CFI.co Autumn 2020

Capital Finance International

Autumn 2020

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AS WORLD ECONOMIES CONVERGE

António Guterres, Secretary-General of the United Nations:

SDG CHAMPION

ALSO IN THIS ISSUE // WORLD BANK: TRANSPORT & LOGISTICS // IBM: NEED FOR NEW SKILLS NASDAQ: THE BOARD PERSPECTIVE ON ESG // McGILL UNIVERSITY: DEVELOPMENT FINANCING FOR EDUCATION ASIAN DEVELOPMENT BANK: CSR IN EMERGING MARKETS// EY: POST-COVID-19 ECONOMICS

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First Thoughts Now in its second phase, the pandemic no longer inspires the same blind fear as earlier this year and governments are exploring ways to repair derailed economies. There is a consensus that the recession must be addressed by strong fiscal impulse and austerity is a dirty word.

In mid-September, a few of us paused to celebrate or lament the fiftieth anniversary of an essay that changed the world. In The Social Responsibility of Business is to Increase Its Profits, Milton Friedman unleashed a doctrine that would form the bedrock of neoliberalism. Just a year after Woodstock, he sparked a true revolution that transformed the hippy generation into a pack of rapacious wolves.

The rejection of social values in business would ultimately give rise to the ‘Greed Is Good’ generation of the 1990s and beyond.

Echoes of the late professor’s lectures are to be heard in calls to stop the march of zombie companies – that is to say, almost any business in a legacy sector that has dipped too deeply into debt.

Policymakers are being warned against funding a ‘corporate twilight zone’ and nudged towards positive reappraisal of ‘creative destruction’ as described by the political economist Joseph Schumpeter.

First Thoughts

The question is whether to use the present crisis, and the fiscal boost already decided upon, as an opportunity to disrupt, innovate, and creatively destroy – or bet safely by helping quasi-zombies to survive.

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Zombies may include up to 16 percent of all companies in Germany according to Creditreform.

And Bank of America research this summer suggests that the UK accounts for one-third of all zombies in Europe. In the US, an estimated 15 percent of firms included in the Leuthold 3000 Universe subsist in the twilight zone – up almost three percentage points over last year.

The trouble with zombies, is that their mere existence discourages innovation and paths to sustainable growth. But allowing these failing companies to deal with reality, and flounder sooner rather than later, would entail a (probably far from creative) destruction of equity and send shockwaves throughout the financial world.

The flipside offers little solace. It would imply a post-pandemic normal that is neither new nor sustainable. When faced with such conundrums, policymakers have at their disposal an unusually effective instrument: a can that can be kicked down the road.

Which sectors should benefit? Well, zombies such as legacy airlines and steel mills may be kept alive but should adapt to observe the boundaries imposed by a planet of finite resources. After the pandemic has petered out, it will be time to restore nature’s health as well as undo the damage caused

by Friedman’s one dimensional and simplistic philosophy. His notion that business is only about profits must be consigned to the dustbin of wonky economic ideas.

First Thoughts

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> Correspondence

“ “ “

Your profile on IMF managing director Kristalina Georgieva rightly focuses on her proven ability to pick up the pieces after a catastrophe. It’s an unenviable position to find oneself in, but Geogieva has proven herself capable.

She has always pushed for synergy in humanitarian aid and civil protection, an approach which has led to effective responses in various crises around the world. She tripled funding for the refugee crisis in Europe and has improved financing and social protection for migrants, refugees and has shown, and engendered, respect for international humanitarian law. Disasters come in two flavours: natural and man-made. This year has seen plenty of both, which Georgieva manages to tackle with compassion, disinterest and determination. She is definitely the woman of the hour, and organisations such as the IMF are bound to be instrumental in whatever solutions can be found to our myriad problems. If only we could find some breathing space so that she, and other leaders, could address some of those issues in a pre-emptive way.

SARAH SMYTHE (Manchester, UK)

I read with interest your article describing the Chancellor of the Exchequer, Rishi Sunak, as “the safest pair of hands for mission impossible”. I understand the need to retain the confidence of the markets, and to keep as many people in employment as possible, but the prolonged and uncertain nature of the crisis makes me wonder about the longevity and viability of these recovery schemes. Balancing the books, when comes the time, will be a Herculean feat — and reports that Sunak intends to do this by hiking up corporation tax (from 19 to 24 percent) and removing the triple-lock on pensions cause me concern. How will this be received by the Conservative party´s increasingly ageing electorate, and the business class it purports to represent?

We certainly live in interesting times.

TOBIAS BENTLEY (Chipping Sodbury, UK)

How refreshing to read the article “A new Development Vision for Latin America”. Much is written about the inherent socio-economic problems that beset the region, and how best to deal with them. The authors brought sorely needed clarity to the debate by pointing out that most public institutions in Latin America are illequipped to keep up with the dynamism and aspirations of their populations. A good many people have been lifted out of poverty, but this has not diminished social vulnerability.

Many of the new jobs are informal and unstable and this, coupled with virtually zero social protection — as the authors rightly stated — prevents workers from seeking better paid and more stable positions. The three traps mentioned are interlinked, but I agree that governments´ dependence on the primary sector and subsequent lack of economic development has led to a decrease in productivity and reinforced the historical reticence in paying tax. It is difficult to see how the pandemic could possibly improve this situation — but in the past, crises have proven to be catalysts for change…

GUSTAVO SCARPA YAMASAKI (Maringá, Brazil)

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“ “ “

Autumn 2020 Issue

The European Union is not in the business of forging, or celebrating, “Hamiltonian moments” or any other monumental shifts or breakthroughs. I was somewhat saddened by the analysis of the EU’s financial response to the Covid-19 emergency proposed by Nouriel Roubini. Roubini is not alone in misunderstanding the project — arguably the greatest peaceful nation-building exercise in human history. He loses sight of the fact that the EU is a project for the ages — think one or two centuries, as opposed to a few decades. The goal is indeed a United States of Europe. Cementing a true and lasting union between disparate nations cannot be accomplished in a single generation, or two, or three. Moreover, it doesn’t require any degree of optimism to observe that the increasingly forceful and desperate attempts by the UK to breach the EU’s united front vis-à-vis its former member have failed to produce as much as a dent. For all its internal squabbling, the EU stands united. Lastly, Roubini courts the patently absurd when he mentions the rise of populist parties across Europe.

First, those parties’ rise got stuck around the 15-percent mark.

Second, the major powers of the Anglophone world, not Europe, have succumbed — almost collectively — to populism and nationalism by elevating into positions of power-grabbers, cheats and liars (the likes of whom are nowhere close to the levers of power within the EU). Before you mention Hungarian PM Viktor Orbán , please remember that he is but a recalcitrant choirboy whose antics pale in comparison to those of Messrs. Trump and Johnson.

EDGAR TRUSS (Claygate, UK)

The idea that Germany’s sanctioning of EU debt and risk mutualisation is “nothing short of revolutionary” displays a gap in the writer’s knowledge of the country’s role and position in Europe and, more particularly, in the European Union. In its preamble, Basic Law — effectively the country’s constitution — states that the German state must promote European unity. Uniquely, Germany’s membership of the EU is anchored in Basic Law as well. The government of Germany has a constitutional obligation to preserve and unify, and to meet any and all threats to European unity with the full might of the German state. This is not optional, voluntary, or open to debate: it is what Basic Law determines. Chancellor Merkel correctly identified the Covid-19 pandemic and its economic and financial consequences as a threat to that unity, and a potential cause of division. She acted, abandoning the “frugals”. She knew that without German support those member states could at best hope for minor concessions, but did not let that stop her from discharging her constitutional responsibilities.

BARBARA KOHLER (Bonn, Germany)

As a keen motorcyclist, and the proud owner of a Commando 750 (albeit currently dismantled and in boxes), I read with interest — and dismay — your article about the crisis surrounding Norton. I knew things weren’t going brilliantly for the company, but I had no idea of the scale of the problem. I was vaguely aware that it had gone into administration, but somehow hoped things would be rectified and that Norton would join Triumph as another story of resurrection in the British bike scene. But while Triumph is celebrating 30 years as a “reborn” brand, it seems the Norton name has been consigned to history — unless the new owner, India’s TVS Motor, can work some magic. And it may well do that. India has become a world leader in the production of simple machines which hark back to another era.

Royal Enfield’s 650 twins, and the little Himalayan 400cc all-roads contender, have undercut Japanese and European manufacturers in price and (almost) matched them in terms of quality and reliability.

India’s capacity for revitalising and fettling machinery, rather than rushing for new developments, should stand it in good stead here. Will Norton ever ride again? I, for one, hope so. Asia plays no small role in the industry —even Triumph out-sources construction to Thailand nowadays. Let’s hope for another back-from-the-brink revival.

SCOTT PALMER (Johannesburg, RSA)

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> Editorial Team

Sarah Worthington George Kingsley Jackie Chapman Tony Lennox Kate Stanton Brendan Filipovski John Marinus Ellen Langford Helen Lynn Stone Naomi Snelling

Columnists

Otaviano Canuto Evan Harvey Tor Svensson Lord Waverley Ian Fletcher

Distribution Manager William Adam

Subscriptions Maggie Arts

Commercial Director John Mann

Director, Operations Marten Mark

Publisher Anthony Michael

COVER STORIES Cover Story António Guterres SDG Champion (14 – 18)

World Bank's Vice President for Infrastructure Time to Rethink Transport and Logistics (20 – 21)

Q&A with IBM’s Bashar Kilani Need for New Skills Emerging as We Transition to the New Normal (28 – 29)

Evan Harvey, Nasdaq The Board Perspective on ESG (32 – 33)

EY Threats and Opportunities in a Post-Covid-19 Economic Context (132 – 133)

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T: +44 203 137 3679 F: +44 203 137 5872 E: info@cfi.co W: www.cfi.co Editorial on p30-31, 70, 88-89, 110-113,166 © Project Syndicate 2020

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McGill University Development Financing Needed for Education (150 – 151)

Asian Development Bank What Emerging Markets Can Teach Us About CSR (164 – 165)

CFI.co | Capital Finance International

Autumn 2020 Issue

FULL CONTENTS 14 – 39

As World Economies Converge

António Guterres Tony Lennox

Makhtar Diop Otaviano Canuto

Bashar Kilani Mohamed A El-Erian

Evan Harvey Lord Waverley

40 – 47 Autumn 2020 Special: From Keynes to Covid

48 – 89

Europe

BLKB Naomi Snelling FCI Farrer & Co UniCredit Equiti Alpha MOS BankInvest Precision Medicine René Havaux Hélène Rey

90 – 103

CFI.co Awards

Rewarding Global Excellence

104 – 115

Africa

Hassan Allam Holding

116 – 125

Middle East

John Häfelfinger ARCA Fondi SGR Anna Birtwistle Ferrexpo Roberta Marracino Iskandar Najjar Delen Private Bank Lars Bo Bertram Shahnaz Radjy Alejandro Beltrán Ric Traynor

World Bank IBM Nasdaq Tor Svensson

— It’s Been a Bumpy Ride Liechtenstein Bankers Association (LBA) Peter Mulroy Hannah Taylor Jim North Josef Joffe Pierre Sbabo Alexandre Delen Mads Berendt Søndergaard Annemarie Schumacher-Dimech McKinsey Spain and Portugal Begbies Traynor

Colin Coleman

Etihad Credit Insurance Massimo Falcioni Metito

Mutaz Ghandour AIM Digital 2020

126 – 133 Latin America

EY Argentina

Sergio Caveggia

134 – 151

North America

Philippe Ziade Growth Holdings

David Dranove Craig Garthwaite

Gallatin Point Capital Matt Botein

Michael Skinner Rainmaker

JPMorgan Chase Ethan Kaplan

Cody Tuttle ISID, McGill University

152 – 165 Asia Pacific

Containers Printers Andrew Amoils

Enter Engineering Bakhtiyor Fazilov

Ahmed M Saeed

166 Final Thought

CFI.co | Capital Finance International

Jimena Rocío García

Kellogg Insight Manuel I Hermosilla Lee Sachs Jamie Dimon Jörg L Spenkuch Christian Novak

Eriell Group Asian Development Bank

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ANTÓNIO GUTERRES:

SDG CHAMPION

By Tony Lennox

“Another plague would remove the animosities among us, and bring us to see with differing eyes, than those which we looked on things with before.”

T

hese are the words of Daniel Defoe in A Journal of the Plague Year, a vivid account of life in London in 1665 when bubonic plague wiped out 15 percent of the city’s population, and brought the economy of the whole of England to a standstill.

Cover Story

Many of those who didn’t die, lost their livelihoods, and just as in the global pandemic of 2020, after a period of fear, isolation and hysteria, the great and pressing concern was how to build a better world from the devastation. Defoe’s graphic description of the plague, and the subsequent economic ruin has distinct echoes for our times.

The Secretary-General of the United Nations, António Guterres, certainly seems to agree with Defoe that the world should now look on things with “differing eyes”.

“The global coronavirus pandemic, which has already caused unimaginable devastation and hardship, has brought our way of life to an almost complete halt,” he said. “The outbreak will 14

have profound and lasting economic and social consequences in every corner of the globe.”

“The pandemic has exposed that gains made to address poverty, hunger, good health and wellbeing may face serious setbacks, unless the global community also urgently addresses the environmental threats that have similar capacity to gravely undermine the systems that enable humanity and the planet to survive and thrive.”

Some economists are forecasting a V-shape recovery; a fast bounce-back. But many more suggest the most likely outcome will be an L-shaped impact – a rapid dip followed by a long period of no significant growth, perhaps continuing for many years.

The United Nations, in its response to the pandemic is perhaps facing the greatest test since its inception in 1945. But the organisation is determined not to be blown off course in its pledge to achieve Sustainable Development Goals (SDGs) by the end of the decade.

CFI.co | Capital Finance International

The task of finding a way through this world-wide catastrophe has fallen to 71 year old Mr Guterres who became Secretary-General of the UN in 2017 having served two terms as Prime Minister of his native Portugal. The leader of the country’s Socialist Party, he was widely admired at home and abroad for his support for humanitarian causes. He began his career at the UN as High Commissioner for Refugees where he became convinced that sustainable development would be essential for the eradication of poverty and inequality.

Since his appointment as Secretary-General, he has enthusiastically championed the UN’s blueprint of 17 Sustainable Development Goals, which aims to achieve “a better and more sustainable future for all”. These include an end to poverty and hunger, promotion of good health and education, gender equality, clean water provision, clean energy and action on climate change.

This holistic response to the root causes of conflicts – integrating peace, sustainable

Autumn 2020 Issue

(ECOSOC) in May, to stem the pandemic, safeguard development gains already made, and ensure that all recovery efforts followed the SDG 2030 Agenda.

“Working together, with our foot on the pedal and our eyes on the (SDG) 2030 Agenda, we will get through this crisis and reach our destination, protecting hard-won development progress and accelerating our joint efforts,” he said.

“Our objective remains clear; to help countries navigate and accelerate progress towards achieving the goals.”

One element of the SDGs is gender equality, and Mr Guterres singled out the role of women in the world economy. The pandemic, he said, had laid bare the extent to which national economies are sustained by the unpaid domestic labour of women. He urged governments to tackle the issue in the post-pandemic world to ensure a better recovery. “Returning to our previous path is simply not an option,” he said.

His words were echoed by ECOSOC president, Mona Juul, who said that the pandemic had exposed the disproportionate burden on women who perform unpaid care work and are overrepresented as frontline health workers. She said that the inclusion of a gender perspective, as enshrined in SDG, into social and economic responses to the virus was essential.

Secretary-General of the United Nations: António Guterres

development and human rights – was going to be challenging enough without an unforeseen global crisis like the Covid-19 virus.

The UN had hoped to achieve their SDG aims by the end of the decade, but the pandemic has thrown a giant spanner in the works, threatening destabilisation in many of the developing countries of the world, most notably in Africa, where progress was being made towards the SDG target.

“Despite all the technological and scientific advances of recent decades, we are in an unprecedented human crisis – because of a microscopic virus,” he said.

“All our efforts must go towards building sustainable and resilient pathways that enable us not only to beat Covid-19, but to tackle the climate crisis, reduce inequality and eradicate poverty and hunger,” he said.

“Getting through Covid-19 and recovering better will cost money, but the alternative will cost far more. This is a global crisis and it’s up to all of us to solve it. Let us continue to wage peace, defeat the pandemic and build a better future.”

Mr Guterres has been at pains to insist that in the pursuit of sustainable economic recovery world governments must build upon the UN’s SDG blueprint. There was a triple imperative, he told the UN’s Economic and Social Council CFI.co | Capital Finance International

At the beginning of the year, the UN announced a “Decade of Action” for SDGs. The conversation at the time was about how to build momentum in the final ten years of the initiative. In its 2019 SDG report, the UN had warned that progress towards the goals was slowing, even reversing in some areas.

Now there are many who paradoxically believe the pandemic, far from being an unanticipated obstacle to SDG progress, may help reinvigorate the project. The UK Stakeholders for Sustainable Development (UKSSD), for instance, pointed to the way many businesses supported communities and the vulnerable during the pandemic, showing a willingness to help society and go above and beyond the normal.

UKSSD blogger, Emily Auckland, said: “It is only by working together that we will create a post-pandemic future that is fairer, just and sustainable.”

Failure to respond quickly at this point in history, said Mr Guterres, could jeopardise progress 15

Cover Story

Mr Guterres, attending a virtual high-level UN the meeting aimed at finding solutions to tackle the damage done by the pandemic to the UN’s 2030 Agenda for Sustainable Development, warned that Covid-19 would cause “unimaginable devastation and suffering around the world”. He predicted that millions would be pushed into extreme poverty, that there would be famines of “historic proportions”, and that we would witness the sharpest contraction of the global economy since the Great Depression of the 1930s.

He said that there must be immediate, collective action in six crucial areas: Global liquidity and solutions to debt; incentives for creditors; incentives to boost sustainable development; a crackdown on illicit financial dealings; the alignment of incentives in global financial systems with SDGs to boost confidence and relaunch investment in sustainable development; and finally, the creation of an over-arching global framework to aid rapid recovery.

Mr Guterres emphasised that bold action taken now, based on the UN’s SDGs, would not only protect the weakest, it would help ensure a stronger recovery. And he again stressed the regularly-quoted phrase that he would “leave noone behind”. The recovery, he said, had to be focussed on building inclusive and sustainable economies that are more resilient in the face of future global challenges.

already made towards achieving SDGs. The UN has drawn attention to several areas where a substantially improved outcome might be achieved because of the effects of the pandemic – one being the question of remittances.

Remittances – the money sent by migrant workers in developed nations to their families in poorer countries – currently account for more than five percent of GDP in as many as 60 lowincome countries. During the pandemic, this flow of cash has been dramatically reduced, causing great hardship in developing countries.

But the pandemic has exposed vulnerabilities in the global remittance system, said Gilbert F. Houngbo, president of the UN agency, the International Fund for Agricultural Development (IFAD). He called for an overhaul of moneytransfer systems to ensure more of the cash reaches needy families, and less is lost in transfer fees. IFAD is currently in negotiation with financial technology firms, mobile operators, banks and postal networks to find a solution to high transaction costs.

Mr Guterres focussed specifically on the effects upon mental health as a result of the pandemic, especially among the young. “Mental health is at the core of our humanity,” he said. “The virus is not only attacking our physical health, it is also increasing psychological suffering.

Throughout my life, and in my own family, I have been close to doctors and psychiatrists treating these conditions. I became acutely aware of the suffering they cause. Even when the pandemic is brought under control, grief and anxiety will continue to affect people and communities.”

His observations were confirmed in late May 2020, when the International Labour Organisation (ILO) warned that more than one in six young people worldwide had lost their jobs due to the coronavirus.

Cover Story

The ILO reported that under 30s had been particularly hard hit, claiming that their financial prospects could be blighted for decades. Guy Ryder, the ILO’s Director-General said that many young people would simply be left behind. Youth unemployment in the EU for instance, which still stands at around 15 percent, had never fully recovered from the financial crisis of 2008, he said.

This was just one aspect of the potential fallout from the pandemic. Mr Guterres also drew attention to the plight of the world’s developing nations, especially those in Africa, whose progress towards the UN’s SDG targets was being thrown off course as a result of the economic damage caused by coronavirus.

Mr Guterres had earlier called on UN member states to adopt a “war economy” to fight the effects of the virus. Defeating coronavirus, he said, was the first stage, but the world should 16

seize the opportunity to create a global economy which was more “inclusive and sustainable going forward”.

“We need to prepare for a recovery for a better economy, a more sustainable and inclusive economy,” he said. “We don’t need to replicate exactly the economy of the past. Many things will change, I would say irreversibly in our lives.”

He said that the world needed to use the current situation wisely; “to seize it as an opportunity” to achieve more inclusiveness and sustainability in national economies. He also expressed the hope that another effect of the pandemic would be to force governments to re-evaluate relationships with the environment, and redouble efforts to combat climate change.

Unsurprisingly for a man who sees his fundamental role as UN Secretary-General to be the achievement of the eradication of poverty and inequality, Africa is at the heart of his Covid-19 concerns.

As the virus began to spread across the continent, Mr Guterres called on warring factions in several African states to agree to a general ceasefire, in the hope that the pandemic would somehow make peace easier to achieve.

Mr Guterres knows that the pandemic will not be defeated until Africa is safe. Economic instability could lead to catastrophic collapse in the region, leading in turn to more conflict, famine and an upsurge in migration.

“In recent years Africans have done much to advance the well-being of the continent’s people,” he said. “Economic growth has been strong; the digital revolution has taken hold. A free trade area has been agreed. But the epidemic threatens Africa’s progress. It will aggravate long-standing inequalities and heighten hunger, malnutrition and vulnerability to disease.”

It was already the case, he said, that African exports were in serious decline because of coronavirus, and demand in the continent’s tourism industry had all but dried up. The opening of a pan-African trade zone, upon which so much is staked, and which was due to take place in 2020, has been postponed as a direct result of the pandemic.

Mr Guterres praised the way African countries had moved rapidly to establish regional cooperation to fight the spread of the disease, including co-ordinated quarantines and lockdowns. He also commended African governments for drawing on their experience of epidemics like HIV/Aids and Ebola in the fight against rumour and misinformation, debunking anecdotal speculations and overcoming mistrust of government agencies.

But the international community, he argued, had to step in to help strengthen local health CFI.co | Capital Finance International

Autumn 2020 Issue

systems, and try to avoid a financial crisis which could push millions of Africans into poverty.

prosperity of all, by addressing inequality in the business model, it is now.”

Elsewhere, Inger Andersen, the Executive Director of the United Nations Environment Programme (UNEP) shone the spotlight on the effect of the pandemic on environmental issues, insisting that the world’s response must not be seen as simply a philanthropic reaction.

Sustainable recovery and development will need to be fully future-proofed, she said. The threat posed by rising global temperatures increases the likelihood of more pandemics, flooding, droughts and the destabilisation of economies.

The Business & Sustainable Development Commission, launched in Davos, Switzerland in 2016, believes that at least $12 trillion could be unlocked through the expansion of sustainable business over the next decade, creating up to 380 million new jobs by 2030.

Meanwhile attention has also been focussed on the generational response to the crisis. Those reaching adulthood in the early 21st century – Millennials and Generation Z - were initially accused of having too carefree an attitude to the virus, even being blamed for helping to spread infection. But it is becoming clear that the response of young people is leading to intergenerational innovation to find ways to survive and grow.

Millennials and Generation Z make up nearly 40 percent of workers in fragile areas such as childcare, restaurants, and tourism – and are bearing the brunt of the economic impact of measures designed to tackle Covid-19. But these young people are also collaborative, comfortable with electronic communication and the use of technology, and above all, adaptable.

They are the generations most likely to seek out sustainable brands, say economists. Unilever, the giant Anglo-Dutch consumer goods company, is a pioneer of in this field. In 2018 their 28 Sustainable Living Brands grew 69 percent faster than the rest of the business – up from 46 percent the previous year. Much of this growth, Unilever believes, is down to the attitudes of younger generations.

Elizabeth Uviebinené, the British author of Slay in You Lane: The Black Girl Bible, summed up this opinion, saying: “Despite the uncertainty ahead, I take comfort in the fact that millennials are a resilient and adaptable generation because we’ve always had to be, and this setback will be no different.”

“The crisis may offer an opening for a new social contract, with business taking a broader role in addressing the well-being of all of society. If ever there was a time for companies to demonstrate their commitment to the health, safety and CFI.co | Capital Finance International

“We now have the opportunity to create a better, stronger, more sustainable, resilient and inclusive future for all,” she says. “Rather than assume that the pandemic makes our task harder, we should capitalise on the opportunity and space it provides to challenge conventional wisdom.”

In 2018, KPMG reported that of the world’s 250 largest companies, only 101 mentioned SDGs in their corporate reporting, and of these, just eight made the business case for SDGS. Ms Davidsen says: “Too often the SDGs are used as just another reporting lens to communicate existing activities differently, rather than to make different decisions. While interest in the SDGs has been building, business leaders tell us they still do not have all the tools and information they need.”

Her role, as the pandemic recedes, is to build a common business framework to guide companies, creating a greater sense of confidence in an uncertain time, she said.

António Guterres believes that people have finally become conscious of the seriousness of the virus and its effects, and now understand that global solidarity and co-ordination of action was required not only to defeat coronavirus, but also to keep the wheels of the world economy turning.

Despite the apparent chaos in the global response to coronavirus, the conflicting advice of experts, the attempts to pin blame, the rhetoric of leaders like Mr Trump, the failure to follow WHO guidance by some, the opportunistic crackdown on civil liberties by others, Mr Guterres remains optimistic that the world can recover, and a new, equitable future be created.

And it would seem that his cautious optimism is shared. Global Web Index, a London-based consumer research body, believes that optimism is a key factor in navigating the coronavirus crisis – and its extensive market research appears to bear that out.

An internet survey of 14,000 people across 13 countries conducted during the height of the pandemic in March 2020 found a reassuringly 17

Cover Story

There is a growing belief that the pandemic could mark a turning point for sustainable business.

Kevin Moss, Global Director at the Washingtonbased Centre for Sustainable Business says that too many businesses have been “myopically short-term” in their focus on their shareholders.

“The coronavirus pandemic is giving business leaders the opportunity to push past some of these limitations,” he says.

Elizabeth Boggs Davidsen, the Director of SDG Impact at the United Nations Development Programme (UNDP), says that the pandemic has exposed the world’s weaknesses, and “reminded us about how interconnected all our fortunes are”.

"There is a growing belief that the pandemic could mark a turning point for sustainable business. Kevin Moss, Global Director at the Washington-based Centre for Sustainable Business says that too many businesses have been “myopically short-term” in their focus on their shareholders." high level of optimism for recovery among respondents, though there were significant variations between countries.

China saw the highest levels of optimism at 93 percent, while in Japan only 17 percent were hopeful of a positive outcome. In the USA and UK, there was an approximate 50:50 split between confidence and pessimism. According to Global Web Index, good communication appears to be the key to maintaining consumer optimism, with those who felt well-informed being generally less concerned for the future.

The Great Plague of 1665 was the first time the citizens of England had suffered such pestilence since the dreadful years of the Black Death in the 14th century. It took them by surprise in much the same way as coronavirus shocked a modern world where such events were seen as things of the past. The Black Death wiped out almost 45 per cent of England’s population in the mid-1300s, and in doing so, also obliterated the feudal system, laying the foundation for a modern nation. Similarly, the Great Plague, followed the next year by the Great Fire of London, allowed the city to transform into a progressive capital. From calamity can come hope.

In his journal of the plague year, Daniel Defoe echoes this conviction with a grimly comic observation that there may yet be cause for hopefulness:

Cover Story

“This is a world of corpses strewn in the streets and pits, yet in the deadcart itself a drunken piper wakes up to cry, ‘But I an’t dead tho’ am I?’” i

Author: Tony Lennox

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WORLD INVESTMENT REPORT INTERNATIONAL PRODUCTION BEYOND THE PANDEMIC

Autumn 2020 Issue

2020 30 anniversary th

edition

Providing governments, business and academia with the latest global investment trends and analysis for 30 years

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worldinvestmentreport.org 19

> World Bank's Vice President for Infrastructure:

Now is the Time to Rethink Transport and Logistics

By Makhtar Diop

Covid-19 has had a huge impact on transport. The response to the pandemic, from social distancing to lockdown policies for affected areas, has disrupted mobility and connectivity everywhere.

I

t has had cumulative impacts on the basic infrastructure and systems that keep regions, markets and supply chains going, especially in the developing world. The vulnerability of global logistics has become starkly visible.

On the supply side, workforce and industry lockdowns resulted in shortages in key sectors such as pharmaceuticals and medical equipment.

Protectionism, and last-mile vulnerabilities in distribution due to the lockdowns, compounded the problem.

On the demand side, the shock came from a massive overnight reduction in the consumer base, hoarding and runs on a few key goods, as well as the collapse of travel and tourism.

The second quarter of 2020 is expected to see a decline of more than 25 percent in global merchandise trade value over the first quarter.

Aviation was hit especially hard, with collapsing demand and far-ranging negative effects, even while air travel is critical to safeguard the mobility of professionals and essential goods.

The International Civil Aviation Organisation (ICAO) estimates a decline of up to 60 percent in global passenger traffic, and gross revenue losses of up to $420bn.

Beyond the immediate effects, there will also be deferred demand and supply disruptions as economic activity and incomes start the long climb back up. In Africa, up to 22 countries have closed their land borders completely at some point, and nearly all have implemented screening measures at border points and port of entries and/or closed ports of entry.

THE WAY FORWARD Mobility must be a crucial part of the response to the pandemic, not just to deal with immediate challenges but also to rekindle economic activity and ensure that the poor are shielded from its immediate and long-term impacts.

It is important to seize on the crisis as an opportunity to address some of the factors that 20

"In the short and medium term, once the pandemic is under control, countries should look into introducing new regulations to make transport resilience and safety an integral part of their new normal." contributed to today’s logistics problems, build future resilience and safeguard the continuity of essential domestic supply chains. One key priority is to promote the use of emergency sanitary measures in the whole logistics sector, from operators to ports, including protective equipment and social distancing. Countries and companies need contingency plans for essential goods including fuel, medicines and foodstuffs.

Getting systems working again will also require rescuing essential operators, for example by reducing fees or taxes on airlines to alleviate the financial crunch and supporting haulage operators experiencing financial distress.

Facilitating online ordering and remote delivery are quick measures that can help avoid crowding at collection points or retailers.

In the short and medium term, once the pandemic is under control, countries should look into introducing new regulations to make transport resilience and safety an integral part of their new normal. The sector should also discuss existing business models and find solutions for complex underlying issues that contributed to the current vulnerability, such as what to do with state-owned air carriers that are highly indebted and not financially sustainable.

The gradual reopening of borders, routes and corridors is likewise a chance to agree on regional harmonisation of trucking regulations, vehicle standards and licensing arrangements to promote cross-border integration, and regularisation of informal operators.

CFI.co | Capital Finance International

The private sector needs to have a major role in this, such as helping suggest precise inspection procedures for critically needed items. Companies and industry associations can also work with governments to patch gaps in supply chains and support long-distance and large-volume transportation for medical supplies, doctors, and nurses.

THE ROLE OF INTERNATIONAL CO-OPERATION International financial institutions such as the World Bank can provide timely support that ranges from financing to knowledge and technical assistance. That includes, among other interventions, activating emergency funding in existing projects or helping governments devise and implement contingency plans for critical goods and mobility.

The World Bank is harnessing the potential of transport to help economies bounce back and working with countries to increase the resilience of transport systems against future shocks, whether it be a pandemic or any other kind of disaster. In Liberia, although disruptions in the food supply chain are still minimal, we are working with the government to ensure the supply chains are sustained. We are supporting efforts to ramp up digitalisation and cybersecurity across the logistics chain — a key step toward improved efficiency and resilience.

The pandemic has brought unprecedented challenges to global logistics, but whatever the future holds post-Covid-19, the sector is too big — 10 to 12 percent of global GDP — to fail. The

Autumn 2020 Issue

Vice President, Infrastructure: Makhtar Diop

"The World Bank is harnessing the potential of transport to help economies bounce back and working with countries to increase the resilience of transport systems against future shocks, whether it be a pandemic or any other kind of disaster." world depends on effective transport and supply chains to bring food to people’s tables, deliver medicines to hospitals, and help our economies grow and create jobs.

As overwhelming as the current situation might be, it provides an opportunity to address the weaknesses of the current system and come out stronger. i ABOUT THE AUTHOR Makhtar Diop is the World Bank’s Vice President for Infrastructure, a position he assumed on July 1st, 2018. The Infrastructure Vice Presidency comprises Energy & Extractives, Transport, Digital Development, and Infrastructure Finance, Public-Private Partnerships and Guarantees (IPG). In this global role, Makhtar Diop leads efforts to develop sustainable solutions and help close the infrastructure gap in developing and emerging economies.

Prior to this appointment, Diop served for six years as the World Bank’s Vice President for the

Africa Region, where he oversaw the delivery of a record-breaking $70 billion to Sub-Saharan Africa to help tackle development challenges such as increasing access to affordable and sustainable energy; boosting women’s and youth’s economic empowerment; and promoting an enabling environment for more innovation and technology adoption. A passionate advocate for Africa’s right to clean and affordable sources of electricity, he also called for greater investment in renewable energy and pushed for greater regional interconnectivity in the power and transport sectors.

Diop brings to the post a deep level of experience and understanding of complex infrastructure challenges. His prior experience includes serving as Director for Finance, Private Sector & Infrastructure in the Latin America and the Caribbean Region. From 2009 to 2012, Diop held the position of World Bank Country Director for Brazil where the World Bank helped finance major infrastructure work and was the Bank’s Country Director for Kenya, Eritrea, and Somalia.

CFI.co | Capital Finance International

In addition to his international organisation experience, Diop, an economist by training who started his career in the banking sector before joining the IMF and later the World Bank, has extensive private sector experience. He has also held government positions, most notably the position of Minister of Economy and Finance of Senegal, where he played a key role in instituting structural reforms aimed at laying a strong foundation for Senegal’s growth in the late 1980s.

A recognised opinion leader in the economic and social development field, Makhtar Diop has been named one of the 100 most influential Africans in the world. In 2015, he received the prestigious Regents’ Lectureship Award from the University of California, Berkeley.

Diop holds degrees in economics from the Universities of Warwick and Nottingham in England.

Follow Makhtar Diop on Twitter: @Diop_WB 21

> Otaviano Canuto:

The Impact of Coronavirus on the

Global Economy

COVID-19 brought the global economy to a sudden stop, causing shocks to supply and demand. Country after country suffered outbreaks, with epidemiological effects leading to economic and financial shocks.

H

ow quickly and to what extent national economies recover will depend on success in containing the coronavirus, exit strategies, and the effectiveness of policies.

According to forecasts from the International Monetary Fund and World Bank, GDP per capita at the end of 2021 is still expected to be lower than December 2019 in most countries.

Emerging markets and developing countries, in addition to facing difficulties with their own coronavirus outbreaks, have suffered shocks from abroad. In these cases, the new coronavirus brought a perfect storm.

CFI.co Columnist

One can foresee a post-coronavirus global economy marked by higher levels of public and private debt, acceleration in digitisation processes, and less globalisation.

The coronavirus crisis is primarily a public health issue, demanding containment policies that have inevitably caused shocks to economic activity. A major reason for containment is the widespread perception that existing local clinical care capacities tend to be swamped and death tolls are higher in a “do-nothing” scenario. Policies to flatten the pandemic curve and gain time are crucial, regardless of whether or not they reduce absolute numbers of infections. Figure 1 from Gourrinchas (2020) illustrates the point.

Even if it is assumed that the overall numbers of infections are the same with or without public health containment policies, lives are saved if the curve is flattened.

Two major types of policies to contain or slow the spread of coronavirus have been applied. One is to identify and quarantine infected people, which has been the approach in Singapore, Taiwan, and South Korea. There are two prerequisites for such an approach to be successfully implemented: government capability to use technology and information to track and monitor individuals, and the ability to carry out widespread coronavirus testing. That is not the case in most countries.

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Figure 1: Flattening the Pandemic Curve. Source: Gourrinchas (2020).

The other type of containment policy is to adopt social distancing, with various degrees of distance and government enforcement: minimising person-to-person contact by banning travel, temporarily closing factories and schools, and official recommendations or orders for people to stay home. This horizontal approach includes some demarcation of essential activities spared from mobility restrictions. Social distancing can be used in combination with the selective focus wherever there is capacity to implement the latter.

The coronavirus pandemic has led to negative demand and supply shocks to the economy.

While demand and supply would of course be negatively impacted in a do-nothing scenario, the impact tends to be exacerbated by socialdistancing policies. The coronavirus recession has a disruptive nature that may leave scars, impeding a return to where the economy was prior to the shock.

CFI.co | Capital Finance International

Solvent but suddenly illiquid firms may be bankrupted, unemployment is rising at a fast pace, and demand and revenues for small businesses have hastily vanished.

That is why an extraordinary role for the state as a catastrophe insurer has come to the fore, providing fiscal support — additional resources to healthcare systems, income transfers to crisisaffected people, tax relief — and credit available at favourable conditions to vulnerable firms. These emergency and temporary measures are geared to minimising the disruptive consequences of the temporary but impactful sudden halt to the economy. Figure 2 illustrates such a flattening of the recession curve, to happen in tandem with the flattening the of pandemic curve.

Is there a trade-off between saving lives through containment policies and output losses as a consequence? Using the historical

Autumn 2020 Issue

economically worse than other cities. If anything, they grew faster after the pandemic was over.

According to Correia et al, “non-pharmaceutical interventions not only lower mortality, but also mitigate the adverse economic consequences of a pandemic”.

The havoc wreaked by the pandemic dynamics in a do-nothing scenario cannot be assumed as economically stronger than the one with containment policies.

Data on the first-quarter 2020 GDP performance of major economies has shown how significant the impact of COVID-19 has been on economic activity and jobs, with large contractions across the board. The ongoing global recession is poised to be worse than the Great Recession after the 2008-09 global financial crisis, especially from the standpoint of emerging-market and developing economies. The depth and speed of the GDP decline will rival that of the Great Depression of the 1930s.

A post-crisis recovery is expected to begin in the second half of the year, at least in those countries where the coronavirus outbreak may be considered to have passed and policies to flatten the pandemic curve can be relaxed (Canuto, 2020c). The shocks caused by COVID-19 are profound, but will invariably be temporary.

Figure 2: Flattening the Recession Curve. Source: Gourrinchas (2020).

Let us mention four possible stylised formats for the evolution of GDP as recoveries take hold, taken from Sheiner and Yilla (2020). The most optimistic is a V-shaped recovery (Figure 3). In this scenario, after suffering a strong blow during the pandemic, the economy soon returns to its previous trajectory. The loss of GDP during the period of restrictions — due to supply shocks and pent-up demand — is definitive.

Figure 3: Optimistic Curves. Source: Louise Sheiner and Kadija Yilla, The ABCs of the post-COVID economic recovery, Hutchins Center

on Fiscal & Monetary Policy, The Throokings Institution, May 4, 2020.

However, if there are no lasting consequences from the virus period and the corresponding economic impact on the production system and economic agents’ conditions, everything returns to normal.

Figure 4: Pessimistuc curves. Source: Louise Sheiner and Kadija Yilla, The ABCs of the post-COVID economic recovery, Hutchins Center

on Fiscal & Monetary Policy, The Throokings Institution, May 4, 2020.

experience of the 1918 influenza pandemic, Correia et al (2020) found that cities where

non-pharmaceutical interventions took place earlier and more aggressively did not perform CFI.co | Capital Finance International

There are, however, two other more pessimistic trajectories. One is a W-shaped recovery (Figure 4). This will be the case if, after a relaxation of social-distancing policies, new COVID-19 outbreaks appear and new rounds of these policies are implemented. This possibility is mentioned by all those who warn against any early lifting of restrictions on mobility and crowding.

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CFI.co Columnist

Less optimistic and more likely is the U shape (Figure 3). The effects of the pandemic persist, not least because the norms of social distancing remain for some time, but eventually GDP returns to its previous trajectory after a period of decline. Even if sanitary conditions are declared to be normalised, consumers and companies will hesitate before returning to their previous consumption patterns and investment plans.

Finally, there is a possibility that the damage left by the new coronavirus is permanent. In this case, the recovery takes the form of an L (Figure 4). The economy grows again, but at lower levels of GDP over time than would be the case if COVID-19 had not appeared.

Return to the pre-coronavirus GDP trajectory may be made difficult as previous investment plans can be shelved. Previously healthy companies may have gone bankrupt because of the abrupt and sudden deterioration in their operating conditions during the crisis. Changes in consumption patterns can lead to the permanent elimination of jobs without unemployed workers finding jobs quickly elsewhere. Production processes can be changed to less-efficient ways to avoid risks previously not considered relevant.

The net worth of families, firms, and governments may also suffer significant deterioration during the epidemic.

Public debt is rising worldwide, something naturally expected as a result of the state's role as the ultimate catastrophe insurer in all countries.

Emergency and temporary measures, financed by the public sector, have generally been adopted, aiming to minimise the disastrous consequences of the temporary, but potentially lethal sudden stop caused by the coronavirus. Around the world, governments have announced dramatic income transfer policies for informal workers, boosts to unemployment insurance, special lines of credit for business segments — sometimes tied to job preservation — tax relief measures and so on.

CFI.co Columnist

Strictly speaking, the shape of the recovery will depend on the quality — in terms of costeffectiveness — of those public policies. On the one hand, there is the burden of public debt. On the other, the greater the smoothing of household income streams — especially the most vulnerable and those without accumulated savings — and the lower the wave of bankruptcy of businesses that would be healthy under normal conditions, the closer the country will be to the U shape, rather than the L. The shape of GDP evolution will also depend on whether previous financial/fiscal fragilities and vulnerabilities are aggravated by the coronavirusrelated crisis. Finally, as one may notice in the case of China, global interdependence means that what happens elsewhere also matters locally.

As COVID-19 outbreaks are still unfolding in most places, it is still early to bet on any specific shape of recovery being predominant anywhere.

Obvious examples of this, in the case of developing countries, are seen in the need to incorporate informal invisible workers into social protection frameworks, and the urgent need to integrate slums. But there is always a risk that underlying institutional weaknesses will be accentuated by the crisis.

US real GDP contracted at a seasonally adjusted annual rate (SAAR) of 4.8 percent in the first 24

Figure 5: World GDP Growth. Source: IMF (2020), World Economic Outlook, April.

Figure 6: Emerging Markets: Equity Markets and Sovereign Bonds. Source: IMF (2020), World Economic Outlook, April.

quarter of 2020, the worst outcome since the last quarter of 2008. The second quarter is likely to be even worse, with forecasts pointing to a real GDP decline of around 40 percent SAAR. These are figures not seen since the Great Depression of the last century. More than 20 million US workers lost their jobs in April 2020, and the unemployment rate reached 14.7 percent.

economic recovery in the second quarter, but demand conditions have not been supportive. The plunge in exports in May 2020 reflects the global nature of the crisis and expresses the limits of the recovery in any single country, when a slump remains under way elsewhere. Domestically, it is worth noting that the hesitancy to consume services, even as quarantines were lifted.

The Eurozone is another fallen giant. In the first quarter of 2020, its GDP shrank 14.4 percent q/q SAAR, as lockdowns were imposed around mid-March and activity started to run at about a third below normal levels. The level of activity may have bottomed-out in May, assuming that restrictions will be gradually eased in the subsequent weeks. In any case, forecasts point to a 45 percent annualised rate of GDP drop in the first half of the year.

The wide variation in first-quarter annual rates of GDP negative outcomes among the giants — US (minus 4.9 percent), Eurozone (minus 14.4 percent), and China (minus 34.7 percent) — can be associated with the different timings of their COVID-19 outbreaks. But they will all have passed through a rough patch at the end of the semester.

Japan’s real GDP is forecast to decline by more than 40 percent SAAR in the second quarter of 2020. Daily increases in the number of infections led the government to prolong the state of emergency for an additional month after May 6.

China suffered first an outbreak-induced sudden stop in February (Canuto, 2020a). There was a rebound in March, but not enough to allow a return to previous GDP levels, with manufacturing prospects worsening in May 2020. The normalisation of domestic consumer demand and the service sector have been key drivers of China’s CFI.co | Capital Finance International

The depth and severity of the crisis were highlighted in the IMF’s World Economic Outlook forecasts released in mid-April (IMF, 2020). The IMF expected global GDP per capita to shrink by 4.2 percent in 2020, compared to a decline of 1.6 percent in 2009, during the global financial crisis (Figure 5). The vast majority (90 percent) of all countries are poised to exhibit negative GDP growth in 2020.

The recovery in 2021 is not expected to be enough to compensate for the ongoing GDP declines. GDP per capita in advanced economies at the end of 2021 is likely to still be lower than in December 2019. Emerging market and developing economies, in turn, face a perfect

Autumn 2020 Issue

markets since the beginning of the crisis, the largest capital outflow ever recorded.

Concerns about debt repayment capacity and the dollar liquidity needs of some emerging markets have increased, making it more likely that the coronavirus sudden stop in advanced economies might cause a sudden stop in capital flows to emerging economies.

Figure 7: Remittances, Foreign Capital, and Aid Flows. Source: World Bank, Migration and Development Brief 32, April 2020.

storm and, in most cases, performance will be even gloomier (Canuto, 2020b).

The global footprint of coronavirus is clear.

But in developing countries, in addition to the challenges of dealing with their domestic COVID-19 outbreaks, negative shocks preceded the arrival of the virus in their territories. The perfect storm came in the wake of the decline in GDP in projections for 2020 released by the IMF in April.

Flattening the curves of pandemic and coronavirus recession tends to be more difficult in developing countries. The flattening of the infection curve is essential to avoid overloading hospital capacity and the resultant death toll. While rich countries have an average of more than four hospital beds for every 1,000 inhabitants, the number drops to 0.6 in low-income countries. The ability to treat critically ill patients with COVID-19 is further reduced.

Social detachment policies are also more difficult to implement when a substantial part of the population lives in slums. Selective forms of isolation are difficult to implement in the absence of technology, and the public capacity to implement them, as in Singapore, South Korea, or Germany.

Developing countries in general also do not have much fiscal space to offset the big negative

Even before the new coronavirus landed on its new front —Latin America, Africa, and other regions — its economic impact had already been felt. In addition to supply shocks derived from unavailable imports that are key to local value chains, commodity prices, tourism, and remittances have collapsed (Canuto, 2020b).

Furthermore, the third dimension of the coronavirus crisis — financial shocks — have also hit developing countries.

EXTERNAL FINANCIAL SHOCK The pandemic and its economic consequences have triggered a shock to financial markets in advanced countries. Deteriorated earnings prospects and heightened uncertainty have led to a broad portfolio switch from risky assets to the safe haven of US short-term Treasuries. Given the high levels of financial leverage in previous years — including non-banking financial institutions that have become major market makers — successive margin calls have sparked massive asset fire-sales and exacerbated their dropping prices.

The Federal Reserve opened an extended and wide toolbox, establishing new channels or reinforcing existing channels to make sure that liquidity would be conveyed to all corners of the financial system. Rather than resuscitating asset prices, the aim seems to be to avoid bankruptcies and to short-circuit all the negative feedback loops and channels of contagion that otherwise would hit the real economy.

The search for safety sparked by uncertainty and fear led to a strong wave of capital outflows from emerging markets (Figure 6), and their depreciations of their currencies. According to the Institute of International Finance, foreign investors have taken $83bn out of emerging CFI.co | Capital Finance International

Given current constraints on liquidity and long-term financial provision by multilateral institutions posed by their balance sheets, Hausmann (2020) has floated some ideas about the use of the IMF and World Bank as vehicles for extending the reach of central bank policies in advanced economies to developing countries.

For instance, US Federal Reserve swap lines with central banks of other countries could be extended beyond the group with which agreements have been recently signed (Australia, Brazil, Denmark, Korea, Mexico, Norway, New Zealand, Singapore, and Sweden).

Extension could be done either directly or with IMF intermediation. Another approach could be the inclusion in the quantitative easing of advanced economies’ central banks of the acquisition of less-risky emerging market bonds, which would open space for international financial institutions to focus on poorer countries.

The poorest developing countries have accumulated high and unsustainable amounts of foreign debt in the recent past. The sustainability of this debt in times of drought in terms of the sources of refinancing has become more questionable as commodity prices and tourism have fallen, as we shall see.

At their most recent meeting in April, the countries that make up the G20 agreed with the suggestion made by the IMF and the World Bank to suspend debt service of the poorest countries to official bilateral creditors, at least until the end of the year. They also suggested to private creditors that they take similar initiatives.

More than ever, foreign aid will be essential so that these countries can, notwithstanding the difficulties, attempt the task of flattening their domestic pandemic and recession curves.

In addition to financial shocks, there have been declines in remittances, tourism revenues, and commodity prices (Canuto, 2020b). The combination of these shocks with the difficulties 25

CFI.co Columnist

Measures to contain the pandemic via social/ physical distancing have particularly affected the parts of the population whose income depends on their physical mobility, making it also essential to flatten the curve of the recession. One difficulty arises from the informality of work in developing countries, as levels of informal occupation vary from 50 percent to 90 percent of the total.

Informal workers do not have benefits such as unemployment insurance, health insurance, or paid holidays. The informality of work implies that relief and recovery policies aimed at formal work, including raising unemployment insurance, reducing payroll taxes, and extending paid medical leave, are of limited scope.

shock. Their debts are more subject to exchange rate and maturity mismatches, their credit ratings are lower, and their financial markets are less deep. In addition, the “flight to quality” in the financial markets that happened in February and March made it more difficult to borrow to cover public deficits.

Developing countries have built up high and unsustainable amounts of foreign debt in the recent past (Kose et al, 2019). Servicing that debt at a time of drought in sources of refinance has become harder as commodity prices and tourism have slumped. All this is happening at a time when those countries must also face the task of flattening domestic pandemic and recession curves. The IMF and World Bank have called on governments to offer debt relief to help poorer countries deal with the coronavirus outbreak.

Figure 8: International Tourism Receipts, World (Real Change, %). Source: UNWTO (e) estimate.

related to the flattening of domestic infection curves has configured the perfect storm for developing countries, brought by COVID-19 (Canuto, 2020c).

REMITTANCES, FOREIGN CAPITAL, AND AID On April 22, the World Bank (2020a) published its Migration and Development Brief 32. The World Bank estimated that in 2019 there were 272m international migrants —including 26m refugees.

CFI.co Columnist

Foreign workers are often the first to lose their jobs in times of crisis, and remittance flows around the world sent by migrants to their home countries are forecast to shrink by more than $100bn in 2020. The global economic lockdown, which has provoked steep job losses across the world, is expected to lead to a 20 percent decline in remittance flows to low- and middle-income nations. That equals a fall from a record $554bn in 2019 to $445bn in 2020.

Last year, remittances amounted to about 8.9 percent of GDP in poorer countries. For the first time, they overtook foreign direct investment (FDI) as a source of money inflows to low- and middle-income countries (Figure 7).

FDI is expected to decline by even more than remittances, reflecting local recessions and the disruption of international trade. The World Bank report estimated that FDI into low- and middleincome countries could fall by more than 35 percent. Private portfolio flows through stock and bond markets could shrink by over 80 percent, while official development assistance (ODA) will maintain its steady evolution.

Among remittance-dependent countries, vulnerable to the ongoing decline, there are fragile states including Somalia, Haiti, and South Sudan, as well as small island nations such as Tonga, with remittances accounting for more than a third of GDP in some countries. Larger countries including India, Pakistan, Egypt, Nigeria, Mexico, and the Philippines, will also be hit because remittances have become a major source of their external financing.

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Migrant remittances are a fundamental source of income for poor households in many countries and the drop in flows this year will increase poverty.

Remittances to Europe and central Asia are expected to fall most, crashing about 28 percent this year, while remittances to Sub-Saharan Africa are forecast to diminish 23.1 percent. But all regions will face steep declines.

In the case of FDI, the latest World Investment Report by UNCTAD (2020) shows a dire picture, with the COVID-19 crisis expected to cause a deep fall. Global FDI flows are forecast to shrink by up to 40 percent this year, from their 2019 value of $1.54tn. FDI is expected to go below $1tn for the first time since 2005, with an additional decline of a further 5 percent to 10 percent in 2021. A reversal to the pre-pandemic trend is expected, in an optimistic scenario, only in 2022.

INTERNATIONAL TOURISM RECEIPTS On March 26, the United Nations World Tourism Organization (UNWTO, 2020) announced estimates of a decline of 20 percent to 30 percent in 2020 of international tourist arrivals, compared to 2019 figures. This would translate into a loss of international tourism receipts of between $300bn to $450bn, almost a third of the $1.5tn generated in 2019 (Figure 2). According to World Bank data, low- and middle-income countries recorded over $420bn in international tourism receipts as exports last year, and will be heavily affected by the decline in 2020.

Another result from coronavirus will be acceleration of digitalisation in production processes and in the provision of public services Digitalisation processes taking place during the pandemic and the confinements tend to remain, to a great extent, definitively extending in areas such as education. To some extent, things like telework happening during the crisis will not reverse entirely.

There will be destruction of analogue jobs, while jobs and opportunities for entrepreneurship that require digital training will be created. Adapting the workforce to this new reality will be among the challenges highlighted by COVID-19.

CFI.co | Capital Finance International

There is also likely to be a partial setback of productive integration across borders, which marked globalisation in the decades before the global financial crisis and which has been under pressure to reverse ever since. In some cases, including medical equipment and medicines, in addition to high technology, the primacy of efficiency and cost minimization will give way to security against the risks of shocks that disrupt the availability of imports.

It remains to be seen how far the demarcation lines of what will be considered strategic by different countries will extend, in terms of the activities they need to re-shore. A key part of this issue is expected to be the intensification of the technological dispute between the United States and China (Canuto, 2019).

The coronavirus pandemic could also accentuate the moving contradiction between a reinforcement of reorientation within countries and the need for policy coordination between countries in many areas. Dealing with challenges, including future pandemics, climate change, cyber security, terrorism, and migration, will require more multilateralism or pluri-lateralism and much less nationalism.

This will mean that the lessons of coronavirus, which has encouraged national solutions, will have to be learned carefully. i

This article first appeared at Policy Center for the New South.

ABOUT THE AUTHOR Otaviano Canuto is principal at the Center for Macroeconomics and Development, a senior fellow at the Policy Centre for the New South and a nonresident senior fellow at Brookings Institution. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund (IMF), and a former vice-president at the Inter-American Development Bank. Otaviano has been a regular columnist for CFI.co for the past seven years.

Follow him on Twitter: @ocanuto

> Q&A with IBM’s Bashar Kilani:

Need for New Skills Emerging as We Re-Imagine and Transition to the New Normal

Bashar Kilani oversees IBM business in the Gulf countries and the Levant, working with clients and partners across industries. In this Q and A, CFI.co's Chairman Tor Svensson asks Kilani about the effects of coronavirus on business in the region, and more.

Tell us a bit about the “new normal” for businesses in the Gulf and the Levant. How do regional differences manifest themselves as compared with other parts of the world — by industry sector, for example?

Bashar Kilani: In just the last six to seven months, the pandemic has altered nearly every aspect of our personal and professional lives. Seemingly overnight, almost every organisation around the world has been forced to shift to a near entirely remote workforce, and they need to keep their operations running smoothly. Governments and businesses were facing unprecedented challenges to manage their business continuity in light of the burdens this placed on capacity, productivity and security issues. Today, the combined health and economic impact of the pandemic is creating a “new normal” that is bound to transform the region, and the world.

In the region, we are constantly seeing bold and innovative measures as well as data-driven decisions that are not only helping contain the spread of the pandemic but reduce the economic impact. We are also seeing retailers shifting to eCommerce and numerous forms of digital engagements in education, healthcare, banking and many more sectors.

As we transition to the new normal, most economic sectors will contract in the short term, and a new phase of experimentation will emerge where organisations re-imagine their revenue streams in terms of products and services and rebuild their supply chains. This requires agility and leadership to explore new worlds and quickly adjust and react as new realities emerge. The transformation will accelerate digital adoption and establish new economic foundations.

Recently, the IBM Institute for Business Value (IBV) published a paper titled Beyond the Great Lockdown: Emerging Stronger to a Different Normal, describing the key trends that will shape the post-lockdown era from protection against cybercrime to operational risk and efficiency and focusing on the workforce of the future.

That new normal will introduce new operational models in the travel, retail, logistics and 28

"As we transition to the new normal, most economic sectors will contract in the short term, and a new phase of experimentation will emerge where organisations reimagine their revenue streams in terms of products and services and rebuild their supply chains." hospitality industries which are major contributors to the economy, in addition to oil & gas, which have seen major challenges during lockdown restrictions. As the region gets back to business, retailers are seeing volumes back to almost 50 percent of pre-lockdown, airlines are starting to connect the main global destinations and activities are slowly picking up across industries.

key to making them relevant in the workforce.

With 70 percent of the region’s population less than 30 years of age, and as we navigate these uncertain times, we are more than ever seeing the importance of emerging technologies and digital skills to support and enhance the economy.

According to an IBM Institute for Business Value (IBV) study, as many as 120m workers in the world’s 12 largest economies may need to be retrained or re-skilled as a result of AI and intelligent automation in the next three years.

The study also shows that the time it takes to close a skills gap through training has increased by more than 10 times in just four years, and that new skills requirements are rapidly emerging as other skills are becoming obsolete.

However, the focus now is mainly on capturing and processing data that will help create new digital engagements and improved customer experiences while conforming with today’s safety regulations such as social distancing and contactless transactions.

Organisations need to change the culture, processes, systems and applications, design different business models, re-skill the workforce to align with the trends and stay in the game.

And it is our responsibility to prepare students and workers for the way those technologies will shape jobs and the nature of work. Today, “new collar” roles are about skills, not degrees or having a traditional background in technology.

I had the pleasure of joining the The Dubai Future Council for Health and Wellbeing — one of the 13 Dubai Future Councils that focus on keeping pace with the latest developments and advances in health sector and employing the best technologies including AI to enhance health and wellbeing in Dubai. The council aims to enhance Dubai’s healthcare sector and create an innovative modern healthcare model that meets the needs of Dubai’s residents, finds solutions to future challenges and adopts the latest international smart applications and technologies to provide residents with quality services that will ultimately improve their quality of life.

At IBM, we are helping re-skill existing workforce in order to align with current trends and remain relevant. In fact, we have recently collaborated with the Ministry of Education in the UAE and Abu Dhabi School of Government as well as other leading government and private entities and educational institutions across the region to offer IBM’s Digital Nation Platform to their ecosystems. IBM Digital — Nation Platform is part of IBM’s global push to close the digital skills gap and empower youth with the most in-demand skills in data science, analytics, programming, cloud and AI, helping them become digital-ready.

What are some of the challenges of having such a young regional population? What are some of the new skillsets required for the workforce? What kind of demand does that create for change in the educational system?

BK: Preparing and empowering young talent and professionals with the necessary digital skills are

IBM has also been working closely with Area2071 and the Dubai Future Foundation to extend access to the cloud-based learning platform to entrepreneurs and startups in addition to several other entities in Dubai. Area 2071 brings together many different types of individuals and organisations to form a collaborative creative

CFI.co | Capital Finance International

Autumn 2020 Issue

Bashar Kilani

community focused on solving important human challenges, at scale. The IBM Garage, where a lot of creative engagements on digital transformation in the region take place is located in Area2071 and IBM regularly participates in transformative initiatives like the RegLab, which is a revolutionary approach on behalf of the UAE in the legislation and application of technologies in the real world faster.

What are the critical success factors for digital transformation? What is the role of AI, and how can data best be used?

BK: The pandemic will definitely accelerate digital engagement and within a few years people will find themselves in a transformed world. We will see an acceleration in the move towards automation, the move towards cloud to make applications and data more accessible, supply chains will emerge with intelligence and flexibility, and in new ways of doing work and engaging people.

Today, most enterprises are only 20 percent of the way into their cloud journeys, but the remaining 80 percent of workloads are still on-premises.

The move to hybrid-cloud architecture where data can flow between different cloud platforms in integrated workflows will enable organisations to embrace the challenges of the digital world.

The successful digital transformation draws upon three components: an appropriate technology platform, the corporate culture to deviate from traditional forms of service and corporate ownership, and deep and meaningful customer engagement (internal or external).

Customer-facing workflows must be humanised and automated, end-to-end. This is where the focus on data becomes so critical for personalisation and efficiency to deliver a unique experience and enable the use of AI to automate interactions and improve accuracy of predictions.

of leading government departments and private sector entities, the board has been formed to shape the development and deployment of human-centered ethical AI to encourage fairness, transparency and accountability in AI systems in Dubai.

On the heels of digital trends that are starting to mature, the next wave of normal has begun. The rise of new technologies — AI, blockchain, the Internet of Things, robotic process automation, virtual and augmented intelligence, 3D printing and others — is teeing-up an era of change in business architecture. IBM defines the result of such revolutionary change as “The Cognitive Enterprise”.

The advisory board has been designed to create a multi-stakeholder collaborative platform and an ongoing dialogue, enabling board members to share knowledge and expertise around human-centered AI and to explore viable policy instruments that can more readily adapt to evolving AI technologies. The board’s remit covers the exploration of practical application and considerations of AI ethics in Dubai and the offering of strategic advice on the development path from soft regulation to responsible and trustworthy innovation in AI field. i

AI-adoption is expected to continue growing rapidly. In fact, average spending on AI will probably more than double in the next three years and with heightened AI use will come heightened risk, in areas ranging from data responsibility to inclusion and algorithmic accountability. The level of cognitive understanding between humans and machines is inherently lower than it is between humans and other humans, yet the latter arena has been structured for centuries around ethics.

Since AI relies on huge computing power, it can derive insight from massive amounts of data that would challenge human cognition. Relying only on traditional ethical approaches to decision making may be insufficient in addressing AIpowered decisions.

Prior to his appointment, Bashar Kilani was the Business Unit executive for IBM software business in MENA. He began his career with IBM in the UK and held several managerial and executive positions in software development, services, sales and marketing. His international career has taken him to assignments in the US, Europe and the Middle East.

The topic of AI Ethics has been a focus in the region and I had a pleasure joining the AI Ethics Board of Smart Dubai comprising representatives CFI.co | Capital Finance International

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> Mohamed A El-Erian:

The Pandemic’s Complex Cocktail

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aving long been buttressed by ample liquidity, financial markets are entering the final quarter of 2020 amid an increasingly tentative global economic recovery, unusual political uncertainties, and lagging fiscal and structural policy responses. And these headwinds come on top of the COVID-19 30

crisis, which has left most countries struggling to strike a balance between protecting public health, achieving a return to a semi-normal level of economic activity, and limiting infringements on individual liberties.

In this context, the hope is that today’s generous liquidity conditions, enabled and supported CFI.co | Capital Finance International

by central banks, will continue to provide a bridge to a better 2021, not only reversing the economic and social damage, but also delivering further gains to investors. But will this bridging operation, already deployed for several years to compensate for other headwinds, be sufficient to overcome what is an increasingly complex pandemic cocktail?

Autumn 2020 Issue

Recent economic data indicate that, outside of China and few other countries, the economic recovery remains uneven and uncertain, and is falling short of what is both needed and possible, in my opinion. Travel, hospitality, and other service-sector activities continue to face considerable challenges, complicating the overall employment picture. Moreover, a growing number of companies in other sectors are pursuing “re-sizing” initiatives that will likely lead to less hiring or even a wave of layoffs.

Adding to these economic challenges are deepening political uncertainties, especially in the United States. An already highly uncertain election process has been further complicated

by President Donald Trump’s COVID-19 infection. And now that a number of lawmakers have also contracted the virus, congressional deliberations on many vital matters have been delayed.

The US Senate has been left with little time to consider anything other than the nomination of a new Supreme Court justice, which the Republican majority insists on pushing through before the end of Trump’s term. As a result, there is only limited hope for a new fiscal relief package, pro-growth structural reforms, or any other meaningful US policy initiatives in the next few weeks Meanwhile, US participation in multilateral policy deliberations – not to mention America’s global leadership role more generally – remains curtailed. Making matters even more complicated, economic and financial responses elsewhere are also hitting a ceiling, particularly in the developing world, where governments are running out of policy space, owing to high deficits, rising debt, and more shaky currency dynamics. This policymaking uncertainty is being magnified by the larger struggle to meet the three main objectives of the pandemic era: maintaining public health and protecting citizens; avoiding further damage to the social fabric, economic welfare, and financial viability; and minimising restrictions, also in the interest of avoiding “pandemic fatigue.”

"Despite this uncertain, unsettling, and inherently volatile cocktail of background conditions, stocks and other risk assets have shown remarkable resilience."

Despite this uncertain, unsettling, and inherently volatile cocktail of background conditions, stocks and other risk assets have shown remarkable resilience. Most notably, a considerable share of investors has been willing to continue “buying the dip,” either because they believe “there is no alternative” to stocks, or because reliable market bounces over

CFI.co | Capital Finance International

the last few years have stoked their “fear of missing out.” This BTD-TINAFOMO conditioning, to use the market parlance, is underpinned by two factors.

First, and most important, investors are enormously confident in the willingness of systemically important central banks – namely, the US Federal Reserve and the European Central Bank – to inject liquidity at the first sign of serious market stress, regardless of how much further they have to venture into the domain of experimental unconventional policy. Yet by building an ever-wider wedge between market valuations and economic fundamentals, central banks may be jeopardising their own credibility, amplifying wealth inequalities, and increasing the risk to future financial stability.

Second, investors tend to regard most, if not all, of the current challenges to the marketplace as not just temporary but reversible. The assumption is that US election uncertainties will be resolved quickly; fiscal and structural reform efforts will be restarted, making up for lost time; and progress toward new COVID-19 treatments, vaccines, or herd immunity will continue to accelerate. In the meantime, markets have come to “expect the unexpected.”

I am in no position to predict the outcome of the election or the prospects for improvements in public-health conditions. But I do have some confidence identifying possible economic scenarios and their consequences, and on this question, timing is important. Whether a comprehensive policy response is enacted now or in a few months bears directly on its potential impact. i ABOUT THE AUTHOR Mohamed A El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council.

He is President Elect of Queens’ College (Cambridge University), senior adviser at Gramercy, and Part-time Practice Professor at the Wharton School at the University of Pennsylvania. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

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> Evan Harvey, Nasdaq:

The Board Perspective on ESG Sustainability is a moving target. Though we might want uniformity, unanimity, and harmonisation — of standards, disclosures, and data points — there is mostly disorder. The signal of value is strong enough to hold our interest, but all the surrounding noise limits our understanding.

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nvestors have certainly heard the signal.

Firms both large and small seek to leverage sustainability in some way, to integrate ESG data into an outperforming, long-term portfolio. Recent research continues to demonstrate that ESG-themed investments can match market returns (Morningstar, 02/19/20) or even exceed them (Financial Times, 06/13/20).

And if ESG returns are overhyped (Institutional Investor, 08/20/20), they are still driving a $30tn investment boom.

How are other stakeholders analysing and integrating sustainability issues into their decision-making? Certain aspects of this trend directly impact R&D, valuation, performance, transparency, and culture — which is why corporate boards have been increasingly involved. As of 2019, 43 percent of all Russell 1000 companies had already developed formal board oversight of ESG issues (Glass Lewis).

As a report from Deloitte’s Center for Board Effectiveness bluntly put it: “Directors need to understand the environmental and social impacts on the business strategy and risk profile of the companies they serve.”

CFI.co Columnist

I wanted to dig into this topic with an expert, so I turned to my Nasdaq colleague Kellie Huennekens. Huennekens worked at EY for many years and now supports our efforts to drive board excellence through (among other things) an integrated approach to ESG expertise, insights and technology.

We’ve heard about certain climate initiatives crossing the 50 percent vote mark with investors and companies lately. Did any specific vote during the 2020 proxy season surprise you?

Absolutely. It’s been an unusual proxy season in so many ways. Growing urgency on climate change is galvanising action. Oil majors announcing netzero ambitions. Continuing growth in investorcompany engagement. And growing investor support for shareholder proposals on climate risk.

For me, the biggest surprise (at least as of early July) has been the 70 percent support for a 32

"Today, best-practice is increasingly synonymous with ESG among and overarching concepts such as corporate purpose and a multi-stakeholder approach to governance." shareholder proposal on diversity and inclusion.

While vote support for shareholder proposals in general can vary based on the specific ask, the investor base and the company’s specific situation, this is an unusually high vote and appears to reflect current events.

COVID-19, the Black Lives Matter and MeToo movements, and the recent Supreme Court ruling on LGBTQ protections sharply focused attention to one key question: how are companies providing all workers with equal opportunity and equal protection?

To be clear, the prioritisation of diversity and inclusion — like climate — has been decades in the making, reflecting attention to systemic, societal and economic considerations that are foundational to economic growth and long-term corporate value. It just so happens that human capital and climate also are going to be two key themes running through many post-annual meeting engagement conversations and the runup to proxy season 2021.

What can proxy filings tell us about the current state of company practice, management, and reporting? Have you noticed an uptick in certain subject areas, such as climate change, gender and diversity, and so on?

A: While the numbers for 2020 are still coming in, an early look at proxy filings found that boards are demonstrating greater involvement on ESG. For example, proxy statements are increasingly including a “letter to shareholders” from the CEO, board chair or the full board to showcase business and ESG related achievements. Nearly all reviewed companies participated in investor engagement (98 percent, up from 92), 92 percent featured their ESG initiatives (up from 82 percent), and 86 percent said investor engagement covered climate change and CFI.co | Capital Finance International

environmental sustainability (up by 33 percent).

As part of the growing focus on ESG and shifting roles and responsibilities, some board committees have been renamed. For example, Nasdaq now has a “Nominating & ESG Committee.” Compensation committees, too, are increasingly codifying oversight responsibility of certain human capital matters – extending beyond the CEO and C-suite.

And they are adjusting the name of the committee to emphasise the human capital element: the Compensation and Human Capital Committee, for example. We’re concurrently seeing an increase in corporate disclosures about director skills and qualifications relating to environmental sustainability and human capital matters.

These are all trends that emerged over the past decade. One thing to watch is to what extent these changes accelerate.

Where do companies turn for guidance on communications with investors, either through the proxy or in other ways? Are there clear standards of disclosure when it comes to these emerging subject areas?

US companies can be incredibly innovative in formal corporate filings as well as other communications. This may be in the form of reporting or dedicated websites housing a company’s environmental and social metrics and related narratives. There may be videos where specific committee chairs explain the work that they do and their priorities in carrying out this work.

Smaller companies are demonstrating the creativity, too. Sometimes you’ll find a single sentence highlighting the board’s commitment

Autumn 2020 Issue

to diversity, which includes the percentage of board members who are diverse in terms of gender or race/ethnicity.

The richness of US companies’ voluntary disclosures can be inspiring, but it’s also messy in that they vary by company. This used to be something that was associated only with the very largest companies. Now a growing range of companies are voluntarily disclosing on topics of interest to their investors and other stakeholders.

My advice to companies is to look at largest five companies in their sector to see what they’re doing in terms of the proxy statement, their sustainability report/website, and governance documents. There’s a wealth of useful information there – in particular, about the direction of shifts in corporate practices and corporate disclosures.

We hear so much about the proxy system being potentially (or even purposefully) contentious; investor engagement is often relegated into the legal and risk category. Are US companies using the system to integrate feedback effectively, or are they using merely it to defray criticism?

Historically, “good governance” was seemingly built on securities law alone. After Enron and WorldCom, we saw companies voluntarily help define best-practice through their own practices.

Mandatory say-on-pay led to a reshaped investor engagement landscape and greater influence by investor stewardship teams. More recently, passive investing and ESG (both as an investment thesis and governance strategy) further accelerated ongoing shifts.

Today, best-practice is increasingly synonymous with ESG among and overarching concepts such as corporate purpose and a multi-stakeholder approach to governance. Leading companies are living this and a growing number of other companies are joining them. The next question is: when will “best practice” become “mainstream practice”?

Individuals divided on ESG agree that: 1) Companies should disclose on material ESG factors and 2) this disclosure should be vetted to mitigate inconsistent messaging and “greenwashing”.

ABOUT THE AUTHOR Evan Harvey is the Global Head of Sustainability for Nasdaq. He also serves on the Board of Directors for the UNGC Network USA and the Global Sustainability Standards Board for the GRI. 33

CFI.co Columnist

My recommendation to companies is that they consider reaching out to key internal (business and functional operations) and external (institutional investors, customers, suppliers and employees) stakeholders to learn what they consider to be material to the business. From this starting point, common themes or categories that the company should consider monitoring and disclosing on becomes clearer. i

> Lord Waverley:

Comprehensive UK Trade Policy Strategy for ‘a New Beginning’ The countdown to the United Kingdom embarking on a new chapter has begun. As I write, there are still many unknowns, the most pressing of which is whether we embark with or without a trade deal.

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ncertainty will prevail until that has been finalised. Trade affects every walk of life: food, goods and services, public services. Jobs and investment in our communities all depend on the UK having successful trade relations with the rest of the world, but to get it right means doing trade differently.

There are essential strategies that should be under consideration. It is time to take stock of what has not worked on trade, and to put it to right so we can build back towards a greener, more sustainable, inclusive economy.

It is time to look at these issues with fresh eyes and to bring a more inclusive approach to finding solutions. The UK is an innovative nation, rich in expertise and ideas and international networks.

The challenge is to align our efforts into a shared endeavour covering all aspects of trade.

It starts with having the right approach to trade governance to ensure that everyone — business, consumers, workers, academics and civil society — has a voice. We must be fully transparent and democratic in what we do. Only then will we build trust to deliver better outcomes.

CFI.co Columnist

It also starts with bringing together all aspects of trade and looking at the issues in a more holistic way. This is essential for an independent trading nation outside the European Union.

We are not there yet. Gaps in trade governance exist where some constituencies have a voice, but others do not. There are gaps in key strategy areas such as trade in services, and a lack of clarity and connectivity between trade policy, climate, and sustainability. It is of concern to some that we are launching into major trade negotiations without a clear strategy on what we are trying to achieve, and how. These gaps in skills and capabilities have been delegated to the EU for the past 40 years.

UK trade accounts for 30 percent of GDP. Creating a conducive international trading environment, having balanced relations with our trading partners, attracting foreign investment, 34

providing the best possible export support and access to trade finance, ensuring trade — these things are helping us deliver our ambitions. The need to become net-zero on carbon emissions while maintaining high standards is also in the mix. Policy is not simply about supporting exports; it is about all aspects of trade.

Never has creating an inclusive and sustainable approach for trade mattered more to the prospects and prosperity of the UK. In Parliament, we have launched the All-Party Parliamentary Group (APPG) for Trade and Export Promotion, which I have the honour of co-chairing.

The group will bring the voices of business, unions, consumers, academics, NGOs and civil society together into the heart of the national debate to create a genuinely collaborative effort to build consensus around the issues that matter and, crucially, deliver better outcomes from trade.

The APPG is strengthened by having as vice-chairs cross-party representation and recognition of the UK: Scotland, Wales, Northern Ireland and the nine regions of England. The group was founded on exactly this vision: to bring international trade policy, trade promotion, investment, and trade finance under one roof and into an inclusive and representative forum. This allows us to look at issues in a way that offers the best chance of delivering better solutions and outcomes.

Parliament can, and must, provide oversight and hold government to account in a way that builds confidence and trust.

The new APPG is ably supported with a secretariat run by an organisation that lives and breathes trade, the International Chamber of Commerce. The collaborative approach with shared endeavour will assist in driving our collective prosperity. It is a unique opportunity to rebuild our economy and our trading links in a fairer and more sustainable way.

Written and evidence sessions will begin in earnest in the new year. In the meantime, we are probing government on a range of issues: the need for a review of the regulatory framework CFI.co | Capital Finance International

Autumn 2020 Issue

to tackle the $3-5tn trade finance gap, the importance of maintaining standards and rights, trade deals, and transparency on the use of development funds to help accelerate the digitalisation of emerging economies.

Consultation has begun on a core programme and an ambitious outreach programme for the UK regions and parliamentary counterparts in other countries. We will also be reaching out to UK business organisations around the world to invite them to participate. There is plenty to consider. A rethink on the role of government and how we strengthen private sector capability, for example, should also be on the table for discussion.

A new Clause in the Trade bill, currently running its course in Parliament, has been proposed that would require Ministers to report to Parliament on how the benefits of new Free Trade Agreements are to be realised, including the trade and export promotion strategies they intend to adopt. After debate Government responded by agreeing to this in a two- year cycle. This is a commendable initiative to ensure the voice of business and those organisations that speak for and represent it are heard. Lord Lansley, having moved his amendments, concluded that...:�businesses can see how the Government will put resources behind the strategy to help them be more successful in the markets they are looking to in the year, or two, or three, ahead. That is what they critically want: stability in a strategy from government and the resources that they know they can rely on to get into those markets and support them.� This will bring understanding and trust by the private sector in a process that has lain dormant for 40 years.

The private sector plays a larger role in trade support in G7 counterpart countries. There is much to learn from countries such as Japan, which has a highly effective partnership between government and private sector. Too much is often asked and expected of government. Operating as an independent nation means government and public funds need to be focused where they add most value — in areas such as trade policy, negotiations, strategic sector support and capacity building.

This is a team endeavour. The time has now come to cast divisions aside and to work together for the common good. i

CFI.co Columnist

ABOUT THE AUTHOR Lord (JD) Waverley Independent Member House of Lords Twitter: @LordWaverley LinkedIn: linkedin.com/in/ jdwaverley 35

> Wealth on the Move:

HNWIs Continually Searching for their Own Little Piece of Paradise

By Tor Svensson Chairman CFI.co

There is continuous movement of wealth around the world. And the wealthy migrate both away from — and towards. ast year, high net worth individuals (a HNWI has personal net assets exceeding $1 million) in the emerging and frontier economies migrated, in particular, to the developed world and the top Anglo countries (except the UK, which lost HWWIs). The recipient countries benefitted from this imported wealth and human capital, while the developing world experienced loss of assets and brain drain.

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The biggest winners were the liberal western democracies, while the losers were the more authoritarian governments such as China, Russia, and Turkey. Law-and-order countries with reliable institutions and good governance benefitted from an influx of rich people. Less institutionally strong countries, such as Lebanon, Nigeria and Venezuela, saw an exodus. In Europe, low-tax countries such as Switzerland, Monaco and Malta gained while higher taxing UK and France lost out. The world’s HNWIs continue to gravitate towards stand-out shining (but smaller) stars such as Monaco, Singapore, UAE and Mauritius.

CFI.co Columnist

The five wealthiest countries in the world — all with per-capita wealth of over US$175,000 vs the $24,000 world average — are Monaco, Luxembourg, Switzerland, Australia, and United States. They all saw a new influx of HNWIs last year.

A recent report, Global Wealth Migration Review, by wealth intelligence firm NWWealth (newworldwealth.com) and AfrAsia Bank (afrasiabank.com) examines recent worldwide wealth migration trends. AfrAsia Bank is a financial services provider with innovative solutions connecting Africa, Asia and the World using Mauritius as the gateway for investment.

The period covered in the report for the global rankings is 2019, i.e. before the pandemic.

Andre Amoils, from NWWealth, the principal behind the research, says “the pandemic will most likely have slowed down migration this year.”

HNWIs can be divided into four bands: billionaires (>$1bn), centi-millionaires (>$100m); multi-millionaires (>$10m) and 36

"Law-and-order countries with reliable institutions and good governance benefitted from an influx of rich people." millionaires (>$1 million). Generally, mobility is mostly observed with tiers two and three above, as billionaires tend to roam little, regardless of their and politicians’ public threats. Millionaires cannot always afford uprooting. Billionaires may be quite comfortable, and the castle or mansion cannot travel, or they may be culturally tied-in from a multi-generational set-up — and rich enough to pay their taxes (or afford clever trust accountants).

HNWI’s motivation to change residence may have to do with moving away from current conditions or seeking new opportunities – or a combination of factors. In the words of the report, wealth migration figures are “a particularly important gauge of the health of an economy”.

It reads: “For instance, if a country is losing a large number of HNWIs to migration, it is probably due to serious problems in that country (i.e. crime, lack of business opportunities etc.).It can also be a sign of bad things to come as HNWIs are often the first people to leave — they have the means to leave, unlike middleclass citizens. If one looks at any major country collapse in history, it is normally preceded by a migration of wealthy people away from that country. Conversely, countries that attract HNWIs tend to be exceptionally healthy and normally have low crime rates, good schools and good business opportunities.”

The main reasons HNWIs travel often have to do with safety: escaping an oppressive government, crime, civil unrest or war. There are also financial concerns, including expropriation, extorsion and taxes.

CFI.co | Capital Finance International

Some wealthy people are drawn to a better lifestyle with improved climate (northerners seeking sun); less pollution (think China); and to enjoy space, nature and scenery (Greek attractions). Then again, HNWIs are also drawn towards work and business opportunities, better schooling, healthcare system, and education for their children as well as better standard of living (life in USA and Australia is great for multimillionaires and the better-off).

POPULAR DESTINATIONS Australia was the most popular country last year for HNWI inflow, with Sydney the dominating city of the world and Melbourne in the number three spot. There was also an influx to Brisbane, Perth, Gold Coast and the Sunshine Coast.

Australia’s points-based immigration system favours business owners and professionals such as lawyers, accountants, doctors and engineers.

No wonder Boris Johnson has advocated for such a system.

Australia with its 25 million inhabitants ticks plenty of boxes with its attractions: personal safety, low crime rates, climate, nature and scenery. There are good education options, it’s an English-speaking country (almost all HNWIs from around the world speak English as a first and second language). Australia also has a firstclass healthcare system, unlike the US, which can be expensive and complicated. It’s one of the fastest-growing economies, and positioned next to surging South East Asian markets.

United States (#2 ranked) has for recent modern history been one of the most favoured destinations, and had a net inflow of 10,800 HNWIs. Many cities welcome HNWIs, including Houston, which also benefits from intra-US general and HNWI movement due to no state taxes; e.g. California has high-taxes (and homeless, crime and forest fires). Benefitting from foreign HNWs on the west coast are Los Angeles, San Francisco, Seattle (jobs and entrepreneurship) and the Silicon Valley region.

On the east coast, chosen destinations are New York City, Boston and towns such as Greenwich.

The US is the world economic leader which dominates many sectors, including banking, asset management, technology, media,

Autumn 2020 Issue

entertainment, education. The US also shares some of the attractions as Australia; Canada (#4) has seen the arrival of 2,200 HNWIs.

particular Portugal, Greece and Malta. Tiny Monaco still enjoy inflows of 100+ HNWIs per annum.

Switzerland (#3 ranked) has for decades been a haven for the well-off, with 4,000 HNWIs moving there last year, predominantly to Geneva, ranked city #2 after Sydney. Switzerland enjoys safety status and a high standard of living. It is the second-largest wealth management hub in terms of AuM. HNWIs can stay close to their money, which is convenient with new cross-border agreements.

Mauritius enjoys comparable influx. It has attracted a steady stream of HNWIs over the past decade, perhaps due to the ease of doing business there. Mauritius ranks first in Africa and 13th worldwide in the World Bank’s 2020 ‘Doing Business’ report. Mauritius is also known for safety and a fast-growing financial services sector. The country is now home to around 4,000 HNWIs (as of June 2020), compared to 2,500 a decade ago.

This dynamic also attracted 1,500 HNWIs to Singapore, country #5 and city #4. Reads the study: “Singapore continues to attract HNWIs, mainly from the rest of Asia. Notably, Singapore is emerging as the top wealth management centre in Asia, which could assist in attracting many more HNWIs in the future.”

Some southern European countries have benefitted from investor visa programmes, in

Other countries with large outflows include India (#2), Russia (#3) and Turkey (#5). Developing and frontier countries including Iran, Pakistan, Nigeria, Vietnam, Lebanon, and Venezuela saw outflows exceeding 100+ HNWIs each.

Some people in the poor countries want to migrate too, but millionaires can afford to: wealth migrates. i ABOUT THE AUTHOR Tor Svensson is the Founder-Chairman of Capital Finance International (CFI.co), which supports the UN SDGs. Tor is senior adviser to a UN recognised NGO.

CFI.co Columnist

Dubai (city #5) has for some years been a chosen city for HNWIs and anybody who has been there will know why. It has futuristic architecture, smart organisation, and many attractions. About 85 percent of Dubai’s population is comprised of expats, so there is cultural diversity. The UAE is an appealing destination for wealth preservation and commerce.

OUTFLOWS The UK (#6 outflux) has seen about 6,000 HNWI leaving annually for the last few years. Recent Non-Dom legislation and other new taxation may have contributed. Or perhaps wealthy Brits just retire in the sun.

remains one of the wealthiest cities in Asia with over 140,000 HNWIs.

China (#1 in global outflux) had a 16,000-net outflow of HNWIs in 2019. However, it is creating new HNWIs so fast they outpace the migration.

The outlook is murky with the coronavirus, protests, trade wars and geopolitical tension with US and Australia.

Hong Kong (outflux #4) lost 4,200 HNWIs. Instability related to the recent Hong Kong protests has almost certainly damaged Hong Kong’s long-term appeal. But Hong Kong CFI.co | Capital Finance International

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Pioneering sustainable bonds.

Green.

Red. And Blue.

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Over a decade ago, we collaborated with The World Bank in developing their first Green Bond. That collaboration started mainstream Fixed Income portfolios for Green Finance. Since then a lot has happened. Our latest contribution was earlier this year. Daimler chose us as their advisor for a Green Financing Framework to accelerate their shift to a zero-emission fleet.

But Green is not the only way. We also advise on and arrange Red and Blue Bonds. Red Bonds address social issues like Affordable Housing and Diabetes treatments.

And the Blue Bonds finance the protection of sensitive marine environments, water quality, and clean water supply.

There’s a lot more to be done. And the opportunity to build the world as it should be is greater than ever.

Read more about our work at SEBGroup.com

CFI.co | Capital Finance International

Autumn 2020 Issue

>

Economic Recovery From the Pandemic May Come to Resemble a Square Root

By Otaviano Canuto

Signs of recovery in various parts of the global economy started in May, after the depressive dip imposed by Covid-19.

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hey emerged after the easing of restrictions on mobility and reflected policies of flattening the recession curve (income transfers to part of the population, credit lines to vulnerable companies, and others).

Far from giving back the GDP lost in all countries, there are doubts about the strength of the recovery.

There is a similar sequence in each country, but there are differences due to the rhythms of the pandemic, and the effectiveness, magnitude, and time scale of the policies to flatten the recession curve.

The pace of the pandemic matters not only because of the possibility of returning restrictions on mobility, but also because it affects customer behavior. It is not by chance that the signs of recovery are stronger in the manufacturing industry and weaker in the service segments that involve an agglomeration of people.

Take, for example, China – the “first in, first out”.

Its GDP grew 3.2 percent per year in the second quarter, above expectations but still leaving the level of its GDP with a decline of 1.6 percent in the first half of the year. On the other hand, retail sales disappointed. It should be the only large economy to show growth at the end of the year (one percent), but well below its pre-Covid trajectory.

It is worth noting that the Chinese resorted to the growth-cum-debt policy that was applied after the global financial crisis of 2008-09. That led to concerns about its financial stability. Recent drops on Chinese stock exchanges were echoed on Wall Street and in Europe.

In the United States, the recent Federal Reserve Bank report —the "beige book" — showed increased activity in all districts, but again far from pre-Covid levels. Industrial production rose 5.4 percent in June, to a large extent due to the normalisation of production of vehicles and auto parts. High-frequency indicators for services, however, show lower levels than before the pandemic.

Employment levels rose in May and June (two and three million, respectively). To a large extent it was the reversal of temporary layoffs, accompanying

the return of mobility. The group of permanently unemployed job seekers increased by two million.

In Europe, the dive caused by Covid-19 was deeper than in the US, and the recovery has been faster.

Industrial production fell 29 percent in March and April, regaining 14 percent in May. But, like in China and the US, with services lagging.

Now take Brazil as a reference for emerging markets. The fall in GDP in the second quarter was less than expected, partly because the emergency aid disbursed by the federal government until the end of May was larger than the losses in the wage bill to date. Doubts arise, however, regarding positive surprises in the second half of the year, not least because everything will depend on the pace of recovery of informal employment at the end of emergency transfers in August.

In the second half of the year, everything will depend on the pace of new virus infections, as this will continue to negatively affect the economy. Consumer behavior tends to reflect that, regardless of a possible return to mobility restrictions.

What will be the shape of the economic recovery curve in the different cases? Will any country have a “V”, that is, the return of the economy in a short time to the previous trajectory after suffering a strong blow during the pandemic? Or a "U"? Perhaps a "W" if new outbreaks of Covid-19 appear and new rounds of mobility restrictions are established?

CFI.co | Capital Finance International

Probably the square root sign illustrates the most likely scenario, with some recovery of the lost GDP but not a return to the previous trajectory.

The surge in demand, previously pent-up, is momentary and exhaustible. It is not possible to compensate for dinners in restaurants or trips that did not occur during restrictions.

Additionally, as observed in all countries, the fear of physical proximity and restrictions on the occupancy of supply capacity will keep limits on the recovery of services.

The collapse in economic activity will leave scars in terms of closed firms and jobs that will not return. Fiscal restriction walls impose limits on the duration of policies to flatten the recession curve. It is not by chance that almost all economic projections suggest national GDPs at the end of next year will still be below last year's levels — except, perhaps, for China and India.

Success in crossing the coronavirus crisis will be measured by the proximity, but not return, to the previous GDP trajectory. The task will be to deal with structural unemployment created by changing consumption patterns, increased levels of poverty in much of the world, the concentration of income, the challenges posed by digitalisation and the trend to relative deglobalisation.

One should add the need to move toward a green recovery. The calculation of the square root will depend on the policies applied in each country. i 39

> Autumn 2020 Special

From Keynes to Covid — It’s Been a Bumpy Ride

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ccording to the celebrated British economist John Maynard Keynes, mastering his area of specialisation meant wearing many hats and serving as a mathematician, historian, statesperson and philosopher. “(An economist) must contemplate the particular in terms of the general,” he wrote, “and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future.” (We’ll forgive Keynes for the pronoun gender-bias; the field has become more diverse since the early- to mid-1900s.)

Economics is an inexact science, looking to past and present to make predictions about the future. It is a branch of the social sciences that explores the relationship between human behaviour and resource management, using empirical methods to construct theories to explain economic actions. Macro-economists are interested in the big picture, focusing on the national and international levels, while micro-economists seek to understand decisionmaking at the individual, business and organisational level.

Economics represents a vast field of study that affords countless applications in daily life. Anyone who has tracked their money in monthly budgets and managed to stay on top of their bills could be said to have some basic insights. Delving deeper into the discipline could help to better understand — and anticipate — market behaviour.

However, the current crisis has sent the experts scrambling; time-tested economic models refuse to accommodate either the pandemic or the much-vaunted New Normal.

Covid-19 has sent shockwaves around the world. It has overloaded healthcare systems and initially sent markets into freefall, an economic crisis of unprecedented scale.

According to The Brookings Institution, it has created “a demand shock, a supply shock and a financial shock all at once”.

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Leaders and economic experts have gathered (virtually) on the World Economic Forum's COVID Action Platform to discuss the way forward.

“Given the nature of the crisis, all hands should be on deck, all available tools should be used,” said Christine Lagarde, the European Central Bank president. “We are providing support, as attractively as we can, so that from the household to the big corporate account, all economic players can access financing through their banks."

Amina Mohammed is the Nigerian diplomat and politician serving as the fifth deputysecretary-general of the UN. She warns that the recession — now in full swing across economies worldwide — “will be worse than the one experienced in 2008”. She encourages businesses to focus on “scalingup production (and) making sure supply chains are alive and reliable”. Workforce retention and young engagement should also be priorities, she adds.

Brian Moynihan, Bank of America CEO and the chair of the WEF’s international business council, gave a nod to the swift actions of central banks, resulting in markets “flooded with liquidity that has been able to stabilise markets to a certain degree across-the-board”.

To manage the ongoing crisis, Moynihan suggests that companies set their employees and customers as the number-one priority.

Employee care should follow a three-point plan: “Keep them well, keep them employed, and keep them mentally healthy.”

The following pages feature profiles on lauded professors and trusted government advisors — all leaning towards that elusive “mastereconomist” status. They explore economics in relation to poverty, debt, retirement, trade and crisis management.

Enjoy their words of wisdoms and glean from them what you can. Because it isn’t over yet… i

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Autumn 2020 Issue

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> ATIF MIAN ECONOMIST Theory, Practice, and Macro-economic Reality in a World Longing for Rebound would be the only viable solution at this point, he believes.

Personal debt in a post-Covid world, according to Mian, will result in income shocks, layoffs or reduced salaries, forcing households to make adjustments that work against the overall economy. Local governments and businesses will be feeling the same pinch, and implementing similar measures. Mian calls for a collective restructuring of debt levels: “Some of it will have to be written-down, some restructured into debt of different maturities.”

Mian has been warning about the downward spiral that out-of-control debt foretells. Covid could hasten that — depending on policy response. Without a restructuring of debt, the danger of economic contraction could become more prevalent, he fears. He worries about families already stretched thin by lower incomes, uncertainty and debt.

“When [faced with] these kind of squeezes before this crisis, the typical response of policymakers effectively has been to somehow try to give them even cheaper credit,” he says. “That cycle is going to be almost impossible to pursue this time round.

“Economic disasters are almost always preceded by a large increase in household debt.”

theories in mind as you dive deeper into the more ‘micro’ level of granular datasets.”

The above proclamation comes from a critically acclaimed 2014 book, House of Debt, written by research colleagues Atif Mian, from Princeton University, and Amir Sufi, from the University of Chicago Booth School of Business.

The proliferation of micro-level data over the past decade has shown Mian the importance of understanding heterogeneity across datasets.

“That really allows us then to connect finance to the macro-economy in a way that is much more based in actual data.”

The duo presented macro-economic theories linking major increases in personal debt with major recessions — then backed those theories up with hard data.

The Pakistani native notes that global debt to GDP has almost doubled, with over $70tn in global debt accumulated since the ‘80s. Mian attributes unequal and unbalanced global growth as the root of the debt addiction. Covid is only going to further complicate matters.

“We have a number of different explanations for what might be causing those booms and busts,” Mian told Equitable Growth in 2018, “what might be causing some countries to grow more aggressively than others. But our number of theories is much larger than the number of observations we have, which is a limiting factor of macro-economics just from an empirical standpoint.

“So, this is where I feel micro-data comes in, which is that it allows us to open up this space by giving us, in technical terms, a lot more degrees of freedom. And that can be used fruitfully and intelligently if you keep the 42

“If you look at the responses to this crisis, it is often going to lead to an incredible increase in the levels of debt that households, governments and corporations are going to have,” Mian said in an interview with Adil Najam, the inaugural dean of the Pardee School of Global Studies. “It’s very hard at that point in time to run macro policy the usual way.”

Interest rates have already hit rock bottom and investor coffers are running low, and Mian sees a return to normal as “close to impossible”. A massive restructuring of the financial system CFI.co | Capital Finance International

“We’ve been kicking this can down the road by ramping up more and more on credit creation, and letting people binge on credit. Either them borrowing themselves or governments borrowing on their behalf, effectively.”

Mian says the trend of unequal economic growth has been gathering steam over the past 30 to 40 years, with a select few benefiting. “That process is fundamentally unsustainable at a global macro level. The creation of credit is the other side of the process that is generating this unequal growth.”

Indebted countries with greenback balances will have to seek alternatives to the traditional repayment plan of boosting revenues through exports. Mian predicts that path will be become more precarious due to the pandemic. Many countries will find it neither possible nor advisable for the IMF to intervene and “roll-over existing debts” — unlike other recent situations.

“I think it would help if the global economy comes together more in the spirit of the Marshall Plan,” Mian says, referencing the $15bn US programme that helped to finance European recovery after World War II. For realistic recovery, Mian would like to see “more avenues of risk-sharing, where the richer countries lessen some of the burden of the poorer countries”.

Autumn 2020 Issue

> LUCREZIA REICHLIN

LONDON BUSINESS SCHOOL ECONOMICS PROFESSOR & NOW-CASTING ECONOMICS CHAIRMAN & CO-FOUNDER

Data Pioneer hopes for a New Era of Economic Co-operation

Italian economist Lucrezia Reichlin is recognised as one of the pioneers of big data.

Reichlin made history as the first female directorgeneral of research at the European Central Bank (ECB), and currently teaches economics at London Business School.

The Rome native decided to pursue economics at an early age. “Economics is a part of everybody’s life,” she says, “so it is important to understand how income is generated, how it is distributed, how an economy grows, or why some economies are doing better than others, why some countries are doing better than others.”

Reichlin left Italy to complete a doctorate programme at New York University then went on to teach at the Université Libre de Bruxelles for 10 years. It was there, with her colleague and future co-founder Domenico Giannone, that she began the research that led to the foundation of her economics company, Now-Casting.

The two academics coined an economic term with their title (“now-casting” is a contraction of now and forecasting) and provided a methodology for its implementation. Now-casting is defined as the prediction of the present and the very near future, and an analysis of the very recent past.

“More broadly we can define it as the exercise of reading, through the lenses of a model, the flow of data-releases in real time,” Reichlin explains.

Policy makers and private investors trust NowCasting to create accurate and timely economic

forecasts from a diverse collection of hard and soft data-input sources, incorporating everything from employment figures and industrial surveys to consumer feedback and social-media posts.

It’s a fully automated process which continuously updates.

“If there is a signal to be picked up in the economic data-flow, the Now-Casting model tends to pick it up weeks or months before other forecasts,” the company says. The service provides “a clear and up-to-the-minute gauge of the real economy” as well as “a transparent and quantitative way to read the news flow”.

Today, Reichlin is a non-executive member of AGEAS Insurance Group and Messaggerie Italiane, as well as a trustee of the International Financial Reporting Standards and the Centre for Economic Policy Research. She is also a fellow of prestigious institutions such as the British Academy, and is a regular contributor to international publications. Her cross-sector experience in academia, policymaking and private enterprise gives depth and clout to her opinion.

“The current geopolitical context should reinforce Europe’s motivation to bolster its crisis-management capacity,” Reichlin warned in the pages of the Project Syndicate media organisation. She reminded readers of the international co-operation that predominated when the US and Europe were on friendlier terms, and currency swap lines could be quickly established to stabilise economies.

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“Today, by contrast, isolationism is on the rise, with the US taking the lead,” she wrote in March.

“The US Federal Reserve consulted no one before implementing its recent emergency interest-rate cut. One shudders to think what would happen if European banks urgently needed dollar funding in this context.”

The pandemic has caused shockwaves for families, industries, and social liberties. It has affected every aspect of our lives, and Reichlin believes the road to recovery will be a long one.

“The COVID-19 crisis has laid bare our lack of resilience, not only in terms of health, but also with regard to the environment and social protection,” she says. “Given this, the EU needs to invest not only in supporting economic recovery, but also in building a more resilient society based on our core values.

“Despite European countries’ shortcomings, they lead the world in terms of social protection and individual rights. They should build on these strengths in order to create fairer, smarter, more sustainable societies. Every aspect of the EU’s pandemic-response strategies should be designed with an eye toward those goals.

“The European Union has always advanced on the back of crises. In this sense, the COVID-19 outbreak could represent a chance for the EU to create a powerful crisis-management mechanism, which pools members’ resources and channels them toward a co-ordinated fiscal policy.”

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> NGOZI OKONJO-IWEALA

ECONOMIST AND INTERNATIONAL DEVELOPMENT EXPERT

Nigerian Economist Throws Hat Into the Ring for Top WTO Post rising through the ranks to become its secondin-command. She was the first woman to serve as Nigerian Finance Minister (two terms) and Foreign Minister, and has been acclaimed as a crucial force in the country’s economic reform.

According to Forbes, Okonjo-Iweala helped Nigeria — which boasts the largest economy in Africa, with a GDP of $502bn — grow an average of six percent per annum over three years. She spearheaded initiatives to reduce the country’s national debt, improve government transparency and curtail corruption, and is credited in large part for Nigeria’s increased economic stability and improved credit rating.

Okonjo-Iweala refers to trade as a passion and a mission. She believes the WTO’s core principles to be sound, but says its handbook could do with an overhaul to make it more relevant and effective. Stability, predictability, nondiscrimination, fairness and transparency are the principles on which the WTO and the world trading system were founded, she says, adding that these guidelines had halted trade wars in the past and would deliver again — if members could reconnect and recommit to those ideals.

“The WTO appears paralysed at a time when its rule book would greatly benefit from an update to 21st Century issues,” she said, listing e-commerce and the digital economy as priorities that have been highlighted by the global pandemic.

Ngozi Okonjo-Iweala is renowned as an economist and an expert on international development. Now the Nigerian native is vying for the top position at the World Trade Organisation (WTO).

The current WTO director-general, Roberto Azevêdo, is stepping down, and Nigeria has nominated Okonjo-Iweala to take his stead.

Candidates from around the world are competing for the post, and five of the initial eight nominees have advanced to the second selection round. If elected, Okonjo-Iweala would become the first woman — or African — to hold the role in the organisation’s 25-year history. She is one of three women hoping for that honour; Yoo Myung-hee of the Republic of Korea and Amina C Mohamed of Kenya also made the first cut.

“If I get chosen, I hope it is a sign, not only to women and girls in my country, but to women and girls worldwide, that women can do it,” Okonjo-Iweala said. “But my insistence is that choosing a director-general for WTO should be on merit.”

She pitched for the position in Geneva this July.

Okonjo-Iweala has expressed her respect for all the contenders — but insists that she is the one 44

with the right “bundle of skills and leadership acumen” to put the organisation back on track.

“I have all the attributes the WTO needs for leadership,” she said. “Throughout my career, I have been involved in difficult negotiations with high political stakes, such as tough economic reform programmes, including trade policy reforms in a variety of middle- and low-income countries, and debt relief negotiations with both the Paris and London clubs. I have brokered numerous agreements that have produced win-win outcomes. I have the skills to effectively engage governments and other stakeholders, and build consensus around areas of common interest.”

Okonjo-Iweala graduated with an economics degree from Harvard University (magna cum laude), and holds a doctorate in regional economics and development from the Massachusetts Institute of Technology (MIT).

Over her 30-year career, she has featured in respected publications, including Forbes’ 100 Most Powerful Women in World list, TIME’s 100 Most Influential People in the World, and Fortune’s 50 Greatest World Leaders.

She jump-started her career with an internship at the World Bank Group and spent 25 years CFI.co | Capital Finance International

“Trade is not an end in itself; it’s a means to an end,” she told The Africa Report. “We’ve seen it as an instrument that helps deliver development and, if properly managed, those who have been marginalised can be brought in. Women and small and medium enterprises can be brought in — those are things that WTO should be looking at.

“I see the ability for developing countries, especially the least developed countries, to benefit, whilst not taking away from developed countries. To get to these issues, you need an honest broker, an objective head, someone with the right skills, someone who knows the subject but with strong political and negotiating skills, the managerial skills to move things and also be someone who can listen well, who is very solutions-oriented.”

Could Okonjo-Iweala become the WTO’s next listener-in-chief? Perhaps, but in the meantime, she will divide her time among her boardroom responsibilities as chair of Standard Chartered Bank, Twitter, Global Alliance for Vaccines and Immunisation, and the African Risk Capacity, among others. She was recently appointed special envoy to the IMF and the WHO’s Covid-19 support.

Autumn 2020 Issue

> JUSTIN YIFU LIN ECONOMIST Eastern Perspectives, Western Preconceptions, and Prospects for Shared Economic Growth Justin Yifu Lin made history in 2008 as the first non-Westerner appointed as chief economist and senior vice-president of the World Bank.

Lin, one of China’s most renowned economists, currently serves as an official advisor to the Chinese government and as dean of Peking University. He is a regular guest on television news programmes, helping to demystify the East’s economic approach for Western audiences.

Over the past half-century, China has gone from a poor country to global superpower.

“China is becoming a major power, not necessarily a dominating power,” Lin says.

“The responsibility that comes with that is that when you become more developed, you have the obligation to help those left behind.”

According to the principles of New Structural Economics — which were introduced by Lin in 2011 and officially endorsed by the government shortly thereafter — China’s success could be exported, and replicated.

“The rise of China will not only be good for China but provide a great opportunity for other countries,” Lin asserted in an interview with The Harvard Gazette. He based this belief on his nation’s commitment to Confucianism, which stresses that the path to prosperity lies in uplifting others and sharing successes. “For example, the Belt and Road Initiative, with its focus on infrastructure connectivity, is not a debt trap to achieve new colonialism, but an opportunity to remove the infrastructure bottlenecks of growth for countries in South Asia, Central Asia, Africa and many parts of the world.”

The simmering trade dispute between the US and China hurts everyone, Lin says, from countries to consumers. “Trade is a win-win, and a trade war isn’t a win for anyone. China did not have any intention to have a trade war with the US. From many prominent economic theories, we know that protectionism is not good, and globalisation would be a better win-win for everyone.” Lin added that the economic woes of the US resulted from internal problems, “like the stagnation of wages of blue-collar workers and the declining size of the middle class” and that better trade terms with China would do little to address those shortcomings.

The economist has written 32 books and has been awarded honorary doctorates from 10 universities around the world. He weighedin with People's Daily Online to comment on China’s economic “report card” for the first six months of 2020. The results, he said, prove that the Chinese economy can cope with uncertainty.

“You cannot use restrictions or trade protectionism to address those kinds of structural problems,” he said. “I think trade war is not good for China; it’s not good for the US, and it’s not good for the world.”

“It can be said that [the Chinese economy] is even better than we originally expected. The COVID-19 epidemic has had a great impact on the global economy, and the economies of most countries are in the doldrums.”

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Although China experienced a 6.8 percent drop in GDP in the first quarter of this year as compared to last year, it showed a 3.2 percent jump in the second quarter.

“It can be said that China is the only country in the world with such an achievement,” he said. “As long as we continue to do a good job in the prevention and control of the epidemic, make full use of the conditions conducive to economic growth, maintain our strength, and concentrate our efforts on doing our own things, I believe we can still become the main driving force for global economic growth.”

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LAUREATES, MIT PROFESSORS, AND > ABHIJIT BANERJEE & ESTHER DUFLO NOBEL POVERTY ACTION LAB FOUNDERS

Poverty Myths, and Professorial ‘Power Couple’ Dispelling Them Abhijit Banerjee and Esther Duflo give new meaning to the term “power couple”. The husband-and-wife team are economics professors at Massachusetts Institute of Technology (MIT), critically acclaimed authors and, most recently, Nobel laureates.

The duo has dedicated their lives to combating global poverty and compiled a repository of empirical data to help policymakers better understand poor people, “in all their complexity and richness”.

Along with Sendhil Mullainathan, a former MIT colleague and recipient of the MacArthur Foundation “genius grant”, Banerjee and Duflo co-founded the Abdul Latif Jameel Poverty Action Lab (J-PAL) in 2003 to support povertyreduction policies with evidence-backed research. The global centre conducts randomised field experiments targeting a range of micro- and macroeconomic trends.

J-PAL is based at MIT and has regional offices at leading universities in Africa, Europe, Latin America, the Caribbean, North America, South Asia and South East Asia. The donor-funded organisation employs about 400 research, policy, education and training professionals, and counts nearly 200 professors in its network of affiliated international universities. Since its launch, J-PAL researchers have conducted over 1,000 evaluations in 86 countries, and the organisation has been granted $63m in research funding.

Banerjee and Duflo have a soft spot for India and have focused much of their research there.

Banerjee was born in Mumbai; Duflo first visited India as a 24-year-old graduate student. Their personal observations didn’t align with existing stereotypes of poverty, and they examined those misconceptions in their 2011 book, Poor Economics.

“This urge to reduce the poor to a set of clichés has been with us for as long as there has been poverty. The poor appear, in social theory, as much as in literature, by turns lazy or enterprising, noble or thievish, angry or passive, helpless or self-sufficient.

“It is no surprise that the policy stances that correspond to these views of the poor also tend to be captured in simple formulas: ‘Free markets for the poor’, ‘Make human rights substantial’, ‘Deal with conflict first’, ‘Give more money to the poorest’, ‘Foreign aid kills development’ and the like.

“Unfortunately, this misunderstanding severely undermines the fight against global poverty: Simple problems beget simple solutions,” they 46

warned, adding that “the field of anti-poverty policy is littered with the detritus of instant miracles that proved less than miraculous”.

They published a follow-up book, Good Economics for Hard Times, in November of 2019. It compiles research that challenges accepted theories of development economics, suggesting that “it may be time to abandon our profession’s obsession with growth” in favour of policies that acknowledge the “desire for dignity and human contact”.

“Restoring human dignity to its central place, we argue in this book, sets off a profound rethinking of economic priorities and the ways in which societies care for their members, particularly when they are in need.

“Everyone gets things wrong. What is dangerous is not making mistakes, but to be so enamoured of one’s point of view that one does not let facts get in the way. To make progress, we have to constantly go back to the facts, acknowledge our errors, and move on.

“The call to action is not just for academic economists — it is for all of us who want a better, saner, more humane world. Economics is too important to be left to economists.”

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Banerjee and Duflo have joined a long list of MIT-affiliated Nobel laureates, sharing the 2019 Nobel Prize in Economics with Harvard’s Michael Kremer for their “experimental approach to alleviating global poverty”. (Harvard boasts more Nobel laureate affiliations than any university worldwide: 160; Cambridge comes in second with 120, while MIT ranks fifth with 97.)

MIT president L Rafael Reif praised the professors for their work. “By providing an experimental basis for development economics, professors Banerjee and Duflo have reimagined their field and profoundly changed how governments and agencies around the world intervene to help people beat poverty,” he said. “In doing so, they provide a proud reminder of MIT’s commitment to bringing knowledge to bear on the world’s great challenges.”

Duflo, 46, is the youngest person to win an economics Nobel, and the second woman after Elinor Ostrom in 2009. Duflo and her husband are the sixth couple to win a Nobel.

“Showing that it is possible for a woman to succeed and be recognised for success I hope is going to inspire many, many other women to continue working, and many other men to give them the respect that they deserve,” she said.

Autumn 2020 Issue

> OLIVIA S MITCHELL FOUNDER OF MODERN PENSION RESEARCH Retirement Dreams Go Up in Smoke as Pandemic’s Effects Begin to Bite Olivia S Mitchell, one of the most respected voices on US pension and social-security systems, gives a grim forecast for retirement prospects in the postpandemic era.

“People will need to work longer, save more, invest in their health with more vigour and — possibly — expect less,” she warned in a CRAIN interview.

Mitchell is a prolific author, with 36 books and hundreds of articles to her name. She has travelled the world as a government advisor and has been rewarded with honours and awards over her 40-year career. She was listed as one of CRAIN’s Top 100 Innovators, Disruptors and Change-Makers in Business in 2016, and was named as one of the 25 Most Influential People and 50 Top Women in Wealth by Investment Advisor Magazine in 2011.

Mitchell studied economics as an undergrad at Harvard University before finishing graduate school at the University of Wisconsin-Madison.

She began her teaching career at Cornell University and has been at The Wharton School of the University of Pennsylvania since the early ‘90s. In addition to teaching two courses at Wharton, Mitchell is the executive director of the university’s Pension Research Council and the director and founder of the Boettner Centre on Pensions and Retirement Research.

“The outlook for retirement is worse than a year ago,” she said in a July interview with The Philadelphia Inquirer. “We’re now in a different world.” She believes that low savings rates and shocked investment portfolios combined with “a new era of low [capital market] returns” will have a dampening effect on retirement plans.

“Even though the stock market came back this year [after the pandemic hit], it won’t remain up reliably, especially as the US government hasn’t figured out how to manage the pandemic,” she said.

According to the IMF’s Finance and Development magazine, the trillion-dollar US Social Security system has already begun the descent into deficit. Life expectancy is on the rise due to advances in healthcare and technology, and elderly populations worldwide are booming. The number of people in the US aged 65 and over is expected to almost double from the 2016 count of 49 million to 90 million by 2060. Within the next 15 years, US social-security reserves will be so depleted they will only be able to pay out threequarters of scheduled benefits. Pension schemes worldwide are receiving fewer contributions and more claims, making the impending insolvency a widespread crisis. Mitchell believes that Covid

may have precipitated the fall of American social security.

“The insolvency may move up to 2029, instead of later, because of the pandemic,” she wrote in a recent research paper. “Medicare also faces shortfalls. I haven’t seen new projections, but it stands to reason Medicare costs are rising. As a result, taxes need to rise. We have huge deficits now in the trillions of dollars, not counting social security and Medicare.

“Amid the pandemic’s spread, capital market values shuddered, health care systems staggered, with millions of infected patients, joblessness shot up, retirement funding shrank, government tax revenue contracted, and unprecedented government spending had become the new normal.”

Mitchell cites the potential rising cost of healthcare as one of the most uncertain variables when planning for a comfortable retirement: “You can project, perhaps, your rent, your cost for autos, your cost for vacation — if you have enough money to take them — and how much money you want to give your grandchildren, if you like them. But the healthcare unknown is absolutely frightening.”

CFI.co | Capital Finance International

The future doesn’t have to be so gloomy, she says, if policymakers begin to look at new funding sources and pension providers consider switching from defined-benefit plans to definedcontribution plans. She encourages individuals to take charge of their finances by charting expenses and earnings in monthly budgets, and implementing plans to reduce debt. She advises everyone to establish a six-month salary emergency fund, and then to focus on building a nest egg for those golden years.

Mitchcell also says it would be wise to work for as long as possible and to resist the temptation of early retirement. Deferring benefits until the age of 70 would significantly boost monthly payouts.

Mitchell keeps busy outside of her university career as an independent director on the Wells Fargo Fund Boards, vice-president of the American Economic Association, and member of numerous research projects and advisory councils.

The economist, who turned 67 in January, says that her “insights into the many risks associated with aging lead me to conclude that, barring very poor health, I will never retire”.

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> Europe

Sweden: A Controversial Approach Belatedly Vindicated

The Swedes are a trusting lot. Asked if they usually confide in ‘other people’, almost two-thirds of Swedes answered ‘yes’. In the US and the UK, the comparable numbers hover around the 30 percent mark. According to data tabulated by the World Value Survey, just about 4 percent of Colombians trust others whilst, on the other end of the scale, 73 out of 100 Norwegians expressed no fear of relating to their fellow men or women – and trusting them.

The exceptionally elevated level of trust displayed in Sweden reflects on the government as well. Although the share of people with a ‘very large’ confidence in the national government has retreated slightly from its 2010 high of 52 percent, most Swedes are reluctant to think ill of their elected officials and bureaucrats.

As a result, Swedish society is rather compliant and placid, if not serene.

The concept of civil disobedience is alien to the nation. Whomever dares break away, rebel, or otherwise act up and shred the social covenant is cast to the fringes of civil society where the maladjusted and troubled dwell in relative comfort but largely without voice or face.

Sweden: Stockholm

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s a swift and radical deviation from the highly prized and peaceful normal – the country hasn’t suffered a war in over two centuries – the Corona Pandemic profoundly upset and confused Swedish society. Moreover, its government lacked the legal instruments – readily available to its counterparts elsewhere – to tackle the novel emergency. The constitution, comprised of four (uncodified) basic laws of which the oldest was drawn up in 1634, has no provision for declaring of state of emergency outside war. As a result, the government did not possess the authority to restrict freedom of movement.

DUALISM An additional limitation was found in the administrative dualism the characterises the Swedish attitude to government. A large number of state institutions are fully autonomous and, as such, beyond the reach of ministers. They operate and act regardless the government’s wishes. Thus, the Public Health Agency (Folkhälsomyndigheten) ruled supreme during the pandemic. Its edicts, pronounced with gravitas by state epidemiologist Anders Tegnell, carried significantly more weight and meaning than the interventions of Prime Minister Stefan Löfven and even the televised appearance of King Carl XVI Gustaf.

Finally, the national government’s powers are also limited by municipalities and lands that set their own policy and manage public healthcare, social welfare, and a host of other services – and do not take kindly to interference from Stockholm. About the only option open to the national government was to restrict public gatherings to a maximum of 500 at the onset of the pandemic, a number later reduced to 50.

Even so, the decision needed the approval of both the national parliament (Riskdag) and every regional chamber (Landsting).

The choice, made in early March, to pursue herd immunity was founded as much on constitutional necessity as it was on public healthcare considerations. The government has now admitted that it made a mistake. At the beginning of May, just about a quarter of the 2.4 million people living in the Greater Stockholm area had obtained some degree of immunity by exposure to covid-19. The 50 percent expected by mid-June was never attained.

Whilst the viral outbreak reached its first high in early May, and fatalities were mounting at an alarming rate, most Swedes remained steadfast in their trust of official policy even though their country came in for strong criticism internationally. The absence of a lockdown caused almost universal consternation as people confined to their homes elsewhere in Europe and the world watched in astonishment as ‘irresponsible and frivolous’ Swedes enjoyed the springtime in the great outdoors, albeit keeping their distance and avoiding crowds as per medical recommendation.

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"Other countries have been opening up whilst the virus was still present, emulating, in a sense, the Swedish approach which excluded stay-in-place orders from the get-go."

In soon transpired that in a high-trust society a hint or recommendation suffices to get the message across. Remarkably, the government took a backseat and let public health authorities set policy. Even as the death toll mounted, and the herd immunity idea was rather hastily ditched, political fallout remained close to nil.

Support for Prime Minister Löfven’s Social Democratic Party actually increased noticeably.

HOME ALONE At Malmö University, Senior Lecturer Astrid Hedin explained that Sweden is sparsely populated with just 25 inhabitants per square kilometre and people are used to keeping their distance from each other. Besides, she added, Swedes are not known for their touchy-feely disposition. Ms Hedin also noted that singleperson households make up 57 percent of the total, the highest share in Europe.

However, communication was key to preserving the Swedes’ institutional trust: “The Public Health Agency has not presented itself as infallible. Instead, they emphasised time and again their willingness to change policy should another country find a better way of addressing the pandemic.”

Although happy with both their government and public health officials, Swedes were visibly hurt by, and disappointed in, the neighbours.

Denmark, Finland, and Norway closed their borders to travellers from Sweden which pointedly did not follow suit. The avalanche of international criticism proved a painful novelty for a people more accustomed to being celebrated for their model behaviour – and neatly organised country.

However, of late the tide has been turning in Sweden’s favour as other countries realise that strict lockdowns represent but a blunt policy instrument that can only be used once before fatigue sets in. As the pandemic continues, weariness is on the rise with increasing numbers of people in the United States, the United Kingdom, Germany, and elsewhere giving voice to their discontent with restrictions on civil liberties – real or imagined.

In fact, other countries have been opening up whilst the virus was still present, emulating, in a sense, the Swedish approach which excluded stay-in-place orders from the get-go. Tegnell still argues that the effectiveness of lockdowns in CFI.co | Capital Finance International

containing the spread of the virus is yet unclear and far from a scientific given.

Dr David Nabarro, one of six World health Organization special envoys on covid-19, heaped praise on Sweden’s light-touch approach and said that, in the long run, universal behavioural change is probably the only way to limit outbreaks. At 57.16 per 100,000, Sweden’s covid-19 death rate ranks almost at par with the US (55.95) and just below that of Brazil (57.68) and Italy (58.71). It is also not that far removed from Spain’s (62.09) and the UK’s (62.55). However, Belgium – which imposed strict lockdowns and reduced ‘social bubbles’ to a minimum – recorded a much higher mortality rate (86.62) and a case-fatality incidence almost four times as high as the one recorded in Sweden.

SORE THUMB NO MORE In Northern Europe, Sweden did stand out as Denmark (10.76), Finland (6.07), and Norway (4.97) all managed to contain the spread of the disease and keep fatalities in check by leveraging public trust and strictly observed lockdowns.

For Johan Carlson, director-general of the Public Health Agency, the comparison fails to take into account that the infection rate keeps heading down in Sweden whilst it is creeping up elsewhere: “I call that the champagne cork effect.”

There is an economic angle to the light-touch approach as well. Dr Carlson warned that an economic malaise with a sharp rise in joblessness can also deteriorate public health and prove deadly as social services need to be curtailed and people cut back on the quality of their food whilst dealing with high levels of stress.

According to Statistics Sweden, the country’s GDP retreated by 8.6 percent during Q2 2020 which compares favourably to the rest of the European Union which saw its overall GDP shrink by 11.9% over the same period. The Swedish unemployment rate, traditionally the highest in the Nordics, rose to 9 percent, up 1.9 percentage points since March. For the entire year, GDP is forecast to drop with 5 percent – a decline similar to those expected throughout the Nordics.

What makes Sweden’s approach to covid-19 unique is that the nation recognised early on that the novel corona virus, absent a vaccine, cannot be completely eliminated and will likely become a contemporary health fixture not dissimilar – in that aspect – from the seasonal flu. The nation also agreed to put the pandemic in perspective.

The Swedish Statistics Office was quick to remind people that in both 1993 and 2000, excess mortality was significantly higher than it is now due to particularly virulent flu strains.

Sweden, then, is keeping calm and carrying on.

With a stiff upper lip that would probably cause even the most stoic of Brits to award the nation an approving nod. i

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> Finding Strength and Promise by Planning for the Long Term John Häfelfinger, CEO of Basellandschaftliche Kantonalbank (BLKB), talks to CFI.co about the opportunities afforded by sustainable finance.

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LKB positions itself as a futureorientated bank and was ranked Best Bank in Switzerland by Forbes in 2019, and Best Regional Sustainability Bank of Switzerland by CFI.co in 2020.

Sustainability is its business model. BLKB sees sustainability in its widest sense and takes a forward-looking approach. It’s an institution geared towards responsibility to people, society, and the environment.

At an operational level, that means its products and services, its role as an employer, and its business policy. It also means the company invests in its offer, in its employees, and in its processes and procedures. This approach is a catalyst for innovation and transformation.

CFI.co quizzed BLKB CEO John Häfelfinger to learn more…

Sustainability has many aspects. What do you regard as the key element?

It’s essentially about thinking and acting with the long term in mind. And indeed that’s what our owner — the canton of Basel-Landschaft — expects of us. Our purpose is to contribute to the balanced economic and social development of the canton and the north-west Switzerland region. It’s a mission based on the principles of stability, risk awareness and regional focus.

A history spanning over more than 150 years shows that these principles make us resilient and are a factor in our success. That’s particularly evident right now, with the Covid-19 situation.

What role does management play in ensuring sustainability is embedded within the bank?

Sustainability is a team effort. The key thing is that the topic is integral to our mission statement, strategy and brand, and also that it’s visible and tangible. It’s also important to have the right resources and budget, and management sets the direction here.

At the same time, all employees need to be empowered to promote sustainability on a proactive and independent basis in their own area. What’s crucial here is that employees have the requisite knowledge and capabilities.

That’s why we’re investing heavily in training and development, and also why we’ve reduced hierarchies within the bank.

CEO: John Häfelfinger

Where do you see the potential for sustainable finance in the case of regional banks in particular?

Sustainability is a huge opportunity for banks with a regional focus. The regional dimension can make a key contribution to ensuring that the full force of sustainability can be felt. Regional banks are closer to their suppliers and other stakeholders. Proximity in the sense of regional focus is a precious value when it comes to sustainability in particular.

The Covid-19 crisis has far-reaching consequences for business and society. What are your thoughts on the subject, and what role do you see here for BLKB? CFI.co | Capital Finance International

Covid-19 is exposing weaknesses — and at the same time highlighting the strengths we can rely on. Our strong position serves us well in the current situation. Our capital and liquidity base is rock-solid, enabling us to assist our customers as well as the wider community both quickly and easily.

Our business model is resilient. It enables us to live up to our responsibilities towards our customers and the wider community as well as implement what we mean by our futureorientated approach. i 51

> BLKB:

Regional Bank that Favours a Future-Orientated Approach What impact do corporate actions have on individuals, society and the environment? Can we take responsibility for the world we live in, and if so, how? Swiss bank BLKB has some answers.

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wiss bank BLKB has been taking responsibility for its region for over 150 years. Established to meet the financial needs of the population and the local economy, it promotes sustainable development for people, society and the environment.

Although the Covid-19 crisis has brought sustainability to public attention, BLKB began addressing the issue some time ago. As a forward-looking regional bank, BLKB has been taking responsibility for people in the region and promoting economic development since its establishment. Sustainable thinking and action are at the heart of the bank’s business operations and the basis of its mission statement.

Sustainability is much more than just being “green”; it remains closely identified with environmentalism in the public discourse. But that is too narrow a definition for BLKB, which sees sustainability as an enduring mission.

The bank takes a far-sighted approach — and the question of whether what it is doing today is also right for tomorrow. “That’s why at BLKB we talk about our future-orientated approach,” explains Marilen Dürr, head of Sustainability at BLKB. “Our view reflects our deep conviction that sustainable development benefits everyone, and we assess issues from a comprehensive, long-term perspective.”

As a sustainable financial services provider, BLKB places an emphasis on environmentally responsible banking operations. The bank also demonstrates the requisite far-sighted approach when it comes to advising customers and helping them to make decisions. BLKB has been tasked by its owner — the canton of Basel-Landschaft — with contributing to the region’s economic and social development. BLKB is the bank for the people of the canton and the north-west region of Switzerland. “Their future should have a home in the region,” says Dürr.

BLKB’s regional importance has been revealed by the Covid-19 pandemic. During the crisis, BLKB has been able to support SMEs and startups in a straightforward way — with loans and 52

bridging measures — thanks to its solid capital and liquidity base.

The bank is able to help where needed, strengthening the regional community as a whole.

BLKB is more than just a financial services provider. It is also a reliable partner for local business, supports cultural life through targeted sponsorship, and plays an important role as employer.

“Sustainability is our business model. It’s about our responsibility towards people, society and the environment,” says John Häfelfinger, the bank’s CEO. “At an operational level, that means our products and services, in particular the advice we give our customers, and our role as an employer and our business policy.”

SUSTAINABILITY IS TEAMWORK The wellbeing and development of its employees are important elements of the bank’s holistic understanding of sustainability. BLKB views capable, highly committed employees as a crucial success factor in a highly competitive market.

The bank promotes a values-based, motivating work environment as well as a far-sighted, responsible corporate culture. “As a financial services provider, we will achieve sustained success if we all adopt and embrace a forwardlooking approach,” says Daniela Strohmeier, HR Development Specialist. To ensure employees are fit for the future, BLKB systematically invests in their personal and specialist training and development.

The bank set up a training initiative in 2019, and has around 20 percent of its staff currently in training or development. Older members of staff in particular are encouraged to undertake more training. The bank sees the promotion of staff aged 50-plus as an opportunity to address the upcoming retirement wave among the Baby Boomer generation. BLKB always accommodates its employees’ individual circumstances through flexible work models and methods.

SUSTAINABLE PRODUCTS BLKB understands that sustainable investment brings long-term success for its stakeholders.

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Studies show that responsible investment is becoming increasingly important in Switzerland, and enjoys strong customer demand.

BLKB identified this trend at an early stage, and quickly came to focus almost entirely on sustainable investment products. “BLKB is one of the few banks in Switzerland to have a comprehensive ESG approach across the breadth of its product line-up,” says Andreas Holzer, Sustainable Investment Specialist at BLKB. ESG criteria have been standard in the bank’s investment business for many years. Its goal is to systematically integrate these criteria in all products and services. In addition to

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credit checks, BLKB takes into account the sustainability of companies before granting a loan. This year, it also began examining ESG criteria within the area of commercial lending.

If a company exhibits shortcomings in relation to sustainability, BLKB — as a responsible bank — discusses the benefits of sustainable business management. The bank sees this as a forward-looking approach that will support the region on its path to becoming a resourceefficient economy.

indirect CO2 emissions on a continuous basis (Scope 1 – 3 of the Greenhouse Gas Protocol).

RESPONSIBILITY FOR THE ENVIRONMENT Climate protection, particularly in relation to CO2 emissions, is a major focal point for BLKB. The bank is committed to adhering to the 2015 Paris Agreement and is reducing its direct and

The forests of north-west Switzerland are suffering from the impact of climate change.

Increasing drought and rising average temperatures are leading to the death of less heat-resistant native species. The bank’s

The bank already operates on a carbon-neutral basis and participates in numerous climate protection projects. The “Forest of Tomorrow” regional project combines climate protection with the promotion of biodiversity. Across the region’s forests, BLKB is funding the planting of 1,000 trees that are well suited to changing climatic conditions.

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customers can contribute to the project and indirectly support the initiative, as well as the funding of investment in energy-efficient buildings.

As a bank anchored within the region, BLKB believes it is important to couple its own CO2 offset with its commitment to a sustainable future. The bank has funded and launched a local climate protection project where the soil in the canton of Basel-Landschaft is used for CO2-storage through humus formation.

“From 2021, we’ll be providing our carbon offsets on a completely local basis,” says Marilen Dürr — thus ensuring the region has a bright future. i 53

> Liechtenstein Bankers Association (LBA):

Modern Industry Association with the Ambition to Shape the Future The Liechtenstein Bankers Association (LBA), established in 1969, is the domestic and international voice of banks operating in, and from, the tiny but influential principality.

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t is one of the microstate’s most important associations and plays a key role in the successful development of the financial centre. Some figures underline the impressive growth of the banking centre over the past 50 years. The balance sheet total increased from around CHF1.5bn (€1.39bn) to CHF72bn (V66.82) and the number of employees from 272 to 2203.

At the end of 2019, Liechtenstein’s banks managed total assets of almost CHF350bn (€325bn).

Along with banks, insurers, and professional trustees, the financial centre includes fund companies, asset managers, and public-benefit foundations. The banks in Liechtenstein have unrestricted access to their two main markets: Switzerland, thanks to the Customs Union of 1923 and the adoption of the stable Swiss franc as the official currency, and the European Single Market, thanks to membership in the European Economic Area (EEA) since 1995 and the associated full incorporation of EU law.

The financial centre is a key industry for Liechtenstein's wealth. It accounts for more than half of the tax income and 23 percent of GDP. With this it is the second-most important sector in Liechtenstein — only surpassed by the industrial sector’s share of 43 percent.

"Liechtenstein stands for stability and security. It enjoys a AAA country rating by Standard & Poor’s." is no lender of last resort, i.e. no central bank.

Moreover, Liechtenstein is not a member of the International Monetary Fund (IMF).

Long before it has become mainstream, the country and its banks have embraced sustainability as a major driver for the future.

However, they take a holistic approach.

Sustainability for them is more than climate change.

The United Nations’ 17 Sustainable Development Goals (SDGs) are guiding principles for the LBA’s domestic and international activities.

The goals address global challenges, including poverty, inequality, environmental degradation, prosperity, and peace and justice. They interconnect and aim to leave no one behind.

Liechtenstein stands for stability and security.

It enjoys a AAA country rating by Standard & Poor’s. The banks favour a low-risk business model which shows in an excellent capitalisation with an average Tier 1 ratio of around 20 percent.

Liechtenstein claims the title of “solar world champion”, having promoted the renewable energy source since 2015, and boasting the highest per-capita installed photovoltaic capacity.

Every municipality is strongly committed and Liechtenstein has become the first “Energy Country”.

Private banking has always been, and remains, the core business of Liechtenstein financial institutions.

Despite this homogeneous orientation, the banks differ substantially with respect to their size. The three large institutions in Liechtenstein — LGT Bank AG, Liechtensteinische Landesbank AG and VP Bank AG — account for more than 85 per-cent of the balance sheet total. From the national perspective, they are considered to be systemic.

A special aspect in this connection is that there

In two other areas, Liechtenstein launched public-private partnership initiatives of a unique and pioneering charac-ter. To mark World Water Day, on March 22, 2017, the Waterfootprint Liechtenstein initiative was launched. The principle behind the project is straightforward: “Drink tap water. Donate drinking water”.

Liechtenstein is aiming to provide access to clean drinking water to one suffering person for every resident — which means improving the living conditions of around 38,000 people.

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Liechtenstein

The second lighthouse project is the Liechtenstein Initiative, which aims to end human trafficking and modern slavery.

The project is a partnership between the Governments of Liechtenstein, Australia and the Netherlands, along with the UN University Centre for Policy Research as well as a consortium of banks, philanthropic foundations, and associations. The LBA and its members are part of these supporting organisations tackling offences to humanity, and are leading causes of money laundering and terrorist financing.

The Liechtenstein government and the Financial Market Authority (FMA) realised

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the potential of digitalisation early on. With blockchain technology and the token economy, pioneering legislative work has been done. The objective of the Blockchain Act is to create legal certainty and transparency. Sustainability and digitalisation go hand-in-hand, and both are important for the reputation and development of Liechtenstein and its financial centre.

the common interests of Liechtenstein banks at national, European and international level.

The LBA stands for market economy-based principles and for an efficient financial centre with the highest standards. The association is committed to ensuring an excellent framework for the business location of Liechtenstein, the financial and the banking centre. It represents

Member interests are pursued in accordance with the principles of sustainability and credibility. As a member of the European Banking Federation (EBF), the European Payments Council (EPC) and the European Parliamentary Financial Services Forum

A major task is to identify those relevant national, European and international developments, in particular regulatory and legislative proposals, and to prepare common positions for its members and stakeholders.

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(EPFSF), the LBA is a member of key European committees, and plays an active role in the legislation process. Since 2017, the LBA has been a member of the Public Affairs Council (PAC) with offices in Washington and Brussels, and is part of the international network Financial Centres for Sustainability (FC4S).

The LBA is involved in opinion-shaping and the maintenance of relations in political decisionmaking. It does not believe in hard, oneway lobbying, but focuses on dialogue. The association wants to contribute by educating on matters relating to banking, and expanding and preserving knowledge. i 55

>

Tech, Trust, and Women’s Role in Creating the Future

By Naomi Snelling

Cecilia Harvey’s jaw-dropping career was launched by a chance careers-day visit to Wall Street. Today, she is a woman on a mission. Several missions, actually.

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ne of those missions is to reverse a crisis of trust in technology. “Now is not the time to have naïve optimism about technology,” she says.

“Technology leaders cannot afford to be indifferent or silent about issues.

“The tech industry in all its forms has such an impact on everything we do, and so the question of how we evolve our technology, and how we lead our teams, becomes one of the most pertinent questions we have to ask.

Leaders in this industry must ask: can our tech potentially be causing harm to the public, and if so, what are we going to do to mitigate that risk? And taking that further: how are we going to drive positive social change?”

Cecilia Harvey migrated from New York to London in 2008, working up through C-suite positions at Accenture and Barclays to become COO at Citigroup. After a five-year stint there, she took on leadership roles with fintech ventures and start-ups. In October 2019, she made the shift from the world of finance to become CEO of sensor technology company Hyve Dynamics.

When Harvey talks about leadership, she’s not referring to technical or logistical brilliance; she is focusing on social impact. “In these turbulent times, people are looking for leaders who are authentic, actionable, inspiring,” she says. “What do you believe? What do you stand for? These are the questions employees and consumers are asking.

“It’s not just about leading within your team.

It’s about taking a leadership role within the wider world of tech and being visible and offering hope and inspiration.”

So, sensors? “Sensor technology can facilitate remote health monitoring and telemedicine, something that becomes more important each passing year with our aging population.

“It’s a privilege to work with this technology. I’m fired-up about coming to work each day and being part of a company creating technology which can improve healthcare equality and help save lives.”

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Harvey believes that Hyve’s patented skin sensor technology, which enhances the realtime wireless collection of biometric data, can play a key role in assisting with pandemic recovery.

“Sensor technology enables identification of many of the key symptoms and markers related to coronavirus,” she says. These markers include temperature, heart rate, respiration, blood oxygen levels, and stress and anxiety indicators. “So it can function as a tool to help get employees back to work, students back in school, and consumers back to stores.

“All the women in my family worked in a hospital and I saw and heard their stories, of how some people couldn’t have access to high quality healthcare, and tech can play such a role in improving that. Sensor technology will reduce the patient wait-times. And it removes barriers and allows for pooling and sharing of healthcare resources between developed and developing nations.”

Raised in a predominantly female environment in New York, with mother, grandmother and aunts, “all I ever saw was women supporting other women”.

Driven by a commitment to help women achieve their goals, especially within the tech world, Harvey has spoken out publicly about the “Queen Bee Syndrome” — a term for the toxic workplace competition between women that many shy away from for fear of breaking the hidden codes of “sisterhood”.

“We don’t have large numbers of women in leadership positions,” she explains, “and if you have a situation where women don’t want to work for other women, it damages the potential for other women to succeed.

“I speak up about it because it can have such a negative impact on the development of female leaders. These behaviours often stem from insecurity or lack of self-awareness, and — as a leader — I believe the only way people are going to improve is if they are given feedback.”

People need feedback, and the opportunity to make related changes, she believes. “It helps CFI.co | Capital Finance International

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people improve their careers and it benefits the overall organisation.”

Her advice on how to succeed in a tech industry?

“In the simplest way — you just have to get out of your own way. People see obstacles for themselves, but nothing is going to be handed to you on a plate, you have to work for it. You have to always create options... I wanted to create multiple streams of income, and I wanted to be in an industry where I was a leader and an influencer.

“I made a decision to leave a comfortable job as COO Citi Group in order to create those opportunities for myself. Leaving that comfort zone allowed me to launch Tech Women Today, to get into fintech, and, more recently, to join Hyve as CEO. If you’re going to get to the next level you need to surround yourself with positive people who have similar goals and values.”

Harvey believes that the pandemic, its uncertainties and challenges create a entrepreneurial breeding ground. “So many people tell me their business arose from crisis,” she points out. “Businesses will emerge from these difficult times. I want to help create a sense of community and help people understand the resources available to them, and the power that they have to make change.”

Harvey founded Tech Women Today as a global platform, a showcase and a resource for women who want to increase their influence in the workplace. Her other programmes include Ladies Who Launch, which morphed into a virtual programme due to the pandemic, and Success Unfiltered, a platform for the stories of female entrepreneurs.

“It’s through our stories that we can really connect with each other,” she says. “I started to think about this last year, and when the pandemic hit it became even more clear that it was a responsibility to get content out there that can lift, inspire and motivate. Really honest content, not slick, polished stories, but a glimpse into the gritty, difficult parts that often propel people to success.

“I’ve been blessed throughout my career to meet so many people with interesting stories to tell, and it’s our stories that show how we are more alike than we are different. My vision is to create a strong, supportive community around this: helping women change careers, start their own business, change their lives; helping them understand they have the confidence and power to do this.

“If I can have just a small role in helping people to do that — and showcase individuals that have done it — then this is my aim.” i

Cecilia Harvey

Cecilia Harvey can be found tweeting at @ImCeciliaHarvey Tech Women Today’s Twitter handle is @TechWomenToday.

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> ARCA Fondi SGR:

Shaping the Future of Asset Management with History of Experience and Reliability Italy’s ARCA Fondi SGR is an asset management company that is authorised to manage the individual portfolios of institutional clients.

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he company was born from the experience of ARCA SGR, founded in 1983 by 12 popular banks.

Today it is owned by BPER Banca (57.061 percent), Banca Popolare di Sondrio (34.715 percent) and by other major Italian banking institutions. With assets under management (AUM) of around €32bn spread across mutual and pension funds and institutional accounts, and with a client base of over 800,000 investors, Arca has established itself as a leading national asset manager.

The composition of the AUM is divided into €25.7bn in mutual funds (market share 2.9 percent at March 2020); €3.8bn ARCA Previdenza Open Pension Fund (market share 18 percent at June 30, 2019); €0.5bn under management for institutional clients, and €2.2bn as investment manager at Sidera Funds SICAV (Société d'investissement à Capital Variable), a publicly traded, open-end investment fund structure offered in Europe.

“Since the first products launched on the Italian market, Arca has been able to introduce innovative investment solutions capable of satisfying different types of investors.” partnership, especially for the customers who entrust their savings to Arca.

A NEW TYPE OF GOVERNANCE ARCA Fondi SGR was one of the first companies to adopt the Protocollo di Autonomia (protocol of autonomy), aimed at the implementation of a sound and adequate company framework to manage conflicts of interest to protect subscribers and safeguard management decisions. It was drawn up by Assogestioni, an Italian association of asset managers. Continuity and autonomy in operations and governance serve as a guarantee that the protection of the customer's interests will always be ARCA Fondi SGR's primary objective and priority.

INNOVATIVE PRODUCTS FOR ALL NEEDS Since the first products launched on the Italian market, Arca has been able to introduce innovative investment solutions capable of satisfying different types of investors. Arca has been the inventor of Arca Cedola, fixed-horizon, coupon paying funds, which have been hailed as the greatest product innovation of the past 12 years on the Italian market. Arca Fondi is a market leader in PIR Funds (Piani Individuali di Rispamio), a segment dedicated to investments in the Italian "real economy”.

SYNONYMOUS WITH RELIABILITY After almost 40 years of operation, Arca Fondi SGR is today one of the best-known companies in Italy. Thanks to its ability to generate value over time, it is recognized as a reliable partner.

One of its main strengths is its extensive network of distributors, consisting of some 100 banks and financial institutions scattered across the country. The close relationship with its distributors resulted over the years in a successful

In 2019 Arca Fondi signed the United Nations Principles for Sustainable Investment (UNPRI), which led to the creation of several ESG Funds and an innovative ESG Rating system. Thanks to important investments in recent years, an ecosystem of innovative services has been created to support customers and partners. The website, an app, a chatbot and an educational blog are just some of the digital tools that have collected awards for Arca Fondi over the years.

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CEO & General Manager: Ugo Loser

Since the first products launched on the Italian market, Arca has been able to introduce innovative investment solutions capable of satisfying different types of investors.

AWARDS In recent years ARCA Fondi SGR has received several awards for Italian mutual funds and pension funds, including CFI.co’s Best Emerging Markets Debt Manager (Europe) award in 2015, 2016, 2017, 2018 and 2020 and CFI.co’s Best Pension Fund Scheme - Italy 2020.

CONSTANT GROWTH Arca has acquired OPTIMA OICRs (AUM €927m); acquisition of Vegagest OICRs (AUM €540m) and BPVI OICRs (AUM €793m) and 60

Institutional mandates (AUM €1.074m). The company has completed acquisition of Carige OICRs (AUM €3.260m), a pension fund (AUM €422m), and investment advisory on segregated account.

ARCA Fondi SGR aims to create added value for its clients on a continuous basis. For precisely this reason, a new range of ESG funds was launched to satisfy an increasing number of investors who are concerned with sustainability. Currently, the range includes two equity and two flexible funds, but new solutions of this type are due to emerge.

At the base of the ESG investment process is an internally developed rating system which allows all issuers of shares and bonds to be classified according to their compliance with ESG criteria.

CFI.co | Capital Finance International

Ugo Loser has been the CEO and general manager of ARCA Fondi SGR since 2011. He has a degree in Economics and Social Sciences from the Bocconi University of Milan, and prior to joining ARCA Fondi he had experience in investment banking and management consulting. Loser was director at Finlabo SIM and Banknord SIM, a partner at Bain & Company Italy (promoting the practice of asset and risk management), and was a senior strategist for the European market of derivatives on fixed income at Paribas.

Loser was also the executive director of Fixed Income Research at Goldman Sachs International, and is a member of the executive board of Assogestioni. i

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> Peter Mulroy, Secretary General of FCI:

Factoring Has the Wind in Its Sails — and a Long and Successful History Behind It There is nothing complex about factoring. It is simply a unique blend of services designed to ease the traditional problems of selling on open account terms.

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actoring is based on the idea of selling or assigning a business’s outstanding receivables (sales invoices) to the factor and receiving a set of traderelated services. These typically include investigating the creditworthiness of buyers, assuming credit risk, giving 100 percent credit protection against debtor write-offs, providing collection and management of receivables and provision of finance through immediate cash advances against outstanding eligible receivables.

FACTORING: SUITABLE FOR SMES? Traditionally, a factoring company provides liquidity to an SME based on the eligible receivables assigned to it. The factoring company may offer a form of credit protection against the default risk of the client’s customers as well, providing additional capital to end-buyers, many of which are also SMEs. Ultimately these companies offer liquidity in the supply chain that normally would unavailable otherwise, mainly aimed at SMEs. The controls that factoring affords allow financial institutions to finance further into the supply chain, offering debt capital.

FACTORING: A LOW LOSS HISTORY? The factoring industry has enjoyed a long history with a low record of credit losses and continuous stable growth. As an alternative form of traditional trade finance, factoring is one of the few mechanisms within the wider financial services industry which allows a financial institution to purchase the assets from an SME client. In this case, that includes the account receivables and all of their underlying rights, and the right of collection of payment from the debtor/customer.

"Factoring will be in high demand during — and after — the crisis.

Companies will seek alternative funding sources and try to mitigate the risk of receivables."

This element strengthens the likelihood that the factor will be repaid as the source is the client’s customers, who typically are much stronger.

The receivables assigned to the factoring company are generally diversified and of shortterm duration (normally less than a 90-day period). In addition, the financing provided to the seller is contracted on a flexible basis, often providing leeway for the factoring company to exit quickly in a deteriorating financial condition scenario. That is true whether it stems from the debtor or the seller, which in part explains the low loss record for the industry (EUF White Paper 2019).

Factoring companies also use strong credit metrics to protect against commercial default or insolvency. They become secure from the assignment of the receivable from the client and from the intricate management system of alerts in case of fraud, dilution, or concentration risk.

AN EXPLOSIVE RISE IN FACTORING Over the past two decades, factoring has increased nearly six-fold, from €500bn to nearly €3tn, a nine percent CAGR. But the largest growth spurt took place during the financial crisis in 2009, when the factoring community took up the slack as banks pulled out of financing arrangements.

Looking back at past recessions, factoring has a strong record of accelerated growth, due to SMEs looking for alternative forms of financing against receivables. It also stemmed from a need for credit protection against debtor default or insolvency, and the ability to obtain funding as sales increased.

Fast-forward to today, as the Covid-19 crisis impacts most economies, and there is another significant opportunity for the industry. Factoring will be in high demand during — and after — the crisis. Companies will seek alternative funding sources and try to mitigate the risk of receivables.

Even with the predicted rise in bankruptcies and the many unknowns, there is likely to be a surge in volume next year.

That doesn’t mean that the community shouldn’t prepare for a challenging period ahead; the industry should return to basics, focusing on maximising risk controls.

WHY DO FACTORING COMPANIES JOIN FCI? FCI acts as a trade association supporting the growth of receivables finance around the world.

It offers its members a platform to conduct cross border factoring in a secure manner. A proprietary communication system called edifactoring.com is a sound and secure means for members to issue factor guarantees, send invoice data, issue dispute notices, and provide payment advice.

"As an alternative form of traditional trade finance, factoring is one of the few mechanisms within the wider financial services industry which allows a financial institution to purchase the assets from an SME client."

CFI.co | Capital Finance International

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1.

Funding SMEs

Global Goals

2.

Boosting Global Trade

3.

Reducing Trade Finance Gap

7.

100% protection against bad debt

4.

Low risk default

6.

Immediate liquidity

5.

Supporting the Real Economy

10.

Low loss solution

9.

Flexible financial tool

8.

Crisis proof

11.

Lower cost of capital

12.

Protection against buyer insolvency

13.

Sustainable

14.

Collection service

Factoring for institutions

FCI recently announced FCIreverse, a global supply chain finance (SCF) initiative, giving members access to a global platform to onboard anchor buyers and provide early payment to global suppliers. It is a place to network, where senior executives meet annually to exchange views and ideas.

In addition, FCI is a rule-making body for the open-account receivables finance industry, and has been for over 50 years. The General Rules of International Factoring (GRIF) is the legal basis for nearly all cross border business transactions, and the legal framework has been accepted by almost every major factoring company. FCI Academy provides e-learning courses, regional

>

seminars, a degree programme in international factoring, consultancy advice, and operational guidance. FCI offers a robust education platform, accentuated by innovative marketing and promotion, and led by an engaged and dynamic secretariat based in the Netherlands.

Factoring is considered a low-risk form of financing, thanks to its direct connection to the real economy via the purchase or transfer of receivables for delivered goods and rendered services. It will be in high demand as banks pull out of credit facilities and companies look for new funding sources.

CONCLUSION Factoring is a straightforward and quite simple form of financing based on a receivable/invoice originated by the SME and directly linked to the real economy. Factoring has proven to be a go-to alternative to classic bank lending and has helped to alleviate much of the burden caused by the recent credit crunch, especially for SMEs.

With the significantly increased risk environment, companies will seek to mitigate the risk of receivables. However, this asset class will be tested as never before; its secure nature and the controls that factoring affords will make it more attractive.

And for those using history as a milestone, factoring certainly has the winds in its sails. i

The Clear Career Path and Enduring Vision of a Trade-Growth Champion Peter Mulroy, Secretary General of FCI, has dedicated his career to supporting the global growth of trade.

M

ulroy was appointed Secretary General in July 2013 and in his seven years he expanded the footprint of the association from 72 to 95 countries, increased membership from 250 to nearly 400 members, decentralised the 62

organisation by creating six regional centers, exceeded all growth targets and led the merger of the two largest factoring associations to create a single voice representing the interests of the members and stakeholders of the global factoring and receivables finance industry.

CFI.co | Capital Finance International

As secretary general, Mulroy assists financial institutions, SMEs, corporates, and other stakeholders to provide legal, operational, credit risk and compliance guidance that specifically relates to open account receivables finance business. He also helps new entrants establish factoring initiatives

Autumn 2020 Issue

"His aim is to ultimately create strong legal and regulatory national frameworks to protect the interests of investors and users of the service." and supports governments, regulators, and central banks to provide training and guidance.

His aim is to ultimately create strong legal and regulatory national frameworks to protect the interests of investors and users of the service.

Mulroy addresses global audiences on the subject of receivables finance and international trade, and has earned his place as an ambassador for the industry.

FCI, previously known as Factors Chain International was established in Amsterdam in 1968 as a non-profit global association for factoring and receivables finance companies.

Today, it is recognised as the world representative supporting the interests of the industry. With close to 400 members in 90 countries, FCI members account for nearly 90 percent of global cross-border factoring volume.

FCI supports the industry with three major pillars: Connect: the business network supports crossborder factoring activities and reverse factoring business through which its members co-operate as export and import correspondent factors Educate: FCI promotes and develops bestpractice in domestic and international factoring, and related open account receivables finance products Influence: FCI promotes and defends the industry with stakeholders and policymakers worldwide Prior to joining FCI, Mulroy was managing director of CIT’s factoring business unit in the US, a $50bn-plus financial services company. At the time, it was the largest factoring company in the world in terms of global volume. Mulroy also served on CIT’s management committee, supporting the company’s global growth strategy.

He came to CIT through the acquisition of the factoring unit of SunTrust Bank, where he had developed its international factoring business.

He has worked and lived in the US, Europe, and the Middle East. He graduated from Rutgers University in New Jersey, studied at the Universität Konstanz in Germany, and earned his MBA from Thunderbird School of Global Management in Arizona. i

Secretary General: Peter Mulroy

Peter Mulroy can be reached at fci@fci.nl and more information can be found at www.fci.nl 63

> How

Will the Pandemic Impact Pay Equity Within the Finance Industry?

By Anna Birtwistle Partner and Hannah Taylor Associate at Farrer & Co

The financial services industry is at a turning point. Though there is evidence to suggest that the global coronavirus pandemic could set back several years’ worth of hard-earned progress in closing the gender pay-gap in the sector, it has provided an opportunity to improve flexible working practices and opportunities.

W

ith the suspension of gender paygap reporting in 2020, the recent equal pay claim against Asda in the UK Supreme Court — the largest ever in the private sector — has put a welcome spotlight on pay disparity. Diversity more generally is also front and centre in the FCA’s mind, with the newly appointed chief executive indicating that if there is not progress in the sector it may eventually become a supervisory matter.

Women in all sectors are already losing out as families are forced to juggle childcare and work and, while many employers have offered flexibility, it remains unclear as to when these challenges will end. For the financial services sector — notorious for having the worst average pay gap in the UK — the full impact of the pandemic may only be felt when pay rises and bonuses are considered next year.

TACKLING THE PAY GAP While many firms may have been relieved that gender pay-gap reporting had been suspended for the year, it brings with it a danger that efforts towards parity will slide.

Reuters reported last year that, despite publicised initiatives to try to improve the issue, including implementing the recommendations from the Government’s Women in Finance Charter, mandatory mixed gender shortlists and flexible working initiatives, there had been a distinct lack of progress.

A large pay gap does not automatically mean that female executives in financial services are not receiving equal pay. However, it does confirm what is already well known: that the City has fewer women than men in higher-paid executive roles. If firms want to make a concerted effort to drive meaningful change when they come to report in 2021, this can only be achieved through improving gender equity at senior levels.

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"With the pandemic said to have the potential to set women’s economic progress back half a century, the Asda case is a timely reminder, if we needed one, of the importance of addressing the issue."

Although the challenges in addressing gender equity remain unchanged from those that existed pre-Covid, certain issues warrant renewed attention given the impact of the lockdown period and remote working, including: • When promotion and bonus decisions come around, ensuring a sufficiently long look-back period to ensure performance is judged fairly and taking into account childcare-related challenges that may have impacted recent performance • Ensuring clients and opportunities are distributed evenly — with remote working there is a greater danger of siloed working, so managers should be reminded to spread work across the team • Recognising and addressing structural issues which may have a greater impact on women and the value attributed to their role, including the impact of prioritising financials when making promotion and bonus decisions, rather than looking at other measurable contributions • Adapting mentorship and peer support opportunities for a remote workforce • Adjusting internal processes and initiatives CFI.co | Capital Finance International

which help women who are remotely reentering the workforce after maternity leave • Being doubly mindful of unconscious bias, including well-meaning biases that might lead a manager to assume that an executive with children at home might not be able to take on a new client or transaction A GOLDEN OPPORTUNITY The lack of ability to work flexibly in such high-pressured environments is often cited as a significant reason for women leaving the financial services industry as they climb the ladder. This in mind, firms should take advantage of the lessons learned during the pandemic to shift the gender dial. If firms are truly committed to closing the gender paygap, cementing new working practices into future plans to return to the office, while also

Autumn 2020 Issue

factoring-in the disproportionate impact on their female workforce into remuneration and promotion decisions, will be vital.

With the pandemic said to have the potential to set women’s economic progress back half a century, the Asda case is a timely reminder, if we needed one, of the importance of addressing the issue. While financial services firms may be able to point to non-discriminatory material factors, such as senior executives focusing on different product areas or markets, often remuneration will be driven by previous financial performance.

As such, the risk of sex discrimination cases for firms which do not actively address the underlying reasons for any gender disparity remains very real, and firms must take note. i

Author: Anna Birtwistle

CFI.co | Capital Finance International

Author: Hannah Taylor

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> Ferrexpo:

Heightened ESG Focus Taking Mining Company to New Level London-listed Ferrexpo PLC looking to bring its environmental credentials to the forefront of its corporate strategy.

F

errexpo has been premium listed on the London Stock Exchange since 2007 and has been a member of the FTSE 250 Index of Companies since November 2016. It believes in open reporting of its Environmental, Social and Governance (ESG) activities to provide transparency to stakeholders and assurance to the public of good corporate citizenship.

In 2019, ESG investing moved into the mainstream, with high-profile investors suggesting that companies may not be considered for investment if frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB), were not adopted. ESG-focused funds saw record inflows in that year, pulling in an additional $20bn — four times the 2018 level. The company decided to take the initiative and has incorporated these frameworks into its reporting, starting this year.

Ferrexpo’s operations in Ukraine comprise two iron ore mines, a third mine in development, processing facilities and infrastructure for global delivery of the iron ore pellets it produces. On a Scope 1 emissions basis, Ferrexpo products are comparable with those of its peers, and it uses new technologies to improve productivity and reduce emissions.

With an increased focus on Scope 3 emissions — those produced by the firm’s upstream and downstream customers — it is notable that Ferrexpo’s ore pellets create 40 percent less CO2 pollution for steel production than the main forms of iron ore produced by its international competitors.

The company also uses biofuels such as sunflower husks for up to 30 percent of the energy for its pelletiser. Ukraine is one of the largest producers of sunflower oil in the world, so the husks are abundant and locally available. An upper limit exists for the use of husks as fuel, because of the need for even and consistent heat. The company is exploring avenues for other renewable energy sources. The cost-saving from the partial substitution of natural gas for husks equated to $0.2 per tonne of production in 2019.

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Acting CEO: Jim North

Water consumption is also addressed, and its use largely comprises recycled water, with very little extracted for production purposes. In 2019, Ferrexpo marked the sixth successive year of steadily declining water extraction from the local network.

An independent review of its tailings (waste storage) facility in 2019 concluded that the Ferrexpo facility was suitable and well maintained. The company also commissioned an independent consultancy to conduct a review of biodiversity around its mines (ongoing), and to study work done in previous years to provide habitats for protected bird species and educate schoolchildren on biodiversity.

UN SUSTAINABLE DEVELOPMENT GOALS The United Nations’ Sustainable Development Goals (SDGs), 17 interconnected ambitions to improve quality of life, are taken seriously by Ferrexpo. Global challenges such as poverty, CFI.co | Capital Finance International

inequality, climate change, environmental degradation, peace and justice are addressed.

Ferrexpo acknowledges it has a part to play, and its efforts in Responsible Business align with the SDGs. The company is working towards a strategic goal of carbon-free pellet production. Climate change and greenhouse gas emissions are of critical concern, and there is a drive to reduce the company carbon footprint. Mining is an inherently energy intensive industry, requiring fuel, electricity and natural gas (for pelletising).

Energy-intensive activities do not have to be carbon-intensive however. Ferrexpo is pursuing studies into modern technologies such as solar power, greener alternatives to natural gas and improving efficiencies through autonomous trucks, all in a bid to reduce its carbon footprint.

SCOPE 3 EMISSIONS REPORTING Scope 3 emissions relate to upstream activities,

Autumn 2020 Issue

such as truck tyres, or downstream activities, which relate to the use of the company’s ore pellets. Scope 3 emissions are dominated by the emissions from blast furnaces that convert the pellets into steel. Ferrexpo has worked with independent consultancy CRU to understand the benefits of using pellets over iron ore sinter fines.

Ferrexpo plans to implement a greenhouse gas management system (ISO 14064) to quantify, monitor, report and verify emissions. This is the globally recognised standard for a number of existing emissions trading schemes. Ukraine does not currently have such a system, but the country is currently in the process of aligning local legislation to that of the European Union.

TAILINGS MANAGEMENT Tailings are an inevitable part of processing ore.

Taking iron from rock leaves behind a fine, inert material. Ferrexpo does not use any harmful chemicals in extraction, and its tailings are nontoxic. Its tailings facility is split into three sections, maintained and managed by the company since 1970, and covers an area of 1,300 hectares east of the Poltava mine. Ferrexpo produces gravel for road construction from the tailings. The reuse of this gravel represented seven percent of the material processed in 2019. Independent consultant Knight Piésold conducted a review of the tailings facility, and concluded that it was well managed and of an appropriate design, with regular inspections by the Ukrainian authorities.

The tailings dam is constructed on flat land, with a drainage channel that diverts water from the base of the dam back to the processing plant.

Around the perimeter, 34 piezometric borehole lines monitor the water levels.

COMMUNITY ENGAGEMENT The Ferrexpo Charity Fund has been in place since 2011 and provides direct assistance to individuals for medical treatments, infrastructure projects, schools and — in particular during the current pandemic — hospitals. The fund consults with local community leaders, cultural institutions and local government to co-ordinate the company’s efforts in the towns and villages surrounding Ferrexpo’s three mines. Total expenditure by the charity fund rose by 49 percent to UAH117m ($4.22m) in 2019.

The fund has four main pillars through which activities are focused each year: • Social partnerships to improve infrastructure such as hospitals, schools, roads and other public institutions, including a veterinary clinic.

• Direct assistance to individuals needing medical treatment, and support for pensioners through aid packages.

• Construction and maintenance of sports facilities and amenities.

• Budgetary assistance for the local council in Horishni Plavni, and development projects in the wider Poltava region.

In Ukraine, more than two-thirds of rural residents (almost nine million people) supply their own water, and do not have a piped supply to their homes.

Ferrexpo Belanovo Mining (FBM) is the company’s development-stage project to the north of its active mines. It engages with communities, and is drilling 59 boreholes in the community of Solonytsya this year to provide access to clean water.

Ferrexpo’s Charity Fund has completed improvement projects at all six secondary schools CFI.co | Capital Finance International

in the local town of Horishni Plavni. Other community development efforts have focused on developing facilities for schools, sports, and local amenities. Ferrexpo also supports local media, print media and local TV channels, and supplemented local council budgets for the provision of basic services to local communities.

Activities in 2019 focused on seven villages and towns around the company’s operations. Ferrexpo supports dialogue with local communities through its three operating entities — Ferrexpo Poltava Mining, Ferrexpo Yeristovo Mining and Ferrexpo Belanovo Mining. Local CSR committees meet quarterly. The company consults with local community leaders on existing and proposed community action plans, and can discuss its ongoing Responsible Business efforts. These committee meetings also serve as grievance mechanisms for individuals and communities impacted by Ferrexpo’s business activities.

The company recruits locally, with 81 percent of new workers coming from within a 30km radius of Ferrexpo operations. It also hires locally for more senior roles, and 67 percent of management roles were filled by people from local communities.

Through thorough community engagement, Ferrexpo aims to dispel the negative image of mining. It is through close collaboration between all stakeholders, both locally in Ukraine and internationally, that Ferrexpo has managed to increase its production and expand its facilities to become the third largest pellet exporter in the world, all of which has only been possible through strong environmental, social and governance practices. i 67

T HE H O ME OF C LUB - W OR KIN G

12 Hay Hill, Mayfair, London W1J 8NR T: +44 (0) 7952 6000 E: membership@12hayhill.com 68

CFI.co | Capital Finance International

www.12hayhill.com

Autumn 2020 Issue

> UniCredit’s Roberta Marracino:

Banking with a Social Impact

Head of Group ESG Strategy & Impact Banking: Roberta Marracino

D

etermined to help shape the postpandemic ‘new normal’, UniCredit is stepping on the accelerator to redouble its efforts at sparking meaningful change in the lives of accountholders and in the wider society.

UniCredit’s Social Impact Banking programme, first launched in 2017 and now present across 11 markets of the Group, is being deployed and strengthened as a vehicle of positive societal change. The programme leverages the bank’s vast pan-European branch network to connect communities, exchange experiences, and build ‘social impact ecosystems’ supported by aggregative financial schemes that fulfil the requirements of all stakeholders.

Overseeing the programme – and pushing the limits of its envelope – is Roberta Marracino who in July took over as head of the group’s ESG Strategy and Impact Banking department with a seat on the bank’s executive management committee. “The current situation is further accelerating the transformation of the entire society in a more sustainable direction and we will continue to play a frontrunner role,” says Marracino before emphasising that environmental, social, and governance (ESG) criteria represent an ‘important’ opportunity for long-term growth by bridging and matching the interests of the bank’s customers and other

parties such as shareholders, employees, and communities.

aimed specifically at supporting young people or women.”

“Our current goal is to disburse a total of €1 billion of financing through Social Impact Banking by 2023. ESG targets and ambitions are a fundamental part of UniCredit’s strategic plan, including the commitment to have a positive social impact across our local markets.”

UniCredit has made a long-term commitment to ESG which sits at the very core part of its business model: “We support our clients, communities, and partners in becoming increasingly sustainable. This is an important challenge, but we firmly believe that every company must do more than ‘business as usual’ to have an impact towards a sustainable future.”

Marracino accentuates that the group has set a number of concrete ESG targets such as a full stop to the financing of coal-related businesses by 2028: “Furthermore, we will boost our support to the renewable energy sector by 25 percent over the next three years as well as increasing loans for projects that improve energy efficiency to SMEs and private individuals. UniCredit already granted €2.1 billion of such loans in Western Europe over the first half of 2020. Our bank is also ranked at the top of the league tables for global sustainability-linked loans and green bonds.”

According to Marracino, the group aims to tailor its approach to specific local conditions and circumstances, matching its initiatives to identify and address the most pressing needs: “This ranges from support of social entrepreneurship or micro businesses through impact finance and microcredit, to large scale financial education programmes and financing CFI.co | Capital Finance International

UniCredit has been widely recognised as an ESG pioneer and an early adopter of sustainability principles. Its experience in these fields is now being rallied to help both the institution and its stakeholders navigate the choppy and largely uncharted waters of the pandemic. Marracino explains that UniCredit has already disbursed more than €6.4 billion to European SMEs to help mitigate the pandemic’s impact and ensure their survival.

Meanwhile, the UniCredit Foundation offers support to hospitals and other non-profit entities manning the frontlines of the battle against the novel virus.

“The Social Impact Banking programme will continue to identify and directly promote the most deserving social entrepreneurs and micro businesses with a dedicated impact finance and microcredit offer. We will continue to do the right thing and support businesses and communities through this difficult time.” i 69

> Josef Joffe:

Europe’s Futile Search for Franco-German Leadership

F

or decades, France and Germany have been known as Europe’s ruling “tandem” or “couple,” even its “engine.” Together, they aimed to work to unify the continent. But, to pile up the metaphors, the French want to drive the jointly leased EuroPorsche, while the Germans insist on rationing the gas money. As a long list of crises – from Belarus to Nagorno-Karabakh – now shows, the two countries are not following the same road map.

That is not surprising. As former German foreign minister Sigmar Gabriel has put it, France and Germany “view the world differently” and thus have “distinct interests.” The truth is that Franco-German divergence is almost as old as the European Union.

That division bedevils the current French and German leaders – President Emmanuel Macron and Chancellor Angela Merkel – as much as it did their towering predecessors, Charles de Gaulle and Konrad Adenauer, ever since the two of them linked hands across the Rhine 60 years ago. They were to turn ancient enemies into trusted friends.

But states don’t marry. They obey interests, not each other.

When two powers are so closely matched, the issue always is: Who leads, and who follows? The hyperactive Macron certainly wants to run Europe (as, truth be told, all of his predecessors in the Élysée Palace have sought to do). Meanwhile, the plodding Merkel keeps stressing German priorities.

The current divergence is also a matter of personalities. Temperamentally, Macron is the opposite of Merkel. Whereas Macron craves the limelight, Merkel, known at home as Mutti (mom), reads from a well-thumbed script about continuity and caution.

This is reflected in their foreign policy as well.

Since he won the presidency in 2017, Macron has successively flirted with US President Donald Trump, Russia’s Vladimir Putin, and China’s Xi Jinping, then turned away in disillusion from all three. France simply does not play in their league.

Merkel, by contrast, has kept her distance from Trump, Putin, and Xi. Macron has also pronounced the “brain death” of NATO, echoing Trump’s description of the alliance as “obsolete.” But a German chancellor would be the last to turn off the lights at the alliance’s headquarters in Brussels. After all, NATO has guaranteed Germany’s security for 70 years – and at a steep discount.

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"France and Germany 'view the world differently' and thus have 'distinct interests.'"

The most recent Franco-German disagreements center on the eastern Mediterranean, where Greece and Turkey – both NATO members – threatened to come to blows over gas exploration in contested waters. Macron was quick to side with Greece, dispatching warships and planes while promising arms. Last month, he hosted a summit in Corsica involving the leaders of six other Mediterranean EU member states to provide a counterweight against Turkey. Germany wasn’t there.

Merkel instead mumbles platitudes about a “multi-layered relationship” with Turkey, which must be “carefully balanced.” German interests are clear: Turkish President Recep Tayyip Erdoğan is guarding the Turkish-Syrian border against an uncontrolled influx of Middle Eastern refugees who will head for Germany if given half a chance.

Provoke him, and he can open the refugee spigot at will.

Then there is the current flare-up between Armenia and Azerbaijan over Nagorno-Karabakh. Macron, Putin, and Trump have urged the two countries to negotiate immediately, while Erdoğan has sided with the Muslim Azeris against Christian Armenia.

Germany, however, is merely “alarmed,” because Merkel can’t afford to alienate Erdoğan.

After large parts of Beirut were leveled by a deadly explosion in August, Macron dashed off to Lebanon, pledging to organise an international donor conference without coordinating with Merkel. France, which controlled the Levant after World War I, wants to keep a foot in the door to maintain its regional influence; Germany has no strategic interests there and instinctively shies away from anything smacking of escalation.

Different interests, different schemes.

Germany is also taking a hands-off approach to Libya, whose civil war has drawn in Russia, Egypt, Saudi Arabia, Turkey, and France. The best Germany can do in the Middle East is to arrange yet another peace parley in Berlin, as is the German habit.

This is just a short list of Franco-German foreignpolicy differences in the last few months. But it confirms the pattern: France likes to jump in, while Germany prefers to hang back. Merkel recently proclaimed “the hour of Europe” in an “aggressive world.” But if France and Germany won’t pull together, how could the other 25 EU members?

CFI.co | Capital Finance International

The irreducible reason is structural. Twentyseven do not add up to one, whether on Russia or Belarus, where President Aleksandr Lukashenko is dead set on wiping out the democracy movement.

When the 27 tried to hash out sanctions against Belarus, tiny Cyprus refused unless the rest agreed to penalise Turkey over illegally exploring for gas in the Mediterranean.

This could have been anticipated. Cyprus is practically a Russian economic colony, and Lukashenko is Putin’s client. After weeks of wrangling, Cyprus finally relented. The EU will now sanction 40 Belarusian officials – a punishment that gives Lukashenko no reason to pack his bags.

The EU is the world’s second-largest economic power, ahead of China, and on paper has as many troops as the United States. But riches alone do not make a strategic actor. If they did, Switzerland would be a great power.

Of course, no European leader will ever fail to appeal to Europe’s common destiny. But in the EU’s case, “unity” is often the opposite of “agency,” the capacity to act as a whole. A bloc of 27 states bound by a unanimity requirement on issues members consider essential will never be a strategic actor, because it will always be guided only by the lowest common denominator that all can accept.

Even if France and Germany ever do march in lockstep, the others will not fall into line, because they fear the duo’s domination. Unless and until they fuse into the United States of Europe, the EU’s member states will never leave vital strategic issues up to majority rule. i ABOUT THE AUTHOR Josef Joffe, a fellow at Stanford University’s Hoover Institution, serves on the editorial council of the German weekly Die Zeit.

Autumn 2020 Issue

> Ric Traynor:

A Haven of Last Resort for Distressed Businesses It is, perhaps, the ultimate countercyclical business: corporate recovery.

T

he UK’s leading independent business rescue and restructuring specialist Begbies Traynor (LSE: BEG) usually fares rather well when others don’t.

However, co-founder and executive chairman Ric Traynor’s (60) job is to help business survive and prosper; preparing them for better times, improving their resilience, and ensuring the expectations of all stakeholders are met.

The Coronavirus pandemic has made for a particularly challenging environment for most businesses. According to the company’s own Red Flag Alert research, the total number of companies suffering ‘significant financial distress’ is already in excess of half a million and could rise considerably more than this over the coming year. Traynor has warned of a ‘double whammy’ as liabilities accrue whilst state support is being pulled: “I expect we’ll see numbers of insolvency in excess of what we saw in 2008.”

Though he eschews a one-size-fits-all approach to corporate recovery, he does not mince his words when considering the plight of corporate zombies and suggests that debt-laden companies without the prospect of a viable turnaround should be allowed to fail and fold: “The right thing might be to let the weak go to the wall.”

Traynor points to the financial crisis of 2009 and the widespread use of quantitative easing – a policy which encouraged businesses to load up with cheap credit. He argues that firms now burdened by unmanageable debts and without funds for development or innovation should make way for better capitalised competitors not dependent on artificial life support.

Traynor is clearly an admirer of the American approach and their how they separate the wheat from the corporate chaff: “Americans are much more red-blooded about how their economy works. That means they get sharper recessions but also faster recoveries.”

Sceptics may – and do – argue that Traynor’s sanguine attitude to corporate insolvencies is merely a way to drum up more business for his company. That, however, misses the point: he is very passionate about helping viable businesses weather storms not of their own making and navigating fickle and choppy markets. Begbies Traynor derives its success, and profit, not just

Co-founder & Executive Chairman: Ric Traynor

from shuttering companies, but from flipping them back to black.

He also argues for proper training for directors and government backed training programmes for employees transitioning between careers.

Having taken a gap year working in a brick factory and a foundry, prior to qualifying as an accountant he has not taken the most traditional route, but experience he feels has served him well in shaping the business what it is today.

A Yorkshireman by birth, Traynor graduated from the University of Birmingham with a degree in Accountancy and Economics before learning his trade at the Manchester office of Arthur Anderson and subsequently founding Traynor & Partners in 1989. Eight years later, after the acquisition of London-based Begbies, the company rebranded as “Begbies Traynor”.

Now with 75 offices spread throughout the UK, Begbies Traynor is recognised as a haven of last resort for companies of all sizes in all sectors.

CFI.co | Capital Finance International

Amongst many other noteworthy feats, Traynor’s business has been instrumental in preventing the demise of a number of iconic football clubs such as AFC Bournemouth, Southampton, and more recently the ongoing administration of Wigan Athletic FC, which all gained a renewed lease on life and continue to delight – or despair – their legions.

Traynor is determined to help distressed businesses find a way forward and expects a spike in demand for his company’s expertise once the government starts to wind down its covid-19 emergency support schemes.

During the company’s virtual annual general meeting, in September, Traynor reported strong growth in revenue and earnings. Last year, Begbies Traynor Group managed to significantly reduce its net debt and conclude three acquisitions. Traynor remains confident that market expectations for the current financial year will be met. Begbies Traynor has been listed on the London Stock Exchange since 2004. i 71

> Equiti:

History of Firsts for Fintech Group with Inclusive Vision

E

quiti is a pioneering fintech firm and world-class provider of online trading technology and multi-asset financial products.

REGULATION AND COMPLIANCE Regulation, compliance and strong business ethics are at the core of the company’s operations that’s why Equiti Group has its subsidiaries licensed and regulated by six global market regulators, including Equiti Capital regulated by the Financial Conduct Authority in the UK. Others include Equiti Jordan regulated by the Jordan Securities Commission, EGM Futures DMCC, regulated and licensed by the Security and Commodities Authority in the UAE, Equiti AM regulated and licensed by the Central Bank of Armenia, Equiti Brokerage (Seychelles) regulated and licensed by the Seychelles Financial Services Authority, and EGM Securities regulated and licensed by the Capital Markets Authority in Kenya.

The company believes that trading on the global financial markets within a safe and regulated environment should be open to everyone. Equiti’s clients include individual and professional clients, brokerages, regulated fund managers, and local and regional banks.

was one of the first brokers to offer liquidity and margin trading using Currenex Viking & Classic platforms along with native MT4 bridge to improve trading conditions for brokers. With growing popularity of the MetaTrader 4 platform, the Group began offering White Label type services via a newly established tech division in 2010. The result was reduced barriers of entry for smaller brokers who immediately benefitted from our expertise and infrastructure in platform administration.

Providing trading support and services on the world’s leading trading platforms, including MT4 and MT5, the company offers a growing range of trading products, including CFDs on shares in top global companies, indices, commodities, currencies, futures, precious metals and more, and is quick-to-market with in-demand products.

In 2018, Equiti became the first online-forex broker to be awarded a licence by Kenya’s Capital Markets Authority, one of the most well-regarded regulatory bodies on the African continent; as well as the first broker to be granted a licence by the Jordan Securities Commission in over ten years.

FX DESK Equiti's FX Desk provides CLOB (Central Limit order book) liquidity combined with pricing from a range of banks, and non-banks while also offering voice execution, macroeconomic analysis, market colour and trade idea generation.

In early 2019 Equiti launched FXPesa, an innovative web and app-based trading platform specially designed for the retail market in Kenya.

Equiti Group’s future growth is being cemented on the back of extremely stringent and robust corporate governance and management principles bolstered by the growing number of regulatory licenses to support its ever-expanding global footprint in new regions as well as new product offerings and solutions.

Equiti has plans to launch exciting innovative offerings and proprietary solutions and applications as well as a range of new financial products in the latter part of 2020.

With offices in Europe, the Americas, the Middle East, Africa and the Asia Pacific region the company is able to support clients 24/6 in nine languages. i

HISTORY OF FIRSTS Equiti has a history of firsts. The company 72

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Autumn 2020 Issue

> Iskandar Najjar, Equiti Group CEO:

Pulling Out All the Stops in Bid to Be the Best: Equiti Group at the Forefront of Fintech Sector Under the leadership of the Equiti Group’s CEO, Mr Iskandar Najjar, Equiti has transformed into a fast-growing global industry challenger. In recent years, the company has expanded its global footprint to new regions and new continents, growing threefold in size while increasing its product offering by over 300%.

T

he company’s mission is to deliver to its clients highly tailored solutions, superior service, fast execution, best value prices, and to be at the forefront of innovation in the fintech sector.

“Our success is driven by our passion to be the best in the industry.”

Innovation is one of the driving forces behind Equiti Group’s growth trajectory and will remain the focus of the company over the next five years.

Iskandar Najjar, Equiti Group CEO: “Equiti is fully committed to exploring and developing new cutting-edge technologies, new product offerings, developing new ways of doing things better that will achieve scalability, and give us a leading advantage and added impetus for further global growth. ”Everything we do, everything we develop, at every level, and in every market, evolves around striving to deliver the best experience and worldclass offerings for our clients.

“Every one of our clients is highly valuable to us, we invest in technology and in developing new offerings and solutions, and work extremely hard to continually improve, innovate and grow every day with our clients being top-of-mind and at the heart of our business.”

It is not only Equiti’s global Business Solutions and Product team that is responsible for innovation, but every employee is encouraged to actively apply their mind to new ways of doing things in their specialist area.

Group CEO: Iskandar Najjar

Group partners with the world’s best technology providers to give its clients the most advanced trading experience.

Innovation is one of the core company values highlighted in the Company’s Employee handbook, and regularly reiterated as a key message and business driver by the Group CEO.

Subsidiaries within the Equiti Group are headed by local CEOs that have made a strong mark in the industry and in their region.

Equiti’s mission to be at the forefront of innovation in the fintech sector is bolstered by two subsidiaries within the Equiti Group, namely AlgoLabs, a research and development company, and EGMLABS, focused on technology developments. In addition, Equiti

• Equiti Capital UK is headed by Brian Myers • Equiti US is headed by Gary Dennison who also oversees the Group’s growth in Latin America and Bloom Capital in New Zealand • Equiti Jordan is overseen by Iskandar Najjar and Mohamed Alahmad CFI.co | Capital Finance International

• EGM Futures is headed by Mohamed Alahmad who also oversees the Group’s growth in the MENA region • EGM Securities is headed by Samwel Kiraka • Equiti AM is headed by Artak Nahapetyan who also oversees the Group’s growth in the CIS region • EGMLABS is headed by Hesham Hasanin • AlgoLabs, located in the UK, is headed by David Lindsay, PhD Equiti draws on the best local and global talent to support its fast-pace global growth and to apply a world-class standard across all its entities. i 73

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Autumn 2020 Issue

> Pierre Sbabo:

Bridging Analytical Metrics Alpha MOS CEO Pierre Sbabo can encapsulate his business in one sentence: “With 27 years of technological advances in the industry, Alpha MOS leads sensory analytical market.”

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ith a clear focus on the food and beverage segment, the company has used research and development as a means to bring disruptive technologies to the arcane world of visual, taste and smell sensory testing.

Alpha MOS is based in France, with subsidiaries in China and the US, and a global distribution network. It has the unusual distinction of being the first company to introduce an electronic nose to the market. As a pioneer in the field of sensory analysis instruments, with the best part of three decades in the sector, the company offers a range of products and analytical services.

This concerns not only the capacity to assess and characterise odour profiles, but also to taste and visual aspects by colour and shape. This allows global companies to bring science to their testing, whether for product development, quality control, or to support manufacturing processes, from raw material to end-product testing.

“Having access to hi-tech but user-friendly instruments to evaluate sensory features allows leading food and beverage companies to complement and strengthen the reliability and the bandwidth of their human panels,” says Sbabo. “Historically, manufacturing plants have relied on human assessors to test odour, taste and visual aspect at the production-line level, or trained sensory panels for in-depth studies during product development.

“Adjusting to a recent shift in consumer behaviour, the market has moved to more frequent releases of new products. This puts extra pressure on human panelists, who need to be trained on a larger number of products and deliver frequent testing on very different products.”

Alpha MOS is able to bridge analytical measurements with human evaluation input.

“We can process more samples, faster, with more product variations,” says Sbabo, “and give much-needed flexibility and peace-of-mind to companies.”

Pierre Sbabo’s mission at Alpha MOS has been to strengthen the company's position as a

CEO: Pierre Sbabo

global leader. Before joining Alpha MOS, Sbabo held leadership roles in Europe, Asia Pacific and the US. He has held positions with global corporations such as General Electric Water and CFI.co | Capital Finance International

Process Technologies, Pentair Filtration and Separation, NSF and — most recently — SPX Flow. There he was in charge of the EMEA food, beverage and industrial segments. i 75

> Alpha MOS:

Improving Human Life Alpha MOS, a world leader in the design and development of instruments for sensory analysis, has gone through significant changes in the last few years. The company’s CEO, Pierre Sbabo, explains how an aggressive strategy to expand the business is already beginning to transform Alpha MOS into a leader in the Food and Beverage sensory testing.

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eadquartered in Toulouse, France, with subsidiaries in the United States and China, Alpha MOS is an expert in organoleptic testing, offering fast and reliable sensory measurement solutions for quality control and product development support to the Food and Beverage market.

In this area, human sensory panels have historically been used to control and assess the sensory characteristics of food products.

While valid, this model is being challenged by changes in consumer habits. Food & Beverage companies need to release more new flavors and products, more frequently. Human panelists are under pressure to adjust to the sheer number of tests to be performed and the variety of flavors to monitor.

“With our solutions, we offer an enhancement of this traditional method. Our equipment is faster, more reliable and offers lower cost of operations.

Our task is to help reduce the burden on sensory panels, bring a higher degree of repeatability and reliability in the tests, and allow human experts to focus on disputable samples” said Pierre Sbabo.

Established in 1993, Alpha MOS was the first company to market electronic noses. Since its creation, it has invested heavily in research and development and later developed instruments for assessing taste and visual aspect. It holds several patents covering detection technologies and methods or data processing. Today, the company designs and sells a range of high-tech instruments for testing the sensory characteristics of raw materials up to end-products, which gives it a unique positioning and a strong competitive advantage.

In addition to technical and commercial teams in Europe, North America and Asia Pacific, Alpha MOS has a network of more than 30 distributors worldwide. Alpha MOS is publicly traded on Euronext Paris – the Paris stock exchange.

In 2017, Jolt Capital, a high-tech investment fund headquartered in Paris, and Ambrosia 76

Investments, a Food and Beverage investment fund from Luxembourg, became majority investors in Alpha MOS. With their support, the company’s strategy pivoted. Alpha MOS decided to strengthen its focus on the Food & Beverage sector and accelerate the development of new solutions that meet F&B production facilities’ tough requirements. This is a key step on the road to becoming a leader of F&B sensory testing.

INNOVATION DRIVEN To support this vision, Alpha MOS has invested millions of euros in Research and Development to meet rapidly changing market expectations and develop innovative solutions in sensory analysis. The latest addition to its product range is the Heracles NEO electronic nose that features increased performance for smell analysis, designed to save testing time while increasing analytical capabilities.

The Heracles NEO range was introduced with a large selection of configurations and options covering the needs of laboratories and test centers in the Food and Beverage market.

It also meets the testing needs of adjacent segments like functional food, nutraceuticals, or food packaging. The Heracles NEO features larger sensory analysis functionalities and tools, stronger performance and an increased sensitivity that set a new benchmark for the industry.

Bringing more innovation to the market, the Heracles QA offers customizable solutions for off-taste detection in Food and Beverage production, for example bottling or packing lines in beverage plants.

Going through a series of blind tests at a world leading beverage company, the Heracles QA has proven its higher reliability and sensitivity with a success rate 20% superior to human panels. In these validation blind tests, Alpha MOS Heracles determined if a beverage meets a given taste profile, thus eliminating the risk for testing errors and the associated subjectivity of the results. The beverage company is now using CFI.co | Capital Finance International

Heracles units to support and strengthen their sensory testing teams.

“The QA solution is based on client-customized equipment offering a simplified user interface, that allows operators to detect off-taste products and reduce customer complaints. We are now working on deploying these QA solutions with several other key accounts.”

IMPROVING HUMAN LIFE Alpha MOS instruments have long been used in industrial applications as well as in academic and research institutes. Their analytical capabilities and performance make them ideal tools for advanced investigations and research studies where organoleptic testing is involved.

On the other hand, their easy-to-use and userfriendly data processing based on AI completely fulfills the needs for fast and reliable testing methods in production quality control, especially in the Food and Beverage industry, but not only.

“We see a growing demand for natural ingredients evaluation and qualification / standardization

Autumn 2020 Issue

of taste. Raw materials adulteration, or endproduct shelf life is also a growing concern.

Production processes have become more complicated with brands developing products in partnership with independent bottlers or packers.

Quality assurance and the consolidation of data require more automation, which creates new opportunities for Alpha MOS in sensory testing.”

The CEO added: “We have accumulated 27 years of experience in sensory analysis that have resulted into top-quality solutions, both hardware and software. By combining our AlphaSoft software suite with our unique AroChemBase data base, what we create is an odor analysis software module that can characterize nearly 100,000 molecules. It links 2,000 VOCs (Volatile Organic Compounds) to sensory attributes. This is the world’s largest reference data base of its kind.”

“Our vision is to offer sensory testing solutions to improve human life, anytime, anywhere. Alpha MOS will continue to aggressively pursue the goal to become the sensory analysis expert in Food & Beverage and adjacent segments.” i

Alpha MOS: Offices in France

CFI.co | Capital Finance International

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>

A Rewarding Blend of Personal Touch and Present-day Efficiency

D

elen Private Bank is an independent Belgian wealth manager specialising in discretionary management and estate planning. Its mission is to protect the wealth of its clients and to achieve sustainable growth of their assets through a prudent yet proactive investment philosophy and via concise estate planning.

The bank’s strategy and vision is inspired by five core company values: personal and familyoriented approach, efficiency, sustainability and prudence.

Both asset management and estate planning are tailored to client needs with dedicated relationship managers on hand. To René Havaux, CEO of Delen Private Bank, the personal element cannot be underestimated in the private banking business: “Wealth management is fundamentally an emotional matter. That is why our personal service is so essential. We want our clients to feel at home in our offices. It’s a prerequisite to start an open and tactful conversation about complex or delicate subjects.”

Next to the all-important personal touch, Delen Private Bank offers clients a powerful digital platform of tools (apps and online). Since its establishment, the bank pioneered in using stateof-the-art technology as a means – not the goal – to improve the quality of its services and clients experience. “The client chooses how he wants to enjoy our services: online or the traditional way”, emphasizes Alexandre Delen, member of the Executive Committee and head of IT. “It’s up to the client, not us”, Since its launch in 2016, the Delen app went through a process of continuous improvement.

Starting as a tool to get 24/7 insight in the return and composition of the client’s portfolio, it evolved steadily towards a digital means to manage financial affairs, as well as to communicate effectively and securely with the relationship manager. Recent features include remote signing for contracts and account and credit openings, the digital archive to store important documents, the itsme® log-in and the discrete mode. “We constantly look for new ways to add efficiency, agility and comfort to our clients’ lives”, says Alexandre Delen. “In times where physical contact is not always the best option, the digital channels offer true value.

Lots of clients happily use online video calls to keep in touch with us.” In addition, the recently launched Delen Family Services allows the client to get a detailed overview of total assets, including real estate, group insurance contracts and works of art. A family-tree format includes insights into current property rights. That is a 78

Member of the Executive Committee and Head of IT: Alexandre Delen

perfect starting point for projections, simulations and tax calculations, navigating the client to concise and proactive estate planning.

Delen Private Bank was established by André Delen in 1936, operating as an exchange office. In 1975 his son Jacques Delen, the current president of the Board of Directors, was appointed CEO. In 1992 holding company CFI.co | Capital Finance International

Ackermans & van Haaren became a shareholder of the bank, besides the Delen family. The company gradually but steadily increased her footprint, both through internal growth and smart acquisitions in Belgium, the UK (in 2011, JM Finn and Co) and the Netherlands (2015, Oyens & Van Eeghen). By the end of 2019, the Delen Group had €43.6bn in assets under management. i

Autumn 2020 Issue

> Morning Has Broken:

How the Right Routine Can Change Your Life

By Naomi Snelling

Celery and kale smoothie anyone? Or maybe a naked dip in the waves, or a spot of laughing yoga?

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ot your bag? Fear not. But morning routines are perhaps more important than ever, given the impact of Covid-19. For some, that involves setting the coffee machine on a timer a la Michael Tay-lor, a full-time stock trader and founder of shiftingshares.com. There are as many morning routines as there are people — so there’s plenty of scope to find one that suits your lifestyle and personali-ty.

But the most notable point of successful routines is this: they start early.

Benjamin Franklin famously said: “Early to bed and early to rise, makes a man healthy, wealthy and wise.” Arnold Schwarzenegger is an exemplar for this mantra; he likes to get up at sunrise, and at one point had his whole family doing exercises together. His favourite quote comes from the lips of CNN founder Ted Turner, who paraphrased Franklin: "Early to bed, early to rise, work like hell, and advertise."

Talking of advertising... today’s bookshelves and social media are bursting with images of glorious morning routines but nailing the perfect one to propel you to success isn’t anything new. Early ris-ing is a trait that has been historically been associated with great leaders. Mahatma Gandhi, Thom-as Edison and Nelson Mandela: all early risers. Even biblical characters such as Abraham, Moses and Jesus are said to have been early birds.

Not surprisingly, the world of sport has spawned a tribe of early risers, with many stars leading by example. During lockdown, Novak Djokovic and Andy Murray did an Instagram Live chat answering fans’ questions. One was: “What’s the first thing you do when you wake up?”

Djokovic’s earnest answer: “Gratitude and prayer, a couple of long deep breaths, hugging my wife and running to my children.” Murray’s deadpan response was: “Nice. Maybe too much information, but I go for a pee.” Murray is not only frank, he is also a fan of high-energy breakfasts: his favourite go-to munchies consists of two bowls of cereal, followed by bagels coated in peanut butter (which he once complained gets stuck to his teeth).

Creatives have similarly chalked-up an impressive reputation for early starts. Victorian novelist An-

thony Trollope wrote in the early morning every day before going to his full-time job at the Post Office. American author Ernest Hemmingway once said: “When I am working on a book or a story I write every morning, as soon after first light as possible. There is no one to disturb you CFI.co | Capital Finance International

and it is cool or cold and you come to your work and warm as you write.”

Japanese author Haruki Murakami gets up at 4am to write, and Booker-nominated writer Alison Moore starts her working day in the shower 79

TOP TIPS FROM LINNEA DUNNE, AUTHOR OF GOOD MORNINGS For anyone struggling with anxiety, sitting down for 10 minutes with pen and paper can make a huge difference. Simply writing down three things you're grateful for every morning, and taking that gratitude with you into your day, has been proven time and time again to be hugely beneficial. I think gratitude journaling is particularly relevant now, with the year we've had.

To wake up the body, make a glass of warm lemon water and take a few minutes on the yoga mat.

You might want to follow a session with someone like Adriene of Yoga With Adriene on YouTube, or just listen to your body and, in the words of Adriene, “find what feels good”. A few minutes of focusing on your breath before you continue with your day will help you feel calm and focused and, again, has been scientifically proven to help combat anxiety and depression.

— where she mentally goes over what she wrote the previous day before heading to her desk.

Linnea Dunne, author of Good Mornings: Morning Rituals for Wellness, Peace and Purpose, says she felt compelled to write her book after a long period of working from home and seeking ways to be more mindful about the way she structured her day and her work. “It’s interesting now that working from home is the norm,” says Dunne, “because I think morning rituals are so important to help with this.

“I'm originally from Sweden (she now lives in Dublin) and I came across some articles about an old Swedish tradition called 'gökotta', which was all about rising at dawn and going out to hear the first birdsong.

“I realised that there were a number of people around me, especially creatives, who already had morning rituals, and many more who were curious.

In a world where our attention often goes straight to social media when we wake up in the morning, and now to negative news and death tolls, and is the last thing we look at before we go to bed, there's something very appealing about dedicating some time every morning — before we get into whatever it is we need to get into that day, to ourselves and our wellbeing.

SPECIAL MORNING MENTIONS American actor, producer and restaurateur Mark Wahlberg wakes up at 2:30am and hits the gym an hour later. The middle of the night is early morning for “Marky Mark” who beds down at 7.30pm.

Author Hal Elrod’s book The Miracle Morning is recommended by action coaches. “Hal Elrod is a genius and his book has been magical in my life,” says Robert Kiyosaki, bestselling author of Rich Dad Poor Dad. Last, but not least, a mention for BBC Radio 4 Today presenter John Humphrys, who allegedly eats around seven bananas during each programme. Although when asked in an interview what he had for breakfast, his droll response was: “The Prime Minister: grilled.”

“Overcoming negative thinking is a huge challenge for my clients, and one of the main contributing blocks that sabotages their love lives. Gratitude and a good morning routine are staples that form the foundation of our coaching toolbox in my programme.

“My clients are usually very busy, with kids, chores and a career, and so there are lots of excuses around not having time to commit to a morning routine. But actually, even five minutes of inten-tional gratitude work in the form of a quick list is extremely powerful, and will start to turn things around within a week or so.

“Don’t underestimate the power of becoming a master over your mind. I am a strong believer in thoughts manifesting into reality, and so if we are not conscious of our thoughts then we are in trouble!

Make the time for yourself and get intentional about the day, and the life, that you really want to create,” she says. i

“The idea of 'gökotta' — a cold, dark morning in the north of Sweden — walking to greet the sun-rise and the first birdsong has some sort of magic to it, and I think part of that magic is about the peace and quiet of the morning, a kind of calm you just don't get any other time of day.

“Gentle yoga and journaling are popular options, and I am myself a huge fan of stretching out on the yoga mat — but ice-cold showers inspired by (Dutch extreme athlete) Wim Hof are becoming huge as well.”

Dating and lifestyle coach Kate Mansfield says that one of her most important tasks for her clients is helping them build strong morning routines.

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Author: Naomi Snelling

CFI.co | Capital Finance International

Autumn 2020 Issue

> BankInvest CEO Lars Bo Bertram:

Strong Demand Ensures Good Returns on ESG-Compliant Investments

CEO: Lars Bo Bertram

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ars Bo Bertram is excited about the future. He notes that over the past few years retail investors have warmed to products that are fully ESG-compliant: “For more than twelve years, ever since BankInvest signed and implemented the UN backed Principles for Responsible Investment, we have gradually incorporated the pallet of environmental, social, and governance criteria into our decision-making processes. During most of that time, investors showed scant interest in ESG products. However, some two years ago the sentiment started to change and demand for investment products that meet BankInvest’s strict ESG criteria boomed.”

Bertram argues that the current pandemic proves the value of excellence in corporate governance: “The mitigation of risk constitutes an important, if not crucial, element of ESG. We now see that ESG-compliant companies usually respond better to the emergency and display a far higher level of resilience than those that have largely ignored these standards. If you really

think about ESG, you’ll be better prepared to face any crisis.”

The strong demand for ESG investment products has also pushed up the stock price of compliant corporations: “Returns are above average which shows that adherence to ESG standards does not negatively affect profitability.”

BankInvest was set up more than fifty years ago by small- and medium-sized Danish banks to develop and manage a broad range of investment products. “We are still 100 percent owned by these banks. Our mission is to design and manage investment products of a quality similar to, or greater than, those offered by our competitors - mostly larger banks,” says Bertram who emphasises that the current low-yield environment calls for excellence and efficiency in fund management: “Over the past years, we have done a lot of work on our cost base.

We need to be very cost-effective in order to survive and prosper. Our margins are ok, and our investment products are gaining market share.”

CFI.co | Capital Finance International

Betram is especially pleased with the good reception of the new products BankInvest develops for its distributors: “30 percent of our business originates from products that didn't exist three years ago. This shows that we are able to respond to market demand. A global equities fund with a Sustainable overlay that we launched just two months ago has already become the largest ECO-labeled fund in Denmark.”

The BankInvest CEO prizes the company’s compact size: “To compete with the ‘big boys’ we need to be nimble as an organisation with short lines of communication that connect inhouse expertise and ensure agile yet precise decisionmaking processes. Whenever needed, we bring in outside experts or enter into partnerships. For example, to design, launch, and manage real estate investment product, BankInvest teamed up with Denmark’s largest pension fund. Thus, we built bridges between users and providers of products. It is what we do – and what we are good at.” i 81

> BankInvest:

The Singular Pursuit of Alpha Powered by ESG

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he Nordic markets, including Denmark, have seen a significant increase in the demand for sustainable investment products. Though green bonds and equity products have been widely available for well over a decade, investors have only recently warmed to them. However, the market for ESG-compliant investment products has grown so quickly over the past few years, that 82

transparency is becoming an issue. Investors face mounting difficulties in navigating the expanding universe of products and options, separating those masquerading as green and sustainable from the real thing.

In Europe, Denmark has been pushing hard for the introduction of an ESG taxonomy. As a first step, the country’s monetary authorities plan to CFI.co | Capital Finance International

launch green certificates tied to existing bonds as a way of determining the exact price of an ESG designation. The German Bundesbank is now considering a similar approach.

At BankInvest, head of responsible investments Mads Berendt Søndergaard notes that companies seem less reluctant to engage on ESG related issues than before: “They know this

Autumn 2020 Issue

Head of Responsible Investments: Mads Berendt Søndergaard

BankInvest was set up in 1969 by a group of small- and mid-sized Danish banks to develop a full suite of investment products for their clients. The company is still fully owned by 38 participating financial institutions who distribute BankInvest products and often do so under their own name.

Initially, BankInvest offered only a few Danish mutualised funds. However, the product range has diversified significantly since then. Over the past couple of years, BankInvest doubled the number of products which has increased the administrative burdens placed on the company as well. Søndergaard emphasises that, given the present low-yield environment, efficiency in fund management is key to success.

matter and realise that investors care about this.”

Søndergaard prefers constructive engagement to criticism: “It’s one of the cornerstones in our policy. Sustainability is, ultimately, a risk mitigation strategy but can also be used to generate alpha.”

A fund management services company that just celebrated its fiftieth anniversary,

renminbi, and of course the present corona pandemic, showed the superior performance of companies deploying ESG as a tool for risk mitigation. It also dispelled any lingering doubts as to the usefulness of these criteria in the pursuit of alpha,” says Søndergaard.

In 2008, BankInvest became one of the first financial services providers in Denmark to sign on to the United Nations Principles of Responsible Investment (UN PRI). The company has since joined the UN Global Compact – a commitment to adopt sustainable and socially responsible policies – as well.

For investors looking for alpha in today’s market, ESG is key as well. A major research effort by BankInvest has found that companies implementing robust environmental, social, and governance standards consistently outperform ESG laggards. Mapping corporate performance since the dot-com bubble burst in the early 2000s, and over the next seven market downturns or ‘corrections’, BankInvest has found that regardless investment strategy, ESG added robustness and above-market returns.

“We are eager to join such initiatives, and other, because the quest for solid returns is not just a financial one. ESG has been a long journey, and one that is still ongoing. The interest in sustainable investments is increasing exponentially. Investors demand strategies and products that have a positive impact and contribute towards the sustainable development goals. Thanks to this interest, ESG data has also become more abundant, reliable and transparent. Bond issuers know that the trend cannot be ignored, and it is up to us as fund managers to explain precisely what we do, and how, to all stakeholders.”

“We kept noticing that equities with a good ESG profile performed better than other and wondered if this was merely a coincidence. This is when we decided to look a past performance all the way back to the IT bubble of the late 1990s. Tracking ESG markers through the ups and downs of the market, including major events such as the 2011 downgrade of US sovereign credit risk, the 2015 devaluation of China

Søndergaard summarises that transparency has become ‘quite important’: “We disclose as much information and data about our investment portfolios and strategies as is possible so that investors can make informed choices.” It is what sets BankInvest apart. That, and the fact that the company is one of only a handful of cooperative asset managers left – that is quite unique in the financial industry. i

CFI.co | Capital Finance International

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> Precision Medicine:

Life Saving & Planet Friendly

By Shahnaz Radjy Executive Committee Member, Women’s Brain Project Annemarie Schumacher-Dimech Co-founder and President, Women’s Brain Project

When talking about sustainability, calls to action abound with regard to the preservation of nature, reduction of consumption, and more. What seldom gets talked about is how to make grand-scale changes to healthcare systems.

T

his is where precision medicine comes in, an emerging approach for disease treatment and prevention that takes into account individual variability in genes, environmental factors, and lifestyles. It allows doctors and researchers to predict with more accuracy which strategies will work best for a particular disease, and for which groups of people. This contrasts with a one-sizefits-all approach, in which disease treatment and prevention strategies are developed for the hypothetical average person.

KEY TO SUSTAINABLE HEALTHCARE SYSTEMS The advantages of precision medicine from a patient perspective became crystal clear to Dr Maria Teresa Ferretti, co-founder and Chief Scientific Officer of the Women’s Brain Project, when she had to face breast cancer 18 months ago. It took exactly one week for her to have the first diagnosis, two weeks to have the molecular characterisation of her tumour and a consequent therapeutic decision, and a grand total of six months for the surgery and the start of radio- and hormonal therapy. Using a predictive algorithm based on a panel of genetic markers, chemotherapy was deemed unnecessary.

“As a patient, precision medicine meant an exact diagnosis in two weeks, a clear therapeutic path tailored to my specific tumour, and avoiding unnecessary treatment that could have been more harmful than beneficial,” she explains. “Today, cancer patients benefit from advances in precision medicine, but a personalised approach to treating neurological disease such as Alzheimer’s is in its relative infancy.”

Neurological and psychiatric patients currently wait up to three years for a diagnosis, and are often treated with drugs that are ineffective and accompanied by side effects.

Such a pivot in healthcare has been spelled out by Dr Antonella Santuccione Chadha, cofounder and CEO of the Women’s Brain Project: “Precision medicine will be achieved in brainand mental health when the word ‘differences’ is replaced by the term ‘characteristics’, with sex and gender as the starting point."

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"The value of giving the right treatment to the right patient at the right time, reducing the personal suffering of the patient and their family, cannot be overstated."

Patients are extremely heterogeneous, and their differences are key to developing an accurate diagnosis and an optimal treatment.

Two patients with the same symptom — let’s say dementia — might have two completely different underlying scientific causes, or pathologies.

The value of giving the right treatment to the right patient at the right time, reducing the personal suffering of the patient and their family, cannot be overstated. This approach also ensures a dramatic reduction on public and socioeconomic costs, which for dementia alone are estimated at $1tn for 2020.

FOR THE SAKE OF SUSTAINABILITY Precision medicine tools must be optimised and scaled for use in the general population.

The classical example is a blood biomarker (a molecule that can be detected in the blood, and that indicates an underlying disease) in Alzheimer Disease (AD) patients. This would allow mass-screening of thousands of patients, as opposed to the current PET scan and cerebrospinal fluid (CSF) analysis. Doing this would require the implementation of safe storage systems for personal data. Taking it a step farther, validated algorithms should be made available to the larger community, and become an integral part of a neurologist’s and psychiatrist’s toolkit.

Ten to 20 years ago, breast cancer patients were routinely treated with chemotherapy. Some benefitted, some did not, and succumbed to terrible side-effects. It took years to learn that the same symptom can be caused by a variety of lesions, with specific molecular and genetic makeup, which also had an impact on the specific response to treatment.

CFI.co | Capital Finance International

That’s one of the reasons Dr Santuccione Chadha recently accepted the World Sustainability Award on behalf of the Women’s Brain Project.

Making healthcare systems more sustainable may sound like a lofty goal, but specific calls to action translate it into concrete and “smart” (Specific, Measurable, Achievable, Relevant, and Timebound — SMART) goals.

The overarching approach is to call for sex and differences to be integrated into research (no more male-mice-only projects) and clinical trials. This will be a significant milestone to ensure that approved drugs factor-in sex and gender differences, and are thus less likely to cause unexpected side-effects.

What may seem like a trivial difference in fact amounts to years of work, wasted resources, and an end-product that is ineffective — or worse, dangerous. Improving the healthcare system to avoid such inefficiencies will save billions of dollars of materials and human resources. Not only will the drugs work better, but patients are more likely to continue taking them for the full course. Improved adherence will also reduce waste and improve health outcomes.

THE ROLE OF TECHNOLOGY Another key workstream led by the Women’s Brain Projects is focused on novel technologies.

Artificial intelligence has the potential to generate unparalleled insights for scientific research, but any such system will only be as good as the data fed into it. Too many large data sets reflect societal biases, and tend to be mainly European, based on white men.

Differentiated data are essential to make clinical trials, drug developments, and health outcomes more inclusive. That’s the idea behind the recently launched WBP Hackathon, focused on taking bias algorithms and deconstructing them to find systemic solutions.

NO WEALTH WITHOUT HEALTH While some may consider sex and gender differences in brain and mental health a niche, the work of the Women’s Brain Project puts it on the map as a cornerstone of good business, investing in the future, and creating more sustainable healthcare systems.

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That is why the Women’s Brain Project is thinking big. The non-profit already advocates for sex and gender differences in brain and mental health as the gateway to precision medicine, publishing papers and working to learn from different disciplines and integrating expertise from across sectors to raise awareness, influence policy, and build the foundation for a Sex and Gender Precision Medicine Institute in Switzerland.

Such an organisation will work with investors ranging from private individuals to foundations, banks, and any other aligned entity with the desire to achieve Sustainable Development Goals 3 (Good Health and Well-Being), 5 (Gender Equality), 12 (Responsible Consumption and Production), and 17 (Partnerships for the Goals).

Forum in Geneva, Switzerland, and the Vitality Institute in New York, USA. Shahnaz is now based in rural Portugal where she runs an ecotourism project while working as a freelance science communication consultant and writer.

You can follow her on Twitter under @sradjy.

Bern (Switzerland). Today, she is employed at the University of Lucerne where she developed and is heading its programme of further education in Palliative Care.

Annemarie Schumacher Dimech, Dr. phil., is Cofounder and President of the Women’s Brain Project. Having graduated in psychology from the University of Malta, and with an MSc in Health Psychology from the University of Surrey, Annemarie obtained her PhD at the University of

Her fascination with the interaction between body and mind motivates her to study physical and environmental factors affecting mental health. The sex and gender differences in various factors, including socioeconomic and psychological factors, affecting brain and mental health was Annemarie’s motivation to join forces with the other Co-founders to create WBP.

Author: Shahnaz Radjy

Author: Annemarie Schumacher Dimech

With COVID-19 putting the spotlight on physical and mental health, now is the time to act. Together we can forge a better future for ourselves and generations to come. i ABOUT THE AUTHORS Shahnaz Radjy is a member of the Women’s Brain Project Executive Committee and holds an MBA in Healthcare Management from the EHESP as well as a Bachelor of Arts in Biology from the University of Pennsylvania. She worked for ten years in chronic disease prevention and workplace health both at the World Economic

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> Delen Private Bank:

Perfectly Combining a Personal Touch with the Latest in Digital Technology The Belgian bank specialises in private wealth management and has managed to combine what many other banks are finding impossible: keeping a personal touch while introducing the latest technology.

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elen is not afraid to go against the flow. While other banks are replacing staff with robots capable of answering basic queries, Delen continues to put priority on the personal touch. As other banks close branches, Delen has been opening new regional offices across Belgium in recent years. In addition to Antwerp (where it has its headquarters), Brussels, Ghent, Hasselt, Liège, Roeselare, Namur, Kempen, Knokke, Leuven and Waterloo, the bank has opened offices in Waregem and Brasschaat in 2020.

“We are committed to keeping and even growing our local roots, to ensure we keep the personal touch with our clients,” says CEO René Havaux.

“Being able to meet a client close to their home or office is a prerequisite, preferably without unnecessary traffic woes. Especially in these difficult times where physical contact is not evident, we need to feel the heartbeat of the local community ” In Belgium the bank has 360 employees; it also has offices in Luxembourg, Switzerland, the United Kingdom and the Netherlands.

Running parallel with this commitment to the personal touch is a drive to introduce the latest technology. While private banking has long been considered rather slow-moving in its embrace of the digital era, Delen Private Bank once again swims against the flow. It’s been recognised as a trailblazer in harnessing the power of IT to deliver a superior private banking product, with the attendant excellence in client services.

Delen Private Bank is continuously investing in innovative solutions – digital or not, that’s up to its clients – and making substantial efforts to improve them and enhance client satisfaction.

Having this in mind, it launched Delen Family Services, a platform that brings all of the client’s assets together to offer an excellent overview of his investment portfolios, real estate, insurances, art etc. All neatly arranged in a digital archive, carved in the bank’s safe IT environment. Simulations give the client insight in the future evolution of his assets, which can trigger his needs for succession and estate planning. The platform can be smoothly integrated in the existing Delen 86

and Promofi. The Finaxis portfolio also comprises Bank J. van Breda and Co., which caters mainly to entrepreneurs and professionals.

In 2011 Delen acquired a 74% (today 91%) majority stake in UK brokerage JM Finn and Co. In July 2015, it reached an agreement to acquire Oyens & Van Eeghen, a transaction which marked the company’s debut on the Dutch market.

Delen Private Bank is a credit institution under the supervision of the NBB (National Bank of Belgium) and the FSMA (the Belgian Financial Services and Markets Authority).

CEO: René Havaux

app for mobile devices and Delen OnLine. Delen’s efforts to improve the functionalities and user experience of its award-winning app convinced the jury to reward the bank once again with the award.

FROM FAMILY BUSINESS TO ACKNOWLEDGED NICHE PLAYER Established by André Delen in 1936, Delen Private Bank initially operated as an exchange office. The bank has grown steadily since then, acquiring various private banks and asset managers. “Their teams are still part of the Delen Investments group today,” adds René Havaux, “since continuity is key to the bank’s growth strategy.”

In 1975 the founder passed the management of the company to his sons. Delen Private Bank is now part of the holding company Finaxis, which is mainly controlled by Ackermans & van Haaren,

Delen Private Bank has no corporate finance, a limited credit activity, a sound financial base and a highly stable and healthy balance sheet. On June 30, 2020, the assets under management of the Delen Group amounted to €41,2bn.

FOCUSED, NO-NONSENSE AND PERSONAL APPROACH Delen Private Bank prides itself on its focused and no-nonsense approach, which covers discretionary asset management and Estate Planning, and enables client assets to grow in a balanced and sustainable manner.

Clients can leave the financial management of their portfolio (Discretionary Asset Management) to a team of financial experts who closely follow the markets. They act proactively, always from a long-term perspective. For the financial planning of clients’ property (Estate Planning) the bank’s lawyers and tax consultants provide detailed and personal advice. They are experts in all matters concerning succession, donations and business transfer, and follow the current fiscal and legal affairs.

A PASSION FOR ART Art and interior design are among Delen’s passions. This is reflected in the selection and design of the bank’s various offices, as well as in its involvement with artistic events. The bank partners with BRAFA, the Brussels Art Fair (created in 1956). BRAFA has become one of the world’s most prestigious art fairs, famous for fine art, antiques, modern and contemporary art and design. In 2020 BRAFA and Delen Private Bank celebrated their 14th year of co-operation. i

CFI.co | Capital Finance International

Autumn 2020 Issue

> Alejandro Beltrán, CEO of McKinsey Spain and Portugal:

Pandemic Accelerates Changes Already Underway

H

e spends his days on the phone with executives of corporations from across the economic spectrum: listening more than talking. Alejandro Beltrán, CEO of McKinsey Iberia, has an insatiable appetite for information. He keeps his finger on the pulse of business in Spain and Portugal – and notes it is weakening. “The pandemic has changed everything. Prior to the viral outbreak, the dynamics of business were already in flux with the ever more pressing need to address environmental concerns and, in parallel, successive waves of digitisation.” Most executives tell Beltrán that all their plans have now been put on hold to deal with the pandemic and its aftermath.

McKinsey – aka The Firm – is well known for tying together political, economic, and social trends to produce a broad global outlook – and spot the unexpected early. In late February, McKinsey was first amongst its peers to recognise the disruptive potential of the corona outbreak in Wuhan, China, and to issue a clear warning about its possible effects. Internally, the company promptly issued a ‘state of telecommute’ decree to keep as many of its more than 31,000 employees worldwide out of the office, but in work.

For Beltrán it is still too early to conclude that a paradigm shift has occurred in the delivery of white-collar work: “It all depends on how long the virus can rage unchecked and, crucially, if a second and successive outbreaks again lead to strict home confinement. What we can conclude is that a number of orthodoxies have been relegated to the dustbin. Corporations are revisiting the way their operations are organised. I also venture to predict that management hierarchies will tilt away from the vertical, entrusting individual employees with more responsibilities as they gain access to more information.”

Beltrán also noted that his clients have gained a new appreciation for agile decision-making processes. The pandemic has shown that the ability to react quickly to a new reality that no risk analyst could have foreseen is of paramount importance to the survival of corporations.

According to the McKinsey Iberia CEO, most business in Spain are still in a ‘certain’ state of shock: “The first order of business was to ensure the health, safety, and wellbeing of staff. The pandemic has reminded executives that we are all human and need to care for each other.”

As the day after slowly dawns, corporations need to prepare for the new normal. Some have seen revenues plummet by 60 percent or more whilst others watched online sales skyrocket as locked-

down customers turned to the internet for their daily shopping. “The economy has undergone a major shift and it will take some time for businesses and consumers to adapt.”

Beltrán is convinced that the pandemic will also accelerate the digitisation of production processes as heralded by the Fourth Industrial Revolution. The haphazard approach to IT and the Internet-of-Things (IoT) will ‘undoubtedly’ be replaced by more a structural vision on CFI.co | Capital Finance International

how to leverage artificial intelligence and machine learning. Beltrán emphasises that the human dimension will not be lost during this transition: “As happened many times before in history, automation actually leads to a growth in job opportunities and employment numbers.

This retooling goes hand-in-hand with human skills development. Take my job: We estimate that about a quarter of the workload of the average CEO can easily be entrusted to a smart machine.” i 87

> Hélène Rey:

The Core of the ECB’s New Strategy

F

ollowing in the footsteps of the US Federal Reserve, the European Central Bank has launched an in-depth review of its monetary-policy strategy. But as central banks contemplate fundamental changes in their approach, they should be mindful of possible disruptions in their operational environment.

Nowhere is this truer than in strategies to address climate change, one of the most important issues of our time. Since European countries have pledged to make their economies carbon-neutral by 2050, the ECB now must reflect on how its 88

monetary-policy framework could help with that transition.

Although the Treaty on the Functioning of the European Union makes maintaining price stability the primary objective of the European System of Central Banks, it also states that, “Without prejudice to [that] objective, … the ESCB shall support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union.” According to Article 3, the Union “shall work for … a highly CFI.co | Capital Finance International

competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment.”

Obviously, a decarbonised economy cannot be achieved without profound structural changes.

Here, the COVID-19 crisis has provided a reality check. While the International Monetary Fund estimates that the pandemic will reduce global GDP this year by about 4.9%, the International Energy Agency anticipates an 8% global reduction in carbon dioxide emissions. Yet emissions reductions of that magnitude must

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Whatever monetary framework central banks settle upon, it will have to be able to accommodate the large structural shifts and relative-price effects ushered in by decarbonisation. Because it is not possible to maintain a constant rate of increase across all prices, the question for monetary policymakers will be which price index to stabilise.

Under the current framework, the ECB targets eurozone inflation by way of the Harmonized Index of Consumer Prices (HICP). But this index includes energy prices, making it ill-suited for the decarbonisation challenge. With inflation in carbon prices having been engineered by EU policymakers, the ECB should not try to force down other prices in the HICP when the relative price of energy rises, as that would create even greater distortions.

The unavoidable conclusion, then, is that the ECB will have to abandon the HICP index and use core inflation indices that exclude energy and food prices. The reason is not just that core inflation is a more reliable indicator of the lower-frequency component of inflation. Rather, it is that monetary policymakers will need to distinguish between price changes that are occurring for good reasons (as a result of desirable structural changes) versus price changes that indicate a temporary imbalance between supply and demand. The ECB should seek to minimise only the latter category.

True, it is sometimes argued that central banks should target consumer price indices like the HICP because these better reflect purchasing power and make policy decisions easier to explain. Yet recent surveys show that the current framework already is not well understood by the public.

Clearly, central banks need to improve their communication policies. But it is not obvious that targeting a core price index that has been purged of energy prices would be any more problematic than the current approach when it comes to communicating with the public. And it should be even less problematic for experts who follow monetary-policy issues closely.

happen every year between now and 2030 if we are to have any chance of keeping global average temperatures within 1.5°C of pre-industrial levels.

In addition to the human toll, the global recession has imposed an enormous burden on public finances, threatening young people’s education, as well as the gains made by women and developing countries in recent decades.

The upshot is that climate change cannot be addressed by simply reducing economic activity; overhauling existing production systems will be absolutely necessary. The only way to achieve

net-zero emissions by 2050 is to transform how we produce, transport, and consume.

One of the most efficient ways to do this – and perhaps the only way – is to increase the price of carbon while accelerating the pace of technological innovation. But this approach inevitably would trigger significant supply shocks. The cost of inputs, particularly energy, would become more volatile as the price of carbon rises and renewables gradually replace fossil fuels. And, beyond energy, transportation and agriculture also would be subject to large, potentially disruptive changes in relative prices.

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Beyond changing its target price, the ECB could also consider reforms to make its framework more robust against supply shocks. One option is to target a path for nominal GDP, so that cost-push shocks accompanied by economic slowdowns do not trigger unwanted interest-rate increases. In a post-pandemic environment where nominal debt levels will be high for a long time, it would be problematic to have to tighten monetary policy just because an adverse supply shock pushed inflation past 2%. If real (inflation-adjusted) GDP growth were subdued, monetary tightening could destabilise debt dynamics and lead to dramatic consequences. i ABOUT THE AUTHOR Hélène Rey is Professor of Economics at the London Business School and a member of the Haut Conseil de Stabilité Financière.

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ANNOUNCING

AWARDS 2020 AUTUMN HIGHLIGHTS Once again CFI.co brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative.

All the winners announced below were nominated by CFI.co audiences and

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then shortlisted for further consideration by the panel. Our research team gathered additional information to help reach a final decision. In many cases, senior members of nominee management teams provided the judges with a personal view of what sets their companies and institutions apart from the competition.

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As world economies converge we are coming across many inspirational individuals and organisations from developing as well as developed markets - and everyone can learn something from them. If you have been particularly impressed by an individual or organisation’s performance please visit our award pages at www.cfi.co and nominate.

Autumn 2020 Issue

> LONDON STOCK EXCHANGE: BEST CAPITAL-RAISING EXCHANGE GLOBAL 2020

London Stock Exchange dates all the way back to 1698, when ye olde broker John Castaing began posting stock and commodity prices at Jonathan's Coffee House in the City. It has evolved into a hitech operation capable of processing upwards of a million trades per day. The exchange affords access to Europe’s deepest capital pool for about 2,000 companies in 108 countries and 47 sectors. London Stock Exchange raised €28.5bn of equity capital in the first eight months of 2020 — €21.5bn of that in follow-

on fundraisings from March through August. It represented six of the top 20 transactions in Europe, or 38 percent of total capital-raising equity on the London market. This year has so far seen companies raise $383.8bn across equity and debt financing, and 99 follow-ons on its main-market exchange contributed £19.2bn through accelerated bookbuilds. London raised seven percent of global equity capital within the first half of 2020. During the pandemic, the LSE has demonstrated vibrancy and resilience, and

the London market serves as a bridge between the US and Asia. A third of its investor base hails from outside the UK, with a third of that from the US and the rest spread across Europe and Asia, a truly international market. New initiatives, such as the Green Economy Mark and Sustainable Bond Market, are pushing investors towards the companies that champion these movements.

The CFI.co judges nod in unison, and present London Stock Exchange with the 2020 global award for Best Capital-Raising Exchange.

> UNICREDIT: BEST SOCIAL IMPACT BANK EUROPE 2020

UniCredit, a leading pan-European commercial bank is known by its slogan of “banking that matters”. This motto applies equally well to the needs and aspirations of accountholders as it does to UniCredit’s corporate strategy for sustainability, inclusion, and diversity.

The bank is not shy to tap into the less glamorous parts of the retail market through its Social Impact Banking programme in order to offer its services and expertise to small businesses, start-ups, and others often overlooked. UniCredit makes no qualms about its ambition to safeguard and promote the interests of all stakeholders – and that includes the wider society of which it is part.

In light of the uncertainties

introduced by the pandemic, UniCredit has redoubled its efforts to engage with stakeholders and map their concerns and needs so that the bank may adjust its policies and product suite to match demand.

UniCredit is committed to provide a diverse and inclusive workplace for its employees and invests considerable effort into advanced training and skill development programmes.

The bank also maintains a number of largescale educational outreach initiatives to share its expertise to the benefit of different social groups across its communities including those most vulnerable.

The history of the bank dates back to 1870, when Banca di Genova - later

renamed Credito Italiano - opened for business.

UniCredit Group was first formed with the merger of a number of major Italian banks and has since expanded its footprint to include a presence across 13 core markets in Europe.

It is also the parent company of the German HypoVereinsbank.

The CFI.co judging panel notes that UniCredit was an early adopter of strong and meaningful corporate social responsibility policies. The bank has established a reputation that lives up to its corporate slogan. The judges wholeheartedly agree that a broad perspective matters a great deal indeed and feel no hesitation in naming UniCredit winner of the 2020 Best Social Impact Bank Europe Award.

> BANKINVEST: BEST ESG RESPONSIBLE INVESTOR DENMARK 2020

BankInvest has demonstrated wisdom and foresight over its 50-year history by focusing on sustainability to foster growth and create value for stakeholders.

The mutual fund was founded with the ideals of a co-operative — and a mission to level the playing field of the Danish financial market, enabling smaller institutions to challenge market leaders in healthy competition. Bankinvest is owned by 38 banks and retail investing represents a core part of its business, along with a strong institutional division. It has appointed a Committee for Responsible Investments, vested with the decision-making power to exclude unsuitable

companies from consideration. Portfolio candidates are vetted for ESG compliance at the pre-investment stage, then guided through active ownership stakes to push for the most responsible and sustainable operations possible.

If an investee’s ESG performance should begin to falter, BankInvest addresses the issue through open dialogue with the company’s management team, by exercising AGM voting rights, or, as a last result, by shedding the shares. BankInvest has partnered with Sustainalytics to execute norm-based screening of portfolio investments against international standards for environmental CFI.co | Capital Finance International

protection, human rights, labour standards and business ethics. An MSCI ESG partnership, which provides BankInvest with specialised analysis of corporate ESG conditions, underscores its commitment to transparency and accountability, which also includes front running quarterly reporting on how BankInvest’s investment portfolios perform compared to its peers within ESG, CO2 and SDG metrics. The CFI.co judging panel is pleased to recognise a company with sustainability in its DNA, and declares BankInvest as the winner of the 2020 award for Best ESG Responsible Investor (Denmark).

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> JPMORGAN CHASE: BEST CSR BANKING UNITED STATES 2020

Global financial giant JPMorgan Chase boasts a 200-year history of integrity, commitment and innovation. The group has developed a multifaceted CSR programme that demonstrates excellent corporate citizenship. It initiated a plan in early 2018 to deploy $1.75bn in worldwide philanthropic capital over five years, and has made great strides in reaching that goal. It focuses the vast scope of its resources and influence to help build strong communities and economies of scale around the world.

It fosters an open and dynamic workplace,

actively creates a diverse corporate culture and prioritises human rights throughout its internal and external operations. JPMorgan Chase gives grants to non-profits, matches donations for employees’ chosen charities, and connects employees to their communities via a threepronged volunteer programme. Tech for Social Good aims to empower people with technology, the Fellowship Initiative works to improve educational outcomes for disadvantaged young men of colour, and the Service Corps offers strategic support to non-profits. The company

strengthens communities through educational initiatives designed to hone a competitive edge and boost job prospects. It prioritises financial inclusivity and develops solutions to increase household financial security. Sustainability is a guiding principle of JPMorgan Chase, touching on everything from risk management, the environmental impacts of its operations and its climate-positive business investments. The CFI.co judging panel confers JPMorgan Chase — a repeat winner — with the 2020 award for Best CSR Banking (United States).

> INVESCO: BEST ESG RESPONSIBLE INVESTMENT EXPERT UNITED STATES 2020

Independent investment company Invesco celebrates the energy and advancements building in ESG. The firm views the stewardship of clients’ assets as sacrosanct — and uses ESG as a focus to amplify returns while creating positive impacts for people and planet.

Responsible investing is embedded throughout Invesco’s global network, from its headquarters in Atlanta to 50 locations across North America, Europe, Asia Pacific, the Middle East and Africa. Invesco ensures that its practicewhat-you-preach ethos can be verified through

transparent and documented resources. ESG performance is reported across asset classes to help clients align investment with a desire for positive change in the world. The metrics enable them to recognise the best opportunities, using ESG performance as a reliable indicator of growth and adaptive evolution. Stakeholders in the Invesco community understand the logic and longevity of sustainability, and investors increasingly look to future-proof their portfolios with proven ESG strategies.

Invesco’s 8,000-strong global workforce in 25

countries manages client assets worth $1.2tn.

The firm engages with investees through an active ownership approach that promotes open dialogue and continuous improvement. Invesco is an active member in a variety of global trade associations. For the fourth consecutive year, Invesco was awarded an A-plus rating in strategy and governance by the UN-sponsored Principles for Responsible Investment. The CFI.co judging panel presents Invesco with the 2020 award for Best ESG Responsible Investment Expert (United States).

> GALLATIN POINT CAPITAL: BEST OPPORTUNISTIC INVESTMENT STRATEGY US 2020

Gallatin Point Capital (GPC) is a private investment firm led by seasoned professionals who have earned their spurs over lengthy careers in finance.

Lewis A “Lee” Sachs served as the Assistant Secretary of the Treasury for Financial Markets, and Matthew Botein oversaw opportunistic investments at BlackRock Alternative Investors.

The GPC managing partners have assembled a talented team of young professionals with a passion for entrepreneurism. The boutique firm takes an atomic view of investment opportunities to identify the needs of the 92

business as well as the expected returns. GPC aims to generate generous returns per unit of risk by backing companies with winning ideas and strong leadership, and supports its investees through collaborative partnerships.

The GPC portfolio of businesses and holdings ranges from new market entrants with experienced founding teams to established enterprises looking for capital growth partners or pursuing specific objectives. GPC treats each collaboration as puzzle to be solved, studying the pieces to find a perfect fit. It pairs equity CFI.co | Capital Finance International

stake or liquidity solutions with managerial expertise to help investees overcome challenges and unlock growth. It favours a creative strategy of more idiosyncratic and uncorrelated rewards and risks rather than those linked with the performance of equity and bond markets. This distinctive approach allows for greater riskadjusted returns and more flexibility in deal structures. The CFI.co judging panel declares Gallatin Point Capital the worthy winner of the 2020 award for Best Opportunistic Investment Strategy (US).

Autumn 2020 Issue

> AVELACOM: BEST CONNECTIVITY & IT INFRASTRUCTURE PROVIDER GLOBAL 2020 Avelacom has developed a comprehensive suite of data services and cloud solutions to ensure financial institutions stay current and competitive with fast and reliable access to market trading and pricing data.

Traders using high volatility strategies — where a few milliseconds’ delay could spell disaster — are sensitive to issues such as packet losses, jitter and latencies. Avelacom’s proprietary network of fibre and microwave tower relay technologies allows the transfer of limitless data at high speeds and high volume across global markets. With offices in North Carolina, London, Singapore and Moscow, the company operates across more than 80 data centres worldwide. A focus on network ownership and connectivity updates has enabled Avelacom to establish some of the lowest latency routes in

Europe, the Middle East, Asia Pacific and Latin America. Avelacom set the speed record with its London-Tokyo route, and recently announced a partnership with Brazilian exchange B3. Despite the diverse scope of client demands, Avelacom is a one-stop-shop for telecom solutions. It offers direct connectivity to all major cloud service providers, and deploys ready-to-go, rentable infrastructure to help clients expand into new markets with minimal upfront investment. It presents analysed data to clients in an understandable format, and is constantly looking for ways to make products more user-friendly. The CFI.co judging panel congratulates Avelacom, the 2020 winner of the global award for Best Connectivity & IT Infrastructure Provider.

> MACKAY SHIELDS: BEST ESG FIXED INCOME INVESTOR UNITED STATES 2020 MacKay Shields follows the mantra: "Big enough to matter, small enough to make a difference." As of September 2020, the firm has a workforce of 211 professionals and manages approximately $144bn. MacKay Shields considers ESG at every level of its operations, aiming to create long-term value for its clients. Each investment team utilizes its own distinct philosophy, processes and expertise to add value across capital markets. As such, each investment team integrates material ESG considerations in its own manner which reflects the character of its respective asset class and investment style. Further, each investment team has developed a team-specific ESG policy, which serves as the cornerstone of the team’s ESG integration process. Within the results-orientated firm, MacKay Shields’ teams have developed proprietary scoring systems to evaluate prospective or current investments against ESG performance. MacKay Shields believes

engagement is an integral part of managing ESG risks. Each team has developed its own approach to engagement consistent with its philosophy and process. Firmwide, investment teams and their strategy-specific policies are united through MacKay Shields' Responsible Investment Advisory Committee (RI Committee). The RI Committee, which features the firm's ESG & Sustainability Initiatives director, senior representatives of portfolio management teams, its General Counsel and members of the risk team, is charged with overseeing firm-wide ESG efforts. MacKay Shields takes pride in its growing reputation for disciplined, ESG-focused investment research, recently earning an A+ rating for the PRI Strategy & Governance module. The CFI.co judges announce MacKay Shields as the 2020 winner of the award for Best ESG Fixed Income Investor (United States).

> MACK INTERNATIONAL: BEST INVESTMENT MANAGER EXECUTIVE SEARCH FIRM US 2020 As the investment world frets and fusses about current, and probably future, market volatility, Mack International is confidently charting a course to calmer waters. The US firm was founded in 2002 with the mission to help clients find the perfect executive investment manager.

Mack International tailors executive search solutions for single and multi-client family offices, wealth advisory, investment management and financial services companies with ultra-highnet-worth clients. The Chicago-based firm’s found, Linda Mack, is an industry thoughtleader who is acknowledged as one of the world’s top wealth management experts.

Mack International is famous for culling candidate lists until only those with a winning combination of suitable qualifications and cultural fit remain. - This can be an elusive target and a hard row to hoe, but Mack International ‘s comprehensive, consultative approach has consistently delivered results for its national and international clients over the years. A dedicated team of senior consultants with over 60 years combined experience in

Family Office and Investment Management personally conduct each assignment. The firm’s founder leads every search. No client work is delegated to junior staff. This hightouch process ensures that the firm gets a profound understanding of its selected clients and candidates, taking their needs and aspirations into account to create ideal, enduring partnerships. Mack International has weathered the challenges brought about by the coronavirus pandemic with characteristic aplomb. Video Conferencing has given the firm the ability to maintain face-to-face contact with clients and candidates, albeit at a distance, in a convenient format. By using resourceful and creative approaches tailored to each engagement, Mack International has helped ensure success for their clients this year despite the limitations imposed on inperson meetings during these unprecedented times. The CFI.co judging panel is pleased to announce Mack International, a repeat programme winner, with the 2020 award for Best Investment Manager Executive Search Firm (US).

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> PIRELLI: BEST ESG RESPONSIBLE MANUFACTURER ITALY 2020

Pirelli is one of the world's leading tyre producers and the only one focused solely on Consumer tyres. Its social responsibility stance has been in place from its early days, and has evolved to align with the principles and practices of the UN Global Compact. A dedicated sustainability team works with Executive Vice Chairman and CEO Marco Tronchetti Provera and a steering committee comprised of top management representatives to develop Pirelli's vision for the future. The team evaluates every aspect of the business through the lens of sustainability.

Pirelli prioritizes this core value — and expects

the same commitment from everyone in its supply chain. Potential suppliers undergo a rigorous selection process before contracts are awarded, and each must demonstrate continued compliance with sustainability standards through regular auditing by an independent party. Pirelli gives suppliers clear deadlines to rectify any instance of non-compliance before resorting to contract termination when deemed necessary. Sustainability targets are periodically reviewed and revised and published as part of Group industrial plans. These targets are cascaded through to the local level, fostering

a culture of transparency and accountability.

With the aim of of accelerating the transition to a more sustainable way of life, the Company proactively participates in trade associations, and contributes to the wider community. It sponsors youth scholarships, family support programmes, sustainable farming workshops and road safety campaigns. In response to the pandemic, Pirelli donated funds to philanthropic community initiatives, particularly in areas where it has operations. The CFI.co judging panel recognizes Pirelli as winner of the 2020 award for Best ESG Responsible Manufacturer (Italy).

> ARCA FONDI SGR: BEST EMERGING MARKETS DEBT MANAGER EUROPE 2020

Arca Fondi SGR weathers choppy market conditions with the confidence borne of 37 years’ investment experience. The Italian firm manages portfolios with agility, adjusting risk profiles to seize opportunities thrown up by market volatility. The current global crisis has affected businesses in unprecedented ways, but the solid risk-management processes implemented by Arca’s multi-manager teams have paid off. Early indicators suggest Arca portfolios, invested in liquid instruments, are among the top performers of their groups. Arca’s investments in digitalisation and organisational

simplification have allowed it to shutter most of its offices during the crisis and operate through just one branch using less than five percent of its staff — with no interruption to operations.

Arca reports that thousands of transactions, subscriptions and redemptions are processed weekly. Teleconferencing keeps internal committees connected and on-target, and there are regular meetings — up to 100 each week — with external brokers and analysts.

Regular reports keep clients informed of investment performance, while weekly webinars strengthen their understanding of market

trends. Arca Fondi SGR serves individual and institutional investors, including pension funds and commercial banks. It subscribes to the ethically based Global Investment Performance Standards developed by the CFA Institute, and independent audits over two decades show its consistent compliance. The CFI.co judging panel has recognised the firm’s performance in several awards programmes, and its triumph over recent challenges elevates its reputation.

The judges present Arca Fondi SGR with the 2020 award for Best Emerging Markets Debt Manager (Europe).

> BEGBIES TRAYNOR GROUP: BEST CORPORATE ADMINISTRATION SERVICES UK 2020

In times of trouble, the Begbies Traynor Group stands ready to offer solace and solutions to struggling corporates. The UK’s premier business rescue and recovery specialist, listed on the London Stock Exchange and boasting over thirty years’ worth of experience, fields an exceptional team of professionals who not only deploy their expertise but share their customers’ passion for excellence. The firm goes far beyond offering wisdom from the comfort of its 78 branch offices spread throughout the UK and works closely with local experts to provide eminently practical advice crafted to match the specific on-site conditions.

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Begbies Traynor Group takes a holistic approach to the business and has expanded its suite of services to include risk consulting, forensic accounting, and corporate finance, amongst others. In order to better balance its portfolio, the company has also moved into the M&A-space. Given the present uncertainties facing the business community, Begbies Traynor Group is wellpoised to help companies navigate shifting market dynamics and protect the interests of all stakeholders. Thanks to a vast network of offices and associates – one that covers the full spectrum of business and reaches deep into CFI.co | Capital Finance International

the economy – the group can tap into a universe of opportunities and knowledge not easily equalled. The company’s skills in sourcing upsides has been particularly beneficial to pulling SMEs back from the brink.

The CFI.co judging panel needs no further convincing that Begbies Traynor Group is well equipped to tip the scales when businesses become unhinged. The group has a strong track record that denotes a remarkable success rate as well as a consistently superior performance.

The judges are pleased to offer Begbies Traynor Group the 2020 Best Corporate Administration Services UK Award.

Autumn 2020 Issue

> CANPACK GROUP: BEST SUSTAINABLE PACKAGING SOLUTIONS CEE 2020 The CANPACK story began in Poland over 30 years ago with the launch of its first line of aluminium products. Now it’s a global packaging leader and believed to be the number three aluminium beverage packaging player in Europe. The company holds sustainability as a core tenet of its operations. Aluminium — the mainstay of its product line — is a raw material with a long life and inexpensive supply. It’s one of most widely reused materials in the world; recycled aluminium needs 95 percent less energy to process than the metal’s production from bauxite ore, which is mined from rock. CANPACK believes aluminium to be an ideal resource for the circular economy, and has built its products around it. The company specialises in metal packaging for beverages and food, chemicals and cosmetics, aerosols and closures. CANPACK also offers glass products and other packaging-related solutions. The group has established itself as a leader in Central and

Eastern Europe, with a growing presence in Western Europe, Asia, Africa, Latin America and, most recently, announced entry into the US (the world’s largest market for aluminium beverage cans). A three-pillar framework details the company’s commitment to care for employees and communities, sustain the environment, and recycle responsibly. In times of crisis, CANPACK is a company that lends a helping hand to those in need. It has mobilised its volunteer programme to contribute to the battle against Covid-19 by providing 3D-printed face shields to medical and long-term care facilities. It has procured, produced, donated and delivered crucial personal protection and medical equipment to communities worldwide, as well as contributed funding and organised donation campaigns to support the fight. The CFI.co judging panel presents CANPACK Group with the 2020 award for Best Sustainable Packaging Solutions (CEE).

> FERREXPO: MOST RESPONSIBLE COMMODITY TRADER GLOBAL 2020 Ferrexpo has a 50-year legacy of turning raw resources into high-commodity assets, from responsible mining operations to best-in-class community impact programmes. The Londonbased company has iron-ore mines in the Ukraine and a commodity trading offices in Dubai and Switzerland. In 2007, Ferrexpo became the first Ukrainian company to be listed on the London Stock Exchange, and now ranks on the FTSE 250 Index. The company has amassed a strong asset base through a “fast follower” approach to technology and innovation. Ferrexpo is in the process of automating its trucking fleet and drilling operations, contributing to an increasingly safe work environment for its employees. As automation advances displace low-skilled labour, Ferrexpo is committed to training employees to upskill. The company assigns one percent of annual EBITDA to support local communities. Over the past decade, Ferrexpo

has invested in upgrading facilities at all six of the local secondary schools and has donated set of iPads to local schools, and sponsors athletic clubs, cultural events and musical performances. It sponsors science programmes, funds scholarships and sets high targets for female enrolment. Ferrexpo ensures that highpotential employees develop by providing 6 to 8 weeks of in-house training through its business leadership programme. It organises development activities and networking events to support women in leadership. The company is just as conscientious in its operations and has made strides towards its vision of full renewable energy. It uses sunflower husks to reduce fuel consumption and is investigating use of solar energy at its operations. The CFI.co judging panel declares Ferrexpo as worthy winner of the 2020 global award for Most Responsible Commodity Trader.

> ENERGEAN: BEST ESG ENERGY GROWTH STRATEGY EUROPE 2020

Committed to the sustainable development of energy resources along the Mediterranean and the North Sea, London-based Energean runs exploration, development and production projects in Egypt, Italy, UK, Greece, Croatia, Montenegro, Malta and Israel (where its flagship gas fields are located), inclusive of the acquisition of Edison E&P which is expected to be completed in 2020.

As a signatory of the UN’s Global Compact, Energean is striving towards a 2050 goal of net-zero emissions and contributing to the SDGs through operational excellence and sound corporate citizenry. It believes the SDGs

can chart a path for building back better after the global pandemic, and has called on the UK’s Prime Minister to support socially just and green recovery plans. Sustainability unites the Energean ethos, as underscored by its 2019 performance report, where business outputs are visually stacked against SDG benchmarks.

Some highlights include better water efficiency (recycling 89% of water withdrawn at production sites) and an increased percentage of natural gas in its portfolio (more than 70% once its acquisition of Edison E&P completes). It achieved reductions in greenhouse gas emissions and non-renewable CFI.co | Capital Finance International

energy consumption and maintained a blemishfree record of emergency preparedness, regulatory compliance, community relations and occupational health and safety. Energean links executive incentive pay with performance on ESG targets, commits to transparent disclosure of emissions tracking and engages with organisations to precipitate the transition to a low-carbon future. Energean is listed on the London and Tel Aviv Stock Exchanges and included in the FTSE 250 Index.

The CFI.co judging panel is pleased to declare Energean as the 2020 Best ESG Energy Growth Strategy (Europe) award winner.

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> MCKINSEY & COMPANY: BEST MANAGEMENT CONSULTANCY SPAIN 2020

Over McKinsey & Company’s four-decade history in Spain, it has served over half of the country’s largest companies and undertaken more than 2,000 projects. The firm is world-renowned for offering clients quality insights that lead to lasting impacts, thanks to its investments in talent recruitment and retention. McKinsey Spain hires across borders and backgrounds to create a close-knit team with diverse strengths.

New hires benefit from consultancy training and an introduction to the company’s core values before being assigned a mentor to guide

their professional development. The company continually strengthens team skills through annual local and practice-related training opportunities. McKinsey’s Madrid and Barcelona offices host some 160 consultants and 220 employees, partnering with public institutions and private companies across a range of sectors, including finance, telecommunications, energy and consumer goods. McKinsey Spain leverages the group’s world-class experience, advanced technology and proprietary data to tailor solutions to regional circumstances and individual client

needs. It complements consulting services with a portfolio of more than 85 solutions designed to facilitate growth and transformation.

The company contributes to the reform and improvement of Spain’s economy with researchbacked data, and is an influential voice in public debate. McKinsey launched the Generation Foundation in 2014 to prepare young Spaniards for employment, equipping them with in-demand skills. The CFI.co judging panel recognises McKinsey & Company as winner of the 2020 award for Best Management Consultancy (Spain).

> EQUITI GROUP: MOST INNOVATIVE FINANCIAL MARKETS BROKERAGE GLOBAL 2020

Over the past decade, Equiti Group has solidified its status as a leading provider of global brokerage services. Equiti Group’s network of twelve (12) subsidiaries and over 300 specialists provides clients in the Middle East, the Americas, Europe, Africa and Asia Pacific with access to individual, professional and institutional brokerage services. Innovation is one of the driving forces behind the group’s impressive growth trajectory. Equiti Group is committed to ensuring that the trading of financial instruments becomes ever more accessible and affordable to clients worldwide.

One of the group’s latest milestones comes from its Kenyan subsidiary, EGM Securities, which last year launched FXPesa as the first provider of online Forex and CFD (contract-fordifference) products for Kenya’s retail market.

FXPesa unlocks global trading opportunities for smartphone users across the country.

Kenya is a recognised fintech hub with an entrepreneurial culture and high smartphone penetration — making it an ideal market to launch Equiti’s app-based CFD trading for Africa. FXPesa (which translates to “FXMoney” in Swahili) has quickly become synonymous

with mobile trading across East Africa. EGM Securities joined the Equiti Group in 2018 and became the first online-forex broker to be granted a licence by Kenya’s Capital Markets Authority, one of the most highly regarded regulatory bodies on the continent. Equiti Group sees market conditions across Kenya and Sub-Saharan Africa — where mobile financial services are superseding traditional retail banking — as ripe for disruption. The CFI.co judging panel declares Equiti Group as the 2020 winner of the global award for Most Innovative Financial Markets Brokerage.

> ALPHA MOS: BEST SENSORY ANALYSIS SOLUTIONS EUROPE 2020

Alpha MOS claims the distinction of being the first company to bring “electronic noses” to the market. The French firm develops sensory analysis tools for industrial and consumer clients worldwide, providing smell-, taste- and visual-assessment technology to control the sensory qualities of products.

More than 1,000 Alpha MOS instruments have been installed in food, beverage and packaging industries around the world. The French company has established a global network, with offices in the US and China 96

and distributors worldwide. Over the past 27 years, Alpha MOS has solidified its status as an innovator in this niche area, with a number of patents under its belt. The science-driven operation fuels future developments with strong investment to create products that will fulfil unmet market needs. Alpha MOS put €3m into R&D in 2019, and has set aside that same financial commitment in its 2020 budget. The specialist outfit is now turning its attention to the integration of a new generation of gas micro-sensors, which would expand its CFI.co | Capital Finance International

market scope to include more general-use applications. The Alpha MOS team has 50 members around the world, with a quarter of the staff in the science department. All new employees undergo a comprehensive onboarding process, including a six-month training programme, to ensure a perfect fit within the organisation. The CFI.co judging panel salutes the bright minds behind this unusual business model, and declares Alpha MOS winner of the 2020 award for Best Sensory Analysis Solutions (Europe).

Autumn 2020 Issue

> BELVOIR GROUP: BEST PROPERTY NETWORK GROWTH STRATEGY UK 2020 Belvoir Group is a people-driven business enjoying a 23-year unbroken run of profit and growth. The group comprises property franchisees and financial advisers, providing customers with properties to buy or rent as well as the financial services to facilitate the move.

Belvoir Group currently manages about 70,000 properties. One of the secrets to its success is a dedicated workforce, including a passionate management team with solid experience gained from climbing the ranks. The group supports opportunities for professional development and internal growth, and opts to promote from within wherever possible. Belvoir Group is a franchising specialist with a highly developed skillset and a deep commitment to its franchisees. It will fight tooth and

nail to keep the best people in the business and give them the support and motivation they need to survive — and thrive. The group is grateful that no franchisee fell by the wayside during the Covid crisis, and has pledged to take any necessary steps to ensure that remains true. It has managed to harness the momentum of 2019 and hopes to meet pre-pandemic levels of performance this year. The group’s residential management revenue is already up by 43 percent. Belvoir Group believes that trends will favour franchises over corporations as more international brands begin to realise the potential benefits. The CFI.co judging panel is pleased to present Belvoir Group with the 2020 award for Best Property Network Growth Strategy (UK).

> FCI: BEST TRADE FINANCE INNOVATOR GLOBAL 2020 FCI is a not-for-profit organisation that has been facilitating cross-border trade finance in Europe, the Americas, the Middle East, Asia and Africa for over 50 years. It is the global representative body for the factoring and receivables finance industry, with nearly 400 members worldwide and an active presence in 94 countries. FCI advises importers and exporters on cross-border invoice factoring and assists members with three solutions: a cross-border transactions platform, a supply chain finance platform, and an Islamic international factoring supplement. The cross-border platform relies on a two-factor system connecting FCI members through Interfactor Agreements. FCI’s cross-border platform helps importers by offering factor guarantee facilities creating additional new sources of trade credit, allowing the buyer to purchase on open account trade terms and eliminating the need to issue letters of credit for sourcing purposes.

Exporters appreciate improved liquidity in the form of better credit protection and financing conditions with lower administration costs and timeframes. FCIreverse

allows Financial Institutions to not only provides its members a global operating platform for on-boarding anchor buyers and their suppliers, but also offers a means by which to on-board suppliers in the 94 countries FCI operates in, to ensure legal, compliance, and educational objectives are met. The Islamic international factoring supplement ensures transactions are Shariah-compliant.

The FCI’s work scope and member roster cover a spectrum of different industries and geographies, with member transactions accounting for about 90 percent of international factoring volume. The organisation draws on a legacy of collaborative international experience to assist with the development of international trade. FCI membership is advantageous for anyone interested in factoring — financial institutions, industry suppliers and companies active in receivables finance — with its trading, consulting, and mentorship opportunities, its legal advisory and its educational outreach. The CFI.co judging panel presents FCI with the 2020 award for Best Trade Finance Innovator (Global).

> UNITED WATERS INTERNATIONAL AG: MOST INNOVATIVE WATER PURIFICATION TECHNOLOGY GLOBAL 2020 Swedish entrepreneur Thorbjörn Laag launched water purification company United Waters International (UWI) in 2005, and built it into a market leader with sage management, smart networking and intelligent investment. Laag serves as executive chairman of the company, and he and his family are the majority shareholders. UWI boasts a global presence and employs some of the world's leading water specialists. UWI has translated more than 40 years of R&D into one of the most advanced water purification technologies the world has ever seen. The research underpinning UWl's technology stems from scientists at the Royal Institute of Technology in Stockholm.

The second-generation of UWl's flagship product, the BioGreen TM system, provides an innovative and eco-friendly solution to remove

harmful metals, bacteria, viruses and microbes from water and can purify up to 2,500m3 of fresh drinking water every 24h. A standard unit consumes a fraction of the energy consumed in e.g. reverse osmosis. The sustainable solution uses no chemicals in the purification process, wastes less water and generates no harmful by-products. The modular units, which require little space and no onsite operator, are fully functional and completely automated within hours of instillation. The system is qualitycontrolled via 24/7 remote access, and UWI conducts annual maintenance as part of the service agreement. The CFI.co judging panel confirms the company as a repeat award winner, and presents United Waters International AG with the 2020 global award for Most Innovative Water Purification Technology.

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> SABIC: BEST ESG RESPONSIBLE PETROCHEMICAL COMPANY MENA 2020

SABIC defines sustainability as its cornerstone, and has done since it was founded 40 years ago.

This enduring commitment continues to drive innovation and growth for the petrochemical company, home to over 33,000 employees, including 1,270 scientists. It has innovation centres in key geographies: the US, Europe, Asia and the Middle East and Africa (MENA).

The group has its global headquarters in Saudi Arabia, with manufacturing plants, sales offices and logistics hubs in 50 countries. SABIC is one of the world’s top three petrochemical companies, supporting client needs for clean

energy, transport, construction, packaging, medical devices, agri-nutrients and electronics.

SABIC’s expansive range, market penetration and strong ESG leadership allow the group to contribute towards the UN’s Sustainable Development Goals, focusing on the 10 targets with the most positive impacts. It promotes resource efficiency through tracking programmes for material loss and water usage. It fights climate change by reducing overall energy consumption and increasing stakes in renewables. It designs products that exceed sustainability expectations and

adapts manufacturing processes for circular economies. It has invested more than $962m in CSR initiatives over the past 18 years to foster long-term, mutually beneficial partnerships with the communities where it operates. Last year, it spent $15.6m on 185 global CSR programmes to protect water resources and support sustainable agriculture, education, health and wellness and environmental protection. The CFI.co judging panel unanimously declares SABIC as winner of the 2020 award for Best ESG Responsible Petrochemical Company (MENA).

My Clinic began operations just three years ago, inviting individuals, families and businesses across the Kingdom of Saudi Arabia to experience how much superior healthcare contributes to positive patient outcomes. My Clinic’s Jeddah facilities are spread wide and stretched several storeys high, housing the full gamut of medical specialities and clinical care under one roof.

My Clinic recruits highly qualified medical professionals to provide world-class care that sets patients at ease, and its holistic approach to healthcare supports positive treatment

outcomes. It offers a suite of convenient at-home services, including consultations, collection of lab samples, vaccinations, physiotherapy, post-surgery care and elderly homecare. My Clinic has also developed a comprehensive and customisable Corporate Wellness programme to improve quality of life for workers across the Kingdom. Workplace wellness initiatives have been proven to reduce healthcare costs and employee absenteeism — and boost workplace productivity. My Clinic solutions focus on delivering optimum clinical outcomes through

a patient-centric approach that encompasses prevention, lifestyle counselling, early screening and diagnosis, clinical services as well as chronic illness care. My Clinic supports its proactive stance by investing in the best people and the latest medical technology across integrated points-of-care. It recently launched an audiovestibular centre to provide care for patients with hearing and balance problems. The CFI.co judging panel announces My Clinic as the 2020 winner of the award for Best Clinical Patient Outcome (KSA).

> MY CLINIC: BEST CLINICAL PATIENT OUTCOME KSA 2020

> TAWUNIYA: OUTSTANDING CONTRIBUTION TO SOCIAL IMPACT KSA 2020

Founded in 1986, Tawuniya was the first insurance company to be licensed under Saudi Arabia’s Co-operative Insurance Companies Control Law. Tawuniya is headquartered in Riyadh, a global financial hub and the capital city of the Kingdom of Saudi Arabia (KSA). Over the past three decades, the company has helped to establish the national insurance market while making consistent contributions to the country’s social welfare and economic prosperity. Tawuniya is particularly proud of its latest collaboration with the Saudi Ministry of Health to establish and operate testing centres in response to the Covid-19 pandemic. It has designed, built and 98

covered all of the expenses for 21 drive-through testing centres, with a capacity of more than 8,000 visitors and up to 20,000 tests daily.

Tawuniya offers clients peace of mind during fair weather and a safety net when times get choppy, with a product line-up including over 60 types of insurance, from medical and auto to property, travel and liability. It was among the first Saudi companies to set governance guidelines rooted in international best-practice and good corporate citizenship. It has developed a four-pillar CSR strategy that targets health, safety, productivity and the environment. Tawuniya supports a free dialysis programme and organises awarenessCFI.co | Capital Finance International

raising campaigns for preventative healthcare, financial literacy and driver safety. It organises blood drives, charity donations and last year introduced the Safe Houses initiative, sponsoring home renovations for poor families. The work ensures safe and dignified living conditions, and includes painting, plumbing, and electrical maintenance. Families are provided with appliances, furniture and safety equipment, and a workforce of volunteers pitches in by donating their time, skills and labour. The CFI.co judging panel congratulates Tawuniya, a repeat winner, on its latest accolade: the 2020 award for Outstanding Contribution to Social Impact (KSA).

Autumn 2020 Issue

> PILIPINAS SHELL PETROLEUM CORPORATION: BEST ENERGY CORPORATE GOVERNANCE PHILIPPINES 2020 Pilipinas Shell Petroleum Corporation has been powering the lives of Filipinos for over 100 years. Starting as Asiatic Petroleum Company (Philippine Islands), Ltd in 1914 selling cased kerosene, the Company since then has proven itself as a trusted partner in nation-building, a good neighbor and a world-class investment case. It credits its consistent record of solid financial performance to a comprehensive governance code, and strong and fit for purpose corporate structure that is guided by its core values of honesty, integrity and respect for people. All employees commit to comply with the Code of Conduct – doing things the right way without taking shortcuts, all the time. This has been the Company’s guiding principle in having a well-built integrity culture. Pilipinas Shell cites its success from its people. It attracts and retains world-class diverse talents with compelling and impactful career opportunities across the world. The employees’ dedication, creativity and resilience have sustained and made the company an established corporate leader in the Philippines. Pilipinas Shell strives to be a good

neighbour and contributes to community wellbeing through the Pilipinas Shell Foundation, Inc. This nonprofit arm of the company championed the Movement Against Malaria health program that decreased the malaria deaths in the Philippines by 97% over the course of 20 years. The foundation invests in education and healthcare, brings power to off-grid communities and engages with environmental partners. Pilipinas Shell is taking the necessary steps to lead in this era of energy transition, by reducing the carbon footprint in our existing assets, and introducing cleaner competitive products.

The Company has recently updated its retail stations with greener features and will launch its industrial-scale solar farm that is considered as one of the largest in Southeast Asia this year. The CFI.co judging panel approves of the Company’s adaptive business approach and long-term commitment as a partner in nation building. The judges present Pilipinas Shell Petroleum Corporation with the 2020 award for Best Energy Corporate Governance (Philippines).

> ETIHAD CREDIT INSURANCE: MOST INNOVATIVE FINANCE SOLUTIONS MIDDLE EAST 2020 Etihad Credit Insurance (ECI) is in only its third year of operation, but the specialised state institution has already made solid contributions to employment and to the economy of the UAE. ECI, aka the UAE Federal Export Credit company, was established by government decree to boost Emirati export activity and economic diversification. It offers export credit, financing and investment insurance products, and helps UAE companies to gain access to new markets.

It has been a landmark year for ECI, despite the pandemic. In the first six months of the year, the company provided 1,468 revolving credit guarantees worth $435.7m to UAE exporters.

It insured non-oil exports worth over $1bn to more than 70 countries, with SMEs accounting for over half of the beneficiaries. Sectors

supported include automotive, pharmaceutical, food, petrochemicals, building materials and cable and steel manufacturers. But its crowning achievement for 2020 thus far has been the launch of Shariah-compliant trade credit insurance and export financing products. This has made it possible for Islamic exporters — including smaller firms and those with shorter manufacturing cycles — to engage in global market trade. This advance, and a strategic partnership with the Dubai Islamic Economy Development Centre, have solidified ECI’s status as the UAE’s leading Shariah-compliant credit insurer. The CFI.co judging panel congratulates ECI on its second consecutive annual award for Most Innovative Finance Solutions (Middle East), this time for 2020.

> EL CORTE INGLES: BEST ESG RESPONSIBLE RETAILER SPAIN 2020 Founded in Madrid in 1940, El Corte Ingles boasts exceptional customer service, an everything-under-one-roof product line, and a massive national presence. The company provides gainful employment to more than 88,000 people and reported a turnover of €15.3bn for 2019. El Corte Ingles takes a five-pronged approach to sustainability: employees, customers, value and supply chains, environment, and society. The retailer has achieved notable milestones along its journey. El Corte Ingles has developed a CSR strategy with more than 100,000 sustainability references — and that figure continues to grow. The €2bn credit line it launched this year was listed as the sixthlargest in 2020’s global sustainability ranking. El Corte Ingles distinguished itself as the first retailer to be granted Zero Waste Certification by AENOR, the Spanish Association for Standardisation. The retailer

collaborates with trade associations and promotes initiatives that contribute to climate action, discourage “fast-fashion” practices and support responsible forest management.

Viajes El Corte Ingles, the brand’s travel agency, offers a range of sustainable tourism packages. Besides, Seguros El Corte Inglés which is the firm's insurance company -offers an innovative life insurance, "Vida Movida", the first life insurance that rewards people who care about their wellbeing and healthy lifestyle. El Corte Ingles is working towards a climate change target of net-zero emissions and no waste across its operations. The retailer is also looking to open its e-commerce market to international consumers in the near future. For a company with strong community ties and a history of responsible conduct, the CFI.co judging panel declares El Corte Ingles as winner of the 2020 Best ESG Responsible Retailer (Spain) award.

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> SMITHS GROUP PLC: MOST INNOVATIVE TECHNOLOGY GROUP LEADERSHIP UK 2020

For 160 years, the Smiths Group has operated on the principle that innovation is key to growth, and an antidote to attrition. CEO Andrew Reynolds Smith has constantly sought to strengthen this aspect of company culture, and over the past five years he has taken steps to ensure that it will endure. Smiths Group develops solutions to the world’s most pressing problems, focusing on five markets: medical technology, security and defence, general industry, energy, and space and aerospace. The group is a global FTSE100

technology company with a presence in 50 countries. It has a track record for capitalising on existing technologies in one sector (such as CT scanning in the medical field) to enhance operational efficiencies in another (such as threat-detection at airports). Smiths encourages employees at every level, from engineers to the R&D team, to be innovators capable of recognising — and seizing — opportunities for improvement. The group understands that time and effort are needed to build and incorporate

this type of corporate culture. Smiths has created a Cross Group Innovation Board with the unifying agenda of directing R&D focus to areas of highest impact and profit potential, from material sciences to Industry 4.0. Smiths Digital Forge specialises in AI, machine learning, data analytics, connectivity and data security.

The CFI.co judging panel was impressed, and presents Smiths Group with the 2020 award for Most Innovative Technology Group Leadership (UK).

> BANQUE INTERNATIONALE ARABE DE TUNISIE: BEST BANK GOVERNANCE TUNISIA 2020

Since its founding in 1976, Banque Internationale Arabe de Tunisie (BIAT) has made good governance a cornerstone of its operations. The bank continually updates its policies, and this year it has designated dedicated groups to provide oversight and recommendations on auditing and risk. BIAT has earned its reputation as a reliable partner, and the confidence of its customers. Its network includes some 200 branches, 2,000 employees and 920,000 account holders. BIAT has expended time and effort to develop an

exceptional governance system. It was among the top 30 African banks ranked for high impact, the only Tunisian institution on the list. BIAT is socially responsible, with a best-inclass system and a dedicated workforce serving Tunisians from all walks of life — individuals, entrepreneurs, SMEs, large companies and institutions. It is a stalwart of the banking sector, demonstrating ethical leadership and active collaboration. The Central Bank of Tunisia invites BIAT to weigh-in on major

decisions, and trusts its advice to be in the best interests of customers and country. BIAT’s reputation extends beyond Tunisian borders, and its expertise has been sought by clients across the continent through the consulting subsidiary it launched in 2014. The CFI.co judging panel commends the bank’s calm and efficient response during the pandemic, and presents BIAT — a repeat programme winner — with the 2020 award for Best Bank Governance (Tunisia).

> BARRICK GOLD: BEST SUSTAINABLE MINING STRATEGY AFRICA 2020

Barrick Gold is committed to collaborative local partnerships and shared stakeholder benefits. The Canadian company owns and operates gold and copper mines in 13 countries in North and South America, Africa, Papua New Guinea, Dominican Republic and Saudi Arabia. Barrick establishes ownership-stake partnerships with host countries to transform natural resources into mutual prosperity. The company follows a corporate governance code that prioritises sustainability, transparency and accountability. Barrick believes that emerging markets must have a hand in 100

sustainability management. It sources senior executives from national candidates and supports professional development with ongoing training programmes. Its workforce is 97 percent local or national, as is 76 percent of senior management.

The company strives to mitigate the impacts of mining operations through the development and annual revision of site-specific Environmental Management Systems. With the exception of four mines in Saudi Arabia and Tanzania, all Barrick mine sites are certified to ISO 14001:2015 — and the four exceptions are on-track to achieve CFI.co | Capital Finance International

certification this year. Barrick releases an annual report on sustainability goals and progress, and consistently ranks at the top of peer reviews. It exceeded last year’s target for water recycling and reuse: 73 percent overall and 78 percent in water-stressed regions. Listed on the New York Stock Exchange (GOLD) and the Toronto Stock Exchange (ABX), Barrick Gold seeks sustainable returns for shareholders and tangible benefits for stakeholders. The CFI.co judging panel declares Barrick Gold winner of the 2020 award for Best Sustainable Mining Strategy (Africa).

Autumn 2020 Issue

> CONTAINERS PRINTERS: BEST SUSTAINABLE PACKAGING TECHNOLOGY & MOST INNOVATIVE PACKAGING TEAM SOUTHEAST ASIA 2020

Since its launch nearly four decades ago, Containers Printers has sought to enrich stakeholders and society by rooting the business in sustainability and innovation. The Singaporean company has evolved into a one-stop-shop packaging specialist, offering a full spectrum of metal and flexible laminate packaging solutions to customers in more than 30 countries around the world. It has developed an ongoing sustainability programme to optimise energy efficiencies and reduce carbon emissions.

Containers Printers facilities have recently been upgraded with LED lighting and solar photovoltaic (PV) panels and new equipment

to improve energy-intensive machinery, such as AC units and air compressors. The company’s sustainability programme aligns with Singapore’s commitment to the Paris Agreement. Containers Printers has been approved as one of 18 companies for a nationwide government scale-up initiative, which aims to upskill management capabilities and expand the product range. Containers Printers has a reputation for innovation as a supplier of sustainable packaging products with a clear focus on transparency and traceability. This progressive company has aligned operations and objectives with the

megatrends of the day, from climate change and sustainability to big data and Industry 4.0. Investments in sourcing, technology and R&D have allowed the company to address pain points of clientele with more challenging manufacturing requirements.

The continuous investments have led to collaborative agreements with multinational corporations and global institutions to develop and commercialise new products. The CFI.co judging panel recognises Containers Printers, a repeat winner, with the 2020 awards for Best Sustainable Packaging Technology and Most Innovative Packaging Team (Southeast Asia).

> KEPPEL CORPORATION: BEST SUSTAINABLE URBANISATION SOLUTIONS SOUTH EAST ASIA 2020

Keppel Corporation began operations in 1968, shortly after Singapore gained independence. From a small ship repair yard, Keppel has grown into a diversified global company offering comprehensive solutions for sustainable urbanisation. It builds on synergies between sectors and key business verticals: energy and environment, urban development, connectivity and asset management. Keppel’s global presence stretches from Asia-Pacific to Europe, the Middle East and the Americas. The group has proven skills in the design, development and delivery of energy and environmental assets,

data centres, residential and commercial properties, among others. Keppel’s multiple income streams flow from the development and operation of projects to the creation and management of trusts and private funds. The group was instrumental in the development of Tianjin Eco-City, the Sino-Singapore joint venture which transformed barren and polluted land into a landmark achievement of green living. Construction crews broke ground in 2008, and there are now around 100,000 people living and working there. It serves as a model for governments worldwide to replicate and scale. Keppel built its latest desalination

plant in Singapore underground, with water treatment and security optimised below and public parks above. Strong ESG performance has earned Keppel Corporation a triple-A rating in the MSCI ESG ratings, and placed the group in the top 11 percent of industrial conglomerates ranked by MSCI. In 2019, Keppel generated $8.2bn of economic value for its stakeholders and invested $9.6m to care for the underprivileged, support education and protect the environment. The CFI.co judging panel presents Keppel Corporation with the 2020 award for Best Sustainable Urbanisation Solutions (South East Asia).

> JANA SMALL FINANCE BANK: BEST INCLUSIVE FINANCIAL SERVICE INDIA 2020

Jana Small Finance Bank has been helping unbanked and underbanked Indians to prosper for over two decades, with inclusive financial services and social contributions. It began as a non-profit, the country’s first urban micro-credit institution. Jana was granted a small finance banking license in 2017, and started its commercial operations in March 2018 and since then has made rapid progress introducing various products and services that truly values the hard earned money of its customers.

Pandemic notwithstanding, the bank is profitable and growing. The bank branch network has gone from 90 to 500

branches in 22 states and Union Territories of India and currently has over 40 lakh customers and 1500+ employees.

Onboarding of customers has been simplified with Video KYC procedures that save time and make client safety a top priority. To achieve customer centricity, ease of communication to customers and turnaround experience, the bank has implemented many initiatives on technology, process and products front viz complete digital sourcing, robotics in loan underwriting, digital tab based collections, UPI QR code based collection etc.

Jana Small Finance Bank has earned a reputation as a driver of financial CFI.co | Capital Finance International

inclusion, and made great strides in extending its services to unbanked and underserved populations – nearly half of its outlets are in semi-urban and rural areas. The bank offers a digital propositions perfectly attuned to its client base, with a range of account options and services for individual and business clients.

Jana’s mobile app brings banking to the palm of the hand making the banking services accessible to its clients “anytime, anywhere”.

The CFI.co judging panel commends the bank on its upward trajectory, and declares Jana Small Finance Bank a programme winner with the 2020 award for best Inclusive Financial Service (India).

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> IBM: OUTSTANDING WORKFORCE TRAINING GLOBAL 2020

With today’s rapid advances in tech, skills can become obsolete before they have been mastered.

IBM, one of the most respected names in IT innovation, published a study last September predicting the need to retrain up to 120m workers in the world's 12 largest economies.

Why? Advances in AI and intelligent automation.

Some 5,670 global executives in 48 countries participated in the study — and only 41 percent of the CEOs canvassed expressed confidence in having the right mix of people, skills and resources to achieve targets. IBM encourages

modern professionals to sharpen their skills through a process of life-long learning. The company has created libraries of educational content, including courses that confer industryrecognised certification, podcasts, blog posts, articles, videos and tutorials. It partners with Global Training Providers to provide learning programmes that boost employee engagement and retention as well as productivity, efficiency and cost savings. Individual learners can seek training through approved providers, or create an IBM learner profile and begin a personalised

learning journey. A subscription service opens up the catalogue for those who wish to explore content as interests or projects dictate — at a discounted rate. In March 2020, in response to the Covid-19 crisis, IBM announced it would be offering many of its educational programmes free-of-charge, enabling people around the world to future-proof their careers and emerge from the quarantine with in-demand skills. The CFI.co judging panel is pleased to present IBM, a repeat winner, with the 2020 global award for Outstanding Workforce Training.

> CQ INVESTMENT GROUP: BEST ESG INTERNATIONAL INVESTMENT SOLUTIONS AUSTRIA 2020

CQ Investment Group differentiates itself through an outstanding ESG focus that has also resulted in strong financial performance. The Vienna-based group, founded in 1991, was the first — and for some time the only — organisation to apply an ESG focus to asset management. Over the past three decades, CQ companies have been awarded more than 300 international awards for their progressive investment strategies. The group has established a global network with a presence in 20 countries across Europe and Asia, including the financial districts of Vienna, London, Frankfurt, Paris, Madrid, Geneva, Zurich and

Yerevan. Eight independent asset management companies are united: ARTS Asset Management, C-Quadrat Impact Asset Management, Quantic Financial Solutions, C-Quadrat Asset Management France, VIG C-Quadrat, C-Quadrat Ampega Asset Management Armenia, Mezzanine Management and Lio Capital. ARTS develops quantitative trading systems that take the emotion out of investment decisions.

C-Quadrat Impact is a specialist in absolute return strategies, sustainable investments and microfinance products, while Italian investment firm Lio Capital focuses on special situation

and distressed investments. Each company ensures that the sum of the group is greater than its parts with individual capabilities and market penetration. CQ Investment Group is a conscientious steward of client assets of more than €7bn. It also shows admirable corporate citizenship and has sponsored numerous social projects to support disadvantaged youth, fight poverty and improve education and healthcare. The CFI.co judging panel presents CQ Investment Group with the 2020 award for Best ESG International Investment Solutions (Austria).

Svenska Cellulosa Aktiebolaget (SCA) owns the largest private forest in Europe, a tract of woodland in northern Sweden that covers 2.6m hectares and 45,000 hectares in Estonia and Latvia. The company practices sustainable forestry management and only harvests around 60 percent of growth. As part of its ecological landscape plan, SCA marks portions of forest for preservation and allows one in every five trees scheduled for harvest to follow a natural lifecycle. SCA calculated its 2019 climate benefits to equal 10.5m tonnes of

CO2 — more than the entire country’s heavy goods traffic and domestic air emissions.

Fossil-based fuels are replaced by renewable alternatives, and SCA invests to reduce its own emissions. The company has used wind power, bio energy and biorefinery to become self-sufficient for its power needs, and a net supplier for surrounding communities. SCA produces 11.9 terrawatt-hours of bio energy last year, most of which went to power its operations; the remainder was sold to other users. SCA sees biorefinery as part of an

evolutionary process that’s been under way for ages. Renewables accounted for just 20 percent of Sweden’s transport needs in 2017, but the target for 2030 is 70 percent. Within the next 15 years, five percent of the country’s total fuel requirements could be covered by SCA’s products. The company translates core values of responsibility, excellence and respect into committed action. The CFI.co judging panel presents SCA with the 2020 award for Best Sustainable Value Creation Strategy (Sweden).

> SVENSKA CELLULOSA AKTIEBOLAGET: BEST SUSTAINABLE VALUE CREATION STRATEGY SWEDEN 2020

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> BANCA GENERALI: BEST ESG PRIVATE BANKING SOLUTIONS ITALY 2020 Sustainability is the core mission of Banca Generali, a commitment that is reflected throughout its business model. The private bank specialises in financial planning and customer asset protection. Since its launch in the early 2000s, Banca Generali has become a reference point in Italy for service value, innovation and sustainable growth throughout its operations, services and products. It has cultivated a corporate culture noted for diversity and inclusion, and has achieved gender parity in the workforce. Ongoing professional development programmes provide more than 164,000 hours of training for its employees. In addition to its subsidiaries and partnerships, the Banca Generali network includes consultancy collaborations with financial planners, private bankers, wealth- and relationship

managers. This structure enables Banca Generali to bundle all its products and services into one convenient platform.

Clients can log into the portal and filter product searches to build an investment portfolio that reflects their individual risk profiles and ESG priorities. The platform is visually stimulating, with colourful SDG icons serving as identifiers and search tools.

It breaks down each fund’s contribution to ESG targets, showing how investments can deliver healthy returns while creating positive impacts.

Banca Generali encourages all stakeholders to participate in the definition and implementation of its sustainability strategies. The CFI.co judging panel recognises Banca Generali as an industry pioneer and champion of sustainability with the 2020 award for Best ESG Private Banking Solutions (Italy).

> PPS PORTFOLIO PERFORMANCE: BEST INVESTMENT SERVICES FOR PENSION FUNDS BRAZIL 2020 Despite the challenges of the pandemic, Brazilian pension fund consultancy PPS Portfolio Performance has continued to onboard clients in 2020. Over the firm’s 24-year history, people have come to trust its team’s advice and guidance. PPS focuses predominantly on pension funds, but also works with a selection of insurance companies and corporations. PPS services are tailored to client needs and may include assistance with the selection of managers and funds, evaluation and recommendations on investment structures, asset liability management and portfolio internationalisation. PPS believes the current investment environment calls for new strategies with greater diversification.

Over the past two years, it has been laying the foundation for stronger partnerships that ease access to international markets. PPS has forged

a relationship with Meketa, an independent, employee-owned, full-service investment consultancy in the US that advises on AUM worth more than $1.4tn. PPS has strengthened its internal ranks by recruiting specialists with outstanding educational pedigrees, international experience and backgrounds in financial markets and pension plans. PPS has released an updated version of its proprietary software programme with new tools to support the automated, quantitative evaluation of portfolio performance. Further due-diligence is supported through qualitative assessments. For the fourth consecutive year, the CFI.co judging panel has found reason to follow this company’s trajectory; it presents PPS Portfolio Performance with the 2020 award for Best Investment Services for Pension Funds (Brazil).

> ENSO GMBH: BEST HYDRO-POWER INVESTMENT PARTNER EUROPE 2020 Hydro-power has gained an increasing share of the renewable energy market, and Austrian company enso GmbH offers a comprehensive suite of services to help investors and developers harness its potential. Over the past decade, enso GmbH has distinguished itself as a green champion among Austrian asset managers. It values hydro-power as a renewable energy source that requires comparatively low LCOEs, short construction timeframes and minimal maintenance costs. Water is available and easily stored, providing a reliable base and an opportunity for grid stabilisation service. The company is also owned by some of the lead investors of enso hydro, a specialist with a portfolio including around 25 power plants in Norway, Albania, Turkey and Austria.

enso GmbH has a tech-savvy team with proven project experience to assist clients with a range of advisory, merger and acquisition, financing, structuring, operation and portfolio optimisation services. It promotes hydro as a solution that can inoculate investors from volatile market cycles tied to fossil fuel prices.

It anticipates steady future demand and implements contingency plans to shield against unforeseen events. That foresight has enabled enso GmbH to take advantage of rainfall by boosting production and storing the surplus until the market becomes less saturated. It has also allowed the company to handle the Covid crisis with cool competence. The CFI.co judging panel presents enso GmbH with the 2020 award for Best HydroPower Investment Partner (Europe).

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> Africa

Unity Key to Remarkable Success in Fighting Covid-19

The corona scare has passed, and most countries of Africa are reopening their borders and businesses. Infection rates never reached the apocalyptic highs that had been predicted. With around 17 percent of the world population, the continent tabulated just under 33,500 deaths from covid-19, or about 3.5 percent of the global total. According to Dr John Nkengasong, the Cameroon virologist who heads the Africa Centres for Disease Control and Prevention since its foundation in 2016, the curve is slowly bending downwards, and fatalities have now dipped to fewer than one hundred a day.

Nkengasong was instrumental in bringing Africa’s 54 countries together in a quickly assembled ad hoc alliance to fight the pandemic and formulate a joint response which has been more effective in containing the viral outbreak and spread than those of others, such as the United States.

Illustration: The national flag of Cameroon

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aunted by the memory of the estimated twelve million Africans dying before cheap antiretroviral drugs became available for the treatment of HIV, Nkengasong mobilised public health officials and pressed political leaders to put their differences aside. He appealed to them to act promptly, jointly, and decisively to halt the pandemic by leveraging the continent’s few advantages such as a relatively young and healthy population.

Rudely shoved aside when other countries deployed their financial firepower in the unseemly global battle to secure test kits, ventilators, and personal protection equipment, the African Union and the Africa CDC joined forces with public and private entities to establish a robust online purchasing platform and strongarm the continent back into the global market. The initiative has been so successful that a number of Caribbean countries have signed up and now source their medical supplies via the new facility.

President Nana Akufo-Addo of Ghana remembers that at the very beginning of the Corona Pandemic, only days after the first case of covid-19 was reported on February 14, he and other leaders agreed that the only viable option was to cooperate closely: “We just had to depend on each other as it soon became clear that little outside help would be forthcoming.”

BEGGING BOWL DITCHED Nkengasong didn’t want to wait for help either: “We reject the image of Africa holding a begging bowl. In fact, I realised that the financial resources were there and just needed tapping into.” Former USAID Administrator Gayle Smith has no doubt: “Africa is a great story that needs telling. The continent is getting a lot of things right where others either dither or simply fail.

In fact, Africa is the only part in the world I’m aware of that actually built a PPE supply chain from scratch.”

Smith is not the only one the sing Africa’s praises.

Director Sema Sgaier of the Surgo Foundation that produced a covid-19 vulnerability index for the continent says she’s optimistic: “The countries of Africa have shown real leadership and succeeded in rallying their scarce resources effectively and impressively.”

The next battle against the disease concerns access to any future vaccine. Nkengasong explains that the first step has already been taken in June by securing a number of latestage clinical trials. The first one got underway in South Africa which by the last week of June had nearly one-third of all Africa’s confirmed cases. Due to limited local testing capacity, clinical trials of new medication usually take place outside the continent. However, the Africa CDC and the World Health Organisation (WHO) have managed to vastly increase lab capacity for covid-19 in a matter of just months. At the start of the pandemic, only two African countries were 106

"I realised that the financial resources were there and just needed tapping into." equipped to test for the coronavirus whilst now all 54 have that capacity.

The WHO estimates that Africa can initially access up to 220 million doses of any future vaccine through its COVAX (Covid-19 Vaccines Global Access Facility) programme – a favourite target of US Administration which declined to join. However, Nkengasong says that Africa needs at least 1.5 billion vaccine doses in order to approach herd immunity by immunising 60 percent of the population. The campaign is expected to cost upwards of $10 billion.

SOUTH AFRICA HURT BADLY Though Africa managed to contain the spread and infection rate of the coronavirus, the economic effects of the pandemic could yet make for a pyrrhic victory. As South Africa reopened its borders on October 1, visitors encountered a heavily damaged country with a jobless rate steadily climbing to breach the 50-percent mark. During Q2 2020, at the height of one of the world’s strictest lockdowns, GDP shrank 16 percent on a quarter-to-quarter basis in real terms and a whopping 51 percent on a seasonally adjusted annualised rate. Over the entire year, South Africa’s GDP is expected to decline by 8 percent or more.

So far, the government and its social partners have been unable to come up with a recovery plan, although President Cyril Ramaphosa did reveal that one had been ‘agreed upon’ without offering any further details. Meanwhile, the government told the National Treasury to look behind the proverbial couch to find a chunk of change for the rescue of troubled flag carrier South African Airways which last turned a profit over a decade ago and has languished in administration since last December.

In an ominous sign that has investors worried, Finance Minister Tito Mboweni seems to have lost his feud with Public Enterprises Minister Pravin Gordhan who insists that the airline must be kept solvent and aloft. Gordhan enjoys the full backing of the ruling African National Congress (ANC) which has long misused SAA as deluxe storage facility for its extended family and its friends – and friends of its friends. An initial 10 billion rand (approx. $590 million) has apparently been committed by the cabinet to underwrite the first stage of the airline’s reorganisation and restructuring.

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Another urgent matter on President Ramaphosa’s plate concerns state-owned power company Eskom which generates more losses than it does electrical power. The company’s singularly poor performance has long checked economic growth and will undermine any recovery plan. Eskom’s losses stem, in part, from bills left unpaid by local, provincial, and national state entities.

NIGERIA REELING Africa’s largest economy is reeling as well with GDP forecast to contract by 6.1% over 2020.

Although the country’s relatively short lockdown was gradually eased from early May, the slump in oil prices – which tumbled from a January high of almost $70 per barrel to an April low of barely $15 – has deprived the federal government of 75% of its oil revenue. According to the Nigerian National Petroleum Corporation, the government’s share of oil export sales in July amounted to just $55.3 million. Although oil prices have recovered some ground since, the loss of income has now fully derailed the Economic Recovery and Growth Plan introduced in the wake of the crippling 2016 recession.

Analysts fear the country may not recover any time soon. During a recent webinar organised by Nairametrics, a Lagos-based financial resources provider, Rolake Akinkugbe-Filani of real estate investor and developer Mixta Africa noted that the economic fundamentals of the country have still not changed and Nigeria continues to live above its ‘pay grade’ looking to finance its deficit addiction by borrowing: “That is just not sustainable.”

Meanwhile, Zambia became Africa’s first covid-related debt defaulter when President Edgar Lungu announced that his country was negotiating a six-month suspension of repayments, beginning October, with the holders of bond tranches worth $3 billion. Zambia’s total foreign debt amounts to $11 billion, a significant part of which is owed to China.

However, Beijing has indicated its willingness to display ‘flexibility’ in renegotiating the terms of outstanding loans but may ask for a quid pro quo in the form of a commitment by the International Monetary Fund (IMF) to support low-income countries. Zambia and others facing a cash crunch remain, however, reluctant to ask for IMF support. President Lungu of Zambia faces an election next year and has so far refused, albeit politely, to enact the reforms the fund has suggested.

Under its own power, and largely without outside help, Africa has succeeded, beyond all expectations, in keeping the coronavirus in check and avoiding a cataclysmic public health emergency. Almost just as importantly, African nations showed that they can effectively coordinate policies by working together to defeat a common foe. This is where the key to the continent’s future lies: Expand that newfound unity to markets and a winner emerges. i

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> Hassan Allam Holding:

Pioneering Development Firm Built on Trust In Egypt, the name Hassan Allam is perceived as more than just a company or organisation. It is synonymous with national development and infrastructure.

The title rightly conjures up images of larger-than-life construction sites, ambitious buildings, and monumental projects executed on a national scale.

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ith a history dating back to 1936, Hassan Allam Holding (HAH) is Egypt’s leading company in engineering and construction projects. It specialises mainly in infrastructure, energy, and industrial projects for the Egyptian market and the Middle East and North Africa (MENA) region.

Over the course of more than 80 years, Hassan Allam has transitioned from a local contractor to a leading global group with a dynamic regional and international position. It has earned a solid reputation of superior technical capabilities through a workforce consisting of professionals of the highest scientific and technical calibre.

With a diversified project portfolio, thanks to its deep experience of identifying and implementing large-scale projects in the infrastructure sector, the company has successfully delivered hundreds of projects. The value of its contracts currently exceeds $5bn.

AWARDS TELL THE STORY The CFI.co award to Hassan Allam and Metito for Best Recycling and Reuse Water Project (Global) 2020 came as a welcome reward for the enormous joint project of creating Al Mahsamma agricultural drainage treatment, recycling, and reuse plant.

The plant has no equal in terms of size and capacity: a million cubic metres each day, and an area of 42,000 square metres of land in the Sinai. The project was also recognised as the Construction Innovation Awards’ Infrastructure Project of the Year for 2019, Best Water/ Wastewater Project by Engineering NewsRecord. It has also been shortlisted for the Wastewater Project of the Year award from Global Water Awards.

The project, with unique structural and technological characteristics, has proved revolutionary in the field of agricultural wastewater treatment. That is partly due to its size and strategic location, but also thanks to the advanced technology used in its implementation.

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Al Mahsamma plant located in the Ismailia Governate in Egypt is one of the national projects that has contributed to the state’s long-term plan to provide water resources and achieve sustainable development for the region.

The station works to daily re-use one million cubic meters of agricultural drainage water that had previously been disposed of in Al Temsah lake, west of the Suez Canal.

This water will now contribute to the cultivation of some 70,000 acres of land to help the state reach its goals in the reconstruction of the Sinai region and contribute to the creation of job opportunities — all while preserving the natural environment of the area.

The chairman of Hassan Allam Construction, the eponymous Hassan Allam, said he was “extremely proud” to have been selected to contribute to the development of a project of such strategic importance. “A project which we were able to complete in a record 10 months,” he said, “amounting to two-and-a-half million man-hours — with no injuries or time lost.”

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That safety and efficiency record is a feather in the Hassan Allam Holding cap — and the contract is testament to the state’s confidence in its capabilities. “Al Mahsamma plant will contribute to combatting water scarcity and will have a resounding impact on Egypt’s water security agenda,” said Allam, “and transform the scope of wastewater treatment across Africa.

We are extending our efforts to provide the latest solutions that help to solve water poverty, one of the major regional and global concerns.”

INFRASTRUCTURE DEVELOPMENT Hassan Allam Holding is distinguished by its work with the concept of integrated projects, as it manages the project from design and construction to operation and maintenance. It has extensive experience in the fields of engineering, construction, and infrastructure. Large-scale engineering and construction projects, the provision of building materials, and electrical and mechanical turnkey solutions have become its stock-in-trade. The company is now taking great strides in the renewable energy sector, and infrastructure investment and development.

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The group relies on its own factories to produce building materials to be used in its various projects. It works with its products to localise the industry — and to drive exports.

Because of the magnitude of its projects, Hassan Allam has become a strategic partner of the state in most national projects. It has the lion's share in a number of different areas, including the New Administrative Capital. This transformational enterprise aims to alleviate greater Cairo's increasing densification, and establish a new growth hub for future generations. The most prominent aspect of this project centres on the construction of a number of new ministries and the water treatment plant. Hassan Allam recently completed the Administrative Capital Airport, which included the construction of the airport's major halls and 48 service buildings.

increasing popularity with construction workers and engineers.

In 1938, King Farouk was on his way to Ismailia when he was injured in a car accident and was taken to the nearby village of Kassasseen to be treated in a small medical facility. As a result, the King ordered that a hospital be built in the area.

Hassan Allam landed his first major contract for that facility, and El Kassasseen Hospital was built on the Cairo-Ismailia agricultural road.

Other early contracts included the Mebara hospital in Port Said, a power station in Damanhur, and the first Egyptian oil refinery in Suez.

Design for infrastructure projects and work is under way to construct another wastewater treatment plant with a capacity of 250,000 cubic meters/day, a triple-treatment plant.

Over the decades, Hassan Allam has continued to expand and grow despite political shifts and challenges. The company transformed itself into a leading progressive organisation with an enviable record for delivering — to the highest standard. One of the main pillars that Hassan Allam was founded on was the importance of human connection.

In 1936, Hassan Allam founded Hassan Mohammed Allam & Co for General Contracting.

The limited partnership company was driven by his managerial and technical expertise, while his charisma and ambition led to the company’s

That legacy has been upheld by generations of Hassan Allam leadership, through the maintenance of exceptional relationships with clients based on trust, with ethics engrained in every facet of operations. i CFI.co | Capital Finance International

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> Colin Coleman:

Making South Africa Whole

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o society can survive with 50% unemployment, yet that is exactly what South Africa may be facing by the end of this year. Joblessness alone, exacerbated by the COVID-19 pandemic, has forced the country into a state of economic emergency.

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South Africa today is a “two-speed society” – one part modern, affluent, technologically advanced, highly skilled, mobile, and increasingly multiracial; the other jobless, marginalised, unskilled, young, mostly rural, and largely African. Under the shadow of the pandemic, it is easy to forget that between the end of apartheid (1994) and CFI.co | Capital Finance International

2007, South Africa made giant strides. Economic growth averaged 3.6% per year, such that GDP doubled from $140 billion to $285 billion during this period. Inflation fell to an average of 6.3%, and government debt relative to GDP dropped to an enviable 28% in 2007. Between 1994 and 2014, the government’s budget grew ninefold.

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was rudely interrupted by the “double whammy” of the global financial crisis and the accession to power of President Jacob Zuma and his cronies.

Zuma’s central purpose was to pursue a cynical project of state capture that hollowed out public institutions and crippled many state-owned enterprises. As a result, average annual GDP growth fell by half over the 2008-19 period, and South Africa’s people grew poorer.

boundaries, and look beyond narrow interests.

That includes the business community, which needs to have an honest conversation about inclusion, executive compensation, and the threat posed by monopolistic and cartel-like behavior. It is in everyone’s interest to expand employment, provide training and internships, support entrepreneurship, finance and mentor small businesses, and drive innovation.

In fact, in terms of overall size, South Africa’s economy peaked in 2011, with a GDP of $410 billion. It has since shrunk by some $120 billion, returning to the same size that it was in 2007.

Over those 13 years, the opportunity cost or “missing GDP” – the true costs of Zuma’s corrupt reign – amounted to a sickening R2.5 trillion ($140 billion). Today, overall government debt of R4 trillion represents 81.8% of GDP. Absent reform, this debt will become a runaway train, reaching 100% by 2023.

In terms of concrete policies, there is clearly a need for emergency measures to address the fault lines that are the pandemic is exposing and deepening. To that end, I have come to believe (though some may not yet share my view) that it is time for South Africa to introduce a fiscally neutral targeted basic income grant (BIG) to help the unemployed.

Had that R2.5 trillion of GDP not gone missing, South Africa’s debt-to-GDP ratio today would be a healthy 54%. Instead, the country has reached the limits of personal and household borrowing. While President Cyril Ramaphosa’s administration is unwinding Zuma’s toxic legacy of state capture, the state cannot afford aboveinflation public-sector wage gains. Trend GDP growth is below population growth, and now the COVID-19 pandemic is devastating jobs and incomes.

As a result, the consolidated budget deficit is expected to reach 15.7% of GDP for the current fiscal year. The costs of public-sector wages (R640 billion), the interest on the national debt (R236 billion), and the bill for social grants (R190 billion) equals South Africa’s entire projected tax revenue this year (R1.1 trillion).

With the salary and interest bills filling all of the fiscal space in the revised R1.8 trillion budget for essential government services, it is clear that both these budget lines must be thoughtfully mancolaged down.

AN ECONOMY FOR ALL SOUTH AFRICANS A new start with zero-based budgeting would allow policymakers to look at everything with fresh eyes. This would not be an excuse to cut budgets arbitrarily, but rather an opportunity to reallocate funding wisely to address critical national priorities.

South Africa: Cape Town

During what might be called the “Mandela years,” when the country adhered to the enlightened example and policies of its first postapartheid president, South Africa introduced a highly effective and successful social grant system that now reaches 18.3 million people.

But starting around 2008, this steady progress

In fact, what South Africa needs is a ten-point action plan of the kind that I outlined recently in an address at the University of Cape Town.

Any such plan should aim to create a fastgrowing, dynamic economy. And it should offer a structure of opportunity and access that is available to everyone, particularly the historically disadvantaged – a merit-based ladder that recognises talent and hard work, regardless of race, gender, or class.

More broadly, many of us South Africans must leave our comfort zones, erase ideological CFI.co | Capital Finance International

Based on the international poverty benchmark of $2.00 per day (which is around R1,080 per month), a BIG for the country’s 10.8 million unemployed people aged 18-59 would cost around R140 billion per year before inflation.

Alternatively, one could take that pool and pay all 32 million adults R365 per month, or all 23.4 million labor-force participants R500 per month. Experts should be appointed to weigh the administrative simplicity, cost, speed, and effectiveness of these options in terms of helping those most in need. To make the BIG program fiscally neutral would require large but eminently achievable tax reforms.

In any case, a BIG program should be viewed as an investment, not as an expenditure. It may even be South Africa’s best option for providing shortterm economic stimulus during the COVID-19 crisis. The recipients are likely to spend the grant money on food, clothing, and other essential household goods, yielding immediate benefits across the economy, not to mention boosting value-added tax (VAT) payments and corporate taxes.

MOPPING UP THE OLD ECONOMY The fact that a R140 billion grant program can be financed in a fiscally neutral way exposes the false dichotomy at the heart of South Africa’s national discourse about fiscal constraints and national needs. When the trade-offs are carefully considered, it turns out that national priorities can still be addressed within the current financial limits.

Tax reform should be accompanied by a renewed focus on tax compliance, with all South Africans being encouraged to support the South African Revenue Service and enforcement agencies in clamping down on the country’s pervasive illegal and unrecorded economy. The SA Revenue Service is reportedly working with the Davis Tax Committee (a body established by the finance minister to align the tax system with today’s globalised economy) to combat tax evasion and avoidance. The authorities are targeting R100 billion or more of non-compliant funding streams, from the abuse of transfer pricing and 111

profit shifting to VAT fraud and other schemes.

These ongoing efforts deserve the public’s full support.

(including issuing spectrum). For PPPs, we will know there has been progress when we see the government issuing requests for proposals.

Equally important is the need to root out corruption and related abuses within the state machinery. According to the South African Auditor-General’s reporting, wasteful, irregular, and unauthorized expenditures at all levels of government totaled some R94.6 billion in the 2018-19 fiscal year. Those responsible must not be let off scot-free. Either the culprits should be punished, or the departments should lose funds in proportion to the reported abuses.

Third, South Africa should be investing in “e-government” technology. This is the wave of the future. And given South Africa’s administrative failures – not to mention the prohibitive cost and low returns of raising publicsector wages – e-government is a practical way to modernise public services. The goal should be to invest in a digital platform that is available to all citizens on their mobile devices.

Owing to the pandemic, there is also an urgent need to protect households and preserve the productive capacity of businesses. These twin priorities should guide the emergency fiscal response and any adjustments to the president’s announced R500 billion pandemic response package. Needless to say, the proposed BIG program would help households significantly.

To rescue pandemic-hit but otherwise viable businesses, policymakers should think more ambitiously about a yet-to-be-allocated R100 billion loan-guarantee scheme. Not unlike the US Troubled Asset Relief Program following the 2008 financial crisis, these funds could be structured as equity, hybrid-equity investments, or even interest free or subsidised loans in qualified businesses.

AN ECONOMIC GROWTH PLAN Beyond addressing the immediate economic emergency, South Africa also needs to put itself back on the path to sustained growth, driven by the private sector. As the industry group B4SA points out, business in South Africa accounts for 83% of GDP, 55% of taxes, 79% of jobs, and 69% of investment. But for business to play its proper role as the engine of growth, the government must remove existing obstacles to investment, particularly the lack of private-sector confidence and weak state institutions. The goal should not be a “big” or “small” state, but one that works.

In my ten-point plan, I focus on several growth opportunities. First, policymakers need to boost confidence among small, medium, and micro enterprises (SMMEs). Commitments to buy, build, and employ locally must feature prominently. The state should also commit to supporting black entrepreneurs; providing essential business infrastructure, technology, and subsidized or free Internet; and paying SMMEs on time. In return, SMMEs must pay their fair share of taxes, and contract with the state in a fair and transparent manner at all times.

Second, South Africa needs to start pursuing more public infrastructure projects and private-public partnerships (PPPs), in addition to facilitating private-sector investments in cargo rail, ports, airports, roads, water, pipelines, renewable energy, aviation, and telecommunications 112

Within a decade, visas, taxes, passports, birth and death certification, immigration documents, traffic fines, education, health, police, municipal billing, social-grant administration, banking, insurance, asset management, and other activities could all be officially recorded and published online (privacy permitting). Likewise, South Africa needs to catch up with advances in biometric technologies. Such investments made today will save billions of rands later, freeing up funds for police stations, hospitals, and schools, and making the economy more attractive to foreign investors.

BACK TO BUSINESS It is now time to clean up the balance sheet of Eskom, South Africa’s electric public utility, once and for all. Eskom remains South Africa’s biggest systemic risk, accounting for 77% of the state’s contingent liabilities. The government’s guarantees on R300 billion out of Eskom’s total debt of R480 billion represent around 15 times the company’s earnings before interest, taxes, depreciation, and amortisation (EBITA).

Rather than sinking R245 billion into a hole, the government should resolve Eskom’s capital structure by moving all the guaranteed debt onto its own balance sheet, on negotiated and enhanced terms with bondholders. Given the spread between borrowing costs for the government and Eskom borrowing costs, this would save the equivalent of R3.5 billion per year.

Moreover, this move would be credit-neutral for the sovereign, because the rating agencies have already included the contingent liabilities in their sovereign-debt models. As such, there would be around R154 billion of debt left – or around a 5x Ebita – which is still at the high end relative to international norms. Ideally, one would persuade debt holders such as the Public Investment Corporation to swap R60 billion of debt for equity, leaving Eskom with around R90 billion.

That would give it a capital structure with which it can stand on its own, allowing an attractive refinancing for the remaining debt stock.

As a quid pro quo, the government could simultaneously negotiate lower-cost coal supply contracts and wage restraint with Eskom workers, to put the utility’s cost structure on a sounder footing. These changes would free the CFI.co | Capital Finance International

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company to concentrate on its core function of providing lowcost, secure, reliable energy.

Finally, the government should review and evaluate the current policy mix of industrial incentives. In the next decade, South Africa will need to create five million jobs, twice the rate of the last decade, to bring formal unemployment to below 20%. Other countries’ experiences with Special Export Zones show that, if well-resourced and properly targeted, SEZs can signal to private investors that the country is open for business. In the most successful cases, SEZ islands of competitiveness have expanded to include the entire country.

As countries increasingly seek to diversify sources of supply – including away from China – South Africa should be reviewing its own past attempts with SEZs, such as the Coega Industrial Development Zone near Port Elizabeth. By exploring and targeting sectors with high potential (manufacturing, agriculture, natural gas, services), South Africa could create its own Silicon Valley, complete with technology data centers and a growing population of tech entrepreneurs. Similarly, South Africa needs to be looking for ways to make the African Continental Free Trade Area work, so that it can capitalise on an export market of 1.2 billion Africans.

A policy package for boosting competitiveness need not center on labor concessions. It also could include government subsidies, worker training, tax incentives, and infrastructure provisions such as subsidized rent on property, ports, roads, and rail. The net overall cost of manufacturing and exporting needs to be attractive for any SEZ’s tenants. Finding the first large anchor tenants and then signing up 1,000 additional tenants over the course of the next two decades are the key milestones to success. Following international precedents, Ramaphosa should guide this policy from a unit within his own office to ensure the right outcomes.

TOWARD A NEW SOCIETY Finally, South Africa needs to confront the structural apartheid that still exists in urban planning patterns. The human, social, and economic costs of segregated and remote townships and informal settlements are unacceptable and unaffordable. Releasing land for integrated urban settlements is probably the largest untapped economic and infrastructure opportunity of our time. By creating non-segregated, denser cities offering proximity to work opportunities, South Africa could utterly transform its social landscape for the better.

Such changes call for a massive government-led effort to bring together urban planning experts, construction companies, civil-society groups, and other stakeholders. Only then can South Africa bridge its divides and provide hope to those who are destitute, starving, and jobless.

This ten-point plan represents a comprehensive proposal to turn the tide toward economic inclusion and dynamism.

Expanding the economy by 2.5% per year in the short term, and by 5% in the medium and longer term, should be the country’s paramount goal – one that would enable a doubling of the rate of job creation to bring formal unemployment below 20% by 2030. Only such a dramatic turnaround can assure South Africa’s survival as a democracy and beacon of progress for the continent. i

South Africa: Cape Point

ABOUT THE AUTHOR Colin Coleman, a senior fellow and lecturer at Yale University’s Jackson Institute for Global Affairs, was CEO of Sub-Saharan Africa at Goldman Sachs.

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> Young, Gifted, and Behind the 8-ball:

The Struggle Faced by World’s Black Entrepreneurs

By Tony Lennox

It’s more than 50 years since Nina Simone first performed Young, Gifted and Black — a ballad which became the anthem of the civil rights movement of the late 1960s. The song was taken up in school assemblies across America’s black suburbs in the hope that it would inspire a generation of young AfricanAmericans to succeed in a mostly white world.

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A half-century later, the most successful black entrepreneurs in the US are from the world of show business and sport.

Television personality Oprah Winfrey, former boxing champion George Foreman, singer Beyonce and basketball legend Michael Jordan are stars who have successfully converted their brands into businesses.

Only one of the 10 top-ranked US performers could be said to be a business entrepreneur in the traditional sense: Daymond John. The multimillionaire marketing mogul and Shark Tank investor (the US version of Dragon’s Den) started out selling pencils to his fellow school pupils; he now runs his own consultancy.

But young black entrepreneurs are beginning to emerge — not only in the US, but also in Europe, Africa and South America — despite encountering impediments not faced by their white counterparts.

According to US census statistics, there were more than two million African-American-owned businesses in the US in 2017. Challenges persist, often based on deep-seated prejudices. Hubie Payne, vice-president at Texas Instruments, points the finger at unconscious racial bias. He says overt racism in business has all but vanished: “If you drop the N-word in the workplace you’d be ushered out the door,” he points out. But there are more subtle factors at work.

“For instance, when I took over a position, by coincidence, from another black person, people asked me ‘is this position just for blacks?’ For somebody who’s come through America and done what it takes, it’s just a stark reminder that everybody thinks you got this job because you’re black.”

In 2016, black women became the mosteducated social group in the US according to the National Centre for Education Statistics. A higher percentage of black women (9.7 percent) 114

is enrolled in college than any other group. And yet, black women still make up just 1.5 percent of leadership roles.

In the UK, businesses run by entrepreneurs from black and minority ethnic (BAME) backgrounds are estimated to contribute £25bn to the economy. A report entitled Unlocking Opportunity by the Federation of Small Business (FSB) and Aston University’s Centre for Research in Ethnic Minority Entrepreneurship (CRÈME) found that BAME-run businesses contributed the economic equivalent of the whole of Greater Manchester.

The 2018 report noted that these businesses were proportionally more innovative, with 30 percent engaging in recent product or service innovation — 11 points higher than their white counterparts. In a 16-year period it was found that almost 30 percent of the British BAME population was involved in thinking about, setting up, or operating a business venture — twice the level of the white population.

“This shines a spotlight on the important contribution made by ethnic minority businesses,” said FSB chairman Mike Cherry.

“If we unlock opportunities for ethnic minority entrepreneurs, this will benefit the UK as a whole.”

There may be a long way to go, however. Wilfred Emmanuel-Jones is often cited as a shining example of black British entrepreneurship.

The Jamaican-born businessman launched a successful gluten-free farm produce brand in 2006. He’d been attracted to farming by working alongside his father on their Birmingham allotment. The fact that the media still applies the soubriquet “The Black Farmer” to Emmanuel-Jones is an illustration of the perceived improbability of BAME involvement in British agriculture.

That’s ironic to the man himself. “There are a lot of immigrants to the UK who have come from a CFI.co | Capital Finance International

farming community,” he said. “They could add great value to the farming industry in the UK, but due to cost, many don’t stand a chance.”

Emmanuel-Jones has launched a business incubator project to help others get into the industry.

The pursuit of black economic empowerment was given a boost by the United Nations in 2000, when it launched its Global Compact with the aim of encouraging diversity in business.

And it is in Africa where entrepreneurship is making great strides, though not without a hint of systemic racism.

When venture capitalists look to invest in start-ups on the continent, they are more likely to support those businesses if the entrepreneurs involved are white, or nonAfrican, according to the African Private Equity and Venture Capital Association.

Investors from North America accounted for 42 percent of all African venture capital deals in the last five years. Of the top 10 African start-ups in that period, eight were led by foreigners.

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Mariéme Jamme

Mariéme Jamme, a Senegalese businesswoman at the forefront of a drive to bring the IT revolution to Africa, says the statistic betrays a neo-colonial mentality. “Many Africans have had their intellectual property stolen,” she said, “so they don’t own their ideas or their companies.”

Many young African entrepreneurs find themselves facing unfair hurdles. Rob LeBlanc, chief investment officer of the Awethu Project, a South African business support agency, says: “If you’re a high-flying young black professional, the first of your family to go to university, the first to get a top-performing corporate job, earning a good salary, a lot of people would think, well, you’re in a great position to go and launch your dream business.

“But the challenge is that a lot of your salary is being used to support dependents, like putting younger siblings through school, or supporting parents and grandparents — so your corporate salary that seemingly would give you a buffer to take a big corporate risk, that’s what’s globally

called ‘black tax’, and when that tax is very, very high, it makes big risks hard to take.”

These black entrepreneurs also face tough competition from what Mariéme Jamme calls “gap-year entrepreneurs” — usually young, white Westerners with the backing of family wealth who see Africa as a land of opportunity.

The lack of inter-generational wealth is a common challenge in the developing world, and a major barrier to home-grown entrepreneurship.

Despite the many obstacles, young Africans are storming the business barricades. Temitope Ogunsemo, a Nigerian tech entrepreneur and graduate of the University of Salford, is the founder and CEO of Krystal Digital, providing information management systems to Nigerian schools.

Another Nigerian, Etop Ikpe, is the creator of Cars45, the biggest digital used-car business in the country. The company has recently expanded into Ghana and Kenya.

Idris Sultan, a Tanzanian comedian and radio-and-television personality, won the Big CFI.co | Capital Finance International

Brother Africa: Hotshots competition in 2014.

He founded Sultan By Foremen, an iconic footwear brand among the country’s urban youth.

Ricky Rapa Thomson, a Ugandan high school drop-out, founded SafeBoda, an Uber-style company in Kampala. The boda-boda cycle and motorcycle “taxis” are a notoriously dangerous form of local transport. Thomson’s aim was to inject some safety at the core. He was given a Young Achievers Award in 2017, has more than 17,000 drivers in Kampala, Nairobi and Mombasa — and founded one of Africa’s fastest-growing businesses.

June Syowia is a Kenyan entrepreneur, CEO of the digital marketing company Beiless Group. Syowia made it to the 2018 Forbes 30-Under-30 list of young businesspeople — globally.

As Nina Simone lyrically predicted all those years ago: “Young, gifted and black / There’s a world waiting for you / This is a quest that’s just begun…” i 115

> Middle East

Business Trumps Politics

Joint business ventures, and the pragmatism required for success, laid the groundwork for the normalisation of relations between Israel and the United Arab Emirates (UAE) which was marked by the touchdown of the first official El Al flight at Abu Dhabi International Airport on August 13. On board, US and Israeli diplomats and officials celebrated the historic moment whilst Israeli journalists, swiftly dispatched by their editors, surprised morning audiences with an ebullient ‘Good Morning from Dubai’ and panoramic shots of the Burj Khalifa, the world’s tallest building poking 830 meters into the sky.

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n an almost-replay of President Richard Nixon’s 1972 surprise visit to the People’s Republic of China, which stunned Americans and opened the host nation to the wider world it had shunned, the announcement of a ‘normalisation pact’ that formalises the links between Israel and the UAE upsets the regional power balance and signals the beginning of a major geopolitical shift that may see more countries recognise Israel and establish diplomatic relations with Tel Aviv.

Iran is, of course, quite unhappy and repeatedly denounced the UAE’s long-expected move as a ‘betrayal’ of the Palestinian Cause, conveniently forgetting to mention that 70+ years of disengagement has delivered few tangible results for the long-suffering people. Whilst in Tehran Supreme Leader Ayatollah Khamenei went on a verbal rampage, the Emirati government emphasised that its ‘bold but necessary’ step helps ease the polarisation in the region.

However, it was business that drew the two countries closer. According to data from the Tony Blair Institute for Middle East Change, trade between Israel and the Emirates last year amounted to a modest $1 billion or so.

This number does not include the business conducted by Israeli surveillance firms in Saudi Arabia, Bahrain, and the UAE – the three countries that adhere to the philosophy that their enemy’s enemy is probably a potential friend.

The common denominator being, of course, Iran.

In business terms, the UAE is most interested in gaining access to desert agriculture technology, a field in which Israel leads the world, and biomedical research. Almost immediately after the rapprochement was made public, companies from both countries announced a joint push for the development of a covid-19 vaccine. National Investment, the Emirati company charged with funding public sector initiatives and projects, on August 15 signed a ‘strategic commercial agreement’ with Israel’s TeraGroup to research the novel corona virus and develop new testing devices and methods.

TeraGroup has made significant progress in the design and manufacture of a breathalyser that offers a fast, cheap, and non-invasive way to detect infections. The company’s BioSafety device has already been deployed by the Emirates Field Hospital in Abu Dhabi which now plans to take its testing regime and kit national.

"In business terms, the UAE is most interested in gaining access to desert agriculture technology, a field in which Israel leads the world, and biomedical research."

Early July, some six weeks before the entente was formalised, the official Emirates News Agency announced that Abu Dhabi-based hightech pioneer Group 42 had inked a deal with two Israeli defence contractors – Israel Aerospace Industries and Rafael Advanced Defense Systems – to conduct research related to covid-19.

The top prize, as grand as it is elusive, remains regional superpower Saudi Arabia which has been courted extensively by Jared Kushner, President Donald Trump’s son-in-law. Kushner is said to have discussed the normalisation of Saudi Israeli relations with King Salman and Crown Prince Mohammed bin Salman.

The UAE has long been quietly tolerant of its small Jewish community. Numbering, perhaps, a few thousand, Jews in the Emirates have received covert government backing and are allowed to discretely maintain two pseudo-secret places of worship. Now, the Emirates are preparing to receive an influx of tens of thousands of Israeli tourists and businesspeople. Tour operators are scrambling to cobble together travel deals and expect that, once the pandemic has abated, as many as 300,000 Israelis may come to visit the UAE annually.

Though the king reportedly wishes to remain loyal to the Palestinian Cause, the crown prince seems more pragmatic and appreciates Kushner own loyalty: The senior adviser to the US president and his point man for the Middle East was one of only a handful of foreign emissaries and officials who sustained a friendly dialogue with Crown Prince Mohammed in the wake of the scandal that followed the 2018 death of the Saudi journalist Jamal Khashoggi.

Abu Dhabi hotel managers have received instructions to ready their restaurant kitchens for kosher certification by the country’s only rabbi, Levi Duchman. The 27-year-old is excited that the doors have, at long last, opened for business, leisure, and rites.

The UAE has largely ignored the barrage of criticism hurled at the country from Iran, Turkey, and the Palestinian Territories. Local support for the deal is strong, especially amongst young people who long to break with the olden ways and are tired of the rhetoric and animosity.

After the Kingdom of Bahrain joined the détente, most critics threw conceded defeat in the face of a diplomatic fait accompli. The country’s move, though not necessarily a complete surprise, may convince other moderates such as Oman, Morocco, and Sudan to offer formal recognition to the State of Israel as well. Further afield, Indonesia and Malaysia are also expected to follow the UAE’s lead before long.

Both men have since cemented a close relationship, although a tentative attempt by the crown prince to coax the Palestinians into acceptance of the Kushner’s peace plan was blocked by the king. Though Saudi Arabia may not yet be willing to take a giant diplomatic leap, the kingdom’s Foreign Affairs minister, Prince Faisal bin Farhan, concluded that the agreement between the UAE and Israel ‘could be viewed as positive’, signalling a telling refusal to stop others from beating a diplomatic path that the kingdom may tread at some point in the future.

For the Israelis, the price of breaking their regional isolation is a freeze, possibly indefinite, on any and all annexation plans. It is an exceptional deal: The mere threat of annexation has given Prime Minister Benjamin Netanyahu the change he needed to help seal a landmark deal long in the making but executed with lightning speed.

The conundrum otherwise known as the Middle East has just become a little less intractable.

Trade and business may yet bring the peace that politics could not deliver. i

"Though Saudi Arabia may not yet be willing to take a giant diplomatic leap, the kingdom’s Foreign Affairs minister, Prince Faisal bin Farhan, concluded that the agreement between the UAE and Israel ‘could be viewed as positive’, signalling a telling refusal to stop others from beating a diplomatic path that the kingdom may tread at some point in the future."

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‫مـلـتـقـــــى االسـتثمـــــار السنـــــوي‬ ANNUAL INVESTMENT MEETING World’s Leading Investment Platform

REIMAGINING ECONOMIES: THE MOVE TOWARDS A DIGITAL, SUSTAINABLE AND RESILIENT FUTURE 20 – 22 October 2020 Events10X Platform

KEY PILLARS

FOREIGN DIRECT INVESTMENT

SMALL & MEDIUM ENTERPRISES

FOREIGN PORTFOLIO INVESTMENT

STARTUPS

+971 4 392 3232 • info@aimcongress.com • www.aimcongress.com CFI.co | Capital Finance International

FUTURE CITIES

ONE BELT, ONE ROAD

#AIMDigital

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> Etihad Credit Insurance:

Export Credit Company Key to United Arab Emirates Resilience Its database includes commercial information on no less than 320 million business entities worldwide, from the proverbial corner shop to the largest globe-spanning corporate behemoths. In barely three years since the start of its operations, Etihad Credit Insurance (ECI) has claimed a key role in underwriting trade and investment flows out of, and into, the United Arab Emirates (UAE).

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reated and expanded in near-record time, the wholy state-owned company is timely helping businesses with a presence in the UAE deal with the economic fallout from the Corona Pandemic. ECI has not only been crucial in limiting the economic damage but is also a much-needed and oft-consulted fount of information on new markets, new opportunities, and the dynamics of the ‘new normal’.

economy away from its dependency on oil as defined in the UAE Vision 2021 five-year plan. The stated goal of reducing the extractive industry’s share of GDP to below 30 percent was met last year (29.5%) whilst significant progress was made to transform the emirates into a knowledge-based economy. Vision 2021 comprises a dozen key performance indicators, including a number that seek to incubate and grow SMEs.

The credit insurance business usually fails to command much attention. If aware of its existence, smaller companies tend to consider the sector as the exclusive preserve of the big corporates; a highly complex and technical pursuit that is, more likely than not, out of financial reach. However, ECI has been working hard to change perceptions by explaining its mission, lowering access barriers, designing bespoke innovative solutions and sharing its knowledge – and database. “We do this by partnering with other actors such as chambers of commerce in Abu Dhabi, Dubai, Sharjah, Ras Al Kaimah, Fujairah, just to mention some of them and creating an ecosystem that includes top local and international commercial banks, multilateral agencies, government Ministries and departments, and a host of others,” says CEO Massimo Falcioni. The Federal government executive is leading the export credit company inspired by the vision of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minister who recently stated “Today, we revive the mission of the UAE’s founders. Today, we begin our mission to prepare for the next 50 years that lead up to the UAE’s Centennial. Our duty is to design the UAE of the future for the next generations and to involve our people in this mission just like our founders did.”

“Today, small- and medium-sized business contribute 53 percent to the UAE’s GDP and provide, moreover, 86 percent of its jobs in the non-oil private sector. We at ECI were already very aware of the supreme importance of SMEs to the UAE economy long before the Corona Pandemic hit. In August 2019, ECI decided to refocus on this sector and prioritise our services to SMEs.” Mr Falcioni is especially pleased with the fully featured online platform that was recently launched to streamline applications, procedures, and facilitate operations.

SMALL IS BEAUTIFUL ECI was set up to help diversify the UAE 120

Innovation plays an important part in ECI’s approach to the credit insurance business.

The company is currently putting the finishing touches on a new Shariah-compliant product line that Mr Falcioni thinks will expand, if not revolutionise, the business: “There is a lack of solutions for Islamic businesses that are unable to benefit from our standard product range.

We are addressing that deficiency by reaching out to Islamic scholars and by offering Islamic product that is entirely separate from all other ECI conventional operations. This way, our company is able to service the full spectrum of the Islamic business community which represents, excluding banks, no less than 12 percent of global GDP – or some $2.2 trillion.”

For its ECI Islamic division, ECI has partnered with the Dubai Islamic Economy Development Centre, Dar Al Sharia, and the Islamic CFI.co | Capital Finance International

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"As private sector banks responded to the crisis by reducing their exposure to risk, hurting exporters whilst doing so, ECI moved in quickly to provide alternatives and act as a market stabiliser." international banks honour the guarantees we provided, according the BASEL II articles.” says Mr Falcioni.

The CEO explains that UAE-based exporters experienced few difficulties in finding commercial banks willing to discount their ECI insured receivables. However, the company went further and helped exporters tap into new markets and find new opportunities: “Since ECI’s founding, we have been very keen to weave a regional and indeed global network of partners. Whilst this is a very competitive region by nature, ECI is not in the business to compete with others, but to collaborate and offer support.

Our network now serves us well and allows ECI to establish new trade routes and help companies replace any business they may have lost due to the pandemic.”

CRUCIAL ROLE IN RECOVERY Over the last six months, ECI opened more than 1,600 revolving lines of credit for its customers.

Mr Falcioni is pleased that the Central Bank of the UAE put in place a strong monetary response and provided ample liquidity to local banks: “The record stimulus package of more than 256 billion Dirhams from the Central Bank, plus the UAE local governments packages and administrative cost reduction or cancellation, combined with our and other local government authorities proactive approach to supporting cross-border trade, has not only helped to stabilise the economy but also succeeded in creating a moment of respite and a chance to reflect on how to tackle the future.”

CEO: Massimo Falcioni

Corporation for the Insurance of Investment and Export Credit (ICIEC), to ensure strict standards are adhered to.

PANDEMIC Sitting at the world’s crossroads of trade and financial flows, the UAE economy was initially expected to suffer more than most from the pandemic. However, in its latest report on the country, the International Monetary Fund (IMF) revised its forecast upwards to a relatively modest 3.5 percent GDP contraction for 2020, followed by a vigorous rebound which should end 2021 on a positive note at 4.9 percent increase.

According to Mr Falcioni, trade volumes have proved surprisingly resilient. “Though a very negative development, the pandemic has not slowed down our business. To the contrary, ECI has stepped in, and on the accelerator, to provide businesses hit by the economic downturn the facilities they need to weather the storm. As private sector banks responded to the crisis by reducing their exposure to risk, hurting exporters whilst doing so, ECI moved in quickly to provide alternatives and act as a market stabiliser. We were able to leverage our international AA- credit rating, and the fact the ECI is a fully government company (sovereign risk), to have both local and CFI.co | Capital Finance International

Mr Falcioni is convinced that recent developments have emphasised the importance of credit insurance agencies such as ECI. “Look, some 80-90 percent of global trade is financed, according WTO. Yet, there is a financing deficit of an estimated by the International Chamber of Commerce from $2 to $5 trillion. If we can somehow manage to close that gap, then the global recovery would surely get underway faster. And this is precisely where we as export credit agencies must step in. There is more than enough liquidity in the system, but guarantees are lacking. We, the government export credit companies, can provide those guarantees,” concludes Mr Falcioni. i 121

> Metito:

Group with a Grasp of Synergy and Solidity Globally, Metito is recognised as a brand of trust and a provider of choice for intelligent water and alternative energy management solutions. With over 60 years of experience and projects spanning 46 countries the company is leading its industry by example marking many milestones along the way.

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etito's operations cover three business areas: design and build, specialty chemicals, and utilities. The group provides customised, comprehensive solutions across the full spectrum of the industry: desalination, wastewater reuse and recycling; industrial solutions — up to and including hyper-pure water and structures both greenfield and brownfield schemes under different project finance structures. The Group also provides custom alternative energy development and management solutions for utilities and corporations looking to uphold sustainable operations through generating clean, emissions-free energy.

Metito has developed thousands of projects worldwide, earning it the trust of market leaders and a reputation for professional excellence.

The group was the first to introduce the reverse osmosis (RO) technology for drinking water outside the US in 1972. It was also the first to pioneer concession contracts with private entities under Build Own Transfer (BOT), Build Own Operate (BOO), and Build Own Operate Transfer (BOOT) schemes in the Middle East. The company pioneered Public Private Partnership (PPP) agreements for bulk surface water supply concessions in Sub-Saharan Africa, and introduced mega seawater desalination plants and mega water treatment, recycling, and reuse plants in Africa.

The group portfolio holds more than 3,000 projects in 46 countries, managed by some 3,500 employees working from of strategically located operational offices.

RESILIENT BUSINESS MODEL With a culture of creativity, accountability, an inimitable shareholder structure and a progressive vision, Metito remains resilient, relevant, reliable, and competitive. It has built a legacy of determination and persistence.

Metito was founded with a vision to be a prominent player and a catalyst in decreasing the impact of growing populations, industrialisation, and globalisation on the earth’s dwindling natural water resources. This vision still stands because of the strength of its team.

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Metito Chairman & CEO: Mutaz Ghandour

“Our people, our most valuable asset, dare to dream and dare to do things differently,” says Metito chairman and CEO Mutaz Ghandour.

“We are always challenging ourselves, taking calculated risks and growing as individuals within a company — and as company within our bigger ecosystem.”

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“Our aim is to continue developing sustainable projects that preserve the environment and the world’s natural water and energy resources, while creating a cycle of prosperity for the communities we serve.”

That clarity of vision has allowed the company to achieve many milestones over the years, central

China

Saudi Arabia

to which are prominent synergistic partnerships, expansion landmarks and pioneering, sustainable projects across Africa and Asia.

In 2007, Metito welcomed the International Finance Corporation (IFC) as a shareholder and in 2014, the company entered a synergistic partnership with Mitsubishi Corporation, Mitsubishi Heavy Industries and Japan Bank for International Co-operation. With such a highprofile shareholding structure, Metito became increasingly competitive and further geared

Mitsubishi

to pursue its growth plans in new and existing territories.

In 2018, Metito expanded its portfolio to include an alternative energy division targeting emerging markets; and just a year after, a Metito-led consortium was awarded the Rangunia grid-tied solar power plant project by the government of Bangladesh. The winning tariff was the lowest recorded in the country.

In 2019, another Metito-led consortium was awarded the first independent sewage treatment plant project (ISTP) under a BOOT model in the Kingdom of Saudi Arabia, Dammam ISTP — with a designed capacity of 350,000 cubic metres per day. This award winning project reached financial close during the evolving Covid-19 pandemic: a challenge, and a reflection of resilience.

That resilience was also on display at the height of the pandemic when, Metito and Hassan Allam JV inaugurated the world’s biggest agricultural drainage wastewater treatment, recycling and reuse plant in Egypt, Al Mahsamma project.

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This award winning project, in the strategic area east of the Suez Canal, will make use of advanced remote monitoring systems and the latest treatment technologies, says Ghandour. “It will sustainably benefit the surrounding community, create attractive opportunities for new investments, and have wider economic benefits for the region and beyond.”

EMERGING STRONGER The disruption of the COVID-19 pandemic has brought opportunities for agile companies, Metito CEO says. “We have always been long-sighted and sufficiently diversified, which limits our vulnerability to global disruptions. Solid financial capabilities, a strong balance sheet, great liquidity and access to credit allow us to continually develop and invest, despite macroeconomic challenges.”

Metito has a vertical and geographical perspective on progress with a motto of “Local presence, global know-how”. Experienced leadership and management teams, digital automation capabilities, access to advanced technology and professional teams all play a key role in creating a resilient business model. i 123

> AIM Digital 2020:

A 360-Degree Approach to Economic Recovery

The largest virtual event for the global investment community puts a spotlight on its six pillars: FDI, Foreign Portfolio Investment, SMEs, start-ups, Future Cities, and One Belt, One Road.

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hat does it take to achieve economic recovery?

Despite the global predicament, forward thinkers believe that a change in perspective, some innovative solutions and a dollop of resilience can recoup the losses and create a future we can depend on. AIM Digital, the first digital edition of the Annual Investment Meeting was conceived from this viewpoint.

The Annual Investment Meeting is an initiative of the UAE Ministry of Economy, under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, vice-president and Prime Minister of the UAE and Ruler of Dubai.

AIM Digital is the first edition of its sort, and probably the largest virtual event to date for the global investment community. It aspires to create a roadmap to build a better global economy that will have a lasting impact for generations to come. The theme is Reimagining Economies: The Move Towards a Digital, Sustainable and Resilient Future.

The event sees a future where businesses take full advantage of the latest technology for their transformation, expansion, and optimisation; a sustainable planet that is free from poverty and environmental degradation; and a resilient world that does not surrender to adversity, but uses it as a catalyst for innovation.

Taking place through the secured virtual platform, Events10x, AIM Digital will open doors of opportunity to the world as it puts a spotlight on FDI, Foreign Portfolio Investment, SMEs, Start-ups, Future Cities, and the One Belt, One Road scheme.

FOREIGN DIRECT INVESTMENT UNCTAD’s World Investment Report 2020 revealed that global FDI flows are estimated to decline by up to 40 percent this year, from $1.54tn in 2019. AIM Digital will use the FDI pillar to offer the most attractive investment projects and showcase fresh investment 124

avenues for global investors. Every country, city and municipality will be given the chance to present viable and sustainable investment opportunities.

FOREIGN PORTFOLIO INVESTMENT By including FPI, investors are given a platform to diversify their portfolio with an international advantage. It will help to secure an infusion of assets in the form of stocks and bonds to boost businesses, and will also facilitate the improvement of the capital account position of the 170 participating countries.

SMALL AND MEDIUM ENTERPRISES According to the World Bank, SMEs represent about 90 percent of businesses and over 50 percent of employment globally. It is also estimated that by 2030, the increasing global workforce will require 600 million jobs, making the expansion of SMEs a top government priority.

Through AIM Digital, SMEs will be able to find new sources of funding and financing solutions for business development and expansion.

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START-UPS AIM Digital will provide opportunities for startups to showcase their competitive edge and business expertise by staging two competitions: the AIM Global National Champions League and the Global Technopreneurs.

The Champions League will feature the winners from the national pitch competitions held in 60 countries, and the top five start-ups will win a prize of $10,000 each. Global Technopreneurs will showcase projects on an individual basis, and the top three will gain the opportunity to join the incubator program Microsoft for Start-ups.

FUTURE CITIES The United Nations forecasts that 66 percent of people will occupy smart cities to accommodate a growing population of 9.7 billion by 2050.

Recent market reports state that the global smart cities market is expected to grow from $410.8bn to $820.7bn by 2025, creating greater possibilities for economic growth and modernisation.

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ONE BELT, ONE ROAD The One Belt, One Road Initiative was proposed

by China in 2013. It aims to improve regional integration and enhance trade, and is expected to mobilise trillions of dollars for much-needed infrastructure development in emerging market economies across Asia, Africa, Europe and the Pacific region. The virtual venue allows investors to tap the potential of infrastructure projects, offering low-cost loans to participating countries.

It will also facilitate the creation of investment partnerships, unlock opportunities, and pave the way for international co-operation.

AIM DIGITAL 2020 MAJOR ACTIVITIES AIM Digital’s major activities are designed to extensively boost investment opportunities in various sectors.

Six pre-conference workshops will be led by industry leaders and specialists from the investment community to explore relevant topics about each of the six AIM pillars. Investment solutions, new avenues for growth and a chance to connect with the global investment community on a platform where insights, best-practice, and ideal investment policies are shared.

The conference will feature more than 300 speakers from around the world, with 40 sessions of depth-discussions. It will be attended by headsof-state, key policymakers, institutional and noninstitutional investors, the heads of international institutions, political economists, academics, and technology leaders.

The 25th meeting of the Indian Ocean Rim Business Forum (IORBF) will take place at AIM Digital. The IORBF is the primary body of The Indian Ocean Rim Association (IORA) that will discuss strategies to boost intra-regional trade and increase FDI inflows, focusing on facilitating trade, exploring trade policy co-ordination strategies, streamlining procedures, establishing regional value chains, and information dissemination.

INVESTMENT ROUNDTABLES The four Investment Roundtables focusing on energy, agriculture, infrastructure, hospitality and tourism will gather ministers, vice-ministers, heads of IPAs, traditional and non-traditional investors and key stakeholders to share investment frameworks, models, approaches and strategies.

It aims to identify the key challenges or issues that present as barriers to investment, and ways to overcome them through enhanced public-private co-operation. It will create insights regarding suitable infrastructure investment models by enhancing the mutual understanding of related public and private sector requirements, and provide the basis for an ongoing dialogue between the sectors.

INVESTORS HUB The Investors Hub highlights the most promising investment ventures in various countries. Representatives of top

investment houses, investment corporations, development banks, sovereign wealth funds and portfolio investors virtually meet with official government envoys in a formal and secured digital setting conducive to the formation of investment partnerships and collaboration.

across the globe for their outstanding projects aligned to achieve increased operational efficiency and productivity, sustainability, and economic growth. Categories include: Most Resilient Cities, City of the Future, Future Government Award, Future Mobility Award, and Smart City Innovator Award.

CELEBRATING EXCELLENCE AIM Investment Awards will grant recognition to the best investment promotion agencies across the globe. AIM Digital will provide awards to the best FDI projects in each region of the world to recognise the accomplishment of the particular country in attracting sizable and beneficial investment projects.

A 360-DEGREE APPROACH AIM Digital offers a comprehensive approach towards economic recovery. There is an additional focus on promoting the United Arab Emirates as an investment destination, underlining initiatives, policy measures, and strategies that are being undertaken.

AIM Future Cities Awards will showcase and recognise smart city solutions providers from CFI.co | Capital Finance International

So, what does it take to achieve economic recovery? As far as the Annual Investment Meeting is concerned: whatever it takes. i 125

> Latin America

Uruguay: A Near-Perfect Country to Live, Work, and Play Post-Covid-19

The best countries to build a prosperous post-corona life include obvious choices such as Australia (#1), New Zealand (#3), and The Netherlands (#8), but also a few surprising ones: Mauritius claimed a top spot (#6) as did, remarkably, Spain (#5), and Tunisia (#4). However, according to Business Insider, the second-best place to settle once the virus has been defeated is Uruguay – a discrete destination for a select league of in-the-know jetsetters, but otherwise lodged in the shadows of its much larger, and more boisterous, neighbours Brazil and Argentina.

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o compile its list, Business Insider only looked at democratic countries and then considered a number of criteria such as economic performance and resilience, climate, cost of living, and attitude towards immigrants. Uruguay pulled in top scores on all metrics, narrowly missing out to Australia, but still lightyears ahead of any other country in Latin America. Only landlocked Paraguay made the list at #13 for its near-perfect climate, welcoming society, and its enviable cost-of-living – almost 60 percent lower than that of the US. Both Uruguay and Paraguay have managed to contain the corona outbreak better than others in South America. Paraguay sealed its borders at the first signs of trouble, instituted a curfew, and gave its medical community a free rein to set policy. “The country took drastic, almost draconian, measures early on. At the time, there were only two confirmed covid-19 cases in Paraguay but that was enough to spark a national emergency,” says Luis Roberto Escoto, the local representative of the Pan-American Health Organisation (PAHO).

According to a study by the Inter-American Development Bank (IADB), the relative success of Paraguay and Uruguay in containing the spread of the virus is owed to their governments’ quick and decisive response. Both countries not only shut their borders, but also restricted large gatherings, and quarantined travellers.

The researchers also found that both countries’ low population density helped slow the rate of infection and facilitated contact tracing.

UNIVERSAL HEALTHCARE Moreover, Uruguay benefitted from a universal healthcare system that was properly funded and possessed the means and expertise to respond to a large-scale viral outbreak. It also helped that the vast majority of Uruguayans trust their government with just 24 percent of people queried in a 2017 IADB poll stating that they do not expect their rulers to do right by them. In next-door Brazil, fully two-thirds of respondents expressed a distrust of their government.

Though Uruguay did not impose a formal national lockdown, some 90 percent of people chose to stay indoors after medical authorities explained in great detail how the virus spreads and appealed to common sense and individual responsibility. Absent extreme poverty and an informal economy, most Uruguayans were able to stay at home without the risk of immediately becoming destitute.

PAHO Assistant-Director Jarbas Barbosa emphasised that strict lockdowns and adherence to social distancing rules are almost impossible to maintain in poor countries where people live in slums and subsist hand-to-mouth.

Once known as the ‘Switzerland of South America’, Uruguay stands out in the region for its egalitarian society. Almost 70 percent of the

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"A few brave and wildly optimistic pundits have suggested that, perhaps, an economic crisis of the magnitude predicted by the IMF and others may spark a genuine movement for change. Though hope springs eternal, Latin American voters have run the political gamut from near-fascist to nearcommunist – and quite literally everything in between – without finding a lasting solution to their plight." country’s population belongs to the middle class and, as such, has a vested interest in moderate politics and good governance. Uruguay is also the highest-ranked Latin American country on Transparency International’s Corruption Perceptions Index, scoring 71 out of a 100 and claiming the 21st spot amongst 198 countries investigated and tabulated.

PROGRESS LOST IADB President Luis Alberto Moreno noted that whilst governments throughout Latin America are slowly managing to flatten the pandemic’s curve, their debt curve is shooting skywards. The World Bank is worried as well and fears twenty years’ worth of progress in poverty reduction may be lost to the novel virus.

The bank’s regional vice-president, Carlos Felipe Jaramillio, sounded the alarm and said that Latin America was facing its ‘worst crisis since record-keeping began, at least 120 years ago’.

The World Bank forecasts that some 53 million people on the continent may be pushed below the regional poverty line of $5.50 per day: “Under a downside scenario, it could actually be worse still,” warned Jaramillio.

Even before the pandemic struck, most South American economies were struggling with anaemic growth, averaging out at just 0.5 percent annually over the last ten years. The International Monetary Fund (IMF) now predicts a sharp 9.4 percent decline in average GDP for 2020, followed by a timid recovery in the years that follow. According to the IMF, Latin America and the Caribbean is the region hardest hit by the pandemic. The fund noted that the economies of Sub-Saharan Africa are expected to shrink by 3.7 this year before roaring back in 2021.

Jaramillo manages a $32 billion World Bank projects and grants regional portfolio and hopes that he can help Latin American governments structure a much more dynamic and resilient post-pandemic economy. He has urges his partners to take a cue from Asia and Africa in particular, and points to Kenya’s revolutionary M-Pesa mobile money transfer system as an example of the innovative thinking and approach that should have been adopted in Latin America a ‘long time ago’: “The continent CFI.co | Capital Finance International

needs to get serious about fostering innovation, entrepreneurship, and competition to address [its] low productivity”.

The World Bank has suggested three priorities that may direct the continent to an accelerated yet sustainable growth trajectory: (1) improved access to digital broadband services, (2) investing in public health and education leveraging the internet, and (3) developing a more dynamic business environment.

PLUS ÇA CHANGE… However, the political moment in most Latin American countries is not really opportune for large-scale transformation. When disgruntled people take to the street even in Chile – arguably one of the best-governed, least corrupt, and most prosperous countries in the region – something is seriously amiss.

The capacity of most states in Latin America to impose pragmatic policies and deliver effective solutions has been undermined by years, if not decades, of neglect of the public sector. That, in turn, has eroded confidence in politics and opened fissures in the fabric of society, amplified and exploited by populists such as Nicolás Maduro in Venezuela, Jair Bolsonaro in Brazil, and Christina de Kirchner and her presidential puppet Albert Ángel Fernández in Argentina.

These and other regional leaders eschew administrative and economic innovation and keep harking back to policies that have failed before – and will keep doing so.

A few brave and wildly optimistic pundits have suggested that, perhaps, an economic crisis of the magnitude predicted by the IMF and others may spark a genuine movement for change.

Though hope springs eternal, Latin American voters have run the political gamut from nearfascist to near-communist – and quite literally everything in between – without finding a lasting solution to their plight. The faces and public discourses may change from red to blue and black, but the underlying corporativism and the associated clientelism are carefully kept in place by nearly all actors. Don’t expect the Corona Pandemic to change any of that. Uruguay is much the exception and thus a lone beacon of hope. i

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>

Don’t Expect Miracles from the Multilaterals

By Otaviano Canuto

Latin American and Caribbean economies need help, but organisations such as the IDB are also stretched thin.

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ith Latin America and the Caribbean potentially facing years of difficulties due to the pandemic and related economic crises, attention has shifted to what multilateral institutions like the International Monetary Fund (IMF) might do to help. There’s no doubt such bodies can play a crucial role in preventing another lost decade in the region. But they will also face limitations because of capital constraints and other factors.

The need is clearly acute. Latin America and the Caribbean remain the epicentre of the global 130

pandemic, currently accounting for more than 43 percent of global deaths. There has been a surge in Covid-19 fatalities in Brazil, Mexico and other countries in the region. And GDP declines in the second quarter of 2020 have revealed how severe an impact Covid-19 has had on local economies.

As the last-resort liquidity provider, the IMF has so far doubled access to emergency funding, and provided more than $5bn of total financing to 17 countries in the Caribbean, Central and South America, mainly through its Rapid Financing Instrument (RFI).

CFI.co | Capital Finance International

But when it comes to full-fledged financing deals, one must distinguish between three country categories.

A first tier includes countries that display strong balance sheets on fiscal and balance-of-payment dimensions, and have access to the Flexible Credit Line facility, designed not to be withdrawn except in extreme circumstances. That serves as positive stamp and a low-cost insurance. Mexico, Colombia, and now Chile and Peru, are in this category. This precautionary lending line was expanded to $107bn.

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A second category includes countries that were already facing external finance difficulties prior to the pandemic, such as Argentina, Ecuador, Honduras and Jamaica. Argentina just restructured $65bn in debt held by private creditors. Now it faces renegotiation of its $70bn debt with multilateral institutions, including $44bn to the IMF. The only possibility is a new roll-over programme, which Argentina has already requested.

Ecuador has also returned to the IMF after its own debt restructuring with private creditors, while Honduras and Jamaica have recently reached agreements with the fund. It is noteworthy that the accord with Jamaica accepted a reduction in its primary surplus as a counterpart to higher public social spending. Those are clear changes from past practices.

There is a third cohort of countries, with some that are already trying package negotiations and others so far not in need of IMF support. As the pandemic and the economic crisis continue to unfold, it is probable that some members of this group will join the second tier.

Multilateral and regional development banks, in turn, have all sped-up their assistance and disbursements for countries to spend on health and social protection systems. This makes money arrive faster by (among other things) approving immediate disbursement projects. For some countries that did not have access to the IMF’s emergency facilities because of lack of a minimum agreement, the banks were the only resource immediately available.

But while the IMF has some remaining lending space, development banks must deal with limitations because of capital constraints. The IDB has prioritised the poorest countries in the region. A capital increase of the World Bank was agreed in 2018, but not implemented.

Washington: Inter-American Development Bank

"But while the IMF has some remaining lending space, development banks must deal with limitations because of capital constraints."

For the coming year, it will get harder for multilateral banks to maintain or expand the disbursement volume. That is unfortunate, given their relevance to support economic recovery, and as cross-pollinators of knowledge.

NO ONE-SIZE-FITS-ALL Covid has been a tragedy for the region, and not only in terms of human lives: income concentration and higher public debts will be part of its legacy. And it left naked the region’s shortcomings on public health expenditures, degrees of formalisation of labour occupation, and lack of digitalisation of government functions.

This gloomy picture contains a diversity of country conditions — which means the support from multilateral institutions must vary accordingly.

Latin America as a whole is expected to suffer a GDP downfall of above 8.5 percent in 2020, only partially recovered by a positive four percent average growth rate in 2021. It is worth recalling CFI.co | Capital Finance International

that the shrinking of per-capita income in the region follows a period of lacklustre growth. The IMF’s World Economic Outlook update in June showed Latin America as the worst economic performer of all developing-country regions, and that is not expected to change in future forecasts.

Among the larger economies, Argentina, Mexico and Peru are poised to exhibit two-digit GDP declines, followed closely by Ecuador, while projections for Brazil, Chile and Colombia show negative growth rates in the range of minusfive to minus 7.5 percent. Uruguay is the only country in this group expected to recover its 2019-level GDP by the end of 2021. Venezuela is a tragedy apart.

Such differences reflect a range of factors, from domestic conditions prior to the virus to how the pandemic has affected them, and policy responses. Countries have taken different approaches, from “let it follow its course” (Mexico, Nicaragua) to stringent mobility restrictions (Colombia, Chile and Peru). Then there are the half-hearted and unco-ordinated local shutdowns in Brazil. Many are planning or executing re-openings, while infections and deaths are declining but still present.

Economic shocks from abroad also affected countries differently. Oil exporters felt the impact of the barrel’s price drop, while Brazil and Argentina have benefitted from China’s demand for agricultural goods. While falling tourism has hit the Caribbean, remittances were less disappointing for Central America and others, helped by the US government income transfer to its residents.

Policies of “flattening the recession curve” — including income transfers to citizens and credit to companies —have played a role, mitigating local shocks at the cost of raising public debt.

Brazil and Peru had the largest income transfer schemes, while Chile prioritised credit to firms; Mexico opted for neither.

In Brazil, the resources transferred to 67m citizens as emergency aid in the first half of the year outweighed in value the whole decline in wages, a major factor behind the lower-thanexpected economic recession. But debt-to-GDP is forecast to reach close to 95 percent by the end of the year. While the federal government managed to cross the storm by resorting to shortterm funding, fiscal challenges will be taller at the end of the crisis period.

Despite this variety of country situations, all face the possibility of a lost-growth decade.

Tackling chronic problems in infrastructure, education, inequality, governance and security will be of the essence, while coping with the immediate Covid-19 legacy. Strengthening multilateral banks’ capital structures would be of great help. i

This article first appeared in Americas Quarterly.

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> EY Argentina:

Threats and Opportunities in a Post-Covid-19 Economic Context

By Sergio Caveggia and Jimena Rocío García

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statement currently circulating on social media warns that "it is strange that certain world economies easily collapse when consumers buy only what they need".

Statements like this often contain some degree of truth. The social isolation linked to the pandemic has generated forced changes in the consumption habits of millions of people. But it has also encouraged those consumers to question their objectives.

The economy in general, and private companies and family business in particular, are subject to an unprecedented degree of pressure. Except for some particular industries, many sectors and segments of the economy must reinvent themselves to survive. Airlines, restaurants and tourism servicerelated fields have faced massive layoffs as revenues or prices have collapsed. However, other sectors are on the rise: medical equipment, telehealth, streaming, videoconferencing, collaboration tools, cloud services and on-line retail stores.

An EY study found, for instance, that 50 percent of consumers will change their consumption habits in the post-Covid long term, prioritising the affordability, health and environmental impacts of their decisions. Companies will need to reconfigure their value proposition around these objectives.

Every day, social media and networks show the magnitude of ongoing changes which will surely modify habits and cus-toms. Changes involve not only consumers’ formats but also the way in which many businesses produce and generate added value. We are facing a turning point that questions and challenges supply and demand assumptions.

Those leading transformation of their market will eventually win. Those failing to invest their energy and resources in innovation will probably see decline in their sectors. Agility and resiliency are key values or elements.

Business innovation is no longer a “nice-tohave”; it is now a need. Companies and family enterprises must innovate and define changes in their business strategy or models. One of the main aspects to be factored-in is the consequences of tax associated with the changes.

Companies’ lack of resources to invest in designing and defining strategic changes, without a safety net or an alternative plan, is a limiting factor. In this context, tax is also key in designing a business strategy. The tax variable is present in 132

Ar-gentina and cannot be disregarded. Recently, the Argentine congress passed a tax moratorium or amnesty law (including application restrictions for multinational enterprises) and amendments to the legislation that promote the knowledge-driven economy.

As if the scenario were not complex enough, changes in the tax system are being analysed from a holistic perspective. Central Bank regulations intend to maintain governments’ hard currency reserves by restricting the free trade of currency.

Today the only source of foreign currency reserves for Argentina are private-sector exports, because sovereign indebted-ness is not available in foreign markets. The “decision tree” to be created under these circumstances is complex. This is particularly so not only because changes to business strategy foundations are being accelerated, but also because they are part of an uncertain and volatile tax and economic context.

Textbooks teach us to model economic and tax scenarios and to sensitise the related variables to draw conclusions. This is having an impact on how expected changes should be arranged and weighted to define appropriate courses of action.

If we intend to put the factors affecting decisionmaking in order, we should emphasise first of all that the tax concept fol-lows the business. If the intention of a company is to modify the tax treatment of a specific taxable event by providing it with characteristics that are not consistent with the substance or economic reality of the new business, or the transaction in question, the structure may be challenged by authorities.

Summing-up, the search for tax shortcuts may generate consequences that outweigh the potential benefits. Probably, however, a specific change to a business model may not be economically viable because the tax cost makes it ineffective. It is true that the unco-ordinated accumulation of federal and local taxes in Argentina over a specific value chain may cause a business to be non-competitive.

In these cases, the tax factor should be reviewed with a view of efficiency — without modifying the substance of the busi-ness. Today more than ever, tax alternatives should be studied to allow for the proper performance of new business models concerning direct and indirect taxes. This puts the company in a position to build alternative scenarios to factor-in pos-sible consequences.

The search of tax efficiency in a business model should not be construed as illicit behavior. The CFI.co | Capital Finance International

Summer 2020 Issue

Argentina Supreme Court of Justice has already ruled in favour of taxpayers’ rights by establishing that "the honest effort of the taxpayer to limit their taxes to the legal minimum is not reprehensible".

And what about technology? In another research, EY also noted a heightened focus on digitalisation. Many business lead-ers and family enterprises’ next-generation members view the pandemic as the point that will allow them to redefine themselves, placing new emphasis on data, robotics and other new technologies. More companies are accepting the home-office as an option, and may lead to changes in requirements for office space.

The decision by some companies to cut back on travel prompted a major surge in demand for virtual-meeting technology. Cybersecurity can also become more of a business resource and transformation enabler: norms and government regula-tions on data and intellectual property could require changes or adjustments.

Author: Sergio Caveggia

A willingness to adapt to consumer demand, readiness and resiliency, transformation and innovation, are essential values. Time is short, and hardship tough. But strong decisions now may pre-empt a brighter and more resilient future. i ABOUT THE AUTHORS Sergio Caveggia is a tax partner currently in charge of Transaction Tax area in Argentina. He joined EY Argentina in 1994 and has developed expertise over 24 years in international taxation and merger and acquisition matters. Sergio is also focus on servicing clients in the Private Client Services (PCS) area. He is highly experienced in inbound and outbound investments, buy side, sell side and restructuring services within the Transaction Tax area.

Sergio has served in a variety of industries and has also been involved in many due diligence procedures performed in the past 20 years. He has given lectures in national universities and is a frequent speaker in tax seminars. He has also written several articles dealing with Argentina tax issues.

He is a Certified Public Accountant who graduated from University of Belgrano in Argentina. He obtained his Tax Specialist’s Degree at the University of Belgrano and has a postgraduate certificate in Business and Management from Universidad Catolica Argentina (UCA). He is also member of the Professional Council of Economic Sciences of Buenos Aires and the Argentina Fiscal Association.

Author: Jimena Rocío García

services in numerous companies in different industries. She also participated in the coordination of many cross-border engagements, dealing with foreign labor and social security legislation matters on each transaction. Jimena participates in numerous seminars related to payroll taxes and labor law matters.

Jimena is a Lawyer graduated in 2010 from UNLAM (Universidad de La Matanza). She is enrolled in the Bar Association of the City of Buenos Aires.

Jimena Garcia is a Manager currently working in the International Tax and Transaction Services (ITTS) and Private Client Services (PCS) areas in Argentina. She joined the firm in 2014.

She has extensive experience in social security & labor law buy-side and sell-side due diligence CFI.co | Capital Finance International

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> North America

Canada: This Is Our Time to Be Kind

‘Peace, order, and good government’, the leitmotif of the British Empire, seems to trump the American ‘life, liberty, and the pursuit of happiness’ when it comes to public safety. Canada, which kept the motto and lives by it, has thus far managed the Corona Pandemic quite well when compared to its more boisterous southern neighbour. The relative incidence of covid-19 cases in the United States is about five times higher than the number reported by Canada.

In September, Prime Minister Justin Trudeau signalled that his government was not in a rush to reopen the land border with the US, closed since March 22 for all but commercial traffic. Public Safety Minister Bill Blair extended the travel restrictions to October 21, ignoring an appeal by 29 US lawmakers to ‘craft a comprehensive framework for the phased reopening of the border’.

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hilst in the last week of September Quebec topped the list of infections with a rate of 55 per 1 million inhabitants, no less than 42 US states reported a higher incidence.

Even the best-performing US state, Vermont with just 4.6 cases per million, is outdone by 7 Canadian provinces and territories.

As leaves start to brown in anticipation of winter, announced like clockwork in the days immediately following the cherished Labour Day long weekend, the Great White North is engaged in a new national pastime: Coming up with explanations for the rather pronounced differences with the Great Unruly South.

Though displays of national pride usually remain confined to cross border ice hockey matches for the Stanley Cup – last brought home in 1993 by the Montreal Canadiens – when it comes to highlighting their society’s accomplishments, Canadians revel in spotting, marking, and underlining the differences with a barely concealed sense of moral superiority.

RULE FOLLOWERS “We usually prefer to follow the rules and wait for our turn,” surmises Sarah Chown of the Ontario Restaurant, Hotel, and Motel Association. Free public healthcare and a media establishment largely devoid of hysterics are other sources of national pride. In anticipation of an early federal election, widely considered a distinct possibility, Elections Canada is calmly preparing for a surge in demand for mail-in ballots – without fuss or causing any controversy.

From the very beginning of the pandemic, federal and provincial leaders have prioritised science over politics, following all policy recommendations to the letter and refraining from spin, alt-truths, and all other forms of massaging public opinion. Without much ado, a contact-tracing app was launched which has recently seen a significant uptick in the number of downloads as people start worrying about a second wave.

Prime Minister Trudeau took ownership of the pandemic, delivering daily briefings laced with messages of comfort delivered in a soothing Rogers tone. The contrast with President Donald Trump’s White House ramblings couldn’t be any greater. Where Trump assigns blame and dodges responsibility, Trudeau offers assurances and provides solace.

Most provincial and federal health authorities have now gained near-superstar status. British Columbia Provincial Health Officer Dr Bonnie Henry captured both the spirit and imagination of the country with her trademark phrase ‘this is our time to be kind, to be calm, and to be safe’ which has since been stamped on t-shirts, bracelets, shoes, posters, and pretty much anything that will carry or convey a message.

However, the preternaturally calm Henry did more than just appeal for kindness: She also

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"Though Henry has been granted the power to directly issue orders to BC police to enforce quarantine rules, she has flatly refused to make use of that authority: “The only way we can get through this as a community is without traumatising people." managed to contain the viral outbreak in a province that, by the force of logic, should have become a covid-19 hotspot due to its proximity to Washington State and close ties with China.

EMBRACING VULNERABILITIES Celebrated as one of the world’s most effective public health officials, Henry has not yet gotten used to her fame which arrived after she teared up whilst expressing concern for the wellbeing of health workers and caregivers during a press conference in March. The Globe and Mail, Canada’s largest newspaper, promptly noted that the nation ‘embraces vulnerability in its leaders’.

Before long, this former fleet medical officer of the Canadian navy became a national hero – and an authority on epidemiology with skills honed whilst tracing Ebola outbreaks in Africa for the World Health Organisation. There she discovered that an effective quarantine does not use punitive measures, but communication and support: “If you tell people what they need to do and why, and give them the means to do it, most will do what you need.”

Though Henry has been granted the power to directly issue orders to BC police to enforce quarantine rules, she has flatly refused to make use of that authority: “The only way we can get through this as a community is without traumatising people.” Henry also realises better than most that the coronavirus is going nowhere any time soon and societies need to adapt and find a balance between minimising the impact of the disease on the population and minimising the negative consequences of the outbreak and lockdowns such as spikes in the rates of domestic violence and suicide.

A NEW CANADA Meanwhile, the federal government in Ottawa is striking a balance of its own. In his annual throne speech to parliament, delivered by Governor General Julie Payette in lieu of Queen Elizabeth II, Prime Minister Trudeau promised to usher in a new era of greener, fairer, healthier, and more compassionate policies to help the nation recover from the pandemic. “This is not the time for austerity,” he said before sketching the outlines of strengthened social programmes to support workers and families affected by the economic downturn, and help businesses weather the storm, in addition to an ambitious push to combat climate change.

CFI.co | Capital Finance International

Though his conservative opponents were slightly less excited and worry about the widening budget deficit, the prime minister is safe in the knowledge that no Canadian government has ever been defeated on its throne speech.

However, Trudeau’s Liberals do not command a majority in parliament and must rely on dissidents from Conservative ranks, and possibly from the more progressive New Democratic Party, to push through their reforms. The federal government may also expect some pushback from the provinces who may resent any changes to the healthcare system which they administer – and mostly pay for.

Federal emergency spending on a wide array of support programmes has pushed to budget deficit to levels not seen since World War II. A July ‘fiscal snapshot’ showed the 2020 fiscal deficit approaching a staggering 21 percent of GDP with Canada’s debt-to-GDP ratio pushing 120 percent. Fitch Rating promptly downgraded the country’s credit rating to AA+ (stable), reducing to just ten the number of sovereign credit issuers still meriting the coveted Triple A status – eight of them members of the European Economic Area.

Canada does possess a history, if not tradition, of quick post-crisis recovery. In its country outlook report, Fitch Ratings analysts expect the longterm consequences of the Corona Pandemic to reduce economic growth to just one percent for two years or longer. Substantial growth, they guesstimate, will only return by 2025.

Though Statistics Canada has recorder strong growth since May, the rebound is not expected to undo the damage done in Q2 when GDP plummeted by 38.7 percent (at an annualised rate). TD Bank Senior Economist Brian DePratto added yet another letter to the post-corona alphabet soup: ‘K’ for a recovery that sees some sectors claw back their losses quickly whilst others stay stuck in a recession.

So far, most Canadians have not yet felt the full financial impact of the Corona Recession. Whilst household spending dropped by 13.1 percent in Q2, and employee compensation fell 8.9 percent, disposable household income rose by 10.8 percent as a particularly generous federal income support programme kicked in. Over Q2 2020, the federal government saw its spending on benefits increase by 193.5 percent compared to the same period of 2019.

Most economists agree that the largesse was called for and saved the country from a 1930s-style depression. However, continued extravagant deficit spending as proposed by the Liberals may not be the wisest course of action. Then again: Nobody really knows how long the coronavirus will roam the globe largely unchecked and when sustained recovery can reasonably be expected to begin. With everybody guessing, perhaps it’s best to keep economies – and societies – on life support for a little while longer and keep the piper at bay. He can wait. i

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> Philippe Ziade:

The Man Who Brings Tesla Home His words contain faints echo of admonition. Philippe Ziade, an optimist with a can-do spirit and a drive to match, is still waiting to be overwhelmed by the millennials. He suspects that a sense of entitlement doesn’t really help.

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dmittedly, the bar set by USLebanese entrepreneur shall forever remain out of reach for most. Steeled by adversity, he battled formidable odds and came out on top. That amazes him to this day, although there was a plan: work, seize opportunity, and pursue your vision.

Tesla’s great innovator Elon Musk is an inspiration. Ziade is determined to become to housing what Tesla is to cars: “Once I got the Tesla people to turn their gaze away from Mars for a few moments, I managed to show them how their technologies and concepts can revolutionize the way we interact with our homes.

Not only will life be immeasurably more comfortable, the environment will benefit as well. This is not about installing a few led lights, but about redeploying already existing technologies in such a way that synergies appear, and a holistic system emerges to power the intelligent home, a place that truly takes cares of us and of nature.”

Philippe Ziade is the embodiment of the rags-to-riches story that still draws untold millions stateside even though social mobility is no longer a given and streets are not paved with gold: except, of course, the Las Vegas Strip.

It was precisely here that Ziade met his good fortune, not working blackjack tables or yanking one-armed bandits, but helping build the palaces and resorts that house. What began as way to pay the rather steep – for a penniless foreign student – tuition fee of the University of Nevada, grew into a multibillion-dollar business in just about twenty years.

Growth Holdings, the company that now bundles the businesses Ziade started, is counted amongst the largest real estate conglomerates west of the Mississippi. From its Las Vegas headquarters, Growth Holdings manages a mutually reinforcing set of business interests and investments.

The company maintains offices in Europe, Japan, and the Middle East to oversee it all.

Not one to get stuck in philosophical musings, Ziade promptly mobilized his engineers to turn his vision to reality and partnered with Tesla to supercharge the research effort. The first intelligent houses have already been completed and delivered to their new owners in a development just outside Las Vegas. Here, aesthetics meets über-smart in nextgen brick-and-mortar.

Founder and Chairman of the Board: Philippe Ziade

Ziade’s luck, as it were, is that he not only has drive, but also possesses a clear vision. Whilst the real estate industry headed for the dumps in the wake of the 2008 banking crisis, he sat on a respectable pile of cash: “At the time, I sold everything I owned. Many thought I had gone off the deep end.” However, a few years later, Ziade embarked on a buying spree, picking up distressed properties, rebuilding his portfolio at a sizeable discount, and becoming Nevada’s largest real estate business by transaction volume.

“Here’s what happens in the life of an entrepreneur: First you’re thrilled by making

money. However, that passes and is replaced by the thrill of sealing the perfect deal. That too passes after a while. Now, I get thrilled by making an impact and helping to make this world a little bit better still.”

Ziade is not particularly worried about the future and trusts in human ingenuity to overcome current challenges. He gets solace from history: “The first half of the twentieth century was absolutely dreadful: two world wars, interspersed by a pandemic. Somehow, we not only survived but prospered as well. The resilience and resourcefulness of societies is often overlooked.”

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Next, Ziade is turning his attention to the hospitality business. “Simply put, we can apply our technology to radically drive down operating costs while offering guests a highly personalized experience not available by any other means.

‘Your every wish’ gets an entire new meaning and we can actually deliver on that promise.”

However, the ‘Musk’ of property development and management remains modest – almost humble – and thus couldn’t be more different than the original. Ziade is intensely grateful for his undeniable success. Not a day goes by when he doesn’t think back to the struggles of his family in war-torn Lebanon and a youth destroyed by terror and opportunity denied: “My story is what keeps me going. It is what gave me the determination to succeed and now provides the drive to contribute.” i 137

>

Pharma Companies Argue That Lower Drug Prices Would Mean Fewer Breakthrough Drugs. Is That True?

Probably not, a new study suggests — as long as the price decreases are modest.

Based on insights from David Dranove, Craig Garthwaite and Manuel I Hermosilla

Remdesivir, the antiviral drug that’s shown promising results in treating COVID-19, costs $3,120 for a five-day regimen.

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s eye-popping as that number is, it pales in comparison to many other drugs on the market, some of which have price tags that reach up to seven figures for a typical treatment course.

In the U.S., such high drug prices can limit access for many and drive up insurance costs, spurring ongoing debate: Do biopharma companies really need to charge as much as they do?

“The industry’s response has been just as constant as the complaints,” says David Dranove, a strategy professor at Kellogg. “They say they have to cover their research costs, and if they don’t, they’ll have to cut back on research.”

In general, developing truly innovative drugs requires more research dollars than developing more incremental ones. It’s also riskier, because the odds of success are unknown. Without sufficient financial incentive, pharmaceutical companies argue, they will deliver fewer innovative drugs, which ultimately means worse health outcomes.

But is this really the case? Does less moneymaking potential truly lead pharma firms to cut back on innovation? It’s a critical question, given that the U.S. government leaves drug pricing largely to market forces.

“We do that as a country because we’re interested in promoting future innovation,” says Craig Garthwaite, a professor of strategy at Kellogg. Effectively, the U.S. is willing to trade off some access to drugs—due to high pricing— to secure more innovative drugs in the future.

To investigate the connection between profit and research, Dranove and Garthwaite teamed up with Manuel Hermosilla at Johns Hopkins. But instead of looking at whether reduced moneymaking potential prompts firms to cut back on innovation, they studied the opposite: Does the promise of higher profits lead companies to plough more money into innovative research?

Specifically, they explored how biopharma research changed following the creation of Medicare Part D, which increased prescriptiondrug coverage for Americans over age 65. Part D resulted in new coverage of about 5 million 138

“When the biopharma industry says that any change to drug pricing is going to destroy the innovation engine, that’s not really true.”

Craig Garthwaite

seniors, meaning more purchases of prescription drugs and more pharma-company profits.

market rather than seek a cure for a disease we can’t currently treat, like pancreatic cancer.

While 5 million people may sound like a lot, in the context of the $400 billion U.S. pharmaceutical market, this was a “relatively modest shock,” as the researchers write. Still, the impact allowed for an effective research experiment.

To test this claim, the Kellogg researchers first had to define what counts as a pharmaceutical “novelty” — that is, what makes a drug truly innovative.

They wanted to see if the expected boost in drug-manufacturer profitability resulted in truly novel therapies aimed at older patients. Or would companies play it safe by focusing development efforts on copycat versions of drugs already targeting this population, such as those treating high cholesterol?

The researchers found evidence of the latter: postMedicare Part D, drugmakers overwhelmingly pursued new versions of existing drugs, rather than innovative products. However, this implies that converse is also true: incremental price reductions may not stifle innovation.

“When the biopharma industry says that any change to drug pricing is going to destroy the innovation engine, that’s not really true,” Garthwaite says. “Our study puts some bounds on that.”

DEFINING DRUG NOVELTY It is well established that pharmaceutical firms focus on products that they perceive as lucrative.

“Drug companies invest in areas where they think there’s demand for their developments, like any profit-maximising firm,” Dranove says.

But critics have argued that this process doesn’t necessarily result in innovative drugs that improve social welfare. Money-making potential, the critics claim, typically pushes drugmakers to bring the third or fourth version of a drug to CFI.co | Capital Finance International

The researchers settled on a definition: “Do drugs represent new options for patients that might not otherwise exist?” Garthwaite says. Based on that line of thinking, they then examined whether clinical trials for a given drug fit the bill.

Specifically, they looked at “target-based actions” (TBAs), or what a prospective drug product actually did in the body—what biologic entity it targeted, and with what function, such as blocking a specific lipid to reduce cholesterol.

More novel drugs tend either to focus on a new TBA or to use a largely unprecedented combination of multiple TBAs. EXPECTED PROFITS AND INNOVATION The study used pharmaceutical research data from 1997 through 2018 on over 70,000 molecules developed globally by over 4,300 biopharma companies. This time period spanned the advent of Medicare Part D, which was created as part of the Medicare Modernization Act of 2003, and became effective in 2006.

This made possible a “natural experiment” on the relationship between expected profits and innovation. Starting in 2006, pharmaceutical companies would have expected an increase in profits for drugs targeting older patients, due to the increased prescription-drug coverage for this population.

The question, then, was whether that increased expected profit would yield greater innovation in drugs targeting seniors—or would companies

Autumn 2020 Issue

"From 2012 to 2018, there was an increase of 106 percent in the number of clinical trials for less-novel drugs targeting seniors, but only a 14 percent increase in trials for the most novel pharmaceuticals." play it safe by focusing on copycat versions of existing drugs?

THE CHOICE: PLAYING IT SAFE The study showed little change in research on scientifically novel drugs for seniors in response to Medicare Part D. “We saw an increase in drug research targeting seniors after the expansion of Medicare Part D,” Dranove says, “but it was largely for drugs with the same target-based actions as previous ones — addressing essentially the same condition in the body.”

From 2012 to 2018, there was an increase of 106 percent in the number of clinical trials for less-novel drugs targeting seniors, but only a 14 percent increase in trials for the most novel pharmaceuticals.

That means that in response to the new financial incentives, drug companies focused largely on copycat versions of drugs rather than truly novel products.

“What the new Medicare Part D was affecting are drugs that are only valuable at the margin,” Garthwaite says.

A GREEN LIGHT FOR PRICING REGULATION The main practical implication of the finding is that incremental changes to drug profits probably won’t affect innovation in a noticeable way.

On one hand, this is discouraging news for healthcare professionals and policymakers who might otherwise champion incremental incentives in order to boost innovation. But on the other, it also suggests that policies that slightly lower drug prices won’t stifle pursuit of novel drugs. In short, the researchers argue that minor changes to drug-company profits will neither encourage nor discourage innovation.

“Increasing competition or decreasing returns from developing products won’t kill the biopharma industry,” Garthwaite says.

That means Americans could potentially enjoy lower drug prices — and the access that goes with these — without suffering a costly loss of biopharma innovation.

D did represent some value to patients—Lipitor was far from the first cholesterol-reducing drug to market, for example, but it improved upon existing ones and became a high-grossing product for Pfizer, a win–win.

“The fifth [copycat] drug brought to market may have the fewest side effects,” Dranove says. “Or it may be the one that drives prices down.”

IMPLICATIONS FOR COVID-19 RESEARCH So what incentives would encourage biopharma firms to develop a truly innovative drug?

For an answer, look at the hundreds of firms that have joined the global hunt for COVID-19 treatments and vaccines. Welfare gains from even the greatest copycat drug “pale in comparison to the first drug that truly cures COVID,” Dranove says. “That’s the game-changer.”

And, of course, the expected profits from a COVID treatment are far higher than those introduced by Medicare Part D. “True drug breakthroughs are really hard, and incremental changes in profitability aren’t the main reason why those things come along,” Dranove says. i

FEATURED FACULTY David Dranove Walter J McNerney Professor of Health Industry Management; Faculty Director of PhD Program; Professor of Strategy Craig Garthwaite Associate Professor of Strategy; Herman Smith Research Professor in Hospital and Health Services Management; Director of Healthcare at Kellogg ABOUT THE AUTHOR Sachin Waikar is a freelance writer based in Evanston, Illinois.

ABOUT THE RESEARCH David Dranove, Craig Garthwaite, and Manuel I. Hermosilla. Expected Profits and the Scientific Novelty of Innovation NBER Working Paper 27093.

“That social impact is ultimately what we care about,” Garthwaite says.

The researchers also point out that copycat drugs developed in response to Medicare Part CFI.co | Capital Finance International

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> Gallatin Point Capital:

Differentiated Capital via Industry Expertise and Bespoke Solutions Private investment firm Gallatin Point Capital (GPC) was founded in 2017 with a primary focus: making opportunistic investments in financial institutions, services, and assets.

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aunched by Matt Botein and Lee Sachs, with backing from BlackRock, GPC invests across a wide range of subsectors within financial services, including banking and speciality finance, insurance, asset and wealth management, real estate finance, and financial technology.

Given the complex dynamics of each subsector, GPC’s industry focus gives it an edge in identifying management teams and opportunities that arise from dislocation or changes in technology, regulation, or market structure. GPC’s network allows it to pick up on opportunities, and most of its completed investments have originated from proprietary relationships.

GPC’s mission is to serve its investors by identifying, organising, acquiring — and then intensively overseeing — a portfolio of businesses and other holdings with the aim of generating attractive risk-adjusted returns. Its core belief is that it is capable of producing those returns by delivering distinctive, tangible value to its portfolio companies and partners.

GPC takes a tailored approach, focusing on transactions in which it believes it can be a value-added partner, with a differentiated angle compared to other sources of capital. This has resulted in a high success rate of completing transactions.

In the three years since its launch, GPC has deployed nearly a billion dollars across nine investments, each transaction reflecting the company’s opportunistic and flexible approach to generating targeted returns while solving the transaction and capital needs of partnering companies and management teams. That is bolstered by the depth and breadth of the GPC team’s knowledge and experience across complicated and dynamic industries, regulatory environments, and assets.

INDUSTRY FOCUS AND EXPERIENCE Focus and expertise are true differentiators and create a competitive advantage in financial services investing, in every aspect of the transaction lifecycle: origination, execution, and management.

GPC’s focus on financial services capitalises on its founders’ extensive careers in the sector, spanning four decades of combined experience identifying successful management teams and providing targeted assistance. That focus helps the firm to maintain a significant advantage in a complex, highly-regulated industry. Its founders have been leaders at institutions such as BlackRock, the US Department of the Treasury, Highfields Capital, Bear Stearns and The Blackstone Group. Each member of GPC’s investment team has dedicated their entire career to financial services.

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The experience, network, and connections that GPC bring to the table create unique opportunities post-closing to add value and support investments through strategic initiatives.

GPC seeks to engage with management to add value in capital allocation, hiring, partnership, and other key decisions.

The ability to understand and navigate complex regulatory requirements and a credible track record with regulators is crucial. GPC’s professionals have a profound understanding of the system through private sector and policy experience.

INVESTMENT FLEXIBILITY AND STRUCTURING GPC approaches each investment with a flexible framework and seeks to create an investment solution that achieves the appropriate risk-return profile while meeting the target companies’ objectives. Examples of GPC’s different forms of investments include: • Control or minority equity: Buyout of leading Lloyd’s of London insurer Canopius • Structured equity, debt or preferred instrument: Investment in family owned real asset manager Hunt Capital Holdings (and, indirectly, its prominent Amber Infrastructure Holdings subsidiary); debt and warrant investment in leading retail mortgage originator Fairway Independent Mortgage Company; structured equity investments in Phoenix Holdings, the leading Israeli insurance company, and neobank Varo Money CFI.co | Capital Finance International

Autumn 2020 Issue

Managing Partner and Co-Founder: Matthew B. (Matt) Botein

Managing Partner and Co-Founder: Lewis A. (Lee) Sachs

• Direct asset ownership: Flow purchase agreement with higher education lender College Avenue • Specific pools of insurance or credit risks: Sponsorship of specialised underwriting entities addressing workers compensation insurance (Pie Insurance) and professional liability insurance (not yet announced) This flexibility creates a potential competitive advantage over capital sources offering a one-size-fits-all approach to investments by addressing the key considerations and constraints of target companies and management teams.

GPC frequently develops structures for modifying an investment’s risk-return profile to protect downside, enhance security, and/or facilitate an exit, while also reaching its partners’ objectives.

With access to significant pools of capital from strategic partnerships beyond its $1.3bn of managed assets, GPC is also able to execute on a range of transaction sizes, from $50m to over $250m.

As economies and financial markets become increasingly dynamic, investors require a matching approach to generating returns. The companies and management teams seeking capital desire a thoughtful partnership as well.

While capital remains abundant in the industry, GPC believes its expertise and flexibility will be key to a sustainable and differentiated value proposition. i 141

ICONIC TIMEPIECES With classic Scandinavian timepieces and timeless men’s accessories, Georg Jensen prides itself on having designs that every gentleman will truly appreciate.

W W W.G E O R GJ E N S E N .CO M

Autumn 2020 Issue

> Michael Skinner:

A Company Leader Driven to Change the Lives of Millions Rainmaker Worldwide is disrupting traditional responses to our planet’s growing water crisis, and the man driving the company vision is CEO Michael Skinner.

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ainmaker’s commitment to economical, turnkey and sustainable water solutions is widely recognised across the global water industry, and Skinner’s is a respected voice within the cleantech, tech start-up and water technology arenas.

He previously held the position of Chief Strategy Officer, where he was instrumental in building Rainmaker’s international distribution channel.

Skinner became Chief Executive Officer in January and brought with him great energy and momentum as Rainmaker entered its next phase of growth.

In the course of 2020, Skinner has achieved many accomplishments, building a strengthened executive and advisory team, acquiring strong investor relationships and leading Rainmaker (OTC: RAKR) into a merger agreement with Sphere 3D (NASDAQ: ANY) expected to close by the end of the year.

Perhaps his most significant achievement to date has been transitioning the company from a product-sales focus to becoming a WaaS provider. After completing this strategic shift, Rainmaker has secured major WaaS contracts across continents providing clean water for a competitive per-liter cost, eliminating large CAPEX and regulatory obstacles previously borne by the customer.

This merger opens up tremendous growth opportunities for Rainmaker and its shareholders.

With additional access to capital markets and funds to grow the organisation and expand equipment production capacity, Rainmaker can accelerate the volume of WaaS agreements that it can secure and fulfil.

“Rainmaker is building significant business momentum as potential customers come to understand the economic and social benefits of our WaaS offering, versus traditional and expensive water delivery options,” he said.

“Our upcoming merger with Sphere 3D is intended to give us the access to the capital necessary to fund anticipated rapid growth.

As we work toward closing the merger, this advance will enable us to avoid any

CEO: Michael Skinner

interruptions in our marketing and production efforts.”

Skinner brought invaluable leadership experience of the water and technology industries to the Rainmaker table. He has been CEO of the Innovation Cluster in the Canadian region of Peterborough Kawartha, recognised as one of the best regions in the country for Innovative Water Technology Startups by Water Canada. He chairs the Advisory Board of the Centre for Advancement of Water and Wastewater Technologies (CAWT), an internationally recognised research institution.

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Rainmaker’s determination to alleviate water stress through affordable and sustainable solutions has deepened as regions experiencing water scarcity have been hit

by Covid-19. “Over three billion people lack access to handwashing facilities,” Skinner said. “If communities do not have clean water available, it is extremely difficult to protect against the pandemic. Despite the new challenges COVID-19 has posed, Rainmaker continues to move our innovation forward to make a considerable difference in the lives of millions.” i To learn more, visit rainmakerww.com 143

> Rainmaker:

Revolutionary Water Supply Solutions That Are Needed Now More Than Ever Across our entire planet, less than three percent of water is fresh. Of this, only 0.5 percent is accessible — and much of it has become contaminated by pollution and untreated wastewater.

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he reality is that over two billion people around the world do not have access to clean drinking water, and more than three billion do not have access to handwashing facilities — in the midst of a pandemic. If water supply solutions are not implemented swiftly, by 2030 nearly half of humanity could be living with severe water stress.

Rainmaker Worldwide’s mission is to help solve the global crisis by providing economical, scalable and environmentally sustainable solutions through innovative technology.

Following a Water-as-a-Service (WaaS) model, Rainmaker is disrupting the water industry’s traditional responses to our planet’s most pressing problem.

Rainmaker Worldwide Inc (OTC: RAKR) is headquartered in Peterborough, Canada, with an innovation and manufacturing centre in Rotterdam, Netherlands. Rainmaker was formed in 2014 to finance and commercialise patented technology and to consolidate the assets, intellectual property, and executive management expertise of Dutch Rainmaker BV.

Air-to-Water machine (and below)

Dutch Rainmaker was founded by Piet Oosterling as a technology company focused on delivering decentralised solutions to world regions affected by water scarcity. Its original technology was developed in 2008 and was continually improved in operation and design.

Oosterling recognised that traditional supply methods were not sufficient to meet the increasing global demand for clean water, or relieve the related stress. Traditionally, drinking water has been drawn from lakes and rivers.

Where these sources do not exist, options have been limited to drilled wells or harvested rainwater. The former can run into issues of groundwater pollution, and the latter can be victim to unpredictable precipitation.

Regions that cannot rely on these methods look to other options, such desalinating seawater or purifying polluted water. But traditional purification technologies are primarily only 144

feasible in large, expensive installations suitable for municipal water systems. In other cases, communities turn to bulk water delivery, which is costly and damaging to the environment.

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Rainmaker’s industry-leading technology has been developed in two categories: Air-to-Water (AW), which harvests fresh water from airborne humidity; and Water-to-Water (WW), which

Autumn 2020 Issue

Dutch military

transforms seawater or polluted water into drinking water. Because of the operating efficiency of its technologies, Rainmaker can provide customers with clean water at a cost competitive with — or better than — traditional alternatives. The compact systems for AW and WW enable decentralised deployment: clean water is produced directly at the consumption site, with no expensive piping or truck transport. AW and WW units can be powered by solar, wind or grid electricity, and can produce up to 20,000 (AW) and 150,000 (WW) liters per unit, per day. The technology uses no chemicals, produces a low carbon footprint, and projects are modular, and easy to scale-up.

Rainmaker’s Air-to-Water in particular has caught the attention of the global water industry. AW uses a turbine to force air through a heat exchanger; the air is then cooled just below dew point, and condensation takes place. The harvested droplets are collected for post-production treatment to

Rainmaker product demo

ensure it meets drinking water standards. With few competing technologies that can produce water at the same scale, Air-to-Water is a modern solution for remote and desperate communities as well as industrial, agricultural and commercial applications. It reduces the amount of water extracted from the Earth, and limits damage to ecosystems.

Compared to the few existing atmospheric water technologies, Air-to-Water provides: • Lower cost • Lower carbon footprint using renewable energy sources • Versatility of energy input as a direct power source Rainmaker’s Water-to-Water system, classified as Thermal Membrane Distillation, does not use chemicals or pass feedwater directly through a filter. WW separates water from all other substances — waste, chemicals, or salt — and passes it through a membrane in vapor form. This is much more efficient than Reverse Osmosis (RO), used by other companies, where water containing dissolved salts and other solids pass through the membrane.

Water-to-Water’s advantages over other waterpurifying technologies: • Energy consumption is comparable to other Membrane Distillation technologies • Large feedwater capability, unlike RO which struggles with feedwater variation within each unit • Extremely high water recovery rate. In RO processes, 30-50 percent of feedwater does not get converted CFI.co | Capital Finance International

• Less discharge at the end of process • Lower carbon footprint than competitors Over years of invested R&D, Rainmaker has networked with prospective customers. Their feedback addressed the logistical and financial barriers that were impeding the purchase of water technology. In 2018, Rainmaker realised that it must transition from a product-sales focus to becoming a WaaS provider.

Restructuring their business model was a major undertaking. In January 2020, Michael Skinner was appointed CEO to lead the company through this strategic shift. Rainmaker now provides clean water for a competitive per-liter cost, eliminating large CAPEX and regulatory obstacles previously borne by the customer.

Skinner has successfully built a strengthened executive team, secured large WaaS contracts and acquired strong investor relationships. Most recently, he is leading Rainmaker into a merger agreement with Sphere 3D (NASDAQ: ANY), expected to close by the end of 2020, which presents tremendous growth opportunity for Rainmaker and shareholders.

This year’s momentum has propelled Rainmaker to increase its reach to water-stressed communities on a global scale. “The water market is long overdue for an affordable clean water solution that does not damage the environment and has the ability to be a long-term solution for water scarcity,” says Skinner. “Rainmaker’s technology and Water-as-a-Service model is what our world needs — now more than ever.” i To learn more, visit rainmakerww.com 145

Autumn 2020 Issue

> Jamie Dimon, Chairman and CEO of JPMorgan Chase:

Outspoken, Ambitious, and Smart He is the archetypal Davos Man and, as such, no stranger to controversy – or grand visions.

What makes Jamie Dimon endearing is his eagerness to go out on the proverbial limb with bold statements that, at times, bespeak of a rather selective memory or a mind on overdrive.

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n January, whilst at Davos for the annual World Economic Forum summit, the CEO of JPMorgan Chase suffered a bee in his bonnet and spontaneously embarked on a twelve-minute rant against socialism and all other forms of state interference with private enterprise.

His conclusion: Governments are very bad at allocating capital.

That was a tiny bit rich for a banker who in 2012 admitted to getting the math horribly wrong on a series of singularly poky hedges – collectively known as the London Whale – which ended up in a pre-tax $2bn trading loss.

A few years later, JPMorgan Chase needed $25 billion in Treasury support to keep its business afloat in the wake of the 2008 banking crisis.

Other than his slightly flippant thinking about politics and macroeconomic management, Dimon is a cautious banker, albeit one with a progressive streak, who recognises that in order to stay ahead a degree of boldness is called for.

Next year, JPMorgan Chase will try to shake up UK retail banking with the launch of an online challenger bank. In the US, an attempt at mobile banking was abandoned after only 18 months. After attracting only about 47,000 customers, Chase shuttered its Finn brand, funnelling some of the online bank’s most innovative features to the Chase mobile app.

Dimon ascribed the Finn failure to bad timing and gaps in customer care. In the UK, he hopes to cash in on the corona-inspired crash of branch-based banking. However, challengers linked to legacy banks have not been overly successful in the UK either with Natwest closing down its Bo mobile bank just six months after its introduction. Goldman Sachs has done a bit better with Marcus which managed to amass over 500,000 clients and accumulate some £21 billion in deposits.

These numbers pale in comparison to domestic digital disruptors such as Starling, Revolut, and Monzo which jointly serve more than 17 million customers.

Fifteen years into his rein at JPMorgan Chase, Dimon is an industry veteran who has watched presidents, central bankers, and economic

Chairman & CEO: Jamie Dimon

downturns come and go whilst navigating his financial behemoth. With over a quarter of a million employees and total assets of $2.7 trillion, JPMorgan Chase is ranked the largest bank in the US by S&P Global and the seventh largest in the world.

Exceptionally susceptible to market volatility and brusque swings in consumer confidence, the JPMorgan Chase CEO seems a bit unsettled by the pandemic and the prevailing lack of certainty. The bank is substantially adding to its already solid loan-loss provisions. During a recent conference call with investors, Dimon held out hope that the US economy may be more buoyant than previously thought and that he may have erred on the side of caution. The bank’s share price promptly spiked.

An avid commenter on current affairs, just as fellow New York business tycoon Mike Bloomberg, Dimon spent the better part of 2018 mulling a presidential run, ultimately deciding against it out of a justifiable conviction that no mainstream party would want a banker on the ticket. From his Park Avenue office, he did take a few swipes at the current occupant of the White House and assured that he could CFI.co | Capital Finance International

beat him in an election: “I’m as tough as he is, I’m smarter than he is.”

Instead of running for office, Dimon decided to share his thoughts with JPMorgan Chase shareholders, outlining his solutions – and, rather surprisingly, setting a good example.

Dimon was the initiator of a $350 million job training programme targeted at underserved communities and seeking to equip people with the skills necessary to climb the corporate ladder.

Last year, he also unveiled a $500 million banksponsored initiative to revitalise neglected inner cities. In his 51-page letter, Dimon expressed disappointment in party politics and in its inability to meet the social needs of many US citizens, before suggesting a Marshall Plan-like federal programme to fix US society: “If we don’t tackle the issues, America’s moral, economic, and military dominance may cease to exist.”

A banker with more than just pecuniary concerns: It may help explain why Dimon survives at the top and – uniquely – fails to make many enemies. Given the age cohort of the present crop of US political heavyweights, Dimon has ample time to consider a career change yet: He’s just 64. i 147

>

How Did School Desegregation Shape the Political Ideology of White Students Later in Life?

A new study suggests that, more than four decades later, the impact of these policies on political leanings is apparent.

Based on insights from Ethan Kaplan, Jörg L Spenkuch and Cody Tuttle

It’s been 65 years since the Supreme Court declared racially segregated schools unconstitutional in the Brown v Board of Education decision. But American schools still have a glaring segregation problem. A recent report found that more than half of the country’s students learn in racially concentrated districts, where over 75 percent of students are either white or nonwhite.

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esegregating schools has been associated with improved long-term outcomes for Black students. Less is known of the long-term impact on white students who attended desegregated schools. One unknown: Did mandatory desegregation programmes shape white students’ political ideology as adults?

Jörg Spenkuch, associate professor of managerial economics and decision sciences at the Kellogg School, is interested in this question and the way it could help illuminate broader ones: What determines our political leanings, and to what extent are they determined by experiences we have when we’re young?

To explore these ideas, Spenkuch teamed up with Ethan Kaplan, at the University of Maryland, and Cody Tuttle, a postdoctoral scholar at Princeton.

In new research, they investigate whether white students who were assigned via court order to attend predominantly Black schools in 1970s Louisville, Kentucky, appear to have been shaped politically by the experience.

The researchers believe this is the first paper to consider whether mandatory desegregation programmes leave an imprint on white students’ political views 40 years after the fact.

And it appears that, indeed, they do. The researchers find that white men assigned to attend predominantly Black schools in Louisville were more likely to be registered as Democrats and to support liberal causes four decades later than white-male peers who were not.

“For policymakers who are currently contemplating whether to lift school desegregation programmes that are still in place, or to implement new ones, what’s important to understand is: What is the net effect of these programmes?” Spenkuch says.

AN ORDER TO DESEGREGATE IN LOUISVILLE When, in December 1974, a federal court 148

"For policymakers who are currently contemplating whether to lift school desegregation programmes that are still in place, or to implement new ones, what’s important to understand is: What is the net effect of these programmes?" ordered that public schools in Lousiville would have to be desegregated, it came as a surprise — and a hotly controversial one. The city, and Jefferson county in which it sits, each operated separate, unequal, and highly segregated school districts. Within Louisville itself, roughly 80 percent of white students attended schools that were at least 90 percent white, and 76 percent of Black students attended schools that were at least 90 percent Black. Jefferson County’s schools were nearly all white.

An appeals court decision in July 1975 ruled that full desegregation had to be enacted in Louisville and Jefferson County at the beginning of the next school year — which was less than two months away.

The ruling judge worked with experts from the Kentucky Commission on Human Rights and with staff members from both school districts to quickly draw up a viable busing plan. The resulting plan mandated that children would be bused depending on the first letter of their last names, their grade levels, and their race.

“I was surprised by how large the effect on party registration was. This is certainly a nontrivial effect.”

Tuttle, who is himself from Louisville, has previously examined the economic impact of the same Louisville desegregation programme on both Black and white students. In that paper, he found that Black students who were bused to predominantly white schools appeared to see economic benefits later in life, while at the same time there was no change in the earnings CFI.co | Capital Finance International

of white students who attended predominately Black schools.

At the time, however, this plan sparked violent white backlash; on one of the first days of the school year, the Chicago Tribune reported, a mob of 10,000 white students at a suburban high school set fire to buses and threw rocks as Black students tried to board them.

Clearly, the court-ordered desegregation plan was met by many whites with an explosion of anger. But what were some of the longer-term effects on white students’ attitudes?

YEARBOOKS AND VOTER-REGISTRATION RECORDS To explore this, the researchers began by pulling names from the 1974–75 yearbooks of fifteen of the high schools that were part of the mandatory desegregation plan.

They hired Aristotle Inc., a company that maintains databases on registered voters and political donors, to pull information on individuals’ party registration, turnout history, and donations to various political groups.

The researchers’ sample comprised 8,900 white men, now in their late 50s and early 60s.

Aristotle found at least one voter-registration record that matched the name and assumed birth year of about 70 percent of those men— roughly in line with national voter-registration rates.

Women weren’t included in the analysis because in that era it was likely that they changed their last names upon getting married, rendering the

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linking of yearbook names and voter-registration records impossible for the majority of them.

It’s important to note that the 1974–75 yearbook, from which the researchers pulled their sample, documented the last school year before the desegregation plan was announced. Spenkuch says that some portion of the white students in those yearbooks who were later assigned to be bused likely decamped from the area’s public schools in order to stay in a majority-white environment in a private school or in another district.

The researchers did this for a reason, Spenkuch explains. At this point in their research, their goal was to capture the net impact of the desegregation plan on all white students, whether or not they were ever bused.

schools had the effect of making the white men in the sample less politically conservative than their counterparts who hadn’t received an assignment to be bused.

A BROADER LOOK AT RACIAL ATTITUDES Spenkuch and his coauthors intend to continue this investigation. In future phases of their research, they plan to identify who ultimately graduated from which high schools and, therefore, see who followed through with their busing assignment. This will allow them to isolate the impact on white students who actually attended desegregated schools.

Pending funding, they also hope to survey thousands of the men in their sample to collect more granular data and, ideally, emerge with more nuanced insights.

“You can think of sitting on the bus and attending a predominantly Black school as the direct effect of the programme—call it the exposure effect,” Spenkuch explains. “But there could also be an indirect effect, meaning your parents take you out of public school and you have a different set of experiences. If you are interested in the overall effect of busing, then we want to capture both of these effects.”

For example, they’d like to learn more about whether being bused affected the students’ attitudes toward race or toward specific social policies.

Because of this, the researchers say that their results probably account for a “lower bound” in terms of the direct impact of white students actually getting on a bus as required by the order.

The answer to this question is not obvious, Spenkuch explains: On one hand, it’s possible that learning alongside Black students did have this effect on many white students. On the other hand, it’s plausible, especially given the scale of white protests, that a strong backlash to the enforced desegregation caused some white individuals or communities to withdraw into segregated bubbles where racial prejudices were even stronger.

THE LASTING IMPRINT OF BUSING For the white men on whom the study focuses, receiving an assignment to be bused to a predominantly Black school increases the likelihood of being registered as a Democrat 40 years later by more than two percentage points — and decreases the likelihood of registering as a Republican by roughly the same amount.

“I was surprised by how large the effect on party registration was,” Spenkuch says. “This is certainly a nontrivial effect.” ”[P]art of our job as social scientists is to explore the advantages and disadvantages of these policies.”

Furthermore, the effect on party affiliation is more pronounced among white men who were assigned to attend predominantly Black schools for two years, rather than one. (The court-mandated plan arbitrarily assigned some students to one year and some to two years of busing.)

The researchers also found that those selected to attend predominantly Black schools are significantly less likely to have donated money to organisations or political candidates that oppose same-sex marriage or abortion.

The ultimate goal of the research is to discern whether the Louisville school desegregation programme weakened racial prejudices and stereotypes among white students.

“My view is that part of our job as social scientists is to explore the advantages and disadvantages of these policies,” Spenkuch says. “Then it will be up to policymakers and the public at large to decide how to weigh them.” i FEATURED FACULTY Jörg L Spenkuch Associate Professor of Managerial Economics & Decision Sciences ABOUT THE AUTHOR Katie Gilbert is a freelance writer based in Philadelphia.

ABOUT THE RESEARCH Kaplan, Ethan, Jörg L Spenkuch, and Cody Tuttle. 2020. School Desegregation and Political Preferences: Long-Run Evidence from Kentucky.

Working paper.

In other words, it appears that receiving an assignment to be bused to predominantly Black CFI.co | Capital Finance International

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> Policy Brief:

Increasing Aid and Development Financing Volumes for the Advancement of Education in Lower-Middle-Income Countries

By Christian Novak Professor of Practice at the Institute for the Study of International Development (ISID), McGill University, Montreal

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continuously educated workforce is essential for achieving sustainable development.

Recognizing the importance and status of education, the United Nations General Assembly included education among the 17 Sustainable Development Goals (SDGs). Unfortunately, the education systems in developing countries continue to struggle to achieve the necessary progress. This is especially the case in the lower-middle-income countries (LMICs), where nearly half of the world’s 1.4 billion school-age children live. Increased volumes of aid and development financing are urgently needed to advance education in LMICs and achieve SDG 4 everywhere.

WHAT IS AT STAKE? The majority of out-of-school children, totalling over 150 million, live in LMICs. Furthermore, 549 million children and youth in LMICs are not on track to reach secondary learning benchmarks, representing 60 percent of the children and youth in such situation globally.

The overall volume of aid from official donors and of financing from multilateral development banks (MDBs) that has been directed to education is very small, also in relation to the higher volume that has been allocated to healthcare.

Furthermore, LMICs have been markedly left behind when pondering the level of financial support directed to low-income-countries (LICs) in consideration of the corresponding sizes of their populations with education needs.

Advancing education, and human capital overall, is crucial for development. The necessary progress of LMICs towards achieving SDG 4, and the consequent contribution to end poverty, is at risk. To advance education in LMICs, official donors and MDBs must increase their financial support to address the financial gap.

THE IMPORTANCE OF EDUCATION AND ITS CURRENT OVERALL CONDITION Economic growth and development are driven by both physical capital and human capital.

While the existence and advancement of technology, machines and infrastructure are crucial for growth, a continuously educated and overall healthy workforce is equally essential for achieving sustainable development. The importance of human capital has since recently been elevated by the World Bank by creating and tracking the Human Capital Index.

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Recognizing the specific importance and status of education, the United Nations General Assembly included education among the 17 SDGs: “Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all” (SDG 4).

According to the United Nations’ latest progress report on the SDGs, 262 million children and youth aged 6 to 17 were still out of school in 2017, and more than half of children and adolescents are not meeting minimum proficiency standards in reading and mathematics. Approximately 750 million adults, two thirds of them women, remained illiterate in 2016.

The overall condition of education is especially worrying in developing countries. Half of the global illiterate population lives in South Asia, and a quarter lives in sub-Saharan Africa, where less than half of schools at the primary and lower secondary levels have access to electricity, the Internet, computers and basic drinking water.

THE ALARMING CONDITION OF EDUCATION IN LMICs1 The level of progress of education systems is particularly alarming in LMICs, where nearly half of the world’s 1.4 billion school-age children live (compared to 200 million in LICs).

According to the International Commission on Financing Global Education Opportunity (the Education Commission), the majority of out-ofschool children—over 150 million—and half of all refugees and displaced youth live in LMICs. Moreover, 549 million children and youth in LMICs are not on track to reach secondary learning benchmarks, representing 60 percent of children and youth globally in such situation.

Specifically in sub-Saharan Africa and South Asia (where 45 percent of all LMICs are located), 80 percent of children and youth are not on track to reach secondary learning benchmarks.

In addition, there is important gender inequality in relation to access to education.

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The authors of a report prepared for the Education Commission2 assessed the results of the TIMSS mathematics test of students living in high-income countries, upper-middle income countries and LMICs. The results show that more than 50 percent of students who tested at the lowest quintile level are in LMICs, and LMICs students represent less than 5 percent of those in the highest quintile.

RELEVANT FINANCING GAP IN LMICS EDUCATION Education is mostly funded with domestic budgets. The Education 2030 Framework for Action adopted by UNESCO Member States in 2015 recommends governments to spend at least between 15 and 20 percent of their public expenditures on education, and it highlights that developing countries need to reach or exceed the upper end of this range to achieve the SDG 4 targets. However, allocations from tax revenues to education in developing countries have been below the recommended level, particularly in LMICs, where such share has been decreasing.

Actually, according to the United Nations’ latest progress report on the SDGs, only one third of all countries globally currently spend such benchmark on education.

Based on a projection developed by the Education Commission regarding future education costs and domestic budget spending, by 2030 about half of LMICs will continue to face a financing gap.

In addition, the overall annual volume of aid from official donors that is allocated to education has been low at US$12–15 billion (6.3–8.7 percent of total annual Official Development Assistance [ODA]), complemented with just US$1.3–3.7 billion (1.6–3.8 percent) of annual financing from Other Official Financing (OOF); much of the latter has been provided by the IBRD and the IADB. From such ODA and OOF volumes consolidated, LMICs have received less than 30 percent.

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The above numbers are also the result of a broader relevant issue experienced by LMICs: in relative terms, LMICs are financially less supported than LICs. For example, total annual aid volume per capita in LMICs is 19% of that in LICs. Note that the largest world’s number of absolute poor live in LMICs; three of the five countries with the largest number of people living in extreme poverty are LMICs. LMICs have a gross national income (GNI) per capita that can currently be as low as US$1,026. The disparity in aid volumes mostly results from the drastic reduction in ODA that countries experience when graduating from the International Development Association (IDA)3, which also affects the volumes from other aid sources and development financing that are linked to IDA policies. Moreover, such graduation occurs when countries achieve a still very low GNI per capita level, currently equal to US$1,175, resulting in a relevant impact for vulnerable countries following the abrupt reduction of financial support.

RECOMMENDATIONS Actions must be taken towards increasing volumes of aid from official donors and of financing from MDBs directed towards education in LMICs. The following are specific recommendations: 1. Expand the use of innovative development financing solutions a. Financial vehicles that can mobilize effectively various sources of capital. Public and philanthropic capital is increasingly used to attract various sources of capital, including private sector capital by means of the socalled blended financing structures. There exist a relevant number of examples that may be replicated. For example, the model of the Global Financing Facility for Women, Children and Adolescents (GFF) may be considered and adapted to finance education.

b. Development Impact Bonds (DIBs). In DIBs (and Social Impact Bonds [SIBs]), experienced non-profit organizations obtain capital from investors for addressing specific social matters.

The return to investors is contingent on the achievement of pre-specified outcomes resulting from the intervention. Public and philanthropic capital is the main source of “outcome payments.” Examples of DIBs for education include the Educate Girls DIB in India and the Impact Bond Innovation Fundfor early childhood development in South Africa. The Education Outcomes Fund is an initiative with high potential to expand the development of DIBs for education in LMICs. c. Guarantee Funds. The International Finance Facility for Education (IFFEd) is an upcoming innovative multilateral organization that will provoke additional financing from MDBs to education financing in LMICs. Funded by a number of countries, IFFEd will achieve its objective by providing portfolio guarantees and grants to MDBs, which will result in increased capacity of the MDBs to provide financing for

education in LMICs, and at reduced costs for the beneficiary countries.

2. Expand the use of innovative aid solutions a. Conditional Cash Transfers (CCTs). CCT programs in developing countries that provide households with cash if children attend school and/or complete school cycles have been effective. CCTs could be designed to attend to specific needs and segments of the population.

b. Results-Based Aid Payments to governments.

The Global Offer for Learning (GOL) idea that was published by the Centre for Global Development4 exemplifies this recommended action: international donors would establish a fund that would pay eligible countries an “assessment award” and an “achievement award”. The assessment award would pay a specific amount each year a country applies a qualified test to assess learning and publishes results. The achievement award would pay a specific amount for each child who has learned basic skills. Results-based aid payments have the capacity to provoke productive assessments, systematic feedback and benchmarking, and encourage innovation within governments. c. In-Kind Aid. Free uniforms and meals have been shown to increase enrolment and attendance. Free uniforms in Kenya resulted in lower school drop-outs among girls, and meals and take-home rations for girls in Burkina Faso and for displaced persons in Uganda increased enrolment and attendance5.

3. MDBs to increase financing volumes and to strengthen efforts to maximize financial additionality and private capital mobilization MDBs’ financing for education projects in LMICs has been proportionally low and concentrated on a few countries. It is imperative that MDBs, both their public and private sector windows, expand education financing volumes in all LMICs. Furthermore, MDBs should take higher risks by supporting education infrastructure and projects that apply technological innovation, among others.

Technology has the capacity to improve education quality, expand outreach, and reduce costs. In relation to private sector projects, strengthened dedicated efforts of MDBs should be directed to structure investments in ways that maximize financial additionality and capital mobilization.

return materializes when educated children and youth complete education and start to contribute to the economy. This is a challenge for developing countries, which are pressed to deliver short- and medium-term results. Still, governments, particularly LMICs, must increase and sustain the allocation level of their public expenditures to education.

TOWARDS ACHIEVING SDG 4 IN LMICs Implementing the above recommendations requires coordinated efforts of all stakeholders.

Discussion platforms and ad hoc committees can result in the necessary engagement, share of information, common planning, and coordinated execution.

In addition, it is paramount that LMICs design effective long-term education programs and systems, that are executed in a timely and consistent manner, and that are funded in the long term with the necessary volumes of capital.

Benchmarking and feedback must be constant, prompting sustained improvement and the adoption of international best practices.

Achieving the SDG 4 targets in LMICs is at stake, but still possible. i Footnotes The list of LMICs may be found in datahelpdesk. worldbank.org/knowledgebase/articles/906519.

2 “The Quality of Education Systems and Education Outcomes.” John L. Newman, Elizabeth M. King and Husein Abdul-Hamid.

November 2016.

3 “IDA-supported” countries are those that are financially assisted by the International Development Association (IDA), an organization of the World Bank Group, which assists the world’s poorest countries (mostly coinciding with the list of LICs).

4 “A Global Offer for Learning (GOL): Based on Experiences with Paying for Results.” William Savedoff. Center for Global Development.

October 2016.

5 “Memo on Evidence in Education: Education Systems and Interventions”. J-PAL Southeast Asia. ~2016.

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4. Review the classification of LICs and LMICs As mentioned above, there is an abrupt reduction of the financial support for countries when they graduate from LICs to LMICs, while LMICs continue to be vulnerable and have critical education needs. The country income classification, developed by the World Bank, is solely focused on GNI per capita. Revising the classification method is therefore recommended.

A broader range of economic and human indicators must be considered.

5. Increase domestic budget allocation Education is a long-term investment, whose CFI.co | Capital Finance International

Author: Christian Novak

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> Asia Pacific

Vietnam: No Stopping Country on the Ascendancy

After two decades of recording full employment and boisterous growth rates, Vietnam has taken a significant, though far from fatal, economic hit even as the country received near-universal praise for its deft handling of the Corona Pandemic. Though most of the nearly one million workers laid off during the first scare in March have since been rehired, average take home pay dipped by 5 percent according to the latest World Bank numbers.

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he Ministry of Labour in Hanoi estimates that around 30 million workers – roughly half of the country’s workforce – were affected by the pandemic in some way.

Used to watch its economy barrel ahead by 7 percent or more annually, the latest GDP data (Q2 2020) showed a measly 0.36 percent growth rate.

However, as GDPs plunge around the world, Vietnam’s continued economic expansion, albeit at a rather anaemic pace, is both remarkable and exceptional. Also noteworthy is the (coronaadjusted) International Monetary Funds’ forecast for growth over the full year to come in at 2.7 percent. The Asian Development Bank is more optimistic still and expects Vietnam’s GDP to regain most of its momentum and end the year on a high note with a 4.9 percent advance over 2019.

By contrast, the view from Hanoi is slightly less sanguine. The national economy put in its worst performance in 35 years whilst the global pandemic continues more or less unabated. The country now faces a ‘covid-19 trap’: Domestic demand has stalled as risk-averse households postpone or cancel consumption and investment plans and export-oriented industries – a major source of jobs and forex earnings – face a gradual slimming of order books.

All manufacturing sectors, with the sole exception of computer components, report a sharp decrease in the volume of overseas orders.

Moreover, the collapse in demand has worsened significantly over the past weeks. Due to restrictions on cross border mobility, the tourism sector fears that just a fraction of the 20 million foreign visitors expected this year will turn up.

GOOD NEWS The good news is that Vietnam is relatively well equipped to take a hit. With a (public) debtto-GDP ratio of barely 7 percent and a stable rating outlook, the government should have little trouble raising cash via bonds. Though the major agencies still rate the country at just below investment grade, Fitch has indicated that an upward adjustment is imminent.

Though its income may take a $6.2 billion hit, the government still enjoys enough fiscal wiggle room to deploy an ambitious stimulus programme. The country maintained its national accounts reasonably balanced for a nation undergoing accelerated development. So far, the Corona Pandemic has widened the expected fiscal deficit for this year by just 1.2 percentage points to -5 percent of GDP. The government unveiled a $12.9 billion package to help businesses and households survive the pandemic. Most support is being offered as tax deferrals and rebates, and discounts on utility bills. An additional $2.7 billion has been freed to support unemployed workers. However, its disbursement suffered delays over bureaucratic hurdles. Many owners of small businesses have

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"As part of its covid-19 response the government in Hanoi has fast-tracked a number of major public works projects such as the new north-south highway, two metro lines, and a new airport for Ho Chi Minh City – formerly Saigon." been unable to access emergency credit lines due to excessive demands for paperwork. Out of an estimated 350,000 eligible businesses, only about 70,000 managed to secure loans.

In its recent economic update on Vietnam, the World Bank suggests the country increase its economic footprint by tapping into the trend towards supply chain diversification. The way Vietnam tackled the Corona Pandemic – early and decisive – has not only created a lot of goodwill but also showed a mature and responsible society ready to meet the challenge without turning to excessive authoritarianism or clamping down on dissent.

World Bank (acting) country director Stefanie Stallmeister thinks that Vietnam may yet turn the table on covid-19 by rapidly exploring new drivers of growth such as the digitisation of the economy or the speeding up of a public investment programme to ready the country’s infrastructure for a return to high growth. Ms Stallmeister also sees opportunities in the ‘contact-free’ economy by promoting e-learning, digital payments, and data-sharing between societal actors, including government departments, to improve decision-making processes and the efficient implementation of their outcomes.

As part of its covid-19 response the government in Hanoi has fast-tracked a number of major public works projects such as the new northsouth highway, two metro lines, and a new airport for Ho Chi Minh City – formerly Saigon.

Prime Minister Nguyen Xuan Phuc also gave the green light for a $9.3 billion resort to be constructed in the Can Gio district by Vingroup, the country’s largest privatelyowned conglomerate. Slated for completion in 2031, the future megaresort represents the largest single investment in the country since the 1970s. Approval had been held up over environmental concerns but was granted after the politburo intervened and ordered the project to go ahead.

BETTER NEWS Perhaps the best news to emerge concerned the fast-track and unanimous approval by the National Assembly in June of the EU-Vietnam Free Trade Agreement (EVFTA) which took effect in August. The trade deal eliminates duties on 71 percent of Vietnamese shipments to the EU. In the other direction, 65 percent of exports will arrive duty-free at their destination. Vietnam has agreed to phase out all remaining duties over the next ten years. The EU promises to do likewise in seven years. After Singapore, Vietnam became CFI.co | Capital Finance International

only the second Southeast Asian country to sign a free trade deal with the European Union.

The EVFTA is seen as an important steppingstone towards Vietnam’s unstated goal of replacing the People’s Republic of China (PRC) as a hub of global manufacturing. The country is already home to the world’s third-largest apparel sector after Bangladesh and the PRC. Last year, garments and footwear counted for about $39 billion in forex earnings, about 20 percent of the total value of exports.

Electronics contract manufacturer Foxconn (of iPhone fame) heard the call and has already begun shifting part of its production to Vietnam.

Nintendo and Google have followed suit.

With close to 100 million inhabitants, Vietnam represents the potentially third-largest market of the Association of Southeast Asian Nations (ASEAN). European exporters are particularly excited by the fast-growing spending power of the Vietnamese. Per capita GDP approaches the $3.500 per year mark usually considered a tipping point beyond which the sales volume of durables such as cars and domestic appliances takes off.

The country seems determined to expand its global reach via trade deals and is pushing the ASEAN to speed up the creation of the Regional Comprehensive Economic Partnership which seeks to add South Korea, Japan, and the PRC to the free trade area plus Australia and New Zealand. Late last year, India opted out of the talks over concerns that unrestricted trade may ‘adversely impact’ its people. Japan and the PRC have since asked India to reconsider. Meanwhile, Vietnamese entrepreneurs are urging the government to pursue a free trade deal with the United States as well.

Though the corona infection rate crept up in August, the Vietnamese government again reacted swiftly and decisively to contain the outbreak, closing beachside resorts, ordering local lockdowns, and introducing more stringent checks on people, livestock, and goods crossing the border with the PRC. It is suspected that the virus may have been reintroduced by travellers returning from up north.

Holding a steady course that keeps its society united, the government of Vietnam is not just weathering the storm but, whilst doing so, keeping a keen eye out for opportunities that may come knocking in the wake of the pandemic. With maturity and a clear sense of purpose, Vietnam is one of the few countries that may expect to do alright whatever shape the new normal takes. i

> Containers Printers:

Expanding Horizons for Packaging Industry and Customers — Despite Covid-19’s Ravages on the World

The Covid-19 pandemic has been the defining event of 2020 for businesses and individuals alike. This was equally true for Singapore-based Containers Printers, but the crisis presented CP with the opportunity to demonstrate its willingness and ability to take on new challenges.

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hile many businesses were required to shut down, CP was deemed an essential service for its support of the food and medical industries. It provides metal packaging and flexible laminates to customers around the world.

In early 2020, CP was asked by a major supplier of medical products to design and produce packaging for protective equipment to support Singapore’s rapidly unfolding Covid-19 response.

Not only did the supplier need new packaging, it also needed help to pack the products — something CP generally does not do.

Faced with a distinctly challenging task, the CP team pulled together, planning and co-ordinating the effort to identify potential bottlenecks and problematic issues. Everything from securing additional manpower to allocating packing areas was addressed, while ensuring that processes and standards were maintained. Within a few short weeks, CP began delivering products: mission accomplished.

The Covid-19 project demonstrated a new way of working that CP has consciously sought to develop, since CEO Amy Chung set a new path for the packaging company in 2014.

Chung identified three key long-term trends whose impact would be felt throughout the industry: the globalisation of brands and markets, the rise of sustainable businesses and products, and digitalisation.

Addressing these trends would require significant investments in people, processes, and equipment as CP laid-out in roadmaps for the business. It also necessitated a multi-year change-management process. The company upskilled its workforce, and developed a mindset open to change and new challenges. With the enduring support of the Singapore Ministry of Manpower, CP has transformed itself into a process- and standardsdriven organisation dedicated to continuous improvement.

CP first sought to adopt the highest global standards right across its business. This meant a demanding process to become certified for quality management (ISO), food safety and packaging (BRC), as well as 156

social responsibility (Sedex), and more. By adopting the epitomy of standards for its business, CP was able to approach customers in markets around the world with an assurance of excellence.

At around the same time, the company began developing a Kaizen culture — where all employees are actively and equally engaged — starting with small groups in its production teams, where small wins (and bigger national awards) created a virtuous cycle of improvement. More recently, CP has worked with Workforce Singapore and McKinsey to implement lean manufacturing practices, with an important emphasis on lean digital thinking and tools.

A commitment to sustainable business practices has always been a core part of CP’s holistic approach to business. From major projects, such as installing solar panels across all of its factories’ roofs in 2019, to ongoing upgrades to equipment and the application of the latest digital monitoring tools, the company’s ongoing sustainability programs find ways to reduce energy consumption and the CP carbon footprint, each and every year.

From a product perspective, CP has a particularly important role to play in delivering sustainable packaging solutions. CP is a signatory to the Singapore Packaging Agreement, an initiative to reduce waste, and has been working with its customers to develop 100 percent recyclable packaging solutions that maintain product integrity and safety.

As the trends have played out, CP has continued to invest in the capabilities required to address opportunities — at times slightly ahead of the market, particularly in the digital space.

One such investment was in a new state-of-art integrated colour-management system, one part of CP’s digitalisation roadmap. While adoption CFI.co | Capital Finance International

of the technology was still developing in the industry, CP knew its impact would be profound.

It would provide customers and clients with faster turnaround, greater colour accuracy, and an easier way of working across time zones and geographies. CP’s investment was validated almost immediately, as the system turned out to be exactly what was needed by customers looking to meet new, stricter standards.

Colour management is now one of a number of digital services the company offers, complementing its brand protection, supply chain intelligence, and consumer engagement services — digital offerings that barely existed in 2014.

Being based in Singapore provides CP with a competitive advantage that the company considers crucial to its success. With the strong support of various government agencies, the country has become a leading centre for R&D for major multinationals, as well as an increasingly important production centre in the medical and food industries.

Singapore has a thriving ecosystem of local and global partners operating at all stages of the value chain, providing CP with access to fundamental and applied research institutes, global brands, local champions, and start-ups.

All of this has enabled CP to develop a spirit of innovation and eagerness to take on new challenges, from rapid turnarounds in support of an imminent product launch to making long-term commitments to co-develop new products.

Most importantly, CP’s customers are happy with the results, and the path it has chosen.

They describe it as “forward-looking” with a “demonstrated openness, and willingness to take on challenges”. The company has, they say, “expanded our horizons”. i

Autumn 2020 Issue

Hybrids Not as Efficient as Previously Thought: But That’s User-error

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ew research shows that CO2 emissions from hybrid-engined cars may be two-and-a-half times higher than previously thought.

but pressure groups Transport and Environment and Greenpeace now believe that figure may be closer to 120g per km.

Plug-in hybrid vehicles powered by electric and conventional motors use a rechargeable battery as well as a petrol or diesel engine, and account for three percent of new car sales.

Plug-in hybrid electric vehicles (PHEVs) had been seen as a possible alternative to fossil fuel-only and conventional hybrid cars, which are to be banned from sale after 20302035.

Lab tests suggest emissions of 44g of CO2 per kilometre for the “environmentally friendly” vehicles,

Data on fuel efficiency from 20,000 plug-in hybrids around Europe reveal

the “lifetime” emissions of the vehicles average 28 tonnes of CO2.

An average petrol or diesel car kicks out around 40 tonnes of CO2 during its lifetime.

The main problem with PHEVs is that owners often fail to charge their cars’ battery pack and rely on the conventional power source: petrol or diesel engines. Those fuel-burning engines are also engaged to suit driving conditions, such as hard acceleration. i

Kit-car Cat Spat: Jaguar Takes Action Against a Tiny ‘Rival’

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small British car firm has been forced into liquidation after a legal row with Jaguar Land Rover.

ready for the road or as kits for customers keen for a mechanical project.

The legal row was the kiss of death for the already beleagured Suffolk Sportscars, based in Pettistree, near Woodbridge. It owed more than £850,000 when liquidators from McTear Williams & Wood were appointed in August.

But no matter how easy these replica classics may be on the eye, Jaguar Land Rover was not happy. The car giant threatened to take Suffolk Sportscars to court over copyright infringement. This, coupled with the other stresses the company was facing, led to its collapse.

The company made replicas of Jag models dating from the 1930s to the 1950s and traded in classic cars — but it was hard-hit by the Covid pandemic.

Liquidator Johannes Rupping told the East Anglian Daily Times newspaper that there had been a combination of factors.

The company advertised replica Jags, available as complete vehicles

“One is that there was an action regarding copyright infringement

brought by Jaguar Land Rover,” he said. “(Suffolk Sportscars) was trying to fight it, but effectively just ran out of cash through a combination of that and Covid-19.”

At the time of liquidation, company assets totalled £41,811, according to documents at Companies House.

That included nearly £10,000 in cash, £17,000 in equipment, vehicles and stock, and £15,203 that the company was owed by creditors.

The funds were set aside to pay 11 former employees’ wages and holiday pay, and cover the £81,580 owed to NatWest, which held a floating charge over the company. i

Royal Enfield Outsources Production to Argentina as Global Sales Rocket

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Royal Enfield entered the Argentinian bike market with a dealership in Vicente Lopez, Buenos Aires. It has expanded to operate five stores in the country, one of the biggest two-wheel markets in Latin America.

This is a first in the British-born company's modern history. Enfield’s partnership with Grupo Simpa goes back to 2018 when it became the Argentinian distributor.

Enfield — affectionately known in biking spheres as RE — has captured the imagination of the market with retro offerings which have an old-school vibe (literally) but modern technology and componentry. Reliable, functional and charming, the recipe has taken Western markets — Britain included — by storm. Its 650cc twins, the Interceptor and the Continental undercut Japanese and European manufacturers on price and often outstrip them in character.

It’s a big deal for a company that is as much of a motorcycling icon in India as Harley-Davidson is in the States. The recent company announcement of the joint venture was attended by no less a figure than Argentinan President Alberto Fernández.

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RE has 31 stores and 40 retail outlets in Latin America. The assembly plant will be based at Grupo Simpa’s facility situated in Campana in Buenos Aires.

As well as the 650cc twins, the single-cylinder 410cc Himalayan “all-roads, no roads” slugger will also be constructed. The 500cc and 350cc Classic Bullet singles, which RE India continued to produce since the closure of the British plant in Reddich in 1971.

Enfield was the oldest of the British bike makers, predating Norton and Triumph with its inauguration in 1907, and the marque has the world record for the longest period of continuous production. i 157

Motoring

s India’s Royal Enfield motorcycles take the biking world by storm, the Chennai firm has announced that it will begin outsourcing assembly and production to Argentina.

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Autumn 2020 Issue

How the Super-rich Will be Spending Their Money as Wealth Trends Fluctuate

By Andrew Amoils

As part of its upcoming 2020 Global Wealth Migration Review, New World Wealth examines the potential impact of coronavirus on the spending habits of millionaires.

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ccording to New World Wealth, there are some 13 million high-net-worth individuals in the world as of June this year. Together, they account for over 35 percent of the world’s wealth.

“Wealth” in this context refers to the net assets of a person. Emerging high-net-worth individuals (HNWI) trends to look out for will affect travel, property, tourism and transport.

A recent report by New World Wealth anticipates a move away from commercial airlines and towards private jets. It also predicts that many HNWIs will choose to work remotely and live in smaller towns. It also foresees a drop in tourism and the use of public transport.

Many London-based HNWIs may choose to move to towns such as Taplow and Marlow, and country areas such as the Cotswolds could also become more popular.

Less international tourism is already a factor of life with Covid. The luxury hotel sector of each country is likely to become more dependent on local HNWIs. The fact that HNWIs will probably avoid public transport in big cities will come as no surprise.

Luxury residential estates, such as the Yellowstone Club, could become more popular, and trends such as online shopping, boutique hotels and outdoor pursuits such as cycling, golf and fly-fishing are likely to continue.

WEALTH VS GDP Wealth includes all assets (property, cash, equities, business interests) less any liabilities.

The report considers wealth to be a far better measure of an economy’s financial health than GDP. • In many developing countries, a large portion of GDP flows to the government and therefore CFI.co | Capital Finance International

has little impact on private wealth creation.

• GDP counts items multiple times (for instance, if someone is paid $100 for a product/service and they then pay someone else that $100 for another product/service, then that adds $200 to a country’s GDP, even though only $100 has been produced).

• GDP ignores the efficiency of the local banking sector and the local stock market at retaining wealth in a country.

• GDP largely ignores the impact of property and stock market moves. These two factors obviously have a massive impact on wealth.

• GDP is quite a static measure — it tends to move only slightly year-on-year. As a result, it is not a great gauge of the performance of an economy.

Wealth figures do not have any of these limitations, making them a better measure of financial health.

New World Wealth provides information on the global wealth sector, with a special focus on high-growth markets. Its reports focus on HNWI demographics, such as city and suburb wealth breakdowns. It also reviews the luxury market in each country, with a special focus on fine art, classic cars, luxury hotels, prime residential property, family offices and wealth management. i

The company is based in Johannesburg, South Africa. For more information, visit newworldwealth.com.

ABOUT THE AUTHOR Andrew Amoils founded New World Wealth in 2013. He previously worked as a wealth analyst for Progressive Media (now Globaldata) in London. His focus areas include statistical modelling and wealth intelligence gathering.

His work has been featured in media outlets including the BBC, The Financial Times, CNN, Fox News, Bloomberg and Forbes.

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> Q&A with Chairman of Eriell Group and Enter Engineering:

Bakhtiyor Fazilov Please, tell us a little about yourself. How did you reach your current position?

As you may understand, it is not easy to talk about oneself, especially for a person in my position. I was born in Samarkand. After school I entered the Tashkent Economic University, the Faculty of International Economic Relations. My career in the oil and gas sector began in Uzbekistan in 2002. I was involved in various contracts for the supply of equipment and spare parts for the Uzbekneftegaz company, but always wanted to be an independent person and realize that my success largely depends on my own knowledge and efforts, so I looked for opportunities to become an entrepreneur. I am glad I succeeded, and today I have a fairly extensive portfolio of companies and interests.

We read a lot about the changes in Uzbekistan over the past three years. Is it easier to do business today?

The history of our country is rich and varied - it contains pages you would want to read over and over again, plus pages one would want to quickly turn over and begin writing new ones. Now we are on such a page - with our life and work we are writing a new page for a young independent Uzbekistan.

Firstly, I would like to mention large-scale fundamental reforms under way in Uzbekistan on the initiative of our President, Shavkat Mirziyoev.

Under his leadership the economy and the legal sector of our country are being liberalised, thus creating an attractive investment climate. There are many examples of that. We successfully cooperate with both the CIS countries, and partners from the US, Great Britain, France, Germany, Hungary, Austria, Japan, China and many others.

Chairman: Bakhtiyor Fazilov

considerable efforts to find alternatives to the use of hydrocarbons for energy generation and Uzbekistan is no exception. Millions of dollars are invested in the construction of solar and wind parks and the development of nuclear energy. But the complete replacement of hydrocarbons will not happen tomorrow.

Hydrocarbons can be used to produce both energy and many other products necessary in people's lives. Therefore, sustainable oil and gas production is a very urgent task for our country.

Deposits often occur in hard-to-reach geological formations and geographical locations. I am pleased to note Eriell’s specialists are wellqualified and experienced to work in such harsh environments.

Founded in 2012, Enter Engineering is a major engineering contractor for the construction

Much attention is paid by our President to the construction of new facilities in the oil and gas industry, and the reconstruction and modernisation of existing enterprises in line with modern requirements. This gives us, businessmen, special energy and enthusiasm.

What do you consider your main business?

There are two companies in my portfolio of assets I would like to highlight: Eriell and Enter Engineering. Founded in 2004, Eriell is an international oilfield services company with extensive experience in harsh climatic conditions. This includes the Arctic Circle with temperatures of -50°C to the deserts of Central Asia with temperatures of +50°C. It is clear the days of easy oil and gas have already passed. Many countries are making 160

Completed Humo Arena

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of industrial and civil facilities. Over the past seven years, we have become one of the leaders among similar contractors in Central Asia. Our customers include international companies such as NK LUKOIL, OJSC AK Transneft, OJSC Arctic Gas, JSC Achimgaz, OJSC Severneftegazprom, NHK Uzbekneftegaz, AK Uztransgaz, Mitsubishi Heavy Industries Ltd, Hyundai Engineering Co. Ltd and other oil and gas companies.

We are also proud of the successful completion, in 2019, of the Humo Arena construction. The Arena is an ultra-modern multifunctional ice complex in the Republic of Uzbekistan. It’s 74,000m2 area holds a capacity of 12,500 people. The complex is intended for the development of winter sports and the holding of international competitions, exhibitions, concerts and other events.

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Eriell site in the Arctic

How is your business coping with the coronavirus pandemic?

At the start of 2020, it was impossible to predict how events would unfold with the coronavirus. Like the rest of the world, Uzbekistan has experienced some troubling moments, and we continue to do our best to win the battle against the virus without seriously damaging our businesses, projects and livelihood.

Tens of thousands of people work at our enterprises. This is a huge responsibility. The health and safety of our employees is our top priority. Proper health protection, working and resting conditions during repair and construction of wells and on construction sites, in shift camps, and during transportation, require high levels of hygiene. The preventative measures we take help reduce the risks of the spread of COVID-19 infection and keep our city offices and local sites working without interruption as much as possible.

Enter Engineering also participated in the construction of a medical facility outside Tashkent.

Unlike facilities in other parts of the world, the Tashkent facility is intended to be a permanent hospital for the treatment of infectious diseases.

What are your ambitions for these companies? Any specific plans for 2021?

The main ambition for these and other companies is their progressive development and strengthening of their position in international markets. We understand doing business around the world today is much more transparent and

accountable than ever. For some companies this means switching to an international financial reporting system, obtaining an international rating, increasing competitiveness and market share. For others, consolidation of their position and the search for new markets; for a third group - attracting foreign investments and forming joint ventures.

How you approach your present situation determines where it will take you. We always try to get the most out of every experience. Even in tough times there are elements to help one achieve that ambition. I would also add quality is more important than quantity. My main companies have a high reputation and a strong impact on the lives of many people both in Uzbekistan and beyond.

A big ambition is to preserve and strengthen this reputation with new achievements and projects.

For example, we took part in the construction project of a gas-chemical plant "OLTIN YO'L GTL" - which is unique for Central Asia. This enterprise will become the flagship of our economy and one of the most advanced facilities in the world.

It will produce high-quality fuels with a low environmental impact, ensuring an eco-friendly future not only for our country, but the region as a whole.

The construction of this plant will create new hightech production capacity in Uzbekistan, enabling deeper levels of hydrocarbon processing. It will contribute to the maximum use of our natural resources and creation of a new value chain.

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We hear that you are the chairman of the National Hockey Association - why hockey?

I have always loved and continue to love sport.

Today the world speaks not only Uzbek, English or Chinese, but also the language of new technologies, art, music and, of course, sport.

It all starts with a dream. For Uzbekistan, winter sports, and especially hockey, are a kind of dream.

Last year we entered the International Ice Hockey Association. This became possible thanks to the construction of the Humo Arena, where athletes can train all year round and improve their skills in this exciting sport.

Hockey requires physical qualities, but also the ability to quickly respond to various situations, plan one’s actions clearly and fulfil one’s plans. In many ways, hockey resembles a business process.

After years of practice each match gives you an hour of excitement. Similarly, it takes years to create a stable business and every successful deal is a reward.

What would you like to say to our readers?

Uzbekistan is an amazing country. I would like to invite your readers to visit Uzbekistan as soon as possible, and see for themselves how beautiful, warm, tasty and comfortable it is here. Uzbekistan is open for business and for the soul! i

Bakhtiyor Fazilov is a prominent Uzbek businessman, Chairman of Eriell Group and Enter Engineering.

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>

China on the Way to Regaining Its Balance

By Otaviano Canuto

China’s economy continues to recover from the coronavirus crisis through the third quarter of 2020, as revealed by the numbers of August activity.

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ts GDP grew by 3.2 percent in the second quarter, after falling by 6.8 percent in the first quarter (compared in both cases to the previous year). It is the only major economy expected to exhibit growth this year. Successful containment of the pandemic has allowed it to be first-in, first-out relative to others.

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One feature it has in common with other countries, however, is the unbalanced shape of the economic recovery. The supply side has run ahead of demand. Re-opening factories in February made possible a steady return of industrial output, which grew 5.6 percent on an annual basis in August, while overall domestic consumption lagged during the first half of 2020.

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Fixed investment has picked up and, on the external side, the gradual lift of global trade activity is helping exports. The uptick in retail sales in August, rising faster than industrial production, suggests a broadening of domestic consumption and a catch-up with production. Except for services that require physical proximity of people, which still face supply restrictions and a demand slowdown.

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As China’s economy marches toward normalisation, one may wonder whether it might move from its previous trajectory, particularly as the post-crisis global economy is expected to be at a new normal. To what extent might pressures toward a “relative de-globalisation” bring China to review its development path? If anything, the post-COVID global economy will probably reinforce its need to speed up its rebalancing.

China’s growth trajectory in the second decade of the century has been one of finding a new growth pattern. Domestic consumption is likely to rise relative to investments and exports, while a drive toward consolidating local insertion up the ladder of value added in global value chains takes place. Services should also rise relative to manufacturing.

Waves of credit-driven over-investment in infrastructure and housing, after the global financial crisis, helped sustain growth. But there is a perception of temporary exhaustion for such a lever. Declining GDP growth rates, from two digits in previous decades to six percent last year — and probably four percent in the year ahead — would be the counterpart to rising wages and domestic mass-consumption, and to the transition toward a higher weight of services and hi-tech.

Major challenges remain. The transition toward a less investment- and export-dependent growth model has been taking place from a starting point of exceptionally low consumption-to-GDP ratios.

Besides high profit-to-wages ratios, low levels of public social spending lead to high household savings. In 2017, private consumption and investment were, respectively, 39 percent and 44 percent of GDP, whereas 60 percent was the average consumption-to-GDP ratio in the rest of the world.

The global economy is tending to exhibit an environment less trade-friendly than in recent years. The pay-off from shifting from a reliance on export to domestic consumption will be higher.

Over the past two years, with the US-initiated trade war, investors from Japan and America have accelerated the transfer of assembly lines and supply contracts in ITC value chains from China to Vietnam, Thailand, Indonesia and, to a lesser extent, Mexico. This may be taken as a signing point, regardless of whether trade tensions subside or continue.

"China’s growth trajectory in the second decade of the century has been one of finding a new growth pattern. Domestic consumption is likely to rise relative to investments and exports, while a drive toward consolidating local insertion up the ladder of value added in global value chains takes place."

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Another challenge is on the technology and value-added fronts. China has done its homework in terms of investments in education and infrastructure to creatively absorb technology.

It has now reached the top of the ladder, where technology content must be locally developed; it is not available by using or adapting existing systems. Regardless of the US election results, the premium for China to speed-up such process will rise in a recovering global economy. China’s bounce back is happening. Focus will increasingly be on its economic rebalancing. i This article first appeared at CGTN. 163

> Asian Development Bank:

What Emerging Markets Can Teach Us About CSR

By Ahmed M Saeed

Fifty years after Milton Friedman’s famous essay arguing that companies should focus solely on shareholder profits, emerging markets businesses are helping lead the fight against Covid-19.

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heir example adds nuance to Friedman’s argument, reminding us that companies can effectively pursue their objectives only if they enjoy the trust of society, and that building trust sometimes entails sacrifice. When the pandemic first struck in Manila, where the Asian Development Bank is based, the government confronted a difficult choice. Lockdowns appeared essential, but millions would go hungry if workers were forced to stay home. The threat of starvation was as real as that from the virus.

The government moved quickly to expand social protections, reaching out to ADB and others for help. As we moved forward, we found that many of the nation’s leading corporations were already hard at work to ensure their employees felt secure, and implementing ambitious new initiatives to deliver food to the poor.

These efforts were not the result of some coldhearted utilitarian calculus. Early on I spoke with the CEO of a construction firm that was determined to do whatever was necessary. “We have 70,000 employees right now and zero revenue,” he told me, “We will continue to pay them until the government steps in or we have no money left.”

Companies acted quickly because they understood, as Oxford scholar Colin Mayer has noted, that “[t]he corporation is not a ‘nexus of contracts’ … it is a nexus of relations. Those relations are based on trust.” Companies accomplish much more when they honor their civic responsibilities than when they engage in a narrowly transactional manner.

What resulted was an enormously productive three-way collaboration between the government, private sector and ADB. Some 63 million meals were distributed to needy families in the early days of lockdown, and Covid-19 testing capacity increased from 5,000 to 35,000 tests per day.

These initiatives were not unique. Indian companies have spent more than $1bn in 164

Delivering food to some of the poorest neighbourhoods in Manila under an ADB-supported scheme during the COVID-19 lockdown.

Covid-related corporate responsibility efforts, and Singapore-based Olam International responded to the crisis by delivering support to 11.5m people in 33 countries, mainly in emerging markets.

have historically focused on the development and legitimacy of political institutions, but it is economic institutions — companies, mostly — that have led the world to a level of unprecedented affluence.

An important strand of development theory argues, in the words of Daron Acemoglu and James Robinson, that “institutions … forge the success or failure of nations.” Scholars

Like political institutions, economic institutions also need legitimacy to be effective. Robust corporate legitimacy requires the apparatus of a functioning market economy and legal

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Autumn 2020 Issue

ADB approved $5 million in grants to provide food support to Manila’s most vulnerable households during the COVID-19 lockdown.

system, but takes more than a commitment to shareholder rights or even to a broader set of stakeholder rights. It must rest on corporate commitment to a purpose that resonates credibly with the rest of society.

The point is not that profit is ignoble, or that business managers should run internal philanthropies. It is that true commitment to purpose, the kind that bestows legitimacy and respect, sometimes entails voluntary sacrifice.

That might mean foregoing a project that harms society, such as a profitable investment in a coal fired power plant, or deploying resources for the greater good during an emergency.

I saw at first-hand how a commitment to purpose confers legitimacy when delivering food to some of the poorest neighborhoods in Manila, and in opening the first new Covid testing facility north of the city. The impact was obvious, on everyone from the neediest slum resident to the most senior government official.

Institutions like the ADB have long leveraged their own substantial reservoir of legitimacy to help build consensus on standards for private sector behavior. For example, ADB supports the World Bank Group’s Equator Principles, which establish voluntary environment and social guidelines for financial institutions. New standards may be needed in emerging markets for corporate social responsibility, and ADB will

therefore be conducting a study on the link between this subject, corporate legitimacy and economic development.

I had the privilege of obtaining two degrees from Milton Friedman’s academic home. In business school we learned about the primacy of shareholder profit. But an older set of ideas prevailed in legal ethics. A lawyer is both a zealous advocate for client interests, and an officer of the court who must honour her or his responsibilities to the system of justice.

as a financial institution that would be Asian in character and foster economic growth and cooperation in what was then one of the poorest regions of the world. ADB assists its members and partners by providing loans, technical assistance, grants, and equity investments to promote social and economic development. Under its long-term Strategy 2030, ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. ADB is composed of 68 members, 49 of which are from Asia and the Pacific.

Across the world, companies have responded to pandemic by recognising their own broader role. We must learn from their example. Without capable and legitimate economic institutions, companies that are profitable and widely respected as contributing members of society, it will become progressively harder to make the world a better place. i ABOUT THE AUTHOR Ahmed M Saeed is based in the Philippines and serves as Vice President for East Asia, Southeast Asia, and the Pacific at the Asian Development Bank. He is a former Deputy Assistant Secretary of the US Treasury and Managing Director at JPMorgan Chase. Ahmed holds JD and MBA degrees from the University of Chicago.

ABOUT THE ASIAN DEVELOPMENT BANK The Asian Development Bank was founded in 1966 CFI.co | Capital Finance International

Author: Ahmed M Saeed

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> Jim O’Neill:

The Logic of Sino-Western Détente While much of the hand wringing over China has abated somewhat during the COVID-19 crisis, the fears animating Western attitudes toward that country have not disappeared, and could resurface at any moment. These tensions represent a major, vexing dilemma for the world, given China’s massive and growing economic power. And the situation certainly hasn’t been helped by the failure of the other major economic powerhouse, the United States, to manage the current crisis effectively.

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Final Thought

wing to my professional background, I usually approach issues like the Sino-American relationship first as a macroeconomist. But as the chair of Chatham House, I have been developing a more nuanced view of the issue, taking into account not just the economic dimension but also security, diplomacy, culture, and other factors.

"The Chinese government’s insistence that even private companies toe the party line raises serious doubts for Western firms and governments dealing with the country."

To that end, it seems only reasonable that we should adopt a broader “optimisation framework” for understanding and managing relations between China and the West. Not to oversimplify matters, but if the economic opportunity that China represents can be expressed as X, Western leaders who want to confront China about actual or perceived transgressions need to weigh the potential costs of doing so against that benchmark.

Soon, we will have data on China’s third-quarter real (inflation-adjusted) GDP growth, and many analysts expect to see an acceleration to around 5% year on year, coming on top of a secondquarter estimated growth rate of 2.6%. If so, there will be good reason to believe that China is experiencing a classic “V-shaped” recovery, putting it on track to register 8% growth in 2021.

Such thinking is only natural, and I suspect that it is already implicit in British and European governments’ approaches to China in recent years.

But in following this framework, policymakers need to ask themselves a subtler question: Is strong economic engagement more effective than unbending confrontation in achieving the desired policy changes in China?

These are just forecasts, of course, and any number of unforeseen developments could radically change the state of play, as 2020 has shown. But if the current growth figures are reasonably accurate, the implication is that China’s nominal GDP ($14.1 trillion in 2019) will match that of the US ($21.4 trillion) later this decade, or soon thereafter.

Answering such questions will require an open mind. During China’s semi-annual Golden Week holiday this month, many Chinese people appear to have travelled far and wide within the country without triggering another wave of COVID-19 infections. Yet when I point this out to other Westerners, their first instinct is to question the anecdotal evidence and reject the credibility of Chinese data. And even when they stipulate that the evidence may be sound, they say they aren’t surprised, given the degree of control that China’s authorities have over the Chinese people.

Moreover, at the current growth rate, China is poised to contribute an additional $1.5 trillion to global GDP just next year, and Chinese consumers will drive close to 40% of that. For comparison, $1.5 trillion is greater than the national GDP of all but the top 15 or so economies. China will effectively be creating another Australia or Spain in the space of a single year. And given that consumer spending continues to account for a growing share of China’s expansion, the scale of the economic opportunities on offer cannot be overstated.

I would have more sympathy with this argument if China and other authoritarian countries were indeed the only ones to have prevented a serious second wave of COVID-19 infections this year.

But similar stories can be found in places like Japan and South Korea, suggesting that we would do better to look for lessons than simply dismissing the evidence.

That takes care of the macroeconomics, but we cannot ignore the other issues. China’s humanrights abuses are legion, particularly in Xinjiang.

Its clampdown in Hong Kong and incursions in the South China Sea have heightened tensions across the region, as has the Belt and Road Initiative through which China is exercising its influence in other countries. The Chinese

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government’s insistence that even private companies toe the party line raises serious doubts for Western firms and governments dealing with the country.

These are serious concerns, and they take us back to the question posed by the optimisation framework. Those advocating more confrontation with China must weigh the probabilities that their approach will succeed as intended, that it will curtail Chinese growth, and that it may reduce economic opportunities for the West. If all of these outcomes are borne out, Western leaders could decide that the strategy was worth it. But if there were a reasonable chance that China’s growth would continue while the opportunities for the West shrank, a policy of confrontation would be utterly self-defeating.

It might be cathartic to opine noisily about another country’s standards and practices, but there is substantial historical evidence to suggest that a country’s citizens will tend to value economic opportunity over most other issues.

That axiom applies as much to the US, the United Kingdom, and Europe as it does to China.

Moreover, even if a country’s leadership still prefers a confrontational approach after considering the potential costs, it would have a much better chance of success by cooperating with other governments in a program of positive engagement rather than zero-sum brinkmanship.

Surely diplomacy and other subtler forms of engagement would go further toward changing a country’s standards than saber rattling and trade warfare ever could.

If there is a change in US leadership next month, one hopes that it will set the stage for a renewed effort at the G20 to resurrect the postwar international order, and to bring governments back to the same table. Everyone has a role to play in working toward a more prosperous and inclusive future. i ABOUT THE AUTHOR Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK Treasury Minister, is Chair of Chatham House.

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