Autumn 2022

Page 148

Giannis Antetokounmpo
Everyday Exceptional The new Maserati Grecale Trofeo. Fuel consumption combined (l/100 km): 11,2 // C O 2 emissions combined (g/km) : 254 // Efficiency class: F * CO 2 is the main greenhouse gas responsible for global warming. The average C O 2 emission of all (cross-brand) vehicle types offered in Switzerland is 149 g/km. The C O 2 target value is 118 g/km (WLTP).


The Limited Edition Bremont Longitude is a groundbreaking timepiece that not only looks back at our country’s legacy but also forward to an exciting future of British watchmaking. The watch’s case back incorporates brass from the original “Flamsteed Line,” in Greenwich, the very spot where the first Astronomer Royal made his celestial observations in pursuit of an aid to navigation.

It has long been the goal of Bremont to bring watch manufacturing back to Britain. The Longitude represents a milestone in that journey, a homecoming of sorts, and proof that, to get where you’re going, you need to know where you came from.

First Thoughts

Her Majesty bequeaths to our country and people continuity, certainty and the strengths embedded in the timeless traditions of our constitutional monarchy. She has been our country’s chief and greatest diplomat, smoothing the path for politicians and officials with charm, wisdom, grace and memorable humour. Her Majesty imbued a lifetime of service and deep consideration with unwavering appreciation to her realms and territories, to the countries of the Commonwealth and far beyond, carrying her values, her profound sense of duty and her love.

As we enter this extended period of mourning heavy with grief, there is, however, a silver lining evident beyond the clouds, the most significant being her heir, our King. I venture with humility that the tribute that we offer to Her Majesty is to thank her for her tireless dedication and to work to ensure that her legacy endures for centuries to come.

In doing so I pay tribute to the King’s already formidable achievements. His honed skills with well-respected guidance on climate change, organic farming, the built environment and multifaith issues—often ahead of his time—are always useful and relevant. However, particular attention must be given to assuring the continuity of our United Kingdom by listening and learning, and that the legacy of the Commonwealth evolves and modernises to ensure its continued relevance and place in the world. The King shares that resolve, I believe, by promoting the dignity of all peoples and beliefs, respect for their cultures and heritage, support for those less privileged and dialogue for greater understanding of seemingly intractable problems.

A new monarch, a new Government, a united people, an appropriate place in the world and the opportunity of a new beginning for a renewed United Kingdom—that is a good place to be. God save the King and the Queen Consort.

Lord Waverley

Chairman of Capital Finance International Tribute to Her Late Majesty Queen Elizabeth II

First Thoughts 8
First Thoughts 9


The article The Devil’s in the Detail for Prada (Summer issue) caught my eye — one, it reminded me of the classic 2006 movie The Devil Wears Prada, and two… that word sustainability. I fully understand the need to cut back on our plunder of the Earth’s resources, incorporate CSI and SDGs and all the other acronyms — to do better, basically. But it seems to me — without uttering the word greenwashing — that these days, it’s all about semantics.

Data are our friends when it comes to analysis; they are our enemy when it comes to personal privacy. They are also dead handy for marketers who want to put a positive spin on, well, just about anything. What is sustainability? What are the metrics? Data can furnish those too, no doubt, but on the whole we’re dealing with just the latest flush of buzzwords to fly from overzealous, backs-tothe-wall PRs who are tasked with making companies seem clean, green, ship-shape and future-proofed.

Let’s face it: large-scale manufacture and consumption will strip our planet of the resources it needs to recover. Growth and expansion cannot continue unabated in a finite world. So, strive for sustainability, by all means, but if (in print, at least) you could find a way to stop bandying the word about like some wholesome antidote to extraction, extrusion, exploitation and excess… I, for one, would appreciate it.

Your article Why Brand Britain in Coming out on Top (Summer issue) is a wishfully wishy-washy dismissal of the miseries that have befallen our country since the grand folly of Brexit.

The pageantry of the Platinum Jubilee? The Red Arrows, the Queen taking tea with a virtual Paddington Bear? Give me a break. Never mind the tea and cakes and tinsel and bright carriages and spiffy uniforms when the Royal family decides to have a high day. Let’s look at exports, imports, the chaos at our ports, the rising jingoism and anti-migrant venom that’s becoming so common, and from such unexpected sources.

Your article relates that in Old Testament times, a jubilee took place every 50 years. OK then: in half a century or so, let’s have a Brexit Jubilee and survey the smouldering heap of bureaucratic chaos and isolation that the disingenuous referendum has left us. Brexit was a “choice” that didn’t need to be offered, and the voices that carried the vote were whimpers of fear of mass migration, not valiant shouts of liberation of the once self-sufficient and confident UK.

Of course, we were very sad to hear of our Queen’s passing — but how wonderful that she spent the last weeks of a long and wonderful life at her beloved Balmoral. Just two days before her death she received the outgoing and incoming prime ministers at the castle. Truly a life of devotion and service to her country.

King Charles III has got off to a pretty good start. I was pleased to hear that his focus as monarch will be quite different to that of his time as heir. No more “black spider” memos to ministers, Charles! The slightly imperious attitude with which he signalled an aide to move a pen set from his desk reminded me that this is a man who (allegedly) has a flunkey to put paste on his toothbrush. He should perhaps try to connect a little more with the ways of the people.

Buckingham Palace

There have been a few anti-monarchy protests and demonstrations (usually just one or two vehement individuals) during mourning. The criticism of the institution by these people has sometimes been unfair, inaccurate and moronic. But we should allow dissent in the spirit of freedom of speech — even during these times of blanket coverage of Royal Family news. Ignoring and punishing those with differing views is not useful to anyone. Quite the opposite, actually.

As an American living abroad, I get asked on a regular basis about our nation’s obsession with firearms.

Pricey Harrison, the Democratic state representative from North Carolina cites a study — now 10 years old — that estimates that the US, which is home to just five percent of the world's population, accounts for 42 percent of civilian gun ownership. According to the Pew Research Centre, the US reached an all-time record for gun deaths in 2020.

The figures (the most recent available) found that nearly eight-in-10 US murders involved a firearm. I wish our country’s leaders were more like New Zealand prime minister Jacinda Ardern. After a horrific attack on a mosque, the Ardern administration introduced a gun reform bill that was fast-tracked and passed — with only one dissenting vote — within 11 days.

I don’t believe this will ever happen in the States. I blame the National Rifle Association, which has disbursed more than $148m with an eye on federal elections since 2010 — nearly all of it supporting Republican candidates.

DIXIE MARSH (Alabama, United States)

I found your summer issue article by Tony Lennox riveting, and as somebody who used to enjoy frequenting football matches, I think the writer was very balanced in his analysis of this sad phenomenon (TheUglyHistoryoftheBeautifulGame). It is unfortunate that there have been so many tragedies over the years and there can be no condoning of violence.

However, as the writer properly points out, it is not only in England that such terrible scenes occur, and it is hard to imagine that there ever will be complete peace in mass participation events. That the English game has cleaned up its act is very welcome and can show the way forward for other countries experiencing their own problems of hooliganism.

MARTIN SMITH (Stratford, London E15)

Back in the mid-1950s, my mother would frequently warn me — in Switzerland, mind you — that if my behaviour continued to deteriorate, the Russians would come and get me. I wondered why they would be interested in my childish transgressions, but it did later occur to me that many prisoners in the gulags would have had similar thoughts before being taken into custody. These were rum days.

Then in my early 20s, and with a certain amount of trepidation, I undertook a holiday trip to Soviet Russia. I found the people there to be generally very kind and warm.

Years later, as a witness to the destruction of the Berlin Wall, my gratitude went out to Mikhail Gorbachev, who was instrumental in bringing an end to the Cold War. His initiatives would eventually result in the collapse of the Soviet Union — although this was never his intention.

A giant among world leaders, he was also the most gentle and charming of men. Generous to a fault and very considerate, the very antithesis of the Soviet era monster.

It’s sad that Gorbachev was (and still is) appreciated more abroad than at home. Perhaps history will judge him more fairly in his own country.

Rest in peace, Mr Peacemaker. ADRIAN BROMLEY-GRAYDON (Zurich, Switzerland)

11 Autumn 2022 Issue

Sarah Worthington

George Kingsley

Tony Lennox

Brendan Filipovski

John Marinus

Ellen Langford

Helen Lynn Stone

Naomi Snelling

Wim Romeijn


Otaviano Canuto

Lord Waverley

Production Director

Jackie Chapman

Distribution Manager

William Adam


Commercial Director

John Mann


World Bank


Cover Story




12 | Capital Finance International Chairman Lord JD Waverley Editorial Team
Director, Operations
Mark Publisher Anthony Michael Capital Finance International Meridien House 69 - 71 Clarendon Road Watford WD17 1DS United Kingdom T: +44 203 137 3679 F: +44 203 137 5872 E: W: The Magazine Printing Company using only paper from FSC/PEFC suppliers COVER STORIES
Energy Shocks Amid Rapid Inflation (24 – 25)
Proptech Real Estate Leasing Market (74 – 75)
Risk, Return, ImpactSDG Aims Need a Shift of Focus (132 – 133)
Financing Where It Matters Most (14 – 15) IBM Financial Services Cyber-Resilience (20 – 21)
Metaverse for Enterprise (108 – 109)
Data-driven Success (28 – 33) > Editorialonpages22-23,38-39,70-71,104,116-117, 124-125,150©ProjectSyndicate2022 DISCUSSION PAPER

As World Economies Converge

World Bank

Anshula Kant Otaviano Canuto IBM Paolo Sironi Nouriel Roubini IMF Chikako Baba Jaewoo Lee

Joschka Fischer KBC Johan Thijs Lord Waverley Wim Romeijn Tony Lennox Joseph E Stiglitz

Brendan Filipovski Nordea Asset Management Eric Pedersen Bedrock Group Maurice Ephrati Ariel Arazi David Joory Kitty Wenham AVL Georg Schwab Stefan Schmid Supernovae Labs Carlo Giugovaz Kenneth Rogoff Copernicus Wealth Management Marco Boldrin CBRE David Casas Alarcón

Rewarding Global Excellence

Gerald Ndosi Bank One Chris Udry

Sir Massimo Falcioni Etihad Credit Insurance Abu Dhabi Global Market Yanis Varoufakis Deloitte & Touche Damian Regan Accenture Bashar Kilani


Louis "Tito" Ducruet WTW I Unity Maryam Kouchaki Ernesto Talvi


PGM OECD Paul Horrocks Michael R Strain


EXIM Thailand Dr Rak Vorrakitpokatorn Containers Printers Women’s Brain Project Anna Dé Janashakthi Life Ravi Liyanage Jusan Bank Nurdaulet Aidossov

Autumn 2022 Issue | Capital Finance International 13 FULL CONTENTS 14 – 39
40 – 53 Autumn Special: Mirror, Mirror, on the Net — Who’s the Richest of Them Yet? 54 – 75 Europe
76 – 87 Awards
88 – 95 Africa
96 – 109 Middle East
110 – 119 Latin
120 – 133 North
134 – 149 Asia
150 Final Thought

Financing Where It Matters Most —

People, The Planet, and the Role of Investors

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

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

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

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

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

Through triple-A rated bonds, IBRD raises about USD 50 billion each year for lending to

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

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

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

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

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

14 | Capital Finance International > World Bank Managing Director and Chief Financial Officer Anshula Kant:
"As the sustainable investment landscape develops, we must remain focused on facilitating sustainable financial flows to developing and emerging market countries."
"Climate change touches almost all development indicators, including loss of lives and livelihoods, food and water insecurity, forced migration, and is threatening to push 132 million people into poverty over the next ten years."

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

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

Firstly, the World Bank brought innovation to the climate finance space by issuing the first green bond in 2008 and we have gone further to label all our bonds as Sustainable Development Bonds.

The World Bank’s first green bond catalysed investing for purpose and climate action in the capital markets. It helped set the standard for the market, and today we continue to play a key role in developing the necessary market infrastructure through our work on the Green Bond Principles and the Harmonized Framework for Impact Reporting. The “sustainability” label in our Sustainable Development Bonds, which is broader and more inclusive than simply green, not only reflects our global work in social and economic development and climate, but also

the fact that all our bonds meet the strictest standards of sustainability, supporting positive impact around the globe.

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

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

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

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

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

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

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

Autumn 2022 Issue | Capital Finance International 15
Author: World Bank Managing Director and Chief Financial Officer Anshula Kant

Otaviano Canuto: Big Slowdown in Chinese Economy Calls for Tweaks to ‘Rebalancing’

Chinese economic figures released August 1 show a slowdown in growth. New Omicron outbreaks — in the context of the zero-Covid policy — the housing slump and heat waves have been decelerating the nation’s pace.

This is another step in the trend of gradually declining rates that has accompanied the “great rebalancing” since the early 2010s. One major difference is the perception of exhaustion from waves of overinvestment in real estate and infrastructure.

The economy started out strong in JanuaryFebruary, but negative shocks led to a contraction in GDP by an estimated 5.4 percent in the second quarter. Industrial production grew 3.8 percent in July over the previous year, below the expected 4.5 percent (Figure 1). GDP growth estimates by several international banks for the world’s second-largest economy this year have been revised down to levels between 2.5 and 3.3 percent.

A scorching, dry summer is stressing energy supplies and leading to production cuts in some provinces and energy-intensive sectors.

The real estate crisis continues to undermine economic performance. Housing is an important component of fixed investment. It grew by just 5.7 percent in the first seven months of 2022, compared to the same period in 2021. Last year, that number was 10.3 percent higher year-onyear.

Property sales are expected to decline about seven percent, and construction to fall about 30 percent, in the second half of this year. The real estate slowdown was driven by the policy choice to reduce developers’ leverage and achieve a long-term objective “for housing, not for speculation”. Banks, regulators, and local governments will have to stick to this policy — and a general bailout is not on the cards. There is an expectation that adjustments to balance sheets of companies and customers and suppliers in the sector will not result in systemic crises, despite occasional defaults and bankruptcies.

Financial stress on highly indebted property developers has increased over recent years. Many were unable to refinance in bond markets in 2021, and several have either negotiated

repayment extensions with creditors or defaulted. As shown by Zhang, many creditors have agreed to negotiate repayment extensions ahead of potential defaults to give developers more time. (Figure 2).

The impact of the Omicron wave on China’s economic growth was significant, especially in regions subject to lockdowns. Retail sales in July were up just 2.7 percent year-on-year, far below expectations of five percent. New Covid

outbreaks and the risk of confinement affected retail trade and domestic tourism.

Since 2020, household consumption has remained weak, persistently below the 201719 trend (Gatley, 2022). The labour market has been very soft, which does not help.

Strictly speaking, only exports maintained a good pace (Figure 3). Trade has recovered faster than domestic activity since the reopening began with Columnist 16 | Capital Finance International >
Figure 1: China's Industrial Production Growth Declined Last Month. Industrial production growth declined in both year-over-year and month-overmonth terms in July. Source: NBS. CEIC. Goldman Sachs Research. Figure 2: China - developer bond repayment bond issues are not getting better. Source:Zhang,X.(2022).TheFinancialStressfromPropertySpreads,GavekalDragonomics,July13th

streamlined logistics and transport. Production and investment are outpacing consumption and services; factory reopening has been a higher priority than the relaxation of individual mobility restrictions.

Factory activity has rebounded more quickly than expected, with exports posting the highest growth

rate in a year this June. In contrast, indicators of the purchasing decisions of households have lagged. Such a pattern runs against the “rebalancing” pursued by Chinese authorities since the beginning of the last decade.

Despite the slowdown, the measures taken by the government can be considered modest.

The People’s Bank of China cut two major interest rates in mid-August — the repo interest rates on one-year and seven-day open market operations — by 10 basis points. On August 22, it announced a 15bp cut in the five-year interest rate, lowering it to 4.3 percent, while the oneyear rate was reduced by another 5bp to 3.65 percent.

Analysts do not believe such rate reductions, or other newly announced incremental fiscal measures, could significantly boost economic growth. The increases in the monetary base (M2) since last year have not been accompanied by an equivalent expansion of domestic credit (Figure 4), denoting the presence of dampening factors underlying the slowdown in investments –certainly in the real estate area, given the fragile situation of firms in the sector and the demand for its products.


To understand Chinese economic growth, it is necessary to go back to December 2011. At that time, I was one of the vice-presidents of the World Bank, and attended a ceremony in Beijing in which then-president Hu Jintao made one of the first statements on the need for that “rebalancing”.

There would have to be a gradual redirection towards a new pattern of growth, in which domestic consumption should increase in relation to investments and exports. An effort would also be made to consolidate value added in global value chains. Services should also increase their weight in GDP relative to manufacturing. China would no longer have the double-digit GDP growth rates of previous decades (Figure 5), but growth would no longer be, as Premier Wen Jiabao had said in 2007, “unstable, unbalanced, uncoordinated and unsustainable”.

High and sustained growth rates had been based on elevated investment-to-GDP ratios — which were only possible with low shares of wage income and domestic consumption, as well as with cheap and repressed finance.

Another factor was that dynamic markets abroad were willing to absorb an expansion of Chinese exports. The combination of high investment and low domestic consumption (a flipside of high profits relative to wages) was only possible because of current-account surpluses in global trading.

Growing income disparities were the domestic flipside of that, a potential source of social strain along with changes in the external environment.

Three mutually reinforcing paths of transformation were seen ahead in 2011, with a structural growth slowdown on the cards.

First, those gains had, to a large extent, already happened by transferring resources from lowproductivity agriculture activities to industry. On the

Autumn 2022 Issue Columnist | Capital Finance International
Figure 3: Exports aside, the rebound of lockdowns has been very lackluster. Source:CEIC,GavekalDragonomicsMacrobond,July14th,2022(ThomasGatley,WebinaronChina). Figure 4: China - credit and M2 money supply (% increase on a year earlier).*TotalSocialFinancing.Source:TheEconomist,August18th,2022. Figure 5: China - annual GDP growth rates. Source: CEIC.

demographic front, the old-age-dependency ratio had started to rise. Gains in economic efficiency and technological progress — based on the absorption of existing, imported technologies — would have to be replaced with local innovation. The set of second-generation policy reforms necessary for that would require time.

As a second path of change, a rebalance in the sector structure and in aggregate-demandcomposition was expected. Higher shares of services and consumption, following rising wages, with a decrease in exports, savings, and investment ratios-to-GDP, should accompany the increased reliance on domestic sources of aggregate demand.

The income gap between coastal areas, where special zones were created and extended, and middle and western regions should fall with the shrinking labour pool. Despite lower GDP growth and total factor productivity increases being harder to obtain, the popular perception of rising prosperity would probably be higher than before, with increasing purchasing power by the population.

The third path of structural transformation would be a shift up the value chain in tradable and non-tradable activities. That should underpin the directions of change in the sector structure and components of aggregate demand. A transition to more sophisticated production processes was under way.

While moving in a less spectacular trajectory, China would morph into a mass-consumer market economy, combined with supply capacity increasingly reliant on the growth of “total factor productivity”.

Having a clear roadmap did not mean an easy ride. Given the low level of domestic consumption in GDP and the dependence on investments and trade balances, the transition risked experiencing an abrupt slowdown. Waves of credit-driven overinvestment in infrastructure and housing followed in a bid to allay fears of a downturn.

The second round of such over-investments came in 2015–2017, in response to a downturn in real estate and the stock market. These were the expansion policies adopted during the pandemic crisis in 2020.

A decline in GDP growth rates, to six percent in 2019, headed towards levels expected after the pandemic (Figure 5). And the gradual reduction of dependence on investment and trade surpluses can be seen in Figures 6 and 7.

The left-hand panel of Figure 6 depicts how domestic demand started shifting away from investment and towards consumption. The right-hand panel shows services outgrowing manufacturing as the production structure became more complex, integrated, and with higher added value.

That is a challenge, and a transition to a less investment- and export-dependent growth model has been coming from a starting point of exceptionally low consumption-to-GDP ratios. No wonder rebalancing toward a consumption-based growth model was expected to be only gradually pursued — GDP growth rates might collapse.

The change in growth pattern would require timeintensive structural reforms.

The left-hand panel of Figure 7 displays the decrease of the role played by current-account surpluses with the rest of the world as part of

China’s growth rebalancing. 2020 was a point off the curve. China’s current-account surplus narrowed in Q1, but widened again to 1.5 percent of GDP over four quarters ending in Q3, reflecting a more robust trade balance and a collapse in outbound tourism. The right-hand panel shows how rebalancing towards consumption regressed as public investment drove the 2020 first phase of after-pandemic recovery — and the reopening after the Q1 lockdown favoured industrial activity.

A harder question is how the gradual evolution of GDP growth and changes in composition since Columnist 18 | Capital Finance International
Figure 6: China’s rebalancing toward consumption and services. Source:Aasaavari,N.etal(2020). Figure 7: China’s rebalancing toward less export-dependence. Source: IMF (2020). Figure
China’s total government debt, by source 2013–2021 (Est.). Source: Borst (2022).

2010 would have performed in the absence of real estate over-investment. It counted only on the rebalancing, an increase in wages and mass domestic consumption, and the transition to greater weights of services and higher technology.

This matters — there is a perception that overinvestment, as a growth lever, has declined in importance. Not only because of the debt levels, particularly via local government financing vehicle debt (LGFVs in Figure 8), but also because its returns in terms of GDP growth showed a lower contribution.

Chinese authorities are now choosing to safeguard their economy from financial vulnerabilities, even at the price of GDP growth below official targets.


The domestic consumption-to-GDP level remains low, which is a challenge. In addition to the high proportion of profits concerning wages, low levels of public spending on the social safety net have led to high household savings. As depicted on the left-hand panel of Figure 9, the coverage of the unemployment insurance system is minimal — even thinner in rural areas. Only 10 percent of 23 million unemployed workers received benefits in 2016.

Spending on social assistance and public health care is low. China’s aggregate welfare and health expenditures are only about 3.5 percent of GDP, less than the average of its emerging market peers (Figure 9).

Another challenge will be in climbing the tech and value-added ladder. China has done its homework in terms of investments in education, infrastructure, etc., to absorb this. In priority sectors, firms have continued to increase their capital expenditure. China has now reached the top of the ladder in many sectors, where “tacit and idiosyncratic” technology content must be locally developed. The new normal of the global economy — post-pandemic and with the war in Ukraine — is an environment less friendly for China to delve in overseas technology.

China should resume the rebalancing between public and private companies (SOEs and POEs) in service sectors (Figure 10, right-hand panel).

The rebalance has stalled, and progress in reforming SOEs has seen limited progress. Credit is still preferentially channelled to state businesses, which enjoy implicit guarantees. Competition between private firms and state-owned enterprises remains uneven. While large state-owned banks

keep lending to SOEs, infrastructure and real estate investments had been supported by shadow finance.

SOE “deleveraging” has paused, reflecting the pandemic effect. What matters here is to call attention to the fact that the performance indicators on the left-hand panel of Figure 10 suggest that the absence of significant reform of SOE businesses has come at a cost in terms of productivity and real returns. According to the IMF, the average productivity gap between SOEs and private enterprises across sectors is about 20 percent.

China has seen remarkable growth over recent decades, but average sectoral productivity remains at about one-third of the global frontier. Productivity gaps are huge in the services sector. Business services productivity stands at just 17 percent of the frontier level, largely because of high entry barriers. Addressing these gaps would mean opening non-strategic sectors such as services to private firms — domestic and foreign. Removing regional regulatory barriers would help to increase competition and factor allocation by facilitating firm entry and mobility across regions and sectors.

These productivity gaps have significant implications for the level of GDP considering the SOE sector’s dominance in the use of resources. The IMF refers to a staff analysis suggesting that reforms closing productivity gaps between SOEs and POEs across sectors could raise output by around four percent.

It is worth recalling the debt legacy of the three previous waves of over-investment in housing and infrastructure. Safeguarding against financial crashes will mean less use of them to boost growth ahead.


China’s economic growth will keep sliding. The rest of the world can no longer count on it as an engine of growth. But given the size of its economy and its growth rates at the margin, it will remain a fundamental component of the global economic dynamics. i FirstappearedatPolicyCentrefortheNewSouth.


Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, a visiting public policy fellow at ILAS-Columbia, and principal of the Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil. Otaviano has been a regular columnist for for the past ten years.

Follow him on Twitter: @ocanuto

Autumn 2022 Issue Columnist | Capital Finance International
Figure 9: Unemployment insurance coverage and social assistance spending. Source: IMF (2020). Figure 9: China’s rebalancing - SOEs and POEs. Source:IMF(2020),People’sRepublicofChina,StaffReportforthe2020ArticleIVConsultation,November.

Paolo is the global research leader in Banking and Financial Markets at IBM, Institute of Business Value. IBV is thought leadership centre of IBM.

Paolo Sironi: All Eyes on Financial Services Cyber-Resilience

No industry is fully immune from cybersecurity threats, from water pipelines to healthcare, financial services included. According to experts, regulators and government officials, all signs indicate that cybersecurity is here to stay and, most of all, is categorically different from the past.

n one side of the security barricade, today’s “always-on” digital operations are driving value but also creating new vulnerabilities expanding an organisation’s attack surface for cyber criminals to exploit. On the other side, threat actors are evolving their tactics, using artificial intelligence (AI) to run algorithms that automatically probe for weaknesses and unleash more efficient attacks. This year dramatic increase of geopolitical tensions has further heightened the alert status, as governments might weigh in to expand existing forms of cyber-attacks, which puts the critical infrastructure of the most digital economies squarely in the crosshairs of hackers.

20 | Capital Finance International IBM Thought Leadership
Figure 1: CEOs greatest challenges in the next 2-3 years

Financial services institutions are some of the heaviest investors and users of security controls, largely driven by stringent regulatory and compliance requirements. As a result, this sector has elevated itself to one of the most secure verticals in the world. However, these organizations remain a top target for cybercriminals chasing high reward pay days given the sensitive nature of the data they manage and their integral role in our global economy.

According to IBM’s 2022 Cost of a Data Breach report, produced in collaboration with the Ponemon Institute, attackers are becoming more sophisticated in their methods which leads to increasing costs for data breaches. The average cost of a data breach in financial services was $5.97M, 37% higher than the $4.35M global average. Across all industries, 45% of breaches occurred in the cloud, but those in the public cloud cost more than breaches at firms with a hybrid cloud model. Cloud migration, compliance failures, and the complexity of security systems are clear cost amplifying factors of the cost of data breaches.

While most banks still do not always apply a baseline security framework across the cloud estate, nor zero trust, the IBM study reveals that the latter reduced the cost of data breaches by 20%. This is clear indication of an action to be taken. All things important when it comes to managing the risk of cyber-security, leveraging AI automation garners the biggest advantage among other cost mitigating factors, such as expanding the collaboration between development and operation teams with DevSecOps practices (that involves introducing security earlier in the software development life cycle) and organizing Incident Response (IR) teams. According to IBM’s 2022 AI and Automation for Cybersecurity research, the longer the time to detect and remediate a data breach, the higher the cost. And the top 25% of AI adopters, among a surveyed population made of 1,000 executives, report successfully reducing the time to investigate incidents by nearly one third, and the time to respond and recover by nearly a quarter.

When it comes to financial services organizations with fully deployed security automation, the IBM Cost of a Data Breach report highlights that they can achieve significant savings, as they managed to lower the cost of a data breach by 41% compared to the global average.

Clearly, the fight is on for short-handed security teams, which are easily overwhelmed with too much data from disparate sources, an abundance of tools, yet often a scarcity of insights. These challenges can easily exceed the skills of even the most knowledgeable security experts and the capacity of the largest, most talented cybersecurity operations teams. Institutions are required to deploy solid strategies for talent and transformation, as cybersecurity employees need both hard and soft skills to succeed with AI.

The scope and breadth of the effort is bringing business attention, as a consistent security posture is a catalyst for business resilience and confidence to grow in a digital economy. In 2022, IBM also surveyed the opinion of 3,000 CEOs of global organizations - across 28 industries and more than 40 countries – about their greatest challenges in the next 2-3 years. Notably, 70% of the 270 CEOs leading banking and financial markets (BFM) institutions indicated cybersecurity resolutions as the major challenge (see figure 1).

Resilience is key to success in the fight against hackers and rogue actors. Attacks can be reduced, and their impact mitigated, but institutions might not be able to eliminate all risks. Therefore, it is the capability to stay resilient and recover with speed – based on a modern hybrid cloud approach with advanced interoperability and portability of IT services, coupled with AI plus automation - that adds further value to deliver on the business expectation. i

The research papers can be downloaded from theseIBMpages:

The 2022 Cost of Data Breach:



Paolo Sironi is the global research leader in banking and financial markets at IBM, the Institute for Business Value. He is a former start-up entrepreneur and quantitative risk manager in investment banking. Paolo is the author of literature about finance, banking, and digital innovation. Member of the IBM Industry Academy, his latest bestseller BanksandFintech on Platform Economies explores how platform theory, born outside of financial services, will make its way inside banking and financial markets to radically transform the way firms do business. Visit Paolo's website for more information.

IBM Thought Leadership | Capital Finance International
Author: Paolo

From Great Moderation to Great Stagflation

The world economy is undergoing a radical regime shift. The decades-long Great Moderation is over.

Coming after the stagflation (high inflation and severe recessions) of the 1970s and early 1980s, the Great Moderation was characterised by low inflation in advanced economies; relatively stable and robust economic growth, with short and shallow recessions; low

and falling bond yields (and thus positive returns on bonds), owing to the secular fall in inflation; and sharply rising values of risky assets such as US and global equities.

This extended period of low inflation is usually explained by central banks’ move to credible inflation-targeting policies after the loose monetary policies of the 1970s, and governments’ adherence to relatively conservative fiscal

policies (with meaningful stimulus coming only during recessions). But, more important than demand-side policies were the many positive supply shocks, which increased potential growth and reduced production costs, thus keeping inflation in check.

During the post-Cold War era of hyperglobalisation, China, Russia, and other emergingmarket economies became more integrated in

22 | Capital Finance International Nouriel Roubini:

the world economy, supplying it with low-cost goods, services, energy, and commodities. Large-scale migration from the Global South to the North kept a lid on wages in advanced economies, technological innovations reduced the costs of producing many goods and services, and relative geopolitical stability allowed for an efficient allocation of production to the leastcostly locations without worries about investment security.

But the Great Moderation started to crack during the 2008 global financial crisis and then during the 2020 COVID-19 recession. In both cases, inflation initially remained low given demand shocks, and loose monetary, fiscal, and credit policies prevented deflation from setting in. But now inflation is back, rising sharply, especially over the past year, owing to a mix of both demand and supply factors.

On the supply side, the backlash against hyperglobalisation has been gaining momentum, creating opportunities for populist, nativist, and protectionist politicians. Public anger over stark income and wealth inequalities also has been building, leading to more policies to support workers and the “left behind.” However well-intentioned, these policies are now contributing to a dangerous spiral of wageprice inflation.

Making matters worse, renewed protectionism (from both the left and the right) has restricted trade and the movement of capital. Political tensions (both within and between countries) are driving a process of reshoring (and “friend-shoring”). Political resistance to immigration has curtailed the global movement of people, putting additional upward pressure on wages. National-security and strategic considerations have further restricted flows of technology, data, and information. And new labor and environmental standards, important as they may be, are hampering both trade and new construction.

This balkanisation of the global economy is deeply stagflationary, and it is coinciding with demographic aging, not just in developed countries, but also in large emerging economies such as China. Because young people tend to produce and save, whereas older people spend down their savings, this trend also is stagflationary.

The same is true of today’s geopolitical turmoil. Russia’s war in Ukraine, and the West’s response to it, has disrupted the trade of energy, food, fertilizers, industrial metals, and other commodities. The Western decoupling from China is accelerating across all dimensions of trade (goods, services, capital, labor, technology, data, and information). Other strategic rivals to the West may soon add to the havoc. Iran crossing the nuclear-weapons threshold would likely provoke military strikes by Israel or even the United States, triggering a massive oil shock; and North Korea is still regularly rattling its nuclear saber.

Now that the US dollar has been fully weaponised for strategic and national-security purposes, its position as the main global reserve currency may begin to decline, and a weaker dollar would of course add to the inflationary pressures. A frictionless world trading system requires a frictionless financial system. But sweeping primary and secondary sanctions have thrown sand in this well-oiled machine, massively increasing the transaction costs of trade.

On top of it all, climate change, too, is stagflationary. Droughts, heat waves, hurricanes, and other disasters are increasingly disrupting economic activity and threatening harvests (thus driving up food prices). At the same time, demands for

decarbonisation have led to underinvestment in fossil-fuel capacity before investment in renewables has reached the point where they can make up the difference. Today’s large energy-price spikes were thus inevitable.

Pandemics will also be a persistent threat, lending further momentum to protectionist policies as countries rush to hoard critical supplies of food, medicines, and other essential goods. After two and a half years of COVID-19, we now have monkeypox. And owing to human encroachments on fragile ecosystems and the melting of Siberian permafrost, we may soon be dealing with dangerous viruses and bacteria that have been locked away for millennia.

Finally, cyberwarfare remains an underappreciated threat to economic activity and even public safety. Firms and governments will either face more stagflationary disruptions to production, or they will have to spend a fortune on cybersecurity. Either way, costs will rise.

On the demand side, loose and unconventional monetary, fiscal, and credit policies have become not a bug but rather a feature of the new regime. Between today’s surging stocks of private and public debts (as a share of GDP) and the huge unfunded liabilities of pay-as-you-go social-security and health systems, both the private and public sectors face growing financial risks. Central banks are thus locked in a “debt trap”: any attempt to normalise monetary policy will cause debt-servicing burdens to spike, leading to massive insolvencies, cascading financial crises, and fallout in the real economy.

With governments unable to reduce high debts and deficits by spending less or raising revenues, those that can borrow in their own currency will increasingly resort to the “inflation tax”: relying on unexpected price growth to wipe out long-term nominal liabilities at fixed rates.

Thus, as in the 1970s, persistent and repeated negative supply shocks will combine with loose monetary, fiscal, and credit policies to produce stagflation. Moreover, high debt ratios will create the conditions for stagflationary debt crises. During the Great Stagflation, both components of any traditional asset portfolio – long-term bonds and US and global equities – will suffer, potentially incurring massive losses. i


Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, is Chief Economist at Atlas Capital Team, CEO of Roubini Macro Associates, Co-Founder of, and author of the forthcoming MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, October 2022). He is a former senior economist for international affairs in the White House’s Council of Economic Advisers during the Clinton Administration and has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is, and he is the host of

Autumn 2022 Issue | Capital Finance International 23

IMF: Energy Shocks Amid Rapid Inflation Could Fuel Faster Wage Gains

Billions of consumers around the world are seeing higher oil prices seep into the cost of living and wages. Filling the gas tank soon starts to cost more when crude prices climb, as does airfare, but higher energy costs also boost prices for all the products on store shelves. Workers seek higher wages to compensate for a loss in their purchasing power.

These are what economists call second-round effects, and they can in turn further raise prices.

If this feedback is large and sustained, a wageprice spiral could emerge, with wage growth and inflation rising over an extended period.

As the ChartoftheWeekshows (available online), when overall inflation is already high, like it is now, wages tend to increase by more in response to an oil price shock. This finding, based on a study of 39 European countries, may reflect that people are more likely to react to price increases when high inflation is visibly eroding living standards.

The larger the second-round effects, the greater the risk of a sustained wage-price spiral through a feedback loop between wages and prices. If large and sustained, oil price shocks could fuel persistent rises in inflation and inflation expectations, which should be countered by a monetary policy response.

As our chart shows, the risk of such a dynamic tends to be greater when the overall inflation rate is already high. For example, wages increase by 0.4 percent when underlying inflation is higher than 4 percent, one year after a 10 percent increase in oil prices, but increase by less than 0.2 percent otherwise.

When overall inflation is higher, people tend to be more alert to price increases of all stripes and seek higher compensation for oil price

Second-round effects: If inflation is already high, wages are likely to increase by more than usual following an oil price shock. (wage responses to a 10% oil price shock, percent). Source:IMFstaffestimates.Note:Thesamplecovers39countriesinEuropefrom2000Q1through2019Q4.

rises. However, differences between high and low inflation periods narrow in the second year. These results impart two messages on the current situation, one concerning and the other reassuring.

Of concern is how current high inflation could increase the risk of energy prices causing sizable second-round effects and a sustained increase in inflation, which includes pushing up inflation expectations. To head off such a risk, central banks will need to respond firmly.

What’s reassuring is the chart shows that even in a high-inflation environment, wages

stabilised after a year rather than continuing to rise at a steady clip. In other words, there was a wage level but not a wage inflation increase.

To the extent that central banks remain adequately vigilant, current high inflation could still cause higher compensation for the cost of living than usual but need not morph into a sustained increase in inflation. i


24 | Capital Finance International >
When inflation is high, wages tend to rise more in response to a spike in oil prices. And the more wages rise, the greater the risk of a sustained increase in inflation.
"Of concern is how current high inflation could increase the risk of energy prices causing sizable second-round effects and a sustained increase in inflation, which includes pushing up inflation expectations."

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Joschka Fischer:

The End of Stability

he world is reeling from an extraordinary confluence of crises, including Russia’s war of aggression in Europe, the ongoing COVID-19 pandemic, sweeping trade and supply-chain disruptions, inflation, food insecurity, and all the morbid symptoms of climate change. Though the world order built after World War II was far from perfect, it at least

provided stability and ample opportunities for international cooperation. But now, it seems to be falling apart.

Russia, a nuclear great power, has attacked its neighbor for no good reason, indiscriminately murdering those whom it still calls its “brothers” and “sisters.” For six months now, the Kremlin

has waged a bloody campaign of conquest that is more befitting of the 1940s than the 2020s.

And Eastern Europe is not alone. The specter of war – and a conflict between the twenty-first century’s two superpowers – also looms over the Taiwan Strait. China is escalating its military threat against Taiwan, and thereby increasing

26 | Capital Finance International
T >

the risk of a direct armed confrontation with the United States.

Nor can we forget Iran, which has been pursuing its nuclear program in earnest since former US President Donald Trump withdrew the US from the Joint Comprehensive Plan of Action in 2018. A nuclear-armed Iran would introduce a new permanent risk of war in a region that is already supercharged with geopolitical tensions and volatility.

Together, Eastern Europe, the Taiwan Strait, and the Middle East form a triad of extraordinarily dangerous crises that are unraveling the postCold War global order and its core principles of non-violence, international cooperation, and economic globalisation. The primary beneficiaries of that order – East Asia and Western advanced economies such as Germany – are already suffering the effects of this thoroughgoing destruction. Snarled supply chains, the breakdown of trade, and surging inflation are proof of a new economic reality.

When the collapse of the Soviet Union ended the Cold War and its zero-sum confrontation between rival geopolitical blocs, the West was able to capitalise on its victory because it seemed to have an attractive alternative model to offer. Its message to post-communist and other developing and emerging economies was, “Just follow our example. A market economy and democracy will deliver modernity, prosperity, and stability.”

Yet beyond the European Union, North America, and East Asia, this formula never really worked as promised. The biggest economic success stories were found in places like China and Singapore, which adopted some market reforms without the democracy. And when the 2008 financial crisis erupted in the US and quickly spread to the rest of the world, many came to doubt the superiority of the Western model.

The question now is whether the new greatpower rivalries will evolve into a broader systemic confrontation between democracy (the US and Europe) and authoritarianism (China and Russia). Is Cold War II upon us?

There is plenty of evidence to suggest that it is. But the situation today is also much more difficult and complicated than in the late 1940s, when Cold War I began. To the newold risk of violent conflict (in Europe, East Asia, or the Middle East) must be added the

increasingly severe effects of climate change. As this summer’s unprecedented heatwaves in both China and Europe have shown, the climate crisis will amplify the new geopolitical and economic crises. No longer can humanity afford to ignore or postpone investments in climate adaptation and mitigation, which will require a full remodeling of the world’s industrialised societies.

The first Cold War ultimately was decided by the nuclear-arms race and the superiority of the Western economic system. This one will be decided by the ability to build a more equitable global order and to resolve the climate crisis. To win, Western democracies will have to offer something that truly benefits everyone. While military armaments will remain important as deterrents against potential adversaries, the key decisions will be taken in other domains.

The important thing to bear in mind about the climate crisis is that it is not typical of human societies’ historical progression. Whereas most crises occur within the existing system and eventually yield to a return to normality, we are now facing a crisis of the system itself. Like it or not, a new reality is announcing itself and demonstrating that there will be no return to the status quo ante. Humanity’s destruction of the environment and altering of the climate have precluded any continuation of existing models.

Russian aggression certainly poses a threat; but it is a familiar one that we know how to deal with. Rising temperatures, dry riverbeds, parched landscapes, falling crop yields, acute energy shortages, and disruptions to industrial production are something else. We have known for a long time that these problems were coming; but we did nothing, because a truly effective response would require a break from the past and a systemic overhaul of our politics, economies, and societies.

Most states have been unwilling to undertake such a project. But one must ask: When the consequences of the climate crisis become even more painfully obvious, will we still have time to mend our ways? Or will the climate already have passed irreversible tipping points, ushering in a new Heat Age that makes life worse for almost everyone? i


Joschka Fischer, Germany’s foreign minister and vice chancellor from 1998 to 2005, was a leader of the German Green Party for almost 20 years.

Autumn 2022 Issue | Capital Finance International 27
"Though the world order built after World War II was far from perfect, it at least provided stability and ample opportunities for international cooperation. But now, it seems to be falling apart."
"Its message to post-communist and other developing and emerging economies was, 'Just follow our example. A market economy and democracy will deliver modernity, prosperity, and stability.'"



Belgium’s KBC Group may not be Europe’s largest bank — 18th by market capitalisation — it is considered one of the most financially solid.

It is an exceptional performer on many levels. From risk-adjusted CIR (cost-income ratio) and ROE (return on equity) to CET1 (common equity tier 1), KBC routinely outpaces its peers by 20 percent or more. The bank consistently features among the most profitable in Europe, with financial returns of more than 15 percent.

The bancassurance group is generous to shareholders as well, paying out dividends totalling €10.60 per share over 2021, representing a return of over 16 percent on the late September share price of €51.66. That value of €2.6bn — €3.6bn including a special coupon — propels KBC Group to the top of the BEL20 index of largest publicly listed companies in Belgium.

In August, CEO Johan Thijs announced “excellent” Q2 results with a net profit of

€811m over the three-month period, beating market expectations by about €100m. Higher interest rates, especially from its business units in Czechia and Hungary, boosted results — but are probably of a temporary nature.

While higher interest rates may continue to underwrite group profits, inflation is driving operating costs higher. Thijs warned investors not to jump to the conclusion that KBC Group is immune to the fallout from the war in Ukraine and the anticipated economic headwinds. “GDP growth is slowing, and inflation is much higher than expected,” he said. “That cannot fail to have an impact on the group. This may not yet be reflected in the overall results, but can already be detected in the details.”


One of those details concerns the closing of the interest rate gap between the Eurozone and Czechia, KBC Group’s second-home market. The Czech National Bank was quick to raise its base rate (currently seven percent), which enabled KBC Group to profitably park some of its ready

cash at the group’s ČSOB daughter. However, Thijs cautioned that the ECB’s recent and future rate hikes will narrow this gap. He expects the European Central Bank (ECB) to raise its base rate to at least 2.5 percent by the end of 2023.

Another hit may come from the inclusion of banks in the windfall tax under consideration by the Czech government. During a recent conference call with analysts and portfolio managers, Thijs said that conversations with the government were ongoing, and that one of the alternatives under discussion is increased bank financing of major infrastructure projects. Last year, ČSOB contributed almost €700m to the group’s €2.64bn profit.

In Hungary, where KBC Group owns K&H Bank, a similar tax — a 10-percent levy on net revenue for 2022, reduced to eight percent in 2023 — was introduced as part of a set of fiscal emergency measures to raise an additional €2.9bn for the treasury.

KBC Group is also active in Slovakia and Bulgaria, where it recently acquired the 122 branches of | Capital Finance International Cover Story 28
‘Sustainability is no longer just a PowerPoint presentation, but an integralcomponentofourbusiness…’


At home, KBC Group seems well-equipped to weather any storm. In Q2, the bancassurer shifted €45m from its unused corona buffers to provisions for possible losses on its credit portfolio because of the looming recession. The group’s cushion for absorbing setbacks now amounts to €268m and is set to further increase by year’s end.

Thijs expects economic growth in Belgium to fall from 2.4 percent in 2022 to 0.3 percent next year. “That forecast is based on a continuation of the war in Ukraine, but excludes an escalation of hostilities. We also assume that Europe is able to compensate for the loss of Russian natural gas deliveries.”

Should that scenario not hold, the Belgian economy may shrink by as much as 2.5 percent — and double that in Central European economies where KBC Group holds significant interests. As cautious as Thijs is, he remains buoyant on the group’s resilience. An early embrace of fintech allowed the group to keep spiralling operating costs in check through increased productivity.

That’s where “Kate” quietly enters the equation: KBC’s customer-facing bot has charmed accountholders. Driven by AI and deep learning (a subset of machine learning that exploits neural networks to mimic the learning process of the human brain), Kate is seen as the way of the future.


Developed in-house, Kate’s success prompted KBC to launch DISCAI, a spinoff to market the company’s AI prowess. It has already obtained

25 patents on AI tech, and now seeks to monetise that.

A first application that detects money laundering via the analyses of unusual patterns in business transactions is being offered for sale to virtual and traditional banks — essentially competitors.

“We don’t have an issue with that at all, nor does it detract from KBC’s competitive edge,” says Thijs. His bank has used the technology along with its regular AML protocols for three years.

“Standard systems detect between 10 and 15 percent of AML cases. We think our technology ups that to around 50 percent.” DISCAI also markets an application that checks if partners to any transaction feature on a blacklist or are subject to international sanctions.

Musing about the outsized potential of DISCAI, Thijs may still take the tech company public.

Cover Story | Capital Finance International
Austrian Raiffeisenbank for a reported €1bn, further consolidating the group’s position in Central Europe.

“Things usually move fast in the tech-sphere,” he points out. “Our team of 100 AI developers is the envy of the industry, and there is no saying where it will take us next.” Other financial institutions have discreetly inquired if the technology that powers Kate may be for sale. “Not yet,” is the response.

Thijs has expressed concern about the dearth of IT specialists. KBC Group is recruiting, but it’s a tough market because of the heavy war for talent.


Kate is more than a helpful bot; she also gave birth to a stable coin. In June, KBC Group ventured into crypto with its blockchain-based Kate Coin. Kate Coin operates in a closed-loop environment, outside of which it has no value. The idea is to reward accountholders with Kate

Coins. The tokens can be redeemed within the KBC universe, and debuted flawlessly on snacks and cold drinks for several thousands of KBC employees at the Werchter Boutique music festival in June.

“This is much more than just a fancy loyalty programme,” says Thijs. “Kate Coin enables us to nudge customers towards, say, sustainable and responsible investment options. Also, someone looking for a credit to buy solar panels may receive extra coins in their wallet.

“During our Kate Coin pilot in the city of Leuven, customers could use coins to charge their electric vehicles. In a next phase, we may open the Kate Coin environment to include corporate clients and even the government. The possibilities are truly endless.”

KBC is the first European financial institution to launch its own digital coin, but it is no stranger to blockchain and successfully pioneered its application in trade finance.

The ECB has picked Amazon to develop user interfaces for its digital currency, which irks Thijs. “We have the knowhow right here in Europe, and KBC in particular has a track record second-to-none when it comes to building digital banking apps.” His annoyance may be justified. KBC Mobile has been recognised and celebrated as the world’s most user-friendly banking app.

The app and Kate are creating an environment that stretches beyond banking. With a few taps or swipes, KBC Mobile users can buy tickets for public transport, make reservations at restaurants, book seats at shows, and claim discounts and cashbacks at 70 retailers.

Cover Story 30 | Capital Finance International


But KBC Group keeps its corporate eye on the core business of banking and insurance. Thijs says the technology is deployed for the convenience of account- and policyholders, saving them time and money.

In Belgium, KBC Group has a network of 439 branch offices and 310 insurance agents. In early September, the company doubled its private banking branches, taking the total to 28, and trebled its commercial banking offices to 24. The reasoning is to better serve corporate and individual accountholders who have at least €250,000 to invest.

Thijs sees the bancassurer’s efforts to take the lead in the digital domain as an essential part of KBC Group’s wider strategy. “Since 2012, we have incorporated sustainability into our operations and decision-making processes.

“Sustainability is no longer just a PowerPoint presentation, but an integral component of our business.”

In Belgium, the group shuns transactions that have an outsized environmental impact. In

Czechia, KBC has reduced its exposure to the coal industry by over 80 percent. “Given that country’s continued dependency on coal, we have been unable to complete exit the sector,” Thijs admits, “but the Czech government has committed to fully phase-out coal from the domestic energy mix by 2033.” The group has appointed a sustainability director in each of its markets to screen and assess investment and credit portfolios for environmental impact.


“Data is, in a sense, the new electricity that drives our business. Data is also needed to properly gauge the impact of our sustainability initiatives. Three years back, we offered KBC Group management training in responsible behaviour, including customer relations. It has earned the group a nomination for inclusion in the world’s 10 most sustainable corporates.”

Over the next few years, KBC Group aims to perfect Kate and take her to the next level. “We expect Kate to address 75 percent of customer inquiries and enable a seamless integration between humans and machine. Kate also operates at the core of a platform designed to save our customer both time and money —

and considerably add to the simplification of transactions and interactions.

“Kate must perfect the user experience and earn the trust of KBC Group customers. I also aim to use AI to reduce institutional risk and contribute to the perfection of the group’s overall riskmitigation framework.”

Thijs has been at the helm of the KCB Group for 10 years. His time at the helm has been characterised by a willingness to delegate and adapt to changing times.

Though he admits that the corona pandemic changed everything, he is not nostalgic. “There was a big and sudden push towards digital. KBC Group was and remains exceptionally well-placed to respond to this shift in consumer demand.

“Our push into tech and digital paid off. If anything, this shows the value of discerning longer-term trends and shaping a clear vision of the future and how you, as a corporate, fit into that scenario. A responsiveness to change is required. Looking back to yesterday, or remaining set in your ways for tradition’s sake, is not our way forward. i

Cover Story | Capital Finance International

Mortgages Agreed Within Seconds? This Banker Vaults Digital Frontiers

Meet Kate. She’s your personal digital assistant. Ask her anything and she’ll show you the way. Now, Kate is — of course — a bot, and as such perhaps not everybody’s favourite. However, KBC of Belgium is convinced that its accountholders will come around to Kate.

In fact, they are doing so already — in droves.

“Right now, Kate correctly responds to 53 percent of the questions asked thanks to the judicious application of artificial intelligence and deep learning technologies developed inhouse. This improves as Kate gains experience. Mind you, at barely 18 months she’s still a baby. Lovable, for sure, but not yet mature. However, we expect Kate to answer and solve fully 75 percent of the queries she receives before long,” says KBC CEO Johan Thijs.

Thijs stresses that Kate’s role is merely to save accountholders time and effort — and add convenience: “She’s the personal banker in your pocket or the palm of your hand. For the holdouts who’d rather chat with a ‘legacy’ account executive, KBC Live, a customer service department with extended opening hours staffed by over 600 commercial employees — mostly staff formerly employed at the bank’s branch offices. In 2020, KBC Belgium trimmed its network from 382 fully staffed branches to 328.

Whilst Thijs finds it hard to suppress his excitement over the bank’s technological prowess, he also insists that technology is but a means to an end: “KBC remains, and will always remain, a bancassurance company that happens to deploy advanced technology to develop and further its core business.”


According to Thijs, improved interaction between humans and machines is a field that holds great promise. KBC has been exploring this frontier, and pushing its boundaries, since 2012: “In that year the bank made a strategic decision to invest in and deploy technology to better serve the needs of its customers. KBC is a pioneer of mobile banking as well, shifting its full suite of services onto handheld devices. After all, the most ubiquitous platform is without doubt the smartphone.”

Thijs emphasises that the accountholder remains in charge and free to decide how to interact with the bank. “There is an overabundance of channels available from brick-and-mortar to phone, online, and mobile. But we do note that our approach — prioritising solutions over tech — leads accountholders towards mobile banking.”

Johan Thijs is one of the longest-serving CEOs in the European banking world. He was appointed to KBC’s Belgium executive board in 2006 and became its CEO just three years later, earning a seat on the group board as well. After another three years, in 2012, he became KBC Group CEO. Thijs (57) moves fast. In 2017, 2018, and 2019, Harvard Business Review ranked him among the world’s 10 best CEOs. He’d probably still be on that list had the review not decided to stop publishing the list.

Part of Thijs’s longevity at the top may perhaps be ascribed to his tendency to upset the proverbial apple cart by slashing hierarchies and bureaucracy. In a now-famous and oftrecounted episode, he asked an assembly of some 500 staffers from the bank’s mortgage loan department how long it took, on average, to approve a home loan. The answer that came back was “10 days.”

Thijs wondered out loud why this could not be done in 10 minutes. This caused much headshaking, and even laughter. Doubling down, the CEO then suggested 10 seconds would probably suffice once the product — mortgages — had been reduced to its very essence. It took about a year of tinkering, but now KBC can — and does — fully process mortgage applications in 10 seconds. Sometimes less.


“All that required was a different mindset,” he said. “You cannot expect a customer who buys a washing machine online in the evening and has it installed the next morning to wait 10 full days for a mortgage or any other banking product.

“That’s not how things work today. It’s essentially the same with our insurance products. We now process car claims fully online without human intervention. The sole exception are incidents involving bodily harm.”

Thijs has a soft spot for the insurance vector of his KBC Group. After obtaining twin master’s degrees in Applied Mathematics and Actuarial Science at Leuven Catholic University, he started his career as an actuary at ABB Verzekeringen (Insurances), one the four corporate constituents of the 1998 merger that formed the present-day KBC Group.

As an actuary at ABB, Thijs showed a knack for re-engineering existing products using data analysis. He also managed to bring others over to his novel approach. He can be quite convincing and is a people-person par excellence. “In order for me to do my thing, I need to have people around. Then it becomes ‘doing our thing’

Cover Story 32 | Capital Finance International
KBC Bank chief executive has no truck with bureaucracy or time-wasting — but stays upbeat, reportsWimRomeijn.

which not only inspires me personally but also increases team productivity and often leads to surprising results.”

For an early adopter of fintech, Thijs is a remarkably cold lover of technology: “Running a big company such as KBC is mostly hard work with some tech thrown in to support operations and accountholders — and for good measure. However, we also need to be able to have some fun, of course.” For Thijs, the important issue is corporate culture: one that emphasises unity, inclusion, and a shared sense of purpose. KBC’s Team Blue is all about creating an ecosphere that allows and enables all members to “do their thing”.

Thijs is a friendly, open, and understanding leader not known to suffer mood swings; he is generally upbeat. “When necessary, I can be quite decisive — but only under exceptional circumstances.”

Sometimes fellow bankers joke that KBC behaves more like an outsized fintech than a bancassurance major. Behind such jest may lurk a degree of envy. A few competitors openly admit to mimicking KBC’s approach, says Thijs. “They have quite a bit of catching up to do while our group continues to expand its leading edge.”

The group employs more than 100 AItechnologists — and is busy hiring more. Thijs muses that his 43,000-strong staff is now

IT-enabled too, and, as such, underwrites his approach.

However, he remains adamant that tech has limits. “A bank can digitalise pretty much everything except for trust — and almost nobody trusts a machine. Trust is what allowed KBC to navigate the banking crisis and come out the other end relatively unscathed, albeit a bit more streamlined.

“Our operations are built on, and supported by, the twin pillars of human and tech whereby accountholders have the final say over how they prefer to interact with their bank. In the end, it is the customer who sets out our course.” i

Cover Story | Capital Finance International
CEO: Johan Thijs

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


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

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

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

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

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

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

India’s political class questions the merits of expanding trade links with the UK. In the colonial era of unfettered imports from Britain, the Indian economy suffered. Indian businesses are keen to

safeguard their interests with a slower pace of trade and investment liberalisation. I have little doubt that the Rajya Sabha (Council of States) and the Lok Sabha (House of the People) will seek assurance that the differing interests of the regions are properly covered.

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

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

Advancing financial services is a key ask. The UK would benefit from better financial and legal services’ access to the Indian market. The Indian financial sector is emerging as a dynamic area of growth, but it ranks only 30th as an export destination. Figures suggest that Britain Columnist 34 | Capital Finance International >
Every community in both countries stands to benefit from an accord that will stand the testoftimeandbemutuallyadvantageous.
"The UK has lost market-share with every country in the G7."

exported services worth just £3.8bn of to India, with financial services making up less than 10 percent of that. Indian financial centres are not large enough to serve the national economy.

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

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

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

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

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


Lord (JD) Waverley

Autumn 2022 Issue Columnist 35
IndependentMember House of Lords Twitter: @LordWaverley LinkedIn: jdwaverley
"Indian financial centres are not large enough to serve the national economy."

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

While the film is a fictionalised account, it accurately depicted a fundamental change in tone. The public reaction took the establishment by surprise. At the time, the breakdown of the princess’s marriage to Prince Charles, the heir to the throne, and their subsequent divorce, had been making sensational headlines across the world. Many thought the response to her death bordered

36 | Capital Finance International >
"Despite her age and frailty, the possibility of her death seemed not to have occurred to many of her subjects."

on the hysterical, something until then alien to British society. People began to ask why the flag was not being flown at half-mast at Buckingham Palace — and no explanations of royal protocol could calm the increasingly angry crowds.

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

In the two weeks leading up to the Queen’s funeral, most commentators focused on her

dedication and service to the country over 70 years. There was a tendency to gloss over the less agreeable moments of family turmoil: the public humiliation of Prince Andrew, the overseas activities of Prince Harry and Meghan Markle.

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

One wonders whether Queen Victoria, given her attitude to Cromwell’s statue in Manchester, would have done the same. Cromwell ran the country as a republic for a few years. By 1660,

the British people, beaten down by war and the heavy hand of Puritanism, were ready to invite Charles II back to the throne.

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

His carefree approach to kingship can be forgiven; his reign followed a dark period in British history. His namesake, King Charles III — given his mother’s example — is likely to steer more towards virtue than frivolity. i | Capital Finance International 37

Joseph E Stiglitz: The Fed Should Wait and See

he US Federal Reserve Board will meet again on September 20-21, and while most analysts anticipate another big interest-rate hike, there is a strong argument for the Fed to take a break from its aggressive monetary-policy tightening. While its rate hikes so far have slowed the economy – most obviously the housing sector – their impact on inflation is far less certain.

Monetary policy typically affects economic performance with long and variable lags, especially in times of upheaval. Given the depth of geopolitical, financial, and economic uncertainty – not least about the future course of inflation – the Fed would be wise to pause its rate hikes and wait until a more reliable assessment of the situation is possible.

There are several reasons to hold off. The first is simply that inflation has slowed sharply. Consumer price index (CPI) inflation – the measure most relevant to households – was zero in July, and it is likely to have been zero or even negative in August. Similarly, the personal consumption expenditure (PCE) deflator –another often-used measure based on GDP accounts – fell by 0.1% in July.

38 | Capital Finance International
T >

Some will be tempted to credit tight monetary policy for this apparent victory over inflation. But that argument commits the post hoc ergo propter hoc fallacy (to assume that because A happened before B, A must have caused B) and confuses correlation with causation. Moreover, most of the main factors behind today’s inflation have little to do with curbing demand. Supply-

side constraints drove inflation higher, and now supply-side factors are bringing inflation back down.

To be sure, many economists (including some at the Fed) expected the supply-side interruptions from Russia’s war in Ukraine and the pandemic to be overcome very quickly. In the event, they were wrong, but only about the speed at which conditions would normalise. Much of this failure was understandable. Who would have thought that America’s storied market economy would be so lacking in resilience? Who could have foreseen that it would suffer critical shortages of baby formula, feminine hygiene products, and the components needed to produce new cars? Is this the United States or the Soviet Union in its dying days?

Moreover, before Russian President Vladimir Putin started massing troops on the Ukrainian border late last year, no one could have predicted that there would be a major land war in Europe. And now no one can predict how long the war will last, or how long it will take for political leaders to stop the price spikes associated with it (some of which are simply the result of price gouging – “war profiteering”).

Still, the overall inflation story is simple: Many of the supply-side factors that drove prices higher earlier in the recovery are now being reversed. Notably, the CPI gasoline index plunged by 7.7% in July, and private indices suggest a comparable decline in August. Again, this price reversal was predictable and predicted; the only uncertainty concerned the timing.

Other prices are following a similar pattern. In July, the core CPI (which excludes energy and food) rose by a relatively modest 0.3%, and the core PCE deflator rose by just 0.1%. That suggests an easing of the backlog of imported goods – the problem behind those empty store shelves and business disruptions earlier in the pandemic.

Recent data support this inference. The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index has fallen sharply from its peaks last fall to just above where it was before the pandemic. While shipping costs are still well above their pre-pandemic levels, they are down almost 50% from last fall’s peaks and likely to keep falling. After soaring during the pandemic and in the early months of Russia’s war, the prices of a wide range of commodities have fallen back to pre-pandemic levels. The Baltic Dry Goods Index, for example, is now below its average level for 2019.

Auto manufacturers have also overcome the problems created by the worldwide semiconductor shortage. According to the Fed’s

own industrial production index, motor-vehicle output was actually above its pre-pandemic level as of July.

After a year of getting a lot of bad news about inflation and the supply-side factors behind it, we are now starting to get a lot of good news. And while no one would suggest that monetary policymaking should rest on just two months of data, it is worth noting that inflation expectations have also moderated, with both the University of Michigan Consumer Sentiment Index and the New York Fed’s Survey of Consumer Expectations edging downward in July.

The standard justification for Fed policy tightening is that it is needed to prevent a cycle of self-fulfilling expectations, with workers and businesses coming to expect higher inflation and setting wages and prices accordingly. But this cannot happen when inflation expectations are declining, as they are now.

Some analysts have suggested that the US needs a long period of higher unemployment to get inflation back down to the Fed’s target level. But these arguments are based on the standard Phillips curve models, and the fact is that inflation has parted ways with the Phillips curve (which assumes a straightforward inverse relationship between inflation and unemployment). After all, the large rise in inflation last year was not due to a sudden large drop in unemployment, and the recent slowdown in wage and price growth cannot be explained by high unemployment.

Given the latest data, it would be irresponsible for the Fed to create much higher unemployment deliberately, owing to a blind faith in the Phillips curve’s ongoing relevance. Policymaking is always conducted under conditions of uncertainty, and the uncertainties are especially large now. With inflation and inflationary expectations already dampening, the Fed should be assigning more weight to the downside risk of additional tightening: namely, that it would push an already battered US economy into recession. That should be enough reason for the Fed to take a break this month. i


Joseph E Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is a former chief economist of the World Bank (1997-2000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation and was lead author of the 1995 IPCC Climate Assessment.

Autumn 2022 Issue | Capital Finance International 39
Chair of the Federal Reserve: Jerome Powell. Photo: Reuters

Mirror, Mirror, on the Net —

Who’s the Richest of Them Yet?

Bezos edges to the front, but Musk comes around the outside, this pair fairly flying now, as Gates seems to drop off the pace as they come into thefinalfurlong…

This ongoing fascination with the world’s richest people: Are we watching a keenly fought race to the pinnacle of human financial achievement, or an obscene farce played out against a backdrop of drought, disaster, and rising international poverty?

It's a tough question, and one perhaps best not examined too closely. We all know the field, though, stamping and puffing to get out of the starting gate and romp to the next billion. So let’s start there. Gates. Bezos. Musk. Buffett. Arnault. We feel we almost know these people as the media keep us abreast of their antics, gambits, affairs, and burgeoning bank accounts. We’re even starting to wonder if the world’s first trillionaire is about the break cover, perhaps even now raking in the final few bucks, bonds, and credit notes to crack the once unimaginable target.

Forbes has its finger on the pulse, as always, and while the numbers change with each deal, transaction, project, or initiative, let’s get the Top 10 list out there right away. No real surprises:

1. Elon Musk: $219bn

2. Jeff Bezos: $171bn

3. Bernard Arnault & family: $158bn

4. Bill Gates: $129bn

5. Warren Buffet: $118bn

6. Larry Page: $111bn

7. Sergey Brin: $107bn

8. Larry Ellison: $106bn

9. Steve Ballmer: $91.4bn

10. Mukesh Ambani: $90.7bn

The Forbes list is much, much longer; it runs into the thousands. But these are the smart primates living high in the canopy of the financial jungle. Their innate smarts are the equivalent of opposable thumbs and tool use, while the rest of us scurry and bumble along the forest floor, chewing on stuff and avoiding predators.

One of the first to ascend to those top twigs was the Oracle of Omaha himself: Warren Buffett.

His almost supernatural prescience and nous have spawned a million imitators, some of whom got rich by simply asking themselves “What would Warren do?” — and acting on the answer. Buffett has made no secret of his successful tactics; he buys oil and other blue chips that benefit the shareholders. In the first quarter of 2022, his Berkshire Hathaway empire ploughed some $41bn of its $147bn cash pile — mostly insurance float — into the stock market.

If he can do it, goes the thinking, so can we. And, of course, we can; the difference is in the size of the stake, and the ability to absorb any unforeseen losses. (This, if you hadn’t twigged it yet, is why the rich get richer.) Buffett’s company upped its stake in energy company Chevron to $25.9bn and purchased 121 million shares of printer manufacturer HP; $4.2bn, please. In March, Berkshire Hathaway popped a quick $11.6bn into the takeover of Alleghany, the conglomerate built on insurance and reinsurance businesses with a dazzling array of add-on manufacturing pursuits.

But Berkshire Hathaway has struggled to find opportunities just recently. Its most recent grand takeover — the $37bn buyout of Portland-based metal components manufacturer Precision Castparts Corp in 2016 — resulted in a $9.8bn write-down. It was a knock that prompted the Oracle to drop back from Wall Street and major acquisitions. Even the very rich must sometimes exercise caution.

And, before we form the impression that the wealthy lists are a blokey preserve, a quick aside to address noteworthy women like Australian mining magnate Gina Rinehart, and Russian model Natalia Vodianova. No, Vodianova’s not on the billionaires list — but she is one of the world’s top-earning models (her face has graced the cover of Cosmopolitan, Marie Claire and Vogue, her name linked with Gucci, Calvin Klein et al). The daughter of a Russian fruitseller is married to one of those who is in the Forbes club: Antoine Arnault, CEO of Berluti footwear and son of luxury goods purveyor Bernard Arnault. Heard of him? Founder of the Luis Vuitton / Moët Hennessy (LVMH) conglomerate? Bernard’s third of the Top 10.

Like some of the others mentioned here, Vodianova tempers her lavish lifestyle with

philanthropy. In 2004, she founded the Naked Heart Foundation to help disadvantaged children in her native Russia.

And if we’re talking about philanthropy, we have to go back to number four on the richest list. The Bill and Melinda Gates foundation, launched in 2000, is the world’s secondlargest charitable foundation, holding $49.8bn in assets. The stated goals are to enhance healthcare, reduce extreme poverty across the world, and expand educational opportunities. Bill and Melinda were joined in that generous venture by number five on the list, Warren Buffett, as well as Mark Suzman and Michael Larson. Gates has said he personally intends to fly the rich list by eventually giving all his money to the foundation.

Which brings us back to the top of the list: Elon Musk, enigmatic genius, alien imposter, or crackpot, depending on your point of view. He, too, has a philanthropic bent, albeit a more modest and controlling one. He donated $6bn to the UN World Food Programme to fight world hunger (with a list of conditions to ensure he had a detailed plan on how the money would be spent). He also donated $5.7bn of Tesla shares to charity last year — and, to his credit, no public announcement was made. The donation came to light through a Securities and Exchange Commission filing. So, some kudos to the king of the rich list.

The pandemic, a blight for so many, was in many ways the making of Jeff Bezos. Well, in terms of making him richer than ever, anyway. Home confinement, boredom, travel restrictions and lockdowns made online shopping a no-brainer, and Bezos simply had to keep his pockets open and listen to the kaching-kaching-kaching of virtual cash registers.

Bezos has made a few $100m donations — peanuts, really — and one of those went to former president Barack Obama's Foundation. Others went to World Central Kitchen's chef José Andrés and non-profit founder Van Jones for charitable use.

So: heroes or greedy buggers who wallow in obscene wealth? Does it really matter? They’re all, each and every one, an inspiration. What they encourage us to aspire to is a question we can only answer individually. i

Autumn 2022 Special


Quiet, Unassuming, Modest — and One of the World’s Most Powerful Women

Despite being one of the world’s wealthiest women, Abigail Johnson cuts an unobtrusive figure on the streets of her native Boston. She is rarely recognised, even by fellow New Englanders.

“I often can’t get a table, so I don’t eat out that much,” she joked during a recent interview. But beneath the modest façade lies resolute determination. Johnson has been president and CEO of Boston-based investment management giant Fidelity Investments (FMR), and chair of Fidelity International (FIL) since 2014.

Asked what advice she’d give her younger self, she is emphatic: “Don’t doubt yourself — keep at it, stay looking ahead, stay committed, and stay true to yourself.” She may well have heeded her own wisdom: her personal wealth is estimated to be more than $22bn.

The 59-year-old is the product of an old Massachusetts family. Her grandfather, Edward Johnson II, founded Fidelity in 1946 with just one employee. Her father, Edward “Ned” Johnson III, who died aged 91 in March, grew the family firm before passing the reins to Abigail.

Today, Fidelity is an international business with 45,000 employees worldwide. The company’s philosophy is to make investment accessible, and affordable, to ordinary families. Abby Johnson, as she is known to her staff, abides by that — but she has her own ideas on how to take the company forward (while still following her father’s advice): “Always strive to be better. No matter how well you might seem to be doing, your job is never done.”

Part of her strategy has been to focus on millennial and female investors. Her first job at Fidelity, while she was still at high school, was fielding phone calls. This exposure gave her an understanding of the importance of customer service, and today she applies technology and personal understanding to help investors engage with the business.

“Don’t assume the answers are already out there,” she says. “The answer might not be something that’s been done before. Trust your instincts.” Johnson’s aim is to keep the company vibrant and proactive, especially in its contact with a new generation of customers. She believes women have an important role to play in Fidelity’s future — as investment managers, as well as customers.

“Asset management is a great career for women,” she says. “We have a real need right now to recruit more women, because when

women customers come into our branches very often the first thing they say is ‘I want to work with a woman’. We don’t have enough women who are customer-facing.

“Women as customers are really quite different. They tend to under-rate their abilities as stewards of their own financial situations. They describe themselves as beginners, even though they know more than they give themselves credit for, and they tend to be more methodical.”

In 2015, Abigail Johnson set up Fidelity’s Boundless programme — specifically designed to encourage more young women to consider careers in the financial services. She has commissioned teams to study how the sector is perceived across genders.

Johnson holds a BA in Art History in 1984 and an MBA from Harvard Business School. She started her career with management and IT consulting firm Booz Allen Hamilton, where she met her husband, the entrepreneur Christopher

J McKown, with whom she has two adult daughters.

Johnson worked in the family firm for 26 years, in a succession of obscure positions, but gradually began taking on more prominent roles. She developed a thorough knowledge of company dynamics before landing the top job at the age of 52. Since 2014, she’s put her own stamp on the business, moving the headquarters from sedate Devonshire Street offices to Boston’s go-ahead Seaport tech district.

Ranked sixth in the Forbes’ list of the world’s most powerful women, Abigail Johnson remains down-to-earth. She takes commercial flights and queues at the car-hire desk like everyone else; she supports arts projects and charities, including a young people’s club, a public radio and television station, and a Boston homeless shelter. She even serves meals there, on occasion — the Johnson family name is known for philanthropy, as well as business expertise.

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A Winner, All the Way

Infrastructure tycoon Gautam Adani, founder of the Adani Group, has created ports, infrastructure, and thousands of jobs. He’s also been kidnapped by bandits and twice held for ransom; it hasn’t slowed him down…

Life at the top of the India’s commercial food chain may be rewarding — Adani Group founder Gautam Adani’s personal wealth is estimated to be in the region of $118.3bn — but it comes with certain setbacks.

The billionaire was kidnapped by bandits in 1997, and when terrorists attacked Mumbai 11 years later, Adani was among the hostages held at the seafront Taj Hotel. It’s not known what, if any, ransom was paid in either incident, but Adani appears to have taken it all in his stride. He remains one of the country’s, and the world’s, most prominent and successful businessmen.

Last April, with domestic and national economies flailing, writhing, and wilting under pandemic woes, and business titans worldwide tied to the metaphorical mast, India’s Adani Group was doing very nicely, thank you. In the middle of the most disruptive financial crisis in recent years, it became the third Indian conglomerate to cross $100bn in market capitalisation.

The wind was still filling the Adani sails exactly one year later. This April, the Ahmedabad headquartered multinational doubled that 2021 figure, and comfortably crossed market capitalisation of $200bn. It was just the third Indian conglomerate — after Tata Group and Reliance Industries — to achieve that.

Gautam Adani was born in the western state of Gujarat; he dropped out of college and moved to Mumbai as a teenager, working for a while as a diamond sorter in the gem trade. He returned to Gujarat and began his business empire by importing PVC for his brother Mahasukhbhai’s plastic business. Adani Enterprises was created to import and export commodities.

Adani created his eponymous group as a commodity trading company in 1988. Today, it has an annual revenue of over $20bn, with operations in 50 countries including port management, power generation and transmission, renewable energy, mining, airport operations, natural gas, food processing, and infrastructure. The flagship, Adani Enterprises, is a standalone holding company. It began as an import-export firm, but now focuses on mining and the trading of coal and iron ore.

Adani Enterprises is the incubator for group business ventures, with three main subsidiaries:


Adani Wilmar (food processing), Adani Airport Holdings, and Adani Road Transport. Other subsidiaries are diverse: defence and aerospace, rail and metro infrastructure, solar PV module manufacturing, oil exploration, petrochemicals, water infrastructure, data collection, agricultural storage and distribution, bunkering, real estate, financial services, and cement.

There’s not much consolation for those seeking environmental awareness in the current portfolio, but Gautam Adani intends to become the world's largest producer of green energy — and has vowed to invest as much as $70bn in renewable energy projects.

There’s a Monopoly flavour to Gautam Adani’s game plan. He controls India's largest port, Mundra, in Gujarat, and he’s the country's biggest airport operator. He acquired a 74 percent stake in Mumbai International Airport, in 2020. In May this year, he acquired Swiss giant Holcim's cement business in India with the investment of a cool $10.5bn.

Gautam Adani doesn’t leave much to chance — and he thinks big. The first-generation entrepreneur is driven by the motto of “Growth with Goodness” and the desire to build worldclass infrastructure capabilities for India. He has transformed the country’s coastline by building ports and logistics hubs, creating thousands of jobs, and bringing in expertise via partnerships with international companies.

The bulk of his fortune comes from public stakes held by the Adani Group: 75 percent of Adani Enterprises, Adani Power and Adani Transmissions, 37 percent of Adani Total Gas, 65 percent of Adani Ports & Special Economic Zone and 61 percent of Adani Green Energy. Shares are held by promoter groups, including Adani family members and holding companies.

Adani is a hands-on honcho unfazed by challenge; he was personally involved in negotiation with 500 private landowners across India in 1994 while setting up the harbour facility at Mundra Port. The hard work paid off; Mundra became a special economic zone in 2007, and with a huge investment in infrastructure, another arrow was added to the Adani quiver.

Gautam Adani is no shrinking violet when it comes to flashing the cash. He owns not one, but three private jets, including his personal favourite, a UK-produced Hawker Beechcraft 850XP. He around-towner is a BMW 7-series, with a Rolls-Royce Ghost and a Ferrari California set aside for sunny Sunday jaunts. His pad is the modestly titled Adani House, a luxurious hideaway — if such a thing is possible in New Delhi, where he lives — with 3.4 acres of land in the densely populated metropolis.

He has created an almost unimaginable lifestyle for himself, but Gautam Adani has also boosted his country’s profile, economy, and prestige. A winner, all the way.

Autumn 2022 Issue | Capital Finance International 43


Mining Disaster that Played Out Above Ground — and Brought Down ‘King Midas’

“The richest man in Brazil” was a title that business magnate Eike Batista didn’t particularly care for. It didn’t do justice to the scope and scale of his wealth, he felt; he was aiming for something more along the lines of “the richest man in the world”.

And for a while, it didn’t seem an unreasonable ambition. The multi-billionaire had, after all, created a mining and business empire, eloped with a top model, raced wildly expensive speedboats at world champion level, once sold a minor stake in his EBX Group to an Abu Dhabi investment fund for $2bn (and another to US conglomerate GE for $300m), and earned himself the nickname of “King Midas”. He claimed his oilfields were worth a trillion dollars (spoiler: they weren’t), and his personal wealth and backing helped Rio de Janeiro win the bid to host the 2016 Olympics.

This is no rags-to-riches tale, but it isn’t quite a riches-to-rags one, either. Batista famously lost $35bn in just two years, and yes, he’s serving a 30-year sentence (under house arrest at present, pending appeal) for paying bribes to secure state government contracts. But according to a July 2022 report in People With Money magazine, Batista is somehow on the rebound, with an estimated personal worth of somewhere between €96m and €275m, including direct earnings, advertising partnerships, royalties, and investments.

Eike Batista was born in 1956 in the state of Minas Gerais, in the country’s south-east. His mother was German, his father Brazilian — the Minister of Mines and Energy, no less — and Batista has joint Brazilian-German nationality. He was one of seven children and grew up in well-to-do towns that date back to, and reflect, Brazil’s 18th-Century gold rush. Minas Gerais is a huge area that may be home to Rio and São Paulo’s impoverished barrios, but it also has its share of opulent mansions, and tasteful baroque churches decorated by the celebrated sculptor Aleijadinho.

After metallurgy studies in Europe (which he didn’t complete — something which was to prove important), the young Eike set out on the yellow brick road. Back in Brazil at the age of 23, he launched his own company, mining and trading gold. Natural resources were always his focus; the fortune he made (and lost) came from mining and oil and gas exploration.

His ventures in the 1980s were wildly successful, and over the next 20 years, Batista expanded his empire. At 29, he became CEO of TVX Gold, which listed on the Montreal Stock Exchange, and from 1980 to 2000 he operated eight gold mines in Brazil and Canada and a silver mine in Chile. He invested in energy, fossil fuels, logistics,

shipbuilding, real estate; by 2010, he had a collection of corporations under the umbrella of the EBX Group. (Each company had an X in its title; Batista saw it as a symbol for the multiplication of wealth. It worked — for a while.) He founded oil and gas company OGX and lashed out $1bn on licenses for exploration off the Brazilian coast. Batista made Forbes magazine’s billionaire list, and by 2010 was one of the world’s 10 wealthiest people.

But there were rumblings of discontent and mismanagement. His mining company, MMX, ran into trouble for failing to follow environmental regulations. In 2008, the Tupí-Guaraní tribe accused Batista’s logistics company, LLX, of forcing them off their land on Brazil’s Atlantic coast. In 2008, police raided his offices. While the tycoon was cleared of wrongdoing, clouds were building on the horizon.

By 2012, Eike Batista’s personal fortune was sitting at a comfortable $34.5bn. Then came falling petroleum prices in an increasingly flaky domestic economy, the inability of OGX oilfields to meet production promises (they maxed-out at one percent of the goal) and calls for repayment of the bond debt he accrued for those exploration and production licences. In October 2013, Batista defaulted on a $45m interest payment. Yes, interest payment. The empire was tilting, if not toppling.

That “richest man in Brazil” title was lost in the avalanche as prices on five of his six publicly traded holdings plummeted. The main disaster was at oil and gas driller OGX Petroleo e Gas, which filed for bankruptcy — one of the biggest default applications in Latin American history. Eike Batista went on trial for insider trading (the case was suspended after the judge was caught

hooning around in one of the defendant’s luxury cars), and by 2015, he was $1bn in debt. In January 2017, he was arrested for paying bribes connected with the Petrobras scandal.

Remember the young man’s aborted metallurgy studies in Germany? Batista dropped-out before graduating — and under Brazilian law, a university degree would have meant a comfier life in a special prison wing. The lazy student ended up sharing a Bangu penitentiary cell with six other inmates.

In 2017, he was released and placed under house arrest. Later that year he was fined $6.3m for insider trading. In 2018, he was found guilty of bribery and sentenced to 30 years. In 2019, he faced further charges of money laundering and insider trading. Batista was declared a fugitive when police raided his estate in Rio de Janeiro and found he had flown to New York just hours before.

The tycoon voluntarily returned to Brazil — “a Brazilian doing my duty” — and handed himself in to the authorities. He was taken to the Ary Franco prison for processing before being transferred to Bangu on the outskirts of the city. He is currently under house arrest, awaiting that appeal.

What about that return to wealth that PeopleWith Money mentioned? It comes, says the article, from “judicious stock market investments”, an impressive real estate portfolio, an advertising contract with a cosmetics firm and other business ventures. Batista has offered to personally help authorities tackle corruption in Brazil. He claims to have put almost all his money back into the companies he ran, showed some serious ambition, and borrowed against his investments.

The name of Eike Batista is not forgotten — and is still respected by many.

44 | Capital Finance International


Modest, Frugal, Retiring, and Famous for Being Anonymous

When the famously private Spanish entrepreneur Amancio Ortega finally gave his consent to a biography, he had one simple request: “Don’t just put in the good parts.”

Ortega, the 86-year-old founder of the Zara fashion brand and the multinational clothing group Inditex, has built a business which has dominated high street fashion for decades. He remains the driving force of his empire, and with a fortune estimated to be in the region of $72.8bn — making him the wealthiest individual in Europe.

The contrast to his early life is stark. He was born in north-western Spain, the youngest of three children, just as the civil war broke out. His father, an itinerant railway worker, had to travel to find employment, which is why the young Ortega left school at 14 to start work in a shirt-making shop.

“My ambition was born of poverty,” he once told a journalist. “I still remember that day when a shopkeeper turned my mother away. It didn’t take much for me to realise that every penny counts. I try to be as grounded as possible, and it is not something to brag about. It’s just the way I am.”

Despite the trappings of wealth — the yachts, the private jets, the desirable properties around the world — Ortega lives modestly with his second wife, Flora Perez, spending most of his time in a simple apartment overlooking the harbour in A Coruña on Spain’s Atlantic coast. He uses an unremarkable car to take the short drive to the vast Inditex complex in nearby Arteixo.

In her book, The Man from Zara: The Story of the Genius Behind the Inditex Group, published in 2012, journalist and close friend, Covadonga O’Shea, says that Ortega’s desire for anonymity is legendary. She spent many years, she says, trying to persuade him to tell his story. She describes him as “a man lacking in sophistication, with a passion and capacity for work, simplicity, and a vision of the future”. “Because of his passion for anonymity,” she writes, “he has unintentionally become an almost mythical figure in the world of business.” His relaxed management style is influenced by his lack of formal education, say observers. Despite the international nature of the fashion business, Ortega has never learned to speak English. He prefers to communicate inperson rather than electronically, and he listens rather more than he speaks. He eats in the general canteen with his workers, and tends to shun invitations to speak at industry events.

Having learned to stitch clothing by hand, he set up in business with his first wife,

Rosalia Mera, at the relatively late age of 37. They created simple bathrobes in their living room; before long they needed to employ a seamstress.

In 1975 he opened his first store, Zorba, named after the title character in the 1964 film Zorba the Greek. Following complaints from a nearby restaurant, also named Zorba, Ortega changed the shop’s name to Zara.

From the beginning, the company’s USP was producing good quality, fashionable clothing at a low price. Before long, Ortega was opening Zara stores throughout Spain and Portugal. In 1988, he created Inditex, which today operates numerous global fashion brands, including Zara, Pull & Bear, Massimo Dutti, and Bershka, among others. Inditex is now the world’s number one

clothing retailer, with more than 7,300 retail outlets in 94 countries, employing 150,000 staff.

Ortega’s business is still driven by a basic mantra: Give the customers what they want, as quickly as possible. He eschews traditional advertising. The company has practically no marketing budget, relying on reputation and location for sales — though it helps that the Duchess of Cambridge is regularly photographed in Zara creations.

He still protects his privacy, though. “The only people I want to recognise me in the street are my family, friends and workmates,” he says. “I’m trying to live a quiet life, be just another person, able to go where I want, have a coffee on the terrace, or take a stroll along the promenade without everybody knowing who I am.”

Autumn 2022 Issue | Capital Finance International 45


Rich Pickings for Carlos Slim, a Financial Prodigy who Started Young — and Kept on Going

Wealth and status mean little to the frugal business magnate who allows himself the occasional indulgence of a fine cigar…

Depending on the state of the world’s stock markets and which wealth-list you consult, Carlos Slim is one of the richest men in the world — though the Mexican industrialist and businessman claims to be indifferent to such rankings.

Carlos Slim is the founder of Grupo Carso, a business empire is so sprawling it is sometimes referred to as “Slimlandia”. Despite his $78bn fortune, this self-made man leads a frugal lifestyle: he has lived in the same house in Mexico City for 40 years. The one luxury he allows himself is an indulgence in Cuban cigars.

As the founder of one of the largest conglomerates in Latin America, he is aware that fortunes can plummet just as quickly as they can soar. Faster, even: it’s said that he lost some nine percent of his wealth when Donald Trump was elected in 2016. The former president’s bellicose rants caused a sudden fall in value of the Mexican peso. In the closing days of Trump’s presidential campaign, he even singled out Slim as part of a globalist cabal intent on snuffing out his populist candidacy.

Within weeks, Carlos Slim was dining with the president-elect at his Palm Beach estate. Such were his charisma and political nous that Trump emerged beaming from the meeting with the words: “A lovely dinner with a wonderful man.”

Carlos Slim was born in Mexico City in 1940 to Julián Slim Haddad (born Khalil Salim Haddad Aglamaz) and Linda Helú Atta, Maronite Christians from Lebanon. Khalil was a successful local businessman, who imparted a love of mathematics and economics to his son. At age 11, the young Carlos invested his pocket money in a government bond, keeping details of his financial endeavours in a hand-written ledger — which he still owns.

In his teenage years, Slim continued to dabble in stocks — under his father’s guidance. He was just 13 when Khalil died, and he inherited the small family business. Within a few years, he was confidently investing growing profits in a range of sectors.

Carlos Slim studied civil engineering at university in Mexico City, and is still referred to in the Mexican press as “el Ingeniero” (“The Engineer”). But his interests include such diverse areas as telecoms, education, healthcare, manufacturing, transport, real estate, media, energy, hospitality, entertainment, technology, retail, sports, and financial services. His businesses account for 40 percent of the listings on the Mexican Stock Exchange, and his net worth is equivalent to six percent of Mexico’s GDP.

Slim was married for 32 years to Soumaya Domit Gemayel, who died in 1990. The couple had six children, most of whom work in their father’s businesses. An interest in art led to Slim to fund

the establishment of a non-profit museum in the city, named in honour of his wife. He has said he has no plans to remarry, but there were rumours in 2009 that he was romantically involved with the widowed Queen Noor of Jordan.

In recent years, Carlos Slim has been gradually handing the empire’s reins to his children, stepping back from day-to-day involvement — but retaining ultimate control. He prefers to concentrate on philanthropic endeavours, nowadays, but every week he has dinner with his children and their families to discuss business affairs.

There are several biographies, in Spanish and English, of Carlos Slim. Most are unauthorised and concentrate on his business acumen, his mathematical brain, and his proclivity for acquiring businesses during periods of recession, at knock-down prices. In his 2019 biography Carlos Slim: The Power, Money and Morality of One of the World’s Richest Men, author Diego Osorno advanced another theory for his stellar career.

After a series of one-on-one interviews with the great man, conducted over a period of years, Osorno concluded that it was Slim’s ability to navigate politics that was the cornerstone of his success. He wrote: “It has been his loyalty to the political system that has helped him to consolidate a personal empire unimaginable in a country with more than 52 million people in poverty.”

46 | Capital Finance International


The Enigmatic Genius Behind Netflix Who Aims to Change US Education

counterpart at Google. The company that once mailed-out rental DVDs now boasts 193 million members across 190 countries. Netflix has been touted as everything from “the death of Hollywood” to “the saviour of cinema”.

Reed Hastings may have helped to reinvent Hollywood, but he is no typical mogul. The selfdescribed “math wonk” trained in the Marine Corps and served in the Peace Corps. He taught mathematics in Swaziland and received an Mscs (Master’s in computer science) degree, specialising in AI, from Stanford University in 1988.

His first business venture — a foot-operated computer mouse — was a failure. Hastings once told reporters: “I’ll never be Steve Jobs, the creative, brilliant person,” and said Elon Musk was “100 times more interesting a person” than he’d ever be.

But perhaps his ultra-ordinary life informs his most extraordinary ideas. His mother, he has said, hated high society and taught her children disdain for elitism and pretension. His father, a lawyer for the Nixon administration, rarely discussed emotions. Hastings decided radical transparency was the way forward, even in business.

His brief career as a high school maths teacher influenced some of his more radical projects. Now 61, with a net worth of $3.6bn, Hastings is a prominent philanthropist — and a proponent of educational reform.

If you’ve seen a TV show recently, chances are you watched it on Netflix. The company is worth $95bn — but it all began 25 years ago with a $40 late fee.

That’s if you believe co-founder Reed Hastings, who says he came up with the idea for the company after forgetting to return a rental VHS cassette. His fellow co-founder, Marc Randolph, disagrees with that recollection; he remembers a shared light-bulb moment when they were in a car somewhere.

Whichever version you believe, Netflix is recognised across the world as “the original” online streaming service. But aside from Stranger Things and Squid Game, CEO Reed Hastings’ 2009 127-page slideshow — dubbed the Netflix Culture Deck — is by far the company’s most famous, or infamous, output. CEO of Meta Platforms (Facebook), Sheryl Sandberg, once described it as “the most important document ever to come out of Silicon Valley”.

Culture Deck documents the key principles of Netflix company culture. Hastings believes that as long as employees are performing, they can do whatever they want. They make deals without sign-off, claim expenses on anything, and are encouraged to offer recruiters better packages.

All they have to do in return is make money: “adequate performance gets a generous severance” is one of the Culture Deck rules.

Hastings himself refuses to use an office, or even a cubicle. Everything, he believes, should be out in the open. Criticism is encouraged, and failure to speak up if you disagree with something is “tantamount to being disloyal to the company”. If an employee’s idea fails, they submit a comprehensive assessment of what went wrong. This is a process Hastings calls “sunshining”. Netflix doesn't want good employees; it wants great ones.

Does the system work? Each Netflix employee generates an average of $2.6m in annual revenue — three times more than their

He served on the California State Board of Education from 2000 to 2004. He is currently on the board of several educational organisations, including The City Fund, KIPP, and the Pahara Institute. In 2016, he created a $100m fund at the Silicon Valley Community Foundation. He has donated $120m to fund scholarships at two colleges and donated to the United Negro College Fund.

A recent investigation found that Hastings was the man behind a mysterious 2,100-acre luxury retreat for teachers in the foothills of rural Colorado. It will apparently operate as a training ground for American public-school teachers aligned with the education-reform movement.

But if you ask Reed Hastings why his next project is radically transforming the education system, don’t expect a radical answer.

“I had a bunch of money,” he once told a reporter “and I didn’t really want to buy yachts.”

Autumn 2022 Issue | Capital Finance International 47
The quirky ‘saviour of cinema’ is a philanthropist with his eyes on a bigger and more mysterious prize…



Add a Swoosh, Some Sweat, and Serious Business Nous — You have Victory on Your Side

There’s nothing like a bit of history to bolster a brand. A mental association with an elite figure or personage doesn’t hurt; add a snappy name, and that’s the trifecta right there. American billionaire Phil Knight, co-founder and chairman emeritus of sportswear giant Nike, is the guy with the winning ticket.

History and a link with high-fliers? Check and check. The eponymous Nike is the mythical Greek goddess of victory, so she goes waaay back. She’s bang in the centre of the VIP section, too, as a winged attendant to the gods Zeus and Athena; so, yeah. Cool name? Check again. Nike was a title just begging for appropriation — and the addition of an elegant logo.

The trouble with Phil Knight is knowing what to focus on, but let’s stick with Nike and the athletics link for a moment. The businessman ran track during his time at the University of Oregon, coached by Bill Bowerman, who later became one of Nike’s co-founders. He and Bowerman each chipped-in $500 to start the company, such as it was.

And Knight was a runner to his bones. His personal best was a 4m 13s mile — not far off Roger Bannister’s earth-shattering 3m 59.4s record in 1954. A great athlete, then; but perhaps we’re giving Knight too much credit when it comes to titles and branding.

His vigour lent him respect and his business acumen was beyond reproach — he started selling low-cost Japanese running shoes from the back of a Plymouth car at the track events where his own athletic performances shone. But before Nike was Nike, it went under the more prosaic name of Blue Ribbon Sports. Employee

Jeff Johnson (the company’s first) suggested the Nike moniker to Knight. Boom. Sure-fire winner.

The famous swoosh logo wasn’t Knight’s brainchild, either; it was commissioned in 1971 — for $35! — from a graphic design student named Carolyn Davidson; we hope she gets some royalties. Knight apparently didn’t much care the graceful curve at first, but — again showing prescience and business nous — decided that it would grow on him. It did. Boom again.

Phil Knight — who retired as CEO in 2004 and company chairman in 2016 — has a track record for picking winners. Two years ago, in July 2020, he was ranked by Forbes as the 24th richest person in the world with a fortune of $54.5bn. He’ll have slipped a little in the rankings — at the most recent tally this July he has a mere $40bn to his name — but he won’t be sweating over the missing beans. His name and status may be linked to the godly sportswear company, but lay out a selection of pies and you’ll find Knight’s fingers in a few of them.

Seen the animated kiddie chiller Coraline?Knight, again. He owns the stop-motion film production company Laika — another cracking title, this time the Russian equivalent of Fido, and the name of the first dog in space. The company was previously Will Vinton Studios, an up-and-coming animation outfit looking for investors. Knight took a 15 percent stake in 1998, and his son Travis — a failed rapper — joined the operation as an animator.

But Will Vinton Studios didn’t meet with the high standards of Knight senior, a Stanford School of Business graduate. He bought the company and assumed control, because that’s how he rolls.

Travis was swiftly elevated to the board and dad rebranded the company. And that’s Laika. Knight ploughed in $180m, and its first feature film, Coraline, was released in 2009. Instant success. Travis Knight became president and CEO of Laika. Knight had another son, Matthew, who died in a diving accident at the age of 34. Laika Studio's 2005 short film Moongirl was dedicated to him.

If the nepotism hinted at in the previous paragraphs turns you off a little, bear in mind that Knight was himself no recipient of family favours. His father, William W, owner of the now-defunct OregonJournalnewspaper, denied Phil a summer job when he was a student. Let him find work for himself, was Knight the elder’s philosophy. One hopes he was impressed when his son took up a post on a rival paper, The Oregonian, tabulating sports scores — running seven miles there and back each day.

Also in the plus column against Knight’s name are philanthropic endeavours. The Portland native has donated millions to his alma mater universities, Oregon and Stanford, as well as the Oregon Health and Science University. He was in the military, worked as a certified public accountant (first with Coopers & Lybrand, then with Price Waterhouse). He even worked as an accounting professor at Portland State University for a time.

These events and career paths may all have shaped the man, but the whole is greater than the sum of the parts. Whichever way you look at it, Phil Knight created a company that has become a household name and brings in nearly $45bn in annual revenues.

Knight. Nike. Swoosh. Boom.

48 | Capital Finance International


Climate Sceptic, Mining Champion, Sworn Enemy of Green Policies

The Thatcher fan and chair of Hancock Prospecting has little sympathy for the Left, green policies, or the Channel Nine TV station…

Gina Rinehart has the power to move mountains — literally — and the chair of Australian mining giant Hancock Prospecting has turned an arid corner of Western Australia into one of the world’s most productive sources of iron ore and minerals.

The mining industry is Australia’s biggest producer of revenue. The country’s abundant natural resources of iron ore, coal, natural gas and rare minerals make up 10 percent of economic output. And Gina Rinehart is vocal in urging for the relaxation of what she sees as “red tape”. In 2010 she took a leading role in the fight against the Labour government’s plans to introduce a super-profits tax on minerals, funding a massive publicity campaign. The-then prime minister Kevin Rudd was deposed and replaced by Julia Gillard, who watered-down the legislation.

Over the course of her career, the Perth native is said to have become the richest woman on the planet (subject to the fluctuation of global commodities prices, of course). Rinehart bristles at the label “mining heiress”. While it is true that she inherited the business from her father, Lang Hancock, in 1992, she says it was in a desperate condition when she took over. “I became executive chair of Hancock Prospecting when our company had extensive liabilities,” she moaned, before self-directing some praise at the company. “After decades of stress and hard work we are now the leading private mining company in Australia.”

The 68-year-old is mistrustful of the media and rarely gives interviews. In a country as legendarily egalitarian as Australia, those with great wealth are a source of public fascination. Rinehart family strife is regular fodder for gossip. When she does speak publicly, her messages are not always well received. She champions her industry and claims that humans do not cause global warming.

She warns against heeding climate change “propaganda”. In a 2020 video address to an Australian business group, she brusquely headed-off any incipient environmental criticism: ““Before the iron ore industry, Western Australia was a hand-out state.” She is notorious for her environmental views, and blames green policies for helping to cause global destabilisation. Her beliefs put her at odds with environmental organisations such as Friends of the Earth.

In 2017, Rinehart sued Australia’s Channel Nine over its production of a two-part television

drama called House of Hancock, starring Sam Neill in a fictionalised account of the fallout from her aged father’s marriage to his Filipina housekeeper, Rose Porteous. Rinehart described the film adaptation as “disgraceful and false”. The channel issued an apology and a pledge not to air the show again, sell it overseas, or release it on DVD.

But these are sideshows for Gina Rinehart as she leads Hancock Prospecting into a new era. The company has projects in sites around the globe: new mines in Australia, a coking coal project in Canada, copper mining in Ecuador, and investment in a natural fertiliser project in North Yorkshire.

Despite her wealth, Rinehart is far from flamboyant, and dedicates herself to business 24/7. Her work-rate is legendary, and she is an admirer of strong women, most notably

Margaret Thatcher. “I’m not saying I’m like this outstanding lady,” she said, “but I too think sometimes women have a beneficial trait. We’re not as guided, or misguided, by ego.”

Gina Rinehart was born an only child in Perth, Western Australia. She spent her early years “onstation” in the scorching Pilbara region where her father — who discovered the world’s largest iron ore deposit in 1952 — constructed the township of Wittenoom. The deposit was so vast that it was estimated at the time to be enough for the world’s entire iron ore needs.

Rinehart attended the University of Sydney, but (according to her biographers) became disillusioned with “left-wing professors” and dropped out after a year. She married twice, bearing two children from each union. Her second husband, American lawyer Frank Rinehart, died in 1990.

Autumn 2022 Issue | Capital Finance International 49


Go Ahead and Bet the Farm on Bitcoin, says ‘Country Boy’ Saylor

to stay and be a corporate bureaucrat.” DuPont offered him a pay rise, but Saylor told them he’d rather be the CEO of his own company. On his promise to complete his DuPont projects, the company helped him set up his own business, and MicroStrategy was born.

Within a few years, riding the dot-com bubble, Saylor was a billionaire. When the bubble burst in the late 1990s, his fortunes were dashed. But the company survived, and he regained billionaire status — thanks largely to timely Bitcoin investments; he bought 17,732 coins for $175m. That’s worth $356,365,054 today. Over the following years, he steered MicroStrategy’s coffers towards Bitcoin, and helped trigger the institutional boom. In 2020, MicroStrategy’s Bitcoin ownership crossed the $1bn milestone.

The cryptocurrency market suffered what observers called a “meltdown” in May 2022. The start of a “crypto winter” was blamed on macroeconomic and geopolitical turmoil, but Saylor was typically blunt about those who rushed to sell.

In a television interview earlier this year, he said: “Do not sell your Bitcoin.” One of his biggest regrets as an investor, he said, was “finding a really good idea and under-investing in it”.

He added: “A digital monopoly that changes the world is a good idea. But people panic — and sell. When you do that, you regret it.” Saylor urged investors to remember the words of Douglas Adams on the back cover of The Hitchhiker’s GuidetotheGalaxy — “Don’t panic”.

Michael Saylor says he became a Bitcoin legend by chance: “I kind of fell off the turnip truck and hit my head on a pot of gold.”

The 57-year-old founder and CEO of MicroStrategy, a business analytics software firm based on the outskirts of Washington, DC, appreciates farming analogies. He often refers to ownership of Bitcoin as “the family farm” — something you should never sell.

He was born in the heart of the mid-west, in the prairie state of Nebraska. His father was a master sergeant in the US Air Force, so the young Saylor spent his early years in military air bases around the world before the family finally settled in Fairborn, Ohio.

In his final year at high school, Saylor was named the student most likely to succeed — but succeed at what? “I wanted to be a rock’n’roll star,” he says. “When I was in college, I wanted to be a fighter pilot, but those hopes were dashed. My third idea was to be a professor.”

His ambitions to fly jets or become an astronaut were scuppered when he was diagnosed with a benign heart murmur. At that time, he was an MIT student on an air force scholarship, gaining a double major in aeronautics and astronautics. Needing money to pursue that third ambition of professorship, Saylor got a job building computer simulations for biotech giant DuPont. When he handed in his resignation to return to MIT, his bosses begged him to stay.

“I was 24 and living in an apartment with milk crates for bookshelves,” he says. “I didn’t want

“Bitcoin is something you can trust,” he said, “across borders, across time, across cultures. And that is such a precious thing. It is a paradigm shift, neutral, ethically sound, non-sovereign — a technically secure monetary network which allows no one to victimise anyone else. It is also functional and progressive.”

Saylor, who has never married, lives alone in Vienna, Virginia. He has said he may step down as CEO after 30 years leading the business, but would remain as executive chairman and continue to serve on the global Bitcoin Mining Council.

A schoolfriend remembers Saylor as a young man buzzing with ideas, but essentially “just a quiet mid-western guy”. He has always been a voracious reader, fascinated by scientific advances that changed the world: the printing press, railways, the telephone, genetics, antibiotics. “The impact of all these things changed the paradigms of society,” he says. “People are capable of accomplishing great things if they set their minds to it. We should not allow ourselves to be hijacked by a small goal, or a pedestrian thought.”

50 | Capital Finance International
‘We should not allow ourselves to be hijacked by a smallgoal,orapedestrianthought…’


Grit, Loyalty and Optimism are the Baron’s True North

David Thomson, quite possibly the richest man in Canada, finds value in art — and ice hockey.

When the fans of the Winnipeg Jets ice hockey team sing the O Canada anthem before a game, the line “…with glowing hearts we see thee rise, the True North, strong and free”, the words “True North” get a deafening roar.

And with that, David Thomson — aka Baron Thomson of Fleet, reputedly the richest man in Canada — may feel a glow of satisfaction. The fans are showing reverence for True North Sports and Entertainment Ltd, the company Thomson founded with businessman Mark Chipman

Chapman, who had revived the team in 2011, paired well with the polymath Thomson, media mogul and chairman of Thomson Reuters. Baron Thomson of Fleet, to use that alluring and imperious title in context, heads a vast international empire that inherited from his father Kenneth (the second baronet, who died in 2006). Thomson junior is a renowned patron of the arts, a collector with a passion for ice hockey. He owns and runs a major real estate business, and thrives on competition. As he once put it: “I’m a very competitive individual and I play a part in a very large picture — and hopefully add value to people’s lives.”

The people of the prairie city of Winnipeg, despite being starved of sporting success for decades, continue to bellow their gratitude at home games

in the 15,000-seat stadium and sports complex built on Thomson-owned land in the heart of the city.

At the age of 65, David Thomson remains a private individual who rarely gives interviews. When he and Chipman announced the revival of the Jets and the National Hockey League (NHL) franchise award, he was cornered by a Winnipeg Sun reporter hoping for a scoop. The tall and reclusive Thomson was courteous but typically taciturn. He was finally drawn to observe: “When you do things for the right reasons, everything else seems to flow.

“The best thing in life is that things evolve, and who would have imagined a confluence of circumstances that suddenly there’s an opportunity, and it makes sense? It’s the right thing to do. I’m just delighted to play a part.”

David Thomson was born in Toronto in 1957, the eldest of Kenneth and Marilyn Thomson’s three children. He and his family lived in London during the Swinging Sixties. At his mother’s funeral in Toronto in 2017, Thomson recalled kite-flying kites in Hyde Park and excursions to Portobello market. He returned to England after his schooling in Toronto, earning an MA from Cambridge University.

He was always aware of his responsibility to the family newspaper business, founded by grandfather Roy, on whose shoulders the hereditary peerage was lain. David worked in junior positions

before taking a managerial role at the familyowned Hudson Bay Company. He was appointed chairman of the Thomson Corporation in 2002.

Thomson inherited a love of art from his father, and has a 2,000-piece private collection, including works by Picasso, Rembrandt, Turner, Constable and Rubens. It also features mediaeval sculpture and Inuit art, some of which is displayed at the Art Gallery of Ontario. He has donated more than $276m for the gallery’s renovation.

David Thomson has six children from four partners but lives alone in Toronto; he still owns properties in London. According to Forbes — on whose billionaires list he ranks 26th — his net worth is around $50bn.

The Thomson Reuters media conglomerate was formed when the Thomson Corporation acquired British news group Reuters in 2008. David Thomson maintains active involvement, and even writes the occasional piece for the Toronto-based Globe and Mail

Competitive he may be, but loyalty and optimism are perhaps stronger driving forces for Thomson. Reflecting on his passion for ice hockey, he recalled a game he watched with his father. Their team was 6-0 down in the third quarter and fans were leaving, but the Thomsons stayed to the bitter end. “I sat there looking at him, and not the game,” David recalled, “realising I had to be the luckiest human being on earth.”

Autumn 2022 Issue | Capital Finance International 51

Born for Business, Ready for Any Challenge

American businessman Dan Gilbert has always had a vision to improve whatever he touches — and the courage to challenge the status quo.

Gilbert comes from a proud line of Jewish businessmen. His dad had a bar in Detroit and his grandfather a car wash. “I used to love going down to their businesses and just watching all the action. I got hooked,” he said. “For me it was just the energy and the environment. Even a car wash has good energy if you just lay back and look at everything going on.”

While in college he earned a real estate agent’s licence, and while in law school he worked parttime at his parents’ Century 21 Real Estate agency. By the age of 23, Gilbert was “hustling mortgages as a broker out of my car, running from bank to bank, begging them to approve the loans”.

In 1985, he launched a brick-and-mortar mortgage company with Ron Berman, Lindsay Gross, and his younger brother Gary Gilbert. Rocket Mortgage caught several lucky breaks in its early days. In 1996, a mail-in mortgage application was introduced; it closed loans worth $35m over the next two months.

At the time, most mortgage applications required numerous in-person visits, so this was revolutionary. Gilbert recognised the power of technology to simplify the mortgage process. Rocket Mortgage, then called Quicken Loans, launched an early-adopter internet strategy in the late 1990s. It became one of the country’s first online direct mortgage lenders. It’s now the largest provider of FHA mortgages in the US — a distinction it has held since 2014.

Rocket has grown into a $27bn holding company that includes Rocket Mortgage, title company Amrock, home-search platform Rocket Homes, personal loans provider Rocket Loans, and call centre Rock Connections.

Today, the company is grappling with big tech changes — AI, data analytics and blockchain — and gearing up for more tech disruptions. Amid stiffer competition with the rise of start-ups like, Blend and Divvy Homes, Rocket has expanded to other markets, including auto loans, solar panels and personal finance. It just acquired Truebill, a personal financial management app.

Mortgages remain at the core of the business, which is dominant in the space. It closed $320bn in mortgage volume in 2020 and has processed more than $1tn in mortgages since it launched in 1985. It has 26,000 employees.

Dan Gilbert believes that business sustainability is rooted in better customer experiences. “We’re in the get-rich-slow business.”


Gilbert became majority owner of the Cleveland Cavaliers basketball team in March 2005. He undertook a complete overhaul of the front office, coaching staff, player personnel and game presentation. Two years later, he bought the dormant Utah Grizzlies American hockey league franchise, moved it to Cleveland, and renamed it the Cleveland Monsters. He also purchased, relocated and rebranded an NBA G-League team now known as the Cleveland Charge.

Consistent wins from Gilbert’s sports teams — particularly the Cavaliers, where LeBron James was a star player — convinced fans that Cleveland’s 52year “sports curse” had ended. But Gilbert clashed with James when he decided to leave the Cavaliers to join the Miami Heat as a free agent in 2010. James announced his decision in a TV special called The Decision. Gilbert responded with The Letter, criticising Cleveland’s homegrown hero for abandoning fans and turning his announcement into a “narcissistic, self-promotional build-up”.

The NBA Commissioner fined Gilbert $100,000 for his remarks. Four years later, when James opted out of his contract with Miami, the two met privately and acknowledged that mistakes had been made on both sides. James returned to Cleveland in free agency — and led the team to its first championship victory — but the wound never fully healed. In 2017 interviews, James said he felt the letter had racial overtones and was disrespectful. In 2018, he left the Cavaliers to sign with the Lakers.


Gilbert enjoyed a brief spell as the world’s 10th richest person in March 2021. Rocket companies’ shares rose 71 percent in March, following a GameStop-like squeeze of the firm’s heavilyshorted stock. Gilbert’s net worth jumped almost $33bn — but the very next day his fortune plunged by $25.4bn. Despite the sharp decline, the stock ended up 30 percent higher than the previous week — and Gilbert was almost $10bn richer.

Under Gilbert’s watch, Quicken Loans/Rocket Mortgage became a 16-time winner of JD Power’s Highest Customer Satisfaction Award (10 in the primary mortgage origination category, six for mortgage servicing). The company also ranked in Fortune’s 100 Best Companies to Work For from 2005 through 2017. In 2016, the Cleveland Cavaliers won the NBA championship and the best team award from ESPY, while the Cleveland Monsters claimed the Calder Cup.

Gilbert ranks number 63 on Bloomberg’s Billionaires Index, with a net worth of $20.8bn as of August 2022. He owns 100 buildings in downtown Detroit.


In September 2012, the Detroit native and his wife, Jennifer, joined The Giving Pledge, committing to giving half their wealth to philanthropic causes during their time on Earth. They sold a chunk of their Rocket Companies stock in April 2021 to support Detroit’s neighbourhoods. The transaction involved 20.2 million shares of Rocket Companies’ class A common stock. Following the sale, the Gilberts still had a 93 percent interest in Rocket Companies.

The Rocket Community Fund (RCF) was established in April 2021, amid a carefully orchestrated media rollout that involved exclusives to The New York Times and CBS programme This Morning. The initiative will distribute funds over a 10-year period.

The first $15m instalment went to cover lowincome residents’ delinquent property taxes. Bloomberg reports on a nationwide property tax debt scheme allowing municipal authorities to collect hundreds of millions of dollars in revenue beyond actual tax debts. In Wayne County, Michigan, where Detroit is located, more than 100,000 homes have been auctioned-off over the past decade. Since 2005, county officials have used the debts to back roughly $3.5bn in bond sales — securities that pay high yields to investors and are funded by penalties, fines, and foreclosure sales.

Flawed tax assessments have systematically inflated tax bills for the lowest-priced homes. Some municipalities’ efforts to securitise or sell the debts have led to a broad, upward transfer of wealth rooted in unfair tax systems.

Gilbert wants to pay the property tax debts, allowing the municipalities to focus on other responsibilities. “Removing this tax burden will build a stronger foundation for Detroit families

52 | Capital Finance International

to thrive,” he said, adding: “Everyone deserves to achieve the American dream of home-ownership, which includes the ability to sustainably and permanently enjoy the home you make for yourself, your family, and your loved ones.”

By the end of 2021, only $40m of the promised $500m had been allocated. The $15m Detroit Tax Relief Fund has helped about 2,500 homeowners, with another 4,000 cases in progress and an ongoing information campaign to encourage others to apply. The other $25m includes funding to revive Detroit’s dormant historically Black college or university (HBCU), the Pensole Lewis College of Business and Design, as well as a programme called Neighbour to Neighbour, in which people go door-to-door throughout the city assessing what unaffordable home repairs residents need.

This April, the RCF committed another $10m to help Detroit contractors grow their businesses. “Development continues to exponentially increase across our city, which will catalyse economic impact, and it is critical that Detroit-based contractors are well positioned to be a part of that growth,” says Laura Grannemann, vice-president of the RCF, which is investing the first $1m into programme administration and operations. “Detroit-based contractors have historically been overlooked, but the Motor City Contractor Fund will increase access to financing for local contractors, empowering them to grow their business and create more jobs for Detroiters.”

Jennifer Gilbert runs the family foundation. When the Gilberts’ eldest son, Nick, was diagnosed with neurofibromatosis, his parents launched a non-profit that has since raised around $40m for research into the rare genetic disorder.


The family has come under fire, with some saying that it has donated just a fraction of the

enormous wealth acquired through tax breaks and the city’s willingness to virtually give-away real estate to Gilbert for redevelopment. The billionaire entrepreneur has redeveloped so much of Motor City real estate that downtown Detroit is known as “Gilbertville”.

The Detroit City Council approved a $60m tax abatement for Gilbert’s Hudson’s site project in July. The tax abatement plan passed 5-4 after three postponements. It will provide Bedrock — Gilbert’s real estate arm — with the 10-year tax break that the company says is necessary to finish the skyscraper.

Gilbert described the Hudson’s site construction as “our most exciting project on the board right now”. It will be the tallest building in Detroit, around 70 storeys high.

The Gilberts, unlike many megadonors, are not plastering their names on anything, other than their foundation. “None of what we do is for accolades and ego,” Jennifer said. “Ultimately, if putting our name on something exponentially grows the impact, we will consider doing it. But if it’s for the sake of having our name up somewhere, we’re not interested in that. That’s not our goal.”

However, when the Gilberts sold company shares to fund their philanthropic mission, they did so just months before publicly disclosing that the company’s gain-on-sale margin declined. Rocket stock dropped when the news broke, prompting investors to file lawsuits against Gilbert for insider trading. The first, filed by a Detroit pension fund and a family trust, was dropped. The second was filed this February.

Rocket and its management face a securities class action in Michigan that accuses them of concealing rising competition and other factors that caused the key financial metric to contract.


Gilbert made an appearance at Forbes’ Under-30 Summit in October 2021, where he opened up about the stroke he suffered in 2019. “It was a big shot out of nowhere,” he said. “They usually are that way.”

The Rocket Companies chairman uses a wheelchair and a service dog to help navigate this new phase of his life. He spends three or four hours a day working with physical therapists. In his first interview since the stroke, Gilbert told Crain’s Detroit Business: “When you have a stroke, here’s the problem: Everything is hard. Everything. Like you wake up, getting out of bed is hard, going to the bathroom is hard, and sitting down and eating at a table is hard. You name it. You don’t get a break. You’re like trapped in your own body.”

Gilbert couldn’t be prouder of Jennifer, who he says has come into her own in the wake of his illness. “I couldn’t ask for a better soundingboard, partner, and confidante. She’s especially done a remarkable job in the last couple years with the businesses and Gilbert Family Foundation — I’m going to have to take notes from her.”

Jennifer was a stay-at-home mum for 15 years — a role she chose and loved — before getting more deeply involved with the family business and philanthropy. She started by contributing towards the design of the buildings, and now runs two design studios.

Gilbert’s son, Grant, insists that he’s not preparing to take over his father’s responsibilities. But he is becoming “the face” of the Gilbert family, particularly on the sports side. Early this year, he told SportsBusinessJournal:“In terms of staying engaged and helping impact and being involved (with the Cleveland Cavaliers), that’s something I want to do for the rest of my life.” | Capital Finance International 53

Poland’s Flag and National Pride Flying High as it Tackles War and Covid Demons

> Countryhasweatheredrecentstorms—andseemssetforimproved economicstatus.

oland has shown remarkable resilience during the pandemic and is poised to increase its economic importance in the EU.

By any measure, Poland has weathered the pandemic storm. Its 2020 real-GDP decrease of 2.5 percent looks like an ordinary recession rather than the shock from a once-in-a-century pandemic. EU GDP fell 5.9 percent. Poland rebounded with 5.7 percent GDP growth in 2021 — and is expected to hit 3.7 percent in 2022.

Poland navigated the Covid-19 pandemic via the size and sophistication of its economy. Back in 1989, when communism fell, its economy was around one-third the size of Sweden’s. Today, it is bigger — and the eighth-largest in the EU. A large domestic economy makes a country less vulnerable to events beyond its borders. Poland has become an export powerhouse over the past three decades — the world’s 20th-largest, with average annual export growth over the past five years of 6.3 percent.

It has emerged from stagnant mining, shipbuilding, and steel industries to become a dynamic modern economy. Back in 1995, its top five exports were services (32 percent), textiles (14 percent), agriculture (13 percent), metals (11 percent), and minerals (seven percent). In 2020, the top five were services (20.8 percent), agriculture (16 percent), machinery (13 percent), chemicals (11 percent), and vehicles (10 percent). Poland is one of the few European countries where manufacturing’s share of GDP has grown in the past 20 years. It also has a burgeoning business scene, with Warsaw and Krakow in the top 100 emerging start-up cities as ranked by policy advisory firm Startup Genome.

Poland’s strong economic ties with Germany helped it through the pandemic. In 2020, exports and imports with Germany increased by 6.2 percent and 5.8 percent respectively, outpacing growth in Poland’s total exports (0.9 percent) and imports (3.2 percent). Germany remains Poland’s largest export partner, while Poland outranks Italy, Switzerland and the UK in terms of German exports.

Poland has benefitted from its economic integration with its larger neighbour, becoming a key partner in the automotive and consumer goods supply chains. Volkswagen produces its Caddy, Crafter and Transporter models in Poznan, while Bosch produces washing machines and carries out R&D in Łódź

Apart from its dynamic economy, credit must go to the Polish government for the country’s Covid response. The government imposed strict lockdowns during each of Poland’s three main waves — but was quick to lift those measures when cases fell. At the time, this seemed questionable in public health terms, but in hindsight it is hard to argue against the economic efficiency. And, after a slow start, 59.4 percent of the population is now fully vaccinated.

The government also introduced its anti-crisis shield measures in 2020. This included wage subsidies, micro-loans for businesses, and increased pensions and unemployment benefits. It was able to do this because of strong fiscal buffers dating back before the pandemic. In 2020, the central bank helped with expansionary policies, including cutting the official interest rate to 10 basis points, the purchase of assets, and the provision of Polish capital to banks to enable loans to SMEs.

But in 2021, a new threat emerged: inflation. It had increased during 2020, but that was seen as transitory: a temporary hiccup from pandemic supply chain crunches. But in March 2021, the rate began to accelerate — and has now reached levels not seen since the shock-therapies of Balcerowicz in the early 1990s (see chart).

The drivers are mostly external. There are the supply-side constraints from the pandemic, and — more importantly and more recently — rising energy and food prices arising from the war in Ukraine.

Poland had been working to diversify its energy supply long before the conflict. It invested in onshore and offshore wind farms. There are plans for the production of green hydrogen. In 2015, the country opened an LNG terminal in Świnoujście on the Baltic Sea which is seeing record volumes.

The government responded to inflation in 2021 by temporarily reducing VAT for electricity, heating, and key foodstuffs. In 2022, it introduced regulated gas tariffs for households and has reduced the income tax threshold.

The central bank has shifted gears back to tightening and increased the official interest rate by over 640 basis points in the past year to 6.5 percent. This has supported the Polish zloty. The central bank has also ended its asset-purchasing programme.

So far, responses from the government and central bank have not slowed inflation; it is now around 15.5 percent. Some commentators believe that price pressures are starting to ease, and the central bank predicts a peak in Q1 2023. All eyes will be on the Ukraine conflict, and Poland’s population is hoping for a mild winter.

The war may also be affecting output. The Purchasing Managers Index for manufacturing has fallen by around 25 percent since February, and has now hit levels similar to those of March and April 2020. The government has responded with some evolving stimulus measures — but must remain wary of any inflationary effects.

Despite this, unemployment has continued to decrease and labour market conditions remain tight. Poland’s EU Recovery Funds, expected to reach €36bn, should help with inflation and with any economic slowdowns. Plans for the funds will focus on renewable energy and the transition to a more digital economy.

Poland has been a bright light in Europe during the dark days of the pandemic. Government economic policies, past and present, have helped it to weather the economic impact. Its resilience is the envy of its neighbours, and it is grappling with inflation by tightening monetary policy.

Time will tell if the central bank’s 640 basis points is enough. What remains beyond doubt is Poland’s continuing climb in GDP and living standards. The pandemic has not slowed Poland down. The white and red flag flies ever higher. i

56 | Capital Finance International
P Source: OECD

Meet Nordea Asset Management’s Responsible Investments Team

"To stay at the forefront of responsible investing (RI), Nordea Asset Management’s team — set up in 2009 — continuously refines its ESG approach in keeping with the increasing complexity, depth and scope of the field."

Nordea Asset Management (NAM) has one of the largest and most experienced responsible investment teams in Europe: 26 dedicated ESG analysts from academia, independent organisations, and investment circles.

To stay at the forefront of responsible investing (RI), Nordea Asset Management’s team — set up in 2009 — continuously refines its ESG approach in keeping with the increasing complexity, depth and scope of the field.

The strength of NAM’s approach is that its investment teams and RI team are fully integrated — ESG analysts sit side-by-side with equities and fixed-income teams. Fund managers are involved throughout the research process, and directly tie results to their investment decisions.

The team is fully integrated with NAM’s investment boutiques managing ESG products, and carries out research, active ownership, and represents NAM in international RI initiatives.

The team is subdivided into five units.

• The Active Ownership team is responsible

for NAM’s engagement activities, as well as for driving the Responsible Investment Committee agenda and RI policy-development. This group also works with the corporate governance team on proxy voting.

• The Climate group maintains focus on climate-change factors and policies, implementation and reporting on TCFD recommendations, and the firm’s membership and obligations under the Net-Zero Asset Managers’ Initiative.

• The ESG Private Equity team supports NAM’s private equity collaboration with Trill Impact.

• The ESG Products and Research team carries out company-specific research and engagement for NAM’s ESG funds, as well as product development.

• The ESG Quant team develops and maintains NAM’s proprietary ESG-scoring model and ESG data platform, as well as advanced applications of ESG data, including the new Principal Adverse Impact module.

The team maintains a broad RI coverage with a particular focus on NAM’s ESG-enhanced strategies, including the ESG STARS and Thematic Sustainable Solutions ranges. It

works closely with the respective portfolio management teams. Over 2021 and 2022, these ESG-enhanced strategies have grown with the launch of strategies such as the Green Bond, Global Climate and Social Impact, and Global Climate Engagement.

Members of the RI team are hands-on. In 2021, they led 1,033 engagements and voted in 4,200 AGMs, in collaboration with NAM’s Corporate Governance Team. In 2021, NAM ramped-up its voting activity — over 90 percent of its holdings were voted on, with some 10 percent of votes going against management. Votes related to climate and social issues were prioritised.

The RI team is also active in the global RI community, taking part in the industry-wide discussion around responsible investment and promoting best practices across the investment community. It is active in 36 investor initiatives across several ESG topics, including the NetZero Asset Managers’ Indicatives and the Finance for Biodiversity Pledge, as well as in several Sustainable Investment Forums around Europe. i

Autumn 2022 Issue | Capital Finance International 57 >

> The $130tn Opportunity in Sustainable Listed Real Assets

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

Our world is changing, and the global economy is at an inflection point. Rising geopolitical tensions, headlined by the war in Ukraine, have driven energy prices to unprecedented levels — which is fuelling an inflationary shock threatening consumers and industry.

The war’s impact on elevated food prices is being compounded by changing weather patterns, as the climate crisis continues to spill into our everyday lives.

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

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

While we all understand the importance of the green transition for the planet’s future, sustainability is no longer the sole driver of

58 | Capital Finance International

change. The energy crisis clearly demonstrates the economic rationale for rethinking the status quo. On-going technological innovation to support the evolution we need is within financial reach.


Identifying sustainable leaders within the real assets space will be imperative for enacting shortand long-term change. While industries within the infrastructure and real estate spaces are responsible for half of all carbon emissions today, these sectors

also make up almost three-quarters of current capital spend towards global low-carbon initiatives. Real assets companies are at the forefront of net-zero action, by investing in green initiatives such as the installation of solar farms, upgrading transmission lines, and improving energy efficiency.

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

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

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


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

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

Another example is National Grid, the owner of critical UK electricity transmission networks. The company is at the forefront of environmental

stewardship. Between 2022 and 2026, National Grid will undertake capital expenditure of £3035bn to ensure the UK is able to meet its netzero targets.

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

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

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

© The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and/or subsidiaries.

Autumn 2022 Issue | Capital Finance International 59
Eric Pedersen
"We should not overlook the tremendous societal impact of increased sustainable real assets spending. Infrastructure and housing developments have not kept pace with recent demographic and societal change in many parts of the world, and major investment is needed to future-proof these assets."

> Redefining Wealth — and Managing It for Generations

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

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

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

“Also needed,” adds Ariel Arazi, “is a solid governance structure, to ensure good decisionmaking and the right checks and balances. It requires generations to be educated in the family’s wealth and have the competencies to maintain it — and, more importantly, to grow it.”

David Joory believes "We should foster a mindset that fights against complacency and focuses on innovation and new ways of contributing towards the family wealth.”

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

Ephrati concurs. “A core part of our purpose is to support the next generation with skill development and we do so through candid engagement on a range of matters related to wealth ownership and management.”

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

“We know this helps them to shoulder the responsibility in the right way: not as an imposition or a reason for entitlement, but as something to be proud of and to steward.”

This notion inspired the creation of the Bedrock Community for Future Leaders, which is led by their in-house Family Governance specialist, Maria Villax, and brings together like-minded next gens to connect, learn, and exchange ideas.

“We host a series of events throughout the year,” explains Joory, “covering a broad range of topics including investment, family governance, entrepreneurship, leadership, strategic philanthropy, and succession planning.”

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

People are attracted to the entrepreneurial spirit that the firm and the partners inspire. “Having this type of environment enables people to create

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

their own path,” says Ephrati, “but also there is a shared sense of direction, stemming from our purpose, that creates passion and enthusiasm in the team.”

A focus on the future also means that Bedrock supports team members in engaging with CSR. “We do that in a number of ways,” says Joory.

60 | Capital Finance International learns wealth management secrets from BedrockGrouppartnersMauriceEphrati,ArielArazi, andDavidJoory.
David Joory, Maurice Ephrati and Ariel Arazi


percentage | Capital Finance International 61 “Illustratively, we facilitate the chance to directly impact the communities local to our offices, by encouraging volunteering. We offer time-off to all staff members to give back to society while working on issues they care about.” From supporting hospices to delivering food parcels, Bedrock team members create a diverse impact in their communities.
addition, Bedrock donates a
of annual profits to philanthropic causes. Donations are further enhanced by employees via payroll giving; with the company having a matching scheme. It helps to maximise the impact and support for causes that individuals are passionate about. i For more information regarding our Bedrock Future Leaders events, please reach out to our Head of Family StrategyandGovernance,MariaVillax: Wearealwaysonthesearchforpassionateandenthusiastic individuals.Ifyouwouldbeinterestedinjoiningourteam,

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

AI takes a starring role in entertainment, fromdeceasedstarsperformingfrombeyond thegravetodigitallycreatedrappers.


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

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

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

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

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

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

Gunna, a black artist who is featured on a song with FN Meka, is currently incarcerated for rapping the same type of lyrics this robot mimics.

“The difference is, your artificial rapper will not be subject to federal charges,” Industry Blackout said.

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

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

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

The increasing use of virtual reality in the music industry has also created new questions about copyright and ownership in the digital world. How much can somebody else’s music be used in the virtual world before it infringes on copyright laws? AI companies have recently been able to create and release “deep fake” music, where virtual voices that sound exactly like popular artists such as Katy Perry and Frank Sinatra — and they can sing anything their creators wish. While

music played in public requires specific licences that pay royalties to the artist, there is not yet any such license for the Metaverse.

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

It is unlikely that AI will loosen its grip on the music industry anytime soon. While digital personalities may not be the way forward, many real-life artists have found success harnessing the powers of the virtual world. Recent surveys found

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that 45 percent of all adults would listen to live music in a virtual world, as would 56 percent of Gen Z, and 61 percent of millennials. Although entry to such concerts is usually free, visitors are prompted to buy virtual merch for their digital avatars to wear. The popular computer game Fortnite held its first concert in 2019 with EDM musician Marshmello. It netted him 147k new Twitter followers — and grew his daily YouTube views by 500 percent.

In 2020, 12.3m people attended Travis Scott’s nine-minute Fortnite concert, which had 27 million visitors, and generated $20m of income from merchandise for the rapper (compared to $53.5m from his entire world tour in 2018/19).

Rapper Snoop Dogg released an exclusive metaverse music video of his song House I Built in April 2022, and Warner Music Group (WMG) announced in January 2022 that they would be hosting a “combination of musical theme park and concert venue” in the same digital space,

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

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

It seems that the future of AI in the music industry does not lie in anonymous creators

developing virtual musicians from scratch, but in collaborations between the real-world and the virtual one. As VR headsets become more commonplace in the household, it is not a question of if you will soon be attending your first virtual concert, but when. i | Capital Finance International 63
rumoured to include artists such as Dua Lipa, Ed Sheeran, and GreenDay

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

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

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

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

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

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

workplace culture that is equally healthy and performance orientated.

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

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

“Software plays an integral role not only in the vehicle development process, but also in the driver experience. Today, consumers expect more intelligent, comfortable, and safer mobility. To

achieve this, we combine our deep application know-how with our software development capabilities and cutting-edge simulation and testing solutions, “explains Schwab.

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

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

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

64 | Capital Finance International
Managing Director, AVL Software and Functions: Georg Schwab
AVLisdrivenbyapassionforimprovingthedrivingexperienceandGeorg SchwabandStefanSchmidexplainhowtheywillmakeitpossible.
Managing Director, AVL Software and Functions: Stefan Schmid

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

Automated and Connected Mobility

with other devices such as mobile phones. It is convenient if the car is playing music from your mobile phone or if a familiar navigation app is seamlessly connecting to the car (as new Apple Airplay). At the same time, cars should (at least) support to navigate in a complex environment (with other traffic participants, varying weather and road conditions, country specifics, etc.) and start interacting with their environment.”

a navigation system on demand instead of buying a navigation system as a standard – that drives the costs for end consumers down.”

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

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

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

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

Mobility is changing. As technologies such as assisted and automated concepts gain focus, we face a paradigm shift in the way vehicles are designed, built and used.

This requires new approaches in development, system testing, as well as validation and certification. AVL is your perfect, professional and reliable partner for high demanding technology solutions within ADAS/AD system development.

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

Schwab expounds this idea: “People like to be connected at any time – even while driving. A car is seen as an additional “device,” which should be seamlessly integrated and synchronized

Making life easier. Making life safer. Making life more connected.

Schwab draws attention to another economic benefit, customised services, “With SdV every vehicle will act differently based on your personal preferences, for example, you can book

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

Autumn 2022 Issue | Capital Finance International 65

Innovation, Inspiration, Experience and a Passion for Financial Industry Challenges


nnovation visionary and industry thought leader, after only six years since founding Supernovae Labs, a consulting boutique specialised in innovation, Carlo Giugovaz led his team in winning the Best Fintech Accelerator Award in 2023, the second one the company received after the 2019 award.

Carlo, a digital banking pioneer with over 35 years of experience in the financial industry, before founding S9L, contributed in leading companies including: PwC (7 years +), McKinsey & Company (7 years +), European Commission in Brussels (1 year +), Intesa Sanpaolo (4 years +), University of Bologna (1 year +) and UniCredit (16 years +).

Today, the thought leader is country manager in Italy and Switzerland for Qorus, with whom he has worked since 2017, and CEO and Founder of Supernovae Group, an entrepreneurial reality formed by Supernovae Labs and Finnovaction.

The first firm is a consulting company with a focus on innovation, targeting financial institutions and fintechs. Founded by Carlo Giugovaz in 2016, thanks to his collaborations with the brightest innovators in the industry, Supernovae Labs is the first Italian accelerator for fintech startups dedicated to banking, insurance and financial services. The company supports financial institutions and fintechs in defining and executing digitalisation strategies, offering a range of open banking and open innovation services and supporting partners at every stage of their path development.

Supernovae Labs credits its success to the value of its team and ecosystem. The company features an international team of experts with years of experience in financial institutions and consulting world. A team of managers who have worked in the most innovative retail, digital, and private banking groups, developing deep knowledge of market needs and the ability to translate the applications of the most innovative technologies into business use cases. Through open innovation, creativity, teamwork, and entrepreneurship, each team member strives to create and share value with their partners, including financial institutions and fintechs.

At the same time, Supernovae Labs is proud to collaborate with industry-leading institutions -including Intesa San Paolo, Gruppo Bancario Iccrea, Widiba, Société Generale, and Qorusand strategic partners - Including MBS, Kirey,

S2E, Startupbootcamp, Swiss Insurtech Hub, and Startup Wise Guys.

With the recent addition of Finnovaction, the new Open Innovation Lab, Carlo and Supernovae Group are broadening their horizons to experiment with new innovative products and services, in order to identify, select and realise new business opportunities. With its Observatory and its Development Sandbox, Finnovaction is constantly monitoring the market to anticipate future trends; and provides an environment designed

to "co-create" solutions that are ready to be implemented and to ensure their scalability.

Together, since the first Award in 2019, Carlo and his team have expanded S9L's ecosystem, renewed the brand by giving it a new identity and image, developed more than 100 innovation ideas in more than 10 different business areas, until witnessing the entry of new scale-ups and unicorns into their network, giving life to what is now one of the most interesting realities on the Italian and European scene. i

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Supernovae Labs:
Executive and
Founder: Carlo Giugovaz
Autumn 2022 Issue | Capital Finance International 67 Supernovae Labs S.r.l. Registered office V le Andrea Doria, 48/A 20124, Milano (Italy) Headquarter Via Giovanni Durando, 38 20158, Milano (Italy) info@supernovaelabs com Accelerating business through innovation We build bridges between banks and fintechs. 3

Healing, Grief, and the Star Who Once Fronted ‘Britain’s Most Violent Band’

KittyWenhamattendsaNickCaveconcertmadeall-the-morepoignant byherowntaleofloveandloss.


hen I walked into Victoria Park in August to attend London’s annual All Points East festival, it had been over a decade since I last saw a musician perform live.

That was in Manchester, 2011: Taylor Swift in her country-pop prime. Which makes it all the more surprising that I was in London to see the man who once fronted “the most violent band in Britain”

It’s a journey that has been in the making since I was a kid, listening to country-pop albums on repeat. Like anyone forced to listen to too much Taylor Swift, my dad desperately tried to introduce me to new music.

He picked out albums he thought I’d like from his vast vinyl collection, and I pretended to listen. He had been a troubled kid who found an outlet in hip hop and punk, and I was busy thinking about boys.

Dad changed tactics. He had something he thought I might like: a song by Nick Cave and the Bad Seeds, featuring Kylie Minogue, entitled Where the Wild Roses Grow. In it, Cave’s character obsesses over the beautiful Kylie, and eventually murders her by bashing her head in with a rock.

I was sold. He added bands like ThePogues and System of a Down to my playlists. My dad and I found a shared language in our angsty music, but nothing came close to NickCaveandtheBad Seeds, and his mini operas of murder, torment, and obsession. On my dad’s 41st birthday, I gave him a copy of Cave’s graphic biography, Mercy on Me. Exactly one month later I turned 23. We celebrated in St Leonard’s Hospice, and my dad gave me my own vinyl copy of Cave’s Murder Ballads album which we’d bonded over so many years before.

Two weeks later, he died.

It felt like divine timing when a few days later, Nick Cave released Ghosteen, his 17th studio album with The Bad Seeds. It was a maelstrom of grief, hope, and meditation. It was also the first album he wrote and recorded since the death of his teenage son, Arthur. I struggled through the stages of grief with each song,

losing hope, finding faith, and hoping for comfort. I booked tickets for four of his tour dates, but each was cancelled as the pandemic struck.

Nick Cave’s headlining set at All Points East in August 2022 was the first time he and his band had performed in the UK in over four years. Some 40,000 fans gathered in London’s Victoria Park that Sunday, and after four years of waiting, I made sure I was right at the front. I’d been to a festival before, so I knew that getting right to the front and staying put was my best chance of seeing Cave up close. I arrived at 1pm. His set started at 8.15pm. Even wearing Crocs, it didn’t take long to realise I’d committed to an arduous task.

I wasn’t the only one. I was surrounded by people who had seen the band perform several times. We made friends, held each other’s places when someone needed to go to the toilet, and everyone told me I should get ready for Cave to jump right into the crowd.

It’s been a long time since his days as a frontman for violent punk band BirthdayParty. In a recent interview reflecting on the concerts he played

following the death of Arthur, he said the crowd “saved” him.

“I was helped hugely by my audience,” he said, “and when I play now, I feel like that’s giving something back. What I’m doing artistically is entirely repaying a debt.” On his website, The Red Hand Files, Cave answers letters from his fans. It’s clear that I’m far from the only person touched by his reflections on grief.

That night in August, Cave takes the stage like a deranged preacher, conjuring up thrashing, howling narratives with an expert sense of theatre. At one moment, it’s a mass of anarchic noise, the next he’s grabbing people’s hands, looking into their faces as he sings his elegiac melodies. He spends most of the time with the crowd, sometimes literally on a sea of outstretched arms pleading for deliverance. My arms are there, too.

He closes his set with a rendition of Ghosteen Speaks, commanding the outstretched arms to rise and fall with his words. Ghosteen is Arthur, speaking to the crowd through Cave: “Iambeside you,youarebesideme/Ithinkthey'resingingto

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befree,Ithinkthey'resingingtobefree/Ithink myfriendshavegatheredhereforme.” i

Rogoff: Britain Is Not an Emerging Market – Yet

The Truss government’s two most problematic policies are the tax cuts for the wealthy and the energy subsidies. While they were celebrated by the conservative press, the tax cuts, especially, are a head scratcher. True, low private investment has perhaps been the single biggest factor hampering UK growth since the 2008 financial crisis, and cutting marginal

tax rates should spur investment, in principle. But that is only if businesses expect the low marginal rates to remain in place. If you think that a Labour government could come to power and reverse the tax cuts (and much more) within the next three years, there is no point in starting construction on a new plant that will take three years to complete. And, of course, the more incoherent the policy package, the

more likely it is to be reversed, regardless of who is in power.

The energy subsidies are an even worse idea. Aside from adding an estimated £100 billion ($108 billion) to the UK’s already high debt load, they also will distort the incentives to reduce fossil-fuel consumption at a time when it is in high demand. And though the measure

70 | Capital Finance International Kenneth

has been billed as “temporary,” energy subsidies are notoriously difficult to remove once in place – as many developing countries and emerging markets know all too well.

While other European countries are also resorting to desperate measures to deal with the huge price spikes consumers have been facing since Russia’s invasion of Ukraine, the Truss plan

resembles an emerging-market scheme in both its scope and scale. Many emerging markets, particularly fuel exporters, seek to cap the energy prices their consumers face, often at huge fiscal expense.

There are also some parallels between the Truss tax package and the effort by US President Joe Biden’s administration to implement a raft

of progressive economic policies that fall well outside the scope of what Biden campaigned on. But at least the Biden policies were clearly articulated by other Democratic presidential contenders in 2020, notably Bernie Sanders and Elizabeth Warren. Moreover, it is not impossible to imagine a 2024 Democratic presidential candidate winning on such a platform, particularly if Donald Trump is the Republican nominee.

Truss’s policies, on the other hand, have had no such recent airing. She won the premiership after a brief campaign among the Conservative Party’s 180,000-odd dues-paying members. No one else had a say, and there was no good reason to believe that voters would embrace her program.

Moreover, even if one argues that the mini-budget is meant to be political theater, it has not been a very effective performance. Voters tend to become most attuned to the economy and government largesse in the year before an election, and there are well-documented “political budget cycles”: during election years, governments push highly visible spending projects and cut back on lessvisible longer-term investments. But the next UK election might not be until January 2025. By that time, it should be clear that the tax cuts will not pay for themselves by boosting economic growth, and any initial positive reactions from voters will have dissipated. While Truss could call for an early election to get a broader mandate for her policies, that would be extraordinarily risky.

To be sure, radical policies, particularly from conservative politicians, are often berated by the press before proving to be far more successful than anticipated. British Prime Minister Margaret Thatcher and US President Ronald Reagan are two leading examples of this tendency, and Truss has made no secret of her admiration for the Iron Lady. But Thatcher and Reagan at least had a coherent policy framework that they clearly communicated; the same cannot be said for the Truss government so far.

Truss and her chancellor, Kwasi Kwarteng, are right to argue that the UK’s biggest economic problem over the past couple of decades has been anemic productivity growth, and that the solution must lie in supply-side reforms. Moreover, there is still time for them to come up with better plans, and to explain them better to the public. The Bank of England is key here also. Until then, the pound is going to be a punching bag, and things are likely to get much worse before they get better. i


Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He is co-author of This Time is Different: Eight Centuries of Financial Folly (Princeton University Press, 2011) and author of The Curse of Cash (Princeton University Press, 2016).

Autumn 2022 Issue | Capital Finance International 71
Prime Minister: Liz Truss

With Air Austral, go discover the Indian Ocean | Capital Finance International PARIS Perth Bangkok Chennai Fort Dauphin Tulear Diego Anjouan TANZANIA Dar es Salaam Moron i Nosy Be Tamatave EUROPE FRANCE MADAGASCAR SEY CHE L LE S MAYOTTE ROD RIGUES AUSTRALIA THAILAND Joh annesburg Majung a Saint-Denis Saint Pierre MOZAMBIQUE Pemba (1) Antananarivo ASIA INDIA REUNION ISLAND MAURITIUS SOUTH AFRICA COMOROS Air Austral The French Airline in the Indian Ocean (1) waiting for programming Air Austral subsidiary In codeshare with Operated in partnership with (1) (1)
Air Austral operates daily flights from its Reunion Island’s hub to Paris. It offers also flights to South Africa, Mayotte, Mauritius, Seychelles, the Comoros, Madagascar, India, Thailand … so many dreams destinations.

A Winning Recipe for Remarkable Growth

Copernicus Wealth Management was founded in 2016 and since then the company has enjoyed rapid growth. CEO Marco Boldrin, as a good Italian, compares the success to the culinary art: “As in a cooking recipe, what provides the quality of the end result is the proper mix and balance of ingredients. Certainly our ambitionand our vision - of being a centre of excellence with regard to financial services and becoming a hub for other asset managers within the Swiss financial centre and economy environment, is proving decisive.”

Another key factor that makes growth sustainable over time is the entrepreneurial spirit that characterises not only the partners but also the other members of the organisation. Last but not least, the team believes in what they do and how they do it.

Having grown to a team of fifty, the company has put in place a well-organised delegation process, sharing and involving colleagues in the decisionmaking process. Knowing that it is the people who make the difference allows them to share responsibility and foster a feedback culture on a daily basis.

Boldrin believes resolutely in not just meeting, but exceeding clients’ expectations:

“This is definitely our aspiration. I believe it is of utmost importance listening to the customer and understanding his or her needs in order to provide with the most appropriate tailor-made solution.”

The company has certainly met the challenge of the recent pandemic and has managed a merger, a takeover and further expansion since 2020. I asked him how they had managed that:

“As is often the case, it is precisely in times of uncertainty and difficulty that the best opportunities emerge, and they have to be seized. Believing in one's own vision, business model and capabilities as well as seeing the change as an opportunity and not as a risk is what allows you to navigate even in stormy waters while keeping your course towards the destination. Pragmatism, analytical and decision-making skills, and let's face it, even a bit of healthy entrepreneurial recklessness, have enabled us to pursue our growth targets. Even in the current difficult international and macroeconomic environment, we continue with our process of consolidation and sustainable growth.”

Opening an office in Zurich has been a major step in becoming a player at the Swiss level,

while preserving its roots and also developing expertise and attracting talent from the South of the Alps. Having an active presence in Zurich is essential to that end.

When I asked Boldrin if the company’s expansion would lead to a broader offer of services, he explained that Copernicus’ growth is focused more on clients than on expanding its range of products.

Given the Zeitgeist, we at are always interested in ESG investments. He expressed enthusiasm on this point:

“ESG issues are definitely becoming more and more relevant, and we too are keeping up with this trend by developing products and services that are in line with the market standards. Besides this, as a company we are also directly involved in financially supporting environmental and social initiatives in the local area. Last but not least, in terms of governance, the chairperson of our board of directors is a woman.”

That Copernicus has managed to grow so exponentially in these turbulent times demonstrates the dedication and ingenuity of the team and certainly augurs well for the future. i

Autumn 2022 Issue | Capital Finance International 73 >
CEO: Marco Boldrin
Copernicus Wealth Management:

Proptech Fuels Commercial Real Estate Leasing Market

is easier than ever to evaluate and compare the features and prices of


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

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

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

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


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

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

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

AI-enabled business intelligence tools can gather and centralise leasing data regionally and

globally, allowing firms to proactively manage lease contracts and transactions end-to-end through a one-stop platform. Data and analyticsenabled tools are central to streamlining listing operations and strengthening the asset portfolio strategy.

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


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

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

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


The number of companies providing technologybased services has expanded by over 300 percent since 2010, while venture capital and other funding has also risen. It remains a relatively young

74 | Capital Finance International > CBRE:
residential rental properties. Figure 1: Proptech 2021 investment rates per asset class. Source:CRETI(CenterforRealEstateTechnologyandInnovation),2022. Figure 2: Number of proptech companies funded in 2021, per country. Source:LSE,Crunchbase.2022.

technology ecosystem, with around three-quarters of these companies founded in the last 10 years.

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

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

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


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

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

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

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

Autumn 2022 Issue 75
Author: David Casas Alarcón



Once again 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 audiences and

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.

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 and nominate.

76 | Capital Finance International ANNOUNCING


Since its launch in 1998, KBC has aimed to become one of the best-performing financial institutions in Europe. The Belgium-based group has proven that it has the market position, liquidity and leadership to reach its goal. It focuses on banking and insurance services for retail, SME and mid-cap clients in Belgium, Czech Republic, Slovakia, Hungary and Bulgaria. First quarter results for 2022 were the best in the group’s history, thanks to prudent provisions at the onset of the pandemic that helped it to

not only survive, but thrive. This summer, KBC became the first Belgian bank to issue a social bond. It also established a partnership allowing app users to compare energy prices and switch providers. KBC runs the business with a view for long-term stability. It has achieved exemplary growth — which never comes at the cost of profitability or sustainability. KBC Group received a nod from the European Central Bank for its climate review. The group advocates for climate responsibility, starting with the CEO and filtering


IBM has been influencing the tech world for more than a century. The company ensures that its operations bring shared benefits by proactively engaging with a broad cross-section of stakeholders: NGOs, government agencies, businesses, industry associations, investors, academia, communities and employees. IBM collaborates with a long list of government partnerships and programmes, including but not limited to charter membership in the US Environmental Protection Agency’s Energy Star programme and participation in the EU Code of Conduct for Energy Efficiency in Data Centres

Programme. The company makes voluntary disclosure on a number of public and private ESG reporting initiatives, like the Customer Data Platform, Global Reporting Initiative and EcoVadis Sustainability Rating Platform. It works with the Wildlife Habitat Council, The Climate Registry and The Nature Conservancy to incorporate environmental protection measures. The company partners with industry leaders to tackle climate change, end plastic waste and promote green energy models. IBM led a coalition of manufacturers in support of California's recycling legislation for video display products. In 1994 in


throughout the ranks of 40,000 employees. KBC boss Johan Thijs has been nominated multiple times by Harvard Business Review as one of the best-performing CEOs in the world. Thijs has a background in data science and brings to banking the type of constant disruption made famous by market-creating tech companies, like Google or Amazon. The judging panel is pleased to recognise KBC Group — a repeat programme winner — with the 2022 award for Best Bank (Europe).

Nordea Asset Management (NAM) forms part of a group with roots dating back to 1820. As the investment arm of Nordea Group, NAM integrates ESG commitments throughout the decision-making process to deliver returns with responsibility. Sustainability ranks high among Nordic values, and NAM levers its global reach and strong capital position to create positive impacts and drive change. As of March 2022, responsible investments (RI) make up 64 percent of NAM’s total AUM — €175bn of €273bn — representing a five percent jump

over a one-year span. The company has a dedicated RI team with 27 ESG analysts. NAM practices active asset ownership and engages with investees to support and encourage their sustainability journey. In 2021, NAM initiated 1,033 engagement topics and voted at over 4,200 general meetings. It has a perfect track record voting in favour of climate resolutions. NAM recently introduced a Global Climate Engagement fund to target companies that could contribute to energy transition despite having a less-than-ideal carbon footprint. The

Switzerland, IBM spearheaded the establishment of the first comprehensive national recycling system for electronic products in the world. It promotes knowledge sharing among academia and industries to drive advancements and amplify impacts across the sustainability field. IBM aims for exemplary corporate citizenship. In 2020, the company increased its contributions, reduced its energy consumption and invested more in employee learning programmes. The judging panel presents IBM — a repeat programme winner — with the 2022 award for Best Stakeholder Engagement (US).

company is currently collaborating on 36 RI initiatives, including seven projects or pledges that it joined in 2021. It’s a founding member of the Net-Zero Asset Managers initiative and helped to co-develop a framework for net-zero investments alongside other members of the Institutional Investor Group on Climate Change. NAM first registered on the judging panel radar in 2014, and the jury has been impressed with its progress ever since. Repeat winner Nordea Asset Management claims the 2022 Best ESG Team (Europe) award.

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Deloitte Cyprus forms part of a global organisation with a 150-year history, 286,000 employees in 150 countries, and four out of five Fortune-500 companies as clients. The company works with public and private sector clients, offering specialised services in risk and financial advisory, audit and assurance, consulting, tax, legal, family enterprise and international markets. The financial advisory team supports local businesses and international players in Cyprus, conducting the necessary feasibility studies and due diligence to help them fuel growth, mitigate risks and maintain regulatory

compliance. Deloitte Cyprus has assisted companies with the assessment of project sustainability and the development of ESG strategies. Deloitte is proud to be involved in the green energy transition and creation of a new port in Cyprus. Strong collaboration across Deloitte’s global offices gives the team a competitive edge in research, networking and deal execution. Deloitte Cyprus offers assistance with M&As, divestitures, private placements, privatisations, equity capital and business valuation. It’s a rock of reliability in moments of financial crisis, stepping in to

guide reorganisation and restructuring solutions to ensure the turnaround of a struggling business. Despite ongoing Covid complications, Deloitte Cyprus has successfully concluded the majority of projects that were put on hold by the pandemic. The company is walking clients through major changes to the Cypriot tax environment, including a new transfer pricing regime. The judging panel presents Deloitte Cyprus — a programme winner for the third consecutive year — with the 2022 award for Best International Financial Advisory Team (Cyprus).


Murdoch Asset Management was one of the first firms to join Independent Wealth Planners UK (IWP), a long-term investor dedicated to building and providing scale to Britain’s independent financial advisory (IFA) firms. Murdoch celebrated its 30year anniversary shortly after the IWP acquisition. Murdoch’s managing director, Chris Birch, says the IWP partnership has delivered numerous benefits, including improved tech infrastructure, an advisor academy and an HR function helping to promote from within. IWP provides the support; firms retain their autonomy. Three new IFA firms

— Custodian Wealth Management, Encompass Financial Management and Omnium Wealth Management — have joined the IWP family, with Murdoch heading the Hampshire and Surrey operations. Murdoch envisions the region as a hub with three fully integrated spokes. They’re in the process of merging investment committees and routing the planning through Murdoch, but the firms will maintain their own brand, advisors and clients. Murdoch has grown the funds under its management from £30.3m in 1991 to £619.8m in 2021. The firm achieved strong

recovery in 2021 from the pandemic slump. But team members aren’t resting on their laurels — they’re gearing up for a big brand push and a full season of seminars. Murdoch has 12 advisory seminars planned, four each in autumn, spring and summer. The firm has also redesigned its website to simplify the visitor journey and highlight the personal contact available through multiple offices. The judging panel presents repeat programme winner Murdoch Asset Management with the 2022 award for Best Investment Management Solutions (UK).

Supernovae Labs is accelerating business by partnering with the brightest innovators of Italy’s start-up and financial services sectors. Supernovae Labs, founded in 2016, is the country’s first accelerator for fintech start-ups dedicated to banking, insurance and financial services. The company sees itself as a fintech matchmaker, promoting promising ventures across a wellestablished international network. Italy was among the 10 countries hardest hit by Covid, with banks under pressure and lending slowed to a trickle. Supernovae Labs persevered by focusing more on consultancy services — and regained much

of its pandemic-halted momentum in 2021. The world is settling into a new sense of normal, where digital reigns supreme and services have reached unprecedented levels of convenience and customer centricity. Supernovae Labs credits its success to the calibre of its workforce and ecosystem. It has assembled a multicultural team, comprising nine nationalities, many talents and one common language. Each member strives to bring value to partners through open innovation, creativity, teamwork and entrepreneurship. Supernovae Labs is proud to work with industryleading institutions - including Intesa San Paolo,

Gruppo Bancario Iccrea, Widiba, Societe Generale and Efma - and partners - including Kirey, S2E, Startupbootcamp, Swiss Insurtech Hub, Startup Wise Guys — and is in the process of establishing new partnerships for 2022. The company assists financial institutions in defining and executing digitalisation strategies, offering a range of open banking and open innovation services. It walks with partners at every stage of development and supports their journey using inhouse research. The judging panel presents Supernovae Labs — a repeat programme winner — with the 2022 award for Best FinTech Accelerator in Italy.

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National Bank of Greece (NBG) is a leading financial institution with a 181-year legacy of responsible corporate governance. The group employs 8,800 professionals through a network of branches and subsidiaries at home and abroad. NBG has earned the trust of six million customers, who rely on its broad range of individual, private, business, corporate and investment banking services. NBG aims to be the first-choice financial partner for customers, employees and investors by pursuing a future-forward vision rooted in innovation and sustainability. Among others, in 2022 NBG established a new Board committee to monitor long term trends and developments in the digital and ESG sphere — and provide respective feedback to the Board assisting in the formulation of implementation strategies. NBG follows best practices in corporate governance

and aligns its corporate governance and sustainable development policies with national regulations and international standards. It’s a leading financer of clean energy and green economy projects. The group’s continuous investments in IT infrastructure are delivering results: NBG had over 2.5 million active digital banking users last year. Staff is always on-hand to help clients make the shift to online banking, as clients are moving more and more towards digital channels. NBG has a highly diverse Board of Directors, including members from different nationalities and backgrounds and maintains high independence and gender diversity levels on its Board. The judging panel presents National Bank of Greece — a repeat programme winner since 2016 — with the 2022 award for Best Corporate Governance (Greece).


Since its launch in late 2017, ATLAS Infrastructure has focused exclusively on listed infrastructure companies. ATLAS differentiates itself with its specialised focus, deep industry expertise and global coverage from its offices in London and Sydney. ATLAS integrates detailed climate change policy scenarios and emissions benchmarking at within its investment process. ATLAS’ Climate Advisory Board brings together experts to collaborate on pressing sustainability challenges. The founding director of Oxford’s Sustainable Finance Programme, Ben Caldecott, forms part of the board. So does Amandine Denis-Ryan, who oversees system change and capability at the leading climate change thinktank in Australia. The remaining board members have backgrounds in economic strategy, scenario modelling and energy innovation. The firm recently expanded the investment team — now

15 strong — improving on its already-impressive analytical capabilities. It has begun to work with the Institutional Investors Group on Climate Change (IIGCC) and non-profit Ceres as a thought leader on emissions forecasting and sciencebased targets. ATLAS is scheduled to present at the IIGCC’s Infrastructure Guidance event and Ceres’ Paris Alignment Investor Working Group. The firm promotes knowledge sharing and has been working with large institutional investors like Blackrock and LGIM to impart some of the lessons learned from its climate-centred approach. Climate commitments don’t come at the expense of investor returns. Over the past year, the firm has outperformed the broader listed equities index by approximately 20 percent. The jury presents three-time winner ATLAS Infrastructure with the 2022 award for Best Climate Impact Responsible Investor (UK).


XM is a big online broker that favours fairness and real human interaction. The company is wellestablished, boasting 13 years’ experience in an industry where online brokers tend to come and go. XM encourages users to sign up for a demo account, where they can trade with a virtual balance of $100,000. XM sees its users as people, never just numbers on a spreadsheet. It invests considerable resources in the development of human potential. XM employees receive three to six months of training, while XM users can peruse an extensive collection of educational materials, video tutorials and market insights. It opens forex and CFD (contract for difference) trading for more than five million clients from 190 countries. The XM dealing desk in Cyprus runs from late Sunday until

late Friday night, giving traders access to the full cycle of forex markets opening and closing every workday worldwide. The XM support team is available around the clock via email or live chat. Support services are localised to the country, and users can set XM’s website to display in 25 languages. The company regularly schedules face-to-face meetings with clients and partners in 120 cities worldwide. The judging panel has followed XM’s progress for several years, first noting the company’s efforts to educate, train and increase knowledge-sharing in the trading community. The panel points to XM’s consistently positive user reviews and high client retention rates as final justification for reaffirming the win for Best Customer Support (global 2022).

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AccountAbility is a trusted global consulting and standards firm, and an awardwinning thought leader within the ESG ecosystem. It is a values-driven organization exclusively focused on working with business, governments, and organizations to advance responsible business practices and improve their longterm performance. With this, AccountAbility has attracted top talent and built a partnership network rooted in collaboration, innovation, and measurable impact. The company has established multiple alliances with like-minded organizations globally, including prominent universities and research departments, public accounting industries, and international data and analytics providers. Recent noteworthy AccountAbility client projects include guiding a Fortune 50 company to link corporate ESG targets

and performance with C-suite compensation, developing ESG disclosure guidelines for a prominent stock exchange with a US$3tn market cap, designing ESG key performance indicators for a Top-10 GCC bank, and developing a global citizenship strategy for one of the world's largest companies.

Led by CEO and ESG pioneer Sunil (Sunny) A. Misser, AccountAbility's projects are designed to deliver practical and relevant solutions that advance the business performance of its clients with objective ESG counsel. The company pioneered the application of double materiality in the alignment of standards and is now working with the International Monetary Fund (IMF) on the development of a sustainable procurement framework and updating their GHG Inventory Management Protocols. AccountAbility


is also working with a Fortune 10 company to translate their ESG strategies into actionable programmes in areas such as biodiversity, energy access and STE(A)M education for women in developing countries. As an outcome, this shows bigger enterprises how to scale socioeconomic and environmental impacts with global citizenship strategies in areas of critical need. Since the CFI. co judging panel last assessed AccountAbility, the company has successfully completed the Public Benefit Corporation (PBC) certification process, and with this PBC status is recognized for its commitment to prioritizing social benefits alongside traditional financial objectives. The judging panel is pleased to reaffirm AccountAbility as the 2022 global award winner for Best ESG Strategy Development Partner.

S4 Capital takes brand messaging to marketfaster, better, cheaper - with a disruptive "Holy Trinity" operation model. The company, which was founded by Sir Martin Sorrell and went public in September 2018, has 57 talent hubs in 33 countries and a $2.5B market cap. S4 Capital works with some of the biggest names in business - from Google and Amazon to PayPal and T-Mobile - marketing itself as a digital investment manager that can master the current digital marketing landscape and track the headwinds of future trends. S4 Capital aims

to disrupt century-old marketing practices with a completely digital approach that capitalises on the 24/7 rhythm of the modern world. The media market in 2021 totalled about $750bn, 60 percent of which came from digital revenues - and forecasts predict a 20 percent increase in the market and over 10 percent increase in digital’s share by 2025. S4 Capital expects the advertising and marketing markets to grow faster than a country's GDP, fuelled almost totally by data-driven digital advertising models. In S4 Capital's "Holy Trinity” business


Since its launch in 2007, Energean has been driving the energy transition in the Mediterranean. The company runs exploration, development and production projects across the region: Egypt, Italy, Greece, Croatia, Montenegro, and Israel.

Energean believes natural gas is the foundation of and catalyst for a more sustainable energy system, replacing more pollutive fuels like oil and coal with a cleaner, affordable and secure energy source. The company seeks to

create value under its ESG framework, based on the UN SDG goals. Energean makes ambitious climate commitments — and follows through on them. It was the first exploration and production company to announce a 2050 netzero target and has already made measurable progress towards that goal – it has achieved a 74% reduction in scope 1 & 2 emissions since 2019.

It recycles 95 percent of withdrawn water, spearheads beach cleaning initiatives

model, data informs the creation, production and distribution of content in an ever-evolving digital media loop. It's agile in an alwayson world, which has proven critical even in turbulent times, and monitors the market's ebb and flow by following a key selection of digital platforms, software and hardware companies. S4 Capital offers its services under one unified operational brand: Media.Monks. The judging panel announces S4 Capital as the 2022 global award winner for Best Digital Marketing Solutions.

and supports biodiversity programmes. Executive pay is linked to ESG performance. Energean shares are listed on the stock exchanges of London and Tel Aviv as well as the FTSE 250 Index. Energean production sites are ISO certified, and its Carbon Disclosure Project ratings were recently upgraded. The judging panel congratulates Energean — a repeat programme winner — on claiming the 2022 award for Best ESG Energy Growth Strategy (Europe).

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American multinational JP Morgan is pursuing a Corporate Social Responsibility plan designed to uplift communities through ongoing investments, business initiatives and philanthropic commitments. The investment bank and financial services holding company has more than 200 years of history and a presence in over 100 markets worldwide. The company levers its capital, data and expertise to fight climate change and develop longterm solutions that promote sustainability. It organises formation programmes to equip people with the skills and tools to advance in their personal and professional lives. It partners with small businesses and entrepreneurs to fuel job creation. JP Morgan is helping clients to achieve financial stability and meet long-term financial goals by developing innovative fintech tools, expanding financial coaching programs and supporting non-

profits that empower people to save, pay down debt and build wealth. It designates investment and philanthropic capital and forges partnerships to help build stronger communities. The company has taken a stance against racial inequality — and pledged to spend $30bn to level the playing field. It is committed to breaking down barriers of systemic racism and driving inclusive economic growth, particularly in black and Latinx communities. JP Morgan’s commercial banking division contributes to the group’s CSR objectives through its day-to-day lending activities. The bank supports companies with a sustainable mindset and invests in affordable housing. The judging panel has praised the company’s good deeds in previous programmes — and reaffirms its bragging rights in 2022 with the Best CSR Banking (US) award.


AES is a Fortune500energy company, delivering global scale and local impacts on four continents. The US-based company is headquartered in Arlington, Virginia and operates in 14+ markets, including in the United States, Central America, South America, Europe, and Asia. AES pulls from 41 years of history to develop energy solutions that fit the needs of its customers and the communities in which it operates. Some highlights from the company’s early years include the first documented US carbon offset programme, the first utilityscale battery energy storage in the world and the first to provide ancillary grid services for energy storage. Over the past year, AES has marked numerous milestones in its mission to accelerate the clean energy transition. It formed the US Solar Buyer Consortium with three other leading solar companies,

investing upwards of $6bn to boost US domestic solar manufacturing. It signed a deal to provide renewable energy to Amazon and expanded on an agreement with Microsoft to supply California data centres with renewable energy. AES pioneered a first-of-its-kind robot to accelerate solar construction and has stated its intent to remove coal assets from its portfolio by 2025. It has invested $10m in over 100 social impact initiatives, which has benefitted more than three million people worldwide. The judging panel has previously recognised the crucial role played by AES in driving the green energy transition. The jury continues to be impressed with company’s ability to unite people worldwide in the fight for a more sustainable future — and reaffirms AES’ bragging rights for the 2022 global award for Best ESG Power Producer.


Barrick Gold understands that ESG criteria must be measured before they can be properly managed. The Canadian company has mining operations in 18 countries across North and South America, Southeast Asia and the MENA region. It recently expanded carbon calculations to include the scope-three emissions produced throughout its value chain. Barrick is working with tech partners to cut emissions. It’s testing a new assay method that has delivered improved samples as well as savings in energy, emissions and time. Barrick department representatives collaborate in sitespecific teams to combat climate change, bringing diverse perspectives together to implement actions. Sustainability performance and incentives for senior and operational leaders are interlinked and accounted for 25 percent of long- and short-term incentive schemes in 2021. Barrick implements

measurable conservation actions to increase biodiversity across its sites and promotes circular economies to create value from waste. The company invests in the socio-economic development of its host countries and allocates funding as recommended by its Community Development Committees (CDCs). Elected committees unite the local leaders and community members — including women and youth — that best understand the region’s needs. One Barrick representative also comes to the table. In 2021, Barrick invested over $26.5m through its CDCs in five priority areas: education, health, food, water and local economic development. For the third consecutive year, the judging panel has found reason to celebrate the sustainability credentials of the company — and announces Barrick Gold as the 2022 global award winner for Most Innovative ESG Mining Solutions.

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Since its launch in 2008, Wing Bank (Cambodia) has worked to provide all Cambodians with convenient access to digital financial solutions that improve their daily lives. The bank has experienced a remarkable transformation in a relatively short span, evolving from a third-party processor to a specialised bank and, since last Autumn, a fully licenced commercial bank. Wing brought in a new CEO, Han Peng Kwang, a specialist with 25 years’ experience in commercial banking, to lead the bank in the next phase of its journey.

The bank puts its customers at the heart of operations, prioritising their needs and promising quick responsiveness. Wing sees its employees as the pillar of the bank, and has created a progressive work culture where they can realise career aspirations while making positive community impacts. The bank helps to strengthen communities by delivering costeffective mobile money services that promote financial inclusion, catalyse growth and reduce social inequalities. All the above is tied together by strong corporate governance standards


that protect and balance shareholder and stakeholder interests. Wing recently expanded the product line to include loans and savings accounts. It also helps clients cover unexpected expenses by allowing salaried employees to draw a cash advance on their wages. During the Covid pandemic, Wing partnered with the ministry of affairs to distribute funds to the hardest-hit populations. The judging panel congratulates repeat winner Wing Bank (Cambodia) on claiming the 2022 award for Best Social Impact Bank (Cambodia).

Established in 2013, Verdant Capital levers extensive investment experience and deep relationships to fuel pan-African fintech development. It stays in close contact with investors and entrepreneurs via offices in Mauritius, South Africa, Ghana, Zimbabwe, the Congo and Germany. Verdant Capital handled the second-largest deal in Nigeria’s electronic payments sector in 2021: the sale of Baxi, one of the country’s largest digital payment networks, to MFS Africa, which simplifies cross-border payments through an integrated hub. In 2021, it advised Zeepay, a Ghanian mobile financial services business, on an $8m series-A

capital raise and the acquisition of Mangwee Zambia. In August 2022 it raised a further $10m for Zeepay in debt funding. The firm helped WIOCC, a leading wholesale telecoms company, to raise funds to develop an interconnected panAfrican network of open-access, carrier-neutral datacentres. The lead investor was from Nigeria, attracted by WIOCC’s expansion into the country. Verdant Capital helped Tugende with debt and mezzanine funding to expand its asset finance

investment banking business, Verdant Capital invested in fintechs through its own funds, the Verdant Capital Specialist Funds business. These included Watu Uganda and Pezesha. In the future, Verdant Capital Specialist Funds expects significant growth. Verdant Capital is IMAP partner firm for its region; IMAP or the International M&A Partnership ranks in the top 10 in the global league tables for middle market M&A. The judging panel presents Verdant Capital — a repeat programme winner — with the 2022 award for Best FinTech Capital Raising


Zambia National Building Society (ZNBS) was established by the Building Societies Actin 1968. Since its inception, ZNBS has grown into the largest Building Society in Zambia, with a nationwide network of 21 branches and 15 properties. ZNBS is wholly owned by the Zambian Government and regulated by the Central Bank. It promotes financial inclusion and property ownership with a specialised service suite centred around mortgage financing and banking. The Society has also developed a complementary product to support the journey

loans, continuing to tackle the challenge of Affordable Housing Finance in Zambia. ZNBS has continued to offer innovative Mortgage solutions on the market which now includes, Equity Release, Bare Land Financing and Diaspora Mortgages.

The Society has also made significant progress on its digital transformation strategy introducing mobile, internet banking and agency banking channels to its client base. Over 1.3 million transactions have been processed over the institutions alternative channels in the last one year signalling a shift in client preferences around the mode of access to financial services... The judging panel is pleased to present Zambia National Building Society with the 2022 award for the Best Mortgage Provider in Zambia.

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Over the past 30 years, MAC SA has evolved into a multidisciplinary financial services company specialising in stock market intermediaition, corporate finance, financial engineering, asset management and Investment research. MAC SA was founded in 1992 and benefits from a cohesive team with extensive experience in financial markets. MAC SA is the stock market leader and is ranked among the top three asset management firms in the country. The Tunis headquartered financial company has proven efficient in helping individual, corporate and institutional clients to navigate COVID crisis by focusing on clients and tailoring services to meet their needs. MAC SA has reoriented the business model to target more bond issuance, levering its expertise as a deals arranger to help companies et countries climb out of debt. It’s also getting more business from M&A

markets, as crisis-hit companies turn to MAC SA for help consolidating activities or lining up potential buyers. Following the path of the parent company, MAC AFRICAN SGI, the Ivorian subsidiary of MAC SA, and after a few years of existence, is currently ranked among the top 5 brokerage companies in the WAEMU region and has recently signed a partnership with a local company to develop its asset management capacities. Business is flourishing in a post pandemic world, and MAC SA is proud to contribute towards the region’s recovery and competitiveness. MAC SA feels confident that it will be able to adapt to changes in the industry by identifying market trends and swiftly responding to tweak an offering where needed. The CFIco judging panel presents MAC SA a repeat programme winner- with the 2022 award for best Stockbroker (Tunisia).

The Export-Import Bank of Thailand (EXIM Thailand) rejects antiquated business models that put profits over people and planet. To support the transition to a green, low emissions and climate-resilient global economy, EXIM Thailand has played an important role in financing such green growth initiatives. One of the latest flagship projects - Solar Orchestra - aims to equip the country's industrial rooftops for solar energy production. Industrial companies benefit from financial support by EXIM Thailand in collaboration with partners including PTT Public Company Limited Group, a major oil player and the biggest energy producer in the country, which cover financing of the equipment, and over the next seven years, collect carbon credits to offset the carbon footprint across its portfolio. Afterwards, the rooftop solar equipment belongs to the factory owner. The programme promotes collaboration between larger and smaller enterprises while also contributing to a greener energy landscape, and, by supporting carbon credit registration for Thai entrepreneurs, driving forward

carbon-neutral economy. EXIM Thailand has also launched "EXIM Biz Transformation Loan" to support investment for improvement of efficiency in production process with offering of low interest rate credit line. Further, EXIM Thailand offers business owners financial and non-financial support to align operations and objectives with rapidly evolving ESG expectations. EXIM Thailand's financial facilities including export credit insurance help Thai businesses reach global markets confidently, while its one stop service centre for SMEs guide them through the export process. One EXIM CSR programme - allowing farmers to "play" in a sandbox ecosystem where agricultural products are transformed, packaged, launched online and successfully exported to global markets - has been praised by both public and privates sectors for improving small farmers' lives, raising their income and expand the level of sustainable livelihoods in rural areas. The jury presents EXIM Thailand with the 2022 Best Product Innovation for Sustainable Development (Thailand) award.


Subic International Management and Consultancy (SIMC) is a female-owned Philippines business founded in 2014. SIMC offers a wide range of services in corporate business management consulting, construction management, facility operations, maintenance, logistics and supply services. It has extensive global experience and an excellent track record of delivering results on time and on budget. SIMC is a preferred partner of subcontractors and suppliers, but its primary clients are the country’s state and defence government agencies. SIMC was awarded the prime contractor, consulting and programme management contract for the first new PNP base in many years. The base will be for the Philippine National Police, which will run social outreach programmes to educate against extremism, support gun trade-ins and provide

training for sustainable professions. The contract was awarded, then slowed but not stopped by the Covid pandemic. SIMC helps clients manage projects from concept to completion. It provided management consultancy on a base in Bahrain and a $12.8m airport hangar in the Philippines. It serves the Philippines’ residential industry, building and renovating homes in accordance with international standards. SIMC works with clients across the marine, military, aerospace, government, construction and transportation sectors. SIMC is a proud participant in the UN’s Global Compact, a voluntary association of businesses collaborating to realise the SDGs by 2030. The judging panel congratulates SIMC, the 2022 award winner for Best Sustainable Management Consultancy (Philippines).

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When Nasdaq began operations in 1971, it introduced the world's first electronic stock market as a quotation system without the option to perform electronic trades. The global system is headquartered in New York and has the second-highest market capitalisation of traded shares worldwide. It gives investors and businesses access to global markets and levers data to extract insight and drive growth. Nasdaq helps global brands accelerate valuation strategies, activate ESG implementation and improve corporate governance. It has developed technology to uphold, expedite and secure

markets. Nasdaq business solutions tackle financial crime across a range of compliance silos, organisations, regions and data pools — detecting and fighting nefarious activity as it occurs. Financial crime, according to the UN, is a multi-trillion-dollar enterprise that funds and enables narcotics trafficking, modern slavery and other types of criminal activity. Financial crime damages trust in markets and illegitimately enriches an individual or group. Nasdaq lends a hand to companies attempting to assess vast amounts of data to effectively detect anomalies and prioritise

areas for investigation, helping to distinguish between a false alarm and a critical discovery. The exchange believes that a holistic approach to financial inclusion can assist in mitigating the advancement of financial crime. With Nasdaq, businesses can better understand the challenges, build awareness, promote financial inclusion and drive financial empowerment to build long-term financial well-being, freedom and stability. The judging panel presents repeat winner Nasdaq with the 2022 global award for Most Innovative Compliance Management System.

TotalEnergies is a multinational French company created in 1924 — and now driving an energy transformation in 130 countries. In Eurasia, straddling Western Asia and Eastern Europe, TotalEnergies works within company’s climatecentered transformation strategy to deliver affordable, clean energy. The company has a history of supporting national energy resilience by developing oil and gas assets, but it's been pushing to clean up the portfolio. TotalEnergies has been active in Azerbaijan since 1996, primarily through its gas operations. In 2015, TotalEnergies sales were split between approximately 65 percent petroleum products

and 33 percent natural gas. Last year, the energy mix rebalanced at around 44 percent petroleum, 48 percent natural gas, seven percent (mostly) renewable electricity and two percent biomass or hydrogen. The company continues to phase out oil production and is looking to natural gas as an ideal transitional solution in the net-zero journey. TotalEnergies identifies opportunities in international markets, working with government and business partners to boost renewable energy production. Transformational strategies are driven by the SDGs and aligned with climate targets. TotalEnergies plans to increase

renewable energy capacity to 35 gigawatts by 2025 and 100 gigawatts by 2030 globally while TotalEnergies Azerbaijan is focused on development of renewable portfolio in the country. The company is working with the Azerbaijan - France Chamber of Commerce to build a sustainable energy roadmap for the nation and its people. It supports gender equality initiatives and invests considerable resources to educate and promote local talent. The judging panel announces TotalEnergies Azerbaijan as the 2022 award winner for Outstanding Contribution to Sustainable Transformation (Azerbaijan).

Jusan Bank has demonstrated the vision and strength to thrive in challenging macroeconomic environments. Over the past three decades, it has gained a deep understanding of consumer banking requirements and responded with an array of product developments and fintech partnerships. It serves retail, business and private banking clients. Jusan Bank refers to 2021 as a breakthrough year of quantitative growth that has laid the foundation for a qualitative transformation of the entire group. It has made significant progress on the recovery of the loan portfolio acquired from troubled

Tsesnabank and fast-tracked a merger with ATFBank. Swift integration of services following the merger ensured maximum retention of clients. It has prioritised continuous investments towards the development of Kazakhstan’s financial ecosystem, which has prompted the national bank to recognise Jusan Bank as strategically important. Jusan Bank takes a holistic approach to ensure balanced risk management. It has exceeded regulatory minimums for capital adequacy and current liquidity ratios, respectively at 28 percent and 211 percent. In terms of

equity and liquidity, Jusan Bank ranks among Kazakhstan’s top three banks, as underscored by the “stable” outlook assigned by Moody's. The bank’s governance policies are rooted in responsibility. It has prevented the bankruptcy of two substantial financial institutions, built a modern financial ecosystem from scratch and adopted increasingly ambitious ESG standards. It allocates sizable support for national education and science initiatives. The judging panel presents Jusan Bank — a repeat programme winner — with the 2022 Best Bank (Kazakhstan) award.

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Ahli United Bank B.S.C. (AUB) boasts an extensive network of 157 branches in eight countries. The group is headquartered in Bahrain with a well-established presence in Kuwait, the UAE, Oman, Iraq, Egypt, Libya and the UK. Performance figures for AUB point to an excellent recovery from Covidcaused challenges,. AUB reported a net profit attributable to its equity shareholders of $340.9m and a return of average equity of 15.3 percent for the six-month period ending on June 30, 2022. Bank leadership believes that AUB’s strong performance underscores its resilience and ability to deliver sustainable core earnings on a consistent basis — despite volatile market conditions. The bank cites its multi-market investments,

robust risk management, cost control measures and cross-border business flows as the secret to its success. AUB recently concluded an agreement with Citibank to acquire its consumer banking business in Bahrain which will further enhance AUB shareholders’ value. AUB is currently in the process of a transaction with Kuwait Finance House through a share-swap deal which is expected to be completed by October of this year. The deal will see the combined entity’s global assets rise to more than $115bn, positioning it as one of the largest Islamic banks in the World. The judging panel presents Ahli United Bank — a repeat programme winner — with the 2022 award for Best Global Network Bank (GCC).


IDFC FIRST is building a world-class bank that’s guided by ethics and powered by technology to be a force for social good. The bank was formed by a 2018 merger between erstwhile IDFC Bank and Capital First, combining the strengths of infrastructural financing with retail lending for consumers and microentrepreneurs. IDFC FIRST Bank prioritises customers’ needs and pushes for innovation throughout the product line-up. It was the first universal bank in India to offer a savings account with monthly interest credits. It introduced credit cards that are free for a lifetime and waived fees for many banking services. IDFC FIRST customers appreciate the convenience of paying toll, fuel and parking charges with India’s first RFID (radio frequency identification) tag. The bank’s business strategy is rooted in sustainability,

inclusion and sound corporate governance. It incorporates ESG considerations across all aspects of the value chain and recently appointed a dedicated head of ESG and consumer lending. IDFC FIRST believes the nation’s net-zero initiatives will open significant financing opportunities in areas like climate adaptation and green economies. The bank levers its capital, digital innovation and talent to deliver meaningful impacts across the operational ecosystem. The judging panel has praised the bank in past programmes, deeming IDFC FIRST as India’s most transformed bank in 2020 and its most promising new bank in 2019. For the second consecutive year, the jury has awarded IDFC FIRST Bank with the title of Best Sustainable Banking Strategy (India 2022).


Jusan Bank has been recognised in numerous international programmes, but it’s most honoured to repeatedly earn the trust and business of clients. The bank increased assets by more than half over the previous year, claiming nearly seven percent of the market share. Its loan portfolio has grown threefold over a 12-month period, while the volume of overdue NPL loans (90 days or more) has dropped from 44 percent to 9.47 percent. Over the year, deposit volume rose by more than half, the retail client portfolio more than quadrupled and the customer base in the SME segment doubled. The bank’s ecosystem of digital services now attracts over a million active users monthly — and it expects those figures to continue their rapid rise. Jusan Bank has developed

a suite of services for small and micro businesses that’s helping to formalise the Kazakh economy. The bank saw the number of users on its business app increase nearly fourfold and the POS terminals in its network multiply fivefold in 2021. It now serves some 145,000 business entities. Jusan Bank has a moderate risk appetite for SME lending and takes pride in helping smaller players transition to larger markets and operations. The bank allocates portions of its profits to finance educational initiatives and humanitarian projects that support the socioeconomic development of the country and its people. The jury recognises repeat winner Jusan Bank with the 2022 award for Outstanding Contribution to Diversification of the Economy (Kazakhstan).

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Learn Capital believes in the vast — and often untapped — potential of human beings. Founded in 2009, the VC firm backs and builds techdriven companies helping humans to flourish. The firm views learning as both the bedrock and a key building block of thriving societies. Education and training are major factors in determining a person’s future — or a country’s economy. It’s one of the more significant factors separating developed and developing countries. Learn manages over $1bn in assets and has a portfolio of almost 200 companies, focusing on

catalytic areas of daily life: health and wellness, education, finance and community. The mission-driven firm is based in Austin, Texas, and has deployed five funds over the past 13 years. Some of its portfolio superstars include Armenia’s SoloLearn, providing free digital courses and a global community to learn coding, and Croatia’s Photomath, the digital math tutor app that secured $23m in funding and exceeded 220 million downloads in February 2021. Merlyn, the first AI classroom assistant, joined the Learn incubator in 2018. According

to a study co-authored by Nobel-Prize-winning economist, Professor Michael Kremer, the highly standardised methodology used by Learn investee NewGlobe, headquartered in Kenya, was found to produce dramatic learning gains at scale. Learn has undergone a partial rebranding to enhance the platform, expand the team and establish Austin as an innovation hub. The CFI. co judging panel presents Learn Capital — a repeat programme winner — with the 2022 Most Innovative Global EdTech Investor (US) award.


For the fifth consecutive year, Costa Rican Investment & Development Board (CINDE) has achieved top marks from the UN International Trade Center (ITC). The organisation earned the highest ranking among the 85 reviewed and received a perfect score on 81 percent of the indicators evaluated. The ITC commented on CINDE’s strong value proposition, which is rooted in investing with purpose for people, planet and prosperity. CINDE reported record figures in 2020 — and 2021 reports surpassed the previous year’s success. Last

year, the organisation saw 22,461 new jobs created in the fields of life sciences, smart manufacturing, digital services and technologies, up by 13.4 percent over 2020. CINDE secured 103 new FDI projects over the past year, representing a 30 percent increase from 2020, with many new companies hailing from non-traditional destinations. Investor confidence in the country and its growing talent pool has enabled CINDE to attract a growing number of enthusiastic international investors. The organisation is proud to

contribute towards the SDGs and publishes an annual report highlighting impact results in the areas of quality education; gender equality; decent work and economic growth; and industry, innovation and infrastructure. Women hold nearly half of new jobs created in 2021, and CINDE is collaborating to further reduce economic gender gaps. The judging panel congratulates CINDE — a repeat programme winner — on claiming the 2022 award for Best International Investment Team (Latin America).


Regional insurance broker Unity Willis Towers Watson (Unity WTW) has established an expansive presence throughout Central America. The company’s network of market-leading insurance providers caught the attention of USbased Willis Towers Watson, a global advisory, broking and solutions company with a 195year history and a presence in 140 countries. Willis Towers Watson acquired Unity Group (formerly Unity Ducruet) in 2020. The parent company strengthened its foothold in Central America while its subsidiary gained access to a broad global network. Unity WTW provides

insurance products to more than 300,000 individual clients and 5,000 businesses, including around 700 multinationals. It processes over 200,000 health, motor and liability claims annually and has experience handling larger claims. The broker combines standardised processes and its own methodology to create a Personalised Risk Overview and determine insurance conditions and costs. Unity WTW levers the regional expertise of its people with the global vision of its parent company to develop data-driven analytical solutions that can help organisations

to shape strategy, improve resilience, motivate staff and maximise performance. It aims to enhance the customer journey by investing in continuous tech innovation. Unity WTW uses client relationship management programmes, web platforms, microsites, dashboards, digital claims tools and mobile apps to provide customers with the most convenient and secure service possible. The judging panel is pleased to present Unity WTW — a repeat programme winner — with the 2022 award for Best Sustainable Insurance Solutions Team (Central America).

86 | Capital Finance International LEARN
Everyday Exceptional The new Maserati Grecale Trofeo. Fuel consumption combined (l/100 km): 11,2 // C O 2 emissions combined (g/km)*: 254 // Efficiency class: F * CO 2 is the main greenhouse gas responsible for global warming. The average C O 2 emission of all (cross-brand) vehicle types offered in Switzerland is 149 g/km. The C O 2 target value is 118 g/km (WLTP).

Grim Covid Challenges Have Put Ghana on the Financial Ropes

> IMFaidandnewfiscalpoliciescouldbethecureforstruggling Africannation.
Accra: Independence Arch

hana has long been seen as an oasis of political and economic stability in West Africa.

Covid-19 momentarily interrupted the country’s growth, and its impact on Ghana’s public debt may have longer-term consequences. Inflation must also be dealt with.

Over the past 40 years, Ghana has transformed itself. After decades of state-led growth, the economy was liberalised. Exchange rate controls were loosened, trade and FDI were liberalised, subsidies and price controls were removed, and many SOEs were privatised.

The reforms led to growth, and growth led to poverty reduction. The proportion of Ghana’s population living below the national poverty line fell from 24.2 percent in 2012 to 10.7 percent in 2021.

But growth has often been interrupted by public debt crises. Big infrastructure spending funded by the main exports of cocoa, cashew, gold, and oil has left the country vulnerable to commodity price swings. The last major crisis was in 2014, when public pay increases and a drop in gold prices led Ghana to turn to the IMF.

Ghana has experienced five Covid waves: July 2020, February 2021, August 2021, January 2022, and June 2022. There have been 169,000 cases, representing 0.54 percent of the population, and a death rate of 4.7 deaths per 100,000 people. The US death rate is 318.62.

Ghana was quick to react. It set up the National Technical Co-ordinating Committee in January 2020 to prepare. In early March, president Nana Akuffo-Addo announced the $100m National Preparedness and Response Plan to ready hospitals, laboratories, and testing facilities.

As the first cases hit in early March, the government introduced lockdown measures: no social gatherings, the closure of schools and universities, and closed borders. Businesses remained open with social distancing. There was restricted movement in the large urban areas of Accra and Kumasi. By June, most of the measures were lifted.

As is the case for much of the developing world, vaccinations have been difficult to procure, with just 26.5 percent of the population fully jabbed.

Although the lockdowns were not as strict as some neighbouring countries, nor as long, the economic impact was dramatic: 42,000 people

lost their jobs in the first two months of lockdown. The tourist sector lost an estimated $171m in the first three months. Many were pushed below the poverty line, and in 2020, real GDP growth fell to 0.4 percent — the lowest level since the 1980s. In the 10 years prior to the pandemic, average real GDP growth was 6.65 percent.

To combat the economic impact, the government introduced the Coronavirus Alleviation Programme. It included soft loans for small and medium businesses, income support for health workers, water subsidies, food packages, and public grain procurement.

In response to this, and rebounding domestic and global economies, real GDP grew 4.2 percent in 2021 and is expected to reach 5.2 percent this year. Unemployment has increased only slightly.

Funding the stimulus programme has been challenging: the total estimated cost was $210m. The government cut infrastructure spending, withdrew funds from its sovereign wealth fund, and sought an IMF loan. There was revenue loss from falling oil, cocoa, and cashew prices. Ghana’s primary fiscal balance fell from -1.74 percent in 2019 to -9.21 percent in 2020.

The sovereign spread on Ghana’s government bonds jumped as capital markets became concerned. Ghana responded by turning to commercial debt. It issued a 40-year Eurobond, the first African nation to do so.

The depreciating local currency added to the pressure on public finances, increasing interest payments on external debt. The Cedi has depreciated by over 40 percent relative to the US dollar.

Ghana’s public debt to GDP ratio increased from 62.2 percent in 2019 to 78.9 percent in 2020. Growing concern from international rating agencies has forced the country to be downgraded to below investment grade. This adds to the challenge of public funding.

The government has responded by improving tax compliance and reducing public sector expenditures through better public investment management and procurement, and by addressing public sector staffing levels. The primary fiscal balance improved from -9.21 to -4.06 in 2021. Increased oil revenues should push the balance back to zero soon. Ghana has begun discussions with the IMF for assistance that could be as high as $3bn.

The country’s central bank responded by lowering the official interest rate from 16 percent in January 2020 to 13.5 percent by May 2021.

But inflation began to accelerate in the second half of 2021. The war in Ukraine has pushed up food and oil prices — and Ghana imports large amounts of rice and wheat.

In July, inflation reached 31.7 percent, the highest level since November 2003. The central bank’s target inflation rate is six to 10 percent. It responded to the rise in inflation by increasing the interest rate. Since September 2021, there have been four rises. In August, the rate increased to 22 percent, the largest single increase in 22 years.

On the surface, a short and sharp lockdown helped to flatten the Covid curve while minimising the impact on economic growth. Ghana did not go into recession, and 5.2 and 5.1 percent real GDP growth is expected for this year and next. But the impact on the currency and public debt has put Ghana into familiar territory.

Assistance from the IMF is likely. If Ghana can put a brake on public sector payrolls and finally increase tax revenue, this silver lining would reduce the risk of further public debt challenges. Economic diversification would be welcome, as long as there was no return to past policies of “picking winners”.

If Ghana is unable to tackle these difficult issues, at some point it will risk losing its much valued economic and political stability. i

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"Over the past 40 years, Ghana has transformed itself. After decades of state-led growth, the economy was liberalised. Exchange rate controls were loosened, trade and FDI were liberalised, subsidies and price controls were removed, and many SOEs were privatised."
"Assistance from the IMF is likely. If Ghana can put a brake on public sector payrolls and finally increase tax revenue, this silver lining would reduce the risk of further public debt challenges."
Autumn 2022 Issue | Capital Finance International 91

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


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

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

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

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


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

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

African banks responded by increasing digital transactions and trade finance capacity, but global “systemic issues” have emerged,

including tighter regulatory controls and difficulty accessing sufficient foreign currency.

The IMF said the dominance of the US dollar in trade and finance “is likely to amplify the impact

of the Covid-19 crisis”. Its report also highlighted increased demand for trade finance, along with a simultaneous slump in letter-of-credit business and banking operations.

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Head of Trade Coverage: Gerald Ndosi
GeraldNdosiconsiderstheessentialsoftradefinanceinSub-SaharanAfrican economies—amidpost-pandemicchaosandRussia-Ukraineconflict...

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

Trade and supply chain finance solutions have played a key role in supporting SSA development

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

SSA banks are raising interest rates due to the Federal Reserve Bank’s decision to use higher rates to curb inflation and mitigate the supply chain challenges due to the Ukraine conflict and Chinese lockdowns. Most African businesses battle to access US dollar liquidity to facilitate their import payments. Emerging economies,

including those in SSA, are faced with huge debtservice costs, putting increased pressure on dollar liquidity. These countries do not export enough.

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

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


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

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

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

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

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

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One: Head Office

Ghana Gets Aid in Tackling Mental Health and Poverty

was convinced this was going to be a complete debacle,” says Udry, a professor of economics. “So we’re going to get very poor people together and talk about their problems and somehow change their lives?”

Still, the researchers, who co-direct Kellogg’s Global Poverty Research Lab, recognised that since mental-health care was largely missing in efforts to combat poverty, perhaps it was worth investigating. “So much of development policy focuses on job training and skills training and market access,” says Karlan, a professor of finance at Kellogg. “Mental health is thought of almost as a luxury problem that is just not dealt with in many developing-country contexts.”

With this in mind, the Kellogg researchers and collaborators Nathan Barker at Yale, Gharad Bryan at the London School of Economics, and Angela Ofori-Atta at the University of Ghana designed a study to implement cognitive-behavioural therapy (CBT) in low-income households in Ghana. CBT is an established psychotherapeutic approach to depression, anxiety, and other conditions that involves helping people recognize and address “cognitive distortions” that influence how they interpret and react to events, along with taking strategic actions to solve problems.

The conditions of chronic poverty, where people are “constantly presented with stimuli regarding their own low status”, may yield negative selfbeliefs about one’s talent, worth, or future prospects, the researchers found. The potential results: poor mental and physical health, which could adversely affect economic outcomes. These sorts of compounding difficulties are exactly what those living in poverty don’t need.

To assess the impacts of CBT, the researchers ran a large-scale randomised controlled trial in rural Ghana, involving thousands of participants living in hundreds of communities. Surveybased measures showed that CBT improved both mental and self-reported physical health, as well as economic outcomes and cognitive skills.

Critically, the impacts occurred irrespective of whether a participant was identified as depressed before treatment began. This has important implications: even though CBT is designed for

"The researchers, who codirect Kellogg’s Global Poverty Research Lab, recognised that since mental-health care was largely missing in efforts to combat poverty, perhaps it was worth investigating."

depression, it can also be beneficial for those struggling with the stress of living in poverty, which for some will lead to depression. “There’s a lot of movement in and out of depression when you’re living with dire trade-offs: What need are you going to put last? Is it going to be food? Is it going to be medicine? Is it going to be education? These are stressful, potentially depressioninducing, decisions to face,” Karlan says.

Those receiving CBT reported missing fewer days of work due to health issues than did the control group.

For those hoping to make an impact on mental health in these contexts, screening for poverty thus makes more sense than screening for depression. Otherwise, care providers and researchers might miss members of the population who would benefit from treatment, the researchers say.


The researchers worked in over 250 Ghanian communities, which they divided into either control communities or those receiving CBT.

In general, this is a population facing significant stress: at the study’s start, 55 percent of participants reported some form of psychological distress, with 15 percent reporting severe levels — much higher than rates observed in the US.

The CBT was delivered in 2016 in 12 weekly 90-minute sessions to 10-person groups.

Therapy was administered by recent college graduates hired and trained by Innovations for Poverty Action and the University of Ghana. The CBT leaders received two weeks of classroom training and completed one week of pilot CBT work before delivering the intervention.

The programme included modules on promoting healthy thinking, solving problems at home and work, managing relationships, and goal setting. For example, participants learned how not to dwell on specific issues or catastrophise events by thinking, for instance, “A week without rain means all my crops will fail this year.”

Participants also learned to recognise and mitigate “should statements,” such as “I should be doing better in life than I am.”

The researchers collected data before and after the interventions from individuals in both treatment and control villages via surveys that measured mental health, physical health, socioemotional skills, cognitive skills, and economic outcomes. They then compared results for the CBT group with those of the control group.

Watching the CBT sessions, Udry found himself rethinking his initial scepticism: “People were so interested in the training sessions. They loved it.” As an example, he observed that participants “seemed excited to talk about problems they had, and that other people in the group really seemed to be paying attention — they were really listening to each other.” Afterward, participants compared the experience to “talking with their pastor”, Udry says.

Participants discussed challenges they faced with their children. “They talked about strategies for when their kids were not in school and didn’t have a job yet — like if a kid didn’t pass their high-school admissions exams,” Udry says. “They had a lively discussion and made a list of strategies on a whiteboard.”


The CBT group did better than the control group on multiple key measures.

Those receiving CBT reported missing fewer days of work due to health issues than did the control group. “That translates to real economic changes because of improved mental health,” Karlan says.

Additionally, those receiving CBT were 10 percent less likely to have any psychological distress and 24 percent less likely to have severe psychological distress than control-group peers. They also reported having 11 percent fewer

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Chris Udry admits that he was sceptical when he and fellow Northwestern UniversityprofessorDeanKarlansetouttotesttheimpactofpsychotherapyin poorcommunitiesinGhana…
Kellogg Insight:

days per month with poor mental health and 20 percent fewer days with poor physical health than the control group.

“We were so glad to see that people had lower stress levels and symptoms of depression,” Udry says. The study also revealed an unusually large improvement for the treatment group compared with the control group in socio-emotional skills, such as those related to self-control.

And benefits of CBT went well beyond mental health and socioemotional functioning. The intervention improved people’s cognitive performance as well, such as their performance on a memory test of 10-digit numbers. Importantly, the results for health and cognitive skills again did not differ by baseline mental health, suggesting the program’s effectiveness for those with and without diagnosable conditions.

Karlan and Udry conclude CBT works through two pathways in the communities that the intervention targeted: by reducing the likelihood of experiencing poor mental health and by directly improving bandwidth for cognitive tasks, including how to allocate mental resources toward solving specific problems, such as household finances.

The researchers plan to analyse more specific economic impacts of the intervention and to use measures of income, investment, and consumption collected during a follow-up survey.

Access to mental health therapy is not always at the centre of antipoverty efforts. But the researchers say the results of this study are a call for a major shift in attitude. They conclude, “increasing access to mental health therapy in low-income countries should be seen as a core means of increasing human capital in the general population, with relevance far beyond treating those with a diagnosable mental health condition”. i

Autumn 2022 Issue 95
"The study also revealed an unusually large improvement for the treatment group compared with the control group in socioemotional skills, such as those related to selfcontrol."


Diversification was the Key for Saudi Arabia in the Wake of the Pandemic

Saudi Arabia has rebounded from the pandemic, and not just because of oil: the government has shown its commitment to better fiscal management.

Al Khobar: Corniche seafront in the Eastern Province of Saudi Arabia

The goal was to plot a smoother economic course through oil-price turbulence. The pandemic has reinforced this aim — and could prove a key turning point in the country’s history.

Saudi Arabia is the world’s second-largest oil producer — and has the second-largest oil reserves. In 2019, crude brought in 57 percent of export revenue. But oil is not a cure-all. While it brings great wealth, it can also bring great volatility.

The oil price fell in the late 1980s and remained low throughout the 1990s and early 2000s. During this period, Saudi Arabia’s gross government debt began to rise, passing 100 percent of GDP in 1998 and 1999. As a result, Saudi Arabi’s credit rating was barely above investment grade. But as the price of the black stuff began to climb in the 2000s, Saudi Arabia’s government debt began to fall, and its credit rating improved. By 2014, government debt had fallen to a remarkable 1.6 percent of GDP (see chart).

But in the second half of 2014, the oil price began to fall as excess supply from US shale oil took effect. The government initially relied on deposits at the central bank, but later turned to domestic and foreign debt. Government debt-toGDP began to creep up.

Saudi policymakers reacted to the debt increase with a serious look at fiscal management. Rather than booms and busts linked to the oil price, the aim was for a medium-term fiscal framework. The National Debt Management Centre was set up in 2015. Energy price reforms were introduced in 2016 to rein-in subsidies, and five percent VAT was introduced in 2018.

The government has continued with its reforms to the diversify the economy. After the privatisations, liberalisations and de-regulations in the 2000s, the government has unveiled new initiatives since 2016. They include the Vision 2030 development plan in 2016 and the creation of the Saudi Arabia Venture Capital Fund in 2018.

When Covid-19 cases began to spread around the world, Saudi Arabia was quick to react. It activated its Command-and-Control Centre, the Supreme Crisis Committee, and the Concerned Committee within weeks to oversee the Kingdom’s response.

Travel bans, the closure of workplaces, schools, mosques and domestic transport in March. By April 2019, total curfews were put in place for Mecca and Medina. Free Covid testing was introduced.

Lockdown measures were gradually relaxed from June 2020, with further reductions in October 2021 for vaccinated people. The measures appeared to have been effective, with Saudi Arabia’s deaths per 100,000 people at 26.8. This is similar to figures from Singapore (27.47)

and Japan (34.6). In contrast, Iran and the US death rates were 171.8 and 319.73 respectively.

“Bad circumstances, God willing, will pass,” said Prince Mohammed bin Salman Al Saud, “and we are heading towards lasting prosperity with the efforts of the people of the Kingdom of Saudi Arabia.”

As a result of lockdown measures, real GDP in Q2 2020 fell 7.2 percent over Q2 2019. The hardesthit sectors were wholesale and retail trade (down 20.1 percent), transport and communication (16.6 percent), and community, social, and private services (15.5 percent). Quarterly GDP growth did not recover until Q2 2021.

Overall, real GDP fell by 4.1 percent in 2020. Unemployment increased from 5.7 percent in 2019 to 7.4 percent in 2020. On top of this, the oil price plummeted in March 2020; oil futures fell below zero.

The government responded with support programmes equivalent to 5.8 percent of nonoil GDP. This included around $10.6bn for the health sector and $8bn for businesses and individuals. The government also authorised the national unemployment insurance scheme to provide up to 60 percent of wages for private companies who retained certain percentages of local staff. The Damaan social safety net was relaunched in 2021 to broaden its coverage.

The Saudi Central Bank introduced a guaranteed facility programme for SMEs and a deferred payment scheme. It cut interest rates by 125 bps during March 2020, and interest rates were not raised again until 2022.

Thanks to the programmes and accommodative monetary policies, GDP recovered in 2021 to 3.1 percent and is forecast to reach 7.6 percent in 2022 – the fastest rate in over a decade. Unemployment fell to 6.9 percent. While an oil price rise has boosted GDP, the main growth

drivers have been the domestic economy and consumer spending. Non-oil GDP grew 4.9 percent in 2021, and is expected to go up by a further 4.2 percent in 2022.

Increased government expenditure and the fall in the oil price combined to push the primary fiscal balance from 4.5 percent of GDP in 2019 to 11.3 percent in 2020. Non-exported oil primary balance, as a percentage of non-oil GDP, went from 33.5 percent in 2019 to 36.1 percent in 2020. By 2022, the fiscal balance is expected to be 5.5 percent of GDP, while the non-oil fiscal balance is expected to improve.

The swift recovery was achieved by further improvements in fiscal management. VAT was increased from five to 15 percent in July 2020. The cost-of-living allowance was removed in June 2020, and customs duties were increased. The increase in female labour-force participation also had an impact. At a governance level, the government set up the Sovereign Asset Liability Management Committee to oversee the public balance sheet and to create a new management framework.

Saudi Arabia’s public debt is expected to close in on its pre-Covid level of 22.5 percent by the end of this year (24.1 percent). This is a long way from the 100 percent government debt levels of 1998-99. Inflation has accelerated during 2021 and 2022, and the central bank has raised interest rates — but at three percent in August (year-on-year), they remain at a reasonable level.

In the short- to medium-term, the 2030 vision and the $3.2tn National Investment Strategy could lead to further growth in non-oil sectors. This will increase the government’s non-oil revenue and improve fiscal stability. Oil will remain important to the Saudi economy for the foreseeable future, but it may become increasingly less important to the rest of the world. Saudi Arabia passed the Covid test with flying colours; now it must maintain its progress in diversification. i

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IMF DataMapper: General government gross debt (percent of GDP). © IMF, 2022. Source:WorldEconomicOutlook(April2022).

> UAE’s Economic Progress to Extend Beyond Post-Oil Era

Nearly seven years ago, President His Highness


n 50 years, when we might have the last barrel of oil, the question is: When it is shipped abroad, will we be sad?” he asked the crowd of the 2015 World Government Summit. “If we are investing today in the right sectors, I can tell you we will celebrate at that moment.”

That optimistic foresight has steered the country towards a more diversified economy that will deliver sustainable and inclusive growth. Far from pumping the last drop of oil, the UAE is wellplaced as a model of economic development and stability as its economic diversification strategy gathers pace — especially in terms of foreign trade and industrial exports.

The federal government’s emphasis on supporting export has resulted in a historic rise in the UAE’s non-oil foreign trade, which reached $144bn by the end of the first quarter of 2022. Exports grew around 18 percent year-on-year to $24.7bn over the same period — doubling over five years — while non-oil imports grew 25 percent to $79.5bn.

But with the unstoppable drive to align with the Centennial 2071 plan to position the UAE as a leading global trading hub, the country will never rest on its laurels.

His Highness Sheikh Mohammed bin Rashid Al Maktoum, vice-president and prime minister of the UAE and Ruler of Dubai, said non-oil sectors contribute over 70 percent of the national economy, and the aim is to increase the UAE’s national exports by 50 percent over coming years.

“In the UAE,” he added, “we work as one team to boost our national economy and reinforce the UAE’s leading position.”


Strengthening SMEs, which constitute around 94 percent of the UAE’s total businesses, is one of the key pillars of the quest to enhance the manufacturing and export sector.

But SMEs are highly vulnerable to any fluctuation in the marketplace, whether caused by the pandemic fallout, supply chain disruptions, or skyrocketing prices of raw materials and machinery.

According to data from the US Bureau of Labour Statistics, around 20 percent of small businesses won’t survive their first year, and 30 percent go to the wall by the end of the second. About half will have failed by the end of the fifth year, and only 30 percent will remain when a decade is over — a 70 percent failure rate.

So, how can SMEs be protected to navigate these challenges? How can new companies enter such a volatile marketplace? The greatest hardship most encounter in their operation cycle is the difficulty of obtaining finance. Banks and financial institutions are hesitant to lend to small businesses, considered risky due to their limited cash flow, low equity reserves, and high dependence on receivables.

The lack of adequate liquidity threatens the survival of a small business, and they are in a disadvantaged position in contrast with large firms. The situation worsens when collateral is required as a guarantee of repayment. Entrepreneurs may have no physical assets to offer, and bad credit — or lack of credit history — may lead to loan rejection.

SMEs have a tough time dealing with the increasing cost of materials and labour. While bigger competitors can alleviate the impact with their reserves, small businesses often find themselves running the risk of diminishing margins or losing their customer base — or both.

State-backed trade finance becomes significant at this juncture. Guarantees, export credit insurance and other trade finance support from the government equip SMEs to defend themselves against non-payment. These act as stimulus for bank lending and give businesses the confidence to extend credit to new and existing customers with better terms. This increases their competitiveness in domestic and international markets, enabling them to employ more people and enhance production and sales.


The launching of the UAE Federal export credit company, Etihad Credit Insurance, signifies the proactive vision of the UAE leaders in bolstering the national production capacity and export sector through a range of bespoke trade credit insurance and project-financing solutions.

Many UAE companies have succeeded even in challenging economic cycles — protected by ECI guarantees.

Emirates Steel, part of the Arkan Group and the leading integrated steel plant in the Middle East, saw an almost 50 percent increase in its export markets across Europe, America, Asia, and the Middle East and North Africa over the past two years. The company’s expansion plans are aligned with the objectives of the UAE’s industrial strategy, Operation 300bn, which is poised to increase the contribution of the industrial sector to the country’s GDP from AED 133 billion ($32.61bn) to AED 300 billion ($81.68bn) by 2031.

Another beneficiary of ECI’s state-guaranteed support, RAK Ceramics, reported that its total revenue increased 21.8 percent to $780m. RAK Ceramics serves clients in 150 countries through hubs in Europe, the Middle East and North Africa, Asia, North and South America and Australia. ECI’s support in securing receivables helped RAK Ceramics to register an outstanding performance last year, despite rising input costs and supply chain disruptions.

Since the onset of the pandemic, the role of export credit agencies has increased to fill widening financing gaps left by the private market — especially in meeting the businesses’ short-term working capital needs. It’s common for trade- and export-related businesses to face finance issues due to increased costs of short-term financing and mounting rejection rates.

Government-backed ECAs have increased trade finance support to businesses. While the appetite

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Sheikh Mohamed bin Zayed Al Nahyan provided a glimpse of what the future holds for the UAE.
By Sir Massimo Falcioni CEO of Etihad Credit Insurance

for lending was low, ECAs filled that gap. Etihad Credit Insurance’s support to UAE exporters in the non-oil sector rose by 260 percent in 2021 to $4.9bn, compared to $1.36bn the previous year.


In unfamiliar market territories, companies are at the risk of non-payment, through client bankruptcy or unforeseen commercial and political perils. Any little ripple in the global economy can spark adverse outcomes anywhere, at any time.

ECAs support protects the business community from going down this path. During the peak of Covid, Emirates Fiber — a subsidiary of the leading textile companies and a major exporter in the UAE Safetex —had been supplying its products to Hollander, the largest global producer of utility bedding products based in North America.

If Hollander were to go bankrupt, millions of dollars would be at stake. And unfortunately, the American company with over 100 years of history did just that. The $1m Safetex gave to Hollander’s open account seemed irretrievable — but the company was covered through a revolving limit by ECI. The firm jumped into action, working with legal partners in the US to secure part of the debt and ensuring the company was a secured creditor. Emirates Fiber was able to recover a substantial portion of the debt — and ECI indemnified the remaining unpaid balance.

As the CEO of Safetex Group said: “It could have been a huge setback, enough to make us go bust. That coverage from ECI saved us from an impending fall.”


Public-private partnerships (PPP) were proposed by the United Nations as a tool for achieving its Sustainable Development Goals (SDGs). These provide the means and opportunity to stimulate the private sector to innovate and create effective solutions to infrastructure and service-related challenges.

As the UAE Federal export credit company, Etihad Credit Insurance’s support to various private entities underscores the country’s effort to foster PPP, especially following the economic challenges caused by the pandemic. ECI was involved in ambitious infrastructure projects that transformed millions of lives.

Last year, it collaborated with the Iraqi Ministry of Finance and global energy giant GE to complete the financial close of the Power Up Plan 4 (PUP4) to strengthen Iraq’s electricity sector. It was a landmark achievement for the UAE’s sustainability drive, where key stakeholders from government ministries joined with financial institutions, export credit agencies and commercial banks to power-up a nation, empower people, and unite industries.

ECI provides reinsurance coverage to JP Morgan, the lender in the project that will enable the production and reliable generation of up to 2.7 gigawatts of electricity for the Iraqi people. Just one megawatt can provide power to as many as 900 homes. Through the concerted efforts of governments and the private sector, the project can provide electricity to 2.5 million homes each year.

ECI and its Israeli counterpart, ASHRA, recently entered into a partnership to provide buyers’

credit guarantees to the funding bank for Ghana’s $147m healthcare project, the construction of four hospitals and the first main central medical storage facility in the country. The agreement is the first PPP project between the UAE and Israel since the signing of the historic Abraham Accords in 2020. It sets the stage for greater economic and trade collaboration following another historic milestone: the signing of the UAE-Israel Comprehensive Economic Partnership Agreement (CEPA).

So, in the post-pandemic era, UAE people and businesses are empowered to sell domestically made products around the world. Companies big and small have fewer concerns about access to the funds that can make their dreams true. Largescale investments are promoted for enduring infrastructure development — clean energy or healthcare — to save, sustain and strengthen current and future generations. i | Capital Finance International 101
Author: CEO of Etihad Credit Insurance Sir Massimo Falcioni

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

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

International financial centre Abu Dhabi Global Market (ADGM), based in the UAE’s capital, is a leading digital-first centre in the MENA region which has played a catalytic role in the transformation. It started operations in 2015 and has created a progressive and innovative

ecosystem that has cemented its reputation as a destination-of-choice for start-ups and investors.

The leading global hub for virtual assets (VA) introduced the first comprehensive, bespoke regulatory VA framework. It was also the

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"Its focus is on developing key highgrowth industry sectors: banking and financing, derivatives and commodities, aerospace, and the tech start-up community."

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

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

Under the leadership of ADGM chairman HE Ahmed Jassim Al Zaabi, innovation and economic

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

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

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

Autumn 2022 Issue | Capital Finance International 103

Yanis Varoufakis: How the West Poisoned Its Money

Capitalism conquered the world by commodifying almost everything that had a value but not a price, thus driving a sharp wedge between values and prices. It did the same to money. The exchange value of money always reflected people’s readiness to hand over valuable things for given sums of cash. But, under capitalism, and once Christianity accepted the idea of charging for loans, money also acquired a market price: the interest rate, or the price of leasing a pile of cash for a given period.

After the 2008 financial crash, and especially during the pandemic, a strange thing happened: money held its exchange value (which inflation diminishes), but its price tanked, turning negative on many occasions. Politicians and central bankers had inadvertently poisoned “humanity’s alienated ability” (Karl Marx’s poetic definition of money). The poison they administered was the post-2008 policy, in Europe and the United States, of harsh austerity for most to finance socialism for the few.

Austerity reduced public expenditure precisely when private expenditure was falling like a brick, accelerating the decline of the sum of private and public expenditure – which is, by definition, national income. Under capitalism, only Big Business has the capacity to borrow significant amounts of the money that lenders, mostly rich people with large savings, are willing to lend. This is why the price of money tanked after 2008: demand for it dried up, as Big Business responded to austerity’s calamitous effect on demand by canceling investments, even as the supply of money (to Big Business) burgeoned.

Like stockpiles of potatoes that no one wants to buy at the prevailing price, the price of money – the interest rate – drops when demand for it lingers below the quantity available to be lent. But here is the crucial difference: Whereas a rapidly falling potato price cures quickly any over-supply problem, the opposite happens when the price of money falls fast. Instead of rejoicing that they can now borrow more cheaply, investors think: “The central bank must think things are grim to let interest rates drop so much. I won’t invest even if they give me free money!” Even after central bankers cut money’s official price sharply, investment failed to recover – and the price of money kept falling, until it reached negative territory.

It was a strange situation. Negative prices make sense for bads, not goods. When a factory wants to remove toxic waste, it charges a negative price for it: its managers pay someone to get rid of it. But when central banks begin to treat

"Austerity reduced public expenditure precisely when private expenditure was falling like a brick, accelerating the decline of the sum of private and public expenditure – which is, by definition, national income."

money like car manufacturers treat spent sulfuric acid, or nuclear power stations their radioactive wastewater, one knows that something is rotten in the kingdom of financialised capitalism.

Some commentators now hope that Western money is being purified in the flames of inflation and interest-rate hikes. But inflation is not driving the poison out of the West’s money system. After more than a decade of addiction to poisoned money, no obvious detoxification method presents itself. Inflation today is not the same beast the West faced in the 1970s and early 1980s. This time around, it threatens labor, capital, and governments in ways that it could not 50 years ago. Back then, labor was organised enough to demand wage increases that averted a cost-of-living crisis, and neither states nor private corporations relied on free money to keep going. Today, there is no optimal interest rate that will restore the balance between money demand and money supply that does not trigger a massive wave of private and public bankruptcy. That is the long-term price of poisoned money.

The US government faces the impossible dilemma of curbing domestic inflation and forcing Corporate America and many friendly governments into a solvency crisis that will threaten America’s own stability. Things are far worse in the eurozone, where policymakers refused to do the obvious once Europe’s banks had failed after 2008: establish a proper federation’s foundation – a fiscal union. Instead,

they let the European Central Bank do “whatever it takes” to save the euro. Only by poisoning its own money could the ECB keep the euro show on the road. Today, the ECB owns huge quantities of Italian, Spanish, French, even Greek debt that it can no longer justify holding as a means of achieving its inflation target, but which it cannot renounce without calling the euro’s existence into question.

While pondering the unresolvable conundrum Europe and America face, this is perhaps a good moment to contemplate the deeper reason why money can be poisoned (which is not the same as being debased by inflation). A good start is to borrow Albert Einstein’s idea that we can make sense of light only of if we accept that it features two distinct behaviors: that of particles and that of waves.

Money, too, has two natures. Its first nature, that of a commodity that we trade with other commodities, can never explain why money would ever acquire a negative price. But its second nature does: Money, like language, is also a reflection of our relation to one another and to our technologies. It echoes how we transform matter and shape the world around us. It quantifies our “alienated ability” to do things together, as a collective. Once we recognise money’s second nature, everything makes a lot more sense.

Socialism for bankers and austerity for most of the rest thwarted capitalism’s dynamism, plunging it into a state of gilded stagnation. Poisoned money flowed in torrents, but not into serious investments, good jobs, or anything capable of reanimating capitalism’s lost animal spirits. And now that the specter of inflation hovers above us, no monetary policy can purify money, restore equilibrium, or channel investments where humanity needs them. i


Yanis Varoufakis, a former finance minister of Greece, is leader of the MeRA25 party and Professor of Economics at the University of Athens.

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Deloitte & Touche: Green Means Growth

The Middle East's Boost From Bank and Corporate Initiatives


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

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

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

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

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

It is not only banks who have raised green bonds to finance loans, but also corporates such as Majid Al Futtaim, Saudi Electricity Company and

Etihad Airways; and as a country, Egypt stepped up with the region’s first sovereign green bond.

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

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

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

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

One area of global concern is that of ‘greenwashing’ or misrepresenting the environmental impacts of financial products. Attempts have been made to define and standardise green bonds and their projects in the form of the Green Bond Principles, the Climate Bond Initiative and the EU Taxonomy. These initiatives have been supported by the development of independent third-party assurance of bond proceeds, to demonstrate where those proceeds have been invested and whether they are aligned to the Green Frameworks presented by the issuers. These arrangements provide some

comfort to investors that the proceeds, if not indeed the impact of the financing itself, is in line with the Green Frameworks.

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

With the increased global interest for investments with positive ESG outcomes, and the need for capital in the Middle East to fund such opportunities, Sustainable Finance products reflecting Middle Eastern characteristics and the

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

ambitious projects in the region, is proving to be a rapidly developing, innovative and eagerly anticipated area of finance.


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


Deloitte & Touche (M.E.) LLP (“DME”) is the affiliate for the territories of the Middle East and Cyprus

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

Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW), as well as the best CSR integrated organisation. i | Capital Finance International 107

Metaverse for Enterprise, from Digital to Immersive Experiences


Commerce is “functionally correct” but lacks the human interaction. Digital experience — enhanced virtual spaces, augmented physical places, and human contact, will revolutionise nearly all aspects of life and business in the next decade.

Global business leaders had an opportunity to get a first-hand experience of the Metaverse at Davos during the World Economic Forum meeting in May. Accenture’s Global Collaboration Village at Davos, in partnership with Microsoft, offered an immersive experience on one of the sustainable development goals, highlighting the environmental impact of the Sahara Desert on trees in Africa.

People could be told about this, see pictures, or watch documentaries, but to be “actually standing” in the middle of it, hearing the desert winds, seeing the movement of the trees, and absorbing the scale of it, enables a totally different conversation. Users now have the direct connection. They are focused on each other. They are standing in the data, in the experience, in the context. They can relate to it and talk about it and develop a whole new level of empathy and understanding.

This experience will enable users to understand how decisions made at a macro level can be felt at a micro level — in a specific way. That is exactly the potential and benefit of the Metaverse.

While we are seeing mass adoption of Metaverse in the gaming community, enterprises are experiencing it in different ways. For businesses, it is becoming a place to create and capture value, and ultimately make money. The “creators” are building new products and services and a new category of digitally native products. The “bridgers” connect the physical and virtual worlds, changing the nature of how products are marketed, distributed and experienced. “Performers” are creating real-time content, while “participants” are learning, exploring and enhancing.

The immersive Metaverse experience is not complete without the Web3-enabled digital ecosystem, in which users can own, monetise, and utilise their data for their own benefit.

Creators can monetise their content and talent through digital assets issued on a blockchain structure that enables value portability. Smart contracts containing conditional programming code that creates utility by facilitating selfexecuting applications will offer universal, public, permanent single source of truth.

Bursting from the crypto community, digital assets are now exchanged and valued. In other words, people are already spending real money to own virtual assets. They will want to spend their virtual money in the real world.

Let’s start with banking and finance. The Metaverse’s emerging economy is an untapped source of growth, representing opportunities for banks to insure and lend against cryptocurrency, NFTs and other virtual assets. Banks will need to decide on the role they will play and take advantage of this opportunity to extend their brand. The rules of competition are already being established. The latest filing by the New York Stock Exchange to patent an NFT exchange points to the battle on the horizon: who facilitates payments and owns the payment rails in the Metaverse.

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> Accenture:

Banks will be able to virtualise familiar customer interactions such as cash withdrawals from virtual ATMs, branch storefronts, and real sponsorships for virtual events. Stretch this to the art of the possible and you could walk out of an appointment with your avatar advisor to an ATM, enter your PIN to get money in your virtual wallet, and walk next door to buy a virtual handbag…

From banks to public services, the Metaverse is capturing the imagination of many governments and cities to create incremental value and provide a higher-quality set of government services. South Korea has announced the fiveyear Metaverse Seoul Basic Plan. It begins by creating a virtual city hall, plaza and civilservice centre. Dubai’s Virtual Assets Regulatory Authority is the first regulator in the emerging digital space. The Dubai Metaverse strategy estimates the metaverse will add $4bn to its economy and support 42,000 jobs by 2030.

Many government-to-citizen relationships can be captured the form of a “smart contract”. The terms articulated in a driver’s licence between the individual and the issuing authority can be captured in a smart contract governing the regulations of the licence. The same applies to a wider range of government documents/ licences such title deeds, resident permits, and tax returns.

Retail felt the technology squeeze and was one of the first industries to be forced to evolve into an omnichannel environment. Strong competitive advantage is now likely to flow to retailers who understand how to use the Metaverse to enhance their stores, build experiences and foster their brand community. Brands can leverage the Metaverse to offer new level of immersive experiences allowing customers to try out products and buy virtual or physical goods. The Metaverse allows retailors to expand their footprint. Instead of having stores in every city, brands can establish a Metaverse presence to serve customers globally.

The Metaverse enables retailers to re-imagine and personalise the store experience for individuals and groups of customers. The possibility of shopping for swimming, golf or ski equipment in a matching virtual environment, for example. Metaverse malls are popping up with storefronts where shoppers can interact with avatars, allowing users to explore digital items and buy NFT vouchers that can be redeemed for an item in the real world. Customers increasingly see their digital shopping experience becoming an ecosystem across multiple online channels — and the Metaverse might be the natural expansion for that.

For the general enterprise structure, the Metaverse will change how businesses interact with clients, develop and distribute products and services, manage the workforce and run the operations. Use-cases beyond gaming are not just in the future: they are already emerging in the enterprise space today.

The Metaverse is seen to enhance remote collaboration from 2D to a 3D immersive space as online meetings enable remote work, and potentially diminish the need for colocation. It is expected to see a continuation of the pandemic-influenced rethinking of how organisations are structured and the dynamics of the workplace of the future.

Accenture is using the Metaverse to re-invent its own business environment. Its enterprise Metaverse, is known as the Nth Floor, referring to the virtual environments created to bring Accenture employees together to meet, collaborate and learn. Whether hosting meetings or socialising, the Metaverse is a versatile, scalable solution for bringing a geographically distributed workforce together.

Accenture has created digital twins of many of its physical offices, from Bangalore to Madrid to San Francisco, to provide familiar environments for its people to meet, collaborate and network.

Learning and human capital development is one of the most obvious use-cases for Metaverse in the Enterprise. Reimagining learning with real-life settings and situations will allow for far more captive learning process, opening possibilities both in onboarding new employees and developing current personnel, which is increasingly important for organizations operating at a global scale.

There is also growing evidence to support the benefits of immersive learning. In a recent Accenture report, it was found that a majority of learners (70 percent) forgot training content within 24 hours — and virtually all (90 percent) forgot after a month. The study also found immersive learning offered a path to achieve 33 percent higher learning retention when compared to video.

Within Accenture’s Nth Floor metaverse, a virtual campus called One Accenture Park is helping new employees to connect with the culture, and plant the seeds of professional relationships. This type of immersive experience enables new hires to experience orientation in a personal way, and meet many more people doing so. This year, 150,000 new hires are working from the metaverse on their first day at Accenture.

Equally important to the focus in use-cases is the role enterprises are required to play in shaping the Responsible Metaverse. To grow and thrive, organisations must have responsibility at their core — from ownership of data to inclusion and diversity, sustainability, security, and personal safety.

Enterprises will find themselves on the front lines of establishing trust and safety and defining the human experience in these new places. Trust will be paramount to adoption of the new experiences, which enterprises are beginning to build. Considerations (and concerns) already held today around privacy, bias, fairness, and human impact are becoming far more acute as the line between people’s physical and digital lives further blurs. Enterprises that wish to lead in this space will shoulder the mantle of building a Responsible Metaverse, and the actions and choices they make will set the standards for all that follow.

Answering this — and acting on it — won’t be easy; it’s a journey riddled with uncertainty well outside the norms of most companies environments. But the chance to shape the next decade of business, to build new worlds, and to explore the brand-new markets that these worlds create, does not come often. i

ABOUT THE AUTHOR Bashar Kilani is Managing Director at Accenture based in Dubai and a member of the Growth Markets leadership team focusing on Digital Economy market making trends that accelerate growth, transform operations, and enable organisations to build their digital core.

Autumn 2022 Issue | Capital Finance International 109
Author: Bashar Kilani

Colombia Weathered Pandemic Storm, but There Is Work Aplenty for President

Continuing a robust display of resilience shown during Covid could now hingeonfluctuatingoilprices.

Latin America
Colombia: Cartagena

Colombia is entering a new era. While Covid devastated the country, the government’s response has at least helped the economy to recover.

Trade has also returned to levels not seen since the plunge in the world oil price in 2014. The stage is set for Gustavo Petro — the country’s first Left-wing president — to make his mark.

Fiscal and financial crises in the 1990s led to liberalisations that helped the Colombian economy diversify in the 2000s. Peace agreements with various rebel groups, notably FARC in 2016, have improved security, making it more attractive for investment.

Despite these improvements, Colombia’s economy remains tied to the price of oil and coal. In 2019, crude oil and coal represented over a third of all exports.

The 2014 fall in the world oil price and a sliding value for coal saw Colombia’s GDP fall below two percent — and unemployment rise above 10.

Covid hit Colombia in four main waves. The first began to build in June 2020 and peaked in August 2020. The second wave peaked in late January 2021. The third was the deadliest, peaking in June 2021 with the seven-day average of deaths reaching 678, more than double the August 2020 peak. The fourth peak in January 2022 saw higher cases, but fewer deaths. Its seven-day death average fell to 263. This probably reflects the lower fatality rate of the omicron variant.

Over six million Colombians contracted Covid — nearly 13 percent of the population. In Latin America, only Brazil, Mexico and Argentina had more fatalities. Colombia’s death rate per 100,000 cases was 278, 28th-highest in the world.

The government responded quickly on the public health front. It created the Unified Command Post, or PMU: a super-committee of representatives from government, government agencies, emergency services, UN agencies and the private sector. The PMU was relatively effective at formulating policy and making swift decisions.

A nationwide lockdown began on March 25, 2020, with schools, workplaces and public transport closed. Domestic and international travel was prohibited. Testing and ICU capacity was also ramped-up and additional medical staff were employed. Medical students were able to get “hands-on” experience during their final semester.

A gradual re-opening began in May 2020, with a proper re-opening in September. After the second wave, covid fatigue saw measures gradually peeled away — perhaps too much so for the third and fourth waves. The stringent early measures hurt economic growth.

The vaccination programme was initially delayed as the government unsuccessfully sought to get vaccines from the WHO’s COVAX programme. By December 2020, it went directly to the pharmaceutical companies.

The vaccination effort was labelled a success. Colombia already had an established network. It adopted an effective two-stage strategy. The first aimed to bring down the mortality rate by immunising health professionals and those most at risk. The second phase focused on reducing the spread. When vaccinations ran low, the government responded by increasing the length of time between doses and by prescribing specific vaccines to different age groups.

The economic impact of the pandemic and the lockdown measures saw real GDP fall by 16.5 percent in Q2 2020. Unemployment jumped from 11 percent in Q1 to 19 percent in Q2. At the same time, the price of oil fell sharply, reducing public revenue. This began Colombia’s worst recession, with an estimated 1.45 million people falling into poverty.

The government responded by increasing social payments to 2.6m poor households, including those of 1.6m elderly residents. A school food programme was provided help to 5.6m children.

The National Guarantee Scheme extended some $2.7bn in partial guarantees to private enterprise to safeguard working capital, workers’ salaries, and income for independent contractors. The government also provided $716m in a new credit facility.

But there was a misstep when a proposed broadbased tax reform in April 2021 brought people out onto the streets in protest. The proposal was withdrawn and replaced by a temporary tax increase on the rich and the private sector. The government also obtained $700m from the IBRD to aid in its pandemic response.

Despite the increased costs and turbulence, Colombia’s primary fiscal balance fell to just 4.36 percent of GDP — and is now trending towards zero, with rising oil prices increasing revenue. Central government debt grew to 51.7 percent of GDP in 2020 — but such levels are generally seen as “sustainable”.

The central bank boosted temporary liquidity by expanding collateral criteria to allow for short-

term repos. It also increased longer-term liquidity by purchasing public and private bonds, and by buying foreign exchange from the government. It supported the smooth functioning of the Colombian currency by providing dollars in the forex market for forward contracts.

The central bank reduced interest rates from 4.25 percent to 1.75 percent between March and September 2020. But as inflation started to increase from mid-2021, the central bank began raising rates again. The official rate is now at nine percent, the highest in 13 years. Inflation is at 11 percent. The central bank has pared-back its asset purchases and other stimulus measures.

Despite all this, the economy remains strong. Colombia GDP grew 10.6 percent in 2021, the highest in a century, one of the strongest regional rebounds. The main drivers were strong consumer spending and that rising oil price. The IMF forecasts GDP growth of 5.8 percent for 2022, but a lot depends on the oil price. Unemployment is at 11 percent — far below its pandemic high of 20 percent.

In August, Colombia’s first left-wing president was sworn into office. Gustavo Petro was a former rebel and Senator who never expected to be leading the country. His narrow win signalled that Colombians want progress on issues such as income equality. Half of all workers are unofficial, with no access to the pension system.

Petro has big plans to reform agriculture and rural development. He hopes for a return to food self-sufficiency by promoting agriculture in less developed regions. He also wants to move Colombia towards green energy. He had some welcome news for the private sector, with the promise to reduce the corporate tax rate. His reforms will be paid for by taxing the super-rich.

Colombia was hit hard by the pandemic, but through good policy and decisive action by the central bank, it has emerged in a strong position. There is still much to do. Besides weathering the short-term economic turbulence from inflation and the fluctuating oil price, Colombia needs to refocus on poverty and income inequality.

Poverty and hunger are UN Sustainable Development Goals 1 and 2, and Petro needs to ensure that they stay at the top of his list — for economic growth and the long-term political stability for Colombia. i

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"Colombia GDP grew 10.6 percent in 2021, the highest in a century, one of the strongest regional rebounds. The main drivers were strong consumer spending and that rising oil price."
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Nothing Beats Local Knowledge — and WTW I Unity Head Knows his Territory

Customer-centricityandaneyeonclimate-changeensuresteadyevolution ofgo-aheadinsurer.


nderstanding local needs and establishing a customer-centric strategy have typified Louis "Tito" Ducruet's career for over 40 years.

As managing director of WTW I Unity for Central America, he has built a culture focused on reaching the full potential of his teams, understanding the particular challenges of the six countries that make up the Central American operation — and meeting, and anticipating, client needs with tailored insurance programmes.

His cross-industry expertise spans all lines of business, from risk analysis to the implementation of complex individual programmes. One of the main characteristics of Ducruet's leadership is an understanding of geographical needs, recognition of local and regional talent, and innovative thinking: anticipating the risks and challenges of the market.

Ducruet has been involved in complex projects, including the Panama Canal Risk Management Programme. Others include:

• Founding partner and director of Capital Bank and Subsidiaries

• Director of factoring company Fortesza

• Partner and director of Formas Eficientes, a printing company

• Partner and director of card personalisation firm Fesa Card

• Member of APEDE (Panamanian Association of Business Executives)

• Former director of the Ronald McDonald Foundation

• Member of the American Chamber of Panama (Amcham).

Ducruet graduated with degrees in Business Administration and participates in various committees in the insurance industry. He chaired the commission that created the law of Insurance and Reinsurance Captives of Panama.


WTW I Unity prides itself on being the only regional insurance broker in Central America to provide personal service, regional presence, and world-class quality. It identifies new solutions by harmonising its global vision and local understanding with a clear vision of the future.

“The use of analytics and risk-transfer tools is indispensable,” he says.

The firm’s deep local knowledge and global support can help to identify upcoming risks for damages for property, people and capital, providing solutions that outline clients’ strategies. It can improve organisational resilience, motivate staff, and maximise performance. WTW I Unity's

premise is to work with clients to uncover sustainable opportunities.

“One element of understanding the context that impacts — or will impact — our clients and the world is climate change,” Ducruet says, “and

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Managing Director: Louis "Tito" Ducruet

the transformation it demands of business.

Today more than ever before, the insurance and brokerage industry is aware of the impacts.”

According to damage claims reports, global losses linked to climate change have increased by around 250 percent in the past 30 years.

Natural catastrophes have increased by a factor of 3.6 in insured losses. This is just part of the motivation for insurers and brokers to create new business models under ESG and sustainability criteria.

In terms of natural upheavals, Latin America and the Caribbean is a disaster-prone region. In the last 20 years, some 1,205 events — from floods, hurricanes and earthquakes to droughts, fires and volcanic eruptions — have affected more than 150 million Latin Americans.

“The way to accompany our customers is in the evolution towards resilience,” says Ducruet. The short-term actions the firm is considering include:

• Development of a climate strategy and transition plan

• Integration of a strategy combining life and property and casualty insurance solutions, underwriting, reserving, capital modelling, investment and corporate governance policies

• Quantitative risk consulting

• Monitoring, reporting and improvement, including climate and ESG criteria in the risk framework.

• Combination of risk prevention and risk management

• Corporate resilience.

Climate change is one of the main focus areas that make up the ESG strategy at WTW I Unity.

Environmental ESG factors are closely linked to good corporate governance, for which WTW I Unity accompanies its clients. The solutions include climate risk and resilience, zero-emission transition planning, the circular economy and sustainable supply chains.

Social factors are particularly relevant in the Central American region’s challenges in healthcare and wellbeing of client workforces. WTW I Unity fosters an environment of equity and commitment in the workforce. Diversity, equity and inclusion, wellbeing, safety and security, fair

and equitable pay and benefits programmes are all considered.


Corporate governance is one of the most important elements, because without it, efforts to implement sustainable solutions will be unsuccessful. The company has identified key points:

• Board governance

• Sustainable investments

• Mitigation of risk transfer

• Transparency

“An effective ESG strategy needs discipline and focus to address specific requirements,” Ducruet points out. “Understanding the strategic options and the interaction between them is essential to prioritise resources and establish a plan of action and impact.

“There are many ways to continue on the path to ESG in the region. WTW I Unity provides a holistic vision that enables progress towards sustainable growth for its clients. This is the perspective that moves you.”

The company has been operating in Latin America for more than half a century, with 15 regional offices and more than 3,000 employees. It manages more than two million lives with health and benefits insurance.

In Central America, it has been operating for over 40 years, with six regional offices and some 500 employees serving 760,000 policyholders. At WTW I Unity, human talent is seen as essential for sustainable growth.

Employees are the driving force for sustainable growth. “Our commitment to social responsibility through national development initiatives, corporate volunteer programmes in the communities and outreach programmes that promote healthy lifestyles are part of our DNA,” says Tito Ducruet.

“For WTW I Unity, corporate sustainability is vital to ensure the development of a long-term approach based on economic, environmental and above all social pillars, from the inside with our colleagues and outwards with our customers, to improve the quality of life of organisations and their employees.” i

Autumn 2022 Issue | Capital Finance International 115
"One of the main characteristics of Ducruet's leadership is an understanding of geographical needs, recognition of local and regional talent, and innovative thinking: anticipating the risks and challenges of the market."


Will the Fed Strangle Latin America Again?

Thirty-five years after former US Federal Reserve Chair Paul Volcker left office (and nearly three years after his death), the mere mention of his name still gives shivers to Latin Americans who remember the economic devastation caused by his battle against runaway inflation in the 1980s.

With US inflation near a 40-year high, at 8.3% in August, Fed Chair Jerome Powell recently signaled policymakers’ commitment to hiking

interest rates further, prompting many to wonder if Latin America is adequately protected against the collateral economic damage of another “Volcker Moment.”

The short answer is yes – because there won’t be one.

In April 1980, consumer prices in the United States increased at an annual rate of 14.6%, and

the Fed under Volcker responded aggressively. The benchmark federal funds rate rose from 9.9% in July 1980 to 22% by the end of that year, leading to a sharp and protracted recession in 1981 and 1982. The US unemployment rate soared, and it took three years to return to its level before Volcker began his anti-inflation crusade. The US dollar appreciated 50% against the Deutsche Mark – then Europe’s predominant currency – and commodity prices plummeted.

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It worked: the Fed’s drastic measures ultimately tamed inflation. But the Fed’s victory cost Latin America dearly, thanks to the quadruple whammy of sky-high interest rates and recession in the US, dollar appreciation, and the decline in commodity prices. Over-indebtedness, sovereign defaults, bank failures, and depressed investment led to a “lost decade” of negative growth in GDP per capita and widespread human suffering, with more than 20 million people

falling into extreme poverty. The region started to recover only in 1989, following a massive external-debt restructuring promoted by then-US Treasury Secretary Nicholas Brady.

Of course, Latin America’s lost decade was not solely the Fed’s doing. External debt among the region’s countries had risen significantly since the mid-1970s, owing to global banks’ recycling of petrodollars following the fourfold increase in

oil prices in 1973. In 1980, as US interest rates went through the roof, external debt in Latin America stood at 1.8 times the value of annual exports.

Today, Latin America’s ratio of external debt to exports is identical to the 1980 level and twice as high relative to GDP. But jitters about the Fed’s monetary policy are unfounded, owing to the US economy’s own vulnerabilities in that regard. Whereas the total debt of US households, corporations, and the federal government was equivalent to 100% of GDP in 1980, today that ratio stands at a whopping 220%.

Despite Powell’s tough rhetoric, the Fed will not engineer the aggressive interest-rate hikes that many experts think are needed. Faced with a choice between allowing inflation to overshoot its target and increasing interest rates substantially above current inflation levels, the Fed will choose the former. The reason is straightforward: Choosing the latter might trigger a domestic financial and economic crisis. In 1980, highly indebted Latin American countries paid a high price for the Fed’s anti-inflationary measures. But while Latin America’s external debt burden is the same today, the US is highly indebted, too.

Given the Fed’s concern for the health of the US financial system, there is a limit to how fast and how high it can jack up interest rates. A steep rise in interest rates in today’s highly leveraged US economy would put household, corporate, and possibly government balance sheets under tremendous stress, generating a wave of bankruptcy and insolvency that would compromise the stability of the entire financial system.

This implies that inflation will most likely overshoot the Fed’s target of 2% for the foreseeable future. As a bonus, above-target inflation will help dilute high levels of indebtedness.

In the early 1980s, the Fed did not consider the potential impact of its decisions on Latin America. That hasn’t changed. What has changed – and what will protect the region from another lost decade – is that it is in the US’s own interest to avoid the potential repercussions of dramatic rate increases. The Fed’s current anti-inflationary crusade will certainly not be turbulence-free, but Latin America – and the world, for that matter –can breathe a sigh of relief. i


Ernesto Talvi, a former minister of foreign affairs of Uruguay, is a senior fellow at Real Instituto Elcano in Madrid.

Autumn 2022 Issue | Capital Finance International 117

Kellogg Insight: To Prevent Unethical Behaviour, Think Small — at Least Initially

Why? The researchers found an intriguing self-fulfilling prophecy at work: people expect there to be higher numbers of cheaters within larger groups. This perception, in turn, increases the sense that cheating is common — and therefore acceptable.

The study illustrates the importance of context and social norms in determining whether we behave ethically. After all, we don’t magically transform from saints in groups of five to sinners in groups of 100. Rather, we unconsciously cue off other people and what we expect their behaviour to be.

“When you think your behaviour is normative,” Kouchaki explains, “then it seems more defensible. Questionable behaviour seems more justifiable when you think more people are doing it.”


The researchers began their investigation by recruiting 88 participants to complete an in-person study. Participants were randomly assigned to a room with either a small group of five people or a large group of 25 people.

Participants were told they could earn money by unscrambling 10-word jumbles in three minutes, $1 for each one they solved. But there was a catch: they had to complete the puzzles in sequence to receive payment — that is, if they solved the first and third, but not the second, they would be paid only $1 for the first. They would also receive a $10 bonus if their performance was in the top 20 percent of the room.

Participants didn’t have to report solutions to the word jumbles — only which ones they solved, which presented a tempting opportunity to lie.

And unbeknown to them, the seventh word jumble was unsolvable, allowing the researchers to determine conclusively whose pants were on fire.

The results were clear: in the small groups, 27 percent of participants reported solving the unsolvable word jumble. In the large group, that figure rose to 54 percent.

The researchers found the same pattern when they did a similar experiment with a group of 187 online participants. Participants were only told the size of the group — but couldn’t actually see their competitors. In keeping with the earlier results, they cheated at higher rates in a group of 100 than in groups of 10. In the large group, participants reported solving an average of 1.14 unsolvable word jumbles, compared with 0.747 in the small groups.

While these first two experiments found strong evidence of more cheating within larger groups, they didn’t explain why. So, for the next experiment, the researchers investigated that question directly.

They recruited 296 online participants, assigned them to either a large group of 100 people or a small group of 10, and gave them instructions for the word-jumble task used in the earlier study. Instead of actually completing the task, however, participants answered a series of questions designed to probe the mechanism underlying large-group cheating behaviour. Researchers asked participants how many people in their

group they thought would cheat, whether they thought cheating was in line with the norms of the group, and how likely it was that cheaters would be caught.

The researchers found that, as group size increased, the expected number of cheaters increased too. Statistical analysis revealed that this larger number of expected cheaters caused people to view cheating as more normative. Their analysis did not show a clear correlation between expectations of getting caught and the likelihood of cheating.

It’s worth noting that only the expected number of cheaters — and not the expected percentage of cheaters — had the effect of making cheating feel normative. Large-group participants expected that, on average, 36.95 people would cheat; small group participants said 4.55. This translates to a higher percentage of expected cheating in the small group (45.55 percent) than the large group (36.95 percent).

The researchers suspect this is related to a common fallacy called ratio bias. Studies have found that people will choose a seven-in-100 chance of winning over a one-in-10 chance of winning, even though the odds are worse. This is because our fallible brains focus on the numerator and think, essentially, “well, seven is more than one — better odds!” Similarly, if you believe 37 of the 100 people in your group will cheat, it makes lying feel more prevalent than if you believe five of 10 people will cheat — even though this perception is not accurate.

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Across several experiments, Kouchaki and her co-authors — Celia Chui of HEC Montreal and Francesca Gino of Harvard Business School — found that people cheat at higher rates in larger groups.
“Questionable behaviour seems more justifiable when you think more people are doing it.”
Maryam Kouchaki
"Statistical analysis revealed that this larger number of expected cheaters caused people to view cheating as more normative. Their analysis did not show a clear correlation between expectations of getting caught and the likelihood of cheating."

In other words, our collective belief that others are more likely to cheat in large groups becomes a self-fulfilling prophesy by spurring more of us to cheat when we’re in those large groups.


How can we avoid the moral perils of large groups? Perhaps by keeping the competition pool small. By minimising the number of other competitors, leaders can decrease their employees’ expectations of facing numerous cheaters and, as a result, reduce the odds that they themselves will cheat, Kouchaki and her coauthors suggest.

More importantly, be explicit about how employees are expected to perform.

Communicating your expectations for honest, accurate, and transparent performance will lower employee expectations that others will cheat. This can help, even if competition-group size cannot be decreased, since you will be decreasing employee expectations that others will cheat.

And finally, don’t assume that people know that cheating is unacceptable. When people in larger competition pools expect that more people will cheat to win, they tend to believe that cheating is more acceptable, and they end up cheating more themselves. Leaders can counter these perceptions by clearly emphasising which performance behaviours are tolerated — and which are not.

And, of course, there’s no substitute for promoting an ethical culture.

To Kouchaki, one of the sobering lessons of this research is just how easily we justify unethical behaviour. Something as simple as the size of our reference group can make the difference between cheating and truth-telling. So, a word of warning: left unchecked, she says, “These small psychological processes could create a path to a really corrupt culture.” i

Autumn 2022 Issue 119
"By minimising the number of other competitors, leaders can decrease their employees’ expectations of facing numerous cheaters and, as a result, reduce the odds that they themselves will cheat."

US Successes, Failures and Fears on Pandemic Unfold — It’s Not Over Yet

No country’s Covid-19 experience has been watched as closely as that of the US. It is the world’s number one economic, military, and cultural superpower — and what happens there matters everywhere.

Friends and foes alike have been astonished by the country’s response, and its human, economic, and political costs. America the great has emerged on “the other side” — but now it must deal with the rising threat of inflation.

While there had long been predictions of a global pandemic, few countries seemed as wellprepared as the US. The CDC (Centres for Disease Control and Prevention) was founded back in 1946, and through its successes — the eradication of smallpox — and despite some failures, it evolved into a trusted institution. Then there is the NIAID (National Institute of Allergy and Infectious Diseases), headed by Anthony Fauci, whose mission is to research the prevention and treatment of infectious diseases.

In 2015, the Obama administration set up the Global Health Security and Biodefense unit within the National Security Council (NSC). It was created in the wake of 2014 Ebola outbreak in West Africa. It built on work by the George W Bush administration to create a pandemic crisis plan. The NSC and Biodefense unit was streamlined by the Trump administration in 2018.

On January 11, 2020, China reported its first official death from Covid-19; on January 21, the first official case was reported in the US. Ten days later, the US banned entry to foreign nationals who had been in China 14 days prior to their arrival. The first official US death came on February 29. Confusion and contradictions followed — between the CDC, NIAID, the states, and the Trump administration. There was no clear national voice or co-ordination. On March 15, the CDC recommended that gatherings be restricted to 50 people; the very next day, the White House cut that limit to 10. Facemasks swiftly became a contentious issue. While the US was seen to lead the world in science and the study of pandemics, its governing institutions were letting the country down. Scientific rational was being drowned by politics and conspiracy theories.

North America

y March 26, the US was leading the world not in its pandemic response, but in the number of cases — and deaths.

Each state largely made its own lockdown decisions, with wild variations in strictness. Early on, the federal government oversaw the distribution of vaccines and the bulk purchase of masks, ventilators, and other medical equipment. This, too, quickly became politicised.

The Food and Drug Administration (FDA) gave emergency-use authorisation (EUA) for the Pfizer-Biontech and Moderna vaccines in December 2020. This was the first widescale use of RNA vaccines. The speed of the vaccines’ development surprised many, but reflected decades of research.

Rollout began to speed up as 2021 progressed. By May, 50 percent of the US population had received a first dose, and by July more than half of the 329.5 million-strong population had been “fully” vaccinated. Today, that figure stands at about 68 percent.

Despite the vaccines, the virus had already done much of its damage. The deadliest wave came in January 2021, when the seven-day average for deaths reached 4,098. By March 2021, over 500,000 people had died.

As of September 2022, the US leads the world in the total number of cases — 95.3 million — and deaths: 1.05 million. It ranks 16th globally in terms of deaths-per-100,000 people. The impact of the virus and the lockdowns resulted in a drop of real GDP of 9.1 percent in Q2 2020 compared to the same period in 2019. In annualised terms, the decrease was 31.2 percent.

According to the National Bureau of Economic Research, the US went into recession in February. It emerged from that just two months later, the shortest US recession in history. Unemployment peaked at 14.7 percent in April, but had halved by October. The S&P 500 decreased 32 percent

between February 14 and March 20, but had recovered the lost ground by August.

The recovery was driven by unprecedented fiscal stimulus. In March 2020, three relief packages were signed into law, with supplementary packages added in April and December. Together, they delivered around $5tn to the US economy. Individuals and families received around $1.8tn, businesses $1.7tn, and the states around $745bn.

The packages included a one-time, direct cash payment of $1,200 per person, and $500 per child in April 2020, and a $600 direct cash payment in December. There were loans and grants to companies, an expansion of unemployment benefits, and more funding for vaccine research.

The Biden administration delivered a fifth stimulus package worth $1.9tn in March 2021, including further direct cash payments of $1,400 per person. The stimulus contributed to gross federal debt reaching 128.7 percent in 2020, surpassing the 119 percent seen in 1946. Despite this, the US currency has strengthened in 2022 as investors turn to the dollar as a safe haven.

The Federal Reserve responded by cutting interest rates to near-zero in March 2020. It added liquidity to the banking system by expanding the amount of its repurchase agreement, and by restarting quantitative easing (the direct purchase of assets) which it first used during the 2008 financial crisis.

An unforeseen by-product of the pandemic was the “Great Resignation”. When unemployment rose sharply in April 2020, the participation

rate fell from 63.4 percent in February to 60.2 percent in April. Employment figures recovered along with the economy, but the participation rate did not (see chart). Many Americans have simply not returned to work.

Some commentators blame the cash payments and improved unemployment benefits. But as those benefits fade, the participation rate remains low. Anecdotal evidence suggests that many Americans simply decided to retire early. If the US enters another recession, many of them will be forced back into the workforce. Another unique feature of the pandemic has been the rise in remote working. While some companies are trying to encourage a return to the office, many workers are resisting.

Stimulus packages and vaccine rollouts have now been overshadowed by trepidation over inflation, which began to rise in May 2020 as supply bottlenecks pushed up prices. The war in Ukraine, rising house prices and the Biden stimulus package have now pushed inflation above eight percent, the highest since the 1980s.

The Fed responded by raising its target for the Federal Funds rate by over 200 bps. Despite economists predicting that core inflation would cool, many are now predicting that another recession will be needed to head-off a shift in inflation expectations. Is stagflation on the horizon?

US fiscal and monetary policies have helped the US economy to rebound. But a tight labour market with many missing workers, as well as external inflationary pressures, may see the country dip into another recession in this year and next. i

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B Labour Force Participation Rate. Shaded areas indicate US recessions.
"A pandemic is a lot like a forest fire; if caught early it might be extinguished with limited damage."
George W Bush

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Strain: America’s Education Emergency

n the fall of 2020, many local and state authorities in the United States decided not to reopen schools for in-person learning. This will be remembered as a shameful failure by policymakers to get their priorities straight. Absurdities abounded.

In Georgia, adults could enter tattoo parlors, but fifth graders could not go to math class. In many states, adults could gather in a bar, but children

were forced to sit in front of computer screens, receiving online lessons that, in many cases, were equivalent to no schooling at all.

We now know the consequences. Newly released test scores from the National Assessment of Educational Progress this month show a dramatic reduction in nine-year-olds’ math and reading abilities. Math scores were lower in

2022 than in 2020 – the first-ever decline in the NAEP’s five-decade history – and reading scores were down by the largest amount in over three decades. Moreover, this year’s math and reading test scores were both below their 2004 level. The pandemic erased two decades of progress.

It is no surprise that students struggled to learn. Zoom is no substitute for real classrooms, which

124 | Capital Finance International Michael R

"In many states, adults could gather in a bar, but children were forced to sit in front of computer screens, receiving online lessons that, in many cases, were equivalent to no schooling at all."

were closed for far too long in much of the country. Worse, the lowest-performing students were hit the hardest by school closures and remote learning. Math test scores for students performing at the 10th percentile fell by four times more than did scores for students at the 90th percentile. For reading, the lowest-performing students’ scores dropped by five times as much as the highest-performing test takers.

Now that COVID-19 is being treated as endemic in the US, policymakers have an opportunity to reverse some of this damage. But there is scandalously little political appetite to do so. Pandemic learning loss will echo through many children’s lives for decades to come. My rough calculations using Bureau of Labor Statistics data suggest that losing a year of schooling will reduce the typical high-school-educated worker’s earnings by at least $40,000 per decade.

For some students, the effects could be even larger. A study published by the Brookings Institution this spring finds that the pandemic led to a 16% decline in high-school graduates attending two-year colleges and a 6% decline in four-year college enrollment. Prior to the pandemic, typical households headed by a college graduate earned roughly twice as much as those headed by earners who didn’t hold a four-year degree.

That’s a lot of lost lifetime income. But those dollar figures represent more than just lost purchasing power or material consumption. For far too many children, they also represent diminished aspirations and a diminished ability to contribute to society; and for the country more broadly, they represent needlessly lost talent and future economic growth.

Addressing pandemic learning loss should be a top priority at all levels of government. Politicians and policymakers need to get all students back in the classroom, and then increase the amount of time they spend there. It would not be unreasonable to operate schools on Saturdays, at least until math and reading scores return to their pre-pandemic trend. Moreover, the school day should be extended by an hour or two, especially for older students, and the school year should be lengthened as well. The US does not

need to continue structuring children’s education based on the old agrarian calendar: let summer vacation start in July, not in June.

In addition to building skills and making up for lost classroom time, longer school days, weeks, and years would potentially increase the country’s troublingly low workforce participation rate by making it easier for parents to work without having to worry about childcare. A longer school year would also ameliorate summer learning loss, which underpinned the achievement gaps between students from higher- and lower-income families long before the pandemic.

These measures will cost money. But Congress enacted legislation in 2020 and 2021 appropriating nearly $200 billion for the explicit purpose of helping states and localities support student performance during the pandemic. Since much of that money has not been spent, why not use it to provide bonuses to teachers who are willing to work after three o’clock, on Saturdays, and in the month of June to help students make up for lost learning? In addition, funding could be used for tutoring services for students who need extra help.

Of course, teacher unions are likely to oppose such measures. But they have lost much of their credibility. After all, they have been responsible for a large share of the problem, insisting that it was unsafe for public-school teachers to return to work even after COVID-19 vaccines and treatments had become widely available. They have consistently put teachers’ desires ahead of students’ welfare and educational attainment. Their political allies need to start putting children first.

The extent of pandemic learning loss is an educational, economic, and moral failure. We now have gold-standard evidence documenting its harm. It is not too late to reverse some of the damage. Addressing this national emergency should begin immediately. i


Michael R Strain, Director of Economic Policy Studies at the American Enterprise Institute, is the author, most recently, of The American DreamIsNotDead:(ButPopulismCouldKillIt) (Templeton Press, 2020).

Autumn 2022 Issue | Capital Finance International 125
"In addition to building skills and making up for lost classroom time, longer school days, weeks, and years would potentially increase the country’s troublingly low workforce participation rate by making it easier for parents to work without having to worry about childcare."


Chinese Producer Prices (PPI) are an important indicator for DM equities and, indeed, for global inflation. Since China joined the WTO in 2001 and became the world’s workshop, Chinese PPI has tended to lead U.S. CPI.

It may come as a surprise, but for various reasons, PPI in China’s industrial sector is actually in deflation! Chinese industrial producer prices are strongly linked to Chinese export prices, which then filter into the rest of the world’s CPI.

If President Xi relaxes his zero-COVID policy, the resurgence of Chinese exports could help dampen global inflationary pressures and support corporate profit margins. This, in turn, would help the Fed and other DM central banks engineer the elusive soft landings they are all striving for.

Chinese industrial inventory growth has surged as working capital (proxied by undiscounted

bankers’ acceptances) grew strongly in 2020. This suggests that the portion of inflation that supply chain disruptions have driven can be mitigated if China were to open up more fully. Low vaccination rates and the poor efficacy of China’s COVID vaccines will delay any reopening. However, the spectacle of Chinese households refusing to pay mortgages for unbuilt properties is a sign of fatigue, if not protest over the combination of slower growth and COVID restrictions.

Part of the slowdown in Chinese PPI is a function of lower commodity prices as investors fret over demand destruction due to the global economic slowdown. To a certain extent, this seems misplaced, particularly concerning energy prices. Increased backwardation in oil futures suggests looming shortages, despite the decline in front-month prices.

While we think oil prices should be fundamentally higher, this view doesn't necessarily suggest that Chinese PPI will rise and the country’s ability to export disinflation will falter. China benefits from the sharp discount in Russian Urals crude vs. benchmark oil prices. In addition, Chinese refiners—including the two largest, stateowned ones—have fat profit margins due to the discount and can ensure producer prices remain muted.

Relatively cheap energy prices and the broad downturn in industrial commodity prices should continue to weigh on Chinese PPI.

There are two main reasons why investors should care about Chinese PPI. International and especially U.S.-focused equity investors are fretting over the outlook for corporate earnings. Earnings can be decomposed into profit margins and sales growth. Sales growth is now rolling

126 | Capital Finance International
> Inflation - Beyond the Headlines and Beyond the Borders: Specialised Investment Research and Analysis from PGM Global Inc. ThefollowingisanexcerptfromaproprietaryresearchnotepreparedbyPGMGlobalandsharedwithclientsinJuly2022. −5 0 5 10 Chinese PPI tends to lead U.S. inflation China PPI vs. U.S. Core PCE, % YoY E−CN−01346 % 99 01 03 05 07 09 11 13 15 17 19 21 23 4.2 1 2 3 4 5 Chinese PPI (L) U.S. core PCE (R) PGM Global (data via Bloomberg) Shaded areas = U.S. recessions -15 -10 -5 0 5 10 15 What happened to China's main export: disinflation? Chinese export price index vs. Industrial producer price index, % YoY E-WD-00062 % YoY 010305070911131517192123 10.0 -2.5 Export price index Chinese Industrial PPI PGM Global (NBS data via Datastream) Shaded areas = U.S. recessions −400 −200 0 200 400 600 A proxy for working capital Undiscounted Banker's acceptances CNY Bn. vs. Industrial inventories, % YoY E−CN−01663 CNY billion 10 12 14 16 18 20 22 −274 −154 % YoY 0 5 10 15 20 25 30 Undiscounted BAs (L) Undiscounted BAs 6 month MAV (L) Industrial inventories (R) PGM Global (PBOC data via Bloomberg) Shaded areas = U.S. recessions −10 0 10 20 Commodity and other input prices are cooling CRB raw commodities in RMB, % YoY vs. Chinese CPI and PPI, % YoY E−CN−01720 Commodities in RMB terms, % YoY 10 12 14 16 18 20 22 −2.5 CPI & PPI, % YoY −5 0 5 10 Commodity prices in RMB, %YoY (L) Chinese PPI, %YoY (R) Chinese CPI, %YoY (R) PGM Global (data via Bloomberg) Shaded areas = U.S. recessions

over sharply. Profit margins remain at near fourdecade highs; there are good reasons to ask how long this can persist.

Between 1950 and China’s ascent to the WTO in 2001, U.S. profit margins tended to peak before wage gains, and precipitated recessions. This changed—coincidentally or not—when China joined the WTO and became the world’s factory. China exported disinflation, pushing down prices for U.S. consumers and widening the profit margins of U.S. firms. If Chinese lockdowns ease, the country can spur another round of

disinflation, which would help both U.S. firms and the Fed.

Perhaps a more interesting reason investors should care about Chinese PPI is the nexus of China’s industrial plans and global competitiveness. China’s desire to become a world leader in high-tech products is hardly news; however, its strategy might be. China has been using its large, tech-hungry domestic market to scale production and boost its global competitiveness. Chinese firms have a dominant market share at home. Lower energy costs and

PPI, in general, will help Chinese tech hardware firms compete internationally.

Europe’s tough stance on Russia and impractical energy policies have exacerbated the bloc’s broader economic malaise. This is particularly true of Germany, which is inching ever closer to an energy catastrophe and electricity rationing. As recently as 2020, the UN had ranked German Industry the world’s most competitive, with China in second place. The current macro trajectory suggests China can close that

Autumn 2022 Issue | Capital Finance International 127
gap. -20 0 20 40 Cash Rules Everything Around Me Profit margin for refining Russian Urals oil, USD/bbl, spread Urals minus Brent C-EN-00330 USD/bbl 17 19 21 41.5 -28.9 Refining margin: Russian Urals Oil Urals-Brent spread PGM Global (Oxford Economics data via Datastream) Shaded areas = U.S. recessions −10 −5 0 5 10 15 Chinese producer prices rolling over as commodity prices fall Chinese producer prices vs. purchasing prices (raw materials, fuels and power) E−CN−01292 % 98 00 02 04 06 08 10 12 14 16 18 20 22 6.1 8.5 China Producer Price Index YoY China Purchasing Price Index YoY PGM Global (data via Bloomberg) Shaded areas = U.S. recessions -5 0 5 10 15 Uh oh? DS U.S. equity index ex Finl and Res: sales growth and profit margins E-US-03556 Sales growth, y/y 8387919599030711151923 12.2 Profit margins 4 6 8 10 Sales growth (left) Profit margins % (right) PGM Global (data via Datastream) Shaded areas = U.S. recessions 28 30 32 34 36 Profits peak before wages do... or at least they did U.S. profits and non−financial corporate compensation as a % of GDP E−US−03362 Compensation/GDP, % 51 55 59 63 67 71 75 79 83 87 91 95 99 03 07 11 15 19 23 Profits/GDP, % 7 8 9 10 11 12 Compensation/GDP (left) Profits/GDP (right) PGM Global (BEA data via Datastream) Shaded areas = U.S. recessions China joins WTO 0 100 200 300 Picking the right Tech Chinese ETFs, rebased vs. ratio E−CN−00911 Price index, rebased 15 17 19 21 Ratio 0.6 0.8 1.0 1.2 1.4 CQQQ ETF (L) KWEB US Equity (L) Rel: KWEB / CQQQ (R) PGM Global (data via Bloomberg)

We have been fairly optimistic about Chinese tech for a few months now. Recently, the internet platform companies, which have a heavy weighting in the KWEB ETF, have done relatively better than the tech-hardware heavy firms (CQQQ). This makes sense given the government has been relaxing, however unevenly, regulation on the platform companies. However, as far as future growth is concerned, we continue to think the hardware-focused firms will do best, as they are of strategic importance to the CCP and continue to benefit from increased investment.


Chinese producer prices are easing, in what could be a boon for global consumers, profit margins and DM central banks. A lot will depend on President Xi’s commitment to the zero-COVID policy. The PPI trends are also supportive of Chinese equities, and especially Chinese tech hardware firms. This is particularly true when contrasting the outlook for China with that of Germany. i


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Aretha Franklin, Queen of Soul: No Caprice, Simply Sadness…

oul legend Otis Redding, performing for an enthusiastic crowd just weeks before his death in 1967, stepped up to the microphone and said: “This is a song that a little girl took away from me.” The song was Respect — and the “thief” was Aretha Franklin.

Redding understood that Franklin, already the undisputed Queen of Soul, had turned his original into an international hit — and a feminist anthem. She had also instated soul music as the soundtrack of an era of upheaval in American society.

The original Respect, released by Redding in 1965, was about a working man who expects his woman to do her part around the home. Aretha Franklin spun the lyrics on their head; her funkier version was about a strong, liberated woman demanding R.E.S.P.E.C.T from her man. She added the spelled-out word, the backing chorus of “Ree, Ree, Ree” — a nod to her nickname — and a perfect soul hook provided by saxophonist King Curtis.

Released in April 1967, the song turned Franklin into an international star at the age of 25. It became her trademark song, but her journey to fame was no overnight sensation. She recorded her first album at the age of 14, a collection of gospel songs she knew by heart from years singing them with her sisters, Erma and Carolyn, in her father’s Baptist church in Detroit.

By the age of 18, she was exploring the music of the secular world: jazz, R&B, and bebop. Some in the Baptist congregation accused her of “singing the Devil’s words to God’s tunes”. Throughout the late 1950s and early ‘60s, Franklin recorded and released many covers — but the hits eluded her. It was only after she signed for Atlantic Records — and came under the influence of the producer Jerry Wexler — that she found her musical soul, and soul music found its figurehead.

Despite her reticence and modesty, she became a focus for the burgeoning Civil Rights movement. Her songs, performed with such power and passion, caught the mood of the times as African-Americans strived for equality. In 1968 — a pivotal year in US history — Time magazine described Aretha Franklin as “bearing witness to

"By the age of 18, she was exploring the music of the secular world: jazz, R&B, and bebop. Some in the Baptist congregation accused her of 'singing the Devil’s words to God’s tunes'."

a reality so simple and compelling that she could not possibly fake it”.

Franklin’s childhood was not underprivileged. She was born in 1942 in Memphis, Tennessee, to a relatively wealthy couple, Clarence LaVaughn Franklin and Barbara Siggers. Her father was a preacher, and a personal friend of civil rights campaigner Martin Luther King Jr. Clarence Franklin earned a good living on the religious circuit, but his relationship with Aretha’s mother was strained. She left the family home when Aretha was six, and died of a heart attack four years later.

Clarence Franklin’s status afforded him a degree of celebrity, and he was close to many of the performers of the day, including soul giants Jackie Wilson, Sam Cooke, Ray Charles and Marvin Gaye. Another family friend, jazz singer Dinah Washington, heard a young Aretha perform at a family gathering and proclaimed that the girl was “the next one”.

Aretha’s youth brought its own challenges — her mother’s desertion, teenage pregnancies, unhappy marriages, and the fatal 1979 shooting of her father in an attempted robbery in Detroit. In a biography published after the singer’s death 2018, writer Emily Williams said: “Despite the extremely difficult sociological climate that she was subjected to as an African-American woman, and the harshness of that world, she found a way to draw strength from within herself.”

One of her peers described Franklin as “cloaked in a brooding sadness”. She commanded a giant stage persona but was an introvert offstage. Her small circle of friends described her as a woman

who chain-smoked and compulsively snacked. As Jerry Wexler put it: “It wasn’t caprice or temperament, it was just sadness.”

In the book Dancing in the Street: Motown and the Cultural Politics of Detroit, Suzanne Smith wrote: “When her single, Respect, climbed the charts in 1967, some fans declared it to be the summer of ‘Retha, rap, and revolt’. Her songs became anthems, the soulful sound of a movement that increasingly seemed propelled by black pride and power rather than earlier ‘dreams’ of racial integration.”

Writer Jamil Smith said: “Her music spoke to the demand for equality along gender and racial lines simultaneously, knowing that one freedom could not exist without the other. Aretha Franklin was never shy about reflecting black reality and encouraging those fighting for civil rights.

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Song,civildisobedience,heartache,sympathyfor theoppressed:thesingergaveherallforherbeliefs andherpeople.

“She articulated the African-American experience through the common themes of love lost and gained. She did so in a way that was both digestible for the masses and uncompromising in its honesty about America.”

In the late 1960s, America was experiencing intense social upheaval. There were campus protests, riots, and heavy-handed policing. Opposition to the Vietnam War was growing, and African-American communities were angry that a disproportionate number of young black men were being drafted.

The Civil Rights movement, which had for years been peacefully campaigning for an end to segregation, was splintering — with some factions calling for violent struggle. Although Aretha Franklin was a friend and supporter of

Martin Luthor King, she didn’t necessarily share his belief in peaceful protest.

In 1970, the communist and Black Power activist Angela Davis — labelled a “dangerous terrorist” by Richard Nixon — was accused of buying the guns in an attempt to free prisoners from a California courthouse. Franklin put up bail for Davis, who was ultimately acquitted.

The singer had herself been taken into custody as a teenager, accused of disturbing the peace. She said of Davis’s arrest: “I’ve been locked up, and I know you got to disturb the peace when you can’t get no peace. Jail is hell to be in. I’m going to see her free, not because I believe in communism, but because she’s a black woman and she wants freedom for black people.”

While Aretha Franklin toured and performed, freeof-charge, at civil rights rallies, she expressed support the Marxist-Leninist group the Black Panthers. The organisation, founded in 1966, advocated class struggle. J Edgar Hoover, head of the FBI, called the Panthers “the greatest threat to the internal security of the country”. After King’s assassination in 1968, Franklin sang the hymn Take My Hand, Precious Lord at his funeral. Later that same year, she performed a blistering version of the national anthem at the Democratic Convention that brought many in the crowd to tears.

When a White House official approached the newly elected Barrack Obama with a list of potential performers to sing at his inauguration. The president-elect waved a hand to interrupt him, and in the ultimate mark of R.E.S.P.E.C.T., simply said: “Aretha.” i | Capital Finance International 131

Risk, Return, ImpactSDG Aims Need a Shift of Focus

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

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

A lack of credible information or transparency dissuades new market participants, as the risks


blended finance


and opportunities of investing in frontier markets remain unclear. Investing remains the preserve of a few who understand local market dynamics.

This compounds the challenge of private investment into the least-developed countries (LDCs) and social sectors. These economies and markets are in critical need, and the SDG gaps remain. Despite donor government commitments to “leave no one behind”, these geographies

and sectors typically have a history of a limited number of transactions. They also lack and an evidence base.

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

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


Meggin Thwing Eastman, Paul Horrocks,

132 | Capital Finance International > OECD:
Russia’s war on Ukraine and interruption of global food supplies has put greater pressure on the development system. INSTITUTIONAL
A Joint Discussion Paper from MSCI
December 2018 "In contrast with the transparency and openness of Official
Assistance (ODA), the risk-return and impact of
transactions typically remain hidden behind
confidentiality clauses." Donors, DFIs, MDFIs 1 0 2 4 2 3 Mobilisation and Impact: Need for greater risks and impact less returnsGreen, Social, Sustainable and Sustainability linked a GSSS Bonds SDGs3

take priority over impact, to the detriment of the sector or region.

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

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

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

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

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

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

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

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

Greater co-operation amongst DFIs and MDFIs on bundling projects would help to develop the necessary aggregation for issuance and diversification of GSSS bonds so attractive

for institutional portfolios. Co-operation, not competition, is needed to grow the market.

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

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

The scale and ambition of the 2030 Agenda demands a new shareholder governance model that explicitly prioritises the mobilisation of private finance. Donors need to take a more active role in working with DFIs and MDFIs to grow the financial capacity of sustainable development finance. This requires exploring options, approaches and incentives to deliver scale and depth. MDFIs and DFIs need to see themselves as mobilisers of capital. i | Capital Finance International 133

Strict Pandemic Lockdowns Sent Filipino Economy into a Tailspin

The Philippines’ flag was flying high when the pandemic hit, but lockdowns sent the service sector reeling in 2020, resulting in a sharp recession.

Fiscal stimulus and expansionary monetary policy led to a strong GDP recovery in 2021. Reforms made during the pandemic may yet contribute to another period of economic growth — if inflation can be caged.

Asia Pacific
Philippines: Makati

n the decade prior to the pandemic, real GDP growth averaged 6.4 percent, and unemployment fell from 7.3 percent to 5.1 percent. One of the key drivers was FDI, which increased from $1.07bn in 2010 to $8.67bn in 2019. The Aquino and Duterte administrations both strived to reduce bureaucratic red tape and corruption.

Covid cases slowly built up in 2020, but the pandemic really hit in 2021 with the seven-day average of deaths peaking in August 2021 at 267. A January 2022 spike in Omicron cases did not cause an increase in the death rate. Overall, the Philippines had 3.91m cases, with a death rate of 56.92 per 100,000 people — comparable to Indonesia, Australia, and South Korea.

The government responded to the start of the pandemic with a strict lockdown. The Oxford Covid-19 Stringency Index for the Philippines — a composite measure of nine of the response metrics — reached the maximum score of 100 in March 2020, and remained above 50 until November 2021. Time magazine called it “one of the world’s longest lockdowns”. Thailand’s stringency rating peaked at 76 in April 2020 and fell below 50 by September 2020. The death rate per 100,000 cases suggests that the curve was successfully flattened.

Lockdowns were rolled out in localised “community quarantines”. This provided authorities the flexibility to tailor their responses to specific circumstances — but big differences between locales did create some confusion, as well as economic disruption.

The strictest level of lockdown included stayat-home orders with residents requiring a pass to shop for food. Non-essential businesses were forced to close and public transport was curtailed. Armed police manned checkpoints and were encouraged to use force against lockdown violators. As in many places around the world, critics began to see signs of a police state in the lockdown measures.

The length of the lockdowns in some part reflects the government’s slow progress on vaccination. A widespread programme did not begin until July 2021, after which it quickly accelerated. Currently, over 66 percent of the Filipino population has received two doses.

The economic impact of the lockdowns was severe: construction, accommodation and transport were the hardest-hit sectors. Real gross fixed capital formation, including public investment, decreased by 35.6, 37.9, and 29.9 percent respectively in Q2, Q3, and Q4 2020. GDP decreased by 16.9 percent in Q2 2020 and remained negative until Q2 2021. The recession was the worst since independence.

The Philippines was hit harder than its neighbours because it has a higher share of services in its economy, a lower share of exports, and a higher proportion of personal remittances (see table).

Lockdowns around the world also saw a decrease in remittances going back to home countries. In comparison, the export sector was generally less affected across countries.

The government responded to the downturn with the Bayanihan Acts I and II in 2020. These measures included increased social assistance, support for the healthcare sector, and assistance to micro, small, and medium enterprises (MSME). There were capital injections to cover loan and interest payments of beneficiaries and increased public infrastructure spending. Direct government support amounted to 4.4 percent of GDP in 2020.

The government also eased credit requirements for households and companies and provided a credit guarantee scheme for MSMEs. In 2021, it introduced the CREATE scheme to speed-up reductions in corporate tax rates and provide tax incentives for fresh investments. These stimuli and tax cuts saw the primary fiscal balance decrease from 0.07 percent of GDP in 2019 to 3.91 and 4.56 in 2020 and 2021 respectively. General government debt increased from 37 percent of GDP in 2019 to 51.7 percent in 2020.

While pressures on public finances have increased, the primary balance and general government debt levels (relative to GDP) suggest that the government still has some fiscal breathing room. The credit-rating agencies agree; the Philippines’ rating remained stable during the pandemic — and stayed above investment grade. The government has indicated its commitment to minimise budget deficits.

The fiscal picture was also helped by a 13 percent higher-than-projected revenue collection in 2020. This seems to have been driven from increased tax compliance as the result of digitalisation. This dividend should provide further strength to public expenditure and the economy. There has also been an improvement in transparency and accountability.

Hale, T., Angrist, N., Goldszmidt, R.

Hum Behav 5, 529-538

On the monetary front, the Bangko Sentral ng Pilipinas (BSP, the central bank) decreased official interest rates five times, and by a total of 200bps to two percent by November 2020. It also provided liquidity to the market through the purchase of government securities in the primary and secondary markets.

The economy responded to the fiscal and monetary measures by rebounding to 5.6 percent real GDP growth in 2021, and is expected to reach 6.5 percent in 2022. This is faster than average for the South-East Asian region.

Inflation began to increase towards the end of 2020 and has accelerated since March this year. In August, inflation stood at 6.3 percent. Food and energy costs are driving the increase. Since May 2022, the BSP has increased interest rates four times, for a total of 175 bps to 3.75 percent. August saw a slight decrease in headline inflation, but core inflation continued to rise.

The BSP is likely to continue to raise interest rates until the headline figure falls below its twoto four percent target range. This will dampen any recovery, but interest rate rises will help to strengthen the Philippine peso from further falls against the US dollar. The currency has been depreciating since April 2021.

The government of Rodrigo Duterte used strong action to safeguard the local health system before tackling the pandemic’s economic impact, swinging between the two goals. While the country saw a sharper recession than its neighbours in 2020, improvements in revenue collection and fiscal accountability should help the economy to grow.

Growth in exports would see its growth accelerate even faster. Increased economic integration with other ASEAN members and the outcome of the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) could help in that regard. i

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I COVID-19: Stringency Index. The stringency index is a composite measure based on nine response indicators including school closures, workplace closures, and travel bans, rescaled to a value from Oto 100 (100 = strictest). Source:
et al. A global panel database of pandemic policies (Oxford COVID-19 Government Response Tracker). Nat

Janashakthi Life Reinforces Its Commitment to Delivering Excellence with Exceptional Performance

Sri Lanka’s Janashakthi Life puts its staff and customers front andcentretoensureexceptionalperformance.

Janashakthi Life is one of Sri Lanka’s leading insurers, established with the aim of providing protection and financial security to the island nation’s residents.

Founded in 1994, Janashakthi Life has been a pioneer in the sector, becoming a respected brand and a household name. From humble and local roots, the company today stands tall in meeting and exceeding regional and global standards.

Janashakthi Life’s approach to changing the insurance sector has involved revolutionising the industry in several ways. Firstly, it was transforming to become an insurer constantly innovating financial and protection solutions to fulfil all consumer needs — benchmarking bestin-class performance across industries.

Another emphasis is putting greater focus on digital space to improve the consumer experience and make operations in developing business value seamless across the value chain. In doing, the firm has integrated consumer and all customer touchpoints across 72 branches, and all 1200 members of the sales force.

“We also track post-purchase behaviour to understand consumer expectations,” says Director and CEO Ravi Liyanage. Customer onboarding to claims processing is seamless and provides an unmatched consumer experience to ensure our policyholders are content.

“Our sales force are the front runners of our business. The members are trained to identify specific individual needs and augment and tailor-make solutions to match those needs.”

A high-performance ethos defines Janashakthi Life. The drive and passion of the team has constantly raised the bar — and achieved notable success. “I believe our consistent financial performance, achievements, accolades, and recognitions affirm our status and position,” he says.

Janashakthi Life’s most valuable asset is its people. They are the heart of the company that gives energy to Janashakthi Life’s purpose. The firm is committed to their well-being and growth, enriching and rewarding career experiences in a diverse and inclusive environment.

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Director / Chief Executive Officer of Janashakthi Insurance PLC: Ravi Liyanage

There has been considerable investment in training and ongoing professional development, and these initiatives brought about the financial performance and achievements in the MDRT programme. Productive employees build capacity for collective accountability, Liyanage believes.

“Think larger than life when you are confronted with a challenge,” he adds. “Be accountable for goals set for yourself and resilience to bounce back without comprise.”


Post-pandemic, there has been an increasing demand for health-related insurance products. Certain segments in the market are speculative about overseas medical benefits because of foreign currency issues, says Liyanage.

In the medical insurance segment, consumer perception is changing with the growth of medical-related products and services. Awareness of critical illness — and the related expenses — tend to encourage more proactive behaviour. There have been significant behavioural change towards investment-based insurance products, especially with the current interest rate hike.

Consumer behaviour is also changing the ways in which policyholders engage with insurance companies for online onboarding, post-purchase behaviour, and online services and payments.

The future of the local insurance sector has changed, and Janashakthi Life is ahead of the curve. “Forecasting the future is a challenge in every sense,” admits the chief executive.

In the near future, the industry may not reach desired GDP penetration levels — as in the case of neighbouring countries. “But once the macroeconomic challenges have been overcome, the industry will be capable of entering into growth momentum as it used to be. As for the immediate future, companies who are capable of adopting change with innovative mindset will be well poised to the next growth trajectory.”


The benefits of social media include the dissemination of information and engaging consumers in a more profound way than traditional media. Statistics show that 58.4 percent of the global population uses social media — which amounts to 4.62 billion users. Meta (Facebook), YouTube and WhatsApp share the highest popularity. These media are likely to be catalysts for change in years to come.

Sri Lanka is by its nature a resilient country. Political and economic stability benefit from reforms. Changing the economic model towards that of a self-sufficient nation is possible in essential goods and services. i

Autumn 2022 Issue 139

‘Dr Rak’ and the Big Turn Around: Taking the Steps to Sustainability

Until fairly recently, the global community strived for economic gains while ignoring environmental, social and community impacts.

Extreme climate change has triggered natural disasters and destroyed live and land, with losses from damage reaching $2.5tn, according to the World Economic Forum.

Rak Vorrakitpokatorn, President of ExportImport Bank of Thailand (EXIM Thailand), a state-owned specialised financial institution tasked as Thailand Development Bank, has long been aware of the challenges. The Bank has synergised with concerned sectors to drive the UN’s Sustainable Development Goals (SDGs) and adhere to the COP26 declaration to achieve net-zero greenhouse gas emissions by 2065.

Vorrakitpokatorn, known to his workmates as “Dr Rak”, launched a three-stage framework:


The Bank has established policies for the sustainable growth of business sectors, society and community under the Sustainable Banking and Responsible Lending principles. These key policies are to gear Thai businesses towards a Bio-Circular-Green economy, with eco-friendly industries representing a quarter of its loan portfolio. This reaffirms the Bank’s commitment towards sustainability, especially in strengthening SMEs for sustainable growth.


Dr Rak is committed to driving the sustainable development from policy into practice. The sustainable development concept and financial innovations minimise impacts on the environment, community and society. As an example, the Solar Orchestra Programme offers “total solutions” for green businesses. The Bank supports businesses in investing in rooftop solar power generation and links it end-to-end with the carbon market ecosystem. Funds have been raised through green bonds to support clean energy projects. It provides sustainable financial and non-financial support as a one-stop trading facilitator for SMEs. The fully-fledged “Beyond Banking” mission equips entrepreneurs with knowledge, capital enhancement, online trade channels and risk-hedging tools to help ensure sustainable success for SMEs in the global market.


Employees are the key to the organisation’s success. Vorrakitpokatorn has laid strong

foundation and fostered a sustainable corporate mindset from front to back offices under the ESG framework. Constant upskilling and re-skilling allow the employees to stay up-to-date and practice according to standards set by the Bank. The Bank further encourages volunteering in CSR activities and community engagement to broaden their

contributions to sustainability for wider range of stakeholders.

Rak Vorrakitpokatorn is recognised for the way he has paved sustainable growth foundations. EXIM Thailand is well-positioned as a strong government ally in driving Thailand toward a sustainable tomorrow. i

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President of EXIM Thailand: Dr Rak Vorrakitpokatorn

> Obituary: Banzai, Mori! Japanese Designer Whose Cultural Exchange Sparked a Revolution

Hanae Mori took issue with the drab image of women in post-war Japan, and introducedenduringWesternflourishes.

The summer of 2022 brought with it the death of two of Japan’s most iconic fashion designers: Issey Miyake and Hanae Mori.

Though Hanae Mori may no longer be a household name, the famed “translator of fashion” revolutionised clothing for Japanese women and paved the way for every designer that has followed her. Affectionately referred to as Mori-sensei (teacher), she was the first Japanese designer accepted into la Chambre Syndicale de la Couture Parisienne, the highest echelon of Parisian fashion. She was made a chevalier of the Légion d’honneur in 1989, and in 1996 was awarded Japan’s Order of Culture — the first fashion designer to receive such an honour.

Born Hanae Fujii in 1926, Mori was raised in a small town in the coastal Shimane prefecture. From the Meiji era of her parent’s generation, Japan’s growing middle class began to be influenced by the Western world through Hollywood movies and jazz music. Mori remembered her mother as a woman who loved dressing up, ordering garments from Tokyo and Osaka. Her parents dressed the family in Western clothes, and Mori was the only girl in her school wearing a skirt and blouse instead of a kimono. “We were the only ones in my hometown who dressed Western-style,” she told the Associated Press in 1996. “It was embarrassing for me as a child to be different, but I guess we were rather envied, too.”

By the 1930s, Japan’s emerging “modern girl” image was that of an independent thinker, stylishly dressed in Western clothes, fusing traditional Japanese dress with fashionable accessories such as the Machiko Maki headscarves reminiscent of those worn by Hollywood stars. Around this time, the family moved to Tokyo so that Mori and her brothers could receive a better education.

"In 1951, Hanae Mori opened her first atelier above a noodle bar in Tokyo’s Shinjuku district, a bombed-out slum now being revived into one of the city’s busiest districts."

She was 15 when the Pacific War began. Her family was evacuated, but Mori was drafted to work in a factory and stayed in a city being destroyed by war. Japanese women who worked in factories and the city adopted more masculine fashions called kokumin-fuku. Even the daughters of middle-class families like Mori adopted traditional peasant workwear: loose wrap jackets and tie-waist monpe trousers. She recalled thinking that Western fashion would be the future for Japan.

Post-war, Mori earned a degree in Japanese literature at Tokyo Women’s Christian University. There she read Western books like Gone With the Wind, and fascinated by the descriptions of Scarlett O’Hara’s corseted waist and the intricate dresses of the 18th Century. She met her husband, Ken, at University and married the same year she graduated. But she found her new role as a housewife unfulfilling. “I was a very nice housewife for one month, but I did not like to be at home,” she said.

After Japan’s surrender in 1945, American forces occupied the nation and ushered in drastic changes. Its empire was dissolved, its government, economy and education system

were reconstructed on Western models. Occupied Japan provided endless inspiration for Hanae Mori. She noted how the wives of American GIs dressed in clothes tailored to their bodies, and watched them alter outfits to fit. Western clothes, she observed, were more three-dimensional.

Her interest in these techniques led her to take a dressmaking course. As Japan recovered from the destruction of the Pacific War, women joined the workforce in droves.

In 1951, Hanae Mori opened her first atelier above a noodle bar in Tokyo’s Shinjuku district, a bombed-out slum now being revived into one of the city’s busiest districts. With two assistants and three second-hand sewing machines, Mori provided made-to-order clothes to the wives of American GIs and the fashionable “modern girls” of Tokyo.

In Shinjuku, other businesses were emerging from the rubble. People noticed short-skirted Western designs in shop windows, and women flocked to buy her jackets, slacks, sweaters and skirts. For young Japanese women who were forced to wear trousers during wartime, a bodice that showed off the waistline was “an unfulfilled dream”, Mori wrote in 1994. Her designs symbolised the rise of Japan as a modern powerhouse, a fashionable nation of working women.

Hoping to inspire a new image of Japan after its defeat in the war, Mori combined Western designs with delicate Japanese touches to introduce the world to the aesthetic virtues of the country.

Across the street from Mori’s shop was a cinema that regularly showed Hollywood movies. It was often frequented by a movie producer, Sotojiro Kuromoto, who noticed her designs in the window and commissioned her to make costumes for his films.

"Across the street from Mori’s shop was a cinema that regularly showed Hollywood movies. It was often frequented by a movie producer, Sotojiro Kuromoto, who noticed her designs in the window and commissioned her to make costumes for his films."

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For the next five years, Mori was known as the “Edith Head” of the Japanese film industry (Head was a famous American costume designer who worked with the film industry).

Mori designed outfits for hundreds of movies, including some of the most renowned cinematic works of the era. Her work can be seen in movies by legendary Japanese director Yasujirō Ozu, such as Early Spring and Early Autumn, and Yoshishige Yoshida’s Farewell to the Summer Light. She dressed the era’s biggest stars, and designed elaborate costumes for popular singers.

By 1960, Mori was a mother of two; she considered leaving the business. She booked a trip to Paris to see the boutiques and salons of her favourite designers. She visited Hubert de Givenchy, Dior, Pierre Cardin and Coco Chanel. She was struck by their delicate approach to working with fabrics and fittings, and how they all believed that the women they dressed should reflect their husband’s social status. The outlier, she observed, was Coco Chanel, who did not care who her client was married to, and preferred to focus on the women themselves. When Mori attended her own fitting with the legendary Paris designer, she was shocked by Chanel’s suggestion that she abandon her black outfit and wear bright orange clothes to contrast with her rich black hair.

“The whole Japanese concept of beauty is based on concealment and a refined hiding,” she would later remark. She would come to describe the meeting as fateful. “I was back in the couture mood again and wanted to set up shop in Paris,” she said. “I suddenly realised that I should change my approach and make my dresses help a woman stand out.”

As she spent more time in the West, attending operas such as Madama Butterfly, she was dismayed by the portrayal of Japanese women as passive, submissive victims. “My self-expression in response to those in the West who looked down upon Japanese women took shape in the form of a butterfly boldly spreading its wings,” she wrote.

Mori’s approach to design was transformed. Back in Japan, she synthesised Western cuts with Eastern fabrics and patterns — and bolder colours. “I would need to create innovative designs that no foreigner had ever seen by using 100 percent Japanese-made clothes and Japanese artisans,” she wrote.

By combining features from both cultures, she hoped to challenge the world’s image of Japan. She featured iconic national motifs, such as cherry blossoms, snow-capped mountains, kabuki and Japanese calligraphy. She worked with silk, obi and kimono fabrics to create the aura of a kimono without its restrictions. Patterned with flowers and birds, and adorned with lace and embroidery, her designs merged classical femininity with quiet revolution.

In 1965, Mori became the first Japanese designer to host a show in New York. The East Meets West collection was an instant success, appealing to the jet-setting tastes of the time. Her client list included Bianca Jagger, Nancy Reagan, Hillary Clinton and Grace Kelly. Soon, she was the face of a $500m fashion house. Mori was commissioned to design opera and ballet costumes for clients including dancer Rudolf Nureyev, as well as uniforms for flight attendants and Olympic competitors. In 1993, Mori designed the wedding dress of Masako Owada for her 1993 marriage to Japan’s Crown Prince Naruhito.

Three years later, she retired.

Although her fashion house did not live on, her legacy as a champion of cultural exchange and young Japanese designers has. “When Kenzo, Kansai Yamamoto and Issey Miyake were students of design, they used to visit me frequently at my studio,” Mori said in a 1982 interview. International designers of today, such as Giorgio Armani, count her as an inspiration.

Hanae Mori died in August 2022, after a short illness. She is survived by her two sons. i

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Hanae Mori in 1974

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


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

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

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

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

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

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

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

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

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

Containers Printers was founded in Singapore back in 1981 with one humble product: a square

cooking oil tin. The firm’s portfolio has diversified to include metal and flexible laminate packaging solutions for a global market. Sustainability is firmly front and centre for the company.

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

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

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

Deep Fintech and Telecom Collaboration — It’s the Future of the Banking for Jusan

‘Wehavebuiltagoldendigitalbridgebetweenbusinessandretail client,’saysJusanBankCEO.


anking and financial services came early into every Kazakhstani's life. No wonder, then, that the sector there is advancing by leaps and bounds.

Consumers’ lives have been made easier with newly developed products and services. Just a few years ago, citizens could not even imagine that an app could be used to buy a TV or air tickets in instalments, get into the shares market, or get a mobile service aside from a simple transfer or loan repayment. spoke to the CEO of Jusan Bank, Nurdaulet Aidossov, to get his vision of the present, and the future, of innovative services and products.

“Loving my job is the key point for me,” he says. “Passion greatly energises and motivates me to look for game-changing solutions — and drives business processes. Outstanding results cannot be reached without motivation.”

Over the years, Aidossov has learned to find experienced and talented staff — and differentiate between them. They could be completely different people, he says. “I believe that the experience so expected from the labour market is no longer crucial. An employment history may be long, but in a rapidly changing world, some of that experience may not be relevant. “But skills are of the utmost importance: being able to adapt to new realities, to be open to innovation, and to switch between tasks. All of these things are above simple experience. Skills rock.”

Aidossov would rather put his faith in skills than experience. “These two drivers, the passion for work and skills, are typically more essential than the experience — and even education. I am by no means undervaluing the education. You need to have ongoing training and upskilling to enhance your competence and forge a successful career.

“To my mind, the classical education approach that you study your major and deepen that is fading. The future is in hybrid occupations.” Being a good accountant is not enough today, he believes. “You need to know IT, financial analytics and so forth for service providers to engineer information systems and gain an insight of what can be refined and fine-tuned.”

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CEO: Nurdaulet Aidossov

A law officer who knows and understands how a financial system works can give more sound and relevant advice, he says. As a specialist engaged in the financial sector, he believes that finances are the most forward-looking economic realm, “constantly masterminding ground-breaking reinventions — with the fintech trends factored-in”.

An open mind and the ability to tinker and produce fresh ideas are needed to understand data-driven decisions. “Our business is no place for emotiondriven or illogical decisions,” Aidossov says. “Everything should be underpinned by sound analytics. That is the key to success.”

Financial services and banking affect all lives in 2022, and banks should promote welfare, save time for clients, and support endeavours and projects that make dreams come true, he believes. “We influence people's lives, and that is a great responsibility. It’s no coincidence that our motto is: ‘Believing in you and creating opportunities for you’.”

By helping SMEs to digitalise and provide access to products and services can be using a single Jusan application. “We have built a golden digital bridge between business and retail client. I see how efficient the business-bank-client model is, where the bank lends its shoulder to both parties. The process should be as seamless as possible.”

Besides financial services, the bank holds financial awareness courses in-house via the Jusan Academy, where you will gain basic knowledge of the stock market fundamentals and investment methods. You also learn how to diversify your investment correctly, how to choose securities to buy and many other useful skills. “Our mission is to contribute to a better quality of life for our clients.”

“People should take an interest in the bank's health — not just ours, but that of any financial institution. They should ask how promptly services are delivered, and whether there are additional services to be had.

“As we have moved beyond routine banking, they should ask each ecosystem can offer. As well as the normal deposits, cards, transfers, and loans, we offer mobile service — free to our cardholders — insurance, investments, travel, entertainment, education, all accessible through our mobile app. Our clients can reliably cover most of their demands with a single tap while benefiting from the products synergy.”

He intends to expand the Jusan ecosystem to specific products to suit the specific needs. “We should focus on current client demands — not as a bank, but as an ecosystem, making equal space for online and offline services.

“We are shaping a universal banking model that includes classic banking and neo-banking

services where our client is the boss. I think that the future lies in an ecosystem-based approach, mainstream fintech, and telecoms and banking permeation. Mobile communications and banking are almost the same — the clients receive banking services through smartphones.

Kazakhstan has good internet and banking services, he is pleased to report. “The future is in a greater collaboration of the fintech and telecoms. We already have the OGO Project, enabling a telecoms service-provider with an client base to provide our services as a ‘white label’: accepting payments, transfers and deposits and granting loans. Banks go for telecoms as MVNOs (mobile virtual network operators). And this collaboration will get stronger.”

Aidossov is “at one” with Kazakhstan’s regulatory authority. It employs the latest approaches to banking legislation. “We do not feel like our sector is over- or under-regulated. I think we are in tune with the times and the proposed legislative innovations and amendments are reasonable, and fairly conservative.

“It is critical to address challenges, adapt, and arrive at solutions under relevant laws. Kazakhstani laws are quite advanced and meet all the current and future market issues. We comply with the international AML standards and are accredited by many international institutions. Some more advanced countries lack such progressive legislation.”

His inspiration comes from other experts and co-workers. “Someone inspired me, another set a task that I worked hard to get done. I admire thought-leaders and successful people from various fields beyond the banking world.”

Aidossov sees his role as “the 12th man on the football field” — and he doesn’t believe in micromanagement. “I should have all information, be involved in all processes, see the bigger picture, and be able to avoid time-wasting.” His leaderships style is about understanding products and client needs, and encouraging passionate and idea-driven employees. He also values constructive criticism. “A team should always be diversified: that is the way to solid performance.”

He knows that mistakes come with experience, and says he has made some of his own — but “not fatal, show-stopper” errors. “I became a bank CEO at quite a young age, and I have nothing to regret. So far…”

Jusan puts an emphasis on the work-life balance. “It is about the quality, or focus, of time, not its quantity. In my life, my hobby, my passion and my growth are all tied to my occupation. There was no single day that I dragged myself to work. I have always been motivated, and accept all complex and critical moments as a challenge.” i

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The English Game is in Crisis

Cricket’s image as a long and dreary game with arcane rules, played in half-empty grounds peopled by old men in Panama hats and striped blazers, is hard to shrug off. Irish playwright George Bernard Shaw once quipped that the English, not being a very spiritual people, invented cricket to give them some idea of eternity.

While there has probably never been a time when the sport has not been perceived to be in crisis, cricket in England — the country where it was invented — is facing many problems. There have been charges of institutional racism at the professional level and a lack of facilities at the grassroots; ticket sales for the county championships have fallen. And there are challenges from new formats, which the traditionalists say are “just not cricket”.

The modernisers say the game in its original format is too complicated, takes too long, is mired in elitist tradition, and basically too boring for the modern age. And a match can drag on. The longest took place in Durban in 1939, when England and South Africa batted and bowled for 12 days before agreeing a draw — because the England team needed to catch the boat home.

Such “timeless tests” no longer take place, with matches limited to five days — but they still can, and often do, end in draws. There are those who relish the five-day format, where the game unfurls slowly, imperceptibly swinging one way and then the other.

The crux of the battle between old and new forms of the game is that some see, in cricket, the class system at work. And while cricketing metaphors like being hit for six, playing a straight bat, being on the back foot, and having a good innings have seeped into everyday language, for many English people today, cricket is a closed book.

Those fighting to “save” cricket, paint a picture of ingrained narrow-mindedness, a game run by an old boys’ network doggedly resisting change, holding onto outdated traditions.

The game was exported to the Empire in the 1800s and flourished wherever the map was painted red (with the exception of Canada, which always preferred baseball). It should come

as no surprise that changes to the game’s ageold format came from former colonies. Kerry Packer, the late Australian media tycoon, shook the establishment to its core when he used his fortune to lure some of the top international players to his infamous World Series Cricket competition in 1977.

His rebellion — which resulted in bans for Australian cricketing brothers Ian and Greg Chappell, Sir Viv Richards, Michael Holding and Imran Khan — introduced the cricketing world to such novelties as coloured kit, playing under floodlights with a white ball, and much other razzmatazz. Packer’s critics called it “a circus”.

The World Series fizzled out after a few years, but the notion of changing the game had been born. The International Cricket Council (ICC) approved new formats over the following years: one-day games and limited-over variations began to attract the crowds, television, sponsorship, and advertising.

India grasped the format change with enthusiasm. In 2007, the Indian Premier League (IPL) was instituted — a glitzy Twenty20 version of the game, played under floodlights in garish uniforms by teams of international players attracted by vast wages. The IPL pulls in 200 million TV viewers for each match, and has contributed more than $6bn to the Indian economy. It has been a huge hit, with spectacular hitting, Bollywood anthems and dancing cheerleaders.

In England too, the limited-overs game has been successful in drawing crowds, while interest in the traditional county championships has continued to dwindle.

In 2021 the England and Wales Cricket Board (ECB) added yet another format in a bid to “make cricket more accessible” — The Hundred. Before its launch, market research was carried out. To widespread mockery, the ECB even approached the website Mumsnet for opinions. It turned out that a large proportion of the population didn’t understand cricket, its rules, or the complicated scoring system. The survey concluded there was little interest in the sport.

The Hundred is an entirely new form, limited to 100 balls and designed to attract a younger

audience. New city-based teams have been invented, albeit under the administration of the old county structure, with names like the Northern Superchargers, London Spirit, Birmingham Phoenix and Welsh Fire. At half-time the crowds are treated to live music and dancing.

Overs have been replaced by “sets” and reduced to five balls instead of six. Wickets, a word found to be confusing to the younger generation, are now called “outs”. And because the games are “two-headers” which include women’s teams, the term “batsman” has been replaced by “batter”.

Unsurprisingly, before a ball was bowled, the Twitter hashtag #OpposeThe100 began trending. Facebook reaction was generally critical, even abusive, though Instagram’s younger audience was more positive. The Cricketer magazine, in

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Reformers say the sport is riddled with snobbish attitudes and blighted by baffling rules; a battle withthepuristsison.
It’s Just Not Cricket — or is it?

a report entitled “Who on earth is The Hundred for?” concluded that the new audiences sought by the ECB were people “with the attention span of a concussed goldfish”.

The competition, launched in 2021, was broadcast live on the BBC and attracted healthy viewing figures. Stadium attendances were also impressive. The second edition in 2022, however, saw those viewing figures fall by 20 percent.

The legendary West Indian bowler Michael Holding has been scathing about the short forms. The IPL, he says, has financial value — but no cricketing value. “They’re dumbing-down the game more and more,” he said. Of The Hundred, he said: “Worse than Twenty20. I don’t even think about it. I’m happy to be called an old fogey.”

It remains to be seen if tampering with the format will save cricket as a major sport in England. The problem goes deeper than white balls, rock music at half time, cheerleaders and razzamatazz.

Andrew “Freddie” Flintoff, the Lancashire-born, state-school boy who rose through the ranks to captain England — and earned hero-status for winning the Ashes in a memorable 2005 test series against Australia — recently admitted: “You have to be lucky, or privileged, to play cricket.”

His recent BBC TV series, Freddie Flintoff’s Field of Dreams, in which he tried to encourage working-class lads from his native Preston to take up the sport, received much praise for its depiction of the state of cricket in England today. In the three-part series he attempted to destroy the image of cricket as “a game for posh boys”.

More starkly, Flintoff’s programme revealed a sport withering at its roots, starved of funding, and with local clubs and village teams folding for lack of members. Most state schools in England lack the facilities to teach cricket. It is estimated that since the 1980s, more than 10,000 school playing fields have been sold off for development. The bulk of those playing for the current England team were privately educated.

Whether those devising new formats are tinkering at the edges of a game that has already decomposed from within is up for debate. Such novelties as The Hundred may or may not be enough to attract new generations to the ancient game.

But to quote George Bernard Shaw once more: “After all, the wrong road always leads somewhere.” i | Capital Finance International 147

Let’s Talk about Sex: Gender Holds Secrets for Effective Treatments

Dr Antonella Santuccione Chadha, co-founder and pro-bono CEO of the Women’s Brain Project, wins the prestigious Veuve Clicquot Bold Woman AwardSwitzerland2022forprecisionmedicine.

The Women’s Brain Project (WBP) is thrilled with CEO Antonella Santuccione Chadha’s victory in the 2022 Veuve Clicquot Bold Woman Award in Switzerland for her research on Alzheimer’s disease and other neurological conditions.

The WBP is an international non-profit organisation (based in Switzerland) studying sex and gender determinants of brain and mental health to achieve precision medicine. Founded in 2016, the WBP is composed of a group of experts hailing from various disciplines, including medicine, neuroscience, psychology, pharmacology, and communications, who work together with caregivers, patients and their relatives, policymakers and other stakeholders. The WBP aims to identify how sex and gender factors impact diseases, diagnostics, drug and novel technologies development in order to achieve precision medicine for sustainable and inclusive healthcare.

The announcement was made at an awards ceremony in Zürich in September. The honour will reward her for her tireless pursuit of putting her heart, knowledge, passion and soul into the topic of sex and gender differences and precision medicine.

The Veuve Clicquot Bold Women Award she received recognises exceptional women changing lives and transforming businesses across Switzerland and beyond. “It is very humbling for me to have received this award in recognition of my professional and entrepreneurial journey over time, until today,” she said. “An incredible journey made memorable by all the co-workers, friends, supporters, and friendly opposition I ran into along the route. I have the honour and privilege of leading some of the most talented and passionate teams at the Women's Brain Project and Altoida, tonella Santuccione Chadha.

It’s a major coup for the Women’s Brain Project, which aims to develop precision medicine in order to provide accurate and long-lasting treatments for brain and mental diseases. Technology, innovation, the drive for a more precise diagnosis, improved care, and effective treatments for brain and mental diseases are all benefit, she says.

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Antonella Santuccione Chadha

The next step in the journey is the creation of a Sex and Gender Precision Research Institute. This will provide tools and support for healthcare professionals and patients to provide service for female patients around the world. “We trust that investors and supporters will join us in this very important effort,” said Chadha.

Antonella Santuccione Chadha is a medical doctor with expertise in clinical pathology, neuroscience and psychiatric disorders. She has decades of experience in preclinical research, patient treatment, clinical development, medical affairs and international regulatory frameworks.

Chadha has delivered TedX talks and is the author of scientific publications and books. She has received accolades, including the World Sustainability Award in 2020, and Woman of the Year in Switzerland 2019. She had been named as one of the top 100 Women in Business in Switzerland, and was nominated for Swiss Women for Innovatin by the University of Basel, and received the Premio Medicina Italia award.

She leads the Women’s Brain Project with the support of a dedicated team. She is the chief medical officer of Altoida, a company focused on pioneering precision neurology diagnostics.

“I would like to thank the jury for the award and the illustrious house of Veuve Clicquot for recognising and honouring women entrepreneurs

whose talent, boldness, and enterprising spirit have enabled them to successfully create impactful businesses around the world,” she said. “Congratulations to the other finalists Léa Miggiano and Sandra Tobler for their spectacular work.”


• Karina Berger, entrepreneur and former Miss Switzerland

• David Degen, entrepreneur and former footballer

• Chantal Gaemperle, Swiss & executive viceresident of Human Resources and Synergies of LVMH Group

• Martina Hingis, former tennis champion

• Madeleine von Holzen, editor-in-chief of Le Temps

• Patrizia Laeri, former host of the SRF programme Börse, and entrepreneur

• Stefan Regez, former head of consumer magazines & member of the Executive Board of Ringer Axel Springer Schweiz AG since 2019.

“Antonella Santuccione Chadha impressed us with her entrepreneurial spirit and boldness, combined with her scientific expertise, all in a field where everything remains to be built,” said the former tennis champion Martina Hingis.

The Bold Woman Award is given to the woman who:

1. Demonstrates entrepreneurial daring

2. Reinvents tradition with success

3. Maintains an ethical approach to business

Founded in 2016, the Women’s Brain Project is a unique mix of research, advocacy, policy and communications. More importantly, it's a community around the idea of sex and gender specific medicine for brain health. It's a movement that aims to bring Swiss precision to medicine.

“We have been incredibly productive, generating papers, reports, videos, interviews, textbooks, lectures, webinars, books and much more,” said Maria Teresa Ferretti, co-founder and chief scientific officer of the Women’s Brain Project. “We shaped the global discussion on gender medicine and brain health, educated lay public and peers, opened up new avenues of research in the field of novel technologies. I am incredibly proud of Antonella and this prize, if ever there was a bold woman on Earth, this is Antonella, and of the Women’s Brain Project. I can't wait for the next prizes to come!” i


Dr Antonella Santuccione Chadha is a medical doctor with expertise in clinical pathology, neuroscience and psychiatric disorders. She has decades of experience in preclinical research, patient treatment, clinical development, medical affairs and international regulatory frameworks. She has delivered TedX talks and is the author of several scientific publications and books. | Capital Finance International 149
Madeleine von Holzen, Martina Hingis, Chantal Gaemperle, Antonella Santuccione Chadha, Patrizia Laeri, Stefan Regez

Jim O’Neill: What Liz Truss Must Do

With Conservative Party members having chosen Foreign Secretary Liz Truss to succeed Boris Johnson as their leader, the United Kingdom will have its third prime minister since voters decided in June 2016 to leave the European Union. Truss has just two years and a few months to go before another general election must be held. To survive, she will need to tackle a long list of policy challenges, unify her deeply divided party, and win over more of the public. Given that her predecessor was ousted two and a half years after winning an 80-seat majority, her task will not be easy.

In courting the Conservative Party’s 180,000-odd members, Truss presented herself as a modern-day Margaret Thatcher, advocating lower individual and business taxes and less regulation – the classic center-right recipe for boosting economic growth. But since there are many more immediate issues facing the UK population, it remains to be seen whether she will, can, or even should follow through on these promises.

As many political commentators have suggested, Truss’s performance and political future will be judged on an extremely shortterm basis. Forget the usual window of the “first 100 days”; this prime minister needs to be thinking about how she can make her mark within the first month.

Truss has served in various government roles since 2010, and one attribute that stands out in her record is adaptability. After supporting Remain in the Brexit campaign, she switched sides and managed to hold on to positions in two strongly pro-Brexit cabinets, first under Theresa May and then under Johnson.

She proved her adaptability once again in the Tory leadership campaign. When asked how she would respond to this year’s energy and costof-living crisis, Truss repeatedly suggested that she was not in favor of handouts. Yet in her last interview before the vote, she indicated that she would provide a specific policy response within a week, and rumors are that she plans to announce an energy-price freeze. Not only would that policy cost the Treasury another £100 billion ($115 billion); it also happens to be what the main opposition parties have been advocating all summer.

"As many political commentators have suggested, Truss’s performance and political future will be judged on an extremely short-term basis."

An energy-price freeze clearly comes with big fiscal risks, especially if Truss still intends to cut the national insurance tax, cancel a planned corporate-tax increase, and boost defense spending to 3% of GDP. Politically, however, it is probably the smart thing to do if she wants to start out on the right foot.

Truss also demonstrated flexibility when she was quizzed in her final campaign interview about interest rates and the Bank of England. After berating the BOE throughout the campaign and implying that she would push for a change to its mandate, she offered a much more conventional answer, suggesting that it wasn’t her job to comment on the right level of interest rates (that being the preserve of the independent central bank). On the eve of her party leadership victory, she sounded much more prime ministerial.

But if Truss wants the broader electorate to view her as a capable leader deserving of reelection in late 2024 (or earlier), she will have to do more than simply remain adaptable. She will need to embrace policy positions backed by rational analysis, and that will almost certainly require her to abandon her narrow campaign program of lower taxes and deregulation.

Moreover, she cannot secure a majority for her party in a general election without winning some seats in the so-called Red Wall (traditionally Labourleaning) districts of the Midlands and Northern England and Wales. These voters will have very different policy preferences than the small cohort of committed Tories who put her in charge. Many doubtless would support more regulation and higher taxes to improve public services.

If I were Truss, I would remain open-minded on these issues. She can still be in favor of lower taxes and less regulation; but she should not let these preferences preclude necessary action on more immediate problems like the cost-ofliving crisis. If she is honest about it, Tory voters should understand that the circumstances forced her hand.

Of course, if Truss wants to address the country’s most pressing needs, rather than simply pandering to voters, she would focus squarely on boosting productivity, especially in the many areas where it has been persistently weak. If she could manage that, she could end up serving longer than even Thatcher or Tony Blair did.

Perhaps that is wishful thinking. But since she has only just begun, there is still hope. In today’s increasingly uncertain world, Truss’s demonstrated flexibility in the face of big economic and geopolitical developments may turn out to be just what the country needs. i


Jim O’Neill, a former chairman of Goldman Sachs Asset Management and a former UK treasury minister, is a member of the Pan-European Commission on Health and Sustainable Development.

Final Thought 150 | Capital Finance International
"But if Truss wants the broader electorate to view her as a capable leader deserving of re-election in late 2024 (or earlier), she will have to do more than simply remain adaptable."

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Autumn 2022 Issue | Capital Finance International 151
A BRIEF HISTORY OF TIME GETS A NEW CHAPTER “I have wondered about time all my life.” - Professor Stephen Hawking