CFI.co Spring 2023

Giannis Antetokounmpo

The new Maserati Grecale Trofeo.

Everyday Exceptional

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

WAT C H M A K I N G O N C E A G A I N F I N D S BRITISH SHORES 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 A study from Science magazine has offered a quantitative look at the decades-long disconnect between the fossil fuel industry’s “private understanding of climate science and its public climate denial”.

The largest trade association for the US oil and gas industry, the American Petroleum Institute, has known about the threats posed by anthropogenic (human-caused) global warming since the 1950s; the coal industry has been aware since the 1960s. Investigative reports and leaked internal documents show that ExxonMobil has sowed doubts and fought legislation against predicted climate catastrophe since the 1970s. The Total oil company and automotive firms GM and Ford have known of the risks since at least the ‘70s, Shell Oil since the ‘80s.

Exxon’s own predictions through to the 1990s aligned with observable climate changes.

Documents show that company research ran parallel to, or predated, the consensus of academic and government scientists. Rather than publicise the peer-reviewed models predicting global warming, the company chose to cast doubt on them. Instead of leading the vanguard to develop renewable energy, it doubled down.

First Thoughts

Harvard researchers Geoffrey Supran and Naomi Oreskes were instrumental in bringing those documents to light. “We now have the smoking gun showing that they accurately predicted warming years before they started attacking the science,” Supran said. “These graphs confirm the complicity of what Exxon knew, and how they misled.

“They could have endorsed their science rather than deny it. It would have been a much harder case to deny it if the king of big oil was backing the science, rather than attacking it.”

ExxonMobil remained silent until the evidence began to threaten its image and operations.

Then it began a campaign to discredit the research and block legislation using “dark 8

money” and political lobbying. Internal documents leaked in 2015 have sparked dozens of lawsuits for “deceptive marketing, misleading shareholders and culpability for climate damages”. Supran and Oreskes provided expert input in some of those cases, but the company has so far managed to dodge responsibility. In 2019, it was subpoenaed to appear before an EU parliament hearing.

It ignored the summons — but its lobbying access credentials were not revoked. Other hearings across the country amounted to little more than complaints about efforts to suppress the truth.

In 2021, undercover climate activists posing as head-hunters secretly recorded former ExxonMobil senior lobbyist Keith McCoy bragging about his cosy relationships with congresspeople “across the aisle” and contributions to third-party shadow organisations exploited to fight climate action legislation. “There's nothing illegal about that,” he insisted. “We were looking out for our investments. We were looking out for our shareholders.”

Benjamin Franta, founding head of the Climate Litigation Lab and a senior research fellow at the University of Oxford Sustainable Law Programme, hopes the Science exposé will prove useful for the future of litigation, public policy, and corporate accountability.

“It reinforces the notion that corporate malfeasance and political obstruction — not a lack of scientific knowledge — have been the main roadblocks to solving climate change,” he said. “And, of course, it implies the need to remove those roadblocks to achieve the action we urgently need today.”

ExxonMobil maintains that it has done no wrong, citing the failure of past litigation attempts as proof of its innocence and blaming detractors for “cherry-picking internal documents to cast the industry in a poor light”.

All of this begs the question: when will big polluters be held accountable for their actions?

First Thoughts

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Correspondence

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As a CFI.co subscriber for over 10 years, I’m looking forward to taking delivery of the Spring issue of your magazine.

But first, some burning questions: Will it be produced by an AI platform of the type we have all been playing around with over the past couple of months? Have you fired all your warm-bodied writers who have informed and entertained me over the years?

I hope not — but am aware of the risks (and possibilities) for the sector. I nowadays study all articles for any obvious errors — AI is by no means a perfect resource — as well as evidence of a lack of knowledge of news prior to September 2021, in the case of Chat GPT. The editorial ecosphere has been warned...

Looking at positives and potentials, perhaps collaboration between AI and human writers is the best path ahead. At least in the short term, because the bots are not going to need us forever. But there will always be a place for human warmth and skill in writing projects. Or so I hope.

Print this letter if you are not a robot.

JAMES PRIORY (Wellington, New Zealand) What ever happened to “he, she, it”? In an increasingly crazy world, pronouns have become not just “a thing”, but yet another point of contention, confusion, confrontation, and bigotry.

Bigotry, I must stress, on both sides of that peculiar little fence — I almost called it “man-made”, which would have sparked yet another semi-public squabble. Social media, as always, is driving this silly agenda; I wondered where CFI.co — part of the “regular”, or “real” media, which used to collectively be known as the Press — stands on this.

So far, my eyes have not been blighted by any theythem pronouns sneaking into your venerable organ, and I hope that it stays that way. Little as I personally care for Richard Dawkins and his pompous ideas, I find it hard to argue against his recent observation that “sex is pretty damn binary”.

For all I know, the CFI.co staff are cross-dressers, or identify as teddy bears or rattlesnakes — and I care not a jot. As long as they keep it to themselves, and don’t insist on changing the English language.

TERRY THOMAS (Ipswich, UK)

The IFC’s Alfonso Garcia Mora was quoted in your Winter issue as saying that to mitigate the harmful effects of climate change “requires the mobilisation of trillions of Dollars”.

While Mr Mora may instinctively dive head-first into the financial solutions suggestions box, I don’t know that the ordinary person on the street would agree.

“The money exists and is mostly in the hands of institutional investors,” Mora says in your report (On the Frontlines of Climate Change and War). Yes, indeed — and those same hands that clutch the requisite trillions are the ones destroying the planet with greed, aided and abetted by technology and shiny global corporate campaigns.

For all the talk of sustainability, people and planet, and other face-saving platitudes blurted out by PR departments, big finance — and big oil, pretty much big anything — is part of the problem, not the solution.

Common sense adjustments to our expectations, demands, needs and consumption can play a part in reversing worrying climate events. Greenwashing, carbon credits and vague promises of tree-planting won’t cut it.

DENISE O’BRIEN (Galway, Ireland)

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Spring 2023 Issue

Thank you for the segment on California’s female tech founders. As a woman teaching high-school computer sciences, I applaud CFI.co for putting the spotlight on some of the women who inspire girls everywhere.

The start-up scene can often seem like a boys club, but if you dig just a little you’ll find lots of super-smart women quietly challenging the status quo — and driving the tech revolution.

I also thank your editors / contributors for raising awareness about the importance of funding STEM education throughout the US. These courses help to root students in scientific reasoning and critical thinking, and train the next generation of problem-solvers and innovators.

Unfortunately, women frequently lack an equal place at this table. They hold perhaps 30 percent of tech-related jobs — and less than 11 percent of leadership roles. They often have a harder time securing investment funds than their male counterparts. Having said this, the tech industry fares better on the gender pay-gap than many sectors.

I hope more girls and young women get excited about STEM education. It will give them marketable employment skills, and can launch them into positions from which solutions to real-world problems can be delivered.

MAVIS THOMPSON (Boston, Massachusetts, USA) Joseph E Stiglitz’s article on the rise of fascism (Winter issue) made for informative, if infuriating, reading. It showed how easily global economics can be hijacked for political ends — and how the most vulnerable sections of the population are so often landed with the heaviest burden.

Stiglitz succinctly summarised the US Republican party as a personality cult that attacks the media, as well as science and education, while spreading misinformation and seeding as much mistrust as possible. Polarisation and gridlock have hampered governments tackling the spread of Covid-19, shoring-up the supply chain, and trying to keep inflation in check. Your writer didn’t even touch on the burgeoning climate crisis.

If an optimist sees the glass as one-eighth full, a realist might call it bone-dry. Pessimists, meanwhile, are looking at a shattered glass.

NAME WITHHELD (Denver, USA)

Your Africa section report (Winter issue) was right to congratulate Casablanca on its transformation into an international player. The financial centre of this proud Moroccan city is ranked more highly than Johannesburg, and its stock exchange is bigger than those of Egypt and Nairobi.

The reforms initiated in 2010 by King Mohammed VI were visionary, and have been extraordinarily productive. M6, as he is affectionately known by his people, wanted to create a financial gateway for Africa — and that’s precisely what we now have in Casablanca.

Morocco’s progress is not limited to that one city; it can be witnessed, to varying degrees, throughout the country. My knowledge comes largely from frequent R&R visits to Tangiers over the decades.

This was always an exciting, welcoming, and vibrant destination — and its development over the past 12 years has sometimes been overwhelming (in a mostly positive sense).

The city is developing swiftly and intelligently, and a visitor is immediately aware that this is very much a destination on the move.

Visitors to the once sleepy port are still made very welcome, but they can hardly fail to notice the advances and achievements Tangiers has made.

My last trip coincided with the popular and atmospheric annual music festival, Tanjazz, that was put on hold during the pandemic.

I’m so glad it’s back.

DAVID MARTINEZ (Gibraltar)

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Chairman Lord JD Waverley

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Editorial Team

COVER STORIES

Sarah Worthington George Kingsley Tony Lennox Brendan Filipovski John Marinus Ellen Langford Helen Lynn Stone Naomi Snelling Wim Romeijn

IBM Thought Leadership OECD

Sustainable Development & Climate Change

DISCUSSION PAPER

Transparency Makes the Invisible (14 – Hand 15) Visible Again, And Inclusive

by Paolo Sironi

Kazakhstan & Uzbekistan

Columnists

Otaviano Canuto Lord Waverley

Lord Waverley

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

IBM

Production Director Jackie Chapman

Distribution Manager William Adam

Subscriptions Maggie Arts

Commercial Director John Mann

Director, Operations Marten Mark

Publisher Anthony Michael

Creating Digital Advantage for Uncertain Times

INSTITUTIONAL INVESTING FOR THE SDGS (30 – 32)

Cover Story

Seldom Down, Never Out (38 – 42)

Accenture

Green is the New Gold

(112 – 113) A Joint Discussion Paper from MSCI and the OECD

Meggin Thwing Eastman, Paul Horrocks, Tansher Singh, Neeraj Kumar 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: info@cfi.co W: www.cfi.co

December 2018

Kellogg Insight China’s Economy (138 – 144)

UNCDF Secrets to Easing Funding Process

Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers www.magprint.co.uk

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(152 – 153)

CFI.co | Capital Finance International

Spring 2023 Issue

FULL CONTENTS 14 – 55

As World Economies Converge OECD

María del Pilar Garrido Gonzalo

Lord Waverley

Otaviano Canuto

Paolo Sironi

IBM

Nouriel Roubini

Mohamed A El-Erian

Wim Romeijn

Tony Lennox

Naomi Snelling

Joseph E Stiglitz

56 – 65

Spring Special: Digital Banking and Big Data

66 – 77

Europe Brendan Filipovski

78 – 91

Heather Smith

Kitty Wenham

Lagos Business School

Professor Chris Ogbechie

GIPC

Yofi Grant

Tunis International Bank

Banque Internationale Arabe de Tunisie

Verdant Capital

Edmund Higgenbottam

CFI.co Awards Rewarding Global Excellence

92 – 103

108 – 117

Africa

Middle East Afghanistan International Bank

Joseph Carasso Jr

Abu Dhabi Global Market Authority

Dhaher Bin Dhaher Al Mheiri

Accenture

Bashar Kilani

114 – 123

Latin America CAIXA

124 – 133

Maria Rita Serrano

Simon Wilcox

AccountAbility

Sunil (Sunny) A. Misser

North America Prospect Capital Management Alimentation Couche-Tard

134 – 153

154

Asia Pacific

New World Development

Kellogg Insight

Laura Pavin

Nancy Qian

Ben Jones

David Dollar

Titus Drummond

James Caan

Women’s Brain Project

Anna Dé

UNCDF

Final Thought CFI.co | Capital Finance International

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> OECD:

Sustainable Development and Climate Change Require More than Just Money

By María del Pilar Garrido Gonzalo Director for Development Co-operation, OECD

Blended finance could hold the key to overcoming major world challenges.

F

inancing the UN’s Sustainable Development Goals and climate objectives requires huge financial investment — in an increasingly urgent timeframe.

Seven years remain to meet the 2030 Agenda.

The pressure to act has resulted in calls from the international community to reform global financing for sustainable development architecture and multilateral development banks (MDBs).

Those changed would include the Bridgetown Agenda launched by Mia Mottley, Prime Minister of Barbados, as well as the G20 review of MDB capital adequacy frameworks and G7+ proposal to reform the World Bank Group.

US Treasury Secretary Janet Yellen has emphasised the need to mobilise finance more effectively. Governments alone will not be able to bear the burden, and private finance has a crucial role to play.

Efforts to unlock private investments for sustainable development in developing counties — with the support of blended finance — are not on-pace to meet global ambitions. This is despite the “push-effect” of institutional inclusion in ESG-related and SDG-aligned investments.

Blended finance can provide financial returns to investors, and expand resources for developing countries. It complements domestic investment in those countries, and official development assistance (ODA) inflows. It can help to close the SDG- and climate-financing gaps — and there is scope to achieve more.

Official development assistance (ODA) from the OECD Development Assistance Committee (DAC) members amounted to some $186bn in 2021.

Between 2012 and 2020, $300bn in private financing was mobilised by official development finance interventions, peaking at just over $51bn in the final year.

The recent annual conference of the OECD DAC Community of Practice on Private Finance for Sustainable Development (CoP-PF4SD) brought together around 800 policymakers and experts to discuss how to achieve scale and impact when mobilising private finance for the SDGs. 14

"Efforts to unlock private investments for sustainable development in developing counties — with the support of blended finance — are not onpace to meet global ambitions."

Blended finance can boost limited public funds by investing in proven financial instruments such as credit and political risk-guarantees or first-loss exposures. This changes the riskreturn relationship of public sector projects and transactions in developing countries to match the private sector’s appetite — and lies at the heart of the blended finance concept.

Development finance instruments applied at market rates can improve viability and boost investor confidence, while concessional development finance reduces the weighted average cost of capital. It works towards delivering financial sustainability.

The conference distilled three key points: UNLOCKING PRIVATE FINANCE REQUIRES MORE THAN MONEY One of the key bottlenecks is a dearth of bankable projects in developing countries. “Bankable” means ready-for-financial-close projects with predictable and secure long-term cash-flows.

Investment into pipeline development is needed — as is capacity development and a thorough financial and operational risks-and-gaps analysis.

An understanding of good practice in terms of instruments, projects and programmes — including peer learning — is important for public sector actors aiming to unlock private finance.

It is equally important to facilitate the correct institutional set-up to enable mobilisation at scale, and bring donors together for collaborative approaches to mobilisation and impact.

A unified approach is crucial to scaling finance. In the multi-stakeholder concept, blended finance actors can include development ministries or ministries of foreign affairs and the aid agencies that typically administer the ODA budget.

Ministries of finance or treasuries typically hold decision-making power on financial guarantees CFI.co | Capital Finance International

and shareholder positions on the boards of MDBs. Stronger ties between public and private sector actors improve mutual understanding of each other’s needs, investment preferences, and value added.

The OECD DAC Blended Finance Principles put effective partnering centre stage, and realities require follow-up.

INSTITUTIO INVESTING SDGS

INNOVATION AND REPLICATION MAY NOT LEAD TO SCALE Tailoring blended finance to local contexts and conditions is one of the OECD principles. Tailormade transactions ensure that players can come together with their various comparative advantages. “New” and “first time” deal structures must be followed by implementation of proven structures at scale to capitalise on the efforts. While development actors and policymakers tend to focus on innovative approaches, mainstream private sector financial actors value track records and comprehensive A Joint Discussion Paper from M data.

The CoP-PF4SD conference foundEastman, that smaller,Paul Horroc Meggin Thwing repetitive, and similarly structured projects can be conducive to scale. But excessive replication DecemberIf 2018 can foster fragmentation.

10 development actors were to set up a blended finance facility of $10m each, this would create 10 times the transaction cost as nine development actors backing one established facility of $100m.

From a private sector view, a vast offer of smaller scale blending opportunities can be hard to digest and involves high transaction costs. The 2020 edition of the OECD Blended Finance Funds and Facilities Survey captures 198 existing vehicles.

The IFC Amundi Planet Emerging Green One (EGO) fund, invests in green bond issuances in developing countries. As a collective investment vehicle, it pools official and commercial finance as “anchor investments”, and pension funds, insurance companies and asset managers as senior investors.

The fund closed at $1.42bn in 2018, with the aim of deploying $2bn over the seven years of operation. Unlocking commercial capital will require a certain degree of transparency.

USE ESTABLISHED INSTRUMENTS AND PRACTICES Recent market developments put a strong

Spring 2023 Issue

Author: María del Pilar Garrido Gonzalo

emphasis on “portfolio approaches” to mobilise commercial financiers and overcome ticketsize and diversification challenges. These include credit-risk sharing mechanisms such as securitisation as well as green, social, sustainability and sustainability-linked (GSSS) bonds.

With regards to the former, development actors can leverage the vast outreach of local commercial lenders by absorbing part of their credit risks via syndications or guarantees. This can enable them to do more (for example, loans to micro-SMEs or young entrepreneurs). In the burgeoning GSSS bond market, development actors can fuel the uptake in ODA-eligible countries through targeted actions in policy areas such as market infrastructure, support of issuers, anchor investments, impact reporting or guarantees.

Development finance is not being reinvented by the use of guarantees or technical assistance.

Securitisation and GSSS bonds can be seminal in mobilising and motivating investors.

The international community needs to act if global challenges are to be overcome; reform proposals are required to get there and the Spring IMF/WB Meetings and upcoming Macron summit in June are events that could and should propel action. The increased use of blended finance instruments has a contribution to make. i

as the Deputy Minister of Planning an Economic Policy, the Technical Secretariat of the 2030 Agenda, Chief of Staff and Senior Advisor.

Prior to this, she worked for 13 years at the country level on locally led sustainable development cooperation projects in Costa Rica, Central America and the Caribbean, and the Latin American region for UNDP, the European Union and the Diputació de Barcelona.

ABOUT THE AUTHOR María del Pilar Garrido Gonzalo is the OECD Director for Development Co-operation.

She has also worked for NGOs on multistakeholder partnerships for sustainable development, particularly engaging with the private sector and civil society organisations.

Before joining the Organisation, between May 2018 and May 2022, Garrido was the Minister of Planning and Economic Policy in Costa Rica, responsible for the areas of climate-resilient development, sustainable public investment, public sector reform, and development cooperation policy. Also, in office, she has served

Garrido is both a Spanish and a Costa Rican national, holds a BA in Political Science from the University of Costa Rica, a MSc in Economics from Trinity College and a MA in Political Science with an emphasis on democratic governance and public policy from University of Costa Rica.

CFI.co | Capital Finance International

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> Lord Waverley:

Central Asian Region Revealed in All its Glory, Mystery, and History Lord Waverley negotiated Memoranda of Understanding with each of the five parliaments of Central Asia, and was the architect of the Aktau Declaration on Joint Actions. In this first segment of a two-part series, he presents a unique insight into the region...

CFI.co Columnist

O

ne is acutely aware as to how much can be achieved by first-hand engagement in a region of crucial importance that is full of potential but had once been closed for access.

"We should be acting now to help secure their futures by understanding the needs amid the powerful spheres of influence exerted by adjacent nations."

Sir Halford Mackinder, the British political geographer of early 20th Century, once profiled this part of Asia in his land-based theory of world power as “Heartland”, the strategic centre of the “World Island”, and that whoever controlled it controlled the world.

be viewed as reliable partners and rational actors on key issues. They remain favourably inclined towards western countries and keen to partner with social, economic, and political cultures.

PART ONE: KAZAKHSTAN AND UZBEKISTAN Long before the advent of oil and gas as a prize, mystery and a heightened realisation of its impending post-independence importance first drew me to Central Asia. The region has a mystical resonance in the imagination, whether through the writings of the orientalists or the biographers of the Great Game. The colonial withdrawal and Soviet takeover of the region led to a steady decline in what was once a tradition of scholarship and trade, as access to the region became restricted.

We should be acting now to help secure their futures by understanding the needs amid the powerful spheres of influence exerted by adjacent nations. It is incumbent upon us to listen intelligently, to welcome, and to benefit from these new voices at the table of nations.

The need for a balanced foreign policy that accommodates this geopolitical approach cannot be overlooked. Afghanistan is a part of the Central Asian nexus and has natural regional affinities.

Countries there understand the various ethnic cultures, and essential economic development will filter from the north.

The dissolution of the Soviet Union and liberalisation in China and Mongolia removed barriers to access to central and inner Asia, but the strategic importance and the global business and academic community are only now beginning to understand Central Asia. I wish to elevate the profile of a region that has recently been substantially neglected in foreign policy terms, but which has become greatly relevant to the global political stage and regional stability.

The region possesses abundant agricultural, mineral and energy resources, with great potential for renewable energy, including hydropower and solar. It contains all the necessary ingredients for industrial growth and has a widely educated workforce. Scientific potential is enormous, bearing witness to considerable technological sophistication.

The prospective importance can scarcely be overstated, with interests such as counterterrorism, energy security, democratisation, and the rule of law essential.

Thanks to an innovative pipeline grid, a new golden triangle of trans-Caspian oil and gas resources is emerging that will transform the regional economic potential. Central Asian countries are characterised by predominantly moderate and secular governments which should 16

However, industries such as cotton monoculture require vision and assistance in the continued transition from a command economy to market mechanisms that create jobs, exports, and opportunities. It is predicted that these countries will experience strong future economic expansion with economic engines benefitting from oil and gas field production in the years ahead, and position the region for solid growth, development, and diversification. This will be fuelled by high global commodity prices and stronger domestic demand.

CFI.co | Capital Finance International

Kazakhstan: Astana

Tashkent: Amir Temur Monument

Spring 2023 Issue

The hydrocarbons sector is the backbone of the larger economies, but structural challenges undermine the full development of the natural resources sector. The need for local technical skills and the limited financial capacity to develop the energy sector make the search for foreign investors a priority, while corruption remains a concern for some foreign investors.

Regional interests should not fall into the trap of a single-commodity economy. There are real opportunities in the form of energy co-operation beyond hydrocarbons, and the potential for sustainable partnerships for outside interests is immense.

The priorities of advancing dialogue on European security through the Corfu process launched to take security dialogue forward with political, military, and economic dimensions, go together with a theme of promoting inter-ethnic and religious tolerance. The Shanghai Cooperation Organisation, comprising most of Central Asia, has achieved considerable results in developing international contacts, as well as in implementing initiatives to strengthen security and stability to combat terrorism, extremism, and separatism.

Management of the key pipelines that serve as a gateway for Central Asia are evolving into a dynamic Eurasian artery of economic growth and development. Transport corridors will link Central Asian countries with wider regional continental trade and transport networks, further strengthen the sovereignty of the regional states, and facilitate the opening of the political and economic systems.

For all these reasons and more, it is essential to push relationships forward on all fronts, and seek to balance the interests of the US and China in the multi-vector policies of the Central Asian states.

This would strengthen the parallel-to-trade objectives in advocating the benefits of good governance, transparency and accountability, freedom of the press and human rights.

Engagement is essential with the Central Asia states that have completed the transition stage of their independence. Thirty years on, it is a new game — and a positive one — in a region that is of priority strategic interest.

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CFI.co Columnist

The fragile, nascent political systems should be encouraged towards the growth of democratic and anti-authoritarian regimes. This will succeed if a long-term view of reform is taken. Democracy is an evolutionary process and should be seen as a partner, not a preacher. The democratisation of state power and governance, ensuring freedom of choice and the development of electoral legislation, reforming the judicial and legal systems, and developing civil society — these are all areas in which there can be useful engagement in the spirit of partnership and cooperation.

Inauguration: President Kassym-Jomart Tokayev

Kazakhstan This new country is an old nation that has been shaped by a particularly dramatic set of circumstances. There have been successive waves of invasion, immigration and migration along the Great Silk Road, which gave birth to the mix of cultures and traditions which make the country what it is today. It is the ninth-largest country in the world, with an area of 2,724,900 square kilometres, and is the largest landlocked country in Europe and Asia.

CFI.co Columnist

The country is best known historically as a crossroads of people and cultures. Over the centuries, the Kazakh steppe saw some of the world’s greatest conquerors — Alexander the Great, Timur, and Genghis Khan — and was neighbour to the Safavid Empire of Persia, the Mughal Empire of India, and the many great Chinese dynasties while forming part of the Mongol, the Timurid, and Russian empires.

The Kazakh khanates emerged in the centuries following the fall of the Mongol Empire, as the people of Central Asia consolidated their land and created the outlines of the first Kazakh nation.

The Kazakh Khanate, located roughly on the territory of present-day Kazakhstan, was founded

by Sultans Kerey Khan and Zhanibek in 1465. It was the first sovereign state of the Kazakhs.

The formation of the independent Kazakh Khanate began when several tribes, under the rule of Sultans Kerey and Zhanibek, departed from the Khanate of Abilkhaiyr Khan. The sultans led their people toward Monğolistan, eventually settling in the area between rivers Chu and Talas in south-eastern modern Kazakhstan, and founded an independent state.

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Between the 17th and 19th Centuries, the Kazakh people fought numerous wars against Chinese and Dzungar tribal confederations, as well as Russian expansion, but survived intact. Kazakhstan was fully incorporated into the Russian Empire in late 19th Century and became the second-largest republic of the Soviet Union of the 20th Century.

On October 25, 1990, Kazakhstan declared itself a sovereign state, and on December 16, 1991, it proclaimed full independence.

system. The Head of State’s initiative to limit the presidency to a single seven-year term, without the right to re-election, provides a solid foundation for a stable long-term policy course, and guarantees the permanence of the democratic reforms. This is an initiative without precedent, aimed at the long-term stabilisation of the political system, eliminating the risks of power monopolisation, and strengthening the basic principles of democracy.

POLITICAL BACKGROUND The Republic of Kazakhstan became a sovereign state in a new era in 1991. The country's independence was first acknowledged by the US, followed by China and the UK. At the dawn of its independence, Kazakhstan embarked on a series of reforms aimed at shifting the country’s economy from a centrally planned system to a modern free market model, and changing its oneparty government to a multi-party democratic system.

The president has announced a new economic policy, the development of a real economy, a decrease in the government’s stake in the country’s GDP, a reset of the public administration system, and implementation of rule-of-law principles. The main objective is to ensure inclusive growth and wellbeing for all citizens. The most important principles of this policy are the promotion of entrepreneurship, competition, and the fair distribution of wealth.

Over the ensuing 31 years, Kazakhstan has established diplomatic relations with 186 countries and transformed itself into one of the dynamically developing economies of Eurasia, with a respected diplomatic voice on the world stage.

Today, Kazakhstan is entering a new stage of development. President Kassym-Jomart Tokayev launched a process of political transformation to build a just and fair nation. The primary aim is to make the justice central to state policy, to improve the welfare of the people and respond to their needs.

This country is gradually implementing largescale domestic political and socio-economic reforms aimed at a more sustainable and diversified economy, a more equitable society, and a competitive and resilient political CFI.co | Capital Finance International

TRADE AND INVESTMENT Kazakhstan has a rich past — and great opportunities to become one of the world’s most competitive economies. Trade plays an important role, and the country is well-positioned to benefit from the growing markets of China, Europe, and Central Asia. Its history echoes the epic silk route of centuries past, and its present with two-way rail and road traffic between China and Europe.

Kazakhstan has built on its continued success and religious, social, and political harmony to become a magnet for large investors — and a locus of further innovation. Its private sector foreign direct investment (FDI) has amounted to over $400bn since independence, and has played a central role in the country’s rapid development. But long-term foreign investors’ interest can be sustained only by the willingness to create a welcoming, supportive, and engaging business environment.

Spring 2023 Issue

Tian Shan mountain range

Ancient rock carvings

Kazakhstan has worked hard to create such a climate, not only for its own business sector, but also for the increasing number of foreign investors. Social stability is key, as is the evolution of legal frameworks to bolster investor confidence.

Amid a pandemic-induced slowdown of economic activity, the Kazakh government has taken concerted efforts to reassure domestic and foreign investors that all obligations and guarantees of the state will be fulfilled.

A strong, world-class financial sector is being developed. The Astana International Financial Centre (AIFC), an independent court based on English law, has been created. It hosts more than 1,700 companies from 71 countries, providing an international common-law framework, an independent court and arbitration centre, tax benefits, and a special labour regime.

With the second-largest reserves in Eurasia, Kazakhstan is a reliable supplier of oil and gas, a vital ally in the current global energy crisis. The country accounts for 45 percent of the global uranium market output, and is a competitive and reliable long-term supplier of nuclear fuel for powerplants around the world.

CFI.co | Capital Finance International

Opportunities in green energy sector, with the fostering of economic development and the advancing of energy transition, is of crucial importance for Kazakhstan as it sets out to meet a goal of achieving carbon-neutrality by 2060.

The government of Kazakhstan continues to work to further improve the investment climate by ensuring rule-of-law, safeguards, and protection of intellectual property rights. Its key objective is to maintain stability and predictability for foreign investors.

FOREIGN POLICY Since gaining independence in 1991, Kazakhstan has consistently strengthened its position in the international arena as a peaceloving and open-minded nation — and a reliable partner in global and regional affairs.

The country views itself as a middle-ranking power with a multi-vector foreign policy that makes a significant contribution to the formation and implementation of the global and regional agenda in security, co-operation, and development.

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A multi-level system of state support for investors has been established, including industry benefits and an investment environment of exemptions from taxes and customs duties, and land grants.

A strategic investment agreement has been introduced to provide special conditions for investment projects worth more than $50m, including the stability of legislation for 25 years, the reimbursement of capital infrastructure costs, the possibility of extending preferences under the special economic zones, and other customised measures.

Kazakhstan possesses the world’s sixth-largest natural mineral reserves deposits, and ranks a global 10th for total mineral production (excluding oil and gas) with deposits of around 60 precious and non-ferrous metals. The government has designed incentives such on tax, customs preferences, provision of land plots and basic infrastructure to support investors.

Wind farm in Kazakhstan

In 1992, with the goal to promote peace and security in the entire Asian region, Kazakhstan initiated the Conference on Interaction and Confidence Building Measures in Asia (CICA).

This pan-continental security forum implements confidence-building measures, and forges and enhances political dialogue and interaction to promote peace and stability in the 28 member states.

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Kazakhstan was once home to the Soviet Union’s Semipalatinsk testing site, where some 450 nuclear devices were tested between 1949 and 1989 — the equivalent of 20,000 Hiroshima bombs. After the collapse of the Soviet Union, Kazakhstan inherited the fourth-largest nuclear arsenal in the world, but closed Semipalatinsk and dismantled the nuclear arsenal 30 years ago.

It has clearly indicated that CICA, as a responsible community of nations, can break new ground on national safety, helping economies to mature, creating jobs, and embracing partnerships for the future.

Convinced that spiritual and religious leaders play a significant role in fostering inter-ethnic and inter-religious harmony and respect, Kazakhstan convened (and has since hosted) seven high-level meetings of the triennial Congress of the Leaders of World and Traditional Religions since 2003.

The most recent was held last September, with the participation of Pope Francis. The congress provides a platform for dialogue between religious and political leaders for the sake of peace.

Based on the reach and success of the country’s multi-vector foreign policy, Kazakhstan became the first Central Asian country elected to serve as a non-permanent member of the United Nations Security Council from 2017-2018. In 2021, it was elected a member of the United Nations Human Rights Council (2022-2024) of the UN General Assembly in New York. In 2015, 20

Kazakhstan signed the Enhanced Partnership and Co-operation Agreement (EPCA) with the EU, which governs trade and economic relations. After ratification by all individual member states, the agreement entered into force on March 1, 2020.

Kazakhstan has been a staunch proponent of multilateralism, which it values for forging the international community’s collective vision and approach to solving global and regional problems based on multilateral consultations and agreements. The country has long been recognised the inextricable nexus between security and development at national, regional, and global levels — and it has called on the international community to develop integrated approaches to cross-border security, conflict resolution, and peace-building efforts in postconflict countries.

CULTURAL AND TOURISM Kazakhstan’s centuries-old history and multifaceted cultural heritage form essential parts of modern life in the country.

• Horsemanship. The domestication of horses, and the development of equestrian culture, originated in the territory of modern Kazakhstan.

Ancestors of the Kazakhs create protective armour for horse and rider, and invented riding aids such as stirrups.

• Golden Man. In 1969, “Kazakhstan’s Tutankhamun” was discovered near the town of Issyk. The skilful craftsmanship of the golden warrior garment revealed a rich mythology, reflecting the power and aesthetics of the Steppe civilisation.

• The Silk Road. The unique location of Kazakhstan in the heart of Eurasia has contributed to the emergence of transit corridors between various regions and civilisations. These CFI.co | Capital Finance International

routes were transformed into the Silk Road system, a transcontinental network of trade and cultural ties across the length and breadth of Greater Eurasia.

• Apples and tulips. The foothills of the Tien Shan Mountain range are the historical homeland of apples and tulips. The “original” apple tree — the Sievers tree — originates from Kazakhstan, and around the world there are now more than 3,000 varieties of cultivated tulips, most of which are descendants of ancient Kazakh flowers.

Kazakhstan is home to over 27,000 ancient monuments, including the Golden Warrior, a Saka prince clad in gold armour, and five UNESCO World Heritage sites. Three are cultural sites — the Mausoleum of Khoja Ahmed Yasawi, Tamgaly, home to 5,000 ancient petroglyphs, and the Routes Network of Chang’an-Tianshan Silk Road Corridor — and two natural sites, the Saryarka plains (world-famous for birdwatching), and the Western Tien-Shan.

Ecological tourism now plays an integral part of adventure holidays, offering a wide variety of natural zones and climatic conditions. Tourists in Kazakhstan are able to fully experience all four seasons. There are tours in around Almaty and in east and south Kazakhstan, with welcoming climates and the presence of majestic mountain ranges and rivers. Local culture flourishes with Kazakhstan’s traditional drink of kumis — fermented mare’s milk, once believed to be a cure for everything from the common cold to tuberculosis — while Kazakhs living on the steppes drink shubat, fermented camel’s milk.

Kazakhstan is rich in natural attractions. In the vast expanses of the Great Steppe are national parks, nature- and game reserves, and 79 natural monuments — all of which occupy just nine percent of the republic’s total area.

Spring 2023 Issue

Uzbekistan Humans lived in what is now Uzbekistan as early as the Palaeolithic Period (or Old Stone Age), 55,000 to 70,000 years ago. The territory of present-day Uzbekistan stemmed from an advantageous location on the ancient Great Silk Road. It became a key international junction for trade and cultural exchange, and throughout history, the people of this area have maintained relations with many regions in South Asia, the Middle East, the Mediterranean, and Eastern Europe.

It was one of the epicentres of the Islamic Golden Age — a period of flourishing enlightenment, science, culture, and philosophy which predates the Western Renaissance. Many of the philosophers and scientists of the time were born where modern Uzbekistan lies today. Avicenna (Abu Ali Ibn Sina), for example, was the author of some of the most famous books on medicine, which for nearly 500 years were part of the curriculum in leading European universities.

Amir Timur, more commonly known as Tamerlane, ruler of the Timurid Empire stretching from China to Turkey with its capital in Samarkand, established ties across Europe, seeking friendly relations, and expanding trade.

Records of his correspondence with leaders in France and Spain — at one stage, he appealed to Charles VI of France to send more traders to Asia — evidenced the importance he placed on economic ties. In 1402, King Henry IV of England despatched a letter (archived at the British Library) to Tamerlane, accepting Amir’s offer of free trade between England and Timur’s empire. He was a formidable general and an enlightened ruler, whose policies gave further rise to multiculturalism and free trade.

Khiva, Uzbekistan: Muhammad ibn Musa al-Khorazmi

A large-scale reform programme by the newly-elected President Shavkat Mirziyoyev was launched in 2017, creating a milestone in the nation’s development. Progressive democratisation, based on rule-of-law, human rights and freedoms, more government accountability and openness, and improving quality of life were at the forefront of state policy.

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CFI.co Columnist

POLITICAL BACKGROUND Incorporated into Russia in late 19th century, Uzbekistan was part of the Soviet Union until 1991. From the first days of its independence, the goal was to become a developed, sustainable, democratic state. In a relatively short period, profound structural and institutional transformations were carried out that laid the foundations of a multi-structured economy, and principles for secular, pluralistic, and democratic governance. The Economist named Uzbekistan its Country of the Year for 2019.

President: Shavkat Miromonovich Mirziyoyev

Government policy has become increasingly focused on long-term sustainable development and economic growth, as well as social wellbeing.

New strategic priorities have been established in the spheres of public administration, economic liberalisation, social policy, and foreign relations.

National development guidelines have been adopted on human rights, gender equality, schools, higher education, the transition to a green and digital economy, innovative agriculture, and environmental protection.

CFI.co Columnist

Forced labour and child labour have been eradicated, ending an international boycott of Uzbekistan’s cotton and textiles industries. In 2020, Uzbekistan was elected to the UN Human Rights Council. The country adopted a National Human Rights and Gender Equality Strategy

including ratifying the UN Convention on the Rights of Persons with Disabilities.

Human-capital development has become a priority in a country where more than 60 percent of its 36 million people are under the age of 30 and the most populous in Central Asia. The introduction of the English language and Western education standards has becoming widespread, and is considered an effective tool to counter religious extremism, radicalisation, and predominately Muslim but secular ethnically diverse country.

Broad public support for Mirziyoyev’s reformist course ensured his re-election in 2021, and the adoption of a development strategy for deeper and wider modernisation — reforms that have become irreversible. A focus on human rights

Samarkand City: Registan Square

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CFI.co | Capital Finance International

and dignity, a vibrant civil society, a welfare state, and sustainable, environmentally friendly and inclusive development have been put at the heart of the transformation.

The fight against corruption has become the highest priority of state policy, with a dedicated anti-corruption agency being created.

To consolidate these important values, a major constitutional reform was initiated. Citizens have taken an active role in shaping the new constitution in a nationwide discussion. Tens of thousands of proposals from citizens were considered by a Constitutional Commission, consisting of MPs, senators, and representatives of civil society. The president has proposed initiatives for future inclusion, including the

Spring 2023 Issue

Tashkent: Independence Monument

abolition of the death penalty, the establishment of Miranda Rights, and Habeas Corpus principles.

TRADE & INVESTMENT From the first days of Uzbekistan’s independence in 1991, the country set the goal of economic transformation. In a relatively short time, structural and institutional transformations were carried out.

A predominantly agrarian economy, with abundant natural and human resources, has been rapidly transformed into the most diversified Central Asian economy in a blossoming, emerging market.

The foreign exchange market has been liberalised. For the first time, Uzbek banks and enterprises received international ratings and entered world financial markets. International bonds in national currency were also issued. The country was admitted as a beneficiary in the EU’s GSP+ and the UK’s Enhanced GSP Scheme. The country is in the process of joining the World Trade Organisation.

There are also water-saving technologies being introduced, and expansion of green areas.

In 2022, GDP reached $80bn with a record of $8bn in FDI. Over the past six years, Uzbekistan has increased investment inflows to more than 30 percent of GDP. This year, it hopes to attract about $30bn in investments — of which $25bn is private. The trade turnover of Uzbekistan in 2022 increased by 18.6 percent over 2021 — up to $50bn, doubling the figure from 2016.

Exports reached $19bn (15.9 percent growth), another record.

President Mirziyoyev has initiated intensive political dialogue which has resulted in a radically improved reginal political atmosphere.

Mistrust, suspicion, rivalry, and hidden hostilities have been replaced with goodwill, trust, and co-operation. Acute regional issues of the delimitation and demarcation of state borders, water-use, and transport have been resolved.

Ambitious goals have been set for 2030, including increasing GDP per capita by 60 percent, joining the ranks of upper-middleincome states, and placing $120bn into the economy — including $70bn in FDI. In 2022, a programme was introduced to ensure the "green" growth of Uzbekistan until 2030, which provides for a transition to a green economy by reducing greenhouse gas emissions, increasing the capacity of renewable energy sources (up to 15GW, and bringing the share of total volume of electricity production to more than 30 percent).

CFI.co | Capital Finance International

FOREIGN POLICY Uzbekistan has substantially changed the nature of its foreign policy. A once inward-looking country has become open, active, and responsible for regional affairs. It aims to build strong relationships with its immediate neighbours, and strengthen the long-term development, prosperity, and stability of the region.

The process has received UN support. In 2018, a General Assembly resolution was adopted, entitled Strengthening Regional and International Co-operation to Ensure Peace, Stability, and Sustainable Development in the Central Asian Region. Relations are restored, the visa regime is being liberalised, new border-crossing posts are being opened, and cultural and humanitarian ties are becoming the norm. With greater connectivity and transparency, Uzbekistan’s foreign trade turnover with its neighbours has substantially increased.

Over the past four years, the trade turnover between Uzbekistan with the region’s states has increased 2.6 times and exceeded $6.5bn.

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The reform programme has opened the country, and dramatically accelerated the liberalising economy. The doors for foreign capital and advanced technologies are actively sought by providing in law additional guarantees and benefits to investors. Uzbekistan’s place in several international rankings, including the Index of Economic Freedom, the World Bank's Doing Business Index, the OECD Country Risk Rankings, and the World Open Data Rankings have all improved considerably.

Liberalisation and diversification of the economy have ensured Uzbekistan's continued inflow of investments, as well as positive economic growth, even during the pandemic. Despite Covid, Uzbekistan maintained positive economic growth for 2020 — a global rarity. The economy grew by 7.4 percent in 2021. The latest EBRD Regional Economic Prospects project GDP growth of 6.5 percent this year, and 7.0 percent in 2024 — with 4.9 percent and 5.4 percent the respective Central Asian averages.

Tashkent: The Palace of International Forums

Uzbekistan promotes regional security and stability and is a leading supporter of processes aimed at peaceful settlement in Afghanistan.

It is actively participating in the reconstruction of the country. Due to challenges of the Aral Sea disaster, water shortages and food security, Uzbekistan is embracing efforts to control climate-change.

In addition to this strengthening of relations with other Central Asian countries, Uzbekistan pays attention to multifaceted and mutually beneficial co-operation with strategic partners and international organisations. The main goal is to address global and regional challenges — climate change, health, food, and security threats —with investments in advanced technologies, and the application of knowledge and expertise to boost the transition to innovation and a valueadded economy.

CFI.co Columnist

Uzbekistan has striven to become one of the centres of world politics. The country hosted the summits of the Shanghai Cooperation Organisation and the Organisation of Turkic States in 2022, and dozens of high-level international conferences, where Tashkent has put forward several important initiatives. The EU-Central Asia Connectivity Conference, held in Samarkand in November 2022, focused on improving connectivity between Europe and Central Asia.

As a double-locked country, Uzbekistan promotes the diversification of transport routes to open access to world markets, participating in the processes of global integration and cooperation.

TOURISM & CULTURE The government has placed a priority on the development of tourism, now considered a major part of the national economy. Uzbekistan has a rich, diverse, and unique heritage, which 24

straddles several periods of history. Uzbekistan is famous for its architectural monuments, natural landscapes, magnificent palaces and the ruins of past civilizations.

It was one of the main crossroads of trade and culture on the famous Great Silk Road. In the Middle Ages, it became a major Islamic civilization centre for culture, science, and enlightenment — which gave rise to the Western Renaissance.

Philosophers and scientists of the Islamic Golden Age thrived on the territory of current Uzbekistan.

Among them were mathematician Muḥammad ibn MŪsā al-Khwārizmī — who gave us the terms algebra and algorithm — and the religious scholar Al Bukhari, the author of the second holiest source of inspiration and knowledge for Muslims after Quran.

More than any other country in Central Asia, Uzbekistan boasts a number of unique historical monuments — more than 8,000 ancient architectural and archaeological sites. The fabled cities Samarkand, Bukhara, Shakhrisabz and Khiva, all with world-class sites included in UNESCO’s Cultural Heritage List.

That list also includes less intangible cultural treasures, such as the Navruz holiday, the khorezm lazgi — considered one of the most ancient dances in the world — shoshmakom, a vocal and instrumental musical style, and bakhshi, a performance of epic poetry and stories.

Uzbekistan has a 30-day visa-free regime for citizens of 94 countries, with five days of visafree transit for 53 countries and e-visa regime for 57. The country considers itself the most touristfriendly country in the region, and prides itself on being ranked one of the five safest countries for solo travellers.

CFI.co | Capital Finance International

There is a boom in the tourism and infrastructure sectors. The government subsidises the construction of hotels, increasing year-to-year, with a plan for 64,000 rooms by 2025. The government is implementing an open-sky policy and encouraging foreign air carriers to fly to Uzbekistan. i

Part two of Lord Waverley’s series will appear in our next issue: Kyrgyzstan, Tajikistan, Turkmenistan.

ABOUT THE AUTHOR Lord (JD) Waverley House of Lords, UK Parliament Crossbench Member Co-chair All Party Parliamentary group: Trade & Investment All Party Parliamentary group: Future UK’s Freight & Logistics sector Founder www.GoGlobal.trade

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Spring 2023 Issue

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> Otaviano Canuto:

Macro-economic Policy Change: We’re Not in Kansas Any More The possibility of multiple financial shocks lies ahead.

T

hree significant changes to the macroeconomic policy regime in advanced economies have unfolded in the past two years.

Fears of a chronic insufficiency of aggregate demand as a growth deterrent — which prevailed after the 2008 global financial crisis — have been superseded by supply-side shocks and inflation. As a result of that, the era of abundant and cheap liquidity provided by central banks has given way to higher interest rates and liquidity squeezes. Finally, also because of those changes, there was a strong devaluation of financial assets in 2022.

A triple structural change in the macro-economic policy regime in advanced economies has taken place, as compared to the post-global financial crisis period.

Figure 1: U.S. 10-Year Treasury Real Interest Rate

Some believe that the era of ultra-low interest rates and low inflation is gone; others believe the situation is reversable. Quantitative tightening and higher basic interest rates by central banks became the new norm, as a sort of normalisation of monetary policies.

There are now fears about further financial shocks. Starting in 2021, inflation in the US and Europe rose to the highest levels in decades. US consumer prices rose by about seven percent in 2022, the highest in four decades. In Germany, 2022 ended with an annual inflation rate of 9.6 percent, perilously close to the first double-digit inflation since 1951.

CFI.co Columnist

The surge is explained by succession of supply and price shocks, while a robust recovery of post-pandemic demand was taking place. In 2023, rising interest rates are threatening to push the global economy into recession.

Many analysts initially viewed the inflation as transitory, and reversible. Now it is acknowledged that excess demand, relative to supply, called for restrictive central bank policies. Doubts are emerging about how high, and for how much longer, interest rates will have to go to soften labour markets, and prevail over the resistance in services inflation. Are these symptoms of a business cycle, or some structural change that means an end to low inflation and low interest rates?

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Figure 2: Less Generalised Inflation in the U.S. and Europe. Source: Brooks et al (2022).

In the years following the 2008-09 global financial crisis, sluggish economic growth was attributed to insufficiency of aggregate demand. Multiple hypotheses were established: hangovers from the financial crisis, income concentration, the exhaustion of the technological waves of previous decades, and demographic dynamics.

There were long period of low interest rates (Figure 1), accompanied by a flood of liquidity from central banks via quantitative easing programs (purchases of government bonds, mortgages, CFI.co | Capital Finance International

and, in the euro area, private assets) after the 2008-09 crisis. That offset the relatively low use of expansive fiscal policies. But the fiscal policy signal changed with the emergency government support during the pandemic.

Multiple shocks showed that supply, not demand, was causing the difficulty. There has been a decline of labour market participation, especially in the US. Certain segments of the population have left the workforce at unusually high rates, either by choice or necessity. This has been compounded by disruptions in global labour

Spring 2023 Issue

The energy transition is also intrinsically inflationary. Changes in the scope of globalisation, labour shortages and climate change have put into question the belief of a continuing era of low inflation and interest.

Looking ahead: Inflation rates seem to have peaked in the US and Europe (Figure 2), but the tightness of labour markets and the downward resilience of core inflation in services are potential dampening factors. Mild or hard recessions loom on both sides of the Atlantic. The inversion of the US yield curve (Figure 3) suggests this to be the case.

Figure 3: 10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity

Inflation is expected to remain high in 2023. But expected medium-term inflation remains low, which may be interpreted as a sign of inflation so far not becoming entrenched (Figure 4).

Goodhart and Pradhan have argued that demographic dynamics and a retreat from globalisation mean higher inflation and higher interest rates over the long term. In contrast, Blanchard believes that the factors that have led to low real interest rates on safe assets will return once the current inflationary shock is over.

The frequency and intensity with which (relative) deglobalisation, geopolitical events, and climate change bring new shocks will determine whether the 2021/2022 reconfiguration of demandsupply interaction will persist. And whether US and Europe return to the path on which a mismatch between wealth and creation of new assets tends to lead interest rates again to low levels.

Figure 4: U.S. Inflation Expectations. Source: Federal Reserve Bank of New York, Survey of Consumer Expectations.

THE END OF BOUNDLESS LIQUIDITY For years, central banks have responded to virtually any sign of economic weakness or financial market volatility by putting more money in. During the pandemic, central-bank balance sheets made huge additional jumps relative to the trend since the global financial crisis (Figure 5).

But as they extended what were supposed to be time-limited interventions, some collateral damage was inflicted. Liquidity-laden financial markets became dissociated from the real economy.

flows, as fewer foreign workers have received visas or are willing to migrate.

Russia's invasion of Ukraine triggered food and energy supply shocks. Governments intensified their weaponization of trade, investment, and payment sanctions — worsening tensions between the US and China.

Some global supply chains have been rewired to aim for more “friend-shoring” and “nearshoring”. The perception of geopolitical risks and the greater frequency of extreme weather events are leading companies to pursue resilience over cost efficiency. Less quantity-responsive and more price-responsive supply chains could become the norm.

CFI.co | Capital Finance International

The diagnosis of inflation as transient gave way to promises of quantitative tightening in earnest — and raised interest rates. The Fed continued 27

CFI.co Columnist

Figure 5: Central Bank Balance Sheets. Source: Refinitiv / Financial Times

In the US “taper tantrum” in 2013, the-then chair of the Fed, Ben Bernanke, announced that the institution would start planning the end of quantitative easing — and ended up reversing this course six weeks later. It also occurred in the fourth quarter of 2018, when another fed chair, Jeremy Powell, had to make an embarrassing about-turn from his mild quantitative tightening because the markets got choppy.

to inject liquidity into the economy until March 2022, gradually shrinking its balance sheet starting in June.

It also finally began to raise policy rates. It switched to a series of steeper hikes, including a record four successive ones of 0.75 percentage points between June and November 2022, and ending the year with another 0.50 percentage points. It should raise the base rate by 0.25 percentage points two or three more times in the first few months of 2023, and leave it there for a while.

US low inflation and ultra- low interest rates have been replaced with higher inflation and interest rates (Figure 6). The European Central Bank is moving in the same direction, though with less intensity.

Figure 6: U.S. CPI inflation and Fed Policy Rates. *UK RPI Pre-1989. Source: Keith Fray, Steven Bernard, Matthew Brayman and

Justine Williams (2022). War, inflation and tumbling markets: the year in 11 charts, Financial Times, December 29.

LOOMING FRAGILITY If 2022 was a year of equity and fixed-income devaluation, the financial year ended with losses of more than $30tn in equities and fixed-income bonds. Figure 7 shows how negative a year it was for investors, in both stocks and bonds. The macro-economic slowdown in 2023 is likely to also lead to lower overall asset yields, especially from stocks.

Corporate debt increased in the years of low interest rates and abundant liquidity. Although analysts suggest that there is no generalised vulnerability in terms of mismatches of rates between assets and liabilities, there are multiple points at which some sudden disappearance of liquidity could lead to dramatic adjustments and insolvencies.

The OECD in 2022 highlighted major financial market developments, spill-overs to credit risk, and rising vulnerabilities in several market segments as a reflection of tighter monetary conditions, slower global growth, higher inflation, and geopolitical tensions.

CFI.co Columnist

A metamorphosis in financial flows took place during the era of easy money, with a significant part of global financial activity shifting after the global financial crisis from highly regulated banks to less regulated and constrained entities, including asset managers, private equity funds, and hedge funds. Non-bank institutions replaced banks in financial intermediation, and a morphing and migration of risk took place.

After the 2008 financial crisis, high capital requirements were established, limiting banks’ activities; the banking system was de-risked. But the newly prominent intermediaries are not likely to maintain strong resilience against sudden and sharp changes in the cost of borrowing, or access to finance.

The post-2008 crisis reforms, while targeted at reinforcing financial stability, may have replaced counterparty risk with liquidity risk. Shocks on 28

Figure 7: Total Nominal Return in U.S. Stocks and Bonds, 1871 to 2022 (percent). Source: Keith Fray, Steven Bernard, Matthew

Brayman and Justine Williams (2022). War, inflation and tumbling markets: the year in 11 charts, Financial Times, December 29.

asset prices may be propagated by intermediaries being obliged to shrink their holdings, exacerbating those shocks via transmission and contagion.

The displacement of counterparty risk into liquidity risk appears in several forms. In US Treasury markets, banks used to perform a critical warehousing role, especially in the shortterm lending “repo” market. Stricter capital rules have led them to move to other, higher-margin business lines, while other market participants have not yet filled the void. When volatility rises, hedge funds and high-frequency traders keep a certain distance.

The emphasis on collateral has also exacerbated instability by increasing selling pressure. The UK gilt market meltdown in October 2022 is a prime example: pension funds had bought derivatives as part of a liability-driven investing. Then, CFI.co | Capital Finance International

after Liz Truss’s newly inaugurated government announced a plan for massive unfunded tax cuts, government bond yields soared, suddenly hitting some of the country’s highly leveraged pension funds.

When gilt prices fell sharply, they received margin calls requiring them to post more collateral. The price was driven down, leading to more margin calls: a vicious circle. Were it not for the emergency intervention of the Bank of England, the withdrawal of the Truss government’s proposal, and the government’s eventual downfall, the forced sale of bonds by pension funds could have turned into a major financial crisis.

Another potential form of illiquidity has arisen in recent years as investors have moved beyond bank accounts, stocks, and bonds. In times of market stress, funds focused on real estate,

Spring 2023 Issue

"Whatever the duration of the new policy regime may be, we are no longer in Kansas with respect to supply versus demand, monetary policy, and financial stability." private credit, and others have been hit by more redemption requests than they can easily handle.

The BIS Quarterly Review examined how poor liquidity conditions across market segments have kept asset price volatility elevated, and contributed to swings in global financial conditions. The report focuses attention on signs of fragility in the markets for agency mortgagebacked securities (MBS), dedicating a box to the risk of liquidity disruptions.

There are also non-transparent off-balance-sheet risks in both the bank and non-bank financial sectors. The BIS review of December contained a chapter by Claudio Borio, Robert N McCauley and Patrick McGuire on “huge, missing and growing” Dollar debt in foreign exchange swaps, forwards, and currency swaps.

The fragility of the financial system has implications for the work of central banks.

Instead of facing their basic dilemmas — reducing inflation, or maintaining economic growth and employment — they now face the task of reducing inflation, maintaining growth and jobs, or guaranteeing financial stability. As growth slows, monetary tightening is prolonged, and illiquidity bouts exacerbate financial fragility, central banks might be forced to try to reconcile their quantitative tightening and interest rate hikes with interventions to provide liquidity at key points of the system.

Whatever the duration of the new policy regime may be, we are no longer in Kansas with respect to supply versus demand, monetary policy, and financial stability. i

First appeared at Policy Centre for the New South.

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CFI.co Columnist

ABOUT THE AUTHOR 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 CFI.co for the past ten years.

Follow him on Twitter: @ocanuto

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

> Paolo Sironi:

Creating Digital Advantage for Uncertain Times Changing a car tyre isn’t that hard — unless the vehicle’s moving. And financial institutions have been trying to achieve the corporate equivalent of this feat over recent years.

I

t’s never been easy. It’s still not easy.

Geopolitical uncertainty causes market shocks and recalibrations.

Client demand grows. Business leaders look for sustainable products and solutions. All the while, financial services’ C-suites respond, rather than reacting.

Changes and uncertainty have made a dramatic comeback after more than a decade of relative stability in the world economy and capital markets — and it appears they may remain centre-stage for some time. The landscape will continue to transform in 2023. Financial institutions are faced with a challenge: How to preserve increasingly expensive capital, while investing in transformation to emerge stronger after the storm. Leaders will be expected to adapt and respond to geopolitical and macro-economic tensions, new “digital-native” competitors, and environmental and sustainability challenges.

In doing so, they have to redefine the real value of digital transformation.

Figure 1: CIR remains sustained compared to 2007; ROE declined globally since the GFC erupted. CIR measures a banks efficiency;

IBM Thought Leadership

Macro-economic tensions spur changes, epitomised by spiking inflation, which has led major central banks to raise interest rates (except in China — and Japan might be just late to the party). The US Federal Reserve Board was the first to raise rates, aware of the negative potential in an economy whose real GDP is stagnant. The European Central Bank followed, despite the recessionary effects of energy supply challenges caused by the war in Ukraine.

Sudden reversals in monetary policies may prove untenable, adding more uncertainty to future decisions. From a banking perspective, higher interest rates should favour interest rate margins which have steadily declined over the past decade, especially for institutions centred on retail and wholesale lending. But recessionary expectations are resulting in growing credit-risk appraisal and a significant increase in the cost of operations — which might offset most economic benefits for financial intermediaries.

Geopolitical risk brings economic headwinds, and calls for a refreshment of strategies. Economic decoupling tests the resilience of value chains while heightening financial risk across 30

ROE measures performance based on average shareholder equity. ROE and CIR 5y averages of the median, 1st and 3rd quartile calculated in each region across the top 25 banks by Total Assets.

Note: CIR from 2010 MEA only. Note: Single year when different than 2007. Source: S&P Global, IBM Institute for Business Value.

geographies and sectors. As globalisation helped to reduce costs, deglobalisation will drive them up, fuel inflation, and change financial clients’ needs.

New competitors brought new challenges with them — and they continue to do so. Digital adoption is accelerating, exposing the shortcomings of traditional financial services. This creates an opening for digital-savvy competitors to capture and engage clients, resulting in potential revenue loss for incumbents. Large traditional institutions are hindered by legacy business and operating models that are not sufficiently agile. Many of these models were designed in another era, for another era, a time before the speed enabled by modern technologies.

Sustainability pressures mount, but data are not always available. Environmental concerns have led to new restrictions on business and economic activities. While banks can be an integral part of the sustainable solution to find new revenue CFI.co | Capital Finance International

opportunities, they are also exposed to fresh risks and complex compliance requirements.

According to IBM research, eight out of 10 CEOs (83 percent) expect sustainability investments to produce improved business results in the next five years. But 57 percent of CEOs identify unclear ROI and economic benefits as a leading challenge, while 44 percent cite a lack of dataled insights. Financial institutions will need to navigate this area with great care, for their business and the planet.

Without business model innovation, growth and performance cannot be had. Infusing a model with new tech for increased efficiencies and enhanced value is essential. According to 2022 mid-year analysis by Wanclouds, total tech spending in retail banking bounced back from the pandemic — on target to grow by 4.3 percent and reach $250bn. Although many banks made headlines for their innovation efforts, sustained financial performance has not materialised since the Global Financial Crisis of 2008. Return on

Financial institutions set up innovation centres, configured as siloed experiments rather than real transformation engines. The outcomes often failed to achieve key ambitions as part of an enterprise strategy. Many firms lacked a holistic strategy to rapidly integrate fintech services on a secure platform. Most attempted to digitalise existing business models without changing the foundations of client engagement, continuing

to replicate traditional processes on mobile interfaces.

Business models need to reflect digitalisation if they are to drive growth and performance.

The shift to digital prompts financial firms to search for value-based approaches to customer relationships, and that can change the institution to its core. Adjusting the business and operating models together allows technology to deliver on its promise of innovation.

ADVANCED TECHNOLOGY Technology is a deflationary force against current CFI.co | Capital Finance International

uncertainties, and a conduit to new revenue opportunities. Remaining mired in legacy constraints is not an option. Many financial institutions are moving to digital foundations and transformations, and not just to keep pace with competitors. They recognise that modern banking and financial markets require ecosystems with digital capabilities that preserve resilience while leading to healthier financial performance.

But the next systemic crisis might not be about finance. Operational risk has always existed, and the chances of it causing the next crisis are higher than they’ve ever been. Why? New digital 31

IBM Thought Leadership

average equity (ROAE) faltered industry-wide in the past decade (see Figure 1), while a sticky cost income ratio (CIR) did not sufficiently improve and in some cases worsened.

channels and ecosystems bring increased risk — cyber-risk in particular. Over the next four years, the costs associated with cybercrime ($10.5tn annually by 2025) are estimated to exceed worldwide cybersecurity spending ($267.3bn annually by 2026).

IBM Thought Leadership

Rather than living in a state of perennial defence, where attention is focused on mitigating threats and surviving to fight another day, chief risk officers (CROs) are recognising security as an essential thread that ties together an organisation’s business and tech strategies.

They’re using it to unlock larger pools of value, aligning operations for greater efficiencies, and collaborating more effectively to deliver better outcomes.

According to 2022 IBV research, chief information and technical officers of global financial institutions have defined unified security frameworks — from cyber-risk to compliance postures — as their top priority to generate greater business value in the next three years This year’s Global Outlook for Banking and Financial Markets, from the Institute for Business Value, reflects on these aspects of the global macro-economic environment, pondering the investments made by key institutions in every jurisdiction, and on the lessons learned. It also looks at new ways forward, unpacking the uncertainty that seems sure to remain in 2023.

Digital transformation has been difficult; limited success is often a reality before coding even begins — for several reasons.

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First, C-suites need board engagement to help them address skills gaps in the workforce.

Second, digital transformations require funding, but in ways that differ from traditional growth strategies, which can be challenging. Risk also must be managed — but in a new operational space, firms have limited experience dealing with a host of new vulnerabilities.

Add to this scenario the fact that 2,000 CIOs and CTOs around the world have identified a lack of multi-year commitment from top management as the main factor hindering the success of their cloud strategies.

ABOUT THE AUTHOR 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 Banks and Fintech 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 thePSironi.com for more information.

In any business or digital transformation, there is an essential question to consider: Do customers and employees have better experiences as a result? Transformations that empower the workforce lead to more efficient servicing of dynamic customer needs. There must be access to data and AI platforms for optimal performance — combining human and digital intelligence.

Transformations that enable better experiences help the enterprise move from reactive to responsive across the value chain.

In 2023 and beyond, what sits at the heart of growth and performance, cost and efficiency, risk and compliance?

It’s people.

It’s experiences. i

The 2023 Global Outlook for Banking and Financial can be found at: ibm.co/2023-banking-financial-markets-outlook CFI.co | Capital Finance International

Author: Paolo Sironi

Spring 2023 Issue

CFI.co | Capital Finance International

33

> Nouriel Roubini:

India at a Crossroads © Project Syndicate 2023

I

ndia is poised to become the world’s most important country in the medium term. It has the largest population (which is still growing), and with a per capita GDP that is just onequarter that of China’s, its economy has enormous scope for productivity gains. Moreover, India’s military and geopolitical importance will only grow, and it is a vibrant democracy whose cultural diversity will generate soft power to rival the United States and the United Kingdom.

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One must credit Indian Prime Minister Narendra Modi for implementing policies that have modernised India and supported its growth. Specifically, Modi has made massive investments in the single market (including through de-monetisation and a major tax reform) and infrastructure (not just roads, electricity, education, and sanitation, but also digital capacity). These investments – together with industrial policies to accelerate manufacturing, CFI.co | Capital Finance International

a comparative advantage in tech and IT, and a customised digital-based welfare system – have led to robust economic performance following the COVID-19 slump.

Yet the model that has driven India’s growth now threatens to constrain it. The main risks to India’s development prospects are more micro and structural than macro or cyclical. First, India has moved to an economic model where a few

Spring 2023 Issue

fast, despite investment rates (as a share of GDP) that were much lower than China’s. The implication is that India’s investments have been much more efficient; indeed, many of India’s conglomerates boast world-class levels of productivity and competitiveness.

But the dark side of this system is that these conglomerates have been able to capture policymaking to benefit themselves. This has had two broad, harmful effects: it is stifling innovation and effectively killing early-stage startups and domestic entrants in key industries; and it is changing the government’s “Make in India” program into a counterproductive, protectionist scheme.

We may now be seeing these effects reflected in India’s potential growth, which seems to have declined rather than accelerated recently. Just as the Asian Tigers did well in the 1980s and 1990s with a growth model based on gross exports of manufactured goods, India has done the same with exports of tech services. Make in India was intended to strengthen the economy’s tradable side by fostering the production of goods for export, not just for the Indian market.

Instead, India is moving toward more protectionist import-substitution and domestic production subsidisation (with nationalistic overtones), both of which insulate domestic industries and conglomerates from global competition. Its tariff policies are preventing it from becoming more competitive in goods exports, and its resistance to joining regional trade agreements is hampering its full integration into global value and supply chains.

Another problem is that Make in India has evolved to support production in labor-intensive industries such as cars, tractors, locomotives, trains, and so forth. While the labor intensity of production is an important factor in any labor-abundant country, India should be focusing on industries where it has a comparative advantage, such as tech and IT, artificial intelligence, business services, and fintech. It needs fewer scooters, and more Internet of Things startups. Like many of the other successful Asian economies, policymakers should nurture these dynamic sectors by establishing special economic zones. Absent such changes, Make in India will continue to produce suboptimal results.

Narendra Modi

“national champions” – effectively large private oligopolistic conglomerates – control significant parts of the old economy. This resembles Indonesia under Suharto (1967-98), China under Hu Jintao (2002-12), or South Korea in the 1990s under its dominant chaebols.

In some ways, this concentration of economic power has served India well. Owing to superior financial management, the economy has grown

Finally, the recent saga surrounding the Adani Group is a symptom of a trend that will eventually hurt India’s growth. It is possible that Adani’s rapid growth was enabled by a system in which the government tends to favor certain large conglomerates and the latter benefit from such closeness while supporting policy goals. Again, Modi’s policies have deservedly made him one of the most popular political leaders at home and in the world today. He and his advisers are not personally corrupt, and their Bharatiya Janata CFI.co | Capital Finance International

Party will justifiably win re-election in 2024 regardless of this scandal. But the optics of the Adani story are concerning.

There is a perception that the Adani Group may be, in part, helping to support the state political machinery and finance state and local projects that would otherwise go unfunded, given local fiscal and technocratic constraints. In this sense, the system may be akin to “pork barrel” politics in the US, where certain local projects get earmarked in a legal (if not entirely transparent) congressional vote-buying process.

Supposing that this interpretation is even partly correct, Indian authorities might reply that the system is “necessary” to accelerate infrastructure spending and economic development. Even so, this practice would be toxic, and it would represent a wholly different flavor of realpolitik compared to, say, India’s vast purchases of Russian oil since the start of the Ukraine War. While those shipments still account for less than one-third of India’s total energy purchases, they have come at a significant discount. Given per capita GDP of around $2,500, it is understandable that India would avail itself of lower-cost energy.

Complaints by Western countries that are 20 times richer are simply not credible.

While the scandal surrounding the Adani empire does not seem to extend beyond the conglomerate itself, the case does have macro implications for India’s institutional robustness and global investors’ perceptions of India. The Asian financial crisis of the 1990s demonstrated that, over time, the partial capture of economic policy by crony capitalist conglomerates will hurt productivity growth by hampering competition, inhibiting Schumpeterian “creative destruction,” and increasing inequality.

It is thus in Modi’s long-term interest to ensure that India does not go down this path. India’s long-term success ultimately depends on whether it can foster and sustain a growth model that is competitive, dynamic, sustainable, inclusive, and fair. i ABOUT THE AUTHOR 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 TheBoomBust.com, 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 NourielRoubini.com, and he is the host of NourielToday.com.

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> Mohamed A El-Erian:

There Is More Inflation Complexity Ahead

N

early two years into the current bout of inflation, the concept of “transitory inflation” is making a comeback as the COVID-related supply shocks dissipate. This comes at a time when it is critically important to keep an open mind about the trajectory of inflation, including by avoiding 36

© Project Syndicate 2023

an over-simplified transitory narrative that risks obfuscating the real issues facing the US economy.

“Transitory” is a comforting notion suggesting a short-lived, reversible phenomenon. Critically, the concept assumes away the need to adjust behaviors. After all, if an inflation scare is only CFI.co | Capital Finance International

temporary, the best way to deal with it is simply to wait it out (or, to use a policy and market term, “look through it”). That is why this narrative is particularly dangerous. By encouraging complacency and inertia, it could exacerbate an already serious problem and make it harder to solve.

Spring 2023 Issue

The US Federal Reserve’s initial response to rising inflation is a case in point. In 2021, the world’s most powerful and influential central bank rushed to characterise higher inflation as transitory. It doubled down on this approach even after the data went against it, refusing to pivot for too long.

The Fed’s repeated mischaracterisation delayed crucial policy responses at a time when the persistence of inflation was starting to influence corporate price-setting and workers’ wage demands. As a result, the Fed not only lost credibility but also inflicted unnecessary pain on millions of American households, particularly the most vulnerable segments of the population.

While a few economists have never given up on the transitory inflation thesis, the vast majority already realised last year that it was a regrettable analytical and policy error. That makes the current re-emergence of this narrative even more perplexing.

A recent article in Politico noted that “There is also at least some reason to believe that [the economists and policymakers] who assured [Americans] that inflation would be transitory, including Fed Chair Jerome Powell, might have been kind-of-sort-of right, though the transitory period was just longer and uglier than expected.”

This is unfortunate. Not only does it force a time dimension on an inherently behavioral concept, but it also ignores the fact that the Fed’s initially fumbled response forced it into one of the most aggressive, front-loaded series of interest-rate hikes ever, including four consecutive 75-basispoint increases. Moreover, while US inflation has been slowing, it is dangerous to suggest that the problem is behind us.

Looking ahead to the rest of the year and early 2024, three possibilities stand out for me. The first is orderly disinflation, also known by critics as “immaculate disinflation.” In this scenario, inflation continues to come down steadily toward the Fed’s 2% target without damaging US economic growth and jobs. The dynamics involve primarily a labor market that avoids excessive wage increases while continuing to anchor strong economic activity. Given what else is going on in the economy, I would put the probability of this scenario at 25%.

"'Transitory' is a comforting notion suggesting a short-lived, reversible phenomenon. Critically, the concept assumes away the need to adjust behaviors."

The second scenario is one in which inflation becomes sticky. The inflation rate continues to decrease but then gets stuck at 3-4% over the second half of this year as goods prices stop declining and services inflation persists. This would force the Fed to choose between crushing the economy to get inflation down to its 2% CFI.co | Capital Finance International

target, adjusting the target rate to make it more consistent with changing supply conditions, or waiting to see whether the US can live with stable 3-4% inflation. I do not know what the Fed would choose in such a case, but I would put the probability of such sticky inflation at 50%, so I hope it has given this scenario some thought.

Lastly, there is the possibility of what we can label “U inflation”: prices head back up late this year and into 2024, as a fully-recovered Chinese economy and the strong US labor market simultaneously drive persistent services inflation and higher goods prices. I would put the probability of this outcome at 25%.

This is not just about multiple scenarios with no single one dominating. It is also about probabilities that must be viewed with caution.

Former US Secretary of the Treasury Lawrence H. Summers captured well the prevailing mood among many economists: “It’s as difficult an economy to read as I can remember,” he recently said.

This sense of uncertainty is evident in the shortterm outlook for economic activity, prices, and monetary policy, as well as long-term structural shifts like the clean-energy transition, the rewiring of global supply chains, and the changing nature of globalisation. Heightened geopolitical tensions also play a role.

Whatever happens, the worst thing we can do is fall back into complacency. Powell, after championing “transitory inflation” for too long, is now warning against it. “There has been an expectation that [inflation] will go away quickly and painlessly and I don’t think that’s at all guaranteed,” he said recently. “The base case, for me, is that it will take some time. And we will have to do more rate increases…”

Simplistic economic narratives, especially comforting ones that entice those looking for shortcuts, often mislead much more than enlighten. This was the case with the transitory inflation narrative that, while discredited in 2021-22, is now reemerging. It is also the case with those who are predicting with a high degree of confidence a US recession (I am not in that camp), only to dismiss it as “short and shallow” in order to regain their economic comfort zone. i ABOUT THE AUTHOR Mohamed A El-Erian, President of Queens’ College, University of Cambridge, is Professor at the Wharton School, University of Pennsylvania, and the author of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse, Random House, 2016.

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PRIME MINISTER PEDRO SÁNCHEZ:

SELDOM DOWN,

NEVER OUT

By Wim Romeijn

Echoes of the Franco Era still haunt Spain in subtle and often divisive ways.

Now, a vibrant democracy, the country has taken decades to shed its past and rid society of the last vestiges and symbols of authoritarianism. A watershed moment was reached when Prime Minister Pedro Sánchez ordered the remains of dictator Francisco Franco moved from a vast mausoleum to a more modest grave.

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T

hough the Franco family challenged the reburial in court, the exhumation went ahead as planned with the coffin carried out of the grand basilica in the Valley of the Fallen by the dictator’s descendants and on to a helicopter for transport to a chapel at the Madrid Mingorrubio cemetery. In a clear sign of the unease still sparked by the Franco legacy, the family were not allowed to drape the coffin with the national flag. Instead, they carried the flag used at the dictator’s 1975 funeral in an act of quiet protest.

It took considerable political audacity for Prime Minister Sánchez to direct the removal of Franco’s remains from the Valley of the Fallen – about 50 kms northwest of Madrid. Here, a 38

vast, and to many unsightly, mausoleum was carved out of a rockface with the help of prison labour. The complex, including an underground basilica that rivals in size St Peter’s in Rome, is overlooked by a 150-metre-high cross – reportedly the tallest such structure the world.

An adjacent Benedictine abbey houses the priests who say perpetual mass for the peace of those fallen during the Spanish Civil War (1936-39).

An estimated 30,000 fighters from both sides of the war are buried here. The site has been a focal point for Franco supporters and a shrine of the extremist right. Prime Minister Sánchez expressed hope that the Valley may now become a place of remembrance for all victims of the civil war.

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NATURALLY DARING Prime Minister Sánchez (51) is not shy when circumstance calls for daring. With the odds stacked against him and his socialist party (PSOE – Partido Socialista Obrero Español), he narrowly “won” the November 2019 election, securing just 120 out of the 350 congressional seats, but keeping ahead of all other parties. The meagre result did not stop the PSOE-leader from teaming up with his main rival on the left Podemos (35 seats) to form a minority government with the implicit blessing of the Catalan Republicans (13 seats).

At the time, few in Spain would have placed a bet on the longevity of the Sánchez II cabinet.

After all, his first stint at the head of a minority government lasted only 272 days and tripped

over the 2019 budget for which he failed to obtain congressional approval. The proverbial comeback kid of Spanish politics, Sánchez may be downed but never defeated.

After Díaz’ ouster, Sánchez reluctantly agreed to uphold the deal until Prime Minister Rajoy became embroiled in a hugely embarrassing corruption scandal that rocked the nation to the core and sparked the first-ever vote of no confidence against a Spanish prime minister since the country’s return to democracy.

CFI.co | Capital Finance International

UPSETTING THE APPLE CART From 1982 to 2015, Spain’s political landscape was clear, flat, and easy to understand and navigate. Two parties, one on each side of the ideological divide, dominated the landscape and regularly swapped places in government. There was no need for messy or awkward coalitions since either one could invariably claim an absolute majority in parliament. The scenery began to change in the wake of the 2008/9 financial crisis which hit Spain harder than most countries.

Populist movements on the left – such as the Indignados Movement that grew out of the massive anti-austerity protests which erupted on May 15, 2011 – quickly capitalised on the wave of discontent and coalesced into Podemos 39

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In 2016, he was almost summarily removed as party secretary general by PSOE grandees – amongst them iconic former prime minister Felipe González and the Andalusian socialist leader Susana Díaz – after he failed to impress the need for a centre-of-left coalition with newcomer Podemos. Just a year earlier, Ms Díaz had managed to distance the PSOE from the communist-dominated United Left (Izquierda Unida), breaking a bond established in the early days of Spain’s transition to democracy. She was not about to make the same mistake twice and preferred the party to plot its own course.

However, Sánchez promptly put in a new bid for the party leadership and in the 2017 primaries managed to edge out both Díaz and another contender, thus reclaiming his old position.

Whilst this power struggle was unfolding, Díaz had navigated the party into the curious and unnatural position of tacitly supporting the minority government of Prime Minister Mariano Rajoy of the centre-of-right Popular Party (Partido Popular).

(We Can). The new party claimed the slice of the progressive political spectrum abandoned by the PSOE and caused a major upset in the 2015 general election when the list it headed (an agglomeration of smaller and often single-issue parties) obtained almost 21% of the popular vote and secured 69 congressional seats. Podemos has since formalised a grand coalition on the left with Izquierda Unida, previously spurned by the PSOE, to form Unida Podemos.

The rise of the populist left was mirrored almost to perfection on the right with the ascendancy of Ciudadanos, a liberal right-of-centre party with Barcelona origins. Occupying the political space forfeited by the Partido Popular, severely wounded after its implication in a number of corruption scandals, Ciudadanos became the fourth-largest party in the country after the 2015 general election and debuted in congress with 40 seats. The party briefly supported Pedro Sánchez in a failed bid to form a government.

Since then, Ciudadanos has moved a bit more to the right bumping into “great disrepute” conservative politics suffer for historical reasons – and losing at the polls as a result. Its attempts at becoming a catch-all party, along the lines of the British Tories or, indeed, Spain’s own Partido Popular in its heyday, have largely failed. In the 2019 election, Ciudadanos secured just seven percent of the vote – the worst result ever for the party and good for only ten seats in congress.

MINDING THE PITFALLS Prime Minister Sánchez has so far managed to deftly navigate the fractured political landscape and keep his PSOE in the driver’s seat. He exudes an unmistakeable air of stateman-like strength, vigour, and firmness, much more than perhaps justified by his rickety coalition and with partners that excel in quarrelling. Nonetheless, his government is now likely to serve its full term.

Late last year, he even managed to get a budget approved on time – almost unheard of in Spain.

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However, political realities have forced the prime minister into compromises that have infuriated many of his supporters. The most controversial of these involved scrapping the archaic law of sedition, untouched since its introduction in 1822. The move was imposed on the government by the pro-independence Catalan Republican Left (Esquerra Republicana de Catalunya) on which the prime minister’s minority government relies for support in congress. The law has been replaced with one that includes the more innocuous-sounding charge of “aggravated public disorder.”

Sánchez justifies his conciliatory approach to Catalonian independence by pointing out that tensions have eased considerably: “The main task of any leader is to build coexistence and that’s what we’re doing.” In mid-2021, Prime Minister Sánchez surprised friend and foe by announcing partial pardons for nine separatist 40

Prime Minster Pedro Sánchez

leaders jailed for their role in the organisation of an irregular and unlawful independence referendum. They had been found guilty of crimes ranging from sedition to the misuse of public funds and convicted to serve prison terms between nine and thirteen years.

By ordering the release of the separatists, Sánchez took a remarkable risk. A poll taken just before he unveiled his decision showed that 61 percent of Spaniards opposed clemency with just 29 percent of respondents espousing a more lenient view. However, just two weeks later that sentiment had started to change with just a slim and shrinking majority still against the pardon.

Former regional president Carles Puigdemont, who organised the rushed independence drive, was not eligible for a pardon since he remains in self-imposed exile in Belgium and has not been tried. He dismissed the Sánchez’ actions as “showboating” and branded the pardons as “personal, not political, solutions.”

CFI.co | Capital Finance International

Puigdemont’s Together for Catalonia party has since fallen out with the Catalan Republican Left, adding significantly to the loss of proindependence momentum. The latest polls show a razor-thin, almost Brexit-like, majority of voters opposed to independence. Prime Minister Sánchez’ tactic seems to bear more fruit than the gung-ho way of his predecessor Mariano Rajoy who threw the book at the separatist, inflaming passions on both sides – a particularly dangerous thing to do in Spain given the country’s past.

ONLY YES IS YES Another, and perhaps more prosaic row, erupted over the Podemos-inspired sexual consent law, aka the “only yes is yes” law meant to combat the proclivity of Spanish courts to hand rapists only light sentences when victims fail to prove they strongly resisted their attackers. However, due to a restacking of criminal offence categories, the law had the exact opposite effect to the one intended. Since “only yes is yes” came into force, those convicted of sex crimes have seen

Spring 2023 Issue

“justice, reparation, and dignity” to the victims of the civil war and the dictatorship that followed.

The law bans groups that glorify the Franco regime whilst it – almost paradoxically – also encourages a “shared discussion based on the defence of peace, pluralism, and human rights.”

As such, it builds on the 2007 Historical Memory law introduced by José Zapatero, another socialist prime minister. Then as now, the Partido Popular strongly opposed the initiative as a possible prelude to the undermining of the 1977 amnesty law and the Pact of Forgetting which helped usher in democracy.

The PP’s business-like leader Alberto Nuñez Feijóo has promised to repeal the law if he wins next year’s general election. The PP has a clear issue with the past and the need to forget it.

Mariano Rajoy – prime minister between 2011 and 2018 – was especially proud of cutting the historical memory budget to zero during his administration. Former firebrand PP leader Pablo Casado said Sánchez’ Democratic Memory law would only dig up “old grudges.”

As for digging up, a lot of that is being done all over the country to locate and identify the remains of tens of thousands of people who still lie in unmarked graves. This February, forensic experts in Catalonia recovered and identified the remains of Cipriano Martos, a young activist and trade unionist who died in police custody in 1973 after being forced to drink a mixture of petrol and sulphuric acid – touted by officers as a truth serum – during an interrogation.

their sentences reduced considerably, leading to howls of indignation from conservatives.

Vox, a party far to the right of the Partido Popular, has been particularly vociferous in its criticism of the Sánchez II government. The party consistently seeks to paint the prime minister and his government as a cabinet of leftist curiosities/loons intend on destroying everything presumably precious about Spain. Returning the courtesy, the left dismisses Vox as a cabal of “fachas” (fascists) – a very grave insult in a country where many keep personal memories of Francisco Franco alive and a few still confess to missing the caudillo.

LOW ESTEEM Collectively, the Spanish are also prone to light depression. Whilst most people on the outside consider the sun-drenched, beach-lined, and culture-laden country one of the best places to live or vacation anywhere in the world, the Spanish seldom tire of complaining about their inept rulers, the byzantine bureaucracy they erected and the chronic underperformance of the economy.

Often, Spaniards will wonder out loud what half a century or so of democracy has brought them, leaving out the bits about the tripling of the average income, social freedoms unthinkable before, and joining the European mainstream at long last.

CFI.co | Capital Finance International

Post-covid, tourists began to return and helped push up GDP growth to an impressive 5.5 percent in both 2021 and 2022 – undoing the damage wrought by the pandemic in 2020 when the Spanish economy shrank by a staggering 11.3 percent. The International Monetary Fund expects the economy to keep growing, albeit at a much-reduced pace of 1.1 percent, this year.

However, that would still beat the IMF forecast for the euro area.

Inflation remains steady and hovers around the 6 percent mark – also lower than many of the country’s EU peers. Meanwhile, the stock market is booming with the Ibex barrelling ahead, gaining just over 14 percent in January and February, and reaching its highest level since February 2020 – the month before the pandemic burst onto the global scene. Banks have put in an especially remarkable performance with Santander, CaixaBank, and Sabadell all registering gains deep into double digit territory and announcing record dividend pay outs – notwithstanding the 4.8 percent windfall tax introduced late last year on the banks’ income from interest and commissions.

HAPPY COINCIDENCES With the economy performing better than expected, Pedro Sánchez is ready to face down his detractors in the upcoming municipal elections (May), widely considered a rehearsal for the general elections scheduled to take place in December.

The opposition argues that regardless of international comparisons, things are objectively bad with almost no wage growth and huge price increases of staples such as olive oil (+40 percent), sugar (+50 percent), and non-alcoholic beverages (+15 percent). Food inflation, long a thorn in the government’s side, runs at an estimated 15 percent even after a €700m cut in VAT on basic items.

Economy minister Nadia Calviño blames the slow release of the €77bn in grants the country received under the EU’s pandemic recovery programme. Though the funds have been paid by Brussels, spending has been held up because of Spain’s highly decentralised form of government.

With each of the seventeen autonomous regions having their own bureaucracies, it takes time for support funds to reach the intended beneficiaries.

Minister Calviño expects that most of the red tape involving the distribution of EU cash will 41

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LEGACY ENCHILADA To deal with the Franco legacy, a political hot potato if not enchilada, Prime Minister Sánchez was determined to push his signature Democratic Memory law through both houses of congress.

The senate passed the legislation by the smallest of margins late last year. The law aims to bring

Extremes such as the fate that befell the young Martos help explain why forgetting is particularly hard in Spain. Pundits often mention the “two Spains” that are destined to never meet – and remain at odds. The two countries are, thankfully, not visible on the street or audible in conversation but do shape, and poison, the political matrix.

That subtly toxic undertone has turned many away from politics altogether. In the European Union, Spain scores lowest when it comes to trust in political parties (8%) and governments (22%) according to a recent Euobarometer poll.

The Spanish economy is still, by some measures, a laggard in Europe. Early last year, The Economist ranked Spain last on a post-pandemic recovery list of 23 countries. However, the pessimism this may have inspired was misplaced. This year, Spain moved into fourth place on that list. The performance boost was largely due to the country’s energy mix which excludes Russian natural gas.

have been dealt with during the course of the year: “That’s when we’ll see their impact.”

She perhaps forgot to mention that the timing conveniently dovetails with the next general election.

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Meanwhile, the Spanish tax service reports a surge in revenue unmatched by any other euro zone country. In 2022, the tax haul hit its highest level ever, jumping 15.9 percent year-on-year and injecting an extra €30bn into state coffers. Economic growth and inflation explain only part of the fiscal windfall. The relative generosity of the Sánchez administration, and its multiple social support initiatives, seems to offer a more likely explanation.

GOOD NEWS Finance ministry officials believe that behavioural changes in the “grey economy” – the shady zone of unregistered activity – have been crucial in upping the national tax intake. During the pandemic, many people discovered that being under the fiscal radar would disqualify them from receiving any form of government support. Likewise, businesses found that liquidity support was either unavailable or minimal if most of their work was kept off the books.

According to a 2018 IMF estimate, Spain’s shadow economy represented 17.2 percent of GDP. Pulling that significant slice out of the dark zone, if only partially, is a major accomplishment – intended or otherwise – of the Sánchez administration.

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So far, the tax boost is not being deployed to reduce the government’s structural spending deficit which currently stands at around 5 percent of GDP – well above the temporarily suspended 3 percent eurozone ceiling. In 2022, Spain’s debtto-GDP ratio has, however, dropped markedly from a high of 118 percent to 113 percent – the steepest decline on record.

There is even so a long way to go to make up for the lavish spending during the pandemic which pushed up the debt-to-GDP ratio by almost twenty percentage points. But Calviño remains optimistic: “Despite the complex international context of the war in Ukraine, the Spanish economy is absorbing the extraordinary impact of the pandemic at an unprecedented rate.”

CHAMELEON Pedro Sánchez possesses an undeniable knack for political survival. He is a master at picking the battles he can win whilst carefully avoiding those that he cannot. Keeping a minority government afloat with the help of a feeble and often unpredictable coalition partner is not a minor achievement. Implementing a reasonably clear and consistent set of policy initiatives under such a circumstance borders on genius.

It is a given that Prime Minister Sánchez has mastered the art of compromise. However, this allows the opposition to brand him an unprincipled chameleon willing to change colours to hold on to his lofty perch. Though there may be a grain of truth to the allegation, Sánchez did succeed in bringing a measure of stability to the politics in Spain which was noticeably absent before.

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Though polls indicate the PSOE may not win the December general election, the Partido Popular would be ill-advised to count their predicted win as a given. Sánchez, the Spanish comeback kid, is unlikely to roll over and leave the stage without putting up a good fight.

Moreover, the PP cannot possibly obtain an outright majority – those days are past – and has only the hard-right extremist Vox to turn to as a possible coalition partner. The return of “fachas” to power is a prospect that may yet drive Spanish voters to the PSOE and Sánchez in unexpected droves.

Also, and not to be underestimated, is Sánchez’ expert handling of the pandemic and its economic and social fallout, and the shockwaves caused by the Ukraine War. It is no exaggeration to conclude that the world has changed almost beyond recognition over the past three years with previous certainties gone and a host of new uncertainties introduced.

Spain, never known for its financial or economic resilience, and still busy absorbing and dealing with the repercussions of the 2008/9 banking crisis, was perhaps not expected to survive as well as it did – and even prosper. Prime Minister Sánchez’ extraordinary adaptability to the unexpected, and his agility in responding to crises of whatever kind, have been crucial in avoiding a meltdown and instrumental in plotting a course to a sustainable future.

That legacy may well be his best asset in the upcoming election campaign – and one hard to beat. i

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> The Rise and Rise of ESG, from

Investment and Worker Safety to the Ethics of the Defence Industry

By Tony Lennox

‘Immediate actions — necessary to mitigate losses from catastrophic events like the war in Ukraine and the pandemic — should be distinguished from the steps that are necessary to preserve a company’s long-term value.’

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n April 2013, the concrete roof of a dilapidated factory collapsed in Dhaka, Bangladesh, killing 1,134 people — mainly female garment workers — and injuring 2,500.

Many of them had been producing clothing for international fashion brands — including Benetton, Primark, Walmart, Prada and Gucci — which turned the calamity into a global embarrassment. Just a few years earlier, the United Nations had instituted its Environmental, Social and Governance (ESG) principles. The human cost of the Dhaka tragedy highlighted the urgent need for global business to take safety aims seriously.

The rapid growth of Bangladeshi “sweatshops” over the previous decade — in response to Western consumer demand — had led to overcrowded, badly maintained factories and poor working conditions. The average wage for garment workers at the time was around $30 a month. Pope Francis denounced the system as slave labour.

The Dhaka tragedy had another consequence: Western consumers began to realise the link between the fashionable clothes sold in glitzy stores and the grim reality of their origins.

The stark images of death and destruction in Bangladesh had investors questioning the ethical practices of many business and industry sectors.

Australian James Gifford was the executive director of the UN’s Principles of Responsible Investment at the time. He had been a “shareholder activist” in his native Australia for some years and was among the group of free thinkers who shaped ESG strategies in the early 2000s. “It is absolutely in the financial interests of leading Western clothing brands to have safe factories and not to have scandals,” he said. “We’re now seeing all the clothing brands scrambling to sign-up to new protocols on building safety.

“This is the change that the world is seeing.

Formerly, people thought there must be a tradeoff between profits and looking after workers or looking after the environment.” Companies, 44

"The disruption to global trade caused by the pandemic failed to interrupt the progress of ESG." he said, needed to look after supply chains.

Transparency in that area is just one of the issues being tackled by global business. Investor and consumer knowledge, and the power of social media, have put every industry in the spotlight. ESG aims are now part of the business mainstream in Europe and the US. The disruption to global trade caused by the pandemic failed to interrupt the progress of ESG. Amy S Matsuo, regulatory and ESG insights leader at KMPG US, says that far from provoking an investor flight back to traditional investment, the crisis amplified awareness in investors, policymakers and consumers.

“Pressure from investors, employees, customers and the general public has driven companies to commit to and act upon an ESG strategy,” she said, “focusing primarily on environmental factors. With the advent of Covid-19, stakeholders are turning attention to workplace safety, employee health and wellbeing, job security, data privacy, customer engagement, supply chain management, community investment, corporate leadership and innovation. ESG has expanded into a ‘main street’ issue, with significant reputational risk for companies.”

Gifford, now head of Impact Advisory and Thought Leadership at Credit Suisse, said there was growing recognition that the world was changing. Many of the most important changes are within the ESG bracket, he said. “Change is opportunity, and ESG issues — being some of the largest, most important megatrends happening in society — simply translate into opportunities for the cutting-edge of investors to outperform their peers.”

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The pandemic, followed by Russia’s invasion of Ukraine in February, had investors rattled.

In times of crisis, investors historically tend to play safe, seeking out reliable havens for their money — usually gold or government bonds. But companies with strong ESG polices generally outperform those with less environmental and social awareness. A 2020 study of ESG investments showed that 60 percent achieved positive returns, and only eight percent were negative.

The growth of ESG adoption since the term was coined in 2004 shows no sign of wilting in the face of economic challenge. Companies which demonstrate a belief in sustainability and ethical standards are judged to be more trustworthy.

Research by Morgan Stanley’s Institute for Sustainable Investing found that sustainable funds offer reduced risk — whatever the asset type. The analysis suggests that non-ESG funds have a greater downside deviation in volatile markets.

Spring 2023 Issue

Gifford says sophisticated analysis by investors is growing. It is no longer just about picking out “the bad guys” from an investment portfolio, or investing in obviously green areas such as wind farms or solar power. It’s about seeking out companies with the potential to make the world a better place.

“Investors want to focus on what the boards of major corporations are actually doing, what they’re thinking about, what’s keeping them up at night,” he said. “With this radical transparency, with social media, with the accountability that corporations are feeling, all of these issues are becoming core to business, and core to those investing.”

The war in Ukraine has raised questions over the perceived rigidity of ESG principles — particularly in relation to the defence industry.

Arms manufacturers have seen a degree of investor flight in recent decades, and the sector is seen by many as running counter to ESG

aims. In March, a Bank of America report said that the Ukraine crisis “reminds us that, like most things in investing, ESG is complicated and nuanced”.

The conflict has led some to question whether investing in a strong defence industry should be considered fundamentally “social” in deterring regime aggression. An opinion piece in The Financial Times in March questioned the blanket approach of ESG aspirations; the effects of war on Europe’s doorstep illustrated the crucial nature of defence, it argued. “Surely an important component of (Europe’s) ability to provide safety and security to its citizens should qualify for some recognition in the social element of ESG?” Similarly, in response to the increasing cost of energy — especially in a Europe so dependent on Russian oil and gas — there have been calls to soften climate-change priorities.

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But Adam O Emmerich, a partner at US law firm Wachtell, Lipton, Rosen & Katz, says that while ESG investing is fundamentally about generating long-term financial value, the Ukraine conflict has prompted unprecedented support for the liberal international order. “The war provides important lessons,” he said, “and underscores the need for a non-disruptive transition to a lowcarbon world — a view already shared by major investors.

“If unaddressed, climate change will trigger a humanitarian crisis on an unprecedented scale and lead to trillions of Dollars in losses. From an ESG perspective, a company’s performance is still being measured in returns delivered over decades and not days.

“Immediate actions — necessary to mitigate losses from catastrophic events like the war in Ukraine and the pandemic — should be distinguished from the steps that are necessary to preserve a company’s long-term value.” i 45

> Britain’s Ongoing Fascination

with Mr Fox, Russet Rogue of Fairy Tales and Animation

By Tony Lennox

As the 20th anniversary of the ban on foxhunting nears, the ‘toffs vs townies’ divide endures.

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recent poll by the Royal Society of Biology found that the red fox was Britain’s second-favourite wild mammal — beaten to the number-one spot by the humble hedgehog.

The fox, with its alert, pointy face and glossy coat, is easy to anthropomorphise. Folklore is filled with foxy tricksters. It’s no surprise that Walt Disney studios portrayed the outlaw Robin Hood as a fox in its 1973 animated film of the same name.

The children’s writer Roald Dahl, who believed that fox hunting was “foolish, pointless and cruel”, introduced a generation of youngsters to The Fantastic Mr Fox in 1970 — a book which has gone on to become a successful film, opera, and musical. The character has even appeared on British stamps. Dahl portrayed his vulpine hero as the leader of an embattled community of woodland creatures, fighting for their hedgerow homes against three dark-hearted farmers.

"But the reality is that England’s hunts remain intact, continue their pursuits — and even thrive. There are 318 registered packs of hounds in England and Wales." hugging urbanites”. In 2019, the-then prime minister Theresa May reignited the debate, suggesting she wouldn’t oppose attempts

by Conservative MPs to repeal the ban. Her statement enraged the anti-hunt lobby.

While animal cruelty remains the overriding factor, the favourable portrayal of the fox in fiction could be another reason why 85 percent of Britons approve of the Hunting Act, introduced to ban the chasing of wild mammals with dogs.

When the ban was finally enacted into law, many believed that foxhunting would be consigned to history, along with bearbaiting and cockfighting.

But the reality is that England’s hunts remain intact, continue their pursuits — and even thrive.

There are 318 registered packs of hounds in England and Wales.

But opposition to the bill in the early 2000s was considerable. In 2002, a crowd of some 400,000 tweedy country-dwellers marched on the Houses of Parliament in possibly the biggest rally the capital had witnessed since the protest against the prosecution of the Tolpuddle Martyrs in 1834. The Hunting Act was to prove one of the most controversial and divisive bills ever debated.

It eventually required the use of the Parliament Act to force it through, following opposition from pro-hunting peers in the House of Lords.

They use the loophole of trail-, or drag-hunting, where scent tracks are laid across countryside for the hounds to follow. But inevitably, the hunts sometimes flush out a real fox. The law allows for such “accidents”, though anti-hunt groups which shadow events claim that the legislation is deliberately flouted. There have been 573 successful prosecutions under the Hunting Act since 2005.

The proposal to ban foxhunting in England and Wales — the Scottish government had outlawed the practice in 2002 — was one of Tony Blair’s most popular election pledges when the Labour Party fought the 1997 election. The Countryside Alliance, an organisation which campaigns on behalf of rural communities, described the ban as “class warfare”, while other pro-hunt groups complained that the motivation behind the Act was political, and driven by misguided “bunny46

The fox is seen as a predator, frequently blamed by farmers for killing poultry and new-born lambs. Animal rights campaigners maintain it’s essentially a harmless scavenger which feeds mainly on earthworms — and that hunting it with hounds is a barbarous and bloodthirsty relic of ancient times.

In recent years, the fox has colonised urban parks and gardens where it can often be seen trotting along busy roads in broad daylight.

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And while its nocturnal habits of knocking over dustbins, digging up lawns and noisily mating are a nuisance, for many town-dwellers its presence is not only tolerated, but welcomed.

Spring 2023 Issue

While the Act outlawed the hunting of foxes, deer, badgers and hares, an exemption was created to allow for the hunting of rats. The rat, though an equal in terms of cunning and success, has never

possessed the anthropomorphic cachet enjoyed by the fox. Not even Disney’s 2007 animated film, Ratatouille — about a rat chef — could redeem its reputation.

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The fox still has Britons, especially those living in towns and cities, in its thrall. The handsome rogue portrayed in fairy tales still has a place in our hearts. i 47

> Rugby Injuries Tackled Head-on as

Fans, Clubs and Ruling Bodies put Renewed Focus on Player Safety

By Tony Lennox

Tony Lennox reports on the ruck forming around rule changes to the rough-but-popular game of the oval ball.

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ollywood legend Richard Burton had a true Welsh passion for rugby. He once said he’d rather play for his country at Cardiff Arms Park than portray Hamlet at the Old Vic. He introduced his wife, Elizabeth Taylor, to the sport after their first marriage. “I prefer rugby to soccer,” she said. “I enjoy the violence, except when they start biting each other’s ears off.”

Rugby Union was described by Sir Winston Churchill as “a hooligan’s game played by gentlemen”. But this cavalier approach to violence on the pitch, and to player safety, is being crash-tackled as the game edges into a new era — which some say could threaten its future.

The clamour comes at a difficult time. English premiership rugby is in financial crisis, principally from loss-of-income during the pandemic. Two major clubs have disappeared from the league because of cash shortages. Club owners are at loggerheads with the game’s ruling body in England, the Rugby Football Union (RFU), over rule-changes about the ways players can make a tackle.

The RFU, which is responsible for grassroots rugby, is walking a tightrope in its support for the sport at amateur level. It oversees some 2,000 local clubs and promotes rugby in schools to ensure a strong national team — but recognises increasing risk in the professional game. Since union went professional in 1995, players have become bigger, fitter, faster and stronger. International players today are, on average, 10 per cent heavier than their amateur predecessors. The combination of extra weight and speed means that tackles have become more brutal – and injuries have increased.

Ten years ago, 4,500 former professional players of American Football, a similarly punishing contact sport, sued the National Football League (NFL) for “downplaying the consequences of concussion”. The NFL has paid out $700m in out-of-court settlements. Now the RFU, and governing bodies throughout the rugby-playing 48

"English premiership rugby is in financial crisis, principally from loss-of-income during the pandemic.

Two major clubs have disappeared from the league because of cash shortages." world, are facing similar class actions for systemic negligence in player protection.

This has sparked a push to re-evaluate the rules — the latest being a decision to ban above-thewaist tackles, a move which has been ridiculed by some sporting legends. Ed Bartlett, of level six rugby club Old Reigatians in Surrey, has started a petition to reverse the rule-change. “Dropping the tackle height will make the game a farcical spectacle to watch,” he says. Ireland captain Johnny Sexton agrees that the new rule could “fundamentally change the game”.

The British Journal of Sports Medicine categorises union as considerably riskier than rugby league, soccer, American football, or ice hockey. Broken bones, torn ligaments, bite injuries and concussion are common at all levels — and there is growing evidence that repeated head trauma is linked to brain damage.

Many supporters of the sport are becoming disillusioned by constant rule changes. They say the natural flow of the game is being disrupted, with stoppages in play increasing and refereeing CFI.co | Capital Finance International

decisions causing confusion for spectators.

Purists argue that rugby is a high-impact collision sport, and that injuries are inevitable. No-one is forced to play, they point out.

Those backing the rule changes, however, counter with the estimate that the probability of

Spring 2023 Issue

a player being injured during a season is as high as 90 percent.

“Should I allow my child to play rugby?” is a frequently posed question on social media forums such as Mumsnet. And while the game at youth level has adopted many new safety

measures — including touch-rugby for undersevens and weight limits for teenage players — many parents remain fearful for their children.

Some schools are removing rugby from the sports curriculum for fear of lawsuits. And in litigious times, who can criticise that caution? In his CFI.co | Capital Finance International

diaries, rugby-loving Richard Burton once wrote: “I grew up among heroes who went down the pit, who played rugby, told stories, sang songs of war.”

He was describing a way of life which may no longer be sustainable. i 49

> David Hume’s Philosophy, Controversy,

Superstition, Atheism — and Lucky Toes

By Tony Lennox

The Scots philosopher’s sometimes divisive words gave him prominence in life, as in death.

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t’s ironic that a statue of the 18th Century Scottish historian and philosopher David Hume, situated at the top of Edinburgh’s Royal Mile, has earned a reputation for bestowing good luck.

The toes on the right foot of the statue, which depicts Hume in the flowing robes of a Greek philosopher, gleam from countless touches by passing townsfolk, tourists, philosophy students, and defendants on their way to the nearby courthouse.

How a statue commemorating a colossus of The Enlightenment — a man who detested superstition — should have earned a reputation for bringing good fortune remains a mystery.

His most famous work, A Treatise of Human Nature, is recognised as a cornerstone of modern philosophy. It contains hints about the author’s character — and readers may conclude that he’d find the toe-rubbing tradition amusing.

Hume was a famously jovial character who, in middle age, packed on some weight thanks to his taste for fine food and port. In the company of fellow thinkers and drinkers at Edinburgh’s notorious Poker Club, he would “dine, play a game of backgammon, converse and be merry with my friends”.

Hume was born in an Edinburgh tenement in 1711. His father died two years later, and his mother Catherine raised her three children alone. The young David was a precocious child, admitted to the city’s university at the age of 12, but academia wasn’t for him. “There is nothing to be learned from a professor which is not to be met with in books,” he announced.

He left without graduating and concentrated on the pursuit of philosophical thought, devouring the works of Cicero and Virgil. In 1734, aged 23, he travelled to France to “prosecute my studies in a country retreat”.

He spent the next three years there, working on his three-volume work A Treatise of Human Nature, which was published in 1739 after he returned home. The book is considered to be one of the most influential works in the history of philosophy, and Hume’s most important — but it failed to make an immediate impact.

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Edinburgh, Scotland: David Hume statue and St Giles Cathedral

Hume wrote: “Never literary attempt was more unfortunate than my Treatise. It fell deadborn from the press, without reaching such distinction as even to excite a murmur among the zealots.”

Later in life, recognising that he’d “gone to press too early”, Hume revisited his tome, reshaping and clarifying various sections. While this book is the one for which he is chiefly celebrated today, Hume had a greater triumph with his History of England, published in the 1750s.

Hume never strayed far from controversy. His atheism led to him be blocked by the Church of Scotland from taking up posts at Glasgow or Edinburgh universities. His writings were also “listed” by the Vatican’s Index Librorum Prohibitorum — meaning that Roman Catholics were prohibited from reading his books.

In 1776, the year of his death at the age of 65, Hume wrote a short account of his life in which he admitted to a “love of literary fame”. He’d travelled to Paris where he was surprised to be met with great respect and affection. He was CFI.co | Capital Finance International

earning a salary of £1,000, which in those times made for comfortable living. He never married.

The University of Edinburgh, having apparently forgiven him, named a tower after him. Hume’s status as Scotland’s greatest philosopher at last became apparent.

In the wake of the Black Lives Matter protests in 2020, Hume’s stated belief that white Europeans were superior to black Africans threatened to cast a shadow over his legacy. Protestors looped a placard containing the offending quote around the neck of his statue. The controversy illustrates the complexity of applying modern judgements to historical characters.

Hume, who remained an atheist until death, joked that he might ask the ferryman to Hades to allow him a few more years of life in order to see “the downfall of superstition”. The ferryman, said Hume, would reply: “You loitering rogue!

That will not happen these many hundred years… Get into the boat this instant!”

And David Hume’s “lucky foot” is still being rubbed. i

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> The Top Traits of a Great CEO

By Naomi Snelling

Does your chief exec have what it takes? Do you? Naomi Snelling tells you how to find out...

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othing can properly prepare you for parenthood, and the same is true for being a CEO. The challenges are immense, but the rewards are fulfilling.

within this framework, in an entrepreneurial style, to achieve their goals. Yes, now and then mistakes are made, and they are allowed. They are sometimes even useful for the organisation to learn more quickly or effectively.”

LEAD FROM THE FRONT … visibility and transparency matter It’s a classic military leadership technique, and most civilians ascribe to it in one way or another.

There may be no rule book, but there are some guidelines.

TRUST YOUR TEAM ... to work towards your vision Mutual trust a fine thing. Your team needs to know what success looks like, and you need to trust them to find their own route there.

“To me, a leader is someone who eats their own cooking,” says Sean Ferres, founder of Copy Millions Blueprint Program, a global movement of some 400 freelance copywriters and closers from 30 countries. The summit speaker believes in leadership from the front, getting in the trenches, and getting your hands dirty.

“Because if you don't set the best possible example for your team, who will?”

BE YOURSELF … and continue to grow as a person “Be yourself,” advised Oscar Wilde. “Everyone else is already taken.” There’s only one Nelson Mandela, Elon Musk, Bill Gates. What you bring to your company is something unique. Celebrate who you are and the skill set, personality, tenacity and inspiration that you bring to the role.

BE POSITIVE … even in the face of challenge Klaus Schlichtherle, chief executive of Infinigate Group, the pan-European value-added distributor (VAD) of cybersecurity solutions, has more than 15 years’ management experience.

“I have made it a habit to first approach people and events positively,” he says, “at worst neutrally, and preferably not negatively at all. For me, this means aspiring to go through life with a constructive view on the world, not a destructive one. To be honest, I have to practice that every day. And I don't always succeed 100 percent,” he admits.

“At Infinigate, we care about cybersecurity in order to help businesses be safer places, today and in the future. As a value-added distributor in cybersecurity, secure networking and secure cloud, we offer a platform for vendors and resellers in this domain.

“Security in cyberspace is our focus. Nothing less, nothing more. Our people know that.

Managers and leaders don’t have to give everybody a detailed activity plan. That’s how I want the business to be running.”

CONTINUOUSLY SOLICIT FEEDBACK … and create an environment that supports that In a recent interview with The Financial Times, Eric Johnson, CEO of JSR, Japan’s leading semiconductor materials maker, described how honest dialogue with staff and stakeholders was key to helping him restructure the company.

SHARE YOUR VISION ... to empower your staff Leaders make things happen, achieve specific outcomes, to turn plans into reality. As Schlichtherle says: “I aspire to give people a vision, a mission and the purpose of their work — and I give them the support they need to focus on this.

No matter how accessible you think you are as a leader, your team could be withholding information, ideas and fears from you. Dina Denham Smith, founder and CEO of Cognitas, is an executive coach to leaders at top brands including Adobe, Netflix, PwC, Dropbox, and Stripe. “You can tell your team, ‘We all have blind spots, myself included’,” she says. “I need your help to see mine, and I want you to question and disagree with me if you think I am off-base.”

“I give them an idea what the future of the company will look like, and this is the compass that steers them to focus on what they can do to help get us there. They know their own capacity, and their part in this, better than anyone. They figure out by themselves what they can do

She advises leaders to consistently ask the team for their ideas — and assure them they don’t need to build an ironclad case for each one.

Publicly acknowledge and thank independent voices that share a dissenting opinion, question your logic, or disagree with you.

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SPEAK LAST … and channel your wisdom Author and business guru Simon Sinek says that great leaders speak last. Not to have the last word, but because it ensures that everyone feels heard. It also gives the CEO the benefit of understanding what everybody else thinks before giving their own opinion.

Use with care: Leaders need to set the tone and purpose of a meeting. Being the last one to speak doesn’t make you a leader — it’s a privilege of leadership.

Like the judge at a trial, the final word rests with you, not because of any supernatural ability but because of the authority conferred by your position. Corporate authority needs to be wielded with understanding, compassion and care. In a Tony Robbins podcast, Sinek related how Nelson Mandela learned to “speak last” by observing his parental guardian, Thembu King Jongintaba Dalindyebo. He would gather his men in a circle and wait until they had spoken before speaking himself.

Mandela later used this approach in his own meetings — and his biographer, Richard Stengel, quotes him as saying “Don’t enter the debate too early.” Stengel says Mandela would hear his colleagues out and summarise their points before offering his own views, subtly steering the decision in the direction he wanted. i

Spring 2023 Issue

> Business Leaders Find Alternatives to

Pay Increases in Cost-of-Living Battle Salaries falling behind inflation, and continual hikes ‘won’t always be possible’ as a countermeasure, firms say.

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he cost-of-living crisis is burgeoning, the war for talent rages on, and pay awards have been plateauing for six rolling quarters — falling behind inflation.

Employers are looking at how they can improve the employee experience, beyond hiking salaries.

Research by human resources firm XpertHR shows that nearly half of directors set pay awards higher than planned in the battle to attract and retain talent. There was stiff competition between companies to secure workers with the requisite skills.

In the survey, 52 percent of directors said they felt compelled to pay higher salaries to help employees keep up with the cost of living. This money came largely from reducing office space and overheads (42 percent of organisations), spending less on technology and innovation (40 percent), and organic business expansion (68 percent). But 63 percent of directors admitted

that salary increases would not always be possible.

Even organisations that could pay workers more say increases would not necessarily be in line with inflation. Employers are considering other ways to invest in staff retention. Almost threequarters (73 percent) are opting to put support and advice programmes in place.

Of those offering support, 56 percent have given staff a non-repayable lump sum or bonus payment. Amounts of between £500 and £1,000 were cited by some organisations, typically reserved for employees earning less than £40,000 a year. Payments are not consolidated into salaries, and this targeted approach means the additional cost is not an ongoing burden for employers. A quarter of respondents say they have opted to offer staff interest-free loans.

The data show that 53 percent of business leaders are conducting regular benchmarking of pay rates, while half are providing access to CFI.co | Capital Finance International

an employee discounts provider. Slightly fewer (49 percent) are offering flexible work locations and patterns, and 31 percent are offering better benefits and incentives.

XpertHR managing director Scott Walker says employers are being forced to look for alternative ways to help staff manage the cost-of-living crisis. “Financial wellbeing advice leads the way,” he said, “helping individuals understand the options available to them and how to look after their money.”

Walker says many employees are finding there is little money left after paying their bills. “We’re seeing an increasing number of employers getting creative.” The alternatives include repayable loans, non-repayable lump-sum payments, and even discount vouchers.

Employee assistance programmes can go a long way in demonstrating support, he believes, and flexible working and training could boost retention. “It’s still possible to support staff and build a strong employee experience,” he said. i 53

> Joseph E Stiglitz:

Who Stands for Freedom? © Project Syndicate 2023

T

he Republican Party has long wrapped itself in the American flag, claiming to be the defender of “freedom.”

The GOP believes individuals should be free to carry firearms, spew hate speech, and eschew vaccines and face masks.

The same goes for corporations: Even if their activities destroy the planet and permanently change the climate, the “free market” should

be trusted to sort things out. Banks and other financial institutions should be “liberated” from regulation, even if their activities can bring down the entire economy.

Following the 2008 financial crisis, the pandemic, and the acceleration of the climate crisis, it should be obvious that this conception of freedom is far too crude and simplistic for

the modern world. Those who still espouse it are either mind-numbingly blinkered or on the take. As the great twentieth-century philosopher Isaiah Berlin put it: “Freedom for the wolves has often meant death to the sheep.” Or, put another way, freedom for some is unfreedom for others.

In the United States, the freedom to carry guns has come at the expense of the freedom

Spring 2023 Issue

balanced against each other, and any reasoned discussion among typical Americans (meaning one not captured by political activists and special interests) would inevitably conclude that the right to an AR-15 is not more “sacred” than others’ right to live.

In complex modern societies, there are innumerable ways that one’s actions can harm others without one having to bear any consequences for it. Social-media platforms constantly pollute our “information ecosystem” with disinformation and content that is wellknown to cause harm (not least to adolescent girls). While the platforms present themselves as neutral conduits of information that is already out there, their algorithms are actively promoting a socially harmful substance. But, far from paying any costs, the platforms are reaping billions of Dollars in profits every year.

The US tech giants are shielded from liability by a 1990s-era law that was originally designed to foster innovation in the inchoate digital economy. The US Supreme Court is now considering a case involving this legislation, and other countries around the world are also questioning whether online platforms should be able to avoid accountability for their actions.

For economists, a natural measure of freedom concerns the range of things one can do. The greater one’s “opportunity set,” the freer one is to act. Someone on the verge of starvation – doing what she must just to survive – effectively has no freedom. Viewed this way, an important dimension of freedom is the ability to realise one’s potential. A society in which large segments of the population lack such opportunities – as is the case in societies with high levels of poverty and inequality – is not really free.

to go to school or the store without being shot.

Thousands of innocent people – many of them children – have died so that this particular freedom can live. And millions have lost what Franklin Delano Roosevelt thought was so important, the freedom from fear.

There is no such thing as absolute freedom within a society. Different freedoms must be

Neoliberal economists have long ignored these points and focused instead on “freeing” the economy of what they view as pesky regulations and taxes on corporations (many of which have benefitted massively from public expenditures).

But where would American business be without an educated labor force, the rule of law to enforce contracts, or the roads and ports needed to transport goods?

In their new book, The Big Myth, Naomi Oreskes and Erik M. Conway show how business interests managed to sell the American public on the staunchly anti-government, “free market” vision of capitalism that emerged in the decades after World War II. The rhetoric of “freedom” was key. The captains of industry and their academic servants systematically recharacterised our complex economy – a rich matrix of private, public, cooperative, voluntary, and not-for-profit enterprises – as simply a “free enterprise” economy.

In books like Milton Friedman’s Capitalism and Freedom and Friedrich Hayek’s The Road to Serfdom, capitalism was crudely equated with freedom. Central to this vision of capitalism is the freedom to exploit: Monopolies should have unfettered power to trample potential entrants and squeeze their workers, and firms should be free to collude to exploit their customers. Yet only in a fairy tale world (or an Ayn Rand novel) would such a society and economy be called “free.” Whatever we call it, it is not an economy that we should want; it is not one that promotes broadly shared prosperity; and the greedy, materialistic individuals that it rewards are not who we should want to be.

Investments in public goods (such as education, infrastructure, and basic research) can expand the opportunity set for all individuals, effectively enhancing the freedom of all. But such investments require taxes, and many individuals – especially in a society that valorises greed – would rather free ride, by avoiding paying their fair share.

The Democratic Party needs to reclaim the word “freedom,” as do social democrats and liberals around the world. It is their agenda which is genuinely liberating, which is expanding opportunities, and which is even creating markets that are truly free. Yes, we desperately need free markets, but that means, above all, markets that are free from the stranglehold of monopoly and monopsony, and from the undue power that big businesses have amassed through ideological mythmaking. i

This is a classic collective-action problem.

Only through coercion, forcing everyone to pay their taxes, can we generate the revenue needed to invest in public goods. Fortunately, all individuals, including those who have been forced against their will to contribute to society’s investments, may be better off as a result. They will live in a society where they, their children, and everyone else has a larger opportunity set.

In such circumstances, coercion is a source of liberation.

ABOUT THE AUTHOR 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.

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> Spring 2023 Special

Digital Banking and Big Data Dovetail to Boost Customer Experiences and Minimise the Rising Spectre of Fraud Four percent of all e-commerce revenue worldwide was stolen by fraudsters last year — but ones and zeroes can help...

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he digital transformation juggernaut is hurtling along at full steam — and banks must embrace the relevant technologies or risk becoming obsolete.

In bygone eras, a bank’s clients dealt with tellers who could greet them by name.

Nowadays, the institutions are increasingly reliant on big data to get to know their clients.

A data trail is left with every card-swipe and successfully cleared transaction. The amount of information generated in global terms is staggering: some 2.5 quintillion bytes of data each day. (A quintillion is a billion-billion, or a one followed by 18 zeroes, if you were wondering.)

Most financial institutions have beefedup their digital game with mobile services and third-party fintech partnerships. Those leading the digital transformation harness the power of those data to better understand their customers, enhance product performance, identify market trends, and mitigate cybersecurity risks.

Businesses that take advantage of this sort of analysis report an eight percent increase in revenue — and a 10 percent reduction in overall costs. Banks can gain a 360-degree

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view of customer spending patterns and segment them by profiles. This provides the insights needed to individually tailor the user experience.

According to Accenture, a third of bank customers who abandoned a business relationship cited a lack of personalisation as a reason for cutting ties. When institutions understand how customers spend their money, it’s easier to spot opportunities for upselling — and recognise signs of fraudulent behaviour.

Software company HubSpot reports that businesses are 60 to 70 percent more likely to sell to existing, rather than prospective, clients. Big data analytics can help them pinpoint needs and boost profit shares.

Customers gain peace-of-mind when data is leveraged to combat fraud. And fraud is rife. Global verification platform Sumsub provides customisable KYC, KYB, transaction monitoring and AML solutions. It reports a 40 percent surge in payment fraud from 2021 to 2022 — and nearly four percent of all global e-commerce revenue was stolen by fraudsters last year.

Banks hoping to capitalise on the benefits of big data need robust security measures

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to protect their systems, and their clients.

Corporate privacy breaches can expose clients to identity theft; it happened to more than 40 million US consumers in 2021. Flagstar Bank, one of America’s largest residential mortgage servicers, suffered a banking databreach in 2022 that affected 1.5 million customers.

Combining analytics with machine learning and AI can help to mitigate financing risks and target marketing campaigns. Automated analysis and predictive algorithms can categorise customer profiles according to risk. Products and offerings can be tailored to specific needs, creating the sort of personalised service that leads to stronger relationships, and higher retention rates.

Similar benefits can be found on the back-office side. Data analysis can track the performance of products and people, pinpoint top performers, and identify areas for improvement. Big data can streamline the feedback cycle for customers and staff, with more timely responses and an accurate assessment of satisfaction levels.

So read on: the following pages highlight four leaders from the banking and tech worlds who are using digital tools to shape the financial future. i

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> DAWN SONG CO-FOUNDER AND CEO OF OASIS LABS

Dawn of a New Age in Data Control: Oasis Gives Power to the People Dawn Song and the Oasis team are striving to bring about a better internet by giving users control over their own data.

Users sign away the rights to their data without ever reading the fine print. For some it causes rage, others are resigned to it, but most people understand that if you’re not paying for a product, you ARE the product. User data is collected by companies, sold to brokers, and used as fodder in ad algorithms. Song calls for stronger enforcement of data property rights and insists that ownership should reside with the user.

“Today, companies are taking users’ data and essentially using it as a product; they monetise it,” Song told The New York Times. “The world can be very different if this is turned around and users maintain control of the data and get revenue from it.”

OASIS FOR A BETTER INTERNET Song, the co-founder and CEO of Oasis Labs, believes that the internet is broken — but it can be fixed with a combination of privacy computing and blockchain.

“I strongly believe that building a responsible data economy is critical for our society, and this requires a community effort,” she said.

“Today’s privacy concerns are numerous, and solving them will involve not just technology but also businesses and governments using this technology to be better stewards of our data.”

Oasis enables users to collect, protect and govern their own data. Song likens the process to the Black Box system used aviation.

Encrypted data goes into a trusted execution environment (TEE) of interworking software and hardware. Data is processed within a secure enclave, from which only encrypted results emerge. Blockchain sets and enforces the parameters for use policies.

The company has launched its own blockchainnative crypto token, ROSE, which can be earned as a reward for sharing data on the Oasis Network or purchased through crypto exchanges.

OASIS ORIGINS AND ECOSYSTEM FUND Oasis Labs was founded in 2018 with $45m in early-stage VC funding from a16z crypto, Accel and Binance, among others.

Oasis was quick to establish an Ecosystem Fund to fuel project building on its network.

It targets founders and projects in gaming, non-fungible tokens (NFTs), data tokenisation and decentralised finance (DeFi). It was seeded with $160m from major VC firms, including Dragonfly Capital Partners, Draper Dragon Fund, and Electric Capital. The Oasis Ecosystem Fund continues to attract fresh patronage. It reached a $235m milestone in May 2022, after a capital infusion of $35m from a funding round with participation by Newman Capital and Seven X Ventures.

In November 2021, Oasis introduced Emerald, which is compatible with Ethereum Virtual Machine — but claims “99 percent lower gas fees than Ethereum, high throughput and instant transaction finality”.

PARTNERSHIPS Oasis’ privacy-preserving message has resonated well with the market, as evidenced by the company’s active project pipeline and thriving partnerships.

“Through TEEs, Oasis Labs can help ensure that data isn’t copied, stolen or misused, allowing individuals to put their data to use without giving up control,” she told PC Mag.

Google Cloud Platform has brought its confidential computing product to Oasis’ software development kit, Parcel. The BMW Group has announced an early-stage project for differential privacy solutions. MetaAI (formerly Facebook AI) is partnering with Oasis to explore “secure computing technologies in AI”.

YuzuSwap, the first decentralised exchange (DEX) on the Oasis Network, reached a $323m trading volume within 24 hours of operation.

DeFi insurance provider Tidal will “provide asset coverage for lending protocols and DEXs that will be integrated into the Oasis Network”.

Oasis uses differential privacy techniques to help businesses make the most of valuable data without jeopardising individuals’ privacy.

“Companies often find themselves making a false trade-off between using and securing their data,” says Song. Oasis enables them to extract insights from siloed data, previously deemed too regulated or risky to use.

Song hopes to see widespread adoption of Oasis tech, particularly in the medical field, where data can be used to advance the development of drugs and cures. Oasis collaborated with Stanford University Medical Centre on a project allowing patients to share retinal data with researchers through its privacy-protected platform.

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With Oasis, analysts can still do their jobs, says the company CEO. “But we can prevent them from doing things they are not supposed to do — like, in the case of Uber, giving out individual riders’ information.” (Song was part of the team brought in to clean up that mess.)

ACADEMIA AND RECOGNITION Song, described at the time as an exceptional student, was encouraged by a high school mentor

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to pursue the sciences. She got an undergrad degree in physics from Tsinghua University, the top science school in China, before migrating to the US to continue her studies. She started a physics course at Cornell University before switching to computer science. She earned a Masters from Carnegie Mellon University, where she also taught for five years, and a PhD from the University of California Berkley, where she’s been a faculty member since 2007.

The professor is an award-winning researcher and a frequent guest speaker at global tech conferences. The MacArthur Foundation awarded Song a “genius” fellowship in 2010 for her work on computer security and privacy. Her research in cybersecurity yielded more praise and prizes: a CAREER award by the National Science Foundation, a Guggenheim Fellowship and a Sloan Research Fellowship. She’s one of the most CFI.co | Capital Finance International

cited scholars in computer security and has received the Faculty Research Award from companies including Google and IBM. Dawn Song is a serial entrepreneur, launching Ensighta Security in 2008 (acquired four years later by FireEye for $3.2m) and Menlo Security, a spin-out co-founded with fellow Berkley alumni in 2013.

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> JAMIE DIMON JPMORGAN CHASE CHIEF EXECUTIVE

Crisis-hardened Banking Exec Warns of the Coming Storm Businesses and households should batten down the hatches, says JPMorgan Chase chief executive Jamie Dimon.

In mid-2022, Jamie Dimon expressed his fear that financial chaos was on the horizon. It could turn out to be a minor disturbance — or the economic equivalent of a Superstorm Sandy event.

“Right now,” he mused at the time, “it’s kind of sunny, things are doing fine, everyone thinks the Fed can handle this. (But) that hurricane is right out there, down the road, coming our way.

“These are very, very serious things which I think are likely to push the US and the world (into) some kind of recession six to nine months from now.” That was in October 2022.

Dimon has this year expressed a more optimistic — albeit still cautious — outlook in an interview with Fox Business.

He spoke of heightened risks due to the conflict between Russia and Ukraine, the energy crisis, food shortages, inflation and central banks’ overcorrection with quantitative tightening.

These factors, along with the Fed’s rate hikes, are “having a huge effect on smaller countries, poor nations, those who are reliant on importing oil and gas”.

Dimon believes these uncertainties may result in a “kind of Goldilocks mild recession”. But it could just as easily swing the other way.

Dimon has experience of weathering violent economic headwinds. He became the CEO of JPMorgan Chase in 2006, just before the global financial crisis of 2008. When he took the helm, JPMorgan was the third-largest bank in the US. After accepting state aid and snapping up weaker firms, Dimon led JPMorgan to the Number One spot. He’s celebrated as the “only survivor of the generation of managers who headed the big Wall Street banks when the financial crisis hit”.

So, if Dimon says to brace for economic turmoil, it would be wise to heed his words. JPMorgan Chase is.

“With all this capital uncertainty, we’re going to have to take action,” Dimon said. “I kind of want to shed non-operating deposits again, which we can do in size, to protect ourselves so we can serve clients in bad times. That’s the environment we’re dealing with.”

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The bank will be taking a conservative approach to its balance sheet, and Dimon said investors should do the same. But that hasn’t prevented the bank from bringing in fresh talent. “So far, we’re still in the hiring mode,” he said. “We have a lot of growth plans. You know, I tend not to stop growing because you have a recession.

“Even in a recession, we’re opening in new countries. And we think those things are very good for shareholders over the long run.”

Dimon, who is of Greek descent, shed light on the innovation hub that JPMorgan established in his ancestral home. He calls Greece a “rational government that makes rational decisions”, but insisted his lineage didn’t factor into the decision to invest there.

The bank has had offices in Greece since 1968, but the innovation hub will be the main arm of its development of digital assets, focusing on cryptography, distributed ledger technology, and artificial intelligence and machine learning related to payment systems. Greece was a shoo-in for the expansion plans, with a ready talent pool specialising in the fintech and data science sectors. The Athens-based hub expects to employ 50 people, and is still shopping for suitable real estate.

The bank has signed an $800m deal to acquire a 48.5 percent stake in the Greek start-up Viva Wallet. The payments fintech provides card acceptance services through its POS application, add-on Google play devices, and advanced payment systems in online stores.

Viva Wallet became Greece’s first unicorn start-up, with the latest valuation somewhere between €1.7bn and €2bn.

“Viva has done an amazing job in 23 countries,” said Dimon. “They’ve managed to serve stores or groups in different countries with different systems. While we are doing a good job, they have created systems that we still don’t have.”

While JPMorgan continues to shore-up digital assets, Dimon still expresses caution and scepticism on the subject of cryptocurrencies.

“I think sceptical is too soft a definition,” he said in an interview with El Pais. “I would never invest in crypto. (It) is necessary to separate the technology — the blockchain — from cryptocurrencies as a pure investment asset.

“We’re one of the largest users of blockchain in the world, because it allows us to process data in real time. I have never understood the CFI.co | Capital Finance International

value of cryptocurrencies as investment assets.

They have become fashionable, but deep down I think they hide a system that could be very similar to Ponzi schemes.”

He added: “That does not mean that I do not defend the right of people to invest in them.

I also don’t think people should smoke, but I defend their right to do so.”

In a CNBC interview in December 2022, Dimon called the crypto market a “complete sideshow” and likened tokens to “pet rocks”. He challenged

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the American public to consider what crypto is used for: ransomware pay-outs, exchange costs, money laundering, the financing of terror, tax avoidance, and sex trafficking. Dimon wonders how governments could have allowed this happen in the first place — and what they’ll do in the future.

The media have helped to boost the hype and hysteria surrounding crypto, and many people have fallen prey to an illusion. For an example, look no further than the rise and fall of FTX and its founder, Sam Bankman-Fried.

Dimon says that the government is responsible for protecting investors, but they’ve dropped the ball. There was a lot of smart money tied up in FTX, but there were also lots of “little people” hurt in the fallout. “These were retirees, grandmothers, lower-income folks, and it was a shame,” said Dimon, adding that crypto “should have immediately been put in some kind of regulatory framework so that there’s some investor protection”.

Regulators are starting to introduce safeguards, but in Dimon’s opinion, it’s too little, too late.

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The billionaire remembers a time, 20 years ago or so, when banks competed with rival financial institutions that were held to the same strict regulations. Now, the market has become flooded with shadow banks, fintech start-ups and tech giants that are playing by a different set of rules.

“We are partners with some of them, but we compete against all of them,” Dimon admitted.

“There is going to be a very tough battle, and not everyone will survive it. A lot of people will suffer as the match heats up.”

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> JANE FRASER CITIGROUP CEO

Bank with Soul and a CEO with Heart: Citigroup Treads a Wholesome Path Chief executive Jane Fraser is no stranger to glass ceilings, or glass cliffs...

Jane Fraser was the first woman to be tapped to head a major US bank — and she has proved that she has the grit and gumption to lead during challenging times.

Fraser was promoted to the Citigroup chief executive’s role in 2021 after holding several senior positions. She was hired to head the investment and global banking unit in July 2004, and promoted to head the strategy, mergers and acquisitions division in 2007.

Fraser held that position throughout the 2008 financial crisis and brought profitability back to Citi Private Bank during her four-year tenure as CEO; until then it had been running an annual deficit of around $250m. She took over CitiMortgage in 2013, and the group’s US consumer and commercial banking section in 2014.

In 2015, Fraser headed Citigroup Latin American operations, and four years later she was appointed president of Citigroup. She ran the global consumer banking division, overseeing retail banking, wealth management, credit cards, mortgage, operations and technology in 19 markets.

As the “glass cliff” reference suggests, each of those posts came with its own challenges. Fraser spearheaded recovery efforts during a marketwide drop in demand for mortgage refinancing in 2013, closing several offices and laying off more than 1,000 employees. In 2014, she dealt with the fallout of Citigroup’s $7bn settlement in a federal investigation involving the quality of mortgage-related financial products prior to the 2008 housing crisis.

Fraser took over the Latin American division shortly after Citigroup’s Banamex was fined $2.2m on fraud charges. She was named president a month before the Bank of England fined the group £43.9m for failing to provide accurate regulatory returns for its British operations between 2014 and 2018.

Citigroup’s former CEO, Michael Corbat, said that Fraser had helped to shape the company in many ways. She admits that each promotion required something of a leap of faith as she assumed crisis control of thorny assignments.

“The most I’ve ever learned,” she said, “was probably (at CitiMortgage) — because it was 62

a crisis, and because I didn’t know anything.

I didn’t know the business at all, and so the leadership skills that you learn (when) you have to hire people who are better than you, who are more knowledgeable than you, you have to get the team to work together ... I think it taught me modern leadership skills.”

Despite her humble attitude, Fraser was more than prepared for leadership. The Scottish native graduated from Cambridge’s Girton College with an economics degree. She worked in London as a Goldman Sachs analyst, and in Madrid as a securities broker, before going on to earn an MBA from Harvard Business School.

She spent a decade at McKinsey & Company, rising through the ranks of financial services and global strategy to become partner. Fraser maintained her career as she started a family, working part-time while raising her young children. She travelled the world and co-authored a book with three other McKinsey employees: Race for the World: Strategies to Build a Great Global Firm. She caught the eye of Citigroup execs while promoting the book.

“Today (leadership) is about how do you inspire communities of innovators,” she says. “You have to shape the context for them, and then let them get to work and do their amazing things. In the old days, it was about telling a group of followers, who would then execute.”

During her tenure at Citigroup, Fraser has led efforts to pare down sprawling operations and bring the group back to basics. “We went back to just being a bank,” she says. “We exited most of the businesses ... when Citibank and Travelers merged.”

She identified two metrics for reframing the bank’s future: excellence and empathy — “not only by what needed to change, but also what was already strong” in the bank. “I believe that empathy is about delivering excellence. It is about competitiveness. It is about edge. I’m not sure that was a mindset that existed in the world a number of years ago. I think more and more leaders today are recognising that that’s the case.”

Fraser has embraced the value of empathy in the way the bank deals with its workforce. As the pandemic blurred lines between home and work life, she found the “relentlessness of the pandemic workday” to be unsustainable; it was taking a toll on employee wellbeing. She began to introduce “reset measures” to ensure a healthier balance.

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For “Zoom-free Fridays”, Fraser instructed staff to schedule calls for work hours, and encouraged them to take advantage of accrued vacation days. She championed the hybrid work schedule that rival banks were quick to demonise. Citigroup allow most employees to work from home for two days of the week. “When our work regularly spills over into nights, very early mornings and weekends, it can prevent us from recharging fully,” she wrote, “and that isn’t good for you nor, ultimately, for Citi. Nothing should stop us from building a bank that wins, a bank that champions excellence, and a bank with a soul.”

The flexible schedules are a strategic bid to attract and retain talent in times of an increasingly tight labour supply. “We’re not seeing people coming back who had left the workforce in anything like the numbers we expected,” she said. “We’re going to have to keep listening to our people to get that balance right.”

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Fraser extols the benefits of flexy time while also insisting on the power of in-person collaboration, spontaneity, and apprenticeship.

“There is a lot of value that you get from being together,” she believes. “But for me, it’s also a sense of belonging. We all felt that it was lonely on your own. And the firms you work with, if you’re proud of them, if you’re proud of the job they’re doing, it inspires a sense of belonging and a higher purpose for what you’re doing every day, rather than just going through the set of tasks.” But, she added, “that doesn’t mean you’ve got to be there all the time”.

Nor, stressed, does empathy mean a lack of productivity. The bank brings remote workers back into the office for coaching and mentoring if their efforts don’t pass muster.

A new investment banking hub in Malaga, on Spain's Costa del Sol, exemplifies the group’s commitment to promoting that work-life balance.

Hundreds of aspiring beachside bankers applied for junior level positions that pay just half the starting salaries offered in New York or London — but promise eight-hour days with no weekend work. Investment bankers in London will typically work 70 hours a week in quiet periods — and up to 100 hours in busier times. The laid-back lifestyle and comparatively low cost of living in Malaga have lured in prospective applicants.

The bank has nearly completed its aim of hiring 30 juniors for the Malaga hub. The young and multicultural group, mostly aged 22 to 26, represent 22 countries and work in 15 languages.

A couple of months after the Spanish hiring spree, Citigroup let dozens of investment bankers in its deal-making unit go when expected revenue growth began to falter. “Wallets — particularly in investment banking — are further behind [on expectations],” she said. “We’ve been replacing some of our investments there.”

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Fraser is striving to increase diversity and to narrow the gender pay-gap. The Citigroup CEO makes a third less than some of her male peers, with a compensation package of $22.5m: a base salary of $1.3m, cash incentives of $6.4m, and $14.8m in deferred incentives of stock and performance share units.

She praises the bank for its progress in gender and diversity balance, while acknowledging there is more to be done. “We look at recruiting, retention, development and promotion,” she said, “and manage the processes around it to try to make sure that we provide everyone with the opportunities that they deserve.

“You need to get comfortable with the uncomfortable. Transparency works, and making those commitments public definitely helps as a forcing device that we all need, so you don’t slip.”

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> SAFRA CATZ ORACLE CORPORATION CEO

Tech Bros, Take Note — There’s a new Queen of the Cloud: Oracle’s Safra Catz Acquisitions, innovations, a hefty R&D budget and an open mind — this leader knows which way is up.

Oracle head of operations and sales Safra Catz has put the tech world on notice after being announced as the Cloud Wars CEO of 2022 by the Acceleration Economy Network.

The business exec has an estimated net worth of $1.6bn and is frequently named in lists of the most influential businesswomen in the world.

She occupied the 19th spot on two Forbes’ 2022 lists, Power Women, and America's SelfMade Women.

Israeli-born Catz joined Oracle in 1999 after a decade in investment banking. She began her Oracle career as senior vice-president, and has served as a board director, president, CFO, and co-CEO with Mark Hurd, the former boss of Hewlett-Packard. Catz and Hurd were selected to co-captain the company in 2014, when Oracle co-founder Larry Ellison stepped down to serve as executive chairman and CTO. Catz was in charge of operations, legal and finance, while Hurd oversaw sales, service, and marketing.

Catz became sole CEO in 2019, when Hurd passed away from cancer just five weeks after announcing a medical leave of absence.

“After we lost Mark, all of a sudden, I was responsible for sales,” recalls Catz. “Well, what do I know about that?” Of course, the famously low-profile leader knew about customers — from back office to end-user. She has since led the Oracle’s transition from selling products to partnering with clients to streamline and futureproof businesses.

“The way we used to sell a product is that our geniuses in their ivory towers would build a product and throw it out to a customer,” Catz joked. “They’d lean out and say, ‘Give us a call if you need help, but we’re hoping you’re smart enough to know how to use it.’ And then the system integrator and the customer would implement the product — sometimes with some help from Oracle Consulting — and that was the relationship until our geniuses came out with something new, and would throw it out the window again.”

She likens the business model to two occupants — Oracle and its customer — sharing a house.

“We now have to basically move in with you.

And live in the townhouse with you. And the customer’s on this side and Oracle’s on that side.

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“They’re totally connected, because we basically get rid of the wall between our two enterprises: us and you.” Oracle customers have commented that they can’t “tell where my people stop, and your people start” — which Catz takes as the ultimate endorsement.

She has proven herself a formidable force in the tech world, credited with spearheading 130 acquisitions during her 24-year tenure. “When we do acquisitions, we decide what we want. We decide what fills a hole,” Catz told Bloomberg.

“And if the price is too high, our alternative is the $5bn we spend on R&D every year. We’re not well-known for overpaying, because at Oracle, we always have an alternative.”

Each prospective deal is assessed from many angles: “The market continues to change all the time, and we are always looking at everything in evaluating how it fits with our strategy.”

One of the Oracle’s latest acquisitions, health-tech firm Cerner Corporation, has contributed to strong profit growth for the software giant. Oracle bought Cerner for $27bn in June 2022. Post-acquisition, Cerner was performing beyond expectations.

Quarterly revenue jumped 18 percent year-onyear in the period ending November 30 (nine percent if Cerner is excluded). That the bump exceeded “the high end of our guidance by more than $200m”.

Oracle’s cloud revenue, including Cerner, was up by 48 percent (27 percent increase without the health tech acquisition). The firm is also targeting the financial service sector, which Catz believes will become key to Oracle’s future. She outlined the company’s plans to leverage banking relationships to develop B2B transactions with its cloud technologies stack.

“Our ambition here is to completely automate B2B commerce between buying and selling companies that are running Oracle Cloud ERP, and manage all of the financing and insurance and logistics associated with that transaction,” Catz said. “We have very strong partners in finance, insurance and logistics, so we can completely automate the entire transaction, where B2B transactions begin to look like B2C transactions.”

Client success is central to Oracle’s mission, and Catz has found, particularly during the pandemic, that digital connections are crucial.

“We’ve learned that being bold is the way to win, and being timid will wipe you out,” she said.

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"We’ve built a platform that is secure, high-performing, sustainable and cost-efficient."

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“We’ve built a platform that is secure, highperforming, sustainable and cost-efficient. On top of that, we’ve built horizontal applications that are focused on so many industries where digital technologies are critical for survival and success.”

According to the latest research, the global cloud market is expected to reach $600bn this year, up from $410.9bn in 2021. Oracle is ready to capitalise on that growth with 40 commercial and government cloud regions in 22 countries on five continents.

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“Everyone will go to the cloud,” Catz predicts.

“The only question is who they will go with. Every company has a different offer, and every customer has different needs. Companies must move into the 21st Century — and everyone knows that.”

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> Europe

Tiny European Nation Forges Fresh Digital Identity for Itself, and Gives Other Countries a Path to Follow

By Brendan Filipovski

In just 30 years, Estonia has gone from a member of the Soviet Bloc to a “zero-bureaucracy e-state”.

Estonia: Tallinn

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hen it regained its independence in 1991, some households did not even have a landline, let alone a mobile. Today, 99 percent of government services are conducted online and foreign entrepreneurs are becoming Estonian e-citizens. The country has become the posterchild for digitalisation.

How was it done — and can it be replicated?

In the 1980s, the Estonian economy was stagnating. The boost from Soviet industrialisation was long gone and Estonia was looking to break from the Soviet system. Factories were closing, infrastructure was crumbling, living standards were falling. Coupons were introduced in the 1990s to ration staples such as bread and sugar — even vodka.

Any change was welcome post-1991. The government implemented bold macro-economic reforms and opened the economy to free trade.

At the micro level, the ICT sector was seen as the route to rapid transformation. It was embraced as a shortcut to a superior bureaucracy.

“We couldn’t build an average paper-based bureaucracy, and thus we chose digital tools,” said former national digital advisor Marten Kaevats. “We didn’t have the money to buy products from large-scale companies such as IBM, SAP or others, so we needed to invent our own.”

The Informatics Council and Informatics Fund were entrusted to lead the ICT revolution, with an early focus on introducing IT into public administration. After a slow start, the Department of State Information Systems (Riigi Infosüsteemide Osakond, or RISO) was formed in 1993. It was directly answerable to the Chancellery, and from that point, Estonia accelerated through the milestones.

In 1994, the Principles of Estonian Information Policy was released to co-ordinate the development of IT systems within government departments. The document recommends dedicating one percent of GDP to ICT funding, and the use of public-private partnerships to build network infrastructure.

In 1996, the Tiger Leap (Tiigrihüpe) programme was launched to connect every school to the internet and to improve ICT education. The internet link was achieved in 2001, with free public wi-fi released the following year. In 2001, the government defined internet access as a human right.

A government IT network, established in 1998, became the X-Road in 2001. This distributed data system allows government departments and citizens to interact. In 2007, the government became the first in the world to use blockchain technology for the verification of data and registries.

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"Some 60 countries have adopted Estonian digital solutions, proving that Estonia’s know-how and success can be replicated."

With the public now online, and a solid publicsector network established, services became more ambitious. In 2002, the foundation for the next stage was laid with the introduction of eID (electronic identity). Passports can be only given out by governments, and they can legally protect them. “This is the idea behind the digital ID,” said former president Kersti Kaljulaid. “It's a passport, on the Internet.”

Every Estonian citizen over 15 is issued with a physical ID card, corresponding with their 11-digit personal identification number. The card contains a chip that stores each citizen’s private key, which uniquely identifies them online and allows digital-signing and encrypted communication. A claimed 99 percent of the Estonian population have an ID card. Mobile SIM and app versions that do not require a card-reader are available.

Via eID, citizens can access over a 1,000 government services, 24/7. The initiative has helped to streamline services such as e-health, which comprises an electronic universal health record and prescription service. Patients and practitioners can liaise with one another, and treatments can be tracked. This minimises over-prescription, one of the contributors to the opioid crisis in the US. In just three minutes, income taxes can be electronically submitted via e-tax; 98 percent of citizens use the system. Digital voting, or “i-voting”, was introduced in 2005. Citizens can vote at any time, from anywhere, during an election period. In the 2021 local elections, almost half the country’s voters used the system.

The private sector can use the open-source eID to identify customers. Several banks have adopted it for online transactions, while retail stores are adopting it for customer loyalty schemes.

In 2014, eID was adapted to create the e-Residency programme which allows foreigners to set-up companies in Estonia, and access government services.

The 2030 digital agenda includes making more use of cloud networks and AI, and the automatic delivery of government services based on key life and business events. The government estimates that eID and digital government services save each citizen five days a year, or, in Dollar terms, two percent in GDP: $744m in 2021. E-residency has already generated over a billion euros for the government.

CFI.co | Capital Finance International

Digitalisation has had a spill-over effect on Estonia’s ICT industry, allowing local firms to innovate and provide services internationally, and attracting foreign entrepreneurs. ICT services have grown from $184m in 1995 (six percent of the total) to become the leading export in 2020, worth $4.08bn — an increase of 18.65 percent.

Estonia has created 10 tech unicorns, including Skype and Wise. Its export complexity ranking has increased from 41st in 2000 to 27th in 2020, ahead of Netherlands, Norway and India.

GDP per capita is double Russia’s level.

Estonia has achieved all this despite its small size, 1.3 million population, and a difficult starting position. Some say it simply avoided the mistakes of others and adopted best practise. But it developed most of the systems itself, and has been a pioneer in many aspects of digitalisation.

Other nations are benefitting from Estonia’s open-source systems. Some 60 countries have adopted Estonian digital solutions, proving that Estonia’s know-how and success can be replicated. Its X-Road network has been adopted in Argentina, Brazil, Cambodia, Iceland, Namibia and Vietnam.

Estonia is championing the inter-operability of digital services in the EU, and used its 2017 EU Presidency to push the agenda. Inter-operable digital signing was an early success for the EU, but Estonia wants more everyday advances like its 2019 agreement with Finland on digital prescription services.

The Estonians believe the main reason for their success was neither systems nor technology, but political commitment to digitalisation. After a false start, progress improved after the creation of RISO in 1993, and the success has kept the government committed and motivated.

The population has been along for the ride.

Not every country’s citizens would accept this level of personal data to be shared online, but Estonians appear convinced by the security, the decentralisation, and —most importantly — the benefits.

“I keep stressing, it’s not the technology,” said former president Toomas Hendrik Ilves. “It’s political will, policy, laws, and regulations — in that order. For it to work, you need laws that underpin the system. You want to define digital identity, then set out the regulations to avoid abuses.

“And in Estonia that has worked.” i

Spring 2023 Issue

> Dancing in the Streets:

Britain’s Part in Making Motown the ‘Sound of the Sixties’

By Tony Lennox

S

ixty years ago, a 13-year-old blind black singer took to the set of Ready, Steady, Go! — an appearance which posed the question to UK television viewers: “Are you ready for a brand new beat?”

Motown was thriving, essentially made for a black audience by black performers, and with its own charts. Popular culture developed along disparate lines, and mainstream America knew next-to-nothing of African-American sounds.

The beat in question was the Motown Sound: rhythm & blues straight from the streets of Detroit, America’s “Motor City”. The singer was a young Stevie Wonder. Within a few years, Tamla Motown would dominate the charts on both sides of the Atlantic, establishing itself for many as the true Sound of the Sixties.

By the early sixties, musical styles were shifting and blurring. The Beatles, still performing at Liverpool’s Cavern Club, were among the first to recognise Motown’s compelling sound. In 1963, the Fab Four recorded a Gordy-Janie Bradford song, Money (That’s What I Want). A year later, as they were breaking into the US market, John, Paul, George and Ringo included the song on an American album release. The publishing royalties gave Motown an unexpected boost, and helped to introduce white America to the label.

Smash after smash flowed from Motown’s Hitsville studios — a converted garage in suburban Detroit — making household names of Smokey Robinson & the Miracles, Mary Wells, Marvin Gaye, Martha Reeves & the Vandellas, The Supremes, and, of course, Stevie Wonder.

The label — the first record company owned and run by black Americans — was the creation of Berry Gordy, a former Detroit car worker-turnedsong-writer who set up the business in 1959.

A year earlier, he’d had his first song-writing success, Reet Petite, penned for Jackie Wilson. It was a hit in the UK, but failed to make a dent on the Billboard Hot 100 in the US. The record forged a link between Motown and young British fans, whom Gordy later acknowledged as crucial in helping to break the racial divisions of the American music industry.

Even as late as the 1960s, segregation was rife in the US, and it applied to the music industry as much as public transport.

As The Beatles became a global phenomenon, they credited Motown performers as major influences. New York attorney and company lawyer George Schiffer wrote that the British musicians were the label’s best publicists, “mentioning our records and artists wherever they go”.

Gordy was driven by a desire to make music, and to champion black America. In his autobiography To Be Loved: The Music, The Magic, The Memories of Motown, he recalls the night he listened to the commentary of the historic heavyweight fight between Joe “the Brown Bomber” Louis and the Nazi German champion, Max Schmeling, in 1938.

Louis won the fight. He had lost to the German two years earlier, and the result had been hyped CFI.co | Capital Finance International

as “proof” of Aryan supremacy. Gordy wrote: “This fight was perceived by everyone as a superpower contest between America, the land of the free, and Nazi Germany. I was only eight at the time, but I knew Joe Louis was a hero, a hero of all the people, but he was black like me.

“I knew what that meant. I had gotten a taste of the world — the real world, the white world.”

When The Supremes toured the UK in 1965 to promote Baby Love, singer Mary Wilson said: “Coming from the United States during that era was quite an eye-opener, to see how well we were received. Growing up we weren’t black, we were negroes — a very negative term — so to go to a country where people just adored us, well, that was new. We were treated like royalty. We were not treated like that in the States.”

Gordy originally wanted to name his label Tammy Records, after the hit song popularized

by Debbie Reynolds from the 1957 film Tammy and the Bachelor. When he found the name was taken, he decided on Tamla instead. Tamla Motown scored seven number one hits in the UK in 1966. Motown artists became established bestsellers in the country. Jimmy Ruffin enjoyed his tours so much that he eventually migrated to Britain.

Gordy, then aged 86, came to London in 2016 for the West End premiere of Motown the Musical. He was joined, appropriately, by Paul McCartney. Gordy said: “There are just so many memories I have of the UK. I will personally never forget that whole experience.” i 69

> And Now, in Other News...

Something Positive, at Last!

By Heather Smith

After a year marked by continued pandemic challenges, international conflict and catastrophic climate events, the world is overdue for some feel-good news — and it turns out that there was plenty to celebrate last year.

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ore than could fit in a single editorial, in fact. So, here comes that good news, in instalments. In this first part, we focus on the shifting energy paradigm...

WIND POWER IS A WIN-WIN The UK announced plans to build to the world's largest floating wind farm off the coast of England and Wales. The project, called Gwnt Glas (or Blue Wind, in English), is expected to be 20 times bigger than the current record holder, which is located off the coast of Scotland. The floating wind farm — a collaboration between French energy company EDF and Irish renewable energy company DP — will generate enough electricity to power nearly a million homes.

Unlike conventional offshore turbines, which are limited to 50-metre-deep installations, floating wind farm platforms can be installed in deeper waters, where 80 percent of offshore wind capacity is found.

SOLAR ENERGY HEATS UP In 2022, the world’s installed solar energy capacity surpassed the one-terawatt milestone — enough to meet the electricity demands of almost all European countries combined.

It’s still only a fraction of global energy generation, which was at 26,823 terawatt in 2021, but it’s a step in the right direction. The US, EU and China are credited as the main drivers of this transition, and developing nations with renewable resources are forging ahead, too.

Nearly 40 percent of Morocco’s installed energy capacity comes from renewable sources; it’s aiming for 50 percent by 2030. Over the past decade, the North African country has attracted over $5bn in renewable energy infrastructure investments. “We’re trying to ensure that the return on capital invested on projects, particularly those most competitive in wind, solar and now hydrogen, improves so that it is a sustainable strategy,” explained Leila Benali, the Moroccan minister of energy transition and sustainable development.

COAL POWER: ON THE WAY OUT Coal is finally getting the boot — despite reaching an all-time high of 36 percent of global power 70

"Floating wind farm platforms can be installed in deeper waters, where 80 percent of offshore wind capacity is found." generation. The insurance industry increasingly views new coal projects as uninsurable, and 62 percent of reinsurers now have coal-exit policies.

After 30 years of operation, Hawaii’s last coal plant closed in September, moving it closer to the goal of 100 percent renewable energy by 2045.

Hawaii was the first US state to make a net-zero pledge and begin introducing environmental protection measures into state law in 2015.

Australia’s largest coal-fired power plant, Origin Energy, will shut down seven years earlier than anticipated — and be replaced by a virtual power plant and large-scale battery storage system. This comes on the heels of two rival energy companies also announcing the closure of coal power plants years ahead of schedule. Cheaper and cleaner options are pushing coal out of the mix, with renewables predicted to grow from 30 to 70 percent by 2030.

ON TRACK TO MEET CLIMATE GOALS Against a backdrop of tightening regulations and mounting public pressure, banks are looking to clean up their portfolios. In December, HSBC announced the end of financing for new oil and gas fields. Britain's biggest domestic bank, Lloyds, reached a similar decision in October.

According to a report from climate thinktank Ember, if the current growth of renewables continues until 2030, the world might actually meet the climate targets outlined in the Paris Agreement.

“Even as coal and power emissions hit another all-time high, there are clear signs that the global CFI.co | Capital Finance International

electricity transition is well under way,” said Dave Jones, Ember’s global programme lead.

“More wind and solar is being added to grids than ever. And not just in a few countries, but across the world. They are able — and expected — to provide the majority of clean electricity needed to phase out all fossil fuels, at the same time helping to increase energy security. But with sustained high gas prices amid Russia’s war with Ukraine, there is a real risk of relapse into coal, threatening the global 1.5 degrees climate goal.

“Clean electricity now needs to be built on a heroic scale. Leaders are only just waking up to the challenge of how quickly they need to move to 100 percent clean electricity.”

Researchers continue to push the boundaries.

Stanford University engineers have somehow developed solar panels capable of generating

Spring 2023 Issue

electricity at night, while US physicists made a breakthrough in fusion ignition that could eventually turn the dream of near-limitless, lowcarbon energy into a reality.

COMMUNITIES FLEX COLLECTIVE POWER Corporations, start-ups and municipalities are capitalising on renewables, but the real magic — and biggest impacts — happen when communities take ownership of their energy needs.

According to a report from Allied Market Research, the market was valued at $881.7bn in 2020 — and is expected to approach $2tn by 2030. Community-owned energy projects could lead to a more equitable distribution of wealth.

Recent world events are driving the search for sustainable solutions. Community energy projects protect residents from price-gouging

by utility companies that have raked in windfall profits. Rather than rely on centralised energy generation, businesses and households can reap the economic and environmental benefits of developing local energy systems. While the upfront investment might seem prohibitive, in the long run, these projects cut costs and emissions, boost community resilience, and help to stabilise the energy grid.

Solar microgrids are a game-changer in settings such as war-torn Ukraine, where two dozen portable solar battery systems were donated and deployed at hospitals. New Use Energy, Footprint Project and their partners raised over $600,000 for Ukrainian relief assistance.

In the US, Delaware launched a solar equity programme that gives free home solar panels to lowincome residents, whose energy burden can be up to three times higher than high-income households.

CFI.co | Capital Finance International

The programme will also cover 70 percent the cost of panels for moderate-income residents.

In the UK, “solar punks” in East London are combatting financial and ecological crises by turning streets into generators. Artists and activists Dan Edelstyn and Hilary Powell started a co-operative movement to install solar panels on dozens of homes in Walthamstow, donating materials and labour for some households. They raised over £113,000 through a crowdfunding campaign.

“Everything’s just driven by profit and people are so trapped in making ends meet. It’s hard for them to see that there is an alternative,” said Powell. “If we’re to have an equitable future in this transition ... we can’t let renewables repeat the power games and monopolies we’ve seen in the fossil fuel industry. There has to be equitable distribution.” i 71

> Death to Debt!

The People and Organisations Saying ‘No to Owe’ — and Picking Up the Tab for Us

By Heather Smith

Consumer and family debt are millstones that can — sometimes — be removed...

D

ebt is a modern reality for countries, companies and households, but — according to historian Louis Hyman — consumer debt is a relatively new phenomenon.

Hyman links it to the advent of the automobile and intermediary finance companies. “For the first time, money from the core of capitalism, the consumer banks, was invested, albeit indirectly, in consumer debt,” he writes.

“What began with automobiles spread to vacuum cleaners, furniture, radios, and nearly every kind of durable good desired in the great boom of the 1920s. Lending was still limited to finance companies, which were limited to repossess-able, durable goods, but for the first time, American personal debt had become a good investment.”

Fast-forward a century or so and the world’s debt obligations have ballooned out of control. As of August 2022, the US topped the charts for the highest household debt — a staggering $16.5tn.

China and Japan take second and third places on the list, with respective figures of $10.9tn and $2.6tn. EU households owe a combined $7.1tn; the UK’s figure sits at about $2.4tn.

These figures include home mortgages, student loans, credit cards and medical debt. But hope is on the horizon.

COMMUNITY-LED DEBT RELIEF In the UK, Dan Edelstyn and Hilary Powell are blurring the lines between art, economics, and activism. The duo literally and figuratively blew up £1.2m in local predatory high-interest payday-loan debt in a 2019 movie project Bank Job. Filmmaker Edelstyn and artist Powell were inspired by the exploits of the Rolling Jubilee Fund and Debt Collective, which, over the past decade, has raised around $700,000 to abolish $32m in student, medical, and probation debt.

Debt Collective believes that access to things like education and healthcare must be available for free, as they are in most wealthy countries. The decentralised organisation strives to make this 72

"As of August 2022, the US topped the charts for the highest household debt — a staggering $16.5tn." dream a reality by uniting debtors to use their collective debts as leverage.

Hyman’s historical research outlines how the wealth inequality gap began to widen in the 1970s, as more capital concentrated in the top one percent of the population. “Whereas in the post-war period, the one percent paid the 99 percent in wages, after 1970 the one percent increasingly just lent the 99 percent money.

Mortgage-backed securities and then other forms of asset-backed securities channelled capital from the top to the borrowers at the bottom.

The shift was rapid. In 1990, one percent of US credit card balances were securitised, but by 1996, 45 percent were securitised.”

Books like David Graeber’s The 5,000 years of Debt and Andrew Ross’s Creditocracy expand on the topic. “The whole literature around it was quite altering, in terms of how you look at the world, and how you look at the relationships between people in our society,” remembers Edelstyn. “It opened my mind to a whole different way of analysing social relations and economic relations.”

The more Edelstyn and Powell researched, the more they noticed how interlinked money creation is with debt, banking regulations, and changes to the banking system.

“Enough was enough. I felt this notion of ‘creditocracy’ was self-evident and something had to be done,” said Edelstyn. “We realised that CFI.co | Capital Finance International

banking was right at the core of the problem of creating all of this debt, and we also realised that we needed to make money quite quickly.”

Powell wondered: “If banks can create their own money at the click of a button, why can’t we?

Rather than using it to profit though, our idea was to use it to help those most affected by the fall-out of our unequal debt-based economy.”

The husband-and-wife activists found an old co-op bank building to rent, dubbed their new enterprise the Hoe Street Central Bank (HSCB) and began to print fine-art bank notes depicting local heroes like the founders of a food bank and homeless kitchen, and the head of a primary school. They sold the screen-printed art currency at the face value of the notes — one, five, 10, 20, 50, 100 and 1,000 — and split the proceeds, supporting local organisations and

Spring 2023 Issue

buying payday-loan debt. They raised £40,000, half of which went back into the community; the other half went towards the purchase of highinterest debt.

Unpaid debts are often sold on the secondary debt market for a fraction of what’s owed. An FCA-licensed debt-buyer, such as a collection agency, can acquire £1,000 of personal debt for under £100 — and then chase the debtor for their full bill plus accrued interest. Threatening letters and persistent phone calls are common tactics.

Edelstyn and Powell spent £20,000 to acquire £1.2m in geo-targeted payday debt. In March 2019, they sent out 411 letters to debtors with long overdue accounts, not to request repayment but to invite them to watch the artists-activists blow up that debt. They stuffed the account

paperwork in a “debt-in-transit” van and detonated it near London’s Canary Wharf.

HSCB notes are no longer available, but the bank is still selling bonds to amplify the reverberations of its “bank heist”. The bond certificates were created by local artisans working with traditional methods of screen printing, letterpress, foil block, and company stamp. Bondholders of £50 or more also receive a commemorative coin made from fragments of the van explosion.

Other organisations have taken a similar — although not as explosive — path to debtforgiveness.

MEDICAL DEBT RELIEF RIP Medical Debt, a 501 (tax-exempt) charity based in New York, was founded in 2014 by CFI.co | Capital Finance International

former debt-collection executives. Since its launch, the organisation has abolished over $8.5bn in medical debt. The ongoing campaign promises that for every $100 donated, $10,000 in medical debt can be relieved.

A portion of the debt-forgiveness by RIP Medical Debt — some $147m — was achieved with the support of Sharon McMahon’s “Governerds” community.

McMahon, a former high school government and law teacher, became an Instagram sensation during the 2020 US presidential election. She began posting stories to provide people with factbased explanations and non-partisan news during the political turmoil. Several of her posts went viral and now she has over a million followers, many of whom have mobilised under her call for collective action.

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Apart from the medical debt forgiveness, McMahon and the Governerds have raised $623,000 to support Ukrainian war-relief via onthe-ground organisations such as World Central Kitchen and CARE. In 2021, McMahon launched a teacher grant programme and raised over $560,000. When she reopened the programme in 2022, the community raised $1.2m — most within the first weekend.

“I am hopeful that we can be the change we wish to see,” she said, “that every small action has an infinite number of ripples; that, incrementally, and slowly, and through this grassroots effort, we can affect significant change in the world. I am very encouraged by seeing what is coming out of my community, and what can happen when we work together instead of working against each other.”

The US Consumer Financial Protection Bureau (CFPB) explains how medical debt negatively impacts millions of Americans. Around twothirds of bankruptcies in the US involve medical debt. Around 20 percent of US households are burdened by medical debt, which represents over half of the unpaid bills on credit reports.

“When it comes to medical bills, Americans are often caught in a doom-loop between their medical provider and insurance company,” said CFPB director Rohit Chopra. “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.”

Mistakes are common as medical debt passes through the credit-reporting infrastructure, and patients often have difficulty getting errors corrected or resolved. The situation has been exacerbated by the pandemic and the costs incurred to cover Covid testing, treatment and hospitalisation.

Past-due medical debt affects households unevenly in the US. It’s more prevalent among black (28 percent) and Hispanic (22 percent) citizens than the white (17 percent) or Asian communities (10 percent). It’s also more common in the south-east and mid-west US, where only nine to 20 percent of the population is covered by Medicaid and the Children’s Health Insurance Programme.

CFPB research suggests that medical debt weakens underwriting accuracy. Despite being less predictive of future repayment than traditional obligations, it can lead to lower credit scores. A poor credit rating can make it harder to rent an apartment, get a loan, or take out a mortgage. It can even be an impediment to employment.

Public pressure has led the three biggest credit reporting agencies in the US — Equifax, Experian and TransUnion — to implement changes that will remove around 70 percent of 74

medical collection debt from Americans' credit reports. Once paid, medical debt will no longer be included in reports; previously, medical collection debt lingered on a person’s credit report for seven years.

People will have 12 (rather than six) months to clear medical bills before any unpaid collection debt appears on reports. Finally, no agencies will include medical debt of less than $500 on a credit report. According to the CFPB, the majority of medical debt falls under that threshold.

These changes have resulted in the removal of an estimated $60bn in medical debt from US consumers’ credit reports.

“That will give patients more time to sort out these bills with their insurance company — which is often a time-consuming and frustrating process,” said Ted Rossman, a senior industry analyst at Bankrate.

“Medical debt is often the most depressing and stressful kind, because you or a loved one just endured a health-scare — only to face huge bills you can’t afford,” said Howard Dvorkin, CPA, chairman of Debt.com. “You’re already fragile, either physically or emotionally, and often both.

Pile medical debt on top of that, and it can crush anyone’s resolve.”

According to the Kaiser Family Foundation, a non-profit focusing on health policy analysis and journalism, 53 percent of Americans with $10,000 or more in medical debt fear that they’ll never be able to pay it off.

STUDENT LOAN RELIEF Chegg.org research found that a third of Americans felt unable to clear study-related debt, and a College Board study found that the average cost of a four-year degree from a public CFI.co | Capital Finance International

or private institution has doubled over the past three decades. Outstanding student loan debt in the US totalled $1.76tn in the fourth quarter of 2022, compared to $481bn at the start of 2006. That makes student loan debt almost equal to the size of the economies of Brazil or Australia.

But relief is coming, if US president Joe Biden has anything to say about it. “The burden is so heavy that even if you graduate,” he said, “you may not have access to the middle-class life that the college degree once provided.”

The Biden administration introduced a plan to provide up to $20,000 in debt relief for individuals earning less than $125,000 a year, or households earning less than $250,000.

When the programme opened last year, it was inundated with millions of applications.

Relief efforts were halted by legal challenges, and ultimately blocked by two federal courts.

Other changes to the income-driven repayment plan for federal student loans could “reduce monthly payments for millions of borrowers, expand the loan periods that can count towards eventual loan-forgiveness, and shorten the loan-forgiveness term for some undergraduate borrowers with low initial balances”.

Conservatives are challenging the authority of the executive branch to enact such sweeping changes. The fate of the student loan relief package now rests with the Supreme Court, which is expected to deliver a verdict by June 2023.

Critics of debt-forgiveness programmes complain that it’s a patchwork solution for a systemic problem. But for anyone lucky enough to receive it, it must feel like a new lease on life. i

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> Forgiveness, Peace, and Film Sets:

Downeys Sr and Jr Come to Terms with Life, Parenting, Film and Death

By Kitty Wenham

A famous father and son explore their relationship and strange lives in Hollywood in Netflix documentary Sr.

O

nce the highest-paid actor in the world — with $80m in earnings — Iron Man star Robert Downey Jr is justifiably famous. Fewer people have heard of his father and namesake, maverick filmmaker Robert Downey Sr. This disparity is set to rights in the Netflix documentary Sr. What begins as an introduction to the elder Downey’s body of work soon becomes a “foray into that crazy thing of trying to understand your dad” — as his health declines.

Robert Downey Sr died in 2021, while the documentary was still being filmed.

Downey Jr and the team worked on the project while Sr addressed a more nebulous and abstract concept; it was the only way he would agree to taking part in the film.

To other families, the footage may feel uncomfortably raw, but veteran filmmaker Chris Smith (Tiger King, Fyre, Jim & Andy, Bad Vegan) expertly navigates this challenge. The result is a stirring eulogy, more love letter than documentary.

Downey Jr reminisces on his unusual childhood with his father and his mother, actor Elsie Ford; he was surrounded by a “cacophony of creativity” and warmth. He describes falling asleep in a crib on his father’s “sets” — his own home or the streets of New York City — to the sound of running dailies and clapper boards.

Jr appeared in his first film, his father’s 1970 movie Pound, at the tender age of five. He is described by others as a natural, and he was instantly comfortable in the scene. “When I saw cameras,” he says, “I perceived it as time with my dad.”

It makes sense, then, that the pair would use a documentary as an outlet to deal with their impending end-of-life separation. The black and white material intercut with archival footage creates the intimate feeling of watching a stranger’s home movies without ever feeling voyeuristic.

Robert Downey Sr was one of the pioneers of the 1960s and ‘70s underground cinema scene in New York. The first movie discussed in Sr is a 1966 work in which a welfare recipient marries his 76

mother. This sets the tone; Downey Sr’s breakout movie Putney Swope (1969) was a provocative satire of Madison Avenue ad agencies and racial tension. It was also one of 25 movies selected for preservation in the US National Film Registry by the Library of Congress in 2016 as "culturally, historically, or aesthetically significant". Downey Jr’s debut, Pound, sees the cast portraying dogs waiting for adoption. Released two years later, Greaser’s Palace follows a pink-hatted Jesus figure as he descends on a barren Western town. “I believe he is connected to some kind of creative deity,” Jr notes in the documentary.

TV producer Norman Lear described time spend with Downey Sr was “perfectly, wonderfully, deliciously insane”.

Downey Jr’s memories are presented tenderly, but never idealised. There are negative points to address: both father and son struggled with substance abuse. Downey Jr is famously tightlipped about this period of his life, and in Sr, references are often leavened with charm and humour. “You did not give a mad fuck, did you?”

Jr says to his father in one scene, laughing.

The father allowed his son to try marijuana at the age of six. In one unusually candid (archival) interview, Downey Sr remarks: “A lot of us thought it would be hypocritical to not have our kids participate in marijuana and stuff like that. It was an idiot move on our parts to share that with our children. I’m just happy he’s here.”

This’s about as deeply as the issue is addressed in Sr. Some reviewers have expressed disappointment at the lack of explicitness, but this is a masterclass on creating a deeply affecting and personal movie while maintaining healthy boundaries. This, of course, is a privilege that only the highest-paid actors are afforded — but it provides an example for documentary makers to follow: exploring pain without creating trauma porn.

Those looking for bare-all revelations may be disappointed, but the viewer feels closer to father and son for the restraint. The result is a celebrity memoir stripped of celebrity.

Fans of Robert Downey Jr’s Marvel movies may be used to excessive visual explanations; in an CFI.co | Capital Finance International

era of series and remakes, giving the audience the opportunity to pick up on subtext is rare, and welcome.

But be careful not to read too much into this; pressed on whether audiences should find a greater meaning to his movies, Downey Sr pithily replies, “Oh God, I hope not.”

The information audiences will want is there — but rarely in traditional, talking-head form.

Neither father nor son is directly asked how the offspring of a cult counterculture filmmaker became one of Hollywood’s most bankable actors, or how Sr feels about his son’s work — but the clues are there. In a segment discussing erstwhile colleague and Sr enthusiast director Paul Thomas Anderson (There Will Be Blood, Magnolia, Boogie Nights), Downey Jr jokes: “It’s no mystery that Paul Thomas Anderson is probably the son my dad wishes he had had.”

How such a schism in movie-making philosophy occurs is hinted at in brief interviews where Downey Jr talks about growing up in a financially

Spring 2023 Issue

unstable home. He laughs about how the family was always either broke or flush (flush, to them, meant having $500 in the bank). The reminiscing is always light-hearted, and apparently positive, but you can’t help but read into it a possible effect on Jr’s life choices and parenting style.

It’s not long before the focus switches to Downey Sr’s struggle with Parkinson’s. This slow walk towards his death becomes a driving force, and what started as a disjointed (if entertaining) documentary finally finds its footing.

We see Sr suffer from tremors and a dizzy spell while filming outside; he has to rest on a park bench. Anyone who has lost a loved one to a degenerative disease will recognise these poignant moments.

One of the most painful scenes sees Downey Jr and his eight-year-old son, Exton, visit Downey Sr shortly before his death. They attempt to lighten the mood with humour, as they do throughout.

Exton is instructed by his father to repeat the one-liner from his debut in Pound, but it’s clear

Sr has forgotten the reference. It’s uncertain, at one point, if he even recognises his son. This is the messy reality of a slow death that cannot be eased with money or power.

Some may be disappointed at the lack of clear answers that Sr provides, or frustrated by the elder Robert Downey’s reticence. Even with years to prepare for the end, things are left unspoken, questions go unanswered. The wishes of the dying person are in conflict with those they are leaving behind. You never know when the last day is coming. You always think you have another chance until you don’t. Anticipatory grief doesn’t save you from regrets. In one particularly raw moment, Jr tells his therapist: “'I don't want to do the wrong thing.”

The clear message is that moving on, forgiveness and understanding are more important than lingering on the heavy details of the past. A lot of the healing seems to come through Jr’s relationship with his own son. It’s clear that Downey Jr has been able to learn from his father’s parenting mistakes.

CFI.co | Capital Finance International

The level to which the actor has committed to working on himself is admirable. From the beginning, Sr is as much about Robert Downey Jr’s experience as a father as it is about his experiences as a son. The imminent death of a family member creates a desire for answers — which is overridden by the need for quality time spent together.

Forgiveness and peace must be found some other way. i

Author: Kitty Wenham

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ANNOUNCING

AWARDS 2023 SPRING HIGHLIGHTS Once again CFI.co brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative.

All the winners announced below were nominated by CFI.co audiences and

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then shortlisted for further consideration by the panel. Our research team gathered additional information to help reach a final decision. In many cases, senior members of nominee management teams provided the judges with a personal view of what sets their companies and institutions apart from the competition.

CFI.co | Capital Finance International

As world economies converge we are coming across many inspirational individuals and organisations from developing as well as developed markets - and everyone can learn something from them. If you have been particularly impressed by an individual or organisation’s performance please visit our award pages at www.cfi.co and nominate.

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> JP MORGAN CHASE PAYMENTS: BEST PAYMENT DIGITAL TRANSFORMATION STRATEGY GLOBAL 2023

JP Morgan Chase & Company can trace its roots back to the combination of more than 1,200 predecessor institutions over the past 224 years.

JP Morgan Chase Payments is a vital part of the group’s global network, processing $9.6tn in daily payments across more than 160 countries and 120 currencies. It offers corporate treasury, trade finance, card and merchant services. The company likens payments to a language that speaks volumes about the growth trajectory, trustworthiness and innovation of a business, from MSMEs to multinational corporations. It

looks at global trends and predicts that the next decade will be transformational for the payments ecosystem. Harnessing key innovations could unlock up to $54bn in new opportunities for businesses — and JP Morgan Chase Payments is partnering with powerful players to accelerate these changes. In September 2022, it announced an agreement to acquire Renovite Technologies, a leading cloud-native payments technology company. The move will help to modernise JP Morgan Chase Payments’ infrastructure and increase the flexibility of merchant acquiring

capabilities worldwide. Renovite has been supplying services to JP Morgan since 2021, and its integration with the group will bolster clients’ capacity to accept more methods of payments and support their business growth. This acquisition complements the company’s strategic investment in Viva Wallet, a European cloud-based neobank, and its partnership with Volkswagen Financial Services. The CFI.co judging panel announces JP Morgan Chase Payments as the 2023 global award winner for Best Payment Digital Transformation Strategy.

> THE ACCESS BANK UK LTD: BEST AFRICA TRADE FINANCE BANK 2023

The Access Bank UK is headquartered in The City of London, the European financial centre that's actually a city within a city. In addition to this prime location, the bank has a strong base in the UK and abroad, with fully regulated branch operations in Dubai's International Finance Centre and in Paris, France and a Representative Office in Lagos, Nigeria. The UK bank forms the international expansion arm of the Access banking group, which has a network spanning three continents, 12 countries and 55 million customers. The

Access Bank UK offers a comprehensive range of services, including commercial banking, asset management and trade finance. It is a correspondent bank to the Central Bank of Nigeria and a confirming bank in the IFC's Global Trade Finance Programme. The Access Bank UK has a wide ranging geographical footprint and internationally experienced staff which allows it to unearth and nurture opportunities across OECD markets. This year, the bank has advanced plans to open in other new jurisdictions . The

Access Bank UK provides trade finance services that help attract investments to Sub-Saharan Africa and support the international expansion of its businesses. The bank’s income has risen consistently over the past twelve years. Over the past year, the bank's income-driven strategy has led to increases of 18 percent in revenue, 13 percent in pre-tax profits and 26 percent in lending. The CFl.co judging panel presents repeat winner The Access Bank UK with the 2023 award for Best Africa Trade Finance Bank.

> PROSPECT CAPITAL: BEST MIDDLE-MARKET LENDING INVESTOR US 2023

Prospect Capital Management (Prospect) is an SEC registered investment adviser that was founded in 1988 (along with its predecessors) and has been led by the same executive team over the past 23 years. Prospect has over 100 employees and $8.8bn of assets under management as of December 31, 2022. Prospect invests across middlemarket lending, middle-market buyouts,

structured credit and real estate. Prospect currently operates two business development companies focused on middle-market debt investments in the US, including both sponsor-owned and non-sponsor-owned companies. Prospect's track record in middlemarket lending includes the deployment of $14.2bn across 418 investments with 314 realisations. Since 2006, Prospect has CFI.co | Capital Finance International

achieved significant outperformance versus the industry benchmarks S&P 500, Barclays High Yield and LSTA Leveraged Loan Index.

Prospect demonstrates alignment with investor interests: Prospect managers and employees own $1.1bn of its funds under management.

The CFl.co judging panel announces Prospect Capital as the 2023 award winner for Best Middle-Market Lending Investor (US).

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> SCOTTISH FRIENDLY: BEST MUTUAL INSURER UK 2023

Scottish Friendly continues to build upon a legacy that started back in 1862, when it operated under the name City of Glasgow Friendly Society. The mutual insurer is now responsible for over £5.4bn in assets under management and has a roster of more than 776,000 members. As a mutual, Scottish Friendly serves the interests of its members and isn’t beholden to shareholders. It adheres to an ethos that aims to help individuals and their families support themselves and take

better control of their financial wellbeing. It offers a range of tax-free investment solutions, including investment ISAs, junior ISAs and life insurance solutions for over 50’s, as well as working with a number of partners to manufacture and administer life and critical illness products.

The mutual credits its strong position to a consistent approach to investments and a time-tested 3-part growth strategy. Scottish Friendly also prioritises

the wellbeing of its colleagues, including personal development opportunities for those colleagues. It also prides itself on its investment in local communities, working with the likes of Action for Children and the Scottish Book Trust.

Scottish Friendly has been placed in the CFI.co awards programmes consecutively since 2019 and once again claims the title ‘Best Mutual Insurer in the UK for the fifth consecutive year.

> AQUIS EXCHANGE: BEST PAN-EUROPEAN EQUITIES TRADING EXCHANGE 2023

Aquis Exchange pioneered the subscription-based model for multilateral trading facilities (MTFs) of pan-European shares in London and Paris. The company has three distinct business lines: Aquis Exchange, the MTF operator; Aquis Technologies, the exchange tech developer; and Aquis Stock Exchange (AQSE), the home of growth-stage companies across the UK. Aquis forges close connections with company boards prior to and post their IPO listing. Aquis Stock Exchange believes that one of the best ways to support their growth is through fair

and proportionate rules that don’t put smaller companies at a disadvantage.

It is also committed to protecting growth companies from aggressive short selling by third-party players. As a fully regulated growth exchange, Aquis brings public markets together to provide companies with scale-up capital when it’s most needed.

The exchange is helping companies go public earlier, at the £10-100m valuation bracket.

Aquis expanded its offering from lit book to dark pool trading by acquiring the MTF business line of Swiss investment banking company, UBS.

Since its launch in 2022, Aquis Matching Pool has shown remarkable success. Aquis Exchange continues to gain traction and an increasing share of the market. As of December 2022, AQSE supported 107 companies with a combined market value of £1.8bn. It also had more new entrants than its larger peer, AIM. Aquis is dual listed on its own and the AIM market. The CFI.co judging panel presents Aquis Exchange — a repeat programme winner — with the 2023 award for Best Pan-European Equities Trading Exchange.

KBC is a banking and insurance group with headquarters in Belgium and core operations in Central and Eastern Europe. KBC Asset Management forms an integral part of the group, shepherding the group's investments and helping clients to grow and protect their wealth.

KBC performs scrupulous money management and consistently ranks above the credit rating norm for Belgium and the EU. It achieved 14 percent return on equity in 2022.

KBC Asset Management reported excellent progress over the past year, achieving record net sales despite downturn markets. It onboarded 95,000 new clients by the end of 2022, reaching a total of 2.7 million investors. Sustainability

continues to drive KBC development.

It was recently included on Euronext BEL ESG stock market index and received a CDP "A" label for its climate communication - one of only four companies in Belgium with this distinction. KBC private banking clients are assigned a dedicated private banker to serve as a single point of contact and sounding board for their complex investment needs. The private banker listens carefully and suggests investment strategies that align with clients' circumstances and ambitions. Investment advisory is complemented by inhouse and network experts, including legal, tax, inheritance planning, real estate and insurance. KBC encourages career

mobility, whether horizontally or vertically, and offers several development programmes centred around strategic and organisational themes. KBC AM is striving to realise a dream of maximum investor participation, allowing people from all walks of life to benefit from capital markets. It has removed roadblocks to retail investing by lowering threshold requirements and focusing on digitalisation. The virtual assistant of KBC, named KATE, helps clients navigate investment options on digital channels, where over half of KBC investment plans is now sold. The CFI.co judging panel presents KBC Asset Management NV - a repeat programme winner - with the 2023 award for Best Asset Management Team (Belgium).

> KBC ASSET MANAGEMENT NV: BEST ASSET MANAGEMENT TEAM BELGIUM 2023

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Spring 2023 Issue

> CAMARCO: BEST CORPORATE COMMUNICATION ADVISORY UK 2023 Camarco is a communications consultancy that takes a proactive approach to relationship management of staff and clients. It invests to develop and maintain a top-notch team to provide clients with a dedicated point person throughout each communications campaign.

Camarco employees are all equity-staked team members, all pulling together for the benefit of the company and its clients. It looks after clients’ reputations according to the pillars of protect, promote and prosper. The UK firm works with clients worldwide, thanks to a global network in 36 countries, from the US to the UAE, Canada to China, Singapore to South Africa. Camarco and US-based Stanton have been working together over the past 15 years to provide clients with seamless advisory both sides of the Atlantic. The two firms strengthen their affiliation through

an employee work experience programme that encourages collaboration and cultural understanding. Whatever the communication need — financial, investor relations, corporate, ESG, internal, debt restructuring and litigation, campaigns, crisis, digital — Camarco helps clients put the right foot forward. Camarco is led by senior partners with 25 years industry experience. It recently appointed new heads and fresh talent to build up the ESG and digital department. The firm has found significant crossover opportunity in the high-growth areas of sustainability and listed funds. Camarco has brought on more clients, including some large-cap companies, and reported revenue of £9.4m in 2022. The CFI.co judging panel presents Camarco — a repeat programme winner — with the 2023 award for Best Corporate Communication Advisory (UK).

> WISEENERGY: BEST SOLAR ASSET MANAGER UK 2023 WiseEnergy, the solar asset management arm of the NextEnergy Group, manages over 1.8 gigawatts of capacity through 1,350 solar assets in nine countries. It works with clients worldwide through offices in the UK, EU, US and India. WiseEnergy welcomes the rush of newcomers to the solar market, but differentiates itself with a track record of delivering superior returns by maximising revenue, reducing operational expenditure and minimising risk. It has automatised some reporting features, thereby reducing risk and service costs for clients while also improving the work-life balance of staff.

The company believes its corporate culture contributes significantly to maintaining its competitive edge. With a moral compass that points true North, WiseEnergy attracts professionals with the talent and passion to solve pressing real-world problems. It continues to increase diversity and inclusion by removing barriers to recruitment. Last

year, WiseEnergy has launched a pilot programme for promising candidates early in their careers and with atypical backgrounds (vs. others in the sector) allowing them to gain experience in renewables and allowing them to test out different departments and benefit from onsite training. The company invests considerable resources to keep employees feeling valued, supported and inspired.

It made great effort to achieve gender pay parity and a leadership team that is equal parts male and female. It supports numerous charity causes and encourages the entire workforce towards altruism and activism.

NextEnergy Group (of which WiseEnergy is a business unit) contributes five percent of annual profits to the NextEnergy Foundation, which works worldwide to increase clean energy, reduce emissions and alleviate poverty. The CFI.co jury presents WiseEnergy — a repeat programme winner — with the 2023 Best Solar Asset Manager (UK) award.

> HFM: BEST ONLINE TRADING APP GLOBAL 2023 HFM welcomes all types of traders — novice, expert or longer-term investor — to experience its recently revamped online trading app. The intuitive interface gives traders on-the-go access to trade over 1,200 of the broker's 3,500 instruments, including derivatives across forex, stocks, commodities, bonds, ETFs and indices. App users can choose between three customised options to trade in amount, lots or units. They can consolidate multiple accounts under the HFM wallet to streamline the management of disparate portfolios. The app enables round-the-clock monitoring of accounts and unfettered trading with ultra-fast execution. The app generates a comprehensive history of users’ trades, allowing them to study past performance for future insights. HFM also offers a wealth of educational resources

to sharpen traders’ skills and bolster their strategies. HFM’s new app is a powerful trading tool in the palm of the hand. It has already been downloaded by over 1.5 million users. HFM is one of the brand names for HF Markets Group, which has authorised and regulated operations in Cyprus, where the group is headquartered, as well as the UK, Dubai, Mauritius, South Africa, Seychelles and Kenya. HFM clients can rest assured that their funds are secured thanks to the group’s close cooperation with regulators and the segregated accounts it holds at major banks. It also offers negative balance protection on trading accounts and maintains an investor compensation fund. The CFI.co judging panel presents HFM — a four-time programme winner — with the 2023 global award for Best Online Trading App. CFI.co | Capital Finance International

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> ORACLE: BEST CLOUD-BASED INTEGRATION SOLUTIONS GLOBAL 2022

Founded in 1977, Oracle has become a master of the cloud. The company serves 430,000 customers in 175 countries. It designs, manufactures and sells software and hardware products as well as complementary services related to financing, training, consulting and hosting. Oracle has reinvented itself several times over the past four decades, reliably interpreting trends to seize opportunities and maintain a market-leading position. It reported revenue of $42bn in the 2022 fiscal year. Some of that was fuelled by 150 strategic acquisitions, which cost the company

more than a $110bn. Over the past decade, Oracle has invested over $64bn in R&D and been granted more than 18,900 patents worldwide. The company markets its enterprise cloud solutions as the fastest path to modernising a business’ workflow and accelerating growth. Oracle’s cloud integration services allow businesses to migrate critical workloads with ease and speed. They can build cloud-native applications using Oracle’s developer and deployment services. Oracle has established cloud data centres in more than 40 regions, ensuring businesses can run workloads

with confident continuity. Its automated cloud services help to reduce operational overhead, while over 80 compliance programmes ensure companies stay current with global, regional and industry regulations. Oracle’s cloud environments are protected with built-in security features, and its cloud computing is powered by renewable energies.

It offers a free tier to encourage the building, testing and deployment of cloud applications. The CFI.co judging panel presents repeat programme winner Oracle with the 2022 global award for Best Cloud-based Integration Solutions.

> FEDERAL REALTY INVESTMENT TRUST: BEST ESG REAL ESTATE INVESTMENT STRATEGY US 2023

Federal Realty Investment Trust views ESG as a framework for long-term growth and value creation. Its key objectives involve advancing decarbonisation, strengthening resiliency, connecting communities, empowering teams and governing responsibly. The company earned its first LEED certification in 2012 and within a decade had invested around $2.3bn in LEEDcertified buildings. It has reduced Scope 1 and 2 greenhouse gas emissions by approximately 22 percent between 2019 and 2021 and is committed to achieving net-zero emissions by 2050. In 2021, 60 percent of the electricity

used by Federal came from renewable sources.

The company installed its first rooftop solar system in 2012; now they crown nearly a quarter of Federal properties. Over 300 EV charging stations support the transition to a low-carbon economy. Federal invests in underrepresented communities in ways that advance social equity. It protects biodiversity through urban revitalisation rather than greenfield development and keeps beehives on multiple properties. One of Federal’s flagship projects — Assembly Row in Somerville, Massachusetts — demonstrates how ESG planning makes good business sense

and benefits all stakeholders. The transformation project turned a polluted former industrial site into a thriving social centre and economic growth engine, delivering positive impacts for government coffers, city residents and Federal shareholders. The S&P 500 REIT has delivered 55 consecutive years of increased dividends, while honouring a sustainability commitment that demands financial investments serve a greater societal good. The CFI.co jury presents repeat winner Federal Realty Investment Trust with the 2023 Best ESG Real Estate Investment Strategy (US) award.

Priority Income Fund, a closed-end investment fund, bridges the gap between banks and financial markets to provide the capital American-based businesses need to flourish.

The fund is managed by Prospect Capital Management, an SEC registered investment adviser since 2004, with $8.8bn of assets under management as of December 31, 2022.

Priority Income Fund follows an investment strategy that prioritises investing in Collateralized Loan Obligations (CLOs), which

are pools of first lien, floating rate, senior secured loans. These loans benefit from a history of benign market default rates, averaging just over two percent over the past 20 years, which translates to a low 0.55 percent average annual market credit loss rate when coupled with a 75 percent historical market recovery rate. Over the last four years, the Priority portfolio achieved a lower average default rate (0.80 percent) than the market (1.59 percent).

Senior secured loans also offer collateral and lender protections through a first lien on assets

of the borrower. Priority Income Fund favours disciplined underwriting practices and has selected to collaborate with only 25 of the 130 CLO managers that have issued since the credit crisis. The fund has a nine-year track record of paying consistent income to shareholders.

Minimum investments start at $1,000 and the current dividend of 10.91 percent annualised is paid monthly. The CFI.co judging panel announces Priority Income Fund as the 2023 award winner for Best CLO Closed-End Fund Investor (US).

> PRIORITY INCOME FUND: BEST CLO CLOSED-END FUND INVESTOR US 2023

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Spring 2023 Issue

> MOODY’S INVESTORS SERVICE: BEST CREDIT RISK ANALYSIS LATAM 2023 Businesses worldwide trust Moody’s to assign the credit ratings that signal their investment worthiness to potential shareholders and finance providers. International rating agency Moody’s Investors Service is the first point of contact in the rating process.

It connects prospective clients with a relationship manager and then assigns an analytical team to review the company’s submitted documentation. The analytical team goes over the material with company management and then passes the analysis on to the rating committee. Issuers receive a ratings notification and review the press release prior to publication. Moody’s Local, a Latin American domestic credit ratings platform launched in 2019, provides the regional expertise to complement the group’s global coverage. The regional affiliate covers research and risk analysis across Latin America through an established presence in Argentina, Bolivia, Brazil, Mexico,

Panama, Peru and Uruguay. Moody’s Local is driven by experienced regional analysts using customised methodologies to deliver market-specific insights. The corporation is in the process of acquiring SCRiesgo’s domestic credit agencies in Central America and the Dominican Republic, which will significantly expand Moody’s footprint in Latin America and support its continued development of regional capital markets.

Moody’s cloud-based IssuerFocus platform serves as a customisable, one-stop-shop for corporate ratings, research and peer assessment. The user-friendly platform enables round-the-clock access, real-time updates and tailored alert preferences.

IssuerFocus is available throughout Europe, Asia Pacific and the Americas. The CFI.co judging panel announces repeat winner Moody’s Investors Service as the victor in the 2023 awards category Best Credit Risk Analysis (LATAM).

> BANCO HIPOTECARIO: BEST FINANCIAL INCLUSION BANKING STRATEGY CENTRAL AMERICA 2023 Banco Hipotecario, a state bank of El Salvador, prioritises financial inclusion for all municipalities and individuals across the country. It tailors services to fit the needs of the population and seeks to remove obstacles to credit approval. It has established a specialised unit to listen to clients and address their financial challenges without exclusion. Gender equality and financial empowerment are of paramount importance at Banco Hipotecario, which has launched a range of credit lines specifically for women. Women tend to oversee household spending, with an average of 89 percent of women worldwide controlling or sharing daily shopping needs.

Banco Hipotecario gives women access to the financial products to buy their own home, further their professional development and improve social well-being for themselves and their families. The bank provides educational

resources to help aspiring entrepreneurs launch an enterprise and help established SMEs optimise operations. It offers products for agribusinesses and microenterprises, including street merchants. Banco Hipotecario is embracing blockchain technologies. It has incorporated bitcoin into the financial system and instructs clients on how to use this emergent fintech tool. Banco Hipotecario is a peoplecentric, solutions-driven financial institution that treats all Salvadorans as partners in the wealth creation and socio-economic development of the country. It assesses applicant credit worthiness by the analysis of capital flow rather the formality of their circumstances. The CFI.co judging panel congratulates Banco Hipotecario — a repeat programme winner — on claiming the 2023 award for Best Financial Inclusion Banking Strategy (Central America).

> CAIXA ECONOMICA FEDERAL: BEST SOCIALLY RESPONSIBLE BANK BRAZIL 2022 CAIXA is one of the largest banks in Latin America, from the number of clients to the size of its distribution network. In Brazil, it’s also proud to deliver some of the highest social impacts, dispensing more than $309bn (R$1.6tn) in continuous and emergency social benefits over the past four years. CAIXA has been serving the needs of the country and its people since 1861. In partnership with Brazil’s Ministry of Citizenship, CAIXA provides financial benefits to promote citizenship, support youth development, increase financial inclusion and lift families out of poverty. CAIXA champions women’s causes to prevent domestic violence and combat sexual harassment. It organises financial education and entrepreneurship programmes and prioritises the leadership and career progression of female employees. The bank has three million female clients and its CAIXA for Her programme

provides psychological support for women in dangerous domestic situations as well as the tools to help lower-income women gain financial independence. Social promotions include breast cancer awareness campaigns and mental health programmes. Product innovations include a maternity moratorium for loan payments. As part of its gender empowerment initiatives, CAIXA is training 5,000 employees from the Social Assistance Reference Centres, and more than 40 companies and associations have embarked on this prevention journey with bank.

CAIXA’s gender strategies go beyond financial support to implement life-saving measures for women. The CFI.co judging panel applauds the “good neighbour” business practices of CAIXA Economica Federal, the winner of 2022 Best Socially Responsible Bank (Brazil) award.

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> APPLIED SCIENCE PRIVATE UNIVERSITY: BEST UNIVERSITY INTERNATIONALISATION STRATEGY MIDDLE EAST 2023

Applied Science Private University (ASU) believes continuous improvement leads to academic excellence. It was founded in 1991 to give Arab youth an alternative to overseas studies.

Now international collaboration is a staple of the curriculum. ASU has established dozens of external agreements with international universities to further cross-border collaboration, including 14 in the UK and nine in the US. It was the first university in Jordan to obtain American accreditation for the faculties of engineering, nursing and pharmacy. It’s considered a “premier institution” by the Accreditation Services for

International Schools, Colleges & Universities (ASIC), a British accreditation standard. ASU was recently awarded the ESQR certificate from the European Quality Assurance Commission— the only Middle Eastern university with such a distinction. Over the past year, ASU has risen in the QS ranking from the top 100-110 to the top 80-90 universities in the Arab world. This achievement reflects the largest improvement possible for a university over a 12-month span and underscores significant advancements in the areas of publications, citations, educational facilities, international academics and student

employability. The university consistently expands course and degree offering to remain competitive with global trends and real-world challenges. It has introduced new bachelor’s degrees in financial technology and risk management, AI in accounting and auditing, cybersecurity and cloud computing as well as a master’s in cyber laws. The CFI.co jury is proud to recognise a stronghold of scholastic excellence and a repeat programme winner — Applied Science Private University — with the 2023 award for Best University Internationalisation Strategy (Middle East).

> ABU DHABI GLOBAL MARKET: BEST INTERNATIONAL FINANCIAL CENTRE EMEA 2022

The UAE’s capital city, Abu Dhabi, has earned recognition as the “Capital of Capital” for its prominent positioning among investors and business leaders. Abu Dhabi Global Market (ADGM) is the international financial centre (IFC) connecting these global players with regional opportunities.

Driven by its robust regulatory ecosystem, ADGM aligns with Abu Dhabi’s economic goals and vision bringing innovation, transformation and diversification in various key sectors by leveraging its strengths and introducing progressive initiative. ADGM notable initiatives in 2022 have made it the fastest growing IFC in the middle east region.

In preparation for the upcoming COP28 in 2023, ADGM has begun to bolster guidelines and frameworks around sustainable finance with a focus on environmental instruments and disclosures. One such initiative has been by the Financial Services Regulatory Authority (FSRA) of ADGM towards introducing an

‘environmental instrument’ as a class of financial instrument, an approach that has allowed carbon offsets to come under its regulatory umbrella.

The innovative regulatory framework has allowed for the world’s first regulated voluntary carbon trading exchange and clearing house, AirCarbon Exchange (ACX) to be established within the IFC. ADGM’s FSRA has also proposed a comprehensive sustainable finance regulatory framework, issued in November 2022, that provides a robust regulatory framework for sustainability-focused products and services, including rules on sustainability-orientated investment funds, managed portfolios and bonds.

It also contains a framework for environmental disclosures by companies based in ADGM. ADGM’s proposed framework, which it will finalise in early 2023, aims to enable accelerated growth of a sustainable finance ecosystem in the jurisdiction and support the UAE’s transition to net zero greenhouse gas emissions.

ADGM understands the importance of mobilising private finance to unlock critical infrastructure investment and advance net-zero goals to mitigate further climate catastrophes. Furthermore, ESG and sustainable finance events such as the R.A.C.E (Regulation, Awareness, Collaboration, Ecosystem), part of Abu Dhabi Finance Week (ADFW) 2022 and the fifth edition of Abu Dhabi Sustainable Finance Forum (ADSFF) in mid-January 2023 promoted collaboration between world leaders, entrepreneurs and investors at local, regional and international level. ADGM Academy and its partners have also launched an entrepreneurship initiative to establish an SME hub that provides national and expatriate talent with the tools, training and start-up accelerator programmes that support the development of the tech ecosystem in Abu Dhabi.

The CFI.co judging panel has recognised ADGM in several awards programmes and reaffirms its meritocratic successes with the 2022 Best International Financial Centre (EMEA) award.

> QNB ALAHLI: BEST SME BANK EGYPT 2023 AND BEST RETAIL BANK EGYPT 2023 QNB Alahli combines the benefits of local expertise with the international scale of its parent company, which has grown over the past six decades to become the largest financial institution in the Middle East and Africa. QNB Alahli offers a wide range of services for business and retail clients that align with ongoing trends in digital transformation, financial inclusion and sustainable finance. At the COP27 conference, the bank entered collaborations with the European Bank for Reconstruction and Development to promote green mortgage 84

financing, climate risk management practices and technical assistance and incentive grants for green economy youth projects. QNB Alahli launched Nilepreneurs, a five-year running programme, in collaboration with the Nile University to develop, support and train the next generation of SME entrepreneurs. It has implemented financial inclusion measures to bring modern banking conveniences to artisans and micro businesses. The bank has established specialised subsidiaries to meet Egypt’s leasing, factoring and life insurance CFI.co | Capital Finance International

needs. QNB Alahli serves more than 1.4 million individual and business clients through a network of hundreds of banking branches and ATMs along with thousands of POS merchants nationwide. The bank has maintained a sound asset quality and cost ratios, while also achieving substantial growth in its loan and deposit portfolio, market share and returns.

The CFI.co judging panel presents QNB Alahli — a longstanding repeat programme winner — with the 2023 awards for Best SME Bank and Best Retail Bank (Egypt).

Spring 2023 Issue

> KING ABDULAZIZ CENTER FOR WORLD CULTURE: OUTSTANDING CONTRIBUTION TO CULTURAL DEVELOPMENT MIDDLE EAST 2022 King Abdulaziz Center for World Culture — commonly known as Ithra — is the largest citizenship initiative by Saudi Aramco to promote talent development and crosscultural engagement in Saudi Arabia. Ithra, which means “enrichment” in Arabic, was designed around the pillars of culture, creativity, community, art and knowledge.

The centre has hosted over 20 exhibitions and welcomed more than 2.9 million visitors since its launch. Ithra was built around the country’s first commercial oil well, paying tribute to the wealth generated while also reframing the narrative around the power of human potential. Visitors can roam through the museum on a journey of discovery or immerse themselves in theatre productions designed to spark curiosity and creativity. Life-long learners will find knowledge and opportunity at their fingertips in the first digitally integrated library in Saudi Arabia. Ithra’s Idea Lab

supports the development of a creativebased economy by stimulating individual and sector growth across arts, sciences and technology. The Children’s Museum offers a hands-on experience for younger audiences, while the Ithra Tower provides skill-based programming for all age groups and interests. Ithra champions regional content and film production by providing funding and development opportunities to talent and small businesses. Ithra produced 20 films, supported 14 content series projects, 10 VR/AI projects and more than 500 printed projects related to art and culture in Saudi Arabia. Ithra also conducts studies and research on cultural and creative industries across the MENA region to provide reference to peers and industry players. The CFI.co judging panel presents ITHRA with the 2022 award for Outstanding Contribution to Cultural Development (Middle East).

> AFGHANISTAN INTERNATIONAL BANK: BEST CORPORATE GOVERNANCE AFGHANISTAN 2022 Since its launch in 2004, Afghanistan International Bank (AIB) has provided essential financial services to the local population while simultaneously exceeding national regulatory requirements to remain competitive on a global scale. AIB adheres to a strict governance structure that’s aligned with international best practices. High ethical expectations permeate all the bank’s operations, and it ensures stability by focusing on prudential risk management, transparency and compliance with international standards. AIB invests considerable resources in cybersecurity, AML, KYC and other financial crime compliance measures. It partners with industry titans like Deloitte, Cisco, Oracle and Google to maintain the most robust security systems and monitoring functions. AIB distinguishes itself among regional competitors as the only Afghan bank with two cybersecurity certifications and the

capability to clear US currency. It was also the only bank in the country to publish quarterly financial statements over the past year. Nearly 10 percent of the bank’s workforce is engaged in compliance activities, which are reinforced by automated, algorithm-powered tech systems. Comprehensive due diligence accompanies the onboarding of all new customers, including an indepth analysis of the ownership structure of corporate clients and around-the-clock monitoring of transactions to assess money laundering and financial crime risks.

AIB — which heads the country’s rankings in terms of profitability, liquidity and assets — has earned a reputation for trustworthiness and a culture of compliance. The CFI.co judging panel presents repeat-winner Afghanistan International Bank with the 2022 award for Best Corporate Governance (Afghanistan).

> APPLIED SCIENCE PRIVATE UNIVERSITY: MOST INNOVATIVE COMMUNITY IMPACT RESEARCH UNIVERSITY MIDDLE EAST 2023 Since Applied Science Private University (ASU) first opened its doors in 1991, the institution has been a pioneer of academic excellence. It continues to add to an impressive list of firsts with every year in operation.

It was the first university in the Middle East to earn the Lloyd’s Register Quality Assurance, the first in Jordan to obtain a “golden level” quality assurance certificate, the first to obtain international accreditations at programlevel and the first private university to warrant a fourstar QS international rating. ASU believes continuous improvement to be the most straightforward path to excellence. ASU students and faculty collaborate and publish on numerous community research projects, particularly in the fields of health, economics and environmental sciences. It established a consultation and training centre to spur impactful interaction between the university and regional business sectors.

It was the first university in the Middle East to open a cadaveric laboratory — one of only 11 worldwide — which was approved as a global training centre for

residents and doctors in all surgical specialties. The lab has put Jordan on the map for medical education as well as medical tourism. ASU is also a contributor and promoter of the Jordanian Database for Nursing Research, a repository of published nursing studies that supports continued investigation across priority areas.

The expertise of the faculty members at ASU are well recognized and received at national and international levels, this is demonstrated by the representations and memberships of various accreditation and evaluation bodies such as heading decision makers committee to develop guidelines for the schools of Nursing in Jordan regarding the establishment of new programs at graduate levels with the Jordanian Nursing Council (JNC) and act as a peer evaluator for international programs with the Accreditation Commission for Nursing Education (ACEN). The CFI.co judging panel presents Applied Science Private University — a repeat programme winner — with the 2023 award for Most Innovative Community Impact Research University (Middle East).

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> LAGOS BUSINESS SCHOOL: BEST STRATEGY IMPLEMENTATION EXECUTIVE EDUCATION AFRICA 2023

Since Lagos Business School (LBS) inaugurated its campus in 1991, the management development institution has continued to build upon a reputation for quality education by preparing high-calibre professionals to excel in the corporate world. LBS offers several study programmes, including MBA degrees, a doctorate of business administration, executive education programmes as well as open-enrolment and company-customised courses. From the internal working of the private university to the structuring of its educational programmes, everything at LBS

revolves around the central pillars of business ethics and sustainability. LBS aims to shape responsible leaders capable of managing ethical and profitable businesses, whether on a local or globe scale. The university has attained some top-tier accreditations, including the Association of MBAs (AMBA) and Association to Advance Collegiate Schools of Business (AACSB). LBS is among only two percent of business schools in 70 countries to obtain AMBA accreditation and among less than five percent of business schools globally to be accredited by AACSB. The graduate

business school forms part of the Pan-Atlantic University and is inspired by principles from Opus Dei, an institution of the Catholic Church.

It adheres to a values system rooted in integrity, professionalism, service, mutual respect and community. LBS MBA graduates enjoy high prospects in the labour market, 92 percent of which secure positions at top companies within a year of graduation. The CFI.co judging panel announces Lagos Business School as the 2023 award winner for Best Strategy Implementation Executive Education (Africa).

> MAUBANK: BEST GROWTH STRATEGY BANKING MAURITIUS 2022

MauBank has achieved steady growth over the past three years given its prudent management of assets and liabilities. It reports an increase in after-tax profits of 130 percent from 2021 to 2022, thanks to a strategy of consolidation and reinvention resulting in reduced operating costs, an uptick in revenue and the liquidity to meet unexpected challenges. The judging panel was impressed with the bank’s steadfast piloting of pandemic challenges, fuelled by a focus on expansion, conquering market shares and product development. Our winner

is moving forward significantly in terms of its four pillars: retail, SME, corporate and international banking.

Impressive growth comes from MauBank’s international banking efforts, serving global entities and nonresident customers with a comprehensive range of well-defined products and services.

Technological developments to further enhance the customer experience are also fostering significant growth. The jury applauds the bank’s new Green Financing Scheme (financing to promote renewable energy

improvements). All told, it is clear to the panel that MauBank, appreciating the increasing competition in the sector, is determined and well-equipped to maintain its position among the country’s top three banks. Brand CX Tracker, 2021, confirms that MauBank has risen to the top tier of the banking sector: helped, in good part, by its creative marketing and communications strategies. The judging panel is delighted to present MauBank with the 2022 award: Best Growth Strategy Banking (Mauritius).

AIA Insurance Lanka — a part of the largest independent, publicly listed life insurance group in the Asia-Pacific region — delivers on a promise to help clients lead healthier, longer, better lives.

It offers inflation-fighting pension schemes and smart savings plans. AIA’s healthcare ecosystem is complemented by telemedicine consultations, online fitness classes and exclusive member discounts. AIA Insurance Lanka has been serving the island for more than three decades and has established an expansive distribution network including 100 branch offices and 4,000 wealth

planners. The company is credited with numerous pioneering achievements in Sri Lanka. It was at the vanguard of bancassurance and now works with leading banks to expand distribution. AIA Insurance Lanka is leading the industry’s digital transformation with cloud-based processing, automation, digital signatures and data analytics.

AIA Sri Lanka’s strongly capitalised shareholder’s equity — LKR 19.8 billion as at the end 2021 — gave the company the strength and stability to withstand any risks while continuing to honour customer commitments. Its high-quality

portfolio and prudent investment strategy helps to maintain a solid fiscal footing. CSR initiatives in 2022 included donations to underprivileged children and elders, donations to the SL Cancer Society and Alzheimer’s Foundation, educational scholarships, community safety programmes and foster-parenting programmes. AIA Insurance Lanka has been recognised in numerous awards programmes over the years — and the CFI.co judging panel adds to the accolades with the 2022 award for Best Life Insurance Company (Sri Lanka).

> AIA INSURANCE LANKA LIMITED: BEST LIFE INSURANCE COMPANY SRI LANKA 2022

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Spring 2023 Issue

> NEW WORLD DEVELOPMENT: BEST INVESTOR RELATIONS TEAM HONG KONG 2022 New World Development (NWD) is a publicly listed property investor and developer with operations in Hong Kong and mainland China. NWD’s investor relations (IR) team practices proactive shareholder engagement to publicise the group’s mission statement and milestones. NWD properties are marked by artisanal excellence, with bespoke features that aspire to inspire.

The group’s corporate governance is structured for the long-term sustainable development of the business and the communities where it operates.

It applies forward-looking strategic planning for continuous improvement and innovation, demonstrating the courage to take risks and the credentials to influence the market. The IR team celebrates NWD’s high ranking among international sustainability rating agencies. It was one of only 20 real

estate companies to be included in the 2022 Dow Jones Sustainability (DJS) World Index and placed for the fourth consecutive year in the DJS Asia Pacific Index. It received high marks in the Carbon Disclosure Project for its climate change and water security assessments and maintains a leading regional ranking in the Global Real Estate Sustainability Benchmark. NWD has a flair for luxury and a heart for social inclusion. In 2022, it broke registration records for the highest number of first-round sales for luxury residences in the New World Hangzhou Arts Centre development. The previous year, it launched the non-profit social housing enterprise, New World Build for Good. The CFI.co judging panel presents New World Development — a repeat programme winner — with the 2022 Best Investor Relations Team (Hong Kong) award.

> FIDELITY: BEST ONLINE BROKER GLOBAL 2023 Since its launch in 1946, Fidelity has established a global investment presence spanning four continents. More than 40 million people trust the Boston-headquartered company to help them achieve their financial goals. As of December 2022, Fidelity had $10.3tn worth of assets under administration and $3.9tn in total discretionary assets. It offers a range of investing and financial planning services, including a full-featured, low-cost brokerage account that’s suitable for novice and experienced investors alike. Fidelity’s online trading account enables access to a range of investments, including stocks, options, ETFs, mutual funds, CDs, IPOs and precious metals.

It’s one of the most competitive brokerage accounts on the market, delivering superb execution quality that saved customers over $1.9bn through price-improved trades in

2021. It charges no commission for stock, ETF and options trades; no fees on outgoing account transfers, bank wires and insufficient funds; as well as zero-expense-ratio index and mutual funds. Fidelity’s competitive pricing is complemented by more than 20 free and independent research providers covering individual stocks, thematic topics and daily market updates. Fidelity account holders have access to over 3,400 mutual and exchangetraded funds, including Fidelity's own products (with long track records of reliable performance). Fidelity customers enjoy access to trading in 25 international markets and exchanging money in 16 currencies. They can even buy fractional shares, or “stocks by the slice”. The CFI.co judging panel announces Fidelity as the 2023 global award winner for Best Online Broker.

> MAUBANK: BEST DIGITAL TRANSFORMATION IN BANKING MAURITIUS 2022 MauBank’s investment in the digital ecosystem has helped deepen its relationship with customers through improved products and services, crossselling and faster integration, which has driven financial returns and supported innovation. The bank has reviewed its priorities following the pandemic and pursued its digital roadmap for greater operational efficiency, service quality and customer experience. Leveraging the introduction of the Instant Payments System by the Bank of Mauritius, MauBank’s mobile application WithMe now includes new functionalities that allow users to access accounts in other domestic banks from the application and make instant transactions 24/7. Today, WithMe has a remarkable array of features, including card activation and PIN management, that allow customers to serve themselves anywhere and the bank is continuously

working on bringing the latest payment technologies to give convenience of choice. The online lending platform processing vehicle leasing applications end-to-end was further developed to accommodate credit card applications. Unique in Mauritius, it delivers instant in principle approval to the applicant. The digital platform allows applicants to upload documents, checks their credit information with the Central Bank (Mauritius Credit Information Bureau) through an API, and can reject or give approval instantly for a credit card application in four phases and inform the end user within minutes. The bank has also revamped the management of cybersecurity risk to tackle the new factors that accompany such changes in service delivery. MauBank is confirmed as recipient of the 2022 award: Best Digital Transformation in Banking Mauritius.

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> APIP-GUINÉE: BEST FOREIGN INVESTMENT PROMOTION STRATEGY AFRICA 2023 APIP-Guinée focuses on promoting private investments and developing entrepreneurship in Guinea. The agency serves as a one-stop shop for domestic and foreign investors and a growth catalyser for local businesses. APIP-Guinée can facilitate the creation of a business within a 72hour timeframe. It collaborates with government ministries to identify and implement reforms to improve the business environment. It organises forums to highlight the advantages of investing in Guinea: first and foremost Guinea has a sustained a macroeconomy as well as a legal and fiscal framework offering competitive business incentives. The state has also made substantial investments to modernise basic infrastructure in priority sectors such as energy, mining, transport, hospitality and ICT. APIPGuinée aims to magnify the country’s visibility among global investors by nurturing the

capacity building of national entrepreneurs. It’s a partner of multilateral development banks, like the Islamic Development Bank, African Development Bank Group, World Bank Group as well as the UN Development Programme. It connects entrepreneurs with regional sources of funding through a network of 15 financial institutions and nine micro-finance enterprises.

The agency identifies potential investors and provides them with information on the country’s favourable business climate, tax incentives and import exemptions. It works with investors to streamline the approval process for business licenses and building permits and will liaise with other public institutions if additional licencing is required. The CFI.co judging panel presents APIP-Guinée with the 2023 award for Best Foreign Investment Promotion Strategy (Africa).

> KWALE INTERNATIONAL SUGAR COMPANY LIMITED: BEST AGRIBUSINESS VALUE CREATION LEADERSHIP KENYA 2022 Kenya’s Kwale International Sugar Company Limited (KISCOL) extracts added value from the cultivation and processing of sugarcane.

The company produces affordable, locally grown sugar to sweeten Kenyan lives.

KISCOL is helping to offset national deficits and improve food resiliency while developing sugar by-products that support the country’s energy and environmental targets. KISCOL, a subsidiary of the Pabari Group, commissioned the construction of its $300m processing facility nearly a decade ago. The operation now encompasses 5,500 hectares of cultivated sugarcane sustained by an innovative water management system, a sugar mill with the capacity to crush 3,300 tonnes of sugar per day and an 18-megawatt power plant fired with biofuel. KISCOL has implemented some of the most efficient

irrigation infrastructure across East Africa, reducing the water requirements for crop growth by 40 percent. KISCOL’s power plant generates enough electricity to cover its own operations as well as a 10-megawatt surplus to supplement the ever-increasing demands on the national grid. The power plant utilises a by-product of KISCOL’s sugar production, bagasse, as the main raw material for electricity generation.

Bagasse is an environmentally-friendly and relatively cheap biofuel. KISCOL also plans to build a distillery capable of producing 30,000 litres of ethanol from molasses, another by-product of sugar production.

All of the above is sweet news to the CFI.co jury, which has named Kwale International Sugar Company Limited as the 2022 award winner for Best Agribusiness Value Creation Leadership (Kenya).

> RED MED CAPITAL: BEST INVESTMENT BANK MOROCCO 2023

Over the past two decades, Red Med Capital has evolved into a multi-disciplinary independent investment banking group. The group launched its first business in Casablanca in 2004, and through robust and steady development, it now operates five subsidiaries in corporate finance (M&A, ECM/DCM), asset management, private equity, brokerage and custody and real estate.

Red Med Capital is among the first home-grown independent investment banking group in the country, covering the full range of investment products with strong governance expected of a global player.

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Red Med Corporate Finance, with more than $10bn intermediated transactions, has developed a strong expertise in renewable energy/Power to X industry by supporting and advising large multinationals, local companies and private equity funds prioritizing renewable energy development in Morocco. The country is a key player in the region, with almost 40% of renewable energy in its energy mix and is projected to produce four percent of the world’s green hydrogen demand by 2030. Red Med Asset Management, with $1,2 bn in AUM, promotes a prudent risk management that has proven resilient in the face of difficult market CFI.co | Capital Finance International

conditions and delivered excellent relative performance over its 13 funds. In May 2022, Red Med Private Equity launched the first OPCC venture capital fund targeting Moroccan SMEs. The client-focused group considers SMEs to be vital to the country’s socio- economic growth and is committed to helping them become the national champions of the future. The group offers advisory and assistance on IPO listings through the restructured securities brokerage it acquired in 2021, namely Red Med Securities.

The CFI.co judging panel congratulates Red Med Capital on claiming the 2023 award for Best Investment Bank (Morocco).

Spring 2023 Issue

> ARVIEM: MOST INNOVATIVE ESG SUPPLY CHAIN SOLUTIONS GLOBAL 2023 Swiss Arviem offers solutions to the alarming research concerning carbon emissions in the global supply chain. A company’s supply chain could cause up to four times the greenhouse gas emissions of its direct operations, especially considering that transport is the second highest carbon emitter worldwide. Arviem helps enterprises to bring visibility into their supply chains by tracking and monitoring their cargo in-transit with sensor technology. Thanks to real-time alerts triggered by disruptions and unexpected events, organisations receive immediate, actionable and responsive intel on the company’s trade activities. Arviem’s sensors are attached to the client’s cargo to track temperature and humidity fluctuations, door openings, route deviations, position-based ETA, geo-location.

Arviem’s sensors also detect shock, intrusion, transhipment or rollover. Arviem offers a carbon footprint reporting and emissions monitoring solution that empowers organisations to

measure and mitigate their environmental impacts. With Arviem’s data-backed solutions, clients can pinpoint the most carbon intensive segments of their logistics chain and develop strategies to lower emissions and conserve resources.

Trade is a global business and Arviem serves clients from 120 countries worldwide.

The company continues on a long-term, organic expansion plan achieving a 40% annual growth rate over the last 5 years. Arviem has a presence in US, Europe and Asia and operates over 24 logistics hubs globally through partnerships.

It has assembled a multicultural team with 12 nationalities and numerous language capabilities. Arviem has secured multimilliondollar financing and won grant support from the EU’s Horizon 2020 research and innovation programme. The CFI.co judging panel presents repeat programme winner Arviem with the 2023 global award for Most Innovative ESG Supply Chain Solutions.

> KRUNGTHAI BANK: BEST SOCIAL IMPACT BANK THAILAND 2023 Krungthai Bank (Krungthai) was established in 1966 and became the first state enterprise to float shares on the Thai stock exchange in 1989. Krungthai offers a range of banking services for personal, SME and corporate clients. It has developed products and partnerships to enrich the lives of its clients and help them achieve their goals. Krungthai has made many advancements in digital banking and payments that support the Thai government’s plans for a cashless and financially inclusive society. Khon La Khrueng is a co-payment subsidy scheme by the government to help lower living costs and stimulate spending. Rao Tiew Duay Kan and Tour Tiew Thai tourism stimulus schemes also help encourage domestic consumption throughout the country.

Paotang Pay, a new digital wallet added to Paotang mobile application, enables merchants to increase their sales. NEXT INVEST, a new investment feature in Krungthai NEXT mobile banking application,

streamlines investments in gold, stocks, and funds in one place and allows clients to make investments starting from only 100 Baht (about $3 USD).

New AI capabilities allow Krungthai staff to easily personalise solutions for clients. Krungthai also aims to strengthen Thai society through an extensive CSR agenda. It supports biodiversity, reforestation and water management projects. Krungthai has been recognised for its relentless efforts to reduce social inequalities and improve living conditions for people with disabilities. It runs a composting programme that has diverted seven tons of food waste from landfills. Since 2019, Krungthai’s Go Local, Grow Local initiative has helped build self-reliant communities, preserve cultural heritage, increase financial literacy and spur entrepreneurism. The CFI.co judging panel presents Krungthai Bank — a repeat programme winner — with the 2023 award for Best Social Impact Bank (Thailand).

> APIP-GUINÉE: FEMALE ENTREPRENEURSHIP PARTNER AFRICA 2023 APIP-Guinée is the promotion agency serving as a onestop shop for foreign and domestic investors interested in establishing or expanding businesses in Guinea.

It organises events to highlight the country and its people as an excellent investment opportunity.

APIP-Guinée prioritises women in its financial inclusion initiatives, as the agency understands that gender empowerment will play a key role in stimulating the national economy. The agency launched APIP Mobile, a roving multi-service office and information centre, to bring its services closer to the public. The mobile unit roams the country, setting up information sessions or making workplace visits to provide advice or assistance.

Women and young people are priority targets of this programme. Since the launch of the mobile office, APIP-Guinée has seen female-founded businesses increase from 10 to 30 percent. APIP-

Guinée has developed seven specialised support programmes to help entrepreneurs create thriving local businesses, two of which are designed to foster female entrepreneurship. One APIP-Guinée programme provides the support system, tools and contacts to enable 125 women to execute their entrepreneurial vision. Another aims to build the technical, marketing and accounting capacities of 150 female entrepreneurs and then select 30 women to champion with tailor-made support services, including access to financing partners. APIP-Guinée encourages women to be innovative and enterprising. The agency explains how important it is to — and how to — dissociate family money from business funds. The CFI.co judging panel announces APIP-Guinée as the 2023 award winner for Female Entrepreneurship Partner (Africa).

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> ENVIRONMENT AGENCY — ABU DHABI: BEST REGIONAL ENVIRONMENTAL AGENCY MEA 2023

Although much of Abu Dhabi is desert with majestic sand dunes, the emirate also has a variety of other terrestrial and marine ecosystems – from mountains and wadis to coastal and inland sabkhas to coral reefs and mangroves. These ecosystems are biologically rich and are home to 3,800 species of plants and animals. The Environment Agency – Abu Dhabi (EAD) was founded in 1996 by scientists dedicated to protecting the region’s rich biodiversity and preserving quality of life, and today, the Agency is the largest environmental regulator in the Middle East. The Agency focuses on the development and enforcement of environmental regulations and policies, data-backed research to track environmental progress, habitat and biodiversity conservation, as well as educational and outreach programmes. The Agency leverages

decades of scientific evidence to create policies that set the environmental direction for Abu Dhabi’s government, businesses and communities — without compromising growth and development. It also monitors, analyses and manages environmental data across key priority areas such as: biodiversity, climate change, air and marine water qualities and the sustainable management of waste and groundwater resources. The Agency uses modern tools and technologies for environmental and biodiversity monitoring and undertakes initiatives to boost innovations in environmental data collection, accessibility and assessment. In 2008, EAD established the Abu Dhabi Sustainability Group (ADSG), which includes over 50 members from government, private companies and non-profit organisations. The Agency also established the

Abu Dhabi Falcon Hospital in 1999, one of the largest of its kind in the world, which treats over 10,000 birds annually. The EAD team is proud to carry on the conservation legacy of the UAE’s founding father, the late Sheikh Zayed through the conservation and restoration of endangered species and habitats, especially the Arabian Oryx, the Scimitar-horned Oryx and Mangrove restoration programmes, as well as managing 20 protected areas under the Sheikh Zayed Protected Areas Network. In 2022, EAD’s restoration of coastal and marine ecosystems in Abu Dhabi was named one of the top 10 global restoration flagships under the UN Decade on Restoration.

With this in mind, and more, the CFI.co judging panel announced EAD as the worthy winner of the 2023 Best Regional Environmental Agency (Middle East and Africa) award.

> TAYLOR-DEJONGH: BEST ENERGY PROJECT FINANCE ADVISORY EMEA 2023 Taylor-DeJongh is a UK-based investment banking firm with over four decades of experience in project finance and advisory. It works with oil and gas, energy, industrial and infrastructure clients from around the world, with a long history of collaboration in China, the Middle East, Africa and Russia. Taylor-DeJongh has advised on $250bn worth of debt and equity investments across 600 projects and 110 countries. In six of those projects, Taylor-DeJongh played a role in the development, structuring, negotiation and financing of the first independent power

plant in a host country. Taylor-DeJongh employs analysts with the technical background to comprehend clients’ aspirations and challenge their assumptions. The firm levers decades of experience in capital markets and infrastructure operations to help clients achieve their goals.

It brings key project operators to the table and guides them towards a successful conclusion.

Taylor-DeJongh has established a wide network of associates and expert contacts to complement its advisory capacity and facilitate the business plans of clients. The firm maintains strong relationships

with potential partners, including equity investors and government agencies. Taylor-DeJongh has partnered with numerous governments to bring about the energy and infrastructure projects needed to spur socio-economic development. To date, the firm has advised on 267 conventional and renewable power projects as well as 145 oil and gas projects, many of which have been in the emerging markets. The CFI.co judging panel congratulates Taylor-DeJongh on claiming the 2023 award for Best Energy Project Finance Advisory (EMEA).

> KPMG IN SAUDI ARABIA: BEST AUDITOR KINGDOM OF SAUDI ARABIA 2022 KPMG in Saudi Arabia (Legal Name: KPMG Professional Services) is an independent member firm of KPMG International within the Kingdom of Saudi Arabia. The private joint stock company is led by 77 shareholders, which includes both citizens and expatriate residents in its shareholder base. The firm specialises in audit, tax, and advisory services, working from a country rather than regional model, which allows it to place more emphasis on improving its relationship with regulators. KPMG in Saudi Arabia was founded in 1992 and employs 1,634 full-time professionals (as of December 2022) through its local footprint which includes Riyadh, Jeddah, and Al-Khobar. It is an independent member firm of KPMG International. KPMG firms operate in 143 countries and territories 90

with more than 265,000 partners and employees working in member firms around the world.

KPMG’s vision is to be the most trusted and trustworthy professional services firm. In the local market, it is one of the largest audit firms of public listed companies as well as an advisor to several companies which it does not audit. These companies place their trust in KPMG for their auditing and business consultancy needs. KPMG is also a reliable partner to government entities and provides auditing services to the sovereign wealth fund of Saudi Arabia and the governmentbacked smart-city project, NEOM. It works closely with the Saudi Central Bank (“SAMA” and Capital Markets Authority (“CMA”) to ensure compliance with strong governance standards.

KPMG collaborates with the Saudi Organization CFI.co | Capital Finance International

for Chartered and Professional Accountants (“SOCPA”) to promote capacity building and organise continuing professional development training. KPMG invests considerable time and resources in the development of human capital, especially through KPMG’s nationalisation program to help develop and increase the number of Saudi youths in the workplace, and through using online learning platforms and student mentorships to raise standards countrywide. It prioritises good corporate citizenship through pro-bono support of new businesses, charitable sponsorships, female empowerment programmes and SDG (Sustainable Development Goals) alignment. The CFI.co judging panel announces KPMG in Saudi Arabia as the 2022 award winner for Best Auditor (Kingdom of Saudi Arabia).

Spring 2023 Issue

> CITI: BEST SOCIAL FINANCE BOND GLOBAL 2023

Founded in 1812, Citi has a heritage of enabling growth and economic progress through a global network of financial services across nearly 160 countries. It moves over $4tn in financial flows daily and has over 100 million customers and 13,000 institutional clients serving 90 percent of the world’s Fortune 500 companies. Citi throws the weight of these operations behind ambitious sustainability goals. The bank prioritises sustainable development across its value chain, over half of which is rooted in emerging markets. It adheres to strong

leadership principles by taking ownership and working together with partners to succeed. In 2021, Citi announced the launch of an inaugural $1bn Social Finance Bond. Proceeds from the bond will finance projects that expand access to financial services, affordable housing, basic infrastructure, healthcare and education in underserved and unbanked communities in emerging markets. The bond will contribute to Citi’s pledge of providing $1tn in sustainable finance by 2030, including $500bn for social finance and $500bn for environmental finance.

It worked exclusively with women and minorityowned brokers on the $1bn Social Finance Bond to advance racial equity and gender equality.

Within the next few years, Citi expects its social finance programme to create positive impacts by expanding access to essential services for 15 million low-income households, including 10 million women. The CFI.co judging panel points to the bank’s expansive network and noteworthy achievements in sustainable finance as factors in selecting Citi as the 2023 global award winner for Best Social Finance Bond.

> COUCHE-TARD: BEST CONVENIENCE STORE DIVERSITY & INCLUSION EMPLOYER GLOBAL 2022

Since opening its first store in Quebec in 1980, Alimentation Couche-Tard (ACT) has evolved into a global convenience leader with nearly 14,300 stores and 122,000 employees across 24 countries and territories. It has fueled global expansion by focusing on the values it lives by, which have shaped a unique culture rooted in collaboration, integrity, responsibility and innovation.

The company counts its people as its greatest asset and prioritises their personal wellbeing and professional growth through a number of diversity, equity and inclusion programmes.

This year, ACT launched its seventh, and newest global business resource group, BRAVE, to

support its military veterans and their families.

BRAVE is building a recruiting platform for veterans to make it easier for them to join the ACT team and help make the transition from military to corporate life. ACT’s diversity and inclusion work began with a focus on gender diversity and has made true progress including reaching its representation goals for women on the board of directors and in executive management. It is now focusing on increasing the number of women in mid and senior-level management.

ACT also seeks to increase racial and ethnic diversity across the business through programmes dedicated to recruiting and

developing Hispanic and Black talent. In the 2022 financial year, ACT inaugurated a formal mentorship programme as well as many internal and external educational opportunities to create better pipelines for advancements. It is proud to have a diverse entry-level workforce and is working to advance equitable representation, opportunities and pay across all parts of the company. The CFl.co judging panel points to ACT's strategic sustainability focus on people, planet and prosperity as the cinching factor in winning the 2022 global award for Best Convenience Store Diversity & Inclusion Employer.

> PROSPECT CAPITAL: BEST REAL ESTATE INVESTOR US 2023

Prospect Capital Management (“Prospect”) is an SEC registered investment adviser that was founded in 1988 (along with its predecessors) and has been led by the same executive team over the past 23 years. Prospect has over 100 employees and $8.8bn of assets under management as of December 31, 2022. Prospect invests across middle-market lending, middle-market buyouts, structured credit and real estate. Prospect operates a private REIT focused on real estate investments in the US. Prospect’s track record

in real estate includes investing in $3.8bn of initial property value across 108 properties with 45 realisations. Prospect’s real estate investments are predominantly in multifamily properties and other tenant diversified real estate. To date, Prospect has acquired 81 multifamily, 12 self-storage, eight student housing, four senior living, and three triple-net lease properties. Prospect invests in class B and C multifamily workforce housing in secondary and tertiary markets with value-add upside CFI.co | Capital Finance International

potential, helping to alleviate the affordable housing crisis in the US. Prospect also conducts environmental analysis prior to investing and implements "green" efficiency improvements.

Historical annual multifamily real estate returns of 10.2% have outperformed the broader real estate asset class by 1.2 percent. A diverse portfolio including multifamily real estate improves returns and lower volatility. The CFl. co judging panel presents Prospect Capital with the 2023 Best Real Estate Investor (US) award.

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> Africa:

Can Namibia Turn its Resources to Riches?

By Brendan Filipovski

Gas, gold, copper, uranium, diamonds, and now light crude: what is stopping the African country’s advance?

Namibia: Skeleton Coast

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T

he fog constantly rolling along the Namibian coastline conceals oil-drilling rigs, diamond-recovery vessels, and shipwrecks.

In 2022, oil deposits — over 12 billion barrels’ worth — were discovered 270kms off the country’s south-west coast. More are anticipated; there is even talk of Namibia joining OPEC. Discoveries like this could transform Namibia — but the shipwrecks should remind us that caution is still needed.

Since gaining its independence in 1990, Namibia has encouraged oil exploration. In the deepwater Orange Basin, a consortium led by Shell discovered at least 500 million barrels of oil at the Graff-1 well. Shell has also found oil in the Rona and Jonker wells. Just weeks after the initial announcement, lightning struck twice: Total Energies announced the discovery of up to 12 billion barrels at its Venus-1 well.

The reserves are deep beneath the ocean floor.

Graf-1 lies under 2,000 metres of water — and another 3,200 metres of seabed. Such sites can only be drilled with semi-submersible drilling rigs which float on the surface and maintain their position with computer-controlled anchors.

But unlike natural gas reserves (9 TCF) discovered in Namibia’s Kudu Basin in 1974, these later discoveries appear able to be immediately commercialised. The quality light crude is suitable for production, and there is strong international demand. An agreement to build an oil and gas pipeline between Namibia and neighbouring Zambia has been announced.

The fields are expected to produce low carbon emissions — which is key, given the world’s transition to renewable energy sources.

Once production begins, the impact for the Namibian economy will be huge. At their peak, the new fields could be worth an annual $5.6bn.

Namibia’s GDP of some $12bn (per capita GDP $4,865) is expected to double by 2040. For a country with a 21.7 percent unemployment rate, this could be transformative.

Oil export revenue will help with Namibia’s balance of payments and public debt. Its current account balance has deteriorated since 2006, while public debt has increased from 24.6 percent of GDP in 2012 to 71.8 in 2022.

But before the riches flood in, a lot of infrastructure must be built. Oil projects take up to 10 years to get running; peak production takes more time still. Offshore oil was discovered in Uganda in 2008, but production is not expected until 2025.

Chart 1 - IMF DataMapper: Export Diversification Index (Index). © IMF, 2022. Source: IMF Board Policy Paper "Sustaining Long-Run

Growth and Macroeconomic Stability in Low-Income Countries - The Role of Structural Transformation and Diversification", March 2014.

QatarEnergy has a 45 percent stake in Shell’s Graff wells, and a 20 percent stake in Total’s Venus. It is keen to use its expertise to expedite production, starting as soon as 2027.

— and, so far, the diversity of the economy has held up. If you look at the export diversification index, that has improved since independence.

Angola’s has worsened.

While hopes are high, there are potential pitfalls.

An oil discovery can sometimes become an economic curse.

Taking the ICT industry as an example, Namibia’s industry has grown from $32.9m in 1995 to $235m in 2020. Fishing exports increased from $213m in 2000 to $495m in 2020.

Angola has been Africa’s top oil producer since deposits were discovered there in 1955, with boosts from the development of offshore fields in the early 2000s. It’s not just oil; the country is rich in diamonds, gold, and copper. Resource rents and weak institutions contributed to the civil war that lasted from 1975 to 2002. Former Angolan president José Eduardo dos Santos used revenue from the state-owned company to enrich his inner circle, and to hold onto power. Dos Santos ruled from 1979 until 2017; his party remains in power.

In addition to weakening institutions, the oil boom has stunted other industries. Export revenues have fallen 36.6 percent since 1995.

Oil exports pushed up the exchange rate, making it hard for domestic companies to compete. Top talent has been lured away.

Could Namibia suffer a similar fate? There are many similarities. Both countries are governed by former Cold War Marxist governments that rose to power after independence. Both suffer from unequal income distribution. Angola has a much larger population: 34.8 million against Namibia’s 2.7 million. Namibia has not experienced a civil war, as Angola did post-independence.

Perhaps the biggest point in Namibia’s favour is that it is already living through a resource boom

Diamonds are Namibia’s largest export. It has the highest quality gems in the world, and is the seventh-largest producer in terms of volume.

While diamonds have been mined there since 1908, it was the introduction of advanced marine mining in 2002, by De Beers, that fuelled the recent boom.

De Beers operates a 50-50 joint venture with the Namibian government. In 2000, diamond exports were worth $98.8m; in 2020, $950m.

The government receives taxes and royalties from the industry. Marine mining is carried out by specially designed ships that can dredge the seabed at depths of up to 150 metres.

Namibia’s gold, copper, and uranium production has increased over the past 20 years. Unrefined copper has increased from exports of $7.8m in 2000 to $520m in 2020. This broad growth has helped to increase economic diversity.

And oil will deliver five-times the revenues that diamonds can. Namibia would do well to learn from its exploration partner Qatar. Qatar has a similar population, its lands are also covered by desert — and it is diversifying via domestic economic development, and its sovereign wealth fund. i

"Oil export revenue will help with Namibia’s balance of payments and public debt. Its current account balance has deteriorated since 2006, while public debt has increased from 24.6 percent of GDP in 2012 to 71.8 in 2022."

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> Community, Commitment, Christian Values — and a

Sincere Desire to be True to Modern Management Lagos Business School holds its head high and stands firm on its core beliefs to create balanced, compassionate leaders of industry.

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igeria’s Lagos Business School (LBS) is a community committed to creating and transmitting management skills and business knowledge.

The graduate school is part of the Pan-Atlantic University (PAU), a private institution owned by the non-profit Pan-Atlantic University Foundation (PAUF). LBS is guided by Christian values, coupled with business and management expertise relevant to Nigeria and the greater African continent. “We strive to be a worldclass business school that will have a significant impact on the practice of management by creating and transmitting knowledge,” says dean Chris Ogbechie.

The practice of management, for LBS, means focusing on high-potential professionals, with an emphasis on ethics and management-asa-service. Guiding values are professionalism, integrity, spirit of service, mutual respect, and care for the community.

Front view of LBS campus

VISION When it comes to vision, LBS “aims to be widely recognised as the business school with the greatest impact on the knowledge and practice of management in Africa”. Teaching, research, and engagements are aimed at developing responsible leaders with the skills and expertise required to help solve Africa’s business, economic, social, and institutional challenges.

LBS’s brand promise is to provide world-class management training matching that of the world’s top educational institutions. What follows is a link to the world’s best companies and managers — defining management development and leadership transformation among top-tiered Nigerian corporates and multinationals.

The Prelature of Opus Dei, an institution of the Catholic Church, guarantees that Christian vision and values underscore all teaching, publishing, and research.

ORGANISATIONAL STRUCTURE The school is organised in functional units or directorates (academic and non-academic), each headed by a substantive director, who is assisted by managerial and administrative staff.

The LBS management board, chaired by the dean, is responsible for overall organisation,

direction, and management — including strategic and operational decisions. The board reports to the University Management Council (UMC) via the dean.

The LBS faculty board, also chaired by Ogbechie, is responsible for student-related academic decisions. It addresses student discipline, curriculum and learning and admissions.

The International Advisory Board was established to create a mechanism for measuring effectiveness and to advise on future direction.

The IESE-LBS Advisory Board guides LBS management on academic and management practices. It also provides on-campus learning visits for faculty and staff. The board reviews and advises LBS on administrative and programme activities.

Pan-Atlantic University (PAU) adopts governance mechanisms to ensure currency and relevance in academic and administrative pursuits.

Lagos Business School offers academic and executive programmes, function-specific seminars, and customised executive sessions in management education. Its courses have CFI.co | Capital Finance International

been ranked among the best in Africa and the school has won the recognition of world-class organisations. Besides the quality of education, LBS stands out because of the emphasis on professional ethics and community service.

There is a wealth of experiences in the diverse faculty members and industry practitioners, and education at LBS is comprehensive. The main pedagogy is the case-study method and group work to ensure participant-centred learning.

ACADEMIC PROGRAMMES LBS offers postgraduate masters’ degrees in business administration (MBA) in four formats: full-time, modular, executive, and modular executive. Graduates will be versed in business management, analytical thinking and problemsolving. Communications, global awareness, and interpersonal and ethical reasoning skills are also taught.

It also offers Doctorates in Business Administration (DBA), and academic programmes are complemented by an executive education unit. In line with LBS’s strategy and vision for Africa, the executive education programmes are designed to build holistic perspectives and integrate functional expertise into the general view of business.

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There are executive programmes in openenrolment and in-company (custom) formats across various management disciplines. They include globally recognised methodologies and workplace application.

Short, function-specific programmes cover various management disciplines, such as strategy and innovation, sports business management, agro-allied sector, operations management, marketing and sales management, leadership and personal effectiveness, human resource management, general management, business information systems, board effectiveness and governance, accounting, finance and economics.

The school has a commitment to advancing thought-leadership in leadership, sustainability, financial inclusion and entrepreneurship. These areas are woven into the fabric of the school, as well as the business environment and society.

LBS foyer

Business ethics is the bedrock of Lagos Business School, and has been since its inception. Students and executive participants take sessions on business ethics. The aim is to arm graduates with the capacity to make sound moral judgments in their personal and professional lives. This is done through research creation, dissemination, and capacity building.

The LBS Sustainability Centre is the first of its kind in Nigeria. It is designed to refocus the relationship between businesses and stakeholders by creating responsible leaders. The centre works with organisations to help them incorporate sustainable practices in their operations. The development of innovative products and services can transform communities — and generate revenue.

This enables businesses to sustain livelihoods, reduce poverty, and contribute to national development and the achievement of the UN’s Sustainable Development Goals (SDGs). The LBS Sustainability Centre achieves this through stakeholder engagements and partnerships, research, and industry engagements.

LBS classroom

The Sustainable and Inclusive Digital Financial Services (SIDFS) initiative was founded in 2015 when LBS began a work entitled Sustainable Business Models for Delivering Digital Financial Services to Lower Income, Unbanked Citizens of Nigeria. Through research, engagements and advocacy, the work created an evidence base for financial inclusion, and identified marketenabling policy interventions in Nigeria.

The LBS also developed a series of technical economic papers investigating the relationship between financial inclusion and vital macroeconomic parameters, advocacy, and communication. The objective of SIDFS is to enhance the responsiveness of financial services providers to create and deliver value propositions that improve the economic well-being of Nigerians 96

LBS cafeteria

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Spring 2023 Issue

Professor Chris Ogbechie

— with an emphasis on gender equality, poverty reduction and support for rural populations.

the Association to Advance Collegiate Schools of Business (AACSB).

The Business Innovation Accelerator, a collaboration with the Bank of Industry, aims to provide entrepreneurship training and empowerment to young Nigerians across the six geopolitical zones.

It is also accredited by the Nigeria Universities Commission (NUC). LBS has been ranked among top global providers of executive education every year since 2007 by The Financial Times, and rated #1 in Africa and #41 in the world in the 2022 Executive Education Rankings. The school is listed among the top 100 global business schools on The Economist magazine’s 2021 MBA Ranking, and holds a Tier-One status on CEO Magazine’s 2022 Global MBA Ranking.

This centre is intended to play an essential role in shaping Nigeria's Entrepreneurship Ecosystem to support and enhance technical, managerial, financial, and leadership skills. The accelerator has been set up to develop impactdriven entrepreneurs who use for-profit business models to solve problems and transform society in positive ways.

LBS is a member of the Global Network for Advanced Management (GNAM), Association of MBA’s (AMBA), AACSB International, the Association of African Business Schools (AABS), the Global Business School Network (GBSN), the Principles for Responsible Management Education (PRME), Graduate Management Admission Council (GMAC), European Foundation for Management Development (EFMD), Nigeria Economic Summit Group (NESG) and the Convention on Business Integrity (CBI).

ACCREDITATION AND RANKING LBS is ISO 9001:2015 certified and accredited by two of the world’s leading accreditation bodies, the Association of MBAs (AMBA) and

QUALIFIED TO A FAULT, STEEPED IN EXPERIENCE FOR HIS ‘PASSION SUBJECTS’, BLESSED WITH ENERGY Lagos Business School’s dean could not be better suited to his position.

Chris Ogbechie is Dean and Professor of Strategic Management at Lagos Business School — but his titles don’t stop there.

He is also Visiting Professor at Strathmore Business School in Nairobi, Kenya, and at the University of Kigali, in Rwanda. His academic career started with his own tertiary education — a first-class honours degree in mechanical engineering from Manchester University, an MBA from Manchester Business School, and a PhD in Business Administration from Brunel Business School — and has since been nourished by his vast experience in marketing, strategy, corporate governance, and sustainability.

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Ogbechie has held senior posts in various companies and countries; he was head of marketing and sales at Nestle Nigeria and held international posts for the famous company in Malaysia, Singapore, and Switzerland. He has also worked as a consultant at Nigerian, Ghanaian and Kenyan firms.

Professor Ogbechie teaches strategy, sustainability and corporate governance at the Lagos Business School, and at the Strathmore Business School. He is the founding director of the Lagos Business School Sustainability Centre. His research interests are in strategy for turbulent environments, strategic leadership, board effectiveness, and corporate sustainability.

Professor Ogbechie has over 30 years’ experience in corporate board matters and has been involved with several start-ups in Nigeria.

He was chairman of the board of directors at Diamond Bank Plc, and he sits on the board of several private and public companies, including National Salt Company of Nigeria Plc (NASCON), Health Partners Ltd, Hubmart Stores Ltd, Summit Healthcare Group, and Palton Morgan Holdings.

Chris Ogbechie has written for several publications on the subjects of financial services marketing, strategic management, corporate social responsibility, corporate governance, and sustainability. i 97

Invest Africa:

Six Reasons to Choose Ghana Being a top-rated country for almost everything — from cost of doing business to airport services — Ghana has a lot going for it.

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s the world gradually emerges from the pandemic and economic recession, the search is on for the next global commerce hotspot.

Emerging markets in Africa, Latin America and the Middle East are being sized-up as possible new engines of economic growth. Amid the heated debates and ponderings, the case for Africa is stronger than ever. The continent keeps exhibiting strong indications of a significant take-off — and soon. Africa is the second-largest continent in terms of area and population, has a wealth of untapped natural resources, enormous potential for sustainable agriculture — and it benefits from the Africa Continental Free Trade Area (AfCFTA), the largest free market in the world.

With this ongoing economic revival, Ghana has established itself as a nation to watch for trade, investment, and tourism. It combines a conducive business climate, transparent regulations and political stability to make it one of the most favourable economic environments for investors.

If you have ever wondered why the country has taken centre-stage in discussions on investment, here are six reasons.

Stable Democratic Climate Ghana is ranked as the most stable political environment in West Africa, with advanced democratic institutions and systems that ensure good governance and the rule of law. The Global Peace Index rates the country as first in West Africa, and second in all of Africa.

Ghana's political stability can be attributed to strong and transparent democratic institutions, which have made it a beacon of hope for the West African region. This reliable democratic dispensation makes it the safest place in the subregion.

Strong Resource Pool Ghana is resource-rich, with an enormous pool of untapped raw materials for investors to leverage — especially now.

The country is Africa’s number one gold-producer, and the world’s second-largest cocoa producer. It has the third-largest bauxite reserves in Africa, an estimated reserve base of 900 million tonnes, 98

valued at $50 million in its raw state — and $400bn once refined.

With five million hectares of arable land, four million of cultivable land, and 228,792 hectares of irrigable land, there is more economic potential in addition to the 189,000 barrels of oil produced daily, and the eight trillion cubic feet of natural gas reserves.

Ease of doing business Ghana’s progressive policies, including its vision to transform the country into an industrialised nation by 2030, have been instrumental in creating a business-friendly environment.

According to the Ease of Doing Business Reports, Ghana is among the best spots in West Africa. In 2021, the AT Kearney Global Services Location Index judged Ghana to be the best West African destination for investment — and the third-most attractive on the continent. Ghana is regarded as one of the most competitive economies in the region by the World Economic Forum Global Competitiveness Index.

Accessibility With an average flight time to Europe and the Americas of eight hours, Ghana is (according to the World Population Review) geographically the country closest to the “centre” of the globe.

Therefore investors looking to export to, or access, markets in the Americas, Asia and Europe will find Ghana a prime location with its unique geographical situation.

Investors have easy access to the rest of the world through Ghana's main airport, Kotoka International — again ranked the best in Africa for service. Tema Port, one of the largest regional ports, is in Ghana — sustained by an excellent network of trunk highways.

Competitive Labour Force Businesses in Ghana can select from a wide pool of skilled and/or trainable workers. The country has one of the highest literacy rates in West Africa (according to the World Bank Group), as well as the most competitive minimum wages in the subregion. For businesses looking to set up in Ghana, this ensures a low cost of production and a skilled and accessible workforce.

Headquarters of AfCFTA As an emerging economy playing a central role in CFI.co | Capital Finance International

Africa’s Free Trade Area Agreement and hosting its secretariat, Ghana is in pole position to work with investors and make it easier for them to access products and services from a continentwide market of 1.3 billion people.

Headquartering the AfCFTA is expected to boost Ghana’s hospitality, and more broadly, the services sectors, and generate increased international exposure. This heightened visibility and increasing investments will further stimulate trade, creating opportunities for Ghanaian businesses, as well as entrepreneurs looking for access to the African market.

BUDDING COMMERCIAL HUB Ghana is becoming a regional powerhouse in commerce, adopting policies to reduce the general cost of doing business and incentivise investment.

The country is a hub that connects businesses and investors to Africa as a whole. The government’s investment promotion wing, GIPC, plays a pivotal role in helping investors navigate Ghana’s business environment by providing them with insights on opportunities and incentives. It follows through with guidelines and assistance to help manage business risks and challenges.

Spring 2023 Issue

Ghana has created a positive, go-ahead business environment that allows domestic and international investors to capitalise on opportunities. i IN-DEPTH INVESTMENT ADVICE AND EXPERTISE ONTAP: COMMITMENT GUARANTEED Exciting African opportunities are to be sniffedout, not sniffed-at — and Ghana has some rich pickings...

The Ghana Investment Promotion Centre plays a pivotal role in helping international investors discover one of the African continent’s undersung financial hotspots.

From establishing and maintaining liaison with ministries, government departments and agencies to navigating local hurdles, legal requirements and incentives, the GIPC takes its advisory role seriously — as does the man at the top.

Chief executive Reginald Yofi Grant draws on three decades of experience in investment banking and finance. He heads the Ghana Investment Promotion Centre, under the Office of the President of Ghana. In his role as CEO of GIPC, Grant oversees the development of a slick and

conducive investment climate for those twigging to the vast possibilities offered by Ghana.

Africa — for four consecutive years — by AIM Global.

Grant is director for Sub-Saharan Africa on the World Association of Investment Promotion Agencies (WAIPA) steering board. He collaborates with partners to address some of the world's most pressing issues, promoting investment and open, free trade and attracting FDI.

As a council member of the Continental Business Network of the African Union and a member of the board of trustees of the OACP Endowment and Trust Fund, he remains passionately committed to shaping the continent's financial and economic transformation.

He is widely recognised in financial spheres and has co-founded several companies, including Grant Dupuis Investment Ltd and Praxis Fortune Caliber. Yofi Grant is equally renowned as a leader and financial policy adviser, at home in Ghana and abroad. He’s led several advisory mandates for equity and debt transactions, and developed and implemented one of the largest agriculture funds in Sub-Saharan Africa, the AAF SME Fund LLC.

Reginald Yofi Grant is a fellow of the Aspen Global Leadership Network (AGLN). i

Grant has been recognised for his efforts in the financial sector — and the way in which he conducts himself. He has received awards — including Best Business Personality of the Year for Africa — and has been featured in The Washington Post, The Economist, and Forbes Africa. Under his direction, the GIPC has won recognition as best IPA in West and Central CFI.co | Capital Finance International

CEO: Yofi Grant

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> This Star of the North African Banking Firmament

Remains Relevant, and Ready to Adapt

Tunis International Bank has seen and celebrated 40 years of innovation, growth and success.

TIB Management Team

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unis International Bank (TIB) was established in 1982, as the first banking corporation in Tunisia licensed to deal primarily with nonresidents.

TIB is a private, non-resident commercial bank.

Its main shareholder is Burgan Bank Kuwait, a subsidiary of one of the largest holding companies in the MENA region, Kuwait Projects Company (KIPCO).

TIB’s traditional and natural marketplace has been the Maghreb countries: the western part of North Africa and the Arab world. TIB has played a leading role attracting foreign investment and developing business and partnerships among the Gulf and Mediterranean countries, as well as Western Europe.

The bank provides a comprehensive range of international financial services for corporates, financial institutions, governments and individuals. The offered services include foreign exchange, money market operations, international trade financing, private banking facilities, loan syndications, and commercial and investment banking.

The range of TIB products and services is continously reviewed, refined, and expanded to meet the customers needs.

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Tunis: TIB Head Office

TIB products are continously developped also through the synergies with co-members of the KIPCO group.

solutions and products which are under constantly revision and individually tailored to meet their evolving needs.

TIB is internationally and domestically recognised as an innovative institution, and remains dedicated to providing banking services of the highest standards. TIB proactively serves customers with

TIB won widespread acknowledgement for the level of its professional services — including CFI.co’s award for Most Innovative Customer Service Bank (Tunisia) 2022. i

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Spring 2023 Issue

> A Tunisian Transformation:

BIAT is Driven by Civic Duty, Concern for the Planet, and Prudent Risk-Avoidance

Banque Internationale Arabe de Tunisie implements strategic projects and initiatives — and meets with enviable success

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IAT’s financial performance attests to many positive things: the development dynamics of its strategic projects, its prudent riskmanagement policy, its cost control, its governance — and the ongoing commitment of its people.

The solid and resilient Tunisian financial institution has been able to maintain a growth trajectory in all its business lines. By taking advantage of technological advances, and with social responsibility at the heart of its strategy, BIAT consistently aims for dynamic but sustainable growth.

The bank's governance system is constantly updated to align it with organisational changes and international best-practice. The result is efficient management and optimal operation while staying on the path to healthy and secure growth.

The transformation of the BIAT business lines has come about through the reorganisation of its corporate- and investment-banking activities. A new trading room has been set up, enabling the bank to broaden its range of financial products and services — and better support its clients.

The trading room meets international standards, and — thanks to specialised talent, state-ofthe-art tech, and a modern layout — helps BIAT clients by analysing their needs and proposing tailored solutions.

BIAT has been steadily implementing its digital transformation project, which is bearing fruit in terms of customer engagement and product innovation. New functionalities are constantly deployed with the aim of becoming the “benchmark digital bank”.

As a responsible and civic-minded institution, BIAT places great importance on the strength of its societal commitments. It is only too aware of the importance of environmental issues in the development of a sustainable future, and has doubled down on that by joining the Africa Business Leaders Coalition. The initiative involves signing a climate statement to reaffirm an ongoing commitment to society, the economy, and the environment. BIAT has renewed its partnership with coastline and marine

protection association La Saison Bleue. The BIAT Foundation, meanwhile, has undertaken the challenge of rehabilitating the Belvedere botanical gardens in Tunis.

BIAT is strong, as well as kind: it made it into the Top 100 African banks list published by African Business in 2022. It ranks first in the Tunisian banking system, and 38th in the CFI.co | Capital Finance International

whole of Africa — a jump of 12 places over the previous year.

BIAT prides itself on being a solid and responsible organisation at the forefront of dynamic development. It maintains a focus on digital transformation and social responsibility, and attracts some of the world’s best experts to help it to promote responsible and sustainable growth. i 101

> Inclusive Pan-African Investment Bank

Keeps the Continent’s Finance Flowing

Managing Director: Edmund Higenbottam

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erdant Capital is a leading Pan-African investment bank and investment manager, specialising in private credit and private equity.

It was established in 2013, and leverages its deep investment experience and enduring relationships to fuel fintech development across the African continent. It stays in close contact with investors and entrepreneurs via offices in Mauritius, South Africa, Ghana, Zimbabwe, the Congo, and Germany.

Managing director Edmund Higenbottam is a Cambridge graduate who worked at Deutsche Bank and Morgan Stanley before moving to the African continent in 2008. He has expertise in microfinance and fintech, and is responsible for the Verdant Capital Hybrid Fund, which invests in inclusive financial institutions across Africa.

Verdant Capital is the IMAP partner firm for its region. IMAP — with 40 partner firms in 40 countries, 500 M&A bankers and the 102 192

completion of 250 transactions each year — is the world's largest M&A partnership.

its rent-to-own car business for underbanked people.

Verdant Capital handled the second-largest deal in Nigeria’s electronic payments sector in 2021: the sale of digital payment network Baxi to MFS Africa, which simplifies cross-border payments via an integrated hub.

In 2022, in addition to advising clients in its 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 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 in debt funding for Zeepay.

Verdant Capital Specialist Funds expects significant growth in coming years. It is licensed and registered by the FSC (Mauritius), authorised by the FSCA (South Africa), and registered with BaFin (Germany).

The firm helped wholesale telecoms company WIOCC to raise funds to develop an interconnected pan-African network of open-access, carrier-neutral datacentres. The Nigerian lead investor was attracted by WIOCC’s expansion into the country. Verdant Capital helped Tugende with debt and mezzanine funding to expand its asset finance business in East Africa, and helped Planet42 to grow

The firm has been widely recognised for its achievements; it is a repeat winner in CFI. co’s awards programme. In 2022, it took the honours for Best FinTech Capital Raising Team (Africa). It has also been named Africa Global Funds' Best Independent Advisory Firm (Pan Africa, 2020 and 2021) and Private Equity Africa's Local Financial Advisor of the Decade (2022). i

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> Middle East

Success and Emulation are No Reason for Dubai to Slow Down

By Brendan Filipovski

Diversification, determination and lateral thinking have taken the emirates — Dubai especially — to new highs.

Dubai

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D

ubai was forced to diversify early and has built a city and an economy that many seek to emulate. But the emirate is still on the move, and its rulers are casting their ambitions further.

Between 1975 and 2005, Dubai’s real GDP grew almost nine times, while its population grew at almost the same rate. Today, it has a GDP-percapita rate larger than Spain or South Korea.

Oil was discovered off the coast in 1966, but — unlike Abu Dhabi — the reserves were relatively small. They were enough to make the emirate rich overnight, but not enough to guarantee generational wealth. The reserves are smaller than those of Oman, Vietnam, and South Sudan — and 20 times smaller than Abu Dhabi’s.

Dubai’s foresight in diversification was justified when oil prices fell in the 1980s.

It built on its maritime history to build Jebel Ali into one of the largest container ports in the world — and the gateway hub for the Middle East. Dubai also expanded into manufacturing products such as petrochemicals and aluminium.

Manufacturing now accounts for around nine percent of GDP. In the 1990s, Dubai began to invest in tourism.

In 2022, it ranked second in the top 100 city destinations index. Dubai International Airport is the second-busiest in the world: 66 million passengers passed through it in 2022. Dubai has become one of the world’s most popular conference- and short-trip destinations, and an attraction for Hollywood stars and sports teams. Part of the strategy has been to focus on luxury resorts, shopping, and eye-catching developments such as the Palm Islands, Burj Al Arab hotel, and the Burj Khalifa. In 2021-2022, Dubai hosted the World Expo.

There have been recent investments in finance and IT. The creation of the Dubai Financial Market stock exchange in 2000, and that of the Dubai International Finance Centre in 2004 — with its own economic zone and legal jurisdiction — helped to make Dubai the leading Middle East financial centre. It was ranked 17th in the Global Financial Cities Index 2022. It has attracted the attention of hedge funds, with Millennium Management and ExodusPoint Capital Management opening offices there.

Over the past two decades, Dubai has emerged as the region’s leading gold-trading hub — as importer and exporter. But the emirate needs to continue its work with the Financial Action Task Force to bolster anti-money-laundering and counter-terrorism measures.

A special economic zone for IT, the Dubai Internet City, was created in 2000 and has been investing in incubators and start-ups ever since. There has been a recent focus on fintech and blockchain.

In 2022, Dubai was ranked the second-best start-up ecosystem in the Middle East (after Tel Aviv). It hosts all three of the UAE’s unicorns: 106

"The 2040 urban masterplan released in 2021 aims to accommodate a population increase of 76 percent by 2040 — and to increase the land available for hotels and tourism by 134 percent."

Vista Global, Emerging Markets Property Group, and Kitopi.

Dubai success at exceeding diversification expectations has come at the cost of debt.

During the 2008-09 financial crisis, when the real estate, construction, and tourism industries suffered, Dubai borrowed $20bn from Abu Dhabi to help several government-related entities (GREs) to stay afloat.

In 2019, S&P considered that Dubai’s debt still posed a risk. Many GREs moved from loans to bonds and longer-term debt to relieve pressure, and weathered the worst impacts of the pandemic. A lot of that debt will need to be rolled-over soon, and investors will be watching closely. Dubai will be hoping that tourism continues to rebound.

Dubai’s strongest competitor is also its nearest.

Abu Dhabi has 94 percent of the UAE’s oil reserves and a $700bn+ sovereign wealth fund — so it does not have the same sense of urgency to diversify. However, it has also shown foresight with its efforts.

It has also been making some serious investments in tourism. It has a branch of the Louvre and is building a natural history museum and a Guggenheim. Sea World opens this year, as does the World’s largest snow park, eclipsing the indoor slopes of Dubai. Abu Dhabi International Airport hopes to expand its throughput by 30 million passengers when the new Midfield Terminal opens. A member of the Abu Dhabi royal family bought the Manchester City football club in 2008, which has lifted the national profile.

There is also investment in finance and IT. Abu Dhabi has the largest stock exchange in the region and uses its sovereign wealth fund to draw in foreign banks and financial companies. In 2015, it opened the Abu Dhabi Global Market (ADGM) on Al Maryah Island. ADGM has recently been developing financial frameworks for virtual assets like NFTs and DeFi instruments.

In 2012, Abu Dhabi replaced Zayed Port by opening deep-water facilities at Khalifa. Port Khalifa is equipped with the latest automation technology and has secured tenants such as Cosco Shipping and Mediterranean Shipping. It provides 2.5m TEU (a unit of measurement used to determine cargo capacity for container ships and terminals), but is planning to expand this to 15m TEU by 2030.

However, given the scale of Dubai’s 19.3m TEU Jebel Ali port, it is hard to see how Port Khalifa CFI.co | Capital Finance International

can be more than a niche competitor. Despite the rivalry, it is important to note the close cooperation between Abu Dhabi and Dubai. Abu Dhabi was instrumental in helping Dubai during the 2008-09 crisis. Both emirates collaborate on the UAE space programme. The space agency is headquartered in Abu Dhabi, but satellite production happens in Dubai.

Qatar has also been pursuing a policy of diversification with a similar emphasis on finance and tourism. It hosted the football World Cup in 2022, the first Middle Eastern country to do so.

It also bought Paris Saint Germain in 2011 — and its former prime minister is in the running to buy Manchester United. Saudi Arabia’s Public Investment Fund bought Newcastle United in 2021.

Qatar is building the city of Neom on the Red Sea coast as a tourist and ICT hub.

Plans include a 170km “linear city” and an international airport. Saudi Arabia has been expanding the port of King Abdullah, which was the world’s second-fastest growing in 2021.

Dubai, of course, is planning to stay ahead of the competition. The 2040 urban masterplan released in 2021 aims to accommodate a population increase of 76 percent by 2040 — and to increase the land available for hotels and tourism by 134 percent. A major focus of the plan is to increase green spaces in the city and to improve public transport — both current weaknesses.

In 2022, the World Bank highlighted the “the sustainable development city in Dubai” as a model for green residential development.

On January 4 this year, Sheikh Mohammed bin Rashid Al Maktoum released the Dubai Economic Agenda D33 with the goal of making Dubai one of the top three cities in the world.

D33 comprises over 100 projects with a focus on innovation, including a regulatory “sandbox” for tech start-ups and funds to scale-up 400 local firms to global status. It is also looking to make the manufacturing sector greener.

D33 has a wise focus on public-private partnerships. While the Dubai government is planning to increase its expenditure to $190bn over the next decade, it is earmarking $270bn for the private sector.

History suggests that such ambitions are a good bet. Even with richer rivals flexing their financial muscle, Dubai looks set to remain the Middle Eastern city to aspire to. i

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Constant Improvement, Constant Investment — a Simple Recipe for Banking Success and Recognition Dedication to good governance and a philosophy of community service have stood Afghanistan International Bank (AIB) in good stead — and led to multiple awards over the years.

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ince its launch in 2004, AIB has been proudly providing essential financial services to the local population — while meeting, or exceeding, international governance standards.

Outstanding governance has led humanitarian agencies to select AIB as fulcrum for the distribution of critical aid.

In a region where normal operations can be challenging, that focus on governance is vitally important to the bank — and, by extension, to the Afghan economy.

This philosophy and the resulting achievements have not gone unnoticed — AIB has won nine consecutive CFI awards, the most recent for Best Corporate Governance (Afghanistan) 2022. That translates to a win for every year that the award has been contested.

AIB is one of the country’s leading financial institutions for profitability, liquidity and assets, with a well-earned reputation for trustworthiness and a culture of compliance.

It has consistently supported the Afghan economy and provided banking services throughout the global disruptions of recent years. AIB is the only

domestic bank with US Dollar-clearing through a recognised international bank, making it a vital conduit for global financial flows.

AIB’s strong liquidity position has taken it to an elevated position in the international banking community, and its positive actions have won it the respect of regulators. This status has helped AIB to maintain healthy external business relationships.

Its focus on risk-management, money-laundering awareness, cybersecurity, financial crime compliance measures and Know-your-Customer (KYC) practices has made AIB an outstanding operation in the region.

Investment in technology was crucial to that success. AIB’s banking system is hosted on advanced software from Oracle, making it one of the few banks – even in developed nations – to use the latest incarnation of the software.

AIB has integrated the latest financial crimecompliance management (FCCM) technology — it is currently moving to the most recent version — and its KYC and AML (anti-money laundering) protocols are constantly updated.

The AIB board closely monitors AML and compliance, meeting monthly to ensure total

compliance with the policies and procedures established and approved by external experts.

AIB’s Learning Management System (LMS) enables all employees to review AML content, and take online tests to keep their compliance knowledge up-to-date.

The Bank’s Headquarters in Kabul

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CEO: Joseph Carasso Jr

On the cybersecurity front, AIB holds the most thorough security certifications of any bank in Afghanistan. The bank makes constant upgrades to its cybersecurity systems to ensure readiness with the latest standards and practices, and to ensure its network is welldefended from unwanted traffic and security breaches.

An FTI Consulting review in 2022 described AIB as having a “culture of compliance” that had progressed the program from both the perspective of local Afghan requirements and US BSA standards.

AIB assesses AML and compliance against stringent international standards to ensure CFI.co | Capital Finance International

excellence. AIB’s compliance operations represent a broad section of the bank’s identity, comprising almost 10 percent of its employees.

The bank’s strategy is to make continual improvements and investments to ensure AIB remains a positive ambassador for the Afghan banking sector. i 109

> ‘Capital of Capital’:

Abu Dhabi Cements City’s Position at Global Market Forefront

CFI.co in conversation with Dhaher Bin Dhaher Al Mheiri, Chief Executive Officer of Abu Dhabi Global Market Authority.

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bu Dhabi Global Market (ADGM) is the international financial centre of Abu Dhabi, operating within an international regulatory framework based on the direct application of the English Common Law and governs Al Maryah Island which is designated as the financial free zone of Abu Dhabi, the capital of the United Arab Emirates.

ADGM augments Abu Dhabi’s position as a leading financial centre and a business hub serving as a strategic link between the growing economies of the Middle East, Africa and South Asia and the rest of the world.

WHAT SETS ADGM APART FROM ITS COMPETITORS? As the leading international financial centre of the capital city of the United Arab Emirates, ADGM stands as the destination of choice to accelerate business opportunities and foster economic growth. We have pioneered a progressive regulatory framework. We bring value to the UAE’s market and the broader region through our vibrant ecosystem. It comprises an independent jurisdiction with internationally recognised laws that harnesses transformational economic opportunities and facilitates a robust and transparent hub for the global financial industry.

ADGM is ideally placed for investments and growth via a clear focus on new clusters that complement traditional and new-age finance simultaneously. It is the first IFC in the MENA region to introduce a fully-fledged but evolving, digital asset regulatory framework. It is also home to leading global players in cryptocurrency, multilateral trading facilities, and blockchain.

By enabling professional service providers with global reach, ADGM has attracted Investors from around the world and built a strong international clientele.

The unique positioning of the IFC serves as an East-West gateway and benefits from Abu Dhabi’s global connectivity as the nexus of three continents. Eighty percent of the world’s population is within an eight-hour flight from Abu Dhabi, and 33 percent live within four hours.

ADGM is the catalyst that showcases Abu Dhabi as the prime destination to access capital and generate growth. It showcases the global appeal 110

CEO of Abu Dhabi Global Market (ADGM): Dhaher Bin Dhaher Al Mheiri

of the capital and supports the diversification of Abu Dhabi’s overall economy.

WHAT IS YOUR PERSONAL VIEW ON THE KEY STRENGTHS THAT ADGM? We have seen seven years in operations and each year has been a milestone, bringing growth for the associated people and stakeholders.

CFI.co | Capital Finance International

It is encouraging to see the progress and achievements of ADGM, its authorities – the RA, FSRA, ADGM Courts and its “knowledge-arm” – ADGM Academy.

The authorities of ADGM are the pillars of the ecosystems and various frameworks that exist within the organisation.

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corporate banking activities such as treasury and trade finance.

The strategy has created 13 specialised Clusters, each representing its ecosystem of expertise, networks and opportunities for business development. Clusters under development include asset management and sustainable finance, strengthening Abu Dhabi’s position as the international financial hub and building a diversified knowledge-based economy.

ADGM has showcased substantial growth by working on key focus areas while Paving the way ahead and maintaining momentum. There has been widespread recognition of Abu Dhabi as the ‘capital of capital’ with the presence of top global sovereign wealth funds (SWFs), venture capitalists and investment firms.

WHAT ARE ADGM’S PLANS AND GOALS FOR THE NEXT TWO TO THREE YEARS? ADGM is enhancing its services across sectors including governing foundations and family businesses. It will continue to grow its network of international partners to leverage synergies with jurisdictions around the world.

As a digital-first business enabler and custodian of Abu Dhabi’s financial sector, ADGM is committed to the development of a sustainable, innovative, and knowledge-based economy.

The Cluster Strategy adopted last year brings together disparate corporate banking businesses and services underneath a single umbrella, encompassing the entirety of CFI.co | Capital Finance International

We have already started bolstering our guidelines and framework around sustainable finance and ESG, charting the path to COP28, which is due to take place this year. ADGM’s FSRA has introduced enhancements to the capital market with a focus on environmental instruments.

A recently concluded consultation paper on a comprehensive sustainable finance regulatory framework covers rules on sustainabilityorientated investment funds, managed portfolios and bonds as well as environmental disclosures by large ADGM companies. When published in the coming months, the sustainable finance and ESG framework will be the first of its kind in the Middle East, Africa and South Asia (MEASA) region.

We will continue to foster cross-border collaboration with like-minded partners in other regions, an essential strategic focus for ADGM in delivering bilateral opportunities for inward investment and nurturing a sound and sustainable global financial system. Developments in the next few years will cement this strategic impetus. i 111

> Accenture:

Green is the New Gold: Sustainability Takes Centre Stage in the Middle East

By Bashar Kilani Managing Director, Accenture

Digitalisation is a key part in the puzzle to unlock value — and save the planet at the same time.

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ust as the digital revolution transformed how we live and work, sustainability is driving new value and growth, permeating everything that we do.

It is a force for change — and technology is a vital enabler of the process, from accelerating net-zero transitions to building better value- and supply chains. Sustainability and digitalisation are increasingly intertwined, with technology providing the necessary tools to address environmental and social challenges. Such considerations are now incorporated into the design and deployment stages of emerging technology.

A digital twin is a virtual replica of a physical system — a building, city, or industrial plant — that can be used to simulate and optimise performance. By using data and analytics to create a digital representation of a physical system, waste can be reduced, efficiency can be increased, and resource use optimised.

The business case for sustainability is clear, and organisations are being driven to act.

Industry leaders are reimagining supply chains, looking to increase visibility and decarbonise operations to build resilience in the face of uncertainty. As businesses take a stand and lead the charge for a greener future, they look to stakeholders — including governments — to assist them.

Later this year, in November, the UAE will host the COP28 conference at the Expo City in Dubai — the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC). This is a vital forum for experts and government ministers to discuss and co-ordinate efforts to address climate change.

In a world concerned about the over-use of fossil fuels, decision to hold COP28 in the Middle East is significant: the region is home to some of the world's largest oil-producing countries.

The conference presents an opportunity for these countries to demonstrate a commitment to change.

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Author: Bashar Kilani

The UAE is one of those leading the way. It has a target of generating 50 percent of its energy from renewable sources by 2050. The country is already home to the world's largest single-site CFI.co | Capital Finance International

solar power plant, with a capacity of 1.2 GW. It has declared 2023 the Year of Sustainability, a national campaign to promote action in all aspects of life — energy, water, food, and waste

Spring 2023 Issue

"Digital twins can also help in the urban context. Planners can simulate and optimise traffic flows and waste-management systems before infrastructure is installed. This means reduced congestion, improved air quality, and more efficient city services." management. The campaign is supported by educational programmes, sustainability workshops, and awareness drives. The UAE Green Agenda 2030 aims to transform the country into a global hub for green economies and innovation.

Saudi Arabia’s Green Initiative aims to reduce carbon emissions by 60 percent by 2030 — and to plant 10 billion trees. Saudi has set similarly ambitious targets — half of all energy generation from renewable sources — but with 2030 as the deadline. There have been heavy investments in solar and wind power, with a $500bn initiative to build a mega-city entirely powered by green energy.

Both countries have implemented carboncredit initiatives to offset their own emissions by investing in greener projects elsewhere. The Dubai Carbon Centre of Excellence has launched a trading platform which allows companies to purchase carbon credits from internationally certified projects. Saudi Arabia has a similar platform, the Saudi Green Initiative Carbon Trading Programme.

Digital twin technology will help to identify opportunities for energy and resource efficiency.

A replica of a building can be used to model and optimise its energy use, and identify opportunities for improvements in heating, cooling, and lighting.

The twin of a manufacturing plant can be used to simulate and optimise production processes, reducing waste and energy consumption.

Digital twins can also help in the urban context.

Planners can simulate and optimise traffic flows and waste-management systems before infrastructure is installed. This means reduced congestion, improved air quality, and more efficient city services. Another benefit of twin tech is the ability to support circular economy models. By creating a digital representation of a product or material, it is possible to track its use throughout its lifecycle. Again, this cuts waste and boosts efficiency.

Accenture is helping businesses, governments and organisations to build their digital cores.

It has made its own net-zero commitment and target date — 2025 — while working with clients to achieve their goals. The firm has established a CFI.co | Capital Finance International

sustainability services practice to help industries across the region develop and implement green strategies. The focus is on the management of supply chains, energy and carbon, and the circular economy.

Accenture's focus on sustainability in the Middle East is an important contribution to the region's future. Its expertise and experience assist companies with their sustainability goals, while supporting the global effort to address climate change by reducing waste and increasing energy efficiency across its operations.

The Middle East is making significant progress on sustainability. While there is still much work to be done, the region's commitment is a positive sign for the future of the planet. 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.

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> Latin America - Hope, Fear, and an Existential Crisis:

Can Lula Help the Amazon to Survive Onslaughts of the Bolsonaro Regime?

By Brendan Filipovski

Optimism flared with Brazilian election result — but the incumbent will have his work cut out to avert environmental and humanitarian disaster.

President of Brazil: Luiz Inácio Lula da Silva

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Deforestation in the Amazon & Average Global Soybean Price he great, green Amazon once seemed to stretch on forever, but we now know otherwise. Far-right former president Jair Bolsonaro’s administration has done unprecedented damage to the region.

Sq-KMs 30,000

USD 600 per tonne

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Decades of protection for Nature and indigenous peoples were trashed during Bolsonaro’s term.

Deforestation rose by almost 60 percent; two billion trees in thousands of square kilometres of rainforest were lost to chainsaws and fire.

20,000

400

Some believe that an environmental tipping point is rapidly approaching, with incoming president Luiz Inácio Lula da Silva posited as the Amazon’s saviour. Could it be possible?

Former army captain Bolsonaro won office by talking tough on urban crime, but his regime was a boon to illegal mining, logging, and farming.

For him, protection of indigenous land and the Amazon was the crime. “Where there is indigenous land, there is wealth under it,” he once said.

Bolsonaro grossly defunded the Ministry for the Environment (IBAMA) and the National Indian Foundation (FUNAI). The environment ministry’s budget in 2021 was the lowest in 20 years.

He transferred some responsibilities from both ministries to the Ministry of Agriculture — and the military.

The enforcement of protection laws fell dramatically. Of some 200,000 deforestation alerts between 2019 and 2021 — 98 percent of them illegal — only seven percent were subject to any action. There was no additional protection for indigenous land. Illegal mining has roughly doubled since 2019. The Amazon has become a wild frontier for prospectors and criminals; activists and investigative journalists have been murdered.

Bolsonaro stopped following the Action Plan for Prevention and Control of Deforestation in the Amazon (PPCDAm), introduced in 2004 by thenpresident Lula da Silva to slow deforestation. It did so between 2004 and 2012.

Soybeans are Brazil’s second-largest export by value, and along with cattle farming are a key reason for land clearing. Deforestation increased by 59.5 percent in the four-years under Bolsonaro. The largest increase occurred in his first year, despite a five percent decrease in the average global soybean price. The following three years were marked by larger-than-normal burning seasons, as past conservation efforts went up in flames.

Climate scientist Carlos Nobre wonders if the Amazon is close to reaching tipping point, where rainforest degrades into dry savannah. He estimates the crucial level of deforestation for that to happen to be around 20 to 25 percent.

“It’s hard to say when it’s going to happen, but we are seeing that it is coming faster than we previously thought,” he said.

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Chart 1: Deforestation in the Amazon & Average Global Soybean Price. Source:Source: Federal Reserve & National Institute for(Brazil) Federal Reserve ofofSt.St. LouisLouis & National Institute for Space Research

Space Research (Brazil).

Some experts estimate that we are already at 17 percent. If the feared transition to savannah happens, the region will begin to emit more carbon than it absorbs. Had Bolsonaro won a second term, things would have been worse still. In a bid to win votes, he made election promises to legalise mining on indigenous land.

“Brazil is ready to retake its leadership in the fight against the climate crisis,” says incumbent Lula. His election victory was greeted with global relief. He has so far merited the optimism shown in him. At COP27, he promised to end deforestation by 2030, a vow he repeated in his inauguration speech.

On his first day in office, Lula issued several protection decrees, including the reinstatement of the PPCDAm, and the creation of similar plans for the Cerrado, Atlantic Forest, Caatinga, Pampa and Pantanal regions.

He established the Permanent Inter-ministerial Commission for the Prevention and Control of Deforestation, bringing together 12 ministries and offices. He also created Brazil’s first Ministry for Indigenous People, headed by an indigenous person.

Lula has restarted the Amazon Fund established in 2008. In a recent meeting with US President Joe Biden, he obtained promises of US funding. Norway has contributed $1.2bn — donors had suspended funding with the election of Bolsonaro — and the fund aims to “prevent, monitor, and combat deforestation” and promote preservation and sustainable land use. Future efforts could put the Amazon at the centre of global carbon offsets and trading.

Simply having an administration committed to following and enforcing existing laws and regulations will make a huge difference. As deforestation immediately jumped when Bolsonaro was elected, deforestation decreased 61 percent compared to the same time the CFI.co | Capital Finance International

previous year. The Carbon Brief website estimates that simply enforcing the Forest Code adopted in 1965 could cut deforestation by 89 percent by 2030. Lula is also likely to increase the number of indigenous territories.

Lula benefits from the actions he took during his previous presidency. When he implemented the PPCDAm in 2004, it marked the beginning of a downward trend in deforestation (see chart).

Some estimate that it reduced deforestation by 67 percent; Lula himself claims 80 percent.

Of course, Lula’s term was not without its own controversies. Apart from corruption charges for which he was jailed (before the charges were annulled), he approved the $9.5bn Belo Monte Dam on the Xingu River. Some 50,000 indigenous people were displaced by the project — which, as warned by critics, has not delivered on electricity output.

Lulu has perhaps been chastened by his mistakes; his rhetoric on infrastructure in the Amazon is more subdued this time around. But he will not have things all his own way. Six of nine Amazonian states are run by Bolsonaro allies. Worse, Bolsonaro’s party increased its seats from 77 to 99 in Congress — and rightwing parties comprise a majority of the 513 seats. In the Senate, Bolsonaro’s party won 13 of the available 27 seats, a 17 percent share.

So far, the January 8 coup attempt seems to have strengthened Lula’s position. More Brazilians disapprove of the coup than supported him in the election. The result has forced some separation between Bolsonaro and others on the right, who historically managed to work with left-leaning governments. The coup may be a godsend for the Amazon. Time will tell.

But Lula must take every available advantage as the tipping point looms. Paris Agreement targets will be mean little if the Amazon ceases to be lungs of the world. i

Spring 2023 Issue

> Social Activist-Turned-Chief Executive:

Leader Showing True Commitment to Worthy Causes — and to Brazil’s People

CAIXA’s Maria Rita Serrano understands challenge and inequality, and strives to overcome both.

CEO: Maria Rita Serrano

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razil is currently facing major political and economic challenges — and CAIXA has the tools to tackle those issues.

At the head of the bank is CEO Maria Rita Serrano, whose career has been marked by challenges met, and overcome. Reinstating CAIXA as a fundamental axis for the country’s sustainable development is her life’s mission.

“I had the honour and joy, after 33 years of a career ardently defending CAIXA, of being invited to chair it,” she explains. “I come from a humble and hard-working family, I am a woman, a social and union activist, and I was the elected representative of the bank's employees in its board.

“It is not the common trajectory of a CEO of a financial institution in Brazil. But this bold choice by President Lula (Luiz Inácio Lula da Silva) fills me with hope of working to improve the lives of Brazilians.”

CAIXA is a vital national institution, especially in its role of managing public policies for the

federal government. With 162 years behind it, the bank was born stirring the dreams of ordinary Brazilians. It was in CAIXA that enslaved people could deposit savings to buy their writ of emancipation.

as ABC Paulista, joined CAIXA in 1989. She faced discrimination and understood the need for change in decision-making spaces. In Brazil, only 12 percent of board positions are held by women.

Serrano knows this story in all its depth and nuance, and one of her goals is to keep CAIXA on this path by keeping it a state-owned company focused on socio-economic development.

In 2016, she ran as employee representative to the CAIXA board of directors; she was elected and invested in 2017. In 2019, she was reelected with 82 percent of the votes. In 2002, she was voted in for a third term — this time with a 91 percent majority.

“During the pandemic, CAIXA employees served half of the Brazilian population,” she says. “CAIXA is a company that excels. This is the bank that has resisted the dismantling of public assets in recent years ... and it resisted thanks to the effort and commitment of its employees.”

During the military dictatorship, Rita Serrano became an activist for social causes. Back in 1982, her concern was for unemployment, inequality, lack of opportunity, and the misery of a large part of the Brazilian population.

Serrano, a trade unionist and the first president of the Bank Workers’ Union in the region known CFI.co | Capital Finance International

Serrano has published several books. In 2018, she launched Caixa, Banco dos Brasileiros, which recounts the centennial history of the bank. Recently, she published Rompendo Barreiras, on her life trajectory and activism in defence of public assets, and the challenges for women in positions of power.

Born in Santo André, São Paulo, Maria Rita Serrano graduated in Social Studies and History, with a Master's degree in Business Administration from the University of São Caetano do Sul (USCS). i 117

A Country Reborn, Held Close by a Caring and Compassionate Bank As Brazil exits an oppressive regime, CAIXA is there to ease the transition to inclusion and protection for people and planet.

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AIXA Econômica Federal has a wholesome raison d’etre: to promote a fraternal, just, and egalitarian society that conserves and values Brazil’s environmental, cultural, and social

heritage.

The country holds the lion’s share of the planet’s natural wealth, which puts it in a position to lead solutions to the climate emergency and environmental destruction.

And CAIXA cannot — and will not — act or make a decision without considering the sustainability agenda. The solid, historical institution is fundamental to the financial system in Brazil.

CAIXA is the main executor of public policies and works with the federal government to promote sustainable development, with a focus on collective wellbeing. CAIXA resumes its historical role by focusing on public policies, products and services which will return Brazil to its leading position on the global stage. It focuses on issues related to sustainability, job creation, sustainable housing, infrastructure, agriculture, energy transition, and the promotion of citizenship and dialogue.

The bank maintains and establishes relations with national and international partners with technical capabilities and financial resources that can accelerate the implementation of this agenda. Some actions are on the immediate horizon.

CAIXA's accreditation with the Green Climate Fund, a global investment platform created to support developing countries to meet their goals in the Paris Agreement, will be resumed. The bank provides public support with grants from the CAIXA socio-environmental fund to generate female-focused employment and income, promote the bioeconomy and local production arrangements, and protect vulnerable groups.

With transparency as a guiding force, the bank defines and communicates its institutional commitments and goals so that the public can contribute to, monitor, and measure progress.

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"A new CAIXA has been born, for a new Brazil — with a spirited commitment to rebuilding the country and improving quality of life."

With its double identity of bank and state entity, CAIXA plays a fundamental role for the nation’s development. As CEO Maria Rita Serrano points out: “Financial intermediation should serve the economy to foster production, services, jobs and improve the lives of the population ... (and) the work of state-owned banks is fundamental.

State investments can be factors of economic, employment, and income stabilisation, always with sustainability and the neediest people in mind.”

CAIXA has some 4,200 branches staffed by 86,000 employees across the country, as well as 13,000 lottery outlets garnered during its 162 years of history. It overcame recent management turmoil with solid governance, credibility, and the commitment of its family of employees.

Anchored on these assets, CAIXA will expand its financial instruments to reduce inequalities and poverty while preserving ecosystems and biodiversity.

A new CAIXA has been born, for a new Brazil — with a spirited commitment to rebuilding the country and improving quality of life. The reorganisation allows the bank to excel in managing the government's income transfer programmes. It is expanding partnerships with states and municipalities to develop infrastructure projects while promoting financial inclusion, advancing technology to improve customer service and care, and balancing commercial operations to invest in cultural projects. There is an ongoing focus on labour relations and the social and natural diversity of Brazil.

of the Amazon. Yanomami populations were left in an atmosphere of destruction and neglect that was aggravated by the pandemic and the Jair Bolsonaro administration that encouraged the invasion of their lands.

Recently, the world has been appalled at the vulnerability and neglect of indigenous peoples

CAIXA immediately implemented policies to support the affected people, and sent a “truck

CFI.co | Capital Finance International

Spring 2023 Issue

branch” to serve 30,000 families in the states of Amazonas and Roraima. The actions will give indigenous people access to federal government benefits, and the support of CAIXA. The truck branch reaches isolated regions affected by climate catastrophe or in vulnerable situations. In addition to the trucks, CAIXA also

has six boat branches that travel the waters of the Amazon.

These are examples of how a state-owned bank can make a difference with more than financial support. Combining governance, credibility, and responsibility, public banks such as CAIXA can do for the Brazilian population what some financial entities CFI.co | Capital Finance International

are not willing to do. It represents the sustainable arm of the state in the financial market, making a real difference to the lives of the population.

And this is just the beginning. Aligned with the agenda of the reborn Brazilian state, CAIXA will drive social transformation, where natural capital is valued as a strategic asset for the country — and the world. i 119

> Cybersecurity and

Digital Transformation

By Simon Wilcox

With the increasing integration of IT in all aspects of our lives, Simon Wilcox considers the security challenges facing boards and senior leadership teams.

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nformation technology is one of the most dynamic and fast-moving areas in business.

The rapid pace of improvement in what it can do, coupled with its use in just about every aspect of our lives — from business to entertainment, banking to HR — means that trends in the sector have a massive impact on us.

Although IT has been of great benefit, it also presents problems. Cybercrime is now a trillionpound industry, with dedicated hackers, criminal organisations, and even nation states involved in increasingly complex attacks.

A few recent examples: • The Royal Mail was hit by a ransomware attack in which criminals threatened to publish stolen data • Fourteen British schools had confidential details on children’s special educational needs, child passport scans and teachers’ contract details leaked online • UK water company South Staffordshire plc reported that the bank details of some of its 1.7 million customers could have been accessed — and potentially leaked — on the dark web.

SIZE DOESN’T MATTER It’s tempting to believe that cybercrime is an issue only for larger, stock market-listed firms, but the risks apply to companies of all sizes.

While it’s natural for directors to be absorbed in, and distracted by, other priorities, the reality of cybercrime deserves their focused attention.

Technical resilience does not show on the balance sheet, but it’s an intangible asset for your organisation. Without it, you’re exposed to significant risk and far-reaching consequences, including data- and financial loss, regulatory fines, and reputational damage.

Contextually, worries about cybercrime are pervasive. Gartner’s Board of Directors Survey concludes that cybersecurity-related risk is the second-highest threat to most businesses (the first being regulatory compliance risk). Yet few directors feel confident that their enterprise is appropriately protected.

The threat is increasing, and so is the pressure on firms to demonstrate that they are taking appropriate action. Gartner reports that there is increasing regulatory pressure on organisations 120

"Gartner maintains that, by 2024, organisations that adopt a cybersecurity network architecture will be able to reduce the financial cost of security incidents by an average of 90 percent." to better manage their cyber resilience. In 2023, organisations in regulated sectors must look to increase their resilience to ensure regulatory compliance, including greater informationsharing, rigorous self-assessment, and continuous testing.

Gartner maintains that, by 2024, organisations that adopt a cybersecurity network architecture will be able to reduce the financial cost of security incidents by an average of 90 percent. They also note that by 2025, 40 percent of boards will have a dedicated cybersecurity committee, overseen by a qualified member.

Due diligence towards cybersecurity is predicted to have strategic cost benefits. Gartner believes that by 2025, 60 percent of organisations will use cybersecurity risk as the primary determinant in conducting third-party transactions and business relationships.

So, let’s consider the challenges, developments, problems and solutions associated with these trends.

Evolution in the Digital World Digital transformation is simply the expected evolution of our daily lives. Businesses are digitalising more services to help customers make more effective use of technology and the internet — and make their lives simpler and easier.

It’s a natural evolution. Look at where we were five, 10, or 20 years ago. The technological landscape is rapidly changing, and this rate of change increases in-line with the growing complexity and capability of the technology itself.

CFI.co | Capital Finance International

Of course, we’ve had an acceleration point, due to the pandemic — but evolution in the digital world is part of our daily lives. As the reach and complexity of technology have increased, so have the activities of cybercriminals, who recognise the opportunity provided by access to company systems and customer data.

Is IT Security a Cost Burden?

Historically, IT has always had a cost attached — but we have slowly reached the point where boards now understand that it can provide a strategic advantage. IT security is currently where IT development was a few years ago.

Security is too often regarded as a cost, a burden, something we have to do. We are now at a turning point, where many forward-thinking companies are really starting to understand that technology security, done well, allows them more confidence in what they are doing. It gives them some peaceof-mind that they are doing the right things.

Spring 2023 Issue

I would urge the boards and senior leadership teams of enterprises of all sizes to avoid being naïve and complacent about the risks posed by cybercrime.

Cybercrime is Varied There are several categories of cybercrime, each with serious risks. A key threat is a ransomware attack, in which criminals invade and occupy company systems and demand significant sums to release them. Firms can also be the victim of phishing activities, in which employees are tricked into revealing sensitive security details and company data. Other crimes include theft of personalised customer data.

Cybercrime is Commoditised It's easy to imagine that cybercrime is what happens to other organisations. But it’s worth emphasising that it is no longer the domain of sophisticated criminal groups.

Cybercrime has become commoditised and is available as a service. Would-be cybercriminals can buy the software they need on the dark web for just a few hundred pounds, equipping them to attack vulnerable firms, steal data, and launch ransomware attacks.

Increased Planning and Speed A clear trend is more careful planning of cybercrime approaches. Hackers are scanning the web to understand the vulnerabilities of available software.

When they find a chink in the armour that can be exploited — say in version 6.3 of a software release — then they create a list of target websites that run version 6.3 to immediately attack them. It’s more targeted than randomly trying a wide range of IP addresses. Attackers no longer need to knock on every door — they know which websites are running vulnerable software.

CFI.co | Capital Finance International

This means that these attacks can happen more rapidly.

Mounting a Defence Education and collaboration are key elements of a defence. We are now seeing companies — even competitors — sharing data security insights to enable higher levels of protection across their business sectors. They are protecting their organisations, and those of their peers, which engenders improved security across the business community.

If, like me, you believe in the principle of “a rising tide lifts all boats”, then it’s clear that the more the business community does to raise cybersecurity standards, the greater the deterrent to opportunist criminals.

Active Protection is Important Cybersecurity is vital for large and small 121

Is cybersecurity part of your digital transformation strategy?

Six key steps your organisation can take to protect from cyber-crime.

1. Assets

2. Vulnerability Audit

3. Prioritise

4. Patch

5. Anti-virus and End Point Detection

6. Education

Organisations should be aware of all their data assets, computer systems, and potential points of network ingress to fully understand what they have on their networks.

Prioritising the most important IT machines and data is the next step for an organisation and then make a clear plan for patching and protecting the most important machines, in priority order.

All organisations need to commit to anti-virus and endpoint detection response capabilities to stop or mitigate ransomware ever getting onto their machines in the first instance.

businesses. Experts are routinely consulted for strategic and operational advice, and many organisations will have departments dedicated to attack protection. But relying on technology alone for protection is not enough.

Cybersecurity experts urge that all employees, from the C-suite downwards, must be educated and vigilant. They must be aware of threats, even in a simple email requesting company details. A passive approach to cybersecurity is not enough to be protected from determined hackers.

Specialist Security Support Most businesses are effective at managing risks, but they are often less effective at identifying and understanding them. This is where specialist IT security advisers can help. They can inform company policies and procedures. Without this expert knowledge, firms can make mistakes in compliance or legal regulation, such as GDPR or the laws relating to cybersecurity. It’s important to have the help of a specialist at all stages.

An Alien Concept?

Unless your company sells cybersecurity, your management team and board might not fully understand it. You might work for a brewery or an airline, or a fashion brand.

You must speak to your board in language that they understand. You have to be clear, and you have to be transparent. It’s important to provide them with the facts and the scale of the risks, and a clear, costed programme for mitigating and managing them.

Need for Colleague Education As cybersecurity incidents and issues become more public, everyone is becoming more aware of spurious emails and SMS messages. Managing these, and the need for continuous education 122

The second step is for organisations to conduct a vulnerability audit across their entire computing estate, to identify and understand where the vulnerabilities and misconfigurations in their systems lie.

Many organisations understand their vulnerabilities and the threats they face, but too often fail to push the systems patches out to resolve vulnerabilities and misconfigurations. An unpatched system is one of the most easily exploitable routes into any network.

Finally, educate employees, making them aware of the threats especially around malicious links and phishing emails. This has been made harder during the pandemic with many working from home or moving to hybrid work models. Send constant reminders to be vigilant and to always check any links before clicking them, even if they are from a work colleague.

and vigilance, has to be a push down from board level.

You have to bring everyone in your company along with you, and clearly explain the threats.

Appropriate checks and balances in your business allow cyberthreats to be identified and countered, while ensuring that you do not paralyse day-to-day operations.

Consequences of Failing to Act The consequences of cybercrime can be significant. In addition to substantial, perhaps crippling, business disruption, boards need to consider the reputational impact of data losses.

There are also huge fines for businesses if they don’t properly secure or safeguard client data.

Under the General Data Protection Regulation (GDPR), the EU's data protection authorities can impose fines of up to €20m or four percent of worldwide turnover for the preceding financial year, whichever is higher.

Directors can be held personally liable for data breaches or other protection failures, with fines of up to £500,000.

points of network-ingress to fully understand what they have on their networks.

2. Firms need to conduct vulnerability assessments across their entire computing estate, understanding where the vulnerabilities and misconfigurations in their systems lie.

3. Businesses need to prioritise the IT devices most important to their business, and devise a clear plan for patching and protecting them in order of priority.

4. Patch the machines. Many organisations understand their vulnerabilities and what threats they face, but never get around to pushing those systems patches out to resolve vulnerabilities and misconfigurations. An unpatched system is one of the most easily exploitable routes into a business network.

5. Companies need to commit to antivirus and endpoint detection response capabilities to stop or mitigate ransomware.

6. The simplest step is education and awareness, continuously reminding staff about malicious links and emails which can potentially come in.

This was more difficult during the pandemic, with remote working. There need to be constant reminders to be vigilant. i

It’s a misconception that cybercriminals are not interested in a company’s commercial data and digital assets. They are increasingly a target, and forward-thinking board members need to plan how to protect their business data and commercial future, rather than assume they are not on the radar.

While it’s not possible to completely eliminate the threat of ransomware, there are six key steps that companies can take.

1. Organisations need to be aware of all their data assets, computer systems, and potential CFI.co | Capital Finance International

ABOUT THE AUTHOR Simon Wilcox is MD of Digital Craftsmen, a firm specialising in cybercrime prevention strategies and management.

Decode Risks.

Unlock Opportunities.

Trusted ESG insight that provides a more holistic understanding of risk. moodys.com /esg

CFI.co | Capital Finance International

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© 2023 Moody's Investors Service, Inc. and/or its licensors and affiliates. All rights reserved.

Spring 2023 Issue

> North America

A Sporting Chance: US Investors See Gold in European Football

By Brendan Filipovski

Passion project, vanity, true enthusiasm, or the chance to make a quick buck: why do Americans want to buy sports clubs?

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Spring 2023 Issue

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F

or some reason, billionaires like to buy sports teams. And for the past 30 years, Americans have shown a penchant for snapping up European football clubs.

The reasons for this, and the nature of the acquisitions, have changed over time. Now, with interest rates rising, could the odd fascination be about to tail off?

Owning a team used to be a passion project rather than an investment, on either side of the Atlantic. In Britain, the rise of professionalism in the late 1890s saw membership-based clubs give way to joint-stock companies — and, later, local businesses.

But the motivation then was civic pride, rather than serious profit (although local brewers often benefitted from associating with a club, for obvious reasons). When the English Premier League was launched in 1992, those local business leaders were increasingly crowded-out, cowed by the huge sums involved.

In the US, sports team structures are sometimes as fragile as their players are tough. New owners were often serial opportunists rather than serious players. Clubs came and went, or jumped between cities, like the Lakers going from Minneapolis to Los Angeles. Leagues regularly had to fight off upstarts and rivals; think of the decade-long battles between the NBA and ABA, and the NFL and the AFL. Everything changed in the 1980s: sports teams were officially big business. There were increased revenues, but the biggest returns were from the fast-rising value of the clubs themselves thanks to a lucrative “buy and hold” strategy.

An explosion of cable TV subscribers pushed up the broadcasting rights of the major sports as the major US broadcast networks (NBC, CBS, and ABC, later joined by Fox) fought for viewers in a fragmenting market.

In Europe, governments deregulated TV broadcasting, which saw the rise of commercial newcomers and pay-TV operators. This led to intense competition for sports broadcast rights which had previously been the preserve of public broadcasters.

The US, with its larger single market, had a head start. Sporting clubs became the playthings of the rich and famous. And the rich needed to get richer.

The San Francisco 49ers were sold for $17m in 1977, the Chargers were sold for around $72m in 1984, the Philadelphia Eagles for $185m in 1994, and the Minnesota Vikings for $600m in 2005.

Would-be team owners began to cast their gaze across to the English Premier League (EPL), which separated from the Football League in 1992. The EPL’s TV deal had increased from an initial £191m for the 1992 to 1997 seasons to £1.2bn for the 2001 to 2004 seasons. Some of 126

League NFL EPL* NBA MLB Bundesliga IPL Big 10 Conference, US College Football

Total Current TV Rights $113bn, 2022 to 2033 $11.4bn, 2022-23 to 2024-25 $24.3bn, 2016-17 to 2024-25 $12bn, 2022 to 2028 $5.1bn, 2021-22 to 2024-25 $6.02bn, 2023 to 2027 $7bn, 2023 to 2030

TV Rights Per year $10.27bn $3.8bn $2.7bn $1.7bn $1.28 $1.204bn $1bn

Table 1. *Includes international rights. Source: Various and author’s calculations.

the top EPL clubs were worth more than their NFL counterparts.

There was a belief that the value of European football teams would only increase as US bestpractice marketing, management, and financing came to Europe. American owners also envied the global reach of European football.

Today, the EPL’s TV rights per year, when accounting for domestic and overseas deals, is second only to the NFL. In 2005, the Glazer family, owners of the Tampa Bay Buccaneers, became the first Americans to own an EPL club — they bought Manchester United for $1.4bn. That’s twice as much as the Minnesota Vikings were sold for in the same year. But this was not a case of a sugar daddy throwing money at a sexy club. To the dismay of supporters, the Glazers bought United using a leveraged buyout, saddling the club with the very debt they had used for the purchase. Many United fans believe that the debt has hamstrung the club.

European football, meet American financial engineering. And the purchase of United opened the floodgates.

In 2006, Randy Lerner, then owner of the Cleveland Browns, bought Aston Villa. In 2007, George Gillett Jr (then owner of the Montreal Canadiens in the NHL) and Tom Hicks (then owner of the Dallas Stars in the NHL and Texas Rangers in the MLB) bought Liverpool. In 2010, the club was sold to another American, John W Henry of the Fenway Sports Group (FSG) — also owner of the Boston Red Sox. Also in 2007, Stan Kroenke, then owner of the Denver Broncos, bought his initial stake in Arsenal, which he acquired in full in 2011.

Today, seven of the EPL club are owned outright

by Americans, with another two clubs having significant US investment. Stateside owners have begun to spread out to consider clubs is France, Italy, Spain, and Portugal. German clubs — with 51 percent ownership by supporters — are the outliers in the sports business in Europe.

Since the pandemic, there has been a change: American investment funds are getting in on the action and buying European teams in increasing numbers. When Covid-19 hit and matchday revenue dried up, European clubs needed cash — and American investment funds sensed distressed assets.

RedBird Capital Partners bought French team Toulouse FC in 2020. In 2021, Italian club Genoa CFI.co | Capital Finance International

was bought by 777 Partners, Oak Tree Capital bought a stake in Inter Milan, Orkila Capital bought Belgian Champions Club Brugge, and RedBird bought an 11 percent stake in FSG. In 2022, RedBird purchased AC Milan, as well, and Clearlake Capital purchased Chelsea with Todd Boehly.

With rising interest rates in 2022, American interest fizzled for a while. Liquidity was no longer dirt cheap. Both Liverpool and Manchester United were put up for sale in November 2022, but US investors have been conspicuous by their absence.

Liverpool has subsequently walked back from an outright sale.

Of course, not every supporter has been enamoured with foreign interest in “their” clubs. Supporters want rich owners to buy trophies and sustain longterm success. FSG famously helped Liverpool win their first EPL title in 2019/20, but few owners can compete with the deep pockets of Gulf sovereign wealth funds and royal families.

Supporters were opposed to the number of American-owned clubs involved in the 2022 plans for a breakaway Super League. They feared being kicked out of domestic competitions in a case of money-over-tradition. After the audacious coup failed, John W Henry apologised to the fans.

But the attempt reflects the undying motivation of American owners to preserve the value of their investments. Relegation scares them; guaranteed European TV money is more what they are used to back home.

The current Champions League format involves 32 teams in the group stage, and in 2022-23 the total prize pool was around €2.032bn. The proposed Super League would have had only 20 teams, but an initial prize pool of €3.5bn.

While the 2022 Super League bid was defeated, a new proposal has recently come to light. While it is not a closed competition and would involve more teams, it does include a mechanism that virtually guarantees that the biggest clubs will play in the Super League.

Whatever the future is for American investors and European football clubs, one must wonder what the founders — many of them were working-class, even members of the clergy — would make of it all.

The American hunger for sports team ownership has not entirely diminished — many are now considering fresh opportunities: European basketball, and the Indian cricket’s IPL... i

Spring 2023 Issue

> Prospect Capital Management:

History of Innovation at Leading Asset Manager

F

or 35 years, Prospect Capital Management, along with its predecessors, has established a history of innovation across its private and public fund management business.

The firm’s founders launched Prospect with creative ideas, a large network of relationships, a drive to succeed, and the courage to put their savings at risk, with the firm continuing with such attributes today.

Prospect invests across the United States in diversified portfolios by industry, company, strategy, and situation. The firm’s core investment strategies include middle-market lending, middle-market buyouts, structured credit, and real estate.

Prospect focuses on generating value for its investors, portfolio companies, private equity sponsor relationships, and employees through creativity, rigor, perseverance, integrity, and teamwork. Prospect’s objectives include preserving capital by making private credit and private equity investments at reasonable multiples of recurring cash flow, earning attractive current cash yields and long-term capital appreciation, and achieving consistent low-volatility returns.

The firm has persevered over the course of multiple economic cycles and has developed many industry-leading innovations over its long history, including achieving: • The first and only multi-line business development company (BDC).

• The first non-traded closed end fund focused on investments in collateralized loan obligations (CLOs).

• The first and only BDC with a significant real estate business.

• The first (and in many cases only) BDC to issue medium-term notes, convertible notes, at-the-market issuance programs, non-traded perpetual preferred stock, and traded perpetual preferred stock.

• The first investment grade credit rating for a BDC after the Great Financial Crisis.

• The first and only BDC with five investment grade credit ratings.

• The first BDC acquisition (of Patriot Capital) in December 2009.

Because of Prospect’s achievement of the above and other results, investors have gravitated to Prospect’s long-term expertise, track record and history of innovation. The firm has grown to over 100 employees and $8.8 bn of regulatory assets under management as of year-end 2022.

Prospect has invested in nearly 1,000 companies CFI.co | Capital Finance International

across liquid and private businesses with a network of private equity sponsors, management teams, and market participants that inform its investment process.

Prospect is currently offering two investment opportunities to retail investors: • Preferred Stock in Prospect Capital Corporation, a publicly traded BDC. The preferred stock currently has a 6.5 percent per annum dividend rate paid monthly.

• Common Stock in Priority Income Fund, a closed-end fund. The Common Stock currently has an 11.0 percent per annum dividend rate paid monthly and covered over 150 percent by net investment income.

Prospect firmly believes there is no greater alignment of interest than for management to invest alongside its shareholders on the same terms. Prospect’s team and employees own approximately $1.1 bn of its funds under management.

With its experienced team, disciplined investment approach developed over more than three decades, and commitment to transparency and governance, Prospect is wellpositioned to capitalise on market opportunities ahead. i 127

> AccountAbility CEO Leading the Charge in a

Changing ESG Universe

T

he days of turning a blind eye to the impact of Environmental, Social and Governance (ESG) matters are over.

Today, organisations of every scale, across industries and in all geographies are active in moving the ESG agenda forward in ways that are transparent, meaningful and have genuine impact.

relevant sustainability strategies and programmes, and review and improve corporate governance to ensure effectiveness, transparency, and accountability.

While the urgency for ESG action has never been greater, much has changed in the past three years to impact business and its relationship with the ESG agenda. How and where employees work is disrupted, markets are more volatile and unpredictable, supply chains have been hobbled, inflation seems universal and military hostilities are reshaping the world’s energy supply.

Against this backdrop, corporate purpose, social impact, stakeholder engagement, environmental action, geopolitical implications, and good governance are all intrinsically tied to a company’s economic performance. Certainly, in the year ahead, sustainability will be impossible for business to ignore.

Alongside these challenges a raft of new international regulations and frameworks are helping guide our global ESG future. But for business, the pace and scope of this change can be dizzying and confusing.

As a leading ESG advisor to business executives, investors and other stakeholders, AccountAbility provides the expertise and resources needed for leaders to address risk, seize opportunities, and achieve returns from their ESG strategy.

AccountAbility is at the very centre of this ESG universe. After close to three decades helping organisations meet their sustainability goals, the international advisory and standards firm has seen a transformational operating shift from a well-intentioned environmental and social movement to a de-facto global business priority.

Today, the sustainability agenda is central to business operations, and ultimately performance.

Leaders recognise the financial imperatives of moving to a more sustainable economy and the commercial opportunities this presents.

The firm’s advisory services help organisations interpret changing regulations, factor sustainability issues into their decisions and embed ESG into business strategy and value creation. With broad expertise and experience across all facets of sustainability and corporate responsibility they provide the full context needed to craft an optimal ESG strategy.

“At AccountAbility we believe that doing well and doing right are not mutually exclusive outcomes”, comments AccountAbility CEO Sunil (Sunny) A. Misser, a pioneer in the field of mainstreaming ESG back when sustainability was a developing academic platform that few companies recognised. “With decades of global experience in helping organisations meet their strategic goals, we understand how to deliver practical, effective and enduring ESG solutions that enable our clients to succeed.”

AccountAbility CEO: Sunil (Sunny) A. Misser

Today, the consulting and standards firm is recognised around the world as an award-winning leader in the ESG ecosystem. The firm has a centred purpose – to innovate and advance the global sustainability / ESG agenda by improving the practices, performance, and impact of organisations – and operates globally with businesses, investors, governments and multi-lateral organisations through a highly qualified team from offices in New York, London, Riyadh, and Dubai.

The firm has been the recipient of multiple business and finance awards and was recognised by the CFI.co Judging Panel for a second consecutive year as a Trusted ESG Global Consulting and Standards Firm and Best ESG Strategy Development Partner, 2022.

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Importantly, Misser distinguishes AccountAbility’s proven corporate mandate. "We are not an advocacy platform or an activist forum – we are an expert ESG advisory firm that provides objective counsel to CEOs and Boards on how to improve their business performance."

The firm’s Advisory services provide specialised expertise and practical solutions to clients across industries and geographies that want to assess, establish, and/or implement leading practice sustainability initiatives that deliver tangible ESG impacts and drive long-term value. AccountAbility helps clients to identify, map, profile, and engage the stakeholders that matter, in order to define and prioritise material ESG issues, design robust and CFI.co | Capital Finance International

A key question stakeholders are asking today is whether they can trust corporate disclosure of sustainability information and what framework or standard to adopt. First launched in 2003, and frequently updated, AccountAbility’s Assurance Methodology (AA1000 AS v3) has been adopted as an essential tool used by sustainability professionals worldwide for reliable, credible, and trustworthy sustainability disclosures.

The firm’s long legacy in the standards space, and trusted sustainability standard and ESG frameworks helps ensure organisations deliver on their strategy, governance, reporting, and disclosure goals. The firm’s Stakeholder Engagement Standard (AA1000 SES) is amongst the oldest and most widely used global guidance of its kind.

The company recently expanded access to its Assurance Standard with translations for the Spanish, Korean, and Chinese language markets (in addition to the existing German, French, Italian, and Portuguese language standards) and in the months ahead will expand further with versions that serve business communities in other languages.

Spring 2023 Issue

“At AccountAbility we believe that doing well and doing right are not mutually exclusive outcomes… However, we need to adopt a mindset – to plant trees under whose shade future generations will rest.”

AccountAbility CEO: Sunil (Sunny) A. Misser

Misser is a tireless and passionate advocate for leadership and collaboration to address the challenges before us and the opportunity to create a more sustainable future. “A successful ESG strategy is more than a “tick-the-box” exercise. We are living in a changed world, and the leaders who step up with clear thinking, smart ideas and practical solutions will shape and architect the successful organisations of the future. We need to adopt a mindset - to plant trees under whose shade future generations will rest”, says Misser. Inspiring words indeed.

Leveraging its global research and advisory experience, AccountAbility has identified 7 priority trends for 2023 to help leaders stay ahead of the curve on sustainability matters for the years ahead.

7 SUSTAINABILITY TRENDS THAT WILL SHAPE BUSINESS IN 2023 1. Navigating the Net-Zero Landscape – Against an unprecedented volume of climate pledges and commitments, net-zero has taken centre stage.

But what is it, and how can organisations take meaningful, effective, and transparent climate action?

2. Stakeholder Activism is Getting Louder – As businesses face increasing pressure to take

a stance on a range of sustainability issues, investors are leveraging their influence to demand that companies act on ESG matters.

How can business leaders best respond to this reality?

3. Geopolitics: The New “G” in ESG – As Geopolitical instability increasingly cuts across the ESG landscape, how can businesses deal with this additional "G" while staying focused on their sustainability goals?

4. Building a Diverse, Prepared and Future-Focused Board – Driven initially by stakeholder activism, how can changes in board composition unleash the power of re-framed governance - to improve effectiveness and shape corporate action?

5. Next Generation ESG Disclosure and Reporting – Consolidation of global ESG standards, and a shift from voluntary to mandatory disclosure are set to heighten attention on corporate sustainability disclosure practices. How will these changes impact ESG reporting?

6. The Road to a Sustainable Value Chain – For value chains to create competitive business advantages, they must incorporate ESG transformation towards a viable and sustainable future. How can sustainable procurement help value chains responsibly adapt to this next normal?

7. Nature Based Assets will Drive Valuations – Nature based reporting, target-setting, and asset CFI.co | Capital Finance International

valuation frameworks are coming. How will they provide a path forward for companies as they consider the impact they have on Earth’s natural systems across their value chains?

In a perfect world, corporate purpose, strategy and ESG would be approached sequentially. But large, established companies and those growing at pace, operate under a range of priorities, urgencies, and constraints, and as a result they don’t have this luxury. Their business reality is one of constant change, where everything must happen – all at once, and right now.

ESG implementation that aligns with a clear purpose and well-considered strategy recognises this reality and can be effective in advancing a company’s business model.

Consumers and society, as a whole, are expecting more (and different) from business – in an atmosphere of low trust and high expectations. This is compounded by a pace of sustainability change that can be dizzying, and sometimes confusing.

Yet, it is possible to advance the Sustainability/ ESG agenda – with careful consideration of focus and balance.

Enough said… i 129

> Be Your 'Authentic Self' at

Couche-Tard’s Global Stores

Inclusion and diversity for employees has been taken to new lengths by a company that has its heart in the right place.

C

anadian multinational Alimentation Couche-Tard (ACT) has evolved into a global leader in convenience stores and mobility.

With 122,000 team members across 24 countries and territories, the company takes pride in representing a spread of cultures, races, genders, and minority groups. ACT continues its diversity and inclusion journey across the organisation, embracing it at all levels, from store staff to top management. The company strives to be an inclusive and attractive employer, providing a work environment where people feel safe, respected, and able to “bring their authentic selves to work” every day.

The company’s wholesome efforts began in earnest in 2019, with the formation of its first business resource group, the Women's Council, to provide "winning conditions" for female employees. Today, the company has seven active business resource groups for race, LGBTQ+, disabilities, ethnic diversity, and, most recently, military veterans and their family members.

In March 2020, ACT president and chief executive Brian Hannasch signed the CEO Action 130

"Alimentation CoucheTard is committed to creating pipelines that bring more diverse groups into its management structure." pledge, joining a coalition of leaders working to advance fairness and inclusion in the workplace.

When Hannasch signed up for this commitment, Alimentation Couche-Tard became the first convenience store retailer to join the movement — and demonstrate its commitment to the cause.

From there, the company began bold conversations across the organisation to listen, learn, and take meaningful action. This included training, across the business, on unconscious bias and the sharing of experiences, with town halls, internal communications, surveys, and personal conversations with top leadership.

CFI.co | Capital Finance International

Inspired by a "One Team" culture — putting its people and its customers first — ACT has won high praise and recognition. It was named as Best Convenience Store Diversity & Inclusion Employer (Global) 2022 by the CFI judging panel — and it took the Gallup Exceptional Workplace Award in the same year.

"To be recognised ... among such prestigious global honourees is a proud moment for ACT," said Hannasch. "Protecting and promoting ACT's winning culture is a top priority for us, and we have worked together as one team to create a highly engaged workforce and company that has only become better and stronger through the challenges of recent years."

Alimentation Couche-Tard is committed to creating pipelines that bring more diverse groups into its management structure. This includes internal training programmes for managers, directors, and emerging leaders, as well as industry association-sponsored minority training programmes exploring ways that underrepresented groups can gain crucial tools and education to advance their careers — and grow with the company. i

Spring 2023 Issue

> Is a Life of Luxury a Worthy Pursuit in the Modern Day?

By Naomi Snelling

C

oco Chanel once said, “Luxury must be comfortable, otherwise it is not luxury.”

She also noted: “Some people think luxury is the opposite of poverty. It is not. It is the opposite of vulgarity.”

So, what is luxury? The term is subjective, but it’s generally accepted to mean a condition of abundance, ease, and comfort. We use it as a prefix for everyday items — hotels, cars, homes — and to typify something that the hedonist can aspire to.

Queen of Sheba, first mentioned in the Hebrew Bible or Tanakh, went on to be an important figure in several traditions and religions. She is believed to have been the wealthy ruler of Saba, and when she visited King Solomon, it was with a caravan of camels bearing gold, jewels, and spices.

It can mean something with superior performance — a vehicle, a yacht, a watch — or something that generates premium sensations, like fine wines or exquisite art. Generally, luxury is equated with something expensive, available to a select few, and possessing an innate quality against which lesser things may be compared.

The legendary Egyptian queen Cleopatra lived the ultimate luxury lifestyle before clasping that asp to her bosom. She famously bathed in asses’ milk and travelled the Nile on a sumptuously appointed boat. Not only did she appreciate luxury, she used it to show off her elevated position — and achieve her political goals. Like the Queen of Sheba, she seems to have been happy to flaunt her wealth — once dropping an enormous pearl into a cup of wine and swallowing it (presumably while a doting Mark Antony looked on).

But luxury takes on a slightly different complexion around the world — and perhaps the ancients could have taught us a thing or two about it. The

Another, more recent queen, Marie Antoinette of France, became a virtual synonym for luxurious excess. Following her proxy marriage CFI.co | Capital Finance International

to King Louis XV, she travelled from Austria to France with an entourage of 57 carriages, 117 footmen and 376 horsemen. She reportedly commissioned over 300 dresses a year and never wore anything twice. She was dedicated to the pursuit of perfection and took great delight in her excessive lifestyle (best summed-up in her famous “Let them eat cake” quote.

Nowadays, bringing luxury into the everyday is an artform. Life-coaches and gurus encourage living your life as art. Luxury can be as simple as a cup of coffee with an indulgent foam topping, a comfortable down-filled quilt, or a tailored linen shirt. The ring you wear on your finger should fill you with delight, the handbag you carry should be simultaneously elegant and functional.

Moments of luxury brighten our lives and pierce the banality of ordinary life. And luxury, like most things, changes with the times. The last word goes to American fashion designer Tom Ford: “Time and silence are the most luxurious things today.” i 131

> Why are US Conservatives

Against Investment in ESG?

By Heather Smith

Republicans balking at ‘woke liberal agenda’ that they claim could erode profit margins and threaten livelihoods.

U

S politicians are treating sustainability as an ideological debate rather than a science-backed call to action.

Ron DeSantis, governor of Florida and a possible Republican presidential candidate for 2024, has introduced restrictions to prohibit staterun fund managers from considering ESG factors in investment decisions for the Sunshine State.

“Corporations across America continue to inject an ideological agenda through our economy rather than through the ballot box,” he said. “Today’s actions reinforce that ESG considerations will not be tolerated here in Florida, and I look forward to extending these protections during this legislative session.”

January’s resolution is the latest development in the governor’s crusade against what he sees as a “woke liberal agenda” threatening American consumers and livelihoods. The legislation, he claims, is meant to put people before corporate power; he has released documentation to challenging the “woke corporatist definition” of ESG. According to the conservative translation: “ESG investors are corporate cartel elites who do not represent the will of the people, but rather base their investment strategies on social causes and virtue signalling while driving up costs for consumers in the name of diversity and sidelining hardworking Americans by threatening their livelihoods.”

The move by DeSantis expands on a resolution approved by trustees of the State Board of Administration (SBA) in August 2022, directing Florida’s fund managers to invest state funds to prioritise the highest return on investment.

Investment decisions must be based only on pecuniary factors, without consideration of social, political, or ideological interests.

“Corporate power has increasingly been utilised to impose an ideological agenda on the American people through the perversion of financial investment priorities under the euphemistic banners of environmental, social and corporate governance and diversity, inclusion and equity,” DeSantis said. “With the resolution we passed today, the tax Dollars and proxy votes of the people of Florida will no longer be commandeered

by Wall Street financial firms and used to 132

implement policies through the boardroom that Floridians reject at the ballot box.

“We are reasserting the authority of Republican governance over corporate dominance, and we are prioritising the financial security of the people of Florida over whimsical notions of a utopian tomorrow.”

This follows action taken in December to revoke all proxy voting authority for outside fundmanagers. The anti-ESG legislation is supported by the state’s CFO Jimmy Patronis and attorney general Ashley Moody.

“As a fiduciary of the state of Florida, I and my fellow trustees have an obligation to make responsible investment decisions on behalf of the beneficiaries we represent,” Moody said, “not cater to woke corporate executives trying to force political ideology.

“Through this action ... we will continue to fight back against ESG agendas that put partisan ideology ahead of financial returns for Florida’s retirees.”

Patronis said that the Florida Cabinet has reaffirmed that it doesn’t want “a single penny of our Dollars going to woke funds” and called for asset managers to be “laser-focused on returns” and nothing more.

“Florida’s not going to subsidise the actions of a bunch of leftist ideologues who hate America,” he said. “We’re not going to let a bunch of rich people in Manhattan or Europe try to circumvent our democracy.”

In December 2022, Patronis announced the state’s treasury division would be divesting from BlackRock, the world's largest asset manager, because it had “openly stated they’ve got other goals” than producing returns. “There’s no lack of companies who will invest on our behalf,” he added, “so the Florida treasury will be taking its business elsewhere.”

Florida’s divestment — $1.4bn in long-term securities and $600m in short-term funds — represents a fraction of the assets managed by BlackRock, which reported $8.6tn in AUM at the end of 2022. Other Republican states had already pulled more than $1bn from BlackRock as of October 2022.

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Washington, D.C.: Capitol Hill

BlackRock chairman and CEO Larry Fink hit back: “Stakeholder capitalism is not about politics. It is not a social or ideological agenda.

It is not ‘woke’. It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper.

This is the power of capitalism.”

Fink stands behind his assertation that climate risk equates to investment risk. “The majority of our clients are investing to finance retirement,” Fink wrote in his 2022 letter to CEOs. “Their time horizons can span decades. Sustainable investments have now reached $4tn. Actions and ambitions towards decarbonisation have also increased. This is just the beginning — the tectonic shift towards sustainable investing is still accelerating.

“Every company and every industry will be transformed by the transition to a net-zero world. The next 1,000 unicorns won’t be

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search engines or social media companies, they’ll be sustainable, scalable innovators — start-ups that help the world decarbonise and make the energy transition affordable for all consumers.

(ISS) and Glass Lewis — which controls about 97 percent of the US market share for voting advice — of potentially violating their legal and contractual duties by tying recommendations to climate and social goals.

“Bold incumbents can, and must, do it too.

Indeed, many have an advantage in capital, market knowledge, and technical expertise on the global scale required for the disruption ahead.

“ISS and Glass Lewis must comply with federal law that applies to proxy advisors,” warned the letter, which was signed by 21 Republican attorneys-general. “It has come to our attention that you have made several commitments that may interfere with your ability to honour your legal obligations.

“Our question to these companies is: What are you doing to disrupt your business? How are you preparing for, and participating in, the net-zero transition? (W)ill you go the way of the dodo, or will you be a phoenix?”

Across the US, Republican politicians are attempting to remove sustainability concerns from the investment process.

This January, republican attorneys-general accused Institutional Shareholder Services

“It appears that both have acted contrary to the financial interests of their clients and have promoted and relied upon false or misleading statements — and in so doing, have engaged in fraudulent and misleading practices.

“Your actions may threaten the economic value of our states’ and citizens’ investments and pensions — interests that may not be CFI.co | Capital Finance International

subordinated to your social and environmental belief, or those of your other clients.”

The letter demands written assurance that the firms will “cease such violations and commit to following the law”.

ISS responded with a statement that letter “reveals a fundamental misunderstanding of market forces at work”. It claimed its “sole agenda is to provide its clients with tools and policy options to enable them to make informed investment decisions and vote their shares in accordance with their distinct views and fiduciary responsibilities”.

ISS said it took its legal obligations seriously, and would respond to questions laid out in the letter. “(We) look forward to continuing to serve our investor clients with the diversity of independent and objective research offerings they demand.”

Glass Lewis declined to comment, other than to say it would soon be issuing a response. i 133

> Asia Pacific

Tiny Chips and Huge Tech Advances Make Taiwan the Island of Surprises

By Brendan Filipovski

Taiwan’s semiconductor industry has become the lifeblood of the country’s economy — but its survival depends on a foundation just nanometres thick.

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evenue from sector accounted for close to nine percent of Taiwan’s GDP in 2020. The country has a 63 percent share of the global chip-foundry business, and 73 percent of advanced semiconductors. This has raised its strategic importance at a vital time.

Taiwan’s international relations have become semiconductor diplomacy. But Taiwan’s key strategic asset could be under threat — not from China, but from its friends. On December 6, US President Joe Biden was photographed with a shovel at the site of TSMC’s $40bn investment in new chip “fabs”, as the manufacturing plants are known, in Phoenix, Arizona. Is it a case of friendsharing or friends caring?

The man dubbed the Father of Taiwan’s Economic Miracle, Kwoh-Ting Li, wanted to transform the nation into a technology hub. Taiwan’s swift growth began in the 1950s and ’60s as surplus labour from the agricultural sector was combined with industrial policy and capital from the government, Washington, and private investors.

But Li knew that, like Japan, Taiwan would need to move from labour-intensive manufacturing to capital- and technology-intensive industries to avoid the middle-income trap.

A campaign started in the 1970s to lure Taiwanese and Chinese engineers and entrepreneurs “back to Taiwan”, with promises of government support and the opportunity to break glass ceilings and run their own companies. It was “reverse braindrain”.

Morris Chang was one of those who returned.

After earning a doctorate in electrical engineering from Stanford, he spent 25 years at Texas Instruments where he became head of its global semiconductor business. In 1985, he was recruited to head Taiwan’s Industrial Technology and Research Institute (ITRA), and oversee a project that eventually became the Taiwan Semiconductor Manufacturing Company (TSMC) — today’s global leader in the field.

Chang’s key innovation was to set TSMC up as a foundry that made chips for other companies, rather than competing as an integrated device manufacturer. This was unheard of at the time, but it proved to be an astute move. Today, TSMC is the sole supplier of chips for iPhones, and boasts industry giants like AMD, Qualcomm, and Nvidia as customers.

In chip-foundry, Taiwan discovered a vital strategic asset. TSMC and other Taiwanese companies have made themselves indispensable to chip designers and end-customers around the world — including the US and China. Chinese telco giant Huawei has been stunted without access to TSMC chips, because of US restrictions. (China has

"The war in Ukraine has prompted security analysts to focus on the Taiwanese strait, another nationally contested area." referred those restrictions to the WTO.) During the pandemic, when TSMC production dipped and demand for chips rose, a global shortage hit the auto industry.

“If Taiwan is safe, the global supply chain will also be secure,” said Taiwan’s Minister of Economic Affairs, Wang Mei-Hua. And the impact of trade disputes and pandemic bottlenecks focused minds in Washington, and elsewhere.

Governments want to reel in supply-lines that have “spread too far” with globalisation. The boundaries will be determined by national interest, rather than cost.

Semiconductors are a key example.

The war in Ukraine has prompted security analysts to focus on the Taiwanese strait, another nationally contested area. The US fears the economic disruption and strategic damage that would follow an invasion of Taiwan by China.

They are not alone in their concern: “If you take a military force or invasion, you will render TSMC's factories not operable, because this is such a sophisticated manufacturing facility,” said TSMC chair Mark Liu. In August 2022, the US government enacted the Chips and Science Act. It provides $52bn in loans, grants, and other incentives for chipmakers to produce in the US. In addition to investing in the US, manufacturers must also apply limits to advanced chip-making for China — no chips below 28 nanometres in size. The EU is expected to release a similar semiconductor policy, with up to €43bn in incentives, this year.

In response to the US carrot, and any implied future stick, TSMC has committed to investing $40bn in new fabs in the US for five- and threenanometre chips. Up to 600,000 chips could be produced in a year, potentially enough to meet American demand.

Samsung and Intel are also taking advantage of the incentives. In total, manufacturers have committed to $200bn in investments in the US. TSMC, Samsung, Intel and other chipmakers are looking to pull back from China, and invest in South East Asia, Japan, and Germany.

Will these investments weaken the strategic position of Taiwan? Has it seen the peak of its semiconductor soft power?

There is no doubt that TSMC’s investments in Arizona and elsewhere will cut production in Taiwan. But Taiwan retains the most advanced production on the island — and is investing to ensure that its companies maintain their technological lead. Local and foreign firms are expected to invest up to $108bn in R&D and production for chips as small as one nanometre.

The Taiwanese government recently announced a 25 percent tax credit for R&D expenses.

Taiwan will not surrender it technological lead without a struggle. The country has a central role in the semiconductor supply chain — and semiconductors are not like textiles; they can’t be easily off-shored. TSMC and others are involved in every step of a chip’s design and production.

Then are also other Taiwanese companies, such as chemical firms, in the supply chain.

Taiwan can be quietly confident of these two points; it has used this playbook before. In the 1990s, Taiwanese semiconductor manufacturers stepped up investment in China, lured by lower costs and the potential of the export and domestic markets. Taiwan’s first democratically elected president, Lee Teng-hui, placed restrictions on investment to ensure that advanced technology and key operations remained on the island.

The restrictions had the desired effect. China produces only older-generation chips for Taiwan, and its domestic chipmakers are years behind in terms of innovation.

It will not diminish TSMC’s competitive position or importance to build fabs closer to its main customers. Apple CEO Tim Cook has already hinted that Apple will be a key customer of the Arizona fabs. It’s not as if the US is only giving money to Intel.

But Taiwan cannot be complacent. Not that long ago, Intel and the US were seen as the leaders in semiconductors, and Taiwan was seeking US investment. Intel would surely love to retake the crown from TSMC — and the US government would not be disappointed. Then there is Samsung waiting in the wings...

This bout of friend-shoring is not the first choice for TSMC or Taiwan. Taiwan has never been a major player on the international stage. But the small island has long demonstrated agility in making the best of difficult situations. i

"The small island has long demonstrated agility in making the best of difficult situations."

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> New World Development:

Leading Disruptor in Real Estate Industry

F

ounded in 1970, New World Development Company Ltd (“the Group”, Hong Kong stock code: 00017) was publicly listed in Hong Kong in 1972 and is a constituent stock of the Hong Kong Hang Seng Index.

The Group’s core businesses include investment in property and property development, and investment in and/or operation of roads, construction, insurance, hotels and other strategic businesses, boasting operations in Greater China, particularly in the Greater Bay Area. As at 31 December 2022, the Group had a total asset value of HK$621.9 billion and a landbank with a total attributable gross floor area of 8.81 million sq ft in Hong Kong available for immediate development.

A REVOLUTIONARY BRAND REVAMPS A HALF-CENTURYOLD BUSINESS K11, the revolutionary brand founded in 2008

by Dr. Adrian Cheng, Executive Vice-chairman and Chief Executive Officer of the Group, is now the driving force of the Group. One striking embodiment of K11's vision is K11 MUSEA. Located in the heart of Victoria Dockside, K11 MUSEA is Hong Kong's pioneering cultural-retail landmark. It greets visitors with its rotating worldclass, museum-quality art collections and offers immersive experiences in retail, art, culture, entertainment and gastronomy, all under one roof.

K11 is expected to attain a footprint of 39 projects with a total gross floor area of 2,906,000 sq. m in 11 major cities across Greater China, including two highly anticipated projects, 11 SKIES and K11 ECOAST. Located right next to the Hong Kong International Airport and the Hong Kong-Zhuhai-Macau Bridge, 11 SKIES is within easy reach of the 86 million people living in the Greater Bay Area. The HK$20 billion project, which is scheduled to open in phases between 2022 and 2025, will house more than 800 shops and 120 dining concepts, offer unprecedented entertainment, and provide access to world-class financial and medical services. A one-hour boat ride from 11 SKIES takes us to K11 ECOAST, another project that also serves the residents in the Greater Bay Area. K11 ECOAST is K11’s first flagship project in Mainland China located in Prince Bay Area, Shenzhen. The project has a total gross floor area of 228,500 sq. m, and includes a K11 Art Mall, K11 HACC multipurpose art space, K11 ATELIER office building and the Promenade. K11 ECOAST is expected to open by the end of 2024, and will serve as a new cultural and retail landmark and a pioneer in circular economy in the Greater Bay Area.

THRIVE AGAINST MARKET HEADWINDS Despite a challenging housing market in China in 2022, the Group bucked the trend and, most notably, notched up impressive sales for the New World Arts Centre in Hangzhou. The accumulated sales of the residential part of the project have surpassed RMB11 billion, demonstrating the Group's resilience and strong market appeal.

As one of the first Hong Kong-based companies to expand into mainland China, the Group has been a key player in shaping the cities and revitalising urban areas, taking a leading role in numerous signature developments and urban renewal projects. Today, the Group is the most active Hong Kong developer in the Greater Bay Area and has established a strong foothold in the Greater Bay Area and the Yangtze River Delta.

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CREATE SHARED VALUE As a leading sustainable cultural enterprise, New World Group recognises the importance of sustainability and is committed to "Creating Shared Value" for communities. By curating and providing products, services and various initiatives that align with the United Nations Sustainable Development Goals and its own Sustainability Vision 2030, and that address environmental and social needs, the Group aims to foster a sustainable culture to have a positive impact on society and create a better future for our next generation.

The Group will keep enhancing the ties with stakeholders, further incorporate ESG factors into business operations and dedicate itself to support the partners so as to create shared value to all the stakeholders. i 137

> China’s Economy Is in Flux.

Here’s What Businesses Need to Know

This is the transcript of a special episode of The Insightful Leader podcast, produced by Laura Pavin of Kellogg Insight. It features Nancy Qian, Ben Jones, and David Dollar.

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he end of zero-Covid, escalating geopolitical tensions, and China’s potentially irreplaceable role in the global supply chain — plenty for Pavin and her guests to discuss...

Pavin: In recent weeks, China abandoned its controversial zero-Covid approach to the pandemic, which it had maintained for nearly three years. The approach was never particularly popular in the global business community, because it caused havoc to supply chains everywhere. And lifting it is sure to send infections soaring — meaning even more chaos, at least in the short term.

But for economists and policymakers who closely study China, this is hardly the only story. This year, the nation saw its largest democratic protests in decades; and China and Russia declared “no limits” to the partnership between their nations—shortly before Russia invaded Ukraine, significantly ramping up geopolitical tensions with the US. All this, combined with China’s growing economic and military might — and the US’s growing nervousness about how intertwined its economy is with China’s — has American businesses wondering: How should they interact with China?

Nancy Qian: For the last few years, if you read the news headlines, it does feel like every day there’s something about China.

Pavin: That’s Nancy Qian. She’s a professor of managerial economics and decision sciences at Kellogg, and co-director of the Global Poverty Research Lab. Qian: And the issues are so complicated, it seems like a good time for us to dig into the minds of people who have been thinking about this from the research community and see what we can learn from them.

Pavin: Nancy Qian is joined by Ben Jones and David Dollar. Jones is the Gund professor of entrepreneurship at the Kellogg School of Management. He studies economic growth in advanced economies, and he was the senior economist for macro-economics for the White House Council of Economic Advisers. David Dollar is a senior fellow in the John L Thornton China Centre at the Brookings Institution. He’s 138

"The big overarching question we have, as you know: What are the biggest challenges for the Chinese economy in 2023 as it’s easing out of almost three years of very stringent Covid-zero policies?" a leading expert on China’s economy and USChina economic relations.

Qian: The big overarching question we have, as you know: What are the biggest challenges for the Chinese economy in 2023 as it’s easing out of almost three years of very stringent Covidzero policies — and in an environment where the political rhetoric, especially with its biggest trading partner, the US, is getting evermore adversarial? What do you think are the biggest challenges for China next year?

David Dollar: I think the biggest challenge is going to be managing this exit from the zero-tolerance policy. I and many other China experts were quite surprised at the dramatic way in which China seems to be deconstructing those policies. I think Xi Jinping and other leaders are apparently being responsive to a lot of public unhappiness that’s been demonstrated in various ways. It has to have some positive effect on the economy, the rest of the economy, because I think the zero tolerance had a pretty negative effect. So easing up, there has to be some increase in people’s consumption going out to restaurants, travelling.

But again, we don’t know how people are going to react. And then what happens with this disease will definitely react back on people’s behaviours.

If it spreads very quickly, then you may not get too much change in people’s behaviour, because they’re going to essentially self-restrict instead of having the government restrict them.

Ben Jones: So, just to dig into that a little further: the US has had a very loose policy from a government perspective around Covid for quite a long time. And yet we still see kind of puzzling — maybe not-so-puzzling — constraints on labour supply where at least some people seem like they don’t want to go back to work, maybe for a variety of reasons.

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And that may be one of the forces that is driving up inflation, say, under service workers or other things. When you look at China, where we’re already talking in general about structural challenges and labour supply with an aging economy, do you think that there’s going to be a labour-supply issue going forward, even in this relaxed policy, kind of like in the US or maybe different from the US? Dollar: Yeah, I think that makes a lot of sense, Ben. Looking at my own behaviour and that of some of my close friends, we have no government restriction on our behaviour, but we self-restrict.

I was just out doing some errands, and I was wearing a mask whenever I went in anywhere.

And we’re generally turning down invitations to any kind of large event, my wife and myself; it just seems unnecessarily risky.

You definitely get a lot of self-restriction in this environment, and that carries over to the work side. And I would think you would get a similar reaction from many middle-class urban Chinese, that if they can avoid working or going to work, they’re going to do so.

Qian: And I was thinking about the Chinese context and specifically when I think about my family or my friends in China who are my age and who have children, most of them still rely on grandparents, right? There are parents, the elderly parents, for childcare. So, as we’re exiting and if Covid rates are going to go up and the elderly are unvaccinated and they start self-restricting, that’s just going to be really complicated if they also have to provide childcare.

Dollar: Absolutely. You may very well get an oscillation in official policy. So, if there’s a big resurgence of the disease and rising deaths and crisis in hospitals, they’ll probably come back.

Not all the way to zero tolerance, but to a much more restrictive policy.

We’ll probably see that kind of oscillation that just creates tremendous uncertainty about economic activity, about investment. Do you want to be expanding your business when there’s this kind of uncertainty about whether people are going to be going out and consuming? It’s got to be something of a constraint.

Jones: Building on that, there’s both the government policy point, David, and then there’s

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"China is big. There are many different people with many different views and preferences and risk perceptions." the self-restriction point. And Nancy, that’s a really interesting observation about how households are structured, and then the exposure of older Chinese within the household. And that might extend self-restriction considerably compared to what US behaviour has been because our household structures are different.

But it does seem that the Chinese government has also been deploying a narrative to justify zeroCovid over years that the disease is really scary and really deadly, maybe more so than you hear from the government, even in the US. And do we have a sense that Chinese sort of believe this is even riskier than people do in other countries?

And that will lead to much more tentativeness and self-restriction in terms of getting back to work and driving demand and in the economy.

Dollar: Well, the fact that people got really unhappy with the zero tolerance and were willing to go out and demonstrate an environment where that can be quite personally risky, I think that that says that people were not completely buying the government story. I like this storyline that just watching the World Cup has had a considerable effect: to see 80 to a hundred thousand people packed into a stadium, nobody wearing masks, people cheering. Now, when I see that myself, I worry a little bit.

Qian: China is big. There are many different people with many different views and preferences and risk perceptions. And it has to go through what all the other countries went through, right? Which is this kind of rather conflictual often, a very conflictual process of where people who are very different kind of find their own equilibrium.

And the reason I’m saying that is I remember when I had Covid, my parents had Covid, my kids had Covid. And every time this happened, the degree of concern that was shown for us from my Chinese family and friends was, I would say, a hundred times more than my colleagues at Northwestern.

So, I feel like there is this sense of extraordinary fear that I think Americans felt in the beginning and sort of moved on from, and that the Chinese still feel now, but they will move on from. And at the same time, there’s also this diversity and opinions. I think the young people, like young people everywhere, are kind of more ready to get on with things.

China: Shanghai

And we have that even in the US, like in the beginning of the disease: there are parts of the 139

US and Florida, Texas, they just wanted to live as if we didn’t have to deal with the disease. And I feel like that heterogeneity also exists in China.

And one of the things we’ll see is once we lift the restrictions, all of these differences and opinions will be expressed in a way that they haven’t been allowed to be expressed under a strict Covid-zero policy. And that’s going to cause internal social frictions that just have to be worked out. And I’m very interested to see how the government deals with that type of social conflict, if we want to call it that.

Jones: So, to build on this, people talk about structural challenges for the Chinese economy.

They sometimes talk about demand and how it’s always low consumption, high savings, but also, is there enough domestic demand going forward?

They talk about debt. There’s a lot of maybe bad investments in housing or other forms of capital investment.

David, I mean, as you look at sort of these structural features, which people talk about without necessarily reference to Covid, but now we’re going to go ahead into a year where Covid is still complicated, how concerned are you for the Chinese capacity, say, of the government to manage social insurance, manage stimulus, to keep the economy going after three years of having to rely on a lot of government intervention, just to keep doing it if people are trying to stay home?

Dollar: You know, I do think the risks in the financial system are quite serious. They have really overbuilt the housing stock and their private real estate developers, many of them are in trouble. And so far, the authorities have managed that without an obvious financial crisis.

So that’s very much to their credit.

But they do kind of push the envelope in terms of credit expansion and making sure that enough finance gets through to many of these developers so that they don’t default on their bonds and go bankrupt. So far, they’ve managed that — but it’s a pretty big challenge to have got there.

Jones: Well, I just wanted to follow this kind of out-of-the-world a bit and come to decoupling, which of course is a big issue. Decoupling means moving away from trade and economic interaction with other countries. And if you’re the Chinese government, you’re facing a lot of terrorists from the US, a lot of retaliation.

And as you’re trying to get back on your feet and get back to work coming out of the Covid times, you might be looking for demand from global consumers for your products to help support the economy. You might be looking for more foreign direct investment into China to bring investment in Dollars, but also maybe technological knowhow and connectivity to the world economy.

How important is decoupling for understanding what’s going to happen in the Chinese economy 140

in the year or two ahead, and how important is that going to be for Chinese policymakers?

important to the US. That’s just one example, right?

Dollar: I think it’s extremely important. China has to worry about this decoupling trend, which is really kind of politically driven in a sense, particularly from the US. The idea being that we don’t want to be so dependent on China for national security reasons, but then you have to add on top of that the US economy slowing down, the European economy slowing down. Maybe one or both will go into recession. So you’ve got the kind of long-term structural issues of decoupling, and then you’ve got short-term cyclical issues that things look pretty bad.

The US needs to make sure that that’s not completely under the control of China. Is it possible to have a quasi-decoupling, between the extremes of a complete wall and a free-for-all, where certain strategic interests are addressed without wrecking the entire economies of these two countries and the rest of the world?

Qian: When we think about decoupling, I guess my very basic question is: What does that even mean in this context? There’s one extreme, which is the Cold War, where Moscow and Washington were just cut off. There was a wall politically, economically; there was no trade. I think everyone agrees, everyone in business in research agrees, that that would be disastrous.

The economic impact on the US and China and many other countries would be terrible if we just completely decoupled. On the other extreme, you have just a free-for-all, like free trade. This is probably the mentality we had like in the ‘90s.

And this is probably not realistic at this point in time. There’s been a lot of discussion about how the semiconductor industry is strategically very CFI.co | Capital Finance International

Dollar: You know, if you look at actual trade between China and the US, since America imposed these tariffs under Trump and then followed up with many other measures putting Chinese firms on our so-called entity list — which really prevents American firms for exporting most things to them — since all of that, there’s definitely been some downward trend in US-China trade, but it’s been surprisingly modest.

And this year we’re going to hit a new high in imports from China. So while we have this rhetorical war going on, there continues to be a very high level of trade in both directions.

Now, as you dig a little deeper, you will find there are specific products where that story is not true. The US is importing about 50 percent less semiconductor and telecommunication equipment from China. You can see evidence of this — it’s really more of a tech war than a trade war.

Spring 2023 Issue

world, biggest trading nation. That just seems completely unrealistic and quite dangerous.

Qian: I guess when I think about decoupling today, I think two issues come up. One is implementation. How does one actually implement decoupling? I can see how you can do that for narrowly defined products with short supply chains. But if it’s a complex product, it’s almost impossible without going all the way and building a wall.

And the reason is that most businesses know their suppliers. They don’t know the suppliers of their suppliers. And to ask them to know the suppliers of the suppliers of the suppliers all the way down to the raw material to make sure that some aspect isn’t coming from China.

That’s administratively very cumbersome, if not completely impossible, given the complexity of the products that we’re making these days.

Jones: Industries in the US have achieved trade protection through anti-dumping and countervailing duty tariffs, because they’re sort of the easiest to get. To respond to David’s point, when you step back, it’s actually a very small percentage of products. And so really, it’s a sort of annoyance around a lot of trade, but it’s not actually the kind of thing that’s going to show up in the aggregate numbers. I do worry about this national-security reasoning, which has been coming into trade policy and getting people sort of outside in their view of their World Trade Organization obligations.

The Trump administration was saying national security applies to steel and aluminium, and you get to much bigger commodities rather than narrow tech products. It’s not really clear how far the cat gets out of the bag. And responding to David’s point that we don’t know where this is going looking at it right now, maybe too soon.

And if the political momentum is such that people are going to keep obstructing trade and there’s going to keep being retaliation as there often is, whoever’s instigating it in the first place, we could be decoupling in some more meaningful way.

But I guess more practically, David and Nancy, are you seeing — I mean, obviously telecom in Huawei was a big issue that spills from

intellectual property, the national security and then chips — but do you see people making incipient arguments that national security should apply to a much wider class of products? Or do you think that national-security argument has kind of run its course and we kind of know the verticals that we’re talking about, and it won’t really infect other forms of trade?

Dollar: Well, I think in Washington, at the risk of oversimplifying a little bit, you’ve basically got two views. You’ve got the kind of nationalsecurity view that within the spectrum of all the thousands of different products that we trade, there are a few that are of national-security import, and we should be restricting these. And maybe we have it about right at the moment, you know, that’s one view.

But the other view is that anything that’s contributing to China’s growth and development is a threat ultimately to the United States. You know, this is a true “let’s keep China down” kind of approach. And in some people in this camp, you bring up the issue that this is going to hurt the US economy, hurt innovation.

And what you’ll get back is as long as it hurts the Chinese more than this is a good nationalsecurity policy. And I personally think this is really quite dangerous when you start declaring that your policy is trying to keep down another major economy, second-biggest economy in the CFI.co | Capital Finance International

And the second concern is about spill-over effects. I have had conversations with people, entrepreneurs. in the US and China that are very concerned about decoupling and making business decisions based on that. No one I speak to actually works in defence industries or defence-related industries. They all work in other industries, but I would say that there’s a spill-over effect of concern. So I was speaking to a vice-president of one of the US’s largest foodmanufacturing companies. It produces candy and food and food colouring, things like that. It’s not strategic at all. But she was telling me that the discussion they’re having with the corporate leadership is that they’re probably not going to be in China for the next 30 years. And the reason is because they just can’t deal with the policy fluctuations.

They’re trying to divert a lot of their investments towards Latin America, south Asia, other countries that are politically more benign. If we do strategic decoupling, we need to do it correctly, in the sense that both China and the US need to articulate their policy clearly so that people really understand that it’s really about these strategic sectors and this is how it’s going to be implemented and carried out. And there’s not this general concern of uncertainty for everyone’s business going forward, because that could just generate inadvertent decoupling.

Dollar: I think those are really important issues you’re raising, Nancy. On the first one, I think I have a good example. It doesn’t exactly come out of the national-security realm, but it’s analogous.

It’s the case of the solar panels; the US has countervailing duties on solar panels from China, more than 250 percent. And the result of that is we don’t import any solar panels from China.

We import them primarily from Vietnam and Malaysia. And these are Chinese firms that have moved some of their factory operation to Vietnam and Malaysia. The US was thinking of launching an investigation about whether it should extend the countervailing duties to those panels. But it 141

dropped that; it just told the industry that, for at least two years, there would be no countervailing duties on panels coming from Vietnam and Malaysia.

Because if you want to increase renewable energy in the US, this is where these panels are produced. So what you have there is a very complex supply chain. China’s not necessarily being hurt by this. China’s finding new business in ASEAN countries, selling machinery and components. And in some ways, some of the value added we’re trading between the US and China now is in a sense being mediated by countries like Vietnam. And just trying to figure all that out could end up being a pretty costly bureaucratic impediment to trade.

Jones: Yeah, just building on that, which I think are issues of both complexity and then substituteability. When I was working in the White House in the first term of the Obama administration was when the tsunami came to Japan and took out the Fukushima nuclear reactor, and that shut down a regional economy in Japan, which is very important potentially to the global economy. We were struggling then to figure out what is the implication of the Fukushima shutdown disaster for the US, for US workers, for US manufacturers, for the world, which has many dimensions.

We found ourselves calling major multinationals, like major auto manufacturers in the US, and saying, do you have suppliers in this area of Japan? And then they would say to us, “Well, we know where our direct suppliers are, but we don’t know where the suppliers of our suppliers are much of the time.” It is very complicated, and it’s very costly to figure out.

I think that that makes it far more difficult to manage from a policy perspective. The second point though was substitute ability, which I think reflects on, you can move solar panels to Vietnam and avoid tariffs, which is very common in how companies around the world respond to antidumping and countervailing duty type of tariffs or other forms of tariffs. But there’s also the issue, backing up a little bit about decoupling.

And if the US wants to disengage from the Chinese economy, China can integrate with other economies. If the EU is saying, “No, but we’ll still trade with you in all these ways,” in that case, are you really putting any pressure on the Chinese economy or the Chinese government? Or are you just shifting demand and supply to other regions of the world economy? And so really the one who’s losing in that context is you, the US. Dollar: Yeah, I think it’s completely unrealistic to expect our trade partners to completely decouple from China. I think keep that in mind that the degree of integration between the US and China is one issue, but the fact that we’re both integrated into the same global system, I think that’s probably more important.

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Qian: In all this conversation about decoupling, the question is how best to identify the strategic sectors. And they have to be clearly and transparently identified; how to identify those and how to articulate the policy to the public, and including like the bus businesses. People understand exactly what this means for their business, that they can carry on as usual. And for the few sectors that need to comply, what does it mean to comply?

Jones: We talked before about sort of Covid policy in China as a government choice, and then also sort of self-restrictions as a personal choice to avoid getting Covid. And I think that going to this decoupling metaphor, we have the US and China governments imposing certain kinds of policy restrictions through tariffs or other means on each other. But then we have a bunch of companies, multinationals often, that are trading across borders and may not be restricted but have to make choices themselves.

I just want to dig in here if we can, on multinationals and what’s your decision? Do I CFI.co | Capital Finance International

continue to expand in China? Do I hold steady and wait, or do I exit? How we think about what kind of choices they might be making, and then maybe how that might change depending on the industry you’re in.

Dollar: I think multinationals in general remain pretty committed to China. Quite a few of them are in China to sell under the domestic market. If there’s going to be a decoupling they’re not going to leave, they’re going to just double down and source more from China if they’re worried that international trade is being threatened.

Jones: So, an example like electric vehicles, and what are companies that you think would go that route?

Dollar: There are a lot of companies that fly under the radar; multinationals have a big share of the toothpaste market in China, for example. And they came in with the brands that we’re familiar with, but they also bought up a lot of Chinese brands and continue to sell. So you go into a store, and it looks like there are 20 different toothpastes

Spring 2023 Issue

this and also to make it at a consistent high quality at a low cost. And they figured it out with this one factory in China. And they’re going to keep working with this one factory. Their entire business plan, their cost analysis, depends on working with this guy, and they actually can’t find anyone in the US or in Mexico to make the same thing. They’re actually just going to double down and work with China and they’re raising money to expand the size of that factory in China.

One thought was that as China moves up the value chain and makes more and more high-tech things, it’ll be harder for people to just switch away to another producer. And the other thought I was thinking, that came to me when David mentioned McDonald’s and KFC, which are great favourites in China along with Coca-Cola and Disney movies, is that it seems like a bad idea for the US to move away from these customer-facing brands. Having brand presence in China has lots of benefits, right?

Obviously for the businesses, they make money, but even from the US is strategic self-interest.

We know now, like from economic research and from political scientists, the importance of soft power, right?

Dollar: You know, a lot of our conversation has been about China, but more generally, the US has introduced quite a bit of protection aimed at lots of different trading partners. And I think that really cuts into our soft power around the world, because it means a lot to other developing countries and even the European countries, which are advanced. But yeah, mostly they’re pretty small compared to the United States.

available, but actually there’s a relatively small number of companies behind that.

There are lots of consumer products, food products, you know, where companies are deeply committed, and not just the preparation, the production, of food, but also restaurants, fast-food restaurants, all our familiar ones: McDonald’s, Kentucky Fried Chicken, Starbucks.

I think a lot of multinationals are in China to sell to China. Aside from the tension with the US, obviously Covid and the zero-tolerance policy have had considerable effects. I definitely think it’s got many companies worried about how lean their value chains had become in a sense that they hadn’t really built in any redundancy.

time. And I think as it moves up the value chain, it actually makes it harder to substitute away from China. Earlier I gave the example of a food company. They were thinking of producing their raw agricultural products, sourcing that from China versus Latin America, and they can do it from Latin America. So that was not a very difficult move for them.

A phrase I’ve heard is “China plus one,” meaning you’re mostly producing in China, and a lot of that’s for the Chinese market, but it’s good to have at least one other country where you’re operating. And it’s typically a developing country.

But a lot of what China’s producing now is pretty high-tech. So recently I spoke to a startup entrepreneur who spent the last 10 years working for a large MNC that sent him to China all the time. They were a tech multinational. And during this time, he met some guys in a Chinese factory and they figured out how to make a really small and very powerful battery to make portable blenders. These guys want to make portable blenders so you can make margaritas on the fly, from your backpack. You can just pull this out of your backpack and start blending ice and you can make eight of them.

Qian: I just wanted to add two thoughts to that.

One is China’s moving up the value chain over

The battery’s really strong and, according to him, it took a while to figure out how to make CFI.co | Capital Finance International

Access to the US market is very important for countries around the world. And in my experience, it’s been a source of goodwill that this is a public good the US provides to the world, having this big open market. I do think the tariffs that we’ve introduced, the various trade impediments, this, this tendency toward Buy American in our recent legislation, all of this is undercutting our influence around the world.

Jones: But I think there’s another question: maybe the good feeling that exists between nations might prevent conflict, or have other kinds of benefits in the world. And it’s really the big question in history in the 20th Century, which is when countries sort of advance, in terms of their standards of living, do they shift towards more political liberty, towards democracy? Or not? I think the kind of laissez-faire era of globalisation was built on connectivity, regardless of the political regimes. Often you’re dealing with the pursuit of economic well-being for all the nations involved, but potentially it would encourage the rise of a middle class and create pressure in those societies for democratic change.

And it’s not just China. We’ve seen a sort of authoritarianism building in a number of countries around the world — Russia, Turkey, 143

Hungary — that it seems are moving against democracy and participating in a world exchange, and trade isn’t really working. And now maybe it’s even worse if we disengage and we didn’t run that experiment.

But I think there’s more scepticism now that this kind of laissez-faire globalisation pays the kind of economic or conflict dividends, especially with Russia invading Ukraine, that we would’ve hoped for. I feel like this is a very big question, which we don’t maybe know the answer to though.

Maybe it’s not so simple as just letting everyone into the system and kind of hoping for the best, and that maybe we need to think carefully about engagement based on shared human rights or political values.

Dollar: My sense is that there is a relationship between economic integration and political liberalisation, human rights; that these are issues, but it’s extremely long term. There’s tremendous uncertainty. Nobody’s really made it to high income without political liberalisation, with the exception of a few oil-rich states.

Unless you’re sitting on some huge quantity of natural resources, basically nobody’s made it to high income without political liberalisation. But as they said, I think it’s extremely imperfect.

Relationships can take a long time. It was naive to expect that there would be political change in China. I mean, there has been a lot of political change in China, just not the shift to some kind of democratic system that we would recognise.

It was naive to expect that to happen because China joined the WTO and started trading. I don’t know any serious China scholar who thought that whole path was likely.

Qian: I guess I don’t think anyone knows or should pretend to know what exactly can bring about political liberalisation. It’s hard to think of an example of a country that has become a stable democracy without a certain level of human capital, social capital stability that comes with economic development. Economic development is a necessary — but perhaps not sufficient — condition for political liberalisation. If you don’t do economic liberalisation and boost incomes, political liberalisation probably just isn’t going to happen.

And then the other thing that comes to mind, and again, this is sort of a refinement of what David was saying, is just the benchmark: What’s the right benchmark? I think it is naive to think 144

that the benchmark for China or Russia today should be the US or France or the UK. And here I’m going to put my economic, economichistorian hat on. When we think about how long it took for the West to become stable democracies, really, the latest you want to start that process is probably the enlightenment. So that’s a couple of centuries, right?

And Russia and China were ruled by the Czar and the emperor until the beginning of the 20th Century. They’ve only been on this road for a hundred years. If you see it in that light, the long-run trajectory both in terms of economic and political development is positive over time for China and Russia. And they’re actually going pretty fast. I would say they’re on the fast track relative to the enlightenment until the Civil Rights Act.

standards of living and greater influence in the world. I guess I get to bring this full circle in a way. David, you were surprised how quickly Xi and the Chinese government turned around on zero-Covid. And one read of that, we may disagree, but one read of that is it shows a certain pragmatism. I mean, if you look at Putin in Ukraine, it seems like it’s all bad news all the time for Russia, but nonetheless, doubling down, doubling down, doubling down. We haven’t seen a dramatic policy reversal there.

But here we see a very dramatic policy reversal suggesting that the government is capable of maybe surprising us in pragmatic ways. As we think forward along the lines of development and human capital and political liberalisation, do you see interesting practical choices ahead that now seem more possible?

Dollar: When I worked for the World Bank, and when I worked for the US Treasury, I had opportunities to sit in on some senior meetings, where I was never the principal. I was kind of the fly on the wall. But the US in particular was always pushing China for very specific economic reforms: Open the capital account, more flexibility of the exchange rate. After a while, the typical Chinese response was: “We agree; we just think it’s not quite right timing-wise, and we’re going to get there. We’re moving in that direction.” And I remember one very frustrated US official, that kind of bang-the-table moment, said, “Well, when are you going to get to that?”

And the Chinese response was, “We Chinese like to think in terms of centuries.”

Dollar: I would argue that pragmatism is a feature of recent Chinese decision-making.

Deng had that famous statement that it doesn’t matter if a cat is white or black, as long as it catches mice. And there’s been a worry — you see it very much in the West — that the Xi Jinping was taking China in a different direction, that he was going to be more ideological, less pragmatic.

Jones: I love this historical orientation, but I will say that I think the more contemporary, if I looked at Russia, I mean Putin is sort of taking us back to a pre-World War II mentality in some ways, a 19th Century mentality of capturing resources. China is in a very different category.

I mean, Russia is an oil state, and so in some sense it’s a big one. But today’s earlier point, it’s in a bit of a different group.

Actually, if I were going to list one more, despite the rhetorical support, China is not really giving Russia any material support. And I think that that’s actually quite important.

And the government can sustain a lot of authority and economic power through its control of the oil and gas resources, where China really is much more of a diversified economy, and its success and development is going to require the kinds of things you guys are both talking about in terms of human-capital development.

I think the path forward for China is really quite different, economically, to get the higher CFI.co | Capital Finance International

So frankly, I’m very encouraged with the easing of the zero-tolerance policy; that does show responsiveness, pragmatism. Hopefully, we’ll see that in things like further reform of the capital markets, which I think would really help China a lot.

Qian: One more thing on this point about China not giving material support to Russia — for those of you who aren’t on Chinese social media, it’s interesting to know. I found it really interesting, even from the beginning of the war, that China, which is known for censoring things that are misaligned with the official view, didn’t really censor support for Ukraine on social media. And my sense was that that was a positive sign that the Chinese government was actually open and would be pragmatic about it. i

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> Tarantula Wasps, Mystery Ops, Subs and a Four-legged Able Seaman:

Your Mileage in the Military May Well Vary

By Titus Drummond

Titus Drummond reflects on some of the more unusual moments he spent aboard the ships of the Royal Fleet Auxiliary.

O

n the second of November 2015, I flew into Lomé, the capital city of the West African country, Togo – and the airport was totally, fascinatingly manic.

It was night-time and the indoor lighting was dim and orange, creating a dark atmospheric ambiance that gave the place a kind of “Hollywood wartime” feeling. It was humid and hot, and sweat soaked my ill-chosen clothing.

There was a colourful crowd, mostly young men with glistening skin and loud voices, clamouring loudly about... well, who knows; it was a fog of noise.

Uniformed officials in berets moved through a maze of cellophane-wrapped suitcases. The noise, the officials, the mountains of luggage: it was all intoxicating. It drew me in, and I wanted to be a part of it. If only there had been a bar I would cheerfully have stayed — but here was a man waving a piece of paper with my name on it. Waiting for me at the local naval base was the good ship RFA Gold Rover, which I was to join as a Second Officer (systems engineer). My boss and I would be responsible for all the onboard electronic and electrical systems. Everything, in fact, with wires in it; from radar to galley, winches to engine monitoring.

Author: Titus Drummond

The next morning, I was astonished to see a group of Togolese navy recruits swimming past our ship, out of the harbour — most wearing life jackets — and disappearing out to sea. A string of exhausted men later returned, and all I could think was, “Don’t these people worry about sharks?”

RFA Gold Rover was, at the time, believed to be the oldest operational tanker still at sea.

She had been launched in March 1973 and commissioned a year later; one of her first roles was assisting with evacuations from Cyprus during the Turkish invasion. After 43 years of active service, she was scrapped in September 2019.

We sailed for seven days, from Togo to Ascension Island, where I watched a friend catching triggerfish, aka blackfish or Melichthys niger, if you want to be formal. I’m anti-fishing, but interested in fish physiology. Triggerfish are interesting; they are particularly intelligent (for fish) and excitingly aggressive when divers stray into their territory.

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Bonetta cemetary

They have evolved a system whereby they erect their front dorsal fin, locked in the vertical position by a second fin. Nothing can unlock the fin until the second fin is either operated externally, like the trigger of a gun (thus the name), or the fish voluntarily lowers it. The result is that predators are unable to drag triggerfish from their hiding places.

Later on, ashore with my friend Ryan, I visited the Bonetta Cemetery (British ships used to drop crew members suffering from yellow fever here, and many ended up here).

CFI.co | Capital Finance International

A day later, we were back to sea on exercise with a convoy, doing who knows what with a couple of jets. Our next port of call was a naval base at Niterói (about 10 days from Ascension). Niteroi sits the other end of the President Costa e Silva Bridge from Rio de Janeiro.

After ticking off the tourist meccas of Christ the Redeemer and Sugarloaf Mountain, it was back across the Atlantic to Simon’s Town in South Africa. It took 23 days, but the RFA (Royal Fleet Auxiliary) has no commercial constraints. We might be delayed by the most obscure of things.

Spring 2023 Issue

RAS Gold and USNS Big Horn

Tarantula wasp

Once, in December 2014, we were out in the Gulf. I was looking out to sea and saw a periscope looking back. Another time, I was strolling towards the pointy end on RFA Orangeleaf when, from nowhere, two strangers clad in black ran past me.

I went charging up to the bridge. “Who were those two?” I asked. The Officer of the Watch looked out of the window — the two strangers were still clearly visible — and responded: “Which two?” he asked. A standard miliary answer can sometimes be unsatisfying. The mystery men had been on a mission to the former Yugoslavia, I learned; we’d picked them up the night before and were dropping them off again in a few hours. I was honoured to be told so much detail...

Simon’s Town is a small colonial place, very picturesque, full of very nice people — and another naval base. One of the most notorious sailors to ever have lived there was Able Seaman Just Nuisance — a great dane. The story I heard is that the dog — on his own — would catch the train from Simon’s Town to Cape Town to escort drunken sailors back home.

The railway company was not happy that Just Nuisance didn’t buy a ticket — and apparently, he would sometimes join the errant sailors on a binge rather than herding them home. There was

Triggerfish

a simple solution to the ticket issue: members of the armed forces were entitled to free rail travel.

And that’s how Just Nuisance joined the Royal Navy as an Ordinary Seaman. When he died, he was buried with full naval honours.

So now, 71 years later, Ryan and I were heading up a rocky track to visit his grave. It is simple, and clean, and a very emotional spot for some.

Many were touched by the remarkable life of this tearaway dog who had accepted the King’s shilling.

Nearby is a derelict South African naval base, where I was able to indulge another of my fancies: spider spotting. Here I saw a black widow, and pointed it out to Ryan — who promptly took two paces back. He still refers to this moment as a near-death experience.

Ryan’s day wasn’t over yet; on our way back down, something big and orange came out of nowhere and buzzed us. “Look, Ryan,” I shouted, “what luck! A tarantula wasp.” Again, Ryan managed to control his excitement to the point of apparently not having any.

Tarantula hawks, as they are known, are among the larger parasitic spider wasps. The females’ CFI.co | Capital Finance International

sting paralysing the spiders, which are entombed in burrows. A single wasp egg is laid on the spider’s abdomen; when it hatches, the larva eats the unfortunate host — alive.

Ryan’s unease at the appearance of this fascinating wasp did make some sense because, while not particularly aggressive, their sting is said to be excruciating. Coherent thought becomes impossible, and the most commonly prescribed remedy is to lie down and scream. Indeed, the Schmidt Sting Pain Index, rating effects of various wasps, gives the Tarantula Hawk its maximum rating — and classifies it as second only in terms of pain to the legendary South American bullet ant, Paraponera clavata.

Young Ryan, after we’d descended back to sea level and sunk a few beers in our favourite watering hole, the Harbour View, was soon talking about black widows and tarantula hawk wasps as if he met them every day.

I retired from the sea in 2019 but Ryan is still there, having adventures — and fun. But I dedicate this story to Just Nuisance: a good dog, a true adventurer, a fine seaman and, to many, a friend. i 147

> Working Hard — and Loving Every Minute of It:

A Man in his Element

By Naomi Snelling

On the face of it, James Caan has the whole enchilada: TV celebrity, philanthropist, and champion of entrepreneurship — with several global companies to his name.

H

e's also the founder and chair of the government-funded Start-Up Loans Scheme — which earned him a CBE. Behind the success lie dedication, persistence, and effort — and the courage to step into the unknown armed only with rock-solid self-belief and a can-do attitude.

His early years were not easy ones. Caan was just two when he arrived in the UK from Pakistan. He grew up in the East End of London, which at the time was not the friendliest or most welcoming environment. The family home burned down — taking his tailor father’s orderbook with it — but the Caans literally rose from the ashes, thanks to an indomitable spirit and admirable tenacity.

“I like the challenge of building something, achieving something that no one else has done,” he says.

“What excites or compels the man who wants to climb Mount Everest, or the sportsman who wants to be the greatest of all time? They want to achieve something. Entrepreneurs are the same; we are reaching for the summit.”

And James Caan should know. He cut his entrepreneurial teeth at high school, where he sold jackets made by his father to his friends — taking a cut of each sale. After dropping out of school at 16, he went on to become one of the UK’s most prolific entrepreneurs. Caan has started, scaled, and sold a string of businesses, including the recruitment company Alexander Mann — which he started from a broom cupboard in Mayfair, armed with just the Yellow Pages.

By the time he sold the firm in 2002, it was generating £130m in sales and had offices around the globe. The serial entrepreneur is furthering his legendary status with a global financial platform, Recruitment Entrepreneur International, which has a footprint in 18 countries. His other enterprises include Humana International and private equity firm Hamilton Bradshaw (Caan remains its chairman today).

So, what’s his secret? “You have to take one step at a time,” he says. “You don’t always know where each step is going to lead, but I’m a great believer in methodically working towards your goals.”

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James Caan

Gradual progress leaves space for unexpected opportunities, he believes. “When you start something, it's because you're inspired and motivated: you find something that interests and excites you, and then you develop it.

“Sometimes it works, and sometimes it doesn't.

But as you navigate your way through, you evolve, CFI.co | Capital Finance International

and your confidence grows, and you start to believe in yourself. You start to think, ‘I can really do this’.

“Everything I’ve ever done has been one step at a time, I've never (tried to) run before I can walk.

If anything goes wrong, you only drop a step, whereas if you run, you trip up.”

Spring 2023 Issue

“Living in the West, you realise that the best way to break the poverty cycle is through education.

And it’s an amazing feeling to realise that because of my father, these kids have a chance to change their lives. When I built the school, my vision was that I wouldn’t just transform the lives of those children, but I would transform the lives of everyone in the village and the community.”

Caan was there recently, and spoke to one of the English teachers. She was a graduate of the school and had come back to teach there after her university training. “And that was amazing,” he says.

When Caan first published his business book, Start Your Business In 7 Days, he had no idea what a catalyst it would be. “Someone bought my book and gave it to Lord Young, who was the special advisor to David Cameron,” he says. “One of the biggest challenges the British economy was facing was that we were not creating enough jobs.”

Caan adopted his father’s advice — “observe the masses and do the opposite” — as one of his guiding principles. Despite fallout over his namechange (from Khan to Caan) and his choice of a path different to that of the family business, Caan’s respect for his father lay at the heart the project of which he is proudest: building and funding a school in Pakistan.

“When I went back to Pakistan for the first time and went into the village where my father was born, I saw lots of kids running around at 11 o'clock in the morning. I wondered why they weren’t at school — and then I realised there wasn't one.

“It pulled at my heartstrings, because I knew my dad’s story so well ... he was in a large family, the country was in turmoil, and his family needed to live. My grandmother sent him to a tailor’s shop to earn a trade at the age of eight, so he never saw the inside of a school.

“I wanted to provide other kids with the opportunity that my father never had. And I had an unshakable conviction: that I wanted to build a school that I would be happy to send my own children to.

“Everybody said I was mad, because it's a remote village, and I was trying to create an incredible building, and it was a bit out of place.”

With typical tenacity, Caan built a state-of-theart facility, naming it the Abdul Rashid Khan School, in honour of his father. “I’ll never forget arriving on the first day it opened, and there was a queue of children a mile long,” he recalls.

But he didn’t just create the building; he also funds the teachers’ salaries, school minibuses, and their running costs. Caan visits at least once a year.

CFI.co | Capital Finance International

Caan was asked by UK government to found and chair Start-Up Loans in 2012 — a governmentfunded scheme to provide advice, business loans, and mentoring to start-ups. The organisation has backed more than 50,000 businesses and created 64,000 jobs.

“To be recognised by the government, to head a campaign to turn the British economy, and create a country where you stimulate entrepreneurship — it was a really proud moment,” he says.

Caan caught the eye of the producers of BBC programme Dragon’s Den — and his role as a dragon made him a household name. His fame, and his calm and measured approach, became hallmarks.

Caan is on a global mission to ensure Recruitment Entrepreneur International becomes a leading support platform. “There’s an undeniable desire to succeed and to become the best,” he admits.

“But mainly I choose the life I choose because I love it.” i 149

> Women’s Brain Project:

Grey Areas in Grey Matter Research When It Comes to Gender

By Anna Dé Head of Policy & Advocacy, Women’s Brain Project

Considering sex- and gender-specific outcomes from biomedical research may improve treatment, productivity — and national economic outcomes.

O

n March 8 — International Women’s Day 2023 — the Women’s Brain Project released the results of a study into the economic benefits of investing in sex- and gender-specific brain research.

The Women’s Brain Project (WBP) is an international organisation studying sex and gender determinants of brain and mental health to achieve precision medicine and care.

It is in the process of establishing a Research Institute for Sex and Gender Precision Medicine.

The recent study was conducted in conjunction with Economist Impact, an organisation driving progress on world issues. The collaboration resulted in a White Paper entitled Sex, Gender and the Brain: Towards an Inclusive Research Agenda. The paper provides a thematic review of sex and gender differences across five brain conditions: Alzheimer’s, migraine, multiple sclerosis, Parkinson’s and stroke. The conclusion is that there is a need for more research based on the economic benefits of earlier and more reliable diagnoses, disease prevention and management, and more effective treatments. All of these, the study found, could mitigate the impact of these debilitating conditions.

The starting point was the conceptualisation of a general framework for brain diseases, which was then adapted to build five frameworks according to disease-specific outcomes. The novel frameworks convey how sex- and genderspecific research can impact a country’s GDP. Brain diseases are poorly understood, and they receive less investment into drug development and patient care. “This is aggravated by the fact that the majority of brain diseases are affecting the female population worldwide,” says Dr Antonella Santuccione Chadha, co-founder and pro-bono CEO of the WBP. “Women are underrepresented in clinical research, and the preclinical research does not systematically study the influence of sex and gender in disease models.”

Considering sexand gender-specific outcomes from biomedical research may have 150

Visual 1: White Paper front cover

the potential to improve treatment, workforce productivity — and national economic outcomes. Neurological disorders affect men and women differently, with women overwhelmingly affected by the most prevalent CFI.co | Capital Finance International

disorders including dementia and migraine.

The impact of sex and gender on the economic costs of neurological disorders has not been properly studied; most research is carried out on a one-size-fits-all manner.

Spring 2023 Issue

"Brain diseases are poorly understood, and they receive less investment into drug development and patient care. 'This is aggravated by the fact that the majority of brain diseases are affecting the female population worldwide.'"

To optimise care for brain diseases, it is important to enrol both sexes into clinical research and drug trials. “Neglecting sex and gender differences ... can lead to delayed and misdiagnosis, undertreatment and poor prevention,” says Dr Maria Teresa Ferretti, co-founder and Chief Scientific Officer of WBP. “We need to implement a precision-medicine approach, leveraging sex and gender disaggregated data to fill in the current knowledge gaps and promote tailored, more efficacious, and more sustainable solutions to neurological disorders.”

Visual 2 – Figure 1: Conceptual framework

As a follow-up to the White Paper, WBP plans to develop a robust economic model with which to quantify economic implications and build an evidence-based case for investment.

This has implications for scientists, healthcare professionals, governments and policymakers, regulators, the pharmaceutical industry, patients and caregivers. WBP is committed to transforming the clinical trial landscape by ensuring the right treatment to the right patient. i

For further information, please visit: womensbrainproject.com/ei-white-paper ABOUT THE WOMEN’S BRAIN PROJECT The Women’s Brain Project (WBP) is an international organisation studying sex and gender determinants of brain and mental health to achieve precision medicine and care.

WBP is a global leading player in the field of brain research, supporting innovative science, precision medicine and care, unbiased AI and promoting gender health equity to make healthcare systems more sustainable. WBP is in the process of establishing the Research Institute for Sex and Gender Precision Medicine.

Visual 3: Stakeholder ecosystem

In general, women may live longer than men, but they live more years with disability.

They are also more likely to provide unpaid

care for family members. Both disability and caregiving responsibilities can limit workforce participation.

CFI.co | Capital Finance International

WBP commissioned Economist Impact to examine the economic rationale for investing in sex-and-gender specific brain research, resulting in the White Paper. This programme is supported by sponsorship from F Hoffmann-La Roche AG and Organon Belgium BV. 151

> UNCDF:

Secrets to Easing Funding Process for Less Wealthy Countries’ Climate Battle

Qatar’s under-sung conference shared the limelight with larger international events — but it provided some key points for decarbonisation...

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high-level conference addressing climate change was convened in March — and we aren’t talking about COP28. It was a high-level event, focusing on economic security, global growth, and sustainable development. We’re 152

not talking about the World Bank-IMF Spring Meetings, either.

The event in question was the Conference on the Least Developed Countries (LDC5), which took place in Doha, Qatar. Leaders from the private CFI.co | Capital Finance International

sector, civil society and governments convened to raise resources and cement partnerships to implement the Doha Programme of Action, a new generation of renewed and strengthened commitments for sustainable development in the 46 least-developed countries (LDCs).

Spring 2023 Issue

"Emphatically, the reality of climate change makes any carbonand petrochemical-fuelled development path untenable."

The conference is one of the most important gatherings to address climate change as well as economic security. Not as two distinct development themes, but as a single, existential challenge to be overcome — if sustainable development is to be achieved where it is most needed.

increased greenhouse gas emissions and continued environmental degradation is no longer possible.

A recent report by the UN Conference on Trade and Development (UNCTAD) looked at the lowcarbon transition of LDCs, and its implications of structural transformation. The causal relationship between greenhouse gas emissions and structural economic vulnerability may not yet be clear, but the relationship is intimate and acute.

Two critical elements to success are sustainable and inclusive trade regimes that advance low-carbon transitions, and give access to international finance to fund climate resilient projects and infrastructure. The United Nations can play a critical role in both respects. It can take a leading role in cultivating the global trade environment that supports low-carbon transitions. Through its singular convening power, the United Nations can support a powerful network of partners—national governments, multilateral institutions and non-governmental organizations—to fully leverage the power of intellectual property rights, trade agreements, and multilateral frameworks to advance climate objectives. The UN can also help the LDCs to unlock climate finance through the UNCDF, the UN’s Catalytic Finance Entity for the World’s 46 Least Developed Countries. Via the Local Climate Adaptive Living Facility (LoCAL), the UNCDF is working to increase climate financing by providing performance-based climate resiliency grants and technical support to local government authorities. The LoCAL facility provides a countryowned mechanism for channelling climate finance to 34 countries across Africa, Asia, the Caribbean and Pacific. LoCAL’s performancebased climate resilience grants enable local governments to access climate finance for small-scale infrastructure projects that provide a lifeline for communities. Through the inclusion of community experiences and knowledge in the regular sessions of local consultative councils, LoCAL supports local governments by listening to voices and needs of communities in relation to investments. The facility also provides an internationally recognised standard that gives investors and donors the confidence to finance locally led adaptation projects, while enabling local governments to access international funds. A new standard issued by the International Standard Organization, ISO 14093, was launched at COP27. It is based on the Local Climate Adaptive Living Facility and offers a country-based mechanism to increase local government access to climate finance for adaptation. The ISO cements LoCAL’s position as the accepted approach to gaining climate finance-delivery at the local level.

LDCs are among the most vulnerable to damage from extreme weather events due to lack of capital for climate-resilient infrastructure. The resulting economic harm of disrupted commerce, reduced trade and infrastructure damage translates into higher costs to access credit markets. “LDCs pay nearly 10 percent more on overall interest costs for development finance as climate change effects are transmitted to sovereign credit profiles,” according to the report. The insult to this financial injury stems from the fact that LDCs are responsible for just four percent of all global greenhouse gas emissions.

Another example involves exposure in global supply chains. The UNCTAD report found that FDI flows to LDCs went mainly to natural resource sectors, and those vulnerable to aggregate demand shocks, especially fuels and minerals. The mining and quarrying sector showed consistent growth in terms of foreign value added. Such FDI flows have positioned LDCs as global exporters of high carbon-emitting commodities. The trade volatility experienced by LDCs diminishes the budgetary space that local and national governments have to invest in if they wish to de-carbonise their economies — they are largely limited to commercial opportunities tied to carbon.

Doha: Qatar

"LDCs are among the most vulnerable to damage from extreme weather events due to lack of capital for climateresilient infrastructure."

With every climate-related disaster — more economic activity disrupted, infrastructure damaged, businesses decimated — the capability of LDCs to support sustainable economic development becomes compromised. That means the ability to finance their own climate resilience and cut emissions is compromised.

This vicious cycle shows how LDCs are being left behind. They lack access to development finance and remain vulnerable to global trade shocks, while developed countries reap lion’s share of the economic security benefits of decarbonisation.

As it was stated in the UNCDF report, Local Government Finance is Development Finance: “The road forward can only involve a green transition. An alternative ‘dirty’ route with CFI.co | Capital Finance International

“Emphatically, the reality of climate change makes any carbon- and petrochemical-fuelled development path untenable.”

The LDC5 conference may not have the profile of the COP or the World-Bank IMF Spring Meetings.

But it may do as much, or more, to achieve the promise of sustainable development — and leave no one behind. i 153

> Jim O’Neill:

Could These Two Trends Save Britain? © Project Syndicate 2023

As the United Kingdom marks the third anniversary of its formal departure from the European Union, its overarching economic narrative is one of doom and gloom. But there are some promising early signs that the country could be moving toward the kind of regional rebalancing that it needs.

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s if conditions weren’t gloomy enough in the United Kingdom, the International Monetary Fund recently downgraded the country’s growth forecast even as it offered a brighter outlook for the rest of the world. This was an odd and rather audacious move. While the UK certainly faces challenges, it is not clear that they have become any more difficult since the IMF released its last forecast in October 2022. If anything, a stronger global economy should benefit the UK, too.

of National Statistics reported productivity data at the level of individual boroughs. As expected, productivity growth was weak just about everywhere. Between 2004 and 2020, however, productivity rose by about 18% in Manchester, and by 21% in Greater Manchester, compared to just 15% in London. Moreover, if you strip out 2020 – the first year of the pandemic – while Greater Manchester’s relative outperformance compared to Manchester recedes, it still persists vis-à-vis London.

"Delve deeper into the data and you will find similar trends across many price ranges."

Discussions about the UK’s never-ending gloom These data are encouraging for several reasons. tend to ignore two trends that may be suggestive of a pleasant surprise, despite the current political leadership’s haplessness. (I say “could” because much will depend on whether Britain can overcome the policy chaos that has prevailed since Brexit.)

The first trend involves UK house prices – which is both a favorite dinner-party topic for homeowners and a persistent source of frustration for all those not fortunate enough to have gotten a foot on the homeownership ladder.

Alongside the lack of social mobility, this is one of the UK’s central economic challenges. But the issue is not just high prices relative to incomes.

Equally important are the regional disparities in housing prices.

Final Thought

For many decades, housing prices in London real-estate tended to rise by more than those elsewhere, the only exceptions being during big financial crises, when London prices also fell (typically owing directly to the crisis). But this pattern has been breaking down since 201516. If the apparent reversal of house-price behavior does constitute a new trend, it should be a massive positive story. British economic commentators, however, seem barely to have noticed it.

To be sure, the highest London house prices actually peaked before the 2016 Brexit referendum, because Prime Minister David Cameron’s government had adopted tax policies designed to discourage buy-to-rent house purchases (where were generally speculative bets by landlords on London property). But while urban house prices in other parts of England had already begun to outperform those in London 154

before the referendum, Brexit reinforced the trend. The top end of the London housing market was hit hard by the break from the European Union, while most other markets were hardly affected.

Then came COVID-19, which ushered in the new era of remote work and radically increased the attractiveness of more affordable locations outside London. And that was followed by Prime Minister Liz Truss’s policy fiascos, which led to an abrupt spike in UK mortgage rates, making the London market even less affordable for many aspiring homeowners.

Against this backdrop, a recent issue of The Sunday Times Property section caught my eye with a story about the number of houses in the UK worth more than £1 million ($1.2 million). It found that, in 2022, the number of such homes in the London metropolitan area grew by less than in any other region (though London still accounts for around 10% of the overall stock).

Nor is this story confined to the high end of the market. Delve deeper into the data and you will find similar trends across many price ranges.

Notwithstanding the obvious implications for lower earners, this trend could point to a positive development in the UK economy. It would be very good for regional productivity, social mobility, and the distribution of wealth if Britons are beginning to recognise that there are more opportunities to succeed in places other than London.

That brings us to the second under-noticed trend: the slow and steady success of devolution.

Last year, for the first time ever, the UK Office CFI.co | Capital Finance International

Not only have Greater Manchester’s house prices followed the broader pattern of regional outperformance over London in recent years, but Manchester itself has been a pioneer in the “devolution revolution” (former Chancellor of the Exchequer George Osborne’s catchphrase for the delegation of greater policymaking power to local governments).

By the summer of 2024, seven (mostly urban) areas in northern England will have adopted the same basic mayoral structure as Greater Manchester. If they can match Greater Manchester’s reformist zeal, they, too, could start to share in these modestly hopeful trends toward greater regional convergence.

Now, as promising as these trends are, it remains to be seen if they will persist. The UK is nowhere close to solving its regional problems.

Despite Greater Manchester’s somewhat better outlook, it is still home to some of the country’s most underperforming areas, and its overall productivity remains a whopping 40 percentage points below London’s. Moreover, if non-London house prices rise too much, that will simply bring new affordability problems, especially if the higher costs are not accompanied by growth in productivity, real earnings, and living standards.

Still, for now, both trends merit far more attention and study. i ABOUT THE AUTHOR 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.

A BRIEF HISTORY OF TIME GETS A NEW CHAPTER

Spring 2023 Issue

“I have wondered about time all my life.” - Professor Stephen Hawking

Professor Hawking did more than wonder about time. He spent most of his life probing into the beginnings of our universe, and discovered the very origins of time itself. And then, this theoretical physicist, whose legacy stands alongside those of Galileo, Newton and Einstein, made his discoveries accessible to everyone. The fact that he did all of this whilst battling debilitating motor neurone disease was all the more remarkable, showing Hawking’s courage, insatiable curiosity, and ambition. The Hawking limited series watches are a fitting tribute to this titan of science, and Bremont is proud to present them alongside Professor Hawking’s family.

CFI.co | Capital Finance International

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The new Maserati Grecale Trofeo.

Everyday Exceptional

*

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