Department of Finance, Government of Ajman, UAE: Ajman Finances in Good Hands

The Department of Finance of the government of Ajman plays a key role in providing financial services for the sustainable development of the emirate.

It was established by Amiri Decree No. (8) 2002 and restructured in 2010 to form the Department of Financial and Administrative Affairs under the Emiri Decree No. (4). It was further modified under the order of Amiri Decree No. (15) of 2012 to form the Department of Finance (DOF).

The DOF supervises all the financial affairs of the emirate's government and establishes and implements the emirate’s general annual budget. It works in co-operation with local government Departments, issuing final accounts and verifying the collection of public revenue as well as transferring funds to the relevant agencies.

Preparation, adoption and development of government resources with agencies is also part of the DOF remit, preparing bills of laws and local decrees related to financial affairs, consulting and providing technical support in the Unified Financial System of Ajman.

The Government Budgets Division has various tasks and responsibilities. It prepares, reviews and updates the current budget and financial planning methodologies in accordance with best practice. It also studies and analyses each draft annual budget and liaises with other departments and authorities.

The DOF also prepares the draft general annual budget of the Government of Ajman and monitors its execution, in addition to monitoring and controlling withdrawals, transfers and additions. Trends and performance are analysed against financial revenue.

The DOF prepares periodic financial performance reports, studies the potential financial impact of amendments and additional credits received, and drafts decrees and legal resolutions.

Cashflow projections are created for the Ajman Government, with comprehensive performance reports, management systems development and government performance indicators.

The budgets division excels in preparing medium-term financial plans, and integrating financial and strategic planning.

The Smart Financial Planning and Analysis system is a strategic initiative launched by the DOF to improve the Public Financial Management system by transforming the government’s budgeting system into a performance-based budgeting system.

The system enhances the planning, analysis and preparation of the Ajman Financial Plan and budget by partnering with the Department of Finance and local government departments. It represents a qualitative shift in the management of resources, from spending to planning. A medium-term plan is being created to integrate strategic and financial planning to rationalise spending, financial discipline, financial sustainability and more diversified and sustainable economic growth.

In line with the digital revolution with artificial intelligence, the system is based on the principles of AI with reports and dashboards displaying information and data to create a more informed decision-making process.

Features of the Smart financial planning and analysis system:

Recognition and analysis of inputs to deliver quality outputs

Continuous development and improvement, backed by an automated analysis process, which is self-monitored

Processes vast amount of data in real time

Detects and analyses data trends

Uses inbuilt solution generation capabilities

The user-friendly screens follow-up the business process “tree” and the credits passed by the data before submission. Risks are analysed and financial impacts on future projects are studied.

PEFA is a methodology for assessing public financial management performance. It identifies 94 characteristics (dimensions) across 31 key components of public financial management (indicators) in seven broad areas of activity (pillars).

The adoption of these indicators is a strategic initiative to strengthen DOF capacities to assess the status of country public financial management (PFM) systems and develop a practical sequence of reform and capacity development actions.

The PEFA programme provides a framework for assessing and reporting on PFM, using quantitative indicators. It is designed to provide a snapshot of performance at specific points in time using a methodology that can be replicated in successive assessments, giving a summary of changes over time.


Pavilion Global Markets: Global Recognition in Niche Market as Company Expands its Horizons

[caption id="attachment_17504" align="alignright" width="300"] President: Patrick Belland[/caption]

Pavilion Global Markets Ltd was founded in Canada more than 50 years ago as an institutional agency-only broker-dealer.

For over half a century, Pavilion Global Markets (PGM) has provided expertise in execution and advice to institutional clients worldwide. Over those years, PGM has continually evolved to meet the needs of its global client base. For example, the company expanded its transition management services into the US in the past five years, and now plans to extend these services beyond North American horizons.

“As a private, employee-owned firm, we are committed to serving our clients first,” says president Patrick Belland, “and we focus on being experts in a few services.”

Today, the company remains true to this mission, focusing on global securities execution, transition management and global macro research. “We serve over 200 institutional clients worldwide, with a continued concentration in these three, core value-add offerings.”

PGM encourages employee ownership and provides a team dynamic that “emphasises excellence in client service”, says Belland. The company benefits from this alignment of employee and client and goals.

“We have almost 40 employees and a flat structure that provides our employees the opportunity to contribute at all levels of the business. Company success is shared across all divisions of the business.

While the expansion of its transition management services into the US market is relatively new, PGM has been providing transition management services for over 20 years. A focus of this service is rigourous project management coupled with unparalleled client communication. The success of the business has led to a commitment and dedication to that service. “We are also free of the most notable conflicts that challenge providers of these services,” Belland says, “and we always provide full transparency on all of our pricing.”

“The opportunity to grow our transition management offering globally provides an exciting opportunity for our business and our employees.”

“Under Mario Choueiri, our head of transition management, we will continue to focus on offering a fully transparent and conflict-free business model that supports our clients and our growth.” Belland has been with the company for over 27 years and has led it through changes and challenges both in the industry and within the company. “Respect and communication are the foundation of our culture,” he says, “and as a leader, I strive to ensure employees are included and engaged in our overall mission and, ultimately, recognized for their efforts and dedication to client service.”

Remaining employee-owned and encouraging employee ownership strengthen the level of employee commitment and sense of worth in the company. “Having employees bring ideas forward and lead new initiatives creates a broad sense of leadership across the company,” says Belland. “Communication, respect and recognition provide the opportunity for everyone to be a leader.”

The business aims to grow by remaining focused on its areas of expertise and gaining recognition as a global leader in a niche market.


Exxaro’s Socio-Economic Initiatives: Empowering Communities and More

It’s been a fruitful year for South African resource company Exxaro Resources, which has bolstered its reputation with concerted efforts in socio-economic responsibility.

The company is devoted to creating to bettering the lives of community residents with meaningful investments.

Exxaro Resources Powering Digital Innovation

One initiative saw Exxaro Resources commit R20bn ($1.36bn) to the expansion of its production portfolio at the South Africa Investment Conference. President Cyril Ramaphosa aims to raise $100bn in the next five years through his investment drive, and Exxaro’s investment will help to transform South Africa’s socio-economic landscape.

Exxaro Resources is also injecting some R10bn ($680m) into expansion projects in the Lephalale region, site of the flagship Grootegeluk operation, and a further R10bn in the Mpumalanga area, where the remainder of the mines are situated. This includes the Belfast mine, the first digitally connected mine in South Africa.

The Belfast mine’s digital footprint captures the essence of Exxaro’s 2026 strategy, combining technology and collaboration as a catalyst for significant change.

The mine continues to push the boundaries of real-time decision-making and productivity improvements. It started operations this year, producing coal with relatively low sulphur and nitrogen oxide emissions. The shift to digital allows Exxaro’s maintenance teams to remotely monitor equipment to access performance data, facilitating early problem-detection.

Coal production at the mine underscores the importance of the future of the resource for South Africa, and the pivotal role the commodity plays. Belfast production showcases the progress of digitalisation, job creation, upskilling of employees, and sustainability.

Powering Youth Development

The company invests in youth development and an initiative, Youth Exponential Development programme (YDx) — run in partnership with SADICO — helps communities to adapt to the changing environment. It is spurred on by new technologies and the Fourth Industrial Revolution (4IR). Exxaro has invested R40m ($2.7m) in YDx to upskill 34 South African youths from underprivileged backgrounds in “train and trainer” instruction.

This focuses on skills such as digital technology (telecommunications, IT, broadcasting and Internet) and Fourth Industrial Revolution concepts such as the Internet of Things (IoT), Artificial Intelligence (AI), robotics, 3D-printing, nanotechnology, autonomous vehicles, cryptocurrency and cybersecurity.

With these skills, participants are able to start the digital skills training process for others, and 400 people have already benefited from the programme.

Skills development and education are vital to the digital future of the African continent, and programmes like these help Exxaro to have a positive impact on South Africa’s unemployment rate.

Powering Community Development

Another way Exxaro Resources contributes to South Africa’s economic growth is through its investment in SMMEs, supporting business owners in a drive for economic transformation.

By the end of August 2019, Exxaro had created 178 permanent jobs through its social investments, Enterprise and Supplier Development (ESD) initiatives and Social Labour Plans (SLPs).

A partnership with Nasua Mpumalanga has provided Emakhazeni Local Municipality with free community wi-fi. Hotspots are available at the Municipal Hall, Exxaro Business Enterprise Development Centre, Belfast Taxi Rank, Belfast Clinic, the community hall, U Save Shopping Centre, 4 Ways Take Away and Kayalami High School.

Another example is the Flashing Lites aid initiative. Flashing Lites is a black-owned production studio for corporate films, live-streaming, animation and photography battling high rents and poor cash flow. Exxaro provided funding to secure the future of the business.

With this mindset, the company introduced Ga-Nala municipality in Mpumalanga to the new community hall, built by Exxaro and the people of Ga-Nala. It can accommodate 560 people, and will be used for events and programmes to promote individual and community social inclusion.

The Ga-Nala community hall is just one of several recent empowerment initiatives and outreach efforts by Exxaro. After purchasing the old Total Coal SA assets in Mpumalanga in 2015, the company has constructed Bonginhlanhla Primary School, in collaboration with Seriti and Eskom, several local maths and science literacy programmes, and refurbished the Ga-Nala landfill site.

Exxaro Resources Empowering People

Exxaro Resources recently launched its conneXXion building, aimed at enhancing the health and wellbeing of employees while minimising their environmental footprint. The building has a Five Green Star-rating from the Green Building Council of South Africa, with e-parking bays and central staircases, to encourage employees to avoid elevators.

The conneXXion building epitomises innovation and represents Exxaro’s commitment to the environment, reducing the carbon footprint, and conserving natural resources.

As the unemployment rate falls, Exxaro Resources minimises negative impacts of operations and raises the country’s economy and morale. Exxaro pledges to continue investing in initiatives for underprivileged communities to build a brighter tomorrow.


It’s not Nuclear Physics: Pension Fund Chief Champions Ethics and Balance

[caption id="attachment_14523" align="alignright" width="300"] CEO: Matthew Eyton-Jones[/caption]

Matthew Eyton-Jones is the CEO of a pension fund with a difference: it provides benefits to the staff and fellows of the European Organization for Nuclear Research (CERN) in Geneva.

That’s right, the same organisation which led the search for (and found) the elusive Higgs Boson particle in the Swiss-based Large Hadron Collider.

Eyton-Jones is not a nuclear physicist, however. His expertise lies elsewhere.

The CERN Pension Fund is a multi-asset investment portfolio with more than 7,500 members and beneficiaries, which makes pension payments in 48 countries. Eyton-Jones is a graduate of the Advanced Leadership Programme at Cambridge Judge Business School and the Investment Management Programme at London Business School.

He is also a member of the Chartered Institute for Securities and Investment and the Chartered Insurance Institute. He has over 20 years’ experience in the pension fund, investment banking, and investment management sectors. His previous employers include Mercer Consulting, the Bank of America, Goldman Sachs, and the John Lewis Partnership.

As well as being an experienced CEO, Eyton-Jones is also an investor and entrepreneur. His interests include public equity, private equity, venture capital, and angel investing.

He is currently an investor in CatchApp; the world’s fastest meeting scheduler. His entrepreneurial streak is evident in his work at the CERN Pension Fund, which recently invested in the renovation of a hotel that had been part of the fund’s property portfolio for some years.

When the previous tenant moved out, Eyton-Jones saw an opportunity. He partnered with a specialist real estate company to transform and enhance the hotel. “This was not only an excellent value-added investment opportunity for CERN,” he says, “but also a fascinating project with satisfyingly tangible results.”

Eyton-Jones joined CERN in 2015, becoming only the third CEO since the fund’s inception in 1955. He has responsibility for managing a CHF4.3bn (£3.36) portfolio invested in public equity, private equity, venture capital, fixed income, commercial real estate, hedge funds, timber, farmland, and money markets.

By 2017, he was ranked number sixth in the Sovereign Wealth Fund Institute Public Investor 100 Rankings of the public investor executives. His career began in 1997, when he started work as a trainee on the underwriting floor at RoyalSunAlliance in Liverpool; at the time, he pulled in a salary of £7,500 a year.

Eyton-Jones is a member of the World Economic Forum Expert Network, a Life Fellow of the Royal Society of Arts, a Fellow of the Royal Geographical Society, a Member of Chatham House, a Liveryman at the Worshipful Company of International Bankers, and a Freeman of the City of London.

He believes in giving something back to society and fostering opportunities for others, and has also served on the Alumni Council at Cambridge Judge Business School, as a board member at Villiers Park Educational Trust, and as a member of the Integrity Committee at the Chartered Institute for Securities and Investment. He also spent several years serving in the Royal Navy Reserve and is a strong supporter of naval and maritime charities.

Unsurprisingly, Eyton-Jones believes in the value of ethical business practices, underwritten by a focus on good governance. Under his stewardship, the CERN Pension Fund has earned best-in-class ratings from its international peers. Part of that success has been improving gender balance, with 33 percent of the board— including the chair — and 60 percent of the staff comprised of women. The chief investment officer and chief operating officer are also female.

“Diversity and inclusion are crucial to good governance, along with ethical transparency and accountability,” Eyton-Jones says.

The scientists at CERN tend to make the headlines, but behind the scenes, Eyton-Jones and his staff are working hard to ensure everyone can count on a secure financial future.


Tactical Management:  Global Goals and Expertise, Specific Focus on Looking After Client Needs

[caption id="attachment_14526" align="alignright" width="300"] General Manager: Raphael Nagel[/caption]

Tactical Management provides — as the name suggests — strategic management support.

In today’s competitive landscape, businesses operate in an ever-evolving environment of cross-border challenges. Tactical Management is dedicated to helping enterprises seeking to venture into overseas markets to find new ways to stimulate growth and maximise potential.

It does this in global markets and operates in nine countries, with associates in the Middle East, Africa, Asia Pacific, the Americas and Europe. Tactical Management has tackled 27 projects since its inception, providing 1,784 jobs and attracting $749m of investment. It operates in three main business divisions: Private Equity, Corporate Structuring and Multi-Family Office.

Tactical Management also acts as a global and independent private equity firm. The team applies its collective skills and experience to serve clients across multiple industries. It focuses on its clients’ most critical issues and opportunities: strategy, operations, transformation, advanced analytics, global understanding, mergers and acquisitions and sustainability — across all industries and geographies.

Tactical Management is one of the leading signature corporate structures company and manage all aspects of corporate structuring for companies, partnerships and trusts. The firm has built an enviable reputation for advising on schemes of arrangement and cross-border mergers of regulated businesses.

The range of experience of its team grants the firm a in-depth understanding of the corporate requirements of each client group. Tactical Management also understands the need to deliver swift and innovative solutions, providing the opportunity to remain competitive in fast-changing markets by using the advantages of different jurisdictions.

Against the changing backdrop of digital innovation and the investment landscape, multi-family offices worldwide are in need of an update to meet the demands of ultra-high-net worth individuals and families. Tactical Management goes beyond wealth management and works on a bespoke service delivery model by removing any conflict of interest and taking charge with asset management advice.

The firm brings functional expertise to the table, coupled with a holistic perspective, unbiased financial advice, timely execution, cost-effective solutions and a strict focus on client confidentiality.

Tactical Management assembles a global network of multidisciplinary systematic thinkers to design and deliver a specialised, personalised service.

Meet the Team

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Raphael Nagel is Tactical Management’s general manager, with vast experience in the finance industry. He has held senior management positions in international banks and investment funds over a period of more than 17 years.

His multidisciplinary academic background in Germany, UK and Spain and global knowledge in Law and Economics has contributed to his success in strategic planning, global networking, economic improvements and goal attainment. He holds a Master’s Degree in Business and Corporate Law, a Master's Degree in Business Administration and he is on the way of receiving his Doctor's Degree in Engineering and Management of the Natural Environment, and he has a Specialisation in Refinancing and Business Restructuring

Veronica Cabrera, executive director, is a dynamic and motivated professional with a proven record in generating and building relationships. She has managed projects from conception to completion and has a deep understanding in M&A process and debt restructuring. Cabrera leads and oversees the Dubai office’s experts and is driven by results. She holds a degree in Law, Economics and Study in Refinancing and Business Restructuring.

Business development specialist Fatima Sotto has years of experience in the field, working closely with managers in collective systematic planning strategies. She is team leader in SME companies in the UAE and Philippines. She holds a degree in Industrial Engineering Management.


Jim O’Neill: A Living Wage for Capitalism

At 3.6%, unemployment in the United States remains near its lowest level since the late 1960s. There are even signs that people who had previously dropped out of the labour force are being attracted back into it as employers scour a tight labour market for the marginal employee. Consistent with this news, US Federal Reserve Chair Jay Powell has pointed out that wage gains are finally accruing to lower-paid workers.

In another nod to lower-paid workers, in July, the US House of Representatives passed a bill to boost the federal minimum wage from $7.25 per hour to $15 per hour (an increase that would be phased in over seven years). But the legislation has no chance of passing the Republican-controlled Senate. Moreover, the Congressional Budget Office estimates that a $15 minimum wage would lead to job losses for 1.3 million lower-paid workers.

One heard similar objections in the United Kingdom back in the spring of 2016, when then-Prime Minister David Cameron’s government introduced its National Living Wage policy. Yet, over the past three years, there have been no signs of a reversal of employment gains. And in recent months, wage growth has started to pick up after a decade of stagnation, with the Resolution Foundation now predicting that real (inflation-adjusted) average weekly earnings in the UK could exceed their August 2007 peak of £513 ($660).

"Despite strong headline employment figures in the US, the UK, and other Western economies over the past decade, business investment spending has remained stubbornly weak, as have productivity and wage growth."

While the topic has yet to feature explicitly in the UK election debate, both Labour and the Conservatives are pursuing programs to boost minimum wages further (they also seem to share the goal of increasing infrastructure spending). In late September, Chancellor of the Exchequer Sajid Javid announced that the minimum wage of £8.21 per hour for workers over 25 would be expanded to include all workers over 21. He also promised that by 2024, the minimum wage will have risen to two-thirds of median earnings. Not to be outdone, Labour has vowed to hike the minimum wage to £10 per hour if elected.

Predictably, these statements from both parties raised eyebrows in business circles, and led to warnings of future job losses. And yet I find myself thinking that a higher minimum wage might deliver benefits beyond what is captured in the traditional economic calculus. Given capitalism’s growing crisis of credibility, business leaders would do well to consider embracing such policies more enthusiastically.

As I have pointed out before, despite strong headline employment figures in the US, the UK, and other Western economies over the past decade, business investment spending has remained stubbornly weak, as have productivity and wage growth. These trends have coincided with a period of strong corporate profits and macroeconomic conditions that, in theory, should be favorable for investment.

Indeed, low interest rates, strong profits, and reduced corporate taxation would seem to be a perfect recipe for significantly higher investment spending. But instead, we have witnessed an acute increase in actual and perceived inequality, and a popular backlash against both capitalism and democracy across Western countries. Companies have not responded to the textbook stimuli for investment, either because they don’t see the long-term economic rationale for it, or because they are in less capital-intensive industries and simply do not think that they need any more buildings and equipment. The problem, of course, is that without investment, productivity is not likely to increase. And without productivity growth, there is little reason to expect sustainable wage growth.

Whatever the reasons for lagging investment, it is clear that public policy has a role to play here. If what we are witnessing is a market failure, it is both reasonable and appropriate for the state to step in and provide the needed investment spending – as both the Tories and Labour are suggesting they will do if they win the UK election.

[caption id="attachment_14540" align="alignright" width="224"] Author: Jim O'Neill[/caption]

But policymakers can also change the risk-reward calculus for business, and one way to do that is by significantly increasing the minimum wage. Higher nominal wages for low-paid workers can boost real earnings, increase consumer spending, and help make housing more affordable. And insofar as raising the minimum would increase companies’ wage bill, it would create a stronger incentive to replace labour with capital. That could result in reduced output and higher prices, but it could also lay the foundation for renewed productivity growth.

In any case, to those who would counter that companies cannot afford to accommodate such a policy-driven change, I would point out that since 2015, aggregate demand has remained strong enough for them to absorb wage increases easily enough. Should such a policy make companies realise that they have a social purpose that is greater than merely boosting next quarter’s earnings, so much the better. i

About the Author

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


GPF Aims To Be the Leader in ESG Investing and Initiatives in Thailand

Under the leadership of Mr Vitai Ratanakorn, Secretary General, Thailand’s Government Pension Fund (GPF) has taken a new approach to ‘Doing well by Doing Good’ through ESG Investing.

[gallery link="file" ids="17519,17520,17525,17526,17527,17529,17523"]

“His ambition is high. He wants GPF to be the leader in ESG investing and initiatives in Thailand”, Srikanya, GPF’s Deputy Secretary General told CFI.co in a recent telephone interview.

“There is no compromise in sacrifying social values through financial values or the other way around. We must achieve both. As a pension fund, our investment is long-term enough to generate both the social values and financial values. Creating social values is not an option but a mandate for pension fund like us.” Srikanya recalled a speech Mr Vitai gave to key executives late last year.

“My boss [Mr Vitai] pays most of his attention to ESG investing”, Srikanya said, “it was rather slow in the beginning to get everyone involved. The misperception that ESG investing would have to sacrifice alpha makes many reluctant to focus on it. After repeated internal communication and workshops supported by PRI and OECD, our investment team put their shoulders to the wheel”, Srikanya said.

“The first movement in ESG investing was my boss’s initiative to launch ESG-focused portfolio in October 2018. We set aside approximately THB 1 billion ($3.3m) to invest in 33 listed companies in the Thailand Sustainability Investment List. GPF’s ESG-focused portfolio is the first ESG fund in Thailand. The move has made the mark for GPF toward leadership in ESG Investing and Initiatives in Thailand.”

The setting up of the ESG-focused portfolio is just a first step, Mr Vitai has initiated. His plan is by the end of 2019, GPF must have its own ESG scoring tool to evaluate investment opportunities in Thai stocks and bonds.

His 2020’s plan is even more challenging. By the first quarter of 2020, he targets to use ESG lenses for GPF’s investment in all Thai equity. All must be screened, to ascertain that GPF will not have companies with corrupt ESG track records in its portfolio.

Mr Vitai’s stroke of genius was to initiate a project so-called ‘Negative List Guideline’, Srikanya said. The project was developed on a conviction that collaborative engagement would enhance investors’ influence and improve efficiency of the engagement process.

“His idea of negative list guideline has gained a tremendous response. We have as many as 32 institution investors signed MOU to become a signatory to the guideline. The agreement is if a Thai listed company breaches good practices in ESG issues, all signatories will discuss firstly on positive engagement.”

Representative from the signatories will have a dialogue with the company in question. If the dialogue turns positive and the issues are solved, no action would be taken. The company in question will be sanctioned by investment-pending from the signatories only when the issues are proven having breached ESG practices and yielded damages to stakeholders. The name of the company will then be on the negative list. i

About GPF

GPF was established in 1997 as an institutional investor for reserved fund and plan members’ saving fund. Total AUM is THB 937 mil.; in which THB 394 mil is Members’ saving fund and the rest is reserved fund.


UK Won’t ‘Move On’ After Brexit: It Will Move Forward

Many of the existential issues that have driven a period of prolonged introversion in the UK, hampering its international engagement, have now been laid to rest.

Brexit will continue to be the defining prism through which the world views the UK; a fundamental issue of domestic British politics and a key variable in the UK’s future prosperity.

The election mantra of the conservative party — “Get Brexit Done” — resonated with a British public frustrated with indecision and rancorous wrangling. Translating a simple leave/remain referendum into a concrete plan to extricate one of the world’s largest economies from the world’s largest economic bloc was always going to be a tortuous affair. Attempting to chart such a difficult course without a parliamentary majority was a recipe for national psychodrama.

Popular exasperation became so great that Prime Minister Boris Johnson’s assurances of forward motion won enough votes from remainers and Labour supporters to revolutionise electoral arithmetic and secure the largest Conservative majority since 1987.

"So what will this new era mean for British politics and Britain’s place in the world?"

So what will this new era mean for British politics and Britain’s place in the world? Will it prove to be the cathartic release voters hoped for, with Britain finally able to move forward? Or will it simply change old problems for new ones as it enters the next Brexit phase?

That substantial Conservative majority has blocked any parliamentary avenue for revoking the decision to leave the EU. The scale of the victory also settled the question in terms of popular debate. The election allowed the UK to overcome a key stage in the Brexit process and permit the Withdrawal Agreement to pass the parliamentary hurdles. It will also probably define the terms of the UK’s exit from the European Union.

That said, the European Commission President Ursula von der Leyen is suggesting that an extension to the transition agreement may be needed mid-year to complete a comprehensive trade deal, and work out agreements about a series of other issues by year-end. This could mean speculation of “No Deal” is back on the table.

The UK will benefit from political stability and a solid parliamentary majority beyond the January 31 withdrawal bill deadline. While moves to dispense or amend the fixed five-year term provision are expected, a general election during the upcoming five-year term is unlikely. The UK’s strength is in its diversity, and this will power an advance on the world stage.

This should not detract from the need for government to address the fundamental challenges of uniting the country after the divisive Brexit experience, and to tackle the vital internal decisions and social discords that have been allowed to accumulate. Looking outward will help heal the internal divisions.

The significance of this stage of the process should not be underestimated. It will frame the next stage and mark a fundamental shift in the nature of the debate. The trading relationship between the UK and the EU is still to be negotiated, and will be the most consequential stage for business and the UK’s global trade relations.

"The trading relationship between the UK and the EU is still to be negotiated, and will be the most consequential stage for business and the UK’s global trade relations."

While this stage will not be mired in the same parliamentary paralysis that has dogged the process thus far, there is still enough uncertainty over the outcome of the upcoming negotiations to hamper business and investment decisions.

Johnson has signalled his intention to conduct a major review and restructure of key government departments. In one example of international consequence, he has articulated his long-held view that the separation of the Department for International Development from the Foreign and Commonwealth Office in 1997 was a “colossal mistake”. He now appears intent on merging the two departments.

The rationale for the merger is to maximise the value of overseas engagement by creating more natural cross-programme synergies and reducing bureaucratic inefficiencies. The operational challenge of such an ambitious move could lead to disruption for UK policymakers and front-line civil servants. It is to be hoped that disruption will be short-term, but it has the potential to be significant. The UK’s aid budget and diplomatic network are among the world’s largest.

The Department for International trade is set to play a central role in international relations and domestic politics as policy setting moves from Brussels to London. Trade policy will involve compromises, and provide fertile ground for political mischief-makers who seek new ways to criticise the implementation of Brexit. The politics and policy of trade are likely to collide in coming years.

But should it transpire that exiting the EU is bumpier than anticipated, we have been informed that that the UK would be welcomed back into the fold.

By Lord Waverley


ACTIVE RE: Willingness to Embrace Opportunity Brings its Own, Enduring Rewards

[caption id="attachment_17492" align="alignright" width="300"] CEO: Juan Antonio Niño[/caption]

Active Re was born after its Chairman and CEO, Juan Antonio Niño, saw the gap in the regional market of reinsurance solutions and the immense opportunity for business. As he worked with several captives in early 2000’s, by 2007 he embraced the opportunity for change and founded ACTIVE RE.

Niño is the sole founder — at the time he had just three colleagues — and each have proven to be crucial to the strategy of continuous growth. All are still with ACTIVE RE, and now hold senior positions.

Being the reinsurance business fairly unknown in the Latin American market where the company started, it took a bit of guidance (and a lot of trust!) for clients to understand all the benefits reinsurance solutions for their businesses could have. Niño credits the success to the strength of a superb team and a modus operandum that calls for shared benefits. Active Re has become an internationally rated reinsurer of “Excellent Investment” grade.

The firm's clients include insurance companies, financial institutions and commercial financing companies, marketing and sales companies, construction companies, tourism organizations, co-operatives, and savings and loans societies. It specializes in reinsurance products, from fraud and theft to credit, life and surety bonds.

The company’s overriding business philosophy is its motto “Benefits for all” and its operational philosophy: “Put client first, measure risks twice, and after due diligence, pay claims, always!”

The company is headquartered in Barbados, with representation offices in Panama City, Miami, London and Madrid, and looking closely to expand and open a new representation office in Eastern Europe to attend our clients in that hemisphere.

The company’s current business focus is to do what we know (risks we know), continue to learn and study the global markets, get strong and trusty allies and everything we do, do it with integrity. Always respect our mission - “Benefits for all”!

The CEO

The company’s CEO started working at the age of 13. At 18 he was working shifts in the National Bank of Panama to be able to support his studies in Economics and Finance in the Universidad Nacional de Panama. After his graduation, he was granted a scholarship to study a Masters in Economics in the University of North Wales. Learning the language in record time, he was able to successfully finish his master’s degree, and went on to pursue a career in banking. He completed several post-graduate programs in prestigious institutions, including Wharton School of Business, in Philadelphia, and Harvard Business School, in Boston, Massachusetts.

Niño possesses a strong business and leadership record and has a deep understanding of the business landscape in the Latin American region thanks to his tenure as president of the Panamanian Banking Association (ABP) and the Latin-American Federation of Banks (FELABAN). He was president of APEDE (Asociacion Panamena de Ejecutivos de empresa) and was the first vice-president of the National Council of Private Enterprise of Panama (CONEP).

Almost 40 years forward our CEO continues to breakthrough in the finance and insurance world. His experience and success in the bank industry, where he held senior positions in national and regional banks, and led the most successful bank in credit card issuance in the Central American region, got him to be a pioneer of the industry in Latin America, founding one of the first local reinsurers in 2000; then to found ACTIVE RE in 2007.

Now 12 years after its creation, ACTIVE RE continues to evolve, serving more than 70+ countries around the globe, led by Niño who still actively leads and engages in all important decisions of the company.


Unity: Central American Insurance Giant Counts Its People as Assets

[caption id="attachment_17495" align="alignright" width="300"] CEO: Louis “Tito” Ducruet[/caption]

Unity — the only regional insurance broker in Central America — is focused on delivering the best service to its clients.

That means the best negotiations on insurance programme coverage on all lines: personal, corporate, life and health; offering the best.
With a presence in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panamá, Unity consolidates the experience of well-known local firms into one strong regional company — Unity by name, and unity by nature.

The company has a vision for the future which focuses on a three-pronged mission: to offer exceptional insurance brokerage service throughout the region, to achieve satisfaction for all clients with standardised processes, and to guarantee sustainable growth and profitability.

As well as being a leaders in the most important insurance companies of each country where it operates, Unity differentiates itself from the competition with a unique methodology — PRO, Personalised Risk Overview.

Through this initiative, Unity has designed and created insurance programmes tailored for individual needs. It believes in getting to know a client’s specific needs with regard to business, risk and policy conditions.

It also factors in the cost of the most appropriate coverage to insure and protect its properties and human capital.

Unity prides itself on being a dynamic and entrepreneurial organisation. “We carry our business from a creative point of view, generating added value for our clients,” says CEO Louis “Tito” Ducruet. “Innovation and initiative development in diverse areas has allowed us to obtain excellent results.

“Our service approach processes digital innovation in areas such as operations and digital sales, technological developments and access to international markets. This allows Unity to offer clients a unique experience, adapted to their needs and requirements.”

Unity takes seriously its commitments to Social Responsibility and Ducruet says the company’s people are “without question, our most valuable asset”.

“Our team members hold in their hands the success of the insurance business,” Ducruet says. “Additionally, we contribute to the development of the community through a wide variety of actions from social investment to volunteering in the region.”

Unity partners in corporate volunteering, and works with CentraRSE, SumaRSE, Proyecto Sonrisa, Hábitat para la Humanidad and Ángeles Seguros.


FAMA Investimentos: Shared Economy Investment Opportunities that Meet the Highest ESG Standards

[caption id="attachment_17498" align="alignright" width="300"] FAMA Investimentos logo[/caption]

If, five years ago someone approached a fund manager and said: “I come from five years in the future and have valuable information. In my time, you can request a car or taxi ride via an app wherever you may be. There is no need to wait in the street, exposed to safety hazards and the elements. You do not need to exchange money for the service or waste time swiping your credit card. You don't have to tell the driver your destination and, if you're on a phone call, you don't have to interrupt it; just hop in the car and off you go. You have never heard of the company that provides this service, but from the time I come from, there is no one who doesn't use it.”

Supposing this fund manager had, among the top positions in his portfolio, a car rental company. He would probably wonder how dismal the fate of this company would be. Trusting that what the time traveller said was true, he would happily and immediately sell all the shares of the car rental company, believing that he had made the best decision to protect client capital.

While this story may seem farfetched, it is not far from reality. In May 2014, when Uber's operations began in Brazil, there was no idea how big it would grow. Localiza - the nation's largest car rental company - was inexorably pitting itself against a strong competitor, an innovative company that would offer high service, convenience and affordable prices.

Uber started operations in Rio de Janeiro, but nowadays is available in more than 100 cities, with 600,000 active drivers and 22 million users. Impressive penetration in just five years.

More striking, perhaps, is what happened to Localiza. Its market value grew from R$ 8 bn at that time to R$ 35 bn now, the highest in its history. In these 5 years, not only has the company's fleet nearly tripled, but Localiza also acquired Hertz's operations in Brazil.

How can this be possible? Isn´t it a nonsense that the company could deliver this sort of growth at such a time?

During these five years, Localiza was (and remains) the main holding of the fund that FAMA Investimentos manages. The story of the time traveller and Uber's success dramatises the question we considered while holding our position in such a potentially adverse scenario. And the answer came from the ESG aspects of the company.

Our vision for ESG has been embedded in our investment culture and philosophy since our founding more than 25 years ago. Similarly, we seek to invest in companies whose culture is permeated by ESG factors as well.

For FAMA Investimentos, the key ESG-related metrics and KPIs are just quantitative data which, when segregated, contribute very little to the analysis. Trying to understand a company's culture, its extent and its capillarity is much more subjective and abstract and requires not only multiple interactions with different stakeholders but also a lot of field work.

Back to Localiza. We have never had doubts about the company's social and environmental concerns, as well as its very high level of corporate governance. It is natural for ESG-cultured companies to think very long term, as they are worrying about sustainability not only in the 'green' sense, but also – and especially – as it applies to their own business.

Thus, it was not difficult to understand that “urban mobility” and “shared economy” have long been priorities for Localiza. The company, contrary to conventional wisdom, probably celebrated Uber's debut in Brazil, rather than feared it.

Consumer behaviour is changing – and changing fast. Many of the most desirable items for young people from a decade or more ago (motor car and home, for example) have changed dramatically, moving from ownership to shared use.

Companies that ignore this trend (or believe it will be restricted to expensive and high value-added goods) risk seeing their business decline, leading to a massive value loses for similarly inattentive investors.

Many still have a slightly outdated view of ESG, sometimes confusing it with impact investing, sometimes just thinking of better environmental indicators.

Incorporating ESG aspects leads companies to take fewer risks, be more mindful of changes in their industries and seize opportunities that are ignored by those focusing only on the short term. They will be doing the same as before but just in a much better way.

The trend of the shared economy is a reality and not restricted to value-added goods. Innovative companies, even in more traditional industries such as construction, have already adapted their business models to contemplate a world where using is worth more than owning; or that sharing on a condominium basis is beneficial for all. We could mention MRV, also in our fund, that positions itself ahead of the industry in Brazil, by rethinking the housing market.

Lower value goods are already starting to pop up between sharing initiatives. Clothing lending start-ups, while still incipient, already appeal to a fair portion of the population, especially the younger generation. We have little doubt that when this behaviour becomes more mainstream, we will see Arezzo, the largest Brazilian shoe retailer (yes, we have a holding) deeply involved in this area. This company is concerned with sustainability in all stages of its processes, is thinking about social issues, culture and the environment, and will be fully aware of yet another possible consumer move.

These examples are not exhaustive and may certainly become obsolete with the passage of time and as technology advances. But integrating ESG into the analysis greatly increases the chances of positioning FAMA Investimentos with the winners.

In such a dynamic world, making investments through simple old accounting and financial forecasts has become too obsolete, to say the very least.


Banco Hipotecario: Vision, Dynamism and SDG-Adherence

[caption id="attachment_17501" align="alignright" width="300"] President: Celina Padilla Meardi[/caption]

Banco Hipotecario President Celina Padilla Meardi has a vision to create better opportunities for her fellow Salvadorans through banking services.

She believes that updating knowledge in legal, financial and technological areas will help to achieve that goal. She has put her extensive professional training to good use.
After graduating from the Universidad Doctor José Matías Delgado in 2002 with a degree in Legal Sciences, Padilla Meardi obtained her license as a lawyer and notary.

Padilla Meardi continued her postgraduate studies and achieved a Master's in International Transactions and Comparative Law from the University of San Francisco. She also has advanced studies in the legal aspects of technology and blockchain, and in 2018 graduated in Network Designer Conversations from the Generic Management Skills Programme of Medellin, Colombia.

"With a customer-centric and dedication to the modernisation of financial services offered by the bank, Padilla Meardi bases her management style on four pillars: trust, transparency, respect and communication."

With this experience, a commitment to her country and strong ethical values as a professional, Celina Padilla Meardi took charge of Banco Hipotecario in June 2019. Under the administration of the president of the Republic of El Salvador, Nayib Armando Bukele Ortez, she was charged with generating productivity and strengthening Banco Hipotecario services.

With a customer-centric and dedication to the modernisation of financial services offered by the bank, Padilla Meardi bases her management style on four pillars: trust, transparency, respect and communication. This has generated an environment of innovation and development.

One of her aims is to enhance the Banco Hipotecario’s adherence to the Principles of Responsible Banking through the Financial Initiative of the United Nations Environment Programme, UNEP FI.

This aligns the Banco Hipotecario’s business model with the UN’s Sustainable Development Goals, entrenching the role of financial institutions in the care of the environment at national and international levels.

As a founding signatory, the bank has committed to promoting products, services and relationships to support and accelerate changes in the economy necessary to achieve shared and lasting prosperity.

Important steps have been taken with the launch of the BH 365 Financial Correspondents and the BH Lite Account, products that will allow thousands of people — some of whom had been excluded from the national financial system — to benefit from banking services.

Recently, Padilla Meardi inaugurated the BH Café project, an agency that provides products and financial advice and makes available technological tools, including tablets, free Wi-Fi, a comfortable working space (and delicious coffee — from Salvadoran suppliers).


PwC Bermuda: New Tech and Cybercrime Top List of Concerns in Reinsurance Survey

[caption id="attachment_17511" align="alignright" width="300"] Author: Arthur Wightman[/caption]

The inability to deploy new technologies and the readiness to confront structural change top the list of risks — the banana skins — facing the global reinsurance industry.

This is according to a biannual risk report by PwC. Entitled Reinsurance Banana Skins 2019, it reveals fears that the industry is grappling with legacy IT systems as new data sources proliferate.

The second-biggest worry is cyber risk, because of the unknown liabilities of underwriting cyber policies, and the threat of cyberattacks against insurance companies that hold valuable data.

Closely linked to these worries, the report notes, is the industry’s concern around change management. This reflects worries about insurance markets being upended by new technologies, and radical shifts in customer expectations.

Technology has opened-up a proliferation of data from new sources — such as sensors and Internet of Things connectivity — while ushering-in ground-breaking advances in risk analytics. The results are revolutionising risk evaluation and prevention.

The big risk for reinsurers was being left behind as the industry transforms, says Arthur Wightman, territory leader of PwC Bermuda, and insurance leader of PwC in the Caribbean. In this scenario, the front-runners recognise that talent and access to data are as important as the systems themselves in navigating change.

Potential Vulnerabilities

The inclusion of cyber risk so high on the list of banana skins reflects the accumulation of exposures and risk of unforeseen losses in portfolios on one hand, and the potential vulnerabilities within reinsurers’ digitalised operations on the other.

“Successful technological transformation isn’t just a systems issue,” Wightman says. “It demands buy-in and upskilling throughout the organisation. The workforce needs to embrace change and see it as an opportunity.”

The third-biggest concern on the list is climate change — which received its highest-ever score. The reinsurance industry expressed anxiety about the costs of mounting claims from more frequent and more severe natural disasters, and the prospect that some risks could become uninsurable.

Rounding-out the top five is regulation risk, up from eighth place two years ago. This is largely due to concerns about a raft of new rules such as the EU General Data Protection Regulation and IFRS 17. The remainder of the top 10 mostly focus on operating risks.

“The impact of climate change is at number three, a new entry in the top 20 and noticeably higher than for the insurance industry as a whole,” the report states. “From floods to wildfires, the frequency of events and the severity of reinsurers’ losses are mounting as once-sporadic events become almost commonplace.

“Even greater risks lie ahead if climate change continues on its current trajectory. Through modelling of the vulnerabilities and their impact, reinsurers have a central role to play in strengthening prevention and resilience worldwide. The industry can also bring hard numbers to the debate over how to tackle this global threat.”

Investment performance, at number six, reflects worries that low yields could encourage insurers to take greater investment risks to improve returns. Doubts were raised at number seven on the list — the industry’s ability to attract and retain talent, particularly in technical areas.

Cost reduction (up two positions to 10) and reputation risk (up five to 13) both reflect the current mood. Political risk is also slightly higher at number nine, with protectionism, populism and trade wars of particular concern for the reinsurance industry.

“Respondents were more sanguine about the macroeconomic environment (11) and interest rates (14), which were down significantly from 2017 — although the survey was taken early in 2019 before concern around current interest rate declined,” the report notes.

In the bottom half of the table, governance risks were generally seen as under control, particularly corporate governance (18) and business practices (15) — although quality of management is more of a concern for the reinsurance industry. The bottom cluster — including social change (18), capital availability (19), and the UKs departure from the EU (20)—are largely unchanged.

The survey also shows the extent to which the reinsurance industry shares risks with the broader insurance community of brokers, life companies, and other respondents.

A key difference is that the reinsurance industry places more emphasis on the threat posed by climate change. The score assigned to this banana skin (3.86) is higher than the score of any other ranked by the non-reinsurance response.

Technology and cyber risk are considered more urgent by the reinsurance industry. Regulation and investment performance are seen as slightly less worrying.

The report also assesses reinsurance respondents on how prepared they feel the industry is to handle the identified risks. On a one-to-five scale (one bad, five good), they gave an average response of 3.17, which is higher than the average 2017response of 3.02. The broader insurance industry gave an average response of 3.11 this year (up from 3.02 in 2017).

“If we look at the top five risks as a whole,” the report notes, “what’s striking is the extent to which they feed into each other — technology is driving change management risks, for example, just as data regulation and cyber threats are heightening technology risks.

“This underlines the importance of looking at today’s fast-evolving risk landscape in the aggregate.”

About the Author

Arthur Wightman leads the Bermuda member firm of PwC International Limited (PwC-I). He is responsible for a leadership team whose job it is to sustain and enhance an inclusive, flexible and high performance culture that enables PwC's professionals to develop the leadership skills required to create lasting value for the companies, communities and broader stakeholders they serve. Arthur also serves on the executive leadership team of the member firms of PwC-I operating across the Caribbean region (Bermuda, Cayman, Barbados, Jamaica, British Virgin Islands, Bahamas and Turks & Caicos).

Arthur is also the Insurance Leader and overall Markets Leader of the member firms of PwC-I operating across the Caribbean region. He leads professionals to accomplish our purpose: to help our clients find solutions to their important problems and to work with them and our other stakeholders to build trust in society. Arthur is focused on helping companies to prepare for profound changes ahead and be equipped to seize opportunity. He has significant experience in serving large, multinational clients in various industries with a focus on Financial Services and specifically, the insurance, banking and asset management sectors. He also delivers services to public sector organisations. Arthur delivers a spectrum of services including audit, assurance, deals and consulting services.

Arthur has extensive experience in delivering value to boards and executive management and has a strong track record in helping organizations to solve complex problems and realize opportunities through his extensive knowledge of issues, trends and challenges that businesses face.

Throughout his career, he has served numerous global financial services clients. His public sector experience includes various Ministries of the Government of Bermuda, the Bermuda Hospitals Board and the America's Cup organisation responsible for delivering the 35th America's Cup. He has experience and relationships with the following regulators: Securities and Exchange Commission, Bermuda Monetary Authority, Financial Conduct Authority, Prudential Regulation Authority, Monetary Authority of Singapore, Swiss Financial Market Supervisory Authority, National Association of Insurance Commissioners and Public Company Accounting Oversight Board.

Arthur is published and quoted in numerous local and international financial publications and is a frequent contributor to industry events. A thought leader, he has authored many PwC global financial services and insurance and reinsurance sector reports. More recently he has published thought leadership on blockchain in financial services and cyber. Arthur also speaks widely on and is a champion for diversity and inclusion in the workforce.

Arthur serves and has served on several Boards of non-profits. He was the recipient of the Queen's Certificate and Badge of Honour in Her Majesty the Queen's New Years Honours, 2018. Arthur is a Fellow of the Institute of Chartered Accountants in England and Wales and member of the Chartered Professional Accountants of Bermuda.

About PwC Bermuda

PwC Bermuda is the largest professional services firm in Bermuda, specialising in insurance & reinsurance, asset & wealth management, banking, government & public sector and private clients. They are part of a network of firms in 157 countries with more than 276,000 people who are committed to delivering quality in assurance, advisory and tax services. They help organisations and individuals create the value they’re looking for.


Tadau's Susanna Lim: CEO’s Vision of a Zero-emissions Future, with the Means and Drive to Achieve It

[caption id="attachment_17516" align="alignright" width="300"] Tadau CEO: Susanna Lim[/caption]

Malaysia’s Tadau Energy envisions a World without pollution, zero emissions, so that future generations can inherit a healthier planet and clean air.

Susanna Lim is the founder and — since 2015 — CEO of Tadau Energy Sdn Tsb (TESB). She believes in challenge limits, not limiting challenges, and has focused on strengthening its core business of renewable energy generation. Under her leadership, Tadau Energy forges ahead in the design, construction, commission, operation and maintenance of solar, wind and other sustainable power sources.

The company is a leader in the field in transforming energy generation through advances in connectivity, rural electrification and efficiency. Susanna Lim aspires to enhance innovation and technology while contributing to the nation’s economy. She is committed to achieving sustainable environmental and community development goals via clean energy and bio-agricultural practices.

Tadau has received numerous global awards. Hailed by the World Bank for its initiative and innovation, it was the first company in the World to issue a Green Sukuk valued at RM250m ($60m). That earned a coveted “Dark Green” certification from Norway’s Centre for International Climate and Environmental Research (CICERO).

“As the CEO, I am entrusted with the responsibilities on Tadau Energy’s strategy and other key policy of the company,” Lim says. “We are commited in delivering to all our stakeholders, investing in our employees, dealing ethically with our suppliers, and generating long-term value for shareholders who provide the capital that allows companies to invest, grow and innovate.”

Prior to her foray into renewable energy, Susanna Lim was managing director and founder of legal firm Susanna & Lau Advocates; she has been a solicitor since 2002.

In those roles, Lim was responsible for M&A and national development under Public Private Partnership. She graduated with a Bachelor of Law (Hons) from the University of London, and has a certificate of legal practice from the Legal Profession Qualifying Board, Malaysia. She was admitted as an advocate and solicitor of the High Court of Malaya and the High Court of Sabah and Sarawak.

“I always believe employees are the greatest assets to the company,” she says. “For success, company culture and empathy are very important. We combined global expertise to provide the know-how and technologies, and paired them with top-notch management professionals to achieve our goals.”


Ana Palacio: Europe on a Geopolitical Fault Line

Two months ago, in his address to the United Nations General Assembly, UN Secretary-General António Guterres expressed his fear that a “Great Fracture” could split the international order into two “separate and competing worlds,” one dominated by the United States and the other by China. His fear is not only justified; the fissure he dreads has already formed, and it is getting wider.

After Deng Xiaoping launched his “reform and opening up” policy in 1978, the conventional wisdom in the West was that China’s integration into the global economy would naturally bring about domestic social and political change. The end of the Cold War – an apparent victory for the US-led liberal international order – reinforced this belief, and the West largely pursued a policy of engagement with China. After China became a member of the World Trade Organization (WTO) in 2001, this process accelerated, with Western companies and investment pouring into the country, and cheap manufactured products flowing out of it.

As China’s role in global value chains grew, its problematic trade practices – from dumping excessively low-cost goods in Western markets to failing to protect intellectual-property rights – were increasingly distortionary. Yet few so much as batted an eye. No one, it seemed, wanted to jeopardise the profits brought by cheap Chinese manufacturing, or the promise of access to the massive Chinese market. In any case, the thinking went, the problems would resolve themselves, because economic engagement and growth would soon produce a flourishing Chinese middle class that would propel domestic liberalisation.

"This has produced a golden opportunity for China to begin constructing a parallel system, centered on itself."

This was, it is now clear, magical thinking. In fact, China has changed the international system much more than the system has changed China.

Today, the Communist Party of China is more powerful than ever, bolstered by a far-reaching artificial intelligence-driven surveillance apparatus and the enduring dominance of state-owned enterprises. President Xi Jinping is set for a protracted – even lifelong – tenure. And, as US President Donald Trump has learned during his ill-fated trade war, wringing concessions out of China is more difficult than ever.

Meanwhile, the rules-based international order limps along, without vitality or purpose. Emerging and developing economies are frustrated by the lack of effort to bring institutional arrangements in line with new economic realities. The advanced economies, for their part, are grappling with a backlash against globalisation that has not only weakened their support for trade liberalisation and international cooperation, but also shaken their democracies. The US has gradually withdrawn from global leadership.

As a result, international relations have become largely transactional, with ad hoc deals replacing holistic cooperative solutions. Institutions and agreements are becoming shallower and more informal. Values, rules, and norms are increasingly regarded as quaint and impractical.

This has produced a golden opportunity for China to begin constructing a parallel system, centered on itself. To that end, it has created institutions like the Asian Infrastructure Investment Bank and the New Development Bank, both of which mimic existing international structures. And it has pursued the sprawling Belt and Road Initiative – an obvious attempt to position itself as a new Middle Kingdom.

Yet many, including in Europe, are not particularly concerned about the emergence of this parallel system. So long as it brings ready access to project finance, it’s fine with them. As Europe becomes increasingly alienated from the US, many Europeans also believe that they can improve their strategic position by situating themselves on the frontier between the two emerging worlds.

That strategy may offer some advantages, including opportunities for arbitrage. But as anyone who lives on a fault line knows, there are also formidable risks: friction between the two sides is bound to shake the foundations of whatever is positioned atop the boundary.

This is especially true for the European Union, which is built on a commitment to cooperation, shared values, and the rule of law. If the EU aids in building a parallel structure that contradicts its core values, particularly the centrality of individual rights, it risks severing its meta-political moorings – the beliefs to which its worldview is tethered. A Europe adrift will eventually sink.

The solution is not for Europe simply to take America’s “side,” and turn its back on China. (That, too, would run counter to European values.) Rather, the EU must heed Guterres’s call to “do everything possible to maintain a universal system” in which all actors, including China and the US, follow the same rules.

In this sense, the recent joint statement by Xi and French President Emmanuel Macron reaffirming their strong support for the Paris climate agreement is promising, as is Europe’s growing recognition that China is not only a partner or economic competitor, but also a “systemic rival.” But this is only a start. Europe needs a robust China strategy that recognises the profound, often subtle challenges that the country’s rise poses, mitigates the associated risks, and seizes relevant opportunities.

Achieving this will require perspective and discipline, neither of which comes naturally to the EU. But there is no other choice. As soon as Europe stops defending the rule of law and democratic values, its identity – and its future – will begin to crumble.

About the Author

Ana Palacio is former Minister of Foreign Affairs of Spain and former Senior Vice President and General Counsel of the World Bank Group. She is a visiting lecturer at Georgetown University.


Alisher Sultanov, Energy Minister of the Republic of Uzbekistan: There Must Be Conservation and Cooling in Uzbekistan

[caption id="attachment_17539" align="alignright" width="300"] Energy Minister of the Republic of Uzbekistan: Alisher Sultanov. Photo: Bakhodir Saidov[/caption]

Driving from the airport to Uzbekistan’s ancient city of Bukhara, visitors can see a series of new residential buildings on the side of the road, evidence of the building boom currently underway in Uzbekistan. If you look closely, you can see metal frames attached to the outside walls. Most of the frames are empty at the moment, but once construction is complete and the homes are ready to be occupied, the frames will house air conditioners.

These air conditioners are a symbol of economic development, of improved living conditions, of aspiration. But, for me, they are also symbolic of the challenge that faces my nation and countless others across the world.

Western Europe and North America already have their air conditioners, where they are needed. But now, just as world leaders wake up to the threat of climate change and incautious use of carbon fuels, our people want air conditioners too. And why shouldn’t they have them?

At the recent United Nations “Agenda for Sustainable Development” conference in New York, we in Uzbekistan played host to energy ministers from across our region, all members of the Asian Development Bank-sponsored CAREC programme. This included Kazakhstan, Tajikistan, Pakistan and Turkey. All of us -- ministers representing a total population of nearly 340 million -- face this dilemma every day. Our peoples want better lives and access to what your estate agents call “all mod cons”. But we realise that most modern conveniences consume energy, and energy demand is quickly rising.

Some of us – Kazakhstan and Uzbekistan in particular – are major energy producers and we are not insensitive to international calls to restrain consumption growth. We believe we can contribute best by producing more efficiently. For instance, we in Uzbekistan generate far too much electricity from high-value natural gas. Hence our recent decision to build our first nuclear plant, using Russian technology.

For decades now, our nations have underinvested in energy infrastructure. In my country, some 75% of the electrical production and transmission system is over 30 years old, and some parts are over 50. The situation is somewhat better elsewhere in the region, but not by much.

Our governments have all recognised the need to modernise and upgrade, though we have only begun the process. Equally, we are all investing in conservation in our domestic markets - metered power consumption, for instance - and in home insulation. Uzbekistan has raised electricity tariffs to more realistic levels, both so that producers and suppliers can cover their costs but also to encourage greater conservation at the household level.

But the critical new development is the emergence of a regional approach where, potentially, capital costs can be spread across a much larger base and where regional financing mechanisms can be developed. Through information sharing and networking, we are all developing more investor-friendly regulatory environments. Whereas in the past such international investment that existed was at least partly driven by geopolitical interests and other nations’ foreign policy goals, future FDI should be attracted on commercial terms.

Again taking my own nation as an example, we have recently restructured some of our energy enterprises, such that several will soon be seeking external capital. We are encouraging partnerships with global companies, anticipating gaining both capital and knowhow.

Likewise, my fellow ministers and I committed our nations to aggressively increase electricity generation from wind and solar sources, seeking to double production by 2023.

[caption id="attachment_17540" align="aligncenter" width="900"] Uzbekistan: Historic square in Samarkand. Photo: Bakhodir Saidov[/caption]

We see growing potential for cross-border trade in electricity, and full restoration of the power grid which existed when we and several of our neighbours were part of the Soviet Union. An agreement signed in July has been making this possible.

This is how lower and middle income nations can continue to develop, despite the acknowledged need to protect the planet. There is pressure on us. There are those who, in their heart of hearts, might think we shouldn’t be installing those air conditioners, that we need somehow to curb our ambitions. There are even arguments that the focus on economic growth is in itself bad for the environment. But that is an argument for inequality and hopelessness. What we need is clean and sustainable energy production, transmission and consumption.


Q&A with the Executive Secretary of the UNCDF: Judith Karl

[caption id="attachment_14583" align="alignright" width="300"] Executive Secretary: Judith Karl[/caption]

How would you sum up in three single words what characterises your team at UNCDF?

Innovative

Nimble

Trusted

What are you trying to accomplish?

We aim to make finance work for the poor.

In the current global financial ecosystem, finance flows are unequally distributed, and scarcest in the areas where sustainable development needs are the greatest. But this does not have to be an inevitability. There are built-in incentives and structural rigidities that can be changed to create more conducive financial pathways that work for those left behind. If we move from billions to trillions under the existing architecture, we will likely just perpetuate current inequalities with larger sums of money. So at UNCDF we look deeply at what localities, what populations, and what SDGs are most adversely affected by these asymmetries, and we design new financial pathways to show that financial eco-systems can be more inclusive, more accessible for a wider range of actors, and more SDG positive.

"UNCDF’s longest standing practice on local development finance works to expand the local fiscal space through inter-governmental fiscal transfer systems and mechanisms, as well as by addressing the legal and regulatory bottlenecks that limit fiscal resources from flowing to local economies."

Our 2019 publication Blended Finance in the Least Developed Countries shows that of the private capital mobilised as a result of blending, only 6% landed in the LDCs. And that 6% is volatile, i.e., highly concentrated in a handful of countries, sectors, and transactions. Of course there are reasons that the investment climate is harder in LDCs and we don’t deny those. But we also know that perceived risk is sometimes higher than real risk; and that current pricing and incentive structures do not work for smaller ticket sizes, and harder to reach localities. This requires a stronger “handshake” between development agencies that provide TA, development finance entities that tend to work at the sovereign level and/or at big ticket sizes, and commercial investors/banks. UNCDF sits at the nexus – a hybrid development/finance agency with flexible capital. After all, it is in the real economy that sustainable development meets people’s lives; it is in the local markets, SMEs, local infrastructure, and local financial ecosystems that people find their opportunities, make their living, and determine the education, health, and development outcomes for their families.

By deploying innovative finance models that successfully crowd-in public and private finance, we can create the demonstration effects that develop and transform markets; shift the dynamics of financing towards the local level; and, ultimately, catalyse the system change that helps ensure we truly leave no one behind. In the process, we are working to ensure that the financial ecosystem can be a force for good and for the achievement of the 17 Sustainable Development Goals for all.

Is the hardest challenge deploying capital to the countries that need it the most?

Yes, we find that capital is often least likely to reach the people and places that need it most. This is not only true for least developed countries in general, but even more so for secondary cities and remote regions within these countries.

Since the global financial ecosystem is sovereign based, it substantially favors national governments when it comes to accessing capital. At present, countries, as well as large corporations can easily access capital markets, while even large cities in the developing world lack such direct access. National governments in many developing countries also possess a monopoly on taxation, which means that local governments are unable to raise or retain revenues at the local level. Municipalities in LDCs are often limited to the budgets they receive from the central government, which are insufficient for meeting the range of basic services expected by citizens, let alone investing in local economic development and catalytic infrastructure. Furthermore, the lack of flexibility in official development assistance and its distribution means that such resources are allocated to specific projects, with local governments unable to finance the most pressing local development needs.

UNCDF’s longest standing practice on local development finance works to expand the local fiscal space through inter-governmental fiscal transfer systems and mechanisms, as well as by addressing the legal and regulatory bottlenecks that limit fiscal resources from flowing to local economies. We also work with municipalities, domestic banks and the private sector to promote local economic development and SDG-responsive investments. By increasing local access to finance, primarily from domestic capital markets, we enable local catalytic investments in priority thematic areas. One of those priority thematic areas is women’s economic empowerment, which in turn positively impacts achievement of a range of other SDGs. Last year, 50% of UNCDF’s localised investments primarily targeted women, while 60% of the jobs created went to women.

Similarly, climate change is another priority area where increased local investment is needed in order to build resilience. Since we started working on climate resilience, UNCDF has mobilised approximately $75 million, which has supported 240 local governments in 14 countries, to mainstream climate adaptation and resilience into their budgeting and planning processes. Through increased climate finance and technical assistance, local governments in some of the most vulnerable regions have been able to design and implement over 600 local adaptation investments.

How can UNCDF catalyse more capital flows, including private investment capital, to go into the toughest markets and reach those who are currently left behind?

UNCDF recognises that in order to bring capital flows into LDCs at greater scale, changes to the ecosystem to support investments in the Least Developed Countries (LDCs) need to be found. UNCDF aims to create demonstration effects in this space by employing three broad approaches: Embed investment decisions in larger changes to markets that are supported by technical assistance and programming; Move beyond transaction by transaction approaches and develop a portfolio based approach to investment; Only engage when no other actor in the financial ecosystem is willing or able to do so, so we are addressing a real gap – if another investor is willing to finance, we are not needed.

As a hybrid development and finance institution, UNCDF can support market development while also identifying specific companies or transactions that merit support; UNCDF can provide business advisory and investment capital to suit the different needs of the company or project at every stage of its development. UNCDF’s approach to capital deployment is to leverage its concessional resources to crowd-in more commercial finance. This can be done through on balance-sheet direct investments and through third-party managed off balance-sheet investments.

The UNCDF LDC Investment Platform (LDC IP) serves as the organisation’s centre of excellence on structuring and deployment of investment finance. The LDC IP demonstrates to domestic and international investors that LDC markets can and do generate returns, provide opportunities for successful investment, and merit the attention of a wider range of investors. It also helps a number of companies advance to the next level of growth where more commercial funding will replace the concessional funding. At the same time, our programme areas (or other parts of the UN system) use those demonstration effects to support policy and regulatory improvements as well as scale-up of what works by other actors.

Through the LDC IP, UNCDF can directly provide loans or guarantees between $100,000 and $500,000. As the companies and projects grow, they can be passed to third-party managed off balance-sheet blended finance vehicles for growth capital between $250,000 and $2.5 million. When the companies or projects need more than $2.5 million, they should be healthy enough to gain financing from development finance institutions or fully commercial sources.

Why is women’s economic empowerment so important from the standpoint of finance?

We have to look at whether, how and when finance works for women. Women are drivers of inclusive prosperity. When women’s incomes rise, health and education outcomes improve for themselves, for their families, and for their communities.

For these outcomes to materialise, financial ecosystems need to be designed with women in mind. The current financial mainstream in most countries perpetuates barriers rather than clears them. Women make up the majority of the globally unbanked. They often lack access to financial tools and face social norms that discourage them from using these tools when they are available. And women face persistent challenges in bringing their economic activities into the formal financial sector, often paying higher interest rates, experiencing a higher loan rejection rate, and frequently being asked to provide more collateral than men — despite the fact that women are typically under-collateralised and less likely to own property. And local infrastructure endowments (roadways, markets, transportation options) are seldom designed with women’s movements, childcare needs, and safety in mind.

There are many proven models for redesigning how women can interact with, and make empowered decisions in, the financial ecosystem. It requires a change in the way the financial and infrastructure services are designed and promoted: we need more women engaged as architects of these services, while being understood in all of their economic roles – as consumers, decision-makers, income earners, and heads of households. Digital financial innovations constitute one promising frontier for positive change, but again – there is nothing inherently inclusive about digital solutions, unless they are designed to rethink financial pathways head on. Fortunately many of our digital innovators have the courage to disrupt, we just need more actors who share that vision.

In today’s economy, equality for women and women’s economic empowerment are one and the same. And women’s economic empowerment is a key driver of practically the entire SDG agenda. Finance needs to embrace this reality, and stand behind the investments that will bring it to scale.

What is the role of UNCDF with regard to all the 17 SDGs? How do you add value?

By strengthening how finance works for poor people at the household, small enterprise and municipal levels, UNCDF contributes to SDG 1 on eradicating poverty and SDG 17 on the means of implementation. UNCDF’s development focus also contributes to a number of other SDGs including SDG 5 (Gender Equality); SDG 7 (Clean Energy); SDG 9 (Industry, Innovation and Infrastructure); SDG 11 (Sustainable Cities and Communities) and SDG 13 (Climate Action).

When we look at the whole SDG agenda, we see a set of goals that provides an opportunity map for the world. These goals are our north star, where we all need to point to in order to achieve a sustainable, inclusive and prosperous world. So we see our greatest value in our demonstration effect, and in our ability to shift perceptions about what is possible, what is profitable, and what is sustainable when we translate “leaving no one behind” into reality. A lot of that effort is what SDG 17 is all about - transformation achieved through partnerships. We help define the problem, then ask market players and/or governments to work with us to design the solution, test what works, then bring it to scale. We learn together with policy makers and regulatory bodies, share knowledge, and show the solutions marketplace how innovation can change the sustainable development equation.

What is the importance of mobile handsets in frontier and pre-frontier markets e.g. in Africa?

Mobile technology is critically important in these markets. They are stretching the boundaries of financial services well beyond what brick-and-mortar institutions are capable of. But what we have also found is that a mobile wallet is only as good as the amount of capital in it, and the real life problems it can help poor people solve. To that point, financial inclusion is a means to an end. It is not an end in itself.

We also have a tendency to believe that digital economies are inherently inclusive. But the reality is that this is not a given. Findex data has shown how progress in digital financial inclusion may lead to a widening of the gender gap in some contexts.

This is precisely why we have launched our digital strategy, Leaving No One Behind in the Digital Era. It is a natural progression for our work in financial inclusion, which we are implementing in more than 20 LDCs. We focus on helping countries to make important decisions about digital infrastructure, innovation ecosystems and enabling policy frameworks that will result in national digital economies that are inclusive and sustainable. We work on innovation sandboxes with regulatory authorities and market players, and deploy a digital economy index to determine barriers to readiness and inclusion. The strategy sits on four workstreams: empowered customers, inclusive innovation, enabling policy and regulation, and an open digital payment ecosystem. As host to the Better Than Cash Alliance, we look at how the digitisation of payments in the public and private sectors can achieve critical mass to drive mobile wallet uptake and – critically – integration into the wider financial ecosystem. This is where transformation can really begin.

As we see it, meaningful digital financial inclusion has to provide the capability for the traditionally underserved—women, youth, MSMEs, smallholder farmers—to meet their daily needs, as well as to improve their marketability and competitiveness in the digital-economy age.

How has blended finance been successful?

Blended finance is one of many instruments the international community can use to help shift the flow of capital to investments and markets that are otherwise being ignored. But there are challenges, and no magic bullet. Having published two annual reports on blended finance in the LDCs with the OECD, we have found that a very small portion of commercial finance mobilised by official development finance reached the LDCs—6% as of our most recent edition. But we also highlighted several case studies that provide clear proof of the potential that blended finance solutions possess.

One case study from our 2018 edition of Blended Finance in the Least Developed Countries involves the Central Africa SME Fund (CASF)—a $19 million fund that provides private equity, long-term debt and technical assistance to SMEs in the Democratic Republic of Congo and the Central African Republic—that was launched by XMSL, a Dutch private equity fund. The International Finance Corporation (IFC) provided the anchor investment and technical assistance funds, totaling just over $13.5 million, which catalysed $6.5 million in additional equity investments. As of the 2018 report, CASF provided finance to 32 SMEs across 10 sectors in these markets, exiting four investments completely while returning over 50% of invested capital to investors, performing in line with initial return targets. Additionally, more than 500 jobs have been created at portfolio companies since investment by CASF alone.

Our 2019 edition showcases an example from a domestic financial intermediary in Nepal—the Town Development Fund (TDF). Relying on a combination of loans, upfront cash contributions, and grants from the Government of Nepal, TDF has supported over 70 towns in the financing of water-sector projects. TDF’s executive director credits their blended finance model with providing access to safe drinking water and basic sanitation facilities to 87% of Nepal’s population.

Clearly, blended finance approaches can help mobilise resources to help LDCs bridge financing gaps, as well as create demonstration effects that narrow the gap between the perception of risks in these markets and the actual levels of risk. This is why we offer clear action items to improve the use of blended finance in LDCs: including expanding the involvement of LDCs in blended finance policy discussions; improving impact measurement and transparency; and encouraging concessional finance providers to engage with their boards, donors and LDC governments in finding innovative ways to take more risk and experiment with new solutions.

How do you turn the SDG road map into an opportunity for creating finance for LDCs?

I have always seen the SDGs as an opportunity map – for businesses, for money managers, for all of us. After all, it lays out the profile of what a prosperous, inclusive, and sustainable world needs to be. Today’s private customers, consumers, savers, and investors are increasingly proactive in directing their dollars towards value for the planet and for the future they want to see. The challenge to all of us is to design the pathways that make it more attractive to direct our collective resources toward that good.

And that is where UNCDF plays a role. We are helping to answer the “how” question, by creating demonstration effects and showing new approaches to address old problems. In the process, we are making finance work for those too-often underserved by the global financial ecosystem. That potential for transformation—and the promise of the SDGs to leave no one behind—is what motivates UNCDF, now and into the future.


Evan Harvey, Nasdaq: SDG Awareness and Action - A Report From the Global Exchange Community

The UN Sustainable Development Goals (SDGs) seek to alleviate social, economic, and environmental problems by the year 2030, but progress has been slower than necessary and scattershot in impact. Certain SDGs tend to attract awareness and action from companies if they are closely related to their business objectives, but others (#1 No Poverty, for example, or #14 Life Below Water) seem relegated to specialist intervention. The goals themselves are nonbinding, absent government adoption and mandates, and there are only a handful of standards for the management and/or reporting of SDG performance.

Most of the world’s stock exchanges support the SDGs. Industry advocacy and support takes many forms, including participation in the UN Sustainable Stock Exchanges Initiative and the UN Global Compact. Some exchanges have also integrated the work of the SDGs into the sustainability tools and support that they provide to listed companies, leveraging events, white papers, and webinars to demonstrate the market value and business impact of the SDGs.

"Notable exceptions from the Nasdaq-listed roster include Intel, Microsoft, Symantec, and Starbucks – each reporting steady progress and specific metrics – but most large companies are notably absent from the conversation."

Yet a relatively small number of companies are publicly reporting progress against the SDGs, which implies that the 2030 target is in serious jeopardy. Notable exceptions from the Nasdaq-listed roster include Intel, Microsoft, Symantec, and Starbucks – each reporting steady progress and specific metrics – but most large companies are notably absent from the conversation. Small- and medium-sized enterprises (SMEs), fundamental building blocks of job creation and international development, seem to be particularly silent. The most recent Sustainable Development Goals Report (UN, 2018) cites certain factors for this, including a lack of expertise and resources, especially in developing economies.

Given this seeming gap between advocacy and performance, we wanted to examine the level of SDG awareness, action, and efficacy within the global exchange community. WFE provided CFI.co an understanding of SDGs-related industry practices based on a WFE survey.

[caption id="attachment_14607" align="aligncenter" width="586"] Question: Are the UN SDGs well known/well understood in your market?[/caption]

Under Chief Executive Nandini Sukumar, the WFE created a set of Sustainability Principles that (among other things) formalizes industry commitment to the UN SDGs by accelerating development of sustainable finance and promoting awareness in the capital market. Ms. Sukumar, citing the WFE Annual Sustainability Survey, says, “73% of the exchanges with sustainability initiatives have some form of SDG-specific initiatives. These initiatives include education programs on SDGs for issuers, disclosure guidance and offering SDG-related products in their markets.” Certain SDGs (#5 Gender Equality, #8 Decent Work Conditions, and #13 Climate Action) are the most engaged among WFE members.

Survey Results

We sent questions to the Sustainability Working Group — a subset of WFE members that are especially committed to sustainable business integration — and received responses for more than half of them. Participating exchanges included B3 (Brazil), Bolsa de Valores de Colombia, Borsa Istanbul, Bourse de Casablanca, Dubai Financial Market, the Egyptian Exchange, Ho Chi Minh Stock Exchange, Johannesburg Stock Exchange, London Stock Exchange Group, National Stock Exchange of India, Shanghai Stock Exchange, the Stock Exchange of Thailand, and the Taiwan Stock Exchange. Two members elected to remain anonymous, and Nasdaq itself has contributed to the industry data in this article.

We found that awareness and valuation of the SDGs is nearly universal, yet actionable progress is not being measured. The SDGs are vital to capital market function, particularly for listed firms and their respective supply chains. Without reaching for the Goals, one responding exchange said, “Neither the capital markets nor the real economy will be able to survive in the coming decades.”

80% claim that the SDGs are well understood in their market

87% believe that the SDGs are a fundamental part of the sustainable economy

More exchanges (54%) do not measure SDG progress than do (46%)

Wanting to press further, we asked this question: How does your exchange engage, inform, or otherwise communicate with issuers and other stakeholders about the UN SDGs? The disparate range of answers may help to explain the gap between industry awareness and industry action, as there is no global standard for measurement – but it’s also clear that the responding exchanges are proactive.

“The SDGs are recommended as a global reporting framework for listed companies in LSEG ESG reporting guidance,” according to the London Stock Exchange Group (LSEG). “FTSE Russell — the global, multi-asset index provider part of LSEG — develops investment tools that incorporate alignment with the SDGs in the index design.”

Taiwan Stock Exchange cited strong information disclosure, corporate governance, stewardship responsibility, sustainable product development, and market capacity building as evidence of their commitment to SDG progress. Other exchanges cited index development as a key driver. Other exchanges were more candid about market inhibitors. Further support from stakeholders including issuers is needed to allow exchanges to move forward more aggressively.

Other Industry Initiatives

The UN and exchange leaders had previously identified the SDGs that most pertain to the industry and the various ways that capital markets can help deliver on the Goals. Per this guidance, the SDGs that receive special emphasis from Nasdaq and others include:

#5 Gender Equality. Ensuring women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life.

#12 Responsible Consumption and Production. Encouraging companies, especially large and trans-national companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.

#13 Climate Action. Improving education, awareness raising and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning.

#17 Partnerships for the Goals. Enhancing the global partnership for sustainable development complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technologies and financial resources to support the achievement of sustainable development goals in all countries, particularly developing countries.

An influential joint report from the UN SSE and the WFE (How Exchanges Can Embed Sustainability Within their Operations: A Blueprint to Advance Action, 2019) makes one point clear: “The imperative of sustainability as embodied in the SDGs demands deep transformative change from both business and public policy. For exchanges, the incorporation of sustainability considerations is likely to be a determinant of long-term performance and resilience in a changing world.”

About the Author

Evan Harvey is the Director of Corporate Responsibility for Nasdaq. He also serves on the Board of Directors for the UNGC US Network and chairs the Sustainability Working Group at the World Federation of Exchanges.