The Vontobel Portrait 2012 - Global Change by Bank Vontobel AG

Will the

emerging markets remain the

engine of global economic growth? How can

we feed

nine billion people?

Where will we invest in the

future?

Global

Change Portrait 2012

The Vontobel Group The Vontobel Group combines the expertise of an independent Swiss private bank with the innovative strength of an active international asset manager. Our integrated business model with our three business units Private Banking, Investment Banking and Asset Management ensures close cooperation and allows us to successfully pool our knowledge and resources for the benefit of our clients and business partners. Each day, around 1,500 Vontobel employees worldwide create sustained added value for our clients: they diligently manage and monitor the client assets entrusted to us, while carefully observing the financial markets and interpreting global macroeconomic developments. Whether they are in the heart of Zurich, New York, Hong Kong or Dubai – employees in 19 international locations identify and analyze trends and subsequently create innovative investment strategies and products. The Vontobel Group was first established in Zurich in 1924. The registered shares of Vontobel Holding AG are listed on the SIX Swiss Exchange. Our solid capital position and our stable shareholder structure – reflecting the entrepreneurial, longterm view of our major shareholders – provide our company with strong and secure foundations. The Vontobel families hold a majority of around 52% of votes and capital. At the Vontobel Group, our relationship with our clients and business partners is built on performance and trust. We uphold conservative values and adopt a prudent approach to risk. Solidity, stability and reliability are the principles that guide us in our work.

< Front cover: Street scene in Mumbai, India Stephen Wilkes, Gallerystock India: key figures Area Arable land Population Ø population growth p.a. Population under 15 years Population over 60 years Population in urban areas Registered mobile phones*

3.2 million km2 53% 1.2 billion 1.43% 30.8% 7.5% 30% 545 million

Sources: The Economist, 2012; *UN, 2010

The Vontobel Group Facts and figures as of 31 December 2011

Client assets (in CHF billions)

131.6 82.2

Assets under management 28.5 Private Banking 7.9 Investment Banking 45.8 Asset Management1

41.7 7.7 1

Custody assets Structured products outstanding

excluding assets managed on behalf of other segments

Shareholders’ equity (in CHF billions)

1.5

BIS tier 1 capital ratio (in %)

23.3

Net new money in 2011 (in CHF billions)

8.2

Moody’s rating Bank Vontobel AG: A1 Standard & Poor’s rating Bank Vontobel AG: A+

Further information: www.vontobel.com

Dear reader

Francis Bacon was a shrewd observer of the world around him. In his essay ‘Of Innovations’, the English philosopher and statesman wrote: “He that will not apply new remedies must expect new evils.” In 1625, Bacon had thus already recognized that time is a great innovator and a powerful driver of change. The passage of time alone is a source of transformation – even if man does not act and leaves nature untouched. However, men are not inactive. Society and the state are not inactive. And companies that are exposed to competition are most definitely not inactive. This is certainly true of the Vontobel Group: in today’s rapidly evolving world, we are entirely committed to delivering our expertise to our clients day after day and to demonstrating that we understand the process of change that is happening all around us. The high level of trust that clients place in us confirms that we are on the right track. At a time when once well-established rival firms within the finance industry have collapsed or are being integrated into their parent company, the Vontobel Group is there to support you as a strong and independent partner. Reliability and stability are the hallmarks of our company. These are values that can no longer be taken for granted today; values that are now experiencing a renaissance. The extent to which they are sought by clients is reflected by the performance of our business: in 2011, clients entrusted over CHF 8.2 billion of new money to our bank. Particularly pleasing is the fact that these assets originated not only from Europe but also increasingly from growth markets in the Middle East and Asia.

uncertainty – driving people onto the streets in some countries or propelling them towards new industries or lines of work that didn’t exist yesterday. Global change has many facets. In the Vontobel Portrait 2012, we take a closer look at several aspects of this phenomenon. Three renowned academics provide us with their own perspectives on global change. The British economic historian Niall Ferguson takes a critical look at the failings and shortcomings of Western society. The economist Jagdish Bhagwati has been an eloquent defender of global change for many years: he states that without change, emerging economies would have significantly fewer chances and development opportunities. Despite the evident shift in power from West to East, Bhagwati believes that economic growth in China and India will encounter certain limits and that the fear and panic with which both Asian giants are regarded in the West is unfounded. Meanwhile, Professor Nina Buchmann from the Swiss Federal Institute of Technology (ETH) in Zurich examines the enormous challenges facing the world if we are to secure the supply of food for all its inhabitants.

We are all witnesses to the momentous processes of change that are having an increasing impact on all areas of life. They are being driven by demographic developments, climate change, the scarcity of resources and the shift in economic centres of power. Global change is occurring everywhere. In many cases, it gives rise to feelings of

Global change is influencing countries, economies, companies and households. Consequently, the financial world is also being affected – and to a significant extent. Global change is finding its way into every portfolio and has thus become a decisive factor that needs to be taken into account in investment strategies and decisions. It is precisely in this area that our clients can turn to us. At Bank Vontobel, our specialists in the fields of research, investment processes and advisory have long been analyzing these developments and creating strategies and solutions for our clients to show how the significant opportunities, as well as the risks, arising from global change – with all its implications – can be applied in the area of wealth and asset management. Here, our focus is on exploiting opportunities and controlling risks.

Herbert J. Scheidt Chairman of the Board of Directors

Dr. Zeno Staub Chief Executive Officer Vontobel Portrait 2012

Contents

6 10

Prof. Niall Ferguson Historical perspectives on future prospects.

Marine power plants – the new green wave.

Dr. Zeno Staub We must free ourselves from our Eurocentric views.

Georg von Wattenwyl Structured products – harnessing opportunities created by global change.

Prof. Jagdish Bhagwati The misplaced fear of the East in the West.

Rajiv Jain We are not bargain hunters.

Christophe Bernard Global change – a megatrend with implications for investment portfolios.

Vertical farming – growing crops in a skyscraper.

Prof. Nina Buchmann Feeding the world remains a major challenge.

Sabine Döbeli Sustainability is about actively assuming responsibility.

Christophe Grünig Protecting assets, controlling risks and seizing opportunities.

‘Natur konkret’ – reclaiming alpine pastures.

Daniel Bruderer Global change is also visible in investment portfolios.

u-blox – Swiss expertise, world-class ideas.

Global change infographics Our changing world.

Dr. Hans Vontobel ‘Panta rhei.’

Vontobel Portrait 2012

“Preserving

traditions,

embracing

change.”

Herbert J. Scheidt Chairman of the Board of Directors What conclusions will historians and economists draw when they look back one day at the events now unfolding? Did the Eurozone debt crisis mark the end of the single currency? Will eminent economists see it as the prelude to the creation of a strong fiscal or even political core union? Were the domestic political woes and severe economic challenges facing the US a precursor to the accelerated weakening of its status as the dominant world power? Or was the US merely experiencing a brief lull in vitality and confidence before returning even stronger than before to display economic and political defiance in the face of China’s growing might? We do not yet know the answers to these questions. It is, however, important for us to closely monitor and analyze the rate and intensity of these developments – including in the context of global change. The ‘too big to fail’ problem is a key issue for our industry and the economy. The big banks have used this topic to set the pace during the financial and credit crisis. But how has the Vontobel Group fared during these challenging times in its capacity as a medium-sized Swiss financial institution with a strong family shareholder base? If we take a critical look at our company, our findings confirm to us that we are moving in the right direction in many ways. First, we operate according to a conservative set of values – without this impacting on our innovative strength or professional risk policy. Second, the size of our company means that we are compelled to remain close to the market and to permanently scrutinize our actions. We constantly ask ourselves whether we are doing the right thing and acting in the best interests of our clients and shareholders. People are always at the centre of our thoughts and actions. At the same time, we must strive to achieve a balance between the need to preserve proven traditions and the need to embrace change. These may seem like contradictory goals but Vontobel can deliver on them day after day through our ‘Global Change’ initiative. <

Herbert J. Scheidt has been Chairman of the Board of Directors of the Vontobel Group since 2011. He served as the company’s Chief Executive Officer from 2002 to 2011. Prior to this, he held various international management positions at Deutsche Bank over a period of two decades. After graduating from high school, Herbert J. Scheidt trained in business management before completing an M.A. in Economics at the University of Sussex and an MBA at New York University.

Vontobel Portrait 2012

Historical perspectives on future prospects. Niall Ferguson The British historian Niall Ferguson currently holds the professorship of History and Economics at Harvard University. He is also a member of the Minda de Gunzburg Center for European Studies and teaches at Oxford and Stanford University.

Prof. Niall Ferguson We are living today through the end of that ‘Great Divergence’ between the West and the Rest which began over five hundred years ago. Thirty-five years ago, the average German was roughly 15 times richer than the average Chinese. Today the ratio is less than 3 to 1. Back in 1980, the Chinese economy accounted for just 2.2% of global economic output, one-third the size of Germany’s share. By 2016, according to the International Monetary Fund, the Chinese share will be 18%, six times larger than Germany’s. Indeed, in that year China will become the biggest economy in the world, overtaking even the mighty US on the basis of purchasing power parity. While the West stalls, China’s growth rate is around 8 or 9%. Industrial production is growing at an annual rate of 15%. Capital investment in dollar terms is now greater in China than in the US. And in 2010, the value of initial public offerings on Chinese stock markets exceeded that of IPOs in New York by a factor of 3.5. The social consequences of this economic miracle are also deeply impressive. According to Credit Suisse, a third of the Chinese population now have wealth of between USD 10,000 and USD 100,000, compared with less than 7% of Indians. More than 17 million Chinese have wealth above USD 100,000. There are 800,000 millionaires here and 65 billionaires. We are living through a truly extraordinary reversal of economic fortunes – a break with nearly half a millennium of history. In my recent book ‘Civilization: The West and the Rest’, I argued that after 1500 the West first surged ahead of the Rest – including China – thanks to a series of institutional innovations that I call the ‘killer applications’:

Vontobel Portrait 2012

1. Competition. Europe was politically fragmented into multiple monarchies and republics, which were in turn internally divided into competing corporate entities, among them the ancestors of modern business corporations. 2. The Scientific Revolution. All the major 17th-century breakthroughs in mathematics, astronomy, physics, chemistry and biology happened in Western Europe. 3. The Rule of Law and Representative Government. An optimal system of social and political order emerged in the English-speaking world, based on private property rights and the representation of property owners in elected legislatures. 4. Modern Medicine. Nearly all the major 19th- and 20th-century breakthroughs in healthcare, which more than doubled life expectancy, were made by Western Europeans and North Americans. 5. The Consumer Society. The Industrial Revolution took place where there was both a supply of productivityenhancing technologies and a demand for more, better, and cheaper goods, beginning with cotton garments. 6. The Work Ethic. Westerners were the first people in the world to combine more extensive and intensive labour with higher savings rates, permitting sustained capital accumulation. For hundreds of years, these killer apps were essentially monopolized by Europeans and their overseas cousins in North America and Australasia. Westerners not only grew richer than ‘Resterners’. They grew taller, healthier, and longerlived. They also grew more powerful. Beginning with Japan, however, one non-Western society after another has worked out that these apps can be downloaded and installed in nonWestern operating systems. That explains about half the catching up that we have witnessed in our lifetimes, especially since the onset of economic reforms in China in 1978.

“Western

predominance is

ending

in our time.”

Niall Ferguson

Vontobel Portrait 2012

Niall Ferguson

The rule of law? Many Americans confidently assume that they still have the best legal system in the world, offering entrepreneurs, investors and consumers the best possible protections. But this is largely contradicted by the latest World Economic Forum (WEF) Executive Opinion Survey, which covers 16 measures of the efficacy of the legal system, ranging from the protection of private property rights to the policing of corruption and the control of organized crime. It is an astonishing yet scarcely acknowledged fact that in no fewer than 15 out of 16 different areas, the US now fares markedly worse than Hong Kong. Indeed, the US makes the global top-20 in only one area: investor protection. On every other count, its reputation is shockingly bad. True, the People’s Republic of China still lags behind the US in most areas. But not in all. And Taiwan leads the US on 10 out of 16 counts. The only consolation for American legislators, lawyers and law enforcers is that many other Western countries are even worse, especially in Southern Europe. What about science? The latest statistics from the World Intellectual Property Organization show the continuation of a trend identified in ‘Civilization’. If measured by the number of international patents granted – admittedly an imperfect measure – the West’s lead is rapidly being eroded. As I predicted, China did in fact overtake Germany in 2009. Finally, there is competition, the original killer app that sent the fragmented West down a completely different path from monolithic imperial China. Helpfully, the WEF has conducted a comprehensive Global Competitiveness survey every year for more than 30 years. Since the current methodology was adopted in 2004, the US’ average competitiveness score has fallen from 5.82 to 5.43, one of the steepest declines among developed economies. China’s score, meanwhile, has leapt up from 4.29 to 4.90. Many Americans continue to believe – even after the death of Apple Chief Executive Steve Jobs – that the future will be, like an iPhone, ‘designed in California’ and only ‘assembled in China’. They are wrong. Western predominance

Vontobel Portrait 2012

Workers at a textile factory in China.

Ask yourself: who has got the work ethic now? The average South Korean works nearly 40% more hours per year than the average American. The school year in South Korea is 220 days long, compared with 180 days in the US. The consumer society? Did you know that 26 of the 30 biggest shopping malls in the world are now in emerging markets, mostly in Asia? Only three are in the US. Modern medicine? Well, the US certainly still leads the world in one respect: it spends three times the share of gross domestic product that China spends on healthcare (and twice what Japan spends). But the results in terms of public health are certainly not three times better.

The other half is explained by Westerners’ tendency to delete the secrets of their own success.

“Capital investment in dollar terms is already greater in China than in the US.”

is ending in our time – and it is ending not just because the rest of the world finally figured out how to download the West’s killer apps. It is ending because Westerners either failed to update them – or chose to delete them. According to some commentators, however, what we are really witnessing is a contest between two alternative institutional models: market capitalism and state capitalism. In ‘The End of the Free Market’, Ian Bremmer argues that authoritarian governments all over the world have “invented something new: state capitalism”. For Bremmer, state capitalism poses a grave ‘threat’ not only to the free market model, but also to democracy in the developing world. I believe that this is an unhelpful over-simplification. The reality is that most countries in the world are arranged along a spectrum where both the intent and the extent of state intervention in the economy vary. The question today is not whether the state or the market should be in charge. The real question is which countries’ laws and institutions are best, not only at achieving rapid economic growth but also, equally importantly, at distributing the fruits of growth in a way that citizens deem to be just. As recently as 40 years ago, the answer was clear. Western countries were better than non-Western. In terms of both economic efficiency and social justice, the institutions of Western civilization were markedly superior. This is no longer the case. Let us begin by asking a simple question that can be answered with empirical data. Where in the world is the role of the state greatest in economic life, and where is it smallest? The IMF publishes data for general government total expenditure as a percentage of GDP. The figure for China (2009) was 23%, down from around 28% 30 years ago. By this measure, China ranks 147th out of 183 countries for which data are available. Germany ranks 24th, with government spending accounting for 48% of GDP. The US is at number 44 – coincidentally on 44% of GDP. By this measure, state capitalism is a European, not an Asian phenomenon: Denmark, France, Finland, Belgium, Sweden, Austria, Greece, Italy, the Netherlands, Hungary and Portugal all have higher government spending relative to GDP than Germany. The Danish figure is 58%, more than twice the Chinese figure.

to 21% of China’s GDP in 2008, among the highest figures in the world, reflecting the still leading role that government plays in infrastructure investment. The equivalent figures for developed Western countries are vanishingly small; in the West the state is a spendthrift, not an investor, borrowing money to pay for goods and services. The implications are clear. If we are to understand the changing relationship between governments and economies in the world today, we must eschew crude generalizations about ‘state capitalism’, a term which is really not much more valuable today than the old Marxist-Leninist concept of ‘state monopoly capitalism’. We are all state capitalists now (apart, perhaps, from in Wenzhou). Indeed, we have been for over a century, ever since the modern state began its steady growth in the late 19th century and the German ‘national economist’ Adolf Wagner formulated his law of rising state expenditures. But there are myriad forms of state capitalism, from the enlightened autocracy of Singapore to the dysfunctional tyranny of Zimbabwe; from the egalitarian nanny state of Denmark to the libertarian paradise that is Texas. The real contest of our time is not between a statecapitalist China and a market-capitalist America, with Europe somewhere in the middle. It is a contest that goes on within all three regions as we all struggle to strike the right balance between the economic institutions that generate wealth and the political institutions that regulate and redistribute it, while minimizing the kind of rent-seeking behavior – ‘corruption’ in all its shapes and forms – that tends to arise wherever the public and private sectors meet. <

The results are similar if one focuses on government consumption, in other words the share of GDP that is accounted for by government purchases of goods and services as opposed to transfers or investment. Again, it is the Europeans whose states play the biggest role in the economy as buyers: Denmark (27%) is far ahead of Germany (18%). The US is on 17%. China is on 13%. For Hong Kong the figure is 8%, for Macau 7%. The only respect in which the Chinese lead Western states is in the enormous share of gross fixed capital formation accounted for by the public sector. According to data from the World Bank, this amounted

Vontobel Portrait 2012

â&#x20AC;&#x153;We all struggle to strike the right balance between the economic institutions that generate wealth and the political institutions that regulate and redistribute it.â&#x20AC;? Niall Ferguson

Bridge over the port of Hong Kong, China.

Growth in gross domestic product in 2010 10%

China

India

Brazil

Germany, Japan, Russia

US, Switzerland

The growth in Chinaâ&#x20AC;&#x2122;s gross domestic product was more than three times higher than that of the US in 2010. Source: Vontobel Research, 2012

Per capita income Gross national income per capita in USD (measured at purchasing power parity exchange rates). Source: World Bank, 2010 (GNI p.c. PPP)

Switzerland

USD 50,170

USD 47,360

Germany

USD 37,950

Japan

USD 34,640

Russia

USD 19,190

Brazil

USD 11,000

China

India

USD 3,550

ÂŠ Tom Nagy, Gallerystock

USD 7,640

“Global

change

generates more

opportunities than risks.”

Dr. Zeno Staub has been CEO of the Vontobel Group since 2011. He previously held the post of CFO before being appointed Head of Investment Banking and later Head of Asset Management at Vontobel. Zeno Staub studied Economics at the University of St. Gallen, where he also completed a doctorate. He wrote his doctoral thesis under the guidance of Professor Heinz Zimmermann on the topic ‘Managing complex interest rate risks with derivative instruments – application of the value at risk concept’.

Vontobel Portrait 2012

We must free ourselves from our Eurocentric views.

Dr. Zeno Staub Chief Executive Officer The world is evolving more and more rapidly. What is your view of the major global changes that are occurring today? For a long time, the world developed in a linear, stable and predictable manner. This was largely due to the existence of two centres of power – in the West and East. This clear bipolar world order meant that we had a fairly good idea of what was right and wrong. Today, however, we are confronted with an open, multipolar system. When I was a student, economists always differentiated between risk and uncertainty. The distinction between these two concepts always seemed difficult to grasp in practice. I now understand the difference all too well, since it plays a critical role in today’s world. ‘Risk’ represents elements that can be described and analyzed adequately using models – distribution models and evaluation models. In contrast, ‘uncertainty’ denotes those elements that we cannot describe or evaluate because there are no parameters to quantify them. Does this mean that we have reached the limits of certainty? In certain respects, yes absolutely. Risks existed in the old world but it was possible to plan and control them. However, the mounting uncertainties we face in today’s world have left many politicians, business leaders and members of society in a state of

perplexity. Gideon Rachman, Chief Foreign Affairs Columnist at the Financial Times, once observed: Previous generations have, since 1945, lived in a world that grew continuously better. The economy was always improving. In the West, we gained greater freedom and became more affluent. The competition between the different regimes already appeared to have been decided. This all changed virtually overnight with the financial crisis of 2007 and 2008.

Many people, especially in Europe, fear globalization. Have you heard any positive views about the process of global change? Yes, quite often in fact – especially in Asia, where people clearly recognize the advantages of globalization. Individuals who are convinced of the benefits of free competition – in terms of ideas, goods and services – are firm advocates of globalization. They know that it generates added value at an aggregate level.

In global terms, what do you regard as the greatest challenges facing different countries and societies? I am convinced that in Switzerland, we must free ourselves from our predominantly Eurocentric views. It is essential to think and act globally. European history began around 2,500 years ago with the defeat of the Persians by the Greeks. At the time, the West stood firm against the emerging Eastern powers despite the fact that Persia was much stronger. Following these decisive events, the West increased its dominance little by little.

Have we forgotten this in the West? We have lost sight of a few things. The prosperity currently enjoyed in the West didn’t materialize overnight. It developed over centuries as a result of the West’s economic dominance over the East. There are two reasons why the West’s supremacy is now being undermined. The first is the excessive redistribution of wealth that is programmed into our system. And second, we have started to not only enjoy the fruits of our productivity but to also erode its very substance. At the same time, we are seeing a major shift in the economic balance of power from West to East. This means that the comparative advantages for our economies are declining continuously.

Do you think we have reached another turning point? To some extent, yes. However, it is no longer necessary for the East – China, India and other aspiring Asian countries – to wage a war against the West. Their economic power is enough to give them a strong voice in the international arena and to enable them to assert their own interests wherever it counts.

In which areas is the hegemony of the West disappearing? Examples are technology, innovation, systems engineering and science in general – in fact, all the areas that are important for the economy. The countries and regions that are now catching

Vontobel Portrait 2012

up with the West are performing very well because their workforce displays a level of commitment that has long been absent in the West. If people in Asia are willing to work for a quarter of the salaries paid here in Europe, to live in very small homes and to spend at least one or two hours travelling to work each day, it will become increasingly difficult for the West to remain competitive.

Will the process of global change create any new opportunities? Global change will actually generate a host of opportunities – including for investors. It is definitely one of the key theme for the coming years. Returns are always linked to changes. Investment opportunities only arise where changes occur – and we want to systematically exploit these developments.

to have an even more targeted focus. In the past, many international clients simply wanted to entrust their assets to a Swiss bank. Today, the same clients are seeking highly specialized services that are ideally tailored to their needs. At Vontobel, we are therefore committed to pursuing a distinctive, focused approach and to achieving excellence in all that we do. These are the challenges that we have set ourselves.

Which factors do you consider most important for the growth of prosperity? Unless we take action, it will be impossible to maintain our current standard of living in the West. We need to address four factors – demographics, indebtedness, social security and competitiveness – in order to restore the stability of the system as a whole. Only then will we be able to achieve moderate growth and to create genuine opportunities for people who have no such chances today.

How optimistic are you about the implications of global change for Switzerland? Switzerland will be able to benefit from global change if it sets the right priorities. This applies both to the protection of individual financial privacy and to competitiveness. Our country is in a special position on three counts: first, our economy has an above-average dependency on exports. Second, Switzerland has a very high level of prosperity. And third, we have a different political system to the rest

Is ‘Swissness’ no longer important? Swiss quality is still important and is a valuable distinguishing factor in the global marketplace but it is now more of an added benefit than a core element of our offering. Advisory and investment expertise and product and service quality are our priorities. ‘Swissness’ is, however, still synonymous with reliability, legal certainty, a separate currency and a high level of continuity in client service.

“An uncompromising level of global competitiveness is the key to our future prosperity.” Which areas would you focus on personally? I believe that the most pressing issue is the reduction of primary deficits. This is not to be confused with straightforward deficit reduction. It is only once primary deficits have been cut decisively that we will be able to halt the downward spiral. Another important aspect is the enhancement of our competitiveness. This means that we will all have to work longer and harder in the future. At the same time, social security systems need to be trimmed back and reduced to their core function. Anyone who focuses exclusively on cutting government debt without tackling other issues will not achieve success in the long term.

Vontobel Portrait 2012

of Europe. An uncompromising level of global competitiveness is the key to our future prosperity. We need to be much better than other nations if we want to retain our independence. A forward-looking strategy is the only solution for our country. The finance industry has been in turmoil since the financial crisis of 2008. How has the Vontobel Group addressed these developments? Our company focuses on wealth and asset management as well as on selected areas of investment banking. The financial crisis has reinforced our belief in our conservative system of values. At the same time, however, it has shown that our business models need

What importance, if any, will bank client confidentiality have in the future? I would like to make one thing clear: Switzerland has not abandoned its banking confidentiality regime, even if other countries would welcome this move. Switzerland still upholds values that are no longer considered important in some western countries. Interestingly, these are the same values that are still assigned great importance in Asia. I am referring here to aspects such as age, experience, family and discretion, to name but a few. The people who have played down the importance of these values in our region of the world are claiming that the future belongs to Asia. I think that sounds like a contradiction. Vontobel wants to integrate the theme ‘global change’ into every stage of the value chain in Private Banking. What does this mean exactly? As a bank, we have undergone a painful process in recent years together with our clients. However, this process has also provided us with new knowledge and insights. We know all about the relationship between East

and West, which is fraught with tension, and about the resulting scarcity of resources and demographic change. Value chains are growing shorter and no longer entail a diversion via northern countries. It is precisely these developments, which are driven by global change, that we have gradually incorporated into our portfolios and advisory processes.

“We will all have to work longer and harder in the future.”

How can your clients mirror the process of change in their portfolios? We consider it our core responsibility to preserve the assets that clients entrust to us and to help grow their wealth wherever possible. Here, the investment horizon often goes beyond a single generation and extends far into the future – in the case of both private and institutional clients. In the past, it was relatively simple to deliver on this mandate. In today’s multipolar world, this has become a much more complex undertaking. Global Change is part of our response. <

Dr. Zeno Staub

Vontobel Portrait 2012

The misplaced fear of the East in the West. Prof. Jagdish Bhagwati Rudyard Kipling wrote in ‘The Ballad of East and West’: “Oh, East is East, and West is West, and never the twain shall meet.” Yet, in our own time, as India and China have reformed their policies and accelerated their growth rates dramatically in the last quarter of a century, the twain have already met in the critical economic race of growth, which affects international economic and political relations. Indeed, the giants that were supposed to awaken after the 2nd World War, continued to snore until the 1980s, only to finally wake up and begin to grow faster. In fact, in an irony, Kipling may well have been re-validated by now since the divide between the East and the West has re-opened in reverse because the East has hugely overtaken the West through its remarkable economic performance: the twin giants have taken gigantic steps. Inevitably, the result has been panic in the US which sees a transfer of hegemony to a fearsome, authoritarian and muscle-flexing China (though not to the more agreeable, non-threatening and democratic India even though it is almost equally large in population and in territory, and besides has enjoyed very high growth rates just short of China’s two digits since the reforms starting in 1991). The situation is reminiscent of the recovery and meteoric rise of Japan in the postwar period so that Japan had almost overtaken the US in economic size by the 1980s. This had led to what I called then the ‘diminished giant syndrome’, a defeatist sense that the 21st century would be Japan’s just as the 20th century was America’s and the 19th century had been Britain’s. Just as I had predicted, when I characterized the panic as a ‘syndrome’ rather than objectively justified, the Japanese threat vanished when the bubble burst and Japan entered a decade of malaise, with growth averaging about 1% a year. Some threat Japan turned out to be! While there is no shortage of pundits and media commentators who extrapolate the continued rise of both China and India into the future, and many predict a resulting transfer of hegemony from the US to China with much anguish and international discord, there are plenty of reasons to draw back from such a stark scenario. Nor, for that matter, are many of the fears of these two Asian giants, in terms of what it implies for Western prospects

Vontobel Portrait 2012

for gains from trade, justified: we can confidently expect to undertake mutually-profitable trade with these, as with other lesser nations. Realism necessary on growth rates in China and India The high growth rates for both China and India cannot be expected to continue, but for different reasons. For China, the extraordinary growth rates in double digits have occurred because of abundant labour in conjunction with the export-oriented developmental strategy. The ‘export platform’ provided by the Guangdong provinces led to a tremendous increase in the demand for labour which was filled by the surplus population in the area. When labour is abundant, growth will be greater because labour, in economists’ jargon, is a ‘slack’ variable. But now, thanks to the one-child policy and the exhaustion of surplus labour in these provinces, labour is getting scarce and wages are rising. Labour benefits now, not because growth offers employment to underemployed workers, but by increasing the wages of employed labour. Growth then cannot be as high. China is then going to have to build a lot of expensive infrastructure to bring in workers from the hinterland. But there are problems that arise both internally and externally from China’s authoritarian politics. Without the rule of law, a free press, democratic politics and a vibrant civil society, the roused aspirations of the Chinese people for increased economic benefits and political rights spill over into numerous and growing ‘social disruptions’. The regime also remains unpredictable in its orientation; few can predict who will succeed whom and what their

Jagdish Bhagwati The Indian economist Jagdish Bhagwati is Professor of Economics and Law at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations in New York.

“The high

growth rates for Asia

cannot

be expected to

continue.”

Jagdish Bhagwati

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responses to growing demands from the Chinese society will be. As the Sovietologist Padma Desai, reflecting her knowledge of what had happened when Stalin had died, once remarked years ago when she was asked what would happen in China: “It would depend on whether Mao Zedong dies first or Chou En-Lai does!” Will the leaders today accommodate these demands or will they crack down as at Tianmen Square? If the latter, chaos could affect the economy badly. Prospects for future Chinese economic performance therefore remain under a question mark. Then again, China’s authoritarian structure undermines her growth prospects through her inability to exploit the synergies and huge growth potential obtained through software in a world transformed by Bill Gates, Steve Jobs and the IT innovators. Communist systems abhor software as it undermines their control. PC (personal computer) and CP (communist party) are incompatible. The Communist Party has also made corruption all-pervasive, as the Financial Times journalist Richard McGregor has beautifully documented in his prize-winning 2010 book ‘The Party: The Secret World of China’s Communist Rulers’. The Party functionaries put their and their families’ fingers in every pie. This is what I call ‘profit-sharing’ corruption which is less damaging than ‘rent-creating’ corruption as in Indonesia and pre-reforms in India where monopolies were created and their profits (which economists call ‘rents’) were handed over to brothers-in-law and cronies. But, in the long run which has already arrived in China, resentment of Chinese corruption has become widespread, leading again to potential disruption of the system that led to unparalleled growth earlier.

even occasional roadblocks, to successful export and hence economic performance. In the end, China’s main problem is similar to that of Japan in the 1930s. At the time, Japan was a major exporter of several labour-intensive goods like hurricane lanterns, pencils and apparel. These caused foreign sectors to feel the heat of fierce competition. Japan became known for its ‘one dollar blouses’. This was also the time when the phrase ‘yellow peril’ entered common parlance. The problem was that Japan was growing fast and had a high trade intensity, and foreign countries found it hard to accommodate Japan in trade. I have called it the problem of Gulliver in a Lilliputian world economy. Today, China is just that, with a much higher growth rate and higher trade intensity, and the world finds it hard to accommodate it. Moreover, unlike Japan in the 1930s, where only (specific) Japanese exports made it a Gulliver, China also imports masses of raw materials which then cause difficulties for foreign industries using these same materials. So, China is a double Gulliver, both in its exports and its imports. The proper way to accommodate this oversized Gulliver will involve adjustment assistance programs, and related institutional changes, in the West and elsewhere. As for India, the prospect of it accelerating closer to the Chinese two-digit growth rate of recent years is not bright. While democracy is India’s strength, it is also a weakness when it slows the pace at which reforms, still incomplete, are pushed forward. So, while there is no danger of reversal of the reforms which have brought both accelerated growth and reduced poverty, it is hard to see where further acceleration of growth in India will come from.

Externally, on the other hand, the lack of democracy, and the suppression of dissent, imply that the regime is anathema to human rights activists worldwide. This also means that Western governments will be increasingly under pressure from Western civil society to disrupt Chinese exports which they regard as ‘illegitimate’, thus undermining steadily China’s ability to sustain a substantial presence in international markets. In fact, even if China shifts inwards and reduces its reliance on exports, it will still remain a major exporter and vulnerable to attacks on its trade, particularly exports.

Growth rates in the East are no threat to the West In any event, the high growth rates in India and China in the East are not an economic threat to the US and the European Union in the West. Permit me to refute two common errors in this regard. One arises from the superficially persuasive thought that, if India and China develop skills and capital, they would be growing similar in ‘factor endowments’ to the developed West. If so, they would produce goods that the West produces and exports. So, the prices of Western exports would fall and the West would be harmed.

There is already a steady drum-beat in the US Senate of strident complaints against China’s exchange rate policy, for example. More effectively, China also finds itself at the receiving end of complaints before the WTO Dispute Settlement Mechanism. It already lost a major case in July on its actions to prohibit the export of raw materials, rareearths in particular; and seven solar firms have combined to file an anti-dumping complaint with the US government, seeking US action against exports of solar panels by China. More will undoubtedly follow, posing continuous pinpricks,

But this is outdated thinking. As countries become similar, trade in ‘similar products’, or what is also called trade in variety, breaks out. Just walk down Madison Avenue in New York and you will see trade in variety in men’s fashions with Giorgio Armani, Calvin Klein, Kenzo, Pierre Cardin, Christian Dior and Ralph Lauren, all in business cheek by jowl (and incidentally none of them seeks protection). My student Robert Feenstra and my colleague David Weinstein have calculated the gains from variety, which occurs typically between developed countries, and they are huge.

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In short, the fears that the rise of the East spells doom for the West are exaggerated, at minimum, and erroneous, at best. Whether we can dispel these fears is an open question. The Russians have a proverb: fear has big eyes. I am afraid that it may also have deaf ears. <

Jagdish Bhagwati

Louis Vuitton promotes its luxury products in Shanghai with larger-than-life advertisements.

Again, many fear out-sourcing of services to India. But this is a bogeyman. Here, there is increasing two-way trade: services are out-sourced and in-sourced into the US, for example. Again, the out-sourcing of some component services like backroom operations makes a firm more competitive; out-sourcing 10,000 such jobs may save the entire firm with its 100,000 jobs. Then again, the high cost of supplying a service means that that job would be gone from the US even if it was a closed economy like the Garden of Eden. But because India has lower wages, that job is viable there and comes up even as the same job in the US disappears. The inference that the job has been outsourced to India by wicked and greedy American businessmen is then totally wrong.

“As countries become similar, trade in ‘similar products’ breaks out.”

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â&#x20AC;&#x153;We can confidently expect to undertake mutually profitable trade with the two Asian giants, as with other lesser nations.â&#x20AC;? Jagdish Bhagwati

Mother and child waiting in Terminal 3 of Beijing International Airport.

ÂŠ Stephen Wilkes, Gallerystock

Global change – a megatrend with implications for investment portfolios. Christophe Bernard Chief Strategist of the Vontobel Group In periods of low interest rates, high volatility and strong correlations across asset classes, it is vital to understand the factors driving global change. A portfolio that benefits from global trends is a prerequisite for the generation of stable and positive returns. Understandably, there is some nostalgia for the ’golden age’ of investing between 1982 and 2007, when the returns generated in the equity, fixed income and real estate markets far exceeded the rate of inflation. However, this phase – which was shaped by globalization, economic stability, the growing acceptance of capitalism and record corporate earnings – came to an abrupt end in 2008. The very factors that had allowed this megatrend to develop proved unsustainable. One of the most striking aspects of the 25-year boom was the economic stability that accompanied it. Thanks to the disinflationary impact of globalization, central banks were able to stimulate the economy at will without compromising their mandate to combat inflation. When the dotcom bubble burst in 2000, the US Federal Reserve (Fed) immediately cut key interest rates to avoid a deeper recession – laying the groundwork for a bubble in the real estate and credit markets. These actions encouraged growing levels of debt which, in turn, smoothed the economic cycle by artificially boosting growth. As a result, the US recorded only 16 months of recession between 1982 and 2007. This is equivalent to around 5% of this period, compared to the occurrence of recessions during 35% of the period from 1854 to 1982. Unfavorable demographic factors The demand for assets is determined to a significant extent by the proportion of prime actives relative to the number of dependants within a country. In industrialized nations, the size of the economically active generation is constantly decreasing relative to the proportion of the population

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that is of retirement age: in Japan, it has been decreasing since 1990, and in Europe and the US since 2010. In China, the proportion of prime actives relative to the number of dependants is expected to start declining from 2015. In most emerging markets, increasing numbers of young people are entering the labour market but this is not enough to compensate for the unfavourable age structure in industrialized nations. As a result of this demographic trend, pension schemes that were established at a time when factors such as life expectancy and the cost of ageing were fundamentally different will come under mounting pressure. A few countries began adapting their pension systems after the 2008 crisis but further unpopular reforms are now needed – posing a real challenge for democracies where the election cycle does not coincide with the timeframe for such reforms. Money market investments with zero interest rates Industrialized nations have pushed their debt levels to the limits of what is sustainable – or have gone beyond them in some cases. Consequently, they are unable to further increase government spending to avert an economic downturn. The US Fed, the Bank of England, the Bank of Japan and the European Central Bank have all helped to mitigate the fallout from the 2008 crisis by reducing interest rates to zero. When this measure also proved insufficient, they resorted to unconventional monetary policy measures such as quantitative easing or long-term bank refinancing operations. This leaves them with little – if any – firepower in the event of external shocks like a surge in oil prices. Scenario analysis as well as portfolio construction should take the economic cycle and factors such as shorter durations and higher volatility into consideration. ’Buy and hold’ strategies are unlikely to be successful in the future. What is the value of savings if short-term interest rates are at zero for the foreseeable future? What is the attractiveness of long-term government bonds yielding below 2% with inflation running at or above 2% and central banks promoting policies which might eventually result in higher inflation?

“The nostalgia for the ‘golden age’ of investing is understandable.” The current situation poses a major challenge for wealth preservation – not to mention the growth of wealth in real terms. We are currently witnessing a shift in economic momentum towards Asia – a powerhouse that accounts for two-thirds of global economic growth. Population growth coupled with a rising standard of living is leading to higher consumption of commodities while supply remains tight. The identification of such trends is a prerequisite to achieve positive investment returns. However, this alone is not enough: one needs to evaluate which economic agents are the true beneficiaries of rising commodity prices – it may not be mining companies but rather manufacturers of mining equipment or countries that are altering tax regimes to capture a higher portion of commodity revenues. Our core investment beliefs As an independent, globally active private bank, Vontobel is committed to thinking and acting independently. In doing so, we are always focused on one objective: helping our clients, whether private individuals or institutions, to realize their financial goals. To this end, we use our expertise to identify promising trends that will ultimately be reflected in client portfolios. We believe that the current investment environment poses challenges that require more than a ’traditional’ asset mix and portfolio structure. <

Christophe Bernard is Chief Strategist of the Vontobel Group. As Chairman of the Investment Committee, he is responsible for the bank’s investment strategy. Christophe Bernard has over 20 years of investment experience and was previously Chief Investment Officer of Union Bancaire Privée in Geneva and Deutsche Asset Management in Frankfurt.

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Feeding the world remains a major challenge. Nina Buchmann chairs the World Food System Competence Centre at the Swiss Federal Institute of Technology (ETH) Zurich and is Professor of Grassland Sciences at the Institute of Agricultural Sciences. She previously worked at the Max Planck Institute for Biogeochemistry in Jena, where she headed her own research group.

Prof. Nina Buchmann Global change, the world food situation and food security – these three terms have appeared in the media with increasing frequency in recent times. What are the reasons for this? Are these issues interconnected in a way that only becomes apparent at second glance? What is certain is that components of global change – anthropogenic climate change, changes in land usage and the loss of biodiversity – have a direct impact on agricultural production and consequently on the world food situation. The three components and their effects Anthropogenic (man-made) climate change, which is characterized by rising temperatures, changes in precipitation and the more frequent occurrence of extreme events such as droughts, intense rainfall and flooding, reduces the growth of vegetation, increases the spread of pests and disease, and destroys crops before they can be harvested. Changes in land usage have an impact at an earlier stage in the agricultural process – affecting the actual amount of land available for cultivation. The current trend of urbanization, which is closely linked to the continued growth of the global population, creates the need for a sustained increase in the volume of arable land available for agricultural production and/or calls for higher productivity on existing but often degraded land. Both of these factors pose a serious challenge for agriculture. In addition, numerous new land uses have emerged in recent years to rival farming – prompting the question of whether land should be used to cultivate crops for food production or crops for energy generation?

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At the same time, we are witnessing a worrying loss of biodiversity. Many of the resources and processes provided by our ecosystem are dependent on biodiversity. Today, we are already trading in some of these ecosystem services such as agricultural produce or wood. In the case of other ecosystem services, the value of biodiversity will only become apparent in the future – as the basis for medicinal or pharmaceutical products, for example. There are other ecosystem services that we know to exist but don’t actively consider, such as the recycling of nutrients by organisms in the soil, flood and avalanche prevention, or the control of pests. All of these services are essential for the production of food – a fact that is often disregarded by the public. The failure to recognize these aspects is partly attributable to the fact that it is difficult to quantify the global impacts of a loss of biodiversity and the related services in monetary terms. The first estimates appeared around 15 years ago. At the time, it was calculated – albeit subject to significant imponderables – that the value of these ecosystem services is several times higher than the global gross national product! There is another trend that gives grounds for concern regarding the world food situation: a major proportion of the food we eat is increasingly based on only a small number of crops such as corn, rice and wheat. This is unquestionably a move in the wrong direction, which shows that we are failing to exploit the available biodiversity. All three components of global change are interconnected. In the past, declines in biodiversity were mainly caused by changes in land usage – not by climate-related developments. However, an increasing number of reports in

“A

50%

increase in food production is still

not enough.” Nina Buchmann

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Aerial photograph of crops being harvested in Jamestown, North Dakota, US.

“Should we cultivate crops that can be used for food production or crops for energy generation?”

Nina Buchmann

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scientific literature now suggest that the disappearance of various species is driven primarily by climate change. Since organisms are unable to adapt rapidly enough to the new environment, changes in land usage are heightening the problem of climate change and vice versa. Four pillars of food security The urgent question we must answer is therefore: how can we secure the global food supply in future and how can we ensure food security for the growing global population at a time of changing consumer behaviour and evolving environmental parameters? We are faced with an immense challenge: food production needs to increase by 50% by 2050 in order to keep pace with the anticipated growth in the global population. Against this backdrop, it is worth taking a closer look at the four pillars of food security. The first relates to the availability of foodstuffs – mainly comprising agricultural produce and the foods refined by the food industry. The second pillar describes human access to food, including distribution and transportation aspects. The third pillar focuses on the extent to which people can really make use of the food that is available to them, without being prevented by illness or hygiene issues. The fourth pillar concerns stability, i.e. the continuity of supply of foodstuffs despite the high variability of environmental factors and political and environmental influences. All four pillars are interlinked and are affected by the interacting components of global change. This hampers the implementation of solutions to secure the food supply, even before taking food distribution issues and political governance into account.

and socio-economic aspects of this topic, since we require appropriate political and economic structures and conditions if we are to guarantee the fair distribution of adequate quantities of food. Weak or fragile states are rarely in a position to assist in the implementation of solutions but are sometimes powerful enough to obstruct them. Challenges facing global society The core issue from a scientific perspective is how food production can be intensified in a sustainable manner. Here, we must learn lessons from the past and structure future cultivation in a way that makes more efficient use of resources. In other words: we must avoid causing land degradation and we must exploit the broad range of methods and tools that is already available to us today. Furthermore, we must develop interdisciplinary solutions and view agricultural production systems as one integral system in order to simultaneously optimize the use of various resources. At the same time, we will have to focus much more explicitly on land-related aspects to develop suitable cultivation methods for specific regions. For example, we must succeed in making more effective use of water or in enhancing fertility on a long-term basis. We will have to follow new avenues and exploit the functional benefits of biodiversity to deliver intensive and sustainable production. This is all the more critical since we will no longer be able to rely solely on our traditional knowledge to respond effectively to the major changes in our environment in the future. In the end, we must involve all stakeholders – from small-scale farmers through to the modern agro industry – in this process. The challenge that we must overcome is so great that we cannot afford to dispense with any of the expertise available to us. <

Time is running out Ensuring the sustainable use of natural resources is one of the main solutions to the problem of food security. This encompasses the careful use of land, water, biodiversity and energy, as well as the sparing consumption of resources in the production and processing of food. The questions we must ask ourselves are how agricultural production should be structured in the future, where can it be conducted and what role can or must processing take – whether it is to produce fortified or personalized food – to further enhance the quality of food or to take account of health problems. We need to address all of these questions without delay – especially considering that it took many years, if not decades, to cultivate drought-resistant crops, to name just one example. The same can be said of the promulgation of smart agricultural practices. The rejuvenation of degraded land with only limited fertility and/or limited water retention properties can take decades or even centuries. Based on the precautionary principle, it is therefore imperative for us to take action here and now to prepare for the future. At the same time, we must not forget the political

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â&#x20AC;&#x153;Food production needs to increase by 50% by 2050 in order to keep pace with the projected growth in the global population.â&#x20AC;? Nina Buchmann

Women working in paddy fields in Akhori, Unnao, India.

China: the worldâ&#x20AC;&#x2122;s largest rice producer Global rice production totals 456 million tons (mn t); China accounts for 29.9% of this output.

Ch in

Global

6.6 mn t 13

456

Source: The Economist, 2009/2012

29.9% The three largest agricultural producers in USD billions Source: The Economist, 2009/2012

165

India

211

China

516

Agricultural land resources in decline The per capita availability of land (in hectares) that can be used for agricultural purposes is decreasing globally. Source: FAO, 2011

1970: 0.38 ha 2000: 0.23 ha 2050: 0.15 ha

By 2020, the following % of these agricultural products will be used for biofuel production globally. Source: OECD-FAO Agricultural Outlook, 2011

Coarse grain

13%

Vegetable oil

15%

Sugar cane

30%

ÂŠ Panos Pictures, Sanjit Das

Biofuels from agricultural products

Protecting assets, controlling risks and seizing opportunities … Christophe Grünig Head of Wealth Management in Private Banking

“Intelligent investing is about exploiting the potential for returns on a targeted basis.”

We are all witnesses of our time – and, as such, are observing first-hand the way in which the pace of global change is constantly accelerating. For the financial markets, this means that investing will become even more challenging in the future than it already is today. How can we, as wealth managers, respond to these fundamental changes? What are the implications of global change for our clients and business partners?

Effective risk management and real asset protection are our first priority in this period of radical change. We can only achieve this by promptly identifying and avoiding undesirable sources of risk. At Vontobel, intelligent investing is about exploiting the potential for returns in the market on a targeted basis – while always considering the calculated and controlled risks involved. To compensate for fluctuations in value, it is also necessary to diversify investments across different asset classes. Our second priority is to swiftly recognize and seize the genuine opportunities for investors that arise as a result of the momentous processes of change we are seeing. One such example is the shift in the world’s economic centre of gravity from West to East. In addition, our specialists closely monitor the changes that are of significant relevance for future investing. This includes the phenomenon of demographic change, with all of its social implications – but also technology and innovation cycles, climate change and the scarcity of resources.

Christophe Grünig is Head of Wealth Management and a Member of the Investment Committee of the Vontobel Group. He spent ten years as CIO of Harcourt Investment Consulting AG, which specializes in alternative investments.

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In Wealth Management, our clients can count on us to analyze these developments on a daily basis and to respond to them in an opportunistic manner. Our ultimate objective is to consistently exploit the potential for returns of the assets entrusted to us. <

... because global change is also visible in investment portfolios. Daniel Bruderer Head of Product Sales Global Change Investing in Asset Management How can investment opportunities related to global change be exploited? The answer is simple: by building a portfolio of companies with promising business models that also take account of sustainability criteria. Global population growth and rising per capita income are driving up demand for consumer goods and services. At the same time, the availability of resources is becoming scarcer. As well as solving the problem of excess demand using innovative technologies and approaches, our clear objective today must be to mitigate the negative impacts of man’s economic activities on the environment on a long-term basis. Fortunately, both the state and the business community appear to be increasingly aware of this fact.

“We concentrate on quality companies with high standards.”

At the Vontobel Group, the area of Global Change Investing within Asset Management is based on two core concepts. The first is our theme strategies – Clean Tech, New Power and Future Resources – where we focus on companies that are active in the search for alternatives to fossil fuels as our primary energy source, the development of new environmental technologies or the more efficient extraction of resources. The second concept behind Global Change Investing is our regional sustainability strategies such as International Equity, Swiss Equity and Emerging Markets Equity – one of the few strategies that make it possible to invest in the emerging markets with a focus on sustainability – where we concentrate on quality companies with very good earnings prospects and strong upside potential that also satisfy high environmental, social and governance standards. We base the selection process on our own sustainability evaluations, which are assigned the same importance as financial analysis at the Vontobel Group. <

Daniel Bruderer manages Product Sales Global Change Investing at Vontobel. He has specialized in sustainable financial investing for many years, including in his previous position at a Swiss firm that is a pioneer in the field of sustainable investments.

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Our changing world.

How will our planet look 50 years from now? Its finite resources are being shared by an increasing number of people. Life expectancy is growing. Energy consumption is also rising significantly. Fossil fuels, especially coal, are being used more than before – with implications for our climate. Here are some figures and forecasts for tomorrow’s world.

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World population 2000–2050 (in millions) The world population is expected to increase from 7 billion today to around 9 billion by 2050. Africa will display by far the highest growth rate. The United Nations estimates that the population of our planet will reach 10.1 billion in 2100 and that around one-quarter of the world’s inhabitants will be aged over 65. Source: United Nations, World Population Prospects, 2011

Asia

3,719

2000

5,142

2050

Africa

811

2000

Europe

Global assets in USD trillions

2,192

2050

727 719

2000 2050

Latin America 2000

Emerging markets in %

521

Source: McKinsey Global

751

2050

Institute, 2011

North America 2000 313 2050 447

2020 20 1 0

371 tn

198 tn 30%

21%

One trillion: 1,000,000,000,000 + 4.0 ºC

Global warming by 2090 (in °C)

Use of fossil energy sources

+ 2.4 ºC

Even if energy consumption could be kept constantly at the rate in 2000, the temperature of the Earth would rise by around 0.6 °C. A rise of around 2 °C is considered most likely.

Use of nonfossil energy sources

+ 0.6 ºC

Source: IPCC (Intergovernmental Panel on Climate

Constant emissions based on rate in 2000

Change), 2007

Global energy consumption 2000–2050 in exajoules 1 exajoule = 1 quintillion joules = 1,000,000,000,000,000,000 joules

17 6

108

204

50 20 40 20

2000 97

2010 144

44 2000

020

48 20

59 2

0 30

2050 43

2020 199 20 0 20 0 28 10

20 20 0 36 203 38 2040

62 2040 26 2030 0 2 20210 0 0 2 000 02

0 14

205

18 9 2 203 2 2 020 0 0 0 20 10 00

2 20

94 2050

13 12

2020 133

2030 1 3

2040 124 205 0

2000 8

Gas Oil Coal Nuclear Biomass Solar Wind

2010 110

Source: Shell, 2008

2030 2

10 2040

246

2050

263

1950

2000

2050

China 555 India 358 US 158 Russia 103 Japan 84

China 1275 India 1017 US 285 Indonesia 212 Brazil 172

India 1531 China 1395 US 409 Pakistan 349 Indonesia 294

The world’s five most densely populated countries 1950–2050 (in millions) Source: United Nations, 2010

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Marine power plants – the new green wave. Waves of sea water roll in and out, day after day. Mankind has been fascinated by this perpetual process for centuries but is only now beginning to harness the waves to produce electricity. The first marine power plants are already in operation and are supplying renewable energy.

they all face: how to transport the electricity they produce. This problem arises due to the significant distances between the locations where the power is generated and the places where it is consumed. Efforts are therefore underway to combine marine power plants and wind power plants at sea so that they can share electricity cables that connect them to the land.

The French power station La Rance has been exploiting the difference between the ebb and flow of the sea since 1967 to generate electricity. However, the dams connected to these types of power plants seal off entire bays and river mouths, with a massive impact on the environment. A better alternative are tidal current power plants. With their massive rotors, they resemble underwater wind farms.

A sea full of energy The exploitation of marine energy is still in its infancy but the potential offered by this field is enormous: the World Energy Council predicts that it could provide enough power to meet up to 15% of global energy requirements in the future. The World Climate Council estimates that this figure could be as high as 30%. <

Numerous innovative concepts already exist in the area of marine power plants – and there is one challenge

voithhydro.com, pelamiswave.com, minesto.com

The technology used in Mutriku is known as ‘oscillating water columns’. It is not the only method that can be employed to generate electricity from the power of the sea. Another is Pelamis, a

snake-like structure around 180 metres long and weighing approximately 1,300 tons that uses a system of hydraulics to transfer the motion of the waves to generators. A further concept that is still in the design phase is the kite structure developed by the Swedish firm Minesto. The device, which comprises a wing and a turbine, is tethered to the sea bed and rotates to capture tidal energy.

Limpet – the wave power plant on the Hebridean island of Islay.

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The sea batters the cliffs with immense force, while waves several metres high form in the vast Atlantic. Man has always been amazed by the power and impact of the sea. This eternal movement and countermovement gave experts the idea of harnessing the potential of waves to produce energy. The first power plants are already in operation and are commercially successful. One example is the wave power plant in Mutriku in the Basque region of Spain, which was connected to the grid in July 2011. Using a powerful breakwater just off the coast, Mutriku captures the waves, which set 16 turbines in motion. The energy plant is expected to produce 660,000 kilowatt hours of electricity each year – enough to power around 250 homes.

Like Mutriku in Spain, Limpet in the UK uses an oscillating water column to generate energy.

Voith Hydro constructs tidal energy plants in the sea that resemble windmills.

The concept developed by the Danish firm Minesto to use marine energy.

Pelamis Wave Power in Edinburgh manufactures systems that generate electricity from the waves. One such device supplies the Orkney Islands with renewable energy (main picture and bottom right).

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Structured products – harnessing opportunities created by global change. Georg von Wattenwyl Head of Financial Products, Advisory & Distribution in Investment Banking Climate change, the scarcity of resources and corporate governance – these are all themes that Bank Vontobel addresses by offering sustainable solutions in the area of structured products. These instruments give investors the opportunity to make a broadly diversified investment in a basket of companies that are very well positioned in a specialist field – and to do so in the currency of their choice. As a leading provider of theme products, we constantly seek to identify future-oriented trends and to develop compelling investment solutions for investors. Here, structured products act as building blocks that can be optimally aligned to sustainable investment themes. Structured products are investment solutions for private investors that offer flexibility and a short time-to-market. They can serve as a substitute for equities, bonds or other asset classes. Professional investors and asset managers can also access Vontobel’s electronic trading platform deritrade®, which enables relationship managers to create structured products directly for their clients. Partners who sign up to use deritrade® can select from an investment universe of over 700 underlyings and a host of different currencies. The broad product offering is complemented by a sound secondary market. Our high level of financial solidity is another aspect that is of decisive importance in the field of structured products. As well as offering superior products, Vontobel has considerable innovative strength and delivers first-class service. Our experienced international team of over 70 specialists is committed to preserving and extending our leading position in good or challenging market environments. <

Georg von Wattenwyl manages Financial Products, Advisory & Distribution in Investment Banking at Vontobel. He has been advising clients and business partners on all aspects of structured products for 12 years.

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“Our innovative product range and high level of stability are distinguishing factors.”

We are not bargain hunters. Rajiv Jain Head of International Value Equity The debt crisis in many states is symptomatic of their profound structural problems. Painful political decisions are needed to get the economies of these countries back on track and to position them for sustainable growth. In this period of uncertainty, it is advisable for investors to refocus their attention on high-quality equities. This signals the start of the proverbial search for a needle in a haystack. The ‘value approach’ that we pursue is a Vontobel Group speciality. It can be described as ‘high-quality growth at a sensible price’ – but this does not mean we are bargain hunters! To portray our methods in this way would be an oversimplification. Instead, we engage in a targeted search for stocks that display a particularly high level of quality in terms of earnings stability across the economic cycle. We focus primarily on firms that deliver superior returns in relation to equity and have low levels of leverage. Unlike many investors who often base their decisions on short-term valuations and are entirely fixated on the price/earnings ratio, we have found that the markets frequently undervalue stable growth. We strive to identify and realize the resulting investment potential. Favourable opportunities to purchase shares often arise as a result of market corrections, such as those that we are currently witnessing.

“Brazil is a phenomenal market – even better than Asia.”

In volatile market environments, some investors overlook very attractive potential investments – for example, few realize that Mexico’s share index has risen by an average of 10% annually over the last five years, although the country’s gross domestic product grew by less than 2% over the same period. Companies that profit from sustained levels of demand from emerging markets have excellent future growth prospects. Brazil is one concrete example of a Latin American country that has emerged as a reliable growth market over the last 20 to 30 years. India also offers attractive prospects – especially in view of its incredibly large domestic market. I am committed to seeking out companies that offer golden investment opportunities wherever they can be found. <

Rajiv Jain is responsible for research and global equity portfolio construction at Vontobel in New York. Rajiv Jain has been working for Vontobel’s Asset Management business since 1994. He studied Economics in India and the US.

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Vertical farming â&#x20AC;&#x201C; growing crops in a skyscraper.

ÂŠ Soa Architectes

The global population is growing incessantly: it is expected to rise from seven billion today to nine billion by 2050. How will we feed all these extra mouths? One solution is vertical farming, where the cultivation of crops is transferred from rural to urban areas and goes vertical.

La Tour Vivante is a project developed by Soa Architectes in Paris. The tower provides a setting for sustainable farming and has windmills on its roof to generate energy.

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Lettuce, strawberries and tomatoes are grown in the tower. Greenery in the glasshouses, green office space.

Professor Dickson Despommier developed the model together with his students at Columbia University in New York. Their work is inspired by the fact that the global population is expected to grow to over nine billion people by 2050. Based on its current level of productivity, the farming industry would require additional arable land covering an area around half the size of South America to feed all those mouths. But where can this land be found? Vertical farming provides an ecological way out of the dilemma. Certain aspects of the concept have long been in place: the indigenous people of South America and rice farmers in East Asia adopted a very similar

Thirty large glasshouses stacked on top of each other to create a high-rise farm in the heart of the city, producing enough food for over 50,000 people – and doing so in an environmentally friendly manner, without fertilisers or pesticides, using a closed system of water, soil and plants. This is the vision of vertical farming.

A concept for vertical farming by the Australian designer Oliver Foster.

concept by building terraces to cultivate their crops. The advantages of vertical farming are obvious: the production of foodstuffs in central urban areas eliminates the need to transport them over long distances. The growing of crops in high-rise farms promotes environmentally sound agricultural practices and means that crops are not destroyed by adverse weather conditions and can be harvested all year round. At present, these types of high-rise farms are still at the model or prototype stage. One of the greatest challenges they face is the question of how to replace sunlight. If LED lighting is used instead of daylight, this will lead to a marked increase in electricity consumption – meaning that vertical farming would have a poor energy balance. Putting the concept into practice Several modified examples of vertical farming have been put into practice in locations such as the South Korean city of Suwon. Equally, a number of small-scale projects have been implemented in the Netherlands. For example, PlantLab, a company based in Den Bosch, is cultivating a wide variety of crops – including roses, strawberries, beans, cucumbers and corn – at three subterranean levels. It is able to do this without daylight and is generating three times the level of produce of a conventional glasshouse. Vertical farming has not yet achieved a large-scale commercial breakthrough but the concept is attracting interest in the United Arab Emirates, China and India, as well as in the US, Canada and the UK, where various ideas and projects already exist. < verticalfarm.com, soa-architectes.fr, odesign.com.au

The new green urban landscape at night. Vontobel Portrait 2012

Sabine Döbeli has been Head of Sustainability at the Vontobel Group since 2006. She studied Environmental Science at the Swiss Federal Institute of Technology (ETH) in Zurich and is Vice-Chairwoman of the Forum Nachhaltige Geldanlagen and a Member of the Board of Trustees of the Climate Foundation Switzerland.

Sustainability is about actively assuming responsibility. Sabine Döbeli Head of Sustainability at the Vontobel Group In the current period of financial market volatility, when issues such as tax justice and the ‘too big to fail’ problem feature prominently in the public debate, sustainability is not the first concept that comes to mind when people think of financial services providers. However, the three topics mentioned here demonstrate just how critical it is for banks to pursue a sustainable business strategy if they want to remain a credible partner to their stakeholders in the long term. Many banks have long been aware of this fact. The success of the Principles for Responsible Investment – a UN initiative launched in partnership with institutional investors to promote a more responsible approach to investing – illustrates the fact that many institutions are actively addressing the issue of sustainability. More than 900 companies that collectively manage in excess of USD 30 trillion of assets have signed up to the initiative and have thus pledged to incorporate sustainable principles into their investment processes. Vontobel is one of these signatories and made significant progress in achieving the various targets prescribed by the Principles for Responsible Investment in 2011. Milestones in 2011 The related activities at Vontobel focused on the methodical integration of sustainability issues into the financial analysis process in Asset Management: working with sustainability specialists, our financial analysts drew up sectorspecific papers that identify opportunities and risks in the area of sustainability, define minimum criteria for each sector, determine how critical issues should be addressed and formulate questions for the companies concerned. In the case of the pharmaceutical industry, for example, the financial analysts now examine whether clinical trials are conducted internally or are largely outsourced. If they are outsourced, the company must ensure that the trials are performed diligently and are compliant with ethical standards. Any failings in this area

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could jeopardize the approval of the drugs – at a very high cost to the organization. The analysts also look at the question of whether pharmaceutical firms have clear guidelines and processes in place to avoid the production of any misleading marketing materials. In the past, there have been repeated incidents in which the inadequate disclosure of the side-effects of medicines has resulted in large fines for the manufacturer. By taking greater account of questions such as these when evaluating a company, the analysts can produce a better assessment of the quality of its management and the risks inherent in its business model. In 2011, Vontobel concluded a Voting Rights and Engagement Policy with Hermes EOS (HEOS), a leading provider of equity ownership services – enabling it to actively exercise its voting rights for all of the funds in its Global Change Investing boutique. This represents another milestone in Vontobel’s sustainability commitments. Vontobel’s voting rights in these funds are now exercised in a way that promotes good corporate governance and sustainable business models in the companies concerned. In addition, HEOS engages in an active dialogue with firms on behalf of Vontobel (and other investors) to address specific risk issues. This type of engagement is even more effective than the exercising of voting rights in motivating companies to take greater account of sustainability aspects in their work. For example, our partner HEOS met with the management team of one American oil company to discuss its contingency planning and risk management systems. HEOS presented proposals for improvements to the company’s systems and described how a corporate culture can be established in which employees assume greater ownership for safety issues. Vontobel regards measures such as these as the cornerstone of its sustainability commitments: they provide it with a longer-term perspective and lead to a more comprehensive analysis of opportunities and risks in the field of asset management. At the same time, Vontobel is taking steps to

continuously reduce the environmental impacts of its business activities. Data processing centres are the largest consumers of electricity within the finance industry. Vontobel has therefore made various changes to the structure of its largest data processing centre to reduce the amount of electricity used by its cooling systems. An energy audit was conducted at Vontobel’s main office building in Zurich in 2010. Based on its findings, Vontobel was able to adjust the settings of some systems, significantly reducing energy consumption as a result. Initiatives at an operational level Sustainability commitments also entail the assumption of social responsibility. Vontobel has introduced paternity leave for new fathers, helping them to combine their professional commitments and family life. An even more important step to promote a healthy work/life balance is the provision of part-time working models – including for certain management functions. In 2011, Vontobel defined sustainable purchasing guidelines for all important product groups and services to ensure that sustainability aspects are duly taken into account in the area of purchasing. The criteria range from the selection of environmentally friendly products to standards relating to employment legislation. The Vontobel Group’s involvement in organizations such as the Sustainability Forum Zurich, the Climate Foundation and the Forum Nachhaltige Geldanlagen helps to ensure that sustainable business principles are also promoted in other areas of the economy. Companies can be considered to have delivered on their claim of operating sustainably if external stakeholders can gain a clear insight into their activities in this field. Transparent reporting is of primary importance in this context. In its latest Annual Report, Vontobel has, for the first time, published sustainability data in accordance with the requirements set out in the Global Reporting Initiative. More detailed information on all aspects of our sustainability commitments is available on our website: www.vontobel.com <

“Without transparency, there is no sustainability.”

Climate Foundation supports SMEs Vontobel is a founding member of the Climate Foundation that supports projects to improve energy efficiency and promote climate-related innovations at small and mediumsized enterprises (SMEs). For example, an industrial mill was able to install a new system of steam generation for the processing of cereals with the assistance of the Climate Foundation. Instead of using gas burners, steam is now produced by burning biomass waste from its own processes, as well as woodchips. Materials that were previously classed as waste are now a valuable fuel. As a result of these measures, the mill is emitting around 650 metric tons less CO2 each year and is saving money previously spent on the consumption of gas and the disposal of waste.

Switching sides to gain a new perspective Vontobel participated in the ‘Seitenwechsel’ programme for the first time in 2011. Under this initiative, members of its management team spent a week working in a soup kitchen, a psychiatric clinic and a social welfare institution to gain a radically different view of life. This heightened their awareness of the world in which other people live and enhanced their social skills.

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‘Natur konkret’ – reclaiming alpine pastures. It is a paradox: the population of Switzerland is growing – but so is the amount of unused land within the country. Countless alpine pastures have been left untended over the decades and are now wild and overgrown with trees and vegetation. However, efforts to reclaim the pasture land have now begun. In Ticino, the process is being led by Guido Leutenegger (aged 53), his four-legged landscaping assistants and his ‘cow shares’ called Lotti, Petra and Laura. Guido Leutenegger is a tall, striking man who originates from the Canton of Thurgau. He patiently answers questions about the natural pasturing project he launched in 1997. He admits that he never imagined he would become a farmer and cattle breeder with a herd of around 500 highland cows that graze on 25 alps in Ticino, tending the landscape and providing premier quality meat. “I consider myself a green entrepreneur,” states Guido Leutenegger. Nature has always been important to him. After growing up in Kreuzlingen, close to Lake Constance, he trained as a primary school teacher but soon found himself drawn away from the classroom. He started work in the Office of Urban and Rural Planning in the Canton of Thurgau, where he discovered how important it is to take care of the countryside, to use it sustainably and to preserve a high level of biodiversity. According to the National Forest Inventory 2010, the amount of woodland in Switzerland has grown by 600 square kilometres in around 10 years. This is almost equivalent to an area the size of the Cantons of Zug and Appenzell. The area of land that is unproductive or no longer in use is growing significantly in the mountain cantons in particular. The spread of woodland and shrubs is especially pronounced in the alpine valleys. In the canton of Ticino, for example, farmers and communities have abandoned countless alpine pastures. This poses a problem from an ecological perspective since, in our era of old cultivated landscapes, biodiversity is greatest not where nature is allowed to take over but rather in those places where man shapes, nurtures and cares for the land. Ecological diversity is what Guido Leutenegger is striving to achieve with his business and his ‘Natur konkret’ brand. Together with his herd of around 500 cattle, he has so far reclaimed approximately 2,500 hectares of dormant alpine pastures and restored them as open cultivated land that

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boasts a high level of biodiversity. The highland cows from Scotland are the ideal creatures for Leutenegger’s extensive approach to agriculture. For more than seven months of the year, they graze on rough pastures, feeding on what nature can offer: unfertilized grass, tasty plants and fresh spring water. The red-brown cattle with their shaggy coats and long horns may appear primitive and wild but are, in fact, very good-natured creatures. Their cloven hooves and their comparatively low body weight makes highland cows the perfect animals for the alpine pastures of southern Switzerland. An unconventional investment Guido Leutenegger is not only a man of sustainable principles; he also has a wealth of ideas. Ever since it was founded, his business has been offering clients an unconventional investment opportunity known as ‘cow shares’. It works on the basis that investors each pay CHF 2,500 and receive a certificate stating that they are the co-owners of a specific cow. The client receives a return on his investment in the form of certified organic meat. Over a period of 10 years, he can obtain top-quality meat worth CHF 350 annually. This is a truly innovative idea. ‘Cow shares’ have attracted considerable interest: “Demand increased further after the financial crisis, since many clients appreciate the transparent and sustainable nature of the investment,” states Leutenegger. And that is not all: investors often visit their cow on the alp to show it to friends and family. Today, Leutenegger has more than 300 ‘cow investments’ in his herd of around 500 cattle. Investors tend to order more meat than the agreed annual amount. Many private clients purchase meat from Leutenegger even without investing in ‘Natur konkret’, and more than 15 restaurants now feature the organic meat from Ticino on their menus. In addition to the excellent quality of the produce, clients appreciate the fact that the cattle are reared in a natural environment with a focus on their welfare, and they like knowing where the meat comes from. Although a large proportion of the consumers live around Lake Zurich, there is no one typical type of ‘Natur konkret’ client. “Our clients tend to have the same basic philosophy as us – sensible, moderate and sustainable,” states Guido Leutenegger. < natur-konkret.ch

The reclaiming of alpine pastures is an active part of modern efforts to protect the landscape.

Peaceful coexistence: Guido Leutenegger with one of his cows. Herd management: an employee records the animals’ location. Curious about the world: highland calves, just two weeks old. Main image: Landscapers on the move. The Alp Gesero near Bellinzona offers an ideal habitat for highland cows.

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u-blox – Swiss expertise, world-class ideas. The benefits of global positioning systems (GPS) go far beyond that of simply guiding users from A to B. The combination of positioning, mobile communications and intelligent devices has become an important component of our lives within a short period of time – making it possible to locate the nearest restaurant in a matter of seconds using a smart phone or to add map data to digital photographs thanks to geotagging functionality. You can even have your lost cat safely back in your arms if it has a GPS tracker fitted to its collar. Satellites orbiting the Earth 20,000 kilometres above our heads make this possible by enabling people and machines with GPS receivers to locate anything, anywhere. Positioning systems are also creating new opportunities in the fields of industry, agriculture and healthcare. The Swiss firm u-blox has been focusing intensively on all aspects of global positioning and communications technology for 15 years. In 1997, a number of PhD students from the Swiss Federal Institute of Technology (ETH) in Zurich developed a brilliant new business concept and by 1999, u-blox technology was already being used in the Swiss road toll system. Just one year later, it was integrated into the first GPS-enabled mobile telephones. As u-blox grew, it became increasingly important to ensure the professional management of the company. “The founders of u-blox, all of whom are electrical engineers, wanted to continue concentrating on their core areas of expertise – development and production,” states CEO Thomas Seiler. “Since 2002, I have therefore also been managing the areas of Marketing and Sales,” he explains. The company today offers a range of innovative solutions for the consumer, industrial and automotive markets. Headquartered in Switzerland and with a global presence spanning Europe, Asia and the Americas, u-blox employs 210 people and is listed on the SIX Swiss Exchange. A ‘black box’ for cars Navigation systems are now a standard feature in cars but the technology offers even more possibilities: drivers can access useful information about traffic and parking conditions, special attractions and petrol stations, while assistance can be automatically summoned in the event of an emergency via wireless communications. The ability to recover stolen vehicles is becoming an issue worldwide but with global positioning, it is no longer an impossible challenge. Furthermore, in-vehicle GPS systems can be used to record location, speed and acceleration data for accident reconstruction. Insurance companies are now starting to offer reduced insurance premiums to clients who opt to have this feature installed in their vehicles. 44

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Providing medical care for an ageing population is another challenge we face in today’s world. Thanks to positioning technology and communications, it is now possible to locate and track elderly people or patients. This means that the question “Where are you?” can already be answered reliably in emergency situations. This location and tracking function is likely to be used in a much broader context in the future. Innovative telemedicine services can now be provided using wireless technology, with medical expertise being ‘transported’ to patients in isolated locations cost effectively. This means that the remote monitoring of a patient’s vital signs and the automatic summoning of medical assistance in an emergency are no longer a utopia. It is difficult to imagine the industrial sector without global positioning. “As a result of the globalization of the markets, manufacturing and logistics have become incredibly complex. In order to keep fuel and storage costs as low as possible, technology is now used to optimize transport routes, traceability and the planning of deliveries,” explains Thomas Seiler from u-blox. This is dependent on having reliable positioning within buildings as well as outdoors. In addition, more and more autonomous machines are being used in industry. With the help of global positioning, robots can move independently from A to B to execute tasks in industry, agriculture and the transport industry. Mobile appliances and smart machines – which are wirelessly connected – are now able to respond to their environment thanks to new technology. At home anywhere in the world Global change has increasingly opened up the markets in recent years – a trend that has also benefited u-blox. It is therefore not surprising that the website of the small Swiss company based in Thalwil, near Lake Zurich, is available not only in English and German but also in Chinese, Japanese and Korean. The world is its marketplace. < u-blox.com

About u-blox u-blox is a leading provider of semiconductor components for electronics systems in the areas of positioning and wireless communication solutions for the consumer, industrial and automotive markets. Headquartered in Switzerland and with a global presence spanning Europe, Asia and the Americas, u-blox employs 210 people. It was founded in 1997 and is listed on the SIX Swiss Exchange.

Manufacturing and logistics have become incredibly complex.

Thomas Seiler, CEO of u-blox, in the test laboratory at the company’s head office in Thalwil. Many innovative products created by u-blox have become industry benchmarks. Thanks to GPS and wireless technologies, waiting times at tram and bus stops can be determined to the nearest second. Main image: Being able to navigate in open terrain is becoming increasingly important; u-blox has the right technology.

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“Panta rhei, said

Heraclitus – everything

flows.”

Dr. Hans Vontobel Honorary Chairman of the Vontobel Group The saying ‘panta rhei’ or ‘everything flows’ is attributed to the Greek philosopher Heraclitus. For over 2,000 years, this expression has been used to describe the phenomenon that we now rightly refer to as ‘global change’. This process of change has been an inherent part of our world since the beginning of time. However, it has intensified significantly during our lifetime in terms of both its pace and momentum. This shouldn’t surprise us, given that the number of inhabitants on our planet has soared from 1 billion to 7 billion over a period of just 200 years. All of these people want food to eat, goods to consume, homes to live in and the means to travel – and yet the Earth has only a finite supply of resources. This evolution is therefore also compelling us to change in many respects, be it from a social, economic or technological perspective. Many people have doubts and misgivings about these developments. If we look back at history, this can, however, help us to evaluate things properly – and it can give us the courage to embrace change. The massive technological developments of recent years are worth considering in this context. Groundbreaking inventions can render existing technologies and products obsolete – we need only think of mobile telephony or the numerous methods of generating energy using wind, solar or hydro power as examples. Innovations can open up new markets and create fresh jobs. They also drive economic growth. Every change is a source of opportunity – even if it admittedly also entails additional risks. What we must do is to identify and anticipate these risks at an early stage – in other words: we must draw the right conclusions from the changes happening around us. Heraclitus was right: everything flows. <

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Dr. Hans Vontobel studied Law at the University of Zurich. He then embarked on a career in banking in Geneva – later becoming a partner and Chairman of the Board of Directors of Bank Vontobel. Now aged 95, Hans Vontobel is Honorary Chairman of the Vontobel Group.

History 1924 1936

1943 1960

The brokerage firm Haeberli & Cie. is established in Zurich.

1936

Jakob Vontobel acquires the brokerage firm Haeberli & Cie. and establishes the limited partnership J. Vontobel & Co.

The son of Jakob Vontobel, Dr. iur. Hans Vontobel, joins the company.

New Wealth Management and Private Banking Services units established. Bank Vontobelâ&#x20AC;&#x2DC;s first-floor offices at Bahnhofstrasse 58 in Zurich.

1972 1984

1986 1988 2000 2004 2007 2009

2010 2011

The grandson of Jakob Vontobel, Dr. iur. Hans-Dieter Vontobel, joins the company.

2012

Bank J. Vontobel & Co. is converted into a public company and Vontobel Holding AG is established.

Listing of Vontobel Holding AG bearer shares on the Zurich stock exchange.

Vontobel Asset Management AG is established. Head office of the Vontobel Group at Gotthardstrasse 43 in Zurich.

Bank J. Vontobel & Co. AG is renamed Bank Vontobel AG.

Expansion of Vontobelâ&#x20AC;&#x2122;s cooperation with the Raiffeisen Group that began in 1994.

Relocation to the new head office and opening of the Vontobel wCampus in Zurich.

Bank Vontobel Europe AG is granted a full banking licence for Germany. Vontobel acquires Commerzbank (Schweiz) AG.

Vontobel opens branches in Basel and Berne.

Vontobel launches Private Banking activities in Dubai.

Awards At Vontobel, we deliver first-class performance in order to generate value for you – even in challenging periods. We have received the following awards in recognition of our expertise:

‘Best Private Banking Boutique’: awarded by the specialist publications ‘Professional Wealth Management’ (PWM) and ‘The Banker’, which are produced by the Financial Times Group.

‘Best Wealth Management Advisory in Switzerland’: awarded by the specialist publication ‘Global Banking & Finance Review’.

‘Best Asset Manager for Bond Funds in Switzerland’: awarded by the rating agency Feri EuroRating Services and the news channel n-tv.

‘No. 1 in five categories’: Vontobel Research achieved top-three rankings in all eight categories of the Thomson Extel Survey 2011, including 1st place in five categories.

‘Swiss Derivative Awards – Top Service 2011’: Bank Vontobel received the ‘Top Service’ award in recognition of its comprehensive 360º investor service.

TOP Service Bank Vontobel

The Vontobel Portrait 2012 is intended solely for information purposes. The information and views contained in it do not constitute a request, offer or recommendation to use a service, to buy or sell investment instruments or to conduct other transactions. In addition, there is a risk that forecasts, predictions, projections and results described or implied in future-oriented statements may not prove correct. Information and statements concerning audited financial results and corporate governance should only be taken from the Annual Report 2011 of Vontobel Holding AG. It is available at www.vontobel.com or can be obtained by post upon request. The opinions expressed by external authors in this publication are their own and do not necessarily reflect the views of the Vontobel Group.

e Vontobel Portrait 2011 is also available in German, French, Italian, Spanish, Russian and Chinese.

/11 4000 EN

03/12. The Vontobel Portrait 2012 is also available in German, French, Italian, Spanish and Russian. Printed Linkgroup without impacting climate. Printed by by Linkgroup without impacting thethe climate.

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