Pan Finance Q3 2024 Magazine

Immigrants: The unsung heroes of global trade

THE ECONOMIC REALITIES OF IMMIGRATION

CAN CENTRAL BANKS STILL GO GREEN?

GLOBAL CHALLENGES REQUIRE FINANCIAL INNOVATION

HOW FINANCIAL MARKETS CAN DRIVE CLIMATE ACTION

CONFIDENCE

IN EVERY FINANCIAL MOVE

AIX Investment Group, with over a decade of proven excellence, has established itself as a trusted leader in the financial industry. Through strategic collaborations with top industry experts, the firm provides a diverse range of tailored investment solutions across several regulated entities. Committed to transparency, innovation, and diversification, AIX Investment Group ensures that client investments are secure, adaptive, and positioned for long-term success.

The Statement

GLOBAL BUSINESS DIGEST & MARKET ANALYSIS

CAN CENTRAL BANKS STILL GO GREEN?

GLOBAL CHALLENGES REQUIRE FINANCIAL INNOVATION

HOW FINANCIAL MARKETS CAN DRIVE CLIMATE ACTION

GOLD PRICES SURGE TO RECORD HIGH

Gold prices have surged to a record high, breaking above $2,600 U.S. per ounce and closing at $2,646.20 on September 20, following the U.S. Federal Reserve’s interest rate cut. This marks a 27% increase in gold’s price in 2024, the largest annual rise since 2010. The rally is driven by central banks increasing their gold purchases amid rising geopolitical tensions, especially in the Middle East, and strong consumer demand in China. Lower interest rates, a weaker U.S. dollar, and ongoing global uncertainties are expected to continue fueling gold’s upward momentum in the coming months.

URSULA VON DER LEYEN UNVEILS NEW EU COMMISSION OFFICIALS

European Commission President Ursula von der Leyen has revealed her new top team, tasked with navigating the European Union through a period of global uncertainty, including the ongoing war in Ukraine, rising competition from China, and the possible return of Donald Trump as U.S. president.

“It’s about strengthening our tech sovereignty, our security, and our democracy,” von der Leyen declared as she introduced the new commission during a session at the European Parliament in Strasbourg.

This reshuffled team, announced after weeks of political negotiations, signals the EU’s priorities for the next five years. Key appointments reflect the union’s focus on industrial strategy, defence, and climate policy as it prepares to confront mounting geopolitical challenges.

France’s candidate, Stéphane Séjourné, was named Executive Vice President overseeing industrial strategy, a critical portfolio as the EU seeks to enhance its technological independence. Séjourné’s role will be pivotal in balancing the bloc’s industrial growth with the need to compete globally, especially with China’s rising influence.

In a move to bolster Europe’s defence, former Lithuanian Prime Minister Andrius Kubilius was appointed as the new Commissioner for Defense. Kubilius, known for his strong anti-Russian stance, reflects a shift towards a more hawkish approach in Eastern Europe, especially in light of Russia’s invasion of Ukraine.

Additionally, Spain’s Teresa Ribera, a socialist and advocate for climate action, secured a role as Executive Vice President, tasked with steering the EU’s economic transition towards carbon neutrality. Her appointment underscores the EU’s continued commitment to addressing climate change, despite Green parties’ electoral losses in June.

Von der Leyen’s appointments highlight the delicate balancing act she faces. With the commission composed of nominees from all 27 member states, she had to navigate competing national interests while also reflecting the political power shifts after the European Parliament elections in June.

ITALY CONSIDERS HIGHER TOURIST TAXES AMID CONCERNS OF OVERTOURISM

Italy is currently considering a significant increase in its tourist tax, proposing a fee of up to €25 per night for holidaymakers staying in the country’s most expensive hotel rooms. This proposal, which marks a substantial rise from the current tax rates of €1 to €5 per night in popular cities like Venice, is part of a broader effort by the Italian government to address the growing challenges of overtourism and to generate additional revenue to support local services, particularly in financially disadvantaged areas.

With nearly 60 million international visitors flocking to Italy in 2023, many of the country’s most iconic destinations are grappling with issues such as overcrowding, particularly from cruise ship day-trippers and overnight visitors during peak tourist seasons. The proposed tax increase aims to make tourists “more responsible” by directly contributing to the upkeep and maintenance of the areas they visit. Services like refuse collection, which are often strained by the influx of visitors, could greatly benefit from the additional funds generated by the new tax.

If implemented, the tax will be tiered according to the price of hotel rooms. High-end accommodations priced over €750 per night would incur the maximum tax of €25, while rooms priced under €100 would see a smaller tax of €5. Mid-range rooms, costing between €100 and €750 per night, would be taxed at rates ranging from €10 to €15, depending on their price.

The proposal, however, has sparked controversy within Italy’s tourism industry. Daniela Santanchè, Italy’s tourism minister, has defended the increase, stating that it is a necessary measure in an era of overtourism to improve services and promote more sustainable tourism practices. Nevertheless, industry leaders, such as Maria Carmela Colaiacovo, president of the Italian hotel association Confindustria Alberghi, and Barbara Casillo, the association’s director, have voiced concerns.

Appointments

ANTHONY MILLER Chief Executive Officer, Westpac

Westpac has appointed Anthony Miller as its new CEO, succeeding Peter King in December. Miller, who joined Westpac in 2020, quickly rose through the ranks, leading the Westpac Institutional Bank and later the Business & Wealth division. Chairman Steven Gregg praised Miller as the standout candidate, highlighting his customer-focused approach, proven performance record, and deep understanding of the Australian market. Miller, a former CEO of Deutsche Bank Australia/NZ, expressed excitement about the role, emphasising his commitment to building on King’s transformative work. With a diverse background, including a legal career and extensive experience in investment banking, Miller aims to enhance trust and reliability at Westpac.

DRAGHI URGES €800BN INVESTMENT IN EU’S ECONOMY

Former European Central Bank President and Italy’s ex-prime minister Mario Draghi has released a critical report addressing the future of the European economy, urging the European Union to undertake a massive investment initiative to avert potential economic decline. Speaking in Brussels, Draghi emphasised the gravity of the situation, stating, “For the first time since the Cold War, we must genuinely fear for our self-preservation.” This stark warning highlights the urgent need for the EU to confront its economic challenges head-on, or risk severe long-term consequences.

Commissioned by European Commission President Ursula von der Leyen, Draghi’s report outlines a comprehensive strategy for revitalising the EU’s economy. He proposes that the EU needs to invest between €750-800 billion annually, which amounts to approximately 4.4-4.7% of the EU’s GDP. Such a significant investment, Draghi argues,

IGNACIO JULIÁ

Chief Executive Officer, Banco Santander

Banco Santander has appointed Ignacio Juliá as the new CEO of Santander Spain, succeeding Ángel Rivera, who will step down on October 1st. Juliá brings over two decades of experience from ING, where he most recently served as CEO of Spain and Portugal. His extensive background includes roles as chief financial and risk officer and head of retail. As CEO, Juliá is tasked with driving the transformation of Santander Spain’s business model to enhance customer service and achieve further growth and efficiency. Ana Botín, Banco Santander’s executive chair, praised Juliá’s experience in transformation projects, emphasising his role in accelerating the implementation of global platforms and boosting the bank’s growth in Spain.

CECILE HILLARY

Chief Financial Officer, Danske Bank

Danske Bank has announced the appointment of Cecile Hillary as its new Chief Financial Officer, set to join the Executive Leadership Team by 1 March 2025. Cecile Hillary, currently Group Treasurer at Lloyds Banking Group, brings over 24 years of experience from leading international financial institutions, including Barclays, Morgan Stanley, and JPMorgan. She succeeds Stephan Engels, who will retire after nearly five years with Danske Bank. Carsten Egeriis, CEO of Danske Bank, praised Hillary’s extensive expertise, expressing confidence in her ability to contribute significantly to the bank’s strategic goals. Hillary expressed excitement about joining the strong and ambitious Nordic institution.

is necessary to ensure that Europe remains competitive on the global stage, particularly against economic giants like the United States and China. This investment would represent the highest investment-to-GDP ratio in Europe since the 1970s, reflecting the scale of the challenge and the ambition required to address it.

Among the key recommendations, Draghi advocates for loosening competition rules to allow for greater market consolidation, centralising market supervision across the EU, and promoting joint defence procurement initiatives. Additionally, he stresses the importance of accelerating the push towards decarbonization, as well as the need for common EU funding mechanisms to support public goods such as energy infrastructure and defence.

However, the proposal has sparked significant debate, particularly in Germany, where Finance Minister Christian Lindner has expressed strong opposition to the idea of pooled EU debt, citing concerns over “democratic and fiscal problems.” Despite this resistance, Draghi warned that without bold and decisive action,

the EU risks compromising its welfare, environment, and freedoms.

Microsoft and Blackrock Partner on AI Infrastructure

In a landmark move, Microsoft, BlackRock, Global Infrastructure Partners, and MGX have announced the launch of a $30 billion investment fund dedicated to expanding artificial intelligence (AI) infrastructure. The Global AI Infrastructure Investment Partnership (GAIIP) aims to mobilise up to $100 billion in capital, targeting the development of data centres and supporting energy sources, with a focus on the U.S. and partner countries.

The demand for AI-driven computing has surged as deep learning and large-scale data processing become more prevalent. To support this demand, the partnership will prioritise building energy-efficient data centres capable of handling immense computational needs. Nvidia will also lend its expertise in AI, ensuring the initiative remains on the cutting edge of data centre technology.

As the world increasingly relies on AI, the power requirements of these systems have skyrocketed. The International Energy Agency (IEA) estimates that global energy consumption by data centres, AI, and related sectors could double by 2026. GAIIP’s multi-billion-dollar investment seeks to tackle these challenges by focusing on renewable energy and infrastructure updates, aiming to mitigate the environmental impact of AI development.

Microsoft’s vice chairman, Brad Smith, emphasised the scale of investment needed, stating that the initiative addresses critical infrastructure demands that exceed the capacity of any single company or government. By pooling resources, the coalition aims to enhance national competitiveness, security, and prosperity.

The fund reflects a growing recognition of the need for advanced infrastructure to power AI’s rapid growth. While AI promises transformative potential across industries, its success hinges on investments in both the hardware and energy sectors. With this unprecedented financial commitment, Microsoft and its partners are betting big on the future of AI, aiming to shape its development sustainably and responsibly.

Hong Kong to Issue AI Guidelines for Financial Sector

Hong Kong is gearing up to release its first official policy on the use of artificial intelligence (AI) in the financial industry, marking a significant step in the city’s ambition to position itself as a leading financial hub. According to sources close to the matter, the policy statement is expected to be unveiled in late October during the city’s highly anticipated Fintech Week.

The move comes as financial sectors across the globe are increasingly adopting AI technologies, with applications ranging from trading and investment banking to cryptocurrency management. “The government and financial regulators are actively monitoring global developments to ensure the responsible use of AI in Hong Kong’s financial industry,” a spokesperson from the Financial Services and Treasury Bureau (FSTB) said. “A policy statement will be issued later this year, outlining our stance on the application of AI in the market.”

The FSTB’s forthcoming statement is anticipated to introduce a framework of ethical guidelines for the deployment of AI in financial services. This will address key issues such as responsible use, transparency, and risk management. Although the final document is still being drafted, officials are reportedly consulting industry leaders for feedback before finalising the details.

The policy is expected to signal Hong Kong’s broad support for AI, even as the city finds itself in the midst of global tech tensions, particularly between the U.S. and China. Many American AI services, such as OpenAI’s ChatGPT and Google’s Gemini, remain largely unavailable in the region, creating uncertainty for both consumers and financial institutions. In contrast, Chinese tech companies like Baidu and ByteDance also face challenges in delivering their AI solutions in Hong Kong.

The policy comes at a time when countries like Singapore (which has recently emerged as a strong contender in the fintech and AI landscape) are advancing their AI regulations, aiming to attract investors who are cautious of Hong Kong’s tightening ties with Beijing.

France’s Deficit Spirals as Public Spending Surges

France’s public finances are in a worse state than anticipated, with spending rising sharply, according to outgoing Finance Minister Bruno Le Maire. The country’s deficit is projected to reach 5.6% of GDP this year, far exceeding the EU’s 3% target and surpassing the government’s initial 5.1% forecast.

Le Maire attributed the growing deficit to lower-than-expected tax revenues and significant spending increases by local authorities, which could impact the 2024 accounts by €16 billion. The finance minister acknowledged the gravity of the situation in a letter to parliamentarians, admitting that the deficit threatens to spiral out of control.

The deteriorating financial situation poses a challenge to President Emmanuel Macron, who campaigned on promises to reduce the public sector and boost investment. The worsening figures suggest Macron may have to implement severe public service cuts or raise taxes to meet his goal of bringing the deficit below the EU’s target by 2027.

France has already planned a €20 billion reduction in spending next year, following similar cuts this year. However, implementing such measures could prove difficult in a politically gridlocked environment, with the French public’s strong attachment to social benefits and frequent strikes.

The fiscal crisis has led to credit rating downgrades for France and scrutiny from the EU, which has placed the country under its excessive deficit procedure. As Macron prepares to appoint a new prime minister, questions remain about the government’s ability to navigate the ongoing financial turmoil.

The deepening fiscal crisis in France is not only a domestic concern but also a growing point of contention within the European Union. The EU’s excessive deficit procedure, which France is now subject to, could result in increased pressure from Brussels for more stringent fiscal measures. This international scrutiny adds another layer of complexity for President Macron as he seeks to balance the need for economic reforms with maintaining public support.

SocGen to Exit LME’s Open-Outcry Trading Floor

Societe Generale SA is set to withdraw from the London Metal Exchange’s (LME) open-outcry trading floor, a move that will leave only seven members on the iconic “Ring” and further fuel debates about its future.

Starting August 27, Societe Generale’s UK unit will cease operations on the trading floor but will continue serving clients as a clearing member of the exchange. The bank’s departure follows similar exits by other dealers, including Triland and ED&F Man, in recent years.

The LME’s trading floor, known for its red-leather couches and hand-signalled trades, has faced declining relevance in a market increasingly dominated by electronic trading. While some view the Ring as outdated, others argue it remains an effective platform for managing the LME’s complex daily, weekly, and monthly contracts. Critics, including high-frequency trading firms, have long pushed for its closure.

The LME has previously stated that it would consider closing the Ring permanently if fewer than six members remained or if the remaining members accounted for less than 75% of historically traded volumes. In a notice to members, the exchange confirmed that Societe Generale’s withdrawal does not meet these criteria.

The Ring’s roots trace back to the UK’s Industrial Revolution when metals traders gathered in a London coffee house to conduct business. However, even before the Covid-19 pandemic forced a temporary closure, trading had increasingly shifted to electronic systems and direct interoffice deals. Despite a brief reopening, trading volumes on the floor have significantly decreased.

Societe Generale’s exit leaves CCBI Global Markets as the only remaining bank with a presence on the Ring. Other floor brokers include Amalgamated Metal Trading, Marex Group, and Sucden Financial. The decision is not expected to affect Societe Generale’s metals team headcount, as the bank remains committed to providing clearing and execution services on the LME.

Morgan Stanley to Offer Bitcoin ETFs to Wealthy Clients

Morgan Stanley has made headlines by officially announcing that its approximately 15,000 financial advisors will soon be able to offer bitcoin exchange-traded funds (ETFs) to select clients, marking a significant move in the institutional adoption of digital assets. Starting next week, the firm’s advisors will be able to pitch two specific bitcoin ETFs: BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund. This development comes as a direct response to growing client demand for exposure to the burgeoning digital asset market.

However, Morgan Stanley is setting strict eligibility criteria for clients interested in these speculative investments. Only clients with a net worth of at least $1.5 million, a high-risk tolerance, and a particular interest in speculative investments will be eligible to participate. Additionally, investments in these bitcoin ETFs will only be permitted through taxable brokerage accounts, excluding retirement accounts, as per the firm’s guidelines. This cautious approach reflects the firm’s intent to offer exposure to bitcoin while ensuring that clients do not become excessively exposed to this volatile asset class. The firm will closely monitor clients’ bitcoin holdings to prevent overexposure, highlighting the high-risk nature of such investments.

This move makes Morgan Stanley the first major wirehouse firm to provide such products, setting it apart from other major financial institutions like Goldman Sachs, JPMorgan, Bank of America, and Wells Fargo, which continue to restrict their advisors from proactively offering bitcoin ETFs. These institutions currently only allow clients to access such funds if explicitly requested.

The decision by Morgan Stanley is seen as a major milestone for the institutional adoption of bitcoin in traditional finance. Observers, including those on social media platforms like X (formerly Twitter), have celebrated the move as a significant step forward.

JPMorgan Expands Private Banking Presence in Dubai

JPMorgan Chase & Co. is strengthening its presence in the Middle East by establishing a new private banking team in Dubai, a city that has rapidly become a hub for global wealth. This move is part of a broader strategy to tap into the growing population of affluent individuals relocating to the Gulf region. To spearhead this initiative, JPMorgan has strategically transferred two experienced bankers, Sebastian Botana de Beauvau from Geneva and Carol Mushriqui from London, to lead the Dubai team. The firm’s decision aligns with the increasing influx of millionaires and ultra-wealthy individuals attracted to the UAE, drawn by its tax-free environment, political stability, and luxurious lifestyle.

Dubai’s appeal as a financial centre has grown significantly, with the UAE expected to see an influx of 6,700 ultra-wealthy individuals in 2024 alone, nearly double the number anticipated in the United States. This trend has made the Middle East a prime focus for global wealth managers. Prominent financial institutions like UBS Group AG, Deutsche Bank AG, and HSBC Holdings Plc have also been expanding their operations in the region to cater to the needs of this burgeoning market. For instance, HSBC bolstered its presence by adding 100 bankers last year, with plans to continue expanding its workforce, while Julius Baer Group Ltd. has enhanced its services for wealthy Indian clients in Dubai.

JPMorgan’s international private banking division, the largest among U.S. financial institutions, has been progressively expanding its global footprint, adding 11 city locations over the past decade. The new Dubai team will specifically target affluent clients, family offices, charities, and foundations across the Gulf region. This expansion not only underscores JPMorgan’s commitment to the Middle East but also highlights the region’s growing importance as a key market for global wealth management services.

Warren Buffett’s Berkshire Hathaway has made headlines by selling approximately $6 billion worth of Bank of America (BoA) stock this summer, marking a significant reduction in its stake in the financial institution. According to the latest filings, Berkshire offloaded 21.1 million shares over three consecutive days last week, generating $848.2 million at an average price of $40.24 per share. This sale is part of a larger divestment strategy that began on July 17, during which Berkshire has sold a total of 150.1 million shares, reducing its Bank of America holdings by 14.5%. The average selling price during this period was $41.33 per share.

Despite this substantial sell-off, Bank of America remains a key component of Berkshire Hathaway’s portfolio. It continues to be the third-largest equity holding for the conglomerate, accounting for about 11% of its total portfolio. Even after the reduction, Berkshire retains its position as the largest shareholder of Bank of America, holding 882.7 million shares valued at nearly $36 billion. However, its stake is now more closely aligned with that of Vanguard Group, which owns 639 million shares.

The motivations behind these sales remain speculative, especially given Buffett’s past statements indicating a preference to hold onto BoA shares despite broader concerns in the banking sector. With Berkshire’s cash reserves reaching a record $277 billion as of June 30, this move suggests a strategic shift that has yet to be fully revealed. As Buffett recently turned 94, this could be part of a larger, long-term strategy to rebalance the portfolio or prepare for future investments. Additionally, it may reflect a cautious approach amid economic uncertainty or an anticipation of new opportunities in the evolving financial landscape. The market will undoubtedly be watching closely for further developments.

Ford Shifts EV Strategy Toward Smaller, Affordable Vehicles

Ford Motor Company is adjusting its electric vehicle (EV) strategy, focusing on smaller, more affordable vehicles as a pathway to profitability, marking a significant shift from its traditional emphasis on large trucks and SUVs. This new direction, described by Ford as an “insurance policy,” aims to capitalise on the growing popularity of hybrid models while expanding the automaker’s EV offerings.

Ford’s updated strategy includes cancelling the development of a large electric threerow SUV and delaying the production of its next-generation “T3” full-size electric pickup by 18 months until late 2027. Instead, the company plans to launch a commercial electric van in 2026, followed by a mid size pickup in 2027. The move reflects Ford’s belief that the highest adoption rates for EVs will occur in the affordable segment, particularly for smaller vehicles.

Marin Gjaja, Ford’s Chief Operating Officer for the Model e EV unit, emphasised the necessity of competing in the lower-cost segment. “We’re quite convinced that the highest adoption rates for electric vehicles will be in the affordable segment on the lower sizeend of the range,” he told CNBC.

Ford’s revised EV plans will cost up to $1.9 billion, including a $400 million write-down of manufacturing assets and up to $1.5 billion in additional expenses. The company is also refocusing battery production and sourcing efforts in the U.S. to take advantage of tax incentives and credits, aiming to improve profitability amid a challenging market environment.

The decision to shift away from larger EVs, particularly the cancelled three-row SUV, was not made lightly. Ford CEO Jim Farley and other executives had previously promoted the vehicle as a key component of the company’s EV lineup. However, Farley acknowledged that the weight and cost of battery packs required for large vehicles are a significant limitation under current technology and charging infrastructure.

Saudi

PIF Injects

$1.5 Billion into Lucid to Boost SUV Production

Lucid announced on August 5, 2024, that Saudi Arabia’s Public Investment Fund (PIF) will invest up to $1.5 billion to boost production of its new Gravity SUV. This announcement caused Lucid’s shares to rise 6% in extended trading, following a 3.9% drop during regular trading hours.

The investment is crucial as Lucid prepares to launch the Gravity SUV later this year. The financial boost will fund operations until Q4 2025. CEO Peter Rawlinson stated that the funds will be used for tooling, building a Saudi factory with an annual capacity of 150,000 vehicles, and other investments.

Ayar Third Investment, a PIF affiliate, will purchase $750 million in convertible preferred stock and provide an equal amount as a credit line. This is the second investment from Ayar Third Investment this year, strengthening the relationship between PIF and Lucid. With this investment, PIF’s total investment in Lucid reaches approximately $8 billion, holding a 60% stake. Cantor Fitzgerald’s senior equity analyst Andres Sheppard noted that the move alleviates investor concerns about PIF’s commitment to Lucid.

In addition to the investment news, Lucid reported better-than-expected second-quarter revenue of $200.6 million, surpassing analysts’ estimates of $192.1 million. This was driven by price cuts on its luxury electric sedans, boosting sales during the April-June period. In February, Lucid reduced prices of its Air sedans by up to 10% to compete with more budget-friendly gasoline-electric hybrid cars.

Lucid produced 3,838 vehicles in the first half of 2024 and reaffirmed its target of 9,000 units for the year. In Q2, the company delivered a record 2,394 vehicles, exceeding market expectations. Looking ahead, Lucid plans to launch a more affordable mid-size car in late 2026.

On an adjusted basis, Lucid reported a loss of 29 cents per share, slightly wider than the expected 27-cent loss.

GOLDMAN SACHS TO TRIM WORKFORCE

Goldman Sachs plans to cut a few hundred employees as part of its annual performance review process, according to The Wall Street Journal.

The review, which typically results in the dismissal of 1% to 5% of staff, is expected to impact 3% to 4% of the bank’s global workforce, or approximately 1,300 to 1,800 employees across various departments. Goldman employed around 45,300 people as of June, and the annual reviews, which resumed in 2022 after being paused during the COVID-19 pandemic, are set to continue through the fall.

A Goldman spokesperson, Tony Fratto, disputed the reported numbers, calling them inaccurate, but confirmed the reviews are a standard procedure. Last September, Goldman initiated a similar round of layoffs, affecting at least 450 employees, marking the fourth round of cuts in 12 months, including a significant reduction of 3,200 employees in January 2023. The review process also factors in in-office attendance, with Goldman pushing for full-time office presence, especially among investment bankers.

Goldman’s layoff announcement follows the bank’s recent success in lowering its stress capital buffer requirement after a dispute with the Federal Reserve. Despite the layoffs, Goldman has reported positive performance metrics, including a 21% increase in investment banking fees and a 27% rise in asset and wealth management revenues in the second quarter of this year. These financial gains highlight the bank’s strong position, even as it streamlines its workforce to maintain efficiency and competitiveness in the market.

The planned layoffs are part of a broader trend within the financial industry, where major banks are continuously adjusting their workforce to align with shifting market conditions.

CITIGROUP EXPECTS 20% SURGE IN Q3 INVESTMENT BANKING FEES

Citigroup’s investment banking fees are projected to rise 20% in the third quarter compared to last year, driven by increased activity in debt capital markets and mergers and acquisitions, Chief Financial Officer Mark Mason said at a New York investor conference.

However, the bank expects a 4% decline in market revenue, following a 10% surge in 2023 that has not continued into 2024. Despite this, Citigroup maintains a positive outlook on the U.S. economy, forecasting a soft landing if the Federal Reserve cuts interest rates as anticipated. Mason also noted that clients are evaluating the potential impact of the upcoming U.S. presidential election on sectors such as energy, healthcare, and consumer goods.

In Citi’s consumer credit card division, payment rates are declining among lower-credit-score customers, while higher-FICO-score clients continue to increase spending. Credit card delinquencies, although rising, appear to be stabilising.

Regarding regulatory compliance, Citi is addressing issues flagged by regulators, particularly in data management. The bank was fined $136 million in July for slow progress on fixing data-related problems. Mason assured investors that the bank is working to improve data quality, speed, and standardisation, and is assessing whether additional resources are required to meet regulatory deadlines. Citi’s second-quarter profit exceeded Wall Street expectations, with investment banking, markets, and services driving revenue. However, its 7.2% shareholder return fell short of its medium-term target of 11% to 12%.

Overall, Citigroup’s mixed performance highlights the challenges the bank faces in balancing growth in investment banking with ongoing regulatory and market pressures, as it strives to achieve its long-term financial goals.

STANDARD CHARTERED INVESTS IN UNITED FINTECH

UK-based banking giant Standard Chartered has confirmed its investment in United Fintech, a London-based digital transformation platform that collaborates with fintech companies in the capital markets sector. This strategic move is part of Standard Chartered’s broader ambition to enhance digital transformation across capital markets, wholesale banking, and wealth management. United Fintech acts as a onestop shop for banks, hedge funds, and asset managers, offering cutting-edge technology solutions through partnerships with innovative fintech firms.

As a result of the investment, Standard Chartered has secured Board observer rights at United Fintech and, upon meeting certain preconditions, will be granted a rotational Board seat. This seat will enable Standard Chartered to play a more active role in shaping the platform’s strategic direction, leveraging its expertise to drive further innovation in the financial services industry.

Geoff Kot, Global Head of CIB Business Platforms & Partnerships at Standard Chartered, expressed enthusiasm for the collaboration, highlighting United Fintech’s impressive growth and the potential for its technology to disrupt and transform market infrastructure. Kot emphasised the bank’s commitment to continuing its digital transformation journey in partnership with United Fintech.

Christian Frahm, CEO and Founder of United Fintech, welcomed Standard Chartered as the latest addition to the platform’s global investor group. He noted that this investment underscores the bank’s dedication to accelerating digital transformation and its forward-thinking approach to collaborative innovation. Standard Chartered joins a prestigious roster of investors, including Citi, BNP Paribas, and Danske Bank, which have all recognized the value of United Fintech’s innovative platform.

US InsurTech Sector Deals and Funding drop in H1

In the first half of 2024, the US InsurTech sector experienced a notable downturn in both deal activity and funding, reflecting broader challenges within the financial technology landscape. Only 53 deals were recorded during this period, representing a 43% decrease compared to the 93 deals that took place in the same timeframe last year. This sharp decline in deal activity was accompanied by a significant drop in funding, with InsurTech companies raising a mere $0.5 billion, a staggering 78% decrease from the $2.3 billion raised in the first half of 2023. If this trend continues, the sector is on course to close out 2024 with an estimated 106 deals, marking a 30% decline from the 153 deals recorded in 2023.

The most significant InsurTech deal in the first half of 2024 was a $32 million Series A funding round for Healthee, a healthcare tech company. This round was co-led by prominent investors such as Fin Capital, Glilot Capital Partners, Group11, and strategic partner TriNet. The investment is intended to bolster Healthee’s AI-driven platform, which aims to deliver personalised healthcare solutions and support, ultimately striving to reduce costs and improve care outcomes for both employers and employees. This deal highlights the ongoing interest in healthcare-related InsurTech solutions, even amid broader sector challenges.

California continues to be a major hub for InsurTech and FinTech innovation, leading the US with 15 deals, which accounted for 28.3% of the national total in the first half of 2024. The state also maintained its leadership in the broader FinTech sector, with 497 funding rounds capturing 31% of the market, despite a decrease from the previous year. California’s dominance underscores its critical role in shaping the financial technology industry, even as the sector faces a challenging investment environment.

UK Fintech Investment Surges Amid Global Downturn

The UK fintech sector witnessed a remarkable surge in investment during the first half of 2024, nearly tripling to $7.3 billion, according to a report by KPMG. This impressive growth comes in stark contrast to the global fintech investment landscape, which saw a decline of 17 percent, falling from $62.3 billion in the second half of 2023 to $51.9 billion in the first half of 2024. Despite the global downturn, the UK has managed to attract substantial investments, positioning itself as a dominant player in the fintech space.

One of the most significant factors contributing to the UK’s strong performance was a series of major deals that captured investor attention. Notable transactions included the $4 billion buyout of IRIS Software Group by Leonard Green, a $999 million venture capital round by Abound, and a $621 million funding raise by Monzo. These deals played a crucial role in driving the overall investment figures. However, even without these large-scale transactions, UK fintech investment still amounted to $1.8 billion, underscoring the sector’s resilience and continued appeal to investors.

In the first half of 2024, the UK recorded 198 M&A, PE, and VC fintech deals, which, although down from 284 in the same period last year, still indicates robust activity in the sector. Meanwhile, other regions, particularly the Americas, experienced a downturn. Fintech investment in the Americas decreased from $38.5 billion to $36.7 billion, with the US seeing a significant drop from $35 billion to $27.4 billion.

Hannah Dobson, KPMG UK’s head of fintech, sees potential recovery signs on the horizon. She also highlighted the expected growth in investment in AI applications within fintech and regtech sectors, as well as the upcoming EU MiCA regulation for crypto and digital assets, set to take effect in December 2024.

Chinese Tech Giants Boost AI Investment Despite U.S. Sanctions

Chinese technology companies, including Alibaba, Tencent, Baidu, and ByteDance, have significantly increased their capital expenditures on artificial intelligence infrastructure in the first half of this year, underscoring their commitment to advancing AI technologies despite ongoing U.S. sanctions.

Alibaba, Tencent, and Baidu collectively spent 50 billion yuan ($7 billion) on capital expenditures during the first six months of the year, more than double the 23 billion yuan spent in the same period last year. The investments are primarily directed toward acquiring processors and building infrastructure to support the training of large language models for both their own AI initiatives and those of other organisations.

Alibaba alone invested 23 billion yuan, marking a 123% increase from the previous year. Eddie Wu, Alibaba’s CEO, emphasised the company’s focus on meeting growing demand in the AI sector.

“We’ll continue to invest in R&D and AI capex to ensure the growth of our AI-driven cloud business,” Wu stated, noting that new servers are operating at full capacity almost immediately, promising a high return on investment in upcoming quarters. Alibaba’s cloud business revenue grew by 6% in the second quarter, with AI-related product revenues more than doubling year-on-year.

Tencent reported a 176% rise in capital expenditure to 23 billion yuan, partly attributed to investments in GPU and CPU servers to enhance its cloud services. James Mitchell, Tencent’s chief strategy officer, acknowledged increased demand for GPU rentals but noted that the scale remains smaller compared to the U.S. market due to less substantial funding among Chinese AI startups.

Baidu maintained a more measured approach, increasing its capital expenditure by 4% to 4.2 billion yuan in the same period.

ByteDance, the parent company of TikTok, has also ramped up its AI-related spending, leveraging its substantial cash reserves exceeding $50 billion.

CaixaBank

Expands

GenAI Initiative with ‘GalaxIA’ Project

Spain’s CaixaBank is significantly expanding its generative AI efforts with the launch of a new initiative, “GalaxIA,” designed to integrate and enhance AI technology across its operations. This ambitious project represents the second phase of the bank’s broader generative AI strategy, following the successful implementation of its initial “GenIAl” project, which was launched late last year. The “GenIAl” project laid the groundwork for AI-driven innovations, particularly in enhancing customer service and streamlining various banking processes.

The “GalaxIA” initiative aims to build on these successes by targeting both immediate and long-term objectives. In the short term, CaixaBank plans to leverage generative AI to further improve customer service, optimising interactions through more personalised and efficient responses. This will include the deployment of advanced AI tools in contact centres and customer service management systems, aiming to provide quicker and more accurate resolutions to customer inquiries and issues.

On a more strategic level, “GalaxIA” will focus on transforming complex business processes, such as mortgage handling and loan processing, which are traditionally time-consuming and resource-intensive. By incorporating AI into these areas, CaixaBank hopes to achieve greater efficiency, reduce processing times, and enhance overall customer satisfaction.

The project will involve over 100 experts from a wide range of disciplines, including AI, cybersecurity, cloud computing, and business operations. These professionals will be drawn from CaixaBank and its subsidiaries, including Portugal’s BPI and VidaCaixa, ensuring a broad base of expertise and collaboration across the group.

Additionally, the “GalaxIA” initiative will explore the implementation of explainable AI, a critical component aimed at improving fraud detection and ensuring that AI systems operate transparently and fairly.

By expanding its generative AI capabilities, CaixaBank is positioning itself at the forefront of technological innovation in the financial sector, with the goal of delivering enhanced services and improved operational efficiency for its customers.

BNY Mellon Fined for Swap Reporting Violations

The Commodity Futures Trading Commission (CFTC) has levied a $750,000 fine against BNY Mellon for swap reporting violations that occurred between December 2012 and at least 2018. This penalty marks a significant regulatory action against the bank, which had previously faced similar fines in 2019 for comparable infractions. The CFTC cited BNY Mellon for failing to adhere to specific sections of the Commodity Exchange Act (CEA) and CFTC regulations, underscoring the ongoing challenges financial institutions face in maintaining compliance with complex regulatory requirements.

As part of the enforcement order, BNY Mellon has been mandated to implement written policies designed to monitor communications in languages other than English, ensuring they meet regulatory standards. This measure reflects the CFTC’s broader focus on enhancing transparency and accuracy in financial reporting. The bank’s proactive self-reporting of the violations played a crucial role in reducing the penalty, demonstrating the importance of cooperation with regulators. Additionally, BNY Mellon has engaged an independent compliance consultant to bolster its internal compliance program, signalling its commitment to addressing the regulatory shortcomings. A spokesperson for the bank stated, “BNY takes its regulatory responsibilities seriously and is pleased to have resolved this matter.”

This fine is part of a broader crackdown by the CFTC on swap reporting violations within the financial industry. In a related move last September, the CFTC imposed fines totaling $53 million on major financial institutions, including Goldman Sachs, Bank of America, and JPMorgan Chase, for similar reporting errors, with Goldman Sachs receiving the largest penalty of $30 million.

The Dodd-Frank Act of 2010 requires financial firms to report all swap transactions to registered swap data repositories, a mandate that has been in place for over a decade. Despite these long standing requirements, the CFTC continues to uncover significant reporting failures across the industry.

Rakuten Bank Surpasses $74.75 Billion in Deposits

Rakuten Bank, a prominent Japan-based financial institution, has achieved a significant milestone by surpassing $74.75 billion (JPY 11 trillion) in deposits as of the end of July 2024. This impressive figure reflects the bank’s continued growth and its strong presence in the Japanese banking sector. The bank also reported having over 16 million active accounts, a clear indication of its widespread customer base and the trust it has built over the years. These accounts exclude any that have been closed, emphasising the scale of active participation among its clientele.

In a press release, Rakuten Bank highlighted several key initiatives that have contributed to this growth. Since May 2024, the bank has been offering enhanced digital services through JRE Bank, an internet banking platform specifically designed for JR East Group customers. This service is part of the bank’s strategy to provide more accessible and convenient banking experiences to its users, particularly those who are part of the JR East network.

In addition to its digital expansion, Rakuten Bank has increased the number of organisations that accept direct debit payments for public utilities, further integrating its services into the daily lives of its customers. The bank also offers the Money Bridge service, which links Rakuten Bank accounts with Rakuten Securities accounts. This service provides customers with preferential interest rates on their combined balances, making it a popular choice for those looking to optimise their financial management.

Moreover, Rakuten Bank continues to enhance customer loyalty through initiatives like the Super Point Up Program, which allows users to earn higher reward points when shopping on Rakuten Ichiba, and the Rakuten Pay app, which facilitates seamless mobile payments. These initiatives underscore Rakuten Bank’s commitment to providing comprehensive and customer-friendly banking solutions, driving its continued success in the highly competitive Japanese market.

TABBY ACQUIRES SAUDI DIGITAL WALLET TWEEQ

Shopping and financial services app Tabby has made a significant move by announcing its acquisition of Tweeq, a Saudi-based digital wallet that is licensed by the Saudi Central Bank (SAMA).

The acquisition, unveiled at Saudi Arabia’s 24 Fintech event, is currently subject to regulatory approval but marks a pivotal step in Tabby’s expansion strategy in the Middle East.

Tweeq, which was founded in 2020, has quickly established itself as a mobile-first spending account provider, offering users an innovative alternative to traditional banking services. Its platform enables customers to manage their finances more effectively, positioning it as a key player in the region’s rapidly growing fintech sector.

Following the acquisition, Tweeq will continue to operate independently, retaining its brand identity and operational autonomy. However, there is significant potential for integration into Tabby’s broader suite of financial products, which includes digital spending accounts and advanced money management tools. This integration could further enhance the financial services offered by Tabby, providing customers with a more comprehensive range of solutions for their financial needs.

This strategic acquisition aligns with the goals of Saudi Vision 2030, which aims to expand digital financial services and foster a cashless society within the Kingdom. By bringing Tweeq into its ecosystem, Tabby not only strengthens its position in the GCC region but also contributes to the broader national objective of creating a more inclusive and technologically advanced economy.

Tabby CEO Hosam Arab emphasised the strategic importance of the acquisition, noting that it would empower customers across the Gulf Cooperation Council (GCC) with access to innovative financial products.

SILICON VALLEY HIT BY PROPOSED TAX ON UNREALISED GAINS

A proposed tax on unrealised gains is causing a stir among Silicon Valley’s wealthiest investors, sparking widespread concern over its potential consequences.

This novel proposal, aimed at taxing the paper profits of affluent Americans before they are actually sold or realised, has led to significant backlash from the tech industry’s elite, who fear the measure could have far-reaching effects on financial markets and investment strategies.

The proposed tax has drawn sharp criticism from key stakeholders in Silicon Valley, who argue that it could stifle innovation and reduce the flow of capital into new ventures. Investors are particularly concerned about the possibility of a shift in investment strategies, with many considering more conservative approaches to protect their portfolios from the potential tax burden.

The uncertainty surrounding the proposal is also raising fears of increased market volatility, as investors may react defensively, leading to fluctuations in stock prices and other assets.

Beyond the immediate financial concerns, the proposed tax has sparked a broader debate about the fairness and practicality of taxing unrealised gains.

Critics argue that it could create a disincentive for long-term investments, as investors might be less willing to hold onto assets that could trigger significant tax liabilities before any actual profit is realised. This could have a chilling effect on the venture capital ecosystem, which relies heavily on patient capital to fund highrisk, high-reward startups.

Supporters of the tax, however, see it as a necessary step toward addressing income inequality. Some have argued that taxing unrealised gains could help generate significant revenue for public services and infrastructure.

PAYPAL VENTURES INVESTS IN UME TO EXPAND BNPL SERVICES

PayPal Ventures has made a strategic investment in Ume, a Brazilian fintech company that leverages the Pix payment system to offer “Buy Now, Pay Later” (BNPL) services. This investment is part of PayPal Ventures’ broader focus on international e-commerce and AIdriven companies.

Ume, which currently operates through 6,000 businesses across Brazil, has integrated its services with the Pix system, a popular domestic payments platform introduced by the Brazilian government in 2020. Since incorporating Pix in early 2023, Ume has significantly expanded its merchant base and repeat customer count. The company reports that 85% of its BNPL transactions come from returning customers.

Ian Cox, a partner at PayPal Ventures, praised Ume’s success in capitalising on Pix’s widespread adoption in Brazil, noting that the company is poised to shape the future of payments in the country.

This investment aligns with PayPal Ventures’ history of backing innovative financial technology companies. Earlier this year, PayPal Ventures contributed to a $30 million funding round for Rasa, an AI company serving various industries, and in 2021, it acquired a stake in MELI Kaszek Pioneer, a SPAC focused on fintech and e-commerce in Latin America.

Ume’s strategy aims to enhance payment flexibility for consumers while providing merchants with additional tools to attract customers. The majority of Ume’s transactions, about 80%, occur offline, with merchants paying a fee for Ume credit purchases and consumers typically incurring interest on instalment payments.

With this investment, Ume is set to further solidify its presence in the Brazilian market, offering small and medium-sized businesses (SMBs) an array of financial products to drive growth.

REVOLUT - EUROPE’S MOST VALUABLE PRIVATE TECH FIRM

Revolut, the UK-based challenger bank, has reached a $45 billion valuation, making it Europe’s most valuable private tech company.

This milestone was achieved following a secondary share sale, allowing employees to cash in on $500 million in shares acquired by investors, including Tiger Global, Coatue, and D1 Capital Partners.

CEO Nik Storonsky praised the achievement, attributing the company’s success to its employees’ hard work and innovation. “We’re delighted to provide the opportunity to our employees to realise the benefits of the company’s collective success,” Storonsky said.

The valuation leap from $33 billion in 2021 reflects Revolut’s strong financial performance, with 2023 revenues reaching $2.2 billion—a 95% increase from the previous year—and a profit of $545 million before tax. The company anticipates continued growth in 2024, projecting an 80% rise in annual revenue and aiming to expand its user base by five million to hit 50 million customers by year-end.

Revolut has also secured significant regulatory milestones, obtaining a banking licence in Mexico and a restricted UK banking licence after a three-year wait. Founded in 2015 as a digital payments app, Revolut has since diversified its offerings globally, including services like cryptocurrency trading, buy now, pay later (BNPL) credit, and more.

As Revolut’s valuation now surpasses many traditional UK high street banks, speculation grows about its potential stock market debut. While no date or location has been confirmed, reports suggest that the UK Treasury may advocate for a London listing, though Revolut could also consider New York.

As Revolut’s valuation now surpasses traditional UK high street banks, speculation grows about a potential stock market debut.

FINTECH360 AND NUVEI LAUNCH ADVANCED CASHIER SOLUTION

Fintech360 and Nuvei have announced the launch of an advanced cashier solution designed to revolutionise secure and efficient digital transactions within the forex B2B sector. This new offering aims to set new benchmarks in the industry, addressing the growing demand for robust payment processing solutions that cater to the unique needs of forex businesses. By leveraging Fintech360’s innovative technology, the solution is poised to enhance productivity and streamline operations for companies operating in the highly competitive global market.

A key feature of this solution is Fintech360’s Payment Gateway, which enables businesses to accept payments in multiple currencies, thereby providing them with a significant competitive advantage. The platform’s integration with over 250 payment providers ensures flexibility and ease of use, allowing forex businesses to cater to a diverse clientele across different regions. This is crucial in the forex industry, where fast, secure, and reliable payment processing is essential for maintaining customer trust and operational efficiency.

The Ultimate Cashier tool, another integral component of the solution, further optimises transaction processing through intelligent routing and advanced risk management protocols. This tool is particularly beneficial for forex businesses that handle high transaction volumes, as it minimises delays, reduces costs, and enhances overall security. By ensuring that transactions are processed quickly and securely, the Ultimate Cashier tool helps businesses maintain a competitive edge in the fast-paced forex market.

Nuvei, a leading global payment processing provider, has partnered with Fintech360 to bring this solution to market. The collaboration combines Nuvei’s expertise in payment processing with Fintech360’s innovative technology, ensuring that the Ultimate Cashier tool operates smoothly and reliably.

MASTERCARD LAUNCHES PAYMENT PASSKEY SERVICE PILOT IN INDIA

Mastercard is set to introduce its innovative Payment Passkey Service in India, launching a pilot program in collaboration with prominent online merchants, banks, and payment aggregators.

This new service aims to revolutionise the way online transactions are conducted by replacing traditional one-time passwords (OTPs) with more secure and efficient passkeys and tokenization methods. The initiative is designed to enhance the security of online payments while streamlining the user experience, making digital transactions faster and more convenient.

The pilot program will involve key industry players, including BigBasket, Axis Bank, Juspay, Razorpay, and PayU. Through this service, shoppers will have the option to select their Mastercard or another securely stored card during the online checkout process. Payment confirmation will be facilitated through biometric authentication methods, such as face scans, fingerprints, or PINs, ensuring that the transaction is both secure and user-friendly. Once the payment is verified, it is processed instantly, with no financial data being shared with third parties, thus maintaining a high level of privacy and security.

India was chosen as the launch market for this pilot due to its rapidly expanding payment ecosystem and advanced tokenization market, which aligns with the Reserve Bank of India’s ongoing efforts to create a more secure and resilient payment infrastructure. Mastercard’s decision to pilot this service in India reflects the country’s status as a leader in digital payment innovation.

If the pilot proves successful, Mastercard plans to expand the Payment Passkey Service to more consumers and financial institutions globally in the coming months. This initiative is part of Mastercard’s broader strategy to enhance digital payment security worldwide.

Immigrants are unsung heroes of global trade and value creation

Professor

Bedassa Tadesse

of Economics, University of Minnesota Duluth

Roger White Professor of Economics, Whittier College

In nearly every country that hosts foreign-born citizens, immigration emerges as a lightning rod for controversy. The economic realities of immigration, however, are far more complex than the negative sound bites suggest.

Far from being a burden, as critics claim, immigrants play pivotal roles in driving innovation, enhancing productivity and fostering economic growth in their adopted countries. They also elevate their adopted and origin countries’ standings in global value chains, contributing to economic resilience.

We are economists who study global trade and migration, and our recent work reveals that immigrants contribute far more to the economic fabric of nations than previously understood.

By facilitating what’s known as “trade in value added,” or TiVA, immigrants play a crucial role in helping countries specialize their production, move up the value chain and significantly enhance trade sophistication.

Moving up the value chain means progressing from producing basic, low-value goods to more complex, higher-value products. This shift involves improving skills, technology and production techniques, allowing a country to capture more economic value and develop advanced industries.

So, what exactly is trade in value added, and

why is it important?

In today’s global economy, products are rarely made entirely in one country. Instead, different stages of production occur across multiple nations. TiVA measures each country’s contribution to a final product, providing clearer insight into global value chains. For instance, while an iPhone may be assembled in China, its components come from various countries, each adding value.

MEASURING THE EFFECT ON GLOBAL VALUE CHAINS

Our study found that a 10% increase in immigrants from a particular country residing in one of the 38 Organization for Economic Cooperation and Development member states leads to a 2.08% increase in the value added from their home country that becomes embedded in their host country’s exports to the world.

This effect was strongest in the services sector, followed closely by agriculture and manufacturing.

To understand how this works, consider Indian software engineers in Silicon Valley. Their understanding of the U.S. tech industry and India’s IT sector can lead to partnerships. These partnerships lead to Indian firms providing specialized coding services for American tech giants. The result? Higher-value U.S. tech exports that incorporate Indian expertise. This

perfectly illustrates how immigrants boost trade in value added.

Or take Chinese immigrants in Italy’s fashion industry. Their cultural knowledge might help Italian luxury brands tailor products for the Chinese market and connect Italian designers with highly skilled textile workers in China. The result? Italian fashion exports incorporate Chinese craftsmanship, elevating both countries’ global fashion value chain positions.

Our findings show that immigrants are pivotal bridges in global trade networks. They leverage their unique knowledge, skills and connections to strengthen economic bonds between nations. That’s in line with previous research showing the significant role immigrants play in fostering bilateral trade.

WHY IMMIGRATION MATTERS IN THE GLOBAL ECONOMY

In an era of increasing skepticism toward globalization and migration, understanding the positive economic impacts of immigration is crucial. Our current and previous research, and the findings from related studies, indicate that rather than “stealing jobs,” immigrants often create value and new economic opportunities that might not otherwise exist.

Immigrants bring diverse skills, knowledge and networks to their host countries that can enhance innovation, fill labor shortages and

open new market opportunities. They often possess unique insights into their home country markets, helping host country firms navigate cultural nuances and business practices that might otherwise pose trade barriers.

For home countries, emigrants can serve as cultural ambassadors, creating awareness, showcasing products and services, and helping to integrate their homeland into global value chains. They may also contribute to knowledge transfer, investment flows and business connections that boost their home and host countries’ economic development.

Moreover, immigrants’ ability to enhance trade in value added suggests they play a role in moving countries up the economic value chain. Rather than simply facilitating trade in raw materials or essential manufactured goods, immigrants appear to boost trade in more sophisticated, higher-value products and services. This is crucial for economic development, as countries that position themselves higher in global value chains tend to see bigger benefits.

RETHINKING IMMIGRATION AND TRADE POLICIES

Our observations have important implications for both immigration and trade. For one, they suggest that restrictive immigration policies might have unintended consequences, hindering a country’s trade performance and position

in global value chains. Countries that want to become more economically competitive might consider more open immigration policies.

What’s more, our research indicates that immigrants’ economic benefits extend beyond the often-cited labor-market and fiscal impacts –in other words, having more workers who pay more taxes.

The evidence suggests policymakers should take a more holistic view of immigration’s economic effects, considering its role in facilitating sophisticated international trade and value creation.

Our results also align with previous research highlighting the potential value of workforce diversity for businesses, particularly for firms engaged in international trade. Employees from diverse national backgrounds can bring valuable insights and connections that help their companies navigate global markets and value chains.

It’s worth noting that immigrants’ impact on trade in value added varies across countries and sectors. This suggests that rather than one-size-fits-all approaches, targeted policies might most effectively leverage immigration for economic benefit.

Maximizing immigration’s positive impacts on trade and value chains also requires supportive policies and institutions that allow

immigrants to use their skills and networks fully. These might include programs to assist with economic integration, language training, credential recognition and support for immigrant entrepreneurship.

A NEW PERSPECTIVE ON IMMIGRATION

As the global economy continues to evolve, with value chains becoming ever more complex and interconnected, the role of immigrants as facilitators of trade and value creation is likely to grow even more significant. Countries that recognize and leverage this potential stand to gain a competitive edge in the global marketplace.

Our research paints a picture of immigrants not as economic burdens but as valuable assets who enhance their host and home countries’ positions in the global economy. By making sophisticated trade linkages possible, and by boosting participation in global value chains, immigrants contribute to economic growth and development in ways that go far beyond conventional understanding.

As debates around immigration continue, it’s crucial to move beyond simplistic narratives and recognize the complex and often subtle ways that immigrants contribute to prosperity. In an interconnected world, immigrants aren’t just crossing borders – they are helping to weave the fabric of global trade and value creation.

Lucrezia Reichlin

Lucrezia Reichlin, a former director of research at the European Central Bank, is Professor of Economics at the London Business School.

Can Central Banks Still Go Green?

At a moment when the private sector is withdrawing resources from climate funds and public finances are constrained everywhere, the idea that central banks can play a larger role should not be discarded. Monetary policymakers today are well equipped to walk and chew gum at the same time.

During the years of low inflation and zero or negative interest rates, many central banks joined the fight against climate change and started experimenting with various tools such as special loans, asset purchases, and collateral requirements biased toward “green” investments. But with the return of inflation, monetary policymakers have grown more cautious.

Presumably, they are eager to demonstrate that price stability is their primary focus, implying that when inflation is persistently above target, climate policy matters less. But a firm commitment to price stability does not require central banks to drop green-oriented monetary policies altogether. Since today’s central banks have more than one instrument at their disposal, hiking interest rates to fight inflation can, in principle, go hand in hand with targeted green policies. The question is how to do it now that central banks’ balance sheets are supposed to be shrinking.

Moreover, the return of inflation does not alter the original case for green monetary policymaking. Central banks still have two good reasons to remain committed. First, they need to account for climate change in order to manage their own portfolio risk. With regulators and supervisors asking the financial sector to do this, it is only natural that central banks should do it, too.

Public authorities have drawn up new guidelines for the private sector because they recognize that climate risks are financially significant, and that limiting exposure to fossil-fuel assets is fully consistent with traditional risk-management criteria. This is especially true for larger portfolios, and notwithstanding the recent decline in central banks’ holdings, their assets worldwide still total around $40 trillion.

The second reason is that in most countries central banks are mandated to support the general objectives of their governments in guaranteeing citizens’ welfare, as long as

doing so doesn’t interfere with price stability. Supporting the green transition therefore should figure prominently within any framework that rigorously assesses the potential trade-offs between price stability and economic policymaking.

Central to this process is the concept of “double materiality,” which holds that you should do what you can to have an impact, and not focus solely on mitigating your own financial risks. Although central banks are not in charge of industrial policy, they do have tools to allocate capital within their normal operations, and these are already in use in many countries.

When the Network for Greening the Financial System (NGFS) reviewed current policies for eight case studies in Asia and Europe, it found that most green measures were motivated by the aim of mitigating climate change, rather than risk management. For example, in 2021, the Hungarian central bank loaned Ft300 billion ($825 million) to credit institutions at 0% interest on the condition that this funding be

lent to households for the construction or purchase of new, energy-efficient residential real estate.

Similarly, in 2021, the Bank of Japan introduced a program that provides 0% interest loans to financial institutions to fund investments or loans that contribute to Japan’s climate goals.

The People’s Bank of China has also launched two targeted lending facilities to motivate financial institutions to back emissions-reduction projects; and other major central banks, including the Bank of England and the European Central Bank, have rolled out special corporate-bond purchase programs that favor stronger climate performers.

The NGFS’s findings point to an accumulation of valuable experience in green policymaking by central banks. Though there are relevant differences across these institutions, they

collectively represent a huge amount of fire power.

But won’t central banks have to shrink their balance sheets, and won’t that harm their green-related financing? Not necessarily, because with interest rates on reserves, a central bank can, in principle, increase rates to tame inflation while still maintaining a large balance sheet. The US Federal Reserve has already opted to maintain a system of ample reserves, and since its liabilities will remain large even when inflation is on target, these will have to be matched by large assets.

Under this framework, central banks that have adopted a double-materiality approach can aim for an asset portfolio that is consistent with their government’s climate and industrial policies. In making the choice between larger or smaller balance sheets, they should con-

sider the longer-run advantages of supporting green financing.

To be sure, some will object to any policy that encourages central banks to leave a large footprint in markets, or that tasks unelected officials with what looks dangerously close to an industrial policy. We have all heard the argument: “Central banks are doing too much and risking their independence.”

But climate change is the existential problem for all of humanity. At a moment when the private sector is withdrawing resources from climate funds and public finances are constrained everywhere, the idea that central banks can play a larger role should not be discarded. The devil, of course, will be in the details. Transparency and careful management of trade-offs will be crucial.

William R. Rhodes

William R. Rhodes, President of William R. Rhodes Global Advisers LLC, is Co-Chair of the Bretton Woods Committee’s Sovereign Debt Working Group, a former chairman and CEO of Citibank, and the author of Banker to the World: Leadership Lessons From the Front Lines of Global Finance (McGraw Hill, 2011).

John Lipsky

John Lipsky, Co-Chair of the Bretton Woods Committee’s Sovereign Debt Working Group, is a former first deputy managing director of the International Monetary Fund.

Meeting Global Challenges Requires Financial Innovation

The sums required to meet global challenges like mitigating climate change and strengthening financial-market stability far exceed available public funding. Attracting voluntary private investment, however, will require the development of a menu of innovative financial instruments.

No one doubts that many of the world’s biggest challenges – such as mitigating climate change, strengthening financial-market stability, and boosting economic growth in developing and emerging economies – are deeply intertwined. Multilateral cooperation will thus lead to better outcomes than uncoordinated national responses. What is less obvious is which of the many proposed approaches to addressing global challenges should be pursued.

Multilateral institutions – notably, the United Nations (including its Framework Convention on Climate Change), the International Monetary Fund, the World Bank, the World Trade Organization, the Financial Stability Board, the G20 (with its Common Framework for Debt Treatments), and the multilateral development banks – have delivered some positive results. But progress has been patchy, and even these institutions’ most ardent supporters would agree that a much more concerted effort backed by far greater resources – especially financial resources – is needed.

But how can we mobilize sufficient financing to meet the challenges we face? Given that the sums required far exceed governments’ available resources, part of the answer must be to increase private financial involvement. Attracting voluntary private investment, however, will require us to develop innovative new financial instruments.

Fortunately, the Bretton Woods Committee has already produced a series of concrete proposals – developed and published by its Working Groups, including those on the Future of Finance, on Sovereign Debt, and on Multilateral Reform – to meet this imperative. The most recent contribution is a report by the Sovereign Debt Working Group (of which we are co-chairs) on the potential of state-contingent debt instruments (SCDIs).

SCDIs rest on the idea that it is possible to create a form of debt in which the repayment burden varies according to the borrower’s means. For example, if a country that depends on exports of agricultural commodities faces weather conditions that significantly reduce the sector’s output, its ability to service its debts would be severely undermined. But, with a SCDI, its debt-service obligations would be altered according to a formula specified in the debt instrument to account for relevant climate conditions.

If executed well, this approach would sharply reduce the risk of debt restructuring or rescheduling in the case of earnings shortfalls. Crucially, SCDIs also provide additional returns to investors if outcomes are more favorable than anticipated. They can thus be an attractive instrument for both lenders and debtors, to be used in situations where the debtor’s ability to pay may be significantly influenced by exogenous factors that can be reliably measured but cannot be forecast without a meaningful margin of error.

One type of SCDI, known as value recovery instruments (VRIs), has already been used by a number of sovereign borrowers, including Greece, Mexico, Suriname, and Zambia. But if SCDIs – especially VRIs – are to fulfill their potential, their integrity, effectiveness, and marketability must be improved.

The Sovereign Debt Working Group report offers suggestions for how to do just that. For example, the report shows that the “trigger events” and formulas used for adjusting debt-service payments must be defined clearly, and they must accurately reflect changes in the debtor’s ability to pay. This means effectively capturing and measuring the cash flows that will be directly available to the sovereign at the time the debt comes due.

Moreover, payout formulas must preserve positive incentives for debt-

ors, thereby reducing the risk of moral hazard. In order to maximize the upside potential of VRIs, they should be embedded in underlying fixed-income bonds, so that the combined instrument is more liquid and more likely to be included in bond indices. And documentation must be standardized, in order to reduce both costs and risks. Standardization would promote mainstream acceptance of SCDIs, much as it has done for collective-action clauses in bond contracts.

Of course, even with an improved design, SCDIs are not a panacea. While they can help attract more private investment to efforts to address global challenges, additional solutions – especially financial innovations – will be needed. Developing a larger menu of potentially useful financial formats should be an urgent priority.

Lynn Forester de Rothschild

Lynn Forester de Rothschild, CEO of E.L. Rothschild, is Founder and CEO of the Council for Inclusive Capitalism.

How Financial Markets Can Drive Climate Action

As Western democracies grapple with rising political uncertainty, capital markets must spearhead the global fight against climate change. By engaging with high-emitting industries, rather than simply divesting from them, investors could help achieve meaningful climate progress while still delivering sufficient financial returns.

Climate change is on the ballot in November’s US presidential election. A second Donald Trump presidency could lead to an additional four billion tons of carbon dioxide emissions by 2030, erasing the progress made under President Joe Biden. Conversely, Vice President Kamala Harris, the presumptive Democratic nominee, established a record of being tough on polluters during her tenure as California’s attorney general.

Meanwhile, Europe’s rightward shift and complicated coalition politics are slowing global climate action. As Western democracies grapple with rising political uncertainty, it may be up to capital markets to save the planet.

Alas, our financial system is caught in a classic prisoner’s dilemma: it is costly for any single institution to decarbonize on its own while others continue to profit from carbon-intensive portfolios. But if all asset owners and managers committed to reducing CO2 emissions and supporting a just climate transition that pro-

tects workers, communities, and consumers, they could create long-term value and deliver prosperity for all.

The inconvenient truth is that without robust climate policies – such as carbon pricing and elimination of fossil-fuel subsidies to reallocate capital toward clean energy – there is little incentive for collective action. In a world where it pays to pollute, investors will be tempted to support companies with unsustainable practices, shifting the burden of the energy transition to others and ultimately leaving everyone worse off.

Contrary to activists’ hopes, climate action is not necessarily a win for everyone. A once-in-a-generation transition carries financial and political risks, as well as opportunities, creating winners and losers throughout the investment value chain. The question, then, is whether major asset owners and managers can steer markets toward achieving climate goals and generate sufficient financial returns.

The answer is yes, but achieving this requires three major strategic shifts. First, investors must engage with high-emitting companies rather than simply divesting from them. Divestment campaigns often trigger partisan efforts to protect the fossil-fuel industry, whereas engaging with high-emitting companies and tracking their progress offers tangible climate benefits beyond portfolio decarbonization.

In a 2023 study, for example, economists Kelly Shue and Samuel Hartzmark analyzed nearly two decades of emissions data from more than 3,000 companies, finding that high-emitting “brown” companies produce, on average, 261 times the emissions of climate-friendly “green” firms. This suggests that a 1% reduction in the emissions of an oil or gas company has a far greater environmental impact than a tech company or a bank achieving net-zero emissions. As geopolitical tensions rise and national fossil-fuel production becomes increasingly vital for energy security and affordability, policymakers should keep these findings in mind.

Second, investors must actively seek emissions reductions instead of passively investing in low-carbon industries. As recent years have shown, exchange-traded funds focused on environmental, social, and governance investments not only underperform the market but also fail to accelerate climate action.

Moreover, it has become abundantly clear that Big Tech companies like Meta (Facebook), Apple, Amazon, Netflix, and Alphabet (Google) tend to dominate sustainable equity funds. Although these funds may seem environmentally friendly at first glance, research shows that by directing capital away from high-emitting companies, they have inadvertently deprived critical sectors of the resources they need to invest in the clean-energy transition.

By contrast, active funds that focus on encouraging carbon-intensive companies to decarbonize can drive climate action by channeling investments into sectors like renewable energy and waste management. A prime example of this approach is the $100 Billion Climate Action Plan launched by the California Public Employees’ Retirement System, which aims to improve cement production and retrofit fossil-fuel facilities.

Importantly, there is little evidence that merely decarbonizing a portfolio translates into reduced greenhouse-gas emissions.

To support the clean-energy transition, institutional investors must engage with both high- and low-emitting industries, incentivizing carbon-intensive companies to provide emissions disclosures to mitigate the negative impact of high emissions on their stock-market valuations. Given that the shift to a low-carbon economy requires significant long-term investment, institutional investors could also direct capital toward emerging technologies such as sustainable aviation and safe nuclear energy.

Lastly, investors must seize the unique market opportunities created by weak national climate policies. According to the International Energy Agency, clean-energy investments will exceed $2 trillion in 2024 – roughly twice the amount invested in fossil fuels.

To be sure, a second Trump administration could jeopardize the Biden administration’s landmark Inflation Reduction Act. But a slowdown in green investment is not inevitable, given that the IRA’s incentives – including $369 billion in tax breaks and subsidies for clean energy – have won support from voters, investors, companies, state and local officials, and even some Republican lawmakers. The IRA’s impact – catalyzing $240 billion in clean-energy investments in its first year –cannot be ignored.

While green investments enable institutional

investors to navigate domestic volatility, contribute to the fight against climate change, and generate returns, today’s unregulated carbon markets might give the impression that companies are prioritizing carbon offsets over meaningful decarbonization that benefits local communities. Initiatives led by climate and finance experts, such as the Integrity Council for the Voluntary Carbon Market, could thus play a pivotal role in setting standards for carbon credits and maintaining market integrity, helping to scale this essential climate-financing tool.

Regardless of the political climate, 2024 is set to surpass 2023 as the hottest year on record. In an economy that values financial returns above all else, it is natural for individual companies to focus on profits. But focusing exclusively on generating returns overlooks the catastrophic impact of increasingly frequent extreme weather events like hurricanes, floods, and wildfires.

As climate-related disruptions intensify, large institutional investors are uniquely positioned to lead the green transition while still delivering financial returns, thus bringing us closer to meeting the emissions targets set by the 2015 Paris climate agreement. Now is the time for markets to rise to the occasion and help us win the defining fight of our time.

Have the Paris Olympics cracked the code of the circular economy?

Anna Gerke Associate Professor in Management, Audencia

As the planet faces ever more pressing environmental challenges including fast dwindling natural resources, the idea of a circular economy is often put forward as a promising alternative.

Sport organisations are no strangers to this trend. In France, a number of them are working hard to slash their events’ carbon footprints. Ecotrail, for example, which organises annual running contests in the suburbs of Paris, gifts public transport tickets to the start line to all its participants and covers the train journeys of its runners. However, the circularity of mega sport events is still a work in progress.

A leader in this field, the Paris 2024 Organising Committee has set out to halve the greenhouse gas emissions released by the Rio 2016 or London 2012 Games, estimated at an average 3.5 million tonnes of CO2 equivalent

(Mt CO2 eq). It is the first Olympics organisation committee to have appointed a Circular Economy Officer.

But what is the circular economy in the first place? The concept can be boiled down to three key principles:

1) Using fewer resources by prioritising existing ones 2) Making better use of these resources by promoting regenerative design 3) Relying entirely on renewable resources and eliminating the use of virgin resources

THE CIRCULAR ECONOMY’S TEN COMMITMENTS

In November 2023, the Paris 2024 Organising Committee published ten commitments on how to make the circular economy happen:

Buildings - 95% of temporary infrastructure for

Games venues - 100% second life for temporary structures and infrastructure

Furniture - 100% second life for venue furniture - 90% of marketing and signage products reused or recycled

Equipment - 100% of contracts incorporating plans for equipments’ second life - At least 60% of sports, technological and safety equipment leased

Catering - 50% less single-use plastic in the consumption phase in catering - 80% of consumer waste avoided or recovered during the Games

Olympics merchandise - 15% of licensed products manufactured in France - 15% of licensed products made from organic or recycled materials

Most of these commitments correspond to the first principle of prioritising existing resources over new ones. As for the section on furniture, we can note that the committee has also already made headway with its repurposing goal. Hence in March, months before its first use as part of the Olympics, some of the 62 400 office chairs, desks and shelves, were already up for pre-sale for the period following the games. Other concrete announcements have been made to honour the commitment to ensuring a second life to infrastructure, such as the news that the new aquatic centre in Seine Saint Denis would now serve school chidren’s swimming classes.

WHAT THE CHARTER DOESN’T MENTION

However, the strategy fails to mention energy sources or any of the energy-related emissions necessary to make the Paris Olympic Games happen. Only little attention is paid to alternative consumption models such as rental, leasing and sharing. For example, 60% of the sports, technological and security equipment is leased.

Local production is favoured but only to a very low extent as only 15% of licensed products are made in France and use organic or recycled materials. This is a rather poor result with

the perspective of small and local productions and consumption circuits as further feature of the circular economy.

In March 2024, Paris 2024 make a first attempt of taking stock of the impacts of the circular strategy. Thanks to the application of a responsible purchasing strategy “90% of six million resource elements used will be (re)deployed”.

Overall, heads up to the Paris 2024 organising committee, there is a real, serious and respectable effort to make the Olympic Games more circular, but the ball is already over to Los Angeles to make the Games truly circular.

Cultural differences impede trade for most countries — but not China

It’s a widely accepted notion among economists that cultural differences can pose a significant barrier to trade. The larger the cultural gap between two countries – judging by differences in language, customs, values and business norms – the more challenging and costly trade relations become. This is a recurring theme in research.

BUT THERE’S ONE BIG EXCEPTION TO THE RULE: CHINA.

As an applied economist with a keen interest in how culture influences trade, I’ve conducted several studies of the dynamic. In one such effort, two colleagues and I meticulously analysed China’s trade relationships with nearly 90 countries over 16 years.

Our research uncovered a distinctive pattern: Unlike many other nations, cultural differences rarely influence the scale of China’s trade activities.

BRIDGING CULTURAL GAPS: STRATEGIES AND SUCCESSES

Countries have various tools to minimize the effects of cultural differences on their trade. Cultural exchange programs, bilateral trade agreements and international trade shows have shown remarkable success in fostering mutual understanding, easing trade negotiations and overcoming cultural barriers.

HOWEVER, THESE OPTIONS ARE AVAILABLE TO ALL COUNTRIES. WHAT MAKES CHINA UNIQUE?

I suspect that China’s national trading strategy, involving state-backed export industries and substantial global infrastructure investment, is a big part of the answer.

By aligning itself with the economic development needs of its trading partners, China has been able to minimise the negative effects of cultural differences on its trade. It’s a strategy

that has proved to be remarkably effective.

A closer examination of China’s trade ventures in Africa, the Middle East and Latin America — all regions with significant cultural differences from China — paints a vivid picture of this observation.

Despite its cultural differences with nations on the African continent, each with its own unique traditions, languages and customs, China has built a multibillion-dollar trade network in the region that spans industries from mining to telecom. China’s engagement in Africa is facilitated by a combination of local infrastructure investment, affordable technology provision and favorable loan terms. These partnerships are more about creating symbiotic relationships and less about efficiency. This facilitates market access and helps China to overcome cultural barriers.

In the Middle East, too, China has made significant inroads by aligning itself with the region’s

Bedassa Tadesse Professor of Economics, University of Minnesota Duluth

development goals, such as those outlined in Saudi Arabia’s Vision 2030 and the United Arab Emirates’ Centennial 2071. China’s Belt and Road Initiative complements these longterm development plans, offering the capital investment and construction expertise needed to bring ambitious infrastructure projects to life.

China’s presence in Latin America has also grown substantially over the past decade. Despite the geographical and cultural distance, China has become one of the top trade partners for countries such as Brazil, Chile and Peru. This relationship is built on reciprocity: Latin American countries supply raw materials and agricultural products in exchange for Chinese investment in the infrastructure and manufacturing sectors.

Again, this is a strategy that hinges on pragmatic economic interactions focused on mutual benefits and development goals.

THE NEED FOR STRATEGIC ADAPTABILITY

Some might argue that trading with China is an obvious choice due to its size and influence. The economic incentives include access to China’s population of over 1.4 billion and its

significant role in global value chains, especially in electronics, textiles and machinery. As China’s influence in global markets grows, U.S. companies also face competitive pressures to maintain their market positions.

However, China’s trade practices, frequently entangled with governmental intervention, potentially undermine market efficiency — an established economic objective — in numerous ways.

In international trade, market efficiency refers to the extent to which prices in the global market reflect all available information, allowing resources to be allocated optimally across countries.

China has been known to require foreign companies to transfer technology to local firms as a condition for market access. This practice may distort market efficiency by forcing companies to share proprietary technology rather than compete on a level playing field.

Intellectual property theft and insufficient protection of intellectual property rights in China have also been major concerns for Western companies. The lack of robust intellectual property enforcement can lead to inefficiencies, as it discourages innovation

and investment by foreign firms who fear their inventions and technologies may be copied without adequate legal recourse.

Western companies also face various market-access barriers in China, such as joint venture requirements, limits on foreign ownership and regulatory hurdles. These barriers can prevent the efficient allocation of resources and limit competition and innovation, resulting in a less efficient market overall.

DESPITE THESE CONCERNS, WESTERN FIRMS CONTINUE TO DO BUSINESS WITH CHINA.

China’s adeptness in transcending cultural barriers, combined with Western firms’ continued engagement, pose a significant challenge for Western economies, notably the United States’. The challenge is heightened as the U.S. maintains a focus on traditional efficiency approaches in forging trade relationships across diverse regions such as Africa, Latin America and the Middle East.

Since traditional market efficiency approaches might not always suffice, Western economies may need to reconsider their strategies.

How protectionism can help developing countries unlock their economic potential

State intervention has made a comeback. States have, in one way or another, always intervened in markets to develop specific industries and push innovation. But there has been a renaissance since the 2010s, in particular with respect to industrial and trade policy.

There are many reasons for this. The fallout from the global financial crisis in 2007–08, increasing geopolitical tensions, and efforts to strengthen domestic manufacturing in the wake of supply chain disruptions are a few of the leading factors.

Alongside the comeback of state intervention, experts are chiming in on what state-led growth strategies should look like. They highlight different things, but one piece of advice is recurring: these strategies need to incentivise exports and shy away from protectionism.

Governments are right to focus on exports. But the story about protectionism is more complicated. In fact, in most cases of successful industrial and trade policy, a push for exports has been combined with elements of protectionism.

South Korea and Taiwan are good examples. These countries transformed their economies from low-income to high-income at lightning speed, needing only 30 years to do so (from roughly 1960 to 1990).

They achieved this feat through meticulously crafted policies, and export-orientation was a key feature. In a speech in 1965, the South Korean president, Park Chung-hee, called exports “the economic lifeline” of the country. But protectionism was equally important.

Emergency tariffs were often imposed on items with excessively high import growth. In addition to this relatively visible measure, a

range of “covert” protectionist measures were used. For example, a number of special laws on most imports almost invariably meant that import permission had to be obtained from a public agency.

An array of taxes not specified as tariffs were also often imposed when attempts were made to import non-essential items such as golf clubs, whisky and French wine. They were frequently labelled as an education tax, a defence tax, or simply a “special” tax.

In Taiwan, protectionist policies featured more explicitly than in South Korea. In the mid-1970s, almost half of the items in the tariff schedule still carried import tax rates of over 40%.

And, like in South Korea, Taiwan applied a range of non-tariff barriers. These included the tying of import licences to export performance, restrictions on which countries imports could come from and who could import them, and

Jostein Hauge Assistant Professor in Development Studies, University of Cambridge

“approval” mechanisms for import control.

The latter essentially meant that, for firms wishing to import certain products, a reference check had to be made to make sure that domestic suppliers could not meet the would-be importer on price, quality and delivery.

A PATH WELL LIT

By using protectionist measures to avoid excessive import growth and shield domestic firms from competition, South Korea and Taiwan were not doing something supremely novel.

In fact, the most protectionist country throughout history is the US. It had the world’s highest average tariff rates on imported manufactures throughout the 1800s, a period that saw the country transform into a global economic powerhouse.

China in the 1990s and 2000s is another prime example of incorporating protectionism into the design of industrial and trade policy. However, it was a form of protectionism that looked slightly different.

China relied heavily on attracting foreign investment into manufacturing, which was done strategically by nudging multinationals to form joint ventures with Chinese state-owned enterprises. This increased the probability of technology transfer and, in time, of replacing

imported products with those produced in China.

Overall, China’s state-led industrialisation strategy has been hugely successful. Practically all manufactured products today can somehow be traced to a production process in China, and the country dominates many global industries.

While protectionism may be essential to successful economic development, a few issues still need to be addressed.

First, protectionist measures like tariffs have no guarantee of being successful. The 1950s and 1960s, for example, saw governments across Africa and Latin America protect domestic firms from outside competition. The intention was to develop a domestic industrial base, but the firms largely failed to become competitive on the world market.

That said, export subsidies (and state intervention more broadly) have no guarantee of working either. Does this mean we should ditch all state intervention? Of course it doesn’t. All state intervention — including protectionism — can fail, but without any state intervention failure is a guarantee.

One way to think about the practice of industrial and trade policy is that it’s like venture capital: all policies should be evaluated like a portfolio, within which a small number of suc-

cessful bets will pay for all the failures.

Second, can all countries be protectionist at the same time? Probably not, and this is why people worry about trade wars. In fact, we are seeing this unfold at the moment between China and the US.

In a world where nation states can retaliate against one another with things like tariffs, and as long as economic competition between firms and nation states remains a central part of how the global economy is organised, the playing field for economic competition needs to be made level.

Right now, it isn’t level. It vastly favours the wealthiest and most powerful countries, and the multinational corporations based within them.

This is why, in international trade agreements, lower-income countries should be allowed more space in their design of economic development policy — including, but not limited to, protectionist policies.

Simply put, countries that are lagging technologically should be granted a larger policy toolbox. This would give lower-income countries a better chance of catching up with high-income countries. And if we are to take one lesson from economic history in this respect, it’s that protectionist policies have been vital for catching up.

South Africa’s competition law has special conditions for company mergers: do they benefit society or hinder business?

Competition is a good thing. This is the common thread through global competition law, which aims to prevent monopolies –when one firm dominates a sector.

For instance, if the two most prominent companies in an industry want to merge, a country’s competition authority would likely block the merger. This would be on the grounds that the new entity would reduce competition. Such dominance wouldn’t be good for consumers, as competition usually drives down prices and is good for product quality.

South Africa’s competition law follows the same principles. But it has another unique

set of conditions too. South African law says that public interest should also be considered in company mergers or acquisitions. Mergers must consider the impact on employment, small and medium businesses, and ownership by historically disadvantaged persons (those who were discriminated against before 1994).

South Africa is not the only country whose competition policy includes public interest conditions. But it’s the only one which specifically includes this in the aims of the law: the Competition Act of 1998. The public interest conditions have been part of merger reviews for the last two decades.

They are a way of dealing with South Africa’s socio-economic challenges: high levels of pov-

erty, unemployment and inequality.

But the implementation of public interest objectives has had its critics. Business leaders and politicians, among others, have voiced concerns that the use of these conditions in merger transactions will deter investment in South Africa.

In one of the first published studies on the topic in South Africa, we analysed the application of public interest conditions in merger decisions since 2010.

Our research investigated the frequency of the competition authorities – the Competition Commission and the Competition Tribunal –applying these conditions in 221 merger cases

Anton van Wyki Senior Lecturer in Economics, North-West University

Anmar Pretorius Professor of Economics, North-West University

Derick Blaauw School of Economic Sciences, North-West University

between 2010 and 2019. This aspect of South Africa’s competition law framework has not been well researched. So our study, which used descriptive statistics and regression analysis, contributes to the understanding of the use of non-competition goals in adjudicating mergers and acquisitions.

Our results indicate that the competition authorities focused on employment, supplier development fund programmes and black economic empowerment conditions when considering merger cases.

We also found that public interest conditions were indeed used more often and more extensively as time went by. Statistical evidence confirms a potential change in the practical application of public interest conditions in merger decisions since 2015.

PUBLIC INTEREST CONDITIONS IN SOUTH AFRICAN MERGER CASES (20102019)

In most merger cases approved by the competition authority, the newly formed entity was not allowed to lay off any employees for a certain period after the merger. This condition was probably imposed because of South Africa’s high unemployment rate – currently 32.9% – and low economic growth.

More recently, further conditions were also used more often. One was to promote ownership by previously disadvantaged persons. This led to the merged entity providing employees with shares in the company through an employee share ownership programme.

We found that black economic empowerment, employment and supplier development fund conditions were imposed more often in cases where the value of the acquiring firm’s assets was high. This is probably because these companies have the financial capacity to help ease unemployment and assist smaller businesses.

In mining sector mergers, the probability of

public interest conditions being imposed was high. The reason for this could be the large number of South African workers – 477,000 –employed by the mining sector.

If the merger increased the profits of the target firm, the probability of conditions being imposed also rose. This was true for conditions such as employment, supplier development fund programmes, black economic empowerment and conditions specific to the industrial sector or regional economy.

Authorities assess the impact of the proposed merger on the whole sector’s value chain and on the geographic region and location of the entity.

If, for instance, one party to a merger is the main employer or provider of a specific product or service in a specific area, public interest conditions would differ from those where there are multiple potential employers or suppliers.

Some empirical evidence points towards a focus on employment, supplier development funds and industrial sector or region conditions in merger cases in the manufacturing sector.

Lastly, we observed a tendency to impose conditions when the acquiring firm was not a local firm.

We conclude that South Africa’s use of public interest conditions is warranted because of the country’s circumstances, including high unemployment and the racially skewed nature of economic ownership. However, it must be done coherently. It must consider each merger case’s specifics. And it must not cause an undue increase in the costs of mergers and acquisitions. These include transaction and opportunity costs.

WHERE TO FROM HERE?

The appropriate application of these public interest conditions can lead to positive out-

comes. The effective enforcement of all these conditions, especially of black economic empowerment and employment, can assist to reduce unemployment and get the country back on track to positive growth.

Supplier development fund programmes can create opportunities for small, medium and micro enterprises in South Africa to elevate their businesses and expand with the assistance of the larger corporations. We believe that these conditions can potentially benefit all in South Africa, but they need to be applied in a coherent and case sensitive manner to be truly in the public interest.

However, business leaders and politicians, among others, are increasingly voicing concerns over the inclusion of public interest conditions as part of merger transactions.

In one application of public interest conditions, a proposed merger involving Burger King was initially prohibited on public interest grounds – the first one ever in South Africa. In the run up to the 2024 elections the official opposition, the Democratic Alliance, called for public interest conditions to be repealed from the Competition Act.

For businesses involved in this process, the time delay in approving merger transactions leads to increased costs, as confirmed in media reports. It also adds to uncertainty about what to expect from the decision makers. In the case of international mergers, the process in South Africa is much more lengthy and completely different from experiences elsewhere.

At a time when big companies with long standing commitments in South Africa are leaving (such as Shell, GM Motors and BNP Paribas), the country’s way of assessing merger proposals could discourage potential investment. It’s questionable whether that would be in the public interest.

The leading alternative to GDP is languishing over a technical disagreement – with grave potential consequences

Many commentators believe that the world should move away from measuring economic success in terms of GDP growth. Yes, growth has brought prosperity and untold riches, but it has had significant negative side effects for the planet, including climate change, pollution and species extinction. None of these are captured in GDP data.

A whole “beyond GDP” movement has emerged over the last several decades, arguing that we should adopt a new way of measuring the wealth of nations. There is an ongoing debate about the best alternative, and many indicators have supporters, such as gross national happiness and the genuine progress indicator.

Yet one stands out as having by far the most buy-in from major international institutions. Known as “inclusive wealth”, it expands what we mean by wealth to include things like the natural environment and the abilities of the population.

But it comes with a major problem. There’s no agreement around how it should be measured, so different institutions publish very different figures. In our view, this is a major obstacle to its mass adoption.

INCLUSIVE WEALTH

Inclusive wealth ascribes a value to the assets a nation has produced that generate well-being, and measures how they are changing over time. These assets are:

Human capital: the knowledge and skills of the population.

Produced capital: goods and services produced by human endeavour.

Natural capital: the sum of all nature-based assets from which humans derive well-being, both now and in the future.

Social capital: the social networks that exist within a society.

There is strong theoretical support for the idea that this approach is a good way of measuring the sustainability of economic development. The key point is that when inclusive wealth per capita is going up, the future wellbeing of the population will go up, which is a necessary

Eoin McLaughlin Professor in Economics, University College Cork

Cristián Ducoing Senior lecturer at Sustainability transformations over time and space, Lund University

Nicholas Hanley Chair in Environmental and One Health Economics, University of Glasgow

condition for sustainable development.

Foundational texts in support of inclusive wealth include Cambridge economist Partha Dasgupta’s 2001 book, Human Well-Being and the Environment, and his Harvard counterpart Martin Weitzman’s 2003 book, Income, Wealth and the Maximum Principle.

Dasgupta carried out a review for the UK government in 2021 into the economics of biodiversity, which similarly advocates for measuring national inclusive wealth instead of national income. There have also been recent calls by academics in this field to use inclusive wealth to help with the global biodiversity framework, a UN-led drive to be “living in harmony with nature” by 2050.

Inclusive wealth is measured by both the World Bank and UN Environment Programme (Unep). The World Bank has been measuring it since the late 1990s, and first published global estimates in a 2006 report called Where is the wealth of nations : measuring capital for the 21st century. It has since published three major updates to this report, including a major revision to the methodology, with another on the way. As for Unep, it began measuring inclusive wealth in 2012.

But there are still some kinks that need ironing out before this indicator can be of any practical use. In a new paper in Ecological Economics, we compare the approaches of the World Bank and Unep and find a big divergence in their calculations.

This may explain why inclusive wealth has yet

to be adopted in any serious way by any major economies (all we’ve seen so far is some mentions in policy documents, like this one from New Zealand, and a recent decision by the Biden-Harris administration to start tracking the value of US natural resources at federal level using natural-capital accounting).

The discrepancies relate mainly to natural capital. Both Unep and the World Bank include similar if not identical data from the same components: non-renewables such as fossil fuels and minerals, and renewable elements such as fisheries and forest resources. The problem is that the institutions’ research teams value them differently.

The World Bank approach comes up with a present value for expected future earnings by discounting from what they will eventually be worth. In contrast, Unep uses fixed accounting prices, referred to as “shadow prices”, which are based on market prices today.

This leads to different conclusions about the trajectory of our natural capital, and thus, by implication, of the sustainability of current development paths. This is then exacerbated by another discrepancy around how the institutions measure changes in human capital.

COUNTRY DIFFERENCES

In our paper, we highlight the case of Qatar. According to Unep, it is one of the worst performers in terms of the change in inclusive wealth per capita, and so is judged unsustainable. Yet according to World Bank estimates, Qatar’s inclusive wealth per capita is growing

positively.

Which is it? If development is unsustainable, some remedial action will be necessary, but if it is sustainable, no problem. How is the Qatari government to decide how to proceed?

We find similar conflicting signals for many other countries. According to the World Bank data, 20 countries’ inclusive wealth per capita is in decline (in other words, unsustainable), while the Unep data has 45 countries in decline. There is also little crossover in terms of these two lists.

As many as 34 of the countries that the World Bank says have growing inclusive wealth per capita are in decline according to Unep.

We agree strongly with the basic proposition that measuring inclusive wealth is key to ensuring the world develops sustainably. But there needs to be a more consistent approach for this signal to achieve enough credibility to be widely adopted. In our experience, the World Bank is much more transparent than Unep about the data in its calculations. Without full Unep transparency, it’s difficult to get to the root of the discrepancy.

Having said that, both broad approaches have merits, so it’s more a question of everyone committing to a single approach than arguing that one is better than the other. Unless this measurement problem can be resolved, it’s difficult to see countries taking inclusive wealth seriously. That could have serious consequences in the battle to make economic development sustainable.

Japan stock meltdown: why it rattled the crypto market

Larisa Yarovaya Director of the Centre for Digital Finance, Associate Professor in Finance, University of Southampton

Japan’s stock market plunged 12% on Monday, August 5 – its worst day in 37 years. The severity of the fall triggered losses in stock markets around the world. In the US, for example, the Nasdaq index dropped more than 6%, while the S&P 500 dipped by 4.25%.

Markets have since rebounded slightly. The Nasdaq climbed 1.5% on Tuesday, while Japan’s Nikkei 225 closed 10.2% higher than at the start of the day. But there may still be bumpy weeks ahead.

A key reason for these bearish markets is fear of a slowdown in the US economy. US job market data published on August 2 reported the highest unemployment rate since October 2021 alongside weaker than expected job growth. This has caused pessimism to spread among investors about an impending recession in the world’s biggest economy.

The chairman of the US Federal Reserve, Jerome Powell, has suggested that an interest rate cut can be expected in September. Lower interest rates typically mean cheaper borrowing and should boost economic growth.

However, July’s cooling of the US job market has led to speculation that the Fed has waited too long to act. The central banks of other developed economies, such as the Bank of England and the European Central Bank, have already cut interest rates.

Shares of tech companies, both in the US and elsewhere, were also down. And cryptocurrency markets went into decline as well. The price of crypto market leader, Bitcoin, dipped below US$50,000 (£39,000) after trading close to a record US$70,000 just one week ago.

Other crypto tokens, such as Solana and Dogecoin, also experienced a drop of up to 30% in price over the same period.

This cryptocurrency sell-off has been largely attributed to the same fears of a US recession that caused the stock market to briefly crash. However, from a financial perspective, this contagion effect is particularly interesting.

Cryptocurrency was designed to be independent from any centralised authority. It was intended to offer an alternative form of money and an

investment asset immune to the flaws of the traditional financial system.

This was true to some extent before 2017, during the early days of crypto adoption. According to research published in 2018, cryptocurrency markets were relatively isolated and “decoupled” from traditional markets.

However, cryptocurrencies have over time become more integrated into the financial system and are no longer immune to volatility spillovers from non-crypto markets.

Separate research has analysed Bitcoin’s response to US interest rate announcements and found that the intensity of the response to monetary policy news depends on the type of digital asset.

Cryptocurrencies that are closely related to “currency” in their function, such as Bitcoin, should respond strongly to the Fed’s announcements. These cryptocurrencies are used heavily for financial transactions and, therefore, are likely to be sensitive to changes in consumer demand and the overall economic environment. Both of these factors are influenced by monetary policy.

On the other hand, so-called crypto protocols like Ethereum primarily serve as platforms upon which a variety of crypto products can be built, such as non-fungible tokens (NFTs). In theory, a protocol’s price should have a slower and less severe response to monetary policy announcements compared to “pure” cryptocurrencies.

However, crypto assets across all categories have experienced a unified downfall over the past week. The price of Ethereum, for example, fell to its lowest point of 2024 on August 5, showing that financial panic can transmit quickly and efficiently across all markets. Crypto’s popular

appeal of decentralisation and independence from traditional finance simply does not hold.

The value of a cryptocurrency is also largely driven by investor sentiment, with news and social media announcements playing a crucial role in shaping this. So, it’s possible that cryptocurrencies respond even more severely to such shocks than stock markets themselves.

WILL CRYPTO MARKETS BOUNCE BACK?

Crypto assets are volatile, which makes them appealing to some investors who embrace risk. Current prices may be low, but crypto investors are accustomed to volatility and, as with every dip, are evaluating whether now is a good time to buy.

The problem is that technical analysis — interpreting up and down price trends — is often highly inaccurate in any market. And prices may still have room to fall further given that cryptocurrencies have only dipped below their all-time highs.

Early academic research on cryptocurrency bubbles concluded that, as crypto has no fundamental value, Bitcoin’s true price is zero. This idea may seem far-fetched today. But a complete collapse in value remains a plausible scenario in the future for many crypto tokens.

Any new information, such as interest rate announcements, political events like the US election, or the further adoption of crypto assets by institutional investors, can rapidly alter the direction of crypto prices.

A carry crash also kicked off the global financial crisis 17 years ago — here’s why it’s unlikely to get as bad this time

Many casual readers of the financial press will have learned a new term in the past few days: the “carry trade”. This is the culprit for the rollercoaster state of markets, many market commentators and journalists have opined.

Indeed it also played a role in kicking off the credit crunch and resulting global financial crisis in 2007-08. Should we fear a repeat? The answer this time is both yes and no.

The current rumpus started on Friday August 2 when markets in America dropped in response to worse-than-expected data on the number of new jobs created in July. Then Japanese stocks took a bigger battering on Monday, posting the biggest ever one-day drop in the Nikkei, the country’s main share index. Since then, markets have gyrated up and

down as traders and investors attempt to understand what is going on.

So why has the carry trade got the blame? First, a quick explanation of how it works. The carry trade is a financial strategy used by professional investors and also amateurs in the currency market to make money from differences between interest rates in different countries. Investors borrow money in a currency with a low interest-rate and invest it in a currency with a higher interest rate to make a profit.

Investors had been going to town with this strategy in recent years, borrowing cheaply in Japan in yen, where interest rates are still low (0.25%), and investing in place where rates are higher, such as the United States (5.25%-5.5%) and Mexico (10.75%). Researchers at Swiss bank UBS estimate that since 2011, more than US$500 billion (£392 billion) in US dollar-yen carry trades have taken place.

Charles Read Fellow in Economics and History at Corpus Christi College, University of Cambridge

It is possible to make a huge amount of money steadily from these interest-rate differentials on borrowed money, without putting any of your own capital at risk up front. But it is rather like collecting a line of pennies in front of an approaching steamroller: from time to time, carry crashes occur as currencies or interest rates move in a way that makes the trade unprofitable.

At this point, capital flows stop. The asset bubbles, which had been inflated in value by these cross-border flows, then pop. This spreads contagion around the financial system and affects the availability of credit for those in the trade: once even minor losses start to mount up, lenders begin to demand that these investors pony up more cash to cover their potential losses.

This process took off in the past few days and is one explanation being given for why Japanese investors dumped their country’s shares so rapidly, taking the entire world stock-market with them.

CARRY TRADES AND FINANCIAL CRISES

Financial history supports the idea that we should be worried about these carry crashes. My latest book about the history of financial crises, Calming the Storms: the Carry Trade, the Banking School and British

The yen-dollar carry trade also played a role in triggering the global financial crisis of 2007-08. In 2009 a paper by economists at the Bank for International Settlements, a global network of central banks, found that the withdrawal of yen funding from America by carry traders coincided with the start of the credit crunch in August 2007, in which lending suddenly became unavailable across the financial system.

This contributed towards falling asset prices for assets such as collateralised debt obligations (CDOs), which are bundles of debt that were sold on by lenders into the market. These had previously attracted investment by carry traders, but this dried up and generally contributed to a lack of funds for banks to finance themselves with. This continued into the latter half of 2007 and into 2008 as the credit crunch developed into a full-blown financial crisis.

But while we should be worried about the carry trade, a softer landing is likelier than 2007-08. The narrowing of the difference in interest rates between Japan and America has been slight in recent days. The previous gap of more than 5% has only narrowed by 0.15%. It is only when interest rates between countries converge more closely that you should really panic.

In any case, in retrospect, the current market meltdown looks like it was triggered more by the poor American jobs data than Japan’s decision to slightly raise official interest rates. And those jobs numbers showed a mixed picture rather than being unremittingly terrible. It is far from certain that the US is heading into recession, implying that investors may have sold down stocks more than is warranted.

The events of the past week should be seen as yet another one of the market blowups that have occurred as a result of interest rates across the world rising rapidly in 2022 and 2023, a source of financial fragility. These include the panic triggered by Liz Truss’s mini-budget in Britain in September 2022 and the failure of Silicon Valley Bank in America in March 2023.

More ructions are likely, though hopefully none the size of the 2008 financial crisis. If you’re involved in financial markets, either as investor or investee, the wild ride is not over yet.

Financial Crises Since 1825, shows how they have been involved with every major banking crisis in Britain over the past 200 years.

Why we choose to be better, not necessarily bigger

Stephan Hartzenberg, Managing Director at PIM Capital, which was recently named Best Fund Administration Service in Mauritius, outlines why best is better than most

Being named Best Fund Administration Service in Mauritius came as a surprise to us at PIM Capital because we operate in an industry where being the best tends to be measured by different metrics, such as the biggest and the most. These are the metrics of the shareholder model, where the value proposition is focused on the shareholder and their prospect of enterprise value or dividends. PIM Capital is unashamedly designed around stakeholders. We do not work for shareholders. We work to generate value for our clients, our colleagues, our suppliers and all the other members of the communities we work and live in.

When it comes to being the biggest, our business philosophy can undermine our chances of climbing the league table. We have gone as far as exiting relationships with clients with whom we were not aligned. If we are not able to provide excellent service at a price that recognises the value created our business philosophy requires that we decline the work or exit the relationship.

Being selective about who we work with is one of the great benefits of a stakeholder model, rather than the more common pure shareholder model.

When Shane Peters founded the business as Prime Financial Services, a fund services provider in South Africa, in 2005 he knew that he didn’t want the confusion and conflicting agendas that are implicit in the shareholder model. He wanted to build something different. The best way to achieve that, he decided, was to remove shareholder pressure by deciding that the business would never pay a dividend, to himself or anyone else, and that it would never be sold.

Since then, Prime Financial Services has grown and evolved into a provider of fund services and investment product solution infrastructure to clients in multiple jurisdictions. PIM Capital was launched in Mauritius in 2014 by the stakeholders of the Prime group to enable fund solutions offshore. Prime’s offices in Johannesburg and Cape Town employ more than 60 staff, and PIM Capital employs more

than 40 in Mauritius and Botswana. Supporting more than 30 clients around the world across diverse products, funds and mandates, the business manages assets worth $6billion.

The philosophy, which remains unchanged, supports the unwavering pursuit of a better business rather than a bigger one.

The businesses are 100% owned by a single trust. But with no dividends and no potential of a sale, Shane and his team of group directors are invested in the continued success of the business. As salaried employees, their primary agenda is keeping clients happy and providing value to all stakeholders.

The business knows what it is and what it isn’t. We stay focused on what we do well, and we find clients who want those services. Some businesses want to work with a big name, even if that means average service; others want the best possible service. There’s a very specific client base that wants to work with us.

The industry we operate in is relatively commoditised with a few exceptions. We use

similar best-of-breed systems to those used by our larger industry counterparts to tackle similar challenges. What we do differently is to do it better, which the experts at Pan Finance have acknowledged without being approached by us.

We use similar tools, but we use them differently. For example, we put dedicated people on client accounts. If a client has a query, their point of contact will be an expert who can give them feedback and is empowered to resolve any query. There is no need to escalate more complex queries. All client engagements are considered serious enough to warrant expert attention.

The foundation of this is our approach to hiring. We hire smart people, pay them properly and empower them to perform well. While our competitors may have a monster of a ‘machine’, our power is in the individuals in ours. Our team members tend not to have an employee mindset because stake-holding is a two-way street. We strongly believe that technology provides infrastructure, but people will always provide service.

The philosophy written into the trust that owns the business ensures that the culture of the business remains entrepreneurial regardless of its size.

When there are no shareholders and no dividends to pay everything that is generated is reinvested in the business. PIM Capital invests in the people, the processes and the systems. The stakeholder value paradigm accounts for the fact that it is the staff and the clients who build a business. In a stakeholder model, for example, the response to a decline in sales is

not to fire the sales team.

In many ways, stakeholder capitalism seems so obvious that one has to wonder why shareholder capitalism became so popular, although there are signs of a reversal in this trend all over the world.

You need only look at our industry and the apparently never-ending pursuit of bigger at the expense of better to see where shareholder capitalism falls short. Talk to any one of our colleagues in the wider industry to hear how the philosophy of short-term number-chasing erodes all but financial value for shareholders. So many value-destroying decisions are made based on what is good for the shareholder in the short-term. Having no such “shareholders” at PIM Capital means that decisions are made according to what is best for the business. It makes things simple when you don’t have competing interests.

The agenda is simple: provide excellent services, share the fruits with the stakeholders, invest in being the best at what we do. We don’t have to look attractive to potential investors and buyers. Our governance structures are focused on what’s good for the business and its various stakeholders in the long-term. It will never be about getting this year’s numbers up for a sale or an exit.

The industry seems to be at the top of an acquisition cycle with bigger consuming smaller. This is serving PIM Capital well in terms of requests for services from businesses whose providers have been consumed. They have lost their contacts and the benefits of knowing their service providers, they tell us. Usually the service provided has deteriorated as the busi-

ness has grown in size and complexity. The final insult, they tell us, is that the price Is no longer worth the value.

Big, bigger, biggest … it sounds like a mug’s game. PIM Capital will stick with chasing better and best. Thank you for noticing, Pan Finance.

Managing Director at PIM Capital

Stephan Hartzenberg

D. Brian Blank Associate Professor of Finance, Mississippi State University

Brandy Hadley Associate Professor of Finance and Distinguished Scholar of Applied Investments, Appalachian State University

Market trust at stake: What the Supreme Court’s ruling in SEC v. Jarkesy means for investors

Arecent Supreme Court ruling has gotten a lot of attention for how it could reshape government. What’s gotten much less attention is how it could affect markets.

As finance professors, we find this at least as important. The Supreme Court’s 6-3 ruling in SEC v. Jarkesy could make it more challenging for the Securities and Exchange Commission – the U.S. agency that regulates securities markets – to fight fraud. And any time the SEC loses power, as it just did, market trust and transparency may be at risk.

What matters for investors, including anyone with a 401(k) plan, is how the SEC chooses to handle cases moving forward.

WHAT IS SECURITIES FRAUD, ANYWAY?

Securities are investments like stocks and

bonds, and securities fraud is a crime that involves misleading investors. Specifically, it is “the misrepresentation or omission of critical information to induce investors into trading securities,” according to the Legal Information Institute at Cornell University.

Some people joke that “everything is securities fraud,” because words like “misrepresentation” and “securities” are open to a lot of interpretation.

But even though those words can be defined broadly, the SEC prosecutes relatively few cases – those where it has the greatest likelihood of winning.

WHAT HAPPENED IN SEC V. JARKESY?

The story of SEC v. Jarkesy began with the 2008 financial crisis, when a hedge fund manager in Texas watched the value of his funds decline.

In 2013, the SEC accused the fund manager – George Jarkesy – of committing securities fraud, alleging that he overestimated fund values and made other false claims. The SEC charged Jarkesy and fined him US$300,000 in a proceeding in an in-house SEC court overseen by an administrative law judge.

Jarkesy then sued the SEC, claiming he hadn’t been granted a fair trial.

The case found its way before the Supreme Court, which ruled in Jarkesy’s favor. The ruling determined that the SEC proceedings used to identify fraud and impose fines didn’t meet the criteria for a fair trial. Moving forward, such cases will need to be tried in federal court.

It’s an important precedent for the defense of people accused of misdeeds by government agencies. And the SEC isn’t the only agency to use such internal administrative proceedings. More than two dozen other agencies,

including the Department of Labor and the Environmental Protection Agency, will be affected by the court’s ruling.

HOW WILL THE RULING AFFECT SEC ENFORCEMENT?

Some people have argued the ruling won’t change much for the SEC, since the agency had already started routing many cases through federal courts. Additionally, the SEC has plenty of other opportunities to fight fraud through federal litigation, industry bars and suspensions.

However, a ruling that the SEC now must turn to judiciary trials or proceedings instead of internal administrative proceedings will move all securities-fraud cases involving fines to the federal courts, potentially raising the cost of prosecution. That, in turn, could result in fewer enforcement efforts, given limited agency resources.

What’s more, losing the implicit home-court advantage the SEC previously had with its internal proceedings could further slow and complicate enforcement efforts. The result could be that when people commit securities fraud, the SEC won’t have the resources to ensure they’re caught and punished.

In the short term, the Supreme Court ruling avoided limiting the SEC’s power as much as

some of the lower courts suggested it should. So at least the SEC kept most of its rule-making and enforcement authority.

HOW COULD THE RULING AFFECT MARKETS?

To understand what will likely change, it’s important to understand the former status quo.

In the most recent fiscal year, 2023, the SEC filed 784 enforcement actions, ordering nearly $5 billion in fines and distributing nearly $1 billion to harmed investors. That was a 3% increase in enforcement actions over 2022. And the past two years of SEC fines have been the largest on record.

But now, the SEC cannot fine defendants through administrative courts and must seek civil penalties through federal courts.

One potential outcome could be a smaller regulatory burden for investment professionals who may have been concerned with how their actions would be viewed by the SEC – including, but not necessarily limited to, fraudsters. This is because the SEC may bring forward fewer fines or cases with fines due to the additional resources necessary for judiciary proceedings.

If that happens, fraudsters might be emboldened – since the expected cost of committing

securities fraud would be lower than it was before the ruling – and investors would have to depend less on regulators protecting them and more on limiting risks themselves.

This could pose a problem for less sophisticated investors. Lots of people don’t know how to define securities fraud; even fewer can figure out whether a fund manager may have committed it. That risk, in turn, could limit the way investors participate in markets.

But if that simply means Americans buy more shares of S&P 500 exchange-traded funds and invest less in hedge funds, it shouldn’t be a problem for anyone’s bottom line. And more sophisticated investors should be wellequipped to evaluate risks on their own.

At the end of the day, researchers have documented the importance of trust on market quality and efficiency. So whatever helps the SEC maintain trust will have the most value for markets.

Enforcement will remain key to maintaining transparency in markets, but the method of enforcement – be it in a federal court or elsewhere – may not matter very much. The important thing is that people who commit financial crimes continue to face consequences.

Louis de Koker Professor of Law, La Trobe University

Pacific islands are being ‘debanked’.

What does it mean – and why are Australia, NZ and the US concerned?

The withdrawal of major banks from Pacific islands poses significant socio-economic risks to the region, prompting intervention by Australia, the US and New Zealand.

The so-called debanking of the Pacific – when banks close or restrict accounts because they believe customers pose regulatory, legal, financial or reputational risks to their operations – was the focus of discussions at this week’s Pacific Banking Forum in Brisbane.

Australian Prime Minister Anthony Albanese and US President Joe Biden announced the forum last year to deal with growing concerns about the loss of correspondent banking relationships in the Pacific.

Correspondent banks provide banking services to other financial institutions overseas.

For example, a person in Vanuatu might want to send money to someone in Australia, where their local bank may not operate, so another Australian bank will facilitate the transaction on behalf of the Vanuatu bank.

While these relationships have declined globally in the past decade, the fall in the Pacific has been particularly steep. Between 2011 and 2022, the region lost about 60% of its correspondent relationships.

These relationships are significant because, among other things, they enable domestic banks to make and receive international payments. When foreign trade payments cannot be made, trade is threatened.

Also, many Pacific communities rely on money remitted by family members working overseas. In 2022, remittance receipts amounted to 44% of the gross domestic product (GDP) in Tonga,

34% in Samoa and 15% in Vanuatu.

Yet the value of these remittances is eroded by banking costs that consistently rank among the highest globally. In the fourth quarter of 2022, the average remittance cost in the Pacific was 9.1% of the transaction value – more than triple the global target of 3%.

WHY IS THE PACIFIC FACING A DEBANKING CRISIS?

The provision of banking services in the region is challenged by the vast distances and small populations of Pacific Islands.

Foreign bankers also have to navigate different laws, regulations and risks of each jurisdiction. While general crime risks may be relatively low in the region, organised crime is increasing.

Anthony Albanese Australian Prime Minister

Money laundering laws require bankers mitigate financial integrity risks relevant to each jurisdiction and business relationship. This adds to the complexity and costs of each banking relationship. In some cases, bankers respond to this risk by terminating or limiting the relationship.

Pacific Islands such as the Marshall Islands are left with one bank and it is expected it might also close.

While other Pacific Islands – including Samoa, Tonga and Tuvalu – may have a higher number of banking relationships, some services have been limited or are provided at a higher cost.

WHY THE US, NZ AND AUSTRALIA ARE INVOLVED

This week’s Pacific Banking Forum, co-hosted by the Australian and US governments, drew together a wide range of debanking stakeholders.

Officials of governments, central bank governors, regulators, domestic and foreign bankers and representatives of international financial institutions and the Pacific Islands Forum joined to consider the drivers of debanking and potential solutions.

In his keynote address at the forum, Australian Treasurer Jim Chalmers pointed to the importance of these services for local communities as the reason why his government has

been actively talking to all the major Australian banks to let them know how important a con-

tinued Australian banking presence in the region is to the government.

Forum speakers also recognised the benefits of healthy and resilient cross-border correspondent banking relationships.

In her video remarks to the forum, US Secretary of the Treasury Janet Yellen noted that correspondent banking

promotes healthy market competition in the financial services sector; facilitates trade financed through regional and global financial centers; enables financing for infrastructure and development projects; and helps to make economies and financial systems more resilient to shocks.

POSITIVE CHANGE

The Pacific debanking tide may be turning. In 2023, the Pacific Islands Forum commissioned and adopted a debanking study of the World Bank. They also adopted a roadmap of actions informed by the study to make correspondent banking more resilient in the region.

Discussion about the problem now involves Australian, New Zealand and US banks and their regulators. US, Australian and New Zealand dollars are key trade currencies for Pacific jurisdictions and correspondent banking services are important to the economic health of the region.

At the Brisbane forum, a number of Pacific representatives acknowledged the problem of scale in the Pacific and spoke in favour of

regional solutions, aggregation of transactions and greater consistency of laws and processes.

International bankers and regulators, on the other hand, positioned the need for compliance with global anti-money laundering standards and the benefits of improved national identification systems, digital identity and appropriate technology.

While definitive solutions will take time to implement, the World Bank is considering a regional solution that will support temporary access to correspondent banking services if a country loses its last banking service in a key currency.

This will provide the relevant jurisdictions with access to appropriate services while they secure services by another correspondent bank. Such a facility will ease the immediate pressure on the Pacific and allow time for more sustainable solutions to be developed and implemented.

The Australian treasurer also pledged A$6.3 million in funding to secure digital identity infrastructure in the Pacific, improve compliance with global anti-money laundering standards and help build criminal justice and law enforcement capacity in the region.

It is important cross-border banking systems are open, secure and inclusive. The discussions this week in Brisbane may mark a return to a more resilient, re-banked Pacific Island community.

Why the new government is staying silent about the City – it won’t get tough on the UK’s financial sector anytime soon

Rachel Reeves’ first speech as the UK chancellor highlighted the financial constraints the new Labour government faces. With taxes already at a 70-year high in relation to national income, she repeated the pledge of no increases in national insurance, income tax or VAT.

A parallel pledge to stand by present fiscal rules, requiring public debt to be falling within five years, leaves Reeves looking for ways to target taxes.

The government also aims to expand its non-tax revenues by rebuilding a stock of state-owned assets, including a national wealth fund and a new green electricity pro-

vider, Great British Energy.

Labour’s approach is to treat public spending as a catalyst for private enterprise – providing the infrastructure, skills and technological development that can spur the private sector to produce and invest more. Its industrial strategy is founded on the idea that £1 of public investment, wisely targeted, can attract £3 of private investment.

This is in line with economic research suggesting that chronically low public investment explains much of the UK’s relatively slow productivity and output growth, and that public investment in green technology would be especially effective at reviving these.

For the past 50 years, governments of all parties have tended to take the opposite approach – associating public investment with economic stagnation, and anticipating stronger private-sector performance once state-owned assets were privatised.

Labour’s change of course concedes that the UK’s financial markets, even when deregulated and encouraged to expand, have failed to mobilise the necessary investment – leaving wide “funding gaps” for smaller innovation-based firms, especially in disadvantaged regions.

Labour has good reasons to be firmer with financial institutions. Its loss of office in 2010 followed a global financial crisis triggered by reckless banks and insurers, whose bailout at

Alan Shipman Senior Lecturer in Economics, The Open University

Rachel Reeves Chancellor of the Exchequer, UK

the public expense undermined the government’s previously successful budget balancing and public debt repayment.

The need to absorb these losses from the City of London, then let it keep the subsequent return to profit, forced the Treasury into a decade of austerity that left it financially overstretched when COVID struck.

Yet Labour’s pre-election plan hailed the UK financial sector as an “engine of growth”, describing it as “one of Britain’s greatest success stories” and promising to assist its growth and innovation. It’s a far cry from the party’s stance half a century ago, when it flirted with a state takeover of banks and pension funds as the solution to a previous decade of stagnation.

FINANCE’S PECULIAR PEDESTAL

Governments’ fear of imposing more tax or regulation on the City of London, even after its costly 2007-8 implosion, is rooted in the financial sector’s extraordinary contribution to the UK economy.

Finance and related professional services contribute more than 8% of gross domestic product (GDP) and 10% of tax revenue, and support 2.2 million jobs (7% of the total), according to analysis of official data by its main lobby group.

Its £63 billion trade surplus contrasts with, and helps to offset, the deficit on manufactured goods trade. And the financial surplus

it generates, by attracting inflows of money from across the globe, is vital for financing the chronic deficit on the UK’s current account, caused by paying out more than it receives for current transactions with the rest of the world.

But this may not be the whole story of finance’s contribution to the national income and government finances. In the wake of the financial crisis, experts including the Bank of England’s chief economist and chief financial regulator suggested the financial sector’s appetite for risky lending and short-term profit could hinder productive enterprise as much as it helps.

They also recognised that conventional measurements, especially treating the gap between lenders’ and borrowers’ interest rates as “value added”, might greatly overstate the sector’s contribution to the economy.

In doing so, they joined a long line of researchers arguing that the City diverts funds from productive investment into speculation that promotes asset bubbles and house-price inflation.

The financial sector’s post-crisis rebound owes much to the lowering of interest rates from 2008-22 and quantitative easing. This additional source of ultra-cheap funds let banks preserve their “bonus culture”, and widened inequality as the holders of financial assets like stocks and bonds saw their prices rise.

UK financial companies also profit from an elaborate network of tax havens, denting the

tax-raising powers of the UK and many other governments.

The Conservatives had already taken steps to make pension funds invest more in innovative small firms, and set up a state-owned British Business Bank to provide funding where commercial banks would not. Past governments have also used windfall taxes to recoup public money from the banks, and polling suggests there is now widespread support for imposing another on banks’ excess profits.

But Labour’s scope to steer resources back to the “real” economy, away from the financial sector, is limited by lingering doubts about the sector’s underlying health. Banks have strengthened their balance sheets since 2008 and now pass much stricter stress tests. But this partly reflects a shift of lending towards less-regulated “shadow banks”, which are not banks at all but other bodies that have the ability to offer credit.

Now, new threats to global financial stability are looming, including rapid private credit growth among companies and underestimated climate risks.

The fear of another systemic slide – on the scale that left Labour’s previous prime minister, Gordon Brown, with “no money” and more recently sank Liz Truss – means the government is unlikely to give financial institutions the tougher treatment some would recommend.

John Hawkins Senior Lecturer, Canberra School of Politics, Economics and Society, University of Canberra

Will digital currencies become the

norm as the world moves towards a

cashless society?

More than 90% of the world’s central banks are looking at introducing a central bank digital currency (CBDC), to complement existing banknotes.

WHAT IS A CENTRAL BANK DIGITAL CURRENCY?

A CBDC is not a new currency. It is a digital representation of an existing national currency. So an Australian CBDC would have exactly the same value as an Australian dollar. It would be legal tender.

It could be available in both retail and wholesale formats but usage would be optional and it would not replace hard currency.

Retail CBDCs are likely to allow point-of-sale purchases, government payments and transfers between individuals. Central banks are still considering many design features but most think their retail CBDCs won’t pay interest.

Like the banknotes in our wallets, the CBDC we could spend using our phones would be issued by the Reserve Bank.

But it would enable more sophisticated and innovative types of financial transactions, such as “smart contracts”, than existing forms of electronic money such as credit cards.

The wholesale version, by contrast, would only be available to financial institutions. They would be comparable to the deposit (“exchange settlement”) accounts these institutions currently hold with the central bank.

REPORT SHOWS A GLOBAL TREND

The strong interest in CBDCs has been revealed in a recent report by the Bank for International Settlements (BIS) which surveyed 86 central banks.

While the BIS report shows 94% of central banks are considering CBDCs, with about one third running pilot projects, most are being cautious and do not expect to issue their own digital currency in the next few years.

SOME COUNTRIES ARE ALREADY USING THEM

Retail CBDCs are already being used in several countries.

The first was the so-called “sand dollar”, launched by the Central Bank of the Bahamas in 2020. The Eastern Caribbean Central Bank also launched a CBDC, called DCash, in 2021. Nigeria and Jamaica also have CBDCs.

The major economy most advanced in work on a retail CBDC is China. The digital yuan, or e-CNY, has been widely trialled.

A possible Bank of England CBDC, or digital pound, has been nicknamed a “Britcoin” but no decision has yet been taken about whether it will go ahead.

If it does, it will require a vote in parliament and would then take a few years to introduce.

WHAT ARE THEIR USES AND RISKS?

Central banks might be motivated to adopt CBDCs to preserve the role of central bank money. This would help ensure monetary policy remains an effective tool for managing the economy.

CBDCs might also make cross-border payments faster and cheaper. This is especially helpful in countries where many families rely on remittances from members working overseas.

Countries where a large proportion of the population don’t have bank accounts may see scope for improving financial inclusion.

One concern is that a retail CBDC might replace commercial bank accounts. Bank customers might transfer funds from banks to the absolute safety of a CBDC.

This could facilitate illegal activity because, like banknotes, CBDCs may be fully anonymous. But there may be privacy concerns if, to avoid this, people have to register to use a CBDC.

SMART COIN FOR SMART CONTRACTS

A smart contract involves an instant payment made simultaneously with, and conditional on, the transfer of ownership of an asset.

Vending machines provide a good analogy. If you insert $2 and press B4, then the machine dispenses the cookies in the B4 slot. In other words, if (and only if) the vending machine receives the required item of value, then it instantly performs the requested action.

So far, smart contracts have mainly been used for purchases of digital assets such as NFTs. In principle they could be used for buying shares or houses to ensure that the transfer of ownership happens automatically and simultaneously with the payment being made.

If they are to be used for important transactions such as buying shares and homes the payment needs to made using something whose value will not fluctuate between the time a customer decides to buy and when the transaction takes place.

Most discussion of smart contracts has suggested they could be based on so-called stablecoins, such as Tether and USDC. This form of cryptocurrency purports to hold reserves in high quality assets and therefore can maintain parity with a national currency such as the US dollar.

In practice, stablecoins are rarely used for payments outside the crypto ecosystem, and one major Australian bank, the National Australia Bank, has just abandoned its stablecoin project.

Even Meta/Facebook, with its deep pockets and enormous customer base, gave up on its Libra/Diem stablecoin project.

But a CBDC could provide a trustworthy basis for smart contracts.

As the BIS’ chief economist Hyun Song Shin put it, “anything that crypto can do CBDCs can do better”.

THE RESERVE BANK’S ATTITUDE

Australia’s Reserve Bank has so far been cautious about issuing a CBDC.

Then governor Philip Lowe said in 2021 “we have not seen a strong public policy case to move in this direction, especially given Australia’s efficient, fast and convenient electronic payments system”.

As more than 99% of Australian adults have a bank account, the financial inclusion motive does not apply here. And few Australian families rely on international remittances.

Also, Australia’s payments system has been improved over recent years. There is no sign of stablecoins or other crypto making a meaningful challenge to the use of the Australian dollar for payments.

But the Reserve appears to have become more interested of late. An assistant governor said last year a CBDC could “spur innovation” and a study conducted jointly by the Reserve Bank and the Digital Finance Cooperative Research Centre has identified possible uses, including smart contracts, faster settlement of financial transactions and a back-up payments system.

The Bank will be releasing a paper soon setting out a “roadmap for future work”.

Avalanches can grow 100 times larger under the sea than on land – here’s why they’re a risk to the internet

Christopher Stevenson Senior Lecturer in Quantitative Sedimentology, University of Liverpool

Underwater avalanches are powerful natural events that happen all the time under the surface of the ocean. They are impossible to see and extremely difficult to measure, which means we know little about how they work.

Yet these phenomena pose a hazard to our global communication networks. The proliferation of the internet has required an ever-expanding network of fibre-optic seabed cables, which carry practically all global internet traffic.

My new study of an ancient underwater avalanche challenges our understanding of how underwater avalanches develop and may change the way geologists assess their risk potential.

It is estimated that there are now over 550 active seafloor cables around the world with a combined length of 1.4 million km – enough to wrap around the circumference of the Earth 35 times.

When a underwater avalanche breaks seafloor cables, the effects can be widespread and expensive. The 2006 Pingtung earthquake in Taiwan triggered underwater avalanches that cut many seafloor cables connecting southeast Asia with the rest of the world. The largest internet operator in China reported 90% loss of traffic to the US at the peak of the event and Taiwan experienced between 74-100% loss in internet traffic to neighbouring islands.

This damaged global markets by slashing the amount of financial transactions that could happen. Repairing the network to full capacity took 39 days and millions of US dollars in ship time. The underwater avalanche that broke these cables was fast-moving with a top speed of 72km per hour. But it was relatively small compared to giant underwater avalanches I have investigated in the Atlantic.

The good news is there are so many seafloor cables it’s extremely unlikely an underwater avalanche could shut down the internet worldwide. The Pingtung earthquake is an example of how even when primary routes are cut, at

least some traffic will be able to travel on an alternate route.

In a new research paper, myself and colleagues mapped the devastation of a giant underwater avalanche that happened 60,000 years ago from its source area, offshore of Morocco.

It travelled 400km through the largest submarine canyon in the world, and for another 1,600km across the Atlantic seabed. It is the second largest underwater avalanche ever documented.

We mapped the avalanche using a combination of detailed seafloor topographic mapping and hundreds of sediment cores, which penetrated the deposits of the avalanche over a massive area. In every core we analysed the deposits for fossils, which enabled us to determine the age of the event to be 60,000 years ago. It also meant we could correlate the individual avalanche layer over thousands of kilometres.

The avalanche contained enough sediment to fill 140,000 Wembley Stadiums (162km³). It was the height of a skyscraper (more than 200 metres), travelling at least 54km per hour, ripping out a trench 30 metres deep and 15km wide for 400km (the distance from London to Liverpool) that destroyed everything in its path. It then spread out over an area the size of Germany, burying it in about a metre of sand and mud.

However, we show that the avalanche actually started out as a small landslide, which then grew in size by over 100 times along its pathway. This extreme growth in size is much larger than in land based avalanches, which typically grow between four to eight times in size and are tiny by comparison. This challenges scientists’ view that big avalanches start life as big slope collapses.

Instead, we know now that underwater avalanches can start small and grow along their path into catastrophic events of extraordinary power. So these insights may change how we assess the geohazard potential of these phe-

nomena, and may lead us to focus more on the avalanche pathway rather than the initial landslide zone.

How often these events happen depends on where you are. Seafloor canyons that start relatively close to river mouths with high rainfall catchments can experience several small avalanches per year. Other systems far from river discharges like the Agadir Canyon, off northwest Morocco, only have one giant avalanche every 10,000 years.

There are a variety of potential triggers for underwater avalanches including earthquakes, tides, typhoons, river floods and even volcanic eruptions. Climate change will make some of these triggers more frequent and intense.

However, triggers do not guarantee that an avalanche will happen, nor do they relate to the size of the event. For example, in 1755 a large earthquake hit the coast of Portugal destroying large parts of Lisbon and killing tens of thousands of people. However, it only triggered a tiny underwater avalanche. By comparison,

in 1929 a large earthquake off the coast of Newfoundland, Canada triggered the largest underwater avalanche ever documented.

Myself and colleagues used detailed seafloor surveys and sediment cores to reconstruct the properties of this event, which travelled at 68km per hour carrying a concentrated mixture of boulders, sand and mud, and snapping 11 seabed cables on its journey downhill. The avalanche was so large that it produced a tsunami, which killed 28 people along the local coastline. This remains the first and only giant underwater avalanche to have been directly measured by cable breaks.

Our understanding of underwater avalanches is still in its infancy but research continues to provide new insights into where they happen, how they work, and just how powerful and destructive they can be. These fascinating events are a reminder of the many wonders still hidden within the deep sea.

A global IT outage brought supply chains to their knees – we need to be better prepared next time

Friday’s global IT outage – caused by a faulty software update from cybersecurity firm Crowdstrike –wrought havoc on business operations around the world.

Severe disruptions were reported in multiple countries, including Australia, New Zealand, Japan, India, the United States and the United Kingdom. Many businesses were unable to access critical systems and data, leading to significant delays and financial losses.

As the crisis struck, many of us would have been preoccupied with its immediate consumer impacts – hospital systems going down, some supermarkets operating cash-only, flights getting delayed, and news anchors reading from printed notes.

Read more: Massive global IT outage hits

banks, airports, supermarkets – and a single software update is likely to blame

But it’s often forgotten that our supply chains – the complex networks that turn raw materials into finished products and get them where they’re needed – have also become deeply integrated with technology. They were hit hard too.

Over the past few decades, advanced IT systems have been adopted in supply chains to better manage inventory, coordinate shipping and logistics, make decisions and share information.

This technology has brought enormous benefits to supply chain management. But it has also introduced major new vulnerabilities, as we’ve just seen first hand. We need to be better prepared to face similar crises in future.

SUPPLY CHAINS DEPEND ON TECHNOLOGY

Advanced IT systems now enable real-time tracking, automated inventory management, and seamless communication across global supply chains. This has made them more efficient, transparent and responsive.

But to achieve such precision and speed, they’ve also become highly interdependent. Making supply chains operate efficiently hinges on the timely success of everyone –and all the technology – involved.

We’ve now seen just how quickly things can come undone.

Transport systems in particular were hit hard. In the wake of the outage, both shipping companies and ports reported disruptions.

Sanjoy Paul Associate Professor in Operations and Supply Chain Management, UTS Business School, University of Technology Sydney

Towfique Rahman Lecturer, Business Strategy and Innovation, Griffith Business School, Griffith University

Many people have been directly affected by cancelled or delayed passenger flights. But Delivery firm Parcelhero has warned there could also be significant ripple effects for air freight:

Not only will slots for dedicated airfreight flights be disrupted, but many international goods and packages are transported not only in specially designed cargo planes but also in the cargo holds of passenger aircraft.

Other air freight experts have suggested a full recovery could take days or even weeks.

The finance and retail sectors also have an important role to play in supply chains, and faced their own disruptions.

Many Australian banks faced outages, as did major accounting software providers myob and Xero. Many retail operations, particularly those with extensive e-commerce platforms, saw customers face delays in order processing and delivery.

Some further impacts of the outage may not be visible immediately. We’ll only be able to see them as they propagate through supply chains over time.

HOW CAN COMPANIES BE BETTER PREPARED?

Any one of these disruptions in isolation would have been a significant incident. For them all to happen at once made Friday’s crisis strikingly rare. That doesn’t mean businesses shouldn’t

be prepared. The question is when, not if, the next global IT outage will occur.

The nature of Friday’s outage made its impacts difficult to avoid. But not all IT threats are the same. To build more resilient supply chains, businesses within them need to have robust contingency plans in place – even if it means maintaining the ability to perform key processes manually and use paper records (as many did on Friday).

One strategy is for businesses to diversify their sources of key software and technology. This helps avoid over-reliance on what might become a single point of failure. Risks should be monitored proactively, with regular stress tests and audits.

Investing in cybersecurity measures can also often prevent and minimise the impact of many IT threats. This includes regularly updating software, training staff on best practices and employing relevant advanced security technologies.

Educating staff on identifying and responding to potential IT issues is also crucial to reducing human error. There also need to be clear communication channels in place during outages to maintain transparency and trust. These protocols should be updated regularly.

DON’T PUT ALL YOUR EGGS IN ONE BASKET

One of the biggest things to account for in supply chain management is the risk a single “link”

breaks – perhaps a key supplier becomes unable to produce a particular input, or it can’t be transported in time.

On top of diversifying the software systems used for key tasks, businesses should also diversify their sources of key inputs and logistics needs.

Diversifying suppliers mitigates the risk of depending on a single source and means a business has alternative options. Ideally, this allows it to continue operations relatively smoothly when supply is disrupted.

Bringing manufacturing and logistics onshore or to a nearby country (nearshoring) can also help mitigate the risks from international disruptions. And shortening the supply chain by reducing the number of middlemen can reduce potential points of failure.

RECOVERING QUICKLY IS IMPORTANT

How quickly a supply chain can recover from an IT outage or other crisis depends on its preparedness and resilience. Many of the strategies we’ve discussed can significantly reduce recovery times and minimise operational disruptions, allowing businesses to get back to normal.

New technologies have been a boon for supply chain management, but they have also added huge new vulnerabilities. Taking a proactive approach to cybersecurity and contingency planning can’t prevent all disasters, but it remains a business’ best bet.

A third of the world’s population lacks internet connectivity − airborne communications stations could change that

About one-third of the global population, around 3 billion people, don’t have access to the internet or have poor connections because of infrastructure limitations, economic disparities and geographic isolation.

Today’s satellites and ground-based networks leave communications gaps where, because of geography, setting up traditional groundbased communications equipment would be too expensive.

High-altitude platform stations – telecommunications equipment positioned high in the air, on uncrewed balloons, airships, gliders and airplanes – could increase social and eco-

nomic equality by filling internet connectivity gaps in ground and satellite coverage. This could allow more people to participate fully in the digital age.

One of us, Mohamed-Slim Alouini, is an electrical engineer who contributed to an experiment that showed it is possible to provide high data rates and ubiquitous 5G coverage from the stratosphere. The stratosphere is the second lowest layer of the atmosphere, ranging from 4 to 30 miles above the Earth. Commercial planes usually fly in the lower part of the stratosphere. The experiment measured signals between platform stations and users on the ground in three scenarios: a person staying in one place, a person driving a car and a person operating a boat.

My colleagues measured how strong the signal is in relation to interference and background noise levels. This is one of the measures of network reliability. The results showed that the platform stations can support high-data-rate applications such as streaming 4K resolution videos and can cover 15 to 20 times the area of standard terrestrial towers.

Early attempts by Facebook and Google to commercially deploy platform stations were unsuccessful. But recent investments, technological improvements and interest from traditional aviation companies and specialized aerospace startups may change the equation.

The goal is global connectivity, a cause that brought the platform stations idea recognition

Mohamed-Slim Alouini

Distinguished Professor of Electrical and Computer Engineering, King Abdullah University of Science and Technology

Mariette DiChristina

Dean and Professor of the Practice in Journalism, College of Communication, Boston University

in the World Economic Forum’s 2024 Top 10 Emerging Technologies report. The international industry initiative HAPS Alliance, which includes academic partners, is also pushing toward that goal.

FAST, COST EFFECTIVE, FLEXIBLE

Platform stations would be faster, more cost effective and more flexible than satellite-based systems.

Because they keep communications equipment closer to Earth than satellites, the stations could offer stronger, higher-capacity signals. This would enable real-time communications speedy enough to communicate with standard smartphones, high-resolution capabilities for imaging tasks and greater sensitivity for sensing applications. They transmit data via free-space optics, or light beams, and large-scale antenna array systems, which can send large amounts of data quickly.

Satellites can be vulnerable to eavesdropping or jamming when their orbits bring them over adversarial countries. But platform stations remain within the airspace of a single country, which reduces that risk.

High-altitude platform stations are also easier to put in place than satellites, which have high launch and maintenance costs. And the regulatory requirements and compliance procedures required to secure spots in the stratosphere are likely to be simpler than the complex international laws governing satellite orbits. Platform stations are also easier to upgrade, so improvements could be deployed more quickly.

Platform stations are also potentially less polluting than satellite mega-constellations because satellites burn up upon reentry and can release harmful metals into the atmosphere, while platform stations can be powered by clean energy sources such as solar and green hydrogen.

The key challenges to practical platform sta-

tions are increasing the amount of time they can stay aloft to months at a time, boosting green onboard power and improving reliability – especially during automated takeoff and landing through the lower turbulent layers of the atmosphere.

BEYOND SATELLITES

Platform stations could play a critical role in emergency and humanitarian situations by supporting relief efforts when ground-based networks are damaged or inoperative.

The stations could also connect Internet of Things (IoT) devices and sensors in remote settings to better monitor the environment and manage resources.

In agriculture, the stations could use imaging and sensing technologies to help farmers monitor crop health, soil conditions and water resources.

Their capability for high-resolution imaging could also support navigation and mapping activities crucial for cartography, urban planning and disaster response.

The stations could also do double duty by carrying instruments for atmospheric monitoring, climate studies and remote sensing of Earth’s surface features, vegetation and oceans.

FROM BALLOONS TO AIRPLANES

Platform stations could be based on different types of aircraft.

Balloons offer stable, long-duration operation at high altitudes and can be tethered or free-floating. Airships, also known as dirigibles or blimps, use lighter-than-air gases and are larger and more maneuverable than balloons. They’re especially well suited for surveillance, communications and research.

Gliders and powered aircraft can be controlled more precisely than balloons, which are sensitive to variations in wind speed. In addition,

powered aircraft, which include drones and fixed-wing airplanes, can provide electricity to communication equipment, sensors and cameras.

NEXT-GENERATION POWER

Platform stations could make use of diverse power sources, including increasingly lightweight and efficient solar cells, high-energy-density batteries, green hydrogen internal combustion engines, green hydrogen fuel cells, which are now at the testing stage, and eventually, laser beam powering from groundor space-based solar stations.

The evolution of lightweight aircraft designs coupled with advancements in high-efficiency motors and propellers enable planes to fly longer and carry heavier payloads. These cutting-edge lightweight planes could lead to platform stations capable of maneuvering in the stratosphere for extended periods.

Meanwhile, improvements in stratospheric weather models and atmospheric models make it easier to predict and simulate the conditions under which the platform stations would operate.

BRIDGING THE GLOBAL DIGITAL DIVIDE

Commerical deployment of platform stations, at least for post-disaster or emergency situations, could be in place by the end of the decade. For instance, a consortium in Japan, a country with remote mountainous and island communities, has earmarked US$100 million for solar-powered, high-altitude platform stations.

Platform stations could bridge the digital divide by increasing access to critical services such as education and health care, providing new economic opportunities and improving emergency response and environmental monitoring. As advances in technology continue to drive their evolution, platform stations are set to play a crucial role in a more inclusive and resilient digital future.

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Fusion power could transform how we get our energy – and worsen problems it’s intended to solve

Harnessing energy from nuclear fusion – the combining of nuclei, which lie within atoms –could be instrumental in the shift towards a decarbonised global energy system. As issues of climate change and energy security are becoming increasingly salient, the promise of an apparently “clean”, “abundant” and “safe” energy source, such as fusion, is ever more appealing.

In response, the fusion industry is growing rapidly and the trope that fusion is “30 years away and always will be” is beginning to lose credibility as the technology moves beyond its experimental stage.

But it’s too easy to generate hype around a seemingly ideal solution to societal challenges – and I would argue that the realisation of fusion energy may come into tension with the issues it proposes to solve.

Contextualising this hype and exploring areas where these tensions may arise is critical to ensuring the technology develops in an ethically sound way and can provide net societal benefit if it proves viable.

The appeal of a zero-carbon, low-waste, reliable and relatively safe energy source, such as fusion, is self-evident. It is set against the background of growing global energy demand and in the context of climate change. This all necessitates a transition to a clean energy system.

It’s widely thought that fusion energy would be able to plug the gaps of existing energy sources. For example, it would circumvent the intermittency of renewables, given that the supply from solar and wind power is unpredictable, reliant as it is on weather. Fusion also avoids the long-lived radioactive waste, safety issues and public concerns around conventional nuclear fission power. It would help

mitigate the carbon cost and greenhouse gas emissions from fossil fuels.

Fusion energy may also placate energy security concerns because some of its key resources are abundant. For example, the deuterium fuel used in some fusion processes can be readily derived from seawater. This would reduce reliance on imports and insulate nations against global market shocks.

But these benefits may mask deeper ethical questions around the development of the technology and some potentially detrimental impacts. Perhaps one of the clearest instances of such a tension arises over environmental sustainability. This applies particularly to the association with climate change mitigation and the reduction of greenhouse gas emissions.

Climate change is an issue that lends itself to the “techno-fix” approach – in other words, it can be tempting to avoid making impor-

Sophie Cogan PhD Candidate in Politics and Environment, University of York

tant changes to our behaviour because we think we can depend on technology to fix everything. This is known as the “mitigation obstruction” argument.

Squaring greenhouse gas emissions with energy demand also raises questions of justice and equity. Energy demand is growing in certain regions, primarily the global south, that have contributed the least to the current climate crisis. Yet fusion programmes are overwhelmingly based in the global north. So if fusion proves viable, those with access to such a transformative technology are not necessarily those who will need it most.

Climate change is a global challenge, so any proposed solution must account for global impact. Efforts must be made to recognise the context of development and incorporate considerations of global inequity in the

deployment of fusion if we are to meet the climate challenge.

Similar concerns can be found in the materials used for fusion energy. These include critical minerals, including lithium, tungsten and cobalt. Extraction and processing of these minerals emits greenhouse gases. In some cases, extraction operations are located on or near the lands of indigenous peoples. And the supply chains for these materials are embedded in geopolitical tensions, with alliances, collaboration, competition and the potential for monopolies forming.

Mercury, for example, is used in the processing of lithium for fusion reactors. Not only is the element environmentally damaging and toxic but depends largely on Chinese production.

The accelerating pace of fusion energy

increases the risk of overlooking these potential hazards along the way. However, I would say this is not a case where we need to apply moral brakes, but rather shift gear. Approaching these potential ethical tensions requires systematic thought throughout the development process, from thinking about the implications of design decisions and materials choices, through to equitable deployment strategies and knowledge sharing.

Energy access underpins human wellbeing and development and the energy system as a whole has deep societal impacts. Failure to openly engage with the social and ethical challenges of new and emerging technologies in this space would be irresponsible at best, and harmful at worst. This is particularly so when impacts of fusion technology may compound the precise challenges it aims to solve.

Green belt land just isn’t that green anymore

The new UK government’s plans to “get Britain building” include the reintroduction of targets to build 1.5 million new houses, which is likely to encroach on some of the country’s protected countryside spaces or “green belt”. Further pressure comes from plans to build more energy infrastructure such as pylons and wind turbines as part of the goal of decarbonising the electricity supply by 2030.

The idea of protecting the green belt is both politically powerful and divisive, but the definition of the green belt has become confused.

The term was first coined in 1875 by the Victorian reformer and co-founder of the National Trust, Octavia Hill. She believed that the provision of an undeveloped ring of countryside around cities like London would bring good mental and physical health to their inhabitants. Designed to stop urban sprawl, this green belt now covers around 12.6% of English land.

But despite her campaigning, Hill was not able to stop London’s sprawl. The land she cam-

paigned to preserve for peace and recreation, Swiss Cottage Fields, was too valuable and London expanded into the countryside that once encircled it.

Today, some 150 years later, the true meaning of green belt land as good quality, green open space for the inhabitants of towns and cities is getting lost. And the new government may begin to distinguish between high- and low-quality countryside when making planning policy.

As an environmental lawyer specialising in the protection of the countryside, I spend much of my time examining the framework of regulation that makes up modern planning law. Terms like green belt, and others such as “brownfield” and “grey belt” have become part of the political conversation.

Brownfield sites are previously developed urban sites formerly used for industrial or commercial purposes. The previous Conservative government pushed local authorities hard to develop this land in order to protect the green belt from development.

The grey belt is a relatively new term that recognises that some areas of the green belt are in poor environmental condition and may be ripe for development. This includes old car parks and wasteland situated on land technically classified as the green belt.

Recent announcements, including in the king’s speech setting out the new government’s legislative agenda, indicate that plans to develop the green belt are likely to start with this grey belt.

The green belt has been used to encourage developers to focus their efforts on urban brownfield sites that lie within the green belt ring around a city. Reusing brownfield land that was previously developed for another purpose and saving the green belt might sound like a double win.

But many old industrial sites come with high decontamination costs and can be expensive to develop for housing.

The government’s national planning policy framework (NPPF) is used to guide decisions made by planning authorities. If you want to

Ben Mayfield Lecturer in Law, Lancaster University

build an extension or put another house in your garden, your local council will follow this guidance when making their decision.

This framework explains how the green belt aims to stop urban sprawl and prevent built-up areas merging into one another. It’s intended to guard the countryside from development and preserve the character of villages and towns.

If the new government wishes to allow some development of “grey” areas of the greenbelt, the NPPF will need swift revisions. The chancellor, Rachel Reeves, has already promised a review into the framework before the summer recess. That’s expected to reinstate house building targets removed by the Conservatives and to streamline the planning process.

Although planning authorities are discouraged from allowing new development in the green belt, there are already some important exceptions. These include some small developments of affordable housing for local communities, and some minor development close to existing buildings.

This is not insignificant. Government research showed that in 2021-2022, 2% of new addresses were created through the development of green belt land. The king’s speech has

few details on how new housing targets will be met but it is likely that plans will include further exceptions for more housing, or require local authorities to identify which parts of the green belt are grey, and therefore less of a priority to protect.

BLURRING THE BOUNDARIES

The green belt concept is misleading. Although described as countryside in the NPPF, most green belt land is privately owned, and very little is open to public access.

Agricultural and some industrial development is still allowed on green belt land, including large buildings for agricultural use and the extraction of minerals. Much farmed land is in a poor environmental state.

Research commissioned by the last government shows the importance of public parks and urban green spaces, which could help provide better habitats for people and nature than the worst green belt land.

For our most fragile and valuable green spaces, the protection goes beyond the green belt anyway. Sites such as national parks, protected wetlands and sites of special scientific interest all benefit from enhanced protection. To build new homes in a national park, the

National Park Authority needs to give the go ahead and apply tough rules to protect their unique environments.

Building on grey or green belt doesn’t have to be detrimental to the environment. Developments can restore green spaces in a nature-friendly way.

Both Bournville near Birmingham and Port Sunlight in the Wirral were built according to Hill’s philosophy that a green local environment leads to better housing. These developments were planned and funded by influential businessmen, with access to green spaces, fresh air and sunlight factored in to provide pleasant, good quality homes for workers.

The government’s plans to create a new generation of new towns was not expanded upon in the king’s speech, but is a detailed manifesto pledge. This included the promise to consider “beautiful homes” and “green spaces” as part of these new developments.

The creation of these new green towns, targeted development of the green belt and the support of local authorities will be the most effective way to deliver on the government’s promises.

How cyberattacks on offshore wind farms could create huge problems

Against the background of climate change, there’s a push to make offshore wind a much bigger part of the UK’s energy supply in coming years.

But offshore wind farms are already being affected by cyberattacks, according to a recent report. And unless the vulnerabilities are addressed, cyberattacks could cause power outages, leading to critical services such as hospitals being unable to function.

Successful cyberattacks could lower public trust in wind energy and other renewables, the report from the Alan Turing Institute says. The authors add that artificial intelligence (AI) could help boost the resilience of offshore wind farms to cyber threats. However, government and industry need to act fast.

The fact that offshore wind installations are relatively remote makes them particularly vulnerable to disruption. Land turbines can have nearby offices, so getting someone to visit the site is much easier than at sea. Offshore tur-

bines tend to require remote monitoring and special technology for long distance communication. These more complicated solutions mean that things can go wrong more easily.

One of the technologies that could reduce the vulnerability of wind farms to cyberattacks is called anomaly-based intrusion detection. This uses machine learning, a subset of AI, to build up a picture of normal activity on a computer network and then identify patterns of unusual activity that could signal a cyberattack.

Another is predictive maintenance, which relies on AI to detect and flag small vulnerabilities in IT systems and operational technology – the hardware and software that monitors and controls infrastructure – so that they can be fixed before they become bigger problems.

In general, this enhanced security and resilience could be supported by an approach called intelligent automation, where AI and other technologies are combined to streamline the operation of offshore wind installations.

WHY HACKERS TARGET WIND FARMS

Most cyberattacks are financially motivated, such as the ransomware attacks that have targeted the NHS in recent years. These typically block the users’ access to their computer data until a payment is made to the hackers.

But critical infrastructure such as energy installations are also exposed. There may be various motivations for launching cyberattacks against them. One important possibility is that of a hostile state that wants to disrupt the UK’s energy supply – and perhaps also undermine public confidence in it.

There have already been attacks on offshore wind farms outside the UK. The Danish wind power company Vestas was hit by a ransomware attack in 2021. Reports suggest Vestas had to shut down IT systems across multiple locations to contain the issue.

German wind power company Deutsche Windtechnik faced a ransomware attack the following year. The attack forced the company

Kimberly Tam Associate Professor in Cyber Security, University of Plymouth

to disable around 2,000 of its 7,500 wind turbines across Germany to prevent them from being damaged. Normally, turbines adjust their movement to the speed and direction of the wind. If a turbine’s ability to do this is disrupted, for example, by a cyberattack that affects control systems, it could cause stress and structural damage to the blades.

In a worst-case scenario, cyberattacks could lead to the functioning of critical systems at wind farms being lost. Power outages could result if cyberattacks on offshore wind farms are combined with attacks on other energy sources.

It could even lead to loss of life if, for example, hospitals were to lose their power supplies. If control systems at offshore wind farms are lost, and turbine blades move too fast in the wind, the stress on the motor can also cause a fire, and put first responders at risk.

The potential negative effects of such attacks on public trust in renewables are significant. During the 2021 “big freeze” in Texas, when the winter cold led to power outages and

other disruption, some critics blamed frozen wind turbines.

At the time, Texas agriculture commissioner Sid Miller commented: “We should never build another wind turbine in Texas. The experiment failed big time.”

However, Miller’s claims were contradicted by the Electric Reliability Council of Texas, which operates the state’s power grid. It said that failures in natural gas, coal and nuclear energy systems were responsible for nearly twice as many outages as frozen wind turbines and solar panels.

CLIMATE CHALLENGE

A loss of confidence in renewable sources such as offshore wind among the public and policymakers could seriously undermine the UK’s climate change efforts.

The UK has committed itself to reaching the target of net zero by 2050, which means that the total greenhouse gases emitted equal the emissions removed from the atmosphere.

In order to achieve this, it’s necessary to wean the country off fossil fuels, by switching to electric vehicles, for example, and ensuring homes are more energy efficient. But a major step is decarbonising Britain’s energy supply.

Here at the University of Plymouth, we have started a project called Crown, which stands for cyber-resilience of offshore wind networks.

This will support the study of offshore wind technology and its control networks. Researchers will focus on understanding the vulnerability of these wind farms to cyberattacks, and on enhancing security and resilience to attacks.

This is probably one of the best times to analyse and discuss how to mitigate the threats posed by cyberattacks on offshore wind. Any earlier, and the engineering and operations aspects would not be advanced enough to explore the risks. Any later, and the installation of infrastructure on multiple planned projects might proceed apace with vulnerabilities that are difficult to fix retrospectively.

Google

monopoly ruling: where the tech giant goes from here

Renaud Foucart

Senior Lecturer in Economics, Lancaster University Management School, Lancaster University

AUS judge has found that Google is a monopoly and has used this dominance to reinforce its market position.

This ruling, which is subject to appeal, brings the US regulator close to the European Commission in its approach to tech giants such as Google, Meta, and Amazon. Regulators now agree that the nature of these companies’ business means that the market ends up becoming a monopoly dominated by one massive company.

It has thus become the job of the state to protect consumers from tech giants consolidating their dominance. As a company, 80% of Alphabet’s (Google’s owner) revenue, comes from advertising, a total of US$146 billion (£114 billion) in 2021. Almost everything the company does must be understood through this lens.

The main source of Google’s advertising income derives from its 90% market share of the market for general search engines, one of the oldest and most important services on the internet.

To provide users with answers ranging from

the best recipe for an apple pie to a recommendation for a new vacuum cleaner, Google first gathers information about every page available on the Internet. Then, it uses its database of websites, the keywords used for search, what other people typically liked as an answer to similar queries, but also everything it knows about you, to rank possible answers.

Businesses then pay for the right for their own text to be prominently displayed alongside genuine search results. A higher quality of search results means more customers, which makes it easier to attract advertisers. It also means the advert can be tailored to consumer tastes and is therefore more valuable to advertisers.

While research has shown the actual return on investment to businesses from digital advertising is unclear, and sometimes even negative, search advertising remains in high demand. It constitutes 66% of Google’s revenue and growth in the past decade.

Other services such as Google Maps and YouTube also contribute. For a start they also generate advertising revenue. But they also provide even more information to help tailor search ads. This includes how much time a user spends on a page, what they click on,

whether they react positively or negatively to a result, where they are physically and how they travelled there.

All this information about you is stored and serves a single purpose. It builds a highly detailed profile of you as a consumer that has enormous value to advertisers looking to personalise ads directly for you.

In order to gather all this valuable data, it’s vital for Google that it retains that market dominance. Google reportedly spends more than US$26 billion each year to ensure it comes up as the default search engine for the highest number of users.

DEFAULT PROVIDER

On any Android or Apple phone, the default is Google search representing a market share of 94.9%. Google is also the default on almost every web browser. And research shows that even if the cost of switching to another search engine is small, the default position leads to a vicious circle. When consumers stick to the default, it means the possible alternative does not have enough consumer data to offer a high quality search, or to be attractive to advertisers.

Google spends US$8.4 billion a year to operate its search engine – on top of the fortune it already spends on ensuring it remains the default search engine. Today, Microsoft’s Bing is the only search engine truly competing with Google by spending billions to index the whole world wide web.

At some point, Microsoft offered to initially share 100% of its Bing revenue with Apple to secure the default instead of Google. Apple still said no: the amount was less than what Google could offer. Google is not necessarily much better as a search engine. On Microsoft Edge, the only browser where Bing comes as a default, 80% of users stick to Bing. Apple also reportedly has no interest in buying Bing from Microsoft.

Google search is simply so big and so good at making money from advertisers that it is very costly to move away from it. In many ways, the market for advertising on search engines is actually very close to legal monopolies such as water distribution or rail tracks, where the cost of setting up the infrastructure are so big that there is simply no space for more than one company.

In a statement, Kent Walker, president, Global Affairs at Google, said: “This decision recognises that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available. We appreciate the Court’s finding that Google is ‘the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users,’ that Google ‘has long been the best search engine, particularly on mobile devices,’ ‘has continued to innovate in search’ and that ‘Apple and Mozilla occasionally assess Google’s search quality relative to its rivals and find Google’s to be superior.’

“Given this, and that people are increasingly looking for information in more and more ways, we plan to appeal. As this process continues, we will remain focused on making products that people find helpful and easy to use.”

POSSIBLE NEXT STEPS

In the recent US case, the judge has not yet announced how it wants Google to stop using its monopoly.

Some rivals want to split Google’s advertising business from its search engine. Another

solution would be to force Google to share the data it gathers. Doing so could improve search results for everyone.

Just like it makes little sense to have competing pipes bringing water to your home, it makes little economic sense for several firms to pay billions to gather the exact same information. This is why some groups favour having Google share its data.

Existing attempts at setting precise rules for big tech, however, sometimes have no obvious benefits for consumers. The European Commission, for instance, wanted Alphabet to stop sending Google search results about locations directly to Google Maps. But, according to one analysis, when Google removed the clickable maps from its search results, along with the Google Maps reference, there was only a modest increase in searches for other map services. Visits to Google Maps, meanwhile, changed very little.

So, despite all the legal moves to introduce more competition into this market, huge questions thus remain as to what practical steps regulators can take without making the consumer experience even worse.

Training AI requires more data than we have — generating synthetic data could help solve this challenge

The rapid rise of generative artificial intelligence like OpenAI’s GPT-4 has brought remarkable advancements, but it also presents significant risks.

One of the most pressing issues is model collapse, a phenomenon where AI models trained on largely AI-generated content tend to degrade over time. This degradation occurs as AI models lose information about their true underlying data distribution, resulting in increasingly similar and less diverse outputs full of biases and errors.

As the internet becomes flooded with real-time AI-generated content, the scarcity of new, human-generated or natural data further exacerbates this problem. Without a steady influx of diverse, high-quality data, AI systems risk becoming less accurate and reliable.

Amid these challenges, synthetic data has emerged as a promising solution. Designed to closely mimic the statistical properties of real-world data, it can provide the necessary volume for training AI models while ensuring the inclusion of diverse data points.

Synthetic data does not contain any real or personal information. Instead, computer algorithms draw on statistical patterns and characteristics observed in real datasets to generate synthetic ones. These synthetic datasets are tailored to researchers’ specific needs, offering scalable and cost-effective alternatives to traditional data collection.

My research explores the advantages of synthetic data in creating more diverse and secure AI models, potentially addressing the risks of model collapse. I also probe key challenges and ethical considerations in the future development of synthetic data.

USES OF SYNTHETIC DATA

From training AI models and testing software to ensuring privacy in data sharing, artificially generated information that replicates the characteristics of real-world data has wide-ranging applications.

Synthetic data in healthcare helps researchers analyze patient trends and health outcomes, supporting the development of advanced diagnostic tools and treatment plans. This data is produced by algorithms that replicate real patient data while incorporating diverse and representative samples during the data generation process.

In finance, synthetic data is used to model financial scenarios and predict market trends while safeguarding sensitive information. It also allows institutions to simulate critical financial events, enhancing stress testing, risk

A.T. Kingsmith Lecturer, Liberal Arts and Sciences, OCAD University

management and compliance with regulatory standards.

Synthetic data also supports the development of responsive and accurate AI-driven customer service support systems. By training AI models on datasets that replicate real interactions, companies can improve service quality, address diverse customer inquiries and enhance support efficiency — all while maintaining data integrity.

Across various industries, synthetic data helps manage the dangers of model collapse. By providing new datasets to supplement or replace human-generated data, it reduces logistical challenges associated with data cleaning and labelling, raising standards for data privacy and integrity.

DANGERS OF SYNTHETIC DATA

Despite its many benefits, synthetic data presents several ethical and technical challenges.

A major challenge is ensuring the quality of synthetic data, which is determined by its ability to accurately reflect the statistical properties of real data while maintaining privacy. High-quality synthetic data is designed to enhance privacy by adding random noise to the dataset.

Yet this noise can be reverse-engineered, posing a significant privacy threat as highlighted in a recent study by United Nations University.

Reverse-engineered synthetic data runs the risk of de-anonymization. This occurs when

synthetic datasets are deconstructed to reveal sensitive personal information. This is particularly relevant under regulations like the European Union’s General Data Protection Regulation (GDPR), which applies to any data that can be linked back to an individual. Although programming safeguards can mitigate this risk, reverse engineering cannot be entirely eliminated.

Synthetic data can also introduce or reinforce biases in AI models. While it can reliably generate diverse datasets, it still struggles to capture rare but critical nuances present in real-world data.

If the original data contains biases, these can be replicated and amplified in the synthetic data, leading to unfair and discriminatory outcomes. This issue is particularly concerning in sectors like healthcare and finance, where biased AI models can have serious consequences.

Synthetic data also struggles to capture the full spectrum of human emotions and interactions, resulting in less effective AI models. This limitation is especially relevant in emotion-AI applications, where understanding emotional nuances is critical for accurate and empathetic responses. For example, while synthetic data generalizes common emotional expressions, it can overlook subtle cultural differences and context-specific emotional cues.

ADVANCING AI

Understanding the differences between artificially generated data and data from human

interactions is crucial. In the coming years, organizations with access to human-generated data will have a significant advantage in creating high-quality AI models.

While synthetic data offers solutions to privacy and data availability challenges that can lead to model collapse, over-reliance on it can recreate the very issues it seeks to solve. Clear guidelines and standards are needed for its responsible use.

This includes robust security measures to prevent reverse engineering and ensuring datasets are free from biases. The AI industry must also address the ethical implications of data sourcing and adopt fair labour practices.

There is an urgent need to move beyond categorizing data as either personal or non-personal. This traditional dichotomy fails to capture the complexity and nuances of modern data practices, especially in the context of synthetic data.

As synthetic data incorporates patterns and characteristics from real-world datasets, it challenges binary classifications and requires a more nuanced approach to data regulation. This shift could lead to more effective data protection standards aligned with the realities of modern AI technologies.

By managing synthetic data use and addressing its challenges, we can ensure that AI advances while maintaining accuracy, diversity and ethical standards.

Meta just launched

the

largest ‘open’ AI model in history. Here’s why it matters

In the world of artificial intelligence (AI), a battle is underway. On one side are companies that believe in keeping the datasets and algorithms behind their advanced software private and confidential. On the other are companies that believe in allowing the public to see what’s under the hood of their sophisticated AI models.

Think of this as the battle between open- and closed-source AI.

In recent weeks, Meta, the parent company of Facebook, took up the fight for open-source AI in a big way by releasing a new collection of large AI models. These include a model named Llama 3.1 405B, which Meta’s founder and chief executive, Mark Zuckerberg, says is “the first frontier-level open source AI model”.

For anyone who cares about a future in which everybody can access the benefits of AI, this is good news.

The danger of closed-source AI – and the promise of open-source AI

Closed-source AI refers to models, datasets and algorithms that are proprietary and kept confidential. Examples include ChatGPT, Google’s Gemini and Anthropic’s Claude.

Though anyone can use these products, there is no way to find out what dataset and source codes have been used to build the AI model or tool.

While this is a great way for companies to protect their intellectual property and their profits, it risks undermining public trust and accountability. Making AI technology closed-source also slows down innovation and makes a company or other users dependent on a single platform for their AI needs. This is because the platform that owns the model controls changes, licensing and updates.

There are a range of ethical frameworks that seek to improve the fairness, accountability, transparency, privacy and human oversight of AI. However, these principles are often not fully achieved with closed-source AI due to the inherent lack of transparency and external accountability associated with proprietary systems.

In the case of ChatGPT, its parent company, OpenAI, releases neither the dataset nor code of its latest AI tools to the public. This makes it impossible for regulators to audit it. And while access to the service is free, concerns remain about how users’ data are stored and used for retraining models.

By contrast, the code and dataset behind open-source AI models is available for everyone to see.

This fosters rapid development through community collaboration and enables the in-

Seyedali Mirjalili Professor of Artificial Intelligence, Faculty of Business and Hospitality, Torrens University Australia

volvement of smaller organisations and even individuals in AI development. It also makes a huge difference for small and medium size enterprises as the cost of training large AI models is colossal.

Perhaps most importantly, open source AI allows for scrutiny and identification of potential biases and vulnerability

However, open-source AI does create new risks and ethical concerns.

For example, quality control in open source products is usually low. As hackers can also access the code and data, the models are also more prone to cyberattacks and can be tailored and customised for malicious purposes, such as retraining the model with data from the dark web.

AN OPEN-SOURCE AI PIONEER

Among all leading AI companies, Meta has emerged as a pioneer of open-source AI. With its new suite of AI models, it is doing what OpenAI promised to do when it launched in December 2015 – namely, advancing digital intelligence “in the way that is most likely to benefit humanity as a whole”, as OpenAI said back then.

Llama 3.1 405B is the largest open-source

AI model in history. It is what’s known as a large language model, capable of generating human language text in multiple languages. It can be downloaded online but because of its huge size, users will need powerful hardware to run it.

While it does not outperform other models across all metrics, Llama 3.1 405B is considered highly competitive and does perform better than existing closed-source and commercial large language models in certain tasks, such as reasoning and coding tasks.

But the new model is not fully open, because Meta hasn’t released the huge data set used to train it. This is a significant “open” element that is currently missing.

Nonetheless, Meta’s Llama levels the playing field for researchers, small organisations and startups because it can be leveraged without the immense resources required to train large language models from scratch.

SHAPING THE FUTURE OF AI

To ensure AI is democratised, we need three key pilars:

governance: regulatory and ethical frame-

works to ensure AI technology is being developed and used responsibly and ethically

accessibility: affordable computing resources and user-friendly tools to ensure a fair landscape for developers and users

openness: datasets and algorithms to train and build AI tools should be open source to ensure transparency.

Achieving these three pillars is a shared responsibility for government, industry, academia and the public. The public can play a vital role by advocating for ethical policies in AI, staying informed about AI developments, using AI responsibly and supporting opensource AI initiatives.

But several questions remain about opensource AI. How can we balance protecting intellectual property and fostering innovation through open-source AI? How can we minimise ethical concerns around open-source AI? How can we safeguard open-source AI against potential misuse?

Properly addressing these questions will help us create a future where AI is an inclusive tool for all. Will we rise to the challenge and ensure AI serves the greater good? Or will we let it become another nasty tool for exclusion and control? The future is in our hands.

Artificial intelligence is taking the consulting industry by storm – should we be concerned?

Artificial intelligence (AI) is enjoying a long moment in the spotlight. But debate continues over whether it’s a “shortcut to utopia” or possible harbinger of the end of the world.

Meanwhile, one group has quickly leapt on both the technology and all the hype – consulting firms. And they’ve been spending big.

Advocates of the technology are heralding a new era of professional efficiency for consultants. Once-tedious emails, presentations and reports can now be completed in a flash.

Many consulting firms have also already leapt at the opportunity to professionally advise other businesses on making the most of new generative AI tools.

So why does the consulting industry see such potential for transformation – and is hurling it-

self headfirst at this technology a good idea?

Read more: Beware businesses claiming to use trailblazing technology. They might just be ‘AI washing’ to snare investors

WAIT, WHAT DO CONSULTANTS DO?

The consulting industry is notoriously shrouded in mystique, despite regularly winning huge contracts from governments and major businesses.

But in simple terms, consultants aim to offer their clients expert advice and solutions to help improve their performance, solve problems and achieve certain goals.

They often possess specialised knowledge, skills or experience relevant to a particular client, so the nature of their work can vary significantly.

Clients often seek consulting services because they want help with problem-solving and decision-making on a particular project, or want external validation for their decisions and need an independent report.

A wide range of professional services firms offer consulting services, including the “big four”: Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY) and KPMG.

There are also many specialist consulting firms, including McKinsey, Bain & Company, Boston Consulting Group, Kearney and L.E.K. Consulting.

Much of the demand for consultancy services is driven by the increasing complexity of doing business, due to globalisation, digitalisation, changing regulations and many other factors.

However, growth in Australia’s consulting sector has slowed this year amid the fallout from

Tapani Rinta-Kahila ARC DECRA Fellow / Lecturer in Business Information Systems, The University of Queensland

the PwC tax leaks scandal and sluggish economic growth.

HOW CAN AI HELP?

Artificial intelligence (AI) technology has been around in a range of forms for a while now. But until recently, it was mainly used internally by organisations and required specific training. This changed with the public launch of “generative AI” models, such as OpenAI’s ChatGPT.

These models differ from traditional AI in their capability to generate something new, such as text that is virtually indistinguishable from one written by human, or other types of output such as images, videos or sounds.

Large language models like ChatGPT were some of the first to give the general public a sense of what AI could be used for.

But this has had some specific implications for consulting businesses. The models can analyse large amounts of data quickly and cheaply to generate tailored feedback.

With generative AI offering such efficient services for business analysis and strategic planning, many would-be clients might now be questioning whether buying consulting services will remain worthwhile in the long run – particularly as these technologies improve.

GETTING AHEAD OF THE CURVE

It should therefore come as no surprise that the consulting industry is investing heavily in generative AI. Just take the big four, for example.

Deloitte and EY have already deployed conversational AI assistants aimed at boosting staff productivity.

KPMG’s customised version of ChatGPT –KymChat – was launched in March to speed up the preparation of sales proposals for consulting work, by quickly identifying relevant experts.

In May, PwC became OpenAI’s biggest enterprise customer after purchasing more than 100,000 licences for the AI giant’s latest models.

Other players operating in the knowledge work space have also been hyping up the productivity-boosting potential of generative AI for similar tasks.

US finance behemoth JPMorgan Chase recently rolled out its own large language model called LLM Suite, which it says can “do the work of a research analyst”.

WHAT DOES THIS MEAN FOR THE BUSINESS MODEL?

To harness this technology’s potential, firms will need to use it effectively. This means ensuring they maintain a human-centred value proposition for clients that goes above what the technology alone can offer.

Generative AI tools will not replace the human trust that is often crucial for successful consulting, nor provide the depth of specialised knowledge (and access to relevant human experts) that a seasoned consultant currently can.

But the technology will streamline a lot of everyday tasks. It can also provide a sounding board for decisions and business strategies, and suggest solutions.

At least in the near term, firms are likely to use AI to “augment” human consultants, rather

than replace them.

WHAT ARE THE RISKS?

The uptake of generative AI also presents risks to the consultancy business.

One big one concerns creativity. Since the models produce their outputs based on past data, the range of potential solutions they can identify will always be limited to their training data.

Excessive reliance on the same models could start eroding consultant companies’ ability to innovate, by diluting their distinct competitive advantages and make them increasingly resemble each other.

Such a phenomenon has already been observed in research looking into generative AI’s effect on student creativity.

My own research has shown that excessive reliance on automation technologies like generative AI can lead to the erosion of professional expertise. In the long run, this effect could seriously organisations’ knowledge and business reputation.

If younger consultants still in training offload too much of their thinking and analytical work to generative AI, they may fail to develop their own analytical abilities.

And of course, the technology itself isn’t perfect. Generative AI is known to make mistakes and even “hallucinate” – that is, completely make things up.

All of this highlights the importance of using generative AI thoughtfully, and perhaps above all, not losing sight of the unique value humans can bring.

Happy 50th birthday to the UPC barcode – no one expected you would revolutionize global commerce

The first modern barcode was scanned 50 years ago this summer – on a 10-pack of chewing gum in a grocery store in Troy, Ohio.

Fifty is ancient for most technologies, but barcodes are still going strong. More than 10 billion barcodes are scanned every day around the world. And newer types of barcode symbols, such as QR codes, have created even more uses for the technology.

I would have been like most people, never giving a second thought to the humble barcode, if my research as a media scholar at Clemson University hadn’t taken a few strange turns. Instead, I spent a year of my life digging through the archives and old newspaper articles to learn about the barcode’s origins – and eventually went on to write a book about the cultural history of the barcode.

While the barcode didn’t herald the end times, as conspiracy theorists once fretted, it did usher in a new age in global commerce.

BARCODES WERE A GROCERYINDUSTRY INVENTION

While the world has changed a lot since the mid-1970s, the Universal Product Code (UPC) – what most people think of when they hear the word “barcode” – hasn’t. The code first scanned on a package of gum on June 26, 1974, is basically identical to the billions of barcodes scanned in stores all over the world today.

When that first UPC code was scanned, it was the culmination of years of planning by the U.S. grocery industry. In the late 1960s, labor costs were rising rapidly in grocery stores and inventory was becoming increasingly difficult to track. Grocery executives hoped the barcode

could help them solve both of those problems, and they ended up being right.

In the early 1970s, the industry created a committee that developed the UPC data standard and chose the IBM barcode symbol over a half-dozen alternative designs. Both the data standard and the IBM barcode symbol are still used today.

Based on meeting notes I found in Stony Brook University’s Goldberg Archive, the people who developed the UPC system felt they were doing important work. However, they had no idea they were creating something that would long outlive most of them.

Even the grocery industry’s optimistic estimates predicted fewer than 10,000 companies would ever use barcodes. As a result, the scanning of the first UPC barcode received little attention at the time.

Jordan Frith Pearce Professor of Professional Communication, Clemson University

A few newspapers published short articles about the launch event, but it wasn’t exactly front-page news. Its importance was only apparent years later, as barcodes became one of the most successful digital data infrastructures ever.

BARCODES CREATED A SHELF-SPACE REVOLUTION

Barcodes didn’t just change the shopping experience at checkout. By making products machine-readable, they enabled vast improvements to inventory tracking. That meant items that sold well could be restocked quickly when the data indicated, requiring less shelf space to be devoted to any individual product.

As barcode expert Stephen A. Brown has written, that reduced need for shelf space allowed for a rapid proliferation of new products. You can blame barcodes for the fact that your grocery store sells 15 types of almost indistinguishable toothpaste.

Similarly, today’s huge grocery stores and superstores likely couldn’t exist without the massive amount of inventory data that barcode systems produce. As MIT professor Sanjay Sharma put it, “If barcodes hadn’t been

invented, the entire layout and architecture of commerce would have been different.”

OTHER INDUSTRIES QUICKLY GOT ON BOARD

The modern barcode was born in the grocery industry, but it wasn’t confined to the grocery aisles for long. By the mid-1980s, the success of the UPC system encouraged other industries to adopt barcodes. For example, within a span of three years, Walmart, the Defense Department and the U.S. automotive industry all began using barcodes to track objects in supply chains.

Private shipping companies also adopted barcodes to capture identification data. FedEx and UPS even created their own barcode symbols.

As the sociologist Nigel Thrift explained, by the end of the 1990s, barcodes had become “a crucial element in the history of the new way of the world.” They helped enable rapid globalization in ways that would be difficult to imagine if barcodes didn’t exist.

BLACK AND WHITE AND UNNOTICED ALL OVER

As someone who became so interested in this history that I got a tattoo of my latest book’s International Standard Book Number barcode on my arm, the quiet passing of the barcode’s 50th anniversary feels almost poetic.

I grew up in a world where barcodes were everywhere. They were on all the products I bought, the concert tickets I scanned, the packages I received.

Like most people, I rarely thought about them, despite — or maybe because of — their ubiquity. It wasn’t until I began research for my book that I realised how a barcode on a package of gum set in motion a chain of events that transformed the world.

For decades, barcodes have been a workhorse operating in the background of our lives. Modern humans scan them countless times every day, but we rarely think about them because they’re not flashy and just work — most of the time, anyway.

As barcodes keep chugging along in their old age, they’re a reminder that the seemingly boring technologies are often far more interesting and consequential than most people realize.

FraudGPT and other malicious AIs are the new frontier of online threats. What can we do?

The internet, a vast and indispensable resource for modern society, has a darker side where malicious activities thrive.

From identity theft to sophisticated malware attacks, cyber criminals keep coming up with new scam methods.

Widely available generative artificial intelligence (AI) tools have now added a new layer of complexity to the cyber security landscape. Staying on top of your online security is more important than ever.

THE RISE OF DARK LLMS

One of the most sinister adaptations of current AI is the creation of “dark LLMs” (large language models).

These uncensored versions of everyday AI systems like ChatGPT are re-engineered for

criminal activities. They operate without ethical constraints and with alarming precision and speed.

Cyber criminals deploy dark LLMs to automate and enhance phishing campaigns, create sophisticated malware and generate scam content.

To achieve this, they engage in LLM “jailbreaking” – using prompts to get the model to bypass its built-in safeguards and filters.

For instance, FraudGPT writes malicious code, creates phishing pages and generates undetectable malware. It offers tools for orchestrating diverse cybercrimes, from credit card fraud to digital impersonation.

FraudGPT is advertised on the dark web and the encrypted messaging app Telegram. Its creator openly markets its capabilities, emphasising the model’s criminal focus.

Another version, WormGPT, produces persuasive phishing emails that can trick even vigilant users. Based on the GPT-J model, WormGPT is also used for creating malware and launching “business email compromise” attacks – targeted phishing of specific organisations.

WHAT CAN WE DO TO PROTECT OURSELVES?

Despite the looming threats, there is a silver lining. As the challenges have advanced, so have the ways we can defend against them.

AI-based threat detection tools can monitor malware and respond to cyber attacks more effectively. However, humans need to stay in the mix to keep an eye on how these tools respond, what actions they take, and whether there are vulnerabilities to fix.

You may have heard keeping your software up to date is crucial for security. It might feel like a

Bayu Anggorojati

Assistant Professor, Cyber Security, Monash University

Arif Perdana

Associate Professor in Digital Strategy and Data Science, Monash University

Derry Wijaya

Associate Professor of Data Science, Monash University

chore, but it really is a critical defence strategy. Updates patch up the vulnerabilities that cyber criminals try to exploit.

Are your files and data regularly backed up? It’s not just about preserving files in case of a system failure. Regular backups are a fundamental protection strategy. You can reclaim your digital life without caving to extortion if you are targeted by a ransomware attack –when criminals lock up your data and demand a ransom payment before they release it.

Cyber criminals who send phishing messages can leave clues like poor grammar, generic greetings, suspicious email addresses, overly urgent requests or suspicious links. Developing an eye for these signs is as essential as locking your door at night.

If you don’t already use strong, unique passwords and multi-factor authentication, it’s time to do so. This combination multiplies your security, making it dramatically more difficult for criminals to access your accounts.

WHAT CAN WE EXPECT IN THE FUTURE?

Our online existence will continue to intertwine with emerging technologies like AI. We can ex-

pect more sophisticated cyber crime tools to emerge, too.

Malicious AI will enhance phishing, create sophisticated malware and improve data mining for targeted attacks. AI-driven hacking tools will become widely available and customisable.

In response, cyber security will have to adapt, too. We can expect automated threat hunting, quantum-resistant encryption, AI tools that help to preserve privacy, stricter regulations and international cooperation.

THE ROLE OF GOVERNMENT REGULATIONS

Stricter government regulations on AI are one way to counter these advanced threats. This would involve mandating the ethical development and deployment of AI technologies, ensuring they are equipped with robust security features and adhere to stringent standards.

In addition to tighter regulations, we also need to improve how organisations respond to cyber incidents and what mechanisms there are for mandatory reporting and public disclosure.

By requiring companies to promptly report cyber incidents, authorities can act swiftly. They can mobilise resources to address breaches before they escalate into major crises.

This proactive approach can significantly mitigate the impact of cyber attacks, preserving both public trust and corporate integrity.

Furthermore, cyber crime knows no borders. In the era of AI-powered cyber crime, international collaboration is essential. Effective global cooperation can streamline how authorities track and prosecute cyber criminals, creating a unified front against cyber threats.

As AI-powered malware proliferates, we’re at a critical junction in the global tech journey: we need to balance innovation (new AI tools, new features, more data) with security and privacy.

Overall, it’s best to be proactive about your own online security. That way you can stay one step ahead in the ever-evolving cyber battleground.

Absa Mauritius Sustainability Vision 2030

Local companies are increasingly committed to sustainable development, adopting strategies that focus not only on protecting the environment, but also and above all on the community. Absa Mauritius is one of them. Having recently helped to renovate Ladies Ward 1-6 at Jawaharlal Nehru hospital in Rose-Belle and participated in the reforestation project in Le Morne, where 12,000 indigenous trees will be planted by the end of 2024, the group continues to build on its momentum. Nathan Carr. Chief of Staff and Head of Legal at Absa Mauritius, tells us more about Absa’s Sustainability vision 2030.

1. CAN YOU TELL US MORE ABOUT ABSA MAURITIUS’S SUSTAINABILITY VISION, AND HOW DOES THIS VISION GUIDE YOUR DAILY STRATEGIC ACTIONS AND DECISIONS?

Sustainability is rightly seen as the biggest challenge and opportunity of our generation. Driven by Absa Group’s purpose, “Empowering Africa’s tomorrow, together … one story at a time,” we recognise our role as a Pan-African financial institution in shaping a sustainable future within a broader ecosystem. Our commitment is to make a meaningful difference through our daily actions and financial propositions, focusing on impactful results rather than following trends or achieving superficial targets.

Our vision is for Absa Mauritius to be the market leader in sustainability practices on the island and in the region, through our commitment to be an active force for good in everything that we do. This means two things: firstly, that we operate our business in a deliberate way that is sustainable and, secondly, that we proactively partner with our customers and service providers to adapt to Climate

change and transition to a net zero outcome.

To bring this vision to life, we have adopted a comprehensive approach that ensures that sustainability is ingrained in every aspect of our business strategy. This strategic approach is centred on three key strategic pillars:

Sustainable Finance – by providing relevant and competitive sustainable finance propositions to the market,

Responsible Corporate Behaviors – through reducing our own carbon footprint and exceeding our Diversity, Equity and Inclusion targets.

Community Investment – by making a tangible and long-lasting positive impact on our communities in Mauritius.

By focusing on these areas, we are ingraining sustainability in all of our strategic decisions and drives our daily operations. This vision influences everything we do, from the products we offer to the way we interact with our clients and communities, ensuring that our actions align with our commitment to creating lasting,

positive impact and change.

2.HOW DOES THIS VISION TRANSLATE INTO YOUR APPROACH TO ADDRESSING THE CHALLENGES OF CLIMATE CHANGE, AND WHAT SPECIFIC MEASURES ARE BEING IMPLEMENTED BY ABSA MAURITIUS?

We recognise that as an island, Mauritius is particularly vulnerable to climate change, making it essential to improve climate resilience and adaptation to address the social and economic challenges posed by natural hazards such as flooding, beach erosion, and rising sea levels. These issues directly impact key sectors like hospitality and have broader implications for the economy as a whole. Understanding these risks, we are committed to taking decisive and proactive action to mitigate their impact.

Absa Group has set an ambitious long-term goal to achieve Net Zero emissions across scopes 1, 2, and 3 by 2050. While setting these long-term targets is crucial, we believe that the immediate steps we take today are what truly drive sustainable progress and create meaningful impacts. At Absa Mauritius, we have set

Ladies Ward: Jawaharlal Nehru Hospital

a target to reduce our financed emissions by 50% by 2030, and to disburse Rs 30 billion through Sustainable Finance by the end of 2030. Again, these numbers are reflected in hard, quantitative targets that are continually measured, tracked and reported.

In pursuit of these goals, we have already launched various initiatives. We have introduced a special offer to support our colleagues in transitioning to electric mobility and have installed solar-powered car parks that allow for the charging of electric vehicles.

Additionally, we are active in the financing of renewable energy projects, leveraging the expertise of colleagues across Absa Group, who are considered leaders in this sector. We are also working closely with our clients to support their transition to sustainable practices, offering tailored solutions to help them achieve their own environmental goals. We have piloted the islands first fully solar powered green ATM and have installed solar charging for our utilities at and around Absa House in Ebene.

These combined efforts reflect our commitment to addressing climate change with the urgency and responsibility it demands, ensuring that we contribute to a more sustainable future for Mauritius and beyond.

3. WHAT GOVERNANCE PRACTICES HAVE YOU PUT IN PLACE TO ENSURE TRANSPARENCY, ETHICS, AND ACCOUNTABILITY AT ABSA MAURITIUS, IN LINE WITH YOUR SUSTAINABILITY GOALS?

Transparency and trust are critical to our efforts on sustainability. Absa Mauritius has established a strong track record in governance, grounded in principles of transparency, ethics, and accountability. This foundation ensures that our Sustainability objectives are deeply embedded within our governance framework.

Central to the governance approach is a dedicated team composed of senior management, who work in close collaboration with board members across our Sustainability agenda. This collaborative structure ensures that sustainability considerations are integral to our strategic decision-making and daily operations. By maintaining this direct connection, we ensure that our sustainability goals are consistently reflected in high-level decisions. Our Board, through Board sub committees, have direct line of sight on our sustainability strategy and execution and actively challenge and shape that.

To effectively monitor and advance our performance, we have also incorporated specific sustainability metrics into our organisational performance scorecards. This approach enables us to systematically track progress against our sustainability targets, providing transparency and reinforcing accountability across all organisational levels.

Moreover, we are investing in comprehensive training programs that extend from the boardroom to every level of our workforce. These

programmes are designed to instill a robust culture of sustainability and ethical conduct, ensuring that every member of our team understands and supports our objectives.

Through these interconnected practices, we uphold high standards of governance and ensure that our sustainability goals are not only integrated into our operations but are actively pursued and maintained throughout the organisation.

4.HOW IS ABSA MAURITIUS MAKING A POSITIVE IMPACT ON THE COMMUNITY, AND WHAT ARE SOME OF THE KEY INITIATIVES YOU HAVE UNDERTAKEN?

Absa Mauritius has a proud history of empowering our communities. This connection is rooted in our DNA as a caring organisation that recognizes the holistic value of cocreating a vibrant and inclusive society.

Absa remains deeply committed to making a meaningful impact in our local communities through a range of strategic initiatives that reflect its dedication to social responsibility and positive change.

A tangible example of this commitment is our partnership with the Ministry of Health and Wellness to materially rejuvenate the Ladies Ward at Jawaharlal Nehru Hospital in Rose-Belle. With the high prevalence of non-communicable diseases among the population, particularly among women, being a significant public health challenge, we have made it a priority to address these issues. As part of our dedication to empowering women

and improving public health, Absa Mauritius invested in excess of MUR 20 million in the renovation and refurbishment, creating a first class environment that enhances the overall care experienced by patients.

We also place a strong emphasis on community engagement through our Employee Volunteering Programme. A recent highlight is our reforestation project in Le Morne, where we have pledged to plant 12,000 indigenous trees by the end of 2024. So far, over 3500 indigenous plants have been planted to date by more than 200 employee volunteers in partnership with the local community, demonstrating our collective commitment to preserving the island’s natural heritage.

This project typifies the holistic approach Absa adopts by engaging colleagues in the execution of the initiative, working alongside our strategic partners and the local community to effect positive change.

Inclusivity and empowerment are also central to Absa Mauritius’s efforts. We have recently collaborated with the Global Rainbow Foundation to launch a financial literacy programme tailored for individuals with disabilities. We believe that everyone deserves access to education and financial resources, and this programme is designed to empower participants with the skills needed for financial independence and success. This is a targeted initiative aimed at driving financial inclusion.

These diverse efforts highlight our broader commitment to creating positive and sustainable change.

Nathan Carr Head of Sustainability, Absa Mauritius

Amazon countries are stepping-up measures to counter illicit financing of nature crime

With the announcement by the US of a new initiative to counter the illicit financing of environment crime in the Amazon, there are signs the issue is finally an international priority. US Treasury Secretary Janet Yellen launched the Amazon Regional Initiative Against Illicit Finance last month with the stated aim of boosting training, cooperation, and information sharing to help authorities pursue money-laundering investigations against transnational criminal organizations. The US is poised to step-up the fight against the world’s third most profitable category of organized crime.

Nature crimes include a cluster of activities that enable illegal deforestation, degradation and biodiversity loss. Among the most common are land grabbing, illegal logging, illicit mining and irregular agriculture and ranching – all of which are prolific across the 6 million

km² Amazon basin. As noted in the US’s latest strategy on fighting terrorist and other financing, nature crimes are perpetrated by a bewildering array of actors, from organized crime groups, drug cartels, and corrupt land brokers to legitimate companies in the agriculture and cattle sector and large, medium and small-scale landowners.

Nature crimes are part of a wider ecosystem of criminality affecting the eight countries sharing the Amazon rainforest. Alongside illicit timber extraction, illegal gold mining, poaching, and wildlife trafficking are other criminal practices such as targeted assassinations, harassment and intimidation, extortion, fraud, and tax evasion, money laundering, and corruption. The interconnectedness of nature crime with these other illegal activities make the former particularly hard to police and prosecute, especially when committed by hardened criminal syndicates that operate across borders.

One of the reasons why the US is stepping-up efforts to disrupt illicit financial flows related to nature crime in the Amazon is precisely because of the increasing involvement of transnational organized crime. Cartels, gangs, and militia from Brazil, Colombia, Venezuela, and other countries are increasingly involved in laundering profits from the drug trade into “legitimate” businesses in the Amazon. Many of them operate across borders, including socalled triple frontier regions in Brazil, Bolivia, Colombia, Guyana, Suriname, and Venezuela. Some of these “forest mafia” are fueling “narco-deforestation” through illegal land acquisition, mineral extraction, and poaching.

The latest initiative announced by the US builds on the growing determination of several Amazon basin countries and western partners to “follow the money” rather than simply throwing more police and military assets at the problem. Groups such as the UN Office for Drugs and Crime and the Igarape Institute

Robert Muggah Lecturer, Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio)

Melina Risso Diretora de Pesquisa, Instituto Igarapé

Janet Yellen US Treasury Secretary

are already training law enforcement agencies and financial crimes units of Brazil, Colombia, and Peru to improve evidence collection and operational responses to crimes involving the environment.

While several types of environmental crime can be curbed by financial penalties and sanctions on legal and illegal groups involved in criminal activities, the effectiveness of such measures depends on the quality of enforcement. This is a challenge in the Amazon Basin where security and justice institutions are weak and many actors involved in committing nature crime go unpunished, much less pay fines when they are prosecuted. Owing to deeply entrenched corruption and informality, there are often strong political and economic disincentives to take action at the local level.

The scaling-up of counter-money laundering efforts related to nature crime also depends heavily on smooth transnational cooperation. Yet cross-border cooperation is in frustratingly short supply across Latin America, especially among Amazon basin countries where political spats are routine. Ideological tensions and mistrust routinely hamper regional efforts to fight environmental crime, even where there are clear converging interests.

More positively, there appears to be growing agreement on the shared threats posed by nature crime across the region, particularly in Brazil, Colombia, Ecuador and Peru. In the wake of the 2019 Leticia Pact,leaders from all Amazon countries signed a Belem Declaration in 2023 which described environment crimes as a threat to climate and environmental priorities, as well as governance and sustainable development. There is a marked shift in tone

and a sense of urgency. The US announcement to target money laundering and transnational criminal organizations is not coincidental.

At the regional level, governments appear determined to strengthen the fledgling Amazon Treaty Cooperation Organization(ACTO), though this is a slow moving process. Brazil also launched an international police center (the CCPI- Amazon) in early 2024 to foment cooperation, including on financial crimes. Alongside the US commitment,ad hoccoalitions have emerged to expand police and prosecutorial cooperation, including to counter financial crimes and money laundering with support from the EU, Interpol and Europol.

Notwithstanding growing determination to fight nature crime, US-led sanctions and technical support to the region’s police forces are only part of the solution. Drug cartels, major companies, large landholders, and corrupt government agents involved in nature crime are the most likely targets of anti-financial crime units. However, lower level crime groups, small firms and land owners, and landless people involved in illegal deforestation and degradation are not going to be dissuaded. Comprehensive responses are needed, including strategies to strengthen the rule of law and offer meaningful economic alternatives to slow extractivist activities.

Law enforcement agencies across the Amazon basin face multiple obstacles to preventing and reducing nature crimes, including tackling the complex illicit financial networks and practices that enable them. A persistent challenge facing all countries is the deficit in technical expertise: there is a chronic shortage of experts in anti-money laundering and illicit

financial flows. While they have some experience in disrupting money laundering related to drug proceeds, most police agencies and criminal justice institutions have limited expertise in countering money laundering related specifically to natural assets.

Another challenge facing law enforcement relates to the patchwork of money laundering norms and laws across the region. The definition of offenses varies from place to place. A key priority, then, involves harmonizing money laundering legislation and policies across jurisdictions. Without minimum alignment of laws, procedures, and standards between countries, police are simply unable to pursue cases across borders. This applies not just to countries in the Amazon basin, but also the US and EU.

There are other obstacles to disrupting illicit finance networks driving nature crime. For example, many of the actors involved in financing it are not based in the Amazon.

Ultimately, the most significant impediments to disrupting illegal financial flows connected to nature crime are political and economic. Specifically, elected politicians and civil servants may directly and indirectly benefit from nature crimes such as logging, mining, and poaching and have limited incentive to cooperate with police and criminal justice authorities. Likewise, large numbers of local businesses and residents are often heavily dependent on illegal and informal practices linked to nature crimes linked to forestry, mining, and agricultural and livestock rearing, presenting a challenge for law enforcement and prosecutors.

Ayse Coskun Professor of Electrical and Computer Engineering, Boston University

AI supercharges data center energy use – straining the grid and slowing sustainability efforts

The artificial intelligence boom has had such a profound effect on big tech companies that their energy consumption, and with it their carbon emissions, have surged.

The spectacular success of large language models such as ChatGPT has helped fuel this growth in energy demand. At 2.9 watt-hours per ChatGPT request, AI queries require about 10 times the electricity of traditional Google queries, according to the Electric Power Research Institute, a nonprofit research firm. Emerging AI capabilities such as audio and video generation are likely to add to this energy demand.

The energy needs of AI are shifting the calculus of energy companies. They’re now exploring previously untenable options, such

as restarting a nuclear reactor at the Three Mile Island power plant, site of the infamous disaster in 1979, that has been dormant since 2019.

Data centers have had continuous growth for decades, but the magnitude of growth in the still-young era of large language models has been exceptional. AI requires a lot more computational and data storage resources than the pre-AI rate of data center growth could provide.

AI AND THE GRID

Thanks to AI, the electrical grid – in many places already near its capacity or prone to stability challenges – is experiencing more pressure than before. There is also a substantial lag between computing growth and grid growth. Data centers take one to two years to

build, while adding new power to the grid requires over four years.

As a recent report from the Electric Power Research Institute lays out, just 15 states contain 80% of the data centers in the U.S.. Some states – such as Virginia, home to Data Center Alley – astonishingly have over 25% of their electricity consumed by data centers. There are similar trends of clustered data center growth in other parts of the world. For example, Ireland has become a data center nation.

Along with the need to add more power generation to sustain this growth, nearly all countries have decarbonization goals. This means they are striving to integrate more renewable energy sources into the grid. Renewables such as wind and solar are intermittent: The wind doesn’t always blow and the sun doesn’t always shine. The dearth of cheap, green and

scalable energy storage means the grid faces an even bigger problem matching supply with demand.

Additional challenges to data center growth include increasing use of water cooling for efficiency, which strains limited fresh water sources. As a result, some communities are pushing back against new data center investments.

BETTER TECH

There are several ways the industry is addressing this energy crisis. First, computing hardware has gotten substantially more energy efficient over the years in terms of the operations executed per watt consumed. Data centers’ power use efficiency, a metric that shows the ratio of power consumed for computing versus for cooling and other infrastructure, has been reduced to 1.5 on average, and even to an impressive 1.2 in advanced facilities. New data centers have more efficient cooling by using water cooling and external cool air when it’s available.

Unfortunately, efficiency alone is not going to solve the sustainability problem. In fact, Jevons paradox points to how efficiency may result in an increase of energy consumption in the longer run. In addition, hardware efficiency gains have slowed down substantially, as the industry has hit the limits of chip technology scaling.

To continue improving efficiency, researchers are designing specialized hardware such as accelerators, new integration technolo-

gies such as 3D chips, and new chip cooling techniques.

Similarly, researchers are increasingly studying and developing data center cooling technologies. The Electric Power Research Institute report endorses new cooling methods, such as air-assisted liquid cooling and immersion cooling. While liquid cooling has already made its way into data centers, only a few new data centers have implemented the still-in-development immersion cooling.

FLEXIBLE FUTURE

A new way of building AI data centers is flexible computing, where the key idea is to compute more when electricity is cheaper, more available and greener, and less when it’s more expensive, scarce and polluting.

Data center operators can convert their facilities to be a flexible load on the grid. Academia and industry have provided early examples of data center demand response, where data centers regulate their power depending on power grid needs. For example, they can schedule certain computing tasks for off-peak hours.

Implementing broader and larger scale flexibility in power consumption requires innovation in hardware, software and grid-data center coordination. Especially for AI, there is much room to develop new strategies to tune data centers’ computational loads and therefore energy consumption. For example, data centers can scale back accuracy to reduce workloads when training AI models.

Realizing this vision requires better modeling and forecasting. Data centers can try to better understand and predict their loads and conditions. It’s also important to predict the grid load and growth.

The Electric Power Research Institute’s load forecasting initiative involves activities to help with grid planning and operations. Comprehensive monitoring and intelligent analytics – possibly relying on AI – for both data centers and the grid are essential for accurate forecasting.

ON THE EDGE

The U.S. is at a critical juncture with the explosive growth of AI. It is immensely difficult to integrate hundreds of megawatts of electricity demand into already strained grids. It might be time to rethink how the industry builds data centers.

One possibility is to sustainably build more edge data centers – smaller, widely distributed facilities – to bring computing to local communities. Edge data centers can also reliably add computing power to dense, urban regions without further stressing the grid. While these smaller centers currently make up 10% of data centers in the U.S., analysts project the market for smaller-scale edge data centers to grow by over 20% in the next five years.

Along with converting data centers into flexible and controllable loads, innovating in the edge data center space may make AI’s energy demands much more sustainable.

Breaking Barriers: Access Bank Championing Education for Every Child in Africa

“Children in emergency situations have a right to quality education like every other child, yet education in emergencies continues to be critically underfunded and under-resourced. Education is lifesaving and should not be seen as a second phase of a humanitarian response.”

– Wongani Grace Taulo, UNICEF Regional Education Adviser for Eastern and Southern Africa.

It is a basic right for every child to receive an education that is both inclusive and of high quality. However, in Africa, there are nearly 46 million children of school age who do not attend school. Those who face the greatest challenges, particularly those impacted by conflict and climate crises, often lack access to education the most.

According to the United Nations Educational, Scientific and Cultural Organisation, of the 244 million children globally between ages 6 and 18 who are not in school, more than 98 million—or over 40%—reside in sub-Saharan Africa. This includes significant numbers in Nigeria (20.2 million), Ethiopia (10.5 million), the Democratic Republic of Congo (5.9 million), and Kenya (1.8 million). Currently, sub-Saharan Africa exhibits the highest levels of educational deprivation worldwide, with an alarming 90% of children unable to competently read or comprehend a basic text by age 10. Children entrenched in areas plagued by conflict or climate-related emergencies are disproportionately impacted by this learning deficit, suffering the highest rates of educational shortfall in the region. Over half of all children worldwide affected by crises are in sub-Saharan Africa. These vulnerable children should be prioritised for extensive educational support to aid their learning and rehabilitation; however, many are unfortunately left without such assistance.

It is widely recognised that education is a critical component for socio-economic development, significantly contributing to the

improvement of individual lives and community welfare. Education equips people with crucial skills, knowledge, and abilities necessary for personal development and societal progress. The benefits of education extend past scholastic achievement, advancing economic growth, alleviating poverty, promoting social fairness, bettering health conditions, stimulating innovation, encouraging environmental preservation, reinforcing community connections, and supporting self-actualisation.

From an economic standpoint, education is a driving force for expansion and improvement, boosting the productivity and innovative capacity of the labour market. Individuals with education are more likely to land better-paying jobs, foster technological progress, and spearhead initiatives, which in turn enrich overall economic performance and consistency. Additionally, education is crucial in reducing poverty, as it arms people with vital skills to escape persistent deprivation. Quality education not only broadens job prospects but also provides individuals with essential insights that influence their choices regarding health, dietary habits, and family planning, thus enhancing the general quality of life.

Education acts as a leveller, providing opportunities for people from all walks of life to thrive and contribute to society. It encourages social harmony by teaching acceptance and respect for differences and enables individuals to partake in meaningful discussions and unite on community matters. By granting knowledge and skills, education empowers people to make choices, speak up for themselves, and

influence their futures. It reduces inequalities related to gender, ethnicity, or income through accessible educational opportunities. Moreover, an educated public is more likely to take part in civic duties, comprehend their rights, and actively engage in democratic processes, promoting a fair and just society.

Access Bank PLC, one of Africa’s premier financial institutions, continues to reaffirm its dedication to education and community development through its annual Charity Polo Tournament. During the 2024 event, Access Bank announced the construction of 60 additional classrooms in Maraban Jos, Kaduna. This initiative underscores the transformative power of sports in driving community upliftment.

The tournament, which attracted dignitaries, sports enthusiasts, and philanthropists, highlighted how sports can serve as a powerful catalyst for social good. This year’s announcement builds on the Bank’s commendable efforts in 2023, where they commissioned 30 blocks, each comprising two classrooms, during the same event.

Upon the project’s completion, Access Bank aims to double the enrolment capacity of the Access Bank Fifth Chukker School. This expansion is poised to significantly enhance educational opportunities, building on the school’s success in providing quality education and social welfare to approximately 14,000 children to date. The Polo Tournament has also, in recent years, been extended to include South Africa, with a partnership with the

Nelson Mandela Foundation forming a foundation for scaled impact across the continent. Access Bank’s initiatives include scholarships, mentorship programs, and providing a comprehensive educational experience for underserved students.

Continuing with similar initiatives, Access Bank, in collaboration with the Temitayo Awosika Help Foundation, launched the Back to School Project to lessen financial pressures on parents and guardians of children with sickle cell disease. This noble cause has provided over 12,000 underprivileged students with vital scholastic materials. These materials comprise textbooks essential for thorough learning, backpacks for the efficient and safe transport of items, notebooks designed for effective note-taking and homework, along with an array of stationery crucial for everyday learning tasks. Through this provision, TAHF aims to promote educational opportunity and equity, ensuring that children from all economic backgrounds have the essential instruments to thrive academically.

Furthering its efforts to reduce the number of out-of-school children, Access Bank partnered with Kidpreneur Africa to launch “Project Educate Me.” This initiative aims to empower internally displaced and underserved youth with essential literacy, financial, digital, and life skills. Targeting vulnerable populations in Adamawa, Katsina, and Borno states, Project Educate Me will support children in specific local government areas.

By collaborating with stakeholders, the pro-

ject seeks to directly benefit over 150,000 children, ensuring positive, lasting impacts on their lives and futures.

Access Bank Ghana’s partnership with CHAINT AFRIQUE on the “A Sandal More” project, an initiative focused on upcycling used car tires into eco-friendly, durable school sandals. This innovative project addresses the dual needs of promoting quality and inclusive education for all children by providing sandals to underprivileged children, and promoting environmental sustainability by repurposing waste materials. The project was launched in 2023 supported 1,000 school children in Ghana with sandals made from tires. The initiative has impacted over 400 communities and involved skills acquisition programs for youth and entrepreneurs to build capacity on recycling old tires, with 1,000 individuals trained. Collection hubs were provided in various locations for the collection of old tires from customers and employees

Building on its success in Ghana, Access Bank Nigeria partnered with FREEE Recycle to launch a transformative initiative in Oyo State. The program collected and recycled 706 discarded tires from the Oyo environs through FREEE’s network of aggregators. The recycled tires were utilised to produce 2,500 rubber sandals, benefiting school children in various communities across Oyo State. This initiative not only addressed critical waste management challenges by promoting recycling and reducing carbon emissions but also enhanced access to education by providing footwear to school children. Additionally, Access Bank

and FREEE Recycle were committed to empowering local communities through skills development, ensuring sustainable contributions to FREEE Recycle’s manufacturing operations and fostering environmental stewardship across the region.

In Zambia, many girls encounter formidable challenges due to the considerable distances they must traverse to reach school. These distances often pose a barrier to their education, especially in rural areas like Kasama. Recognising this obstacle, Access Bank Zambia has made a significant contribution to the Strong Girls Strong Zambia Campaign by donating 60 bicycles. These bicycles play a crucial role in enhancing educational opportunities for vulnerable girls. By providing a means of transportation, Access Bank Zambia is helping to overcome the logistical hurdles that often prevent girls from attending school regularly and punctually. This initiative not only ensures safer and more efficient travel but also empowers girls to prioritise their education, thereby fostering their academic success and personal development.

Access Bank is actively addressing educational barriers, empowering vulnerable populations, and promoting sustainable development. By focusing on literacy, empowerment, and community engagement, Access Bank not only transforms individual lives but also contributes significantly to the socio-economic advancement of communities. As we all know, education is a fundamental human right and it is our obligation to ensure no child is left behind.

How ‘climate mainstreaming’ can address climate change and further development goals

Canada’s first National Adaptation Strategy urges Canadians to consider climate change impacts in their everyday decisions.

The strategy calls such an approach “climate mainstreaming.” The approach states that:

“as climate impacts become more severe and frequent, and the costs mount, incorporating adaptation considerations in health, social, environmental, infrastructure and economic decisions-making is critical to ensure that our collective efforts keep pace.”

Similar statements are outlined in the 2023 press release of the Intergovernmental Panel on Climate Change (IPCC). The IPCC Chair Hoesung Lee stated, “mainstreaming effective and equitable climate action will not only reduce losses and damages for nature and

people, it will also provide wider benefits.”

Global greenhouse gas emissions need to be cut 43 per cent from 2019 to 2030 to limit global warming to 1.5 C. At the 2023 United Nations climate conference (COP28) in Dubai, parties were deemed off track in meeting their Paris Agreement goals.

A rapid and meaningful expansion of climate mainstreaming — the integration of climate considerations into all development programs and policies — is vital for addressing the urgent global climate crisis.

WHY MAINSTREAM CLIMATE CHANGE?

Mainstreaming climate considerations ensures that responses to climate change are systemically embedded in all policies and actions, rather than treated as a separate issue. This integration allows for more comprehensive and cost-effective interventions by addressing

multiple issues at once.

For instance, within an ongoing program focused on improving food safety in informal, outdoor markets through enhanced hygienic practices, mainstreaming might entail additional activities related to climate adaptation such as raising awareness among food vendors about the importance of refrigeration during heatwaves to prevent bacterial growth.

Failing to mainstream climate considerations can hinder climate action as well as result in maladaptation, which occurs when well-intentioned development actions inadvertently increase climate impacts. For example, seawalls can protect people and property from damage in the short term. However, if they are not part of a long-term plan that can adapt to changing conditions, they can trap communities in risky situations and increase their exposure to climate risks over time.

Steven Lam Visiting researcher, Department of Population Medicine, University of Guelph

Gloria Novović LSE Fellow, Department of Gender Studies, University of Guelph

Hoesung Lee Former IPCC Chairperson

While attention to climate mainstreaming calls for the prioritization of climate considerations across all policy arenas, progress remains slow and uneven due primarily to an institutional resistance to change. Climate action is often seen as the responsibility of a single sector rather than the collective, and incremental changes are inferior to transformative ones.

Furthermore, climate mainstreaming is often narrowly interpreted as simply the addition of climate to existing structures and initiatives. Often derisively dubbed a “just add climate and stir” approach.

To help address these preconceptions, our research has explored how climate mainstreaming challenges resemble similar decades-long struggles to mainstream gender equality across international and national public policy agendas. The question we have asked is: what can climate mainstreaming learn from gender mainstreaming?

INSIGHTS FROM GENDER MAINSTREAMING

The longer history of gender mainstreaming, including institutional investments dating back to 1990s, offers lessons about policy and institutional bottlenecks of mainstreaming. These lessons can help tackle political and institutional challenges of climate mainstreaming. The UN system, with clear gender and climate mainstreaming targets, offers a suitable arena for analysis.

In a new study published in 2024, we reviewed documents of United Nations agencies working in the food and agriculture sector, which is strongly impacted by climate change. We found varying degrees of gender and climate mainstreaming across selected UN agencies.

Key areas where climate mainstreaming fell short compared to gender mainstreaming included: strategic planning, leadership, organizational culture and accountability.

Our review showed ways to improve climate mainstreaming. Here are three actions governments, development partners and industries can take now:

1. Use multiple strategies: draw upon gender mainstreaming good practices to adopt both broad climate initiatives and specific interventions.

2. Build institutional accountability: establish strong mechanisms to track progress in climate mainstreaming. The UN’s framework for gender mainstreaming can act as a useful model. This would help ensure transparency, monitoring and a stronger commitment to climate action.

3. Adopt a climate justice perspective: uphold the needs of climate change-vulnerable populations and prioritize collective human and environmental rights over economic growth. Ensure diverse stakeholders participate across all levels of decision-making.

Accountable and integrated climate justice interventions are prerequisites for a more sustainable and resilient future. Financing is another.

FINANCING IS KEY

While mainstreaming is important, it is nothing without adequate financing. The 2015 Paris Agreement requires high-income countries to contribute $100 billion annually. However, this goal has not been met, and the existing funds are unevenly distributed.’

Historically disadvantaged countries are the least responsible for yet the most impacted by climate crisis. These countries are largely left to balance development and climate action investments in a generally unjust international financial system.

In 2022, official development assistance reached US$204 billion, but this still left nearly half of the humanitarian requirements unmet. Rich countries spent only 0.36 per cent of their total income on aid — slightly up from 0.33 per cent in 2021, but still much lower than the 0.7 per cent promised back in 1970.

With the financing to back it up, a climate mainstreaming perspective may just be the solution to addressing both global development and climate goals.

How investing in green buildings, including cheaper home loans, is a win for banks, people and our planet

Australia is facing dual crises: increasing climate change risks and soaring housing costs. Financial institutions have a crucial role to play in funding and promoting solutions to these challenges.

A recent United Nations Environment Programme report, Banking on Green Buildings, proposes ways to promote sustainable buildings in line with both economic and environmental goals. Suggested options include green bonds and green mortgages for developing and renovating buildings to be sustainable.

Banks have the power to revolutionise how we fund construction. Directing investment into green buildings means future houses can be affordable, sustainable and resilient to climate change.

Our buildings account for around 19% of total energy use and 18% of direct carbon emissions in Australia.

HOW DOES THIS HELP WITH HOUSING COSTS?

Rising costs and a lack of affordable choices are putting immense pressure on Australia’s communities and housing sector. Soaring energy bills have driven up the cost of living, especially for low-income households.

Modern construction methods and green buildings provide an answer since they are more efficient and use less energy. So smart green building strategies can produce more affordable homes for Australians that are cheaper to run.

By reducing living costs, green homes also reduce mortgage default risk. That’s one reason

banks in some parts of the world already promote their benefits.

Various UK lenders offer green mortgages with lower interest rates to buyers of energy-efficient new homes. A European Commission-funded project has also provided green mortgages.

GREEN HOMES INCREASE RESILIENCE

Australia faces increasing risk from natural hazards including bushfires, floods and extreme heatwaves as a result of climate change. Australian households paid an average of A$888 a year in direct costs because of extreme weather events over the ten years to 2022. This figure is expected to exceed $2,500 a year (in 2022 dollar value) by 2050.

Energy-efficient and sustainably built buildings are more resilient to climate change impacts

Ehsan Noroozinejad Senior Researcher, Urban Transformations Research Centre, Western Sydney University

Nicky Morrison Professor of Planning and Director of Urban Transformations Research Centre, Western Sydney University

such as extreme heat. They lower long-term risk for investors and households by improving comfort and safety during extreme weather.

Banking programs that give priority to energy-efficient designs and materials have a dual effect: they reduce environmental impacts and strengthen resilience to climate change.

WHO DOES THIS IN AUSTRALIA?

Green building loans enable financial institutions to develop and expand their product offerings.

NAB’s Green Finance for Commercial Real Estate program is an initiative that increases commercial buildings’ climate resilience. It includes financing for developing green buildings and retrofitting buildings to greatly reduce energy use and emissions.

The former Sustainable Australia Fund’s offering of $100 million in green loans to business was another program that helped make buildings more sustainable. Eligible upgrades included renewable energy and battery storage, building insulation and electric vehicle charging stations. Owners were advised on the emissions profiles of their properties and possible improvements.

Bank Australia’s Clean Energy Home Loan is an example in the housing sector. The bank offers lower rates for home owners to make their homes more energy-efficient and environmentally friendly.

GLOBAL EXAMPLES OF SUCCESS

Financial institutions worldwide have bene-

fited from including sustainable construction investments in their portfolios.

A 2023 International Finance Corporation report, Building Green, shows green construction could be a US$1.5 trillion investment opportunity in emerging markets over the next decade.

Global demand for investments in climate-resilient infrastructure is already high, as green bond issues show. Banks issue these bonds to borrow money from investors. The banks then use those funds to provide loans for environmentally friendly purposes.

In the past two months, First Abu Dhabi Bank raised US$600 million and Commercial Bank of Dubai raised US$500 million by issuing green bonds.

The success of European property consultancy CFP Green Buildings demonstrates the scalability of such programs. It has grown from greening 3,000 buildings per year to over 3.5 million buildings per year.

CFP has now partnered with CommBank to provide comparable tools in Australia to assess commercial buildings, identify ways to improve their sustainability and estimate costs.

The Japan Bank for International Cooperation’s green bonds issues, totalling more than US$1.5 billion over the past four years, is another example of the robust global demand. Funded projects involve renewable energy, clean transportation and green buildings.

Global bank HSBC also plays a key role in this rapidly growing market. HSBC Green Bonds

support activities such as green buildings, clean transportation, energy efficiency, renewable energy, sustainable waste management and climate change adaptation.

These financial solutions are essential to fund actions to reduce environmental hazards and improve climate resilience.

ALIGNING WITH NATIONAL POLICY GOALS

Australia has a target of net-zero emissions by 2050. Our financial institutions can play an important role in getting there by promoting green construction methods including prefab and modular timber buildings.

Owners of homes with a Green Star rating benefit financially from the start. A 2023 KPMG report estimates they may save up to A$115,000 in interest by putting their energy bill savings into repaying their loan. The energy and interest savings exceed the initial costs of achieving a Green Star standard.

A panel discussion last October, led by Urban Transformations Research Centre at Western Sydney University, highlighted the need for sustainable building designs to build community resilience. One of the main challenges that panellists identified is finding ways to finance the costs of constructing and retrofitting buildings amid an affordability crisis.

This is where financial institutions come into the picture. They are key to building a sustainable future and overcoming Australia’s climate and housing challenges.

Audrey-Anne de Ubeda

Responsable de la coordination des programmes de recherche à la Fondation pour les Etudes et Recherches sur le Développement International (FERDI)

Édouard Mien

Chargé de recherche, Fondation pour les Etudes et Recherches sur le Développement International (FERDI), Université Clermont Auvergne (UCA)

Maritime commerce and climate change: how effective would a carbon tax on shipping be?

With 11 billion tonnes of goods traded internationally by sea every year, shipping accounts for around 3% of global greenhouse gas (GHG) emissions. This is more than commercial aviation, for example, which is responsible for 2.6% of the planet’s emissions. Despite this, shipping is often overlooked when considering the overall carbon neutrality of our societies.

Numerous voices, from the South and the North, are calling for the introduction of a carbon tax on maritime transport, a sector currently exempt from the Kyoto Protocol and therefore untaxed. Such a tax would align with the objective of setting a uniform global carbon price, and would be based on the “polluter pays” principle, where the cost is borne by those whose behaviour generates

emissions. It would thus be fair. It would generate revenues that could be used to finance climate change adaptation and mitigation policies, while modifying behaviours and reducing emissions.

As economic researchers, we examined whether these multiple objectives could be achieved simultaneously. We estimate that while a tax of $40 per tonne of CO2 could generate up to $60 billion in revenue, it would only reduce shipping emissions by 1.75%, far below the reduction ambitions announced by the International Maritime Organization (IMO). The other side of the coin is that the tax would have an economic cost of 166 billion dollars, due to higher transport costs and reduced consumer purchasing power. It would also affect poor countries more than rich ones. Let’s take a closer look at why.

SIMULATIONS THAT QUESTION THE RATIONALE FOR TAXING MARITIME TRANSPORT

Using international trade data, we simulated the tax revenues and short-term effects of implementing a carbon tax of US$40 per tonne of CO2 on shipping emissions for 185 countries ($40 per tonne is at the low end of the range of targets set by experts, corresponding to an increase of around 30% in the price of heavy fuel oil based on 2018 prices). Our study identifies several points for consideration. It questions both the double dividend regularly put forward for environmental taxes, which are supposed to reduce emissions while financing the transition, and the polluter-pays narrative, which would position the shipping tax as a fair tax.

The tax revenues generated by this hypothet-

Vianney Dequiedt Professor of Economics, Université Clermont Auvergne (UCA)

ical tax are estimated at between $19.6 and $59.5 billion, for an economic cost or budget loss of $166 billion worldwide. The cost/revenue ratio is therefore high. In other words, if the sole objective is to mobilise financial resources, this tax is probably not the most effective approach

Furthermore, the impact of the tax on reducing carbon emissions from shipping falls short of the IMO’s stated ambitions for reducing GHG emissions from the maritime sector. We estimate that the average distance traveled at sea per $1 of cargo would be reduced by 2.59% with the tax, resulting in a decrease in shipping emissions of approximately 1.75%. When considering the reorientation of certain trade flows toward more carbon-intensive modes of transport, such as road or air, the overall effect of the tax on carbon emissions from trade becomes even more modest, ranging from -0.72% to +0.12%.

Additionally, the introduction of a maritime carbon tax would disproportionately affect consumers in poorer countries compared to those in wealthier ones. Countries that are far from world markets and heavily reliant on maritime transport for trade would be most affected. Poorer countries are also disadvantaged by the type of goods they typically trade,

which are often bulky and of low value. Small island developing states such as Comoros and Haiti, as well as vulnerable countries like Gambia and Guinea Bissau, would be among the most affected. Therefore, the tax would be highly inequitable, and this must be taken into account when allocating its generated revenue.

IMPACT OF CARBON TAX

ON WELFARE BY COUNTRY AS A FUNCTION OF GDP PER CAPITA

Other studies using alternative methodologies to estimate the effect of a tax on shipping confirm its disproportionate effect on poorer countries.

These results, concerning both the reduction in carbon emissions from shipping and the economic impact on poor countries, underscore the importance of clarifying the objectives we aim to achieve with the introduction of a carbon tax on shipping. Such a tax cannot be viewed as a silver bullet for decarbonising the sector and financing the energy transition. Its pros and cons must be carefully weighed against those of other international taxes currently under consideration, such as a carbon tax on civil aviation, a tax on financial transactions or a tax on the ultra-rich. This

comparative analysis will help identify tax instruments that are the fairest, least costly, most incentivising or which generate the highest revenues.

HOW CAN WE SUPPORT CARBON PRICING IN THIS SECTOR?

The introduction of a global carbon price, applicable across all sectors and stakeholders, has been identified as a crucial element in the fight against climate change. Therefore, implementing a carbon tax on shipping should be accompanied by a carbon tax on air freight, to prevent trade flows from shifting toward this significantly more carbon-intensive mode of transport.

Furthermore, introducing compensation mechanisms for poor and vulnerable countries, particularly the Least Developed Countries and Small Island Developing States, aligns with a fairness objective, given the disproportionate impact of the tax on these countries.

Finally, it seems clear that achieving the IMO’s goal of zero GHG emissions by 2050 will require carbon pricing to be accompanied by more directly binding mechanisms that encourage a technological revolution in the sector.

Recycling more than pop cans: A circular economy for our energy landscapes

From cereal boxes to our distinct milk bags, Canadians have been told that one of the best things we can do for the planet is to embrace the circular economy — reusing, repurposing or reallocating assets to ensure they’re kept within useful circulation as long as possible, and ideally forever.

Originally conceptualized as recycling, we are all familiar with the good feeling that comes from tossing paper, plastic and other materials into the blue bin rather than throwing them in a landfill. It’s time to consider applying an expanded version of this approach to what we call energy landscapes.

Considering the thousands of square kilometres that we have carved, scraped and bulldozed to produce the energy we crave, it is past time we started figuring out how we can recycle energy landscapes and make them useful for new purposes.

In our over-crowded world, we can no longer justify exploiting our landscapes for the energy we need and then simply walking away. We need to embrace a circular economy for our energy landscapes of the past and prepare to recycle the landscapes of the future.

RECYCLING LANDSCAPES

Recycling of energy landscapes comes to two forms; that is, the land itself and the infrastructure we place upon it.

Although rare in Canada, the idea is quickly catching on elsewhere. Lignite pits in Germany have been converted to recreational lakes. A derelict, coal-burning power plant in London has been transformed into an exhibition, condominiums and retail space.

In Nova Scotia, a 14 MW wind farm was developed at the site of the province’s coal-fired Lingan power station, and newly proposed

green hydrogen production facilities are to be built on the land of stalled liquefied natural gas projects.

The idea of recycling or reusing applies not just to fossil fuels, but to renewable energy policies as well.

Last summer, the Conservative government of Alberta made decisions on the future land use of renewable energy projects like wind and solar farms. As outlined by academic Ian Urquhart earlier this year, the government’s seven-month moratorium banned all new projects under the rationale they threatened the province’s best agricultural lands and “Alberta’s pristine landscapes.”

However, the restrictions brought in, including a 35-kilometre buffer zone, do not apply to new oil and gas projects. Alberta Premier Danielle Smith’s government therefore created a unique set of recycling concerns around

Martin J. Pasqualetti Professor of Geography and Senior Global Futures Scientist, Arizona State University

Chad Walker Assistant professor, Low-carbon Transitions, School of Planning, Dalhousie University

Michelle Adams Associate professor, School for Resource and Environmental Studies, Dalhousie University

renewables that didn’t apply to fossil fuels.

REUSING SPACE IN AN ENERGY TRANSITION

At a time when more local smart grid projects — bringing together local renewables, battery storage, smart controls, heat pumps and electric vehicles — are being developed, there’s a need to consider how to go beyond recycling to reuse existing space and infrastructure.

Rooftop solar is an obvious choice to better utilize space, though the footprint of household and on-street EV charging infrastructure is similarly unsubstantial compared to your neighbourhood gas station.

Recycling in a clean energy transition will not only have great value in energy landscapes, but also in new clean energy technologies themselves. While we are already slowing the rise of climate change-fuelling emissions, we can go further if we advance the practice of recycling EV batteries and solar panels.

But we can’t stop there. We must also prepare to recycle the landscapes these technologies create.

ABANDONMENT IS NOT AN OPTION

Abandoning exhausted energy sites is wasteful, unnecessary and costly. The customary energy life cycle includes exploration, development, extraction, processing, transmission

and sometimes reclamation. We advocate for an additional stage: recycling, thus preparing the land to be reimagined for another cycle of useful purpose.

We must take greater care of the precious Canadian landscape, especially those that have paid dearly to provide the energy we need. Once the land gives all it can, we should consider it not the end of the life cycle but as a new beginning.

Recycling energy landscapes as a strategy challenges the status quo. We must chart a path toward ensuring that such landscapes are repurposed to benefit both ecosystems and society, and embrace a circular economy for the land.

PAN FINANCE AWARD WINNERS

Established to be a true indicator of excellence, the Pan Finance Awards identifies organisations and individuals who have excelled in their fields. Our awards directory serves to shine a spotlight on and also applaud these leading examples of best practice.

ESG INNOVATOR OF THE YEAR - MAURITIUS 2024 -

MOST INNOVATIVE DIGITAL BANKING SERVICES - MAURITIUS 2024 -

Absa Bank (Mauritius) Limited is part of Absa Group Limited which is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups. Absa Group offers an integrated set of products and services across personal and business banking, corporate and investment banking, wealth and investment management and insurance.

Absa Group owns majority stakes in banks in Botswana, Ghana, Kenya,

Amberdata is the leading provider of digital asset data and infrastructure. We deliver comprehensive data and insights into blockchain networks, crypto markets, and decentralised finance, empowering financial institutions with data for research, trading, risk, analytics, reporting,

Mauritius, Mozambique, Seychelles, South Africa, Tanzania (Absa Bank Tanzania and National Bank of Commerce), Uganda and Zambia and has insurance operations in Botswana, Kenya, Mozambique, SouthAfrica and Zambia. Absa also has representative offices in Namibia, Nigeria and the United States, as well as securities entities in the United Kingdom and the United States, along with technology support colleagues in the Czech Republic.

and compliance. Amberdata serves as a critical piece of infrastructure for financial institutions entering the asset class and participating in digital asset markets.

Applica Corp. is a trailblazer in the field of talent management and staff augmentation, revolutionizing the way companies access and integrate top professionals into their teams.

The company’s groundbreaking Applica® Method has transformed recruitment, enabling organizations to secure highly skilled candidates in record time while optimizing every phase of the hiring process. With a team composed of engineers and psychologists, Applica ensures a thorough evaluation of both technical skills and personal attributes, pro-

viding clients with a full-spectrum view of each candidate.

Applica Corp. promises to present candidates within 72 hours, a remarkable timeframe that relieves clients from the exhausting burden of managing recruitment and onboarding. The company’s focus on team stability is equally noteworthy, significantly reducing turnover rates and underscoring its commitment to the well-being of both employees and clients.

Enflux is the most transparent market maker in crypto. We ensure token stability using ‘market making a service’ business model, reliable algorithms, and extensive market experience.

All our clients can monitor their trading markets in real time via our ana-

lytics platform. This way, they retain complete control over their token in the most transparent manner possible.

We firmly believe that token founders should trust but verify.

BEST DIGITAL BANK FOR HNWIS - 2024 -

Launched in 2015 and recognized as one of the top ten digital banks in the world to watch, EQIBank strives to provide more financial solutions to more countries than any other digital bank. Boasting competitive rates, 24/7 service, security you can trust, and an innovative, simple online global banking experience across all your devices, EQIBank is recognized as one of the world’s leading digital banks.

Our client relationships are built on partnership, continuity, and mutual trust, with our tax-neutral personal and corporate banking services being enjoyed by clients located in over 180 countries. Our jurisdictional advantages are synonymous with best-in-class banking, investment, OTC trading, and wealth planning solutions.

We’re an AI startup developing Imandra®, the cloud-scale automated reasoning system bringing rigor and governance to the world’s most critical algorithms. Imandra strives to recruit, develop, and retain the most talented people worldwide, regardless of their background.

We aim to outperform traditional asset classes while minimizing risks.

In the aftermath of the global financial crisis, major central banks’ liquidity injections have inflated traditional asset classes, while new regulations reduced the banks’ appetite and capability to lend to smaller businesses.

Katch identified these trends and decided to launch funds that invest in short-term lending and financing opportunities for businesses that offer strong guarantees. It focuses on areas such as factoring, receivables monetization, real estate bridge loans, litigation finance, and others.

Paxon is a leading financial advisory firm in the infrastructure and projects sector. Established over 30 years ago, we specialise in innovative financial and commercial solutions for major infrastructure and PPP projects. Paxon is headquartered in Australia, with offices and clients across Asia Pacific and the Middle East.

Our strength is in financial, transaction and PPP (public private partnerships) advisory for social and economic infrastructure projects. Over the last 20 years, we have advised on over US$130 billion of projects.

Paxon supports organisations and leaders to make critical decisions about how infrastructure transactions and projects are delivered. This includes:

Developing financing, funding and commercial models for projects;

Feasibility and business case development; Privatization and PPP assessment; Outsourcing assessments and transaction advice; Financial and commercial advice for projects and transactions; Transaction management; Finance structuring and arrangement.

Paxon has market-leading expertise in infrastructure sectors including: Health and hospitals; Education; Affordable housing; Real estate and urban precincts; Sport and recreation; Transport and logistics (airports, road, rail and ports); Local public transport (bus, metro); Corrections and justice; Water, waste and utilities, and Other infrastructure PPPs.

For more information, please visit our website at www.paxongroup.com. au or email infra@paxongroup.com.au.

PIM Capital was launched in 2014 in Mauritius as a global fund services and investment product infrastructure provider, with a particular focus on Africa. The group was founded a decade earlier in 2005 as a fund administrator in South Africa and has since evolved to employ over 60 staff across their offices in Johannesburg, Cape Town and Gabarone whilst 40 staff are spread across 2 offices in Mauritius, supporting clients globally across diverse products, funds and mandates. The group operates in Mauritius, Guernsey, South Africa, Botswana and Namibia

with the intention to meet clients where they are through a global presence, serviced locally. PIM Capital provides end to end regulatory infrastructure, investment support and administration services to traditional and alternative funds, investment advisors and clients. Serviced asset classes encompass the entire spectrum from alternatives through to listed instruments in mandates structured as either open ended, hybrid or closed ended funds.

TodayPay® is the the world’s first faster refund payment method and inventor of Refunds as a Service™ category. That means helping merchants, marketplaces, logistics, issuers, and insurers disburse value to

their customers instantly, in the payment method and speed of their choice.

Turnkey Trading Partners (“Turnkey”) provides high touch, high service, consulting, accounting, educational, training, and compliance solutions to brokerage and trading firms operating within the alternative investments industry. Turnkey’s customers include International Banks, Clearing Organizations, Swap Dealers, Hedge Funds, Commodity Trading Advisors, Brokers and Traders, as well as Crypto and Digital Asset firms. After nearly 20 years of successful operations, Turnkey supports hundreds of clients from around the globe, making it one of the largest derivatives consulting firms in the United States. As a frequent winner of industry “Best” awards, Turnkey has staked its reputation on successfully providing efficient, cost-effective business support that is

custom tailored to meet each of its customer’s unique needs. Turnkey’s team of leading industry professionals is well prepared to address nearly every situation which may be encountered while operating a regulated trading and brokerage business. Turnkey was founded in Chicago, IL during 2007 by a former industry regulator. In 2017 the firm expanded its operations to the greater Miami area where it now maintains an office in Ft. Lauderdale, FL. To learn more about Turnkey and its service offerings please visit www.turnkeytradingpartners.com.

Since 2000, ViewTrade has provided 300+ firms – from fintech start-ups to leading financial institutions – with the technology and brokerage services they need to create great retail investment experiences. Whether it’s a single API endpoint or a full turnkey solution, ViewTrade provides what your business needs to build or embed investment and financial services. Our technology and experience bring you to market faster, with less risk and at a lower operating cost. ViewTrade delivers a unique combination of modern technology and old-school service, where real people — not chatbots and wiki pages — provide amazing support. With our in-depth knowledge of financial services technology, operations and

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