Russia and China in the region. Both major powers are keen to exploit any dissatisfaction with the EU, and to increase their regional influence. Russian involvement in Montenegro and the Balkans goes back centuries and remains strong. In 2016, an attempted coup on the first day of parliamentary elections was allegedly thwarted. Chinese influence is more recent, but growing. In 2015, Montenegro borrowed €1bn from a Chinese state bank to help build a section of motorway. It almost defaulted on its first instalment in July — which under the terms of the loan would have allowed China to take some Montenegrin territory. China has also provided loans to other Western Balkan countries. In addition to the carrot of ascension, the EU addresses these outside influences by investing in the region. It put in €3bn of FDI in 2020 on top of official support. The recent expansion of NATO membership to Montenegro and North Macedonia helps. But the best way to guard against Russian and Chinese influence would be to expedite ascension negotiations. The Western Balkans should not let themselves get stuck in a holding pattern. It would be wise to concentrate on furthering integration — something that the EU has actively encouraged, and the region is embracing. Regional integration is happening in customs and telecommunications. In July, mobile roaming charges in the Western Balkans were removed for residents. North Macedonia and Serbia share customs, as do Albania and Kosovo. Albania and Macedonia have similar arrangements. But there are more gains to be had for the region. The greater the success of Western Balkan integration, the more likely EU ascension becomes. A prosperous, and more harmonious, Western Balkans would be too attractive for the EU to turn down. It may even be the tonic that European unity needs: a revival of its raison d'être, and an influx of fresh, enthusiastic members. i

Winter 2021-2022 Issue

> Lars Grinde:

‘A Pleasure and a Privilege’ — Leading from the Centre Norvestor Advisory managing partner Lars Grinde leads a firm with 80 Nordic mid-cap private equity investments.

e has witnessed the growth of his industry from its early days, and shaped its role in supporting entrepreneurs and founders.

The private equity firm’s funds invest in mediumsized Nordic companies, typically with revenues of €25m-€250m. Norvestor funds have current investments in 27 companies that together employ more than 18,000 people across a range of industries and sectors. “We are passionate about supporting these companies, helping them to develop and grow,” says Grinde. “The businesses we invest in have ambitious and experienced management teams at the helm, aiming to become leaders in their markets. The companies are very different with respect to the products and services they offer, and the kind of people and cultures that comprise them. “Between them they share some qualities and challenges that make them ‘a typical Norvestor investee’,” he explains. “Key to our approach is forging a partnership with the managers and co-owners of the businesses we invest in. The partnerships are an extremely rewarding aspect of our business. “It can be challenging to find the best ways to work together to support a successful company, but it is gratifying when we get it right. A business with a transformative growth agenda is a typical Norvestor investment. Companies appreciate an experienced and active partner which supports them in crosscountry expansion, in their efforts to digitalise services and operations, and in seizing the full potential from sustainability-related strategies.” Norvestor aims for portfolio companies to grow substantially during the fund’s holding period, usually three to six years. The firm often supports companies in new geographies, acquires complementary businesses, and creates digital strategies to establish best practice ESG. A team of 40 professionals takes care of investments and portfolio management. Members of the Norvestor family of portfolio companies exchange experiences and ideas through formal and informal networks, supported by workshops, seminars and webinars.

Managing Partner: Lars Grinde

A do-or-die approach to learning, growing, and transformation can be seen in the private equity

He is also active in business development and strategy processes that have made Norvestor a

industry. Lars Grinde has more than 30 years of investment experience in PE. He has overseen investments across all sectors and today heads the Norvestor Investment Advisory Committee.

CFI.co | Capital Finance International

trusted partner to founders and entrepreneurs. “Many of the challenges and opportunities our portfolio companies face are similar to the ones we in Norvestor need to respond to,” he says. “It is a privilege and pleasure to work alongside the dedicated management teams and experts in our portfolio companies.” i 67

> Norvestor:

Seeing — and Seizing — the Full Potential of ESG Private equity firm Norvestor has partnered with Nordic businesses for more than three decades.

t has offices in Oslo, Stockholm, Helsinki, Copenhagen, and Luxembourg, and is one of the most active investors in the Nordic mid-cap private equity market.

Sustainability is a key aspect of the investment philosophy, the firm, and the family of Norvestor portfolio companies. All are committed to shareholders, clients, employees, and the communities in which they operate. In 2020 and 2021, ESG considerations, already widely recognised as important, became vital to the asset management industry. It is one of the most important shifts in the investment sector in a generation. ESG and sustainability disclosures are no longer strictly voluntary, and asset managers are increasingly facing scrutiny on how sustainability is integrated into strategies and business practices. The number of ESG regulations and standards globally has nearly doubled in the past five years, according to Enst & Young, to provide structure to the market and prevent greenwashing. In March 2018, the EU released its Sustainable Finance Action Plan. Among the green finance regulations central to the plan are rules mandating greater transparency for ESG funds and the introduction of the EU Taxonomy Regulation, a flagship for Figure Figure 1a classification system the definition of environmentally sustainable economic activities.

Figure 1b

equity by target ESG profile Current private equity portfolio firms Private equity investmentsPrivate by target ESGinvestments profile Current private equity portfolio firms by ESG profile Nordic transactions 1 January 2020 – 15 September 2021 Nordic PE majority-owned firms, as of Nordic transactions 1 January 2020 – 15 September 2021 Nordic PE majority-owned firms, as of 15 September 2021 Sustainability is more than a key fiduciary 100% = 398 transactions 100% = 1,210 firms 100% =or398a transactions 100% = 1,210 firms responsibility criterion for assessing an investment’s risk–return profile — it is where some of the most dynamic investment opportunities are to be found.

Strong

18.8

11.8 Strong

“Companies with innovative solutions to global ESG-related challenges is a dynamic investment space,” says managing partner Lars Grinde. The Nordics, early adopters of socially responsible investing, have seen a step change over recent years. Norvestor believes that this has been driven by a burgeoning number of sustainability start-ups and fast-growing innovative companies. 69.3 Analysis by Norvestor and Nordic Knowledge Partners shows that 19 percent of Nordic PE deals from January to mid-September 2021 involved companies with a strong ESG profile. Those deals have been in a wide range of sectors, from waste-to-energy technology and workforce 68

Weak

Weak 18.8

Neutral

11.8

69.3

Strong

Neutral

Figure 1a: Private equity investments by target ESG profile.

8.9

Strong

91.1

Neutral & Weak

91.1

Figure 1b: Current private equity portfolio firms by ESG profile.

Nordic transactions 1 January 2020 – 15 September 2021

Nordic PE majority-owned firms, as of 15 September 2021

100% = 398 transactions

100% = 1,210 firms

Note: Case-by-case evaluation of the alignment of the target’s products and services with one or more of the UN Sustainable Development Goals. Source: Nordic Knowledge Partners, Norvestor (September 2021).

Note: Case-by-case the alignment of the andUN services with one or more ofGoals the UN Sustainable Developmen Note: Case-by-case evaluation of the alignment of the evaluation target’s products and services withtarget’s one or products more of the Sustainable Development CFI.co |ofCapital Finance International Source: Nordic Knowledge Source: Nordic Knowledge Partners, Norvestor (September 2021) Partners, Norvestor (September 2021) 1

Winter 2021-2022 Issue

tightly intertwined with a company’s sustainability credentials. Companies whose sustainability credentials can withstand scrutiny will become ever more important for asset managers.” At Norvestor, ESG considerations are integrated into every stage of the investment process, from the initial deal-sourcing and due diligence, through the ownership period, all the way to exit. Significant time has been devoted to ensuring that the right yardsticks are used to measure carbon footprints and gauge progress, which results in more comprehensive and accurate disclosures and engaged communities. development to electric transport. All share a common purpose: addressing global challenges, predominantly those related to climate change (see Figure 1a). Examples include a Norvestor fund’s investments in Smartvatten, a technology pioneer for the sustainable use of freshwater resources, SmartRetur, a Nordic market leader within reverse logistics of reusable packaging, and Growers Group, a leading horticulture and agritech company. The wholesome fundamentals resonate with the Nordic corporate culture, characterised by flat hierarchical structures, an emphasis on inclusivity and equality, and a high degree of transparency. Many promising Nordic companies in the ESG space are rooted in the technology and renewable energy industries. The adoption of renewable energy in the Nordics is among the highest in the world, at around 55 percent.

When it comes to cleantech, the region is a world leader. As a result, the region has a multitude of companies that pioneer advanced solutions and services to reduce emissions, promote circular practices and the sustainable use of resources, and enable the green energy transition. Analysing Nordic PE transactions in 2020 and 2021, Norvestor found that platform investments with a strong ESG profile commanded a premium over other deals — 14.5x EV/EBITDA, compared to 12.7x and 10.7x for those with neutral or weaker ESG performance. There is good reason to expect widening differentiation in such valuation premiums, as well as underlying commercial performance. “It is no coincidence that a growing share of a company’s market value is attributable to intangible assets,” says Grinde. “Brand and reputation are now CFI.co | Capital Finance International

Norvestor conducts comprehensive ESG due diligence on target businesses, taking into consideration the entire value chain, climate risks, environmental footprint, and value creation. This identifies how the company’s industry is aligned with a sustainable future, what its key ESG themes are, and how it performs. By assessing the material ESG risks and opportunities, Norvestor gains a sense of growth prospects and financial performance. “Seeing and seizing the full potential requires that ESG is fully integrated into the company’s business model,” says Lars Grinde. “We believe an increased focus on ESG throughout the investment process, will generate value on multiple fronts accelerated, sustainable longterm growth; higher brand valuations, improved competitive positioning, better pricing, attracting and retaining talent, efficiency and productivity — and an ESG premium at exit.” i 69

> How Do We Measure Social Impact?

UniCredit’s SIB Unit has an Answer The social impact finance sector has grown globally in recent years — and it’s expected to accelerate further still, driven by the effects of the Covid-19 crisis.

ut how can companies and beneficiaries best understand and measure the success of projects and initiatives, and what is the goal of impact financing?

Laura Penna, Head of Group Social Impact Banking (SIB) at UniCredit, says the overall aim is to create tangible positive social benefits by financing projects and initiatives with beneficial outcomes. “UniCredit’s SIB has worked with the Human Foundation think-tank to develop a new measurement and evaluation system,” she says. “It focuses on international social impact finance standards to maximise the related direct and indirect social outcomes.” The system allows UniCredit SIB to consistently monitor and evaluate activities across group markets in which the programme is active: Austria, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Germany, Hungary, Italy, Romania, Serbia and Slovakia. SOCIAL TAXONOMY The EU’s social taxonomy — currently under development — will play an important role in setting common standards of measurement. In the meantime, companies can start moving in the right direction. The aim is to track performance and the impact generated by comparing expected and achieved results on an ongoing basis using a tailored framework that accounts for varying characteristics of the different beneficiaries of specific projects. Penna says ESG is “part of how we do business at UniCredit”, with a strong social commitment in all its markets. “Our SIB programme helps us drive tangible positive social change in our communities,” she says. “To ensure that we are always growing our impact and making a real difference, we need to be able to track and measure social impact finance outcomes in a concrete and uniform way.” “Our measurement and evaluation system has been designed to help us do this — and make an important contribution to increased transparency and common standards in the wider socialimpact ecosystem.” 70

Head of Group Social Impact Banking (SIB): Laura Penna

A COMMON FRAMEWORK Given the expected growth across the sector, the need for measurement methodology is increasing. The credibility of impact finance activities must be ensured to avoid “impactwashing”. It is important for the beneficiaries of programmes to guarantee a level playing field, agreement on specific KPIs for each project, and increased transparency in the selection process, says Penna. “This is crucial to demonstrate how social impact financing activities are creating intentional and positive results in our communities,” she notes. “They help ensure a truly sustainable and impactful business approach that engages all relevant actors in the community through a common framework.” FINANCE OFFER A “pay-for-success” mechanism is integral to the finance offer to allow for additional CFI.co | Capital Finance International

economic benefits based on the achievement of agreed social impact goals. UniCredit’s offer supports social innovation as a driver of change through loans at favourable conditions. It also provides financial training and access to relevant partnerships and networks. “SIB is also committed to inclusive finance, supporting entrepreneurs and small businesses through microcredit,” says Penna, “and to financial education to encourage greater financial knowledge and social inclusion that can empower active citizenship.” At the time of writing, the programme has provided more than 5,500 loans in support of social entrepreneurs and initiatives with measurable positive social impact — more than €348m in total. It has also supported some 100,000 students with financial education programmes since its launch four years ago, — and a further 20,000 beneficiaries through additional educational initiatives. i

UniCredit Social Impact Banking Value Chain

Winter 2021-2022 Issue

OBJECTIVES A

Social and economic well-being generation for individuals and territories

Spreading the culture of social impact both internally and externally through employee commitment and partnerships

INPUT € FINANCING CAPITAL

UNICREDIT NETWORK

UNICREDIT EMPLOYEES AND FORMER EMPLOYEES’ SKILLS AND PERSONAL TIME

OUTCOMES

Financial education

Microcredit

Impact Finance

OUTPUT

unicredit.it/socialimpactbanking

INDIRECT

DIRECT

A1 A2 A3

Improvement of physical health

Increase and maintenance of occupation

Improved material living conditions of vulnerable individuals and families

Strengthening of Human Capital

Increased economic and cultural value of the territory

Increased ﬁnancial inclusion

Improved economic and ﬁnancial sustainability of organizations

Development of partnership relationships between subjects engaged in creating social impact

Strengthen trusting relationship with client and the territory

Increased knowledge and commitment of employees who take an active role to spread the social impact culture

Improvement of mental health Increased social-cohesion

banking that matters CFI.co | Capital Finance International

> Kommunalkredit CEO Bernd Fislage:

‘Don’t Just Talk About Sustainability — Live It!’ If recent challenging months have shown us anything, it’s that infrastructure is integral to the efficient functioning of society.

ccess to stable energy and water supplies, communication and health systems is essential to meet society’s needs and create future opportunities. And those needs intensify — for local, regional, national and global economies — during trying times. Investment in infrastructure is, by definition, forward-looking — and it’s the subject of intense focus by Austria’s Kommunalkredit, says chief executive Bernd Fislage. “In times when a global health crisis dominates our everyday life, issues like the modernisation and realisation of agendas such as digitalisation, healthcare and infrastructure are vital,” he says. “Industrialised countries need to maintain and improve their supply, transport and social infrastructures to respond to demographic change, provide adequate living conditions for an ageing population, and prevent any new crises.” Equally important, he says, is the need to develop and invest in innovative and sustainable projects that will have tangible community benefits PROMOTING INVESTMENT There is a renewed value placed on areas such as renewable energy, with a focus on the Green Deal and national climate and Sustainable Development Goals. The financing of infrastructure projects has changed in recent years. Financial leeway is limited in the public sector by national debt and budget ceilings. “Co-operation between the public and private sectors must be intensified,” says Fislage, “and significantly more private capital mobilised. In the current low-interest environment, classic investments without high volatility deliver hardly any returns.” Infrastructure investments are largely crisis-proof as an asset class, he points out, with stable returns and low volatility and default rates. “Ecological and ethical criteria are becoming increasingly important in the investment strategies of institutional investors, as well as private investors.” ENERGY TRANSITION No issue will shape the coming decades as much as energy transition. “The switch to a sustainable energy supply is a global goal, and a commitment 72

CEO: Bernd Fislage. Photo: Petra Spiola

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Winter 2021-2022 Issue

to our shared future,” Fislage believes. “Europe will have to move even closer together to align the Green Deal with future requirements, whether in decarbonisation or the production of clean hydrogen.” Climate protection also means making sustainable investments in local jobs and regional economic cycles. “We take our socio-political role seriously, and we have played a pioneering role in the development and implementation of sustainable infrastructure and energy solutions. “In this context, I’m pleased to mention two relatively young projects in our home market. Together with OMV, we are investing in the construction of Austria's largest electrolysis plant to produce 1,500 tonnes of green hydrogen per year, and cut around 15,000 tonnes of CO2 emissions.

“This way, we are helping to advance innovative technologies in Austria and make an environmental contribution.

and individuals. We all need to pull together to achieve these ambitious climate goals.”

Kommunalkredit has entered into a joint venture with with eww, an energy provider from Wels in Upper Austria for the development for the development, construction and operation of rooftop photovoltaic systems in Austria. The new company offers its customers a "contracting model". No initial investment is necessary, as the company will finance and build the rooftop systems and lease them to the customers on a long-term basis.

SETTING A COURSE FOR THE FUTURE One of the greatest global challenges is climate change. It requires considerable investment, especially in the infrastructure and energy sectors. The UN climate agreement in Paris in 2015 set the course for the future, and the recent COP26 summit underlined the importance of swift and decisive action. “The financial sector in particular is called upon to get involved,” says Fislage. “The goal is to direct capital flows towards sustainable investments.

Customers will receive all the electricity generated by the system — to use in the building or feed back into the public power grid. “With projects like these, we’re trying to make sustainable energy affordable and accessible to industry, commerce

“If we want to ensure that future generations can grow and prosper in a safe and healthy environment, we need to set the right course now. Let’s not just talk about ESG, the SDGs, and sustainability — let’s live them.” i

CFI.co | Capital Finance International

> BLKB is Switzerland's Future-oriented Bank:

A Profound Commitment to Communities in the Region

or more than 150 years, BLKB has assumed responsibility for its host region and is committed to sustainable development. What distinguishes BLKB's approach is a holistic and comprehensive understanding of sustainability. With a focus on "people", "society" and "environment", the mission statement focuses on where the bank wants to have a positive effect and assume responsibility. With its commitments, it makes an important contribution to social and cultural life in northwestern Switzerland. In spring 2021, BLKB entered into partnership with Caritas beider Basel and is thus committed to helping people who have been materially affected because of the corona crisis. After a large internal fundraising campaign among employees, the bank set up a Caritas advice centre in the canton of Basel-Landschaft. In addition, it provides Caritas with premises for these consulting services. Alexandra Lau, Head of Strategy & Market Services and Member of the Executive Board of BLKB, goes into more detail in this interview. MS LAU, PLEASE EXPLAIN THE BACKGROUND OF THE INITIATIVE WITH CARITAS. In our mission statement, we say that we are the future-oriented bank of Switzerland, that we are committed to sustainable development and that we take responsibility for the region. With the Caritas fundraising campaign, we have translated our words into deeds and shown that we are serious about our promise and keep it. Unfortunately, life at the subsistence level is also a reality for us. And this has been exacerbated by the pandemic. We were fortunate not to have to worry about our jobs during the pandemic. That is why we now want to support people who have not been so fortunate. CAN YOU GIVE A CONCRETE EXAMPLE OF THIS SUPPORT? The money from the fundraising campaign will be used in full for direct aid, consulting services and infrastructure of Caritas beider Basel. The consultations deal with topics such as preparation of a household budget, support in submitting applications and dealing with the authorities, and the submission of vouchers for discounted basic care or bridging payments. For example, a man, who was divorcing, turned to Caritas counseling because he could no longer pay his daycare costs. Because his wife became ill, she could no longer carry out her share of custody. As a result, he had to assume all duties for their child. Taking this on in addition to his work was not possible, and so the child had to go into daycare. The man did not get any support 74

for the daycare costs, because the community still assumed joint custody. Although he lodged an objection to the decision of the municipality, he still had to bear the costs himself during this time. With the donations of BLKB, the Caritas consultation was able to take over two monthly invoices of the daycare centre. WAS THIS A ONE-TIME ACTION FOR YOU OR IS THERE A PLAN BEHIND IT? This was not a one-off action and is not a charity project. We pursue a clear strategy in which sustainability is addressed holistically and we have set ourselves the goal of integrating sustainability into all our activities. As a cantonal bank, we assume a special social responsibility with our performance mandate. It goes without saying that we are socially committed. We are therefore always looking for possible cooperations that offer added value to our society. This includes supporting social institutions in a targeted manner. Authenticity, long-term, as well as a direct effect are central to our choice of commitments. CAN YOU GIVE US ANOTHER EXAMPLE OF SUCH A SOCIAL INSTITUTION? We have had a partnership with Jobfactory Basel for several years and are thus helping CFI.co | Capital Finance International

to make it easier for young people to enter the world of work. The Jobfactory offers training and coaching to young people without employment and suitable education. For example, before her apprenticeship, a young woman had the opportunity to gain valuable experience as part of a professional internship at the Jobfactory and develop further at school. At the same time, she received valuable support through coaching in regard to her desired apprenticeship. Today she is completing an apprenticeship as a details specialist at Jobfactory. BLKB supports the coaching offers financially. HOW IS YOUR INVOLVEMENT CONTINUING? Since the start of 2021, we have been a sponsor of Pro Senectute of Both Basel and thus promote targeted services for older people and their relatives. We also offer added value to our society through our commitments in the fields of sport and culture. We have been supporting athletics in the region for many years, traditional sports such as gymnastics and, on the cultural side, the Theater Basel, the Kunstmuseum Basel and, as of this year, the Kunsthaus Baselland and the Fondation Beyeler. We are convinced that giving is the best return. I am pleased that we can create such a great impact with our initiatives and commitments. i

Winter 2021-2022 Issue

Expert Warning that Being a Landlord Isn’t as Easy as it Looks

arning semi-passive income in rent sounds amazing, right? But if you’re considering getting in on the action as a landlord, there is a lot to consider. GAS SAFETY With 77 percent of UK homes using gas for heating in 2021, landlords have a number of safety regulations to meet. They must carry out an annual check on each property via a Gas Safe engineer. So no, you can’t cut costs by doing it yourself. Safety certificates cost £35–£90 for the service and certificate, and if you have a large property portfolio, that can add-up. Insurance can help cover the cost of the annual checks and boiler service.

ENERGY EFFICIENCY AND SAFETY Electrical safety is also a mandatory requirement, and one of the most recent pieces of legislation. An electrical safety exercise must be carried-out every five years, at a cost of around £200. All landlords must also provide energy efficiency ratings, renewed every 10 years. This can be proactively done if significant efficiency improvements are done to the property. Getting on the EPC register can cost £60–£120. LANDLORD LICENCES Landlords who rent houses in multiple occupation (HMOs) must acquire a licence to do so. Previously, only properties three storeys or higher, with more than five tenants, required a licence; it has since been extended to all HMOs. Selective licensing is the one that trips up a lot

of inexperienced landlords. Some 70 councils in England can apply selective licensing. This allows councils to run a “fit and proper persons” test on landlords — at a cost of around £400. LANDLORD INSURANCE Think of this as a safety net. It can cover various expenses associated and can save money in the long run. Whether you’re renting out properties that were previously furnished, or you’ve bought brand-new furniture, you’ll know it doesn’t come cheap. Most standard landlord insurance will cover damages. Landlord insurance will also cover you if a fire damages your rental property. On average, it costs £217 a year. Being a landlord can be hard work and it doesn’t come cheap. Do your research before diving in. i

> Moves Afoot to Allay Fears of Cloud-Based Breaches

s corporate cyber and data breaches accelerate, there is a need for organisations to tighten security for cloud workloads. Profian, a confidential computing platform focused on open-source solutions, has secured $5m in seed funding to bring cryptographic proof and verifiable trust to general computing using Confidential Computing, the protection of data in use by performing computation in a hardware-based Trusted Execution Environment (TEE). The round was co-led by Project A Ventures and Illuminate Financial, and included angel investors Olivier Pomel, CEO of Datadog; Tyler McMullen, CTO of Fastly; Till

Schneidereit, chairman of Bytecode Alliance, and Sarah Novotny, board member of the Linux Foundation. Profian was co-founded by Mike Bursell, former chief security architect at Red Hat, and Nathaniel McCallum, former virtualisation security architect at Red Hat. “Profian’s Confidential Computing platform will allow organisations to deploy even their most sensitive data and applications in a truly hybrid, multi-cloud environment,” said Profian CEO Mike Bursell. The capital raise will enable Profian to develop a suite of open-source products and services around Confidential Computing, hardware and software technologies improving

application security. Profian’s platform will be applicable across industries, but will initially focus on financial services, where it meets confidentiality and integrity requirements of the sector. The Confidential Computing Consortium is a Linux Foundation project uniting hardware vendors, cloud providers, and software developers to accelerate the adoption of Trusted Execution Environment tech and standards. Members include Accenture, Arm, Cisco, Facebook, Google, Intel, Microsoft, Red Hat and VMware. Profian is also a member of the Bytecode Alliance, an industry alliance around WebAssembly and related technologies. i

> 5G Technology Into Second Phase for Industrial Private Network

G-Encode has announced the second phase of its industrial private 5G network. Phase one of the network was launched at the National Composites Centre (NCC) late last year. 5G-Encode aims to prove the commercial benefit of 5G technology to enable three specific industrial uses: augmented reality and virtual reality to support design, manufacturing and training; monitoring and tracking time sensitive assets; and wireless realtime in-process monitoring and analytics. The first phase, using 4G, established a baseline against which results from the private 5G network could be benchmarked. Key to the success is the deployment of network slice-and-splice technology developed by consortium partner Zeetta Networks. Tools and machines require different levels of connectivity,

with varying degrees of latency and throughput. Slicing and splicing enables operators to create multiple virtual networks that can be customised to meet the needs of different processes. Through Zeetta Networks’ multidomain orchestrator platform, engineers can automate the splicing and dicing of the network resources to provide users and machines with the precise level of connectivity required. Leftover capacity can be directed elsewhere. As part of network deployment, Zeetta and partners have created a new network slice by stitching together slices from one transport network and two separate private networks: one at NCC HQ and the other several miles away. Zeetta founder and CEO Vassilis Seferidis says this is the first time that an industrial 5G network can be customised and divided into multiple logical networks. “Each of CFI.co | Capital Finance International

those virtual networks can be extended across a transport network to reach another virtual network in a different administrative domain,” he said. Zeetta’s technology enables end-toend slicing to deliver continuous connectivity across network domains regardless of vendor or technology. “This would allow a critical asset to be tracked continuously in real-time and with the same quality-of-service as it is transported from the point of production, to being received at the destination location.” The homegrown British software is compatible with O-RAN (Open Radio Access Networks) and other open networking technologies, making it tech- and vendor-agnostic. This supports the UK government’s 5G Supply Chain Diversification Strategy, which advocates deployment models based on open interfaces and interoperable standards for the telecoms industry. i 75

> Swiss Precision, African Spirit:

Brahms Group has Found the Perfect Balance Switzerland-based and Africa-led, the Brahms Group was born as a consultancy in 2009 — and has grown into an established player in project development and impact investment.

CEO: Daouda Fall

n the firm’s consultancy days, founder and CEO Daouda Fall raised some $50m for projects in biotechnology and renewable energy. Still at the helm in 2021, his focus now is mostly on developing impact investment projects in Sub-saharan Africa, where the population is expected to grow to 2 billion by 2050. The group’s main business interests are in sustainable energy resources projects, agricultural industry, and civil works — including real estate and construction. The Company creates eco-systems around its projects and is looking at setting up its first project development fund of USD 100 Million in 2022. Its interest in energy, agriculture and finance stems from Daouda Fall’s conviction that these sectors and economic development are coupled. Brahms Group leads the origination and development of various major projects in West Africa. It is a diversified group in terms of its 76

business lines, with a strong industrial and international finance network — and deep understanding and experience of Sub-Saharan Africa. The company is currently developing Guinea’s largest industrial project in downstream oil and gas: a refinery, a storage terminal and port related infrastructure. It is structuring over $350m to finance the project via the Brahms Group financial network. Brahms Group is also developing a 12,000-hectare agricultural project in Senegal in partnership with the Senegalese Sovereign Fund. With his international background, born in Paris with parents from Senegal & Guinea, Daouda Fall has lived in numerous countries which gives him an international eye in the Company’s local activities. Daouda Fall, currently based in Geneva, began his career with Citigroup and JP Morgan. At Citigroup, he managed ultra-highCFI.co | Capital Finance International

net-worth clients and created a solid professional network in the Middle East and Africa. At JP Morgan, he worked as a hedge-fund specialist. Daouda is a board member and managing partner of Ascon Group, an international trading company. Besides its trading activities, Ascon Group is currently developing a Biomass Project in Namibia and promoting water treatment systems for local communities. He is a former board member of mining and logistic company the Mesa Group, where he developed business opportunities. Daouda Fall was also a consultant for the China Mining United Fund. Daouda Fall is a laureate of the Choiseul Institute think-tank that elects the 100 most influential young economic leaders in Africa, and holds a Master’s in Global Political Economy from the University of Sussex. He is a regular speaker at conferences. i

Winter 2021-2022 Issue

Experts Weighing-in On Blue Green Thames Estuary Plan

he Thames Estuary Growth Board’s Green Blue workplan has mapped-out key areas for regional development.

The ambitious vision for growth and development in east London, north Essex and south Kent is led by estuary envoy Kate Willard. The Green Blue plan was released to realise the potential of the estuary, with major progress in the past year. The workplan organises activities around four key themes: • Net Zero — which will catalyse a hydrogen ecosystem to meet some of the estuary’s energy needs and identify how more light freight can be moved onto the River Thames to reduce congestion. • Build Back Better — world-class digital infrastructure is planned for the region, with strategies to source creative industries locally and support the new Thames Freeport. • Places and Spaces — to encourage growth and development in the estuary while protecting its natural assets and beauty.

• Accelerating Investment — a model for investment to make the vision a reality. The growth board will champion green businesses and transport initiatives, and campaign for the Thames Freeport. The River Thames can be used for light freight, moving it off London roads to ease congestion and air pollution. Leading minds on hydrogen power will assess the requirements for delivering infrastructure and appointing specialists Ikigai and DNV GL to roadmap its delivery. Strategic advisory firm MediaLink will analyse the estuary’s digital landscape and devise investment proposals. Willard said progress had been made “at impressive pace”, driving significant investment in the region. “We have laid the foundations to transform the River Thames, as well as the land, communities, and businesses that are bound to it,” she said. i

Britain’s Hydrogen Hopes for a Cleaner and Greener Future

he Thames Estuary is a major part of the UK government’s plans to kickstart a hydrogen economy.

The UK Hydrogen Strategy aims to deliver 5GW of hydrogen production capacity by 2030, creating an estimated 9,000 jobs in a £900m industry that is due to replace natural gas in UK homes, transport systems and heavy industry. The Thames Estuary Growth Board recently commissioned a study exploring the potential of hydrogen for parts of east London, north Kent, south Essex, and the River Thames. Thames Estuary envoy Kate Willard, who chairs the growth board, said the strategy was welcome. “We stand ready to partner with government to play our part in its delivery,” she said. “Our work has captured the scale of potential demand across a range of uses in logistics, public sector fleets, public transport and back-up generation. It has identified strong interest from a broad range of partners who see the estuary as a landmark opportunity. “Our blueprint maps the value and delivery potential of a hydrogen economy.” The Thames Estuary has the potential to generate £115bn for the UK economy by 2050, CFI.co | Capital Finance International

Willard says. The growth board is comprised of talent from across politics, industry, transport, energy, planning, and law sectors. “It has made enormous progress in its first 12 months delivering for people, businesses and communities of the region.” The Green Blue Vision and workplan sets out how to deliver added value to the region — something that would not be possible for local authorities or economic partnerships acting alone. Studies identify new investment potential in hydrogen, infrastructure, waterborne freight, and digitalisation. The Hydrogen Strategy drives a 10-point plan from Downing Street for a green industrial revolution. A UK-wide hydrogen economy could be worth £13bn by 2050, according to Willard. By 2030, hydrogen could play an important role in moving away from fossil fuels. Government analyses suggest that 20-35 percent of the UK’s energy consumption by 2050 could be hydrogen-based, helping to meet net-zero emissions targets by 2050 and cutting emissions by 78 percent by 2035. That view is shared by the UK’s independent Climate Change Committee. A low-carbon hydrogen economy “could deliver emissions savings equivalent to the carbon captured by 700 million trees” by 2032, it believes. i 77

> IMF:

Europe’s Post-Pandemic Economic Challenges By Alfred Kammer

urope has met the COVID-19 pandemic with audacity and imagination and is enjoying a strong but bumpy economic recovery. It now faces two policy challenges: controlling inflation and dialing back fiscal support. While there is considerable uncertainty about inflation, central bankers have plenty of experience dealing with it and can deploy their tools quickly and flexibly. By contrast, unwinding the emergency spending measures governments undertook to support their economies is a major, complex endeavor. If policymakers get it wrong, they risk a repeat of the tepid growth that followed the global financial crisis of 2008. We project that fiscal deficits of key advanced European economies will decline by around 4 percentage points of GDP in 2022, a far larger pivot than the one that followed the global financial crisis. This pivot mainly represents an unwinding of pandemic-related support, with only a part of the resources reallocated toward stimulating hiring and investment. Its impact on growth in 2022 would only be countered to a limited extent by that of disbursements of Next Generation EU funds in support of EU countries’ post-COVID recovery and resiliency plans. The assumption is that private demand has strengthened sufficiently to offset the reduction in government stimulus, driving the European economy along a smooth recovery rather than off a fiscal cliff. BRINGING BACK JOBS Yet risks abound. To be clear, the concern here is not that governments would sit tight if there were new virus waves or other major shocks. Rather, it is that growth in advanced economies settles at a paltry 1 percent or less toward the end of 2022 rather than the 2–3 percent rates that we are currently projecting. Fiscal policy is not able turn on a dime. And central banks would not be well placed to help, given that policy rates are already about as low as they can go. Every quarter of delay in achieving full employment will then add to the challenge of bringing people back into jobs. The issue is much less of a concern for emerging European economies, mainly because they deployed less stimulus and enjoy higher potential growth rates. Nevertheless, they would suffer from reduced demand for their exports from their advanced European counterparts. Higher inflation, on the other hand, has been largely driven by forces that can be expected to fade over time. As during the 2010–11 recovery from the global financial crisis, energy has been the biggest driver, largely reflecting the strong rebound of economic activity, which has returned oil prices to the range that prevailed during pre-COVID years. 78

On the Rise: Energy prices are contributing to the increase in inflation, both in the euro area and in emerging Europe. (24-month percent change, annualised). Sources: Haver Analytics; IMF staff calculations.

The recent surge in natural gas prices also reflects short-term factors — including dwindling inventories following a harsh winter and hot summer in 2021, shortages in renewables output in some places, and less supply. Adjusting for the energy-price “down and up” annual inflation rates computed over a 24-month horizon are close to pre-COVID ranges, as shown in the chart. This is the case even though supply-chain disruptions and associated bottlenecks are putting pressure on durable-goods prices, particularly as demand has bounced back quickly. These supply-demand mismatches are expected to subside in the course of 2022 as consumption patterns normalise, inventories are restocked, and trade bottlenecks, in particular the supply of shipping containers, are resolved. Moreover, inflation in the euro area has also been driven by one-off factors, such as the expiration in Germany of a cut to the Value Added Tax enacted in January 2021. SECOND-ROUND EFFECTS None of the factors now driving inflation would respond to changes in monetary policy. Rather, monetary policy would need to ensure that they don’t trigger a wage-price spiral. Fortunately, the risk of such second-round effects is limited in many advanced European economies, where labor-market slack remains significant. For example, we estimate that hours worked are still some 3 percent below pre-COVID levels. And at pre-crisis employment, central banks struggled with inflation that was too low, not too high. All of this is not to deny that there is considerable uncertainty surrounding the duration of shocks to prices and the precise amount of slack in advanced economies. But, all in all, our as well as analysts’ CFI.co | Capital Finance International

forecasts and market-based measures of inflation expectations suggest that the European Central Bank will again find it hard to achieve its mediumterm objective of inflation around 2 percent. In several emerging European economies, where output and employment are already close to preCOVID levels, the ground for second-round effects is more fertile. Also, inflation expectations have begun to move up, and wages are likely to react more strongly as slack in the labor market continues to diminish. These economies have, rightly, started raising their policy rates toward levels preceding the pandemic. While watching carefully how wages evolve, even there central banks do not need to rush this process given the temporary element in inflation. MAINTAINING MOMENTUM In short, policymakers could easily find themselves in a situation that looks eerily similar to that of the early stages of the recovery from the global financial crisis more than a decade ago. There is a strong case for cutting very high fiscal deficits. But this will also require strong revenue growth and therefore strong activity, which could usefully be supported with additional transfers targeted at households in need, more spending on hiring incentives, and investment tax credits. Getting the pace of withdrawal of fiscal support exactly right will be tricky . Erring on the side of withdrawing too little fiscal support rather than too much seems the better course of action, especially in those economies with ample fiscal space, so as to guard against the risk of undercutting the momentum of the recovery. i Source blogs.imf.org/2021/10/20/europes-post-pandemiceconomic-challenges

Winter 2021-2022 Issue

Meet the Orange Capital Partners Team

range Capital Partners founder and CEO Victor van Bommel is responsible for day-to-day management, strategic direction, and capital-raising.

He chairs investment committees and leverages relationships to source investment transactions. He has been instrumental in raising the OCP investment vehicles and joint venture programmes totalling €2.5bn in equity commitments, and serving prominent institutional investors across North America, Asia, and Europe. Under his leadership, the company has grown to employ 55 people and drive into new territories. Prior to launching OCP, Van Bommel worked at Goldman Sachs in various capacities, including the global distribution of real estate products. He serves on the board of EPT Global and is an advisor to the OCP Charity Foundation. Victor van Bommel holds an MA in Economics and Finance from the University of Amsterdam. His colleagues describe him as a strategic and passionate business leader with relentless drive and energy.

Founder & CEO: Victor van Bommel

Chief Investment Officer: Hedde Reitsma

Partner: Casper Vernooij

Partner: Joris Voorhoeve

Vernooij is a member of the investment committee with focus on technology, innovation, and the digitalisation of property management processes. Prior to joining OCP, he was heading the retail investments arm at Multi Blackstone and overseeing UK and German operations.

expansion. Under his leadership, OCP raised €1bn for its Nordics operations. Voorhoeve set-up the Copenhagen office, and prior to his appointment worked for 20 years at ABN AMRO and Kempen in various investment banking roles: deal origination, execution, and capital raising.

Hedde Reitsma is the chief investment officer, and a managing partner at the firm. Reitsma joined OCP in 2014 and has been responsible for all real estate transactions — totalling €7bn. In his day-to-day role, he is responsible for the management of the Investment arm, strategic direction, and investor contacts. He also engages in refinancing trajectories, investment structuring, and the acquisition of entities with significant balance sheet tax assets. Prior to joining OCP, Reitsma was part of the European Special Situations Group at Goldman Sachs, where he had a specific focus on real estate and NPL portfolios. As a board member of OCP, Hedde Reitsma also sits on the investment committee, chairs the remuneration committee, and is an advisor to The OCP Charity foundation. He studied Financial Economics at the Erasmus University in Rotterdam, and did internships in Shanghai, Jerusalem and Amsterdam. He is known for his quantitative mindset, rational decision-making, and intricate knowledge of his field. Partner Casper Vernooij is responsible for asset management. He was appointed to the OCP board in 2020 when the retail and residential teams merged. Vernooij joined OCP in 2016 at the launch of its convenience retail fund, and under his oversight OCP grew the fund to more than €600m.

He has been involved in more than €12.0 bn of real estate investments across Europe. His colleagues describe him as an energetic and pragmatic real estate professional with genuine real estate expertise. Joris Voorhoeve is a partner of OCP, responsible for business development. He was appointed to the board in 2020, responsible for international CFI.co | Capital Finance International

In his most recent role, he headed the Kempen corporate finance Benelux team where he acted as a trusted board room advisor. Joris Voorhoeve studied International Relations at the University of Leiden and he is a motivating business leader, people manager, and an experienced deal maker. i 79

> Right Place, Right Time, Right Attitude:

Dutch Firm Plays Its Cards with Skill Since its first acquisition in 2014, Amsterdam-based Orange Capital Partners (OCP) has been on a roll.

et up by two former Goldman Sachs executives, Victor van Bommel (founder and CEO) and Hedde Reitsma (CIO) the company employs 55 people at its offices in Amsterdam, Dublin, and Copenhagen. OCP’s main investment strategies are European residential and Dutch convenience retail. Residential accounts for 75 percent of its €4bn portfolio, with the remainder invested in two retail mandates. The company is better known for its drive in the residential sector, but its left-field move into convenience retail in 2016 proved timely. Its first residential venture in 2014 was backed by a US state pension fund. The strategy focused on the Amsterdam market, which was lagging behind most European capitals recovering from the Global Financial Crisis. Within three years, OCP had grown to dominance. “The first few years were good fun,” says Van Bommel. “We were new kids on the block in a market dominated by local families, traders, and housing corporations. The market was completely shut down by a lack of liquidity. We were the first company to invest institutional capital. “When the dust settled, we owned a substantial portfolio in Amsterdam. We were in the right place at the right time.” The founders realised that building a best-inclass team was crucial for success. “We didn’t want to be a one-trick pony, so we invested in our team and our culture. We hired people from all walks of life: former athletes, bankers, creatives, real estate people. We laid the foundations of what we are today.” With a focused and dedicated team, the company quickly became known as a diversity outlier in an industry historically perceived as homogenous. “We employ 14 nationalities, and a third of our employees are female. The diversity brings us creativity, and fresh perspectives.” Out-the-box thinking and that contrarian view paid-off when OCP acquired a €300m convenience portfolio in 2016. Casper Vernooy, former multi-CIO and partner at OCP, said it had been a rare marketplace opportunity. “Due 80

EURm

2014 131

2015 181

2016 535

2017 780

2018 1,218

2019 1,975

2020 3,039

4,000

2,000

2014

2015

2016

AUM Development. Numbers in EUR (millions).

CFI.co | Capital Finance International

2017

2018

2019

2020

2021E

2021E 3,760

Winter 2021-2022 Issue

to the paradigm-shift to online spending, the entire retail sector was under pressure,” he says. “After a thorough analysis, we took the view that convenience retail represented exceptional value. When the right opportunity arose, we took our chances and invested in the sector. We stabilised the portfolios, repositioned assets — and today we’re selling in a very strong market.” Following the recovery of the Amsterdam housing market, OCP was forced to sell its residential portfolio to CBRE Investment Management in a €400m deal in 2017. “Due to our success, our partner wanted to take their chips off the table. Unfortunately, we had to start all over again.” A NEW VISION This interlude changed OCP’s way of thinking about partnership structures, and the wider residential opportunities in Europe. A fragmented residential market, a shortage of housing, and underinvestment in the sector created a perfect opportunity to take a fresh approach. “Our vision was to create a pan-European housing company,” says Van Bommel, “a credible brand, supported by strong governance, that will still be around in 30 years.” That vision only could be achieved with the right partners, who shared OCP’s longer-term view of the residential sector. In 2017, it closed a new partnership backed by a sovereign wealth fund.

GAME CHANGER It was another game-changer. Following a string of acquisitions in the Netherlands, Ireland and Denmark, OCP’s residential portfolio grew to include 8,000 apartments by 2021. Offices were opened in Dublin and Copenhagen. OCP managing partner Hedde Reitsma says people always say real estate is a local business, but “we strongly believe that scale benefits are much more important for residential companies”. Technology and innovation are key differentiating factors, he says. “Do you really think that in 10 years’ time, we will still use external property managers and leasing agents? The entire process will be digitalised, and the living experience for our customers will be revolutionised.” OCP has ambitious targets to grow its portfolio to €10bn by 2025, with the Nordics, Germany and Poland on the list. “Scale allows us to insource processes and invest significant sums in innovation and technology,” says Reitsma. “It will create tenant platforms, and all services that come with it. Besides this, we have set firm targets to make all our assets energy-neutral.” CHALLENGES One central challenge of a competitive market is to source the correct product. OCP focuses on quantitative modelling by evaluating data for investment decisions. CFI.co | Capital Finance International

From a macro perspective, OCP invests only in markets that are supported by favourable demographics, a healthy supply- demand balance, and good affordability compared to ownership. On a micro level, location, apartment types and regulatory environment play crucial roles. OCP partner Joris Voorhoeve says that by combining entrepreneurial and analytical skills, the company has built a solid track record for closing deals. “Even in the uncertain Covid times, we stood firm at our bids. Reputation does make the difference in sourcing deals. We have built a very strong network in the market, based on trust and respect.” SUCCESS The innovative housing company is rapidly moving forward. Next year, OCP will launch a housing brand, further in-source operations, and digitalise operational processes. “We are blessed with an incredible energetic and focused team of professionals. It’s undoubtedly the biggest asset we have,” says Victor van Bommel. “One of our key focus points will be to sustain our corporate culture while pursuing our growth ambitions.” “We push ourselves every day to be the best in what we do — but we need to do it together.” i 81

> Mamma Mia — Here They Go Again!

ABBA Resurrected by Holograms and Several Generations of Adoring Fans By Tony Lennox

ext May, a purpose-built, 3,000-seat arena in London will open its doors to the world in a spectacular, futuristic celebration of the music phenomenon known as ABBA.

It will be a far cry from ABBA’s first international appearance on a cramped stage at the Brighton Pavilion in 1974. It was there that they performed the thumping pop song Waterloo, which hit the jaded Eurovision Song Contest like Napoleonic cannon fire.

Agnetha Fältskog, Anni-Frid Lyngstad, Björn Ulvaeus and Benny Andersson will not be onstage; they’re now all in their seventies. Crowds at the ABBA Arena in the capital’s Olympic Park will be entertained instead by youthful holograms — already dubbed “Abbatars”.

ABBA was the first Swedish winner of the event, and in the following eight years the group went on to dominate the world of pop, selling 385 million records. They topped the UK charts nine times, and by the end of the decade, ABBA was a worldwide sensation.

CFI.co | Capital Finance International

The distinctive songs have touched hearts in every subsequent generation, and it’s easy to believe that ABBA has always been universally loved — but that isn’t the case. On that fateful night in Brighton, the UK’s Eurovision jury awarded Waterloo nil points. And the British music press was predictably sniffy — even as the group began to rack up hit after hit. Many music critics of the time were contemptuous of ABBA’s Euro-pop, dismissing their songs as

Winter 2021-2022 Issue

The group’s cross-generational appeal is rooted in the often derided, but ever-popular schlagen style, a mid-European musical genre. It derives from a fusion of traditional folk and schmaltzy 20th Century ballads. ABBA harnessed the melodies and themes, adding a unique tinge of Scandinavian melancholy.

As if to cement ABBA’s uber-naff status, Alan Partridge, the alter ego of UK comedian Steve Coogan, adopted Knowing Me, Knowing You as the theme to his spoof TV chat show in 1992. His character was embarrassingly lacking in style and taste — the joke being that it was no surprise he’d be an ABBA fan.

The group was made up of four individuals who were already famous in their homeland. Benny and Björn performed as a duo; Agnetha and Anni-Frid were singers in their own right. The four paired-up before ABBA was officially formed: Björn married Agnetha in 1971, Benny and AnniFrid tied the knot in 1978.

But that reputation was to change, thanks to ABBA Gold, a compilation album released in 1992. It eclipsed the sales of The Beatles’ Sgt Pepper’s Lonely Hearts Club Band, introducing new generations to the group.

The girls sang backing vocals on one of Benny and Björn’s records in 1971. “We realised they were better singers than us,” Björn told the BBC. ABBA was officially born. Though already celebrated in their homeland, Germany and Austria, acceptance in the UK was vital. “We knew that if you were accepted in Britain, you were a real pop group,” Björn said. But British music publishers were reluctant to take a chance on ABBA. Eurovision was the only way to win international acceptance. The years of success that followed took their toll. Constant touring put a strain on personal relationships, with Björn and Agnetha divorcing in 1980. But even this turmoil turned to gold. Björn wrote the hit single, Knowing Me, Knowing You, just before the split. He said afterwards: “It was not a very happy time, but very creative.” Many ABBA hits of the period were related, in one way or another, to emotional stresses within the group. Benny and Anni-Frid divorced in 1981, though the group continued to record and tour, their inner woes playing out under the dazzling beam of media curiosity. It’s a common theme in the music industry; Fleetwood Mac’s much publicised relationship troubles led to a similar period of creativity.

middle-of-the-road, the lyrics as naïve. Even in their homeland, they were scorned, with one ABBA critic describing their output as “garbage”. Yet millions bought their records. ABBA’s rise to fame was unstoppable, despite the burgeoning punk-rock era of the late 1970s. Punks saw ABBA, in their flamboyant costumes, singing sugary pop songs, as the very essence of a malaise afflicting the music industry. But although punk injected a rough, anti-establishment counterbalance, resistance to ABBA’s blonde and inoffensive niceness was futile.

ABBA’s final album was produced in 1982, and the members quietly went their respective ways. Benny and Björn continued to write, forming an artistic collaboration with the lyricist Tim Rice and producing a number of hit musicals, including Chess. They went on to create the musical Mamma Mia which revived the group’s fortunes. The show — and two subsequent films — have grossed some $750m. At the height of their fame, the ABBA brand, which included merchandising and other interests, was said to be second only to Volvo in value to Sweden’s economy. But ABBA’s reputation had taken a tumble by the late 1980s. Their extravagant, and tax-deductible, costumes — a ruse to exploit a loophole in the Swedish tax system — linked them to the glam rock era of the early 1970s (paradoxically one of the reasons they achieved such early success in the UK). CFI.co | Capital Finance International

When ABBA won Eurovision in 1974, new vigour was injected into a tired format. The song contest had become predictable and dull. ABBA introduced a vivid style, with vibrant costumes, glitter, glamour — and sex appeal. British sports commentator David Vine was on voiceover duty in Brighton back in 1974. It was several years before Terry Wogan would make the job his own. Vine greeted ABBA’s arrival on stage with the words: “If all the judges were men, which they’re not, I’m sure this group would get a lot of votes.” Such casual sexism might cause outrage today, but in the mid-70s it passed without comment. In coming years, British and European entries mimicked the two-boys-two-girls format. Brotherhood of Man, a British foursome who were schlagen to their boots, won the contest in 1976. And Buck’s Fizz, in 1981, added extra raunchiness, again winning for the UK. They might have been blonde and wholesome, but they weren’t ABBA. By the late 1990s Wogan’s gently mocking commentary had turned the contest, for UK viewers at least, into a fun-poking festival of camp – enjoyed as much for its awfulness as for the music. The UK last won in 1997, and while Wogan called his acerbic commentary “affectionate”, many in the Eurovision world saw it as derision. The UK has finished in last place five times since 2000, twice scoring the dreaded nil points.

ABBA’s 1974 victory was a massive shot in the arm for Eurovision’s reputation. Only one other winner, the Canadian singer Celine Dion, who represented Switzerland in 1988, has gone on to achieve global fame. Interviewed about the success of the new ABBA album, Voyage (which went straight to the top of the UK album charts in last November), on BBC breakfast television, Bjorn and Benny responded positively to the suggestion that they might be prepared to pen a future “Song for Europe” for the UK. Could ABBA be the country’s saviours? Given their record, you probably wouldn’t bet against them. i 83

> Economic Foresight and Proximity to People:

SaarLB Walks this Walk Every Day — and Across Borders SaarLB is a Franco-German regional bank headquartered in Saarbrücken, the capital of Saarland, close to France.

Frank Eloy CSO & Thomas Bretzger CEO

rom the beginning of its 80-year existence, SaarLB has defined the Franco-German and south-west German markets as an integrated core region from a business strategy perspective. To best serve these markets and their customers, the strategic headquarters in Saarbrücken has been supplemented over the years with locations in Koblenz, Mannheim, Trier, Strasbourg, Paris and, as of this year, Lyon. “This geographic network represents an important success factor for the bank, guaranteeing that vital proximity to customers, and the economy,” says Thomas Bretzger, CEO. The bank focuses on SME businesses with customers and investors in corporate and real estate sectors, project financing with a focus on renewable energies, institutional customers, the public sector, high-net-worth individuals, municipalities, and private-public partnerships. 84

“SaarLB stands for focused financial services with an emphasis on financing products,” says Frank Eloy, CSO. “It pursues an integrated Franco-German business approach with corresponding expertise in both countries. For cross-border customers in particular, this is reflected in the ‘Pôle Franco-Allemand’ network forum, which provides customers with a wide range of the bank’s partners, and their networks.” As a public bank, SaarLB has two strong shareholders in Saarland and the Savings Banks Association, which continue to provide unparalleled security. SaarLB is a member of the Savings Banks Finance Group (SparkassenFinanzgruppe) and is the largest credit and Pfandbrief institution in Saarland, as well as a member of the Association of German Pfandbrief Banks (vdp). Economic foresight and proximity to people are more than just claims SaarLB makes. This CFI.co | Capital Finance International

message is lived out in daily interactions, and across borders. The bank’s strong approach, in addition to the corporate values, creates the necessary foundation for the appropriate framework. “SaarLB was an early adopter in the area of sustainability,” says Eloy, “and has been systematically pursuing its strategy since 2014.” The presentable results and successes are documented in an annual SaarLB report. The award of coveted Prime Status (ISS ESG) and the successful placement of a Green Bond programme (€150m) underscore the success of this strategic orientation. SaarLB had a balance sheet total of €15.15bn at mid-year 2021, when half-yearly figures were published; it employs 516 people. The FrancoGerman regional bank has earned recognition, including Family-Friendly Company (IHK) and Fair Company (Handelsblatt) seals, several times. i

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Winter 2021-2022 Issue

> Karl Fredrik-Staubo - Youth, Energy, Agility, & the Courage of Conviction:

Meet the Golar Go-Getters

CEO: Karl Fredrik-Staubo

s the youngest CEO of a NASDAQlisted company, Karl Fredrik Staubo brings energy and verve to his role at Norway’s Golar LNG Ltd.

This creates a dynamic and fast-paced business environment — which is where Staubo comes in. An active man such as Troim needs a CEO who can keep up…

With energy industry experience — and the insights of chairman Tor Olav Troim to guide him — Staubo has also benefitted from what he calls “some supportive industry tailwinds”. He and Troim are focused on delivering some exciting developments at Golar.

Staubo, who has held other executive roles within the Golar group and previously headed shipping on the investment-banking side of Clarksons Platou, quips: “If you dip your hand in, Golar takes your whole arm.”

Troim, a naval architect and a significant Golar shareholder, could be described as “a hands-on resident activist investor”. He has the courage of his convictions and believes in taking bold action. He will back a good idea for the long-term — but remains nimble and flexible enough to pivot when new opportunities present themselves, or circumstances change.

Scandinavian pragmatism — but unlike the LNG industry in general — Golar’s default position is to “keep it simple”. Up- and downstream competitors who take a more complex stance often take years to recreate a comparable offering.

What differentiates Golar from its peers is unique technical, engineering, and operations capabilities. This has frequently turned Troim’s outside-the-box solutions to industry problems into reliable operating reality.

Since Staubo took the helm a year ago, he has overseen Golar’s $5bn sell-off of its gas to power business Hygo Energy Transition, and its Master Limited Partnership to New Fortress Energy. He has reorganised the London office, overseen the publication of Golar’s first ESG report, agreed terms with a cornerstone investor to form Cool Company Ltd — which will own Golar’s shipping assets — and hired top talent to support and grow the upstream FLNG business.

Troim and Staubo are Norwegian. Inspired by Scandinavian roots and leadership, Golar has a flat organisational structure and an execution model that facilitates agile decision-making. With typical

With an equally youthful CFO, Eduardo Maranhao, the pair have refinanced all the company’s shortterm debt to create a balance sheet sturdy enough to finance increasing FLNG opportunities. i

CFI.co | Capital Finance International

> Golar:

Industry Innovator Democratising Access to LNG

or the past 20 years, Golar has focused exclusively on its liquid natural gas (LNG) assets.

Back in 2001, carbon and air pollution were not the mainstream issues they are today; the renewables business was tiny. Transporting energy from one part of the world to another to close yawning gaps in energy and gas prices inspired the firm’s focus on LNG. Poor countries with growing populations were historically paying over the odds for power, typically from carbon-intensive sources. LNG has the potential to link inexpensive gas reserves with those markets. At the time, the LNG industry was dominated by a handful of players who showed little interest in making this happen. Golar’s initial efforts at bridge-building began with LNG carrier “new builds” to service the fledgling spot market. The firm moved up the value chain in 2007, with the pioneering conversion of one of its older carriers into a floating storage and regasification unit (FSRU). FSRUs are now mainstream and have been key to the opening of most new LNG markets. But to really close the price-gap, Golar needed to move up- and downstream. In 2014, the next pioneering step was taken: the conversion of an LNG carrier into a floating liquefaction vessel (FLNG). Two years later, Golar set up a joint venture to build Latin America’s largest thermal power station and establish a downstream LNG distribution business. “In 2018 we successfully delivered the world’s first FLNG conversion, with a carbon footprint per unit of production that matches shorebased mega projects — despite having a flexible platform and operating at smaller scale,” says CEO Karl Fredrik Staubo. The power station, then Brazil’s most efficient thermal plant, fired-up in 2020. The value of that downstream business was realised in April 2021, when it was sold to New Fortress Energy. Over the past 20 years, the need to reduce CO2 emissions and air pollution has become recognised as a global priority. Renewables have become the fastest-growing source of energy; China’s energy consumption, meanwhile, has trebled. But still some 800 million people do not have access to electricity — and 61 percent of the world’s energy remains coal- and oil-based. 88

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Winter 2021-2022 Issue

The need to decarbonise is urgent to ensure the availability of clean, modern energy — at an affordable rate for all. According to the International Renewable Energy Agency, the transition to renewable sources requires balance to overcome challenges related to variable output. Gas is ideally suited for this. It is cleaner than other fossil fuels, with abundant proven reserves — and it’s flexible. “That is why LNG is now the second-fastest growing source of energy,” Staubo points out. “Switching from coal to gas for electricity production saves on average 50 percent of carbon and methane emissions, along with dramatic reductions in air pollution. “We understand that lowering emissions isn’t the same as eliminating them. Repurposing our ships, a unique hydro-turbine that increases the energy efficiency of FSRUs, and use of waste heat to provide 80 percent of the power to operate our FLNGs are examples of in-house initiatives taken to reduce emissions.” Golar is also working on even cleaner solutions, including floating blue ammonia and carboncapture for FLNG. “Through our pioneering, low-cost innovations and investments, we’ve built a flexible floating LNG pipeline that can liquefy, ship, and regas LNG. That commodifies and democratises access to cleaner LNG-based energy,” says Staubo. “Our FLNG offering can now produce the world’s lowest-cost LNG from gas that would otherwise be flared or re-injected. And we can do this profitably in a $30/bbl oil environment. “This is in operation now. This is not some future promise.” Looking ahead, with the support of the board, nimble management, and a helpful commodity price environment, Golar intends to maximise the value of this strategic position, and its $3.5bn share of Earnings Backlog4 to strong counterparts including BP and Perenco. “Our focus will be on liquefying gas from stranded and associated gas reserves using our multiple oil major type-approved infrastructure solutions, diverse workforce, 50 years of LNG operational experience and strong industry partnerships. “We will also continue to look at further optimisations of production and monitor the development of marine infrastructure that supports the growth of hydrogen and ammonia as viable alternatives. This, we believe, is sustainable value-creation.” • 4 Earnings Backlog represents Golar’s share of contracted fees/income for executed contracts less forecasted operating expenses for these contracts as of September 30, 2021. i 89

> AUM Asset Management Ltd.:

ESG Investing from the Bottom Up & Top Down - Setting a New Standard Malta-based AUM Asset Management Ltd. has made ESG investing a core part of its investment approach and strategy.

UM Asset Management Ltd. is an independent investment management company founded in 2015 by financier and investor Jean-François de Clermont-Tonnerre, which offers asset management, MANCO and advisory services to institutional investors and family offices within an ESG (“environment, sustainability and governance”) and UN Sustainable Development Goals framework. With $200 million in assets under management and offices in Malta and London, AUM draws upon its expansive international network of business contacts across Europe and North America to deliver high-return traditional, alternative and real asset investment solutions to its clients. The choice to headquarter AUM in EU-member country Malta was partly due to the country's strong sustainability framework created by Maltese regulators, which provided the proper alignment for AUM to pursue an investment approach that integrates sustainability, environmental and ecological factors in all of its investment decisions. AUM is a results-driven investment manager that seeks consistent growth of clients' wealth, while having a positive impact on the environment and society through the application of a multi-faceted investment approach that offers investors access to a diversified set of strategies, markets, geographies and asset classes.

“Our approach to investing reinforces the idea that companies that choose to take into account how they impact the world and environment will ultimately have a positive effect on their bottom line and the overall growth of their business over time,” said Mr. de Clermont-Tonnerre, AUM Asset Management Ltd.’s founder. “This belief is also supported by our clients who are—today more than ever—seeking investments that weigh the good they do in the world with doing well for themselves.” “ESG and SDG are priority factors for our clients, who are informed about the environment and care about their local communities and the broader impact they are making with their investment dollars,” said AUM Asset Management Ltd.’s CEO, Roberta Bonavia. “Europe saw record inflows into ESG investments in 2021 and we believe this trend will only accelerate in 2022 and beyond.” According to Refinitiv’s 2021 ESG Playbook report, PwC estimates that assets under management across ESG funds in Europe will reach between €2.6 trillion and €3.6 trillion by 2025, and an unprecedented US $30 trillion in wealth transfer will soon land in the hands of (mostly) millennials, who have shown themselves to value sustainable and socially responsible investments.

Investments included in AUM's portfolios are determined by their potential return profile and specific ESG factors. The firm then applies global macro, quantitative, fundamental and technical analyses to its investment theses to provide another layer of informed decision making prior to allocating to its portfolios. ESG principles inform every investment action that the firm takes during the analysis and due diligence process, both from the bottom-up company and top-down macro perspectives.

POTENTIAL ESG AUM FORECAST ($US TRILLIONS) Looking ahead, the growth trajectory for ESG assets under management is exceptional, with potential to hit US $70 Trillion by 2040. While incorporating ESG and SDG factors into an investment framework was more of a trend for many firms in the past, it was the basis of AUM’s core investment approach from the beginning due to Mr. de Clermont-Tonnerre’s commitment to environmental and sustainability issues in his business and personal foundation projects throughout the past 25 years.

In compliance with the EU’s Sustainable Finance Disclosure Regulation (SFDR), AUM makes both entity and product-level disclosures about the integration of sustainability risks, the consideration of adverse sustainability impacts, the promotion of environmental or social factors and sustainable investment objectives.

“Caring for the environment and making sustainable choices is our collective responsibility and making investment decisions that take the environment, bio-diversity and conservation of land into account creates a virtuous cycle that benefits everyone in the end. That is why AUM will continue to apply ESG and SDG principles

CFI.co | Capital Finance International

Malta

"ESG and SDG are priority factors for our clients, who are informed about the environment and care about their local communities and the broader impact they are making with their investment dollars." for the benefit of our clients and our broader communities,” said Mr. de Clermont-Tonnerre. In 2009, Mr. de Clermont-Tonnerre formed a philanthropic foundation in Brussels to serve and support four key focus areas: the environment,

Winter 2021-2022 Issue

Founder: Jean-François de Clermont-Tonnerre

CEO: Roberta Bonavia

science, youth education and culture. In 2020, he established the Collége de France’s Annual Biodiversity and Ecosystems Chair, which aims to promote research and teaching by leading French and foreign specialists in the subjects of biodiversity and ecosystems, and highlight the environmental challenges the world currently faces. This Chair position ensures that these issues are widely communicated to the academic world, decision-makers and the general public to find the best solutions to address the issues of today.

Source: Morningstar Direct Sustainable Universe, 2020. Fidelity Consulting analysis. For illustrative purposes only. Current growth scenario: Assumes retail ESG investing continues on its current growth trajectory of 12% CAGR. Millennial investable growth scenario: Assumes retail ESG investing grows at the same expected rate as millennials' investable assets growth (18% CAGR). ESG investing becomes "new normal scenario:" Assumes ESG investing is synonymous with retail investing, and the 2040 retail ESG market is the 2040 retail (MF/ETF) market (roughly ~$70 trillion), which implies a 27% CAGR. fidelity.com/learning-center/trading-investing/esg-ratings

CFI.co | Capital Finance International

Mr. de Clermont-Tonnerre also currently works alongside Lone Tree Properties Ltd. in British Columbia to support the sustainable protection and conservation of 1,800 acres of land, that was previously cut down and logged, in order to cease all logging there and protect the remaining land for the local community to enjoy, which includes a 900-acre, permanently-protected public park. These and other sustainable and environmental projects underscore his professional and personal commitment to environmental land conservation, the promotion of sustainable solutions in business and taking active steps to improve the overall quality of life for all. i 91

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Winter 2021-2022 Issue

> The Global Leader in Consumer Growth Investing:

L Catterton Has Created a Niche of its Own

Catterton Europe is the European fund of L Catterton, the largest global consumerfocused private equity firm.

With more than 20 years of experience in the sector, L Catterton Europe is focused on making investments of €30-80m in Western Europe middle-market growth companies.

L Catterton's approach is driven by a combination of consumer focus, global reach, and extensive operating resources. L Catterton's longstanding, sector-specific expertise has helped to cultivate a strategic global network, which positions the firm as a partner-of-choice to help growing consumer businesses realise their potential.

Luigi Feola

Jean-Philippe Barade

Arabella Caporello

Eduardo Velasco

At the core of L Catterton's strategy is the firm's strong (and frequently proprietary) deal-flow and differentiated operating capabilities that are deployed to support its portfolio companies. Many of the partners at L Catterton have had direct responsibility for the management of consumer companies, and the combination of private equity investment knowledge and operating expertise add value to portfolio companies and assist in sourcing investment opportunities. Supported by L Catterton Global co-CEOs, J Michael Chu and Scott Dahnke, L Catterton Europe is managed by six experienced partners in London, Paris, and Milan offices. The fund is led by managing partner Luigi Feola, with more than 25 years of experience in the global luxury and consumer retail sector. Prior to joining L Catterton in 2019, he served as senior managing director Europe and jointhead of consumer with Temasek, the Singaporeheadquartered investment company with a portfolio of $235bn.

L Catterton Europe also benefits from the expertise of five partners, including JeanPhilippe Barade, who brings with him more than 15 years of experience in private equity, focusing on consumer and retail. He previously served as co-founder of B&B Investment Partners, a London-based fund sponsored by Walgreens Boots Alliance. Arabella Caporello joined L Catterton after 20 years in private equity. She has served at Advent International and Investindustrial. Eduardo Velasco has been with L Catterton since 2004. Prior to joining the firm, he worked as senior consultant in transaction services at Deloitte Corporate Finance.

Nicolas Desbois serves as partner and group CFO for L Catterton Europe and L Catterton Real Estate. He was previously the CFO of the media and press group at LVMH. Jeremy Sanders serves as Operating Partner and has extensive operating experience, having led PE-backed businesses in the hospitality, pet, and travel sectors. The partners of L Catterton Europe are supported by dedicated and seasoned investment professionals, an operating team, and senior advisors. The fund also benefits from the broader resources of a deep team of nearly 200 investment and operating professionals around the world.

L Catterton believes the breadth and reach of its resources are unmatched in the consumer private equity industry, and provide the firm with capabilities that benefit prospective portfolio companies — and, ultimately, investors. In the past year, L Catterton Europe announced several major transactions, including investments CFI.co | Capital Finance International

Nicolas Desbois

Jeremy Sanders

in Butternut Box, Etro, JOTT, and IAFStore. This exemplifies L Catterton's strategy of identifying and investing in growing consumer categories. In 2021, the firm acquired a majority stake in the storied global footwear brand Birkenstock, positioning the company for continued global expansion. With its unique investment platform, global resources and reach, and recent new hires, L Catterton Europe is set to continue implementing strategic plans to foster growth in the region. i 93

> Fondo Pensione Nazionale BCC/CRA:

Pioneering Pension Fund Provides Balance and Choice for Members When Sergio Carfizzi joined Italy’s Fondo Pensione Nazionale BCC/CRA (FPN) as general manager in 2008, the fund had around €900m in assets and a handful of employees.

he investment strategy was rudimentary — essentially a portfolio dominated by domestic government bonds. FPN is now a multinational with €2.6bn in assets and 23 staff members. It has built what Carfizzi calls “a gem of a portfolio” including uncorrelated alternative strategies. One of Carfizzi’s first steps as GM was to diversify options for fund members. Initially, they had no say; now they can choose between three main sub-funds, according to risk preferences and age. The development of a strong FPN portfolio relied on investment in internal resources, a process complicated by increasing regulation. Lacking regulatory guidance, Carfizzi had to create internal structures from scratch — often as a pioneer. “Pension funds in Italy were born with feet of clay,” he observes. “They needed to be strengthened on many fronts.” Backed by the board of directors, Carfizzi implemented layered risk-management and a compliance system. In the early history of Italian second-pillar pension funds, outsourcing was the prevalent strategy. “For a fund to grow and become independent, internalisation is the correct strategy,” says Carfizzi. He had to strike a balance, and he succeeded. The fund has reached an optimal mid-point between internal and external management capabilities.

General Manager: Sergio Carfizzi

FPN was one of the first pension funds in Italy to create a risk management structure independent of the finance department. “This comprises two people,” explains Carfizzi. “One monitors financial risk, the other operational risks.” FPN has structured a new compliance department that oversees the application of rules and regulations. Sergio Carfizzi works with the head of the finance department on processes and controls. Despite the upheavals of the Covid pandemic, FPN saw good results for every investment line in 2020 — positive returns between three and six percent — while maintaining a lower-than-benchmark risk-level.

FPN is a defined contribution pension scheme founded in 1987 and it’s the complementary pension fund for Italian co-operative and agricultural banks. Benefits depend on the profitability of the portfolio, among other factors. The fund is structured in three investment lines that vary allocation and risk according to time horizons.

The fund has up to 90 counterparties, depending on tactical positioning, representing private equity, private debt, infrastructure, traditional liquid asset classes, and domestic and foreign real estate. Fondo BCC/CRA was one of the first pension institutions in Europe to explore venture capital and crowdfunding asset classes.

There are several OICR Funds in diversified and uncorrelated asset classes — real estate, infrastructure, solar energy, private equity, private debt, venture capital, and crowdfunding.

“Those niche investments form the latest milestone in a long journey,” says Carfizzi. The investment philosophy focuses on diversification. “FPN never loses sight of that.”

The FPN financial team puts its focus into two macro-areas, one controlling direct investments, the other controlling mandates. Since 2021 each macro-area has been involved in ESG-monitoring.

Carfizzi has appointed managers with differing approaches, but balanced and complementary strategies. The portfolio is geographically diverse, allowing FPN to minimise drawdowns and take

CFI.co | Capital Finance International

advantage of emerging opportunities. The same principle applies to FPN’s alternative investments portfolio — worth over €470mn at the end of 2020: 18 percent of the overall portfolio. It was split between private equity (37 percent), real estate (29 percent), private debt (20 percent), infrastructure (13 percent) and insurance-linked securities (one percent). Within that, 62 percent of the portfolio is invested in Italian assets. In the private debt space, in 2020 FPN added non-performing loans (NPLs) to the portfolio, invested across nine funds. In the alternative space, Carfizzi’s management selection is guided by his experience in the credit sector. His objective there was always to evaluate creditworthiness; he takes a similar approach for alternative investments and opportunities. “The investment strategies must take ESG factors into account,” Carfizzi says. “Back in 2009, before ESG became a trend — and while the Italian and European jurisdictions were considering more regulations — we took our first steps towards sustainability. As of 2021, permanent ESG staff have monitored the criteria over the entire investment process.” The portfolio diversification and subsequent investments in “uncorrelated” assets allowed the fund to make its voice heard on ESG. It raised awareness of issues which have become the cornerstone of every sound investment choice. i

Winter 2021-2022 Issue

CFI.co | Capital Finance International

> CBRE:

Sustainability Targets and Preferential Funding to Boost Interest in Net Zero Carbon Real Estate Assets By David Casas Alarcón Property Management Accounting Lead at CBRE’s European Center of Excellence

he formal agreements of the Glasgow Climate Pact, together with the announcements on the deployment of private finance for assets committed to net zero, will increase the growing pressure on the real estate sector to decarbonise the built environment. As organisations come under siege from their clients, investors, and governments to reduce carbon emissions to net zero by 2050, we are seeing a corporative strategy switch around sustainability, with a dispatch in the figure of prominent organisations openly announcing ambitious sustainability targets. Presence in sustainability schemes conveys a positive message towards a firm’s governance and social responsibility, and while many have signed up to Science Based Target initiatives (SBTs), others have gone further in declaring net zero carbon targets, which means removing as much carbon from the atmosphere as they emit. Some have gone beyond, such as CBRE Group Inc. declaring plans to be carbon negative by 2040, or Microsoft pledging that by 2050 it will have removed from the environment all the carbon that they have emitted since the company was founded in 1975. The need to engage with the supply chain to reduce direct emissions will intensify, which means pressure on real estate and landlords.

NET ZERO BUILDING SPACE DEMAND TO RAISE Tenants consider a range of aspects when seeking new office and commercial space, which typically include location, access to public transport and amenities, cost, and floor plate size. However, with corporate mandates toward environmental targets on the rise, certified property sustainability is conforming a more prominent deciding factor and, for some tenants, a must for their new location. To lease an environmentally efficient or even net zero carbon asset is a solid proof of the company’s sustainability commitment, placing the property industry at the heart of the drive to reduce carbon emissions to net zero by 2050. Real estate investors in the journey to deliver more sustainable buildings should see heightened demand for their space and higher building performance. 96

Figure 1: Green bond issuance and forecast. Source: Climate Bonds Initiative

Withal, for efforts from the landlord to build more sustainable properties and from tenants who want to occupy sustainable building to be successful, there has to be intense collaboration and partnership between both sides throughout the life-cycle of the building. Landlords need to be precise with occupiers as to how the building is designed to be operated and re-examine performance periodically, while occupiers need to acknowledge their role in running the office space in an efficient manner. Along with the increased demand for green buildings, we can also expect a shifting towards a more operational efficiency rating for buildings, with an evident link to property value. Tenants and investors will seek to analyse how their properties are performing not only financially, but also operationally, and how it compares to other spaces from the sustainability point of view. As sustainability performance becomes clearer and more defined, it is likely those buildings that don’t comply will underperform. In the following years, properties that are not designed to be net zero carbon are prone to require mandatory retrofits, which might result in unexpected costs, the displacement of tenants and rent loss. CFI.co | Capital Finance International

FUNDING TO EASE ADDITIONAL DEVELOPMENT COSTS Delivering a more sustainable building will, in most cases, cost more than a less sustainable office. However, if this results in an increased demand from occupiers complemented with higher rents, then this should mitigate the additional capital investment. Estimates for additional expenditure vary, and are dependent upon building type, design, and efficiency of delivery, but have been estimated to be in the order of 5-10% depending upon the level of environmental credentials of the space. Nevertheless, construction costs are decreasing as technology evolve, and we may actually see a reduction in capital costs as new development techniques are adopted. However, it’s not just about the cost to physically build a property that should be considered, there is increasing evidence of more preferential interest rates and funding being offered to finance sustainable buildings. Recently, at the COP26 Summit in Glasgow, more than 400 of the world’s banks have committed to decarbonising their investments and lending. The commitment was named “GFANZ” (the Glasgow Financial Alliance for Net Zero) and through it, the signees agree to report annually on the carbon emissions linked to the projects they lend to. Moreover, participants will ensure

Winter 2021-2022 Issue

that trillions of dollars of lending go to green and decarbonising projects, being real estate retrofits a big piece of the cake. Derwent, a UK-based Real Estate Investment Trust, has just agreed a revolving credit facility, which included a green tranche to fund activities that meet their sustainability objectives, including the development of commercial space that receive a minimum green building certification. Beyond the summit’s accolade, the green bond market is on the rise with investors bracing for a potentially record year of sovereign sales in 2022. A green bond is a type of fixed-income instrument that is specifically earmarked to raise money to fund climate and environmental projects, typically asset-linked. The European Union is joining the green bond market with 30% of its 800 billion-euro (US $950 billion) pandemic recovery funding reserved for sustainability projects. Since the first sovereign green bond by Poland in 2016, momentum has grown with more and more issuers coming on board. Governments from around the world sold more than $39 billion in green bonds in 2021, already surpassing a total of $37.5 billion in 2020, according to data from Bloomberg Intelligence. That issuance boom has been led by European countries such as France, Italy and Germany, though developing economies are now joining in. Hong Kong and Chile have been among the largest emerging-market issuers in 2021. Despite the uplift in capital expenditure required to offer sustainable real estate assets, the increasing demand, associated rental premiums, funding access and lower interest expenses should result in a more positive cash flow and an overall increase in returns for greener building investors. The catalysts for developers to invest now in sustainable assets are to increase value and to promote their brand, aware of the fact that it is only a matter of time before real estate regulations become tougher in a push to drive a reduction in energy consumption and carbon emissions. i

Author: David Casas Alarcón

ANNOUNCING

AWARDS 2021 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

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

CFI.co | Capital Finance International

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

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> NATWEST: BEST MORTGAGE PROVIDER UK 2021

As one of the UK’s largest mortgage providers, NatWest has always been a popular destination for home buyers. The bank also has its finger of the pulse of public opinion, and has committed to becoming climate positive by 2025. Part of that initiative includes the bank’s Green Mortgage scheme. The company offers lower rates to those looking for a more eco-friendly, energy-efficient home. UK homes account for 15 percent of the country’s total climate emissions. Lower rates are offered to those buying properties

with an energy certificate performance (EPC) of A or B. The project is in response to research which shows that 70 percent of its customers are concerned about climate change but are unsure how to react. Green Mortgages are part of NatWest’s promise to have a positive impact on the environment. The scheme is one of a number of ideas aiming to encourage greener choices. The scheme offers a reduction on a two year or five year fixed rate mortgage. The bank is a principal sponsor of COP26, taking place in

Glasgow in November 2021, an illustration of its determination to be a leading voice in climate change, recognising the need for collaboration and co-operation between government, business and society in general. The company sees its role as providing support for those seeking a transition to a low carbon economy. The judging panel, for the second consecutive year, recognises NatWest’s commitment to the industry, and in 2021 is pleased to present the award, Best Mortgage Provider UK.

> THE AES CORPORATION: BEST ESG POWER PRODUCER GLOBAL 2021

Over the past forty years, the AES Corporation, a global energy company, has demonstrated its commitment to building a greener, smarter energy future. In 1989, it created one of America’s first carbon-offsetting programmes when it planted 52 million trees in Guatemala to balance emissions from its power plant in Connecticut. In the early 2000s, the company stepped up its focus on cleaner energy solutions, when it began to invest in wind and solar power. The company also pioneered the application of lithium-ion batteries for energy storage, a critical technology in the broader adoption of renewables.

Today, AES works with its customers of all kinds to co-create solutions that meet their business objectives. The company is a major developer of renewable projects and integrator of technologies. It sees climate change as a global challenge that the public and private sectors must address through innovation, collaboration, and knowledge-sharing. The company engages in technology innovations that support renewable energy systems, and it has applied AI to crack tougher challenges. AES has been a leader in batterybased energy storage projects for more than 14

years. It has introduced a prefabricated solar solution produced by Australian company 5B that can double energy density while using fewer resources — and is able to withstand hurricanes and other extreme weather events. AES was also the first publicly traded US energy company to issue a climate scenario report aligned with recommendations from the Task Force on Climate-related Financial Disclosures. The CFI.co judging panel sees in AES a catalyst for positive change and presents the corporation with the 2021 global award for Best ESG Power Producer.

> KOMMUNALKREDIT AUSTRIA AG: BEST ESG INFRASTRUCTURE FINANCE EUROPE 2021

Kommunalkredit Austria AG invests in infrastructure to create added value for society and low-risk returns for shareholders. Kommunalkredit is a sustainability pioneer with a long list of firsts. In 1997, the bank became the first European financial services provider to adopt EU EcoManagement and Audit Scheme guidelines. In 2017, Kommunalkredit issued Austria’s first social bond and, within three years, became the first financial services provider in Austria to join the European Clean Hydrogen Alliance. The bank has built an investment portfolio that spans borders and industries — with a strong

ESG strategy uniting it all. It targets sustainable infrastructure projects that improve quality of life, spur socio-economic development and support climate action. Its main investment areas are energy and environment, communication and digitalisation, traffic and transportation social infrastructure and natural resources — a portfolio that covers 12 of the United Nations’ 17 SDGs. Kommunalkredit positions itself as the bridge between project developers, operators and investors. It tailors financing solutions under an “originate and collaborate” approach to connect sustainable CFI.co | Capital Finance International

infrastructure players with institutional investors. Kommunalkredit’s infrastructure debt fund, Fidelio, outperformed its target of €150m, with a third and final close in late February 2020 totalling over €350m. The fund is already fully invested, including four investments into renewable energy and digital infrastructure projects within the first half of 2021. The CFI.co judging panel recognises the steadfast momentum of Kommunalkredit Austria AG, a repeat programme winner, with the 2021 award Best ESG Infrastructure Finance (Europe). 99

> LIVV LLC: WORLD'S FIRST NET ZERO COMMUNITY 2021

Luxury-home developer LIVV is bridging the gap between real estate, technology and sustainability. The company invites affluent homebuyers to customise their own eco-castle in amenities-rich communities overlooking the Las Vegas skyline or Mojave Desert. Clients can choose from three different home models and personalise with finishes, fixtures, flooring and tech setup. LIVV has already obtained the government entitlements to move forward on its Neo community, which is located in Henderson, but the Magnus community, in Clark County, isn’t expected for completion until

2022. The homes are sleek and modern, with an AI system that gets smarter and more efficient with continued resident interaction. Sensors help the homes act in a sustainable fashion, passively controlling heating and cooling settings to save energy when empty. Sensors also help maintain a healthy living environment, filtering the air against residents’ specific allergens as well as common pollutants. LIVV homes are equipped with Tesla's Powerwall energy storage system, so that the clean energy they generate can be stored onsite, sparking a virtuous cycle of cost

efficiency and environmental responsibility. Each home also comes with a Model 3 Tesla car, because sustainable, high-tech living goes handin-hand with all-electric vehicles. The company has pioneered the world’s first net-zero, positiveenergy communities in its flagship Nevada development, but plans are already underway to expand throughout the US, Europe and the Middle East. The CFI.co judging panel applauds an innovative company challenging the status quo of luxury living, and declares LIVV as the World's First Net Zero Community.

> BRAHMS GROUP: BEST AFRICAN PROJECT DEVELOPER SWITZERLAND 2021

There is clear consensus — the African continent, with its wealth of human and natural resources, makes for profitable investments. The Brahms Group capitalises on this potential by developing impact investment projects in West Africa. The Swiss group was founded over a decade ago by African entrepreneur Daouda Fall. Brahms Group believes the energy, finance and agriculture sectors to be key building blocks of economic and social development — and that the time is opportune in Africa, as foreign direct

investments have begun to outpace international aid donations. Brahms Group is a relationshipdriven and results-orientated company that aims to create wealth for clients, communities and the continent. The group combines a profound understanding of African markets with a solid international finance network to implement an impact investing strategy that promises benefits for all stakeholders. The group plays well with others and has executed a number of successful joint development projects. It has just broken

ground on the most recent of these agreements, this time with Africa Finance Corporation for a petroleum storage and refinery project in Kamsar, a port city in Guinea. It has partnered with Senegal’s sovereign wealth fund on another agricultural project. These initiatives, like so many before them, come with a boost in employment, GDP and CSR commitments. The CFI.co judging panel presents Brahms Group, a repeat programme winner, with the 2021 Best African Project Developer (Switzerland) award.

> ORANGE CAPITAL PARTNERS: BEST REAL ESTATE INVESTMENT TEAM NETHERLANDS 2021

Orange Capital Partners (OCP) is driven by a 55-person team of professionals with backgrounds in real estate, investment banks, consultancy, accountancy and advisory firms. The team is energetic and tech savvy, comprising 14 nationalities and 35 percent female, with an average age of 30. The real estate investment and asset management company was founded in 2014 by OCP managing partner Victor Van Bommel, who believes that business success stems from an open corporate culture that values integrity, professionalism and passion while 100

rewarding initiative and independent-thinking. He has built the business from the ground up, transforming it with the support of his team into an international network with offices in the Netherlands, Ireland and Denmark and around €4.0bn in AUM. The organisation prioritises flexibility, freedom and a flat hierarchy where each voice counts as an equal. An open floor plan underscores this egalitarian mentality, and the team meets once a week to encourage collaboration and creativity. Team members have the autonomy to set their own schedules CFI.co | Capital Finance International

— and the discipline to ensure no detail is overlooked. The company experienced a growth spurt in 2021, as the team had already proven its competence and comfortability with the techenabled, self-disciplined working environments that became the norm during the pandemic. Now, it’s focused on solidifying its reputation as a good landlord — and exporting a clearly successful business model globally. The CFI.co judging panel declares Orange Capital Partners as the 2021 Best Real Estate Investment Team (Netherlands) award winner.

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

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

> OPTIMUM ASSET MANAGEMENT: BEST PENSION FUND ASSET MANAGEMENT SOLUTIONS GERMANY 2021 Optimum Asset Management S.A. assists institutional investors, including pension funds, banks and insurances to diversify portfolios with a selection of cherrypicked properties offering exceptional risk-return ratios and long-lasting value. Team members have complementary backgrounds in international real estate, finance and banking. Optimum stays close to investment opportunities and client needs through an international network with offices in Berlin, Hamburg, London, Luxembourg, Miami and New York. The company has €1.5bn in AUM and has already completed transactions totalling €1bn in residential and commercial assets. It looks for mispriced and mismanaged assets in the €10m to €50m range in German and US markets with strong potential for yield improvement and capital appreciation.

Optimum has a track record for hitting the mark: it’s never sold a building below total investment cost while always achieving above market value disposal prices with average premium of +30%. Optimum can easily monitor investments via local teams on the ground, facilitating an active ownership approach. The company, which sold the Optimum Evolution Fund SIF – Property I to a prominent European institutional investor in 2014, has currently five real estate funds under management. The team’s collaboration, flexibility and perseverance are credited as the main factors contributing to the business’ success. The CFI.co judging panel is delighted to announce Optimum Asset Management S.A. as 2021 award winner in the category of Best Pension Fund Asset Management Solutions (Germany).

> SYDINVEST: BEST INVESTMENT FUND MANAGER DENMARK 2021 Sydinvest offers investors the opportunity to take control of their financial future by becoming unit holders of one or more of its 38 actively managed funds. The Danish fund manager was founded in 1987 and has expanded its offering to cover a broad range of equity and debt securities. It’s a relatively small company that’s punching far above its weight, seeking the best returns at the lowest costs for its 71,000 members. It aims to enrich the lives of members and partners in both the economic and social sense. Sydinvest applies the UN’s Principles for Responsible Investments to asset management, incorporating ESG issues into investment decision-making processes, practicing active ownership to influence ESG performance and promoting transparent ESG disclosure among investee entities. The firm

predicts that ESG and sustainability metrics will play an increasingly pivotal role across its investment portfolio. Sydinvest portfolio managers formulate the overall investment strategy of funds and stay on top of market trends to execute daily reconciliation as needed. This form of hands-on investment management has delivered strong performance over the year, with double-digit actual-to-date returns in the majority of its equity funds since the start of 2021. Sydinvest has become a specialist in emerging market products over the past three decades, gaining ground-level expertise in the regional investment landscape of countries with rapid development and low per-capita income. The CFI.co judging panel announces Sydinvest as the 2021 award winner in the category of Best Investment Fund Manager (Denmark). CFI.co | Capital Finance International

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> QATAR INSURANCE COMPANY – BEST INSURANCE LEADERSHIP GCC 2021

Founded in 1964, QIC was the first domestic insurance company in the State of Qatar. Since its inception, QIC has consistently navigated individuals and businesses through economic cycles by offering a diverse portfolio of personal (car, home, travel, boat, personal accident benefit) and commercial (energy, marine & aviation, property & commercial, medical & motor) lines of insurance, combining a broad-based distribution strategy with excellent service delivery. The group motto promises clients security, stability and strength. Based on the proactive steps taken by

its management, QIC demonstrated resilience by successfully navigating headwinds such as the COVID pandemic and natural catastrophes. Among management’s strategic steps were the highly successful hybrid capital raise of US$ 300 million in H1 2020 and the initial public offering of its subsidiary, QLM Life & Medical Insurance Company in Q4 2020. Today QIC is the leading insurer in the MENA region. In terms of gross premiums, profitability and total assets, QIC is the largest insurance company in the MENA region. During the past decade, through a combination of organic and inorganic growth,

QIC has grown from being a Middle East focused direct insurer, to a global insurance and reinsurance group with operations that spans Qatar, UAE, Oman, Kuwait, United Kingdom, Switzerland, Malta, Italy, Singapore, Bermuda and Gibraltar. QIC is one of the highest rated insurers in the Gulf region with a rating of “A” from Standard & Poor’s and “A (Excellent)” from A.M. Best. The CFI.co judging panel announces Qatar Insurance Company as the winner of the 2021 award for Best Insurance Leadership (GCC).

> AHLI UNITED BANK: BEST GLOBAL NETWORK BANK GCC 2021

Ahli United Bank B.S.C. (“AUB” of “the Bank”) offers clients a wide range of banking services through a network of 156 branches in eight countries. The Bank was incorporated in Bahrain in May 2000. Since its inception, AUB Group has expanded through a series of strategic acquisitions, mergers and organic growth. It targets continued expansion in the region by incorporating/acquiring banks and regulated financial services companies with a

minimum of 10 percent market share. AUB has streamlined its UK operations to support commercial, private and investment banking activities. The multicultural group employs a workforce of 4,000+ professionals, boasting 35 nationalities and a 36 percent female ratio. The Bank has undertaken transformation plan which is expected to spur further growth. The Bank's group-wide digitalisation focus has helped it to deliver results despite the turbulent

market conditions caused by the Covid-19 pandemic. The Bank has invested to improve remote connectivity, data-driven analytics and tech-savvy human capital. The Bank has received solid ratings from leading international rating agencies like Fitch, Moody's and Capital Intelligence. The CFl.co judging panel presents Ahli United Bank B.S.C. with the 2021 Best Global Network Bank (GCC) award - making the Group a four-time programme winner.

> SABIC: BEST ESG RESPONSIBLE PETROCHEMICAL COMPANY GLOBAL 2021

In 45 years SABIC has become the second most valuable chemical brand in the industry. In 1985, it produced 6.3 million tonnes, today it produces 60.8 million tonnes with operations across 50 countries. SABIC has also embraced the challenge of becoming an industry leader in ESG. Since 2010, it has proactively set and progressed towards ambitious sustainability targets. This includes a 25 percent reduction in GHGs, water intensity, and energy intensity by 2025. In 2019, it was a founding member of the Alliance to End Plastic Waste In 2020, 102

it actively participated in G20 discussions on the circular economy. Its TRUCIRCLE circle economy initiative is continuing to deliver; SABIC has become the first petrochemical company to scale up a process for recycling used mixed plastics back to the original polymer for commercial application. Other 2020 highlights include the production of blue ammonia for zero-carbon power generation using carbon storage; this was a joint project with ARAMCO and the Japanese Institute of Energy Economics. In addition it CFI.co | Capital Finance International

supports the Sustainable Development Goals and has made a commitment to focusing on ten of them. This includes a $40 million investment in corporate social responsibility programmes across 34 countries. On top of this it has recently formed an ESG Reporting Steering Committee to maintain its high ESG standards. The CFI.co judges are thus proud to present SABIC as the winner of the global award for Best ESG Responsible Petrochemical Company for the second consecutive year.

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> AL HILAL LIFE: BEST LIFE INSURANCE PROVIDER MIDDLE EAST 2021 Al Hilal Life offers hope and security to thousands of people in the Middle East, providing life and medical insurance services through offices in Bahrain and Kuwait. The company set the wheels in motion for a digitalization campaign in 2020, just in time when the pandemic sent the businesses racing to bolster their online capabilities. Al Hilal Life launched new products and is enabling online purchase options in 2022 along with various other innovative changes to simplify the customer onboarding process and enrich the overall experience. It has fully embraced the digital transformation and aims to strengthen its online presence, particularly as branch foot traffic declines. It will soon launch some digital products that are new to these markets. The digital platform will allow easier access to Al Hilal’s many

takaful savings and protection plans as well as corporate insurance coverage. According to research, the global takaful insurance market is projected to grow from $24.8bn in 2020 to $97.2bn by 2030. Takaful members contribute to a pool system from which claims are paid. Unlike most other insurance types, which can be considered a form of gambling according to Islamic law, takaful is shariah compliant and free from uncertainty. For businesses, it offers group life and medical insurance, as well as coverage against the loss of key personnel or the outstanding debt of deceased borrowers. Al Hilal Life achieved slight growth in 2020, and 2021 profits are higher than the previous year. The CFI.co jury presents repeat winner Al Hilal Life with the 2021 award for Best Life Insurance Provider (Middle East).

> ACTIVE CAPITAL REINSURANCE LTD: BEST SPECIALISED REINSURANCE SOLUTIONS GLOBAL 2021 & BEST REINSURER EMERGING MARKETS 2021 Juan Antonio Niño P., the founder and president of Active Capital Reinsurance Ltd (Active Re), says the history of the company, founded in 2007, has spanned a time of “transcendental” change in global economics. Active Re has flourished due to a focus on diversification and expansion in challenging times. The company, with headquarters in Barbados, and representation offices in Miami, Panama and Madrid, operates in more than 100 countries in Latin America, Europe, North Africa, Asia and the Middle East. Its mission - “benefits for all” - has guided its strategy since inception, delivering reinsurance solutions and comprehensive risk management for clients. It has stepped up diversification, expanding into new markets and increasing product offerings. Active Re achieved its first international investment grade in 2014. In 2018 it was upgraded by the credit

rating agency, AM Best, with an A- (excellent) which has since reaffirmed Active Re’s financial strength rating, putting it in a select group of global companies. While there are many challenges on the horizon, Active Re’s vision is to reinforce its role as a specialised and innovative reinsurer, with plans to improve even further its rating, increase its capitalisation and financial strength, as well as investing in technology, applying analytical tools to create solutions which add tangible value and benefits to customers. The company has won many awards since its foundation, including recognition from the CFI.co judging panel. In 2021, for the second consecutive year, the panel is pleased to once again present two awards, Best Specialised Reinsurance Solutions Global, and Best Reinsurer Emerging Markets.

> SAI GON J.S. COMMERCIAL BANK: BEST COMMERCIAL BANK VIETNAM 2021 SCB will soon celebrate its tenth anniversary since it was founded through the consolidation of three smaller but proud local commercial banks. Today with its combined strength, it is among the top five of Vietnam’s commercial banks by capital and was among the 500 fastest growing Vietnamese companies in 2021. Headquartered in Ho Chi Minh City, it has over 239 branches and 6,700 employees from north to south. It is also one of the most modern banks in Vietnam having embraced advanced technology and new diverse product offerings, which covers the needs of both commercial and individual clients. The CFI judging panel also commends SCB for its extraordinary understanding during the current crisis. SCB has reduced a range of fees for its corporate

clients and has provided new short and medium-term loan products with preferential interest rates. It has also been working closely with companies to provide them with online payment technology to facilitate e-commerce. SCB has also promised to raise the bar further with its decision to partner with McKinsey & Co. for its “Transformation and sustainable development strategy 2020-2030”. SCB is looking to strengthen its competitive advantage through further innovation and increased operational efficiency. The CFI.co judging panel congratulates SCB on its first ten years as a consolidated entity and looks forward to an even brighter future for the bank. The panel is pleased to present Sai Gon J.S. Commercial Bank with the 2021 award for Best Commercial Bank (Vietnam). CFI.co | Capital Finance International

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> BANK OF MONTREAL: BEST COMMERCIAL BANK CANADA 2021

There’s a maxim at the Bank of Montreal which says the company must be great in good times – but even better when the going gets tough. When the Covid-19 crisis struck, the bank made it a priority to reaffirm its commitment to customers – holding virtual advice sessions, providing guidance on how to manage the pandemic’s challenges, and offering access to experts to help clients navigate the difficulties. One of Canada’s “big five”, the Bank of Montreal is a multinational investment bank and financial services company in continuous operation for

more than 200 years. The company runs 900 branches across North America and provides a range of personal and commercial banking, wealth management and investment products and services to more than 12 million customers. The bank has famously not missed a dividend payment since 1829, even during major global catastrophes, including the financial crisis of 2008. It recently launched a “climate institute” which gathers the relevant data and insights needed to be a leading advisor to clients and partners on climate-related risks and

opportunities. In 2021 the bank gave its support to the International Day of the Girl through a series of initiatives aimed at encouraging young women to aspire to leadership roles. The company believes in the importance of amplifying women’s voices, advocating for their rights, evaluating their position in society and reinforcing their capacity as decision-makers. In recognising its commercial performance, the judging panel is pleased to present the Bank of Montreal the 2021 award, Best Commercial Bank Canada.

> NORVESTOR: BEST SUSTAINABLE EQUITY INVESTOR NORDICS 2021

Norvestor has been partnering with Nordic businesses for nearly three decades. The firm has launched eight funds thus far, the last of which was an “Article 8” fund under the new Sustainable Finance Disclosure Regulation. The funds invest in mid-sized businesses with visionary leadership and a clear sustainability agenda. It targets companies with revenues ranging between €25m and €250m and practices active ownership of assets over three to six years. Investee companies have experienced an average increase in operating profits of 20

percent per year during Norvestor ownership. Norvestor looks to the UN Sustainable Development Goals (SDGs) as a framework for shared success, positive impact and measurable progress. It conducts due diligence to identify companies with strong ESG performance — and has found this metric to be a reliable predictor of long-term business prospects. Norvestor works with investees to improve ESG performance. Diversity is on the rise, with 83 percent of portfolio companies in 2020 reporting one or more women on their board of directors — up

from only 13 percent in 2017. Today 21% of board members in Norvestor portfolio companies are female. Norvestor has seen a 31 percent reduction in the CO2 intensity of its portfolio since 2018 and intends to continue cutting emissions by establishing roadmaps to reach netzero. In 2020, Norvestor earned high PRI ratings in the categories of strategy and governance (A+) and private equity (A). The CFI.co judging panel recognises Norvestor as a responsible corporate citizen — and the 2021 award winner for Best Sustainable Equity Investor (Nordics).

> CHARME CAPITAL PARTNERS: BEST MID-MARKET GROWTH EQUITY PARTNER EUROPE 2021

Charme Capital Partners, a European mid-market private equity fund, applies a three-pillar approach to spur transformational change, growth and internationalisation. Charme relies on proprietary sourcing and deep local networks to uncover off-market and primary deal flows. It also identifies potential strategic buyers during the underwriting process. It practices active ownership of portfolio companies, acting as a catalyst to shift mindsets, fuel expansion and explore adjacent high-value-added opportunities. Charme levers scalable platforms to accelerate growth and buy-and-build 104

strategies to expand market reach. It suggests operational efficiency measures to enhance competitiveness, professionalise management and optimise reporting and planning systems. All these efforts leave investee companies on far more solid financial footing at exit time. Charme originates multiple exit routes, proactively managing relationships with prospective buyers to maximise exit value and avoid large auctions. Buyers tend to be large corporates and global private equity funds. The firm has a 16-year track record as a preferential partner for founders and family businesses. It has helped CFI.co | Capital Finance International

numerous companies to double revenue and globalise operations. Under Charme ownership, Poltrona Frau Group’s revenue increased from €83m to €272m over a 10-year period. Charme helped the group gain market share and expand its geographical footprint through strategic acquisitions and international partnerships. Charme Capital Partners, headquartered in Milan with offices in London and Madrid, invests in high-potential businesses across Europe. The CFI.co judging panel presents Charme Capital Partners with the 2021 award for Best MidMarket Growth Equity Partner (Europe).

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> BARRICK GOLD: BEST SUSTAINABLE MINING STRATEGY AFRICA 2021 Barrick Gold aims for the gold standard of sustainable mining — and is increasingly hitting its target. The Canadian-owned company has 11 gold mining operations across the Americas and Africa, and three copper operations. It is ranked in the 95th percentile in the Dow Jones Sustainability Index, achieving industry-leading scores in environmental reporting, water related risks, social reporting and human rights. It believes in the primacy of community partnerships and inclusivity. It took over the Acacia assets in Tanzania and engaged with locals to reduce illegal mining by 75 percent. It worked in partnership with the Acacia community, assisting with the land and infrastructure, to establish a poultry project that provides employment and nourishment. The project sells about $8,000 of poultry and eggs per month to the mining kitchens. Barrick Gold

spearheaded efforts to curtail the spread of Covid, administering some 10,000 Moderna vaccines and introducing rapid testing onsite. It has provided more than $30m in Covid support to host countries and communities. It has established Community Development Committees at all operational sites and spent more than $4.5bn with host country suppliers. It aims to cut costs, reduce emissions and empower communities by installing renewable energy systems, like hydro power in the Congo and solar panels in Mali and Saudi Arabia. It underscores the link between biodiversity and climate change by pursuing decarbonisation opportunities to conserve woodlands and enforce antipoaching laws. The CFI.co judging panel presents Barrick Gold, a repeat programme winner, with the 2021 Best Sustainable Mining Strategy (Africa) award.

> ITALTILE LIMITED: BEST VALUE CREATION RETAILER SOUTH AFRICA 2021 Italtile, a leading manufacturer, retailer and franchisor of tiles, sanitaryware and related products across South Africa and beyond, operates on the guiding principles of commitment to service, efficiency and harmonious teamwork. The company, founded in 1969, strives to stay in tune with the needs of its staff and customers – a tenet which was at the core of its response to the pandemic, which created unprecedented challenges. Despite logistical difficulties, the company believes it has emerged a more resilient entity, remaining on course to become the sector’s best in Africa, with an emphasis on product, price and service. The enforced work-from-home reality of the pandemic had the effect of changing lifestyles, and Italtile has capitalised on a home-improvement boom. The company works hard to maintain an ethos of partnership and empowerment – a percentage of profits are shared among

employees. It also funds its own Foundation Trust, a non-profit organisation dedicated to transforming communities by developing skills, and supporting activities relating to education, sport and conservation. As a supporter of the UN’s Environmental, Social and Governance (ESG) aims, Italtile’s factories rank among the most energyefficient in the world. Its low-carbon footprint Eco-Tec tile range is recognised as a leader in the manufacture of eco-sensitive products. The company has plans to expand further into East Africa but remains faithful to its home market. The 78-year-old chairman, Giovanni Ravazzotti, still regularly visits individual stores and factories, and CEO, Jan Potgieter, admits he still considers himself “a shopkeeper”. The CFI.co judging panel has no hesitation in presenting Italtile Limited the 2021 award, Best Value Creation Retailer South Africa.

> SHELTER AFRIQUE: BEST REAL ESTATE FINANCE COMPANY AFRICA 2021 Shelter Afrique is purpose-driven: committed to increasing access to decent affordable lowcost housing. The pan-African development financial institution has partnered with 44 governments, the African Development Bank, African Reinsurance Corporation and Fonds De Solidarite Africain (FSA) to improve living conditions across the continent. Shelter Afrique views decent housing as a fundamental human right — and a moral obligation for the company. According to the United Nations Human Settlement Programme (UN-Habitat), there are some 238 million people living in slums in Sub-Saharan Africa, while Shelter Afrique’s Centre of Excellence cites a housing shortage of 56 million units. The company addresses this crisis through public and private partnerships to turn slums into decent

housing, applying social distancing to mitigate the spread of infectious diseases. It finances projects to rebuild war-damaged homes and promote certified green housing projects. It has earmarked over $1bn to finance new housing projects as part of its 2019-2023 strategic plan, with the goal of mobilizing $20m of annual equity capital from existing and new members. It works with capital markets to issue bonds, provides lines of credit and is developing a platform to facilitate institutional funding. It is launching a $500m local currency bond in November 2021 to work with developers and financial institutions in their own currency. Shelter Afrique also offers capacity building, advocacy, and affordable housing research services. The company, which celebrated its 40th anniversary in June. CFI.co | Capital Finance International

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> MTR CORPORATION: BEST PUBLIC SERVICE FINANCIAL MANAGEMENT TEAM HONG KONG 2021

MTR is a purpose-driven corporation striving to keep the world’s cities moving. That was no small feat during the Covid pandemic, when global health concerns and national lockdowns put the brakes on travellers. Despite these challenges, MTR Corporation has maintained the same shareholder dividend payments for 2020 and 2021 as it did in pre-pandemic 2019. It accomplished this thanks to the corporation’s diversified business model of rail and property assets combined with the proactive steps of its financial management team at the outset of the pandemic. MTR’s low-

carbon railway is the backbone of Hong Kong’s public transport, supporting over four million daily journeys with world-class standards of safety and timeliness. The railway connects all 18 districts in Hong Kong and offers direct service to 58 destinations in mainland China. Based on the expertise accumulated in Hong Kong, MTR has established railway services in Beijing, Hangzhou, Shenzhen, Macau, Melbourne, Sydney, London and Stockholm. MTR’s property portfolio — 14 station-adjacent shopping malls, more than 1,500 station shops and over 100,000 managed

residential units — allows the corporation to maintain high-quality railway services while achieving fiscal objectives in a responsible and sustainable manner. The focus going forward will be on enhancing ESG performance and spurring socio-economic community development by investing $12.8bn (HK$100bn) over the next ten years into new railway and property projects. The CFI.co judging panel salutes the forward-thinking perspective of MTR Corporation, the 2021 Best Public Service Financial Management Team (Hong Kong) award winner.

> AIA INSURANCE LANKA LIMITED: BEST LIFE INSURANCE COMPANY SRI LANKA 2021

AIA Insurance Lanka is part of AIA Group which has a history of over 100 years of helping people live healthier, longer, better lives, across 18 markets. In Sri Lanka the company has been delivering on this promise for over three decades and has established itself as one of the leading life insurers in the industry. AIA are driven by the brand purpose of helping people live healthier, longer, better lives and were instrumental in changing the ‘you die- we pay’ model of life insurance, to partnering people to help them live life. This purpose has resulted in AIA Sri Lanka becoming a game changer in the insurance industry. With the introduction of their ‘health and wellness solutions’, the insurer no longer provides customers with just ‘products’ but also ‘propositions’; an entire eco-system of wellbeing solutions that helps them get and stay healthy. For example, AIA was the first insurer to introduce telemedicine services to customers in Sri Lanka, even before the pandemic. They also offer free consultations with wellness specialists online, not to forget the virtual fitness platform offered to customers, free of charge. At the end of the day, customer’s health and 106

wellbeing is at the core of the company’s focus. AIA Sri Lanka is also revolutionizing digital transformation in the industry, which inevitably, positively impacts their customer service. Their objective is to make life easy for the customer and they are not afraid to utilize technology to enable that. As part of a multinational giant, AIA has a leading edge when it comes to leveraging on technologies and best practices. This has helped them launch many innovative industry firsts in Sri Lanka including Robotic Process Automation, the new and sophisticated, fully automated and integrated IVR (Interactive Voice Response) system to the Inbound Call Care Centre, and the all new MyPos that uses cutting edge technology to provide their Distribution function everything they need to make a sale, in a single app. AIA Sri Lanka has always maintained a prudent approach to financial management of the Company, and this holds them in good stead during times of external shocks. They judiciously manage their investments, to generate attractive risk commensurate returns and continue to concentrate their portfolios in government securities and high-quality instruments issued CFI.co | Capital Finance International

by the top credit quality banks in the country. These have resulted in the Company reporting a regulatory capital adequacy ratio of 488% as at end 2020, which is four times the required capital adequacy ratio stipulated by the regulator and is the highest in the industry. This means the company can always deliver on their promise to customers, even in the face of a global crisis. In fact, they have a track record of delivering above promised customer dividends for the past 30 years. In 2021, AIA Sri Lanka was recognized as a Best Workplace in Sri Lanka for the ninth consecutive year and was also adjudged the Best Workplace for Women in Sri Lanka for the fourth straight year, by the Great Place to Work Institute®. Not to forget for the first time AIA Sri Lanka was recognised as a Best Workplace in Asia list – Large Category and as a Best Workplace for Millennials in Sri Lanka. Most recently they were also recognised as one of the top 10 women friendly workplaces by Satynmag.com and CIMA Sri Lanka. The CFI.co judging panel presents AIA Insurance Lanka Ltd with the 2021 award for Best Life Insurance Company (Sri Lanka).

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> CREDIT SUISSE: BEST PRIVATE BANKING SERVICES ISRAEL 2021 Based out of Tel Aviv, Credit Suisse has been providing private banking services to local Israeli clients since 2007. And as was the case in 2008-09, its local Relationship Managers have been anticipating and acting on clients’ needs during the current crisis. This personalised service combined with over 160 years of global expertise makes Credit Suisse’s private banking a standout in Israel and the Middle East region. In addition to its broad range of private banking solutions, Credit Suisse also offers private clients wealth management, investment services, and personalised lending services including real estate, aviation, and yacht financing. This is on top of its timehonoured commitment to strict bank-client confidentiality and its high Swiss standards. It is no wonder that Credit Suisse has become

the private bank of choice for many of Israel’s over 130,000 millionaires. Credit Suisse Israel also has a special commitment to the growing number of successful tech entrepreneurs in the country. Credit Suisse can provide them with a complete package covering both their company and private banking. It even organises networking and innovation forums. Credit Suisse is committed to growing its local operations alongside its local clients while also continuing to provide access to its worldwide network of research and advisors. Credit Suisse offers the best of both worlds. The CFI.co judging panel commends the bank’s ability to evolve with local clients’ needs and is pleased to present Credit Suisse with the 2021 award for Best Private Banking Services (Israel).

> YLG GROUP: MOST RESPONSIBLE GOLD EXPORTER ASIA 2021 Gold has been a cornerstone of commerce from the earliest civilisations. Since the minting of the first rude coins, the precious element has been the basis of trade across the planet. But this most ancient of industries is undergoing rapid change. The YLG Group of Thailand, established in Bangkok as the Yoo Lim Gold Factory only 20 years ago, has understood that speed and adaptability are the keys to success. The company, today the leading importer and exporter of gold bullion in Thailand, prides itself on reacting quickly to the needs of clients. YLG has established a secure online trading platform for the trading of bullion, and provides gold futures brokerage services for Thailand’s Futures Exchange Market (TFEX). It also runs a 24-hour online platform for gold

investment. YLG has developed a one-stop solution for gold trading and investment, employing a team of experts to offer advice to clients across all sections of its business. The company also employs goldsmiths, designing and manufacturing a range of high quality jewellery. Every piece of work meets internationallyrecognised standards. YLG is expanding internationally, having established, at the invitation of the Singaporean government, operations to help Singapore become an international hub in the gold trade. In recognition of the company’s dedication to quality and service, the judging panel has no hesitation in presenting the YLG Group the 2021 award, Most Responsible Gold Exporter Asia.

> VARUN BEVERAGES LTD: BEST FMCG CORPORATE GOVERNANCE INDIA 2021 In the world of fast-moving consumer goods (FMCG) there can be few success stories as impressive as Varun Beverages Ltd (VBL), a humble family business which has grown to become one of India’s top performing companies. VBL is the second largest franchise holder in the world, outside the US, for PepsiCo, producing and distributing a wide range of soft drinks throughout most of India. It also holds PepsiCo franchises for Nepal, Sri Lanka, Morocco, Zambia and Zimbabwe. It’s operations span across 27 States and 7 Union Territories in India and 5 other countries across the world. The Company is serving more than 1.35 billion customers and has more than 2 million retail outlets with strengthening infrastructure of more than 90 depots, 1,500 primary distributors & 2,500 owned vehicles. Further, it has 37 stateof-the-art production facilities and employs more than 10,000 people. Founding Non Executive Chairman Mr. Ravi Kant Jaipuria

believes VBL’s success is firmly based on its employees, many of whom have been with the company for decades. He says the contribution of workers who produce the goods, and those who go out and sell to millions of customers is incalculable. Employees are encouraged to adopt the company’s mantra – concentrating on delivering consumer value with integrity and passion. VBL has seen a strong resurgence following India’s lockdowns, exceeding prepandemic levels, as the market improves at a faster than anticipated rate. VBL constantly monitors changes in consumer preferences, and is expanding its nutritional wing, having introduced product innovations, including zero-calorie drinks, energy drinks, and ethnic flavours, demonstrating the company’s innovative approach and forward-thinking. The judging panel, in 2021, is pleased to present Varun Beverages, for the third consecutive year, the award Best FMCG Corporate Governance India. CFI.co | Capital Finance International

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> LA TROBE FINANCIAL: BEST INVESTMENT MANAGEMENT TEAM AUSTRALIA 2021

La Trobe Financial is an Australian investment manager and financial services provider that consistently earns the highest ratings from the country’s independent fund ratings agencies. The firm has been in operation since 1952; it now serves 70,000 investors and manages $13bn in assets. The team is united by a commitment to make positive impacts, helping people to build wealth while contributing towards a sustainable future. La Trobe Financial offers a range of investment, financing and insurance solutions. It has seen significant growth over

the past 12 months, with AUM up by 36 percent. La Trobe Financial has managed to outperform the benchmark for its flagship strategy against the challenging backdrop of the global pandemic. La Trobe Financial has a proud track record of fiduciary responsibility, having never lost a cent of investor capital nor missed a monthly distribution of interest income. The firm has launched two new offerings — a six-month notice account and a two-year account — in response to strong investor demand. The six-month notice

account invests in mortgage assets, Australian cash and other credit instruments, while the two-year account focuses on registered first mortgage loans with low volatility. La Trobe Financial is a Blackstone portfolio company, a leading investment firm with $731bn in AUM. The company and its leadership have been repeatedly recognised in industry awards programmes. The CFI.co judging panel adds its own accolade, announcing La Trobe Financial as the 2021 Best Investment Management Team (Australia) award winner.

> CHUNGHWA TELECOMS: BEST TELECOM HOLDING GOVERNANCE ASIA 2021

Chunghwa Telecoms, the largest integrated telecom service provider in Taiwan, describes itself as a pioneer of smart living, and an enabler of the digital economy. In the fast-moving world of communications technology, the Taipei-based company, which employs more than 20,000 people in Taiwan, works hard to stay at the cutting edge. The business celebrated its 25th anniversary in 2021. Today, Chunghwa Telecoms has the highest market share in terms of revenue and subscribers in the sector, outperforming its rivals in mobile speed and coverage. It operates its own

satellites and runs the largest network of undersea cables, linking locations around the world. The company is currently expanding its 5G network with the aim of achieving 80 percent population coverage, focussing on areas of high business demand, particularly universities, industrial parks, and tourist hotspots. Chunghwa believes 5G will enhance the competitiveness of Taiwan businesses, and will create a digital transformation in industrial ecosystems and smart-city applications, generating new business opportunities. Chunghwa works to establish a corporate culture of ethical

management, adopting a series of business principles which cover areas including a strict prohibition of unethical conduct. Indeed, the company has issued its own “guidelines for conduct” document to clearly define areas of risk, covering everything from bribery to conflicts of interest among directors and managers. The company abides by philosophies of honesty, transparency and responsibility, creating an environment for sustainable development. The CFI.co judging panel, in 2021, is pleased to present Chunghwa Telecom with the award Best Telecom Holding Governance Asia.

> SATURNA: BEST SUSTAINABLE FUND MANAGER MALAYSIA 2021

After a meeting with Islamic scholars in 1984, Saturna founder Nick Kaiser began to build a longterm, values-based, socially responsible and shariahcompliant investment portfolio in Washington State, USA. The Amana Income Fund became operational in 1986, Sextant Growth Fund followed the next year and Saturna Capital was incorporated in 1989 — making the group responsible for some of the earliest Islamic funds in the world. Amana has a track record of double-digit growth. Saturna started its operation in Kuala Lumpur in 2010. Saturna Sustainable Funds launched in 2015, 108

and the Clean Shares scheme was introduced in 2017. Saturna’s sustainable equity and bond funds target larger, more established, worldwide issuers with stable profits and low ESG risks. Shariah principles and ESG considerations are some of the most important filters applied by Saturna asset managers. They conduct due diligence on all investment opportunities, with in-depth research into geopolitical developments, industry and technology trends, market conditions and leadership teams. It bets on companies with strong ESG performance, with the conviction CFI.co | Capital Finance International

that this correlates with more proactive risk management, higher resilience and greater contributions to the global economy. Saturna is proud to operate on a profit-sharing system, where clients pay no up-front fees, and everyone earns when performance is up. The team is now helping to accelerate Shariah and ESG investing throughout the region and in GCC countries. It has launched the first global Shariah ESG equity fund in Jakarta. The CFI.co judging panel declares Saturna as Best Sustainable Fund Manager (Malaysia) 2021.

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> IDFC FIRST BANK: BEST SUSTAINABLE BANKING STRATEGY INDIA 2021 IDFC FIRST — born from the merger of IDFC Bank and Capital First in December 2018 — validates the theory that the whole is greater than the sum of its parts. It has built a business focusing on customer experience, solid corporate governance and preparedness. During its first financial year as a newly integrated entity, retail liabilities grew by 157 percent and retail loans were up 40 percent. Its net-interest margin rose from 1.56 percent (premerger) to 4.24 percent in Q4 FY 2020 — which is indicative of a strong Indian bank. IDFC FIRST serves clients from all walks of life — salaried and self-employed, small businesses and micro-enterprises — through an extensive national network and digital platform. The bank prioritises underserved segments and first-time borrowers. IDFC FIRST Bank takes pride

in bringing more people into the financial mainstream and deploys analytics-backed credit risk assessments to expand lending capabilities. The bank ensures sustainable growth for present and future generations by rooting operations in responsibility, ethics, transparency, technology and human resources. It invests in digital technologies that increase customers’ convenience and reduce the bank’s carbon footprint. IDFC FIRST contributes to the creation of sustainable communities through CSR initiatives promoting education, skill and livelihood training, healthcare and hygiene, financial literacy and inclusion. IDFC FIRST Bank has attracted the attention of the CFI. co judging panel in several past awards programmes. This year the jury names IDFC FIRST Bank as 2021 winner of the award Best Sustainable Banking Strategy (India).

> HAMRAA INSURANCE: BEST INSURANCE COMPANY IRAQ 2021 Founded in 2001, Hamraa Insurance relies on a process of continuous improvement for the benefit and surety of customers. The Iraqi market can be challenging, but Hamraa Insurance has found it to be full of opportunity and receptive to change. As pandemic restrictions eased and motorists worldwide took back to the streets, Iraq’s oil-centred economy has seen increased activity, leading to a jump in cargo and construction business. Hamraa Insurance has expanded its market reach significantly, serving local and international clients — individual, corporates and NGOs — with a range of plans that lend peace of mind. It strikes a balance between highest-quality services and lowest costs. Insurance products are optimised for ever-evolving regional circumstances, with coverage plans for life and annuities, health and medical,

vehicle, aviation, financial reinsurance, guaranteed asset protection, marine and shipping, travel, liability, professional liability, property, casualty and group insurance. Hamraa Insurance has been very active over the past year and has seen a significant improvement in its financial figures. It has moved into the microinsurance business, signed a deal to arrange bank assurance products and launched a new project for the medical industry. Hamraa is a leading health insurer in Iraq. A solid financial base and dedicated team ensure the company is well-prepared for competition. Hamraa Insurance is rolling out the welcome mat for top global re-insurers to explore the domestic market. The CFI.co judging panel presents Hamraa Insurance — a repeat winner — with the 2021 award Best Insurance Company (Iraq).

> KASKO: MOST PROMISING INSURTECH START-UP UK 2021 Founded in 2015, Kasko is helping to usher in Insurance 3.0 with its “Insurtech as A Service” model. It offers traditional insurance companies a white label API platform to build and distribute new products faster, more cheaply, and widely. Speed, flexibility, and an omni-channel presence are essential in capturing a larger share of millennials. Currently, insurance companies can take up to 18 months and €500,000 to develop a new product using legacy IT systems. With Kasko, it only takes around four to six weeks and €50,000. Kasko’s ingenious platform allows insurers to build, test, tweak, and launch a product. And products built using the system cover the whole customer journey from digital quotes to policy documents, administration

and capturing the first notification of loss. Kasko began as a B2C startup but has found a more profitable niche in the B2B2C space. The CFI.co judging panel commends the company’s innovation in both product and product-market fit. Kasko’s success can be attributed to a rare mix of entrepreneurs, tech engineers, and insurance specialists among its founders. Nikolaus Sühr had over ten years of prior experience in the insurance and consulting industries while Matthew Wardle had spent over ten years in tech start-ups and IT consulting. The CFI.co judging panel is impressed by what Kasko has achieved and looks forward to witnessing its future growth. It is pleased to present Kasko with the 2021 award for Most Promising InsurTech Start-up (UK). CFI.co | Capital Finance International

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> ABU DHABI GLOBAL MARKET: BEST INTERNATIONAL FINANCIAL CENTRE EMEA 2021

Abu Dhabi Global Market (ADGM) celebrated its sixth anniversary in October. Located on Al Maryah Island, the international financial centre and free zone has experienced strong growth over the past year: ADGM AUM is up by 148 percent, from $29bn to $75bn, and the island’s workforce is growing, with some 3,450 registered and licenced businesses employing 17,185 professionals. The UAE is ranked one of the most politically and economically stable countries, and its capital city Abu Dhabi is a global business hub with a vibrant social scene. Businesses considering international

expansion or relocation can register at ADGM and operate in a tax-friendly free zone with exemption on import, export, corporate and personal taxation. ADGM promises easy setup for new businesses, with streamlined and fully digital processes for registration and commercial licensing. Three independent authorities — the Registration Authority, the Financial Services Regulatory Authority and ADGM Courts — are responsible for ensuring that ADGM operates according to international best practice and English common law. The financial centre enacts positive change

throughout its actions and brings positive impact via collaboration at local, regional and international level. ADGM is committed to creating a sustainable finance ecosystem, supporting gender equality and increasing financial education. The ADGM Academy offers training programmes, school courses, conventions, webinars, career counselling and research assistance throughout MENA. The CFI.co judging panel declares Abu Dhabi Global Market the winner — for the third consecutive year — of the award Best International Financial Centre (EMEA, 2021).

> LINKLEASE: MOST INNOVATIVE SME EQUIPMENT LEASING SOLUTIONS UAE 2021

Linklease continues to strive to close the financing gap for SMEs with equipment leasing solutions that free-up cashflow, enhance operations and unlock growth. Linklease tailors leasing agreements for clients who need equipment and those who want to liquidate assets and lease them back. It also offers inventory management services with GPS tracking and RFID tagging technology, to enable SMEs to monitor and control valuable equipment. Over the past 8 years, Linklease has expanded its SME asset-based financing

model, connecting smaller businesses looking for leasing options with investors seeking fixedincome bonds. Linklease announced its third bond in October 2021. The first two bonds, issued in December 2018 and July 2020, have delivered on-time and with full payments to investors — a testament to the consistent cashflow in the Linklease business model. The bond programme provides Linklease with capital for new deals across various industries: clean energy, healthcare, transport, manufacturing,

construction and logistics. The company is launching an app to allow investors to explore practical ownership opportunities of returngenerating equipment. It would allow them to own a slice of an MRI machine or the wheel of a private jet. Linklease is looking to implement a club format for private jet travel as demand for this service is up 450 percent in the Middle East. The CFI.co jury presents repeat winner Linklease with the 2021 Most Innovative SME Equipment Leasing Solutions (UAE) award.

> KUWAIT INTERNATIONAL BANK: BEST BANKING VISION MENA 2021

Kuwait International Bank (KIB) traces its origin back to an incorporation in 1973 and the former name Kuwait Real Estate Bank. The bank has grown supported by strong leadership, a solid governance structure and a dedicated team. KIB has established a strategic banking network offering service points through numerous ATMs and branches. Corporate and individual clients can access services through KIB’s digital banking platform or the telebanking service, which allows users to access information via interactive voice response and connect to an 110

agent whenever necessary. KIB offers a full suite of banking services, from credit cards and real estate to Shariah-compliant accounts. Clients earn cashback reward points when using KIB credit cards. Business clients appreciate KIB’s e-payments gateway, which offers a convenient and secure platform for e-commerce activity. KIB’s digital banking app, which is available for Apple, Android and Windows smartphones, gives clients anytime-anywhere control over their accounts. The bank has expanded its technological base to meet the needs of the CFI.co | Capital Finance International

contemporary consumer, adding visual-interface capabilities and instant card issuance at select branches. KIB is a public-quoted company that aims to become a catalyst of socio-economic development for the country and its people. The company first registered on the CFI.co radar in 2015 for its client-centric product range and exceptional ethical standards. KIB has placed every year since in the CFI.co awards programme, with the judges commenting on its high-growth track record. This time KIB claims the 2021 award for Best Banking Vision (MENA).

Winter 2021-2022 Issue

> TAWUNIYA: OUTSTANDING CONTRIBUTION TO SOCIAL IMPACT KSA 2021 Founded in 1986, Saudi Arabia’s Tawuniya has built a diversified portfolio of shariacompliant cooperative insurance products and services to best serve the needs of individuals, SMEs and corporates. It offers a range of insurance products, including medical, motor, property and causality coverage. It also offers takaful insurance, wherein members contribute money into a pool system to collectively guarantee against loss or damage in accordance with Islamic law. Tawuniya has solidified its leadership position, ranking among the top three insurers in the MENA region, by focusing on customer-centricity, organic growth and regional expansion. It aims to become the largest insurer in the MENA region by 2025. The CFI.co judging panel has followed the insurer’s progress closely and was pleased to note its continued

community contributions. The company increased the ratio of Saudi employees to 84 percent in 2020, with women holding more than half of those positions. Tawuniya considers the communities where it operates as both catalysts and collaborators for sustainable development. It continued to support Saudi society in the fight against Covid, donating $266,666 (one million Saudi riyals) through the Ihsan platform, which was launched by SDAIA “Saudi Data and Artificial Intelligence Authority” to facilitate charitable giving. It has also participated in global campaigns to promote healthy lifestyles, from anti-smoking and blood donation to gender empowerment and childhood cancer. The jury presents Tawuniya, a repeat programme winner, with the 2021 award for Outstanding Contribution to Social Impact (KSA).

> ICBC DUBAI (DIFC) BRANCH: BEST DEBT MARKET SOLUTIONS GCC 2021 Industrial and Commercial Bank of China Limited (ICBC), a top-ranking global bank founded in 1984, has been strengthening ties with the Middle East over the past 14 years. The bank serves client needs through a comprehensive network of domestic and international branches, including five in the Middle East, the star of which is located in the Dubai International Financial Centre (DIFC). The economic free zone connects corporate and finance clients from around the world in a business-friendly tax environment. ICBC Dubai (DIFC) Branch is proud to play a part in the development and growth of the region’s debt market. The bank first began to participate in the GCC bond market in 2014, launching a $3bn CD programme which was then increased to $6bn

in 2018 and $8bn in 2020. ICBC Dubai (DIFC) Branch ranks as one of the largest investors, settlers and market makers in the GCC and China Inter-bank Bond Market. It has upped CIBM investments by more than 100 percent over the past four years and been recognised in consecutive awards programmes as an outstanding overseas institution for money markets and foreign exchange trade. The branch has achieved tremendous growth since its inception, due in part to the team’s expertise in bond investments. In 2021, its GCC bond investments increased by 20 percent over the previous year. The CFI.co jury presents repeat winner ICBC Dubai (DIFC) Branch with the 2021 award for Best Debt Market Solutions (GCC).

> KUWAIT INTERNATIONAL BANK: BEST SHARIA-COMPLIANT BANK MENA 2021 Kuwait International Bank (KIB), incorporated in 1973, is an Islamic-aligned financial institution with a strong digital backbone. The bank has been operating according to Islamic law since 2007. It refers to a panel of Islamic scholars on matters of Sharia compliance and a team of IT specialists on matters of tech innovation. KIB offers a full suite of banking services, from credit cards and real estate to treasury services and direct investments. Murabaha accounts provide Sharia-compliant financing solutions to purchase vehicles, real estate and commodities. An Islamic deposit account offers competitive profit and FX spot rates in KWD, USD, GBP and EUR. KIB’s “Ijara Muntahia Bittamleek” is a Sharia-compliant lease-to-own solution. KIB is a bank that leads by example, promoting honest and ethical conduct in all

dealings to assure compliance with regulatory requirements and Islamic principles. It engages with stakeholders and publishes transparent disclosures and timely reports. It adheres to international standards on due diligence and anti-money laundering. It has cultivated a corporate culture where each individual’s integrity and dignity are valued. KIB is proud to provide Sharia-compliant business services that support the Kuwaiti society and economy. The public-quoted company has placed in the CFI.co awards programme on numerous occasions, with the judges commenting on a balance between upholding traditions and spurring innovation. This year makes KIB one of the programme’s most winning participants, as the judges present Kuwait International Bank with the 2021 award for Best Sharia-Compliant Bank (MENA). CFI.co | Capital Finance International

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> SOCIÉTÉ GÉNÉRALE GUINÉE: BEST BUSINESS BANK GUINEA 2021

Société Générale Guinée has a 35-year history as a catalyst of socio-economic development in Guinea. It’s a subsidiary of the Societe Generale group and the oldest fully private financial institution in Guinea. A 28-branch nationwide network and modern digital platform ensure clients are never far from assistance. The bank works with a range of local and international individuals, entrepreneurs, businesses and associations, providing the financial services that help to improve quality of life and reach goals. Société Générale Guinée is more

concerned with financial inclusion than profits. It makes every effort to bring more people into the financial fold, convinced that together, we all grow. Guinea has many mineral resources, and mining has long been an important part of the national economy. Société Générale Guinée relies on mobile banking to serve the majority in this sector. Mobile banking clients appreciate the ability to access accounts, transfer money and pay invoices — all from the palm of the hand. Société Générale Guinée provides business accounts in local and

foreign currencies as well as business checks and a Visa credit card. It also offers treasury services, bond issuance, financing and savings solutions. Société Générale Guinée publishes useful information on its website for new entrepreneurs and organisations about the tax structure and legal requirements in Guinea. The CFI.co judging panel presents Société Générale Guinée, a bank anchored in the values of responsibility, engagement and team spirit, with the 2021 award for Best Business Bank (Guinea).

> CHARME CAPITAL PARTNERS: BEST MID-MARKET GROWTH EQUITY PARTNER EUROPE 2021

> BIAT: BEST BANK GOVERNANCE TUNISIA 2021

BIAT (Banque Internationale Arabe de Tunisie / International Arab Bank of Tunisia) has grown through a series of strategic partnerships, mergers and acquisitions since its launch in 1976. The universal bank has diversified its offering and established subsidiaries to provide insurance, asset management, private equity, stock market intermediation and advisory services. BIAT deploys a workforce of 2000 employees to serve individual and corporate clients through 205 branches. The bank is led by an experienced board of directors and supported by strategic supervisory committees, 112

including those for compliance, audit and risk. All employees understand that compliance — the adherence to legal and ethical mandates — is a daily priority. The compliance committee has an independent structure that affords the autonomy to manage risks and reports directly to the CEO and board. Another independent entity oversees anti-money laundering prevention, mainly via IT tools and personnel training. BIAT goes beyond mere compliance requirements to fulfil a deeper imperative as a force for good. It established the BIAT Youth Foundation in 2014 to CFI.co | Capital Finance International

consolidate its CSR efforts around education, culture and entrepreneurship. BIAT supported local communities during the pandemic by donating $6.6m to the Ministry of Health fund, organising relief initiatives through the foundation and implementing strict measures onsite to protect employees and clients. It extended a lifeline to businesses affected by Covid, giving them the necessary credit to survive the storm. The CFI.co judging panel presents repeat programme winner BIAT with the 2021 award for Best Bank Governance (Tunisia).

Winter 2021-2022 Issue

> L CATTERTON EUROPE: BEST CONSUMER GROWTH INVESTOR EUROPE 2021 L Catterton is a leading global alternative asset manager specializing in growth investments in the consumer sector. The firm was established as a partnership in 2016 between Catterton, a US-based private equity firm, and luxury goods conglomerate LVMH / Groupe Arnault. The move combined Catterton's private equity operations in the Americas and the private equity and real estate operations of LVMH and Groupe Arnault in Europe and Asia. L Catterton has made over 250 investments since its inception in 1989 and now manages more than $30bn in equity capital. It operates in 17 locations across five continents — and L Catterton Europe plays an integral part in that network. L Catterton Europe's welldefined and disciplined investment process is highlighted by its differentiated deal sourcing and portfolio management capabilities. From its offices in London, Paris, and Milan, a team

of experienced investment managers and operational specialists works with brands to help them enhance operations, forge partnerships, expand human capital, and foster growth. L Catterton Europe puts its resources to work for its portfolio companies, helping them to improve supply chains, optimise manufacturing capabilities, and trim operational costs. They also benefit from the firm's global network of industry experts, lending institutions, consultants, and recruiters. The portfolio covers a wide range of sectors, from retail, healthcare, and marketing to pets, tourism, and restaurants. L Catterton backs innovators using technology to disrupt consumer categories. It bets on service providers working to solve real problems in consumers' lives. The CFI.co judging panel announces L Catterton Europe as the 2021 award winner for Best Consumer Growth Investor (Europe).

> BIAT: BEST DIGITALISATION STRATEGY NORTH AFRICA 2021 BIAT (Banque Internationale Arabe de Tunisie / International Arab Bank of Tunisia) is a universal bank and diversified financial services group with subsidiaries in insurance, asset management, private equity, stock market intermediation and advisory services. BIAT stays abreast of the technology that will benefit business efficiency and client satisfaction. The bank is currently beta-testing an online banking application. The app is available upon request through an evaluation platform that solicits feedback from clients. The bank has published a user’s guide to provide beta-testers with step-by-step instructions about the app, which gives clients an overview of their accounts and allows them to make transfers, load funds on prepaid cards and lock or unlock credit cards. The app is

expected to go live for all BIAT clients in early 2022. A corporate version of the app is scheduled for launch in early 2023. Digital transformation is a key component of BIAT’s growth strategy. The bank is evolving along with the population, as smart devices and data packages redefine the boundaries between financial service providers and their customers. This new platform will integrate BIAT’s mobile and web applications into one convenient and secure tool that has been designed according to customer suggestions and international tech standards to provide increased access and facilitate remote operations. The CFI.co judging panel unanimously selects BIAT, a repeat programme winner, in the award category for Best Digitalisation Strategy (North Africa).

> PRESTIGE IFA RECRUITMENT: BEST WEALTH MANAGER RECRUITMENT SERVICES UK 2021 Founder Daniel van Niekerk has walked the talk. Prior to founding Prestige IFA Recruitment, he worked as an international financial advisor in several locations around the globe. This provided him with a valuable insider perspective on recruiting analysts for wealth management companies and managing talent. He brings a wealth of industry contacts to the table. But above all, the CFI.co judging panel is impressed by the force of his personality. Recruiting is a people game, and Daniel’s warm but direct personality is a refreshing asset for both analysts and wealth management companies. He is unafraid to give unvarnished advice and loves helping analysts take their careers to

the next level. In wealth management scenarios, he drills down to find the right candidate rather than just a suitable one. He always keeps company needs in mind when identifying impeccable candidates, even if those employers are not currently looking for new talent. He is unafraid to take creative approaches to finding the right individual. With an international presence and a strong team, Daniel and Prestige have continued to help their clients get results during the current crisis. They are to be applauded for consistency and excellence. It is with great pleasure that the CFI.co judging panel presents Prestige IFA Recruitment with the 2021 award for Best Wealth Manager Recruitment Services (UK). CFI.co | Capital Finance International

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> KATHREIN PRIVATBANK:

BEST PRIVATE BANKING SOLUTIONS AUSTRIA 2021

Modern organisations are keen to display their sustainability credentials, but not many have planted a whole forest. That’s exactly what the Austrian bank Kathrein Privatbank has done. The bank believes that life is about more than financial wealth – it’s about people and their stories, it says. Kathrein Privatbank is one of the leading private banks in the Germanspeaking region, providing investment advice and asset management for families, businesses and entrepreneurs. It still operates from the same building in the heart of Vienna where, in

1924 at the height of a turbulent and uncertain economic period, Carl Kathrein founded his bank. In 2012 the bank established sustainable investment as a portfolio priority. Today its wealth management focus is rooted in sustainability. The bank tailors investment plans to customers’ personal requirements, regularly reviewing strategy and goals, with a network of experts available to give advice and support. Its green investment strategies are closely aligned to the values of customers. Kathrein Privatbank believes that responsible business practices

contribute to a better outlook and a higher quality of life for future generations. Today the bank offers a broad portfolio of products, driven by customer demand. Kathrein Privatbank is so committed to sustainability that in 2020 it launched its “Corporate Forest” initiative planting 3,150 trees in Togo, West Africa. In 2021, in recognition of the bank’s continuing pursuit of customer service, and for the third consecutive year, the judging panel is pleased to present Kathrein Privatbank with the award Best Private Banking Solutions Austria.

> SaarLB: BEST CROSS-BORDER SUSTAINABLE BANKING STRATEGY FRANCE/GERMANY 2021

SaarLB is a Franco-German regional bank with deep roots and specialised cross-border expertise. The SaarLB network includes headquarters in Saarbrücken and offices in Koblenz, Mannheim and Trier, Germany, as well as two branches in France — Strasbourg and Paris — and a three expected in Lyon within this year. The Saarland state, which is the main shareholder of SaarLB at 75 percent ownership, is right on the French border. This regional proximity is reflected in SaarLB staff, many of whom are bilingual with academic and professional experience in

both countries. SaarLB has 516 employees and reported total assets in 2020 totalling €15.15bn. SaarLB specialises in cross-border financial services for SMEs, corporates, commercial real estate, renewable-energy project financing, municipalities, institutional investors and high-net-worth individuals. The integrated offering is spread across a mixed portfolio of French and German business — with a strong concentration in renewable energies. SaarLB is a leading provider of structured project financing for German and French SMEs. It issues green bonds to fuel

renewable-energy expansion and contribute towards climate-protection goals. It finances wind and solar energy projects, helping to balance the global energy mix by increasing the supply of renewables and decreasing CO2 emissions. It publishes an annual sustainability report and hires an independent company for a second-party opinion. Over its 80-year existence, SaarLB has endeavoured to be an engine of sustainable economic growth. The CFI.co judging panel presents SaarLB with the 2021 award for Best Cross-Border Sustainable Banking Strategy (France/Germany).

> VIA OPTRONICS: BEST TECHNOLOGY INNOVATION VALUE CREATION STRATEGY GERMANY 2021

Digital displays are a ubiquitous part of modern life. VIA optronics has developed a patented optical bonding process and is using state-of-the-art technology to create customised display, touch panel and camera solutions for clients worldwide. Headquartered in Nuremberg, the company has production facilities in Germany, China and Japan, sales subsidiaries in Taiwan and the US as well as a subsidiary for design and development of camera solutions in the Philippines. VIA optronics has a global workforce 114

of 800 employees, including R&D. The company tailors solutions to each project’s needs, working with clients in the automotive, consumer electronics, and industrial markets. VIA optronics uses a proprietary silicon-based bonding material — that’s strong and durable — and copper-mesh touch-sensor technology to create displays and systems for high-demand applications, including extreme temperatures, bright sunlight and harsh environments. The company’s displays are easy to read even in bright sunlight and are rugged enough for rough environments. The company is a strategic partner of CFI.co | Capital Finance International

Corning, a materials science pioneer and glass manufacturer, for solutions leveraging Cornings Coldform™ Techology for automotive interior displays. VIA optronics has a growth strategy centered on continued investments in research and development to further enhance its solutions. The CFI.co judging panel points to the company’s next-generation technology, multidisciplinary team and farsighted management as factors in the selection of VIA optronics as the 2021 award winner for Best Technology Innovation Value Creation Strategy (Germany).

Winter 2021-2022 Issue

> ARTICO PARTNERS: BEST SUSTAINABLE EQUITY FUND MANAGER SWITZERLAND 2021 ARTICO Partners has built a diversified portfolio with high outperformance probability by systematically investing in companies with superior fundamentals. The firm looks for companies with stronger ESG performance, faster growth, higher profitability, healthier balance sheet and lower valuation. It processes incoming company data on a daily basis, translating characteristics into fundamental scores to maintain an updated company ranking list. ARTICO Partners developed its own ESG scoring system after finding mixed evidence for the predictive value of raw data. The firm starts with available ratings from the MSCI database, which is known for its broad coverage and institutional standard. It then assigns a proprietary adjusted ESG score. ARTICO believes its ESG scoring system could have contributed to outperformance in global core and emerging markets from

2012 to 2019. ARTICO portfolios and funds achieve admirable ESG and sustainability ratings — AA — and are Paris-aligned with a lower carbon footprint. The funds are managed by a team of experienced partners who co-invest alongside clients, ensuring interests remain aligned. This means that investment decision-makers share in all impacts and consequences, whether positive or negative. The five-man team harnesses 120 years of collective experience to conduct proprietary research supporting investment and risk management. ARTICO’s sustainable equity funds, which cover the global equity universe, have a track record of beating benchmarks — and indications point to that trend continuing. The CFI.co judging panel presents repeat winner ARTICO Partners with the 2021 award for Best Sustainable Equity Fund Manager (Switzerland).

ARTICO Partners Investing in Good Companies

> FONDO PENSIONE NAZIONALE: BEST PENSION FUND GOVERNANCE ITALY 2021 Fondo Pensione Nazionale BCC (FPN) is an Italian second-pillar pension fund that’s raising the bar for responsible investing. Unlike most second-pillar peers, FPN has invested in a broad spectrum of alternative asset classes, including 13 new alternative investment funds in 2020 focused on private equity, private debt and infrastructure. Real estate and photovoltaic solar assets feature in that mix. FPN became the first Italian pension fund to publish a sustainability report in 2019. It released a follow-up edition the next year. FPN engages with investees to promote the establishment, monitoring and reporting of ESG strategies. It has made significant contributions in the green investments field, exercising its influence to inspire others. FPN now manages 97 percent of assets in line with an ESG policy, and a dedicated ESG

team oversees more than half of FPN assets. It aims to increase sustainability coverage for the scheme's assets to 100 percent with a full-time ESG department to monitor and mediate. The pension fund began its sustainability journey ahead of any regulatory mandates, following instead its own internal compass and international best practices. FPN general manager Sergio Carfizzi was recently named an ESG forerunner at Pension & Investments’ 2021 WorldPensionSummit in The Hague. FPN was also honoured there the preceding year, in the category of innovative investments. The CFI.co judging panel adds another accolade to the list, presenting repeat programme winner Fondo Pensione Nazionale with the 2021 award for Best Pension Fund Governance (Italy).

> AUM ASSET MANAGEMENT: BEST SUSTAINABLE SMALL FUND MANAGER EUROPE 2021 AUM Asset Management Ltd. is an independent investment management company that provides investment solutions, asset management, fund management and advisory services to institutional investor and family office clients around the world. AUM Management was founded in 2015 by financier and investor Jean-Francois de Clermont-Tonnerre and has its primary offices in Malta, London and Miami. AUM Asset Management serves institutional investors and family offices, delivering high-value traditional, alternative and real asset investment solutions through the firm's expansive international network in Europe and North America. The firm is domiciled in Malta, in part due to the country's strong sustainability framework created by Maltese regulators. AUM is a results-driven investment manager that seeks consistent growth of clients' wealth, while having a positive impact on the planet and society. AUM's multi-faceted investment approach offers investors access to a diversified set of

strategies, markets, geographies and asset classes in a flexible and nimble investment framework, with the goal of delivering absolute returns and wealth creation over the long term. Investments included in AUM's portfolios are determined by their potential return profile and specific ESG factors. The firm then applies global macro, quantitative, fundamental and technical analyses to their investment theses to provide another layer of informed decision making prior to allocating to their portfolios. Investors are increasingly demanding investment solutions that meet social and environmental factors and deliver positive outcomes for communities and the environment. AUM considers all actions from a sustainability standpoint and takes pride in contributing towards sustainable development through its thoughtful, ESG-centric investment approach. The CFI.co judging panel presents AUM Asset Management with the 2021 Best Sustainable Small Fund Manager (Europe) award. CFI.co | Capital Finance International

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> FITCH RATINGS: BEST CREDIT SERVICES GLOBAL 2022

Fitch Ratings is a leading provider of credit ratings, commentary and research, with a 100-year history of value creation in its coverage markets, which include Africa, Asia-Pacific, Europe, Latin America, the Middle East and North America. In this era of volatility & technological transformation, Fitch provides clarity and insight, enabling its clients all over the world to make better decisions. In addition to ratings, Fitch Group offers courses, qualifications and apprenticeships through Fitch Learning, as well as targeted research and analytics through Fitch Solutions. Fitch Ratings was one of the first agencies to respond to the global pandemic, publishing timely and in-depth COVID-19 related reports to share updated credit views, and providing a dedicated Coronavirus website

with COVID-19 related research, multi-media content and webinars. In 2021, nearly 6 million unique users visited fitchratings.com, a 38% increase year over year. Fitch Ratings’ analytical staff conducted over 16,000 rating committees, and published 31,243 pieces of content, an approximate 15% increase each year. They produced over 15,000 Rating Action Commentaries (RACs) and authored more than 9,500 issuer reports, Non-Rating Action Commentaries (NRACs) and Fitch Wires through 2021. Fitch also held more webinars than any other rating agency; its 438 webinars attracted 36,000 participants. These results have strengthened Fitch’s brand and have driven its business performance even in the face of a challenging global environment.

Fitch Ratings’ focus has, and in our opinion will continue to be, on providing transparent, objective and substantive data that enables confidence in decision-making. Thus, in September 2021, Fitch launched Sustainable Fitch, offering insights, tools and data that have been designed and built entirely and exclusively to help bring clarity to the ESG financial community. This includes the first global ESG Ratings solution for all asset classes at an entity and instrument level built from the ground up to exclusively help the ESG focused financial community make smarter decisions. The CFI.co judging panel has decided in Fitch’s favour in previous awards programmes — and now finds cause to continue another year. Fitch Ratings wins the 2022 Best Credit Services (Global) award.

The British Virgin Islands (BVI) evoke images of pristine beaches and verdant landscapes, but this archipelago is also home to one of the world’s leading offshore financial centres. BVI Finance has promoted the islands’ financial services industry over the past two decades, serving as spokesperson and liaison for new and existing partners in emerging and traditional markets worldwide. BVI Finance maintains a regular presence on the global conference and trade show circuit, engaging with key stakeholders and expounding on the many advantages of doing

business in the islands. The Covid pandemic has prevented most of those events from taking place physically over the past two years, but BVI Finance has maintained momentum by embracing digital channels. It adjusted to complications and moved forward with technical innovation including developing a compelling proposition for FinTech. As a result, it has achieved strong yearly results, with business up by over 60 percent. In some areas, it was the highest growth rate seen over the past three years. The BVI is a self-governing British Overseas Territory with an independent legal

and judicial system based on English Common Law. The jurisdiction boasts an innovative and internationally recognised regulatory regime with a business-friendly operating environment and no taxes on capital gains or withholdings. BVI Finance helps connect global markets and stimulate capital flows, particularly into developing countries. In recognition of the crucial role it plays in the global economy, the CFI.co judging panel presents BVI Finance — a repeat programme winner — with the 2021 global award for Best Offshore Financial Services Centre.

> BVI FINANCE: BEST OFFSHORE FINANCIAL SERVICES CENTRE GLOBAL 2021

> PGM GLOBAL INC: BEST GLOBAL PORTFOLIO STRATEGY TEAM NORTH AMERICA 2021

PGM Global, formerly Pavilion Global Markets, has an annual trading volume of some $70bn and a trading desk that operates around the clock throughout the work week. The company pulls from a 50-year history to provide institutional investors with industry-leading services in securities trading, transition management and global macro research. It conducts unbiased analysis of 35 countries and makes investment calls on a short-term horizon of nine to 12 months. It offers forward-looking, topicfocused research reports, which include four 116

pages of detailed notes and eight informative graphs. On Fridays, it publishes a report called Out of Focus, compiling the research materials that didn’t go into the weekly topical reports. It’s solid timely research, and PGM Global thinks it would be a shame to waste it. PGM Global has some 10,000 charts that it references and updates in real time to conduct global macro research across all asset classes. It focuses on the impacts of macro events on equities, fixed income, commodities and currencies. It also offers bespoke research CFI.co | Capital Finance International

services that have proven equally successful for investment managers and pension funds. PGM’s global macro research team generates market insights that identify risks and opportunities. It combines a top-down, bottomup and quantitative approach to analysis, starting with a global economic overview and then digging deeper to uncover anomalies. CFI.co announces PGM Global Inc, a repeat programme winner, as champion in the 2021 award category Best Global Portfolio Strategy Team (North America).

Winter 2021-2022 Issue

> GOLAR LNG: BEST ESG ENERGY BUSINESS STRATEGY NORTH AMERICA 2021 Golar LNG presents natural gas - cleaner and cheaper than high-polluting fossil fuels like coal - as an ideal transitional energy source for a world moving towards carbon neutrality. Golar is a pioneer in the liquefied natural gas (LNG) market having moved up and downstream along the value chain, starting with the conversion of an older LNG carrier into a floating storage and regasification unit (FSRU) in 2007 and another into a floating liquefaction vessel (FLNG) in 2014. The fleet now includes nine LNG carriers, one FSRU and two FLNGs. Golar also continues to manage and operate the fleet of downstream assets that it sold in April 2021. Golar aims to commoditise and democratise access to cleaner LNG-based energy, taking advantage wherever possible of natural gas that would otherwise be flared or re-injected. Celebrating its 75th anniversary in 2021, the company believes that sustainable value creation will be key to celebrating its centenary. It is constantly evaluating new tech and taking action to accelerate energy-

efficiency and carbon-capture technologies. Golar recovers the heat waste from ships' generators for reuse providing up to 80% of the energy required to run its current FLNG units and has developed a seawater turbine unit for FSRUs that can save up to 5,000 tons of CO2 annually. Repurposing the two LNG carriers into FLNGs is estimated to save over 120,000 tons of greenhouse gas emissions relative to a newbuild of the same specification, equivalent to removing over 25,000 cars from the road for a year. Golar is also investigating the feasibility of marinized hydrogen and ammonia production with a long-standing business partner. The company has a board with a high ratio of women and a workforce with a mix of local and international talent. It has notably high levels of seafarer retention and has never scrapped an LNG ship: Golar understands the importance of repurposing assets. The CFl. co jury presents Golar LNG as the 2021 Best ESG Energy Business Strategy (North America) award winner.

> PGM GLOBAL INC: BEST TRANSITION MANAGEMENT TEAM NORTH AMERICA 2021 PGM Global has taken the final steps of the journey towards full independence since the acquisition of its former parent. The company, once called Pavilion Global Markets, has made a subtle name change — but it still maintains the same strong identity and principles. PGM Global embraces change, one of the few constants in life. It stays on top of ever-evolving capital markets to provide global macro research that facilitates informed investment decisions. Its trading desk is staffed 24 hours a day, five days a week, allowing investors to seize opportunities as they arise. PGM’s transition management team helps clients manage financial changes, altering allocation mix or rebalancing portfolios.

The team continues to grow in the US and the Middle East. The Covid-19 pandemic brought numerous challenges, international travel being one of the more minor, but PGM Global has weathered the storm well. Long-running investments in tech infrastructure paved the way for a smooth transition to digital workflows. Over the last two years, PGM Global secured considerable transition management business in equities as well as fixed income. The team is proud of the revenue — and reputational advances — earned over the past year. The CFI. co judging panel presents repeat programme winner PGM Global with the 2021 award Best Transition Management Team (North America).

> GoldenTree ASSET MANAGEMENT: BEST CREDIT ASSET MANAGER UNITED STATES 2021 GoldenTree Asset Management is an employeeowned firm that specialises in high yield bonds, leveraged loans, distressed, structured products, emerging markets, and credit-themed equities. GoldenTree has nearly $47bn in AUM as of December 1, 2021, deploying capital across alternative and fixed-income strategies covering diverse industries and geographies. GoldenTree is a global operation, with headquarters in New York and offices in West Palm Beach, London, Singapore, Sydney, Tokyo and Dublin. The 250 employees collectively speak approximately 20 languages, and over 60 investment professionals bring an average of 16 years’ experience to the team. GoldenTree’s flagship credit hedge fund has delivered annualised net investor returns of between nine and 10 percent since its inception — and 2020 and 2021 saw an uptick in performance. GoldenTree investments include distressed opportunities, with $30bn invested since 2000 and over $6bn in distressed capital

under management currently. These investments have averaged an internal rate of return (IRR) of 25 percent. GoldenTree began issuing collateralised loan obligations (CLOs, single securities backed by a pool of debt) in 2000 and has realised top decile IRRs across market cycles. GoldenTree CLOs have achieved marketleading equity distributions in the US and Europe, with annualised outperformance on the underlying loans relative to the index averaging over 100bps. In 2016, a CLO equity fund — the GoldenTree Loan Management programme — was launched with a differentiated structure for enhanced returns, witih a second vintage raised in 2019. The strategy in aggregate has raised over $1.3bn. The programme has achieved high quarterly distributions, around 15 percent per annum. The CFI.co judging panel presents GoldenTree Asset Management, a repeat programme winner, with the 2021 award for Best Credit Asset Manager (US). CFI.co | Capital Finance International

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> Africa

Lifting Africa Out of Poverty: Does New Era of Trade Hold the Secret? By Brendan Filipovski

In 1963, African leaders met in Addis Ababa and dreamed of unity on the continent. In Abuja in 1991, they dreamed of a customs union. Both took a leap forward on January 1, 2021, when the African Continental Free Trade Area (AfCFTA ) began operations. “It is the start of a new era of trade between African countries … when [the continent] will realise the great potential of its abundant natural and human resources,” said South African president Cyril Ramaphosa. The potential is enormous. The market created under AfCFTA serves 1.3 billion people, with a combined GDP of $3.4tn. But there’s a long way to go. At 18 percent, intra-African trade is small compared to other continental regions. (Europe is at 68 percent and the EU is at 58). Only Latin America and Oceania have a lower share of intra-regional trade. When we break this down by sub-region (see chart), we find that eastern and southern Africa are the hot spots, within those sub-regions and when compared with the rest of Africa. Western Africa has a similar level of internal trade, while northern and central parts of the continent mostly trade with the rest of the world. There are two points to consider here. First, this picture is shaped by commodity exports. These are high in value and typically distributed outside of Africa. Second, official trade statistics are not picking up informal border trade. If the AfCFTA succeeds in developing intra-African trade, the impact on the continent will be enormous. The World Bank estimates that, by 2035, AfCFTA will lead to a $450bn increase in African income. This includes a 10.3 percent increase in wages for unskilled workers and a 9.8 percent increase for skilled workers. Some 30 million people will be lifted out of poverty.

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major source of these gains will be from removing tariffs, and non-tariff barriers, between African countries. To give an example, South African oranges exported to Kenya currently incur a 25 percent tariff. Removing these barriers will result in an estimated 81 percent increase in intraAfrican trade. Studies indicate that much of this will be new trade, rather than displacement of trade with the rest of the world. Global trade is expected to increase by 19 percent over the same period. Overall, Africa should see a $560bn increase in exports by 2035. Some of these gains will be from African consumers buying products or services from neighbouring countries. Intra-African food exports are expected to annually increase by up to 30 percent by 2040. More excitingly, the liberalisation of trade will push Africa towards new patterns of production. Manufacturing exports are expected to be the main source of export growth, and one reason for this will be increased economies of scale. African manufacturers will have access to new markets and, as they export and produce more, their costs will go down. The AfCTA should also lead to the growth in African supply chains, as generally evidenced by globalisation. African companies will work and grow together, benefitting from respective specialisations. Covid-19 may see a slight reversal of the trend, but this could be politically motivated and focused on particular goods considered of national interest, such as vaccines or silicon chips. Growth in African trade would attract increased FDI. Investors will want to benefit from the new 35% trade, and access to a large single market with a young and growing middle class. Before Covid,

Africa’s middle class was estimated at 170m people. By 2030, it is expected to be over 300m. The challenges, of course, are many. Infrastructure remains an issue. Moving goods between African countries is sometimes difficult, and the continent has some of the highest transport costs in the world. It is sometimes cheaper to ship goods to the US than within Africa. The AfCFTA will provide an incentive for investment in infrastructure. China’s Belt and Road initiative has led to such improvements in recent years. The e-commerce sector is less constrained, but still dependent on physical infrastructure for growth. Mobile internet in Sub-Saharan Africa is expected to increase from 26 percent of the population in 2019 to 39 percent by 2025. There are also fears that smaller farmers and SMEs will be hurt by increased competition. Nigeria cited concerns over wages and a “race to the bottom”. While some may be forced to transition to new areas of activity with the AfCFTA, many farmers, producers, workers, and societies stand to benefit. Trade, income, and wages will increase, poverty will fall. The Organisation for African Unity (OAU) was founded in 1963 but it was not until the 1980 Lagos Plan of Action that serious attention was given to intra-African trade. After Lagos, several regional co-operative organisations were founded. This momentum led to the Abuja treaty in 1991, which established the African Economic Community and the African Central Bank. A customs union was set as a goal. In 2012, the African Union (which replaced the OAU in 2002) agreed to create a Continental Free Trade Area. Negotiations started in 2016 Intra-group

30%

and the agreement was finally signed in Kigali in March 2018. The AfCFTA has been signed by 54 of the 55 African states, with Eretria the only one to refuse. It came into effect in May 2019 after ratification reached 22 countries. The start was delayed by COVID-19, but 39 countries have already ratified and deposited the necessary instruments. The first phase of the AfCFTA covers goods and services, the second will cover intellectual property rights and competition policy, while the third phase will cover e-commerce. The AfCFTA — the secretariat is based in Accra, Ghana — comprises rules of origin, the online negotiating forum, the monitoring and elimination of non-tariff barriers, a digital payment system, and the African Trade Observatory. Also signed were the Kigali Declaration and the Protocol on Free Movement of Persons. Together, the three agreements form part of Agenda 2063, agreed upon by the African Union in 2015. The AfCFTA builds on regional agreements rather than replacing them. Any preferential treatment given to non-African countries in new trade agreements must also be extended to AfCFTA members. Africa is poised for strong economic growth over the next century. The AfCFTA will help realise this and shape the course, and nature, of this economic growth. It will also shape African unity. If it succeeds, it will come to define this century for the continent, as colonialism did in the 19th Century and independence did in the 20th. As Wamkele Mene, Secretary-General of the AfCFTA Secretariat, put it: “This is not just a trade agreement, this is our hope for Africa to be lifted up from poverty.” i

Rest of the region

25%

20%

15%

10%

0% Eastern Africa

Southern Africa

Western Africa

Chart 1: Intra-Africa Trade by Sub-regionsPercentage of total trade, 2020. Source: UNCTAD

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Northern Africa

Middle Africa

Winter 2021-2022 Issue

> Andrew Chimphondah:

The Man Driving Shelter Afrique’s Vision of Homes for All Africans Andrew Chimphondah joined Shelter Afrique in 2018 in the midst of a national housing crisis — and at a critical moment for the company, which was going through “a disruptive event and a governance crisis”.

n the housing front, the United Nations Human Settlement Programme, UNHabitat, estimated that 238 million people were living in slums in SubSaharan Africa. In corporate terms, Shelter Afrique had been making recurrent losses since 2015. “My job was to arrest these losses,” says Chimphondah, “improve governance, and restore shareholder confidence.” Through the support of the board and a newly appointed executive management team, he swiftly succeeded in his corporate mission: the company was turned around by 2020. A profit was at last recorded. “We managed by restructuring the debt from our eight major lenders, which included six global developmental financial institutions through a common-terms agreement signed in May, 2020. This allowed the company to start underwriting new business after being on standstill since 2016.” The lenders agreed to have their loans repaid after four years, ending 2024. “We were successful in paying their interest and principal — in full — by June 2021, three years ahead of the agreed schedule of repayments.” The board-approved strategy clearly worked. “It allowed us to focus on our core mandate: to provide decent and affordable homes for all Africans.” Andrew Chimphondah is group MD and chief executive of Shelter Afrique, the PanAfrican developmental finance institution that exclusively supports the financing of housing and urban development on the continent. Research by Shelter Afrique’s Centre of Excellence in 2019 showed that the continent faces a housing shortage of 56 million units. At an average construction cost of $25,000 per unit, the continent needs at least $3tn. Chimphondah makes a strong case for the deployment of public-private partnerships as a pragmatic way to meet funding needs. “We encourage PPP, more so with governments,

Chief Executive/Managing Director: Andrew Chimphondah

because governments can provide land, subsidise infrastructure, and give financial incentives such as tax breaks. All these factors are critical in bringing down the cost of housing as the cost of land and infrastructure can constitute up to 50 percent of the actual cost of a housing unit.” FUNDRAISING Chimphondah has overseen successful business turnarounds and fundraising initiatives at several housing finance corporations. This was a key skill for Shelter Afrique as it embarked on a mission to establish a funding pool to finance affordable housing across Africa. He admits now that it came as a challenge: most countries had redirected their funding to support the health sector in response to the pandemic. “Part of my job is to help the company raise funds to finance low-cost, large scale housing projects across our 44 member states by creating value for our shareholders,” he says. “This encourages them to increase their equity in the company. I’m happy to report that we have been largely successful in the past three years, recording a five-fold increase in member capital contributions since 2018.” Besides shareholder funds, the company sources finance through debt instruments such as commercial loans and bonds. “We’ll launch CFI.co | Capital Finance International

a 250 billion Naira ($60.8m) bond in 2021 to address the housing deficit in Nigeria,” Chimphondah says. Besides his current role at Shelter Afrique, Andrew Chimphondah is chair of the African Union for Housing Finance (AUHF) and Rugarama Park Estates in Rwanda. He is a nonexecutive board member for Tanzania Mortgage Re-finance Company, Caise Regionale de Refinancement Hypothecaire (CRRH) Togo, and an advisory board member for the Pan-African Housing Fund. Chimphondah joined Shelter Afrique in 2018 from Housing Investment Partners, a South Africa-based fund management firm specialising in financing affordable housing. He served as CEO from 2014 and 2018, and for six years was a managing executive for the National Housing Finance Corporation in South Africa. He has served as a director for home loans at South Africa’s ABSA and Standard Bank. Andrew Chimphondah has membership of the South African Institute of Chartered Accountants and the Institute of Chartered Accountants of Zimbabwe, and holds a Master’s in International Finance from Durham University Business School in the UK. He is currently pursuing a PhD at the Da Vinci Institute in South Africa. i 121

> IMF:

How to Attract Private Finance to Africa’s Development By Luc Eyraud, Catherine Pattillo, and Abebe Aemro Selassie

frican economies are at a pivotal juncture. The COVID-19 pandemic has brought economic activity to a standstill. Africa’s hard-won economic gains of the last two decades, critical in improving living standards, could be reversed. High public debt levels and the uncertain outlook for international aid limit the scope for growth through large public investment programs. The private sector will have to play more of a role in economic development if countries are to enjoy a strong recovery and avoid economic stagnation. Heads of state from Africa made this one of their resounding messages during the recent summit on “Financing African Economies” held in Paris in May. Downward Trend: Investment in infrastructure projects with private sector participation in

Infrastructure — both physical (roads, electricity) and social (health, education) — is one area where the private sector could be more involved. Africa’s infrastructure development needs are huge — in the order of 20 percent of GDP on average by the end of the decade. How can this be financed? All else equal, the main source of financing would be more tax revenue collections, something that most countries are working towards. But, given the scale of the needs, new financing sources will have to be mobilised from the international community and the private sector. Africa is a continent that holds immense opportunity for private investors. It has a young and growing population and abundant natural resources. Cities are seeing massive growth. Many countries have launched long-term industrialisation and digitalisation initiatives. But significant investment and innovation are necessary to unlock the region’s full potential. Recent research published by IMF staff shows that the private sector could, by the end of the decade, bring additional annual financing equivalent to 3 percent of sub-Saharan Africa’s GDP for physical and social infrastructure. This represents about $50 billion per year (using 2020 GDP) and almost a quarter of the average private investment ratio in the region (currently 13 percent of GDP). WHAT CONSTRAINS PRIVATE FINANCE NOW? At the moment, the private sector is not involved much in financing and delivering infrastructure in Africa, compared to other regions. Public entities, such as national governments and state-owned enterprises, carry out 95 percent of infrastructure projects. The volume of infrastructure projects with private sector participation has significantly declined in the past decade, following the commodity price bust. The limited role of private investors is also apparent from an international comparison perspective: Africa attracts only 122

sub-Saharan Africa fell from $15 billion in 2012 to $5 billion in 2019.

Source: Private Participation in Infrastructure (PPI) Projects Database, World Bank.

2 percent of global flows of foreign direct investment. And when investment does go to Africa, it is predominantly to natural resources and extractive industries, not health, roads, or water. To attract private investors and transform the way Africa finances its development, improvements in the business environment seem critical. Our research shows that three key risks dominate international investors’ minds: Project risk. Despite Africa presenting a wealth of business opportunities, the pipeline of projects that are truly “investment-ready” remains limited. These are projects sufficiently developed to appeal to investors that do not want to invest in earlystage concepts or unfamiliar markets. Financial and technical support by donors and development banks can help countries fund feasibility studies, project design and other preparatory activities that expand the pool of bankable projects. Currency risk. Imagine that a project yields a return of 10 percent a year, but the currency depreciates by 5 percent at the same time — this would eliminate half of the profits for foreign investors. No wonder currency risk is a top concern for them. Prudent macroeconomic policy combined with sound foreign exchange reserve management can greatly reduce currency volatility. Exit risk. No investor will enter a country if they don’t have assurances that they can also exit by selling their stakes in a project and recouping their gains. Narrow and underdeveloped financial markets may prevent investors from exiting by issuing shares. Capital controls can slow down or increase the cost of exiting. And, when the legal framework is weak, investors may get bogged down in legal battles to have their rights recognised. CFI.co | Capital Finance International

INCENTIVISING PRIVATE INVESTMENT Improving the business climate is important but not enough. Development sectors have certain structural features that make private sector participation intrinsically complicated, even in the most favorable environments. For instance, infrastructure projects often have large upfront costs, but their returns accrue over long periods of time, which can be difficult for private investors to assess. Private sector growth also thrives on networks and value chains, which may not yet exist in new markets.

When these problems are acute, governments may have to provide extra incentives to make infrastructure projects attractive to private investors. These incentives, which comprise various types of subsidies and guarantees, can be costly and carry fiscal risks. But the truth is, many projects in development sectors won’t happen without them. In East Asia, 90 percent of infrastructure projects with private participation receive government support. With certain design features, governments can maximise the efficiency and impact of public incentives, while minimising risks. Support should be targeted, temporary, and granted on the basis of proven market dysfunctions. It should also be transparent, leave sufficient risk to private parties, and display additionality, meaning that incentives should make worthy projects happen that would not happen otherwise. Finally, their size should be well calibrated to avoid overcompensating the private sector. Given the limited availability of public funds, African countries and development partners could consider reallocating some resources used for public investment towards financing public incentives for private projects. When this reallocation is gradual and supported by sound institutions, transparency and governance, it could increase the amount, range, and quality of services for people in Africa. More innovative thinking can help realise the transformative potential of infrastructure on the continent. i Source blogs.imf.org/2021/06/14/how-to-attract-privatefinance-to-africas-development

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> Location, Attitude, Aptitude and Forward Thinking:

Tanger Med Zones at an Enviable International Position The combination of cutting-edge technology, Grid-Connected Renewable Energy System, geographical proximity to Europe, strategic vision, and a skilled talent pool, led to the creation of a global logistics hub, ranked amongst the best globally. A competitive offer that anchors SMEs and multinationals positions’ with both existing and future customers.

anger Med Zones, a subsidiary of the Tanger Med Group, develops and manages 2000 hectares of economic zones, dedicated to industrial, logistics, and service activities in the North of Morocco. It acts as a strong manufacturing platform for operators originating from 40+ countries, which produce specialized items and materials for their clients all over the world. Developed over a total area of 20 million square meters, consists of 6 activity zones that host more than 1100 multinationals in diverse sectors of activities, which include: Automotive, Aeronautics, Textile, Electronics, Renewable energy, and IT.

Only 14kms away from Europe, the platform capitalized on its skilled talent and advanced technical experience to work towards building a strong, open, and market-oriented environment. Tanger Med Zones is backed by the Tanger Med Port, with 9 million TEU of container capacity, and is connected to 180+ ports worldwide across 70+ countries in five continents. The following strong fundamentals have enabled Tanger Med Zones to meet the expectations of global players and successfully attract firstclass international players from Germany, Japan, Korea, France, China, India, the UK, and the USA among others. These strong fundamentals have enabled the Tanger Med Zones to meet global players' expectations, and become home and a hub for companies such as Continental, Siemens, Sumitomo, Coca Cola, Nippon express, NTT DATA among others. 124

CORPORATE SOCIAL RESPONSIBILITY Tanger Med Zones implemented a multidimensional strategy on corporate social responsibility in line with the United Nations sustainable development goals. Managing operations and infrastructure sustainability, as well as adopting vigorous governance, the Tanger Med Zones strives to strengthen even further the human capital to impact positively on the social and economic poles. TANGER MED FOUNDATION The Tanger Med Foundation for human development consolidates the Tanger Med Group’s strategy in terms of social responsibility and sustainable development. Created in May 2007, the Foundation supports communitybased associative initiatives in the TangierTetouan region. Tanger Med Foundation supports different association-related initiatives in the North region of Morocco in partnership with local authorities and government institutions focusing on four main pillars: Education, Healthcare, Professional Training and Social. TANGER MED ZONES INFRASTRUCTURE INCENTIVES • A one-stop-shop for registration and incorporation process • 25 Km from Tanger Med Port • 24/7 customs services • Build to suit option • Plug and play industrial plots for sale • Plug and play modular warehouse units for lease • Dedicated import-export access inside Tanger Med Port • Fully digitalised services CFI.co | Capital Finance International

The Port of Tangier Med

Winter 2021-2022 Issue

MD: Jaafar Mrhardy

TANGER MED ZONES FINANCIAL INCENTIVES Today, Tanger Med Zones is a base for many international companies who enjoy both a stable, efficient, and robust economic environment, and a competitive combination of incentives, and CFI.co | Capital Finance International

benefits. This includes total exemption from the VAT, patent and urban taxes, dividend and profit shares, registration fees, and stamp duty on capital operations; plus 5 years’ exemption from corporate tax 0% (with a rate of only 15% after that). i 125

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Winter 2021-2022 Issue

> Obituary - Wilbur Addison Smith (1933-2021):

Lion of African Literature A charming chauvinist, addicted to adventure, and in his personal life often as ruthless as the characters depicted in his fast-paced novels, Wilbur Addison Smith conquered the apex most writers quietly aspire to but seldom reach: the ability to ignore critics, speak freely, and disregard societal and political convention.

mith offered no opposition to reviewers who refused to grant him admittance to the cathedral of high literature and readily agreed that he was in the business of churning out ripping yarns – 49 of them in total, selling an estimated 140 million copies worldwide. The effete literary world did not at all match the writer’s old-fashioned notion of masculinity which had been thoroughly instilled by a somewhat larger-than-life father. Herbert Smith, a former boxer and metal worker who ended up running a 25,000-acre cattle station in Northern Rhodesia, present-day Zambia, never touched a book and tried his best to suppress young Wilbur’s trance-like fascination with derring-do Biggles stories and John Buchan’s late-imperial adventure novels. Sent to boarding school in Natal, South Africa, to lay the groundwork for a “proper” career, the young Mr Smith continued to read voraciously and dabbled in writing whilst duly climbing the educational ladder up to Rhodes University in the Eastern cape where he obtained a degree in Commerce. Securing a job first at the Goodyear tyre company, and a few years later at the Inland Revenue Service, Smith never renounced his love of the written word and regularly burnt the midnight oil, “getting nowhere” as he recalled in his 2018 biography. However, the iron discipline paid off and in 1964 his full-length debut novel When the Lion Feeds was accepted for publication. Writing, Smith once remarked, is not a game for sissies: “If at first you don’t succeed, try, try, and then try some more.” Before long, Wilbur Smith was recognised as master of high-octane adventure, liberally sprinkling his work with violence, power, sex, and extreme yet believable daring to captivate a fastgrowing body of loyal followers. He would take his readers on wild rides from his native Africa to tropical islands and from Ancient Egypt to the rise of the ANC (African National Congress) and its anti-apartheid struggle, venturing outside the beaten path with periodic escapades to other landmarks of history. However, it was the epic 17-volume Courtney Series – published between 1964 and 2019 – that established Smith as the chronicler ‘sans pareil’

of the human drivers of history. Tracking multiple generations of the swashbuckling Courtney family from the 1660s to the late 1980s as they make their way around the globe – suffering, fighting, triumphing, loving, exploring, exploiting, and living their times to the hilt and beyond – Mr Smith bested James Michener at his own game and added significant more “sweep” to the genre. He also added a colourful cast of virile characters, driven by rivalry, revenge, and passion, describing their exploits meticulously – careful not to skip even the tiniest detail in scenes that kept readers both enthralled and pining for more. In his personal life, Smith lived almost as passionately as the protagonists of his doorstopper novels. His disciplinarian father gifted Wilbur a Remington rifle for his eight birthday and the boy shot his first lion only five years later. A dedicated conservationist in later years, Smith at various times owned aeroplanes, part of an island in the Seychelles, farms, and homes in the UK, Malta, Switzerland, and Cape Town. Married four times, he became estranged from his three children after his third marriage sparked a family feud of sorts. Danielle (née Thomas) Smith died in 1999 from brain cancer. The writer adopted her son Dieter from a previous marriage although they ended up in court over the division of assets. CFI.co | Capital Finance International

As his popularity rose, critics soon dropped Smith as their favourite. The initially raving reviews he received quickly turned sour with later works being dismissed as “dad’s books” and worse. However, sales continued unabated as did the writer’s formidable output. Smith invariably sat down to write – and let his imagination flow – at eight in the morning for an uninterrupted stint of seven hours. In an ultimate testament to his capabilities as a novelist, the few attempts to bring his tales to the big screen failed rather miserably. The chauvinist and politically incorrect side of the writer occasionally popped out and was on full display in his 2018 memoir On Leopard Rock. Here, Smith confessed to a certain pride in having fathered three children without “ever having changed a nappy.” In his reminiscences, Smith also deplores the lack of “real men” in today’s world and makes no excuses for the wildlife he admits to having “slaughtered” and the elaborate schemes he deployed to avoid the taxman. Wilbur Smith, novelist and adventurer, born on January 9, 1933, continued to write until hours before his passing from undisclosed causes in Cape Town on Saturday, November 13. He is survived by his fourth wife Mokhiniso Rakhimova and three children from earlier marriages. i 127

> Banking

the Future in a Post-Covid-19 World

“Two years down the line, I can safely assume that most businesses - including banks - have had to tear up meticulously detailed plans and budgets,” says Carl Chirwa, head of international banking at Mauritiusbased Bank One. The Covid-19 pandemic has ‘pulled a number’ on every business, government, and individual. As the saying goes: ‘You can plan a pretty picnic but you can’t predict the weather’.”

anking was a margins game, he believes. “We were essentially in the business of buying and selling money; we buy low and sell high to make a margin.”

“I immediately fell in love with banking as a career,” he says — and the “margin principle” remained largely true until the Global Financial Crisis in 2008. Jerome Powell, chairman of the Fed, signalled at the onset of the pandemic that US dollar interest rates were likely to remain near zero until around mid-2022 — at which point the Federal Reserve is expected to stop asset purchases. Margin compression is the “New Normal” and rates seem set to stay lower for longer. The global lockdowns triggered an economic hiatus that put pressure on banks’ interest-earning assets worldwide. Therefore, a NIM’s dependent banking strategy is no longer sustainable. Future-proofed banks have already begun to pivot their focus towards a non-interest-income led revenue model, and are figuring out ways to generate fee-based revenues to sustain earnings. “Fees need to be earned and justified,” says Chirwa. “This means solving real problems in real time, for which clients are willing to pay. Banks should try to solve problems, not push products.” A fee-led strategy requires digital transformation. Digital transformation requires complete rethink of all internal processes”, he says. “Senior Leaders can no longer afford to delegate to a group of techies holed-up somewhere in an innovation lab that periodically reports to senior management.” According to a recent survey by The Wall Street Journal, directors, CEOs, and senior executives consider digital transformation as their number one concern. Yet 70 percent of all such initiatives do not reach their goals. “Fundamentally, it’s because most digital technologies provide possibilities for efficiency gains and customer intimacy,” says Chirwa. “But if people lack the right mindset and organisational practices are flawed, DT will simply magnify those flaws.” 128

Head of International Banking: Carl Chirwa

He offers five key thought leadership lessons: • Figure out your business strategy — before investing. Let digital transformation be guided by the broader business strategy. • Leverage insiders. Rely on staff who have intimate knowledge about what works — and what doesn’t. • If the goal is to improve customer satisfaction, start with a diagnostic phase with input from customers. • Recognise employees’ fear of being replaced. • Emphasise that the process is an opportunity to upskill for the future. • Traditional hierarchies get in the way. Don’t be afraid to fail; it’s part of the process. Fail fast, fail small, and fail forward. CFI.co | Capital Finance International

A snap survey with Bank One clients revealed six common requirements that clients are willing to pay for. They are: • Digital on-boarding: A seamless digital customer on-boarding process. • Omni-channel user experience: Digital access to banking services. • Cybersecurity: Resilience here is key to client acquisition and retention. • Processing efficiency: Near real-time processing, tracking and enhanced visibility of cross-border payments. • Let price and value determine the main banker status in a depressed corporate earnings environment. • Certainty and risk management: Corporate treasurers and CFOs require access to relevant real-time tools and insights. i

Winter 2021-2022 Issue

> Barrick: The Gold Standard in Sustainability

Bringing Socio-Economic Benefits to Host Countries and Communities

arrick Gold Corporation is a good neighbour, a valued stakeholder partner and a responsible steward of the environment. It believes these factors are the critical building blocks for a modern mining company, as important in their own way as geotechnical expertise and free cash flow. The Barrick approach to climate change is driven by site-specific strategies based on science and operational realities, rather than wishful thinking. It is constantly reviewed in the light of technological advances. Identification and realisation of the resulting opportunities have enabled the company to update its 2030 emissions reduction target from at least 10 percent to 30 percent versus its 2018 baseline. Barrick’s aim is net zero greenhouse gas (GHG) emissions by 2050. The current GHG reduction roadmap includes energy efficiency measures across the group with ambitious plans for the use of more solar power and innovations such as the battery technology used to augment its hydropower stations in the Democratic Republic of Congo. Barrick’s environmental strategy has paid substantial dividends, recording zero Class 1 environmental incidents for a third consecutive year, reducing Class 2 incidents by 38 percent, and exceeding its target of reusing or recycling at least 75 percent of its water in 2020. With the Covid-19 pandemic driving more people below the poverty line, Barrick is maximising the social and economic benefits its mines bring to host countries and communities. Barrick’s prompt and effective response to Covid-19 largely protected its business and people from the impact of the virus and provided a further chance for the company to demonstrate its commitment to partnership. Barrick has spent more than $30m on Covid-19-related community support and has prepaid more than $300m to date in taxes and royalties to ease the pandemic’s economic pressure on some host countries. The company has established Community Development Committees (CDCs) at all its operational sites, which put communities at the heart of the decision-making process when it comes to community investment. There was a

"Barrick’s environmental strategy has paid substantial dividends, recording zero Class 1 environmental incidents for a third consecutive year, reducing Class 2 incidents by 38 percent, and exceeding its target of reusing or recycling at least 75 percent of its water in 2020." Barrick investment of more than $26m in such projects during 2020. Barrick is a sector-leading gold and copper producer. Its shares trade on the New York Stock Exchange under the symbol GOLD and on the Toronto Stock Exchange under the symbol ABX. The company owns and operates six Tier One gold mines, assets with the reserve potential to deliver a minimum 10-year life, annual production of at least 500,000 ounces of gold and total cash CFI.co | Capital Finance International

costs per ounce that are in the lower half of the industry’s cost profile. They are Cortez, Carlin and Turquoise Ridge in Nevada; Loulo-Gounkoto in Mali; Kibali in the Democratic Republic of Congo; and Pueblo Viejo in the Dominican Republic. Nevada Gold Mines, a joint venture with Newmont, majority owned and operated by Barrick, is the world’s largest gold mining complex. Barrick has gold and copper mines and projects in 17 countries. Its diversified portfolio spans the world’s most prolific gold districts and is focused on high-margin, long-life assets. i 129

> Italtile:

Resilient South African Group Remains Strong, Financial Optimistic and Locked-into its Ethical Stance

The retail operation is strategically supported by a vertically integrated supply chain of key manufacturers and importers, and an extensive property portfolio. Manufacturers are Ceramic Industries (Ceramic) and Ezee Tile Adhesive Manufacturers. The import businesses are Cedar Point, International Tap Distributors and Durban Distribution Centre. PEOPLE, PROFIT-SHARE AND THE PANDEMIC Across the Group’s operations the focus during the past year remained steadfastly on customer satisfaction and delivering an unrivalled shopping experience. “In light of the challenges posed by the pandemic, this proved very difficult at times, requiring personal sacrifices by many of our people,” says CEO, Jan Potgieter. It is the extraordinary individuals 130

2020: R9,3 billion

2020: R1,5 billion

2020: 78,3 cents

p 77% Headline earnings per share

p 73% Adjusted earnings per share

p 70% Adjusted headline earnings per share

p 21% Net asset value per share

140,1 cents

554 cents

2020: 79,2 cents

2020: 81,5 cents*

2020: 82,3 cents*

2020: 458,0 cents

140,1 cents

140,7 cents

p 70% Ordinary dividend per share

p 26% Net cash

p 4% Store network

2020: R0,9 billion

June 2020: 198

R1,1 billion

56,0 cents

206

2020: 33,0 cents Financial Highlights. *Adjusted for once-off R39 million IFRS 2 charge related to the Broad Based Black Economic Empowerment * Adjusted for once-off R39 million IFRS 2 charge related to the BBBEE transaction announced on SENS on 10 September 2019. transaction concluded in September 2019.

Ten-year share price growth (%)

A home-improvement boom was fuelled by enforced remote working during the pandemic. With people spending more time in the home, and with more time on their hands, previously neglected DIY projects were addressed, while others adapted their properties to create multifunctional spaces. Although discretionary income remained constrained in the low-wage inflation CFI.co | Capital Finance International

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Consumers have also become more risk-averse, and more decisive in their spending behaviour. In-store browsing and research of comparable offerings has given way to online searches. JSE Retailers When customers do decide to transact in-store, they gravitate to trusted brands with one-stopsolutions. 30-06-2017

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In keeping 180 with the Group’s ethos of reward and partnership, every individual in the business is 130 entitled80to a percentage of the profits made in their respective business units. “This scheme 30 incentivises our people to participate in the (20) success of the business, and often has lifechanging benefits for recipients,” says Potgieter. He adds that it is extremely satisfying JSE thatAllthe Italtile Limited Share Group was able to reward its team for their exceptional contribution to the results, through R290 ($18.1m) million paid out in profit share. This profit share scheme is additional to the share incentive scheme which employees are eligible for after three consecutive years of employment.

environment, several conducive factors encouraged homeowners to invest in their primary assets. There were favourably low interest rates, available funds previously earmarked for transport, travel and other recreational pursuits, debt-payment “holidays”, and short-term pandemic support funding.

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who work for Italile and commit to its high380 performance culture that set the business apart 330 from others, he says. 280

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Italtile’s target market is equally clear: homeowners across the Living Standards Measure 4 to 10 categories.

140,7 cents

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The proudly South African manufacturer, franchisor, and retailer of tiles, bathroom-ware and home-finishing products has four retail brands: CTM, Italtile Retail, TopT and U-Light. These are supported by a network of 206 stores throughout South Africa and select sub-Saharan markets, including six online webstores.

p80% Earnings per share

R2,6 billion

30-06-2013

Italtile believes that effective governance is essential to an ethical and successful organisation. “We have enhanced controls in key areas of cybersecurity and health and safety. An independent safety, health and environment audit conducted noted improvement across the retail brands and supply chain audit results.”

p 70% Trading profit

R11,6 billion

30-06-2012

“We drive our business with our core values,” CEO, Jan Potgieter says. “They inform our policies, practices and decisions. It is therefore rewarding that across all our operational metrics, including scorecards, KPIs, employee engagement and satisfaction surveys, we achieved, and in some instances, exceeded our targets. This is particularly noteworthy in light of our deliberate efforts to streamline the business and extract optimum productivity and value from our resources and assets.”

p 25% System-wide turnover

30-06-2011

ounded in 1969, Italtile Ltd has always had a clear goal: to be the best manufacturer and retailer of tiles, sanitaryware and ancillary products in Africa, coupled with an unrivalled shopping experience.

highlights

“Our business model is well-suited to this new trend,” says Potgieter. “Our offering is supported by multi-channel trading platforms. Our brands are trusted household names, and our supply chain meets the one-stop criterion.” GROUP PERFORMANCE Despite the challenging trading conditions, the business delivered double-digit sales and profit growth across all its business units, merchandise categories and all trading geographies compared to the prior year. Significantly, the results

* Adjusted for once-off R39 million IFRS 2 charge related to the BBBEE transaction announced on SENS on 10 September 2019. Winter 2021-2022 Issue

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achieved also outperformed those reported in pre-pandemic 2019. Potgieter says while the business benefited from the home improvement boom, other key contributors to the strong results are the agile response of the resilient team members; the robust business model and integrated supply chain; the focus on continuous enhancement of the customer shopping experience and investment in innovation; and the ethos of profit-sharing and partnership with the Group’s people. At the end of 2020, Italtile determined a focus for the year ahead, and the strategic imperatives that would allow achievement of the Group’s targets. New stores were opened, and the revamp programme advanced. “During the review period, we opened 13 new stores and closed four non-performing stores, bringing the total retail network to 206 stores,” says Potgieter. A total of 11 new TopT stores and two franchised U-Light stores were opened. “In July and August 2021, we opened a further five stores which had been delayed by the impact of the pandemic.” STOCK MANAGEMENT Strong demand and judicious management have served to improve stock turn across the various business units, most notably in the first nine months of the review period. The Group benefitted from its integrated supply chain, with 76 percent of total procurement sourced from local manufacturers and suppliers. “That allowed us to mitigate erratic global supply and shipping constraints,” notes the chief executive. Optimal product mix and range was supported by the business optimisation programme, and the enhanced use of analytics was a focus area. MARKETING CAMPAIGNS Notable spikes in sales over promotions and paydays confirm that the vast majority of Italtile’s customers are price-sensitive. “Our brands

are tailored to bespoke marketing initiatives across the advertising platform spectrum to convey our price, value and service offerings. Disruptive campaigns differentiated us from our competitors and drove gains in market share and share of wallet.” This was bolstered by the use of technology across trading platforms. The Group’s IT unit makes a key strategic contribution, through developing market leading technological innovations across the Group’s multi-channel offering and operations. ESG CREDENTIALS “Our goal for the year was to reduce the Group’s carbon footprint and the consumption of nonrenewable resources,” Potgieter says. This was achieved by increasing use of solar energy, harvesting rainwater, and recycling water in the factories. Solar energy installations have been fitted at 36 stores, two of Ceramic’s factories, and the Group’s support centre and training academy. Properties are constructed and renovated with energy efficient and environmentally sensitive practices and materials. Technology has helped operations to meet targets, cutting the consumption of nonrenewable resources and “recovering, recycling and reusing” where possible. Ceramic’s factories rank among the most energy efficient in the world, and rehabilitation of its raw material quarries is conducted concurrently during use and end-of-productive-life stages. Eco-friendly tiles, taps, shower heads and toilets are all designed to minimise the use of natural resources, contributing to a significant carbon footprint reduction for the Group and its customers. The Group’s recently launched lowcarbon footprint Eco-Tec tile range is recognised as a leader in the manufacture of eco-sensitive products. Social impact is another vital factor in the business. “Our ‘proudly South African’ ethic is CFI.co | Capital Finance International

a key theme in our stores and communications campaigns,” says Potgieter, “and we further our support for the economy by selling high quality products manufactured by local people, creating employment, training, and skills development. About three quarters of all merchandise sold by our retail brands is locally produced.” With the Group’s Italtile and Ceramic Foundation, R121m ($7.5m) was invested in skills development, education, sporting infrastructure, bursaries, conservation and outreach programmes for disadvantaged and disabled people. “A key component of these programmes is that they are consequential, sustainable and measurable,” Potgieter says. The Group’s commitment to transforming the business from within is based on management’s continuous focus on a range of meaningful interventions. Exceeding its targets, the Group achieved a Broad Based Black Economic Empowerment rating of level 2, equating to 96.84 points out of a potential maximum 100 points – a creditable achievement. FUTURE OUTLOOK Investing in the future is a major strategic thrust. Current capital expenditure projects include the continued roll-out of new stores, upgrade and construction of new facilities, and expansion of the Group’s sustainability and energy programme. Potgieter says, “We are confident that if we execute retail excellence disciplines better at every customer touchpoint and reduce existing inefficiencies in our business, we will build further momentum to deliver sales, profit growth and a gain in market share.” While the pandemic is likely to continue to impact the South African economy, “We are satisfied that our strategies, responsive systems, hands-on management team and resilient business model will allow us to respond nimbly to future challenges.” i 131

> Supporting Clients & Thriving in Challenging Era:

BIAT’s on the Ball

he past two years have been exceptional — and during an unprecedented set of global challenges, Tunisian bank BIAT has showcased its resilience.

Financial strength and good decision-making have allowed it to face the repercussions of the crisis, and flourish. By mobilising all BIAT teams, it has given continuous support to its 960,000 clients through a commercial network of 205 branches. “We have put in place support measures for the benefit of our 39,000 business and professional clients through the Moltazimoun initiative, launched in 2020 to help preserve the economic fabric and jobs in Tunisia,” says CEO Mohamed Agrebi. “This has resulted in the granting of more than $380m (1.1bn dinar) of support credits over all regions of the country.” Several key achievements have marked the past two years. DIGITAL TRANSFORMATION The year 2021 was marked by the launch of the first version of the digital offer MyBIAT. Developed in close collaboration with customers, MyBIAT offers digitalised services to facilitate the processing and monitoring of remote banking operations. With a functional and intuitive design, MyBIAT is a secure banking application 132

that complies with the latest technological standards. ACQUISITION OF TUNISIE VALEURS In March 2020, BIAT Group strengthened its position by acquiring Tunisie Valeurs, a financial institution specialising in asset management, stock market intermediation, financial engineering, and treasury securities. “Through this transaction, our positioning on capital market activities has been consolidated,” says Agrebi. “Our corporate offer is more complete, with tailor-made support for our clients from experts in the market.” NEW BRANCH CONCEPT In 2021, BIAT launched its new branch concept, which reflects the expertise the bank offers its clients in terms of relational support and innovation and digital services. “Two pilot sites have already been implemented. In addition to the added value provided by the expertise of our sales teams, we wanted our branches to embody our values of transparency and commitment,” says Agrebi. “We also wanted the process to be more welcoming and user-friendly, for a smoother customer experience.” SOCIAL RESPONSIBILITY “In terms of social responsibility, we are aware of the country's need for solidarity and cohesion. With this in mind, we made a donation of $6.37m (18.3 million dinar) to the 1818 fund, set up to fight against Covid-19. CFI.co | Capital Finance International

“We have mobilised additional funds to finance the acquisition of medical equipment and mobilise other equipment necessary for health services.” REHABILITATION OF SCHOOLS BIAT took part in the first joint social responsibility action of the Tunisian banking sector, initiated by APTBEF to help public schools. “We have taken charge of the rehabilitation and fitting-out of five schools in Kef and Kairouan,” Agrebi notes. “All the work has been completed and will allow more than 1,000 students to continue their school year in good conditions.” BIAT FOUNDATION AND BIATLABS As part of its CSR approach, BIAT continues to support entrepreneurship through various structures. “Our objective is to contribute to the development of the entrepreneurial spirit of young people,” says Agrebi. Incubator BIATLABS has enriched its programme, and celebrated the graduation of another class of young entrepreneurs. The BIAT Foundation has continued to support young people via programmes focused on entrepreneurship, education, and culture. The fifth edition of SPARK CLUB, the BIAT Foundation's entrepreneurial programme for young people aged 15 to 18, helped more than 600 young people to transform their ideas into projects. i

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> Societe Generale Guinée

Guinean Gold: a Private Bank That Has Won Trust of Public Societe Generale Guinée has a century-and-a-half of history — and a go-ahead CEO who has overseen impressive growth.

ociete Generale Guinée was created in 1985 and is today the West African country’s leading private bank in terms of equity, credits, number of branches — and results.

It is primarily owned by Société Générale Group, which holds 58 percent of shares. Remaining shares are held by private shareholders. “The solid financial position of Societe Generale Guinée allows us to better manage regulatory ratios such as legal lending limit,” says CEO Thierno Ibrahima Diallo, “and to provide optimal capacity to satisfy the needs of our commercial customers.” The bank has some 600 corporate clients and boasts strong penetration of large businesses both local and international. Streamlining the service to these clients — and 101,505 private customers — are 326 dedicated employees and a team of professionals that is 2,488-strong. These staff members operated from 24 strategically located branches across Guinea, which sits on a crescent extending into the Atlantic Ocean. The country’s mineral wealth could theoretically make it one of the continent’s richest countries. With its impressive network of branches, which cover the country’s four main regions, SG Guinée is at the centre of a thriving financial hub. The large corporate branch is located at the society’s headquarters in the capital, Conakry. It has been operating for one-and-a-half centuries — so its processes have been continuously streamlined over those 150-odd years. Societe Generale Guinée provides a wide range of innovative products and services with a particular focus on SMEs — as well as the larger clients which choose its services. “The aim is to anticipate and satisfy their needs,” says Diallo. Thierno Ibrahima Diallo was born in Senegal, and graduated with a degree in Banking, Finance and Insurance Engineering from the Ecole Supérieure Des Affaires De Lille 2. He also holds a diploma from ITB (Institut Technique de Banque). The fluent French- and English speaker started his professional career 134

CEO: Thierno Ibrahima Diallo

in 1998 in the Société Générale Group. He cut his teeth in the world of international finance in the Senegalese subsidiary, becoming head of international payments processing and heading research into the optimisation of the customer experience. Two years later, in 2000, Diallo joined the CICCrédit Mutuel group as a customer manager CFI.co | Capital Finance International

for SMEs. In 2005, he joined the Est-Parisien business centre of Crédit Industriel et Commercial (CIC) as a corporate account manager. In 2007, Thierno Diallo joined the ABN AMRO Bank group as a key account manager in its asset finance department based in Paris (ABN AMRO Commercial Finance). In 2010, he was promoted to head of the key accounts division.

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Diallo has experience from a range of highpowered appointments. In 2013, he joined SAS LPP Coffrages Group as export development manager. In this role, he was responsible for the creation of a subsidiary operation in West Africa. In 2014, he returned to the Senegalese subsidiary of the Société Générale Group as manager of large corporate clients. In 2015, he was promoted to head of corporate clients. In 2018, Diallo was appointed director of the Central African Audit Hub (AFC)-IGAD/IRB/AFS, which includes Cameroon, Chad, Congo and Equatorial Guinea. He took over the regional management of the Central and Eastern Africa Audit Hub (AFCE) in 2019. This position had an even larger scope, covering six countries (Cameroon, Chad, Congo, Equatorial Guinea, Madagascar and Mozambique). Since September 2021, Thierno Ibrahima Diallo has been managing director of the Guinean subsidiary of the Société Générale Group. i CFI.co | Capital Finance International

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> Nouriel Roubini, Colin Coleman:

What South Africa Must Do

outh Africa is at a crossroads. To save its democratic project, it needs to put itself on a path to inclusive, dynamic growth, creating a virtuous cycle that delivers on Nelson Mandela’s promise of “a better life for all.”

unemployment, which is now at a recordhigh 34%. In a world beset by economic vulnerabilities, South Africa still manages to stand out for its poor performance and racially skewed outcomes – a tragic legacy of centuries of colonialism and apartheid.

For the past decade, the country has been locked in a low-growth trap, with falling per capita income, rising inequality, and skyrocketing

The combination of low growth, high unemployment, large deficits and debt ratios, and a lack of effective structural reforms has

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created an unstable disequilibrium. After being skillfully managed by Mandela and then by Thabo Mbeki, the country was torn asunder by Jacob Zuma’s decade-long reign of state capture and corruption. Zuma’s successor, Cyril Ramaphosa, is now trying to turn things around, but the challenge is enormous. The economy could go one of two ways. In one direction, weak growth leads to a fiscal crisis,

Winter 2021-2022 Issue

the real rate of interest on its debt stock. Otherwise, its debt-to-GDP ratio will grow continuously. That is what is now happening in South Africa. To avoid a debt crisis, real yields must decrease and/or real growth must increase.

Ultimately, the government must demonstrate to rating agencies and investors that it has a credible growth plan that includes structural reforms, and that resets the fiscal path to align with faster medium-term consolidation as growth kicks in.

Austerity alone cannot fix the problem. To put itself on a firmer economic footing, South Africa needs a program to expand social welfare and recapitalise businesses while also undertaking structural reforms and pursuing fiscal consolidation.

Other reforms must target higher rates of fixed investment. Aside from a COVID-19 vaccination program, policymakers should focus on aggressive tourism marketing; fasttracking bankable public-private infrastructure, including ports and railways; implementing spectrum allocation; creating new incentives to adopt renewables, embrace electric-vehicle production, establish data centers, and transform agriculture and mining; and reviewing industrial and labor policies to draw investment into both labor-intensive and high-skilled production.

Social welfare can be expanded with a $55 monthly Unemployed Relief Grant. Costing 2% of GDP, this should be a multi-year, if not permanent, replacement for the $24 monthly Social Relief of Distress Grant that expires in April 2022. That program has been highly effective and thus merits being doubled. It would put more money into the hands of the 12 million unemployed, who would then spend it (unlike wealthy savers), stimulating economic activity and job creation. The new grant could be financed in part by government saving measures and tax reforms to remove deductions targeted at higher-income taxpayers. In the short term, however, it will require around $7 billion of additional debt on the government’s balance sheet. Fortuitously, that is roughly equal to the anticipated incremental corporate-tax revenues this year, following the recent commodity boom. Grants are not a panacea; but they have an integral role to play in attacking the unemployment and growth crisis, as do other interventions such as wage subsidisation, when properly applied. There is ample evidence to show that grants alleviate poverty and hunger, and help recipients start new businesses. Expanding this form of support is a no-brainer. South African businesses also need support in the form of recapitalisation. Here, a sizable hybrid equity funding scheme for small and medium-size enterprises could go a long way, as would grants funded by the national treasury, in partnership with financial institutions. An injection of risk-sharing equity into eligible businesses would help to stimulate both investment and job creation. further reducing incomes and employment, and inviting more civil unrest like that in July, when riots and looting swept the country. There is good reason to worry that South Africa is already on this path, given its troubled medium-term debt outlook. When a country runs a flat or negative primary budget balance (excluding interest payments), real (inflation-adjusted) growth must exceed

The government also should work with the state electricity utility, Eskom, to devise a credible operational and structural plan that includes recapitalising the company’s balance sheet. The aim should be to normalise Eskom’s debt within a five-year period, thereby defusing a ticking financial time bomb while enabling a green energy transition with concessional funding.

The test of a credible fiscal consolidation path lies in the public-sector wage bill, which is currently consuming an unsustainable share of overall budget expenditures. The solution here requires that unions and the government agree to medium-term public-sector wages without subsequent slippage. The key is to professionalise the public service, crack down on corruption, and improve the efficiency of public spending in health, education, and security. South Africa should deploy the best private- and public-sector expertise and skills available for these purposes. As GDP increases faster than debt, successful deficit reduction should result in the net tightening of bond yields, delivering significant savings on the government’s cost of borrowing. This is an interdependent package deal: extending the stimulus and implementing the structural reforms are prerequisites for meeting the fiscal consolidation targets over time. Successful implementation of the entire package would put South Africa’s economy and society on a more sustainable path, bringing Mandela’s original vision within striking distance. We dare not countenance the alternative. i ABOUT THE AUTHOR Nouriel Roubini, Professor of Economics at New York University's Stern School of Business and Chairman of Roubini Macro Associates, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com. Colin Coleman is a former senior fellow at Yale University and a former partner at Goldman Sachs. 137

> Middle East

Israel fights Water Shortages with Tech, Lateral Thinking, Central Control, and Conservation Tactics By Brendan Filipovski

Water is key to the survival of the human species, and that realisation has been dawning around the world — nowhere more pointedly than in Israel. Since 2018, Israel has intentionally used less water than its annual renewable supply — and that is almost half-way to the definition of an international water-shortage. Through conservation and innovation, the country is winning the battle against drought. This is a region where neighbouring countries are in an even more precarious position. Coupled with the water shortage is the impact of global warming and the struggle to realise UN Sustainable Development Goal 6: “clean water and sanitation for all”. Of the 20 countries with the highest levels of water stress in the world — withdrawal as a proportion of available resources — half are in the Middle East. Israel sits in 18th place, with the 22nd-smallest supply of renewable water, less than that of Saudi Arabia. More than 60 percent of the country is desert, and much of the rest is semi-arid. 150

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ater has long been an existential threat for Israel. Even as Britain and France drew the Sykes-Picot line, Zionists lobbied and eventually succeeded (in 1923) in including Lake Kinneret (the Sea of Galilee) in the British mandate. The country has been battered by droughts, with agriculture restrictions implemented in 1980s and 1990s. In 1998, water rationing came to some Israeli cities. A five-year drought from 2013 to 2017 saw rivers, lakes, and aquifers at 100year lows. Lake Kinneret, Israel’s largest source, fell to the point of the intake pipes for pumping. Israel has not backed down from the challenge. After the drought of 1998, it embarked on major changes in its water governance, pricing, infrastructure, and conservation. The results of these changes can be seen in the accompanying charts. The first shows a decline in water stress and an increase in water efficiency since the 2000s. The second shows the growing use of municipal wastewater and desalinated sea water, which led to a fall in water stress. Since 2006, Israel has decreased percapita consumption of “renewable” water by 43 percent. The government now considers the water supply sufficient for the country’s needs for the foreseeable future. Kuwait, Qatar, and the UAE have also had significant increases in wastewater use, and even larger increases in desalinisation over the same period. But unlike Israel, their levels of water stress have increased. Israel even sells water to some of its neighbours; it has had an agreement with Jordan that predates the 1994 peace deal. It has co-operated on projects such as the pipeline linking the Red Sea to the Dead Sea, and the building of a hydroelectricity and desalinisation plant. But in 2021, Israel agreed to increase its water sales to Jordan by 50m cubic metres, almost double the previous amount. Israel has also been keen, of late, to share its irrigation and water technology with Gulf countries. “Water is a resource that allows for adversaries to actually

find ways to co-operate,” commented Erika Weinthal, of Duke University. Governance was one of the first, and key, areas of reform, and it’s ongoing. In 2007, the Israel Water Authority (IWA) — an autonomous government body that oversees water planning, conservation, and regulation — was formed. Municipal water utilities and bulk potable water producer and distributor Mekorot have been corporatized. The IWA provides accountability for the utilities through benchmarking, incentive-based targets, and sanctions for the worst performers. Municipal utilities have been transformed into regional ones. The national water infrastructure has been strengthened to improve the transfer of water throughout the country. The IWA also changed the price philosophy of water. It moved from the basis of public good to full-cost recovery. Since 2008, only wastewater reuse remains reliant on subsidies. The price of regular water for irrigation is among the highest in the world and varies according to the site and season. The price of wastewater for irrigation has been set below that of potable water. The IWA has also been instrumental in improving demand management, providing conservation education. One TV campaign in 2009 led to an 18 percent reduction in consumption in urban areas. Water-saving devices in the home have proven effective. At 50 percent of consumption, agriculture puts the biggest demand on Israel’s water sources. In 1985, the sector began to use municipal wastewater for irrigation; today that constitutes 86 percent of the total needed for agriculture. Compare this with Singapore, at 34 percent, Australia, 18 percent, Spain, 17 percent, and the US, nine percent. Wastewater now satisfies around 40 percent of Israel’s irrigation needs. Another 10 percent comes from stormwater. This take-up is a result of the IWAs lower pricing structure, increases in wastewater-treatment capacity, and the 2010 legal requirements for improving treatment standards — most now has tertiary treatment.

There has been an improvement in crop yields and water efficiency in Israel. Between 1950 and 2006, agricultural output increased 21.2 times, while water use increased just fourfold. Continual improvements in low-water irrigation techniques have been a major contributor. Building links between universities and the agriculture sector has been a key driver. The adoption of high-value, low-water crops has been vital. Israel isn’t just Kibbutz-grown oranges any more. It is now the largest grower and distributor of jojoba, used in skin- and hair treatment. It can grow in desert conditions and has become a major player in produce grown in greenhouses. Wastewater is also being used to replenish Israel’s aquifers, which are now being used as a buffer rather than an exploitable source. Individual sites are monitored and managed. In dry years, over-pumping is allowed while replenishment is directed in wetter years. Israel has become a world leader in desalinisation. The cost has fallen, and with cost-recovery pricing in Israel treated seawater has become a viable alternative source. Efficiency has been encouraged with large-scale plants and enforced responsibility for base-load supply. Building the plants through publicprivate partnerships has kept costs down. Israel’s desalinated water is some of the cheapest in the world. The Israeli government has structured pricing so that it bears much of the risk. It has ensured that the plants receive favourable electrical prices or can source independent power production. The first large-scale desalinisation plant was built in 2005 in Ashkelon. Israel now has five. Desalinisation now provides 85 percent of urban water consumption and 40 percent of overall water consumption. In a world where around 2.2 billion people lack access to safe drinking water and SDG 6 remains largely out-of-reach, Israel provides a model of what can be done. A successful approach requires demand-management and improvements to governance, not just new technology. i

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1997 Israel: Water Use by Source. Source: FAO Aquastat

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Driven to lead with excellence

stc wins cfi.co award

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> stc:

High Ideals, and a Series of Firsts for Kuwait

uwait Telecommunications Company (stc) believes the pandemic highlighted the importance and necessity of a strong telecom infrastructure.

said CEO engineer Maziad Alharbi, adding that “businesses quickly realised the importance of adopting a digital culture and accelerating the path towards digital transformation.”

“People were eager to stay informed with the latest news updates and maintain open communication lines with their loved ones,”

Telecom services are a crucial component in the road to normalcy, with an increasing push towards digitalisation.

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Once Covid-19 was declared a pandemic, stc realised the criticality of effectively implementing its business continuity plan. As the world recognised the redefined role of digital transformation, telecom companies found themselves on the brink of a digital revolution. “This was a significant time for stc and the telecom industry as a whole,” said Alharbi. “Prior to the pandemic, stc had

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coverage to 98 percent of the populated areas in Kuwait. This allowed stc to manage the increased demand for 5G and connectivity during lockdown periods. “We were ready and managed to enable remote operations for various industries including the health, education, and financial sectors,” Alharbi noted. In early 2019, stc was one of the leading telecom companies to commercially deploy a nationwide 5G network — with over 1000 5G NR sites supported by a massive device ecosystem of more than 100,000 devices including 5G CPEs. This marked one of the largest 5G commercial rollouts in the world. stc’s 5G innovation strategy opened the door to new business prospects in the realms of ultra-broadband, IoT and smart city services. “Due to the prolonged impact of the pandemic, we focused on elevating the user experience by enhancing our 5G coverage. stc started delivering Sub-3Ghz 2.1Ghz 5G NR with nationwide implementation by late 2020, focusing on indoor and weak coverage spots.” As a pioneer telecom operator in the MENA region, stc strengthened its position by launching the commercial E2E 5G SA network in the Middle East. This aided the Company in providing highrise buildings with better coverage, increasing uplink bandwidth, and improve user-traffic latency. ENSURING CUSTOMER SAFETY The strength of the 5G network enabled stc to provide customers with connectivity solutions for work, education, or entertainment purposes. The advanced upgrades applied to stc’s network assisted the Company’s business arm, solutions by stc, to expand its offering. “We provide our customers with complete control and access to manage their accounts,” said Alharbi. This goes hand-in-hand with our digitisation strategy and was supporting the government direction during the pandemic. Promotions and offers were introduced to meet the needs of communication, entertainment, and VIP customers. The digitised experience, backed by the latest technology, stems from stc’s commitment to support the Kuwaiti community.

been implementing its own digital transformation strategy. The level of knowledge and experience the Company accumulated in its years of operation proved useful in impactful contributions to the local economy and government initiatives.” The Company had been focused on strengthening its 5G infrastructure and expanding its network

“The level of uncertainty the entire world was facing when the pandemic hit is a crucial point to consider when looking at the response strategies we implemented,” said Alharbi. “We used our expertise to streamline operations and maintain the level of quality and service we commit to our customers.” “The strategic steps stc took to preserve its competitive and empowering work culture were essential in getting us to where we are today.” One of the main functions was implementing a three-level business continuity plan. CFI.co | Capital Finance International

BUSINESS CONTINUITY PLANNING The business continuity plan consisted of three scenarios. The first, Situation Under Control, was based on employees being present at stc’s head office. They would have the ability to communicate and interact through routine channels, while abiding by health and hygiene controls. The second scenario, Social Distancing, reflected work protocols during the partial curfew period. Work-from-home procedures were initiated with only essential staff at the headquarters. Scenario three, Lockdown, saw all operations shifted to remote working, with the closure of stc’s headquarters and branches. EMPLOYEE TRAINING In line with the continuity plan, stc HR introduced online learning through LinkedIn and other platforms. The team ensured that employees had the proper tools and resources, including hardware and secure, cloud-based storage. IT and HR allowed employees to perform remote requests and seek approvals, in addition to the virtual application (VAPP) that was introduced to integrate remote working. “Now, with the gradual return to normalcy, we have embraced the developments to instil a performance-driven culture built on efficiency,” said Alharbi. “We take pride in our extensive CSR program, where we can effectively give back to our community, especially during times of need.” In Kuwait, private businesses backed the government’s Covid-19 precautionary and relief plans. “We launched a series of social and awareness initiatives targeting health, safety, and social awareness. stc launched a social media campaign that involved influencers, doctors, and specialists to encourage residents to stay home and adhere to the government guidelines. SUPPORTING THE COMMUNITY In another initiative, stc launched its “Far Yet Close” campaign. This provided stc customers and personnel staying at Khiran Resort and Al Joan Resort at Julai’a with unlimited local voice calls to ease the quarantine protocols. Customers could connect with loved ones, while spreading awareness of the pandemic. stc also visited Kuwait International Airport to distribute face masks, sanitisers, and information leaflets. “Stay Safe” is an stc initiative aimed at reducing the spread of rumours and disinformation. The Company worked with the Ministry of Health and dedicated a page on stc’s official website to news and announcements from verified sources, in addition to an emergency contact directory and Covid-19 statistics. Other initiatives included a blood drive, equipping stc branches with safety supplies, and distributing hand sanitisers, face masks, and safety supplies to the Ministry of Interior. 143

stc collaborated with the Communication & Information Technology Regulatory Authority (CITRA) to give customers free unlimited local calls and 5GB daily data usage for a one-month period. Returning citizens were greeted with 25,000 free prepaid lines with internet bundles and free local calls. Another notable initiative was establishing a data link connection between the International Hospital and the Ministry of Health (MOH) data centre. stc partnered with the Tarahom Volunteer Team during Ramadan to distribute 7,000 iftar meals to paramedics across Kuwait. The #today_we_can initiative focused on spreading awareness on the importance of acting today for a better tomorrow, with the aim of supporting community members in need. “Our CSR program remains a top priority,” said Alharbi, “as it showcases our commitment to support and serve the Kuwaiti society.” Over the past two years, stc achieved several significant milestones. One of which was receiving approval from the Communication and Information Technology Regulatory Authority’s (CITRA) for a mobile virtual network operator (MNVO) licence to launch Virgin Mobile Kuwait. Virgin Mobile Kuwait will use stc’s network, with stc acting as a Host Facilities Based Provider with Virgin Mobile Kuwait, making it the first virtual telecom service in the country. Under the direction of its business continuity team, stc received the latest version of the ISO Certification in Business Continuity (ISO 22301:2019) after completing a vigorous auditing process performed by TopCertifier. stc was the leading operator in the Middle East to launch unlimited 5G roaming for all postpaid, prepaid and enterprise customers across all GCC Countries. By subscribing to the roaming service, customers were able to enjoy ultra-fast 5G speeds without any additional charges. The 5G network operates on a 2.1 GHz frequency band, the first of its kind in Kuwait. This improves customer experience and allows for the exploration and development of 5G vertical industry applications. The stc system is considered one of the best ICT solutions for SMEs. The 5G DA will provide them with fast GTM connectivity. The service is also a preferred choice for larger enterprises due to its ability to serve as a primary link and fibre back-up. stc unified its 4G and 5G packages, allowing customers to switch at no additional cost. “This transition allowed us to showcase the strength of our 5G network while providing B2B customers with reliable high-speed internet to manage their businesses online, in addition to offering advanced ICT solutions to fulfil the needs of the enterprise sector.” 144

CEO: Maziad Alharbi

ENABLING TRANSFORMATION stc strives to accelerate vertical transformation by constructing advanced Business Support Systems to fulfil a range of industry transformations. “This stems from our commitment to fulfil the needs of start-ups, SMEs and larger enterprises by offering flexible, automated, scalable, guaranteed, and reliable solutions.” These solutions can accelerate digital strategies into the 5G platform, allowing the introduction of new solutions and business processes. During the pandemic, stc launched its 5G LIVEBUS, a smart and safe bus supported by 5G connectivity. This vehicle combines advanced and integrated safety solutions for business owners and their employees. The initiative targeted all sectors and institutions within the country, especially transport. Through its specialised business arm, solutions by stc, stc focused on introducing lucrative digital solutions to support its B2B customers. solutions by stc aims to provide customers with world-class connectivity and IT solutions, paving the way for digital transformation in businesses. In collaboration with Futures Communication Company, solutions by stc released digital and cloud-based solutions allowing small businesses to develop and activate their own online stores through a dedicated mobile application. The company also introduced Office 365 and Google products to support businesses in streamlining their workflows. The offering line under solutions by stc was extended to large and medium sized B2B customers to help manage safety measures and protocols. The team introduced thermal cameras, monitoring bracelets, remote collaboration tools and a fleet management solution. “Our primary goal is to assist our customers in realising the added value created by adopting technologies and digital solutions that can transform and optimise the way they do business,” said Alharbi. “We have dedicated a team of professionals to provide around-theCFI.co | Capital Finance International

clock assistance. The support team specialises in assisting business owners as they implement new systems.” The shift to digital solutions has taken the business model towards new areas of sustainable growth. “We continue to explore new applications that apply the latest tech to enhance operational and financial performance.” “We witnessed a massive transformation in the telecom industry triggered by the pandemic. This came in the form of increased demand for competitively priced plans, whether voice or internet, connectivity solutions, ICT solutions and innovative products.” “We witnessed a massive wave of demand from the telecom and digital solutions sector, with the opportunity to use our resources to find solutions that meet the needs of corporate customers. This was a trend experienced worldwide and is now considered the future of doing business in most sectors.” The growing demand for 5G and 5G enabled products has opened the doors to a world of potential opportunities in terms of accessibility, innovation, and expanded network services. The 5G revolution has set the bar at a higher level in terms of solutions. “I believe that these two key transformations will play a great role in the future of stc,” said Alharbi. “We have set up a clear transformation journey to cater customer needs and enrich their experience with stc, all defined in our Corporate Strategy AHEAD. We invested early on in building the strongest 5G network in Kuwait and have been implementing our own corporate digital transformation strategy.” “Using our experience and expertise, we will continue to set our sights on meeting the needs of our customers in a way that empowers and enriches their lifestyles, while assisting our corporate customers in achieving the diverse objectives under their unique digital transformation strategies.” i

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> Abdullah Al-Othman & Geidea:

FinTech Supports SMEs and Saudi Vision 2030 Abdullah Al-Othman is the founder and chairman of Geidea, a leading fully licensed provider of digital payment solutions. He is committed to Geidea’s vision of delivering accessible, affordable and customer-centric payment solutions for everyone.

ne of Saudi Arabia’s prominent and most promising young business leaders, Al-Othman’s career started out in real estate in 2008. His initial success in this sector, and a passion for all things digital, encouraged him to invest in a fintech venture, and eidea was born in 2011. Initially launched to improve the efficiency and availability of digital payment channels in the Saudi market, Geidea began by providing software, payment terminals and ATMs to banks. It went on to receive various government licenses and approvals in 2013, thus facilitating rapid expansion. By 2016, his company cemented its position as one of the largest service suppliers in Saudi Arabia and the wider Middle East - capturing more than 75 percent market share in the sector, by delivering 400,000 terminals and serving over 80,000 clients. Since then, the company has focused on offering small merchants a complete suite of payment, ecommerce and business management tools to help them grow and scale. Geidea remains committed to Saudi Arabia’s vital and expanding SME sector – as well as helping the country reach the targets set out in the Saudi Vision 2030 plan. Al-Othman is also founder of AO Holdings, a family investment house founded in 2019, and co-founder of Lemar United Real Estate, an international development company focused on the commercial sector. Lemar has executed high-profile real estate projects across Riyadh, including the Arcade Centre on King Fahad Road, and the three million square-metre Malga neighborhood. In addition to his business ventures, AlOthman is a member of the Business Entrepreneurs in the Chamber of Commerce, an institution that encourages commercial solidarity among businesses and protects their interests. He holds a bachelor’s degree in Information Technology from King Saud University and an MBA from Al Faisal University. i 146

Founder & Chairman: Abdullah Al-Othman

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Whether it’s gaining access to new equipment or unlocking the value of existing equipment, we’ve got a solution that’s as unique as your business.

Winner of CFI.co Most Innovative Equipment Leasing Solutions UAE 2021, 2020 & 2019

> Q&A with Talal Ghandour, Metito Chief Investment Officer and Managing Director:

Water, Water, Everywhere? Not Always True, but Metito Strives to Ensure Clean and Safe Supply

FI.co in conversation with Metito CIO and managing director Talal Ghandour. He explains why water is a precious and profitable resource…

YOU SPENT 23 YEARS WITH THE BANK OF AMERICA CORPORATION, AND NOW YOU’RE A CIO AND MD IN A COMPLETELY DIFFERENT INDUSTRY. HOW HAS THE TRANSITION BEEN? 148

Bank of America is a great organisation to work for, but water is our most valuable and critical resource. With Metito’s vision and role as a key player — and its growth plans — I felt it was an opportune time for me to join the family business. With financial experience gained over the years, I bring a complementary skillset to the CFI.co | Capital Finance International

management team. We work on realising Metito’s strategic plans through sustainable investments and a realignment of resources to secure organic and inorganic growth. I’ve only been with Metito for nine months, but I’ve been extremely impressed by the professionalism, integrity, and outstanding work ethic of our employees, and how they are valued.

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"The critical role we play was highlighted by the pandemic and the heightened need for clean and safe water. We experienced almost no disruption to our business. Metito has developed megaprojects on a fast-track basis across key emerging markets (Egypt and KSA). We’ve grown our staff numbers by 25 percent since the start of 2020." keep up with projected demand, the world will need $500bn in water infrastructure every year until 2030. A comprehensive and collaborative approach between all stakeholders is key to addressing the demand-supply gap. There needs to be sustainable infrastructure to achieve the UN’s Sustainable Development Goals, including clean water and sanitation, food security, health, and clean energy. Water scarcity is now centre-stage and improving its efficient use is vital. Metito is perfectly positioned to benefit given its position as a world leader in intelligent water- and wastewater management solutions. GIVEN THE FINANCIAL CHALLENGES OF UNDERDEVELOPED COUNTRIES FACING THE PROBLEM OF ACCESS TO CLEAN WATER, WHAT ARE YOUR RECOMMENDATIONS? The scale of underinvestment in the sector is well documented. Governments and the private sector have key roles to play. Tackling the supply-demand gap is multi-faceted. It is essential to have the right legal and financial infrastructure to enable private sector involvement. Non-revenue water must be addressed through operational efficiencies of existing infrastructure assets, and the development other greenfield life-line projects. Metito is a pioneer in this space. It commissioned the first water-treatment plant in Sub Saharan Africa, a bulk water supply project in Kigali, Rwanda. That was under a public-private-partnership, a 25-year concession securing 40 million litres of clean water per day, covering 40 percent of Kigali’s water needs and significantly improving water quality for a million residents.

It’s a company committed to its clients, and to the environment. It’s been a fantastic start to my Metito career.

Other key factors include education, improved consumption habits, a better understanding of the reuse of water and wastewater, the introduction of renewable energy sources, innovative, sustainable financing solutions, and continued advances in commercial technologies.

AS A FORMER FINANCIER AND NOW AN INDUSTRY INSIDER, TELL US YOUR VIEWS ON WATER’S INVESTMENT POTENTIAL… The industry holds immense potential, given global scarcity issues and general underinvestment. To

PARAMETERS FOR THE EVALUATION OF COMPANIES’ PERFORMANCE ARE CHANGING IN PUBLIC AND PRIVATE DOMAINS. HOW DO ESG AND SUSTAINABILITY PRINCIPLES AFFECT THE WAY METITO OPERATES? CFI.co | Capital Finance International

Metito has always been committed to working with governments, industries, and communities to meet environmental and water via sustainable infrastructure solutions. With the increased demand for water-reuse projects, Metito is a key enabler of a circular economy, and pioneered decarbonisation projects in desalination. We address the energy-intensive process of desalination in two ways. Firstly, through high-value engineering and working with providers of membrane technology to improve efficiencies. Secondly, through the use of solar energy to offset the energy intensity. Since the foundation of the company, Metito has been committed to creating a cleaner environment. Sustainability has been a key driver in our global operations. We’ve been producing sustainability reports since 2006 to measure our performance, and we’ll continue to innovate and work towards a greener future. We have low staff turnover and high employee engagement. We ensure the implementation of policies that define and reinforce ethical practices, and work with governments to achieve national water-security ambitions. GLOBALLY, COVID-19 HAS HINDERED INVESTMENT PLANS FOR MANY ORGANISATIONS. HAS METITO HAD PROBLEMS, AND IF SO, HOW IS RECOVER GOING? The critical role we play was highlighted by the pandemic and the heightened need for clean and safe water. We experienced almost no disruption to our business. Metito has developed megaprojects on a fast-track basis across key emerging markets (Egypt and KSA). We’ve grown our staff numbers by 25 percent since the start of 2020. Listening to our clients during trying times, and delivering on their needs, was central to our growth. WHAT’S NEXT FOR METITO? We’re focusing on growing recurring revenue streams and growing profitably. We’ll be diversifying our business offerings and expanding into countries where we see opportunities. We look forward to continuing the work of increasing global water security. i 149

> Shaping the Future, AUB-style:

Ones and Zeroes Centre-Stage

hli United Bank (AUB) was created in May 2000 from a merger between AlAhli Commercial Bank and United Bank of Kuwait.

In addition to its base of operations in Bahrain, the heart of the Arabian Gulf, the bank boasts a robust network covering the UK, UAE, Egypt, Kuwait, Iraq, Libya, and Oman. AUB also owns the leading insurance providers Al Hilal Life and Al Hilal Takaful. 150

AUB provides the full suite of retail, corporate, treasury, investment, private banking, wealth management, and Islamic banking services, as well as conventional and Takaful life insurance products and services with an enhanced Shari’a compliant business contribution. AUB aims to acquire banks and regulated financial services companies in its core markets, the Gulf countries, with minimum targeted 10 percent potential market share. CFI.co | Capital Finance International

This will be achieved through M&A and organic growth. AUB intends to acquire complementary banking and regulated financial services companies in secondary markets that enjoy strong cross-border business flows with Gulf countries, and those with similar economic structures. As part of its international expansion, AUB maintains a UK presence as a banking arm to support regional growth, as well as commercial,

Winter 2021-2022 Issue

transformation strategy, designed to improve the operational efficiency of the bank, and enhance the services it provides to retail customers, private banking clients, SMEs, and multinational corporates and financial institutions. AUB has ensured that its services meet the changing needs of all these customers — and are competitive with fintech companies. AUB recognises and understands the shifting nature of customer needs. This is the strongest foundation on which to build and implement the most effective strategy. Digital transformation around its advice, service, and products always responds to the changing requirements of clients. AUB has drawn-up a strategy designed to improve efficiency, enhance customer satisfaction, and gain a competitive edge. The AUB Group is equipped with fully digital banking capabilities (the A-Z Concept) as well as sharing knowledge of broad-based, data-driven culture capabilities (“Organised Actionable Data”). In recent years, AUB has been at the forefront of digital transformation. The bank’s push towards the adoption of fintech services has won it the recognition of leading industry publications — including CFI.co — based on its achievements, innovations, and performance over the past 12-months. On the financial front, AUB has performed well — even in the face of global financial downturns. Its GCC network is a well-managed business model supported by a continued focus on delivery of core earnings, and robust risk-management. Its “intelligent spend” strategy has resulted in resilience against current market volatility. The Best Global Network Bank recognition from CFI.co highlights the achievements of a dedicated team that empowers its clientele. The award marks the latest in a string of accolades garnered from leading industry bodies.

private and investment banking activities. It will explore a complementary PBWM-focused Swiss banking platform to increase the bank’s OECD footprint. AUB maintains a reputation as a premier pan-Gulf-Middle Eastern retail/ corporate/private bank with focus on sustainable and responsible banking. One of AUB’s key objectives is to entrench prudent and disciplined risk- and cost-management culture involving standardised policies and

methodologies, scalable infrastructure, and stringent risk/cost/benefit analysis in all decisionmaking processes. All processes are supported by strong data analytics and an enviable human resource base. DIGITAL TRANSFORMATION The banking industry has been transforming over the past few years to meet the rapidly changing digital needs of its customers. AUB is one global network that has accelerated its digital CFI.co | Capital Finance International

RETAIL AND PRIVATE BANKING TRANSFORMATION The challenge of customer needs lies in their sheer variety. In retail banking, AUB achieves digital transformation with initiatives that cater for diverse requirements. When it opened its first digital branch in Kuwait, it became the first bank in Bahrain to provide video and WhatsApp banking. It launched a VIVR (visualinteractive voice response) offering, and initiated digital onboarding for savings accounts. These developments have taken on even greater relevance during the pandemic. They also represent the future of retail banking, where multiple needs are met through a digital offering. The same is true for private banking, but what is interesting about wealthier customers is how their needs differ from one generation to the next. Recognising these differences, and responding 151

accordingly, is vital in the context of digital transformation in a sector characterised by the high level of human service. Another important consideration is private banking, where enhanced data analytics transforms the customer experience and empowers investment and wealth management decision-making. The main power in any private bank’s value proposition is the advisory service it provides to clients. Behind that lie data and the analytics applied to them. Digital solutions allow customers to see this analysis at any time, with automated notifications alerting them to any material changes in the performance of their investment portfolio. Control is in customer and client hands. But this is not just about managing short- to medium- term financial goals. Customers are also able to plan and invest for the long term. Protecting wealth for the next generation is a key priority. AUB’s clients want to understand what is likely to happen in the future, and how that could impact investments and net wealth. 152

Data analytics can provide some of the key answers.

uses rely on sensitive proprietary data or tech infrastructure.

CORPORATE BANKING AND TREASURY Some of the bank’s most technologically advanced areas include its corporate banking business and treasury operations. Annual investment has been rising in recent years, and continues to grow to keep pace with technological advancement and client demands.

AUB has also been becoming a more sophisticated, data-led adviser to its corporate clients, supported by the provision of technology platforms and digital applications.

AUB’s services include corporate, trade, and property finance, corporate banking, and Shariacompliant banking products. Its treasury business covers money market and forex services, hedging and trading solutions, and structured and Shariacompliant treasury products. Shifting needs require a swift response, and innovating speed is never easy. That’s why AUB has been increasing its investment in, and partnerships with, innovative start-ups and technology platforms. Investing in a ready-built technology solution is often the most efficient approach. But AUB also builds unique solutions, especially if their CFI.co | Capital Finance International

Much of the finance function in companies today is automated, where technologies such as AI and machine learning are used to forecast cashflows and expected sales revenues. Financial data and information are commoditised, so everybody has the same market- and pricing visibility. AUB continues to innovate its market-leading digital cash management solution called B2B. This desktop and mobile solution can be customised to suit different accounting systems, and enable efficient online payment management. Banking is becoming more and more like utility. What differentiates one bank from another is customer experience and access to data. Clients have the ability to use their own data, which will help them to define their future. i

Winter 2021-2022 Issue

> Book Review The Power of Geography: Ten Maps that Reveal the Future of Our World by Tim Marshall

From Battlefields to Battle Stars: Geography is Central To It All By Tony Lennox

Napoleon Bonaparte once said that if you know a country’s geography, you can understand and predict its foreign policy.

t was an astute observation by a general who learned — the hard way, on the snowy steppes of Russia — that geography is unforgiving.

Oceans, mountains, forests, plains: geography has always affected human progress. Today, even though we can traverse any obstacle by air, or speak face-to-face via computers in real time across every time zone, modern humans are as much at the mercy of geography as the Romans were when Hannibal and his armies crossed the Alps. In the age of satnav and GPS, paper maps have become a thing of the past — but a knowledge and appreciation of geography is as important as ever. Tim Marshall, a 60-year-old journalist-turnedauthor, has been obsessed with maps since childhood. In 2015 he published Prisoners of Geography, a book which deals with landforms’ effects on history and politics, and how the whole combines to create society. It was a Sunday Times bestseller. Now Marshall has followed-up with The Power of Geography: Ten Maps that Reveal the Future of Our World, in which he ponders the grip that geographical features still hold. The author draws on his 25 years of reporting experience from conflicts around the globe, including the Middle East, Afghanistan and the Balkans. He has witnessed how geography is at the heart of every power struggle. The book focuses on 10 regions where geopolitical tensions could play a major part in how the world develops over coming decades. The old certainties of the later 20th Century — the delicate balance of nuclear arms between the US and the Soviet Union, for instance — have become a thing of the past. The ending of what Marshall calls a “bipolar era” led — briefly — to the establishment of a unipolar period, with the US as the major economic and military power. Inevitably, Marshall points out, this disintegrated. In the 2020s, the world is “multipolar”, with a resurgence of nationalism and self-interest. China is the emerging superpower to rival the US.

There is nothing new about a multipolar world, he says. The apparent stability of the Cold War stand-off was historically unique. Ever since the rise of the first organised human settlements, tribes have wrestled and wrangled over territory and access to resources. Marshall’s book, while outlining some pessimistic visions of the future, is generally optimistic. We’ve been here before — often, he says — and survived. He ponders particular fragilities and supranational alliances in 10 arenas: Australia, Iran, Saudi Arabia, the UK, Greece, Turkey, the Sahel, Ethiopia, Spain… and space. While nine of the potential hotspots are earthbound, Marshall predicts that geopolitical power struggles will CFI.co | Capital Finance International

soon break free of earthly restraints. On the question of who “owns” space, Marshall writes: “Above a certain height there’s no sovereign territory. If I want to place my laserarmed satellite directly over your country, by what law do you say I can’t?” As nations race to become the pre-eminent power in space, with private companies entering the fray, he predicts the stage is set for a dangerous race for dominance.

The Power of Geography, published in paperback by Elliot and Thompson, is a fascinating and accessible read — with the conclusion that while people may change, the power of geography never will. i 153

> QIC:

Digital Drive, Innovation, a Long History and Regional Expertise

Qatar Insurance Company is a publicly listed composite insurer with 57 years behind it.

ince 1964, Qatar Insurance Company has been addressing the needs of the MENA region — and in the past decade, its network has expanded to cover Qatar, UAE, Oman, Kuwait, United Kingdom, Switzerland, Malta, Italy, Singapore, Bermuda, and Gibraltar. QIC has been a core contributor to the development and diversification of the Qatari economy. It 154

has become the undisputed regional leader in commercial insurance for energy, marine and aviation, property and commercial, medical, and motor fleets. With cover for auto, medical, life, travel, home, and boat, QIC has built a reputation for unrivalled service delivery over the years.

INTERNATIONAL BUSINESS The group’s international business operates under the banner of QIC Global, and generated over $2.8bn in gross premiums in 2020.

QIC is rated “A” by S&P and “A (Excellent)” by AM Best, which underscores the group’s financial strength and stability.

Qatar Re This global multiline reinsurer writes all major property, casualty and specialty lines of business.

CFI.co | Capital Finance International

QIC Global has four major subsidiaries.

Winter 2021-2022 Issue

Seasoned underwriting and finance professionals in the Qatar Re teams provide clients with technical and business expertise gained across all market sectors. With headquarters in Bermuda and offices in Zurich, London and Singapore, Qatar Re is always close to the world’s major reinsurance markets — and the core operations of its clients. Since 2016, Qatar Re has been one of the world’s 50 largest reinsurance companies (Source: AM Best). Antares In 2014, QIC acquired Antares Holdings Ltd, a specialty insurance and reinsurance group operating from the famed Lloyd’s market in London. QIC is the only Middle Eastern insurance group to own an integrated insurance vehicle in Lloyd’s.

Antares delivers a global, diversified range of underwriting services in Property, Reinsurance, Casualty, Specialty, and Marine and Aviation. It ensures efficient and effective service for its clients, focusing on quality, security, continuity, and consistency in risktransfer.

plc (ZIP) and Markerstudy Insurance Company Ltd (MICL) from UK-based Markerstudy Holdings. The transaction made Qatar Re one of the leading participants in Britain’s motor insurance industry, with a market share of over five percent.

QIC Europe Ltd Established in 2014, QIC Europe Ltd (QEL) is the group’s Malta-based, pan European, nonlife insurance and reinsurance subsidiary with branch offices in London and Italy.

FINANCIAL PERFORMANCE QIC has a stable track record of profitability throughout its 57 years of operation. With over $3.5bn in gross written premium in 2020, QIC continued its market-leading position in the MENA region.

Zenith Insurance and Markerstudy Insurance Company In 2018, Qatar Re acquired Zenith Insurance

In Q3 2021, QIC posted a net profit of $140m, a 491 percent rise compared to the same period in 2020. The group’s gross

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written premium increased by four percent to $2.74bn from $2.64bn for the same period in 2020. DIGITAL TRANSFORMATION QIC has been at the forefront of this transition for the Middle Eastern insurance industry. It remains focused on enhancing its digital insurance offerings, and introducing innovative, technologyenabled services for ease-of-use. RECENT DEVELOPMENTS In Q4 2020, QIC carried out a successful initial public offering of its life and medical insurance subsidiary, QLM Life & Medical Insurance Company (QLM). QLM’s share price surged 24 percent on the first day of listing, and the shares have continued to perform well. ANOUD TECHNOLOGIES QIC administers its insurance business through an internally developed end-to-end IT platform called Anoud. This has enabled QIC to lead the digital transformation of the industry in the Middle East — and distinguishes the group from its regional competitors. 156

In 2020, QIC established a wholly-owned IT services subsidiary called Anoud Technologies (Anoud Tech). It markets an integrated insurance IT platform called Anoud+ to third-party insurers. Anoud+ provides them with a comprehensive management solution for all programmes. COVID COVER QIC was the first insurance company in Qatar to introduce Covid-19 cover in its travel insurance products. This innovation gave a breath of life to the travel industry and pace-of-mind to travellers to-and-from Qatar and the MENA region. The cover includes medical expenses, hospitalisation, quarantine, and trip cancelation fees.

Under the guidance of the Qatar Insurance Group’s chief executive, Salem Khalaf Al Mannai, a groupwide digital transformation programme took shape. “The primary objectives were to improve customer experience, modernise the group’s offerings, and introduce an agile methodology of delivering new and innovative insurance products and services,” Al Mannai says. With the interests of existing and potential clients in Qatar and beyond at heart, the management group set to work.

WHEN GROUP MANAGEMENT HAS TO DRIVE PROFIT — AND DEAL WITH A PANDEMIC AT THE SAME TIME… In 2021 — another difficult year for a world in the grip of Covid — QIC Group management orchestrated a return to outstanding financial performance.

Along with the constant drive for improvement, there were other pressing matters to address; the group’s response to the Covid-19 pandemic, for instance. “Our aim in 2020 was to guide the group,” the CEO says, “and offer the safest, and most trusted insurance services to retail and corporate customers.”

The leadership team guided the group so well, and led the revision so successfully, that a net profit of $140m was achieved in Q3 — a 491 percent rise compared to the same period in 2020.

The preparation and consideration paid-off. QIC was able to maintain business continuity and offer unbroken service to its clients and customers, despite the challenges of the pandemic. i

CFI.co | Capital Finance International

Winter 2021-2022 Issue

The Wealthiest Cities in the World for 2021

s part of their upcoming W10 Report, global wealth intelligence firm New World Wealth have reviewed the wealthiest cities in the world for 2021, with a special spotlight on the wealthiest cities in the Middle East and Africa.

The top five wealthiest cities worldwide (as at June 2021) include: New York City: Total wealth held in the city amounts to US$2.9 trillion. The financial center of the US and the wealthiest city in the world. Home to just over 370,000 HNWIs, aswell as 805 centi-millionaires and 62 billionaires. Also home to the two largest stock exchanges in the world (Dow Jones and NASDAQ). Areas around New York City such as Greenwich and the North Shore of Long Island also contain a large amount of wealth that is not included in this figure. San Francisco Bay area: Total wealth held in the city/ area amounts to US$2.6 trillion. The San Francisco Bay area includes San Francisco and the area known as ‘Silicon Valley’. Silicon Valley is home to a large number of IT billionaires and includes affluent towns such as Palo Alto, Los Altos Hills and Atherton. This city/area has been steadily moving up the list over the past few years and should overtake New York City at some point before 2030. Tokyo: Total wealth held in the city amounts to US$2.5 trillion. Tokyo is home to the 3rd largest stock exchange in the world and is the economic hub of Japan. London: Total wealth held in the city amounts to US$2.3 trillion. Home to some of the world’s most exclusive residential areas for HNWIs and billionaires, including the likes of Knightsbridge and Belgravia. The houses and apartments that overlook the parks (Hyde Park, Regents Park and Hampstead Heath) are especially affluent. Beijing: Total wealth held in the city amounts to US$2.0 trillion. Beijing is the official capital city of China and is home to the head offices of most of China’s largest companies. SPOTLIGHT ON THE MIDDLE EAST & AFRICA (MEA) As part of their study, New World Wealth also reviewed the wealthiest cities in the Middle East and Africa. The five wealthiest cities in this region include: Dubai: Total wealth held in the city amounts to US$530 billion. Dubai is the wealthiest city in the Middle East & Africa (MEA) region and the 29th wealthiest city in the world. Home to just over 54,000 HNWIs, aswell as 165 centi-millionaires and 12 billionaires. Major industries there include: financial services, basic materials, oil & gas, transport, hotels, retail and real estate. Affluent parts of Dubai include: Emirates Hills, the Jumeirah Golf Estate and the Palm Jumeirah. Tel Aviv: Total wealth held in the city amounts to US$312 billion. Tel Aviv is the economic and CFI.co | Capital Finance International

financial center of Israel. It is home to a large number of successful startup companies, especially in the hitech arena. Beachfront property in the city is amongst the most expensive in the world. Major industries there include: IT, financial services, professional services and real estate. Johannesburg: Total wealth held in the city amounts to US$235 billion. The wealthiest city in Africa. Most of Johannesburg’s HNWI wealth is concentrated in the suburbs of Sandhurst, Hyde Park, Houghton and Westcliff. Major sectors in the city include: financial services (banks) and professional services (law firms, consultancies). Istanbul: Total wealth held in the city amounts to US$180 billion. One of the world’s oldest cities. Major industries there include: manufacturing (cars, textiles), basic materials, transport, financial services, telecoms and food processing. It is considered to be the main ‘gateway city’ between Europe and the Middle East. Many of the Middle East’s largest companies are based in the city including: Koc Holding, Isbank and Sabanci Holding. Cape Town: Total wealth held in the city amounts to US$130 billion. Home to Africa’s most exclusive suburbs including: Clifton, Bantry Bay, Fresnaye, Llandudno, Camps Bay, Bishopscourt and Constantia. Also home to a number of top-end lifestyle estates including: Steenberg, Atlantic Beach and Silverhurst Estate. Major sectors there include: real estate and fund management. i • “Total wealth” refers to the private wealth held by all the individuals living in each city (i.e. resident wealth). Government funds are excluded. • “High net worth individuals” or “HNWIs” or “millionaires” refer to individuals with wealth of US$1 million or more. • Centi-millionaires refer to individuals with wealth of US$100 million or more. • Billionaires refer to individuals with wealth of US$1 billion or more. • “Wealth” refers to the net assets of a person. It includes all their assets (property, cash, equities, business interests) less any liabilities. • City-states such as Hong Kong, Singapore and Monaco are excluded from the list. • All figures for June 2021.

New World Wealth provides information on the global wealth sector, with a special focus on high growth markets. Their research covers 90 countries and 150 cities globally. For more information, visit: 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 work has been featured in several international publications including: BBC, CNN, the New York Times and Forbes. 157

> Latin America

Central and South America Take a Leading Role in Renewable Energy By Brendan Filipovski

When South and Central American energy is mentioned, Venezuela’s oil reserves in the Orinoco Belt probably come to mind. But most of the region’s power now comes from renewable sources. Hydropower constituted 49 percent of installed capacity in 2020, and the region is making impressive strides in solar and wind electricity generation. But are there even greater efficiency gains to be had? South and Central America have the highest rate of electricity generated by renewables in the world — 67 percent in 2020. This outstrips Europe, with a mere 33 percent. Despite the riches of Venezuela, oil and diesel generate just seven percent of regional electricity needs. Guyana — 86 percent of installed capacity — Suriname and Nicaragua are the most dependent on oil-fired generation (60 percent 44 percent respectively). A high share of renewables is nothing new. Hydropower has long been the largest regional source of electricity. Mega-dams and hydro schemes were a favourite post-World War II project, and three of the world’s largest five hydroelectric dams are to be found here. The countries with the highest share of installed hydroelectric capacity are Paraguay (99 percent), Brazil (69 percent), Colombia (68 percent), Cost Rica (66 percent), Venezuela (65 percent), and Ecuador (59 percent). In actual megawatts, Brazil dominates (see chart below). Most of its hydro capacity is in the northern part of the country, in the Amazon basin. Hydroelectricity has, however, hit some hurdles. El Niño climate effects and changing weather patterns have led to dwindling dam levels. Bigger dams can only compensate so much without regular and predictable rainfall. Public — and international — opposition to grand hydro projects has also risen. While still on the overall increase, hydroelectric generation in the region is diminishing. Fortunately, hydro’s problems have been met with technological improvements in the complementary renewable sources of wind and solar. In Argentina and Brazil, wind projects are now cheaper than comparable fossil fuel projects. Electric batteries have grown in capacity — while falling in price. The region is now set for a second wave of renewable energy. Since 2010, installed wind power has increased by a factor of 17, solar by a factor of over 200 — albeit from a modest base. The adoption of distributed solar (PV) has surpassed expectations, and such growth is expected to continue. By 2040, it is estimated that wind power’s share of total electricity generated will increase from six to 11 percent, while solar will increase its share from one percent to seven. This projected growth will help countries which announced net-zero carbon targets at COP26: Argentina, Brazil, Chile, Colombia, Ecuador, Nicaragua, Panama, Peru, Suriname, and Uruguay. But some argue that the growth of solar and is not high enough.

ritics point to growth levels in Europe, expected to reach 34 percent wind and 13 percent solar by 2040. But this ignores the comparative regional advantage of hydroelectricity. There has also been criticism of the region for not doing enough development of batteries — especially as it has some 63 percent of the planet’s lithium reserves. China is busy in supply chains in the region. Brazil has a 2.3 percent share of global wind power (slightly less than France) and a 1.1 percent share of global solar power (more than all the Middle East combined). After Europe, it has become a favourite for international private investors following green criteria. Wind and solar power have a large presence in Chile and Argentina. Both benefit from long, windswept coastlines and abundant sunshine. Both — and Uruguay — are keen to use renewable energy to develop green hydrogen. The Australian mining company Fortescue recently announced an $8.4bn investment in a green hydrogen project in Argentina. Brazil has benefitted from a large biomass industry (nine percent of electricity capacity in 2020) that has been developing over the past 40 years. But biomass and biofuel are controversial because they are associated with land-clearing. At COP26, Brazil signed a declaration with 100 others — including Argentina, Costa Rica, Ecuador, Mexico, Peru, Colombia, and Chile — to end deforestation by 2030. Electricity from oil has been displaced by renewables and the growth of natural gas (a 160,000 19 percent share in 2019). But countries are

140,000

still keen to find and use oil. Brazil is looking at offshore exploration, while Argentina is exploring shale oil. In Mexico, the government is expanding oil refining and production. Coal’s share increased from three percent in 1990 to five in 2019. No country in the region was prepared to sign-up to a phase-out of coal at COP26. Argentina and Brazil both generate a small amount of nuclear power. The growth in solar and wind, and the strength of hydro, could be better leveraged in terms of efficiency and emissions. Increased connections between national grids and the integration of national markets could realise a $1.9bn annual benefit for the region, according to The World Bank. This is mostly down to countries such as Guyana and Suriname, which would be able to trade their reliance on oil for hydroelectricity and natural gas from Bolivia and Peru. Integration also brings cost savings through the sharing of baseload power and the general pooling of resources. It would also allow countries to develop economies of scale in solar and wind. It would probably encourage private investment, as well. But market integration remains a slow march in 2021. The most interconnected sub-region is Central America, with SIEPAC — the interconnected grids of six countries. But the connections are relatively small, with a maximum of 300 MW. Only Brazil and Argentina (1,150 MW) and Brazil and Paraguay (6,300 MW) have sizeable connections between grids. Bolivia has no connection with any country, while Peru has just one 38 MW connection with

Biomass

Natural Gas

Hydro

Diesel

Nuclear

120,000

100,000

80,000

60,000

40,000

20,000

Chart 1: South and Central America - Installed Capacity. Source: World Bank

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Solar

Ecuador. Brazil and Bolivia do have a natural gas pipeline between them (as do Bolivia and Argentina) and these countries are negotiating connection. In addition to more infrastructure to create bilateral and multilateral connections, more policies and reforms are needed. The good news is that all markets in the region went through similar waves of reform, starting in the late 1970s and peaking in the 1990s and 2000s. All countries relaxed government control in the sector, and established a regulatory system. Most privatised and unbundled their utilities. Auctions were introduced for capacity. All — except Colombia — adopted a cost-based bid approach to pricing. Private investment soared. Today, the private sector accounts for around 40 percent of electricity generation, and 25 percent of transmission, in the region. There remain major differences in the degree of competition and regulatory regimes. Some regions have, after financial crises, seen renationalisation of transmission and distribution — Bolivia — or the reintroduction of regulations — Argentina. The region has an enviable lead on renewable energy, thanks to its hydroelectric history. Development of solar and wind power is increasing, and the potential is enormous. While the region has seen some electricity market integration, more is needed to unlock efficiency gains and realise greater economies-of-scale in renewables. Political will is needed to see this integration advance — and when it is applied, the entire region will advance. i

Coal

Geothermal

Wind

Winter 2021-2022 Issue

> IMF:

Latin America’s Inflation Challenge By Maximiliano Appendino

Inflation has surged in the largest economies of Latin America, prompting large central banks in the region to raise interest rates before economic activity has fully recovered.

ur latest Regional Economic Outlook shows how rapidly inflation is rising. In the first year of the pandemic, average inflation in Brazil, Chile, Colombia, Mexico, and Peru — the LA5 — was below the average for other emerging market economies. It’s now higher, averaging 8 percent year-on-year in October and in the case of Brazil, surpassing 10.5 percent. Soaring food prices are partly driving the surge. They started increasing even before the pandemic and have risen more than 18 percent on average in LA5 countries since January 2020. In Latin America, food prices make up about a quarter of the average consumption basket. For households still reeling from the coronavirus crisis, higher food bills leave less to spend on other goods. In a region with the highest levels of income inequality, the burden is highest for lowincome households who spend a larger share of their income on food.

Inflation Makes a Comeback: Driven in part by rapidly rising food prices, inflation in Latin America has surged, prompting rate hikes early on in the recovery. (headline and food consumer price index; index:January 2019 = 100). Sources: Haver Analytics; and IMF staff cal-

culations. Note: Aggregates are PPP-weighted. Emerging markets (EM) includes LAS. Hungary, India. Indonesia, Malaysia, Philippines, Poland, Russia, South Africa, and Thailand. LAS includes Brazil, Chile, Colombia, Mexico, and Peru.

Even core inflation, which excludes food and energy prices, has exceeded the pre-pandemic trend this year, reaching an average of 5.9 percent year-on-year in October.

automatically with inflation) that could accelerate prices further.

Inflationary pressures should be temporary and medium-term inflation will likely revert to central bank targets. But there is a lot of uncertainty. The shock from the pandemic is unique and its impact on commodity prices, supply bottlenecks, and rising shipping costs is hard to pin down.

There is also the risk that international financial conditions tighten rapidly and unexpectedly in response to inflation developments in advanced economies, leading to capital outflows. This potential shock could jeopardise financial stability and depreciate currencies in Latin America, adding to inflationary pressures.

The region is also battling a long history of high and unstable inflation — a challenge for central banks that have only recently established their credibility. This history may have led to indexation practices (contracts that adjust their terms

Managing expectations, through statements or rate hikes, is a key factor in heading off an inflationary spiral, which is why central banks in the region are moving fast to preserve their hardwon credibility in an uncertain environment. All

LA5 countries have already hiked policy rates and their monetary authorities have shifted up forward guidance. Despite the recent rate hikes, monetary policy stances generally remain accommodative and continue to support the ongoing recovery. The region nevertheless faces difficult trade-offs and needs to balance an uncertain inflation outlook with employment still substantially below prepandemic levels and an uneven recovery in Latin America’s jobs market. i Source blogs.imf.org/2021/11/16/latin-americas-inflationchallenge

"There is also the risk that international financial conditions tighten rapidly and unexpectedly in response to inflation developments in advanced economies, leading to capital outflows. This potential shock could jeopardise financial stability and depreciate currencies in Latin America, adding to inflationary pressures." CFI.co | Capital Finance International

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> Fausto Ribeiro, CEO of Banco do Brasil:

Green Dreams Coming True as Brazilian Bank Focuses on ESG The financial sector has a key role to play in the transition to a new model. At Banco do Brasil, sustainable credit represents 37.5 percent of the total portfolio.

ustainability and environmental, social and governance issues have been steadily gaining relevance.

The global aim is to achieve a model of economic, productive and consumption development that is in harmony with environmental limits and combats inequalities. It is a vision shared by governments, companies, NGOs, and society in general. By considering ESG in business strategy, the sector can offer instruments such as equity for new technologies, emissions-trading platforms and green loans to capitalise on shared-value opportunities. Ensuring sustainable results in the short, medium, and long term depends on the correct assessment of the risks and opportunities. In the financial sector, risk management is incorporated into the corporate culture and related to business continuity. Social, environmental and climatic factors have secured a fundamental role in risk assessment. With the increasing search for investments in products that benefit society and the environment, there is an increasing trend in the issuance of green and social-impact bonds. Long-term financial dividends should focus on ESG risks and opportunities — with more active investor scrutiny of companies' involvement. There is a rising number of sustainable products and services, in-line with the needs of consumers who have been opting for purpose-orientated brands with values similar to their own. This consumer market movement has led financial institutions to act proactively, encouraging clients to adopt sustainable practices and develop economic activities that generate shared prosperity. CHALLENGE OF TRANSITION The debate surrounding actions that lead to a

"With the increasing search for investments in products that benefit society and the environment, there is an increasing trend in the issuance of green and social-impact bonds. Long-term financial dividends should focus on ESG risks and opportunities — with more active investor scrutiny of companies' involvement." low-carbon economy is more intense after COP 26. The issue is urgent, because natural disasters caused by climate change negatively affect global GDP. They also spark mass migrations, conflicts over water, and reduced agricultural productivity. Extreme weather events demonstrate that we must learn a different approach to production. There are opportunities for responsible growth from the development of new technologies, and innovation with a focus on sustainability and the circular economy. These forces are changing areas such as agriculture and energy, and they should converge further still. Disruptive technologies such as AI, machine learning, blockchain, and data management are essential to monitor value chains, understand externalities, and adopt strategies with a positive impact. Increasing productivity in harmony with conservation is a global objective, and one that will guarantee the quality of life for future generations. In this context, BB seeks to support sound, low-carbon agricultural practices. The transition to low-carbon emissions and an inclusive economy is indispensable for nations’

financial stability and prosperity. According to the Boston Consulting Group, it will take nearly $150tn for businesses and governments to neutralise greenhouse gas emissions by 2050. In this endeavour, the financial sector plays an essential role. CORPORATE SUSTAINABILITY To support clients in this transition, BB forecasts the growth of its sustainable business portfolio, which currently totals BRL282bn ($50.5bn) in operations and credit lines. This is designed to finance activities with positive social and environmental impacts. The balance represents 37.5 percent of BB's total classified portfolio, certified by Sitawi a specialised entity. Banco do Brasil has one of the largest sustainable business portfolios in the National Financial System, with an emphasis on sustainable agriculture and social businesses. BB’s agribusiness performance is strengthening, with a 54 percent share of the Brazilian market. Half of this portfolio (BRL225bn, or $40.3bn) comprises sustainable credit lines. The aim is to reach a balance of BRL125bn ($22.4bn) in sustainable agriculture by 2025, compared to the current BRL112.4bn ($20.12bn).

"We are increasingly directing our capital to meet consumer demands for energy efficiency, cost reduction and competitiveness." 162

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Due to this prominence, the bank intends to seek solutions and mechanisms — carbon credits or green interest rates — which contribute to bringing better conditions and incentives for Brazilian farmers. On the energy front, Brazil is a reference point in the international market. It has an electrical matrix with an 83 percent share of renewable sources according to the Energy Research Company, EPE. Even in positive scenario, there is room to grow given Brazil's geographic potential for renewable energy. We are increasingly directing our capital to meet consumer demands for energy efficiency, cost reduction and competitiveness. Banco do Brasil aims to reach BRL15bn ($2.69bn) in credit for renewable energy by 2025 for all customer segments — 100 percent growth over today’s figure of BRL7.4bn ($1.32bn). From the perspective of administrative practices, BB is doing its homework. We are committed to reducing 30 percent of greenhouse gas emissions by 2030 and offsetting 100 percent of direct emissions by 2021. We will reach 90 percent of renewable energy for bank operations by 2024. We already have two photovoltaic plants in operation, and are working towards a total of 29 solar and biomass plants. BB has joined the Business Ambition for 1.5°C initiative and remains committed to achieving carbon neutrality by 2050. We are aware of the challenges in achieving zero emissions, and are targeting the value chain and participating in the debate. We are attentive to regulatory standards, creating mechanisms to support sustainable production and encouraging environmental preservation. It is necessary to take care of the present with an eye to the future, promoting green and sustainable growth. MOST SUSTAINABLE BANK Banco do Brasil has a unique identity. It is a market company, listed on the stock exchange, competitive, profitable, innovative, and efficient. We are “from Brazil”, we have a trajectory that builds on more than 200 years of contribution to the country's economic and social development. The bank plays a transformative role in society by fostering entrepreneurship and sustainable production in all regions. We are the main financier of Brazilian agribusiness and support the sector at all stages of the production chain.

CEO: Fausto Ribeiro

The award for the Most Sustainable Bank in South America — granted by CFI.co — is recognition of Banco do Brasil's commitment to sustainability, and its efforts to adopt ESG practices that enable sustainability and actively contribute to the global sustainable development agenda. i 163

Clicking Our Way Into a Future of Inclusion, or Peering Too Closely Into a Political Void? By Yogesh Patel

acebook, Twitter, Instagram, Snapchat, WhatsApp — statistics show we spent an average of 145 minutes a day on social media this year, up almost a full hour from 2012.

Over the years, companies, celebrities and politicians have used targeted ads, tweets and posts to promote themselves and their products. Halftime ads in the Superbowl have almost all been crafted to generate a buzz on social media.

Look back to the Facebook server crash in October 2021. The server went down for a total of six hours – just six – yet people lost their minds over the loss.

Donald Trump is maybe the most well-known example of a politician with a significant platform on social media, often affecting large portions of political narrative through his tweets in the small hours. In a similar vein, India’s prime minister Narendra Modi is also the product of a created social media presence. His meteoric rise from

Where did they go to vent? To another platform, Twitter. 164

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Chief State Minister of Gujarat to Prime Minister would not have been possible without his social media prowess. By Mid-July 2013 he was already the most-followed politician in the country, constantly butting heads with mainstream media. He launched himself into almost every debate surrounding Muslim minority affirmative action, quickly securing himself a position as the online figurehead of his right-wing supporters. Since his election, he has strayed from the most controversial issues — but in no way has his online persona lost its punch.

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Just after the farmers’ protests, the MeitY released a new set of guidelines for social media companies to follow, should they wish to continue operating in the country. One required companies to monitor all instances of what they deemed to be “grievances”. Businesses would need to work with local law enforcement to address potential riots or profile protest organisations. These policies would, in the words of a MeitY spokesperson, make social media companies, “more responsible and more accountable”. Another rule ensured messaging services identified the originator of circulated content. The government had initially pushed WhatsApp and Signal for this, but the companies claimed it would compromise their end-to-end encryption. These new regulations also allow policy enforcers to police content shown on Netflix and other streaming services, giving them power to remove videos and photos they deem to go against Indian values. But Twitter, WhatsApp and even Netflix are far from the first big-tech companies to feel the wrath of Indian policy makers. In June of 2020, China based company ByteDance saw its number one app get banned. A spiritual successor of the mid-2010’s viral craze Vine, TikTok has become one of the largest social media platforms in the world. In September of 2021, it passed the one-billion-user threshold, the seventh platform to do so. Before the ban, India would have been seen as a major prize for the company, with a userbase of 200 million people, the largest outside of home market of China. But as tensions between India and China intensified, the government shut down the app, for “sovereignty” reasons. Since then, TikTok has been on tenterhooks, awaiting a response from New Delhi while potential security leaks are investigated.

Twitter propelled the leader of the largest democracy on Earth to his current position. Yet, watching the debate that played out this past February, you wouldn’t be wrong for thinking the opposite. As the early 2021 farmers’ protest reached its tensest moments, the Ministry of Electronics and Information Technology (MeitY) issued an order for Twitter to ban users who promoted violence. Some 250 accounts snapped shut… before being unbanned a few hours. A “lack of substantial evidence” was given as an explanation. This was not well taken by the government.

In January of 2021, TikTok removed a couple of thousand employees from India, signalling a departure from the sub-continent, which triggered the taxman. New Delhi launched a tax-evasion probe into the company freezing it’s bank accounts. This ongoing battle between TikTok and India has undoubtedly made other tech corporations feel uneasy. With such a large and globally powerful market, India has the ability to demand foreign companies comply with their rules, and tech companies often have no choice. This growing feud between social media companies has sparked another debate surrounding the true responsibilities of platforms. Are they public spaces, subject to the censorship laws in each country, or are they private enterprises with profitmaking priorities? Platforms such as Twitter and Facebook can use, and abuse, user-data for political gain. The Cambridge Analytica scandal — using data gathered from social media to create CFI.co | Capital Finance International

digital profiles of users to sell them the bestsuited political figure or ideology — proved the importance of data protection laws. Sites like Reddit, originally designed for likeminded individuals with complementary interests, have become echo chambers. What started with good intentions has resulted a space for misguided beliefs to be compounded, without contrasting viewpoints. Such sites were the breeding ground for the January 6 Capitol attack, the Charlottesville white supremacist marches, and other politically motivated manifestations. While it may seem that India is going in the correct direction — with necessary regulation — the overpolicing of user-generated content is where critics of India’s new policies draw the line. In recent years regulators across the world have focused on clamping-down on disinformation and ensuring data protection and privacy. MeitY’s new regulations, on the other hand, have been criticised by social media activists for their focus on protecting government interests. The rules are too broad, say the critics, a hammer where tweezers are needed. Are the major players going to cave or move their interests out of the country? Judging by previous government regulation in countries such as Australia, they will stay. Market size and potential revenue are too great to forsake. But whether these companies can meet the goals set by MeitY will be the litmus test New Delhi will use. We live in interesting times, where the line between private enterprise and public discourse is becoming increasingly blurred. The situation in India over the past year has thrust the debate into the light, with differing opinions flooding in. Tech corporations are deliberating over their next steps, and whatever the outcome is, its will have repercussions for years to come. As other countries realise that it’s possible to regulate and control these new spaces, the nature of protest, political action, and elections will all change. i

Author: Yogesh Patel

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> Connection and Separation:

How Social Media Shape Our World By Tony Lennox

It’s barely 25 years since SixDegrees.com launched the world’s first practical social networking site. It was named after the Six Degrees of Separation theory — the notion that everyone is only six connections away from everyone else.

ho would have predicted that this amusing distraction would one day come to dominate the planet? Today almost 40 percent of the global population has a Facebook or Instagram profile. The ability to connect with practically anyone, anywhere, is just part of daily life for billions. Traditional gatherers and disseminators of news have seen their empires crumble before a social media tsunami. It is estimated that in the US alone, more than 50 percent of voters access their news primarily through social media.

World leaders (including Indian PM Narendra Modi, see main story) have been quick to exploit the advantages. But some have failed to recognise that this new means of communication is a twoway street —people can, and will, talk back. A paper published in 2020 by Anita Gohdes, a professor at the Hertie School of Governance in Berlin, suggests that many world leaders are trying to use social media to “divert and distract” during times of domestic crisis. Some leaders, however, are becoming agitated by the technology: it was originally intended as a simple means to stay in touch; now it’s being used to spark revolt. 166

"Nearly every world leader has a Twitter account or Facebook profile — including Pope Francis, and the Queen." Protest groups from Chile to Catalonia, Hong Kong to France, are putting feet on the streets via social media — in minutes. Bruce Lee’s famous exhortation, “be like water”, has educated protesters who, using social media, rise quickly before trickling away, giving authorities a tough task to trace ringleaders. Nearly every world leader has a Twitter account or Facebook profile — including Pope Francis, and the Queen. Most still have their words filtered through layers of PR, but the ease with which such filters can be bypassed is often too great a temptation. Former US president Donald Trump is said to have tweeted 25,000 times during his time in office. Some commentators believe his election success was partly due to his use of social media. Others suggest that the revealing nature of his CFI.co | Capital Finance International

acerbic, unfiltered 3am tweets led to mockery — and subsequent electoral damage. Social media often reveal the previously unseen human side of a leader. Singapore’s Lee Hsien Loong, for instance, exhibits a conversational and relaxed persona in his engagement with citizens via Facebook. South African president Cyril Ramaphosa holds Q&A sessions on Twitter, fielding questions from citizens. And while Vladimir Putin of Russia claims to be too busy for social media, most Western politicians are happy to dabble — even if it sometimes comes back to bite them. Former UK Chancellor George Osbourne, for instance, faced derision when he posted a picture of himself eating a man-of-the-people hamburger — which was then revealed to be from a posh restaurant, costing £9.70. Such pitfalls are common but underlying all the lampooning is a disturbing truth for world leaders. In the 1970s, American author and cultural anthropologist Margaret Mead unwittingly predicted the future when she wrote: “Never doubt that a small group of committed citizens can change the world.” Nowadays those citizens have social media on their side. i

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> Pump

Up the Volume on Communication Skills

The past two years have not been easy on leaders, but according to Harry Kraemer, good leadership looks much as it did pre-pandemic…

“T

he requirements to be a leader have remained pretty constant. It’s leading yourself, leading others, communicating like crazy, listening carefully, demonstrating you care,” says Harry Kraemer, clinical professor of leadership at the Kellogg Institute. So instead of changing your style, what the current moment calls for is “turning up the volume”. Kraemer is a clinical professor of leadership at Kellogg and executive partner with the Chicagobased PE firm Madison Dearborn Partners. He was previously CEO of healthcare giant Baxter International.

In a recent webinar for The Insightful Leader Live, he shared how leaders across an organisation can amp-up their leadership skills to meet crises with grace. DOUBLE DOWN ON SELF-REFLECTION Before you can lead others through turbulent times, you need to first lead yourself — which of course requires understanding of yourself. This is pretty much always good advice. Kraemer has long advised leaders to set aside a few minutes each day to self-reflect on what they intended to do, what they actually did, and what they might have done differently — at work and in other areas of their life. Self-reflection is even more critical during a crisis, he explains. Even in easy times, we have a tendency to want to move quickly, lest all of our decisions and responsibilities start to pile up. In a crisis, this tendency gets much worse. But this is to confuse activity with productivity. It is better to do less, but to be intentional and strategic about what is done — especially when time is tight and the stakes are high. Kraemer also advises occasionally looking beyond yourself for this insight — a “gut check”, if you will, of whether your actions align with the things you say you care about. Specifically, he advises sharing your priorities and values with others, and then waiting to see how they react. “The good side is when [they] say, ‘Hey, Harry, you know, you can stop here. I mean, I’ve been working with you, I see your actions every day. Based on your actions, I could have guessed what your values are’,” he says. “Now the other side, a little more scary, is when [they] say, ‘Wow,

"Leaders should be extra diligent with other communication efforts, such as ensuring everybody is crystal clear on their own role, the expectations that are in place, and how people will be held accountable." based on your actions, I’m amazed you think those are your values’.” DOUBLE DOWN ON COMMUNICATION No matter where you sit in an organisation, the key to leading others is influence. And the key to influence is showing people that you understand them: their perspective, their experiences, and, at a bare minimum, know their names. When Kraemer asks his MBA or executive education students how many of them want to “lead”, many hands go up. When he asks them how many of them relate well with people, again, there’s a sea of hands. Then he instructs students not to raise their hands — he doesn’t want to embarrass them — but to simply reflect: “How many of you know the name of the receptionist when you walk into the building? How many of you, when you go in the cafeteria, know the names of everybody? And how many children they have? And when you’re talking to the maintenance folks, do you know their favourite sports team, and thank them for everything they are doing?” If you can truly relate to others and see where they are coming from, you can have an enormous impact, Kraemer believes. This is always the case. But during a crisis, leaders need to pump it up. In addition to continuously checking in to see how people are doing, leaders should be extra diligent with other communication efforts, such as ensuring everybody is crystal clear on their own role, the expectations that are in place, and how people will be held accountable. Even if you find yourself spending 90 percent of your time on communication, it isn’t necessarily a problem. After all, says Kraemer, “If I’ve got all the right people, and if everybody knows exactly what to do, what else is there to do?” CFI.co | Capital Finance International

SAME ADVICE, DIFFERENT SITUATIONS In Kraemer’s view, this advice — to focus, above all, on how you relate to and communicate with others — applies to most of the stickiest scenarios in which you are likely to find yourself during a crisis. Take discussions about future layoffs. Don’t promise people that there will never, ever, be any, or that the job is theirs for life. These promises are nearly impossible to keep. Instead, be transparent about what would happen if layoffs did occur, and assure your team that you will do everything in your power to treat them as you would like to be treated. And then follow through on it. This could include providing employees with professional-development opportunities while they are employed, as well as helping them find their next role if they are let go. “At Baxter,” says Kraemer, “we would literally take the time to figure out, on average, how many weeks did it take to find the person another job.” Or take up managing, if you are an entry-level employee hoping to influence your manager to do something differently or convince your board of directors about the wisdom of your next move. Once again, the key is relating and communicating. Kraemer advises studying how those above you in the organisation operate: What do they respond to? What works and what doesn’t? If someone has a big ego, can you convince them that your idea is actually theirs? Maybe they won’t listen to you, but they may listen to someone else. Go ahead and engage that person. As Kraemer says: “I’ve got to figure out a way to be able to relate to you so I can change your mind; I can change the direction.” i 167

> EY Argentina:

Argentina's Promotional Tax System for Knowledge-based Companies is Gaining Ground in the Local Market By Sergio Caveggia and Jimena Rocío García

fter more than two years of the enactment of the “knowledge-based” Law, time has come to ask whether this new promotional system have truly improved the capacity of the knowledgebased industries to generate employment, federal economic development, and foreign exchange reserves. As a way to recap, Law No. 27,506 had been published in the Official Bulletin on June 10, 2019. Such law had established the promotional regime for the knowledge-based economy. The system created a legal framework that removed those types of industries of the uncertainty in which they were. However, the regime was suspended by the Government in January 2020 with the intention of introducing certain changes. Later, in February 2020 a bill was submitted to the Chamber of Deputies to amend certain items of Law No. 27,506. Finally, on 26 October 2020, the Congress enacted Law No. 27,570, which is currently in force. The last amendment divided the benefits according to the size of each local company and the level of maturity of each production sector, among other, while continuing to promote and accompany the development of large companies, which are essential for the growth of the country. In addition, new requirements to qualify for the regime and modifying certain benefits were introduced. The regime will be in force until 31 December 2029. Few industries have grown as much in the world since the beginning of the pandemic as those one linked to the knowledge-based economy. On this path, the new and progressive local tax promotion embraces the generation of quality employment, technological development, and exports of high-added value. The great universe of activities included within the promotional tax regimen should not be overlooked. Those activities are the following: (i) software and IT and digital services, including several ways of implementing and developing these tools; (ii) audiovisual production and postproduction, including digital formats; (iii) biotechnology, bioeconomy, biology, biochemistry, microbiology, bioinformatics, molecular biology, neurotechnology and genetic engineering, geoengineering, and their trials and analyses; (iv) 168

geological and prospective studies, and services related to electronics and communications; (v) professional services, only 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, fine-tuning, 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 exclusively by the use of industry 4.0 technologies, such as artificial intelligence, robotics and industrial internet, internet of things, sensors, additive manufacturing, 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. Moreover, 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 are also included. TAX BENEFITS In general terms, companies that achieve the inclusion within the knowledge-based regime will receive the following benefits: • Tax stability for the taxpayers. • A 60% reduction in the income tax rate for micro and small enterprises, a 40% reduction for medium-sized enterprises and a 20% reduction for big enterprises, applicable on the income originated in the promoted activities (which, considering the current general rate of 30%, would result in effective income tax rates of 12%, 18% and 24%, respectively). • A tax credit bond that equals 70% of the amount payable as Social Security contributions on employees working in the promoted activities (80% 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). STATUS OF APPLICATIONS FOR THE TAX PROMOTIONAL SYSTEM IN ARGENTINA During the last twelve months, local companies have made progress on certain pre-feasibility CFI.co | Capital Finance International

analysis to internally validate whether they are in good shape to access to the promotional system. It is worth noting that a large amount of documentation and information must be gathered and analysed when applying to the knowledge-based regime. This is not extremely difficult, but it does require companies to spend some time to be prepared for the submission. On the other hand, the forecast and previous estimations on the tax and social security savings and the fees of regime’s inclusion are extremely useful to give companies a picture of the actual benefits that will enjoy once the registration is approved. The assistance of skilled tax advisors

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It is worth reminding that companies intending to enjoy the tax benefits shall be required to prove that 70% of their total billing in the last year arises from promoted activities. The professional services must meet this requirement to the extent of their export. The law also sets forth that those interested in applying for the promotion shall meet two out of three requirements in relation to the promoted activity: (i) provide evidence of continued 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. The market shows that companies and their stakeholders are truthfully interested in obtaining the certification needed to access to the tax benefits. Enterprises doing business in Argentina are now relying on this regime to develop a growing strategy if knowledge and technology are key drivers of their business models. i

Author: Sergio Caveggia

ABOUT THE AUTHORS Sergio Caveggia is a tax partner currently in charge of Transaction Tax area in Argentina. He joined EY Argentina in 1994 and has developed expertise over 24 years in international taxation and merger and acquisition matters. Sergio is also focus on servicing clients in the Private Client Services (PCS) area. He is highly experienced in inbound and outbound investments, buy side, sell side and restructuring services within the Transaction Tax area. Sergio has served in a variety of industries and has also been involved in many due diligence procedures performed in the past 20 years. He has given lectures in national universities and is a frequent speaker in tax seminars. He has also written several articles dealing with Argentina tax issues.

at this point can generate added value for the fiscal strategic planning. It could be said that as of December 2021, several enterprises have already performed the submission of the documentation and information required by the local enforcement authority to be categorised as “knowledge-based company”. On the other hand, there are companies that have already obtained the resolution of the enforcement authority approving the application and the registration in the "National registry of beneficiaries of the promotional regime for knowledge-based economy".

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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> Kellogg Insight:

Yes, Consumers Care If Your Product Is Ethical By Susie Allen Based on research of Andrew Luttrell, Jacob D Teeny, Richard E Petty and Aviva Philipp-Muller

Do consumers care about morality when making purchasing decisions?

arketing experts have hotly debated this question for years, without arriving at a clear conclusion. Some studies — along with the everexpanding selection of eco-friendly, fair-trade, and locally made products — would indicate that yes, people want to feel that the products they buy support their values. Yet a bevy of other studies say the opposite. Some researchers have even gone so far as to dismiss the idea of the ethical consumer as “little more than a myth”. Jacob Teeny, an assistant professor of marketing, was intrigued by the discrepancy — both as a scholar and as a consumer. “It’s always been very puzzling to me,” he says. So, in two recently published articles on the topic, he set out to answer the question once and for all. In the first, a review of existing research on consumer morality, Teeny and colleagues Aviva Philipp-Muller and Richard E Petty of The Ohio State University identify weaknesses in how previous studies assessed morality — weaknesses that they believe contribute to the conflicting findings. In the second, Teeny, Petty, and Andrew Luttrell of Ball State University experimentally test a new way of approaching consumer morality. Together, these papers offer a clear takeaway: “Morality does matter,” Teeny says. “Consumers are consulting their ethical beliefs when they make purchasing decisions.” They just aren’t always interpreting morality in the same way as researchers. ‘ORGANIC’ MAY NOT MEAN ‘MORAL’ When Teeny and his colleagues reviewed previous studies on consumer morality, they noticed that many of them used what’s called an “attributelevel approach” to studying morality. That is, the researchers assumed that certain product attributes — for instance, being eco-friendly, locally manufactured, or cruelty-free — were universally considered moral by consumers. Under this approach, some studies found that consumers favoured such products, concluding that morality matters. In contrast, other studies found that consumers weren’t any more likely to buy them, and argued the opposite. The problem, Teeny and his co-authors point out, is that not everyone sees these attributes as moral in the first place. When a consumer buys organic produce, it may be because they feel a 170

"When a consumer buys organic produce, it may be because they feel a sense of moral outrage over pesticides — or just because they believe it tastes better." sense of moral outrage over pesticides — or just because they believe it tastes better. In other words, with an attribute-level approach, there’s no way to tell the difference between consumers who buy an “ethical” product for moral reasons or pragmatic ones. All you know is that they bought it. Similarly, there’s also no way to tell if a consumer is rejecting an “ethical” product because they don’t care about morality, or because they don’t view, say, animal testing as an ethical issue. To address these challenges, other researchers favoured what’s called a “person-level approach.” In these studies, researchers measured how much individuals care about morality in general, then looked at their purchasing habits, assuming that more morally guided people would be more likely to seek out ethical products. But this has pitfalls too. Even among people who hold what’s called a “high morality identity”, certain types of products may not activate that sense of morality. Not buying pork is a moral issue for many Jews, but a non-Jew with a high moral identity likely doesn’t see pork as a moral issue in the first place. MORALITY AND ATTITUDE Teeny and his colleagues advocate for a third approach that helps disentangle what consumers view as moral from what they like or dislike for unrelated reasons. This attitude-based approach makes it possible to figure out whether individual consumers are indeed weighing morality in their purchasing decisions, “because it helps us to identify what people view as a moral decision or not”, Teeny explains. Teeny, Petty, and Luttrell put this “attitude-level approach” to the test in a series of experiments. In the first, they surveyed participants to report how positively they viewed four product categories (eco-friendly household cleaners, electric cars, fair-trade coffee, and Americanmade clothing). Then, they measured how much that positive attitude was a reflection of their moral beliefs. CFI.co | Capital Finance International

The results showed that many people had positive attitudes toward these product categories, but some reported that their positivity had nothing to do with their morality. Others reported that their positivity toward a product category was morally rooted. That group of consumers reported being much more likely to purchase something from that category in the future. This correlational data was important, but Teeny and his colleagues wanted stronger evidence of morality’s effect on purchasing decisions. So, they decided to experimentally manipulate whether or not people thought that their attitudes were rooted in morality. Participants were asked to list their thoughts about eco-friendly cleaners, then told a computer would analyse what they’d written. (In actuality, no such analysis occurred.) The participants were randomly assigned to one of two groups: half were told the computer analysis revealed their views were based in morality, and the other half, that their views were based in practicality. Then, participants reported their intentions to buy eco-friendly cleaning products. “What we find is that simply getting people to self-perceive their own attitudes about a product are based on morality leads them to be more likely to purchase it,” Teeny says. Another experiment established that the more moral a person perceived a product to be, the more likely they were to want to purchase it — regardless of how well the product was reviewed. It all points to one conclusion: morality matters. “This research shows that just like in every other aspect of people’s lives, morality is a strong influence on our behaviour — even stronger than some of the other elements of our attitudes that have been previously shown to influence consumer behaviour,” Teeny says. That doesn’t mean morality always carries the day — sometimes the ethical option is difficult to obtain or more expensive than the consumer can afford. Teeny thinks more research can

Winter 2021-2022 Issue

"Consumer morality is constantly evolving, so it is important to learn how different consumer segments differentially moralise the same products or attributes." help to establish when, precisely, morality wins out and when it doesn’t. “I’m not claiming it’s the end-all, be-all, but consumers do consider it,” he says. “And I think both as consumers and corporations, we can work to develop that interest and desire and allow people to support morality with their dollars.” MARKETING ON MORALITY What does all this mean for companies? Consumers care about morality and reliably act on it. “There is a hunger for consumers to be able to support their morality,” Teeny says. “And so positioning products in ways that are relevant to a consumer’s sense of morality has the potential to be an effective form of motivating consumer behaviour. And sure, maybe it’s motivated by greed, but if it’s also getting these corporations to act more morally, then it’s a win–win.” It’s not just fair trade or local products that could benefit from morality orientated marketing, either: research shows people can hold morally based attitudes toward a wide array of seemingly unlikely products. “You can moralise anything,” Teeny says. “There’s a funny paper about people who moralise refrigerators.” Consumer morality is constantly evolving, so it is important to learn how different consumer segments differentially moralise the same products or attributes. For example, today, people hold morally rooted attitudes toward plastic straws and grass-fed beef that might have been inconceivable 20 years ago. “Society has changed, and new things have been moralised. And we’ll continue to see that,” Teeny says. “Having a more open mind to what constitutes morality, I think, can benefit both businesses and consumers.” i

This article first appeared in Kellogg Insight. ABOUT THE WRITER Susie Allen is a freelance writer from Chicago.

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> North America

Hats Off to Trudeau’s Plans to Cap Oil Industry Emissions, but Better Solutions are To-hand By Brendan Filipovski

A tale of two cities, and one country. In Edmonton, the capital of Alberta, the oil-sand barons increased production even as oil prices fell. In Glasgow, at COP26, Canadian Prime Minister Justin Trudeau announced a cap on greenhouse gas emissions for the Canadian oil industry. Oil is a big deal for the country. It has the third-largest proven oil reserves in the world (9.7 percent of the total) and oil is Canada’s largest export — to the US and other countries. It is also one of its largest emitters of greenhouse gas; oil and gas accounted for 26 percent of Canada’s total emissions in 2019. This tension between economy and environment is worsened by the fact that around two-thirds of Canada’s oil production — and 97 percent of its reserves — are from oil sands, a mixture of sand, clay, water, and bitumen. It produces a heavy oil with high sulphur and heavy metal content. The bitumen is chemically extracted then upgraded to synthetic crude, or mixed with lighter oils or condensates for pipeline distribution. Despite the images on TV and social media, Mexican migration is not one-way: people from Central America are increasingly settling in Mexico, more Mexicans are voluntarily returning from the US — and fewer are leaving in the first place. The US-Mexican border wall was one of Donald Trump’s most controversial pre-election promises. He painted a picture of illegal immigrants flooding into the US, and criticised the number of approved asylum-seekers and legal immigrants. The rise of the migrant caravans from Central America in 2018 strengthened Trump’s stance and led to a harsh zero-tolerance policy which resulted in families being separated. The pandemic has also seen a drop in legal immigration. Executive orders abound. In the first six-months of 2021, a rise in illegal border crossings had President Joe Biden trying to walk the line between tough and humanitarian. Vice-president Kamala Harris famously told Guatemalans: “Do not come”, and the US has been repatriating asylum seekers.

Prime Minister of Canada: Justin Trudeau

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exico can be seen as a sieve as migrants flow through Central America and join the procession. While the dramatic news coverage cannot be dismissed, an increasing number of Central Americans are choosing to stop short of the US, and settle in Mexico.

After peaking at 12.8 million in 2007, the number of Mexican immigrants to the US has been decreasing, according to the Pew Research Centre. Between 2005 and 2014, more Mexicans left than entered. And while net migration has since tilted back towards the US, its advance has diminished. Between 1995 and 2000, net migration to the US was 2.27 million. From 2013 to 2018, the figure was 160,000. The effect of the pandemic on these trends is unclear. While green cards and temporary visas for Mexicans have decreased during the pandemic, unauthorised migration has increased. This may be because of stricter enforcement via Trump’s Executive Order 42 and/or because legal channels have dried up. The US recession of 2007-09 and resulting job losses discouraged migration, while many unemployed Mexicans returned home. The pandemic may have had a similar effect, but with the US economy recovering and labour shortages in some industries, many may again try their luck. The Mexican economy has also performed better over the past 25 years. Since the 1994 peso crisis and the resulting recession in 1995, Mexican GDP has largely tracked that of advanced economies. There have even been occasional runs of out-performance (see chart 1). This has been driven by improved macroeconomic fundamentals and the positive impact 160,000 of NAFTA (now USMCA), which started in 1994.

140,000

Some 33 percent of Mexican adults canvassed in 2015 said that life at home was equivalent to life as an immigrant in the US. In 2007, only 23 percent had felt that way. The growth rate of working-age Mexican citizens has been decreasing since the early 2000s. In the mid-1980s, that population was growing at around 18 percent. This fell to seven percent in 2020 and is expected to drop below zero by 2050. Some commentators are predicting the end of low-skilled migrants. This is coupled with a decreasing fertility rate and diminishing family size, resulting in a falling child-dependency and total dependency ratios since the 1970s. Mexican workers are supporting fewer people and there is less pressure to migrate for financial reasons. It also means a drop in “family chain” migration. Since 2007, Mexicans have found it easier to get temporary work visas. This has allowed them to come to the US for seasonal work such as fruit picking and return home afterwards. In the past, they would probably have stayed in the US. In 2019, there were around 260,000 Mexicans following this pattern. The pandemic has disrupted that.

With improvements in its economy, Mexico has become a more attractive destination for Central American migrants. Many Mexican companies based in poorer states have embraced migrant workers. Added to this is a shared language and similar cultures. The adjustment is easier. Mexico also has a broad definition of “refugee”, making it easier for asylum-seekers facing general violence. It is not all milk and honey though. Mexican law requires asylum seekers to reside in the states in which they register — mostly in the poorer southern states such as Chiapas and Tabasco. Economic conditions are tougher than in the northern states and there are higher levels of gang-related violence. For some, this is still better than the conditions in their home countries. There is also a dynamic with family-chain migration. As Central Americans move to Mexico, they draw family members in their wake. Immigration to the US poses more difficulty, too; in 2019, only 8,000 temporary work visas were issued to Central American migrants.

The other side of the story is increased migration to Mexico from El Salvador, Guatemala and Honduras. Some are looking to enter the US, but an increasing number settle in Mexico. Migrants claiming asylum in Mexico have increased from 3,424 in 2015 to 70,302 in 2019. The figure for 2021 is expected to be around 100,000.

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

Some of this can be explained by Trump’s “Migrant Protection Protocols”, which require an application for asylum before arrival — and

If that day ever comes, the iconic statue on Liberty Island will once again have to open her arms — and maybe learn a little Spanish. i

Biomass

Natural Gas

Hydro

Diesel

Nuclear

Solar

120,000

100,000

80,000

60,000

40,000

20,000

Chart 1: Canadian Average Monthly Oil Production by type of Oil. Thousand of barrels per day. Source: Canada's Energy Future 2020

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the wait for a decision outside the US. But many are seeking a new life in Mexico as hopes of an American dream fade.

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Coal

Geothermal

Wind

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> Sunny Misser:

A Visionary in the New Business Environment

integrity, warm personality and his affability enable him to establish strong, enduring relationships that stand the test of time. People do business with those they trust and like and the ability to create strong rapports with one’s clients and peers is a vital component. Misser’s Advisory Board comprises of top Regulators, former Chairmen and CEO’s of some of the world largest companies – all clients that he personally served and has known for decades.

hen Sunil (Sunny) Misser joined AccountAbility to become its CEO, it was with the aim of filling a gap in the market that he had identified – the “one-stop shop for all things Sustainability”. His background working all over the world had made him the ideal person to fill that gap. Originally from Mumbai (which he still refers to as Bombay), Misser obtained his master’s from Lehigh University followed by another at MIT Sloan School of Management (Massachusetts Institute of Technology) and then forged a formidable career for himself at PwC (PricewaterhouseCoopers) where he rose to become the Global Head of Firmwide Strategy and subsequently Global Managing Partner of its Sustainable Advisory Business.

The fourth attribute is fascinating. Luck is an interesting concept that many leaders refuse to acknowledge. He not only recognises it but realises that whatever life might throw at us, it’s how we deal with those vicissitudes that single us out. “Being deeply learned, working extremely hard and using well spoken words – that’s my definition of good luck.“, he commented.

His roles involved working with large global clients, developing and implementing solutions in the areas of strategy, structure, process, and people.

Misser is a self-confessed workaholic and voracious reader who loves interacting (and learning) from professions completely different to his own – he has befriended athletes, religious preachers, surgeons, chefs, painters and, yes, homeless individuals.

During his time at PwC, Misser not only improved the efficiency and effectiveness of organisations but also oversaw many complex business transformations. He served as a strategic business advisor to CEOs, Boards, and senior executives at Fortune 500 companies and multilateral organisations (MLOs). He was a pioneer in the field of “mainstreaming” ESG (Environmental, Social and Governance) back when sustainability was a developing academic platform and just a vague notion that a few companies paid lip service to. AccountAbility was founded in 1995 with the aim of enabling organisations to incorporate those principles into their working DNA. Misser is very direct when it comes to defining today’s AccountAbility and its purpose. “We are not an advocacy platform or an activist forum – we are an expert ESG advisory firm that provides objective counsel to CEO’s and Boards on how to improve their business performance”. “As a global consulting and standards firm, we focus on delivering practical, effective, and enduring results that enable our clients to succeed”, he states.

AccountAbility’s purpose is to innovate and advance the global Sustainability / ESG agenda by improving the practices, performance, and impact of organisations.

CEO: Sunny Misser

Misser is a big believer in ‘good’ governance. Good governance, as he puts it, comprises three basic elements – managing risk, enabling engagement and improving performance.” He went on to explain, “Good governance creates better performance. Builds great companies. Increases stock values. You buy stock. You create jobs. Businesses grow. They pay more taxes Improved overall performance. Period”.

He has also imparted his ideas in a book which he co-wrote Corporate Responsibility – Strategy, Management, and Value. He is a member of the Council on Foreign Relations and is often quoted in media such as Fortune, Financial Times, The Economist, New York Times, New York Stock Exchange Quarterly, Forbes, Dow Jones Interactive, Global Finance, and Internal Auditor’s Magazine.

He has simplified the narrative, identified and focused on the key factors that drive ESG and has shown many companies how this can add value and improve their overall performance.

His plain-spoken honesty, clarity of thought and relentless focus have led to the best possible practical outcomes and that is what sets him apart.

He attributes his success to four fundamental elements: • Mental and Emotional Resiliency • Mastering your Craft • Building and Nurturing Meaningful Relationships • Effectively Managing Luck - Good or Bad.

It is undoubtedly appropriate to sum up by letting Misser put it in his own words:

The mental and emotional resiliency are qualities that have given him the confidence to lead but he rightly points out that mastering the craft, or being on top of whatever endeavour one chooses, is fundamental to obtaining the best outcomes. Misser sees resilience (in all its forms) as a combination of inner strength, flexibility and persistence. You only have to speak to Misser to understand how open and engaging he is and how his CFI.co | Capital Finance International

“In my 30 years in the consulting business, the awareness of Sustainability / ESG matters (risks and returns) in the C-Suite has never been higher. Stakeholders are no longer satisfied with output measures – instead, they are very much focused on impact. The CEO role itself is expanding far beyond the day-to-day running of the business. The ‘Tone at the Top’, therefore, needs to be genuine, informed and balanced in its response and consider the organisation’s long term viability”. Enough said. i 175

> Fitch Ratings:

Enduring Focus on ESG and Sustainability Projects at Leading Credit Ratings Provider

or over a century, Fitch Ratings has been building and creating value for global capital markets around the world.

The firm’s rigorous analysis and expertise have led to the development of market-leading tools — methodologies, indices, research and analytical products — which help investors to manage risk and fund growth. With growing attention from policymakers and investors on ESG issues, market participants recognise that the long-term sustainability of operations matters more than ever. “Attitudes and actions on climate change, diversity, and human rights affect the risk-return profile of an investment portfolio,” says global head of ESG Research Marina Petroleka, “and an issuer’s brand and reputation.” Fitch Group has responded in a comprehensive manner to this shift in ESG’s importance, initially through the launch in 2018 of a Sustainable Finance Group within Fitch Ratings. This was closely followed in 2019 with the launch of ESG Relevance Scores, the first integrated cross-asset ESG-scoring system for credit ratings. “ESG factors guide individual credit rating decisions across Fitch’s entire rated universe,” adds Andrew Steel, global head of sustainable finance. At all stages, Fitch has engaged with issuers and investors to ensure that its products and services match their requirements. The evolution of Fitch’s ESG offering culminated in the launch in September 2021 of Sustainable Fitch. This new business line is a centralised hub for all of Fitch’s products and services, including ratings which assess ESG performance and the profile of entities and their debt instruments. “It was designed with investors in mind,” says Petroleka. “The ESG ratings are produced by teams of trained analysts who create granular, comprehensive and transparent reports and datasets. “There has also been expansion of our ESG data feeds, through Fitch Solutions, and an increase in specialised research through a dedicated team.” Steel is at the helm of this activity. Now head of Sustainable Fitch, he was previously global group head of sustainable finance at Fitch Ratings. Andrew Steel is also responsible for the 176

Head of Sustainable Fitch: Andrew Steel

Global Head of ESG Research: Marina Petroleka

"At all stages, Fitch has engaged with issuers and investors to ensure that its products and services match their requirements. The evolution of Fitch’s ESG offering culminated in the launch in September 2021 of Sustainable Fitch." leadership, development, and co-ordination of all Fitch Group ESG initiatives.

supported by data and analysis and backed by consistency, comparability, coverage and granularity.”

“With the only service in the world that directly leverages more than 100 years of best practice in rating methodologies and analytical excellence,” he says, “we saw the need to use that expertise to develop integrated analysis and data services to help market participants uncover true ESG risk and accelerate ESG integration.”

Marina Petroleka, meanwhile, brings with her the research acumen needed to analyse the everexpanding issues facing the world of ESG. She leads a growing team of global research analysts undertaking detailed research and credit-relevant analysis on ESG themes and cross-sector trends.

Steel has 30 years’ experience across ratings, banking, private equity and corporate treasury and embodies the analytical expertise of Fitch Ratings. His deep knowledge of equity and debt markets was in some ways the launchpad for Sustainable Fitch.

Petroleka also supports and provides input for ESG-related research in all Fitch’s analytical group areas. She previously held senior research roles in Fitch Group, including EMEA regional credit officer for Fitch Ratings and global head of Industry Research for Fitch Solutions.

“Investors want transparent, cross-comparable ESG ratings that look beyond labelling or targets to assess ESG fundamentals,” he says. “We made sure our approach is informed by the market structure, with outreach across investors, issuers, regulators, NGOs and others.

“The strands which make up ESG conversations are ever-growing and it’s vitally important that the research stays one step ahead,” she says. “Our ESG research team enables just that. It provides global coverage of thematic and crossESG issues, in developed and emerging markets in APAC and Latin America. It also enables exploration of transmission mechanisms in credit risks.” i

“This resulted in Sustainable Fitch, providing investors with best-in-class ESG ratings, CFI.co | Capital Finance International

Winter 2021-2022 Issue

> Could

the US and China Spoil the Latin America Rebound? By Otaviano Canuto

slowdown in China and the wind-down of the US pandemic stimulus are threatening a regional rebound.

The last year has held some good news for Latin American economies. The region’s recovery has been stronger than expected, and growth forecasts by the World Bank and IMF have improved over the past six months. Vaccination campaigns and fiscal support sparked an economic rebound, despite an apparent loss of momentum in the third quarter. But now, the future looks uncertain. Latin America is caught between two global forces that threaten the region’s growth. A potential drop in capital flows from the US is likely as pandemic stimulus tapers off. There is decreasing growth in China, where an energy crunch is hitting just as the country’s exhausted property markets begin to go into reverse. To weather the storm, countries will have to target their fiscal support and signal that medium-term frameworks will be followed — and do what it takes to ensure that a private-sector recovery compensates for policy contraction. Up to this point, Latin America’s recovery has been uneven and partial. This is down to differences in vaccination rates — 75 percent of the population fully vaccinated in Uruguay, five percent in Nicaragua — and in the ability and willingness to deliver fiscal support. By the end of this year, the GDP of most countries in the region is set to remain below 2019 levels, and none is likely to reach the levels forecast for 2022 prior to the pandemic. The recovery has been thanks in part to the strength of GDP growth in the region’s biggest trading partners — the US, China, and Europe — as global financial conditions remained positive, despite occasional hiccups. A commodities resurgence has recently cooled, as prices of some commodity groups have fallen or held steady. But terms of trade have improved overall for commodity-dependent countries.

The Pandemic's Toll: Two lost years for Latin American economies. IMF projections as of October 2021 show Latin American economic growth will continue to lag behind projections made before the pandemic. Source: IMF.

to be resolved in the immediate future — makes interest rate hikes and an end to monetary stimulus likely for next year. Since late September, investor concerns about US inflationary pressures have pushed up yields, reversing a decline in market interest rates. Some fear that changing monetary policy in the US could spark a rerun of the 2013 Taper Tantrum, when capital fled emerging markets. But capital flows to the region have not been as intense in the last few years. For most countries, favourable terms of trade and depressed domestic demand have led to reasonably comfortable external accounts. A repeat of 2013 seems unlikely, but domestic investment could drop if financial conditions worsen.

According to tracking by the Institute of International Finance (IIF), capital flows to Latin America rebounded this year, slowing down in the second half.

Meanwhile, China — top buyer for much of Latin America’s exports — is facing growth deceleration as its property markets’ GDPboosting activity stalls, in a rerun of its economic rebalancing after the financial crisis of 2008. The direct impact of the collapse of Evergrande and other property firms are mostly domestically confined, but the resulting macroeconomic slowdown has shown in the latest figures. China’s new growth pace may exact a toll on exports and commodity terms of trade for the region.

The global landscape looks set to become more hostile, as trends in the US and China will make things difficult for Latin American economies. A global uptick in inflation — reflecting supply restrictions and labour constraints unlikely

Latin American countries can do little to alter these global trends, and it may be best for them to concentrate on the domestic front. The pandemic’s legacy of higher public debt means fiscal and financial support must become more CFI.co | Capital Finance International

selective, focusing on the most vulnerable firms and workers. Countries that typically face narrow fiscal space (Brazil, Colombia, and to some degree Mexico) will shun new spending. Those still in more favourable territory, such as Chile and Peru, must still anticipate tighter external financial conditions. Limited policy space and social pressures exacerbate political risks, but rolling back spending means relying on the private sector to drive recovery. Recent experiences of Mexico and Peru have illustrated how policy uncertainty may restrain private investment. The region will have to rely on higher efficiency, spending less while making sure money goes to help the most deserving and needy segments of the population. On a longer-term horizon, attention needs to be paid to the fact that incomplete economic recovery has generated weak labour markets, rife with scarring and “shadow” unemployment. Hence the relevance of implementing policies of retraining and upskilling. Latin America has already partly reached highincome status — but a substantial part of its population faces high vulnerability to economic shocks and natural disasters. The pandemic has made it painfully clear that the region badly needs a vulnerability-based approach to understand and tackle poverty. i

This story first appeared in Americas Quarterly. 177

"LIVV is the world’s first Tesla-powered net-zero energy community."

> The Art of Living Meets the Art of LIVV:

Creating the Homes the Modern World So Badly Needs

IVV is a company that believes in shattering antiquated and outdated paradigms — and taking the technology of the real estate industry into the future.

The construction of luxury homes over recent decades has been expensive, inefficient in energy use, and too rigid and costly to maintain, says LIVV co-founder and CEO Philippe Ziade. 178

“We are innovators by nature, and we believe that by connecting minds across three major sectors — technology, real estate development, and renewable energy — we are creating the next generation of homes, and, in a sense, the future of living.” Advanced AI powers the LIVV community, diversifying and individualising each living space. “LIVV communities are made up of homes as CFI.co | Capital Finance International

unique as the people who live inside of them,” says Ziade. “With such a wide array of technologies to power, there’s only one environmentally friendly source that has the capacity to do it — and that’s Tesla.” All LIVV communities are powered by batteries from Elon Musk’s famous firm. The company is “next-gen” in terms of tech innovation and sustainability. “We take the core

Winter 2021-2022 Issue

LIVV adapts to customer behaviour, and so does the technology it embraces. “Your home learns your behaviour and adapts to it as you live there, getting smarter and smarter — because of you,” says LIVV co-Founder and executive chairman Alex Bouzari. A COMPLETE SOLUTION Many tech companies are innovating in the residential sector, but mostly at the level of a specific item or function: a doorbell, a camera or a specific health sensor. LIVV provides a full solution, advancing the industry as a whole. “Soon, our homes will take care of themselves and manage our lives for us,” predicts Bouzari. “They can tailor everything to your liking and keep all your devices running smoothly. From energy optimisation to childand pet protection and the monitoring of health and allergies.” TESLA POWER LIVV is the world’s first Tesla-powered netzero energy community. It is developing a roadmap to move the industry towards a net-zero energy community and greater sustainability in building construction and maintenance. By producing more energy than it consumes and storing the excess, the cost of power consumption drops to zero. “Better yet, it sustains the environment for future generations,” says Ziade. “Our homes and communities are net-zero by design.” The LIVV vision is to define redefine luxury modern living based on four criteria: Smart, Sustainable, Healthy, and Flexible. Groundbreaking technology is woven into the fabric and infrastructure of each home.

to heart,” adds Ziade. “Beauty, sophistication of design, location, and quality of construction.” The goal is to redefine “the living experience” as a driver for health, sustainability and innovation. “We combine decades of experience in real estate with innovation, technology and smart systems to build a greener, smarter, and healthier environment, with an intuitive, user-centric approach.”

The company envisions a future where a technology-enabled, AI-powered life can be lived without ever pressing a button, plugging into an appliance, or untangling a cord. The home can be in-sync with your schedule, brewing your coffee, starting your shower, turning on the news, dimming your lights, even preparing your meals. Lighting modes, climate control, curtain and shade settings, music, movies, and games — these things are as you want them, when and where you want them. Smart security management provides child protection and pet safety — indoors and outdoors. Sensors will know when you’re not there, and turn off electricity or a running tap. And all this is designed to sustain the planet as well as its people. LIVV communities are eco-conscious creations that maintain a netzero environmental impact. “And this has to CFI.co | Capital Finance International

happen passively,” says Bouzari, “without you clicking a button. It comes down to the details: net-zero energy, sustainable materials, negligible carbon footprint.” Air quality in the home is continuously monitored, with noxious elements such as radon or airborne pollen identified and removed. Each part of the home is analysed. For asthma sufferers, this is a quantum advance. Impurities in water are also detected and eliminated. The entire structure lives and breathes to make healthier living simple and hands-free. Configuration and adaptation of infrastructure, interior spaces and individual objects allow for smooth home expansions or modifications. By incorporating the latest tech, LIVV effectively future-proofs personalised living. Onsite facilities and amenities cater to all age groups, family sizes and compositions, professional pursuits and leisure interests. Access to community facilities is seamless and automatic. Enabled by unobtrusive iris-scan technology, all it takes is a single glance to unlock the home — and a world of possibilities. “LIVV homes are built for the ambitious, the creative, the passionate,” says Ziade. “The power of AI allows people with busy schedules to reclaim their lives: efficiency as a driver of performance.” SMARTER BUDGET AI and smart home technology come together to anticipate needs, controlling lighting and air conditioning, adjusting to periods of cooking or housework. “LIVV delivers the highest level of innovation, uncompromising efficiency and timeless aesthetics,” says Ziade. “Because your home is built with high-end, durable materials, you end up with lower maintenance costs, less energy use, and less waste.” In a LIVV home, your electric car is charged at your net-zero home or community — with a zero on the power consumption bill. “We don’t go along with the notion that the real estate industry is trailing in terms of innovation, technology, adaptation or quality of construction,” says Bouzari. “We embody the philosophy and corporate culture that believes in further advancing the living experience. We are a technology company that sets the bar of where real estate development should be today — and where it will be tomorrow.” i 179

> IMF:

Cryptoassets as National Currency? A Step Too Far By Tobias Adrian and Rhoda Weeks-Brown

New digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers.

ut doing so is not straightforward. It requires significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money. Some countries may be tempted by a shortcut: adopting cryptoassets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits. Cryptoassets are privately issued tokens based on cryptographic techniques and denominated in their own unit of account. Their value can be extremely volatile. Bitcoin, for instance, reached a peak of $65,000 in April and crashed to less than half that value two months later. And yet, Bitcoin lives on. For some, it is an opportunity to transact anonymously—for good or bad. For others, it is a means to diversify portfolios and hold a speculative asset that can bring riches but also significant losses. Cryptoassets are thus fundamentally different from other kinds of digital money. Central banks, for instance, are considering issuing digital currencies—digital money issued in the form of a liability of the central bank. Private companies are also pushing the frontier, with money that can be sent over mobile phones, popular in East Africa and China, and with stablecoins, whose value depends on the safety and liquidity of backing assets. CRYPTOASSETS AS LEGAL TENDER? Bitcoin and its peers have mostly remained on the fringes of finance and payments, yet some countries are actively considering granting cryptoassets legal tender status, and even making these a second (or potentially only) national currency. If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in 180

payment of monetary obligations, including taxes, similar to notes and coins (currency) issued by the central bank. Countries can even go further by passing laws to encourage the use of cryptoassets as a national currency, that is, as an official monetary unit (in which monetary obligations can be expressed), and a mandatory means of payment for everyday purchases. Cryptoassets are unlikely to catch on in countries with stable inflation and exchange rates, and credible institutions. Households and businesses would have very little incentive to price or save in a parallel cryptoasset such as Bitcoin, even if it were given legal tender or currency status. Their value is just too volatile and unrelated to the real economy. Even in relatively less stable economies, the use of a globally recognised reserve currency such as the dollar or euro would likely be more alluring than adopting a cryptoasset. A cryptoasset might catch on as a vehicle for unbanked people to make payments, but not to store value. It would be immediately exchanged into real currency upon receipt. Then again, real currency may not always be readily available, nor easily transferable. Moreover, in some countries, laws forbid or restrict payments in other forms of money. These could tip the balance towards widespread use of cryptoassets. PROCEED WITH CAUTION The most direct cost of widespread adoption of a cryptoasset such as Bitcoin is to macroeconomic stability. If goods and services were priced in both a real currency and a cryptoasset, households and businesses would spend significant time and resources choosing which money to hold as opposed to engaging in productive activities. Similarly, government revenues would be exposed to exchange rate risk if taxes were quoted in advance in a cryptoasset while expenditures CFI.co | Capital Finance International

remained mostly in the local currency, or vice versa. Also, monetary policy would lose bite. Central banks cannot set interest rates on a foreign currency. Usually, when a country adopts a foreign currency as its own, it “imports” the credibility of the foreign monetary policy and hope to bring its economy–and interest rates– in line with the foreign business cycle. Neither of these is possible in the case of widespread cryptoasset adoption. As a result, domestic prices could become highly unstable. Even if all prices were quoted in, say, Bitcoin, the prices of imported goods and services would still fluctuate massively, following the whims of market valuations. Financial integrity could also suffer. Without robust anti-money laundering and combating the financing of terrorism measures, cryptoassets

Winter 2021-2022 Issue

can be used to launder ill-gotten money, fund terrorism, and evade taxes. This could pose risks to a country’s financial system, fiscal balance, and relationships with foreign countries and correspondent banks.

to long-term monetary obligations. And changes to a country’s legal tender status and monetary unit typically require complex and widespread changes to monetary law to avoid creating a disjointed legal system.

Finally, mined cryptoassets such as Bitcoin require an enormous amount of electricity to power the computer networks that verify transactions. The ecological implications of adopting these cryptoassets as a national currency could be dire.

The Financial Action Task Force has set a standard for how virtual assets and related service providers should be regulated to limit financial integrity risks. But enforcement of that standard is not yet consistent across countries, which can be problematic given the potential for crossborder activities.

In addition, banks and other financial institutions could be exposed to the massive fluctuations in cryptoasset prices. It is not clear whether prudential regulation against exposures to foreign currency or risky assets in banks could be upheld if Bitcoin, for instance, were given legal tender status.

Further legal issues arise. Legal tender status requires that a means of payment be widely accessible. However, internet access and technology needed to transfer cryptoassets remains scarce in many countries, raising issues about fairness and financial inclusion. Moreover, the official monetary unit must be sufficiently stable in value to facilitate its use for medium-

Moreover, widespread cryptoasset use would undermine consumer protection. Households and businesses could lose wealth through large swings in value, fraud, or cyber-attacks. While the technology underlying cryptoassets has proven extremely robust, technical glitches could occur. In the case of Bitcoin, recourse is difficult as there is no legal issuer.

STRIKING A BALANCE As national currency, cryptoassets—including Bitcoin—come with substantial risks to macrofinancial stability, financial integrity, consumer protection, and the environment. The advantages of their underlying technologies, including the potential for cheaper and more inclusive financial services, should not be overlooked. Governments, however, need to step up to provide these services, and leverage new digital forms of money while preserving stability, efficiency, equality, and environmental sustainability. Attempting to make cryptoassets a national currency is an inadvisable shortcut. i

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Source: blogs.imf.org/2021/07/26/cryptoassets-asnational-currency-a-step-too-far 181

> PGM Global Inc:

Global Recognition Rewards Niche Services, Transition Management, and a Comprehensive Strategy

GM Global Inc was founded in Canada as an institutional, agency-only brokerdealer — and for more than half a century, it has provided expertise to institutional clients around the world.

Continual evolution has allowed the firm to meet the needs of its extensive client base. Most recently, it added a temporary assetmanagement service to its core services. “As a private, employee-owned firm, we are committed to serving our global clients — over 200 strong,” says CEO Patrick Belland. “We focus on a few select services: global securities execution, transition management and global portfolio strategy.” PGM prides itself on a comprehensive offering, and emphasises excellence. “We work with our clients from the initial stage of global portfolio advice through to implementation,” says Mario Choueiri, head of Global Transition Management. Choueiri has been with PGM for 15 years and has guided the firm’s expansion into the US, a process now in its eighth year. “The focus is on rigorous project management, coupled with unparalleled client communication,” he says. “The success of the business has been driven by commitment and dedication to client goals. We tailor our service offering to best meet our client needs, and always provide full transparency on our pricing and trade execution.” Aidan Garrib, head of Global Macro Strategy and Research, believes global financial markets are so intertwined that even bottom-up investors need to consider the macro in their investment process. “Our ability to distil the important drivers of financial markets and communicate their impact to investors has never been more important,” he says. “The opportunity to provide a differentiated global portfolio strategy service motivates our team to provide custom work. Clients’ investment needs have become broader and more complex, driving the need for truly global advice.” “By combining our services and working together, we’re able to meet those demands and help them to meet their investment objectives and implementation needs.” Belland adds: “Under the leadership of Mario Choueiri and Aidan Garrib, we offer a client 182

Head of Global Transition Management: Mario Choueiri

Head of Global Macro Strategy and Research: Aidan Garrib

"By encouraging employee ownership, we strengthen that level of commitment and sense of worth. Having employees bring ideas forward and lead new initiatives creates a broad sense of leadership." experience that remains fully transparent and conflict-free.” Belland has been with the company for close to 30 years, 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 recognition comes from teamwork and client satisfaction. CFI.co | Capital Finance International

“By encouraging employee ownership, we strengthen that level of commitment and sense of worth. 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.” PGM aims to extend its leadership in a niche market by remaining client-centric, and truly global. i

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> Kellogg Insight:

What Triggers a Career ‘Hot Streak’? Research Reveals a Recipe for Success By Sachin Waikar. Based on research of Lu Liu, Nima Dehmamy, Jillian Chown, C Lee Giles and Dashun Wangj

ashun Wang was visiting the Van Gogh Museum in Amsterdam when he noticed something interesting. “The paintings narrowed in style and subject after Van Gogh’s move to the south of France in the late 1800s,” says Wang, a professor of management and organisations at Kellogg.

That shift, it turned out, signalled the start of the artist’s most successful period, including iconic pieces like Starry Night Over the Rhone and Van Gogh’s Chair. The observation gave Wang a much-needed clue to a research question he’d pondered for years: What triggers a hot streak? These career-defining periods of unusual success have been observed in almost every creative domain, from Einstein’s “miracle year” of ground-breaking discoveries, including the Theory of Relativity, to director Peter Jackson’s box-office-smash Lord of the Rings trilogy. Wang’s previous research suggested that hot streaks appear at random during a career, like comets with no predictable timing. “Hot streaks seem to happen for most everyone,” Wang says. “But it seemed like they come about by ‘magic’ or just randomly.” That is, no one had found a reliable precedent to these high-success periods. Until now. Inspired by that trip to the Van Gogh Museum, Wang and his colleagues designed a study that used AI to analyse millions of works by artists, film directors, and scientists, in search of potential hot-streak-triggering mechanisms. They found that, across domains, hot streaks are typically preceded by a specific combination of exploration — more diverse work across styles and focus areas — followed by exploitation — a narrower focus on a particular category of work that drives outsized success. “We’ve found one of the first identifiable regularities related to the onset of a hot streak,” says co-author Jillian Chown, a Kellogg associate professor of management and organisations. “It can help individuals and organisations understand the types of activities to engage in, and the optimal sequence to use for bigger impact.” 184

"The research has implications for how individuals and organisations can spur their own hot streaks." AI-DRIVEN ANALYSIS Before this study, the biggest impediment to understanding what triggers a hot streak was not knowing how to characterise creative works in a standard way, across careers. What constitutes an artist’s style, for example? How would one categorise a filmmaker’s diverse productions? To address that problem, Wang and Chown, along with lead author Lu Liu, a PhD student at Kellogg’s Centre for Science of Science and Innovation, Nima Dehmamy, a research assistant professor at Kellogg, and C Lee Giles at the Pennsylvania State University, developed a deep neural network for the three domains of focus: paintings, film, and science. The AI systems used visual-recognition technology to analyse the types of subjects and brushstrokes in paintings, and identified film genre and style by analysing plot summaries, cast, and other information available online. They used this innovative method to examine the careers of 2,128 artists, 4,337 directors, and 20,040 scientists — millions of works in total. The neural network enabled the researchers to capture each person’s style, areas of focus, and other dimensions related to their career output, to understand how their body of work evolved over time, in the context of exploration and exploitation. To understand success and impact — the basis for a hot streak — the study used measures that are generally agreed upon to show success in each field: number of citations of scientific works, art-auction prices, and IMDB film ratings. “Our approach allowed us to correlate hot streaks with each individual’s creative trajectory, to understand what might predict these streaks,” Wang says. A RECIPE FOR SUCCESS The results make clear the “recipe” for a hot streak: exploration of creative options followed by exploitation of a specific “lane” of work ultimately leading to greater success. This held true across all three domains studied. CFI.co | Capital Finance International

Director Peter Jackson made films that fell into horror, comedy, drama, and other genres (reflecting a period of exploration) before hitting it much bigger with the Lord of the Rings fantasy franchise. Analysis of painter Jackson Pollock’s work, similarly, showed exploration of a wide range of styles before the focused “drip period” (1946–1950) that elevated him to global fame. The research found, further, that exploration or exploitation by itself is not enough for a hot streak. That is, only the specific explorationexploitation sequence led to the highest increase in likelihood of a hot streak: hot streaks following that sequence were 20.5 percent, 13.8 percent, and 19.2 percent more likely for artists, directors, and scientists, respectively, versus after a random point in a given career. Exploration and exploitation alone were associated with no such increase. “If you just do one or the other, you don’t get the full impact,” Chown says. “It has to be the combination of exploration followed by exploitation: experimenting in different areas, learning different domains and approaches, then really hunkering down and developing that body of high-impact work.” Wang agrees: “Our work shows that people experiment and likely gain new skills from work in different subfields, and then help find the best one to exploit, which seem crucial for hot streak.” In line with this, the study found that the hot-streak area of exploitation usually isn’t the most recent one explored, supporting the idea that people are gathering information and experience across a number of areas then moving forward with the best-fitting one. SUPPORTING HOT STREAKS The research has implications for how individuals and organisations can spur their own hot streaks. Individuals pursuing any creative endeavour now know that the exploration-exploitation sequence is most likely to lead to a hot streak. “This combination of creative activities is particularly potent,” Wang says. In practice, this might mean exploring multiple subfields to find the right fit — such as a scientist pursuing research in multiple biology domains before settling on one of greater focus.

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Organisations can also make use of hot-streak insights. Academic institutions and grantors, for instance, can analyse professors’ and researchers’ career paths carefully to see who’s more likely to hit a near-term hot streak, and support that individual through advancement, funding, or other resources. Businesses, similarly, can apply this understanding of hot-streak dynamics to decide how they manage intellectual property. “A firm could look at how concentrated their patents are in certain areas to understand their pattern of exploration and exploitation related to innovation,” Chown says, and then make adjustments to work toward a hot streak. Similarly, a pharmaceutical or biotech business could examine how it works within and across products for different therapeutic areas — cancer, or diabetes — as it seeks to explore and exploit. The research may also have implications for how organisations should structure exploration and exploitation, and how they should incorporate these steps into business strategy. Some firms have different groups working on exploration and exploitation, for example, separating out a research and development team from product teams. “That runs the risk of not letting individuals have their own exploration and exploitation sequence,” Chown says, because a given team member would work only on exploration or exploitation, rather than both. The researchers point out there’s much more to know about what triggers a hot streak. “It would be valuable to know what people’s motivations for exploring certain things were,” Chown says. It’s not yet known why an individual makes the move from exploration to exploitation. “It’s still not clear how much exploration is the ‘right’ amount before moving into exploitation,” Wang says. But even with so much left to know, Wang says, “we now finally know hot streaks don’t just happen by magic. “It’s about a person exploring different areas, then finding the right space to exploit for greater success.” i

This article first appeared in Kellogg Insight. ABOUT THE AUTHOR Sachin Waikar is a freelance writer based in Evanston, Illinois.

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> Asia Pacific

Rooftop Revolution in Australia Brings Goal of Green Electricity Ever Closer By Brendan Filipovski

Australia is in the midst of a renewable energy revolution — and it has come not a moment too soon.

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hile the percentage of electricity generated by renewables is low by OECD standards — 24 percent — it has more than doubled over the past decade, and seen healthy growth in just three years. By 2025, renewables may supply 100 percent of electricity — at discrete points in the day, anyway. This is not the result of government policy, however, and it comes despite an abundance of coal and natural gas. This is a revolution from the rooftops. Australia has one of the world’s worst per capita emissions rates. Four times worse than Sweden, three times worse than the UK, and twice as bad as Japan. Despite a small population, it contributes one percent of all global emissions. The main culprit is electricity generated by fossil fuels — 33.6 percent of the total. This is in stark contrast to Australia’s renewable energy potential. Australia is the sunniest country in the world, and one of the windiest. The island continent has vast deserts and a huge coastline where solar and wind farms can flourish.

"But the real heroes in this story are the Australians themselves. Residential rooftop solar power has eclipsed all expectations. It began slowly, with 80,000 installations between 2001 and 2009. In 2010, there were 100,000 more. In 2021, around 27 percent of all free-standing homes in the country have solar panels, the highest tally of residential rooftop energy in the world." Prime Minister Kevin Rudd in 2010 — but twice defeated in the upper house of parliament. Debate was fierce and tore across party lines. The leader of the conservative opposition was replaced after supporting the bill, while Rudd’s position was lost in part because of the its failure. The next government passed a watered-down scheme in 2011, replaced by an even weaker mechanism in 2014.

In 2009, the cost of installation was around $9/ Watt, by 2019 this had fallen to $1.60/Watt. Households have responded to market signals.

The conservative coalition has been in power ever since, and is resistant to innovation. While policies on renewable energy have been released, and initiated the world’s largest pumped storage plant in the Snowy Mountains hydro-electric scheme (dubbed Snowy 2.0), many commentators have bemoaned the general lack of ambition.

The federal and state government incentive programmes have played a part — as has growing awareness of climate change. Lots of sunshine doesn’t hurt, either. Australians see solar panels as cost-saving, as well as a personal contribution to a greener future. Business and industry have also joined the party in the past five years.

There has also been a reluctance to commit to new net-zero carbon targets. Former prime ministers Rudd and Malcolm Turnbull recently sent a letter to South Pacific leaders apologising for Australia’s lack of action on climate change.

Large-scale solar generation is catching up too. Generation “farms” have grown 1,268 percent over the past four years to provide three percent of all electricity generation. Thousands of jobs are being created.

The concern was that Liddell’s closure would leave a gap in baseload supply. Finally, in May 2021, the government announced the construction of a gas-fired power station to cover any shortfall.

But while the federal government has fiddled, several state governments have made large strides. South Australia now produces 55 percent of its electricity through solar and wind power, up from zero in 2006. The state had the lowest wholesale electricity prices in the country in 2020 — even negative, for short periods. South Australia is now aiming to export electricity to the other states and territories. Improvements in battery technology have helped. After storms led to blackouts in 2016, the state government worked with Tesla to install the world’s largest battery.

The private sector is also being inspired by visions of green hydrogen. Iron ore miner Fortescue Metal Group is investing in this option. In July, an international consortium announced a plan to build the world’s largest renewable energy hub in Western Australia. It has an estimated cost of $100bn and will have a 50GW capacity. The whole Australian energy market currently has a capacity of 54GW. The hub will produce 3.5m tonnes of green hydrogen a year.

Commentators have criticised the importance given to Liddell — and the construction of the gas-fired station. They see the whole episode as emblematic of a continuing, troubled love affair between conservative governments and fossil fuels. Is coal now giving way to natural gas rather than renewables? Australia was the largest exporter of LNG in 2020.

But the real heroes in this story are the Australians themselves. Residential rooftop solar power has eclipsed all expectations. It began slowly, with 80,000 installations between 2001 and 2009. In 2010, there were 100,000 more. In 2021, around 27 percent of all free-standing homes in the country have solar panels, the highest tally of residential rooftop energy in the world.

Fossil fuel politics can be seen in the demise of Australia’s emissions trading scheme. Legislation for a cap-and-trade was introduced by Labor

Demand rose as energy prices and volatility increased. It was accompanied by the falling cost in installation, and increases in panel efficiency.

So, what has stunted the growth of renewable energy in Australia? Coal. Australia has 14 percent of the world’s proven reserves and produces 7.8 percent of the global total. Australian coal is cheap and of good quality, so it is unsurprising that it is used to generate 54 percent of the country’s electricity needs. Australia is also a leading exporter of coal, and key for the domestic steel industry. But Australia is under pressure to move away from coal. A proposed feasibility study into a new coalfired power station in Collinsville, Queensland, has been ridiculed by the energy industry — and the public. Renewable energy has become more cost-effective. Despite federal government misgivings, several coal-fired power stations have closed in recent years. None has been more debated than the Liddell power station. In 2015, the owners announced their intention to close the station in 2022. Successive governments have tried to push for a delay and encouraged private electricity operators to fill the gap.

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Demand and efficiency will continue to increase. Improved infrastructure allows households to feed energy back into the grid. By 2050, it is expected that half of all Australian homes will have solar panels.

The federal government should work more closely with the states to further encourage such largescale projects if Australia is to push ahead in increasing renewable electricity generation. Investments into new gas-fired stations and Snowy 2.0 shows a conservative approach that doesn’t mesh with Australia’s potential in renewable energy. As the technology and the trend continue to grow, and the allure of coal fades, Australia is finally realising its potential. Households have led the way, and now the Great Southern Land is no longer merely asleep in the sun. i

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> MTR Corporation Finance Director Herbert Hui:

Cool Head and Strong Hand at the MTR Tiller

Finance Director: Herbert Hui

ith diverse revenue streams, including fare- and non-fare revenues from its property business, MTR has been able to ride out challenging economic cycles since its first railway line opened in 1979. The integrated Rail plus Property (R+P) business model, in which property developments support funding of railway construction and maintenance, had kept the company profitable since it was listed on the Stock Exchange of Hong Kong in the year 2000. In 2020, in the midst of the pandemic, MTR recorded the first annual net loss in its history: HK$4.8bn ($620m).

With an investment banking and corporate finance career spanning three decades, MTR Corporation’s finance director Herbert Hui Leung-wah has the experience to take on challenges with confidence. But nothing could have prepared him for the pandemic. “We have always believed that fare revenue was a very reliable source of income, but that notion was challenged,” he said. “We experienced a 40 percent annual drop in fare revenue in 2020. “On top of that, the recurrent and stable nature of collecting rents from station shop and shopping

mall tenants was challenged. We needed to give out rental concessions and reduce rents on lease renewal. Duty-free shops are still unable to reopen because of the closure of cross-boundary checkpoints.” With the overriding need to keep Hong Kong moving with a high-quality railway service, Hui and his team implemented a set of cost controls to strengthen short-term financial management. “As we can’t control revenues in a pandemic situation, we need a good idea of the cash-flow pattern going forward, and how you manage that. One of the things we did was to raise a very successful 10-year green bond in August 2020 — the largest for a corporate in Asia, amounting to $1.2bn. That reaffirmed our commitment to ESG, riding on MTR as a low-carbon, green form of transport. It also provided additional funds to reinvest into our system.” MTR returned to profitability in the first half of 2021, with an interim net profit of HK$2.7bn ($350m). The company maintained its dividend to shareholders throughout the pandemic —at the same level as in 2019. Hui was appointed as MTR’s finance director in 2016. Before that he was the company’s general manager for corporate finance from 2004 to 2011, when he spent much of his time working CFI.co | Capital Finance International

on the milestone merger between MTR and the Kowloon-Canton Railway Corporation. He began his career at Morgan Stanley before moving on to HSBC as an investment banker, involved in pioneering transactions to reform and open-up the Chinese economy. Hui worked on the first batch of listings of H shares (shares of state-owned enterprises incorporated in mainland China) on the Stock Exchange of Hong Kong in 1993. “This was eye-opening to me as a Hong Konger, being at the forefront of state-enterprise reform,” he said. “It’s been exciting to witness China’s development over the decades and see where the country has come to. These experiences also helped me to develop a wider perspective beyond Hong Kong.” After his first stint at MTR, he held CFO roles at Digital China Holdings Ltd, a mainland private enterprise, as well as K Wah International Holdings, a Hong Kong family-owned company. Hui was voted Best CFO in Hong Kong in an Asia’s Best Companies 2015 poll conducted by FinanceAsia. Working under MTR’s CEO Jacob Kam with fellow executive team members, Hui’s experience and expertise have been instrumental in guiding MTR safely through the most challenging period in its history. i 189

> Tipa Nawawattanasub, CEO of YLG Group:

Driving Group to Golden Greatness

ipa Nawawattanasub is the chief executive of YLG Group, a family-owned company in Thailand.

Thanks to its expertise and experience, the YLG Group has positioned itself in Thailand’s highly competitive investment service in gold. It is recognised for its integrated one-stop service in gold. YLG Group’s operation consists of four major business areas with an integrated service offer that enables it to provide customers with solutions: YLG Bullion International Co Ltd, YLG Bullion & Futures Co Ltd, YLG Bullion Singapore Pte Ltd and YLG Bullion Precious Co Ltd. Tipa Nawawattanasub is a top executive for many companies. She is the CEO of YLG Bullion & Futures Co, and managing director of YLG Bullion Singapore and YLG Bullion International. YLG Group has focused on sincere and faithful service, it has contributed to the reliability and confidence of customers. Tipa Nawawattanasub has a BA in Business Administration (Finance), a degree in Business Administration from the University of Kent in Canterbury. She also has a Master’s in Major Political Science from Ramkhamhaeng University. Her community work includes a place on the board of the Gem and Jewellery Institute of Thailand. Q&A What excites you about the business world in general? In my point of view, I think there are many exciting things in the global business because the new normal exists, so the way to do business also changed. Moreover, the transformation of changing customers' lifestyles affected the adaptation of running business. Currently, YLG’s platform business that connected with online transactions and online communication with customers. For example, our customers can open an online account in order to trade gold with YLG Group and customers can trade gold online easily via YLG application. What lessons did you learn from your earlier career experience? My lesson learned regarding learning new technologies in order to facilitate customers. Currently, we have an application for online gold trading. YLG Group put a lot of time and effort into developing and improving it for customers. However, it takes a long time to develop because 190

CEO: Tipa Nawawattanasub

we would like to offer only the best thing for a great experience for our customers. What motives and enthuses you about the business you now lead? I have strong motivation for the business development and create the opportunity for customers to achieve the purpose. We will support our customer to success in their purpose. The most important thing that supported me to do a business during the global changes and challenges was the engagement of family’s business since I was young. It has so much more than just a company, but it is a part of me like family. In order to make my family proud of me, I desire to see my part of the YLG group grow up continually and sustainable over time. What is special about your organisation’s management style? Can you share some management or organisation secrets? Actually, the organisation's management style is more flexible, adaptive, and energetic because we designed our organisation’s structure to be flat. I always open opportunities for my team to share new and creative ideas together. Normally, many companies have solely one way communication. The CEO usually assigns staff and staff don’t have any choice or option to argue or defend their idea, but I don’t think it is a great idea to drive my team to achieve the company's goals. Our goal is to enrich new ideas of the new generation and share them with my experience and specialisation in the gold trading industry. CFI.co | Capital Finance International

From my point of view, I think the perfect combination between a new idea and my intense experience can create an effective business strategy and led our company to attain company’s mission. What are the key strengths of the team you led? How important is your support team? My key strengths of the team is two way communications and I am always a good listener for my team. I think I can’t overstate the importance of seeing that everyone qualifies as key personnel and everyone is a key component that builds a perfect teamwork. I am only a part of a team, one who defines a goal and motivates the team to attain the company's goal. What are the key traits of a good corporate leader? I think the definition of a good corporate leader is one who can be a good leader and a good team player. A good corporate leader should realise when he should be the commander and when he should be a follower. If I would like to learn about a company's problem, I am a follower, but if I would like to execute strategy, I am a leader who makes commitments to employers. Do those criteria change when applied to your particular industry? Yes, it might change because there are many challenges in the gold trading industry, for instance, customer’s behaviour changes frequently. They shifted to online channels, thus I emphasise developing excellent service in order to meet customers’ needs and give more flexibility for our customers through the service process. i

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> Women's Brain Project

Shattering the Status Quo: Investing in Women in STEM By Shahnaz Radjy

epresentation matters. The now classic TV show The X-Files starring David Duchovny and Gillian Anderson inspired more women to pursue careers in a science, technology, engineering, and math (STEM) field. So much so, that this was referred to as “the Scully effect” named after the main female character. More recently, the movie Black Panther featured Shuri, a young black girl, at the head of Wakanda’s tech innovation efforts. With 2022 named the International Year of Glass by the United Nations, highlighting it among other things as an opportunity to promote the participation of women and girls in STEM, we can hope that such representation will slowly but surely become mainstream and contribute to a post-pandemic “new normal” that is better than how things used to be. Glass, as it turns out, is very on-point with the times. The term “the glass ceiling”, referring to the socio-cultural barrier limiting women’s career advancement, is almost 45 years old and yet it is still relevant today. Studies have shown time and again that women and diversity are good for business, but COVID-19 has set gender parity back by a generation. In many ways, the pandemic has shattered our society. One way in which the pandemic has already enabled us to rethink our systems is that it shone a light on the differences between men and women from a health perspective, paving the way for precision medicine. It also brought mental health and gender-based violence to the forefront, alongside the importance of caregivers, reminding us that silent epidemics are as deadly as ones that make the headlines. Differences between men and women exist in many situations, and none are more apparent yet hidden from the mainstream - as differences in men and women’s brains. With the World Economic Forum Annual Meeting in Davos focusing this year on “Working Together, Restoring Trust”, why not take the opportunity to push for gender equality and brain health? This would be in sync with our times, and yet still visionary, as the Organisation for Economic Co-operation and Development (OECD) has been developing the concept of “brain capital” and France has committed to prioritizing brain research when it takes on the European Union Presidency - to name but two examples.

And, unlike the challenge of finding champions for niche issues such as ALS - which was put on the map by the “Ice Bucket Challenge” that went viral when a pro-golfer shared it on social media - brain health is everyone’s business: we not only all have a love grandparent or parent suffering from Alzheimer’s or a friend suffering from depression, but we all have brains which comes with a vested interest in brain health. While sex and gender differences in brain and mental health is a global issue, a pioneer in this space is headquartered in Switzerland, not far from Davos. The Women’s Brain Project - always open to new partnerships - is an international non-profit working across disciplines on the implementation of sex and gender within precision medicine, from basic science to novel technologies. Their co-founder and CEO, Dr Antonella Santuccione Chadha, is leading by example and an inspiration to many. She was nominated Woman of the Year by Women in Business Switzerland in 2019, and won the World Sustainability Award in 2020. A book based on her life experience “The Headless Baby Girl” was published in Italian in 2021, and the Swiss production company Suisse Vague SA, who acquired the rights for a TV show, are scouting for the right investors to bring the project to fruition. “The time is right to integrate sex and gender differences into mental and brain health, and to shine the spotlight on mental health as a whole. We need more women in clinical trials, doing research, on boards, and advocating for themselves - and if I can inspire just one more person to go into STEM, or one person in STEM CFI.co | Capital Finance International

to practice self care to avoid burnout, it’s already a victory,” said Dr Santuccione Chadha With a growing number of initiatives - including one by the Obama administration and the BBC, and the movies such as “Hidden Figures” focused on recognising women who played lead roles in historical STEM innovation and discoveries, but were overlooked during their time, I hope we can learn from our past and celebrate women like Dr. Santuccione Chadha while she is still in her prime. In Japan, they have an art called Kintsugi whereby broken pottery (not glass, but for this purpose I hope you won’t mind putting them in the same proverbial basket) is repaired by mending the cracks with material mixed with gold, silver or platinum. This treats breakage and repair as part of the history of any given object, and integrates the repair as an integral feature that makes the object more beautiful. This is starkly different to the tendency we have in the West to consider broken things as having lost value. When it comes to rebuilding in a “postCOVID-19” world, can we learn to accept that things will never go back to how they were before, and that this is an opportunity to improve our ways rather than a blemish on our history? If we do, I hope we will continue to celebrate inspiring women in STEM during their lifetimes, and that we’ll invest in brain research and health, integrating gender and diversity as key elements to ensure that findings reflect the richness of our societies. i ABOUT THE AUTHOR Shahnaz Radjy is a member of the Women’s Brain Project Communications Working Group. 191

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> YLG Group - Precious Metals and Changing Trading Rules:

Expertise is the Only Way to Navigate the Space

LG Bullion International was established in 2003 to recognise Thailand’s growing demand for alternative investments, and the import and trade of gold.

YLG Bullion International is one of the members and board of the Gold Traders Association of Thailand. 192

YLG Bullion International operates in the import and export of precious metals and offers services to domestic and international markets. The firm provides seamless and secure online trading for the purchase and sale of 96.5 percent and 99.99 percent LBMA-approved gold bars. CFI.co | Capital Finance International

The YLG Bullion International is one of largest Importer and exporter of gold bullion in Thailand through an online trading platform. The company quotes reasons why it holds the number one trading spot: 1. Round-the-clock trading

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"YLG Bullion International Co Ltd launched the first mobile app which gives innovative experience and leads customers to the universal trade world for trading gold in 5 currencies with real time price 24 hrs." bullion is available in sizes from 1g upwards, stamped with the YLG hallmark. The 96.5 percent gold bullion, very popular in Thailand, can be sold in any jewellery store in various denominations YLG Bullion International has released a New Gold Investment Application in Thailand. Which can, satisfy new generation people needs containing with 9 advantages:

2. Real-time market prices 3. Offer Local Gold bar and LBMA bar. 4. Physical collection during working hours 5. Investment advisory service. The company’s 1kg, 99.99 percent pure gold bars are refined by LBMA-accredited refineries. Purity and weight meet global quality standards, and the

1. Trading in various currencies: USD, CNY, EUR, SGD, THB 2. Minimum trading only 1oz: Or 31.104 grams, around 60,000 THB 3. More convenience: Customer can trade via both website and mobile application on multiplatform 4. More safe: Delivery through OTP security system 5. Able to check previous transaction: All transaction can be checked 6. All time notification: Customer will notify by application from every transaction 7. Automatic price setting: Customers are able to set the prices when the market opens until the market closes, including both sell, buy price and cancellation time as well. 8. Pick up anytime: Customers are able to customize their own delivery date. 9. Trading 24hr: Customers are able to trade 24hrs through online websites and applications. YLG Bullion Singapore was set up in 2012 as the first overseas office. The company is the executive committee member of the Singapore Bullion Market Association, and a member of the Shanghai Gold Exchange International. CFI.co | Capital Finance International

YLG BULLION SINGAPORE The office in Singapore is strategically located in a region with a high potential of gold demand and supply opportunities. It is a member of SBMA (Singapore Bullion Market Association) with products including gold bars, scrap, dore and granules. It features automatic price-setting and order submissions, with special weekend prices, using reputable carriers such as Brinks, Malca-Amit, and Loomis for shipment. WHY CHOOSE YLG BULLION SINGAPORE? • 24 hours trading of precious metals • YLG is a member of SBMA (Singapore Bullion Market Association) • Wide range of products including gold bar, gold/silver scrap, gold/silver ore, gold/silver granules etc. • Automatic price setting and order submission There are special weekend prices using international reputable secured carriers such as Brinks, Malca-Amit, Loomis for shipment. • YLG Bullion International Co Ltd launched the first mobile app which gives innovative experience and leads customers to the universal trade world for trading gold in 5 currencies with real time price 24 hrs. • YLG Bullion Singapore Pte Ltd is a brokerdealer of 99.99 percent gold bullion and physical silver in Asia and the executive committee member of the Singapore Bullion Market Association (SBMA) and a member of The Shanghai Gold Exchange (SGE). In addition, the company was established in Singapore following the invitation from International Enterprise Singapore. i 193

> Aibek Kaiyp:

Jusan Bank’s CEO Champions Change, Hits New Heights in Service Provision First Heartland Jusan Bank, one of the largest banks in Kazakhstan, is developing its ecosystem to go beyond traditional services.

t the helm in this period of transition is Aibek Kaiyp, CEO and chairman of the bank’s management board. His career with Jusan financial group began in 2018, when he headed First Heartland Capital, an investment management company in the First Heartland Group. In 2019, First Heartland acquired 99.5 percent of Tsesnabank shares and changed its name to Jusan Bank. That same year, Aibek was appointed deputy chairman of the Jusan Bank management board, supervising non-performing debts. The area was one of the highest priorities for Jusan; non-performing loans in the portfolio inherited from Tsesnabank JSC amounted to 850 billion tenge ($2.2bn) — more than 90 percent of the bank's assets. "I headed the recovery of distressed assets,” Kaiyp recalls. “We singled out the companies that failed in their obligations.” Jusan played hardball with defaulters. “Each of the problem borrowers had their own reasons, problems, and claims. Each case was worked out not just individually, but literally manually," Kaiyp says. Very soon, consistent and systematic work brought the desired results. During 2019 and 2020, the bank recovered a large amount of assets considered non-performing. “Many borrowers took the decision to repay the loans properly,” says Kaiyp. “That was a period of challenges". By the end of 2019, Kaiyp had become the chairman of Jusan Bank’s management board. With a new team of top managers, he implemented what has become a successful development strategy. This is evidenced by financial and business indicators based on the strategy being implemented in stages. "We focused on global trends of deep transformation of the financial market and their integration into Kazakhstan,” the CEO says. “Analysing various development scenarios, we placed a bet on creating a new ecosystem based on three business platforms: Jusan Retail, Jusan Business and Jusan Private Banking.

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Chairman & CEO: Aibek Kaiyp

“This was so that each of our clients could solve their financial problems and tasks using the Jusan mobile app. In 2020, we implemented several significant projects for the bank at the same time. We relaunched the Jusan Internet banking and mobile apps for retail customers, and Jusan Business for SMEs. We also launched the Jusan Marketplace — a store with a wide range of goods and services — and Jusan Mobile, a virtual mobile operator, in partnership with one of the largest local operators." Under Kaiyp’s leadership, Jusan Bank has completed the independent asset quality review (AQR) by the National Bank of the Republic of Kazakhstan — and confirmed the quality of its assets and compliance with all Kazakhstan and international standards. The development of the digital ecosystem was timely, and allowed the bank to transfer products online and direct customer service to remote channels. And this was happening in troubled 2020, under the shadow of the pandemic and the challenges CFI.co | Capital Finance International

of quarantine. Every effort was taken to minimise risk for customers and employees. As 2021 approaches its close, Jusan Bank and its team reflect on an eventful period. The most significant events include the completion of merger with Kazakhstan's ATFBank, which Jusan purchased at the end of last year, and the acquisition of a stake in Kazakhstan's leading mobile operator, Kcell. Before joining Jusan, Kaiyp worked with HSBC in Almaty as an analyst of the global banking division. He later joined the Kazakhstan branch of the largest Russian bank, Sberbank. Aibek Kaiyp is a representative of a new generation of managers trained by the international educational programme Bolashak, established 28 years ago by former Kazakh president Nursultan Nazarbayev. It has become recognised as one of the most important management training initiatives in the country. i

Winter 2021-2022 Issue

> IMF:

How Trade Can Help Speed Asia’s Economic Recovery By Pragyan Deb, Julia Estefania-Flores, Siddharth Kothari, and Nour Tawk

A renewed push to liberalise trade can invigorate durable growth and minimise post-pandemic scarring.

rade has historically been a powerful driver of economic growth and poverty alleviation in Asia, though the momentum of lowering trade barriers has slowed in recent years.

While tariff barriers to trade in Asia are low overall, a new measure of nontariff barriers suggests those remain high in many Asian emerging markets and developing economies. Unlike tariffs, these barriers include policies that introduce frictions such as licensing requirements or restrictions on trade, payments, or exchanging foreign currencies.

Removing Obstacles: Lowering nontariff barriers has historically been associated with more positive economic outcomes (percent change).

Source: Estefania-Flores, Furceri, Hannan, Ostry and Rose (2021). Note: Figure shows the impact of a large decline in nontariff barriers (two standard deviations) in the short term (after one year) and medium term (after five year), based on regression analysis.

According to recent research, which was detailed in the IMF’s Asia-Pacific Regional Economic Outlook, easing nontariff barriers can boost gross domestic product by about 1.6 percent, potentially healing about a quarter of expected pandemic scarring. The findings take on added significance given that IMF forecasts suggest GDP in 2024 will be 6 percent below the precrisis trend in Asian emerging and developing economies, equal to losses of about $1 trillion annually. TRADE BARRIERS For a better understanding, it helps to consider the region’s history of cross-border activity. Strong GDP growth in Asia was accompanied for decades by a steady rise in measures of trade openness, such as the share of goods and services trade in GDP, and greater participation in global value chains. However, this openness has stalled in recent years, suggesting that Asia’s traditional growth engine was slowing even before the pandemic. This coincided with slower reforms. Average tariffs in Asia fell sharply from more than 50 percent in the 1970s to single digits in the early 2000s, leaving little room to improve. But levies aren’t the whole story. Nontariff barriers have long been viewed as a significant impediment to trade, though concrete analysis has been challenging due to data limitations. To overcome this constraint, a forthcoming IMF working paper compiles a comprehensive measure of trade restrictions for 159 economies as far back as 1949. This index uses detailed trade-barrier data in the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions. This captures various obstacles such as licensing requirements or documentation hurdles for releasing foreign currency.

The index shows that, in contrast to the major drop in tariffs over the past half century, nontariff barriers have declined less and remain relatively elevated. The level for Asia declined from near 20, the highest level, in the 1960s to around 15 by 1995, but has since remained little changed. BENEFITS OF OPEN TRADE These scores tend to be particularly high for lowincome countries such as Nepal, Bangladesh, and Myanmar, though large emerging economies such as China and India also have scope for reforms. The average reading among Asia’s emerging market and developing economies also is significantly higher than those for other regions. Empirical analysis suggests lowering nontariff barriers offers potentially large economic gains. A significant reduction in our measure, along the lines of Sri Lanka’s removal of export licensing, financing, and documentation requirements in the early 1990s, can help boost GDP by about 1 percent in the short-term. Those gains increase to about 1.6 percent after five years. technology transfer, and the reallocation of resources to more productive firms. As vaccinations foster the recovery from the pandemic, policymakers must prioritise economic reforms to support growth and minimise scarring from the crisis, especially in emerging and developing economies. These can include policies aimed at reversing the pandemicinduced setback to workforce education and skill levels, as well as reforms to labor and product markets. Our research illustrates how lowering international trade costs can help: CFI.co | Capital Finance International

Lowering Goods Barriers Many Asian economies require import and export licenses, request extensive documentation for releasing foreign currency, or restrict the use of foreign exchange. Removing such obstacles can ease administrative delays and reduce costs for international transactions. Reducing Services Restrictions There is significant scope to ease restrictions on transactions beyond physical goods in areas such as travel, shipping, and consulting, and on international transfers, as Australia did in the 1980s. Reforms like these will likely offer greater benefit in coming years as services trade grows more rapidly. While reducing trade barriers can help boost output in the medium term, it can also come with potentially adverse distributional consequences. The reallocation associated with reforms generates winners and losers, with the already better-off often benefitting more. Therefore, it’s essential to accompany trade reforms with policies to mitigate impacts on inequality, including financial support for the hardest hit and retraining programs to help workers find new jobs. As economies confront years of lingering effects from the pandemic, a renewed embrace of trade openness is a promising avenue to explore. Healing the pandemic’s scars is a priority, and our research shows that reducing trade barriers can reignite Asia’s growth engine. i

Source blogs.imf.org/2021/11/19/how-trade-can-help-speedasias-economic-recovery 195

> Right On Track:

MTR Rail Empire Weathers the Pandemic in Style with Innovative Business Model As public transport operators around the world battle sharp declines in patronage and revenues during the pandemic, MTR Corporation’s diversified “Rail plus Property” (R+P) business model is paying dividends.

long-term vision has enabled the company to maintain its solid financial base and fulfil its mission to keep cities moving.

MTR is a global leader in urban rail transport with operations extending from its home base in Hong Kong to major cities in mainland China, Europe and Australia. The company takes pride in its track record for providing safe, reliable and efficient railway operations. It delivers 99.9 percent of passenger journeys on-time in Hong Kong, and has built a reputation for quality customer service. In Hong Kong, MTR’s railway is the backbone of the city’s public transport network, connecting all 18 districts and serving millions of passengers every day. The densely populated city has a transportorientated pattern of development. New railway lines open corridors for growth, in some cases supporting the development of purpose-built “new towns” and regeneration of older urban areas. MTR plays a central role in building and operating the lines — as well as rail-related property.

Railway fans and passengers enter Sung Wong Toi Station in Hong Kong on 27 June 2021 to experience MTR’s full Tuen Ma Line service for the first time.

With end-to-end railway experience and expertise — from planning and design through to operations and maintenance — MTR has been delivering major railway infrastructure projects in international hubs for 40 years. They meet world-class design and engineering standards, and include Hong Kong’s High Speed Rail, Australia’s Sydney Metro, and Beijing Metro Line 4, the first PPP (public-private partnership) urban railway project in China. With the its R+P model MTR builds new lines, and plans and creates fully integrated commercial and residential communities above (or adjacent to) stations along the railway alignment. The Hong Kong government grants the company land rights, for which MTR pays a premium based on the existing value of the land before railway construction. The opening of a new rail line enhances the value of these property developments, bringing 196

MTR’s railway network is the backbone for public transport in Hong Kong, serving about 4.3 million passenger journeys a day in 2021.

CFI.co | Capital Finance International

Winter 2021-2022 Issue

Built above a railway depot, LOHAS Park is a major MTR Rail plus Property development project that will ultimately be home to about 58,000 people.

value-capture benefits to MTR. Newly occupied residential and commercial properties bring people to the area and stimulate patronage. There is a significant benefit to the city, too, with the increased supply of much-needed housing units. Profits from the sale of residential properties above MTR’s new lines can be leveraged to finance future projects, and reinvest in the existing network to maintain performance standards and customer experience. The model has proved a winner for the company, which opened its first line in 1979 and has been listed on the Stock Exchange of Hong Kong since 2000. R+P has contributed to the city’s growth and development. A safe, reliable and efficient transport service with seamless connections to homes, offices and community facilities is prized by local residents. In early 2020, MTR — like its transport industry peers around the world — found itself in the midst of an emerging crisis. Passengers cut back on journeys as social distancing measures took hold, cross-boundary train services and high speed rail to mainland China were halted, and tourist numbers dropped. In the first two months, MTR’s Hong Kong patronage fell by 34 percent year-on-year. Steeper declines were to follow in some overseas rail operations as cities such as London, Melbourne, and Sydney were placed under lockdown. With less movement through the railway network,

there were adverse impacts on station shops and shopping malls that MTR manages along the alignments. Rail forms the backbone of the Hong Kong public transport network, and it was essential that services be safely maintained. This put MTR at the forefront of city’s pandemic defence. Extensive health and hygiene measures were implemented: extra cleaning, disinfection and ventilation for stations, trains, managed properties and work locations. Customer-facing staff were required to wear masks and check their temperatures before reporting for duty. New technologies were introduced to enhance hygiene standards, including disinfection robots as well as contactless lift-button sensors. Train service has been maintained throughout the Covid crisis — including normal peak-hour frequency. To help its stakeholders weather the storm, MTR offered passenger fare rebates and reductions, rental concessions to station and shopping mall tenants, and safeguarded jobs. It also maintained the dividend payments to shareholders at the same level as 2019. With the negative impacts of the pandemic on its fare and non-fare revenues, the company tightened cost-control measures, including a recruitment freeze: staff accounts for 50 percent of operating costs. There were cuts in discretionary spending on marketing and consultancy, and cashflows were conserved by postponing non-essential capital expenditure. CFI.co | Capital Finance International

A new corporate strategy was approved by the MTR board in 2020 to keep cities moving. There was a renewed commitment to innovation and the introduction of new technologies to ensure longterm sustainability. To create shared values with the communities the company serves, a strong ESG regime focused on cutting greenhouse gas emissions and promoting social inclusion, advancement and opportunities. MTR has long embraced ESG in financing, too, issuing its first $600m green bond in 2016. In 2020, the company issued the largest singletranche green bond for corporates in Asia-Pacific. Its $1.2bn bond in 2020 won Hong Kong’s Best Green Bond award and the company was named Best Issuer for Sustainable Finance in Hong Kong in The Asset Triple A Country Awards. With the R+P model supporting long-term financial sustainability, MTR is moving to a brighter future. It plans to invest HK$100bn ($12.8bn) in the coming decade on new railway lines and extensions. An existing railway depot site will be transformed into a residential development, providing 20,000 apartments with rough 50:50 split between private and public housing. This year, the Hong Kong rail network was expanded with the opening of the full Tuen Ma Line, a strategic connection for multiple existing lines. The company aims to open its fourth crossharbour railway link next year, extending its East Rail Line which runs through the New Territories and Kowloon across to Hong Kong Island. i 197

> All Plugged-In and Ready to Go:

EV Summit Brings Industry and Experts Together at Oxford An online-only event last year, the EV Summit returned in 2021 as an in-person event at Oxford University’s Said Business School.

peakers were united on one point: the transition from ICE to EV needs more investment in charging infrastructure. There are other hurdles to overcome, but infrastructure was the word on everyone’s mask-covered lips. Several panellists, including Katie Black, of the UK’s Office for Zero Emissions Vehicles, and Victoria Whitehead, of Lloyds Banking Group, noted that over half of new UK car sales are to fleets. And it’s an area where subsidies are working well — but Black said that the government needs to better understand fleet needs. Jane Hoffer, CEO of GoWithFlow, made the point that with most fleet vehicles being replaced every three years, there are still three lease cycles before the ICE sales deadline of 2030. The earlier companies can be persuaded to electrify their fleets, the sooner EVs will filter down into the second-hand market. According to Markus Kroeger of ABB, pressure comes from customers and stakeholders who expect companies to go green. Fleet electrification can help brand perception. Another pressure comes from cities like London, Paris and Berlin which have announced that by 2030, ICE vehicles may not enter. Electrification is a major decision that will be made at senior management level. The initial outlay for vehicles and infrastructure must be justified at executive and board levels. Suitable replacement vehicles must be found, which is more straightforward for cars and light vans than it is for larger trucks and lorries. Tim Jones, of the DPD Group, said his firm aims to be the UK’s most sustainable delivery company. It decided to electrify its fleet with allelectric 3.5-tonne vans. Kroeger pointed out that management responsibilities — now to include in-house charging — will change. With EVs, the fleet management role crosses into energy procurement, facilities management, IT and HR. The final speaker in the fleet session, Alfonso Martinez, MD of Leaseplan, said a survey last

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year showed 80 percent of responding businesses had been asked by employees to provide EVs. Some 82 percent said their companies had an EV transition strategy — but 63 percent had no confidence in it. While 41 percent wished their company was more ambitious, 22 percent thought they were moving too quickly. Amy Stokes, head of e-mobility at Volvo Trucks UK and Ireland, revealed that 45 percent of all deliveries are in range of single-charge trucks in use by companies such as DHL. Barriers to change include the higher investment required, but electric trucks will enable night deliveries to cities, with no noise problem to overcome. Volvo has signed an agreement with Scania to build a network of truck chargers across Europe starting next year. Vauxhall is on-track to becoming fully electric by 2030. It offers battery EVs (BEVs) across its entire LCV range, with a range of some 200 miles; half of all van journeys are within a 15-mile radius. There is a need to mandate charging points in new buildings, MD Paul Willcox believes, and excise duty must be simplified. The race to electrify is more about decarbonisation than cars, driven by the threat of the climate crisis. The industry would like to have some good news to report at the COP26 meeting to be held in Glasgow. Manufacturer Polestar aims to be carbon-neutral in all its operations by 2030. The rest of the industry has to follow suit and publish data so their cars’ carbon footprints can be compared. Jeremy Parkes, global business lead for EV at DNV, shared the modelling his company is doing on the future of the industry. Energy demand will plateau in the 2030s, he predicts, as overall energy efficiency improves. Demand for electricity will double by 2050, and 50 percent of that will be met by renewable sources. Vehicleto-grid (VTG) will balance demand — but it’s not happening quickly enough. In Norway, 400,000 EVs have been sold in the past five years, making up 20 percent of all vehicles — and 83 percent of all sales in the first CFI.co | Capital Finance International

half of 2021. On absolute numbers, Germany has done better still. In Norway there is no purchase tax and no VAT; EVs have free access to toll roads, ferries and bus lanes. Average CO2 emissions per km dropped from 135g in 2011 to 60g in 2018, in line with EU targets for 2030. The UK is stopping the sale of ICE cars in 2030; 11.5m BEVs will have been sold by that date, but that will still leave 20 million on the road. One third of all new car sales are vehicles that cost £24,000 or less — and there are no EVs in that price range. Tax incentives have improved uptake by businesses, but they need to be available to the private sector as well. Confidence in public charging will affect customer choice. Consumers are sharing tips and tricks and everyone finds their own best way to manage charging. Oxford City Council’s deputy leader, Tom Hayes, spoke about an ongoing transition by the council

Winter 2021-2022 Issue

to all-electric buses, the installation of kerbside pop-up chargers, the world’s largest charging hub and Project Leo, a study of localised small scale power generation options from solar, wind and hydro.

Ubitricity, which it acquired earlier this year. It will be topping up the 25 percent of cost not covered by government subsidy, which means no financial cost to local authorities. By 2025, Shell is planning to have 500,000 charge points globally.

All EV manufacturers share the same key challenges, and public charging infrastructure is one of these. The UK trails the Nordic countries and Germany. Having set the timetable for ending ICE sales in 2030, the government has to set the tone and be consistent with subsidies. It needs to avoid situations such as the sudden cut in the plug-in grant last year.

Neil Isaacson, CEO of Liberty Charge, spoke about public on-street charging. His company is working with local authorities to find suitable places on the street or in carparks. Government doesn’t know what the charging roadmap should look like, and needs industry feedback.

Pinar Mavituna, general manager at Shell, said that the oil giant is focusing now on charging infrastructure, with home, on-the-go, and destination solutions. Shell hopes to roll out 50,000 new charging points on lampposts across the UK by 2025 through its subsidiary

Sherief Rahim, director of Improved Corporate Finance, noted that “climatetech” is the latest growth area, with some companies outperforming the NASDAQ in recent years. There have been several takeovers in this area, with high valuations for young companies. CFI.co | Capital Finance International

Matthias Dill, managing partner at Energy Impact Partners (EIP), highlighted the need for joint efforts. Successful start-ups keep their options open, and corporations need to know quickly whether new tech will work. The solution: collaboration. EIP has a global investment platform that links the most promising start-ups with corporations in the energy sector. Victoria Whitehead said that Lloyds Banking Group has set a target of reducing funding for the carbon emitters by 50 percent by 2030. “The spotlight is on the transport sector,” she said. “ In his closing remarks, Ade Thomas of summit organiser Green TV, asked panellists for three words to sum-up the event. For me, the key words would have been Infrastructure, Collaboration and Fleets. i 199

> Chi-Mau Sheih, Chairman & CEO of Chunghwa Telecom:

Strategic Transformation, Regional Partnerships & Commitment to ESG

hairman & CEO of Chunghwa Telecom, Chi-Mau Sheih, is a specialist in telecommunications management, broadband networks, cybersecurity, cloud computing and big data applications. This means the man at the top understands the entire operation — from the ground up. Chunghwa Telecom is the largest integrated telecommunication service provider in Taiwan, with leading offerings in domestic and international fixed communication, mobile, broadband, and internet services. The company also provides information and communication technology and other innovative services, such as IDC, big data, information security, cloud computing, and AIoT. Chi-Mau Sheih’s career has been dedicated to technological and business development progress in the telecommunications sector. He has held several leadership positions at Chunghwa Telecom, including chief marketing officer, senior executive vice-president, and president. Chi-Mau pioneered creativity in the sector. He participated in the high-speed rail Taiwan Application Service Project and its wi-fi service enhancement, where he acted as principal investigator. The project was the first to launch free wi-fi access aboard trains, deploying an e-commerce service mode for passengers to enjoy interactive services with the Taiwan High Speed Rail Corporation. Chi-Mau Sheih was appointed chairman of Chunghwa Telecom in April 2019. In response to market competition, rapid technological advancement, and the ongoing innovation of new business models, he led the company on a three-year strategic transformation, to enhance its overall competitiveness under a customercentric organisational structure. During the process, he focused on strengthening core businesses, deploying emerging services, optimising cost structure, and upgrading basic capabilities. The transformation was completed by the end of 2021, and the result is truly a remarkable success. The company’s financial performance has continued to improve despite COVID-19 headwinds. In addition to strategic transformation, Chi-Mau leads the company in its strategy of pursuing heterogeneous alliances for business expansion and establishing regional partnerships (especially in Southeast Asia) for further growth.

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Chairman & CEO: Chi-Mau Sheih

In December 2021, Chunghwa Telecom, Thai National Telecom, the WhiteSpace, and Delta Electronics (Thailand) PCL signed a MOU for collaboration in a 5G private network. This joint project focuses on solving the pain points of digital transformation for enterprises in the postepidemic era and will assist the Thai government in creating a 5G innovative application service ecosystem. “The influence of the project will be extended to government, manufacturing, tourism, medical and financial industries in Thailand. We believe this kind of collaboration will create a win-win situation, and we will continue to work with high-quality international partners to develop innovative application services,” Chi-Mau remarked. As the CEO of a major brand, Chi-Mau is aware that environmental, social, and governance (ESG) issues are of paramount importance. He ensures that the company exhibits a profound commitment to ESG from the board to all stakeholders. In response to the key outcomes of COP26 (26th United Nations Climate Change Conference of the Parties) meeting in Glasgow, CFI.co | Capital Finance International

Chunghwa Telecom has joined the Net Zero World Initiative, aiming to achieve net-zero emissions by 2050. The company has also set a medium-term goal of 100% net-zero emissions at office sites and full use of green energy in its Internet Data Center (IDC) by 2030. In Nov 2021, the company passed audits from the Task Force on Climate-Related Financial Disclosures (TCFD) and British Standards Institution’s BS8001 and is the only telecom operator in Taiwan to have done so. To mitigate climate change, the company not only proposed internal energy-saving and carbon-reduction plans but also joined the CDP supply chain project, using its purchasing power to encourage hundreds of suppliers to carry out carbon management and emission reduction. At the same time, it has developed low-carbon related services and solutions to help customers in reducing their carbon footprint. Chi-Mau Sheih is devoted to the development of technologies for the telecommunication industry, sustainable corporate management, and smart city application services. i

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

> OCHA - Investing in Climate & Disaster Resilience:

Three Lessons from the Philippines By Veronica Gabaldon and Kareem Elbayar

Would you know what to do if your home office flooded? Or if the communications tower closest to your corporate headquarters gets knocked out by a storm that threatens your operations?

isasters don’t discriminate. As we saw with the floods hitting Germany, Belgium, China, India, and beyond last summer, and as reflected in the Global Risks Report 2021, no one is safe from disaster risk and particularly extreme weather events. Conflicts and food insecurity are on the rise too. Building on a decade of experience of private sector engagement in disaster management in the Philippines – one of the top ten most at-risk countries for disasters – here we share three lessons around investing in business and community resilience that have global applicability. WHY THE WORLD CAN LEARN FROM THE PHILIPPINES In the past few years, the Philippines has been confronted with a growing number of crises ranging from climate-related events such as typhoons to volcanic eruptions, earthquakes, armed conflict and of course the COVID-19 pandemic.

UN Resident Coordinator Gustavo González and PDRF President Butch Meily arrive at Clark International Airport in Pampanga, the Philippines. Photo: OCHA

For humanitarian agencies, acting alone is not possible anymore. And for local businesses, building resilience is not an option; it’s an economic necessity. For the UN Resident and Humanitarian Coordinator (RC/HC) in the Philippines, Gustavo Gonzàles, multisectoral collaboration is essential to efficient humanitarian action. "What we are learning from COVID-19 is that this crisis is exceeding the response capacity of any single player, any single country. The time of a leader as a solo hero is over,” he said recently. Our shared experience of collaboration between the UN system and the private sector in the Philippines during crisis is highlighted as a best practice by the UN Office for the Coordination of Humanitarian Affairs, OCHA. The Philippine Disaster Resilience Foundation (PDRF), a business federation representing hundreds of companies big and small, has become a key player in the humanitarian community, working with the Government and alongside the UN as well as other humanitarian actors, and establishing the first private sector run Emergency Operations Center. The UNDPOCHA Connecting Business initiative (CBi), of which PDRF is a member, supports SouthSouth knowledge exchange and leveraging best practices from the Philippines for globally 202

A screenshot of the HANDA disaster management information system dashboard details the impact of Super Typhoon Rolly (Goni) and Typhoon. Photo Credit: PDRF

relevant case studies and improved private sector engagement in emergencies. THE PRIVATE SECTOR IS AN INTEGRAL PART OF THE COMMUNITY Business and community are intrinsically linked, and in the case of a disaster, the private sector is on the front lines. Businesses and their employees are inextricably a part of their local communities, know how to reach affected people, and know how to communicate with them. So, it makes sense that they play a role in disaster risk reduction, response, and recovery. CFI.co | Capital Finance International

"Disasters immediately impact the local economy, so the private sector is the first one interested in early warning and preparedness," recalls RC/HC Gustavo Gonzàles when sharing his experience working with the PDRF. This often begins with the more classic approach of the private sector making donations – whether financial or in-kind – but goes far beyond that. Businesses have skills and operational knowhow that can make a significant difference in the case of disasters, saving lives and livelihoods.

Winter 2021-2022 Issue

BUSINESS CONTINUITY PLANS ARE KEY FOR THE PRIVATE AND PUBLIC SECTORS A growing trend in the private sector is to adopt business continuity plans – a written document outlining the steps to take in case of an emergency to keep your employees safe, save your assets and infrastructure, and either stay in business or get back to your operations as quickly as possible. This isn’t just important for affected businesses, but for everyone who relies on them for income, products, or services. In the Philippines, PDRF developed an online platform to support MSMEs, Synergizing Recovery Initiatives, Knowledge, and Adaptation Practices (SIKAP). Through mentorship and access to resources, PDRF empowers businesses to prepare for, respond to, and recover from crises better and faster. One example is their Safe in a Storm guidelines. PDRF is also leveraging its experience in business continuity to support public sector entities – hospitals and Government agencies –, ensuring that they can invest in their resilience and “stay in business” through pandemics and beyond. BUSINESS-RUN EMERGENCY OPERATIONS CENTERS CAN COMPLEMENT GOVERNMENT EFFORTS In 2020, the Philippines was faced with a “triple threat”: Two typhoons and the pandemic, all overlapping. Thanks to PDRF’s businessled Emergency Operations Center (BEOC), they were able to monitor the situation and coordinate a more efficient response. This was done in collaboration with the Government and humanitarian actors in country.

Now, PDRF is working with CBi so that other country-level private sector networks can set up similar BEOCs adapted to their contexts. This is a collaborative effort, requiring companies of all sizes to work together with a single purpose: making their communities more resilient. The COVID-19 pandemic had very few silver linings, but improved collaboration and communication between countries was one of them, as was a renewed focus on mental health. In the Philippines, PDRF is working hard to turn a challenging environment into a strength, leveraging experience in private sector engagement in disaster management to inspire and provide practical insights so others can be better prepared, too. i ABOUT THE AUTHORS Veron Gabaldon is the Executive Director of the Philippine Disaster Resilience Foundation, a business federation helping local businesses better prepare for, respond to and recover from disaster. As Director of PDRF, Veron has a firsthand experience on responding to multiple simultaneous crises (COVID-19, conflict and volcanic eruption in 2020). She managed the launch of the first private sector-led Emergency Operations Center in the Philippines. Kareem Elbayar is the Programme Coordinator of the Connecting Business initiative (CBi). A joint project of the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) and the United Nations Development Programme (UNDP), CBi is dedicated to supporting the private sector before, during, and after disasters. Learn more at connectingbusiness.org. CFI.co | Capital Finance International

Author: Veron Gabaldon

Author: Kareem Elbayar

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> Asian Development Bank

Placing a Safer Climate Within Reach in Asia and Pacific By Bambang Susantono

In the wake of COP26, the focus in Asia and the Pacific should be on designing impactful, climate-aligned programs linked to broader national development strategies that move them towards more ambitious targets under the Paris Agreement.

s the world continues its transition towards cleaner, renewable approaches to climate and energy, the ways progress will be planned and paid for are becoming clearer. While some people left COP26 disappointed with the progress made, key frameworks that took shape in Glasgow in the crucial area of climate finance show how talk can be turned into action. Tangible progress will not come a moment too soon for the Asia and Pacific region. Many small island states with unique, scattered geography and marine ecosystems — some rising just a few meters above sea level — are in clear, existential peril. Each year, extreme weather throughout Asia and the Pacific causes death, destroys infrastructure, and disrupts economies. In the Philippines, damage from extreme weather and disasters reached the equivalent of $9.3 billion from 2010 to 2019. Meanwhile, the region now accounts for about half of all global greenhouse gas emissions and is home to 865 of the roughly 1,000 coal-fired energy plants in use around the world. As Asia and the Pacific’s climate bank, the Asian Development Bank is working to help developing countries assemble three core elements in the effort to mitigate and adapt to climate change: technical solutions that help to green their economies; expertise and capacity to take a “whole-of-economy” approach; and financial resources to transition to more sustainable infrastructure. This holistic view covers everything from expanding climate literacy and training to sharing knowledge and a spirit of innovation to help prepare locally tailored approaches. So how can countries respond to rising sea levels, frequent disasters, and dangerous pollution? Let’s consider the power sector. Approaches to answering the challenge of generating enough energy to meet rising demand while tackling climate change will look different for each country. An alternative renewable energy mix— whether wind farms or solar parks—can add to hydropower or geothermal generation that is cleaner and contributes to the energy transition. It all depends on what’s available.

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In the Philippines, damage from extreme weather and disasters reached the equivalent of $9.3 billion from 2010 to 2019. Photo: ADB

But across countries the focus will be on designing impactful, climate-aligned programs and investments linked to broader national development strategies that move them towards more ambitious targets under the Paris Agreement. To develop those investments, it is critical to first weigh the technical feasibility of climate change development projects and use the findings to define an appropriate package of loans, grants and guarantees. Technical assistance is central for each country to reach its climate goals — and remains a key part of how ADB will help. In the power sector, access to technical expertise can help improve understanding of complex issues, build awareness of potential initiatives, and support the transfer of new technologies that allow greater access to power while also promoting the clean-energy transition. This is critical in a region where 350 million people have unreliable access to energy and 150 million people have none whatsoever. Capacity development is also crucial to help countries formulate approaches to a just transition through vocational training and CFI.co | Capital Finance International

social development, so new investments do not disrupt income growth or safety nets for the most vulnerable.

ADB will also work with partners and clients to drive new ideas that protect the environment— and livelihoods. For instance, throughout Asia and the Pacific, vulnerable coastal wetlands are also critical sources of incomes. In Bangladesh, Indonesia, the Philippines, Thailand, and Viet Nam, more than 1.5 million people work in small-scale fisheries. One study estimated that, in the People’s Republic of China and the Philippines alone, investing in climate-resilient coastlines saves an estimated 2,000 lives and $200 billion annually by preventing floods. By avoiding conventional seawalls and instead adopting climate-friendly approaches to contain surges and floods, we safeguard economies and protect jobs.

ADB can build from its strong balance sheet and high credit rating to pass on competitive lending

Winter 2021-2022 Issue

Small island states such as the Cook Islands face the threat of rising sea levels. Photo: ADB

Each year, extreme weather throughout Asia and the Pacific causes death, destroys infrastructure,

With land barely rising above sea level, islands like Kiribati are in clear, existential peril from climate

and disrupts economies. Photo: ADB

change and rising sea levels. Photo: ADB

rates and longer tenors to help finance such large efforts. We can also use multiple financing instruments, including guarantees, to leverage resources and serve as an important conduit for cofinancing. Ultimately, however, our role is distinguished by a pipeline of bankable climate change projects with upfront due diligence, prefeasibility and other preparatory work. ADB projects evolve through careful structuring to ensure the economic and financial returns generate income, enhance the welfare of ordinary people, and can even attract commercial financing. ADB has committed to increase its own climate finance allocation to $100 billion cumulatively from 2019 to 2030 and to fully align its operations with the Paris Agreement by 2025. At COP26, ADB, with our partners, launched several important initiatives for Asia and the Pacific. One, the Energy Transition Mechanism Southeast Asia Partnership—created with Indonesia and the Philippines—will use publicprivate financing to accelerate the retirement of coal-fired power stations and unlock investments in clean, renewable energy as replacements. Another, the Climate Action Catalyst Fund, will

help developing economies join international carbon markets under the Paris Agreement. These initiatives should result in a faster decarbonisation of the region and ramp up financing to help ADB’s developing member countries meet and exceed their nationally determined contributions. Frameworks and planning of this nature often fails to command centre stage. But each smart initiative — and the thinking and capacity support behind them — shows how the largescale climate operations that we now urgently need throughout Asia and the Pacific will take shape as the decade advances. By approaching each challenge holistically, we will reach our goal of a healthier environment together — with healthier economies to match. i ABOUT THE AUTHOR Bambang Susantono is Vice-President for Knowledge Management and Sustainable Development at the Asian Development Bank. Previously, he was the Acting Minister, and ViceMinister of Transportation of Indonesia, and Deputy Minister for Infrastructure and Regional Development at the Office of Coordinating Ministry for Economic Affairs. CFI.co | Capital Finance International

ABOUT ADB ADB was founded in 1966 and is headquartered in Manila. ADB is composed of 68 members, 49 of which are from Asia and the Pacific. The organisation assists its members and partners by providing loans, technical assistance, grants, equity investments, and knowledge to promote social and economic development. Under its long-term Strategy 2030, ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.

Author: Bambang Susantono

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> Jim O’Neill:

How to Make Decarbonisation Economically Sustainable With all eyes on the United Nations Climate Change Conference (COP26) in Glasgow this month, there has been ample media coverage of youth protests, high-level diplomacy, and new agreements to reduce methane and protect the world’s forests. But no task is more important than making decarbonisation compatible with efforts to foster economic development in neglected parts of the world. If developing economies – and lowerincome people in developed economies – are not brought along, global climate targets will remain out of reach.

eading recent commentaries on this topic, I have found myself reminiscing about the oil crises of the 1970s, which I studied closely as part of my PhD. Among the most stimulating analyses is a policy brief for the Peterson Institute for International Economics by my good friend Jean Pisani-Ferry, who argues that “Climate policy is macroeconomic policy, and the implications will be significant.” He, too, sees many comparisons – as well as key contrasts – to the 1970s oil shock. I have written before about my PhD experience when offering predictions of what might happen to crude-oil prices. I reflect often on those lonely, uncertain three years, because while I was fortunate to be able to undertake such a project, I sometimes suspect that mine was not as worthy as others. Not only did I have extremely poor data to work with, but it was also hard to prove anything. Still, in addition to testing my capacity for independent thought, I learned an invaluable lesson: Never trust anyone when it comes to forecasting oil prices.

Final Thought

Consider the research on the 1970s oil crises that was published at the time (most of which I surveyed as part of my studies, and have kept ever since). The consensus then was that the shocks had ushered in a new era of erratic but persistent increases in oil prices. In fact, the exact opposite happened throughout most of the 1980s and 1990s. The reason for this trend is still not entirely clear. But among the likely explanations are that there was a strong supply response to higher prices in the form of increased investment in oil production and exploration, as well as in alternatives; and a strong demand response,

"We have entered a new era in which the climate crisis, and what it will mean for future generations, is finally receiving the global attention it needs." reflected in improvements in energy efficiency. Japanese energy-consumption patterns since the 1970s provide significant evidence to support this hypothesis. Many of the commentators and policy advisers who are now pushing for a higher carbon tax are hoping to recreate this demand-side scenario without the corresponding movements on the supply side. But as we have seen this year, there is a problem with this approach, because we cannot move from 80% fossil fuels to 0% overnight. Stronger initiatives to discourage or even penalise fossil-fuel production and financing means that there will be less marginal supply of fossil fuels sloshing around. That is precisely the point of such policies. And yet, when there is a demand spike for energy – owing to a strong recovery from a recession, as is happening now – we will need all the energy we can get. Otherwise, there will be price mayhem, with all the social and political instability that entails. The upshot is that policymakers who are already confronting the massive challenge of moving the world away from fossil fuels also must come up with ways to prevent severe oil, gas, and electricity price volatility. One counterintuitive idea is for G20 policymakers – or perhaps all UN member states – to agree on a scheme of expanded oil, gas, and maybe

even coal reserves, on the condition that these reserves would be tapped only in an emergency. For example, the agreed benchmark could be a movement of spot prices by more than two standard deviations away from the 200-day moving average. To be sure, there would be serious challenges to such a scheme. If the reserves aren’t big enough, some bad actor could try to precipitate a supply crisis and then profit massively as a supplier of last resort. But that is all the more reason to agree to a framework that is solid enough – and reserves that are large enough – to forestall any such threat. Moreover, without a global strategic reserve initiative, the spikes in energy price experienced this year could become a new normal, potentially derailing the other agreements that emerge from global climate conferences. We have entered a new era in which the climate crisis, and what it will mean for future generations, is finally receiving the global attention it needs. But we have also entered a period in which policymakers will need to do more to ensure that the benefits of capitalism are more evenly shared. That means sparing developing economies – and lower-income people everywhere – from the turmoil fueled by shocks to global energy prices. Failing that, rich countries’ lofty net-zero commitments, made with the best of intentions, will have been for naught. i ABOUT THE AUTHOR Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK treasury minister, is Chair of Chatham House and a member of the Pan-European Commission on Health and Sustainable Development.

"If the reserves aren’t big enough, some bad actor could try to precipitate a supply crisis and then profit massively as a supplier of last resort."waste and introducing smart metering for home and industrial power and gas consumption." 206

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