Tipa Nawawattanasub, CEO of YLG Group: Driving Group to Golden Greatness

[caption id="attachment_21526" align="alignright" width="300"] CEO: Tipa Nawawattanasub[/caption]

Tipa Nawawattanasub is the chief executive of YLG Group, a family-owned company in Thailand.

Thanks to its expertise and experience, the YLG Group has positioned itself in Thailand’s highly competitive investment service in gold. It is recognised for its integrated one-stop service in gold.

YLG Group’s operation consists of four major business areas with an integrated service offer that enables it to provide customers with solutions: YLG Bullion International Co Ltd, YLG Bullion & Futures Co Ltd, YLG Bullion Singapore Pte Ltd and YLG Bullion Precious Co Ltd.

Tipa Nawawattanasub is a top executive for many companies. She is the CEO of YLG Bullion & Futures Co, and managing director of YLG Bullion Singapore and YLG Bullion International.

YLG Group has focused on sincere and faithful service, it has contributed to the reliability and confidence of customers.

Tipa Nawawattanasub has a BA in Business Administration (Finance), a degree in Business Administration from the University of Kent in Canterbury. She also has a Master’s in Major Political Science from Ramkhamhaeng University. Her community work includes a place on the board of the Gem and Jewellery Institute of Thailand.

Q & A

What excites you about the business world in general?
In my point of view, I think there are many exciting things in the global business because the new normal exists, so the way to do business also changed. Moreover, the transformation of changing customers' lifestyles affected the adaptation of running business.

Currently, YLG’s platform business that connected with online transactions and online communication with customers. For example, our customers can open an online account in order to trade gold with YLG Group and customers can trade gold online easily via YLG application.

What lessons did you learn from your earlier career experience?
My lesson learned regarding learning new technologies in order to facilitate customers. Currently, we have an application for online gold trading. YLG Group put a lot of time and effort into developing and improving it for customers. However, it takes a long time to develop because we would like to offer only the best thing for a great experience for our customers.

What motives and enthuses you about the business you now lead?
I have strong motivation for the business development and create the opportunity for customers to achieve the purpose. We will support our customer to success in their purpose. The most important thing that supported me to do a business during the global changes and challenges was the engagement of family’s business since I was young. It has so much more than just a company, but it is a part of me like family.

In order to make my family proud of me, I desire to see my part of the YLG group grow up continually and sustainable over time.

What is special about your organisation’s management style? Can you share some management or organisation secrets?
Actually, the organisation's management style is more flexible, adaptive, and energetic because we designed our organisation’s structure to be flat. I always open opportunities for my team to share new and creative ideas together.

Normally, many companies have solely one way communication. The CEO usually assigns staff and staff don’t have any choice or option to argue or defend their idea, but I don’t think it is a great idea to drive my team to achieve the company's goals.

Our goal is to enrich new ideas of the new generation and share them with my experience and specialisation in the gold trading industry. From my point of view, I think the perfect combination between a new idea and my intense experience can create an effective business strategy and led our company to attain company’s mission.

What are the key strengths of the team you led? How important is your support team?
My key strengths of the team is two way communications and I am always a good listener for my team.

I think I can’t overstate the importance of seeing that everyone qualifies as key personnel and everyone is a key component that builds a perfect teamwork. I am only a part of a team, one who defines a goal and motivates the team to attain the company's goal.

What are the key traits of a good corporate leader?
I think the definition of a good corporate leader is one who can be a good leader and a good team player. A good corporate leader should realise when he should be the commander and when he should be a follower. If I would like to learn about a company's problem, I am a follower, but if I would like to execute strategy, I am a leader who makes commitments to employers.

Do those criteria change when applied to your particular industry?
Yes, it might change because there are many challenges in the gold trading industry, for instance, customer’s behaviour changes frequently. They shifted to online channels, thus I emphasise developing excellent service in order to meet customers’ needs and give more flexibility for our customers through the service process.


YLG Group - Precious Metals and Changing Trading Rules: Expertise is the Only Way to Navigate the Space

YLG Bullion International was established in 2003 to recognise Thailand’s growing demand for alternative investments, and the import and trade of gold.

YLG Bullion International is one of the members and board of the Gold Traders Association of Thailand.

YLG Bullion International operates in the import and export of precious metals and offers services to domestic and international markets. The firm provides seamless and secure online trading for the purchase and sale of 96.5 percent and 99.99 percent LBMA-approved gold bars.
The YLG Bullion International is one of largest Importer and exporter of gold bullion in Thailand through an online trading platform.

The company quotes reasons why it holds the number one trading spot:
1. Round-the-clock trading
2. Real-time market prices
3. Offer Local Gold bar and LBMA bar.
4. Physical collection during working hours
5. Investment advisory service.

The company’s 1kg, 99.99 percent pure gold bars are refined by LBMA-accredited refineries. Purity and weight meet global quality standards, and the bullion is available in sizes from 1g upwards, stamped with the YLG hallmark.

"YLG Bullion International Co Ltd launched the first mobile app which gives innovative experience and leads customers to the universal trade world for trading gold in 5 currencies with real time price 24 hrs."

The 96.5 percent gold bullion, very popular in Thailand, can be sold in any jewellery store in various denominations

YLG Bullion International has released a New Gold Investment Application in Thailand. Which can, satisfy new generation people needs containing with 9 advantages:

1. Trading in various currencies: USD, CNY, EUR, SGD, THB
2. Minimum trading only 1oz: Or 31.104 grams, around 60,000 THB
3. More convenience: Customer can trade via both website and mobile application on multiplatform
4. More safe: Delivery through OTP security system
5. Able to check previous transaction: All transaction can be checked
6. All time notification: Customer will notify by application from every transaction
7. Automatic price setting: Customers are able to set the prices when the market opens until the market closes, including both sell, buy price and cancellation time as well.
8. Pick up anytime: Customers are able to customize their own delivery date.
9. Trading 24hr: Customers are able to trade 24hrs through online websites and applications.

YLG Bullion Singapore was set up in 2012 as the first overseas office. The company is the executive committee member of the Singapore Bullion Market Association, and a member of the Shanghai Gold Exchange International.

YLG Bullion Singapore

The office in Singapore is strategically located in a region with a high potential of gold demand and supply opportunities.

It is a member of SBMA (Singapore Bullion Market Association) with products including gold bars, scrap, dore and granules. It features automatic price-setting and order submissions, with special weekend prices, using reputable carriers such as Brinks, Malca-Amit, and Loomis for shipment.

Why Choose YLG Bullion Singapore?

• 24 hours trading of precious metals
• YLG is a member of SBMA (Singapore Bullion Market Association)
• Wide range of products including gold bar, gold/silver scrap, gold/silver ore, gold/silver granules etc.
• Automatic price setting and order submission

There are special weekend prices using international reputable secured carriers such as Brinks, Malca-Amit, Loomis for shipment.

• YLG Bullion International Co Ltd launched the first mobile app which gives innovative experience and leads customers to the universal trade world for trading gold in 5 currencies with real time price 24 hrs.

• YLG Bullion Singapore Pte Ltd is a brokerdealer of 99.99 percent gold bullion and physical silver in Asia and the executive committee member of the Singapore Bullion Market Association (SBMA) and a member of The Shanghai Gold Exchange (SGE). In addition, the company was established in Singapore following the invitation from International Enterprise Singapore. i


AUM Asset Management Ltd.: ESG Investing from the Bottom Up & Top Down - Setting a New Standard

[caption id="attachment_21531" align="alignright" width="300"] Malta[/caption]

Malta-based AUM Asset Management Ltd. has made ESG investing a core part of its investment approach and strategy.

AUM Asset Management Ltd. is an independent investment management company founded in 2015 by financier and investor Jean-François de Clermont-Tonnerre, which offers asset management, MANCO and advisory services to institutional investors and family offices within an ESG (“environment, sustainability and governance”) and UN Sustainable Development Goals framework. With $200 million in assets under management and offices in Malta and London, AUM draws upon its expansive international network of business contacts across Europe and North America to deliver high-return traditional, alternative and real asset investment solutions to its clients.

The choice to headquarter AUM in EU-member country Malta was partly due to the country's strong sustainability framework created by Maltese regulators, which provided the proper alignment for AUM to pursue an investment approach that integrates sustainability, environmental and ecological factors in all of its investment decisions. AUM is a results-driven investment manager that seeks consistent growth of clients' wealth, while having a positive impact on the environment and society through the application of a multi-faceted investment approach that offers investors access to a diversified set of strategies, markets, geographies and asset classes.

"ESG and SDG are priority factors for our clients, who are informed about the environment and care about their local communities and the broader impact they are making with their investment dollars."

Investments included in AUM's portfolios are determined by their potential return profile and specific ESG factors. The firm then applies global macro, quantitative, fundamental and technical analyses to its investment theses to provide another layer of informed decision making prior to allocating to its portfolios. ESG principles inform every investment action that the firm takes during the analysis and due diligence process, both from the bottom-up company and top-down macro perspectives.

In compliance with the EU’s Sustainable Finance Disclosure Regulation (SFDR), AUM makes both entity and product-level disclosures about the integration of sustainability risks, the consideration of adverse sustainability impacts, the promotion of environmental or social factors and sustainable investment objectives.

“Our approach to investing reinforces the idea that companies that choose to take into account how they impact the world and environment will ultimately have a positive effect on their bottom line and the overall growth of their business over time,” said Mr. de Clermont-Tonnerre, AUM Asset Management Ltd.’s founder. “This belief is also supported by our clients who are—today more than ever—seeking investments that weigh the good they do in the world with doing well for themselves.”

“ESG and SDG are priority factors for our clients, who are informed about the environment and care about their local communities and the broader impact they are making with their investment dollars,” said AUM Asset Management Ltd.’s CEO, Roberta Bonavia. “Europe saw record inflows into ESG investments in 2021 and we believe this trend will only accelerate in 2022 and beyond.”

According to Refinitiv’s 2021 ESG Playbook report, PwC estimates that assets under management across ESG funds in Europe will reach between €2.6 trillion and €3.6 trillion by 2025, and an unprecedented US $30 trillion in wealth transfer will soon land in the hands of (mostly) millennials, who have shown themselves to value sustainable and socially responsible investments.

Potential ESG AUM Forecast ($US Trillions)

Looking ahead, the growth trajectory for ESG assets under management is exceptional, with potential to hit US $70 Trillion by 2040. While incorporating ESG and SDG factors into an investment framework was more of a trend for many firms in the past, it was the basis of AUM’s core investment approach from the beginning due to Mr. de Clermont-Tonnerre’s commitment to environmental and sustainability issues in his business and personal foundation projects throughout the past 25 years.

[caption id="attachment_21532" align="aligncenter" width="300"] Founder: Jean-François de Clermont-Tonnerre[/caption]

“Caring for the environment and making sustainable choices is our collective responsibility and making investment decisions that take the environment, bio-diversity and conservation of land into account creates a virtuous cycle that benefits everyone in the end. That is why AUM will continue to apply ESG and SDG principles for the benefit of our clients and our broader communities,” said Mr. de Clermont-Tonnerre.

In 2009, Mr. de Clermont-Tonnerre formed a philanthropic foundation in Brussels to serve and support four key focus areas: the environment, science, youth education and culture. In 2020, he established the Collége de France’s Annual Biodiversity and Ecosystems Chair, which aims to promote research and teaching by leading French and foreign specialists in the subjects of biodiversity and ecosystems, and highlight the environmental challenges the world currently faces. This Chair position ensures that these issues are widely communicated to the academic world, decision-makers and the general public to find the best solutions to address the issues of today.

[caption id="attachment_21533" align="aligncenter" width="300"] CEO: Roberta Bonavia[/caption]

Mr. de Clermont-Tonnerre also currently works alongside Lone Tree Properties Ltd. in British Columbia to support the sustainable protection and conservation of 1,800 acres of land, that was previously cut down and logged, in order to cease all logging there and protect the remaining land for the local community to enjoy, which includes a 900-acre, permanently-protected public park. These and other sustainable and environmental projects underscore his professional and personal commitment to environmental land conservation, the promotion of sustainable solutions in business and taking active steps to improve the overall quality of life for all.


OECD: Plugging the SDG Financing Gap

Ensuring Blended Finance can mobilise private finance, particularly in the Least Developed Countries and towards Social Sectors, will require a systemic and transformational approach.

Even before the arrival of COVID-19, the SDG financing gap was significant. The private sector is an important contributor to SDG delivery and has increasingly been mobilised with the support of blended finance approaches. Blended finance has been defined as the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries[1]. In 2018-19, official development finance mobilised nearly $50bn of private sector finance for development[2]. However, this amount is not enough. In particular, in countries where development finance flows, especially ODA, become a critical source to finance social services, the current share falls short from commitments. The impacts of the COVID-19 pandemic on developing countries are increasing financing needs while reducing available resources.

Without swift global action, years of progress made towards SDG targets could be undone. Blended finance has an important role in unlocking and channelling commercial finance towards sustainable development. Commercial capital is key as there is a lot available and channelling just one percent of total global financial assets (estimated at $382tn), could bridge the existing SDG financing gap, at $2.5tn annually[3]. Essentially, blended finance allows for financial returns to investors while addressing investment barriers by improving the risk-return profile of investments. Blended finance operates as a market-building instrument that provides a bridge from reliance on development financing towards commercial finance, critical to ensuring SDG compliant sectors and markets get adequate financing for them to develop.

Blended Finance Needs to Grow and Be Redirected to the Countries and Sectors Most In Need

Despite the volumes mobilised the direction of the financing has been skewed towards middle-income countries and commercial sectors (like banking, finance, and energy). While Less Developed Countries (LDCs) are disproportionately affected by the COVID-19 crisis, they continue to receive the lowest share (despite a modest increase in overall volume) of private finance mobilised by official development finance interventions.

[caption id="attachment_21538" align="aligncenter" width="900"] Figure 1: Amounts mobilised from the private sector - main trends (USD billion). Note: The percentage of private finance mobilised for the LDCs is calculated as share of country-allocable private mobilisation. Source: OECD (2021).[/caption]

From a very low base, the mobilisation trends are positive with private finance mobilised for LDCs and other LICs increasing from $3.8bn in 2018 to $4.6bn in 2019. The share of LDCs and other LICs private finance mobilised increased from 7.5 percent to 12 percent as shown in Figure 1. However, the financing remains far below what is needed, as the SDGs are often the widest in the LDCs. This is despite the fact that the LDCs are home to over one billion people, about 14% of the world population across 46 countries. Furthermore, the vast majority of financial resources mobilised, $16.3bn, targeted the banking and business services with only $1.5bn mobilised in the water and sanitation sector.

Building back better from the pandemic requires a multilateral and multifaceted response that advances a transformational and systemic approach. It needs to include innovative financial tools and risk-mitigation instruments, that link that to policy actions, like coordinated engagement between the private sector, local governments, and multilateral development banks (MDBs) and development finance institutions (DFIs). Appropriate coordination and the effective use of blended finance mechanisms could ensure that funds are directed towards projects that are aligned with the SDGs, particularly those in the social sector that are often excluded by private investors or cast aside in favour of opportunities that are more commercial. As the recent OECD–UNCDF Report highlighted[4], Blended Finance has the potential, among other purposes, to leverage digital technologies; finance small and medium-sized enterprises in the “missing middle” (gap); and address market failures that prevent the LDCs from financing their development needs and reaching the most vulnerable[5].

In response to the economic and financial reverberations, the short-term approach has been shoring up development finance portfolios. The general risk aversion of DFIs makes it particularly challenging for them to attract even more risk-averse commercial investors into LDCs and exploring new investable opportunities in the near term as long as the pandemic is ongoing.

In the medium- to long-term, blended finance can play a critical role in the COVID-19 recovery by stimulating economic recovery and increasing resilience to future shocks, both financial and social.

[caption id="attachment_21539" align="aligncenter" width="900"] Figure 2: Private finance mobilised in the LDCs - main sectors and recipients, 2018-19 average $billions. Source: OECD (2021).[/caption]

Meeting the significant sustainable investment needs in the LDCs post-COVID-19 will require a strategic assessment of how blended finance can be deployed at scale. Overall, this could mean moving away from a focus on individual transactions towards the greater use of blended finance funds and facilities. A portfolio approach could also help to create larger deals, to increase diversification (in turn, reducing risks), and make assessment and approval processes more cost-effective. DFIs and MDBs may need to revise their risk–return threshold in order that greater risks and, ultimately, volumes of blended finance can be directed to the LDCs and social sectors.

In order for funds to reach where they are needed most, there must be coordination between governments and other relevant stakeholders, in particular DFIs, in the LDCs who can help direct funds to the sectors most in need. Especially in social sectors, where investors tend to be risk-averse, the role of DFIs can help to build investors’ confidence and mitigate or reduce the risk. Understanding local capacity for deployment and ensuring a local perspective is crucial to the success of the investment and project’s impact. Therefore, developing countries themselves must be empowered to have a stronger role in diverting blended finance to social sectors and the LDCs. Social projects are likely to be closer to government actors, require more consultation and greater understanding of social needs on the ground. Moreover, for projects to receive local currency financing, local ownership will be critical. Local pension funds and other local sources of finance should invest in these social sectors, which are often critical for delivering the SDGs particularly in the context of the LDCs. Local DFIs and other financial actors in the LDCs can help in developing the blended financing structures necessary to deliver social projects.

To ensure the transition towards the more effective use of Blended Finance, a systemic and transformational approach is needed. Without significant change, the required volumes of Blended Finance will not be achieved, and the private finance mobilised will not be directed to the LDCs and social sectors.

The Role of the G20

The G20 is well positioned to advance global efforts towards a more equitable and sustainable recovery from the economic shocks of the pandemic. The group has committed, under the Financing for Sustainable Development Framework endorsed in 2020 under the Saudi Arabian Presidency, to mobilising all sources of finance, including blended and private sector financing towards the alignment and impact of the SDGs[6]. As part of the G20 Development Working Group (DWG) work under the Italian G20 Presidency in 2021, G20 members have further advanced awareness about innovative finance instruments. The Presidency produced a stock take report on how to scale up green, social and sustainability bonds to finance climate related activities and SDG-related projects in developing countries. In parallel, the G20 Sustainable Finance Working Group has worked on reporting and regulations for private finance mobilised towards climate finance and could look at GSS bonds in the future. Greater synergies could be found between these two areas of work, as blended finance mechanisms are used in the issuance of green and other thematic bonds, and lead to the mobilisation of new private finance.

Importantly, blended finance can play a key role in supporting the LDCs to mobilise resources for the medium to long-term recovery. For blended finance to be an effective instrument for the COVID-19 recovery, the wide range of actors involved (donors, DFIs, multilateral development banks, impact and commercial investors, local financial institutions, national and local governments, etc.) should focus on supporting the institutional capacity of countries and building pipeline projects that linked to national development priorities. This includes job creation, SME-development, an emphasis on gender equality, support health systems, and target sectors that are critical for inclusive, resilient and sustainable development.

In summary, four key areas for further work are:

Use blended finance strategically to develop sustainable domestic market systems and build the capacity of local capital market actors.

Design innovative structures that target the hardest to reach and most underserved areas

Improve impact management and measurement, and promote transparency

Bring blended finance to (large) scale through systemic and transformational approaches

Indonesia assumed the G20 Presidency on 1 December 2021, and will hold the G20 presidency throughout 2022. Indonesia has already confirmed its plans to develop G20 Principles on Scaling-up Private and Blended Finance in the G20 DWG. The OECD will support Indonesia in producing practical and actionable guidance for developing countries on how to scale up the use of private and blended finance, building on existing work. This has the potential to address some of the coordination barriers and lack of transparency around deals that have marred blended finance mechanisms in the past. The OECD and Indonesia will work in tandem to identify gaps and challenges faced by developing countries and the LDCs, and identify what capacity would be needed to allow blended finance to support the local economy and local capital markets.

References

[1]OECD (2018), "Blended finance Definitions and concepts", in Making Blended Finance Work for the Sustainable Development Goals, OECD Publishing, Paris, https://doi.org/10.1787/9789264288768-7-en.

[2] OECD (2021). Amounts mobilised from the private sector by official development finance interventions in 2019-19: Highlights, https://www.oecd.org/dac/financing-sustainable-development/development-finance-standards/mobilisation.htm (accessed on 26 November 2021)

[3] Speech by the OECD Secretary General (https://www.oecd.org/about/secretary-general/private-finance-for-sustainable-development-conference-paris-january-2020.htm)

[4] https://www.oecd.org/finance/blended-finance-in-the-least-developed-countries-2019-1c142aae-en.htm

[5] OECD/UNCDF (2020) Blended in Least Developed Countries: Supporting a Resilient COVID-19 Recovery,   https://doi.org/10.1787/57620d04-en (accessed 26 November 2021)

[6] G20 Development Ministers Communiqué (2021), G20-Development-Communique.pdf (accessed 26 November 2021)

About the Authors

[caption id="attachment_21536" align="aligncenter" width="300"] Author: Haje Schütte[/caption]

Haje Schütte is Senior Counsellor & Head of Financing for Sustainable Development Division of the OECD Development Co-operation Directorate. His work focuses on how to address the dual challenges at the core of the 2030 Agenda, i.e. mobilising unprecedented volumes of resources, and leaving no-one behind.

[caption id="attachment_21537" align="aligncenter" width="300"] Author: Ibu Raden Siliwanti[/caption]

Ibu Raden Siliwanti is the Director for Multilateral Funding (Cooperation Bappenas/Indonesian, G20 DWG Team, Ministry of National Development Planning/Bappenas).

By Haje Schütte and Ibu Raden Siliwanti. Contributing authors: Felicia Rodriguez, Wiwien Apriliani (Indonesian G20 DWG Team), Rolf Schwarz, Tomas Hos and Paul Horrocks


Virtually at Work, Physically at Home: VR Tech Ups the Ante

The work-from-home movement may soon take the leap from temporary necessity to selling point.

Facebook’s $3bn acquisition of Oculus in 2014 spawned a virtual office space for employees working from home. The Facebook / Meta VR flagship, Quest 2, released the Horizon Workrooms programme, a space for teams to remotely connect and collaborate.

Virtual reality (VR) and the broader XR (extended reality), have been in development for some time. The first iteration of virtual-world building looked wildly different to modern renditions. In 1962, film-maker Morton Heilig created the Sensorama: a theatre experience with moving 3D images, peripheral visuals, binaural sounds and even air currents. Six years later, the first head-mounted display system was created by Ivan Sutherland — but it was so heavy it needed to be suspended from the ceiling.

Whether you’re into slicing to the Beat Saber or diffusing explosives in Keep Talking And Nobody Explodes, gamers have dominated the market. According to CCS Insight, a market researcher focusing on mobile and wireless tech, 70 percent of dedicated VR system owners have bought a game to suit.

Gaming companies, from Sony and their PlayStation VR to Valve and their Valve Index, still rank among the highest investors. But this is set to change; recent developments have pushed matters into territory that could significantly change work and play.

Meta has recently partnered with the NBA League Pass to offer members the chance to “be” courtside at an NBA game — while in their own homes. The game between the Golden State Warriors and the Houston Rockets in January pitted two top teams against one another, with the winner headed to the Western Conference Finals.

The game was a thriller, featuring a jaw-dropping 40-point performance from MVP candidate Steph Curry. To watch that live from the stands would normally set you back around $1,200. The alternative? A $38 monthly subscription to NBA League Pass and a $400 system.

Music concerts have also begun to show up in the VR space. Travis Scott, a multi-Grammy award-winning artist, launched the first concert on Fortnite. Astronomical drew in 27 million viewers and helped catapult Scott’s album to top spot. Other musicians are now incorporating VR into their concerts, bringing the camera onto the stage and allowing the “virtual fan experience”.

But VR and XR are not for everyone. Some users have reported motion sickness and injuries from falling into or tripping over objects in the room — and that’s before we get onto privacy and security issues. Data selling and farming take on a new life when companies have access to eye-movement metrics and our unconscious responses to visual cues.

The potential uses for XR go beyond the world of gaming and entertainment. Companies are using VR to train and onboard new employees. Last April, the European Union Aviation Safety Agency approved the use of VR flight simulation as a training device.

Walmart in 2018 announced its use of virtual training to assist employees with new technology, empathy, and customer service and compliance.

“The great thing about VR is its ability to make learning experiential,” said Andy Trainor, the senior director of Walmart US Academies. “When you watch a module through the headset, your brain feels like you actually experienced a situation.”

This is the true strength of VR. It is hands-on practice in a cheaper and more detailed form. The ceiling for this technology is world-changing. While it’s currently limited to games, the term “home office” may soon take on a whole new meaning.

By Yogesh Patel


Active RE Reaps Benefits of Being an Early Adopter with Juan Antonio Niño

Over the years, Juan Antonio Niño has established his place in the hierarchy of Latin America’s financial professionals.

[caption id="attachment_21546" align="aligncenter" width="900"] Active RE Chairman of the Board: Juan Antonio Niño[/caption]

The chairman of the board of Active RE has held executive-level positions in some of the region’s most respected banks. In 1999, he became executive vice-president of Banco Uno Panama, where he opened 20 banking agencies over the course of eight years. He acquired extensive experience through his professional activities, and broadened his banking and business knowledge with further education at Harvard University and the Wharton School of Business.

But his success story was just beginning…

One of Niño’s greatest achievements came in 2007, when he founded the globally recognised reinsurance company Active Capital Reinsurance Ltd (Active Re). Domiciled in Barbados and initially specialising in bank insurance and affinity products, Active RE began providing reinsurance coverage to financial organisations.

Active RE offers its products and risk-management services to 418 companies and 152 brokers in 110 countries throughout Europe, Latin America, Asia-Pacific and the Middle East and North African regions. The company's operations and processes are built on strong ethical principles and are fully compliant with all relevant international anti-money laundering and anti-terrorist financing regulations.

The firm was an early adopter of new technologies that gave it a crucial performance edge. By prioritising investments in communication, the company has strengthened its global network. It boasts some 50 associates spread across 10 locations, proficient in eight languages. This provides multiple points of contact tailored to the needs of customers, suppliers, and strategic partners.

In 2019, the international credit-rating agency AM Best awarded Active RE with a financial strength rating of A- (excellent) and Long-Term Issuer credit rating of a-. At the most recent rating review in July 2021, the outlook on these credit ratings was upgraded from stable to positive.

The company lives up to its motto of “Benefits for All” and its operating philosophy: "Put clients first, measure risks twice, and after due diligence, pay claims, every time".

“I want to thank our clients for their trust, support, and loyalty over the years,” Juan Antonio Niño says, also crediting strategic allies, distribution channels, retro-assignees, staff, and employees “for their part in an exciting journey that builds on experience and keeps gaining momentum”.


World Bank: Investment Push Needed for Green, Resilient and Inclusive Development

[caption id="attachment_21575" align="alignright" width="300"] Author: Mari Pengatsu[/caption]

As we enter the third year of the COVID-19 crisis, we face a world with a serious ‘reversal’ problem – a reversal in development progress made over the last 20 years, of a magnitude not seen in a generation. It is the poor and vulnerable that are hit hardest. The per capita income gap between rich and poor countries is widening; poverty and inequality is increasing, both within and across countries; and globally, a decade worth of gains in human capital outcomes have been lost, as the impact of climate change worsens.

Most advanced economies are expected to restore their real per capita income to pre-pandemic levels next year. But 40 percent of emerging and developing economies will remain below their 2019 levels—including more than half of fragile and conflict-affected areas and three-quarters of small states. There has also been a surge in debt levels, with about half of low-income countries in or at risk of debt distress.

The big challenge for 2022 – if not for the next decade – is how to tackle this reversal, putting countries back on a path toward green, resilient, and inclusive development. In the decade before the pandemic, structural weaknesses had already led to a slowdown in growth. Despite the damage, we now have a unique opportunity for a “reset,” not only to address deficiencies in policies and investment gaps of the past, but to make sure that the interlinkages between people, planet and the economy are adequately considered in tackling ongoing global crises including climate change.

The needs are vast and urgent. The focus of the UN Climate Change Conference (COP26) in Glasgow last November was on the “billions to trillions” that would be required to decisively shift to low-carbon, resilient growth. For example, estimates show that even with the appropriate policy environment, low-carbon, climate-resilient infrastructure, including energy, transport, water, and flood management, would require at least 4.5 percent of the GDP of low- and middle-income countries, or US$1.55 trillion per year between now and 2030.

There is broad consensus on the critical need for a major investment boost in all forms of capital—human, physical, social, and natural— to reap the benefits from the opportunities offered by a low-carbon future, while considering countries’ development needs and providing targeted support for the poor. The question is how, given the constraints we see in the global economy today.

First and foremost, for a big investment push to succeed, the starting point must be through strong country leadership and actions. Countries can demonstrate political will by committing to a low-carbon, long-term development strategy to foster predictability and certainty, which will serve as the basis for an investment program with a portfolio of purposeful and transformative projects. Countries also need to create the right conditions to encourage investment through reforms in policies, institutions, and regulations.

Arrangements that bring countries, donor partners, multilateral development banks, the private sector, and other stakeholders together to coordinate their efforts will be helpful. They can be used to identify the most appropriate structure and sources of financing for country-led investment programs and transition strategies. For example, South Africa has recently created a platform for transitioning energy away from fossil fuels, which can help facilitate the acceleration of investments and the mobilization of finance.  Other countries are also in the process of designing similar comprehensive platforms that include exiting from fossil fuels, repurposing assets, facilitating a just transition and providing replacement or access to renewable energy.

To deliver the scale of investments needed, a revamp will be required in domestic as well as international finance, both public and private.

Governments will need to reform their fiscal systems to mobilize domestic resources more effectively. Taxes on ‘public bads’ such as pollution are a large and unused potential revenue source that can incentivize the private sector to invest in more sustainable activities. Elimination of fossil fuel and other detrimental subsidies can also generate additional revenues. Official development assistance and concessional climate finance needs to be expanded as well, to support investment and mitigate associated risks. Strong private sector involvement is essential, not just for investments and finance but also to access and develop better technologies. The participation of the private sector was highly visible at COP26, many leading their own initiatives and ramping up partnerships. We should not lose this momentum.

For the World Bank Group - the biggest multilateral funder of climate investments in developing countries – these developments are encouraging. Our new climate finance targets mean we will be providing, on average, about $25 billion per year to support climate action, with at least 50% allocated to adaptation. It is vital to help developing countries make the right investments now, to deliver finance for the most effective solutions, and to help mobilize and scale up resources.

For the poorest countries,  the World Bank mobilized a $93 billion replenishment package of the International Development Association (IDA) to support recovery from the COVID19 crisis and transition to green, resilient and inclusive development. A substantial portion of these funds will go towards adapting to rising climate impacts and to prepare for future crises.

We are also playing a key role in in supporting policy, legal and regulatory reforms to unlock private finance, not only for mitigation but for adaptation, which is a priority for many developing countries. The Bank has channeled grant and concessional resources for project preparation, as well as blending and de-risking finance to improve the risk-reward profile. Working across the Bank Group with the International Finance Corporation (IFC) and Multilateral Investment Guarantee (MIGA), we also support financial solutions that can be structured as risk sharing or guarantee products,. For example, in Luanda, Angola, the Bank Group provided a guarantee of US$500 million that mobilized US$910 million from international commercial lenders for the Bita Water Supply Project. The investment is designed to improve access to potable water service for over 2 million people in Luanda, reducing the population’s exposure to climate-related shocks and water scarcity.

Past crises show that recovering from reversals in development progress takes time, putting a heavy burden on developing countries. Governments in developing countries have a responsibility to create the conditions to attract investments that are fit-for-purpose, integrating climate with their development goals. The global community can play an important role by exploring all possible means to scale up transformative investments. Close coordination will be critical to avoid fragmentation and maximize impact for a green, resilient and inclusive future.

The costs of inaction are now higher than the costs of action. There is no time to waste.

By Mari Pangestu, Managing Director, Development Policy and Partnerships, The World Bank


Fausto Ribeiro, CEO of Banco do Brasil: Green Dreams Coming True as Brazilian Bank Focuses on ESG

[caption id="attachment_21572" align="alignright" width="300"] CEO of Banco do Brasil: Fausto Ribeiro[/caption]

The financial sector has a key role to play in the transition to a new model. At Banco do Brasil, sustainable credit represents 37.5 percent of the total portfolio.

Sustainability and environmental, social and governance issues have been steadily gaining relevance.

The global aim is to achieve a model of economic, productive and consumption development that is in harmony with environmental limits and combats inequalities. It is a vision shared by governments, companies, NGOs, and society in general.

By considering ESG in business strategy, the sector can offer instruments such as equity for new technologies, emissions-trading platforms and green loans to capitalise on shared-value opportunities.

Ensuring sustainable results in the short, medium, and long term depends on the correct assessment of the risks and opportunities. In the financial sector, risk management is incorporated into the corporate culture and related to business continuity. Social, environmental and climatic factors have secured a fundamental role in risk assessment.

With the increasing search for investments in products that benefit society and the environment, there is an increasing trend in the issuance of green and social-impact bonds. Long-term financial dividends should focus on ESG risks and opportunities — with more active investor scrutiny of companies' involvement.

There is a rising number of sustainable products and services, in-line with the needs of consumers who have been opting for purpose-orientated brands with values similar to their own. This consumer market movement has led financial institutions to act proactively, encouraging clients to adopt sustainable practices and develop economic activities that generate shared prosperity.

Challenge of Transition

The debate surrounding actions that lead to a low-carbon economy is more intense after COP 26. The issue is urgent, because natural disasters caused by climate change negatively affect global GDP. They also spark mass migrations, conflicts over water, and reduced agricultural productivity.

Extreme weather events demonstrate that we must learn a different approach to production.

There are opportunities for responsible growth from the development of new technologies, and innovation with a focus on sustainability and the circular economy.

These forces are changing areas such as agriculture and energy, and they should converge further still. Disruptive technologies such as AI, machine learning, blockchain, and data management are essential to monitor value chains, understand externalities, and adopt strategies with a positive impact.

Increasing productivity in harmony with conservation is a global objective, and one that will guarantee the quality of life for future generations. In this context, BB seeks to support sound, low-carbon agricultural practices.

The transition to low-carbon emissions and an inclusive economy is indispensable for nations’ financial stability and prosperity. According to the Boston Consulting Group, it will take nearly $150tn for businesses and governments to neutralise greenhouse gas emissions by 2050. In this endeavour, the financial sector plays an essential role.

Corporate Sustainability

To support clients in this transition, BB forecasts the growth of its sustainable business portfolio, which currently totals BRL282bn ($50.5bn) in operations and credit lines. This is designed to finance activities with positive social and environmental impacts. The balance represents 37.5 percent of BB's total classified portfolio, certified by Sitawi a specialised entity.

Banco do Brasil has one of the largest sustainable business portfolios in the National Financial System, with an emphasis on sustainable agriculture and social businesses.

BB’s agribusiness performance is strengthening, with a 54 percent share of the Brazilian market. Half of this portfolio (BRL225bn, or $40.3bn) comprises sustainable credit lines. The aim is to reach a balance of BRL125bn ($22.4bn) in sustainable agriculture by 2025, compared to the current BRL112.4bn ($20.12bn).

Due to this prominence, the bank intends to seek solutions and mechanisms — carbon credits or green interest rates — which contribute to bringing better conditions and incentives for Brazilian farmers.

On the energy front, Brazil is a reference point in the international market. It has an electrical matrix with an 83 percent share of renewable sources according to the Energy Research Company, EPE. Even in positive scenario, there is room to grow given Brazil's geographic potential for renewable energy.

We are increasingly directing our capital to meet consumer demands for energy efficiency, cost reduction and competitiveness. Banco do Brasil aims to reach BRL15bn ($2.69bn) in credit for renewable energy by 2025 for all customer segments — 100 percent growth over today’s figure of BRL7.4bn ($1.32bn).

From the perspective of administrative practices, BB is doing its homework. We are committed to reducing 30 percent of greenhouse gas emissions by 2030 and offsetting 100 percent of direct emissions by 2021. We will reach 90 percent of renewable energy for bank operations by 2024. We already have two photovoltaic plants in operation, and are working towards a total of 29 solar and biomass plants.

BB has joined the Business Ambition for 1.5°C initiative and remains committed to achieving carbon neutrality by 2050. We are aware of the challenges in achieving zero emissions, and are targeting the value chain and participating in the debate.

We are attentive to regulatory standards, creating mechanisms to support sustainable production and encouraging environmental preservation. It is necessary to take care of the present with an eye to the future, promoting green and sustainable growth.

Most Sustainable Bank

Banco do Brasil has a unique identity. It is a market company, listed on the stock exchange, competitive, profitable, innovative, and efficient. We are “from Brazil”, we have a trajectory that builds on more than 200 years of contribution to the country's economic and social development.

The bank plays a transformative role in society by fostering entrepreneurship and sustainable production in all regions. We are the main financier of Brazilian agribusiness and support the sector at all stages of the production chain.

The award for the Best Sustainable Bank in South America — granted by CFI.co — is recognition of Banco do Brasil's commitment to sustainability, and its efforts to adopt ESG practices that enable sustainability and actively contribute to the global sustainable development agenda.

Fausto Ribeiro, CEO, Banco do Brasil


Evan Harvey, Nasdaq: Language Locks and Building Blocks

Language has been an inhibitor to the progress of sustainable business. Rather than putting a trendy new name on an essentially new business practice, a series of conflicting, complementary, and confusing labels has come into practice. Because this era is still nascent, and the social and environmental impacts of business tradition are actively being re-examined, there has been little time for alignment and consensus on the applicability of certain words and labels. Many well-meaning stakeholders tend to think of sustainability, responsibility, ESG, green, impact (and even broader terms like purpose and culture) as essentially the same thing, or at least variations on the same idea.

The willful misuse of language and labels has also been a significant obstruction. Some take advantage of sustainability terminology to pitch wholly unsustainable products or amplify otherwise benign services. And for this practice, we have a perfectly serviceable and well-understood label: greenwashing.

Growing concerns over greenwashing have attracted some regulatory action. The US SEC issued a public Risk Alert (The Division of Examinations’ Review of ESG Investing, April 2021) and also sent letters to individual firms demanding more transparency on their use of ‘ESG’ in fund construction, classification, and marketing.

"ESG itself is not really a word but an acronym, and like most acronyms it has no organic or independent meaning."

The impulse to go green, even artificially so, is understandable.

“Trillions of dollars have poured into sustainable investment strategies in recent years and regulators have taken little action to ensure funds are marketed accurately, partly because of the lack of agreement on what 'sustainable', 'green' and 'greenwashing' mean.” (Reuters, 04 Nov 2021)
If the terminology that we associate with sustainability is not universally understood or accepted – or trusted – then certain downstream effects become untenable. Recent COP26 goals reiterate a sense of urgency: we must get to global net zero by 2050, generate $100B (US) in climate financing every year, or the consequences are too dire to contemplate. A widening wealth gap and narrowed path to capital access warps social, political, and economic efficiency; it also undermines our faith in institutions and trust in economies. The theme of the 2022 World Economic Forum meeting in Davos is “Working Together, Restoring Trust.” How can we hope to overcome such intractable barriers? Let’s start by defining our terms.

ESG itself is not really a word but an acronym, and like most acronyms it has no organic or independent meaning. It is literally the sum of its parts—built upon every possible scrap of environmental, social, or governance data—and easily conflated with other imprecise terms (corporate sustainability or social responsibility). Yet language is hierarchical, as Noam Chomsky famously opined, and we can better understand related ideas by outing their signifiers into order and context.

Culture is an unorganised, organic collection of norms, ethics, values and aspirations that drive organisational health and productivity. It is empowered by leadership but really nourished by the entire value chain: employees, customers, clients, suppliers. Culture is sometimes confused with brand, which is commercial and inorganic.

Purpose is the modus operandi of culture, the machinery by which cultural ideals are transformed into real business outcomes. It is organised, outcome-oriented, and measurable. Purpose is an evolving concept in the corporate space, but it is often confused with mission, which is also commercial and arguably inorganic. 85% of Fortune 500 companies publish a mission statement, but less than a quarter issue a purpose statement. (Purpose_Brand, 2020)

Sustainability is a choice within purpose: to strategically maximise certain values (which the IIRC once enumerated as capitals: financial, manufactured, intellectual, human, social, and natural) in order to persevere and prosper. It is a directional shift from chasing short-term cents to modelling long-term dollars, yet also dependent on practical measurement.

ESG is that practical measurement. It is a tactic, a data-driven discipline that measures, values, and incentivises specific performance indicators across the environmental, social, and governance space. It can be the proof point for everything above, the metrical validation of our cultural, purposeful, and sustainable hypotheses.

This hierarchy isn’t meant to downgrade sustainability or ESG, nor to elevate culture and purpose to undeserved status. But it should demonstrate how these concepts are different, where they connect, and why performance in one area likely has a reciprocal or subsidiary relationship with another. Before I exhaust your indulgence, let me put all this theory into a more practical form. My company is currently embarked on a project that not only touches upon all these terms but is strategically driven by them.

Nasdaq relaunched its corporate foundation in 2020, coupled with a new business unit called Purpose. Both were intended to demonstrate our commitment to certain values and aspirations inherent in our culture: equity, access, fairness, transparency. To leverage our experience and natural reach, we examined the capital markets and searched for ways to make them better – and fixed our purpose “to champion inclusive growth and prosperity.”

But even though culturally appropriate and purposefully stated, it’s difficult to turn “champion inclusive growth and prosperity” into a program, a series of action steps, or even a defined outcome. We engaged with two prominent research partners – Commonwealth and the Financial Security Program at the Aspen Institute – to put our purpose to the test. Could we better understand inclusive growth and, better yet, overcome key barriers to prosperity?

The resulting report did so, but also helped us to identify “meaningful steps toward a more just and sustainable capital market system.” The concept of sustainability not only drove our operation as a (somewhat modestly sized) public company, but now was applied to our economic and market stewardship. The responsibility we bear for preserving economic opportunity for future generations was put front and center.

Thus, the agenda was set, but we still needed to refine our project into specific targets:

Resources. One cannot invest what one does not have, and financial insecurity is a foundational hindrance to market participation.

Actionable Knowledge. Everyone deserves to know what investing means and how it operates, without being overwhelmed by unnecessary information or unattainable expectations.

Market Access. Individuals who want to invest must also have the access and applicable products to do so.

Investor Identity. Those with resources, knowledge, and market access must also be able to see themselves—and be seen by family, peers, and society—as investors.

Our success in achieving these targets can be measured in the language and data of ESG: diversity training, investor education, community investment, product availability and credit availability, to name just a few.

The project is just underway and more precise measurements of its impact will come in time. Some of those results may shift our course or reallocate resources to maximise impact. We use the rigor and logic of data to drive our decision-making, make the business more sustainable, measure the positive impact of our purpose and represent our corporate culture.


Keep on Truckin’, urges Canada, but Protest Blockade evades an Easy Fix

What do truckers and Covid-19 vaccinations have in common? You would think very little, but recent events in Ottawa prove otherwise.

In January, Covid-19 mandates required drivers to be vaccinated before crossing the US-Canada border — sparking the Freedom Convoy action.

Protests generally have been on the rise over the past decade. A report from the Centre for Strategic and International Studies (CSIS), a non-profit research organisation, investigated the frequency of global rallies. It found between the years 2009 and 2019 there had been an 11.5 percent annual rise.

On the surface, that sounds like a good thing. When community and political problems are not addressed, the people have the right to voice their concerns. The battle to end police brutality or climate change comes from a different place than that to dispute an election result or drive a conservative agenda.

The Freedom Convoy began on January 22, with convoys of trucks leaving major provinces heading to the Canadian capital. They converged in Ottawa a week later, rallying at Parliament Hill. Spin-off protests have since blocked major roads leading to provincial capitals and crossings at the US-Canada border.

Ontario premier Doug Ford declared a state of emergency and implemented legal sanctions on those impeding the flow of trade routes. The protests have been condemned by the Canadian Trucking Alliance and Canadian Prime Minister Justin Trudeau, who called them “an insult to truth”.

Abacus Data, a think-tank based in Canada, conducted a poll and found two-thirds of respondents had “very little or nothing” in common with the protestors — and most found the rallies to be “offensive and inappropriate”.

Some of the world’s largest vehicle manufacturers — Ford, Toyota, Honda, and General Motors — have been forced to close plants as auto parts are held up in the chaos. Already suffering from a year of global supply shortages, the industry cannot afford additional setbacks.

The hospitality and retail sector around Ottawa has seen a massive drop in traffic and footfall. The protests are keeping people in their homes, and the lack of assurances from Ottawa officials is worrying many small business owners. The Rideau Centre, a popular shopping mall in downtown Ottawa, has been closed since Sunday February 6, impacting thousands of workers.

Sympathetic individuals in other countries have begun to join the cause as opposition to the covid mandate spreads to New Zealand and Australia. Truckers in the respective capitals of Wellington and Canberra have blocked roads surrounding parliamentary buildings.

How can this be resolved? As with most protests, once the initial outrage plays out and the public, media, and world-at-large move on, the protestors are likely to be left with diminishing momentum.

Ottawa will regain control of its streets — at some point — and protestors will disperse. The state of emergency increased the city’s daily budget to help fund additional security and find ways of removing the offending trucks. Smaller demonstrations which bloomed in other countries should die down with the demise of the original.

But all this points to a scary picture.

The protests are said to be propped-up by alt-right groups and conservatives warping the original intent. They have gathered support from right-wing media sources such as Fox News, as well as former US president Donald Trump. The interim leader of Canada’s conservative party, Candice Bergen, has lent her support to the protestors. They “deserve to be heard and they deserve respect”, she says. But many say that the dispute has been hijacked by far-right activists, often with no connection to the trucking industry.

Some of these newcomers have brought xenophobic and racist tensions to the fray, using propaganda tied to the Q-Anon group. This changing rhetoric has galvanised some global far-right sympathisers who raised $8m in support on the GoFundMe platform.

This will end, in due course — but the narrative surrounding the issue may affect politics for years to come.

By Yogesh Patel


Oil North of 60: Africa Seeks to Cash in on Energy Crunch

Already jittery markets, largely without direction, are braced for a near-perfect storm as central banks taper their bond-buying sprees and shelling across the ‘line of separation’ in Ukraine intensifies – a possible, if not likely, presage to an all-out war on a scale not fought in Europe since World War II.

Meanwhile, oil prices, buoyed by a robust post-covid economic recovery, steadily creep north, and are widely expected to break the $100 a barrel barrier before long.

The spot price of crude is but one gauge of heightened – even extreme – market volatility. Just over eighteen months ago, oil producers facing an almost unprecedented slump in demand had to actually pay ‘buyers’ to accept delivery of their crude after storage facilities on land and sea had reached full capacity.

Spooked Investors

OPEC+ member states, plagued by chronic under-investment, currently struggle to restart production shut down in 2020. Most oil supermajors, including US shale drillers, have been focussed on delivering goodies – such as share buybacks and dividends – to (institutional) investors spooked by environmentalist groups. However, by the end of this year, global demand for oil will exceed pre-covid levels by up two million barrels a day.

The global markets for crude, diesel, natural gas, and coal are now exceptionally tight and suffer backwardation – a bullish sign whereby (spot) prices for immediate delivery exceed those for future contracts. “There is not much to give in the system,” says Vitol Group CEO Russell Hardy: “Energy supplies are only arriving just-in-time which is not a great place to be.” Vitol Group is the world’s largest independent oil trader. A nuclear deal with Iran may allow that country to pump an extra million or so barrels a day but, according to Mr Hardy, that extra supply has already been factored in for the second half of the year.

UBS Group commodity analyst Giovanni Staunovo fears that a further escalation of tensions in Eastern Europe may disrupt supplies, either intentionally or because of (geo)political division. That may fuel inflation in the developed world, but also rekindles hope of a windfall elsewhere.

Poking Africa

With oil prices up 70% over the past 12 months, and likely to stay above the $60-a-barrel mark for the foreseeable future in what some analysts consider the beginnings of a supercycle, opportunities open up for marginal producers in Africa to develop recent discoveries off the coast of South Africa and Mozambique where a potential 500 trillion cubic feet of natural gas were identified. Namibia sits on an estimated 11 billion barrels of light oil. Poking around in the Kavango Basin, Canadian oil and gas explorer Reconnaissance Africa thinks the area may hold as much as 120 billion barrels of oil.

In next-door South Africa, the Karoo Basin in the Free State holds some 390 trillion cubic feet of recoverable natural shale gas. However, a recent court order blocking Shell and its local partner Mantashe from conducting seismic surveys off the Wild Coast – hailed by environmental groups – has dampened spirits. Spokesperson for SA Oil and Gas Craig Morkel warned that regulatory weaknesses and legal uncertainties may yet cause South Africa to lose the opportunity to become self-sufficient in energy.

Chairman Nj Ayuk of the Johannesburg-based African Energy Chamber is not at all pleased that the developed world is holding the continent to its clean energy agenda. This makes is harder to secure funding for oil and gas projects that can help lift Africa out of poverty: “Africa contributes just 4% to global greenhouse gas emissions yet is expected to follow the renewables agenda. Natural gas is considered a key component of the green transition and some banks agree with that, but we need more.”

Harmonising Imperatives

Recent discoveries elsewhere on the continent add to the growing unease that the oil and gas bonanza may prove elusive due to investor reluctance. Exploration by, amongst others, Italian energy company Eni has shown that Africa is awash with oil and gas: 2 billion barrels of oil and 1.8 trillion cubic feet of gas off the coast of Côte d’Ivoir; 500 million barrels of oil equivalent off the coast of Ghana; and 250 million barrels of oil in the Angolan Cabaça Development Area.

Both Messrs Ayuk and Morkel agree that the continent’s – and particularly South Africa’s – regulatory framework needs an urgent update to harmonise environmental and developmental imperatives. “If we don’t, we risk losing a great opportunity to transform the country by pursuing energy self-sufficiency,” says Mr Morkel who further notes that the exploitation of onshore reserves is especially interesting given that the costs are 70% rand denominated as opposed to offshore drilling which is invariably priced in US dollars.


Markets in Turmoil: President Putin’s ‘Technical Operations’ Upset the Apple Cart

In the early morning of Thursday, Russian missiles rained down on Ukrainian military installations as markets in the far East opened for business and promptly took a beating in a rolling barrage that soon swept Europe and beyond.

Stocks went down across the board whilst bond yields expanded on investor appetite for safe havens. Commodities from oil to grain also rose sharply, adding to the concern over inflation. Oil breached the $100-a-barrel mark with European benchmark Brent up 5.3% in early morning trading.

Winter wheat touched a 9-year high, surging 6% to $8.52 a bushel on the Chicago Mercantile Exchange. Corn rose in tandem. Nickel, aluminium, platinum, palladium, and of course gold also headed north double-quick time. Commodity analysts expect the rally to accelerate with some predicting an oil supercycle at levels approaching $125 a barrel.

Tumbling Shares

European shares opened sharply lower with the Euro Stoxx 50 dropping close to 5% and the FTSE 100 shedding 3%. In the US, aftermarket trading on Wednesday pointed to comparable losses for the S&P 500. The tech-heavy Nasdaq is expected to lose 2.5% at the resumption of trading, accumulating a 20% dive since its most recent peak thereby officially entering bear country.

Money piled into bonds, driving down the yield of the 10-year T-Bill to 1.882%. However, the worst onslaught was in Russia where trading on the Moscow Stock Exchange was briefly halted only to resume with a staggering crash, wiping out 44% of its market cap in a matter of minutes, prompting the central bank to intervene in support of the battered rouble and massively injecting liquidity into the banking system. Trading was again suspended later in the morning after short sellers had been ousted to no avail.

Notwithstanding the market crash following President Vladimir Putin’s dawn announcement of ‘special operations’ against Ukraine, Russian officials believe their country’s economy – diminutive by most standards – is essentially sanction-proof. The government runs an annual budget surplus (forecast at +0.9% in 2022) and has hoarded an estimated $630 billion in foreign exchange reserves.

Moreover, public debt stands at barely 20% of GDP. After the annexation of Crimea in 2014, and the Western sanctions that followed, Russia launched a vigorous import substitution drive, including a largely successful attempt to wean the nation off its penchant for foreign food products. However, according to several studies, imported goods still account for 75% of the products and ingredients that go into the making and manufacturing of everyday necessities, including food.

Fortress Russia

A fortress or not, in the apparently highly active mind of President Putin, Russia is free to go its own way, re-establish its sphere of influence, and able to dismiss or ignore outside threats or pressure.

However, the Kremlin’s failed attempts at de-dollarizing its trade are an Achilles heel. Half of the country’s international trade remains dollarized whilst fully a third is euro-denominated, leaving only a tiny sliver outside the reach of Western sanctions – and in the hands of Chinese president Xi Jinping, potentially enjoying a last laugh before long.

A significant part of the market volatility may be ascribed to the inability of Western powers to restrain Russia’s irredentism in any tangible way. The ‘mother of all sanctions’ being unveiled by the US and EU cannot hide the fact that talk will not likely stop rolling armour. Committed to remain outside the theatre of operations, NATO cannot do much more than shift a few thousand soldiers and their equipment around to bolster its eastern defences.

The United Nations is quite powerless as well, excitedly palavering in the Security Council and uttering words of great indignation and reprobation. Yet, the almost deafening cacophony of world leaders expressing their anger cannot disguise the tragic fact that fiery words mean nothing in the absence of a big stick.

Shock Without Awe

Ukraine then seems poised to suffer a fate not unlike the one meted out to Czechoslovakia in 1938 when the great powers stood by as Nazi Germany first occupied Sudetenland – not unlike Luhansk and Donetsk – as a prelude to overrunning the entire country. Appeasement didn’t work then and is unlikely to work now.

The only hope, a faint one, is that Ukraine somehow manages to stop the Russian advance – with or without outside help – and give the Russians time to pause and rethink their approach, possibly ditching their president in the process. Absent a quick victory, President Putin may have overplayed his hand. Apart from a few scenes depicting distant columns of billowing smoke, no televised Rumsfeld-style ‘shock-and-awe’ was seen though reports of Ukrainian resistance were likewise scarce – and invariably unconfirmed.

During an emergency meeting of EU ambassadors in Brussels to discuss sanctions, the representatives of Germany, Italy, and Cyprus urged moderation and proposed a more gradual approach. Whilst a diverse ensemble of oligarchs and all members of the Duma were placed on a European blacklist, President Putin – reportedly worth a jaw-dropping $200 billion – was exempted.


Fortress Russia on Shaky Ground: EU Finds Its Footing and Unleashes Its Economic Might

The rouble took a pounding of note, losing almost a third of its value as soon as forex markets opened Monday morning. Equity trading was suspended whilst Russian financial authorities pondered the extent of the sanctions imposed over the weekend. In a nutshell: The Central Bank of Russia is unable to rally its formidable reserves – a hoard estimated at $630 billion – to defend the battered currency which promptly fell off its perch and plummeted to depths unvisited.

The much-touted ‘Fortress Russia’, thought unassailable just days ago, is crumbling as the planned swift advance on Kyiv and Kharkiv stalled in the face of stiff Ukrainian resistance and the world united in relegating President Putin’s Russia to pariah status – no different from the reputation enjoyed by North Korea and Iran. Meanwhile, President Volodymyr Zelensky of Ukraine rose to the occasion to become an instant cult hero and the admired embodiment of indomitable tenacity.

Ducks Lined Up

The European Union sprang a major surprise by getting its 27 ducks neatly in a row to enact three successive sanction packages that not only had considerable bite but effectively crippled Russia. Brussels revealed its hawkish side when it decided to provide €450 million in ‘lethal’ military hardware to embattled Ukraine under the off-budget and curiously (Orwellian?) named European Peace Facility, a financing instrument with a ceiling of €5 billion.

EU Foreign Policy Chief Josep Borrell seemed himself much surprised at the union’s resolve: “Yes, we are doing it… providing arms to a belligerent! Another taboo has fallen. This war requires our engagement to support the Ukrainian army.” Former German minister of Defence and current EU Commission President Ursula von der Leyen called the bloc’s newfound resolve a ‘watershed moment’.

Ms Von der Leyen closed EU airspace to Russian aeroplanes, including private jets, and announced the silencing of Russian state-owned or -controlled media outlets such as Sputnik and Russia Today. She also joined a number of member states in a call to fast-track Ukraine into the EU. Remarkably, not a single EU member objected to her emotional appeal.

Special Track

Earlier, Prime Minister Eduard Heger of Slovakia suggested a ‘special track’ to quickly usher Ukraine into the union: “On Thursday, we woke up to a new world. Ukraine fights for itself, they fight for us, they fight for freedom. We must understand that they fight to protect our system, our values, and we must stand by them.” The sentiment is widely shared in Europe with the entire ensemble of eastern member states – with the notable but unsurprising exception of Hungary – clamouring for Ukraine to be forthwith welcomed into the European family.

President Putin may have seriously miscalculated the West’s response, resolve, and concord after he saw the US and its allies ejected rather unceremoniously from Afghanistan. He also seems to have underestimated Ukraine’s determination to fight for its freedom – forging a nation in the process. His plans for a walkover went awry and now he lacks a ladder to climb down. Instead of sowing division amongst NATO allies and EU member states, Russia’s aggression, and Ukraine’s spirited and heroic defence, have sparked an almost unheard-of sense of unity that inspires and reminds Europeans of their shared values – and the urgent need to protect them.

Dramatic shifts in policy followed in quick succession. Germany mobilised its financial firepower and earmarked €100 billion to re-equip its armed forces. The country also promised to spend at least 2% of its GDP – equivalent to some €68 billion – on its defence as of 2024, an increase of €15 billion.

No Way Out

President Putin, earlier confident that he could pay his way out of any sanctions with his country’s forex reserves, may have had a rude awakening when Russia’s central bank was effectively defenestrated and kicked out of the global financial system, rendering it impotent. Though the central bank offered ‘unlimited rouble liquidity’ to commercial banks, it also jacked up the interest rate to 20% – up from 9.5%.

Counting on China to offer solace remains an iffy proposition. Chinese banks, which hold 14% of Russia’s forex reserves, are already showing considerable reluctance to provide financing of Russian (oil) exports fearing secondary sanctions could cut off their access to euros and dollars. For the same reason, Chinese banks are unlikely to buy any of Russia’s 2,299 tonnes of gold. The full-scale deployment and thundering of Western financial firepower is keenly being followed in China as many lessons are to be drawn.

Thanks to sanctions imposed in the wake of the 2014 invasion and annexation of Crimea, direct exposure of Western financial institutions to Russia is limited. Foreign investors are estimated to hold about $20 billion in dollar debt and another $37 billion in rouble-denominated bonds.

Plane Trouble

Under EU sanctions, aircraft lessors have just thirty days to recover hundreds of planes from Russia. Irish leasing companies such as AerCap and SMBC Aviation Capital have 238 commercial aircraft flying in Russia with a combined market value of $4.1 billion. Even more worryingly for Russian operators is the decision by engine manufacturer Rolls-Royce to ‘pause all activities’ in the country as of 25 February 2022.

Jet engines are monitored and have their settings adjusted remotely by the manufacturer in real-time. Moreover, most engines are operated on a pay-per-use basis. Without constant monitoring, affected engines are flying essentially unmaintained. A ban on the export of spare parts needed to keep planes aloft adds to the complication.

Bad news kept piling up for President Putin as the $1.3 trillion Norwegian sovereign wealth fund – the largest in the world – announced that it would freeze investments in Russian assets and begin divesting from the country. In the UK, energy group BP, promised to ditch its 20% stake in Russian state-owned oil company Rosneft.

Just before the weekend, rating agency S&P Global demoted Russia’s debt to junk status. The cost of credit-default swaps (CDS) almost doubled to 37%. On Monday, CDS issuers swapped to an ‘upfront’ basis – demanding full payment for insurance against a sovereign default – in a sign that they consider fears of severe financial stress justified.

Traders worry that the sanctions regime could prevent Russia from meeting its financial obligations. However, the eventual pay-out level of CDS contracts may be hard to determine as the actual value of the underlying Russian bonds becomes an incognito due to a likely ban on secondary trading.

Whilst echoes of Dr Strangelove reverberate around Moscow, stocks retreated across Europe with the Stoxx 600 share index falling 1.6%. The Stoxx Euro Bank Index fell by almost 6% on concerns over the fallout of the exclusion of select Russian from the Swift payment messaging service. The dollar gained 0.5% against a basket of six major currencies whilst the yield on two-year T-Bills dropped slightly to 1.5%.


Florian Reuter, Volocopter: ‘Pragmatic Excellence’, Transparency, and the World of Urban Air Mobility

[caption id="attachment_21603" align="alignright" width="300"] CEO: Florian Reuter[/caption]

Florian Reuter has been at the helm of urban air mobility pioneer Volocopter almost since its inception, steering the company from strength to strength.

Volocopter was born in 2010 when the founders met in an online forum for tech enthusiasts. Their discussions sparked the creation of a company to operate stable, safe drones as passenger aircraft. The first prototype, in 2011, used a yoga ball as a landing gear. It was enough to score Volocopter a place in the Guinness World Records as the first crewed electric multicopter — and to elicit a call from NASA.

The future-forward aircraft manufacturer, with offices in Germany and Singapore, launched public test flights in 2017. It has since been staging demonstrations in major cities to give people a taste of the future.

In 2022, Volocopter has 500 employees and three purpose-built aircraft — the VoloCity, VoloConnect, and VoloDrone — that meet the same aviation safety standards as commercial airliners. It has also designed the digital and physical urban air mobility (UAM) infrastructure to match (the VoloPort and VoloIQ).

A steady stream of capital and specialist knowledge, and collaborations with aviation authorities, business partners, and governments, has made the firm a leader in certification — and it’s on track to become the first electric air taxi on the global market.

How soon can UAM become part and parcel of our daily lives?

Florian Reuter: There has been very rapid progress. Our short-term goal — something we are very close to achieving — is to secure certification from the European Union Aviation Safety Agency (EASA) for our VoloCity air taxi.

We aim to do this in time for the 2024 Paris Summer Olympics. We will then be able to launch commercial services with piloted aircraft as well as tourist flights and other dedicated services.

The move into the third dimension will trigger a fundamental shift in our mobility system. To fully exploit this potential, we need to interact with the public early on and clearly communicate the benefits and challenges associated with UAM.

What are the next steps?

We’ll start small, with dedicated routes, before we expand the UAM network over the next decade to offer cross-border services in certain regions, such as between Singapore and Malaysia. We’ll also be working toward offering autonomous flight routes, in coordination with local civil aviation authorities.

What legislative or regulatory changes would you like to see?

Collaboration with regulators around the globe has been refreshing; regulators are certainly not hindering innovation. In the case of eVTOLs and UAM they have been real enablers.

One topic that is particularly important to us is globally integrated air traffic management (ATM) standards that apply to the lower airspace where UAM and advanced air mobility (AAM) aircraft will operate. This is a new sector with its own technology, so there is a pronounced need for established global regulatory systems.

Volocopter is based in Germany, and we’re working closely with the EASA to adapt our UAM to existing ATMs. We have performed tests at major international airports, such as Frankfurt. Other countries have their own systems and authorities, and we will need to adhere to their requirements as well.

What is special about your organisation’s management style?

Volocopter champions transparency, open communication, and flat hierarchies. We share as much information as possible with our employees. We encourage innovation and invention, recognise the hard work done by individuals, and we give praise every single week. This has created a strong, unified company culture that helps us move toward our common goal.

What are your team’s key strengths?

Diversity and agility. Our 500-strong team come from various professional backgrounds, including aviation and aerospace, business, automotive, and engineering.

In our mission to attract the world’s finest talent, we adopted English as our working language when we were a group of eight Germans. As a start-up, we needed the company and its diverse workforce to quickly adapt and grow.

One core vision is “pragcellence,” a word we created that means “pragmatic excellence.” We are sensible, realistic, and practical in everything we do, while being excellent in our execution.

What advice would you give industry newcomers?

Always put safety first, and prepare for the long haul. It’s easy to make announcements, show renderings, and even fly prototypes. But the challenges start rolling in when you start flying people and move toward certification for commercial operations.

At those times, the challenge — and the resources and time required — increase by an order of magnitude. Achieving certification may be an arduous task, but it is an essential one. It was of paramount importance to start working with regulators worldwide early on.

At the end of the day, the safety of those on board and on the ground are our top priorities.


Casting Russia Adrift: The Decline of Western Power May Have Been Exaggerated

The Austrian subsidiary of Sberbank, Russia’s biggest lender, has collapsed after its parent company was unable to provide the liquidity required to keep the bank afloat. Sberbank’s other European subsidiaries are being wound down or offloaded in fire sales to local competitors. Sberbank Europe held an estimated €13.6 billion in assets with about 800,000 corporate and retail account holders.

The Russian-owned bank suffered a run on deposits after the EU and the US imposed draconian sanctions on the central bank in Moscow which, as a result, is unable to move or use its dollar and euro reserves. On Tuesday, the EU Single Resolution Board, charged with the orderly dissolution of failing banks, mandated the sale of Sberbank’s units in Croatia and Slovenia to local banks in order to ensure their survival.

In a matter of days, Russia was unceremoniously cut off from the global financial system. Credit and debit cards stopped working, as did Apple Pay and a host of other services. Both Visa and Mastercard blocked Russian financial institutions from accessing their network.

Swiss Pick a Side

Even Switzerland ditched its cherished neutrality and joined the sanctions, promising to follow the EU lead. In his first State of the Union address to a joint session of Congress in Washington, US President Joe Biden hinted that there is more to come as his administration confers with allies to plug any sanction loopholes and further tighten the cordon sanitaire around Russia.

Meanwhile, big corporates are scrambling to exit, abandoning Russia in droves. Apple suspended the sale of its products and banned Russian media from its app store. Earlier, Facebook, YouTube, and TikTok kicked Russian media outlets off their platform whilst Twitter plans to reduce the ‘visibility and amplification’ of content generated by Russian media. Netflix announced its refusal to stream Russian state TV channels as it is required to do under local law.

Snafu at Snapchat

Snapchat exposed its parent company Snap to significant online ridicule when it decided to stop showing ads in Russia, eliciting howls of indignation that the move only serves to free Russian users of annoying commercial messages.

Ford Motor Co also suspended operations until further notice as did Nike. Aeroplane manufacturer Boeing did likewise and said that it will no longer provide spare parts, maintenance, or technical support to Russian airlines. Earlier, Airbus had taken a similar decision. Danish shipping giant Maersk said it has halted all container shipping to and from Russia and no longer accepts bookings from the country. Both Walt Disney and Warner Bros cancelled the release of new films in the country.

Russia tried to stop the exodus by imposing capital controls and simply prohibiting foreign investors to sell local assets. The divestment drive was gathering pace today as corporates weighed reputational damage against their continued presence or dealings with Russia. The only two oil supermajors – ExxonMobil (US) and TotalEnergies (France), both with drilling operations in Russia – that have so far refused to exit the country are facing increased pressure to fall into line.

Ukraine Foreign Minister Dmytro Kuleba on Monday implored all companies still conducting business in Russia to exit immediately: “The world and history will judge you accordingly.”

Urals Shunned

The isolation of Russia, and the growing unwillingness of traders to buy its commodities even though sanctions allow for this, has almost three quarters of Russia’s oil output looking in vain for buyers. European oil majors stopped buying, spurred not only by moral considerations but also by a spike in shipping rates and insurance premiums.

Some European refiners handling Urals crude are no longer willing to do so. Neste’s Porvoo refinery in Finland and Preem’s three facilities in Sweden have started looking for alternative supplies. Yesterday, Urals crude was trading at a $18 discount to Brent.

Though Russia is still pumping natural gas through different pipelines to Europe, German Economy Minister Robert Habeck said that the country is preparing for the ‘worst-case scenario’ and could postpone the planned shuttering of coal-fired and nuclear power plants.

Tumbling Shares

Shares of Russian companies listed on the London Stock Exchange lost well over $570 billion in market cap in just two trading sessions. Sberbank’s London-listed shares lost 74.6% in value whilst Gazprom shares plummeted 37.9%. Since the start of Russia’s ‘military-technical’ operations against Ukraine, shares in formerly well-respected companies such as Novatek (-96%), Lukoil (-93%), and Rosneft Oil (-78%) have been reduced to penny stocks.

Bargain hunters remained largely absent bar the predictably sanguine analysts of Seeking Alpha who caused considerable consternation after recommending a strong buy on Gazprom and other depressed equities, arguing – not altogether without reason – that their fundamentals will ultimately prevail over geopolitics. The message implied but not said: morals and money do not mix. However, that may no longer be sage – or true.

Index provider MSCI concluded that the Russian equity market has now become ‘uninvestable’ and removed the country’s securities from its emerging market indices at a price that is ‘effectively zero’. Only minutes after MSCI delivered its bombshell, FTSE Russell announced that it too would purge Russian stock from its indices.

In Moscow, markets remained closed until further notice whilst ETFs (exchange-traded funds) tracking Russian stocks or with significant exposure to them continued to take a hammering. Both VanEck Russia ETF and iShares MSCI Russia ETF – two of the largest such funds in the US – have been decimated with losses in excess of 60%.

Most analysts and fund managers consider ETFs a fair indicator of real market value absent regular trading. They point to the economic turmoil of 2015 when Greece suspended equity trading for six weeks. As markets reopened, stocks settled at levels close to those of US ETFs with exposure to the country.

Casting Russia Adrift

Both the US and the EU seem to suggest that the sanctions will progressively tighten as Russia advances into Ukraine. Simultaneously, Europe is scrambling to reduce its energy dependency on Russia.

German Chancellor Olaf Scholz revealed plans to fast track the construction of two planned LNG (liquified natural gas) terminals in Wilhemshaven and Brunbüttel with floating storage and regasification units. The GATE (Gas Access to Europe) terminal in Rotterdam – the largest of its kind on the continent – is set to double its send-out capacity to 2 billion m3 per annum by installing additional equipment. The Zeebrugge LNG terminal in Belgium is also investing an extra capacity.

Excluding Turley, European LNG terminal use currently stands at just 67% (up from 49% last year). Even if terminal use could be pushed to 100% – a practical impossibility due to logistics and maintenance issues – the share of LNG in Europe’s gas mix is unlikely to exceed 40%. Though Spain boasts five LNG terminals with some of the lowest use rates on the continent, the country is poorly connected to the European pipeline grid and unable to attain significant send-out rates.

A New Deterrent

The almost instant immiseration of Russia $1.6 trillion economy is unprecedented and may have prompted President Vladimir Putin to issue barely veiled nuclear threats. Mr Putin has grossly underestimated the West’s power to wage economic war, a mistake that will not have gone unnoticed in China as it weighs and recalculates the cost of a move on Taiwan. If one thing has become clear in Beijing, it may well be that its $3.3 trillion forex stockpile may prove worthless.

Though sanctions seldom, if ever, result in regime change, the ones currently enacted against Russia are of such a magnitude and severity that conventional wisdom may yet be disproved. The sanctions are also non-controversial as the global community – with only a few notable exceptions – unites in condemning and punishing Russia for its naked aggression. Should Western powers succeed in crippling Russia’s economy – and war machine – a new and formidable deterrent will have come into existence.


Trust is a Vital Part of ‘Success Recipe’ for Pharma Companies

German pharmaceutical company BioNTech has debuted a modular medicinal production facility — just one of many recent innovations in the medical sector.

A significant impact of the past two years has been raised awareness of healthcare as a priority. A report by global consulting firm LEK found that 75 percent of respondents intend to increase spending on health-related purchases and activities as a result of the pandemic.

A change in public perception has been overdue. Public charity Action on Health and Smoking (ASH) noted, in its 2021 report, that the number of smokers fell from 46 percent of the population in 1974 to just 14 percent in 2019. As health concerns grow in tandem with consumer knowledge, companies have been forced to adapt.

But awareness is not the only aspect of the health industry that consumers need to consider. Pfizer and Moderna have become household names, and the spotlight is focused on pharmaceutical companies.

American-Japanese firm Takeda discovered in a 2020 survey that just 38 percent of adults felt they could fully trust big pharma — and 22 percent had no trust at all.

Medicine manufacturers need to change their relationship with consumers to ensure their survival in a post-pandemic world. Some are already ahead of the curve, and BioNTech is one such firm.

At a recent conference in Marburg, Germany, the company revealed a new manufacturing method. It can compact the machinery needed to produce vaccines to the size and shape of a shipping container. The units take up less space, are transportable, and can be placed anywhere in the world. With plans to launch the first models in Africa later this year, BioNTech could change healthcare across developing nations by turning the tide on malaria and other treatable diseases.

The genius behind the idea becomes apparent when one considers what it takes to produce drugs at traditional facilities. Vaccines, for instance, require complex steps in their manufacture. Machines must be maintained at precise operating pressures and temperatures to ensure the correct chemical reactions. These specifications form a sort of secret recipe — one with thousands of complicated steps. The problem lies in transferring these “recipes” to other production facilities. It’s a slow process, and factors as subtle as the weather or the factory’s elevation mean retuning and updating the process each time.

BioNTech CEO Uğur Sahin hopes the modified shipping containers will speed-up the process, and the provision of aid. The standardised nature of the containers means engineers can replicate the recipe without recalibration. As Sahin puts it: “This is the future of manufacturing — not only for Africa, but worldwide.”

Another company looking to break into the pharmaceutical space while riding on the back of consumer attention is the Mark Cuban Cost Plus Drug Company (MCCPDC).

Billionaire Cuban has latched onto the affordable healthcare market by providing a cut-price service in the sometimes-extortionate US market. It offers hundreds of drugs below the price set by many pharmacies — without the requirement for patient insurance.

MCCPDC charges a 15 percent mark-up and any additional pharmacy fees, yet still manages to undercut the competition. The diabetes drug Metformin retails for $20 for a 30-day supply, but on MCCPDC the price is just $3.90. Imatinib, a drug used to treat leukaemia and other cancers, is available for $17.10 on Cuban’s website. It can cost as much as $2,502 from retail pharmacies.

The future of medicine hinges on transparency. The mistrust surrounding covid vaccines shines a light on an age-old problem. As consumers become more aware of their medical needs, any company that can supply medicine and trust is well positioned for the future.

By Yogesh Patel


This Season’s Collection is Second-Hand — and Purchased Online…

High street fashion giant H&M has posted higher-than-expected earnings, and is optimistic that the fashion industry — valued at $1.9tn in 2019 — could reach $3tn by 2030.

The sector has been growing year-on-year for two decades, revolutionised by fast fashion: the seasonal cycling of styles from some of the world’s largest retailers. Companies are standing-by to replicate catwalk trends and designs — rapid-fire and cut-price. The garments are blitzed into stores as demand peaks, maximising sales. Companies such as H&M and Zara can turn around new items just two weeks after their global debut.

When consumers need to update their wardrobes, fast fashion is the go-to solution. The layout of stores and the marketing imply high-quality at low prices. But this instant consumer gratification has ugly repercussions.

According to Business Insider, the industry is responsible for 10 percent of total global carbon emissions — the same as all EU countries combined. Constant seasonal turnover means material waste. Around 85 percent of all textiles end up in landfill each year.

Consumers bought, on average, 60 percent more clothing in 2014 than they did in 2000 — and the items last half as long. Discarded clothing breaks down into microfibers — which harm aquatic life in rivers and oceans. Half a million tonnes of clothing will release the same number of micropollutants as 50 billion plastic bottles.

The rise in environmental awareness and a parallel drive for sustainability became entrenched during the pandemic. High-profile companies are finally implementing their promises to reduce their environmental footprint. H&M has pledged to shun coal-based fuels and use technology to make its supply chain more sustainable.

Beyond the ethical questions, the fashion industry has struggled over the past two years. Covid lockdowns saw sales plummet for brick-and-mortar retail establishments. Consumption habits changed: away with luxuries, in with necessities. Any company that failed to match the needs of the moment — identified by consultancy firm McKinsey as the trinity of outdoor wear, comfort wear, and online availability — saw sales fall.

Revenge buying — consumers seeking to “get their own back” for the years stolen by the pandemic by going on a spending spree — has caused minor sales spikes. But the overall recovery of the industry has been slow.

In its State of Fashion report, McKinsey notes that the return to formal events and in-person work roles has left people with the desire, or need, to spruce up their wardrobe. It also mentions the fact that 30-40 percent of Americans are now a different clothing size — prompting an equal-but-opposite sort of growth: the rise of the second-hand clothing market.

Reselling will play a bigger role in the wider industry. A report from online thrift store ThredUp showed the second-hand sector is expected to be worth $77bn by 2025 — a growth rate 11 times faster than the rest of the industry.

The overall shift to internet-based retail has benefitted some. UK-based online fashion distributor ASOS recorded a 46 percent rise in revenue at the beginning of 2021. In the UK generally, the high street apparel sector has been left to climb out of a £14.5bn hole, while online trade has blossomed. Research by Retail Economics found 52 percent of all transactions are expected to take place online this year.

The two-headed prong of sustainability and online growth will push the industry towards significant change. As priorities shift and consumers become more aware of the impact their purchasing choices can have, it’s a case of adapt — or go out of fashion.

By Yogesh Patel