Naomi Osaka: Champion of Tennis, Fashion — and Endorsements

Naomi Osaka has stormed the tennis scene, snatching up enough titles and endorsements to break some of the game’s most impressive records.

Her victories over Serena Williams at the 2018 US Open and the 2021 Australian Open have cemented her reputation as the future of tennis. Osaka’s business portfolio has put an end to Williams’ four-year run as the world’s highest-paid female athlete. Her impressive performance — on and off the court — allowed her to unseat Maria Sharapova as the highest-earning female athlete. According to Forbes, while Sharapova earned $29.7m in 2015, Osaka brought in $37.4m during the 2019-2020 fiscal year.

Osaka, 23, holds the top ranking in the Women's Tennis Association, with four Grand Slam singles titles as well as US and Australian Open championships. When she burst onto the scene at age 18, Williams described her as young, aggressive, talented — and “very dangerous”.

Williams has been a role model for Osaka since she grabbed her first racket. Her Haitian father, Leonard Francois, believed his girls could become the next sister-superstars of tennis and tried to train them as Venus and Serena’s father did.

Osaka, who has lived and trained in the US since age three, plays tournaments under the Japanese flag. Her mother, Tamaki Osaka, is Japanese, and Naomi opted for Japanese citizenship in 2019. She grew up speaking Creole and Japanese with her family, and English outside the house. A multicultural background and superstar status make Osaka a sought-after face for endorsements. Her pending date at the Olympics has only intensified the bidding frenzy.

“Naomi is in the fortunate position that she has a good string of income,” her agent and senior vice-president of IMG Tennis, Stuart Duguid, reported to Forbes. “She is not just chasing paycheques, and the first conversation with a sponsor is never about the money any more. There are so many things that are a bigger priority than the money. That is the luxury we have.”

As of February 2021, Osaka is brand ambassador for fashion house Louis Vuitton, Tag Heuer timepieces, Beats headphones, Nike sportswear, cloud finance company Workday, Levi’s and Mastercard. Her investment portfolio includes stakes in Bodyarmor (a sports drink company), Hyper Ice (a recovery tech firm) and the women’s pro-sports team, North Carolina Courage.

She selects with care, and needs to feel connected “either through organic use, culture or messaging”. As an avid gamer, she was delighted to partner with PlayStation to help with a launch in late 2020. She picks brands that “have each other’s backs”.

“It’s even more so the case with Bodyarmor, where I’m actually part-owner of the company,” she said, “so it feels very much like a family and we are in this together.”
For the young entrepreneur, creative input is one of the most crucial details in closing a deal. According to the fashion trade journal, Women's Wear Daily, Osaka has a fierce fashion sense and has partnered with the design departments at leading brands to launch several collections. Her limited-edition collections fly off the shelves almost as fast as her serve — which reaches 201km/h.

Osaka’s Nike collection celebrates her Haitian, Japanese and American heritage, while her partnership with Adeam highlights their shared Japanese roots. She also developed a sneaker with Nike and Comme des Garçons. She collaborated with Scottish accessories brand Strathberry to design a handbag collection.

She became a brand ambassador for Shiseido in 2018 — marking a move towards inclusivity in a country with beauty standards that tend to skew towards fair skin. Now Osaka is launching her own line of skincare products. The company is called Kinló, a mix of kin in Japanese and ló in Haitian Creole, both of which translate to gold. She announced the project on Twitter.

“For me, this project is something that requires more than just being a spokesperson,” she told Business of Fashion. “This is a public health need. I used to tell people that I didn’t need to wear sunscreen — but even if you have melanin, you need to take care of your skin, and I am passionate about that.”


Global Imbalances and the Pandemic

The International Monetary Fund’s tenth annual External Sector Report (ESR, August 2021) shows how current account deficits in the global economy widened in 2020 during the pandemic. On the other hand, the ESR also argues that overall, the misalignment between fundamentals and current account balances has not been exacerbated.

The pandemic widened current account imbalances…

The sum of absolute values of current account deficits and surpluses went from 2.8% of global GDP in 2019 to 3.2% last year, reversing a downward trajectory since 2015.

The report points out four major impacts brought about by the pandemic to explain that increase. First, the dramatic drop in travel and tourism has significantly shrunk the balances of countries dependent on tourism receipts, including some Caribbean countries, Thailand, Turkey, Spain, and others.

Additionally, the demand for oil and its price underwent a deep collapse. Although oil prices began a recovery in the second half of the year, oil-exporting countries experienced a sharp drop in current account balances in the year. On the other side, oil-importing countries saw corresponding decreases in their oil trade deficits.

The explosion in the trade of medical products also had effects: a 30% increase in external demand for essential medical supplies needed to fight the pandemic, such as personal protective equipment, and for inputs and raw materials for its production. Importers and exporters of these articles faced corresponding impacts.

Changes in household spending patterns because of the pandemic also had an impact on foreign trade. ‘Staying at home’ meant spending less on contact-intensive services and buying more durable consumer goods, including electronic devices used in teleworking and distance learning. Not by chance, the economic recovery was faster in Asian countries that export such manufactures.

Figure 1 projects where the sum of current account balances in the global economy would have gone were it not for the effects of the pandemic, according to the IMF report:

[caption id="attachment_20539" align="aligncenter" width="582"] Figure 1: Role of Covid-19 Sectoral Shocks (% of Global GDP). Source: IMF (2021). External Sector Report - Divergent Recoveries and Global Imbalances, August.[/caption]

The extraordinarily lax monetary policies adopted by major central banks made the financing of widening current account deficits unproblematic. That was a difference compared to previous crises, when external financing difficulties pushed some countries into recession.

The policies of flattening the pandemic curves led governments to raise large volumes of loans to cover expenses related to health services and economic support for families and companies, which had asymmetric effects on trade balances. Richer economies used their available fiscal space more than poorer economies to implement even more aggressive fiscal policies, borrowing relatively more than poorer economies. The corresponding fall in current account balances, on average, was therefore greater. As a result, the pandemic has slowed the already ‘declining’ flow of funds from the richest countries to the poorest.

… without exacerbating the overall misalignment between fundamentals and current account balances

An important exercise included in every annual IMF External Sector Report goes beyond monitoring of current account balances to examine the extent to which current account imbalances can be considered ‘excessive’ relative to economic fundamentals and appropriate economic policies. The calculation is made for each of the 30 economies considered systemically relevant and covered by the report.

Excessive imbalances are associated with overvaluation of real effective exchange rates, when deficits are larger (or surpluses smaller) than suggested by adequate fundamentals and policies. Symmetrically, there is also an excess when larger surpluses (smaller deficits) than those foreseeable from fundamentals and appropriate policies suggest undervalued real effective exchange rates. Excessive imbalances can generate instability by fueling trade tensions and increasing the likelihood of sharp adjustments in asset prices.

Despite the increase in global current account balances in absolute terms by 0.4 percentage point of global GDP, excessive global imbalances—that is, the sum of the absolute values of the balances considered to diverge from the levels corresponding to fundamentals and adequate policies in the medium term—remained at around 1.2% of world GDP, close to previous levels. Risks and obstacles to recovery in the global economy continue to be strongly associated with the local trajectories of the pandemic, the consequences of which in terms of divergence between countries are still unfolding.

According to the IMF report:

Twelve of the 30 economies were in 2020 aligned with levels consistent with their medium-term fundamentals and policies considered appropriate: Australia (AUS), Brazil (BRA), China (CHN), Hong Kong (HKG), India (IND), Indonesia (IDN), Italy (ITA), Japan (JPN), South Korea (KOR), the Euro Area (EA), Spain (ESP), and Switzerland (CHE).

In turn, nine economies exhibited a devalued effective real exchange rate or larger balances—that is, larger surpluses or smaller deficits—than those suggested by fundamentals and adequate policies: Germany (DEU), Malaysia (MYS), Netherlands (NLD), Poland (POL), Sweden (SWE), Thailand (THA), Singapore (SGP), Mexico (MEX), and Russia (RUS).

The other 9 economies—Argentina (ARG), Belgium (BEL), Canada (CAN), France (FRA), Saudi Arabia (SAU), South Africa (ZAF), United Kingdom (GBR), United States (USA), and Turkey (TUR)—had current account balances that suggested their real effective exchange rates had excessively appreciated, that is, smaller surpluses or deficits larger than those indicated by fundamentals and adequate policies.

Figure 2 gives a snapshot on where the real effective exchange rate (REER) and, accordingly, the positive or negative current account (CA) gaps were last year, relative to what would correspond to fundamentals and appropriate policies in each one of the 30 economies.

[caption id="attachment_20540" align="aligncenter" width="600"] Figure 2: IMF Staff Current Account and Real Effective Exchange Rate Gaps. Source: IMF (2021). External Sector Report - Divergent Recoveries and Global Imbalances, August.[/caption]

Mexico and Turkey look like outliers for special reasons. Mexico’s external position over-strengthened in 2020 because, while large fiscal expansions took place in other major economies (whose actual fiscal balances went relatively further below their desirable medium-term levels), Mexico had a non-significant fiscal response to the pandemic and an additional weakening of the domestic investment climate.

Turkey’s external position in 2020 was moderately weaker than the level implied by medium-term fundamentals and desirable policies. In Turkey’s case, according to the ESR:

“Expansionary monetary policy and rapid provision of credit by state-owned banks put pressure on the lira last year through dollarization, import, and financial account channels, which led in turn to sales of foreign exchange reserves to support the lira. Despite the marked real exchange rate depreciation, the CA deficit resurfaced because of lower exports (including tourism) and robust imports (including gold). The monetary tightening beginning in late 2020 saw a return of capital inflows and modest reserves buildup, but outflows and reserves losses resumed in March 2021, amid rising policy uncertainty and lira depreciation. Policy uncertainty, large gross external financing needs, and relatively low reserves increase Turkey’s vulnerability to shocks. Only over time will the REER undervaluation, with its usual lags, help move the current account back toward its norm, aided by less expansionary policies.”

Whither current account imbalances?

The evolution of current account balances will depend on the fiscal trajectories ahead. The United States—the biggest economy among the cases of appreciated REER—is expected to delay adjustments, judging by the fiscal packages sought by the Biden administration. In turn, Germany—and its devalued REER—would have an even more imbalanced position if it resorted to quick fiscal adjustments. A tightening of global financial conditions with an impact on capital flows to emerging and developing economies could also affect their balances (although factors mitigating those risks can be pointed out).

Going forward, countries with excessive current account balances should seek to shrink their budget deficits over the medium term, and to implement reforms that increase their competitiveness. Meanwhile, economies with excessive current account surpluses and some fiscal space should adopt policies to strengthen recovery and growth over the medium term, including through greater public investment.

Meanwhile, as highlighted by Martin Kaufman and Daniel Leigh:

"A synchronized push in global investment or health spending to end the pandemic and support recovery could have considerable effects on global growth without raising global balances."

About the Author

Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, and principal at Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.

First appeared at Policy Center for the New South


Mahendra Singh Dhoni: Captain Cool Meets his Younger Self to Pass on Business Tips

[caption id="attachment_20544" align="alignright" width="300"] Mahendra Singh Dhoni[/caption]

Mahendra Singh “MS” Dhoni, one of India’s most celebrated cricket players, has earned the nickname “Captain Cool” for his calm resolve on the pitch.

His reticence with the media has lent Dhoni an air of mystique, too. On the rare occasions that he breaks his silence, journalists jump at the chance for an exclusive.

But the champion cricketer has taken media matters into his own hands. He has launched a video in which a young, long-haired Dhoni, shy and a little awestruck in 2005, sits opposite himself to interview the Dhoni of today.

The video was released on April 2 to coincide with the 10-year anniversary of India’s historic win over Sri Lanka in the 2011 World Cup. The media campaign was sponsored by Gulf Oil, where Dhoni — a keen motorcyclist — is a brand ambassador.

“I am delighted to be associated with a brand like Gulf Oil that is driven by passion to move forward. As an avid biker myself, I can very well connect with the brand’s proposition and product offerings,” said Dhoni, who owns 80 bikes in his personal collection.

“This campaign makes me nostalgic as I revisit my favourite cricketing moments including the winning shot at the 2011 World Cup Finals. It gave me a feel of how it would be to meet my younger self, what we would talk about and what I would advise him if we met”.

That advice is geared towards honing athletic prowess — but the counsel rings equally true in the business world.

It’s all about consistency and attitude, according to Dhoni. “You should be desperate to contribute in every game. And of course, it also comes down to how well-prepared you are. Your planning. Your execution, depending on the opposition.”

He talks about experience as a double-edged sword, where continued success pushes the competition to imitate or outmanoeuvre. “So… you’ll have to keep improving your game.”

He stresses the importance of mental fortitude, consistent practice and the willingness to adapt. To stay ahead of the game, you must also enjoy it.

“Of course there will be challenges, but think of them as opportunities to prove yourself. Because whatever the team’s requirements, that’s always your priority.”
It bears repeating — this is sound business advice. And Dhoni applies it throughout his many entrepreneurial endeavours.

Cricket is the second-most popular sport in the world, with an estimated 2.5 billion fans — the majority of whom come from India. Dhoni announced his retirement from international cricket on August 15, 2020, but he still captains the Chennai Super Kings, an Indian Premier League team.

His love of the sport comes second only to his patriotic pride. His wife, Sakshi Singh Dhoni, was a very close third, he joked during a Wisden interview. “Sakshi provides the spark I might sometimes need,” he continued. “Jokes aside, she is the person to whom I have reference. She is both loving and inspirational.”

Sakshi doesn’t often accompany Dhoni on the road. Her hands are full with the media company she runs, Dhoni Entertainment. In partnership with Black White Orange Brands, the production house will launch the first animated spy series set in India, using Dhoni as inspiration for its titular character. It’s expected to air in 2022.

Dhoni also likes to own sports team, as well as play in them. He is co-owner of a football club, a hockey club and a racing team. He has launched his own footwear line and invested in an India-based online marketplace for used cars. He has joined forces with a food and beverage company to produce chocolate and beer. He became a stakeholder in an organic fertiliser company. He has also entered the chicken farming business and sells vegetables from his 43-acre farm. He’s now exporting produce consignments to Gulf countries, starting with Dubai.

The star athlete has established the MS Dhoni Cricket Academy (MSDCA) in partnership with fellow sportsman, Mihir Diwakar, founder of Aarka Sports. MSDCA now operates on a global scale, with operations in India, the UAE, Qatar, Canada, New Zealand and the UK — in short, all the places where cricket is king… or at least gives soccer a run for its money.


The Gig is Up … or Is It?

The gig economy is anything but stable — but it can be the last line of defence in a crisis, argues Yogesh Patel

The pandemic has left 25.7m people in the US either without work or facing pay cuts. In the UK, the unemployment rate hit five percent for the first time since 2016.

These cuts were especially noticeable to 16- to 24-year-olds, where unemployment hit 11.1 percent. The Resolution Foundation, a think-tank aiming to improve the lives of those on low- to middle incomes, found that those from minority ethnic backgrounds, and those aged 18-24, bore the brunt of job losses.

And this, coincidentally, is the demographic that commonly works in the gig economy. Many have been left unemployed or on furlough, without readily available full-time work. Businesses such as Amazon, Uber and the slew of delivery apps provide an accessible income source with low entry barriers and flexible hours.

In the US, the grocery delivery company Instacart saw an explosion of popularity during the first few months of the pandemic. It hired some 550,000 new workers to handle the growing demand. The freedom to set individual work schedules, and the rise in remote working and shopping, boosted the gig economy in supply and demand.

But this was not without problems. Certain roles within the gig economy did not pick up as drastically as others. While food and parcel delivery may have sky-rocketed, the work for taxi drivers did not. The lockdown restrictions and stay-at-home orders did nothing to help Uber drivers who were appealing for improved workers’ rights. In California the controversial AB5 and Prop 22 bills were passed, resulting in delivery drivers being classed as self-employed, and exempt from any state-mandated benefits.

Gig economy workers face harsh challenges when work stops coming in. No job security, no overtime or sick pay, and no healthcare or medical insurance coverage. This was an issue for delivery drivers, especially those from the BAME community who statistically face a higher risk of infection. The percentage of UK BAME workers who are not working, or partially / completely furloughed sits around 55 percent. This compares to just over 40 percent of the general workforce.

While the gig economy may play a role in temporarily alleviating the unemployment crisis, it is not a sustainable solution. The call for greater rights for workers, and the gradual opening of businesses, point to a dismal end for the sector.

As lockdown orders ease and the vaccination programme advances, the world is opening up again. It remains to be seen how much of the “delivery and home convenience” mindset will remain. But should demand for e-commerce remain, it is unlikely that the gig economy will reduce in size. With the push for greater regulation and unionisation, businesses to turn to it during periods of economic downturn. The gig economy could staunch job losses and business closures come the next recession.


Cartica’s ‘Secret Sauce’: Female Leadership, Humility, and Action

Teresa Barger spent 21 years at the International Finance Corporation (IFC) investing in emerging market companies around the world. At the IFC, she held the positions of division manager for Africa, deputy director of investment review, director of private equity and investment funds.

[caption id="attachment_20562" align="aligncenter" width="900"] Co-founder & CEO of Cartica Management: Teresa Barger[/caption]

What are your hopes for the future of your business, and for the industry as a whole?

TB: I would like to see diversity of firm sizes, of active and passive strategies, of country allocation, and of finance professionals. At the same time, I would like to see convergence around support for transparency, honest financial statements, and good governance.

What relevant changes to legislation or regulation would you like to see?

TB: My pipedream would be to see all stock exchanges everywhere outlaw dual-class structures and the concomitant divergence between economic stakes and voting power.

Do you have any anecdotes to illustrate your progress over the years?

TB: In 2010, I met with the representative of an Indian tyre manufacturer. I asked: “What do you think of your stock price?” They answered: “We don’t care about our stock price, and furthermore, we don’t care about our shareholders.” I note that they now have an active IR team and are busy trying to attract investors(!)

How do ESG parameters and sustainability principles affect the way your industries are run?

TB: Thinking deeply about ESG issues — plus corporate culture and management quality — makes asset managers more well-rounded. Engaging with ESG issues exercises what I call “business imagination”. Without business imagination, investors who have access only to publicly disclosed information will always be caught short.

What are the mid- to long-term challenges faced by your business?

TB: Consolidation of investment power in the hands of a few firms is a challenging prospect. We are also getting precariously close to the tipping point where the absurdities of passive investment will be felt. If the market is virtually all passive, who is there to do the thinking about valuation? Also, passive makes select companies more expensive (with less future value) and leaves behind companies that will be less expensive (more upside). To make markets function, active investors must be sufficiently present to complete the arbitrage.

What excites you about the business world in general?

TB: Since I was 10, I have been convinced that successful businesses allow people to live decent lives. If companies compete fairly and create goods and services at a fair price, then a virtuous economic cycle ensues. And this is what allows us to feed, clothe, and educate our families.

What lessons did you learn from your earlier career experience?

TB: Humility is the corporate value from which all other corporate values flow.

What motivates and enthuses you about the business?

TB: Since we are ESG-improvement investors in the listed space, we want to learn and make companies better every day. This is how we will outperform for our clients.

What is special about your organisation’s management style?

TB: The most special thing about us is that three of the four top executives are women. It is unfortunate that this should be “special”.

What are the key strengths of the team?

TB: Everyone in this business is smart; what matters is how you use that intelligence. The Cartica team is motivated to dig deeper, understand how the blood flows through a company’s arteries, and find practices that can be improved to make the company more valuable.

At IFC, Barger created the first index for EM private equity and co-founded the Emerging Markets Private Equity Association (EMPEA). She also developed the first two corporate governance funds in the emerging markets, for Korea and Brazil. She was subsequently director of corporate governance and securities market development.

In this latter position, she was responsible for the governance aspects of IFC investments and for using governance as a value-adding strategy. She also created the Gemloc bond fund, index, and market development programme for local currency bonds.

Before joining IFC, Barger was with McKinsey & Company.  She is a member of the Council on Foreign Relations and serves on the boards of American University in Cairo, National Investment and Infrastructure Fund of India, Poema Global, and ANERA. She also serves on the advisory council for Princeville Global.

Teresa Barger received her AB magna cum laude from Harvard College and an MBA from the Yale School of Management.  She did post-graduate work at the American University in Cairo, and speaks Arabic and French


Book Review - Built to Last by Jim Collins and Jerry Porras - The X factor: What Makes Some Businesses Excel…?

Visionary companies need a strong ideology and big, hairy audacious goals. Naomi Snelling looks back at a 1994 book that celebrates them…

How strong are your core values, and your core ideology? If you want to build a business or enterprise with enduring vision and reach, these things should run through your organisation like the writing on a stick of Blackpool rock. Get it wrong, and you’re doomed to mediocrity or burn-out — no matter how much charisma you have.

We’re not talking about the clichéd “we’ve got integrity” statement here (cue teen-style eye-roll). These qualities are things you demonstrate by your actions and interactions, and this isn’t Show and Tell. In their book Built to Last, authors Jim Collins and Jerry Porras reveal that values with, um, value, are capable of launching a business into the stratosphere of enduring success. They are sacred tenets, held with passion; they are the engine that can really drive a business.

Built to Last was published in 1994, and quickly translated into 25 languages. It created shockwaves that are still rippling today. Collins’ subsequent book Good to Great was clutched to the bosom of business theorists and strategists worldwide, spawning many business groups.

"A core ideology has to live through all products, services and employees — it’s the beating heart of a business."

What was all the fuss about? The revelation is that the success of visionary companies stems directly from core values — not from a special idea, new product or solution. And that was revolutionary.

The books also reveal that stellar companies invariably boast exceptional leadership, albeit in a style that busts the myth that a charismatic and visionary leader can be a silver bullet. Another key common denominator of businesses with legendary and enduring success is that they never settle for “good enough” — they drive forwards towards “big hairy audacious goals” or BHAGs, as they’ve become known.

Built to Last drew upon a six-year research project at Stanford University Graduate School of Business, exploring 18 truly exceptional and long-lasting companies. Between them, they have an average age of nearly 100 years, outperforming the general stock market 15 times over since 1926. The book studies each company in direct comparison with one of its competitors, focusing on each stage of development.

This is a quest for the secret sauce that makes exceptional companies different. What has consistently differentiated companies like General Electric, 3M, Motorola, Johnson & Johnson, Boeing, Wal-Mart, Hewlett Packard, Procter & Gamble, Walt Disney, and Philip Morris from their rivals?

Through forensic analysis of the secrets of 18 businesses, Collins and Porras reveal that standing the test of time is more about values and ideology than anything else. Having a strong core that drives almost every decision is more important than a product or service. As crazy and counterintuitive as it may seem, it doesn’t even matter what you’re making or offering if your values are firmly held.

For the most part, we live in a culture that values a logical approach to “knowing” things, so this value-centred approach can be undervalued or misunderstood. Yet the book’s thorough review of the 18 case studies demonstrates that there is more of science than art at work.

Collins cites the example of companies which floundered a few times but had a sound core ideology. Such as Sony, for example, which briefly flirted with the food sector before diving deep into the electronics space. Its sound core ideology was the key to its success and endurance.

So, what is a core ideology? Essentially, it’s the DNA of a business: its reason for existing. According to Collins and Porras, it consists of two things: a higher purpose and a set of core values. Profit this is not the primary focus. Paradoxically, visionary companies make more money than those that are purely profit-driven. So that’s one in the eye for conventional business school doctrine, which puts the focus on the bottom line and suggests maximising shareholder wealth as drivers.

A core ideology has to live through all products, services and employees — it’s the beating heart of a business. But reassuringly, it doesn’t have to be perfect — it can be whatever you want it to be, as long as it’s used to guide your business. With purpose and principles to guide you, you can create a vision great enough to attract great minds to help you.

Many of the profiled companies had a few false starts, but continued to experiment, set ambitious goals, and innovate towards their vision. Leaders of visionary companies should be clock builders, not “time-tellers”.

“Having a great idea or being a charismatic visionary leader is ‘time-telling’; building a company that can prosper far beyond the tenure of any single leader and through multiple product life cycles is clock building,” writes Collins. “Those who build visionary companies tend to be clock builders. Their primary accomplishment is not the implementation of a great idea, the expression of a charismatic personality, or the accumulation of wealth. It is the company itself and what it stands for.”

Built to Last claims that the leaders of visionary companies are almost always home-grown. “In more than 1,700 years of combined history, we found only four cases in our visionary companies in which an outsider was hired as chief executive — and that in only two of the 18 companies. In contrast, our less successful comparison companies were six times more likely to go outside for a CEO,” says Collins.

Big Hairy Audacious Goals

And what of the now-famous BHAGs? Perhaps unsurprisingly, visionary companies don’t abide by the status quo. Rather than aim for achievable, practical goals, and mini goals that give a sense of accomplishment, BHAGs create some unease. They are intended to be extraordinary, sweat-inducing and boundary-breaking — and you may not be 100 percent certain they can be achieved. At the same time, they are inspirational, and often create a strong internal drive and team spirit.

Built to Last references former US President John F Kennedy’s out-of-this-world goal to land someone on the moon. “Like the moon mission, a true BHAG is clear and compelling and serves as a unifying focal point of effort — often creating immense team spirit. It has a clear finish line, so the organisation can know when it has achieved the goal; people like to shoot for finish lines.

“A BHAG engages people — it reaches out and grabs them in the gut. It is tangible, energising, highly focused. People ‘get it’ right away; it takes little or no explanation.”

You don’t need to be planning the next space mission, although several companies and countries are — notably the United Arab Emirates and its 2117 project, which aims to put a settlement on Mars within the next 100 years. Whether it achieves this or not, this is certainly a BHAG, and plays a part in helping to position the region as a leader in science and technology.

As well as being inspirational and powerful, BHAGs can often garner headlines. “Land on Mars, a round-trip ticket — half a million dollars, it can be done,” said Elon Musk, regarded as one of the business geniuses of modern times. Jeff Bezos, founder of Amazon and space travel company Blue Origins, hoped to set up a cargo delivery service to the Moon in 2020. That BHAG that seems to have been delayed, but the media have been full of the news that the first Blue Origin human flight to space — with Bezos and his brother — has been won after a four-week bidding process. It set the (anonymous) winning bidder back $28m.

The Bezos brothers and company zoom off on July 20 for what some tabloids call “an excursion into space”, although some critics have sniffed at exactly how much of a “real” space mission it is. They won’t be going even as far as the Moon, some have sniped. When creating a BHAG you have to be prepared for potential kickback like this, and the tongue-in-cheek petition signed by thousands to deny Bezos re-entry to Earth.

Meanwhile, the proceeds from the winning ticket will be donated to Blue Origin’s foundation, Club For The Future, a science and education charity that aims to inspire future generations to pursue careers in STEM subjects. Perhaps it’s time to find the BHAGs that can take your company to infinity, and beyond.

The Big Six - key takeaways from Built to Last:

Make the company itself the ultimate product

Build your company around a core ideology

Create a cult-like culture

Home-grow your management

Use BHAGs, experimentation and continuous improvement

Preserve the core and stimulate progress


Emily Alejos, CIO at Cartica: Leading the Way in ESG Investing in the Emerging Markets

[caption id="attachment_20625" align="alignright" width="300"] Emily Alejos - Chief Investment Officer[/caption]

Emily Alejos joined Cartica Management as Co-CIO in April 2018 after a nationwide search for a talented and experienced investor in emerging markets. Alejos was the perfect hire for Cartica, a proven investor and leader and a great cultural fit. After nine months, she took the reigns as Chief Investment Officer, working closely with the firm's founders and Investment Committee.

Being CIO at Cartica is the culmination of a long and successful career investing in global equities and emerging markets. Before joining Cartica, Emily was Co-CIO and Portfolio Manager/Analyst at Tradewinds Global Investors, and before that, she worked at Credit Suisse first as Portfolio Manager and Head of Latin American Equities and then as PM/Analyst on the International Focus Team. At Cartica, the team is focused on identifying mispriced EM companies with good business models, good management teams, and strong or improving balance sheets. The team actively engages with portfolio companies on ESG and other strategic matters with the long-term goal of increasing shareholder value. “Integrating the team’s expertise on corporate governance issues and working to improve portfolio companies’ ESG profiles by engaging with them on best practices, is what sets us apart and it’s what we love to do!” Alejos said.

Emily hopes that “the market will increasingly recognize the importance of both ESG and diversity of opinion, not just because investors enquire about it but because it’s the right thing to do as it delivers better results. It is also vital that investment managers hold themselves to the same high standards that they hold their portfolio companies to. It is clear our industry urgently needs to embrace independent thought and diversity and inclusion; the pathetic numbers tell the story.”

ESG’s growing traction as an investment strategy has come sharply into focus during the Covid-19 pandemic with almost nine out of ten sustainable indexes doing better than their non-sustainable counterparts in the first four months of 2020, according to BlackRock.

“The trend of acceptance of ESG globally is improving dramatically and not just for investors. It is critical to every company’s success to create a sustainable business model.” Emily is inspired by innovation, entrepreneurship, and management teams willing to challenge themselves and the market to bring about positive change. She is encouraged by the increasing recognition of the importance of emotional intelligence in management teams and their understanding that these values will produce a higher quality product and service.

Always mindful of the importance of humility, she maintains that a great leader should “support and encourage their colleagues to take risks when appropriate and to focus on adding value personally and collectively where they can.” She works closely with her team, providing support and guidance for everyone to excel and grow. “There is so much work to be done and we need to show people how to do it.” Alejos says.

With Cartica’s innovative, proven and disciplined approach to actively investing in emerging markets, it seems fair to say that Emily Alejos is already providing the great leadership to which she aspires.


KPMG Lower Gulf: Banking on ESG Risks in Future

[caption id="attachment_19511" align="alignright" width="300"] Author: Abbas Basrai[/caption]

ESG risks have the potential of negatively impacting banks’ assets, earning capacity, and sometimes their reputation, argues Abbas Basrai.

Environmental, social and governance (ESG) factors and the emerging risks associated with them are becoming increasingly relevant to organizations, especially banks. Issues regarding environmental change, race and gender equality are shaping our society, with increasing levels of awareness and participation from stakeholders.

In an era of fast-moving data and ease of information availability, corporate reputations rise and fall not only due to their financial earnings but also based on their position on social and environmental issues. For modern-day organizations, fulfilling the needs of employees, customers, and the communities they operate in is critical.

Experts estimate that millennials alone could place close to USD 20 trillion in ESG-related investments over the next 30 years in the US, providing a significant platform of opportunity for businesses looking to capture long-term growth. As of mid-2019, assets under management for ESG-related funds stood at approximately USD 800 billion, representing a three-fold increase in the past ten years. All these factors point to businesses no longer being able to afford avoiding ESG matrices if they are to survive.

"While the risk itself is not stand-alone, it does provide a degree of influence on banks’ existing risks, be it financial or non-financial in nature."

The levels of corporate social responsibility (CSR) reports and adoption of various global standards on sustainability such as the GRI (Global Reporting Initiative) and the UN’s Sustainable Development Goals (SDGs) by organizations globally have increased multifold in the last 20 years. But there have also been increasing carbon-emission levels and damage done to the environment during the same period. Additionally, while corporations have made significant progress in enhancing sustainability in their business models, there is still a long way to go.

Risky Business?

ESG is poised to stir up questions of ethics within the banking industry and raise economic and existential queries, activating a new category of risk: ESG risk. While the risk itself is not stand-alone, it does provide a degree of influence on banks’ existing risks, be it financial or non-financial in nature. ESG risks increase the chances of negatively impacting banks’ assets, earning capacity – and sometimes their reputation.

We can draw similarities from the current Covid-19 crisis and its impact on banks with ESG risks. The pandemic raised various issues for banks, such as travel restrictions that forced employees to work from home for an extended period. There were also issues with IT infrastructure, including cyber risks and network capacity constraints. These risks were unforeseen and not expected to happen at an organization-wide level in such a short span of time. In addition, banks also encountered problems around decreased demand for products and services from customers and disruptions to the supply chain. These risks warranted a quick and efficient response from these organizations, and mostly in an ad-hoc manner.

How successful banks are in coping with Covid-19-associated risks can mainly be attributed to the maturity of their operational resilience, and the same can be expected when dealing with ESG-associated risks. While banks can undoubtedly leverage their experience from the pandemic to prepare for upcoming sustainability risks, they will also have to develop new and innovative ways to confront these risks.

Planning and Testing for Risk

Existing risks identified by banks, such as credit and counterparty risks, market risks, liquidity risks and operational risks, are generally recognized to have potential impact on the institution. With ESG risks, the impact is limited to the bank itself, and all its stakeholders, and the risks to which the bank is exposing its stakeholders and the environment, due to its business activities. Dealing with such risks requires an approach of embedding them into the risk-management framework, with comprehensive risk governance and practical risk strategy, before implementation into the risk management cycle.

ESG risks can affect all divisions of a bank, including profit and cost centers and various parts of the three-lines-of-defense model. Enhancing the roles and responsibilities of existing units in the organization can be key to a successful governance model for banks. For instance, clear decision criteria and control mechanisms must be embedded into lending decisions for banks. ESG factors should also be assessed, similar to examining reputational risks in the know-your-customer (KYC) process.

Banks must also be cognisant of the fact that ESG risks’ planning horizons are usually much longer than the three to five years traditionally considered in business and risk strategy design. This especially applies to the climate-change-related components of ESG risks. The strategy on ESG needs to be aligned closely with overall business strategy, requiring regular reviews and updates when necessary.

So far, major International banks have begun their journey of overhauling their governance structures and risk frameworks to counter climate-related risks – especially around oversight of climate strategy and management of climate-related risks. While most banks have set net-zero targets by 2050, the process of quantifying their financed emissions is still underway. As the next course of action, banks need to include quick and early assessment of climate stress tests using available data sources. This is especially important as supervisory bodies in countries like the UK are launching climate-risk stress tests for banks. The UAE and other countries in the Middle East are expected to follow suit.


Click OK and Call Me in the Morning — How Online has Changed Shopping for Meds

Social media have been on about the New Normal since the start of the pandemic. People are still looking forward to a time where quarantines and lockdown orders are things of the past.

But no one has much idea of what form that “normal” might take. According to studies and surveys of consumer behaviour, looking for the end of the pandemic has fundamentally changed the game.

For businesses, it is important to understand these changes. Priorities between hygiene and convenience could alter the trajectory of certain enterprises that have previously run without issue.

One sector that has faced severe disruption has been the pharmaceutical industry. Setting aside the impact of the vaccines and vaccine-distribution, the world of e-pharmaceuticals has exploded. Items sold by online pharmacies rose by 45 percent in the UK, from 29 million items in 2019 to 42 million items in 2021. While this may seem like a drop in the ocean when compared to traditional brick-and-mortar pharmacies — just 4.1 percent of all items came from distance-selling pharmacies — this could be set to grow.

In a survey run by McKinsey, two shifts in consumer behaviour could help to sustain the rise in e-pharmaceuticals. The rise in preference of e-commerce combined with the decrease in satisfaction of in-person shopping due to the risks and hassle of “safe” shopping, show a shift to online.

The past year has seen a general rise in online alternatives, as Amazon can contest. The extended time spent away from traditional stores has highlighted the benefits of online alternatives.

McKinsey points out that consumer priorities have changed, and people are prioritising health and hygiene. With more health-conscious decisions, the expectation is that more over-the-counter medications will be bought from e-pharmacies.

This provides a new way to sell medications, and it is not limited to the UK. In 2018, Amazon made headlines due to its acquisition of medication packing company PillPack. It has since begun to sell medicine via its website. In a country like the US, with a mainly privatised healthcare system, a more convenient, cheaper and faster option is always popular.

Combining prescription medicines with Amazon Prime subscriptions, the company offers discounted meds at competitive prices.

India has also seen disruptive companies enter the market space. Services such as Netmeds and PharmEasy show how the new interest in e-commerce could translate to a rise in e-sales in other countries.

While the market is entering an interesting time, there is concern among some healthcare experts. In an interview with The Pharmaceutical Journal, the CEO of the Association of Independent Multiple Pharmacies, Leyla Hannbeck, warned that online pharmacies “were not familiar with local GPs, while local pharmacists are”.

Hannbeck also worries that online pharmacies will be taking trade from physical stores. “Pharmacies in the UK are paid from the same pot,” she says, “whether they are online or on the high street. Because of this, they do not suffer from the same high costs — and the extra profit generated will instead be passed into the hands of shareholders.”

The promise of better access to cheaper and more convenient healthcare will probably become a selling point. Combined with the changes in consumer preferences and priorities, things could well be angling healthcare and medication shopping towards the net.

By Yogesh Patel


Uzbekistan Celebrates 3,000-Year Heritage with Largest Science Event of its Kind

5th Annual Congress of the “World Society for the Study, Preservation and Popularization of the Cultural Heritage of Uzbekistan” held as part of UNESCO-backed event

Uzbekistan hosted the 5th Anniversary Congress of the World Society for the Study, Preservation and Popularization of the Cultural Heritage of Uzbekistan, as part of Uzbekistan’s Cultural Heritage Week. The event was held in three cities of the Republic – Tashkent, Khiva and Nukus.

The Congress, one of the most important events in the nation’s Cultural Heritage Week, was held in conjunction with the international forum “Central Asia at the Crossroads of Civilizations”, convened at the initiative of the President Shavkat Mirziyoyev, with support from UNESCO.

[gallery link="file" size="medium" ids="20643,20644,20645"]

The Congress is the largest cultural event of its kind in the world, highlighting the World Society’s five-year mission compiling literature and other artifacts of the cultural heritage of Uzbekistan from museums, libraries and universities around the world. Thus far, it has published 50 volumes containing facsimiles of ancient documents, as well as over 1,000 articles and speeches. It has established relationships with over 200 museums from 35 nations. Some 350 international scientists are members.

Founding sponsors, ERIELL Group and Enter Engineering, have both played a crucial role in ensuring the success of the project. The World Society noted that the two companies had contributed towards:

Over 50 cultural events - hosted in dozens of countries around the world;

Seven unique facsimile copies of the greatest ancient Eastern manuscripts to be published;

Hundreds of foreign business trips for research and scientific work; and

50 luxurious illustrated book-albums of the series “Cultural heritage of Uzbekistan” in the collections of the world, to introduce advanced scientific technologies in the preservation of historical monuments and manuscripts.

Commenting on the significance of the Congress, Firdavs Abdukhalikov, Chairman of the Board of the World Society for the Study, Preservation and Popularization of the Cultural Heritage of Uzbekistan, said:

“The project is a vivid example of the consolidation of public, state and international organizations, as well as socially responsible business in the New Uzbekistan. So, today, as the fifth International Congress completes its work, the members of the World Society would like to thank the President and the Government of Uzbekistan, who provide all-round support to this international movement, paying special attention to the issues of preservation and study of our richest cultural heritage. We would also like to express our gratitude to ERIELL Group and Enter Engineering and their chairman, Bakhtiyor Fazilov, who is not only a sponsor but a like-minded person and an active participant in the project since its inception."

Marc Bonnel, President of the international Association ‘Avicenna-France’, said:

“We are thrilled at how respectfully and carefully the President of Uzbekistan treats the cultural heritage of his country. The Congress and other events of the project are world events of unprecedented significance. But they would have been impossible without the diligent attention and support of Uzbekistan’s government and businessmen – true patriots of the New Uzbekistan. It is wonderful that the project “Cultural Heritage of Uzbekistan in the World Collections” has found such strong support in ERIELL Group and Enter Engineering. I am sure that with such partners we will have brilliant results and new, amazing discoveries.”

Bakhtiyor Fazilov, chairman, ERIELL Group and Enter Engineering, said:

“The Congress is the largest cultural event of its type in the world, and it is with great pride and honour that we have supported the Society's activity since inception five years ago. There is full alignment between scholars, business interests, our President and eminent international organisations such as UNESCO - in reaching out to the world to share Uzbekistan's cultural heritage, which belongs to all mankind."

Alexander Wilhelm, Vice President, Marketing and Development, Mueller & Schindler Publishing House (Austria), said:

“We are honoured to be a part of a unique project implemented by Uzbekistan. The research practice of the World Society for the search, study and reconstruction of exact copies of ancient and medieval manuscripts is worthy of high respect and is unprecedented in its aims and scope. Fifty volumes that we published, as well as facsimile editions that we create together with the World Society with the support of ERIELL Group and Enter Engineering are an invaluable gift to the people of Uzbekistan and the world.”

The World Society for the Study, Preservation and Popularization of the Cultural Heritage of Uzbekistan was founded following a first Congress on the theme “Cultural Legacy of Uzbekistan – the path to dialogue between nations and countries”, held in May 2017 in Tashkent and Samarkand. Formal registration occurred on 21 August, 2019.  The Society, headquartered in Paris, aims to identify, catalogue and showcase all art objects reflecting Uzbek cultural heritage currently scattered among the largest collections around the world. As a result of its strategic position on the Silk Road, on the borders of Persia, India and China, over the centuries Uzbekistan has been subjected to multiple cultural influences that have inspired an exceptional artistic output.


Sports United by a Common Goal: Getting Bums Safely Back on Seats

Sport has cultural and economic importance; every country celebrates stars and leagues and teams in some form. It’s one of the great unifiers.

Sporting events are social events, and — as with some many other aspects of modern life — the pandemic put a hold on that. Public gatherings fly in the face of distancing guidelines — and there is always the risk of a big match becoming a “super-spreader” event.

A recent study by the Johannes Kepler University in Linz, Austria, showed that US cities with National Hockey League and National Basketball Association franchises saw a nine percent rise in Covid-19 infections after games. As both sports are played indoors, they are theoretically an effective way to spread a virus.

But a similar study on outdoor sports, conducted by the University of Reading, found that for every football match played, the infection rate in surrounding towns and cities also increased, by six people per 100,000.

There was apparently still a need to keep fans from the stands.

Findings such as these have affected clubs, leagues and the sports industry. Since the start of the pandemic, the NBA has lost some $450m in revenue and MLB (major league baseball) around $640,000 for every crowd-free game. The problem doesn’t stop at club-level though; the general US sports industry was estimated to have lost $12.3bn by mid-2020.

That affects other professionals, from trainers and physiotherapists to broadcasters and ground staff. The shared goal became how to return to the pitch, field, rink or court in a way that fit with government guidelines.

The NBA played the 2019/2020 season in a quarantined area of Disneyworld in Florida. Players and staff were not allowed to leave the area, and there was minimal interaction with fans or media. This stop-gap solution mitigated the financial drain. Projected ticket sales revenue dropped 10 percent, but that could have been much worse.

The 2020/2021 season started in December with a shorter overall season of 72 games, down on the usual 82. There were hopes that this would reignite the excitement for fans, but only seven teams were able to play all their home games with crowds in attendance.

The delicate nature of sports schedules is a problem. When a single player tests positive, the whole team must be tested and quarantined. Games had to be rescheduled or cancelled, teams were out of practice because of all the delays, and the league suffered.

The NBA was the first to find some solutions. It pioneered the comeback that led the way for American football and baseball to follow. Sport is an integral part of society, economically and culturally. For now, it seems to be on the comeback trail; whether the fans will be allowed to follow remains to be seen.

By Yogesh Patel


Verdant Capital: The Fintech Ecosystem in Africa is Entering into a New Era of Growth and Consolidation

The fintech ecosystem in Africa is entering an exciting and challenging phase with more capital, more competition, and more consolidation.

As key segments grow, the rewards and risks grow for challengers and incumbents. Available capital has grown in amount and breadth recent years. “Home-grown” funds specialising in fintech — often with the support of international development finance institutions — have become a core part of the investor group.

Generalist investors from the African continent have taken a more active role, with most having made investments in the fintech sector from recent fund vintages.

As the sector in Africa has scaled and grown, larger, more mature players have started to catch the eye of global tier 1 venture funds. The recent Softbank-led $400m round into Opay is a case in point. Verdant Capital fintech transactions in the past year have involved investors from the US, Japan, China, the Netherlands, Switzerland, France and the Baltics. Certain major global VC investors, such a Partech Global, investor in tech-enabled asset finance business Tugende, and others — such as Wave, in Senegal — have invested from the dedicated Africa Fund since 2018. More VCs are now investing directly from global funds.

Large corporates have entered the competitive landscape through minority investments, such as incumbent payment businesses such as Mastercard and Visa. Others have used corporate repositioning, for example a recent Airtel decision to partially spin-off its mobile money business. It’s a strategy likely to be replicated by other mobile network operators.

Availability of capital is crucial for fintech. By its nature it is disrupting the financial services sector, which was in need of renewal, and had major barriers to entry. This is because of human- and operating expenditure-heavy product life cycles (lending or insurance), and over-reliance on legacy infrastructure not consistent with evolving customer preferences.

Barriers to entry are high, with significant minimum capitalisation for bank, insurance and other licences, lengthy application processes, and the importance of brand in the sector. The movement of financial and human capital has enabled the fintech sector to overcome these barriers.

Scale is becoming an important differentiator in the success of the funding rounds: “It’s good to be the best, but it’s better to be the biggest.” In some ways, this represents convergence with the major tech and venture ecosystems, where growth is prioritised above all — including profitability. In theory, this is justified by platform economics — the theory that the additional revenue from each additional “node” has a more linear impact on the aggregate revenues. Despite the theory’s logical basis, many unicorns, such as Uber and WeWork, remain unprofitable after multiple successful funding rounds.

[caption id="attachment_20685" align="aligncenter" width="1197"] FinTech Africa Transactions. Source: Verdant Capital, S&P Capital IQ[/caption]

In Africa, most fintech players have historically had to “eat what they kill”, i.e. prioritise profitability over growth to achieve profitability sooner. The latent potential of many fintechs, including disrupters to credit and payments, has made for rampant growth in the best operators. Zeepay, a pan-Africa, pan-diaspora electronic payment disrupter, has grown its revenues 13-fold in three-and-a-half years while maintaining constant profitability.

The preference for scale has also been driven by the entry to Africa of the Tier 1 global VCs. This has given fintechs in Africa an additional growth incentive to obtain the higher cheque amounts — and, typically, higher valuations. It has also been driven by competitive strategists from within and without.

Scale, growth, and competition have prompted consolidation from push and pull perspectives. Africa has an aggregate population and GDP similar to India’s, but fragmented into 54 countries. This has prompted cross-border M&A as the sector has matured, and larger players have pursued platform economics by adding national markets.

Horizontal consolidation across segments is also an exciting trend, with payments and credit-tech increasingly seen as highly synergistic. The “rails” to reach lower- and lower-middle market customers, and to receive data and repayments in the other direction, is a critical component in many credit-tech and tech-enabled businesses. Crossfin’s shareholding in Retail Capital, a leading South African tech-enabled SME-lender, is an example of a payment platform acquiring interests in the credit segment.

The “push” factors of strategic threats, including by global payments groups and regional telcos, has led to some fintechs in the growth phase to take pursue either an ever-larger capital round, or an exit. In some cases, the status quo is not an option.

The early-stage VC scene (angel, seed stage, and series A) has recently been pushed out of the headlines by the larger transactions, but activity levels are growing.

Newer disrupters are focusing on more recent themes, such as insurtech, and several ventures are targeting the crossover between fintech and cleantech — for example, OWatt from Nigeria. Insurtech has several interesting players getting closer to “escape velocity”, including Briisk, in South Africa, Alpha Direct, in Botswana, and Kalibre, a global insurtech with roots in South Africa.

Insurtech has greater barriers to entry than many other fintech segments, including a lack of real domain expertise and a longer revenue-building cycle (although the revenues are much “stickier” once built).

Credit tech still has a range of interesting start-ups and earlier stage businesses, including Finclusion, an embedded credit-player in southern and eastern Africa, and asset financing businesses, such as Planet42 in South Africa and Mexico.

As African start-ups from the early and mid-2010s reach a global audience, there is a fascinating new cohort arising…


Kate Ahern: It’s ESG All the Way for Female-led Firm Dedicated to Positive Change

[caption id="attachment_20694" align="alignright" width="300"] Kate Ahern - Head of ESG[/caption]

‘Pick good companies and then help to make them even better’ — the firm’s role, in a nutshell, by head of ESG Kate Ahern

Cartica Management is predominantly owned and led by women, and the firm’s go-ahead attitude consistently attracts professionals dedicated to positive change.

Cartica’s head of ESG, Kate Ahern, works alongside CEO Teresa Barger to lead an active-ownership approach and unlock value using ESG as a fulcrum, and a focus.

Ahern leads sustainability practice and the firm’s engagement process with portfolio companies. She is perfectly qualified for her role, with a decade-and-a-half of experience in ESG management, social impact diligence, and corporate responsibility. Before joining Cartica, she was director of ESG and communications at Bain Capital, responsible for implementing ESG across all asset classes.

Ahern has a deep understanding of her field, and that means having an awareness of potential pitfalls and problems. “I think data presents the greatest mid-term challenge to the industry,” she replies when quizzed on that, “especially in emerging markets, and for investors focused on smaller companies. ESG-related data can be spotty or non-existent.

“We need to find ways to make it easier for companies to disclose information on practices and policies so that investors can make better-informed decisions.”

Ahern believes the die has been cast when it comes to corporate responsibility — investing through an ESG lens is no fad; it’s here to stay. “The challenge now is to continue to improve how we manage ESG risks and opportunities in a way that creates value for companies, their investors, and the broader community.”

After 15 years at the top of her game, Kate Ahern is still excited about the possibilities and potential of the business world. “I think the evolving expectation that companies can — and must — be part of creating solutions to problems is thrilling,” she says. “We’re no longer thinking about government, philanthropy, and non-profits as the only groups that can improve people’s lives, and that can lead to a more sustainable world.

“We now look to the private sector to support those efforts, and in many cases to lead.”

Maintaining motivation is easy, she says. “I love the opportunity to work with my colleagues to make companies better every day. I like being part of a team that’s working to prove the model for our style of investing: pick good companies and then help to make them even better.”

That team is central to the firm’s success, and crucial to the achievement of its ESG goals. “Cartica is full of smart, interesting people who are good to each other,” Ahern says. “Most of them took a winding path to get where they are today. We have former champion tennis players and olive farm owners — I think that helps us to craft a unique perspective on where the world is going, and how we should invest.”

Can public equity investors really help companies to become more sustainable and responsive to all stakeholders — and not just shareholders? “Cartica has built a business that shows that yes, public equity investors can engage with companies to help them to improve environmental, social, and governance practices,” says Ahern, “and to improve on other areas of operations.”


Russell Westbrook - The Career and Rewards that Came from a Simple Question: Why Not…?

[caption id="attachment_20711" align="alignright" width="300"] Russell Westbrook[/caption]

Russell Westbrook may not wear a championship ring — yet — but the NBA star gives a championship performance on and off the courts.

“I’m not gonna play basketball my whole life,” says the Washington Wizards player. “My legacy is what I do off the floor, how many people I’m able to impact and inspire along my journey.”

He established Russell Westbrook Enterprises (RWE) to bring all his entrepreneurial ambitions under one roof. The company aims to “positively influence communities by providing products, services, resources and employment opportunities”. Westbrook has perfected the celebrity entrepreneur formula, leveraging his fame and wealth to further his brand and build business alliances.

Westbrook is setting up for a proactive and profitable retirement, whenever that may come. He establishes business partnerships along hybrid structures involving a combination of endorsement, equity stake and potential investment. He has invested in a Los Angeles car dealership, launched his own clothing line and established a media company.

Westbrook has executive-produced a documentary series about the 1921 Tulsa Race Massacre to air this spring on the History Channel.

“I was in Oklahoma for 11 years and kind of grew up in Oklahoma City,” Westbrook shared in an Associated Press interview. “I wanted to understand more about the origins of Oklahoma and Tulsa. I had been going to Tulsa almost every season, and I had a camp in Tulsa. I heard about Black Wall Street but never really dived into it or understood the impact of the people and community.

“Once I was able to learn the history and dive deeper into it, I was in shock. It’s truly sad what happened to all the business and African Americans and people of colour that had their businesses wiped away.”

During the 1921 riots, thousands of African Americans were left homeless, and the full number of those killed is still not known. The violence also cost over $1.5m in damage to real estate and $750,000 to personal property — which equates to some $30m in today’s money.

“Now, more than ever, I want to be able to show how history can affect our future,” he said, “to make sure we understand our history and know that there were people that paved the way and had to struggle, and things were taken away from them. I want to be able to share that with the world, and the significance of Black Wall Street.”

Westbrook shines a light on past crimes with this series — and hopes to influence future actions through impact investing. He recently made headlines for leading a $63m funding round for Varo Bank, the first “neobank” in the US to be granted national charter status.

“The banking system has ignored or underserved a large portion of the American population — particularly communities of colour. I’m passionate about making lasting social change and creating a stronger and more inclusive system,” said Westbrook. “I am excited and ready to work with Varo to be a part of an economic revitalisation for those who never had the access they deserved.”

He credits a long-standing mantra and mindset of “Why Not?” as the key to dealing with adversity and naysayers.

“It instilled confidence in me to believe. Why not me? Why not be the person to change this? That’s something I try to spread throughout the world, with basketball as my platform. Alongside that, making sure I use it in the community to give back as well.

“That’s where the Russell Westbrook Why Not? Foundation originated. I wanted to have a positive, strong message to give to people and our youth. To give them a sense of confidence and swagger.”

One of the foundation’s latest endeavours is to launch a namesake Why Not? Academy in Los Angeles, Westbrook’s hometown. He will use this opportunity to bring educational improvements to underserved communities in the form of curriculum development, after school programmes and job creation. Once the programme is up and running, he would be open to expanding to other cities.

“Los Angeles was something I wanted to wrap my hands around since I’m from there,” he said. “I wanted to make sure I have resources for inner-city kids, so they have somewhere to go where they can feel they have the resources they need in job creation and even with mental health. And, obviously, having the best education provided for them.”


John Gandolfo, IFC’s Treasurer: Looking Towards Recovery from Covid-19 and a Green, Resilient, Inclusive Future

[caption id="attachment_20721" align="alignright" width="300"] Author: John Gandolfo[/caption]

The Covid-19 crisis has impacted the health and livelihoods of many millions of people across the planet, and it continues to impose an enormous toll on the poor, threatening decades of progress towards raising living standards in the developing world.

Massive unemployment generated by the spread of the pandemic highlights the importance of jobs and economic transformation, and it also puts added urgency on gender and development. Maintaining a strong focus on climate change is critical to long-term goals.

More than ever, innovative solutions are needed to bridge the estimated $2.5tn annual funding gap so that the world can meet the 2030 development goals.

This means turning the billions now invested in sustainable, green, and socially responsible finance into the trillions required if we are to end poverty and boost shared prosperity.

We must dramatically scale-up investments in sustainable finance in this decade, and sustainable bonds can help us get there – offering an important avenue to raise funding in large volumes.

Sustainability is embedded in IFC’s DNA, including its funding programme. Every year, IFC borrows around $14bn in the international capital markets to fund loans to clients. We have two established thematic sustainable bond programmes: green and social. Around 20 percent of annual funding is issued in such bonds, the proceeds of which fund eligible projects from IFC’s loan portfolio with clear environmental or social benefits.

IFC was one of the earliest issuers of green bonds, launching a programme in 2010 to help catalyse the market and unlock investment for private sector projects that support renewable energy and energy efficiency. Since then, IFC kicked off the mainstream green bond market with two landmark $1bn issuances in 2013 and has now issued over $10bn in green bonds.

Similarly, IFC has also been a pioneer of the social bond market, issuing social bonds in both public and private markets and in various currencies since the Programme was launched in 2017 in alignment with the Social Bond Principles. IFC has now issued over $3bn in social bonds.

In March 2020, we issued a $1bn social bond which supported IFC’s $8bn Covid response package. With a final order book of over $3.4bn, the deal was well received in the market and is a testament to investors strongly supporting the alleviation of social issues.

In addition, IFC plays a leadership role in developing guidelines to grow the sustainable bond market; we have been actively involved in various initiatives to promote ESG integration.

We chair the executive committee of the Green, Social and Sustainability-Linked Bond Principles. Under IFC’s leadership of the Principles, the Green and Social Bond Principles were updated in June, representing a significant positive development for sustainable finance and the transition to a low carbon economy. The expansion of these principles will help increase transparency and impact reporting. And to foster the growth of the nascent sustainability linked bond, the Executive Committee published guidelines on selection of key performance indicators (KPIs).

This past year, as complex social issues arose directly from the turmoil of the pandemic, social bonds came to the fore. IFC has played a role in the wave that brought social bonds to investors worldwide, helping women entrepreneurs and female-owned small businesses in need of access to credit. This has also benefitted low-income families lacking quality healthcare and clean water, and smallholder farmers taking their crops to market.

Focusing on social bonds, IFC anticipates the market will continue to grow this year, and if trends continue it could see global issuance exceed $180bn. Surpassing $15bn in cumulative sustainable bond issuance is possible by the end of the year. The project pipeline dictates the issuance and we have seen a healthy and growing pipeline of projects that sustainable bonds will finance, notably around the Global Health Platform and Covid packages that could be potentially supported by Social Bond Programme.

IFC launched the $8bn fast-track Covid-19 facility in March 2020 to provide liquidity to its existing clients, both for financial institutions to on-lend to SMEs and women. We committed more than 50 percent of this facility to benefit the poorest countries and conflict-affected states, and also launched the $4bn Global Health Platform that allows investment in companies to increase the supply of critical medical supplies to developing countries, including face masks, ventilators, testing kits, and vaccines. The senior loans made as part of these programmes are potentially eligible for social bond financing.

The new Base of the Pyramid Programme, meanwhile, will provide up to $400 million to microfinance institutions, non-bank financial institutions, and banks that are focused on micro, small, and medium enterprises (MSMEs). The program will be available to new and existing IFC clients.

Besides the surge of social bonds, transition bonds received attention from the market, driven by the publication of the Climate Transition Finance Handbook by the Executive Committee of the Green, Social and Sustainability-Linked Bond Principles.

The sustainable bond universe is expected to continue to grow, with issuance this year surpassing the same period in 2020.

As investors become more aware of the phenomenal challenges we face as a planet, they demand sustainability be embedded in investments and consequently more are stipulating parameters on their capital finances. At IFC, green bonds and social bonds are critical to stimulating the supply and demand of funding to achieve the SDGs and other sustainability goals.

After more than a year of Covid restrictions, it is tempting to talk about returning to normal, but for some people that means living without access to services, below the poverty line. The pandemic has revealed the lack of resilience in the “old normal”. Across the globe, we have all being affected by this.

This time, we can rebuild better.

Since climate change impacts, which have been compounded by the pandemic, necessitate an exceptional and urgent response, IFC will prioritise climate change mitigation and adaptation as the underpinnings of a durable post-pandemic recovery. In line with the World Bank Group approach, it will seek to promote green, resilient, and inclusive development.

ESG is at the core, which is why IFC was the first issuer to systematically integrate ESG considerations into underwriter selection. An ESG dealer survey has more than doubled in size in its second year, with 46 sustainability questions sent to more than 60 banks. Under the expanded survey there are new questions on embedding sustainability and reducing the carbon footprint. Engaging with partner banks is vital as we move forward with sustainable investing for a resilient recovery.

Not only does IFC therefore help set market standards and lead in issuing green and social bonds, we also work with our clients to structure and issue their own sustainability-focused products, and then mobilise our partners to co-lend into them.

Through syndications and mobilisation IFC works to actively attract and support private investors to invest alongside us in developing countries - connecting borrowers to new sources of capital. Our syndications programme is the oldest and largest among multilateral development banks. Utilising a broad suite of products, new partnerships with commercial banks, institutional investors, insurance companies, sovereign funds, impact investors and development institutions enlarge the pool of responsible capital available to deliver positive social, environmental, and economic impacts.

Development banks use the term “mobilisation” when talking about attracting additional capital and IFC has evolved one of the most diversified mobilisation product offerings among its peers. Investment partners can currently participate in IFC originated debt investments using B Loans, parallel loans, portfolio syndications (via the Managed Co-Lending Portfolio Platform, or MCPP), credit insurance, and political risk guarantees. MCPP is a proven platform that gives institutional investors access to IFC’s impact loans, and it has raised over $10 billion to date.

IFC is leveraging its strategy and experience to bring the private sector back to emerging markets to create the economic growth and the jobs that are needed to bring recovery. As it works alongside investors looking for increased positive social impact, IFC is excited to play a role in helping achieve the world’s most pressing development goals.

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About the Author

John Gandolfo is IFC’s Vice President, Economics and Private Sector Development (acting) and Treasurer, leading a global team responsible for managing IFC’s financial position, safeguarding the organisation’s international triple-A rating and maintaining IFC’s standing as a premier issuer in the global capital markets.

Gandolfo leads IFC’s Treasury and Syndications global team in delivering on IFC’s strategy to create markets and mobilise private capital for development. The team manages over $100 billion in liquid assets, global market borrowings, and derivatives transactions. It is responsible for strengthening local-currency financing by arranging and executing local-currency and risk-management transactions for clients and raising third-party capital through innovative syndication and mobilisation platforms such as the Managed Co-Lending Portfolio Program (MCPP).

Prior to taking the role of IFC Treasurer, Mr. Gandolfo was Director and Chief Investment Officer of the Pension and Endowments Department at the World Bank. His team managed $27 billion of World Bank Group pension and other retirement-benefit portfolios invested across a range of asset classes and strategies.


All the World is But a Console, and Gaming Sector is Thriving

The at-home entertainment industry has thrived as enforced isolation and diminished human contact have drawn more people into gaming.

Steam, the most popular online PC game store, has an unprecedented number of concurrent users — 20 million of them — and some of its top games have broken records too. The gaming sector has been on the rise for the past decade, steadily improving and growing year-on-year. No surprise that 2020 and 2021 are shaping up to be the biggest years yet, with the release of new-generation consoles from Sony and Microsoft — the PS5 and Xbox Series X — and the announcement of console-specific and triple-A titled game releases. While other industries have struggled, gaming is rising to a new level.

A report by 3D software development company Unity shows a 41 percent rise in daily active users during Spring last year — a season typically known for a fall in gaming activity. Mobile gaming saw a rise of 17 percent, mainly categorised by a rise in what Unity calls “mid-hardcore” games. These differ from the “commuter” games in that they require longer play times, are often more challenging.

The number of installations of mid-hardcore mobile games rose by 39 percent, while the number of installations of commuter apps fell by seven percent.

Nintendo’s Animal Crossing: New Horizons was that saw a greater-than-expected userbase powered predominantly by the pandemic. The game was released in March 2020 and in the first six weeks sold 13.41 million units, making it Nintendo’s most successful launch. And — according to Nielson — it hit a record for the most copies of any game sold in a single month, surpassing fan favourite Call of Duty: Black Ops 3.

It’s probable that Animal Crossing’s picturesque tropical islands and cute animal avatars appealed to users at a time when international travel was difficult — and comfort in any form was hard to come by.

Another popular pandemic craze was Among Us. The game was released in 2018 to a muted response, but was popularised by the Amazon-owned online streaming platform Twitch. Hours spent on the site rose by almost 70 percent, from 11 billion in 2019 to 18 billion in 2020. With people stuck at home, the online streaming space saw huge rises in consistent users — and games like Among Us were central to that success.

The game allows up to 10 people to join, with multiple maps and customisable options. The simple gameplay, mobile app and easy-to-run software made the game accessible. It allowed for games nights to run across the world — without the need for in-person interaction. That was an important selling point in a quarantined world, and it became one of the most-played game of the year.

This’s not to say the gaming sector avoided any setbacks. Many releases were postponed as the developers were quarantined. Supply-chain pressures delayed the production of new switch consoles as the supply of components from factories in China and Korea dried up because of closures. Console shortages reduced the profit potential for companies — including Nintendo.

Another consequence of the pandemic was the closure or postponement of conventions and industry events including E3, Gamescom, and Comic Con. The Indie games sector relies on events like these for promotion and publicity. Many of these developers had their projects put on hold.

Overall, though, the outlook for the gaming sector is favourable. While the growth rate may change, the number of converted users should remain stable. The pandemic has hit some businesses hard, but gaming has emerged looking healthy.

By Yogesh Patel


Energean - E&P Company with a Clear Conscience: Committed to Carbon Emissions Cuts

Energean is a gas-focused independent exploration and production (E&P) company — the first in the world to commit to a 2050 zero emissions target and is now looking to significantly accelerate that.

ESG and sustainable development are central to Energean’s operations. It runs safe and reliable operations, and is investigating all options to accelerate the net-zero commitment ahead of the 2050 target date. Its Climate Change Strategy provides a blueprint for minimising greenhouse gas emissions and strengthening the company's low-carbon portfolio.

[caption id="attachment_20739" align="aligncenter" width="1010"] CEO and founder Mathios Rigas[/caption]

It is committed to integrating sustainable business practices into its wider corporate strategy to create a sustainable energy company, yielding healthy dividends.

The company has a balanced portfolio of production, development, and exploration assets in the Mediterranean and UK North Sea. It is driving an energy transition in the Med with the backing of financial and community stakeholders and guided by its corporate ethos.

Energean's ambition is to prioritise value creation under an ESG framework. During 2020, Energean incorporated scenario analysis and carbon pricing into its investment-decision-making process. Energean’s portfolio is tested against a range of robust scenarios aligned with the Paris Agreement, driven by supply-and-demand pricing fundamentals. It also considers additional identified variables that could impact on future market dynamics. Energean's gas-focused portfolio is well-positioned to create value in an increasingly carbon-constrained world, and its strategic fundamentals allow the company to adapt to prevailing markets.

[caption id="attachment_20741" align="aligncenter" width="566"] Short Term Emissions Intensity Target[/caption]

Energean also participated in its first-ever Carbon Disclosure Project submission, achieving a B- in climate change and B in suppliers’ engagement. This positions it among the top-performing third of companies in the E&P sector. At the same time, Energean has implemented the recommendations of the Task Force on Climate Related Financial Disclosure in the core management areas. Energean has reduced the carbon intensity of its operations by approximately 15% to 18 kgCO2/boe in the last year, representing a 73% decrease since 2019.

It has taken further steps to reduce its carbon footprint, including agreements for purchasing green electricity for operated assets in Italy, the introduction of a zero-routine flaring policy, and the acceleration of the development of carbon-capture-and-storage and eco-hydrogen projects at its Prinos asset in Greece.

Energean has achieved a Gold rating by Maala, the CSR standards-setting organisation in Israel, for the second consecutive year.

Social responsibility is fundamental to Energean’s corporate culture and engagement with local communities. During the pandemic, Energean focused additional effort and resources on supporting stakeholders and protecting the health and safety of its workforce.

In 2020, Energean achieved two important milestones: two million working hours without lost-time injuries (LTIs) across Energean sites, and 12 million man-hours free of LTIs at the Energean Power FPSO development and construction project.

In keeping with Energean's ethos and corporate values, the company supports efforts to address societal inequalities and create opportunities in local communities. Its approach emphasises proactive stakeholder engagement, social risk and impact management, and strategic social investments. Activities are designed to generate economic opportunities for stakeholders, create valued partnerships, and maximise shareholder value.

Energean constantly improves transparency and communication on its sustainable performance, initiatives, and practices. To improve the content and quality of data stated in its 2020 Sustainability Report, Energean had the report externally assured by Ernest & Young Greece.

The company's board is the steward of corporate governance. Energean believes that strong governance becomes even more important in challenging times, and must underpin the culture of the whole business.

Climate change issues are a key focus, and the company is comfortably meeting the board-set target of gas comprising 70 percent of annual hydrocarbon production. The “transition fuel” will help the Mediterranean, and the world, meet net-zero targets without any threat to energy security.

Energean has reshaped its board committee structure and created a dedicated Environment, Safety and Social Responsibility Committee, chaired by non-executive director Robert Peck. The board also has female representation of more than 30 percent.

[caption id="attachment_20740" align="aligncenter" width="775"] Sustainability Report[/caption]

CEO and Founder Mathios Rigas

The leadership team is headed by CEO and founder Mathios Rigas. Prior to founding Energean in 2007, Rigas spent 18 years in investment banking. He has experience in private equity investments in oil and gas, project finance, and shipping.

Between 2001 and 2007, Rigas set up — and became the managing partner of — Capital Connect Venture Partners, a Greek investment fund. From 1999 until 2001, he managed Piraeus Bank’s Shipping Investment Banking division.

Having the right leadership and governance structures in place is crucial to the company's ability to deliver on its mission, purpose, and energy transition strategy.

Energean links executive incentive pay with performance on ESG targets, commits to transparent disclosure of emissions tracking, and engages with all stakeholders to precipitate the transition to a low-carbon future.


Cartica Management's Powerful Combination: Investment Acumen, ESG Engagement, and Diverse Leadership

“Many emerging market companies have good ESG practices, but through active engagement we can improve disclosure around these practices to unlock value and ignite a cycle of positive change,” said Emily Alejos, Chief Investment Officer of Cartica Management. Through their framework of fundamental analysis, integrated macro, and country research, and active ESG engagement, Cartica aims to create value for companies and its shareholders.

The firm was founded by seasoned investors, including former executives of the International Finance Corporation, the private sector investing arm of the World Bank Group. The founders brought a deep history dating back to the 1990s of investing in emerging market companies using investment theses based on both fundamentals and on improvements in corporate governance, environment, and social practices. Investing in emerging markets requires an understanding of the unique cultural, political, structural, and economic factors that influence investment performance in this diverse set of countries.

“We knew that investing in EM companies where value could be added through ESG and governance improvements could be both profitable and important for economic development. It lowers the cost of capital for companies and makes markets deeper and more transparent,” said Teresa Barger, Cartica’s Founder & CEO.

More than a decade later, the firm has remained true to its mission and is focused on identifying EM companies with good business models, good management teams, and strong or improving balance sheets. Three core tenets are the foundation of Cartica’s investment philosophy and value-creating strategy today:

Bottom-up fundamental analysis

Integrated macro and country research, and risk analysis

Active company engagement, particularly on issues related to ESG and in improving ESG practices

With these beliefs in mind, Cartica Management has created an investment process which has enabled the team to build a concentrated, high conviction emerging markets strategy of 20-30 names. It is benchmark agnostic with an active share consistently above 98%.

The investment process includes several stages of research, analysis, and Investment Committee review of potential portfolio companies. Through each of these stages, the team considers the company's ESG risks and opportunities and takes these into consideration while developing an ESG engagement strategy for such company.

Cartica starts with a bottom-up analysis of a company’s financials, business model, management team, and corporate culture. The team assesses target companies for (a) their openness to making value-enhancing improvements and (b) proven high integrity. The team then uses its knowledge of emerging markets macroeconomics and local policy dynamics to evaluate whether the risks in a specific investment have been properly priced into the financial models.

“Our “integrity check” is an important element in Cartica’s process,” said Kate Ahern, Cartica’s Head of ESG. Prior to making any investment, the investment team will consider the “integrity” of the company’s management, board, and controlling shareholders. This analysis is intended to assess whether the investment team believes the company is likely to be run for the benefit of all shareholders, including minority shareholders. Considering the predominance of controlling shareholders as well as the absence of the robust legal and regulatory practices of more developed markets, it can be particularly important to assess the integrity of the players. This includes an analysis of a company’s history of dealing with its minority shareholders, bondholders, lenders, and others – which Cartica believes is a key means of identifying downside risks. With the investment team’s extensive contacts and work in emerging markets, Cartica often has direct connection to individuals with firsthand knowledge of the controlling shareholders’ and management’s past behavior and reputation for integrity. Before approving an investment, both an Investment Thesis and an Engagement Thesis are articulated.

Once an investment goes into the concentrated portfolio of stocks, Cartica takes an active ownership approach. The team works with company management to benchmark and seek to improve their practices in E, S and G, to ensure good policies enshrine these practices in the culture, and to develop disclosures of these practices and policies. Cartica’s goal is to make its portfolio companies more valuable by addressing items of opportunity or risk in ESG and beyond, often in capital-markets facing issues such as sell-side coverage or share class disparities.

For example, the lack of diversity on a company’s board should raise a red flag about whether a company is forward thinking and committed to hiring top talent. This is one area that Cartica is intent on improving through active engagement with their portfolio companies, and the team often initiates these difficult conversations with management on this subject.

 “We want to know that the board is doing all it can do to ensure expert guidance and oversight and is not just focused on maintaining the status quo and seeing friends once a quarter,” said Kate Ahern.

It is a good sign to see board members demonstrate that they will go beyond their bubble to find expertise that is different and additive for the company. A 2019 study of U.S. publicly listed companies found that the presence of a female board member may help moderate the overconfidence of male CEOs. The effect is reduced risk, reduced costs of M&A transactions, and improved corporate decision-making.

Cartica has also studied the academic work on corporate culture’s contribution to financial performance. The team uses this knowledge to both assess target companies’ chances for success and to create a vibrant culture at Cartica based on humility, honesty, and collaboration, as well as the shared goal to make companies more valuable while creating returns for investors.

“Investment acumen, ESG engagement, and diverse leadership is a powerful combination which we believe will keep the firm performing at the highest level for decades to come,” said Emily Alejos. Cartica Management is majority owned and led by women and continues to attract a high-performing team that is motivated to be a catalyst of positive change while creating long-term value for companies, shareholders, and communities.