Hala Hanna and Vilas Dhar: How AI Can Promote Social Good

Artificial intelligence is now increasingly present in corporate and government decision-making. And although AI tools are still largely in the hands of institutions that focus on profit before purpose, these new technologies could be equally powerful in promoting social good.

To that end, a joint effort by MIT Solve and the Patrick J. McGovern Foundation shows how AI applications can be used to extend prosperity to economically marginalized groups. Already, entrepreneurs are exploring how AI can be used to address some of the world’s thorniest challenges in thoughtful, creative, and previously impossible ways.

AI is most exciting when it can both absorb large amounts of data and identify more accurate correlations (diagnostics), while leaving the causational conclusions and ultimate decision-making to humans. This human-machine interaction is particularly important for social-impact initiatives, where ethical stakes are high and improving the lives of the marginalized is the measure of success.

What’s more, algorithms are only as good as the data that train them, and the choice of which data to include in AI models is inherently biased. Or, as the saying goes, “bias in, bias out.”

Take the issue of financial inclusion and creditworthiness. For people without a bank account, getting a loan or credit card is near impossible. Yet many of the unbanked can prove their creditworthiness in other ways, such as through a history of paying utility and phone bills on time.

Destácame, an AI-based platform that now serves 1.3 million people in Chile and Mexico, uses an algorithm to create an alternative credit score using data not reported to credit bureaus. By proving its clients’ ability to repay loans, the platform helps to reduce the barriers that often prevent financial institutions from lending to them.

"Although AI tools can triage customer-service requests or even make psychological support available to larger numbers of people, forging a genuinely deep connection requires a human touch."

In education and health, meanwhile, AI can dramatically reduce the cost of providing high-quality services, and improve outcomes. Century Tech’s educational platform, for example, makes teachers more productive by automating rote and administrative tasks. And by understanding how each student learns, it provides customized individual plans aimed at improving their performance in school.

In a similar vein, Ada Health serves both patients and health workers. The platform’s conversational interface, backed by natural language processing, gives patients instant personalized medical insights that help them to identify appropriate next steps. Its AI engine and curated medical knowledge base, meanwhile, provide semi-skilled health professionals such as community health workers, pharmacists, nurses, and midwives with clinical decision-support tools. At the frontlines of health-service delivery where worker shortages are acute, such support can make the difference between sickness and health.

Yet there is a limit to what bots can do. Although AI tools can triage customer-service requests or even make psychological support available to larger numbers of people, forging a genuinely deep connection requires a human touch.

The ISeeChange platform, for example, combines natural language processing with user-generated data and sensor networks to give cities critical data to improve their climate resilience, infrastructure design, and even public safety. Residents submit detailed stories and data about their neighborhoods to the platform, which then aggregates these individual experiences into climate models.

Crisis Text Line, meanwhile, uses machine learning to analyze words and phrases associated with youths in crisis through text messages, and triages messages to ensure at-risk users get help fast. By processing vast amounts of data, the organization has identified some of the most likely predictors of the need for an emergency response. For example, it found a high correlation between the word “ibuprofen” and attempts at self-harm. By using AI, messages containing this word are now prioritized in the queue. But the outreach is done by human volunteer counselors who contact the distressed texter.

These examples show how new business models are helping to extract additional value from big data and AI technologies, benefiting those previously excluded from the data economy. That is why MIT Solve and the Patrick J. McGovern Foundation are collaborating to support tech entrepreneurs solving global problems. We will continue to identify promising ventures in their early stages; equip them with the capacity to grow, scale, and diversify; and champion their stories to bolster the use of AI for social good. And Solve judges will select a new cohort of tech entrepreneurs at the upcoming Solve Challenge Finals.

AI has the potential to improve billions of people’s lives – but only if it creates and delivers value directly to those most in need, rather than fattening the bottom line of businesses already serving the most privileged. By harnessing these technologies for social good, today’s new breed of entrepreneurs can bring about lasting, transformational change.

Crisis Text Line is a Patrick J McGovern Foundation grantee and Solver finalist. Inclusion in this commentary has no influence on Crisis Text Line’s likelihood of being selected for the MIT Solve program.

About the Authors

Hala Hanna is Managing Director, Community at MIT Solve. Vilas Dhar is a trustee of the Patrick J McGovern Foundation.


Implementing the UN SDGs: A Job for Everyone, Everywhere

[caption id="attachment_14344" align="alignright" width="300"] Nadia Isler[/caption]

Everyone seems to agree that the UN Sustainable Development Goals (SDGs) make perfect sense.

Countries and companies, individuals and industries are proudly flaunting their commitment to the United Nations 2030 Agenda — but the pledges can be tricky to implement, and the results difficult to measure.
Fear not: SDG Lab director Nadia Isler — aka “the alchemist of sustainable development” — has the situation under control.

SDG Lab is located in Geneva, a centre for international commerce and co-operation, and the perfect base for the people and organisations driving the implementation of the SDGs.

Isler hopes to “piggyback on this dynamic and make sure that it blossoms all over”. SDG Lab — an organiser, amplifier and innovator — is a nexus for a diverse ecosystem focused on delivering on the UN’s agenda. “This is a neutral space to test ideas, identify past mistakes, and replicate the experiences that have been successful in implementing the SDGs,” Isler explains.

The 2030 Agenda for Sustainable Development outlines 17 overarching SDGs and 169 targets. It was negotiated and adopted by all 193 UN member states, and officially came into force on January 1, 2016.

“These goals are nothing less than a historic commitment of every (UN) country towards defining precise sets of common objectives in addressing the social, economic and environmental challenges of our world,” Isler says. The goals are “unique in that they call for action by all countries — poor, rich, and middle-income — to promote prosperity while protecting the planet”.

Isler serves as the SDG Lab team leader, sharing the expertise gained from a lengthy career in international development and first-hand experience in bilateral co-operation and multilateral affairs. Her career — from a Swiss diplomat to a communications officer for Doctors Without Borders — has given her a breadth of knowledge and experience that she can use for the benefit of the lab, and the fulfilment of the 2030 Agenda.

She describes the agenda as “more than a political commitment” and “a platform for action that every citizen can contribute to”. She urges people to inform themselves on the scope of focus of the goals, and to discuss them whenever possible. Isler would like to see the SDGs incorporated in the school curriculum, so that younger people could learn to badger parents, politicians and corporations.

She reminds the public that the 17 SDGs are indivisible, and should be addressed in their totality. “Many people think of the goals as being discrete stand-alone objectives, or that some might be more important than others,” she says. “What we do at the SDG Lab in Geneva, and in the broader UN system, is to drive home the message that it is an integrated agenda that cannot be separated.

“If a country fails on one SDG, it will not be able to address the other goals. If we want to achieve SDG Three (Good Health and Wellbeing) it means … you also need to address issues related to education, clean water, access to food, gender equality. The 2030 Agenda is a recognition that the international community must address today’s global challenges in an integrated and a systemic way.”

There is one recurring question: who’s going to foot the bill? The answer, according to Isler, is no one — and everyone. She cites estimates of $5 to $7tn yearly to close the gap, and calls for organisations and governments to optimise operations for more efficient use of resources. The burden should be shared through public-private partnerships, she says, and sees private finance playing a bigger role as consumers demand evidence of SDG contributions.

“This is what makes me think we’re in a new era,” she says. “As grey as everything might seem, I think it’s not naïve to be an optimist. I think there are positive signs that there is a huge new dynamic towards more co-operation, partnership and cross-partnerships.”


Simon Tribelhorn: Sustainability Matters

[caption id="attachment_14347" align="alignright" width="300"] Simon Tribelhorn[/caption]

The Principality of Liechtenstein and its financial centre take a holistic approach to sustainability, aligned with the UN’s Sustainable Development Goals.

"Climate change” is a term on everyone's lips, and a fourth summer of record heat in a relatively new century has ensured that not only activists, scientists and media are focusing on the problem.

The topic is now mainstream. For many, enjoyment of “nice weather” is tempered by concern for the future. With melting glaciers, fish kills, floods in Asia, hurricanes in Florida and heatwaves in Greenland, the latest report from the International Panel on Climate Change (IPCC) is more than a wake-up call — it's a kick in the ass. In the words of Pat Cox, former president of the European Parliament: “We are the first generation which destroys our planet, and we are the last which can save it.”

The world is confronted with some major challenges, and the outlook is alarming. There is an urgent need to transform society and the economy — quickly and decisively. The climate goals of the Paris Agreement are no longer seen as paying lip-service to the issue. No single country, company, or institution can overcome the challenges; they are too complex, and have a global dimension.

To achieve the goals of the Paris Agreement in the EU alone, additional investment of around €180bn is needed — a substantial part of which must come from the private sector. The banking sector plays a central role in mobilising and channelling these financial resources, and the Liechtenstein financial centre is ready and willing to accept the challenge.

Sustainability is more than “just” climate protection; the UN recognised this early on. In 2015, it adopted the 17 Sustainable Development Goals (SDGs). They provide a shared blueprint to achieve a more sustainable future for all and acknowledge that ending poverty and other privations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth — all while tackling climate change and working to preserve our oceans and forests. The SDGs address the global challenges we face as a society; they interconnect and aim to leave no one behind.

The Liechtenstein government published its first interim report on the implementation of the SDGs in July, highlighting that sustainable development is a key priority. Liechtenstein has been the “solar world champion” since 2015, with the highest per-capita installation of photovoltaic equipment. Each municipality is committed to increasing energy efficiency, leading to Liechtenstein becoming the first “Energy Country”.

To mark World Water Day, on March 22, 2017, “Waterfootprint Liechtenstein” was launched. The principle behind the project was straightforward: Drink tap water, and donate drinking water. Liechtenstein aimed to be the first country to provide access to clean drinking water to one suffering person for every Liechtenstein resident — so improving the basic living conditions of around 38,000 people. The initiative is well on the way to achieving this target. More than 22,000 “water footprints” have been activated. The government, schools, municipalities and many companies — among them all the major Liechtenstein banks and the Bankers Associations — refrain from buying bottled water and use tap water.

Collaboration

Then there is the “Liechtenstein Initiative”, a plan to end human trafficking and modern slavery. The project is a partnership between the governments of Liechtenstein, Australia and the Netherlands along with the United Nations University Centre for Policy Research and a consortium of banks, philanthropic foundations, and associations.

The Liechtenstein Bankers Association and its members are part of these supporting organisation – for good reason. The UN estimates that more than 40 million people live in captivity, are exploited by forced labour, or suffer some other form of serfdom. Some 25 million of them are pushed into forced labour, 16 million in the private sector.

Although 58 percent of the people who work as slaves live in India, China, Pakistan, Bangladesh and Uzbekistan, around one million people in Europe also live in quasi-slavery. The goods produced often end up in normal sales channels, for example as textiles or food. The International Labour Organisation of the UN estimates that around $150bn is traded annually through slave labour and human trafficking.
And this is where the financial sector comes in. It can be associated in various ways with modern slavery and human trafficking, for example, by handling money generated from such practices, or by financing goods and services whose supply chains include modern slavery or human trafficking. According to studies, modern slavery and human trafficking are the most common predicate offences to money laundering and terrorist financing in the world today.

Driving the change

In light of the global nature of the activity and the need to access financial data to identify abuses, the involvement of the financial sector is essential. Liechtenstein’s financial community and regulatory authorities have considerable expertise in combating illicit financial flows, and can play a pioneering role in tacking human trafficking and modern slavery. This can take place through the promotion of a high due diligence standards, the development of responsible investments, or the promotion of inclusive financial technologies.

The Principality's banks and the bankers association actively support the Liechtenstein Initiative. The commission has been holding global consultations since September 2018 to discuss the sector’s approach to anti-slavery and anti-trafficking compliance; responsible lending and investment; and financial sector innovation.

Experts from around the world present their research and initiatives at these meetings, and a catalogue of measures places the financial sector at the centre of worldwide efforts. This catalogue takes action against those who enrich themselves illegally and at the expense of others, and financial institutions are advised on how they can protect themselves against these transactions. In September 2019, during the 74th Session of the UN General Assembly, the commission has released a blueprint for accelerated action.

Banning unworthy working conditions and forced labour would contribute to more climate protection. How? Legal jobs can be regulated in such a way that less environmental pollution or waste of resources occurs. The circle to the Paris goals closes — and the holistic approach of Liechtenstein makes even more sense.


More Than Profits for Thailand’s Government Pension Fund: Thai Guideline to Maximise Returns and  Remain True to Spirit of Responsibility

[caption id="attachment_14350" align="alignright" width="300"] Secretary General: Vitai Ratanakorn[/caption]

The role of secretary general to Thailand’s Government Pension Fund means Vitai Ratanakorn is entrusted with fiduciary responsibility to the pension’s members.

His role is to ensure that the fund maximise profits for all members. Ratanakorn, however, thinks he can do more. He is inspired by the idea that financial returns need not be sacrificed for social returns. It is possible, he believes, to do both. Fiduciary responsibility is imperative, but social responsibility is more than a secondary consideration.

To engage internal and external stakeholders in social responsibility, Ratanakorn has a vision to become the Thai leader of ESG investment and has initiated projects — an ESG-focused portfolio, ESG due-diligence based on OECD responsible investment guidelines, and ESG factor-integration — based on PRI’s integration framework.

A major achievement was the introduction of Collaborative Engagement and Negative List Guidelines for ESG Investing.

To stimulate institutional investors — key players in the Thai capital market — to move toward ESG investing, Ratanakorn has initiated a project called Collaborative Engagement: Negative List Guideline.

The project was developed on the belief that collaborative engagement can enhance investors’ influence and improve efficiency of the engagement process. After meetings and discussions with capital market policymakers and institutional investors, Ratanakorn came to the conclusion that a common and effective goal of all institutional investors was positive engagement and negative list guidelines for listed companies that breach Thailand’s securities legislation, or do not comply with ESG’s best practice.

His initiative was well-received.

As many as 32 institutional investors with over THB10.8tn ($1.8tn) in assets under management signed the Memorandum Of Understanding and became signatories to the guideline. Signatories agree to conduct joint-collaborative dialogue to influence a company that breaches Thailand’s securities legislation, or does not comply with ESG best-practice.

During the dialogue process, further buying of the stock in question will be depend on the outcome. After the dialogue, if the management of the company complies to best practices and yields a positive result, the signatories will resume the normal transaction. If not, the signatories will add the name of the stock in a negative list.

The introduction of Collaborative Engagement and Negative List Guidelines for ESG investing is marked as the first major achievement in pursuing ESG investment in Thailand. i


Strength at the Helm: Vital for Progress in a Tough and Challenging Environment

[caption id="attachment_14353" align="alignright" width="288"] CEO: Mahmood Yousif Al Kooheji[/caption]

Arbah Capital’s management, counting on a team of seasoned professionals, is definitely on track to deliver superior results with its newly formulated strategy. The senior management comprises of visionary leaders, highly-skilled through their experience and diversity in their respective sphere of duties.

Over the years, the firm has successfully transformed itself into a progressive boutique investment firm, supported by a sturdy financial base and guided by a strong and stable management team. As a result, the firm’s investors have stood by it, and shown exceptional loyalty, throughout the years.

The firm’s management, being equipped with contemporary tricks of the trade and proud of it, is careful to avoid any and all unnecessary risks. At the same time, interactions has been able to help its investors with financial advice and planning, in the process emphasizing the need for risk-adjusted returns achieved through management’s proficiency and dedication.

The senior management of Arbah Capital is of the view that, “Arbah Capital has posed remarkable achievements over the years, the firm since its establishment successfully acquired and exited from many attractive Shari’ah Compliant investment opportunities. Our investment services are persistently getting enriched, and now allowing our investors access to ever-greater opportunities”.

Further, “Despite the on-going global economic challenges affecting the financial sector, we are proudly steering the firm and its investors in a positive direction. Arbah Capital’s vision, mission and goals are well directed towards fulfilling all our investors’ expectations by providing best value-added products and services. Furthermore, we have the right balance of skills, experience and backgrounds to support the management team to achieve our business goals”.

“We look forward to continue to work in the direction that would lead to: post superior financial results while maintaining high professional level, enjoy larger investable universe and provide our investors with well-considered opportunities”.

About the CEO

CEO Mahmood Yousif Al-Kooheji joined Arbah Capital in late 2017. He immediately enriched the vision of the firm by unfolding geographical boundaries. The company has evolved thanks to international investment exposure, and facilitates investment by carrying out all the necessary actions as a prerequisite to meeting client needs.

Yousif Al-Kooheji belongs to a reputable business family based in Bahrain. He is an enthusiastic proponent of diversified investment solutions. He has represented top-tier high-net-worth Individuals and corporations. He holds positions on the boards of various organisations, and has had senior roles in many GCC bodies. He has led and co-ordinated investment banking and wealth management efforts, ensuring the realisation of corporate objectives.

Al-Kooheji is a seasoned executive who has held several senior roles across banking and investments, with many multi-million-dollar transactions conducted globally under his belt. He has been involved in the acquisition and exit of prime assets and large syndicates, and has more than two decades of experience. Prior to Arbah Capital, he served as an executive director at GFH Financial Group, a leading international investment firm in Bahrain. He was part of the senior management team that devised the overall strategy for the revitalization of the group after a crisis. He remained with GFH group for three years.

Previously, he was Head of Investor Relations at Tadhamon Capital, a Bahrain-based investment firm, and served as a key member of Arcapita Bank’s placement team that carried out billion-dollar transactions. He also held senior positions at Al-Salam Bank Bahrain, Bahrain Development Bank (BDB), and Kuwait Finance House (KFH) Bahrain. He was a founding member of Al Salam Bank and KFH Bahrain. At Al Salam Bank he managed to finance large business syndicate deals.

Al-Kooheji also played a vital role in raising deposits and participation in mega projects through approaching high-net-worth Individuals and Institutions. At BDB he was the head of investments, and laid the foundation of Islamic Structured Finance Department, Business Development and Corporate Communication. He has worked in all fields of investment banking, including deal sourcing, syndication, management and exit strategies.

He qualified in areas including secondary education at Bahrain-based educational institutions. He holds a Bachelor’s degree (with distinction) in International Business and Economics from the University of Texas and a Master’s in Finance from the DePaul University, Chicago. i


Delen Private Bank and Digitalisation: A Perfect Blend of Technology and Personal Service

[caption id="attachment_14356" align="alignright" width="300"] CEO: René Havaux[/caption]

Delen Private Bank is specialised in asset management and estate planning for private clients. Group Delen has over 41 billion euros in assets under management.

Delen is one of the largest independent private banks in Belgium. CFI.co talked with René Havaux, who joined the executive committee in 2000 and was appointed CEO in April 2019. In this interview, he shares some of the areas in which Delen tries to make a difference and explains why he cherishes digital technology.

Congratulations on winning the award of Best Digital Private Bank of Belgium for the third year in a row. Are you happy with the title?

René: Absolutely, it was very important for Delen Private Bank to win this award. Our IT specialists are continuously working hard to provide the customer with a user-friendly, trustworthy digital environment that is adapted to everyone’s personal needs. We feel winning this award is the icing on the cake.

Which digital solutions do you offer? Any major changes since last year?

René: Last year we made substantial efforts to improve the Delen app and the Delen OnLine platform. We improved and standardized the user experience and added several new functions. For example, both applications are accessible via the Itsme® app, which makes interaction safe, fast and simple. The most important feature we added this year is the digital vault. Clients can scan important documents with their smartphone, and store them safely in their personal vault. No more looking after lost documents, deeds or contracts… It is all neatly arranged in the safe IT-environment of the bank. The digital vault is part of our new service Delen Family Services.

What makes Delen Family Services or ‘DFS’ so unique?

René: DFS consists of three dimensions: overview, analysis and planning. First, the client brings all pieces of the puzzle together, in the safe vault. Next, his relation manager makes an analysis of his total assets: investment portfolios, real estate, insurances, art… you name it. In a last step, our estate planners can advise clients on succession and planning. It was extremely important to have DFS available to all clients, regardless of their assets and whether they want to use a digital tool or not. At Delen Private Bank, clients decide how they want to interact with the bank – not us.

One last question: the jury mentioned that technology enables your investment managers and staff to dedicate more time to personal contact with clients. Are digital solutions not leading to less customer contact?

René: We have a strong belief that purposeful investing in digital solutions eventually results in enhanced client satisfaction and even more customer contact. Personal contact and digital technology are complementary. Today, customers expect to be able to check their financial status 24/7, and we are glad to provide that service. The goal is not digitalisation in itself, but to offer an increasingly transparent and efficient private banking experience with high-performance tools. New clients can set up an account with Delen’s digital onboarding process for example, requiring little more than an ID card and a digital signature. Thanks to digital solutions, the client is instantly updated with the latest information, which increases interaction and reduces the distance. Finally, thanks to technology we get to know our clients better, which improves the quality of client conversations and allows us to fully concentrate on their needs.


Customer Commandments and Importance of the ‘R’ in CSR: Ignore this at your Peril

The Ethical Business Book by Sarah Duncan

Reviewed by John Foot

[caption id="attachment_14361" align="alignright" width="353"] The Ethical Business Book by Sarah Duncan[/caption]

Sarah Duncan is to be congratulated on producing The Ethical Business Book, a timely and important presentation of “50 ways you can help protect people, the planet, and profits”.

The author makes a strong business case for taking the ethical road, and companies ignore it at their peril. She explains that traditional corporate social responsibility (aka CSR, often a bolt-on after the money has been made) is being superseded by new ethical standards for business.

We are now required to live up to society’s expectations while generating profits. Business owners should be thinking about the “triple bottom line”, which measures not only profitability but also integrity and sensitivity to the environment.

Duncan’s tone is never hectoring, and she is sympathetic to individuals and companies that need to take baby steps. “Don’t be afraid of the half-way house — all businesses are a work in progress,” she writes. “Companies just need to be able to legitimately say that initiatives are being set in train and this is part of an ethical journey to better things.”

The reader is challenged to produce an action plan for greater employee engagement and happiness. It’s a no-brainer when you consider that, according to The Macleod Report, well-motivated staff generate 43 percent more revenue (with 12 percent higher productivity), take far fewer sick days, and are 87 percent less likely to quit. That’s going to ease the recruitment budget somewhat.

Mahatma Gandhi is credited here with having carved out the Ten Customer Commandments (in essence “Though shalt look after them”). But looking after — and retaining — customers as consumer conscience rises will depend partly on their commitment, too. Some will be ready to switch to similar businesses that display better sustainability credentials.

Marketing in this new era moves from manipulation to authentication, adding the values and proof of ethical impact that customers demand. Duncan suggests reinventing BOGOF to “Buy one GIVE one free”. She commends Toms Shoes (a raft of support to the needy), Mindful Chef (school meals for poor children), and Hey Girls (free sanitary towels to those who could not otherwise afford them). Advertising seems to be confined to the informative (which may sadden those who consider the better commercials to be minor works of art).

This guide will be useful to those who are aware they should be doing something for the environment, but aren’t sure quite what. It’s also an admonishment to people who stuff old newspapers in with household waste when no one is looking. Never again, Sarah, I promise.

In the UK, as elsewhere, teenagers’ interest in the Brexit saga is rightly giving way to concern for the welfare of the planet. Young people are worried and in five years, 75 percent of the workforce will be Millennials — who are already shunning companies with poor ethical standards. The Baby Boomers may have eased-off on their idealism, but those born in the 1980s and ‘90s appear to be in for the long haul.

[caption id="attachment_14362" align="alignright" width="159"] Review by John Foot[/caption]

The author tells us that this is the age of the eco-leader, who recognises that quality, profitability, sustainability and social responsibility are connected. So how do we lead, follow and adapt?

This little book could help. Duncan writes well, wasting not a word. The layout and illustrations are superb, with plenty of room for reader response. The author invites us to consider our position in relation to the new business ethics and jot notes in the book. She is realistic about the time needed to reflect on these matters before putting pen to paper (take heed, Dr Phil) and this would seem to be a very useful exercise.

It’s a small volume that could be devoured at one sitting — but it will be referred to many times thereafter.

The Ethical Business Book

168 pages

Published (2019) by:

LID Publishing Limited

London


EBRD: Investing in Sustainable Infrastructure Helps Advance the UN’s SDG Agenda

[caption id="attachment_14409" align="alignright" width="300"] Author: Nandita Parshad EBRD[/caption]

At the beginning of this year, the European Bank for Reconstruction and Development (EBRD) created the Sustainable Infrastructure Group (SIG).

The bank merged its energy and infrastructure businesses to capitalise on synergies between these sectors. It delivers investments that ensure a cleaner, healthier, and more inclusive economic development, while also addressing the rapidly growing concern about the climate emergency.

Establishing the cross-sectoral group — covering the old transport, municipal, and energy teams — fits the needs of today. The market is driving more and more towards the integration of solutions that these sectors offer, through increasing electrification of services, decarbonising sources of electricity and increasingly important digitalisation.

When bringing these together, while considering the challenges of climate change and sustainable development, it is also critical to address the challenges of timing and scale. The infrastructure ensures quality of life in the countries EBRD operates in, helping to mitigate climate change and increasing resilience to it. But the historic rate of investment in sustainable infrastructure needs to double over the next 15 years. These investments need to be of the highest standard, in made in an inclusive manner to involve the local population and apply rigorous safeguards.

The need for high quality, clean and future-ready infrastructure investment is evident. We are in the midst of a global infrastructure boom, and investment choices made now will determine the level of emissions, the quality of life, and economies for decades to come. Framing this work are a series of international agreements, including the Paris Agreement and Agenda 2030, supporting a strategic long-term vision for development, as set out in the United Nations’ Sustainable Development Goals (SDGs).

There is also substantial market pull. The drop in the cost of renewable power generation, the increasing digitalisation of infrastructure services (smart cities), and the prospect for scaling-up the electrification of transport and other public services offer new opportunities. SIG believes that EBRD is uniquely placed to support the private sector in this.

[gallery ids="14415,14414,14413,14412,14411,14410"]

The 17 SDGs are an international currency, a multilateral concept that is recognised by donors and countries of operations as well as other development partners. Pursuing the SDGs also dovetails with the delivery of the EBRD’s mandate, as encapsulated in the six Transition Qualities through which impact is measured. These define a sustainable market economy as competitive, well governed, green, inclusive, resilient, and integrated.

EBRD investments already deliver against a number of SDGs, because it is pursuing projects that lead to positive results. To develop this further requires the integrated delivery of multiple SDGs in a single project or programme, as well as the ability to measure its impact through the SDGs.

An excellent example of such an initiative is EBRD Green Cities, the framework for investment in cities that want to lead the sustainability drive. This initiative is unique in the world of development finance, taking the policy-based approach of, for instance, the late EU Covenant of Mayors, and merging it with investments in concrete projects that will have an impact on urban areas and residents.

The Green Climate Fund has recognised this initiative, and supports EBRD Green Cities with €87m of concessional and grant co-finance. The range of projects under way already includes a fleet of electric buses in Sofia, Bulgaria. and a new district heating plant in Banja Luka, Bosnia and Herzegovina that runs on sustainably sourced biomass. So far, 32 cities have signed up, with the aim to reach 100 Green Cities projects by 2024.

Case studies include Green Cities in Moldova, Green City Planning in Tirana, Albania, Public-Private Delivery of Connectivity in Turkey, and Comprehensive Power Sector Climate Action in Tajikistan. One example is the investment in the modernisation of residential and public buildings in the city of Chisinau in Moldova, a €25m project supported by the E5P donor fund. Modernising buildings has positive impacts. It enhances has positive impacts on health, energy use, and longevity of the asset. It reduces heating costs, by reducing energy use by up to 50 per cent, and can make a significant difference to poorer families.

Refurbishment of schools provides students with a more amenable learning environment. The project was what EBRD calls a “trigger” project for Chisinau’s participation in EBRD Green Cities. In parallel with its implementation, the city commenced a planning process to become an EBRD Green City. This requires Chisinau to develop a tailored Green City Action Plan to instil a more conscious framework to address short-, medium- and long-term sustainability issues.
In Chisinau, this initial project addresses six SDGs:

SDG 1: No poverty;

SDG 3: Good health and well-being;

SDG 4: Quality Education;

SDG 7: Affordable and clean energy;

SDG 11: Sustainable cities and communities;

SDG 13: Climate Action.

Tirana Action Plan

Tirana completed its Green City Action Plan (GCAP) in April 2018, setting out a clear vision for a sustainable future. The GCAP identifies a programme of over half a billion euros of investment in five priority areas: sustainable mobility, green spaces and biodiversity, sustainable energy, resource management, and climate change resilience and adaptation, along with growing the resources and capacity of Tirana to implement and manage these projects.

The GCAP identifies projects to address major challenges faced by Tirana: a move to sustainable urban mobility by shifting traffic away from the car, reducing congestion, air pollution, and travel times, or by creating new green spaces close to the city.

Tirana’s GCAP is a locally driven, comprehensive planning document for the municipal government that will enable the city to continue to develop and thrive when these projects are implemented by the municipal government and its partners.

The first project to be financed under Green Cities is a loan of up to €30m to Ujesjelles Kanalizime Tirana, Tirana's Water & Wastewater Utility Company, in two tranches. The priority will be the extension of the capacity of the Bovilla Water Treatment Plant and the construction of a new water pipeline. The pipeline will provide gravity transfer of water from the plant to the north-western part of the city.

In Tirana, the implementation of the GCAP will address the following nine SDGs:

SDG 3: Good Health and Well-Being

SDG 6: Clean Water and Sanitation

SDG 7: Affordable and clean energy;

SDG 8: Decent work and economic growth;

SDG 9: Industry, innovation, and infrastructure;

SDG 10: Reduced Inequalities;

SDG 11: Sustainable cities and communities;

SDG 12: Responsible Consumption and Production;

SDG 13: Climate Action.

Linking Continents via Eurasia Tunnel

EBRD provided US$150m to finance the construction of the Eurasia tunnel, linking the European and Asian continents in Istanbul.

A Turkish-South Korean consortium manages the 33-year concession, and a partnership of 10 development and private banks provided the financing. The tunnel was also the first public-private partnership (PPP) project in Turkey piloting the concept of a direct agreement with the Ministry of Transport and where a debt assumption agreement was put in place with the Ministry of Treasury and Finance.

The 3.34km-long tunnel presented construction challenges, as the deepest double-deck undersea tunnel in the world. Its deepest point it is 106 meters below sea level, and it is capable of carrying over 40,000 cars per day.

Since opening in December 2016, it has cut the commute between the two sides of Istanbul from 90-minutes to 30. This provides savings in time, fuel and money. In a country facing economic volatility this is an important benefit for people. On the macro-economic level, the tunnel has a beneficial impact on congestion, with positive effects on cross-Bosporus integration and economic growth.

Eurasia Tunnel addresses the following five SDGs:

SDG 8: Decent work and economic growth;

SDG 9: Industry, innovation, and infrastructure;

SDG 11: Sustainable cities and communities;

SDG 13: Climate Action;

SDG 17: Partnerships

Climate Action in Tajikistan

In the power sector, the recently launched second phase of the US$196m refurbishment of the Quairokkum hydro power station on the Syr Darya river is an excellent example.

The work on the station, in northern Tajikistan, was supported by bilateral and multilateral donors, including the Climate Investment Funds and the Green Climate Fund. Quairokkum plays an important role in the provision of clean water and irrigation for agricultural land.

Constructed in the 1950s, it is in urgent need of refurbishment for safety reasons. The operator, Barqi Tojik, will replace obsolete power generation systems and adapt the dam to a changing climate. Installing new turbines will add 48 MW of generation capacity, and reconstructing spillways will help the dam cope with changing rainfall patterns. EBRD also works with the operator Barki Tojik, to integrate modern climate and weather science into the operational regime of the dam. When the new power generation equipment is operational, the clean power production will produce over 800 GWh of power per year.

The Qauirokkum dam refurbishment addresses the following four SDGs:

SDG 7: Affordable and Clean Energy;

SDG 8: Decent Work and Economic Activity;

SDG 9: Industry, Innovation, and Infrastructure;

SDG 13: Climate Action.

As the case studies show, addressing the SDGs is something that is integral to the operations of the EBRD. Its approach to Sustainable Infrastructure rests on its unique ability to mobilise cross-sectoral teams, the setting and enforcing of high-standards for ESG considerations, and the investment to deploy best available technologies.

A continuous drive to mobilise private investment and to maximise connectivity of public services supports this, together with our ability to raise donor support. This blending of finance allows EBRD clients to respect affordability constraints and maintain fiscal stability over the long-term, while delivering first-class infrastructure projects.

More needs to be done to fully link up the three sectors in the EBRD, and this will be achieved by proactively seeking out system-level linkages between renewable energy generation projects and increased electrification, in particular of individual and public transport and municipal services.

The bank will continue to offer its clients and countries policy dialogue to deliver policies that promote legal and regulatory change to enable this, such as regulations that create positive economic externalities and minimal rent-seeking behaviour. To be able to deliver this the bank will also continue to create blended finance packages for clients and use a broad base of donor resources in a targeted and economically efficient manner in line with its IFI principles.

Sustainable infrastructure is rightly receiving a lot of attention amongst global investors, and EBRD will continue responding to this increased demand. i

About the Author

Nandita Parshad is the Managing Director of the Sustainable Infrastructure Group at the European Bank for Reconstruction and Development (EBRD).

Parshad has 30 years’ experience in financing and investing in the energy and infrastructure sector in diverse emerging economies such as India, Eastern Europe, former Soviet Union, Mongolia, Turkey, Middle East and North Africa. Since joining EBRD in 1992, Nandita has led several complex project financings involving debt, equity, syndications and intensive policy dialogue at the highest level in governments and with reputable domestic and international strategic investors.

Parshad led the Energy & Natural Resources Business Group prior to her current role. She is a member of the Energy Transition Commission and the World Economic Forum Global Future Council on Energy. Nandita Parshad has also held various supervisory board and Board of Directors memberships in investee companies, and served as a director on the International Board and Trustee of the United World Colleges.

Prior to working at the EBRD, Parshad worked as a consultant for the World Bank in the Finance Department in Washington D.C. in 1986-1987 and from 1988-1992 as a Project Officer in the Energy Sector in New Delhi, India.

She was born in Kolkata, India, and holds undergraduate (AB 1986) and graduate degrees (MPA 1988) from the Woodrow Wilson School of Public and International Affairs at Princeton University. She supports a number of charities in India and is an active volunteer with the Princeton Alumni Schools Committees in India and the UK.

About the EBRD

The European Bank for Reconstruction and Development (EBRD) was founded in 1991 to move into a post-Cold War era in central and eastern Europe. It is now doing more than ever before — across three continents — to progress towards “market-oriented economies and the promotion of private and entrepreneurial initiative”.

The Sustainable Infrastructure Group at the European Bank for Reconstruction and Development (EBRD) consists of 200 staff covering the power, energy, transport, social infrastructure, and municipal infrastructure sectors in all the bank’s countries of operation.

This group invests more than €3.5bn a year on EBRD’s account in over 100 new transactions, representing a third of the bank’s annual business activity. The group holds a portfolio of about €20bn.


Jim O’Neill: The Return of Fiscal Policy

[caption id="attachment_14419" align="alignright" width="300"] Author: Jim O'Neill Photograph by Suzanne Plunkett.[/caption]

As we enter the last quarter of 2019 (and of the decade), cyclical indicators point to a slowing world economy amid wide-ranging structural challenges. There are plenty of issues to keep one up at night, be it climate change, antimicrobial resistance (AMR), societal aging, strained pension and health systems, massive debt levels, and an ongoing trade war.

But as the old adage goes, one should never let a crisis go to waste. Among the countries feeling the worst effects of the global trade tensions is Germany, where policymakers finally are waking up to the glaringly obvious need for productivity-enhancing, investment-based fiscal stimulus. Similarly, beneath all the chaos caused by Brexit, the United Kingdom is also looking at its fiscal-stimulus options. So, too, is China, as it searches for measures to reduce its vulnerability to disrupted trade and supply chains.

Policymakers around the world are coming to realise that it is neither wise nor feasible to rely constantly on central banks for economic-policy support. In today’s environment of low – and in some cases negative – interest rates, the case for shifting the burden from monetary to fiscal policy is more apparent.

Earlier this month, the European Central Bank decided to pursue interest-rate cuts and another round of quantitative easing (QE) – a move that appeared to accelerate a sharp sell-off in global bond markets. Yet in announcing the decision, ECB President Mario Draghi echoed a growing chorus of commentators now calling for more fiscal-policy measures.

"The slowdown in Germany is equally apparent. Owing to its excessive dependence on exports, the German economy is flirting with recession despite firm domestic demand."

He was right to do so. Yet one can only wonder what benefit he expects to follow from further easing, given that ultra-low interest rates have already failed to boost investment or consumer spending. As for QE, a return to the unconventional monetary policies that started after the 2008 crisis will merely add to the social and political woes already afflicting Western democracies. After all, it is well known that the benefits of such policies accrue mostly to wealthy households that already have significant financial holdings.

Meanwhile, the monthly data from China offer further evidence of an ongoing slowdown there, with a softening of exports clearly suggesting that the trade war with the United States is taking its toll. Perhaps for this reason, Chinese policymakers have eased up on their policy of discouraging domestic leverage (the priority last year), in order to focus on supporting growth.

The slowdown in Germany is equally apparent. Owing to its excessive dependence on exports, the German economy is flirting with recession despite firm domestic demand (by Germany’s lowly standards).

I have long argued that Germany’s economy is not as structurally sound as it seems, and that a shift in its policy focus is long overdue. For over a decade, Germany has adhered to a narrow fiscal framework and focused constantly on reducing government debt. But now even German policymakers are recognising the need for a change. The country’s ten-year bond yields are well below zero, its debt-to-GDP ratio is below 60%, its current-account surplus is obscenely high (nearing 8% of GDP), and its infrastructure is deteriorating.

Since 2008, the US current-account deficit has fallen by half, to below 3% of GDP, and China’s has fallen from 10% of GDP to almost zero. Yet Germany’s external imbalance has continued to grow, threatening the stability of the eurozone as a whole. A major German fiscal expansion could start to reverse this trend. It also would likely have positive multiplier effects for private investment and consumption, thus creating export opportunities for other struggling eurozone members. Moreover, a shift in Germany’s fiscal-policy approach could open the door for a loosening of eurozone fiscal rules. European governments need to have the option of pursuing a more active role in the economy, so that they can invest in the sources of long-term growth and lead the process of decarbonisation.

Turning to the UK, two issues beyond Brexit deserve attention. First, Boris Johnson, the recently installed prime minister, has already given major speeches in England’s North, signaling his support for the “northern powerhouse” model of geographically targeted development. To be sure, many see Johnson’s embrace of the North as a cynical ploy to rally his base before the next election. But surely Johnson and his advisers aren’t so daft as to assume that votes can be bought that easily. Besides, solving the North’s long-term structural challenges and boosting its productivity are even more important for the UK economy than the trading relationship with the EU – as important as that is.

Second, Chancellor of the Exchequer Sajid Javid’s recent spending review augurs a change in UK fiscal policy. Owing to low interest rates and a sharp narrowing of the fiscal deficit over the last decade, Javid believes it is time to start addressing the country’s massive domestic infrastructure needs. He has suggested a new fiscal rule to distinguish between debt levels, with an exclusion for investment spending. Given today’s circumstances, such a rule would make a lot of sense not just for the UK, but also for the EU, Germany, and many other countries. i

About the Author

Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK Treasury Minister, is Chair of Chatham House.


Mohamed A El-Erian: How the IMF Can Battle Gradual Irrelevance

This year, I didn’t attend the October annual meetings of the International Monetary Fund and the World Bank in Washington, DC. Instead, I paid close attention to reports of the gathering and talked to people who were there whom I respect. What emerged is depressing for the wellbeing of the global economy. In particular, the prospect of continued weakness and fragmentation pressures will compound the challenges to the credibility and effectiveness of multilateral institutions.

The convening power of the IMF and the World Bank is unquestionably strong, if not unique. Every year, their annual meetings attract top economic and financial officials from more than 180 countries, as well as a far larger number of private-sector representatives. It’s an exceptional global gathering, not only for officials to exchange views but also for corporate networking.

Over the last few years, the official meetings have increasingly been overshadowed by the ever-growing number of parallel events, notably diminishing the gathering’s contribution to better policymaking. In fact, this year, I couldn’t find a single person who had paid much attention to a key policy output of the meetings – the communiqués issued by the two institutions’ top policymaking committees.

This is in stark contrast to the past. I vividly remember the days, not so long ago, when officials prepared diligently for these policy discussions. Private-sector participants would eagerly await their outcome in the hope of gaining a better understanding of the global economic outlook and the prospects for key national and international policy initiatives. Markets were known to move on particular remarks, which is why officials would spend hours refining the communiqués, lest they be misinterpreted.

The charitable reading of this change is that the substance has shifted to the parallel events. Consider the IMF. The communiqué of the International Monetary and Financial Committee (IMFC), the Fund’s top member-country policymaking panel, is preceded by the release of two flagship IMF publications on economic and financial trends (respectively, the World Economic Outlook and the Global Financial Stability Report). These are supplemented by press conferences and speeches involving many Fund officials. The themes are then picked up in a host of seminars, as well as in presentations by national officials. As a result, many policy implications are covered well before the IMFC meets.

Yet, as much as I respect and admire the multilaterals, and I have done so for decades, I fear that this explanation is too partial. Yes, the IMF maintains an impressive analytical edge, owing to its talented and dedicated staff as well as its unique links to countries. Yes, it has made important strides in improving its understanding of the relationship between financial markets and the real economy. And, yes, it has bravely taken the lead in shining more light on the economic impact of gender inequality and climate change. But its forward-looking analyses have too often proved to be backward-looking, and its quantitative projections have consistently been subject to considerable revisions.

Even more worryingly, the Fund’s policy recommendations – especially those pertaining to the advanced economies – have little impact (to put it politely). One need only look at the widening gulf between what IMF officials have said and the bland, repetitive language of the IMFC communiqués. The policy insights fall on more deaf ears when finance ministers and central bankers are back in their national capitals, underscoring the current ineffectiveness of what once was a key opportunity for improving win-win policies.

Many of the key reasons for this diminished influence have little to do with the multilateral institutions themselves. Politics in many advanced economies has turned increasingly inward, amplifying disdain for policies advocated by the Fund. Years of low and insufficiently inclusive growth have narrowed the scope for international policy cooperation, instead fueling disrespect for global norms and the international rule of law. And even the inclination to use the Fund in pursuit of national interests has waned: the US has simply opted to weaponise its own economic tools directly.

But the IMF and the World Bank are not blameless. For starters, they have been too slow to implement internal reforms. Both institutions also could be quicker to own their recent mistakes, such as those concerning Argentina’s latest financial debacle, the excessive growth of debt among the least developed economies, and the failure to foresee the aftermath of the 2007-08 financial crisis.

In addition, the cherished principle of uniformity of treatment of member countries has been visibly stretched, often in a way that has further dented the standing and credibility of institutions whose governance is still informed by the past. In particular, Europe has long been overrepresented relative to emerging economies, and Europe and the US retain a monopoly over the leadership of the IMF and World Bank, respectively.

These shortcomings raise broader concerns. They increase the tendency toward beggar-thy-neighbor policies at the national level and intensify pressures for fragmentation and disorderly deglobalisation. They also expose the global economy to the risk of financial disruptions that would further undermine already fragile and insufficiently inclusive growth dynamics.

Multilateral organisations often complain that major governments’ weak appetite for institutional reform limits the scope for improvement. After all, these countries are not only the largest shareholders, but also have sometimes blocked initiatives supported by the vast majority of other member states.

Admittedly, the IMF and World Bank are constrained by the world in which they operate. But their managements also have tended to shy away from embracing reform initiatives and making them their own. Rather than acting as a catalyst by underwriting the considerable reputational risk involved with approaches that inevitably face resistance, they often have been pushed to the sideline.

With both institutions now under new management, there is a new window for launching a process of beneficial change for the global economy. Let’s hope that last month’s disappointing annual meetings can serve as a wake-up call. There is no worse fate for these organisations than gradual irrelevance.

About the Author

Mohamed A El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He is President Elect of Queens’ College (Cambridge University), senior adviser at Gramercy, and Part-time Practice Professor at the Wharton School at the University of Pennsylvania. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.


The Saudi Housing Ministry and Vision 2030: Delivering on Home Ownership & Foreign Investment Opportunities Too

John Mann reports from Riyadh

Capital Finance International was in Riyadh to attend the 10 December New Year Budget Forum and heard from housing minister Dr Majid Al-Hogail. He confirms that, in 2020 and via a partnership with the private sector, his ministry will deliver 100,000 homes valued at $17 billion to Saudi families throughout the country.

During our visit to the ministry that same day, it was reported that land grants, loans and other financing opportunities (including key support to lower income Saudis) will be helping 300,000 families during the coming year.

Saudi Vision 2030: Housing is a key lifestyle element of the kingdom’s plan, with a target of 70 percent home ownership by 2030. There are interesting opportunities (and helpful incentives) for national and international building technology investors to set up local manufacturing facilities.

These include direct financing, matchmaking and business support. Investors can expect funding of up to 75 percent of their capital requirements and six months of working capital equivalent. Loan repayments are made over five years (starting from year three).

Given the likely backlog of 1.5m housing units by 2030, Saudi Arabia would appear to be a worthy investment destination. Key reforms this past year have resulted in the country being recognised as one of the top 10 global business climate improvers by the World Bank Group.

See also: Fifteen Reasons Why the Saudi Vision 2030 Plan will Succeed

Interview with Deputy Minister Mazen Al Dawood:

https://www.youtube.com/embed/FDpPBr0_AP0


Fifteen Reasons Why the Saudi Vision 2030 Plan Will Succeed

This writer is reflecting on some wonderful impressions gained – in early December 2019 – during a one-week intensive tour of the Kingdom of Saudi Arabia (KSA) as a guest of the Ministry of Finance.

[caption id="attachment_14456" align="aligncenter" width="900"] Saudi Arabia's Minister of Finance: Mohammed Al-Jadaan (center, with microphone)[/caption]

What first springs to mind is the warm traditional hospitality of the Saudi people. Next, one thinks of the West’s lack of attention, grasp and appreciation of this resourceful, vast country (with a land size well exceeding that of the UK, Germany, France, and Spain combined).

The tremendous transformation taking place is being overlooked. And the Saudi way of life, cultural norms and traditional values are not properly understood abroad.

It’s still early days for Vision 2030 — an ambitious strategic plan spearheaded by the popular Crown Prince Mohammad Bin Salman Al Saud (also known as MbS). The plan sets out to diversify the economy from dependence on oil to a more industrial, innovative and knowledge-based society where the state provides easy access to all necessary services. MbS works consistently to open-up and further integrate the Saudi economy in a global context. Saudi Arabia will host the G20 in November 2020.

Here are 15 reasons why the strong-hearted and optimistic aspirations of the MbS Saudi Vision 2030 will result in success for his people, the region and the wider world:

Backed by the People

The population (33 million – including foreigners) broadly and enthusiastically backs the Vison, which has given the country an impetus and common purpose that all can buy into.

Popularity of the Royals

This was experienced first-hand (at the Ruiz v Joshua boxing match in Diriyah, Riyadh) which was attended by MbS. And speaking to folks from all-over, it becomes clear that the crown prince is a very popular man. And so is his father, King Salman (endearingly referred to as “Our Father”). And no wonder with the caring policies and reforms now being pursued to the benefit of all people (not just the few). These efforts comprise (but are not limited to) job creation; education; fully financed, and subsidised home ownership; international engagement (cinemas are opening; the arts and entertainments are coming to town); and there is far more personal freedom.

[caption id="attachment_14469" align="aligncenter" width="1000"] Mustafa Al-Mahdi, CEO for the Royal Commission for Jubail and Yanbu[/caption]

Good Governance & Strong Institutions

In support of the Vision, an ambitious budget was announced by a leadership full of talented ministers. The cabinet is very capable, experienced and well-educated. The minister, Mohammed Al-Jadaan (pictured), heading a very strong team at the Ministry of Finance reiterated the commitment to inclusive growth and stimulating fiscal policies, such as maintaining non-regressive and low taxes.

Regional governance is also strong with power to implement change. The Royal Commission for Jubail and Yanbu is helping boost investment opportunities and socio-economic development through the leadership of CEO Mustafa M. Al-Mahdi (pictured).

Inclusive & Participative

Saudisation means that companies are now committed to fill their work force with Saudi nationals rather than guest workers. The young Saudis are keen to participate and get the best on-job training. The Vison is inclusive and enjoys broad-based support across all geographic, gender and age groups.

Comprehensive

The vision is comprehensive and includes all elements of society and each wheel in the ecosystems. Projects are backed by inspiring leadership and world-class expert partners.

Funded

Investment sources include the fiscal budget, the sovereign wealth fund (SWF), the private sector, foreign direct investment and the proceeds of the Aramco IPO.

The Public Investment Fund of Saudi Arabia (PIF) is the Kingdom’s SWF and – with assets of $320 billion – this is one of the largest in the world. Yasir Bin Othman Al-Rumayyan, PIF's managing director hopes to lift assets under management to over $2 trillion:

https://www.youtube.com/watch?v=I21pSac3o0E

Aramco IPO

The Aramco IPO (with the largest market capitalisation in the world’s history and subsequently reaching a valuation of $2 trillion) fulfilled several purposes. The IPO placed Saudi Arabia further on the international capital markets map (for both equity and debt issuance) and as a participant in the emerging markets indices. Now energy sector focused investment funds can participate. Furthermore, it creates a new “currency” to be used for future acquisitions.

Aramco is a superbly well-run energy powerhouse, but that is already priced in. The future share value action of Aramco will be greatly influenced by the price of oil.

Gender Reforms & Personal Freedom

Unprecedented reforms have taken place since the adaptation of the Vision. Some 22 of these are related to women’s rights. New regulations regarding the status of Saudi women have been adopted. Female participation in the workforce is a priority and salary parity ensured. The widening of the spectrum of personal freedom as well as the commitment to gender inclusion form part of the “new” aspiring Saudi Arabia. The grand design holds equal opportunity for all and aims to utilise the skills of an empowered youth.

Young & Growing Population

Some 70% of the population is below 30 years of age. The population is growing at around 2.6-2.8% per annum. In comparison, the population growth rate of the EU is 0.19% per annum (with the main source being immigration). This vibrant young Saudi population contributes not only as workers and consumers, but also as fresh thinkers and innovators. International investors want to participate in this growing market.

Housing Ecosystem

With the ever-growing population comes an increasing need for homes. Confronting this challenge, the Saudi housing ecosystem supported by the Ministry of Housing is fully up to the task. Partnership with building contractors and developers, such as Katerra boost productivity. Red tape blockages are being eliminated (think of the UK in contrast). Commercial mortgage banks compete in transparency to provide 100% mortgages for buyers. Interest rates are subsidised by the government. Inclusive finance to first-time buyers is a priority.

The use of new modular and industrial remote production technology in housing construction means that a new-build, say 300 square meters (m2) in a good location can be purchased for $200,000 - with prices even under $100,000 for a nice new family home. At that price level the financing is interest free and repaid over 20 years.

The government owned Saudi Real Estate Refinance Co. (SRCO) under the visionary leadership of CEO Fabrice Susini, is supporting the private mortgage banks. “SRCO is dedicated to financial innovation in the mortgage system to facilitate our emerging and fast-growing home loans and securities markets, including with new Shariah-compliant solutions,” he reports to CFI.co.

See the CFI.co video interview with Mazen Al Dawood, Deputy Minister of Developmental Housing & The General Director of Real Estate Organisation at the Ministry of Housing.

Infrastructure & Transport

[caption id="attachment_14457" align="alignright" width="324"] Metro exhibition in Riyadh[/caption]

KSA continues to invest in giga-projects to complement its already robust infrastructure in support of the Vision. King Abdullah Port near King Abdullah Economic City (KAEC) is an ambitious port project that integrates with energy, mining (Ras Al-Khair, the Minerals Industrial City), Ma'aden and new metals manufacturing capabilities for vessels, platforms and marine engines.

Saudi airports are well positioned to engage with the world. Riyadh’s King Khalid International Airport (RUH) is modern and impressive. Jeddah is set to open-up international flights at its swanky new airport, which includes the largest airport aquarium and a high-speed rail service.

The promising King Abdulaziz Public Transport Project (Riyadh Metro) is poised to link the rapidly expanding spaces of the capital. Riyadh’s growth is dominated by low-rise as opposed to high-rise condominiums in many other capitals around the world. Research shows that people in high-rises have fewer children, so the preferred residences in KSA support larger families and population growth. The new metro’s grid structure will support the enlargement of people and space. And thus, the vision as well.

Industrial Base

Saudi aims to increase its already considerable exports of industrial goods. The Vision aims to vertically integrate sectors, including energy, mining, and industry. The resourceful kingdom produces aluminium and has all the ingredients needed in abundance: water, power, bauxite, and know-how. From here follows a dedication to product innovation.

Innovation

Part of the Vision is the creation of a knowledge-based ecosystem from universities to business innovation. KAUST the applied research university has attracted a world-class faculty that is dedicated to innovation - including in engineering, data systems and the circular carbon economy. KAUST uses extreme supercomputer power to machine-learn and innovate ways to best augment nature. KAUST also links up with SAPTCO (the Saudi bus firm) for innovating driving autonomy and energy efficiency.

Innovation in downstream applications is a natural focus. SABIC Plastic Applications Development Centre (SPADC) has created an innovative environment in support of local initiatives in applied research for plastics applications.

SABIC is a world-class innovator dedicated to innovation and sustainability including polymer applications such as energy efficiency housing technology.

Services & Leisure Economy

[caption id="attachment_14459" align="alignright" width="297"] John Mann holding a lump of bauxite at Ma'aden[/caption]

The future is not only about energy, industry and infrastructure as importance is also placed on the “software”: content and service sectors and activities such as tourism, leisure, entertainment, media, and high-touch customer services such as healthcare and hospitality.

The Qiddaya mega entertainment city is a shining example and is expected to be operational in only four years under the inspirational gung-ho leadership of CEO Michael Reininger and his fast-growing young team Qiddaya’s Reininger, formerly with Walt Disney Co, promises integrated recreational activities and leisure activities for both the domestic market and regional and international visitors. Soon Saudis will be close to self-sufficient in entertainment, sports and cultural activities. Qiddaya will create jobs, boost the economy, and substitute for entertainment spend abroad while attracting other visitors.

Education

Education and jobs move hand in hand. CFI.co has been promoting educational progress (which we view as mission critical) across the world for eight years. Training and the acquisition of skills are at centre stage for both sexes of the young, vibrant population. SABIC’s SPADC educates and has created an innovative environment in support of local initiatives in applied research in plastics applications.

Great universities are available with scholarship opportunities, such as KAUST and Prince Mohammed Bin Salman College (which were included on our tour).

These reasons for Saudi’s Vision 2030 plan to succeed are not exhaustive. First and foremost, stands the ingenuity and drive of the Saudi people and their collective purpose.

The West could learn and appreciate more after considering models that involve family growth, generous government support and the whole-hearted participation of all nationals.

Articles by the same author


The World’s Biggest Industrial Investment Opportunities?

John Mann Reports from the Eastern Province of Saudi Arabia

Capital Finance International, touring Saudi Arabia as guests of the Ministry of Finance, visited Ras Al-Khair and Jubail (the world’s largest industrial city) on 11 December 2019.

The Royal Commission for Jubail and Yanbu, established in 1975 as an autonomous organisation reporting to the Council of Ministers, is responsible for the development of these massive industrial areas and showcasing the significant investment opportunities they represent.

The Commission has held fast to a plan made over forty years ago that has resulted in strong and steady growth with the cities now positioned as key contributors to Saudi Vision 2030. It is easy to be overwhelmed by the business possibilities here and the extent of the progress made so far.

Members of the international investment community were part of this Finance Ministry Saudi Tour (which moved to the East coast one day after the 2020 Budget Forum in Riyadh). There was general admiration for the scale and efficiency of the industrial projects as well as the well-planned and sturdy infrastructure that has been put in place. It is also clear that an ecosystem is being built to fully support local populations.

The Commission is to be congratulated on sticking faithfully to a four decades plan while adapting to new technologies as they present themselves. There is much evidence of an advanced industrial outlook, a good quality of life and a very focused vision of the future.

https://youtu.be/k53w4-7YQ3o


Joy to the World — Founding Father of Indian Company with Mission for Health

“When you spread joy, it returns to you multiplied,” says Huzaifa Khorakiwala, more commonly known as “Sir Dr Huz”.

Wise words from the good doctor, who has wasted no time in putting his own principles to practice. Khorakiwala serves as the Executive Director of Wockhardt Limited, the global pharmaceutical and biotechnology organisation based in India. He founded the Wockhardt Foundation, a national, not-for-profit organisation, to act as the company’s CSR arm in 2008. As the Wockhardt Foundation Trustee and CEO, Khorakiwala runs the organisation with the simple philosophy "where every smile counts".

The foundation is more than a simple non-profit — it’s a movement for human values, social awareness, and social development. The medical and social initiatives launched by the Wockhardt Foundation help India’s disadvantaged communities, and have touched nearly 300 million lives.

"Wockhardt Foundation operates its social programmes based on the 3 B's — Big, Best, and Bold," says Khorakiwala. The Big ensures scale, the Best ensures quality, and the Bold ensures need. He sees healthcare as one of three national building blocks to enhance quality of life; education and hygiene complete the list.

The poorest communities suffer from lack of basic healthcare services, but the Wockhardt Foundation seeks to break any correlation between wealth and health. Khorakiwala realised that communities in rural India were suffering from a shortage of medical professionals: 75 percent of medical graduates opt to live in urban areas — serving only a third of the country’s population. And in urban areas, large segments of the population, from the slums to the shanties, lack safe sanitation.

“Basic healthcare treatment is a right of every individual,” Khorakiwala insists. “I am glad that our initiatives are providing healthcare services to the unprivileged and rural areas, sufficing basic healthcare needs.”

One of the initiatives with real movement is the Wockhardt Foundation’s Mobile 1000 programme, a fleet of over 200 vans that canvas the hard-to-reach rural interior of India to provide basic healthcare such as vaccinations, screenings, and the distribution of free medicines. Khorakiwala took a four-pillar approach to implementing the programme — hardware, software, track and trace, and community. Hardware encompasses all the physically tangible objects in the programme. Fully equipped mobile health vans have a comprehensive suite of first-responder necessities — equipment, medicines, and consumables. GPS tracking systems are another vital part of installed hardware. Software represents the programme’s manpower, with detailed steps for personnel selection, development, and accountability. Track and trace refers to the programme’s revolutionary micro-fleet management system, which pairs scientific route planning and real-time locations to monitor and implement the mobile healthcare service.

With a mission to “win the hearts” of India’s rural community, the last pillar represents “professional healthcare delivery through sensitivity and love”. Since its launch, more than 23 million patients have been treated through the Mobile 1000 programme.

The foundation has applied the same ambition to India’s education system, implementing a highly successful e-learning programme in over 600 schools to date. It has transformed dusty schoolrooms into interactive audio-visual educational centres. The Wockhardt Foundation provides the equipment and teacher-training, monitors the project and maintains quality. One of the first schools in the programme had a pass rate of less than half when it joined in 2012. After the first year in the e-learning programme, that rate jumped to 80 percent; within three years it had reached 100 percent.

An estimated 2.4 million Indian children die before the age of five each year due to improper sanitation. The foundation has launched an initiative to combat the problem, constructing toilet facilities and contributing nearly 5,000 safe sanitation systems to disadvantaged communities. The second phase of the programme focuses on eco-friendly facilities. Nearly 500 bio-toilets have already been installed — systems that require little space and no maintenance, using anaerobic bacteria to break down solid waste and convert it into energy.

The foundation has a host of other initiatives, ranging from toy libraries to free heart surgery for children with congenital illness. All of this aims to fulfil the same belief; social and economic prosperity starts with healthy communities.

Khorakiwala has launched the $19m Health Passion Fund to invest in Indian health-tech start-ups. He is also the founder of the World Peacekeepers Movement, a global grassroots organisation to promote the intellectual depth, emotional appeal, and practical realism of world peace.


Q&A with CEO of Insurance Corporation of Afghanistan: Jamal Asfour

[caption id="attachment_17533" align="alignright" width="262"] CEO: Jamal Asfour[/caption]

What excited you about your earlier career, and what excites you about the business you now lead?
Jamal Asfour: I started my career at Jordan Insurance (JIC) in my home country, Jordan. The interesting aspect of the market was the intense competition. A market player would need to always go for the extra mile in customer servicing standards in order to retain business and grow. This allowed me to learn how to act in the best interests of a client by putting myself in a client’s shoes.

While I was head of BD and research at JIC, we encountered an interesting investment opportunity in Iraq which led to the establishment of the Asia Insurance Company (with other Iraqi shareholders). The Iraqi market had no compulsory insurances in place so we had to work from scratch. We launched the first medical insurance programme in the country, partnering with leading reinsurer Munich Re.

The tenure in Iraq was very successful and the company is respected as the leading private insurer in the country.

Being tagged as the frontier person was not coincidental; I moved to the Insurance Corporation of Afghanistan (ICA) earlier this year. I saw Afghanistan as an interesting country to apply my expertise. It’s quite similar to Iraq in terms of being war-torn.

The most exciting element when starting in a new market is achievements that come through adopting benchmarking principles. I researched and compared various countries’ economic progress in insurance across continents that had allowed some markets to quadruple in size in short time frames. The GCC market achieved 300 percent growth from 2006 to 2016, attributable to various factors. Those factors will be studied for applicability from several angles, and the right solution will be tailored to suit Afghanistan’s situation.

InFrontier, a major equity fund (partially owned by CDC Group) invested in ICA, and there are plans to expand geographically — which is aligned with my ambitions.

What is special about the management style at your organisation, the team you lead and the workforce?
JA: Any organisation’s team members share the same challenge, so I adopt the concept of Peter Drucker (Management by Objectives MBO), starting with the end in mind. We all work as one unit to achieve the desired objective of sustainable and scalable net profitability.

At ICA, we believe an ‘’open door’’ policy is a must for full transparency and openness with team members so common goals can be effectively achieved.

How would you characterise prospects for your industry, and what are the key challenges facing it?
JA: Afghanistan is one of the world’s smallest countries in terms of insurance, so the potential is immense. But various challenges exist, especially the political situation — it’s still considered a high conflict zone. Through peace, I believe all sectors will gain. Afghanistan, according to US research, has more than $1tn in untapped resources. Investors are currently reluctant to get involved due to the situation. I believe Afghanistan will have the world’s highest economic growth percentage for several years if the peace deal goes through.

This will affect all industries, and the Insurance sector could grow at triple-digit rates, at least for a short time. Some legal challenges exist that hinder market growth, and we are advising the government on these, in line with international best practice.

What are the personal and business strengths that qualify you as a corporate leader?
JA: As Sun Tzu wrote in The Art of War, “In the midst of chaos, there is also opportunity.” That reflects my personality of working in conflict zones. Adopting the various strategies of Sun Tzu in running a business operation proved to be very successful.

My analytical and financial skills enable me to make decisions more effective through building various risk-management scenarios — using Sun Tzu’s rules of assessment, planning and combat in the market place.

What are your short-term hopes for the future of your business, and for the industry as a whole?
JA: I look towards seeing more transparency in the insurance industry in Afghanistan, as unfortunately we still do not have market statistics to benchmark ourselves with others, and see how the industry as whole is progressing.

A Track Record for Delivering Results

ICA chief executive Jamal Asfour joined the company in early 2019, bringing with him more than 14 years of insurance experience from across the MENA region.

He is a results-orientated CEO with an enviable track record for delivering strategic, technical and operational value. Prior to joining ICA, Asfour headed the business development, planning and research departments at Jordan Insurance Company, a leading Jordanian insurer with branches and interests in the UAE, Kuwait, Saudi Arabia, Iraq and Yemen.

In 2011, he was appointed CEO of Asia Insurance in Iraq, and led the company to become the country’s largest and most reputable private Insurer. For three consecutive years, Asfour was named as one of the 50 most powerful individuals in the MENA insurance industry.

Jamal Asfour graduated from the University of Kent in Britain with honours in Accounting and Finance.

About ICA

The insurance Corporation of Afghanistan (ICA) is the leading & the 1st established (since 2007) insurer in Afghanistan. ICA won the CFI.co Best insurance Company in Afghanistan for the year 2019 in addition to luring the MENA insurance review newcomer of the year award earlier this year. ICA is the preferred local partner of various international insurers which simply solidifies its position as trusted insurance partner that operates according to International best practices. ICA is proud of it's international partnerships with major World Class Reinsurance players in the Lloyds market as well as the likes of Swiss Re & Hannover Re. It places it's reinsurance business through strong ties with leading reinsurance brokers such as Marsh, Aon, Willis and Lockton offering additional peace of mind to it's numerous stakeholders.


Tadau Energy: Set the Controls for the Heart of the Sun - Ultimate Energy Solution is Finding Traction

A strong focus on green and sustainability and to provide environmentally-friendly and cost-effective alternative to conventional power plants has always been a cornerstone of the business ethics of Tadau Energy Sdn Bhd (“Tadau Energy”). Tadau Energy aims to provide solution to resolve energy poverty and lack of electricity issues in rural areas in Malaysia and other developing countries, by sourcing for lands and to propose new methods of renewable energy projects.

Tadau Energy has completed Malaysia’s first grid connected Large Scale Solar Project with a capacity of 50MWac in Kudat, Sabah, in 2018 which is in line with the Malaysian Government’s strategic intent of decarbonising the energy sector under the 11th Malaysia Plan (2016 – 2020) and to increase power generation contribution through renewable energy from the current 2% to 20% by 2030. Tadau Energy’s Solar Plant is now feeding renewable energy to around 380,000 households and reduce carbon dioxide emission as much as 2,345 tons a year equivalent to the amount of carbon dioxide absorbed by 2000 acres of forest area.

To make the project a reality, Tadau Energy has achieved the World’s first issuance of Sustainable Responsible Investment (SRI) Green Sukuk amounting to MYR250.0 million. This SRI Green Sukuk is a huge vote of confidence of the company’s ability to complete a green project of this size. It also serves national interests as it meets Malaysia’s ambitions to expand its role as a hub for global Islamic financing and to become a centre for Green and responsible Islamic investments in the world.

The framework that Tadau Energy used to issue the Green SRI Sukuk was certified ‘Dark Green’, the highest certification level afforded by the Center for International Climate and Environmental Research – Oslo, Norway (CICERO), an independent green certification agency. This affirms the project corresponds to the long-term vision of a low carbon and climate resilient future.

In overview, this project has driven economic growth, enhance environmental sustainability and create social equity in the workforce. Job opportunities were created for the local community where at least 200 people were employed. The high skill required to build, manage, and maintain the project has also increased the capability of local Malaysians. To this end, Tadau Energy has ensured that the project’s main contractor and international consultancy firm engage local professional engineering firms in an effort to encourage technology transfer and increase the technical skill of local Malaysians.

Meanwhile, Tadau Energy implemented corporate social responsibility (CSR) programs to give back to their communities and to make a positive impact whereby it targeted to light up the lives of more than 1000 villagers without access to electricity living in rural areas of Sabah, Malaysia. One of the CSR programmes conducted is providing solar-powered lamps to the electricity-deprived villagers in Kudat.

Tadau Energy also seeks to contribute to individual/students/agencies/communities who are appreciative towards the interest in solar energy with our own experience and information. We organized teachers’ visitation to the Solar Plant, learning the first-hand on how solar photovoltaic power works, its environmental impact, and the key role that solar plays in helping to create a brighter future for Malaysia’s next generation. These are educators of the younger generation who represent our future. Such visitation puts the learning experience in school about renewable energy into context so that they can deliver a message for a cleaner, greener tomorrow.

Apart from sustainable energy sources, Tadau Energy appreciates the importance of social sustainability whereby Tadau Energy has been practicing agro photovoltaics, which is the incorporation of agricultural activities within solar PV farms. The Company has grown a variety of ground vegetables, crops and flowers between the solar panels to prevent wild grass from growing and to control the natural flow of water as well as prevent soil erosion. Agro photovoltaics has made the land more productive as compare to traditional agriculture, improve the resource efficiency and provide additional long-term income to the farmers. Currently, harvested crops are consumed by Tadau Energy’s own personnel, with the aspiration of supplying to local communities in the near future.

Tadau Energy strongly emphasizes on implementing latest technology in the Solar Plant including to upgrade to smart monitoring system, to conduct drone and electrical connection thermal scanning and integrated data analytics for enhancement of operational efficiency. It constantly provides training and workforce development program focus on improving the skills and competency of their employees.

Solar energy technologies are nowadays the most popular technologies that the world is pursuing. It is the most promising energy to meet the global future demand as it will never deplete.

Tadau Energy will continue their efforts in sustainable use of natural resources and reduce pollution, making a peaceful and clean environment for the future.


Family Office Investing: CFI.co Panellist Speaking at Opal, London

As a part of Opal’s Private Wealth Series, this conference was attended by High Net-Worth Individuals, Family Offices, and Investment Industry Professionals from around the world. The mission to provide an intimate setting for the free exchange of ideas along with purposeful connections was successfully accomplished. The European Family Office winter symposium 2017 included a blend of very informative educational discussion panels, workshops, presentations, and one-to-one meetings.

[caption id="attachment_11530" align="aligncenter" width="700"] Opening remarks by Deepak Lalwani OBE[/caption]

CFI.co has in prior years participated as panellist in similar Opal events in Monaco, Amsterdam and Dubai.

The event was hosted by the Chairman, Deepak Lalwani OBE, from LALCAP (UK).

The event featured a high powered list of speakers and panellists, including internationally recognised psychiatrist and author (“Passing the Buck”, 2016 on Amazon) Simon Bloom.

The topics covered included investment strategies for 2017.

CFI.co’s Chairman, Svensson, was on the panel covering Geo-Political Risks & Cyber Security. The other panellists included Stuart Page, VP of the Board of Trustees, United Nations Interregional Crime and Justice Research Institute (UNCRI) and Dr. Steve Keen, Professor of Economics, Kingston University. This panel was moderated by Renato Alessandro Iregui, from the Raire Family Office.


Klaus Schwab: What Kind of Capitalism Do We Want?

What kind of capitalism do we want? That may be the defining question of our era. If we want to sustain our economic system for future generations, we must answer it correctly.

Generally speaking, we have three models to choose from. The first is “shareholder capitalism,” embraced by most Western corporations, which holds that a corporation’s primary goal should be to maximise its profits. The second model is “state capitalism,” which entrusts the government with setting the direction of the economy, and has risen to prominence in many emerging markets, not least China.

But, compared to these two options, the third has the most to recommend it. “Stakeholder capitalism,” a model I first proposed a half-century ago, positions private corporations as trustees of society, and is clearly the best response to today’s social and environmental challenges.

Shareholder capitalism, currently the dominant model, first gained ground in the United States in the 1970s, and expanded its influence globally in the following decades. Its rise was not without merit. During its heyday, hundreds of millions of people around the world prospered, as profit-seeking companies unlocked new markets and created new jobs.

"Business leaders now have an incredible opportunity. By giving stakeholder capitalism concrete meaning, they can move beyond their legal obligations and uphold their duty to society."

But that wasn’t the whole story. Advocates of shareholder capitalism, including Milton Friedman and the Chicago School, had neglected the fact that a publicly listed corporation is not just a profit-seeking entity but also a social organism. Together with financial-industry pressures to boost short-term results, the single-minded focus on profits caused shareholder capitalism to become increasingly disconnected from the real economy. Many realise this form of capitalism is no longer sustainable. The question is: why have attitudes begun to change only now?

One likely reason is the “Greta Thunberg” effect. The young Swedish climate activist has reminded us that adherence to the current economic system represents a betrayal of future generations, owing to its environmental unsustainability. Another (related) reason is that millennials and Generation Z no longer want to work for, invest in, or buy from companies that lack values beyond maximising shareholder value. And, finally, executives and investors have started to recognise that their own long-term success is closely linked to that of their customers, employees, and suppliers.

The result is that stakeholder capitalism is quickly gaining ground. The change in direction is long overdue. I first described the concept back in 1971, and I created the World Economic Forum to help business and political leaders implement it. Two years later, attendees at the Forum’s Annual Meeting signed the “Davos Manifesto,” which describes a firm’s principal responsibilities toward its stakeholders.

Now, others are finally coming to the “stakeholder” table. The US Business Roundtable, America’s most influential business lobby group, announced this year that it would formally embrace stakeholder capitalism. And so-called impact investing is rising to prominence as more investors look for ways to link environmental and societal benefits to financial returns.

We should seize this moment to ensure that stakeholder capitalism remains the new dominant model. To that end, the World Economic Forum is releasing a new “Davos Manifesto,” which states that companies should pay their fair share of taxes, show zero tolerance for corruption, uphold human rights throughout their global supply chains, and advocate for a competitive level playing field – particularly in the “platform economy.”

But to uphold the principles of stakeholder capitalism, companies will need new metrics. For starters, a new measure of “shared value creation” should include “environmental, social, and governance” (ESG) goals as a complement to standard financial metrics. Fortunately, an initiative to develop a new standard along these lines is already under way, with support from the “Big Four” accounting firms and led by the chairman of the International Business Council, Bank of America CEO Brian Moynihan.

The second metric that needs to be adjusted is executive remuneration. Since the 1970s, executive pay has skyrocketed, mostly to “align” management decision-making with shareholder interests. In the new stakeholder paradigm, salaries should instead align with the new measure of long-term shared value creation.

Finally, large companies should understand that they themselves are major stakeholders in our common future. Clearly, all companies should still seek to harness their core competencies and maintain an entrepreneurial mindset. But they should also work with other stakeholdersto improve the state of the world in which they are operating. In fact, this latter proviso should be their ultimate purpose.

Is there any other way? State capitalism, its proponents would say, also pursues a long-term vision, and has enjoyed recent successes, especially in Asia. But while state capitalism may be a good fit for one stage of development, it, too, should gradually evolve into something closer to a stakeholder model, lest it succumb to corruption from within.

Business leaders now have an incredible opportunity. By giving stakeholder capitalism concrete meaning, they can move beyond their legal obligations and uphold their duty to society. They can bring the world closer to achieving shared goals, such as those outlined in the Paris climate agreement and the United Nations Sustainable Development Agenda. If they really want to leave their mark on the world, there is no alternative.

About the Author

Klaus Schwab is Founder and Executive Chairman of the World Economic Forum.