Paul Horrocks, OECD: Risk, Return, Impact - SDG Aims Need a Shift of Focus

Russia’s war on Ukraine and interruption of global food supplies has put greater pressure on the development system.

Development finance resources will need to increasingly mobilise the private sector. The private sector, meanwhile, is looking for more access to ESG investment opportunities and SDGs. Donors are the development architecture for this private sector mobilisation alongside the multilateral development finance institutions (MDFIs) and development finance institutions (DFIs). Blended finance is typically the structure used for mobilisation.

Despite the pressing need for private sector mobilisation, obstacles stand in the way. In contrast with the transparency and openness of Official Development Assistance (ODA), the risk-return and impact of blended finance transactions typically remain hidden behind commercial confidentiality clauses. This impedes the mobilisation of private finance.

A lack of credible information or transparency dissuades new market participants, as the risks and opportunities of investing in frontier markets remain unclear. Investing remains the preserve of a few who understand local market dynamics.

This compounds the challenge of private investment into the least-developed countries (LDCs) and social sectors. These economies and markets are in critical need, and the SDG gaps remain. Despite donor government commitments to “leave no one behind”, these geographies and sectors typically have a history of a limited number of transactions. They also lack and an evidence base.

The refrains of civil society organisations about the subsidisation of profits could be addressed by donors, MDFis and DFIs through data transparency on returns in these contexts and countries. Greater transparency is also needed on the measurement and management of impact.

There is a trade-off between risk, return and impact —  so is the balance right? Ministries of foreign affairs and development finance providers have been tasked by the governments of wealthy countries to help low- and middle-income nations achieve the SDGs. But finance ministries, treasuries, and credit-rating agencies control the risk exposure and — crucially — the incentives of MDFIs and DFIs to deliver on their mandates. These institutions must often generate sustainable impact and a financial return, which are not always compatible. Returns are likely to take priority over impact, to the detriment of the sector or region.

Financial regulators decide on whether a DFI can have a credit rating and issue debt, or have the capacity to use blended finance instruments such as guarantees. Donors can recapitalise MDFIs and DFIs, but ultimately balance sheets and capital risks are controlled by finance ministries and treasuries. Currently the risk dial is focused largely on financial returns.

The picture is complex as every DFI and MDFI has a different mandate and capability. The new US International Development Finance Corporation (DFC), whose funding is based on budget appropriations, may take more risks than a DFI and invest more readily in LDCs and social sectors.

A wider definition — encompassing concessional and non-concessional blending — could facilitate the mobilisation and the greater use of instruments such as guarantees.

The operational frameworks of MDFIs and DFIs must move from a focus on risk-return, to risk-return and development impact. Investing in developing countries is high risk and does not always equate to financial returns, — but is likely to have  a significant development return.

For DFIs and MDFIs to work effectively in building SDG markets, they need a clear plan from equity to debt, from a DFI willing to take more risk compared to another, to refinancing, and ultimately exit and full handover to the private sector.

There are options available to donors,  DFIs and MDFIs. In recent years, innovators on capital markets have developed thematic financial instruments to accelerate progress on the SDGs, which can be broadly defined as “sustainability-linked financial instruments”. Green, Social and Sustainability and Sustainability-linked (GSSS) bonds, fixed-income instruments, already in use by many DFIs and MDFIs, could be used more effectively for funding activities.

DFIs and MDFIs with a credit rating are typically based in financial markets eager to achieve the SDGs, and the sovereign supporting government are keen to develop SDG capital markets — particularly where a “greenium” exists. Currently investor demand provides a greenium of cheaper financing to the issuer or the DFI and/or MDFI, which could then be loaned-on into riskier projects in higher-returning developing markets.

Access to cheap financing should not come at the expense of local currency finance. The creation of local GSSS bond markets would provide new financial capacity to fund SDG-relevant projects. DFIs and MDFIs can, at the local level, use blended finance to increase the pipeline of projects that can be aggregated to issue as GSSS bonds. In regions such as Sub-Saharan Africa, where access to capital markets and impact reporting are limited, this would enable greater transparency and disclosure.

Greater co-operation amongst DFIs and MDFIs on bundling projects would help to develop the necessary aggregation for issuance and diversification of GSSS bonds so attractive for institutional portfolios. Co-operation, not competition, is needed to grow the market.

DFIs and MDFIs can also provide technical assistance to GSSS bond-issuers, supporting developing countries to set up frameworks to select and implement the GSSS bond. This is a key requirement to obtain a GSSS label. By sharing best-practices in setting-up eligibility criteria for the projects that underpin the bonds, as well as establishing allocation and impact reporting practices, DFIs and MDFIs can strengthen market discipline. This can help to shift investor focus to the region and encourage other GSSS bond issuers to follow suit.

More can also be done at balance-sheet level to transfer risks to the private sector or other donors. This could help bring in a range of new risk profiles, such as institutional and alternative asset managers. A notable example of a risk transferred through the securitisation of projects is the Room-to-Run transaction, the first- synthetic securitisation of an MDB’s private sector loans portfolio. It increased the balance sheet capacity of the African Development Bank.

The scale and ambition of the 2030 Agenda demands a new shareholder governance model that explicitly prioritises the mobilisation of private finance. Donors need to take a more active role in working with DFIs and MDFIs to grow the financial capacity of sustainable development finance. This requires exploring options, approaches and incentives to deliver scale and depth. MDFIs and DFIs need to see themselves as mobilisers of capital.


VR Headsets, Cyborgs and Legal Wrangles: Welcome to the Virtual Music World

AI takes a starring role in entertainment, from deceased stars performing from beyond the grave to digitally created rappers.

What if you could harness the power of AI to create the perfect modern rapper? Well, someone tried — and the star was “cancelled” for racist behaviour within days of being signed to a major record label.

FN Meka is a virtual rapper with millions of followers on TikTok. The digital avatar has the rapper look, a black cyborg with green braids, facial tattoos, and gold chains. But Meka was created by the white cofounders of Factory New, which promises to be a “first of its kind, next-generation music company, specialising in virtual beings”.

Though the character was voiced by an uncredited human, the other elements were created by AI. The company claims to have created technology that analyses popular songs from specific genres and then generates suggestions such as “lyrical content, chords, melody [and] tempo”.

Although the character has been around since 2019, a recent surge in popularity saw Meka amass over a billion views on TikTok. This led to an announcement that FN Meka had been signed by Capitol Records, making him the first AI artist to receive a major record deal.
It lasted 10 days.

The international headlines resulted in renewed questions about the use of the n-word in a 2019 song, and digitally generated images of the rapper being beaten by police on Instagram. One activist group, Industry Blackout, wrote an open letter saying FN Meka was "offensive" and "a direct insult to the black community and our culture".

The group went on to state that the virtual rapper was "an amalgamation of gross stereotypes, appropriative mannerisms that derive from Black artists, complete with slurs infused in lyrics”.

Gunna, a black artist who is featured on a song with FN Meka, is currently incarcerated for rapping the same type of lyrics this robot mimics. “The difference is, your artificial rapper will not be subject to federal charges,” Industry Blackout said.

Gunna, real name Sergio Kitchens, is being held in a US prison without bond on a felony racketeering charge. Included as the prosecution’s evidence are some of the rapper’s lyrics. Kitchens denies the charges and is awaiting trial.

Before long, internet sleuths had tracked down the anonymous human voice of FN Meka, who revealed that he had never been paid for his involvement in the project. Capitol Records announced it had “severed ties with the FN Meka project, effective immediately”.

FN Meka is not the first fully-virtual artist, but even with his rapid fall from grace, he is the only one to approach popular success. Another contender is Polar, a female AI pop singer created by The Soul Publishing, the company behind many of the controversial “life hack” videos you see online. Characterised by signature turquoise pigtails and doll-like features, Polar may not have had FN Meka’s social media success, but she did recently headline the fully-virtual Solar Sounds Festival, which has attracted over four million attendees in the past. Solar Sounds Festival is hosted by the life-simulation computer game Avakin Life, and takes place in Facebook’s Metaverse, a virtual reality (VR) social space accessible with VR headsets. While VR headsets once seemed a curious luxury, the pandemic brought new life to the fringe industry. Bloomberg predicts that the Metaverse could be an $800bn market by 2024.

The increasing use of virtual reality in the music industry has also created new questions about copyright and ownership in the digital world. How much can somebody else’s music be used in the virtual world before it infringes on copyright laws? AI companies have recently been able to create and release “deep fake” music, where virtual voices that sound exactly like popular artists such as Katy Perry and Frank Sinatra — and they can sing anything their creators wish. While music played in public requires specific licences that pay royalties to the artist, there is not yet any such license for the Metaverse.

The question of how much control an artist has over their own likeness may not be new, but it has different implications in the digital world. From a hologram of Tupac Shakur rapping at a concert in 2012 to the rising popularity of performances by deceased artists in South Korea, these questions become increasingly complex. Confusion over who is actually behind a character, and the presence of a larger anonymous team, makes it difficult to establish accountability. In the case of FN Meka, it allowed developers to evade responsibility, and questions, for three years.

It is unlikely that AI will loosen its grip on the music industry anytime soon. While digital personalities may not be the way forward, many real-life artists have found success harnessing the powers of the virtual world. Recent surveys found that 45 percent of all adults would listen to live music in a virtual world, as would 56 percent of Gen Z, and 61 percent of millennials. Although entry to such concerts is usually free, visitors are prompted to buy virtual merch for their digital avatars to wear. The popular computer game Fortnite held its first concert in 2019 with EDM musician Marshmello. It netted him 147k new Twitter followers — and grew his daily YouTube views by 500 percent.

In 2020, 12.3m people attended Travis Scott’s nine-minute Fortnite concert, which had 27 million visitors, and generated $20m of income from merchandise for the rapper (compared to $53.5m from his entire world tour in 2018/19). Rapper Snoop Dogg released an exclusive metaverse music video of his song House I Built in April 2022, and Warner Music Group (WMG) announced in January 2022 that they would be hosting a “combination of musical theme park and concert venue” in the same digital space, rumoured to include artists such as Dua Lipa, Ed Sheeran, and Green Day.

In these virtual reality concerts, artists wear motion-capture suits and can respond to fans in real time. They are one-off, genuine performances in which visitors can interact with performers, and the world around them.

Ariana Grande’s Fortnite tour saw players surfing on cotton-candy waves and fighting monsters while watching her performance. This technology can be harnessed in the real world. In London, fans can watch ABBA perform, captured as their younger selves, without the group being there, or for anyone to wear a headset or look at a screen. These virtual concerts are becoming so popular that in 2022, MTV announced a new category for their upcoming Video Music Awards: Best Metaverse Performance.

It seems that the future of AI in the music industry does not lie in anonymous creators developing virtual musicians from scratch, but in collaborations between the real-world and the virtual one. As VR headsets become more commonplace in the household, it is not a question of if you will soon be attending your first virtual concert, but when.

By Kitty Wenham


Austen Robilliard: Astute Analysis and Robust Research for Better Fund Selection

[caption id="attachment_23547" align="alignright" width="300"] Investment Director at Murdoch Asset Management: Austen Robilliard[/caption]

Austen Robilliard, Investment Director at Murdoch Asset Management explains why the company’s investment management solutions are so successful.

Austen Robilliard joined Murdoch Asset Management in 2007 and since then he and his team have been a major factor in the massive growth in its funds under management. Starting in a research role, he soon developed a proprietary risk modelling system, as the models on the open market were too focused on volatility and didn’t capture what causes funds to fail.

This led to him being recognised as one of Citywire's Top 30 under 30, the London-based publishing and information group´s annual assessment of the rising young stars in wealth management.

Seven years later, he was awarded European fund selector of the year at the 2020 International Investment Awards and in 2020 one of 12 shortlisted by RankiaPro, the Spanish-based investment fund information service.

2021 also saw him promoted to Director of the investment team and becoming Chair of the investment committee at Murdoch AM.  The investment team is three strong and without the contributions of each team member, such accolades would not be possible.

Murdoch puts its success down to its tight-knit staff: Highly aware that as a service-based business, it needs to rely on every single member of the team to look after its clients properly. So, the ethos of ‘treat others how you would want to be treated’ starts with the senior team and applies equally to staff and clients. The staff that have been with the company for many years continue this ethos and help new staff maintain a high standard of care for clients.

What also makes the investment team at Murdoch more effective than those at similar companies is the level of detailed analysis carried out before selecting investment funds that they feel confident in recommending. They firmly believe that the success of an investment fund is determined by the management team and investment process, i.e., the inputs, so this is where the team focuses a good deal of its attention.

Every member of the line-up holds high-level academic and industry qualifications, with their expertise and considerable experience spanning all the company’s services.

Robilliard believes that his team can deliver better outcomes to clients from actively managed funds despite the hazards that passive investors don't have to contend with.

He is cautiously enthusiastic about ESG funds although Murdoch Asset Management applies the same stringent selection criteria to these funds as it does to its unconstrained portfolios.

 “This means looking for those managers with a robust, committed, and repeatable process, and a track record of strong investment returns. We seek above-average returns on a persistent basis over time and aim to strike a balance between performance and the role it plays in society.

“ESG investing can be a cause for good, it just needs to be done in the right way and for the right reasons. “

He also points out that the pool is much smaller when it comes to selecting ESG-integrated funds.

This in-depth knowledge and analysis of all major asset classes, portfolio construction and fund selection has enabled Murdoch Asset Management to increase its funds under management from £30.3 million in 1991 to £680 million in 2021.

The company acquired Custodian Wealth Management in 2021 and are in the process of integrating another two in Southeast England, Omnium Wealth, an IFA business based in Guildford and the financial management company, Encompass, in Hampshire.


CBRE: Proptech Fuels Commercial Real Estate Leasing Market

It is easier than ever to evaluate and compare the features and prices of residential rental properties.

The obvious first step to find a rental home or apartment is to go online. Filter by size, number of rooms, equipment, location, common facilities, price and conditions, scroll the listings that meet our criteria, and view their details. A virtual tour is often possible, and the landlord or broker can be directly approached.

But the digitalisation of commercial real estate leasing has been slow to develop.

Digital leasing solutions are now on the rise, amid an effort to slash deal times and improve client engagement. Younger generations of commercial real estate consumers are demanding greater tech capacity from brokers and landlords for the sake of comfort and transparency.

The shift has been in the making for years, but the pandemic further exposed the shortcomings of low online exposure for asset types not traditionally listed online. New technologies and software have emerged based on virtual tours and online communication. The blindsiding impact of the pandemic forced real estate professionals to adopt a digital transformation roadmap in response.

Digital Leasing Solutions

Many real estate teams still suffer from inefficient processes, long lead times, and slow decision-making. But digital lease management tools can significantly streamline the listing and leasing process.

The market has an appetite for proptech solutions and in 2021, venture capital firms invested $32bn in digital solutions, 30 percent of which went specifically to commercial real estate tools.

[caption id="attachment_23552" align="aligncenter" width="300"] Figure 1: Proptech 2021 investment rates per asset class.
Source: CRETI (Center for Real Estate Technology and Innovation), 2022.[/caption]

Business intelligence products allow better decision-making because leaders are armed with more dynamic data. Much of that data underpins technology platforms that remain unstructured and unusable, so enterprise architecture and end-to-end integration will become increasingly important areas of focus.

AI-enabled business intelligence tools can gather and centralise leasing data regionally and globally, allowing firms to proactively manage lease contracts and transactions end-to-end through a one-stop platform. Data and analytics-enabled tools are central to streamlining listing operations and strengthening the asset portfolio strategy.

Despite the pandemic adding impetus to the digital transformation, the industry has been slow to integrate new technologies. Reasons include the complexity of property transactions. Most sales software adoption has followed a top-down pattern, which has often deterred software developers.

Online Leasing Marketplaces

Existing platforms mainly focus on smaller, less complex transactions or specific asset classes. This is changing as the sector gains scale and expands into new areas. Digital marketplaces for commercial properties offer significant scope to improve conversion rates, shorten deal times and increase efficiencies. But integrating fragmented back-office processes and systems is key to leveraging the full potential.

Tools such as VTS Marketplace enable tenants to search, view and share listings, while also allowing landlords to integrate listings and marketing content with management solutions or match space with prequalified tenants. In early September, CBRE announced a $100m capital injection to accelerate its growth and form a strategic partnership to create a differentiated technology platform for brokers, building owners and tenants.

“VTS’s proprietary technology has redefined how industry professionals lease and manage space, and has been widely embraced by property owners and leasing agents,” says CBRE CEO Bob Sulentic.

[caption id="attachment_23553" align="aligncenter" width="800"] Figure 2: Number of proptech companies funded in 2021, per country. Source: LSE, Crunchbase. 2022.[/caption]

Sizing the Market

The number of companies providing technology-based services has expanded by over 300 percent since 2010, while venture capital and other funding has also risen. It remains a relatively young technology ecosystem, with around three-quarters of these companies founded in the last 10 years.

As the technologies being used become more widely embedded and the industry matures, consolidation and in-house investment by established property companies has slowed the number of new start-ups being founded. Funding to the sector remains at elevated levels, driven by a variety of capital sources.

The US continues to account for the majority of company conceptions and fundraising, and is home to over half of funded companies over the past decade. China has significantly fewer companies, but is the next-largest market in terms of funding with over $16bn raised since 2010.

Western European and other major Asia Pacific countries also have clusters of start-ups. In Europe, the UK and Germany lead fundraising, followed by France, Spain and Sweden. India, Singapore and Australia have been the principal markets for fundraising outside China in Asia Pacific.

Potential and Challenges

The benefits to be gained from being a market leader in property technology solutions expand as the sector and its underlying technologies mature. There is greater customer engagement and increased efficiency, new sources of income and an ability to track and fulfil corporate ESG commitments.

However, in a fractured landscape with many start-ups providing overly-specific products and battling to measure ROI, it can be hard to find the right solution to maximise impact.

That requires a full-process technology adoption roadmap. And 2021 was a year to remember for proptech, as VCs set a new record for investment in private real estate tech companies. With over $32bn invested in proptech companies, the industry should continue to grow.

Analytics will drive bring improvements to the portfolio strategy. The massive increase in data collection made possible by new technologies will bring a need for enhanced cybersecurity, privacy and transparency capabilities.

[caption id="attachment_13595" align="aligncenter" width="300"] Author: David Casas Alarcón Property Management Accounting Lead at CBRE’s European Center of Excellence[/caption]


Lord Waverley: PM Should Appoint Envoys If UK is Serious About Free Trade Agreement with India

Every community in both countries stands to benefit from an accord that will stand the test of time and be mutually advantageous.

Free, independent, and democratic, India is a powerhouse that will play a pivotal role in world affairs, and it commands attention and respect.

A UK-India Free Trade Agreement would be a first for both countries: the UK’s first such alliance with any South Asian country, and India’s with a Western economy and G7 member.

India is the UK’s 15th-largest trading partner — 1.7 percent of total UK trade — and the potential gains from a comprehensive agreement could be more significant than those with Australia, New Zealand, or Japan.

The UK has lost market-share with every country in the G7. It needs to play catch-up on a Global Britain, working hard and fast on relationships. Much is to be gained in strengthening a historical relationship, but it should never be taken as a given.

Former prime minister Boris Johnson’s recent visit to Delhi and Gujarat (half of British Indians are of Gujarati descent) was a helpful bilateral exercise across energy and health sectors, the green economy, and security and defence. It built on India’s desire to move on from Russian weaponry procurement. The need for effective new technology and hardware to respond to threats in the Indian Ocean as part of the Quad Grouping’s alliance with the US, Japan, and Australia is geo-imperative. Our over-dependency on China as a supply-chain provider presents India as a competitive global alternative.

"Indian financial centres are not large enough to serve the national economy."

The UK should expect canny and challenging negotiation, however, and the emphases placed on trade agreements will differ. The UK’s relentless pursuit of FTAs contrasts with India’s scepticism.

India’s political class questions the merits of expanding trade links with the UK. In the colonial era of unfettered imports from Britain, the Indian economy suffered. Indian businesses are keen to safeguard their interests with a slower pace of trade and investment liberalisation. I have little doubt that the Rajya Sabha (Council of States) and the Lok Sabha (House of the People) will seek assurance that the differing interests of the regions are properly covered.

India has a record of pulling out of substantive negotiations, but there are indications of a fundamental change of approach. Delhi is unlikely to acquiesce on reduction of tariffs unless progress is made on mobility. This key demand will be access into Britain for skilled workers. Tariff removals on India’s agricultural sector are crucial to protect employment and its ability to produce its own food supply. Then there are divergences in the services, market access, digital, investment and dispute-settlement mechanisms.

The UK could consider the production of defence equipment in India. It would welcome British shipbuilding experience to lower manufacturing costs in its shipyards. Dual-use technologies are considered important with cross-border data flows, data protection and cybersecurity. These are important areas on which India and the UK could usefully collaborate, as is green hydrogen production.

Advancing financial services is a key ask. The UK would benefit from better financial and legal services’ access to the Indian market. The Indian financial sector is emerging as a dynamic area of growth, but it ranks only 30th as an export destination. Figures suggest that Britain exported services worth just £3.8bn of to India, with financial services making up less than 10 percent of that. Indian financial centres are not large enough to serve the national economy.

Five rounds of negotiation have been concluded with a raft of matters still to be discussed. India is keen to tackle smuggling, counterfeiting and loss of tax revenue, improvising customs arrangements to reduce bureaucratic delays. Red tape is considered crucial for small businesses in India. The UK government has listed intellectual property as important; a trade deal could enable low-cost vaccines to be produced by countries such as India.

Concerns of toxic pesticides being allowed into the UK are a potential stumbling block. Some Indian wheat exports to Britain contained chlorpyrifos — an organophosphate pesticide — which was banned in 2019. International labour standards with low pay and exploitative conditions should be a factor of an agreement. An Investor Dispute Settlement scheme must be put into place to allow foreign investors to sue when profits are threatened.

If the UK is to be serious about this, the prime minister should allocate a trade envoy to India — or four, better yet, to accommodate India’s size and diversity.

The details must be correct. Deals of this size could typically take years to complete. It is questionable, given the challenges, whether the setting of an ambitious but arbitrary deadline for the conclusion of the negotiations is the right approach.

Every community in India and the United Kingdom should benefit — with a draft that will stand the test of time and be mutually advantageous.

About the Author

Lord (JD) Waverley

[caption id="attachment_13312" align="aligncenter" width="300"] Author: Lord Waverley[/caption]

Independent Member
House of Lords

Twitter: @LordWaverley

LinkedIn: linkedin.com/in/jdwaverley


UN Chief: Countries Bound for COP27 Must Make Climate Action ‘The Top Global Priority’

As government representatives begin the finalize the agenda for the COP27 climate change conference in Egypt next month, for pre-COP planning in the Democratic Republic of the Congo capital, Kinshasa, Secretary-General António Guterres told journalists in New York that the work ahead is “as immense as the climate impacts we are seeing around the world”.

“A third of Pakistan flooded. Europe’s hottest summer in 500 years. The Philippines hammered. The whole of Cuba in black-out. And here, in the United States, Hurricane Ian has delivered a brutal reminder that no country and no economy is immune from the climate crisis,” he highlighted.

And while “climate chaos gallops ahead, climate action has stalled,” he added.

Faulty maths

Tweet URL

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The top UN Official underscored the importance of COP27 while warning that the collective commitments of G20 leading industrialized nations governments are coming “far too little, and far too late”.

“The actions of the wealthiest developed and emerging economies simply don’t add up.,” he said, pointing out that current pledges and policies are “shutting the door” on limiting global temperature to 2°C, let alone meet the 1.5°C goal.

Mr. Guterres warned, “we are in a life-or-death struggle for our own safety today and our survival tomorrow,” saying there is no time for pointing fingers or “twiddling thumbs” but instead requires “a quantum level compromise between developed and emerging economies”.

“The world can’t wait,” he spelled out. “Emissions are at an all-time high and rising”.

And he said that while pursuing their own “drop-in-the-bucket initiatives” international financial institutions must overhaul their business approaches to combat climate change.

Backsliding

Meanwhile, as the planet burns, the Ukraine war is putting climate action on the back burner and the dynamic climate actors in the business world continue to be hampered by “obsolete regulatory frameworks, red tape and harmful subsidies that send the wrong signals”.

Meaningful progress must be made to address loss and damage beyond countries’ abilities to adapt as well as financial support for climate action, upheld the UN chief

Decisions must be made now on the question of loss and damage as “failure to act” will lead to “more loss of trust and more climate damage,” he said, describing it as “a moral imperative that cannot be ignored”.

Action ‘litmus test’

COP27 is “the number one litmus test” of how seriously governments take the growing climate toll on the most vulnerable countries.

“This week’s pre-COP can determine how this crucial issue will be handled in Sharm el-Shaikh,” he informed the media, noting that the world needs clarity from developed countries on the delivery of their $100 billion pledge to support climate action in developing countries.

Moreover, adaptation and resilience funding must represent half of all climate finance; multilateral development banks “must raise their game”; and emerging economies need support to back renewable energy and build resilience.

While the Resilience and Sustainability Trust led by the International Monetary Fund (IMF) is a good start, major multilateral development bank shareholders must be the driving force for transformative change, he continued.

“On every climate front, the only solution is solidarity and decisive action”.

The Secretary-General chief upheld that by showing up at COP27 in Sharm el-Shaikh, all countries – led by the G-20 – can demonstrate that “climate action truly is the top global priority that it must be”.

<img title="Secretary-General António Guterres (at podium) briefs reporters on climate change and the UN Climate Change Conference (COP27) in Egypt." src="https://global.unitednations.entermediadb.net/assets/mediadb/services/module/asset/downloads/preset/Libraries/Production%20Library/03-10-2023_UN7957010_SG-Stakeout.jpg/image1170x530cropped.jpg" alt="Secretary-General António Guterres (at podium) briefs reporters on climate change and the UN Climate Change Conference (COP27) in Egypt." width="1170" height="530" />

UN Photo/Cia Pak

Secretary-General António Guterres (at podium) briefs reporters on climate change and the UN Climate Change Conference (COP27) in Egypt.

Step up climate adaptation support

Meanwhile in Kinshasa, UN Deputy Secretary-General Amina Mohammed warned environment ministers and others that the window of opportunity to avert the worst impacts of the climate crisis is closing.

She stressed that greater support for climate adaptation in developing countries “must be a global priority”, particularly progress on adaptation finance.

Ms. Mohammed recalled that at last year’s COP26 conference in Glasgow, developed nations had promised to double adaptation support to $40 billion dollars a year by 2025.

The UN deputy chief called for a clear roadmap on how the funding will be delivered, starting this year.

She added that $40 billion is “only a fraction of the $300 billion that will be needed annually by developing countries for adaptation by 2030”.

Counting every moment

Ms. Mohammed underscored that the world “desperately needs hope”.

“We need progress…that shows that leaders fully comprehend the scale of the emergency we face and the value of COP, as a space where world leaders come together to solve problems and take responsibility,” she said.

“Every moment counts”.

The deputy chief said that it is time to prove that we are moving in the right direction “with an outcome that shows our collective commitment to addressing the climate crisis because people, and the children here today, and the planet matter”.

Source

As government representatives begin the finalize the agenda for the COP27 climate change conference in Egypt next month, for pre-COP planning in the Democratic Republic of the Congo capital, Kinshasa, Secretary-General António Guterres told journalists in New York that the work ahead is “as immense as the climate impacts we are seeing around the world”.

“A third of Pakistan flooded. Europe’s hottest summer in 500 years. The Philippines hammered. The whole of Cuba in black-out. And here, in the United States, Hurricane Ian has delivered a brutal reminder that no country and no economy is immune from the climate crisis,” he highlighted.

And while “climate chaos gallops ahead, climate action has stalled,” he added.
Faulty maths

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The top UN Official underscored the importance of COP27 while warning that the collective commitments of G20 leading industrialized nations governments are coming “far too little, and far too late”.

“The actions of the wealthiest developed and emerging economies simply don’t add up.,” he said, pointing out that current pledges and policies are “shutting the door” on limiting global temperature to 2°C, let alone meet the 1.5°C goal.

Mr. Guterres warned, “we are in a life-or-death struggle for our own safety today and our survival tomorrow,” saying there is no time for pointing fingers or “twiddling thumbs” but instead requires “a quantum level compromise between developed and emerging economies”.

“The world can’t wait,” he spelled out. “Emissions are at an all-time high and rising”.

And he said that while pursuing their own “drop-in-the-bucket initiatives” international financial institutions must overhaul their business approaches to combat climate change.
Backsliding

Meanwhile, as the planet burns, the Ukraine war is putting climate action on the back burner and the dynamic climate actors in the business world continue to be hampered by “obsolete regulatory frameworks, red tape and harmful subsidies that send the wrong signals”.

Meaningful progress must be made to address loss and damage beyond countries’ abilities to adapt as well as financial support for climate action, upheld the UN chief

Decisions must be made now on the question of loss and damage as “failure to act” will lead to “more loss of trust and more climate damage,” he said, describing it as “a moral imperative that cannot be ignored”.
Action ‘litmus test’

COP27 is “the number one litmus test” of how seriously governments take the growing climate toll on the most vulnerable countries.

“This week’s pre-COP can determine how this crucial issue will be handled in Sharm el-Shaikh,” he informed the media, noting that the world needs clarity from developed countries on the delivery of their $100 billion pledge to support climate action in developing countries.

Moreover, adaptation and resilience funding must represent half of all climate finance; multilateral development banks “must raise their game”; and emerging economies need support to back renewable energy and build resilience.

While the Resilience and Sustainability Trust led by the International Monetary Fund (IMF) is a good start, major multilateral development bank shareholders must be the driving force for transformative change, he continued.

“On every climate front, the only solution is solidarity and decisive action”.

The Secretary-General chief upheld that by showing up at COP27 in Sharm el-Shaikh, all countries – led by the G-20 – can demonstrate that “climate action truly is the top global priority that it must be”.

UN Photo/Cia Pak

Secretary-General António Guterres (at podium) briefs reporters on climate change and the UN Climate Change Conference (COP27) in Egypt.

Step up climate adaptation support

Meanwhile in Kinshasa, UN Deputy Secretary-General Amina Mohammed warned environment ministers and others that the window of opportunity to avert the worst impacts of the climate crisis is closing.

She stressed that greater support for climate adaptation in developing countries “must be a global priority”, particularly progress on adaptation finance.

Ms. Mohammed recalled that at last year’s COP26 conference in Glasgow, developed nations had promised to double adaptation support to $40 billion dollars a year by 2025.

The UN deputy chief called for a clear roadmap on how the funding will be delivered, starting this year.

She added that $40 billion is “only a fraction of the $300 billion that will be needed annually by developing countries for adaptation by 2030”.
Counting every moment

Ms. Mohammed underscored that the world “desperately needs hope”.

“We need progress…that shows that leaders fully comprehend the scale of the emergency we face and the value of COP, as a space where world leaders come together to solve problems and take responsibility,” she said.

“Every moment counts”.

The deputy chief said that it is time to prove that we are moving in the right direction “with an outcome that shows our collective commitment to addressing the climate crisis because people, and the children here today, and the planet matter”.

Source


Abu Dhabi Global Market: MENA’s Leading, Digital-First International Financial Centre, A Catalyst for Economic Growth

Over the past decade, Abu Dhabi has put a focus on gaining recognition for the United Arab Emirates as a knowledge-driven financial hub. It has undergone a radical transformation, building on the foundation of an oil-based economy.

International financial centre Abu Dhabi Global Market (ADGM), based in the UAE’s capital, is a leading digital-first centre in the MENA region which has played a catalytic role in the transformation. It started operations in 2015 and has created a progressive and innovative ecosystem that has cemented its reputation as a destination-of-choice for start-ups and investors.

The leading global hub for virtual assets (VA) introduced the first comprehensive, bespoke regulatory VA framework. It was also the first in the world to bring in the Digital Court system — fully integrated with electronic filing, case management and hearing services. All parties, lawyers and court officials can interact, transparently and efficiently — in real-time. ADGM is driven by the objective to strengthen and support Abu Dhabi’s vision for the future, and serves as a strategic global link for the growing economies of the Middle East, Africa and South Asia region (MEASA).

Operating within an international regulatory framework based on direct application of English Common Law, ADGM governs the entire Al Maryah Island, the emirate’s free zone. The island’s progressive and inclusive business ecosystem gravitates toward global financial and non-financial institutions. It leverages synergies between itself and multiple jurisdictions in one of the world’s most advanced, diverse, and progressively governed financial hubs.

Under the leadership of ADGM chairman HE Ahmed Jassim Al Zaabi, innovation and economic development have advanced hand-in-hand. ADGM stays ahead of the curve by developing robust solutions to meet the demands of rapidly changing markets and macro dynamics. From market access to abundant capital, the ADGM ecosystem is designed to provide comprehensive support to tech start-ups, hedge funds, SMEs, venture capitalists, and established financial institutions.

Its focus is on developing key high-growth industry sectors: banking and financing, derivatives and commodities, aerospace, and the tech start-up community. It is also active in diverse clusters in traditional and “new age” finance; ADGM aims to harness all transformational economic prospects.

ADGM has anchored Abu Dhabi’s position as a financial hub for global businesses through its strategic impetus, and serves as a respected conduit to the UAE capital, forging a gateway to the burgeoning ecosystem in the MEASA region.


Deloitte & Touche: The Middle East's Boost From Bank and Corporate Initiatives

The successful issuance of the Abu Dhabi Commercial Bank (ADCB) inaugural green bond in September 2022 is the latest in a series of green finance initiatives that have taken place in the Middle East.

[caption id="attachment_23655" align="aligncenter" width="900"] Abu Dhabi[/caption]

ADCB raised US$500m to support the financing of low-carbon initiatives which assisted it to meet its strategy of supporting the UAE’s ambitions for an inclusive, net-zero economy.

The bond was issued in line with the bank’s ‘Green Bond Framework’, a statement of its intention to mobilise capital for green projects and the parameters for this funding. The bond’s proceeds will finance loans to support projects or companies associated with renewable energy, green buildings, sustainable water and wastewater treatment, clean transportation, energy efficiency, pollution prevention and control.

Globally, the first green bond was issued in 2007 by the European Investment Bank. Known as a Climate Awareness Bond, it was a structured bond with proceeds dedicated to renewable energy and energy efficiency projects. Since then, not only has the number of green bonds rapidly grown, but other green products have also emerged.

Along with Green bonds (bonds with a dedicated environmental benefit), there are also Social bonds (dedicated social benefits), Sustainability Linked Bonds (bonds with coupons linted to entity level sustainability performance targets) and Transition bonds (bonds supporting transition at an activity or entity level). Together with Green Loans, this collection of funding initiatives are examples of ‘Sustainable Finance’: investment decisions that take into account the environmental, social, and governance (ESG) factors of an economic activity or project

In the Middle East, the first green bond was issued by First Abu Dhabi Bank in 2017, with further issuances taking place by the bank a few years later. The Islamic Development Bank and Qatar National Bank have all followed suit.

It is not only banks who have raised green bonds to finance loans, but also corporates such as Majid Al Futtaim, Saudi Electricity Company and Etihad Airways; and as a country, Egypt stepped up with the region’s first sovereign green bond.

Some of these issuance have been in the form of an ESG sukuk bonds, where the issuance proceeds follow the same requirement to be used for environmental, social and/or governance purposes, but the issuance will assume a Shari'a-compliant structure rather than a conventional issuance structure. In line with other Muslim countries such as Malaysia and Indonesia, where such bonds are also emerging, these products demonstrate an interesting convergence of religion, environmentalism and financing.

As products develop, further innovations take place, such as DP World Limited's execution of a green loan, where the loan pricing was linked to DP World's carbon emission intensity, thereby creating an incentive for the company to reduce its greenhouse gas emissions.

Significant headlining projects can also attract sustainable finance. The Red Sea Development Co. in Saudi Arabia for example, obtained a green loan facility to develop 16 hotels and 3,000 rooms.

Alongside the variation in sustainable financing products, as well as a continuation of Environmental focused bonds, we may see moves towards Social bonds in the Middle East region, widening the beneficiaries of the bonds’ financed projects; and Transition bonds, assisting the transition of the Middle East economies to low carbon ones.

One area of global concern is that of ‘greenwashing’ or misrepresenting the environmental impacts of financial products. Attempts have been made to define and standardise green bonds and their projects in the form of the Green Bond Principles, the Climate Bond Initiative and the EU Taxonomy. These initiatives have been supported by the development of independent third-party assurance of bond proceeds, to demonstrate where those proceeds have been invested and whether they are aligned to the Green Frameworks presented by the issuers. These arrangements provide some comfort to investors that the proceeds, if not indeed the impact of the financing itself, is in line with the Green Frameworks.

Given the number of countries in the Middle East having made commitments to Net Zero, there are increased opportunities for Sustainable Finance. Having made a commitment to Net Zero by 2050, the UAE, for example, has an ambitious energy strategy of having 44% of the country’s energy mix met by clean energy by 2050. The UAE, and other regional countries in the Middle East, will require significant levels of capital to achieve these targets and Green Bonds and other green financing options provide a way for investors to invest in green assets and assist these countries to meet their goals.

With the increased global interest for investments with positive ESG outcomes, and the need for capital in the Middle East to fund such opportunities, Sustainable Finance products reflecting Middle Eastern characteristics and the ambitious projects in the region, is proving to be a rapidly developing, innovative and eagerly anticipated area of finance.

About the Author

[caption id="attachment_23654" align="aligncenter" width="400"] Author: Damian Regan[/caption]

Damian Regan is based in Dubai, UAE, having spent the last five years working across the Middle East and over 20 years in London, UK. He has worked within International Accountancy firms during his career and assists clients understand their contribution to society and the environment. In particular, he assists them in effectively communicating and reporting their sustainability goals, results and impacts. He also works with industry bodies and regulators to help develop standards of sustainable practices, reporting and assurance. He currently leads Deloitte Middle East’s Sustainability Reporting & Assurance practice.

About Deloitte & Touche

Deloitte & Touche (M.E.) LLP (“DME”) is the affiliate for the territories of the Middle East and Cyprus of Deloitte NSE LLP (“NSE”), a UK limited liability partnership and member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DME’s presence in the Middle East region is established through its affiliated independent legal entities, which are licensed to operate and to provide services under the applicable laws and regulations of the relevant country. DME’s affiliates and related entities cannot oblige each other and/or DME, and when providing services, each affiliate and related entity engages directly and independently with its own clients and shall only be liable for its own acts or omissions and not those of any other affiliate. DME provides Audit and Assurance, Consulting, Financial Advisory, Risk Advisory and Tax services through 27 offices in 15 countries with more than 5,000 partners, directors and staff. It has also received numerous awards in the last few years which include, Middle East Best Continuity and Resilience provider (2016), World Tax Awards (2017), Best Advisory and Consultancy Firm (2016), the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW), as well as the best CSR integrated organisation.


Africa’s Post-Pandemic Challenges Require Bold and Direct Responses

Gerald Ndosi considers the essentials of trade finance in Sub-Saharan African economies — amid post-pandemic chaos and Russia-Ukraine conflict...

Covid-19 hit Africa hard; there was a sharp decrease in global trade and a rapid contraction of economic output.

[caption id="attachment_23667" align="aligncenter" width="900"] Head of Trade Coverage: Gerald Ndosi[/caption]

The International Monetary Fund (IMF) reported that the world economy shrank by about 3.5 percent — worse than the 2008 financial crisis. Even prior to the pandemic, the continent had been suffering because of a drop in Chinese demand for African commodities, the survey revealed, with oil-exporting countries particularly affected. There was also the impact of the Russia-Saudi Arabia oil price war to consider.

Sub-Saharan Africa (SSA) was on the path to recovery, but that has been disrupted by the Russia-Ukraine conflict. There were disruptions to trade and supply chains in the agriculture, fertilizer, and energy sectors. This has been attributed to trade sanctions imposed on Russia and its supply of commodities to the rest of the world.

SSA countries are net importers of oil, and food commodities have largely been impacted by these sanctions. Russia is the world’s third-largest oil producer and (along with Ukraine) a leading wheat exporter. The sanctions caused increases in prices of major commodities, creating inflationary pressure and threatening economic growth. But commodity-exporting countries stood to benefit from the higher prices.

The Trade Finance Gap

[caption id="attachment_23668" align="alignright" width="200"] Bank One: Head Office[/caption]

Africa’s trade finance gap has been largely attributed to the withdrawal of large international banks from the financial services sector, which began before the pandemic. “The supply of trade finance services, which supports more than 80 percent of global trade flows annually, has been one of the key constraints to the growth of African trade,” the IMF report stated.

Africa is trading $1.1tn per annum, and banks only intermediate 40 percent of these flows. That figure should be closer to 80. Post-pandemic, many African banks recorded falls in net foreign assets and some large international banks and financiers cancelled or reduced lines of credit.

African banks responded by increasing digital transactions and trade finance capacity, but global “systemic issues” have emerged, including tighter regulatory controls and difficulty accessing sufficient foreign currency. The IMF said the dominance of the US dollar in trade and finance “is likely to amplify the impact of the Covid-19 crisis”. Its report also highlighted increased demand for trade finance, along with a simultaneous slump in letter-of-credit business and banking operations.

Southern and western Africa, in particular, reported increases in demand for trade finance. Solutions typically provided by institutions such as Bank One are crucial to addressing the rising working capital requirements for SSA importers caused by oil and food inflation. This worsened the challenges highlighted above. Financial instruments such as letters of credit (LCs), standby letters of credit (SBLCs) and trade advances allow businesses to more easily buy and sell goods. These instruments are effective tools for importers and exporters to access capital, ensure business continuity, and guarantee payment to trade counterparties.

Trade and supply chain finance solutions have played a key role in supporting SSA development initiatives and in providing liquidity to the local economies. Trade finance is becoming more inclusive for commercial businesses and SMEs. Small enterprises are vital to global supply chains, and to solutions such as supply chain finance which are backed with sophisticated technology. Businesses in the supply chain gain access to trade finance liquidity by accelerating cash flow and bridging the working capital gap.

SSA banks are raising interest rates due to the Federal Reserve Bank’s decision to use higher rates to curb inflation and mitigate the supply chain challenges due to the Ukraine conflict and Chinese lockdowns. Most African businesses battle to access US dollar liquidity to facilitate their import payments. Emerging economies, including those in SSA, are faced with huge debt-service costs, putting increased pressure on dollar liquidity. These countries do not export enough.

So, businesses struggle to access trade finance credit and foreign exchange and banks find themselves in a situation of limited access to dollars. The cost of funds is excessive, due to regulatory capital requirements and liquidity overheads. Bank One believes it can make a difference. It is strategically positioned in the Mauritius International Financial Centre and has access to substantial dollar liquidity that can be deployed competitively in SSA to address these liquidity challenges and offer trade finance to clients.

Inflationary pressures on oil, fertilizer, wheat and food have created more working capital requirements for importers in SSA. They need more trade finance lines with banks, and Bank One is well positioned to offer that support.

The Way Forward for SSA

Central banks and capital market regulators have to take a proactive approach with the banking industry to create new trade finance liquidity solutions. It will involve the inclusion of other players, such as private asset companies and equity funds.

There is a need for increased correspondent banking relationships to take advantage of growth opportunities and expanding demand. There is also a need for more engagement between central banks and multilateral agencies to explore new trade finance capacities. And there is a need for improved relationships between governments and development finance institutions (DFIs).

Digital trade finance adoption by SSA banks can help in addressing the trade finance gap. They can provide enhanced access to trade credit by expanding the traditional trade finance offerings to deep-tier businesses with insufficient collateral.

Another way of bridging the gap would be to boost the African cross-trade flows — and the only way to do that is via the recently launched initiative on the African Continental Free Trade Area (AfCFTA). It is estimated by Afreximbank that the initiative can bring together a $3tn market and unite more than $84bn in untapped African exports. The implementation of AfCFTA could help to improve intra-Africa trade by 50 percent and support the trade-finance supply chain among the domestic banks. It may also lure more correspondent banks to support the African trade flows, internationally and domestically.

A collective AfCFTA implementation is crucial for success. A collective effort can kick-start and co-ordinate the implementation process for the member states who have ratified the initiative. It is important to note that capital flows have started to come back in some SSA countries where regulators have been proactive to support sectors that are crucial to economies such as oil and food imports.


The Queen is Dead, Long Live the King: History and Heredity Endure in Britain

[caption id="attachment_23676" align="alignright" width="300"] Queen Elizabeth II[/caption]

When Queen Victoria was invited to officially open the new town hall in Manchester in 1868, she agreed — on condition that the city’s civic leaders remove a statue of Oliver Cromwell.

The traditionally radical city refused, and the Queen declined the invitation. The shadow cast by the country’s 10-year civil war between Royalists and Republicans in the middle of the 17th Century was still there. In a similar incident, just before the outbreak of World War I, Winston Churchill, then First Lord of the Admiralty, suggested naming a new battleship after Cromwell. King George V quickly vetoed the idea of using the name of someone guilty of regicide.

A much older Sir Winston was prime minister when Elizabeth II came to the throne. The nation — so recently ravaged by World War II — willingly grasped at the notion of a new Elizabethan Age, and a country set for global expansion.

Over the following 70 years, Elizabeth II steered a steady and adroit path towards a more modern monarchy, against a backdrop of rapid social change. She had to deal with the dismantling of the British Empire, and the decline of what had been one of the world’s great powers.

She also had to adapt to changing attitudes. After the war, the British began to discard the outdated “certainties”. Some — then as now — questioned the notion of monarchy, and saw it as an anachronism in a world on the brink of social and technological revolution.

That Queen Elizabeth II succeeded in ensuring the survival of the institution, and cementing the monarchy into the life of the nation, was never more vividly illustrated than by the reaction to her death in September.

"Despite her age and frailty, the possibility of her death seemed not to have occurred to many of her subjects."

Despite her age and frailty, the possibility of her death seemed not to have occurred to many of her subjects. When the news broke on September 8, there was a sense of national catastrophe, as if the main supporting beam of the kingdom’s structure had been knocked out.

Perhaps that is unsurprising. The effects of the recent pandemic, the war in Ukraine, the sudden increase in the cost of living and the looming energy crisis all conspired to instil fear into the nation’s heart. These are uncertain times. And now the Queen — the one constant — was suddenly gone.

Over a remarkable couple of weeks, her death appeared to unite the country. Her life of dedicated service, her quiet diplomacy, and above all, her deft determination to remain above the politics of the day turned national grief into something more optimistic.

It became a celebration of a woman who will be remembered as great monarch.

On the day of the funeral, the German newspaper Der Spiegel ran an opinion piece which questioned why the Queen had never made a stand against Brexit. It argued that had she stood up for EU unity, the unpleasant event could have been avoided.

The article missed the point. The Queen — thanks largely to Oliver Cromwell — understood that she was a figurehead, not a politician. She took her private thoughts on Brexit to her grave, as required of a constitutional monarch.

Equally, she remained above the bawdy day-to-day Britishness of her subjects. We will never know what she thought, for instance, of her mocking portrayal by the television puppet show Spitting Image. Did she ever read the satirical magazine, Private Eye, which referred to her as “Brenda” right up to her death?

The Queen and the Royal Family were frequently the subject of fiction. Most recently, the Netflix series The Crown turned her life into a soap opera watched by billions. Throughout her reign she worked hard to stay in touch with changing social trends, even inviting the television cameras into her private life in the 1960s. That was a break with long-held royal tradition; it portrayed the Windsors as an ordinary family — and its impact was immense.

At only one point in her life did she seem to miss the beat of the public mood: the death of Princess Diana. The British playwright, Peter Morgan, the creator of The Crown, was also the screenwriter for the Oscar-winning 2006 film, The Queen. The latter work described the turmoil in the House of Windsor after the death of Diana in August 1997.

While the film is a fictionalised account, it accurately depicted a fundamental change in tone. The public reaction took the establishment by surprise. At the time, the breakdown of the princess’s marriage to Prince Charles, the heir to the throne, and their subsequent divorce, had been making sensational headlines across the world. Many thought the response to her death bordered on the hysterical, something until then alien to British society. People began to ask why the flag was not being flown at half-mast at Buckingham Palace — and no explanations of royal protocol could calm the increasingly angry crowds.

The Queen and her family remained in Balmoral in Scotland, adding to the public feeling of royal insensibility. In the film, she is depicted as confused and uncertain, someone “not best equipped” to cope with the flood of public emotion. Helen Mirren, who portrayed the Queen, won a Best Actress Oscar for her performance. It was reported that Her Majesty approved.

In the two weeks leading up to the Queen’s funeral, most commentators focused on her dedication and service to the country over 70 years. There was a tendency to gloss over the less agreeable moments of family turmoil: the public humiliation of Prince Andrew, the overseas activities of Prince Harry and Meghan Markle.

Perhaps history will focus on the Queen’s achievements. Such as the brief moment when she shook the hand of former Irish Republican Army commander Martin McGuinness. In doing so, she advanced the cause of peace in Northern Ireland.

One wonders whether Queen Victoria, given her attitude to Cromwell’s statue in Manchester, would have done the same. Cromwell ran the country as a republic for a few years. By 1660, the British people, beaten down by war and the heavy hand of Puritanism, were ready to invite Charles II back to the throne.

But there would be no more insistence of the divine right of kings — but the UK is once again a literal kingdom. Charles II, back in the 1600s, was known as “The Merry Monarch”. He launched a tradition of royal scandal with his open dalliances, and once said: “I always admired virtue, but could never imitate it.”

His carefree approach to kingship can be forgiven; his reign followed a dark period in British history. His namesake, King Charles III — given his mother’s example — is likely to steer more towards virtue than frivolity.

By Tony Lennox


Bedrock Group Redefining Wealth — and Managing It for Generations

CFI.co learns wealth management secrets from Bedrock Group partners Maurice Ephrati, Ariel Arazi, and David Joory.

The successful management of multi-generational wealth goes beyond investment advice, say the founding partners of Bedrock Group.

[caption id="attachment_23680" align="aligncenter" width="900"] David Joory, Maurice Ephrati and Ariel Arazi. Photo: AndreyART.ch Photography[/caption]

“We see key ingredients for wealth protection and successful generational transition as having a long-term strategic approach,” says Maurice Ephrati, “whereby the family is clear on how they want the assets to evolve over the course of the next 10 or 20 years.”

“There must be a clear shared purpose which defines the family’s commitment as stewards of the wealth, and a clear set of values that reflect the family’s identity and behaviours.”

“Also needed,” adds Ariel Arazi, “is a solid governance structure, to ensure good decision-making and the right checks and balances. It requires generations to be educated in the family’s wealth and have the competencies to maintain it — and, more importantly, to grow it.” David Joory believes "We should foster a mindset that fights against complacency and focuses on innovation and new ways of contributing towards the family wealth.”

People are attracted to the entrepreneurial spirit that the firm and the partners inspire. “Having this type of environment enables people to create their own path,” says Ephrati, “but also there is a shared sense of direction that creates passion and enthusiasm in the team.”

Bedrock Group believe that educating the younger generations is crucial. “There are too many cases still where the next generation is thrust into the management of assets and/or a family business that they don't understand, don't want, or feel completely overwhelmed by,” says Joory.

Ephrati concurs. “A core part of our purpose is to support the next generation with skill development and we do so through candid engagement on a range of matters related to wealth ownership and management.”
“We know this helps them to shoulder the responsibility in the right way: not as an imposition or a reason for entitlement, but as something to be proud of and to steward.”

This notion inspired the creation of the Bedrock Community for Future Leaders, which is led by their in-house Family Governance specialist, Maria Villax, and brings together like-minded next gens to connect, learn, and exchange ideas. “We host a series of events throughout the year,” explains Joory, “covering a broad range of topics including investment, family governance, entrepreneurship, leadership, strategic philanthropy, and succession planning.”

The Bedrock team members are passionate about their work. “That’s an innate part of our company culture, and something that is actively encouraged,” says Arazi. “The Partners create an environment and have a leadership style that allows people to identify opportunities through their individual lenses — and pursue them.”

People are attracted to the entrepreneurial spirit that the firm and the partners inspire. “Having this type of environment enables people to create their own path,” says Ephrati, “but also there is a shared sense of direction, stemming from our purpose, that creates passion and enthusiasm in the team.”

A focus on the future also means that Bedrock supports team members in engaging with CSR. “We do that in a number of ways,” says Joory. “Illustratively, we facilitate the chance to directly impact the communities local to our offices, by encouraging volunteering. We offer time-off to all staff members to give back to society while working on issues they care about.” From supporting hospices to delivering food parcels, Bedrock team members create a diverse impact in their communities.

In addition, Bedrock donates a percentage of annual profits to philanthropic causes. Donations are further enhanced by employees via payroll giving; with the company having a matching scheme. It helps to maximise the impact and support for causes that individuals are passionate about.

For more information regarding our Bedrock Future Leaders events, please reach out to our Head of Family Strategy and Governance, Maria Villax.

We are always on the search for passionate and enthusiastic individuals. If you would be interested in joining our team, please contact us here


World Bank MD and CFO Anshula Kant: Financing Where It Matters Most

Financing Where It Matters Most — People, The Planet, and the Role of Investors

[caption id="attachment_23702" align="aligncenter" width="682"] Author: World Bank Managing Director and Chief Financial Officer Anshula Kant[/caption]

Amid overlapping crisis facing the world, developing countries face the greatest risks as they are home to a great share of the world’s poor and most vulnerable, and those least able to adapt. These challenges are exacerbating poverty and inequality and stand to reverse decades of important and hard-won development gains in health, nutrition, education, and gender equality.

Stability and sustainability require a broad and holistic approach that includes financing and support from all corners to tackle the climate crisis, meet the urgent development needs of the vulnerable people living in poverty, and deliver the peace and prosperity that are at the heart of the Sustainable Development Goals. More and more investors are integrating environmental, social and governance (ESG) risks as part of their investment process, and some are actively looking for investment opportunities that support the SDGs and make a positive impact on society.

As the sustainable investment landscape develops, we must remain focused on facilitating sustainable financial flows to developing and emerging market countries.

The International Bank for Reconstruction and Development (IBRD), also known as “World Bank” is an international financial cooperative owned by 189 shareholding governments that leverages its equity to raise funds from private investors in the capital markets to finance loans to governments.

"Climate change touches almost all development indicators, including loss of lives and livelihoods, food and water insecurity, forced migration, and is threatening to push 132 million people into poverty over the next ten years."

The World Bank is focused on ending extreme poverty and boosting shared prosperity, ensuring economic opportunities in society for everyone. The institution lends to developing countries at rates lower than they are able to obtain from the international markets and provides development expertise and knowledge-sharing as part of the package.

Through triple-A rated bonds, IBRD raises about USD 50 billion each year for lending to middle income countries. Another entity, the International Development Association (IDA) is a more recent entrant in the capital markets and now raises about USD 10 billion each year to supplement funds received from donors providing support to the poorest and most vulnerable lower income countries through grants and loans at highly concessional rates.

Climate Change is profoundly connected to the World Bank’s goals of sustainable development and human wellbeing. Climate change touches almost all development indicators, including loss of lives and livelihoods, food and water insecurity, forced migration, and is threatening to push 132 million people into poverty over the next ten years. Moreover, the poorest countries, having contributed the least to global greenhouse gas emissions, are especially vulnerable to the adverse impacts of climate change. Regardless of where they live, the poor and the vulnerable are suffering the most from climate change.

Applying a “whole of economy” approach with developing country clients helps the World Bank mainstream climate considerations across its portfolio. The approach focuses on policies and plans to create the right enabling environment for climate action and sustainable development pathways. If they are well designed and well implemented, the policies countries put in place for low-carbon and resilient growth could also help them address poverty and inequality.

Therefore, we help countries integrate climate considerations into their development strategies and deploy climate finance in ways that achieve the greatest impact for mitigation and adaptation. In short, we are weaving climate into all our decision making, not just for investments in sectors traditionally associated with climate, such as energy and transport, but also in health, education, and fiscal policy. Our investment decisions are made based on where they have the greatest positive impact.

For example, in Vietnam, working with the government, the World Bank released a Country Climate and Development Report to help the country balance its overall development and growth goals with climate risks. We found that without the right investments in adaptation and mitigation, climate change could cost the country 12 to 14.5 percent of their GDP per year by 2050 and plunge up to a million people into extreme poverty. However, there is now an opportunity to implement this whole of economy approach and put in place the right policies and strategies to decarbonise and achieve their net-zero ambition without reducing GDP growth.

This holistic approach can be applied not just to corporates, institutions, and economies. It can and should also be brought to the capital markets to make sure that all capital flows align to sustainable objectives.

There are three areas where the World Bank is helping to build sustainable capital markets to channel finance towards sustainable activities:

Firstly, the World Bank brought innovation to the climate finance space by issuing the first green bond in 2008 and we have gone further to label all our bonds as Sustainable Development Bonds. The World Bank’s first green bond catalysed investing for purpose and climate action in the capital markets. It helped set the standard for the market, and today we continue to play a key role in developing the necessary market infrastructure through our work on the Green Bond Principles and the Harmonized Framework for Impact Reporting. The “sustainability” label in our Sustainable Development Bonds, which is broader and more inclusive than simply green, not only reflects our global work in social and economic development and climate, but also the fact that all our bonds meet the strictest standards of sustainability, supporting positive impact around the globe.

Secondly, on disaster risk management, we are using our expertise and triple-A rating to issue catastrophe bonds, which are structured bonds that provide countries a tool to transfer disaster risk to the capital markets. Earthquakes, cyclones and hurricanes not only impact lives and essential infrastructure, but also require governments to be prepared to deliver funding quickly in times of need. In the past two decades, the World Bank has transferred USD 5 billion of catastrophe risk across more than 20 countries to the capital markets. Cat bonds are highly scalable and could become even more important in the future.

Last July, we helped Jamaica become the first Caribbean government and small island state to independently sponsor a cat bond. The USD 185 million bond will provide Jamaica financial protection against losses from named storms for three Atlantic tropical cyclone seasons ending in December 2023.

And thirdly, we are working closely with member countries to incorporate standards and transparency guidelines that will help them develop their own sustainable capital markets. Our efforts range from technical assistance on design and implementation of countries’ climate plans under the Paris Agreement to a range of policy advice and advisory work. Among others, we focus on the sovereign issuance of sustainable and thematic bonds, the development of green taxonomies, and green bond frameworks. Our advisory program has facilitated the development of green taxonomies in Colombia, and the issuance of sovereign and sub-sovereign green bonds by providing technical assistance in Egypt, Nigeria, Fiji, Philippines, and others and advisory work with Thailand and Malaysia’s public debt management offices for issuing Sustainability Bonds.

Organisations like the World Bank, together with governments and other public sector entities, cannot solve the massive challenges we are facing without the private sector.

Financial decisions need to be made based on where they matter most for people, for the planet, and with a shared purpose. A holistic viewpoint is critical for the emerging market and developing countries where we work. As accounting and disclosure guidelines, national green and social taxonomies and sustainable finance regulations are taking shape around the world, it will be critical that they do not have the unintended effect of steering private capital away from precisely the countries where it can have the greatest positive impact.

In all these approaches transparency is key – and while standardisation and harmonisation are welcome, country context needs to be included as a factor to help investors assess ESG risks. Lack of data, capacity, and resources in emerging market and developing countries make them different from developed country contexts and seemingly higher in terms of ESG risks, even when the positive impact of investments there are much greater.

We must get this right to ensure that sustainability standards and regulation will not have the unintended consequence of steering capital looking for sustainable options away from emerging market countries. Investments in emerging markets and developing countries may lack data, and some may have higher ESG risks than investment alternatives in developed countries. In many cases however, they make a much bigger positive impact on the people and the planet than comparable investments in developed countries.

Read the magazine version.


The $130tn Opportunity in Sustainable Listed Real Assets

The investment opportunity in ensuring that existing infrastructure and real estate assets meet society's evolving needs is set to increase significantly over the next three decades.

[caption id="attachment_23727" align="aligncenter" width="900"] By Eric Pedersen Head of Responsible Investments at Nordea Asset Management[/caption]

Our world is changing, and the global economy is at an inflection point. Rising geopolitical tensions, headlined by the war in Ukraine, have driven energy prices to unprecedented levels — which is fuelling an inflationary shock threatening consumers and industry. The war’s impact on elevated food prices is being compounded by changing weather patterns, as the climate crisis continues to spill into our everyday lives.

We must confront these challenges by adopting new approaches to reduce fossil fuel reliance and decrease energy use. In addition to accelerating the shift towards renewable and alternative power generation, the world needs to become more energy efficient.

At Nordea Asset Management we see major opportunities for sustainable change within industrial processes and transport systems, and in intelligent construction. Smart building systems can slash power consumption, costs, and environmental impacts. Green building techniques and materials, as well as innovative appliances, can reduce energy consumption by an average of 33 percent.

"We should not overlook the tremendous societal impact of increased sustainable real assets spending. Infrastructure and housing developments have not kept pace with recent demographic and societal change in many parts of the world, and major investment is needed to future-proof these assets."

While we all understand the importance of the green transition for the planet’s future, sustainability is no longer the sole driver of change. The energy crisis clearly demonstrates the economic rationale for rethinking the status quo. On-going technological innovation to support the evolution we need is within financial reach.

Environmental and Societal Impacts

Identifying sustainable leaders within the real assets space will be imperative for enacting short- and long-term change. While industries within the infrastructure and real estate spaces are responsible for half of all carbon emissions today, these sectors also make up almost three-quarters of current capital spend towards global low-carbon initiatives. Real assets companies are at the forefront of net-zero action, by investing in green initiatives such as the installation of solar farms, upgrading transmission lines, and improving energy efficiency.

We should not overlook the tremendous societal impact of increased sustainable real assets spending. Infrastructure and housing developments have not kept pace with recent demographic and societal change in many parts of the world, and major investment is needed to future-proof these assets.

Real assets are appealing to investors in the current economic climate. Underpinned by essential needs — housing, power, transport and communications — these entities are often like monopolies, exhibiting contracted or regulated returns which provide a bedrock of stability.

Most real assets can pass-on price increases, which is why the space has historically outperformed global equities during periods of above-average inflation.

Nordea Asset Management at the Forefront of Change

The investment opportunity in ensuring that existing infrastructure and real estate assets meet the evolving needs of society is set to be worth upwards of $130tn over the next three decades. We are already witnessing a multitude of compelling corporate opportunities tied to the themes of environmental and social stewardship and technological evolution.

LINK, a diversified property-owner headquartered in Hong Kong, is committed to net-zero by 2035, with an interim target for 2025. In keeping with its commitment to SBTi standard, the company seeks 100 percent green building across its portfolio by 2025/2026 and reduced its carbon emission intensity by 15 percent over the past two years.

Another example is National Grid, the owner of critical UK electricity transmission networks. The company is at the forefront of environmental stewardship. Between 2022 and 2026, National Grid will undertake capital expenditure of £30-35bn to ensure the UK is able to meet its net-zero targets.

When it comes to technological transformation, Portuguese electric utilities group EDP is a shining light in decarbonisation innovation. It is one of the world’s largest renewable energy developers, generating 24.7GW, which services nine million customers. EDP currently has a hydrogen capacity target of 1.75GW by 2030. It aims to abandon all coal use by 2025 and operate with 100 percent renewable capacity by the end of the decade.

And within social stewardship, companies such as Ventas, the diversified healthcare REIT with 1,200 properties across the US, Canada, and the UK, are well positioned. Ventas is a beneficiary of secular trends, including senior housing demographics and accelerating demand from the medical office and life-science markets. While the US senior population is seeing significant growth, senior housing supply in the country has fallen 66 percent since 2017.

By Eric Pedersen Head of Responsible Investments at Nordea Asset Management

Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB (“the Legal Entities”) and their branches and subsidiaries. This document is advertising material and is intended to provide the reader with information on Nordea’s specific capabilities. This document (or any views or opinions expressed in this document) does not amount to an investment advice nor does it constitute a recommendation to invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. This document is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instruments or to participate to any such trading strategy. Any such offering may be made only by an Offering Memorandum, or any similar contractual arrangement. This document may not be reproduced or circulated without prior permission. © The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and/or subsidiaries.


Containers Printers: No Shortage of Challenges, but CP Has Sustainability Issue Wrapped

The environmental effects of packaging once went unnoticed by consumers, but that has changed — and Containers Printers is all for it.

In a world increasingly aware of sustainability and responsibility for the environment, consumers and businesses are steering towards positive territory.

Customers want sustainable products and carbon-neutral processes to back their purchases — and that includes packaging. There is governmental encouragement to adapt; in the UK, the Plastics Packaging Tax now affects packaging with less than 30 percent recycled content.

Singapore-based Containers Printers (CP) is ahead of the game in that regard. It has been conducting research with partners looking into advanced tech, including chemical recycling and digital solutions to support Lifecycle Assessments.

But that does not mean a lack of hurdles, admits CEO Amy Chung. “Customers’ priorities are now on ESG parameters and principles, but that increases business costs and staff requirements, including new skills sets.”

"The trajectory leads directly to carbon-neutrality and a circular economy — and CP is committed to supporting that."

Chung says she is confident that the company can operate profitably on a sustainable basis. “But there’s a need for market demand to substantially grow,” she says, “and the industry must be recognised as an essential value-add, not as a cost item.”

Legislation needs more clarity and alignment, she believes, to be less burdensome for the packaging industry. “Perseverance and patience are necessary,” she adds. “Mid- to long-term challenges include manpower and cost.”

During the pandemic, CP faced challenges in material availability, shipping routes, and pricing. Covid 19 brought workforce shortages, reduced visitor access to the CP site, and disruption to the supply chain. CP overcame those challenges, says Chung, remaining operational throughout.

“But if the Covid situation continues, demand will be impacted. This will further burden companies and affect profitability prospects. More M&A transactions are being observed, which makes it tougher for smaller companies like Containers Printers.”

Initiatives such as remote audits, combined with safe distancing, have prompted CP to embrace a new way of working. “Adopting the changes prepares us to work this way,” she says. “It has accelerated some trends and projects, including in digitalisation of our factories.”

Containers Printers was founded in Singapore back in 1981 with one humble product: a square cooking oil tin. The firm’s portfolio has diversified to include metal and flexible laminate packaging solutions for a global market. Sustainability is firmly front and centre for the company.

CP supports customers in meeting new legislation guidelines and sustainability targets, Chung says. Singapore’s Mandatory Packaging Reporting (MPR) legislation requires companies to provide packaging data to the government.

The island state is promoting the 2030 Green Plan to establish national sustainability agenda. The trajectory leads directly to carbon-neutrality and a circular economy — and CP is committed to supporting that.


Interview with Georg Schwab & Stefan Schmid: AVL Reimagining Motion through Continuous Innovation

AVL is driven by a passion for improving the driving experience and Georg Schwab and Stefan Schmid explain how they will make it possible.

Technology is revolutionising the way we live and move. Nowhere is this more evident than in the automotive industry. In the 136 years since Carl Benz patented his Benz Patent-Motorwagen, the history of the motor car has been one of continual transformation and innovation with new features contributing to the comfort and safety of the driver and passengers.

The industry is now undertaking a new, amazing journey where a vehicle's software has become more relevant than its mechanics. Software drives innovation at a breath-taking speed and mobility is shifting into an unrecognisable experience, one which will prove far more rewarding to the car user.

A vehicle’s ability to react to its environment is rapidly moving from relatively basic functions such as lane control and automatic windscreen wipers to fully autonomous driving and consumers expect their next vehicle to be further along this journey. They also expect to have access to the same smart functions and comfort that they enjoy in their private environment.

[caption id="attachment_23742" align="alignleft" width="200"] Managing Director, AVL Software and Functions: Georg Schwab[/caption]

At the forefront of this transition is AVL List, one of the world’s leading mobility technology companies for development, simulation and testing in the automotive industry, and in other sectors. Founded in 1948 in Graz, the green heart of Austria, the company is now represented in 26 countries with over 10,700 employees worldwide. Known as the ‘home of innovation,’ AVL generated a turnover of 1.6 billion euros in 2021 and has consistently invested 12% of its turnover in R&D activities to ensure continuous innovation.

North of the Danube from the beautiful medieval centre of Regensburg in Bavaria is home to AVL Software and Functions, an AVL entity founded in 2008 to focus on software and electronics, as one of the very first companies, for intelligent, ecologically compatible mobility as well as system integration and electronics development - in other words - to make the driving experience safer, smarter and more energy efficient. Since then, it has grown rapidly and now employs over 800 staff. The workers enjoy a sustainable workplace culture that is equally healthy and performance orientated.

Georg Schwab and Stefan Schmid, Managing Directors at AVL Software and Functions, highlight the future of Software-defined Vehicles (SdV) and describe them as the new “smart phones on wheels” as with the growth of electric cars and autonomous driving comes an increase in the proportion of software. It is no longer important how powerful a vehicle is, but more how well it is connected and which functionalities it provides.

As human beings, we often experience difficulty in deciphering all the signs around us, especially in a built-up urban area; the software will be able to make driving in such conditions far easier. The SdV will be more seamlessly integrated into daily life as continuous software updates become the new normal.

“Software plays an integral role not only in the vehicle development process, but also in the driver experience. Today, consumers expect more intelligent, comfortable, and safer mobility. To achieve this, we combine our deep application know-how with our software development capabilities and cutting-edge simulation and testing solutions, “explains Schwab.

Indeed, SdVs might bruise the odd, they have the ability to safely navigate roadways in various types of weather conditions and can transport passengers without the need for a human driver. They lead to increased mobility, fewer crashes, decreased fatalities and increased traffic flow efficiencies.

SdVs also will have the benefits of providing increased mobility and independence for persons with disabilities and older adults. SdVs can be summoned by older adults, persons with disabilities, or caregivers to provide reliable curb-to-curb service for both one-way and round-trip transportation needs.

Schmid also emphasises that, “In order to drive the transformation to software-defined vehicles new job roles and skills are relevant.” AVL is constantly upgrading their employees’ skills and creating the necessary new roles.

Back to the vehicle as smart phone analogy, our vehicles will offer the same personalised features as our devices, starting from a login that might involve a password, voice-activated mechanism, or multifactor identification for security. This will unlock individual preferences to benefit the owner and other drivers who, for instance, might have different mirror settings, preferred routes, and favorite radio stations.

[caption id="attachment_23743" align="alignleft" width="217"] Managing Director, AVL Software and Functions: Stefan Schmid[/caption]

People will soon also trust their cars to do the driving, especially as 5G accelerates the development of safe autonomy. In the meantime, drivers can benefit from the productivity, infotainment, and the conveniences we now associate with smartphones. And this will be delivered with a focus on safety and on not distracting the driver. This will automatically eliminate the danger of drivers picking up a phone to send or view a text.

Schwab expounds this idea: “People like to be connected at any time – even while driving. A car is seen as an additional “device,” which should be seamlessly integrated and synchronized with other devices such as mobile phones. It is convenient if the car is playing music from your mobile phone or if a familiar navigation app is seamlessly connecting to the car (as new Apple Airplay). At the same time, cars should (at least) support to navigate in a complex environment (with other traffic participants, varying weather and road conditions, country specifics, etc.) and start interacting with their environment.”

The socio-economic benefits include increased energy efficiency which should result in lower fuel costs. Also, faster development cycles will reduce the cost of bringing vehicles onto the market benefiting the end consumer.

The reduction in accidents will mean that far fewer vehicles will have to be replaced, which is a costly, not to mention sometimes deadly, process.

Schwab draws attention to another economic benefit, customised services, “With SdV every vehicle will act differently based on your personal preferences, for example, you can book a navigation system on demand instead of buying a navigation system as a standard – that drives the costs for end consumers down.”

Schwab and Schmid are both emphatic that the company’s environmental credentials are sound.

“In everything we do as AVL, we strive for climate-neutral technologies and efficiency in the usage of energy whether it be from solar, biomass or wind. We want a safe vehicle on the market for every driver and a reduction in the number of accidents. Furthermore, predictive functionalities will enable energy efficiency.”

In 2021 in the UK, 27,300 people were killed or seriously injured in road accidents. That companies such as AVL are dedicated to developing the technology that will dramatically decrease this tragic number, while also making journeys far more enjoyable and productive and even possible for the elderly and disabled should make us all feel optimistic about the future; and it is just around the corner.