The New Global Context - Uncertainty Unveiled

[caption id="attachment_8788" align="alignright" width="229"] Davos[/caption]

The emergence of a global market place may already be grinding to a halt. Before long, economic integration, a process only just begun, could be derailed or superseded by fast-paced political, social, and technological developments over which states and their governments often have but limited control. That won’t do.

This New Global Context, now being unveiled in ways both surprising and exciting, is what will drive discussion at the 45th Annual Meeting of the World Economic Forum (WEF) in Davos, Switzerland. The four-day event, split into a series of agendas, brings together leaders from government, business, academia, and civil society. Over 2,500 participants are expected to descend on Davos to exchange thoughts, ideas, and views on most any topic under the sun: from deforestation to gender issues to cyberspace governance and way beyond.

In a world subject to profound change, increased situational awareness and contextual intelligence become essential tools for stakeholders that wish to help trace vectors of development rather than be overtaken by them. The WEF offers a platform that, due to its scope, allows invitees an unparalleled opportunity to broaden horizons and deepen knowledge.

Modesty is not part of the Davos happening. The WEF bills the event as nothing less than a venue that helps shape the global agenda for the upcoming year. And such it is indeed. Being a forum that attracts both policy- and decision makers, the WEF also attracts considerable flak, some of which hails from globe-trotting anti-globalisation activists who unfailingly turn up to disrupt affairs.

“In a world subject to profound change, increased situational awareness and contextual intelligence become essential tools for stakeholders.”

More substantial criticism is levelled by the likes of MIT (Massachusetts Institute of Technology) Professor Emeritus Noam Chomsky who regularly censures the WEF for being “out of touch” with the needs, aspirations, and living conditions of common people. Indeed, the Davos Man – a neologism to describe the wealthy international elite whose members pay no heed to borders or nations – seems under threat from a re-emergence of nationalism, sectarianism, and isolationism in various corners of the world.

Best Hope?

Rather than a standard-bearer of the perceived evils of capitalism-without-borders, the Davos Man – for all his failings – still seems to offer the best hope for sustained global development that eventually, and perhaps inevitably, will overcome widespread ills such as poverty, violence, and ignorance. Far from personifying an excuse for the unbridled application of borderless capitalism or corporatism, the Modern Davos Man has read, or at least perused, the writings of Thomas Piketty – our latter-day Marx – and has sustainability values foremost on his/her mind.

Today, no self-respecting CEO, investor, or policymaker can do without at least paying tribute to environmental, social, and governance standards of quality. With climate change now nestled at, or near, the top of the global agenda, the reduction of noxious emissions is the thread that links the various agendas and debates.

New at this year’s meeting are the Transformation Maps that will allow participants to better identify and understand the drivers of change. These maps – akin to tag clouds – were drawn-up by over a thousand experts, representing a bewildering array of fields of knowledge, at the November 2014 Summit on the Global Agenda – allegedly the world’s largest brainstorming session – which took place in Dubai.

Also, each year the Global Agenda Councils, a network of expert volunteers, comes up with an outlook that provides insights into specific regional and global challenges from the perspective of most stakeholders involved. In the introduction to the 2015 Outlook on the Global Agenda, former US Vice-President Al Gore identifies growing income inequality as one of the most pressing issues that need be addressed: “Over the last 25 years, the average income of the top 0.1% of the US population has grown twenty times faster than that of the average citizen.”

Troubling Disconnect

Jobless growth is another issue causing worry: “Economies may be growing, but the number of available jobs is largely failing to keep pace,” writes Mr Gore who goes on to warn of the danger persistently high unemployment levels has to governments. A perceived lack of leadership and a weakening of parliamentary democracy suggest “a troubling disconnect between the public and the authorities that govern them.”

Writing on income inequality, UN Special Advisor Anima Mohammed concludes that robust economic growth by itself has not been effective in reducing the gap between the excessively rich and the desperately poor: “Deep challenges remain, including poverty, environmental degradation, persistent unemployment, political instability, violence, and conflict. These problems are often closely related to inequality.”

The 68.7% of the world’s population with assets valued at under $10,000 collectively own just about 3% of global wealth. On the other extreme of the scale, the 0.7% of humanity with more than a million dollars in property, own fully 41% of global wealth. The 2014 Pew Global Attitude Study found that in Sub-Saharan Africa over 90% of people consider income inequality a “big problem.” The corresponding number in the United States is, at 80%, in a similar ballpark.

While the concern is clearly there, and indeed tops the trends, politicians have been slow to react. Even in countries with governments that actively pursue income equalisation policies – such as Brazil, Mexico, and Rwanda – the gap has proven hard to shrink, let alone bridge.

“Addressing inequality is good for business as it creates a new demographic of consumers, thus widening the market for profits and services and increasing profit opportunities, especially for women,” writes Mrs Mohammed who is UN Secretary-General Ban Ki-moon’s special advisor on post-2015 development planning.

Pot-Shot

While a cheap and cheerful pot-shot to take, Mr Gore was perhaps not the most fortunate of available choices as a messenger of global trends that cause worry and merit exhaustive debate. The former vice-president has gained some notoriety for walking away from discussion and dismissing those brave enough to challenge his convictions. He famously quipped that it is “kind of silly” to discuss the science behind climate change and refused to engage Bjørn Lomborg – author of The Sceptical Environmentalist, director of the Copenhagen Consensus Centre, and a self-styled techno-optimist – on whether climate change should have precedence, or not, over investments in health and education.

As a repeat non-debater – and one with an outsized personal carbon footprint to boot – Mr Gore seems rather lost in the cacophony of expert voices that characterises the Global Agenda Councils. Also, Mr Gore may indeed personify the lack of leadership that is the third trending issue raised by the councils. If the World Economic Forum proves but one thing, it is that leaders must listen and learn, and act and adapt. Though relativism offers a philosophical slippery slope, the truth may indeed have more than one side to it – however inconvenient that may be.

The Top 10 Trends
According to the Global Knowledge Network

Deepening Income Inequality

Persistent Jobless Growth

Lack of Leadership

Rising Geostrategic Competition

Weakening of Representative Democracy

Rising Pollution in the Developing World

Increasing Occurrence of Extreme Weather Events

Intensifying Nationalism

Increasing Water Stress

Growing Importance of Health in the Economy

WEF: An Explainer

Committed to “improving the state of the world,” the World Economic Forum is a Swiss foundation that sprang from the European Management Forum organised since 1971 at the Davos Congress Centre in Graubünden with support from the European Commission and a number of trade organisations. Initially conceived as a venue to acquaint European captains of industry with US-style management techniques, the forum quickly broadened its brief after the collapse, in 1971, of the Bretton Woods global monetary framework. The forum shifted its focus from purely business management to include economic and social issues.

After the Yom Kippur War of October 1973, the forum’s scope was expanded yet again to now include politicians as well. Offering a non-partisan platform devoid of national identity – or with a set agenda or objective other than promoting global understanding and prosperity – the event soon attracted droves of national leaders eager to meet peers, and even opponents, on neutral ground.

The formula proved exceptionally successful. On the brink of war over Turkish underwater research conducted in the vicinity of Greek islands, in 1988 Turkey and Greece agreed on a “no-war” approach to their differences at the annual meeting of the now rechristened World Economic Forum. To this day, the Davos Declaration ensures lasting peace in the Aegean Sea.

Then in 1992, South African President WF de Klerk met in Davos with both Nelson Mandela and Chief Mangosuthu Buthelezi, founder of the Inkatha Freedom Party, to discuss the post-apartheid future of their country. Two years later, Davos was the stage of yet another historic meeting between foes when Israeli Foreign Minister Shimon Peres shook hands with PLO Chairman Yasser Arafat and both proceeded to lay the groundwork for the Cairo Agreement, successor to the Oslo I Accord, regarding limited self-rule for Gaza and Jericho.

Don’t Call Us…

The World Economic Forum Foundation is funded by 1,000 member companies, mostly blue chips with an annual turnover northwards of $5bn, which also dispatch their most senior executive officers to Davos to take part in the discussions. Participation is by invitation only and includes, besides business leaders, politicians, academics, religious leaders, and representatives from non-governmental organisations (NGOs), the media, and multilateral organisations.

Besides its flagship event in the Swiss Alps, the World Economic Forum organises an increasing number of meetings and networks around the world that bring and bind together young leaders, social entrepreneurs, researchers, educators, health professionals, and others. Each year, the WEF organises a series of regional mini-Davos promoting closer liaising between corporations, governments, academia, and NGOs. In 2015, regional meetings are planned in East Asia (Indonesia), Latin America (Mexico), and Africa (South Africa).

The 2015 annual meeting in Davos – an Alpine resort town of some 11,000 inhabitants – will also showcase the fifty or so initiatives currently being undertaken by the WEF. Over 250 sessions are scheduled to take place besides a number of off-piste meetings featuring an overview by prominent experts of the state-of-the-art in more exotic and diverse fields of endeavour such as nanotechnology, quantum physics, literature, music, astronomy, and architecture.

Impact

One of the more transcending topics at the 2015 meet – and quite possibly a new buzzword – is impact investing. In its most basal of forms, the concept entails the maximising of profits while doing good deeds. Amongst the exceedingly wealthy – aka high-net-worth and ultra-high-net-worth individuals – impact investing has become the hottest trending topic after the WEF in December 2014 released a study cum manual entitled Impact Investing: A Primer for Family Offices. The document aims to encourage stewardship amongst the affluent while impact investing aims to capture their imagination – and assets.

Curiously enough, the WEF found that most high-net-worth individuals are willing – if not positively eager – to engage but struggle with a lack of specific expertise. In a nutshell: they do not quite know where and how to start. The WEF study was presented to the public at Art Basel Miami Beach – the biggest contemporary art fair in the US displaying the work of over 4,000 artists represented by 267 galleries from 31 countries. While perhaps not artsy, the WEF study attracted the attention of the gathered – and deep-pocketed – art lovers congregating at the event.

Abigail Noble, head of impact investing initiatives at the WEF, said: “We’re just making sure that there’s a little bit of a moderating voice, hopefully getting ahead of the potential hype or bubble. Though I am very passionate about impact investing, I do recognise it might not be for everybody. We want to make sure that decision-makers within family offices begin by asking the right questions of the sector and of themselves.”

As a worthy concept, impact investing has been around since 2007. However, it has only recently gained a little traction. The WEF estimates that worldwide approximately $50bn worth of assets is being managed to extract a maximum of impact. According to WEF numbers, about $4tn is held globally by family offices – private companies used as vehicles for the management of family fortunes.

Some prominent names have already signed up for impact investing. Steve Case, cofounder of America Online (AOL), and eBay founder Pierre Omidyar were amongst the early adopters of impact investing. In Brazil, where the WEF organised a round-table for ultra-high-net-worth individuals in August 2014, the event attracted more people than seats at the table. Mrs Noble thinks family offices can play “a key role” in the evolution of impact investing: “They generally have more discretion over their assets than do managers that are subject to regulation such as those presiding over pension funds and insurance companies.”

The WEF readily admits in its report that impact investing may include higher upfront costs and a measure of liquidity risk, normally associated with venture capital underwriting start-ups. As such, impact investing is not right for all: “It’s got a lot of potential but that doesn’t mean that it’s without flaws,” concludes Mrs Noble.

Measuring Impact

Gauging the real impact of WEF initiatives and proceedings is a daunting task. For all the talk taking place and initiative being displayed at Davos, the real impact on people’s life is mostly channelled through projects, both large and small, undertaken by businesses, foundations, and state entities. Thus, the World Economic Forum is but a venue – albeit the world’s most important one – for those concerned with the future of the world to swap ideas, experiences, and knowledge.

Since the turn of the century, the forum has opened up considerably, raised its public profile, and presented a more humane persona in an attempt to remove any appearance of being the scene of backroom dealings. Voices critical of unfettered globalisation have been invited in as well. Though select media are welcomed as active participants in the debates taking place, the working press – as opposed to their invited brethren – are still kept at bay and remain confined to processing reams of often self-congratulatory releases.

Admittedly, organisers have to toe a fine line in order to keep the annual Davos meeting true to its original character as a safe and secure venue – if not haven – for thought leaders and other people of great consequence. Understandably, the WEF is loath to see its main event reduced to a stage for posturing, electioneering, and grandstanding of either the political or nationalist kind.

As it is, tangible results from the meetings may best be found by observing the slowly changing attitudes of both big business and government. An unexpectedly large number of global trends were first brought to the fore at Davos meetings. Subsequent changes in attitudes, ultimately benefiting countless millions around the globe, can often be traced back to exchanges between decision makers facilitated by the forum.

As such, the WEF is to economic thought what the Cannes International Film Festival is to the movie industry: a platform for the display of new ideas, ingenuity, and creative leadership that challenges established beliefs, shatters dogmas, and clears intellectual cobwebs. If it didn’t exist, it would urgently need to be invented.

Global convergence, a process now threatened by the sudden return of sectarianism, is of too great a value to be allowed an early demise. Rather than a peril, globalisation offers opportunity. It is now up to the Modern Davos Man to ensure these opportunities benefit all, instead of just the select few.


World Economic Forum Opens in Davos: Sharing and Caring

[caption id="attachment_8791" align="alignright" width="250"] Davos: WEF 2015. Photo: Copyright © CFI.co[/caption]

Davos – Over 2,600 of the world’s most notable people have ascended to Europe’s highest mountain town for a series of meetings that aim to address “key issues of global importance.” Nestled at 1,560m above sea level in a picture-perfect Alpine valley, Davos becomes the capital of the world for a few days each year as the town’s 11,000 or so inhabitants welcome heads of state and government, captains of industry, billionaires, and scores of other prominent people who arrive to deliver their take on global affairs.

Thanks to the WEF, Davos is briefly allowed to recapture some of its former glory as the most glamorous of Swiss ski resorts, a title it lost long ago to St Moritz – a few valleys over to the south.

The 45th annual edition of the World Economic Forum (WEF) gets underway today amid heightened security provided by up to 5,000 army personnel and countless other and slightly less visible officials dedicated – with predictable Swiss precision – to keeping uninvited guests and possible evildoers at bay. Anti-globalist protesters are not expected in any disruptive numbers: it’s fairly cold in Davos and frightfully expensive as well.

“The World Economic Forum serves the international community as a platform for public-private cooperation. Such cooperation, to address the challenges we all face, is more vital than ever before. But it requires mutual trust. My hope is that the annual meeting serves as the starting point for a renaissance of global trust.”

- Klaus Schwab, WEF Executive Chairman

In normal times a rather sleepy – if exceptionally prosperous – town, for the next four days Davos is home to not just WEF invitees, but also their entourage of highly-trained drivers, yes-men, busy fixers, efficient personal assistants, go-getting interns, and charming ladies without any immediately apparent function. These hangers-on and their VIP patrons are in turn surrounded by hordes of camera-toting journalists aiming to catch a glimpse, and quite possibly a word, of the wise and learned men – and the odd woman – who may shine a light on the societal ill du jour.

Mr Happy Meets Mr Gore

Wednesday’s headline sessions include a discussion on the perils of climate change with singer-songwriter Pharrell Williams of Happy fame and one of a growing number of celebrities following in the footsteps of Bono – absent due to a bicycle accident. Mr Williams will be joined by former US Vice-President Al Gore, unfailingly present at the WEF, to provide an answer to the question: What’s Next? A Climate for Action is the right answer.

In another morning session, Italian Prime-Minister Matteo Renzo will hold a talk on transformational leadership. Former UK Prime-Minister Tony Blair, another return visitor to Davos, has been shoehorned in at the last moment by the organisers to expound on religion’s role in the contemporary world. His address – Religion: Pretext or Conflict? – aims to explore whether religious intolerance is actually religious in nature – a topic of singular relevance since the Paris terrorist strikes.

Ukraine President Petro Poroshenko and WEF founder and Executive Chairperson Klaus Schwab are set to consider the severely strained relations between Kiev and Moscow and the conflict over both the Crimea and the Eastern Ukraine. Later in the afternoon, former US Treasury Secretary Larry Summers, OECD (Organisation for Economic Development and Cooperation) Secretary-General Angel Gurría, and Canadian Finance Minister Joe Oliver will discuss the looming centennial slump and ways to avoid a decade of secular stagnation – the condition whereby previously buoyant market economies get stuck in a self-perpetuating cycle of negligible growth.

Cooperation Vital

WEF Executive Chairman Klaus Schwab said on Wednesday morning that “sharing and caring” could possibly be the one-liner best suited to describe this year’s mega-event: “The World Economic Forum serves the international community as a platform for public-private cooperation. Such cooperation, to address the challenges we all face, is more vital than ever before. But it requires mutual trust. My hope is that the annual meeting serves as the starting point for a renaissance of global trust.”

The event comprises around 280 conference sessions touching on most any issue under the sun. Academics provide insights into the latest research developments while some of the world’s foremost nerds are ready to explain in layman’s terms the most recent technological trends and innovations. The overriding theme, as chosen by the organisers, is The New Global Context, a sufficiently broad description that aims to capture the post-financial crisis scepticism regarding the benefits of unfettered globalisation.

However, world events are moving at breakneck speed, undermining the WEF’s attempts at creating a comprehensive and all-inclusive agenda. Whilst up until a few weeks ago, Ebola was at the top of the bill, discussions on the deadly disease have now been relegated to a lower pane in order to make room for newer developments such as the precipitous drop in oil prices, renewed sectarian violence, and the Swiss National Bank’s surprise move away from the euro. The unveiling of an amended quantitative easing push by the European Central Bank, set to take place on Thursday, will undoubtedly dominate the latter part of the Davos meeting.

Ice Row Shuffle

As delegates and others shuffle the ice-clad streets of the Swiss ski resort, Greece prepares for an election and possibly a watershed moment in its history. Greek voters may well have the future of the euro in their hands. If it is up to German Chancellor Angela Merkel – also present in Davos alongside her new best friend, French President François Hollande – the Greek will be no more than a footnote when the history of the Euro is written.

While in Davos, Chancellor Merkel will deliver stern lessons in fiscal discipline and call everyone’s attention to the folly of overspending. François Hollande, all but written off a few short weeks ago, is of course the man of the hour – the heroic defender of all freedoms in the face of bigotry-turned-violent.

The corporate world is also exceptionally well-represented at Davos with Microsoft’s co-founder Bill Gates in attendance besides Google’s Eric Schimdt, Yahoo’s Marissa Mayer, and Facebook’s Sheryl Sandberg. The money brigade includes George Soros, Italian shoe magnate Mario Polegato, Irish telecom mogul Denis O’Brien, Indian industrialist Ado Godrej, and about one hundred other billionaires.

Mr Polegato, founder and chairman of Geox – a shoemaker and retailer – predicted upon arrival at the Edelweiss Hotel that cheap oil is not going to last: “By the end of the year, oil will be trading at around $70 a barrel.” Asked by Bloomberg News how he would invest his untold millions, Mr Polegato recommended US dollars, gold, and … Picassos.

Russian billionaire David Yakobachvili, begs to disagree and cannot visualise an immediate end to the second coming of the era of cheap oil. Mr Yakobachvili also fails to see the difficulty in fixing the world’s economy: “That is a fairly easy thing to do. It is a lot harder to face off the threat of military escalation. Conflicts pose the most serious threat to global wellbeing.”

Affluent Oracles

The billionaire oracles assembled in Davos are eager to dispense investment advice, predictions, and other titbits of conventional wisdom to please and impress both their peers and the masses. It is part of an event that gauges the state of the world with a view to improving it.

Be that as it may, the annual Davos happening has become first and foremost the premier global networking event: a LinkedIn on steroids for the masters of the world. Deals are struck a dime a dozen, complex issues get boiled down to their pragmatic essentials, and lofty resolutions adopted wholesale.

It is a matter of being there and of being seen, heard, and applauded by the world’s movers and shakers. Davos is not necessarily a place where troubling issues are solved. It was not conceived with this in mind. Rather, the WEF flagship event is a venue for those who hold power in one form or another to speak their mind.

However exclusive and rarefied its atmosphere, the WEF Davos happening is a one-of-a-kind event that brings together the 1% – or 0.1% – that really matters. Like it or not, such an event – a coming-out party of sorts for the (however) chosen few – remains a necessity. Question is: do these uppity types really control the world’s events as they – and we – think they do?


World Economic Forum: Less Is More and Other Wisdom from Davos

[caption id="attachment_8799" align="alignright" width="250"] Davos: World Economic Forum 2015. Photo: Copyright © CFI.co[/caption]

Less is more, and you better get used to it. That is the message US real estate tycoon Jeff Greene brought to the World Economic Forum (WEF) in Davos, Switzerland. One of the hundred or so billionaires to attend the annual powwow of the world’s decision makers, Mr Greene warned that Americans’ lifestyle expectation are too high: “These need to be adjusted so we have less and smaller things. We need to reinvent our whole system of life.”

While this missive is echoed by others concerned about sustainability at the World Economic Forum, Mr Greene apparently does not think the prescribed standard of modest living applies to himself. He arrived in Switzerland with his family and two nannies aboard a private jet, fully enjoying the perks his $2.2bn fortune buys. Mr Greene claimed his fortune by trading credit default swaps and other exotic financial instruments in anticipation of a real estate market crash of 2008.

Later on Wednesday, Mr Greene met former UK Prime-Minister Tony Blair – now a consultant to questionable governments and big business and worth a mere $120m – for supper. On the first day of the Davos meet, Mr Blair delivered a talk on the rise religious extremism followed by a panel discussion. Though at the World Economic Forum in Davos, heckling is frowned upon if not strongly discouraged, Henning Zierock interrupted the proceedings by reminding Mr Blair of his own responsibility for the escalation of sectarian violence across the Middle East.

"Though at the World Economic Forum in Davos, heckling is frowned upon if not strongly discouraged, Henning Zierock interrupted the proceedings by reminding Mr Blair of his own responsibility for the escalation of sectarian violence across the Middle East."

Mr Zierock presides over the German Culture of Peace Society and drew scattered applause with his intervention. Islamic scholar and panellist Hamza Yusuf Hanson agreed and went on to explain that regime change unleashes forces from within society that are almost impossible to control. “The first President Bush understood this and was fearful of creating a political vacuum in Iraq. However, the second Bush simply failed to grasp the enormity of his decision to replace the Iraqi government.”

Mr Blair defended the removal of Saddam Hussein from power, arguing that the dictator “wasn’t exactly a force for stability, peace, and prosperity for his country.” Mr Blair also pointed out that the regime of Saddam Hussein bore responsibility for the “killing of many hundreds of thousands of people.”

Political Backlash

In another WEF conference session, Paul Achleitner, chairman of the Supervisory Board of Deutsche Bank, revealed that the financial community had failed to anticipate the severity of the political backlash against their overreach. According to Mr Achleitner, the collapse in reputation suffered by the bankers possibly holds lessons for the tech giants such as Google and Facebook whose attempts at self-regulation may not be enough to quell growing opposition to their dominance: “Self-regulation, no matter what you do, is just not going to be good enough for tech companies.”

Google is currently facing an anti-trust probe by the European Commission while the European Parliament last month backed a motion that calls on regulators to consider breaking up the company. President Fadi Chehadé of the Internet Corporation for Assigned Names and Numbers (ICANN) – a not-for-profit organisation responsible for maintaining the unique identifiers that ensure the global network’s smooth operation – concurred and added that the public’s trust in technology companies is eroding fast: “Most tech leaders have been far too complacent about reputational risks.” Concerns about Internet surveillance by US security agencies, the dominance of US tech companies, and widespread corporate tax avoidance all conspire to fuel public misgivings.

PricewaterhouseCooper (PwC), one of the world’s Big Four auditors, yesterday released its annual survey of business leaders which is markedly less upbeat than the one presented at last year’s World Economic Forum. Worldwide, only 37% of the over 1,300 CEOs and entrepreneurs consulted expect economic growth rates to improve, down from 44% last year. Optimism has plummeted most in Russia. While most chief executives in 2014 had few doubts about the country’s excellent future prospects, the latest poll shows Russian CEOs downbeat.

Though the International Monetary Fund (IMF) revised its global growth forecast downwards from 3.8% to 3.5%, the fund’s Director of Research Olivier Blanchard said the drop in oil prices and the depreciation of both euro and yen will provide some solace. Calling the economic outlook for Russia “quite weak,” Mr Blanchard pointed at stagnation in Europe and Japan, or both, as the “most obvious risk” to the global economy.

A Lesson from Germany

UBS Chairman Alex Weber, formerly head of the Bundesbank, said in Davos that the quantitative easing (QE) package about to be unveiled by the European Central Bank (ECB) is “only part of the solution.” Mr Weber explained that as long as Eurozone member states fail to reform, questions about the viability of the euro will remain: “I think there will always be questions about viability of the project and Europe has not done enough to dispel these concerns.”

Mr Weber expects the ECB to announce a sizeable QE initiative but pointed out that the massive cash injection “only buys time for European policymakers to fix the issue.” The USB chairman called the structural reforms adopted along the periphery of the Eurozone – in countries such as Greece, Italy, Spain, and Portugal – “inadequate” and concluded: “Now Europe’s not back, the problems are back.”

Delivering a German take on developments, Mr Weber warned: “Policymakers shouldn’t kid themselves. They are in charge of reforms and if they don’t deliver reforms, they are not doing their job. The Eurozone needs to continue to work at integration and policymakers need to deliver policy reforms. If that doesn’t happen, the project of a single currency – which had benefits, very much so – becomes increasingly a difficult project to run.”


World Economic Forum: All Eyes on European Central Bank

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Davos – Clearly enjoying her role as the real moneybags of the World Economic Forum (WEF), German Chancellor Angela Merkel – small in stature but as ever a commanding presence – lashed out at Russia yesterday for its “flagrant violation” of the territorial integrity of Ukraine. While willing to accommodate “Russian sensitivities,” Mrs Merkel only suggested a slightly slower pace for Ukraine to draw closer to NATO. She also reminded Russian President Vladimir Putin that the ultimate goal should be his own plan to extend economic cooperation from Vladivostok to Lisbon.

Asked by Prof Klaus Schwab, WEF founder and chairman, for her take on Sunday’s elections in Greece and the possibility of a “Grexit,” Chancellor Merkel dismissed the country’s withdrawal from the Eurozone as an “immediate possibility” and said she understands that a clear majority of Greek voters wish to keep the euro. Mrs Merkel called on Greece to shoulder its own responsibilities and praised the Athens government for the painful reforms already carried out. Chancellor Merkel also assured the Greeks that they may continue to count on the “solidarity” of other Eurozone member states.

The second day of the Davos meet saw participants scrambling to interpret the historic, though belated, move by the European Central Bank (ECB) to kick-start the Eurozone’s stalled economies via quantitative easing (QE) – a stratagem employed earlier, with mixed results, by the US Federal Reserve, the Bank of England, and the Bank of Japan.

"Chancellor Merkel also assured the Greeks that they may continue to count on the “solidarity” of other Eurozone member states."

ECB President Mario Draghi unveiled a larger-than-expected intervention, promising to buy up government and corporate debt at a monthly rate of €60bn, starting next March. The ECB will keep buying bonds until September 2016, or beyond should inflation remain below the bank’s stated target of 2%.

The euro took a predictable nosedive to close at $1.13 – nearing an 11-year low and down almost 2% for the week. However, stock markets around the world sprang to life on the news from Frankfurt with the S&P500 and the Dow gaining as much as 1.5% overnight. In Japan, the Nikkei gained 1% while by the end of yesterday’s trading the German DAX benchmark index had jumped 1.32% to close at an all-time high. The midcap MDAX added 1.52%. Stocks in neighbouring Switzerland fared less well with the Zürich market failing to join the global rally, ending down 0.11% in a day of volatile trading.

In Davos, the assembled pundits were duly impressed by the scale of the ECB’s QE programme, though concerns remain about the new risk-sharing scheme adopted at the behest of the Germans. Each of the 19 national central banks that together with the ECB form the Eurosystem will be solely responsible for any losses incurred on the (sovereign) bonds it buys. The ECB’s exposure remains limited to 8% on government-issued bonds and 12% on bonds issued by European institutions. There is to be no pooling of risk – as was the norm until now – which could signal the start of Eurozone fragmentation.

It is as of yet not clear if Greece will receive its share of the QE billions. The ECB has set a number of minimum standards for bonds to be eligible for purchase. These are sufficiently ambiguous that Greece could be left out in case the country’s new government decides to review its commitments under the earlier bailout agreement.

Managing Director Christine Lagarde of the International Monetary Fund (IMF) commented that the ECB’s QE drive already seems to be working: “If there is some re-anchoring of inflation in the euro area, those emerging European markets, which are pegged to the euro, will have the benefit of that.” US Secretary of the Treasury Larry Summers, also in Davos, exclaimed: “I am all for European QE!”

Others were slightly less excited. Citigroup’s Chief Economist Willem Buiter called the move by the ECB a “poor man’s monetary policy” and added that it will fail to encourage robust economic growth. “The policy is designed to not to disappoint financial markets, but only just, and will probably fail to get Europe’s economy out of its rut,” concluded Mr Buiter.


Davos: Inequality Causes Concern, Few Expect Improvement

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A semblance of calm has returned to Davos. The World Economic Forum (WEF) has finished this year’s proceedings and most of the 2,633 participants have returned home. Crews are busy disassembling the vast quantities of hi-tech hardware that provided security, communications, and other conveniences for the event.

Après-Davos is usually somewhat of a downer. This year is no exception. As summits go, the WEF stands apart: no decisions are taken or final statements released. The forum is first and foremost a networking event that allows high-level participants to swap ideas and experiences, and express opinions.

This time around, most participants seemed particularly concerned about inequality. The concentration of wealth into the pockets and portfolios of ever fewer people was considered the top trend on the WEF Global Agenda for 2015. On the eve of the Davos get-together, anti-poverty organisation Oxfam International released a study showing that by this time next year the wealthiest 1% of the world population will own assets equal in value to those held by the remaining 99%.

In a panel discussion on rising inequality, Professor Christopher Pissarides of the London School of Economics said that simply taxing the rich and handing money to the poor is unlikely to decrease inequality in today’s open and globalised world. Prof Pissarides, recipient of the 2010 Nobel Memorial Prize in Economic Sciences, argued that fiscal receipts should go towards job creation and education rather than direct income support.

"On the eve of the Davos get-together, anti-poverty organisation Oxfam International released a study showing that by this time next year the wealthiest 1% of the world population will own assets equal in value to those held by the remaining 99%."

“Governments would be well-advised to use more imaginative ways of rebalancing incomes with policies supporting the creation of more and better jobs at the lower level while simultaneously investing in education.” Prof Pissarides dismissed the Oxfam International study on income inequality as gratuitous: “Of course it’s a shocking statistic and given the inequality it’s not difficult to construct other shocking statistics. It’s obviously something to worry about, but my view is that the real issue, and what you should really address, is poverty. We’d be doing better by emphasising ways of reducing poverty rather than by sensationalising the issue by saying how much the very rich people are worth.”

Lack in Social Cohesion

According to Anne-Marie Slaughter of the New America Foundation, a US think-tank, government leaders the world over seem unable to ensure or deliver social cohesion: “In the United States, we are grappling with a racial divide and class divide the likes of which we have not seen for decades. We should be having a national dialogue about race, class, and justice, but we are not. We are seeing demonstrations, hearing different views through media but we are not having a national conversation.”

Mrs Slaughter emphasised that voter apathy is part of the problem: “The political system is broken and we are unable to fix it.” Similar views were echoed by most participants of the panel discussion on the last day of the Davos meeting. However, few of the attendees expected change anytime soon.

“Pessimism prevails. Most of the people I spoke with do not consider innovative policy initiatives likely to deliver tangible results,” concluded Felix Salmon, editor at Fusion – a US television and digital news network. Mr Salmon predicted a regulatory revolution may in the end be called for to redress inequality.

Back in Business

Meanwhile, UK Chancellor of the Exchequer George Osborne called on the countries of the Eurozone to follow the example set by Britain’s economic policy. In Davos, Mr Osborne said that both France and Italy could benefit from UK-style reforms. The chancellor also commented that Europe needs to get “back in business” and become more competitive and fiscally responsible.

Mr Osborne said that the $1.2tn quantitative easing (QE) programme announced last week by the European Central Bank (ECB) will not of itself prove sufficient to reanimate the lacklustre economies of the Eurozone: “In order for that to happen, the ECB’s initiative will need to be accompanied by clear plans to make the continent more competitive.”

George Soros, the flamboyant US business magnate and investment guru who in September 1992 broke the Bank of England and made over a billion pounds short-selling sterling, said that Germany is not being helpful by imposing austerity on troubled Eurozone member states and suggested that instead of QE, the bloc could have used its AAA credit rating to raise cash on the cheap.

Mr Soros is unimpressed by the ECB’s big move and warned that it may lead to asset bubbles. However, Mr Soros’ main concern is that QE could further exacerbate income inequality: “It will benefit the owners of assets while wages will remain under pressure through competition and unemployment.” Mr Soros expects the divergence between rich and poor to have “serious political consequences.”

No Comment

Also present, German Finance Minister Wolfgang Schäuble refrained from offering direct comments on the ECB’s QE programme other than remarking that the central bank was doing its job “very well.” Mr Schäuble reiterated his view that Eurozone fiscal policies have ample room for improvement. He also cautioned against complacency: “The moral hazard is that some countries may perhaps misunderstand the reasons behind this major injection of liquidity and postpone urgently needed reforms.”

Though its flagship meeting in Davos has now ended, the World Economic Forum is by no means done. The foundation is already busy at work preparing for the East Asia regional meet – Anchoring Trust in East Asia’s New Regionalism – scheduled to take place from April 21 to 23 in Nusa Dua, Indonesia. Other regional WEF events planned for this year are Advancing through a Renovation Agenda (May 06-08, Rivera Maya, Mexico), Shaping a New Strategic Context (May 21-23, Dead Sea, Jordan), and Then and Now: Reimagining Africa’s Future (June 03-05, Cape Town, South Africa).


World Bank Group: Remittances - A Vital Channel for Global Cash Flows

Envision the world economy as a complex, interconnected array of financial engines whose propulsion helps reinforce one another’s momentum. One of the component engines is a small but significant one that, until a few years ago, was not recognised for the powerful contribution it makes to the global financial system.

Sustaining the welfare of about 700 million people around the world – and representing the only source of income to provide food, healthcare, housing, and education to millions of families – this small-engine-that-could sometimes also powers the creation of family-run businesses and entrepreneurial ventures. This engine may seem relatively small, yet its sustained output has supported the growth of the overall global economy, lifted entire regions out of poverty, and eased the burden on governments to provide social benefits by allowing hard-working families to generate their own incomes.

The engine described is remittances – the person-to-person, low-value and (mostly) cross-border cash transfers that migrants send home to their families. These financial flows are generated by enterprising migrants who have accepted jobs in wealthier countries – or in the more dynamic regions of their home country – and who make patient, often arduous efforts to squeeze savings out of already tight budgets.

"The engine described is remittances – the person-to-person, low-value and (mostly) cross-border cash transfers that migrants send home to their families."

Money is sent back home to relatives and friends through an array of methods – ranging from sophisticated electronic payment services to unregulated bargaining with bus drivers and friends. Each of these remittance mechanisms exacts a cost, through the need to convert currencies, maintain electronic systems, or remunerate the various layers of intermediaries who take part in the transfer chain.

Implications

Because of the importance of remittances to 700 million people or more worldwide, international financial experts are increasingly focusing their attention on the most vital implications of worldwide remittance flows. The cost of such transfers has been an important issue on the G8 and G20 financial agenda since about 2006, and a great deal of progress has been achieved in helping migrants save money by using more efficient and lower-cost remittance-sending services.

The World Bank estimates that, since 2006, about $54 billion has been saved by remittance-senders thanks to the global effort for the reduction of remittance costs. That sum is equivalent to the entire gross domestic product of countries such as Costa Rica or Tunisia.

For many millions of hard-working people and their needy families, remittances are often the only potential access-point for any type of financial services. Remittances, in fact, are often the gateway to the financial world for both remittance-senders and beneficiaries.

Nonetheless, those who advocate greater financial inclusion note that only a small percentage of remittance flows generates a “butterfly effect,” leading to the expansion of financial-services use that goes beyond the simple remittance transaction itself. As the need has grown for specialised services that meet the needs of both senders and beneficiaries, the financial sector has risen to the challenge and created more efficient pathways for transferring money across borders.

However, an additional, and more worrisome, factor has recently made the remittances issue even more complex. Over the last 18 months or so, major commercial banks worldwide have decided to “de-risk” their operations in an attempt to reduce their chances of falling prey to any possible money-laundering scheme or of tolerating any pathways that might allow money to reach terrorist organisations. This development had a serious impact on the global flow of remittances.

Banks Essential

Banks play an essential role in the transfer chain that allows, say, someone in Los Angeles to hand over $200 cash at a money-transferring storefront and have the equivalent sum – about $1,500 Guatemalan quetzals – delivered, within seconds, to Chiquimula, Guatemala. Without the active participation of the banking industry in the clearing and settlement of transfers along the various steps of the international cash-transfer process, many money-transfer operators would be unable to operate. A reduction in the number of operators would have a dramatic impact on the level of competition which, in turn, would increase the overall cost of remittances to many developing economies.

Banks surely consider many factors when deciding whether or not to back away from the remittances market. A common denominator is the concern for attracting deeper scrutiny to operations and, thus, face exposure to potentially severe penalties for possible violations of anti-money laundering (AML) laws and measures on combating the financing of terrorism (CFT).

To reduce such risks, many banks have abandoned the remittances market, gauging that the modest amount of revenue they might obtain do not justify the cost of ensuring compliance, as required by regulatory entities, with restrictive legal frameworks. Yet, as many banks withdraw from the remittances market, they are also removing crucial transactional capabilities from the marketplace – thus making it more difficult – and more expensive throughout the entire system – to transfer money.

Due to the shrinking number of banks involved in international money-transfer operations, more and more operators are “being driven underground.” These operators now seek solutions that are barely legal – and, ironically, often use systems that are too complex to be properly monitored by AML/CFT watchdogs. Paradoxically, the attempt to avoid AML/CFT violations is triggering an even more acute crisis throughout the international money-transfer system, exposing countries to the risk that ever-larger part of their cash flows are taking place in less-transparent and less-monitored circuits and instruments.

Concern

As a result, the tightening-up of the international cash-transfer system may result in less efficiency and higher costs. Remittances may become more expensive and offer fewer opportunities to the people who most need access to safe, formal, affordable financial services: the poor of the world.

International organisations and standard-issuing bodies like the G20, the World Bank, and the Financial Action Task Force are concerned about this problem. They are working with governments that seek to safeguard the integrity of their markets even as they recognize the need for remittance-flows to continue reaching their destination in safe, lower-cost ways.

The financial industry is similarly focused on continuing to serve their customers with well-regulated, well-monitored payment systems, thus preventing flows of remittances from being diverted into ill-regulated underground channels.

The international remittances system is facing increasing complexities, but regulatory and standard-setting institutions are committed to continue to work in tandem with the financial industry to avoid the danger that the international cash-transfer system may suffer a costly contraction. As standard-setters and industry leaders consider measures to keep the remittances system flowing smoothly, they should remember the important stabilising role played by multibillion-dollar cross-border transactions in ensuring global financial security as well as the vital human role that remittances play in helping hard-working migrants, toiling far from home, support their needy families in impoverished economies that desperately need capital for day-to-day survival. i

About the Authors

Massimo Cirasino is the World Bank Group manager for Financial Infrastructure and Access and head of the Payment Systems Development Group.

Carlo Corazza is a Senior Payment Systems Expert in the Finance and Markets Global Practice of the World Bank Group.


Greece: The Primacy of Politics to Provide a Solution

[caption id="attachment_8821" align="alignright" width="202"] Greece: Athens[/caption]

Just a few years ago, Forbes Magazine – that self-proclaimed “Capitalist Tool” – identified the primacy of politics as the greatest danger facing Europe and the European Union (EU).

The publication merrily took a swipe at Mario Draghi, president of the European Central Bank (ECB). Mr Draghi was described as overly eager to embrace the misguided discourse of his political masters – a man living in a virtual reality shaped by wishful thinking.

Notwithstanding Forbes’ damning verdict, Super Mario went on to secure the euro’s survival, backing-up his “whatever it takes” bravado with a cool €1.2 trillion in QE funds.

Two years on, the primacy of politics – a concept that seriously spooks investors and the markets they operate in – is again brought to the fore with Greek voters electing into power a government decidedly reluctant to dance to the prescribed tune. Even before that government was properly seated, investors and creditors the world over embarked on a concerted campaign to remind the Greek that they cannot ignore the markets’ iron-clad dictates.

Not one to be intimidated that easily, Greek Prime-Minister Alexis Tsipras will shortly dispatch his finance minister to Brussels to lay the groundwork for a renegotiation of the 2010 bailout package that subjected his country to an extremely severe austerity programme. The Eurozone’s finance ministers seem willing – if not really anxious – to open negotiations but have ruled out any and all forms of debt relief.

"Though Prime-Minister Tsipras said yesterday that the country’s creditors cannot really expect Greece to ever fully repay its national debt, an impasse is not in the making"

Though Prime-Minister Tsipras said yesterday that the country’s creditors cannot really expect Greece to ever fully repay its national debt, an impasse is not in the making. In fact, there is plenty room for negotiation. As US economist Paul Krugman pointed out in an article for the New York Times, Greece has been running a primary surplus since 2013.

Under the deal it struck with the troika – comprised of the European Central Bank, the European Commission, and the International Monetary Fund (IMF) – the country agreed to work towards running a primary surplus equivalent to 4.5% of its GDP. This surplus represents the sum of what Greece takes in via taxes receipts and what it spends, excepting interest payments. As such, it represents the net transfer of resources to creditors.

Wiggle Room

Since Greece complies with the surplus requirements the troika imposed, there is some wiggle room here. Mr Krugman suggests the troika considers relaxing its demands on this point. Allowing Greece to reduce the primary surplus to, say, 1% of GDP would free up significant sums for spending.

This would make plenty of sense. Rigid austerity policies, such as those forced on Greece, tend to become downward cycles: as less money is spent, the economy contracts, and tax receipts dwindle necessitating yet more austerity. This is the way Greece saw about 25% of its GDP evaporate over the past six years.

However, the reversal of this trend is within realm of the possible. Mr Krugman shows that freeing up money for Greece by reducing the primary surplus requirement will see the multiplier effect kick in. The IMF estimates this multiplier to be about 1.3. Thus, each additional billion euros in government spending is likely to result in €1.3bn being added to the GDP. About forty percent of this amount will be recaptured in taxes. So, in the end, each additional billion euros spent, will reduce the primary surplus by only €500m.

Eliminating the primary surplus altogether means adding 9% to Greece’s GDP, fully 12% up from what it would have been with austerity policies left unchanged. Mr Krugman predicts that under such a scenario, unemployment would drop by approximately ten percentage points.

All Happy

While it is unlikely that the new government in Athens will be entirely excused from running a primary surplus, it seems equally unlikely that the troika will flatly refuse to consider some relaxation of its demands. Moreover, a smaller primary surplus in no way implies that Greece reneges on its debt obligations – keeping everybody, including the Germans, happy.

Dutch Finance Minister Jeroen Dijsselbloem – president of the Eurogroup and representing the Eurozone’s nineteen finance ministers – said on Tuesday that there is “very little support” for a debt write-off amongst his peers. That said, Mr Dijsselbloem continued to affirm that the Eurogroup could possibly have a second look at the “sustainability” of Greece’s debt.

Meanwhile, German Finance Minister Wolfgang Schäuble called on the Greek government to put measures into place that “ensure the economic recovery continues.” Perhaps unwittingly, Mr Schäuble offered Prime-Minister Tsipras a way forward that avoids a head-on confrontation between Greece and its creditors.

It is precisely at this point that the primacy of politics pays off. Greek voters have awarded Prime-Minister Tsipras a solid mandate to seek a new deal. Earlier, these same voters had signalled a clear willingness to accept far-reaching reforms, and the resulting austerity, in order for their country to stay in the Eurozone.

In fact, Greek voters have consistently rejected politicians proposing radical and irreversible change. Even Prime-Minister Tsipras, leader of the Coalition of the Radical Left, had to tone down his rhetoric and solemnly promise the electorate not to take Greece out of the Eurozone. The coalition’s lead economist Yanis Varoufakis – tipped to become the country’s new finance minister – assured markets that a “Grexit” is not on the cards: “We are not going to Brussels and to Frankfurt and to Berlin in confrontational style. There is plenty of room for mutual gains and benefits.”

Going Long on Greece

Thanks to politics, Greece may yet have a chance to rise from the ashes. With a weakened euro, a renegotiated bailout deal, and possibly some direct or indirect help from the ECB’s quantitative easing programme, going long on the country would seem a fairly safe bet.

Developments are sure to be watched closely in Spain where the left-wing and Eurosceptic Podemos (We Can) Party has now taken a commanding lead in the opinion polls. Fully 28% of Spanish voters wish to elevate the party to power – and that percentage is rising fast. The ruling centre-right Partido Popular (PP) saw its following slashed in half (from almost 45% of the electorate in 2011 to barely 19% now), while the Workers’ Party (PSOE) is also sliding down at an accelerated clip.

Spain is heading to the polls on December 20 for a general election and though much can still change, voters are likely to unambiguously signal their discontent with continued austerity.

This produces an interesting quandary for both Mr Dijsselbloem’s Eurogroup and the European Commission: give the Greek too much in the upcoming renegotiation and Spain will be next-up demanding a new deal, with Portugal following not far behind. However, refusing to relax the conditions to which Greece has been subjected will inevitably lead to a polarisation that serves nobody – least of all the creditors. Politics – and the pragmatism of its practitioners – will undoubtedly carry the day.


The Profitability of Sustainable Companies: Towards a Rating System

By Luisa Nenci

[caption id="attachment_8826" align="alignright" width="205"] Author: Luisa Nenci[/caption]

A Green Economy (GE) is growing if economic prosperity goes hand-in-hand with sustainability – developing investments in green sectors and in greening brown sectors. Some investors are already screening companies through enhanced qualitative parameters. However, these practices usually lead investors to companies operating in a green sector (for example renewable energy projects) and not to “normal” companies in the process of implementing a green business model.

These latter companies may be adopting cleaner production processes as part of an integrated strategy to maximise profits by making more efficient use of inputs (such as energy, water, and raw materials), thereby minimising waste and pollution. This is different from a conventional pollution abatement which captures or converts waste during production and thus increases capital and operating expenditures.

Environmental gains – if included in the company’s evaluation procedure – will also produce financial benefits: cleaner production improves profitability, creditworthiness, and brand loyalty. Many cleaner production initiatives yield paybacks in 3 to 24 months because process re-engineering not only decreases pollution but manufacturing costs as well. Cleaner production initiatives also help companies comply with environmental regulations and obtain a competitive edge on international markets.

This study focuses primarily on how and why people – consumers, businesses, non-profit organisations, government agencies, and financial institutions – make decisions regarding the use of valuable resources taking into account imperfect data, risk, and uncertainty. Furthermore, it analyses this decision process and considers how it could be restructured so that people are encouraged to take decisions that result in a more favourable impact on both the environment and society.

“In a purely economic approach, businesses pollute because this is the most economical way to address practical issues considering current economic factors. The consequences of many decisions for the environment are difficult or even impossible to gauge.”

In a purely economic approach, businesses pollute because this is the most economical way to address practical issues considering current economic factors. The consequences of many decisions for the environment are difficult or even impossible to gauge. In the environmental field, identification and quantification risk involves managing variability and uncertainty. In this context of uncertainty, the second phase of the decision-making process determines how much risk is acceptably based on the identification of a certainty (confidence interval) assigned to future events.

Having information usually reduces the uncertainty of a decision. However, sometimes even with proper data, people behave in a manner that causes environmental degradation. This begs the question: Why?

There are various answers to this question. Ethics may be lacking: people pollute because they lack the moral and ethical fortitude to refrain from doing so. A sense of ethics, such as a concern for the well-being of future generations – are important in environmental economics.

Efficiency, risk treatment, and ethical considerations can guide private and social choices related to the environment because a win-win solution is created. While the former is primarily a guide to avoid wasteful use of resources, the latter refers to the adequate management of the consequences of human actions and has to do with ensuring fair treatment to all parties.

Social and Environmentally Responsible Business

The narrow and exclusive focus on short-term profits has led to counterproductive and negative consequences for both business and society. In order to support broad and shared value creation processes, a number of firms have been working with stakeholders – shareholders, employees, customers, suppliers, the surrounding community, etc. – implementing corporate social responsibility (CSR) policies.

Instead of focusing on a generic responsiveness toward society, a stakeholder management perspective turns, first, on the importance of locating and classifying stakeholders – who are typically defined as “any group or individual who can affect, or is affected by, the achievement of the organisation’s objectives,” and, second, to detect, scan, and respond to social demand in order to achieve legitimacy and increase acceptance and prestige which, in turn, support long-term value creation.

An extensive and in-depth review of about 250 empirical and theoretical contributions allowed the mapping of the principal mechanisms by which CSR efforts may contribute to improved corporate performance, leveraging stakeholder-related drivers.

A Theoretical Framework

Studies have proven that CSR policies universally carry a favourable rate of return. As a whole, and despite a generally positive attitude towards CSR, periodic reviews have challenged the validity of studies that link investment in CSR to an improved bottom-line, rekindling the debate on the business case for CSR.

Pavie and Filho (2008) state: “There is a positive correlation between corporate social and financial performance. This relation tends to be bidirectional and simultaneous and a firms’ reputation is an important moderator of this. The various measures of financial and social performance are behind this relation.”

Even though the real impact of the CSR efforts on corporate performance is still questionable, the general inconsistency of the results obtained has to be attributed to the complex relationship between social and economic performance. This is ruled by situational, company- and facility-specific elements that are difficult to detect by most analytical approaches.

The Social and Environmental Credit Rating (SECR) System

The innovative proposal of my research is the development of a SECR and ethical rating system for the evaluation of medium-risk companies. This system is to include parameters based on the principles of environmental economics. The inclusion of social and environmental responsibilities of a given business into the rating system will upgrade the evaluation, encouraging the adoption of eco-friendly choices through credit and investment rewards.

Because this rating system will focus on the profitability of CSR policies – such as transparency, social responsibility, and accountability standards that stretch to beyond the minimum legal requirements – which reduce overall corporate risk and allow companies to access less expensive credit lines.

The main function of the rating system is to constitute a tool that efficiently provides a concise indication and summary of the comprehensive scrutiny conducted by independent analysts. The ethical rating will imply a methodologically impartial assessment based on the recognition of shared principles by companies. This rating represents a condensed and easily understandable judgement.

A well-designed set of indicators will measure key interactions between social, environmental, and economic criteria of different companies across selected sectors. Three principal groups of indicators relevant to the Green Economy (GE) concept can be considered:

Define an exclusion list of sectors in which investors do not want to take positions;

Define the social and environmental impacts and benefits of individual sectors;

Define key sectors for GE investment.

Key sectors of the green economy include energy, building, transport, manufacturing, tourism, waste management, as well as critical ecosystem and resource-based sectors of agriculture, forests, fisheries, and water management.

The rating thus created will fill in the existing gap between the evaluation of micro projects – which normally have a low level of risk – and the full environmental impact assessment study required for large companies and big projects. Moreover, companies and projects with a medium environmental risk level are generally small and medium enterprises (SMEs).

[caption id="attachment_8828" align="aligncenter" width="611"] Table 1: Relationship between CSR and Corporate Financial Performance (CFP). [k: number of correlation coefficients] - click to enlarge[/caption]

The Framework

The framework, described above, will be implemented in order to set up a rating system that is based on an ethical review that investigates aspects related to social and environmental economic activities. This rating system will be closely complementary to a traditional evaluation because it can’t be the sole reference parameter for investors.

Taking into consideration the Sustainable Values ABIS (Academy of Business in Society, 2009) Research Project findings and recommendations:

“The role of the ratings agencies has not been considered and they have not been involved. However, a number of commentators have emphasised that they could and should be incorporating ESG risks into their assessments. We have not explored the dialogue and relationships inside companies between the CR/Sustainability function and the investor relations function, and within the investment community between ESG analysts and financial analysts and how this can be improved. The Value Creation Framework represents an important breakthrough, but the next step would be to show the interactions between improvements to the individual drivers of non-financial performance with one another.”

This strategy will be theoretically tested to assess a specific hypothesis: implementing an ethical rating system will promote investments in sustainable companies because socially and environmentally responsible businesses usually perform better.

The implementation of the concept of sustainability involves the assessment of the impact of corporate activities on society and the environment. That impact will be evaluated and included into the ethical rating via the selection of measurable parameters whose relevance will be tested through the analysis of real cases concerning companies that surpass median sectorial outcomes.

The implementation of the SECR has been developed from an original sample of 22,877 Spanish companies which are categorised according to their functional dimension, sector of economic activity, and geographically location. A theoretical model was developed with the idea that if banks can differentiate projects based on environmental risks, this may help companies show their achievements in sustainability.

“The role of the ratings agencies has not been considered and they have not been involved. However, a number of commentators have emphasised that they could and should be incorporating ESG risks into their assessments.”

For example, two sectors – construction and consumer – of the sample have been distributed on a matrix according to their financial credit merit (CM). The environmental impact which characterises their sectors were identified as green credit merit (GCM). Results show that if projects are funded with a rating of at least 50%, the bank will grant loans to at least 173 projects (≈ 7%) which are financially viable but may not be environmentally-friendly.

When a comparison is made between CM and green energy credit (GCMen) or waste (GCMw) where a specific environmental parameter is taken into account, results increase to funding 416 projects (≈ 17%) with a clear negative impact on energy (GCMen) and circa 10% with a clear impact on waste (GCMw).

Therefore, this (preliminary) analysis suggests that the GCM can significantly affect credit rating because it may include specific warnings about possible compensation of profitability and environmental quality. The increased sensitivity to the specific indexes GCMen and GCMw is due to fact that an improved definition of the environmental impact of projects helps in their evaluation and in better remediation techniques. The strong correlation between standard credit score and the more generic GCM is determined from the fact that if a bank decides to use an environmental credit rating, a first evaluation screening will involve a company’s green reputation or lack thereof.

Conclusions

Bridging the gap between current investment flows and what is needed to achieve sustainable growth is achievable. By defining the benefits created by investing in a green company, it is easy to conclude that the incremental costs of green growth is negligible compared to the costs of inaction.
However, there are important barriers to overcome, such as institutional inertia, the disadvantage of being the first, and a natural resistance to change.

A strong political and business vision is needed to undertake the transformation. More competitive solution are required because these reduce business risk by replacing environmental and social risk with the long-term management of physical and human resources. Improved management reduces the risk of fines for pollution or dumping, or to lose talented or experienced employees due to a contrary public opinion. Companies will gain competitiveness in terms of both financial budget and the financial management of cash flows.

The goal of green finance is to mobilise the largest possible green capital, sharing environmental and social objectives with the public. Mobilising private capital towards green investments will boost performance by increasing corporate competitiveness. Multiplying green public investments creates a win-win-win solution: economic growth receives a boost, environmental impact is reduced, and social equity is assured.


Stephen Heintz: Getting the Rockefellers Out of Oil

 The Rockefellers are set to join the Occupy Movement – sort of. The family that built its legendary fortune on oil will now abandon nearly all investments in fossil fuel. The surprising announcement was made in September at the eve of a United Nations summit on climate change that took place in New York.

The Rockefeller Brothers Fund (RBF), a philanthropic entity with approximately $860m in assets, is managed by Stephen Heintz who joined the organisation in 2001 after a distinguished career in the non-profit and public sectors. The fund joins a growing number of charitable institutions that have recently decided to move investments away from fossil fuel and into cleaner alternatives.

According to Arabella Advisors, a US consultancy that helps investors allocate resources in socially and environmentally beneficial ways, some 180 institutions and wealthy individuals have over the past few years pledged to divest assets in excess of $50bn. Mr Heintz revealed that the Rockefeller Brothers Fund is in the process of liquidating all its positions in coal companies and corporations involved with tar sands.

Mr Heintz cautioned that the divestment drive will take time: “We are moving soberly, but with real commitment.” The RBF president also said that the fund will hang on to some stocks of fossil fuel companies in order to keep its say at shareholder meetings.

“Mr Heintz considers the move away from fossil fuel a ‘logical step’ that would meet with the approval of the five Rockefeller brothers who created the fund in 1940 as the primary vehicle of their family’s many philanthropic undertakings.”

Mr Heintz considers the move away from fossil fuel a “logical step” that would meet with the approval of the five Rockefeller brothers who created the fund in 1940 as the primary vehicle of their family’s many philanthropic undertakings.
“Just as John D Rockefeller moved the US from whale oil to petroleum in the late 19th century, the current generation needs to help bring about the next shift. We are quite convinced that if John D Rockefeller were alive today, as an astute businessman looking out into the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”

In 2010, the RBF Board of Trustees already decided to set aside 10% of the endowment for investment in sustainable development with a focus on clean energy and businesses that advance energy efficiency and thus mitigate the effects of climate change. Steven Rockefeller, one of the trustees, said that he foresees financial problems for companies that possess more fossil fuel reserves than can be burned without contributing significantly to climate change: “We see this as having both a moral and economic dimension.”

Repeatedly tipped as one of the most influential voices in the non-profit sector, Mr Heintz recognises that divestment may ultimately not impact fossil fuel companies to any noticeable degree due to their immense market capitalisation. However, it does send an important signal. Divestment activism started as a fringe movement on college campuses just a few years ago and has now become mainstream.

The Rockefeller family has long been actively involved with environmental issues and even tried to convince Exxon Mobile, the largest successor to Standard Oil, to mend its environmentally damaging ways – without much success. Also, a $2m fund set up by the Rockefellers in the 1980s to spur the development of renewable energy alternatives failed to survive: “We were too early,” said RBF Chairwoman Valerie Rockefeller Wayne.

However, now RBF President Heintz has few doubts: It is the time to act. “We fully expect the percentage of mission-aligned investments, including those targeted to clean energy development, to grow in the coming years as the organisation seeks solid investments that advance both its programme and long-term financial goals.”


Greece: Attack of the Merchants of Doom Fails to Impress

[caption id="attachment_8844" align="alignright" width="164"] Martin Schulz[/caption]

President Martin Schulz of the European Parliament (EP) arrived in Athens today to read the riot act, before the Greek government does something it may come to regret. Mr Schulz travelled with a sizeable entourage of journalists to ensure the widest possible coverage of his expedition. The EP president is expected to urge Prime-Minister Tsipras to slow down some.

In particular, Mr Schulz wants the prime-minister to reconsider the termination of the privatisation drive he ordered on his first day in office. The sale of state-owned corporations is part of the bailout agreement Greece agreed to in 2010. The new government has now abruptly halted the sell-off of the Port of Piraeus, the Public Power Corporation, and the Hellenic Petroleum refinery amongst other assets such as power grids, motorways, and airports.

The government also rehired the cleaning ladies fired late last year from the Ministry of Finance. It is not clear if Mr Schulz will object to this decision as well. During his stay in Athens, the EP president will also meet the leaders of the defeated political parties, including former Prime-Minister Stavros Papandreou whose Movement of Democratic Socialists failed to win a single seat in Sunday’s parliamentary elections.

OMG

Yesterday, markets went near-berserk as the Tsipras Administration unveiled its first anti-austerity measures. The rating agencies – as ever stalwart protectors of financial propriety – promptly downgraded the country’s economic outlook from stable to negative. Investors, scarcely in need of prodding, voted with their feet and inundated their stockbrokers with sell orders. In a few hours of trading, banking shares lost almost 26% of their value. The overall market was down by 9.6%. The interest rate on the Greek five-year bond shot up to 15% – the highest level since 2012.

"The sale of state-owned corporations is part of the bailout agreement Greece agreed to in 2010."

Predictably, most European creditor and guarantor nations issued stern warnings that Greece should not expect any debt write-offs or other favours. German Economy Minister Sigmar Gabriel frostily remarked that the Greek government should perhaps have discussed the cancellation of the privatisation programme with its partners: “Citizens of other euro states have a right to see that the deals linked to their acts of solidarity are upheld.”

Meanwhile, US President Barack Obama called up Prime-Minister Tsipras to offer American (moral) support. However, the Chinese were somewhat less impressed now that its state-owned port administrator and shipping company COSCO may no longer take over the Port of Piraeus.

Chinese media, taking their cue from the Beijing government, cautioned the Greek prime-minister against becoming a real-life Phaeton – the unruly son of Helios who was allowed to drive the sun chariot for a day but failed to control the horses and put the earth in danger of being burnt up, forcing Zeus to intervene with a well-placed thunderbolt – killing the young god.

Mythological considerations aside, as the Greek government seeks to honour its electoral promises – a tell-tale break with tradition – Prime-Minister Tsipras and Finance Minister Yanis Varoufakis now try to reassure the wider world that their administration is not looking to pick a fight. However, Messrs Tsipras and Varoufakis have also made it clear that they will not be boxed in.

In a sign that both touchy markets and panicky international players overreacted to developments, Greek banking stocks on Thursday bounced back as bargain hunters stepped in. As reason prevailed, the benchmark ATG Index gained 1.4% in a relatively calm day of trading.

Expressing Confidence

Daniele Nouy, who chairs the European Central Bank’s Supervisory Board, expressed confidence in the strength of Greek banks to survive the crisis. Deputy Prime-Minister Giannis Dragasakis insinuated that his government would not allow banks to collapse and assured that the “proper functioning of banks” is a concern shared by all members of the cabinet.

What most doomsayers fail to realise is that the Tsipras Administration seems doggedly determined to restore a measure of hope to the nation. The soothing of jittery investors’ nerves is no longer the priority. However, even without allowing for debt-relief, there is plenty to negotiate about.

The new government has already suggested it will want to reduce the unrealistic primary surpluses it is required to run to more manageable, and reasonable, proportions. This would free-up significant sums for policy measures aimed at encouraging economic growth and lessening social want. Prime-Minister Tsipras stated, quite correctly, that such a change would not involve the country reverting to its spendthrift ways: “We will keep our budget in balance and seek to help the weakest sectors of society while battling cronyism, corruption, and waste.”


<br>Old Mutual: Best Community Engagement Programme, South Africa

Responsibility is at the heart of Old Mutual’s  success over the past 165 years and the CFI.co judging panel is impressed  to see that core value has been translated into the community work of this financial group.

The panel feels that the way Old Mutual has used this core value of the business stands out as an example to others across the word. Many companies have extensive community engagement programmes but what sets Old Mutual apart is the way the company delivers directly through its business. By effectively leveraging the group’s key strengths the impact goes far further than the value of money spent. Old Mutual has perfected this approach over the years and stands out as an example of what can be achieved for the benefit of communities by combining responsibility and keen intelligence.


BNY Mellon: Winner of the CFI.co Wealth Manager Award, US

The CFI.co Judging Panel has named BNY Mellon as winner of the prestigious award, ’Best Wealth Manager, Unites States, 2014’.

Client retention at Mellon is strong and the Bank is a superb relationship manager. This truly outstanding name in North American banking, which can trace its heritage back 230 years, is the result of a 2007 merger between Bank of New York and Mellon Finance.

The panel congratulates BNY Mellon, the largest deposit bank in the world, on its outstanding focus on and great success in providing the most sophisticated wealth management services.


Banco Interacciones: Our Winner in Mexico for a Second Year

The CFI Judging Panel would like to congratulate Banco Interacciones on repeating its triumph of last year. Once again this outstanding institution is named Best Investment Bank and Best Government Bank, Mexico. The Panel was delighted to confirm successive year awards and commented that highly focused and ambitious Interacciones is moving from strength to strength in an important and very promising market.

Banco Interacciones, headquartered in Mexico City, celebrated its twentieth year of operation in 2013. The Bank lends to domestic municipalities and states to finance construction, energy and infrastructure projects. More than half of the highway network has been constructed with the help of this bank.

Interacciones is now reaching out to overseas companies and positioning itself – realistically in the opinion of the Panel – as best partner for infrastructure projects in Mexico.


<br>The Odebrecht Foundation Wins CFI Award for Community Engagement, Brazil

The Odebrecht Organisation is a very successful and highly diversified Brazilian group which is active in the domestic engineering and construction sectors and invests heavily in energy and infrastructure projects. The history of the business can be traced back to the arrival in Brazil in 1856 of Emil Odebrecht as an immigrant from Germany.

Family member Norberto set up the Odebrecht Foundation in 1965 with a view to offering additional support to employees. After some years individual Odebrecht companies took up these responsibilities allowing the Foundation to focus on matters of public concern. Simply put, Odebrecht set out to help government improve the quality of life of Brazilian society. According to the CFI Judging Panel, ‘Much has been achieved in Brazil through Odebrecht dedication and generosity’.

The focus for Odebrecht has always been on the education of Brazil’s young people. The first priority was to encourage progress in the north east and particularly in the most needy regions not properly benefiting from the national economy. In 2003, the Foundation partnered with government and other concerned parties to bring support to Bahia Southern Lowlands. The laudable objective here was to allow youth to remain in the region by delivering work opportunities and generally improving lifestyles. This resulted in a United Nations Public Service award in the year 2010.


<br>The CFI.co Award for Best HSE Standards, West Africa, goes to Mobil Oil Nigeria Plc

Mobil Oil Nigeria Plc traces its proud history back to 1907.

This top petroleum products marketing player now operates extensively and very successfully throughout all states in the country.

The CFI.co Judging Panel confirms that their 2014 award for Best Health Safety and Environment Standards (Oil & Gas), West Africa goes to this outstanding organisation which they say, ‘always places HSE concerns at the heart of their operating strategy. Mobil Oil Nigeria is not only an exemplar of industry efficiency but also conducts itself according to the very highest ethical standards. We congratulate Mobil on this award which is well deserved.’


<br>A Touch of Class: Century Properties Group Wins Real Estate Award in the Philippines

With a passion for quality in both service and product plus an uncannily keen sense for offering the right deal at the right time, the Century Properties Group from the Philippines claims the Real Estate Awards. The CFI.co Judging Panel named the company ‘Best Premier Real Estate Developer, Philippines, 2013’.

The judges were particularly impressed by “the superb value proposition” Century Properties Group consistently offers. Examples cited were the New York-themed Gramercy Residences – currently the tallest building in the Philippines – and the Knightsbridge Building were affluent families may enjoy a taste of London.

A successful and rather unique collaboration between Century Properties and iconic Italian fashion designer Versace has resulted in Milano Residences. This 52-storey building, soon to be opened, features a Versace-inspired façade and is part of Century City, a mega-development marketed as “a new urban experience” set to redefine the skyline of Makati, one of greater Manila’s sixteen cities.

The Philippine economy is on a roll. Over the second quarter of 2013 the growth rate shot up 7.6%. With half its population of 100 million aged less than 26 and remittances from overseas workers totalling over $20 billion annually the market has places to go. The Century Properties Group is exceptionally well placed to take full advantage of both improving purchasing power and the new wealth being created. The Company recorded a 15% year-on-year growth and is set to power ahead in the stylish manner that it has carefully nurtured over the years.


Sergey Glazyev: Much More Than Meets the Eye

Sergey Glazyev, one of the closest advisers to Russian President Vladimir Putin, has a predilection for preaching doom and gloom, especially when it comes to the economic prospects of recalcitrant Ukraine. Mr Glazyev is wholly convinced that the force of arms is superfluous to getting Kiev back in line.

An economist and philosopher by training, Mr Glazyev predicts that the West will instantly give up on the Ukraine once the true extend of that country’s financial needs becomes apparent. “Unless the Ukraine receives the $120bn required to stave off a meltdown of its economy now, some $300bn will be needed at a later stage to undo the damage wrought. Without Russia and the Eurasian Customs Union, the country simply stands no chance.”

Pundits in Moscow suspect that Mr Glazyev’s economic analysis of the Ukraine convinced President Putin to scale down military operations in the eastern part of the country and reduce the level of support offered to pro-Russian separatists. Mr Glazyev considers it much smarter to relax and sit back waiting for winter to bite and finish the job.

"While considered an oddball by some for his periodic nationalistic rants, Mr Glazyev has the attention of the powerful in the Kremlin."

While considered an oddball by some for his periodic nationalistic rants, Mr Glazyev has the attention of the powerful in the Kremlin. He plies them with often well-founded arguments that underpin the natural desire of Mr Putin and the members of his cabinet to assert Russia’s might in the world. While formally in charge of furthering the Eurasian Customs Union, one of President Putin’s pet projects, Mr Glazyev’s not inconsiderable influence extends to nearly all foreign policy issues.

Mr Glazyev authored over forty books and a multitude of research papers, mostly on Russia’s position in the wider world. Since 2008, he is a member of the prestigious Russian Academy of Sciences. In 2004, Mr Glazyev ran for president as an independent candidate after the leadership of the left-wing nationalistic Rodina Party, which he helped found in 1999, refused to endorse his candidacy. In 2007, Mr Glazyev retired from politics with a sneer to Vladimir Putin who he accused of stifling political debate and crowding out the opposition.

In a perfect example of the “Putinesque” tendency to keep enemies closer, Mr Glazyev was invited to join the Kremlin’s inner circle in 2012. Here he thrived and was able to put his anti-Americanism on full display. This, however, may bode ill: Only last month Mr Glazyev caused some unease after declaring that the smaller regional wars now wreaking havoc in various corners of the world were actually instigated by the United States in preparation for World War III: “Because America is in decline, it needs war in order to prevail over China, weaken the European Union, and undermine Russia. Only this way will the US be able to control Eurasia.”

It would be a serious mistake to write Mr Glazyev off as a crackpot. His intellectual powers are not inconsiderable. As a doctor of philosophy, a respected economist, and a tireless crusader against corruption and the power of the oligarchs, Mr Glazyev is not a political featherweight and commands respect even from those, like Mr Putin, whom he initially opposed and attacked.

With the recent ascendancy of the so-called “siloviski” – the hardliners – Mr Glazyev has now gained a prominence that was denied him as a politician. As tensions with the West escalate and sanctions tighten, Mr Glazyev is increasingly called upon to find answers. He is currently working on a draft proposal to restrict the outflow of foreign exchange. This year, investors are expected to withdraw an estimated $150bn from Russia. Mr Glazyev appears to favour the introduction of capital controls in the form of a tax on funds being moved abroad. He has also suggested decoupling the rouble from the market and fixing its exchange rate.

With a great say in both financial matters and foreign policy, Mr Glazyev is a man to watch closely for clues on deciphering Russia’s next move.


AIM 2015 Focuses in FDI Based on Innovation and Technology Transfer to Achieve Sustainable Development

Foreign Direct Investment (FDI) projects are key means to continue the development of local skills and provide sustainable job opportunities. That is the premise of the 5th Annual Investment Meeting (AIM).

[caption id="" align="alignright" width="232"] AIM Conference[/caption]

The meeting, organised by United Arab Emirates (UAE) Ministry of Economy, is scheduled to take place from March 30 to April 1 at the Dubai International Convention and Exhibition Centre. The event is being held under the patronage of Sheikh Mohammed bin Rashid Al Maktoum, vice-president and prime-minister of the UAE and ruler of Dubai. This year’s theme is sustainable development through FDI-induced innovation and technology transfer.

The theme supports UAE’s national innovation policies as contained in the comprehensive National Innovation Strategy recently adopted by the government. This strategy aims to transform the UAE into one of the most innovative nations in the world within seven years. In its first phase, the strategy embraces thirty national initiatives for achieving a top rank in innovation. The push received a boost after the UAE was named the most innovative Arab nation in 2014.

While announcing the strategy, Sheikh Mohammed remarked that innovation is driven by effective institutions, strong policies, specialised skills, and an economy in which all sectors work together to discover new ways of conducting business. A flexible and creative economy, based on a national culture of innovation, is the fastest and most sustainable way to reinforce the UAE’s competitive edge on a global level.

"The UAE has displayed a far-sighted vision and values the concept that the continuous development of services and manufacturing should be based on technology and innovation in order to be sustainable."

The Dubai strategy launched last December clearly lists the key drivers of sustainable development, the most important one of them being innovation.

Today in the UAE, annual investment in innovation amounts to some AED14bn (approx. €3.4bn) of which half goes to research and development. Spending on innovation is expected to rise significantly in the years to come.

From a broad perspective, sustainable development means developing the right mix of economic, social, and environmental policies for both the present and the future. However, foreseeing the future is not easy. This is where the importance this year’s AIM theme is visible as it relates to achieving sustainability with quality investments based on innovation and technology transfer.

A deeper look shows that we can spot synergies between developed and developing economies. Developing countries seek to benefit from the expertise of the developed world as seen in the successive waves of economic development of Western Europe.

The United Kingdom is a good example: it saw a gradual decrease in industries of steel and coal in the 1970s and 1980s. This led the UK to adopt a strategy based on FDI and focused on attracting people of specific skills. The solution adopted at the time actually addressed the high surge in the unemployment rates as it sought to equip huge numbers of redundant labourers with new and transferable skills.

With the gradual eastward expansion of the European Union and the priority given awarded to developing regions, Eastern Europe benefited by providing a more competitive and skilled workforce while Great Britain started prioritising the promotion of what became known as the knowledge economy.

In many cases, developing economies benefit from the expertise available in fully-developed countries. Many economies depend on innovation and technology transfer as key drivers of national policies. The concept of sustainable FDI is now more important than at any other time in history, because this approach not only attracts foreign investment but positively impacts host countries that now benefit from technology transfers through investment.

This topic is very important in the UAE, especially since the huge economic development seen in the past few years was largely driven by FDI.

Just as Britain experienced a drop in the competitiveness of its natural resources and manufacturing industries during the last decades – and as a result shifted its FDI policy – the UAE, which used to depend heavily on its oil reserves, moved towards a diversification of its economy. The country succeeded in becoming the trade, services, logistics, finance, and tourism hub of the region.

The UAE has displayed a far-sighted vision and values the concept that the continuous development of services and manufacturing should be based on technology and innovation in order to be sustainable.

The UAE has the ambition to become the leading technological hub for Europe, Middle East, and Africa. To accomplish this, the country needs the technology transfer that FDI can readily provide. The UAE FDI-driven economic strategy aims to attract higher quality and value-added investments. Policymakers are now more aware of the importance of developing local skills and nurturing them, not only through FDI, but also through proactive internal innovation.

AIM 2015 is working towards a sustainable economy and society, and also aims to blend technology transfer with local innovation. This is expected to trigger the use of FDI projects as a means to continue the development of local skills and providing job opportunities for coming generations.

Sustainable FDI and economic policies that encourage innovation and technology transfer through FDI will be the key topics discussed at the 5th AIM. The event is expected to attract more than 500 exhibitor companies from 140 countries. It will also display products, services, and projects from a wide array of industries. Exhibitors will represent sectors such as agriculture, aviation, commodities, trade, construction, education, research, energy, financial services, government, healthcare, telecom, legal, pharmaceutical, marine, real estate, tourism, and waste management.