Year: 2020

Looking towards the future of participation banking

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The first private financial institution to provide Islamic banking services in Turkey was established in 1984, and began its activities the following year. By 1999, the number of Islamic finance institutions had grown substantially and were included in the scope of the country’s Banking Law. In 2005, these institutions took their current name of ‘participation banks’.

At the time of writing, there are 53 banks active in Turkey: six participation banks, 34 conventional banks, and 13 development and investment banks. Ziraat Participation Bank, the first public participation bank, started operating in 2015.

At Ziraat Participation Bank, known in Turkey as Ziraat Katlim Bank, our mission is to become a participation bank that understands the expectations and needs of our customers in the best way possible, offering reliable solutions and value propositions through the most appropriate channels. We also believe in the importance of carrying out our activities with world-class levels of sustainable profitability and efficiency – showing an awareness of the ethics and principles of participation banking – while facilitating access to financial services focused on customer satisfaction.

Our vision is to become a global, reputable and leading participation bank that strengthens participation banking not only in Turkey, but also in the wider region, consistently generating value and offering customers more at every stage of their financial journey.

 

A partner in business
The banking system is built on two basic functional pillars: accepting deposits and lending funds. Participation banks and conventional banks diverge in their methods of performing these two basic functions. Participation banks base their deposit collections on a partnership, lending the funds collected from their customers to other customers who need financing within the framework of the participation banking principles. The profit generated from these loans is then distributed to the fundholders based on the terms and conditions of partnership agreed to while making a deposit.

Because the profit generated isn’t known at the outset, fundholders aren’t guaranteed any profit margin. In the conventional banking system, however, there is a set interest yield for the deposits collected from customers at the beginning of their transactions. Conventional banks use other financial instruments with interest yields to utilise these funds and guarantee that they will provide the determined interest yield to their customers at the end of maturity.

As for loan operations, consider them under two headings: cash loans and non-cash loans. Cash loan transactions in participation banks are based on the financing of their customers’ purchases of tradable goods or services, or are carried out based on a joint undertaking of the related purchase. The key point here is that the customer is not provided with non-tradable finance.

In the financing provided to the customer, the financing rate for the repayment maturity determined at the beginning of the transaction constitutes the profit amount to be generated by the participation bank over the relevant maturity period. In addition, in profit-loss partnership transactions, the profit obtained within the framework of the partnership is also shared and added to the bank’s profit. Cash loan transactions in conventional banks are based on the issuance of a certain interest rate according to customer needs. The loan does not have to be for the purposes of purchasing tradable goods or services – it is collected together with the related loan interest over the predefined maturity.

With non-cash loans, participation banks can perform all non-cash financing transactions in accordance with the principles of Islamic banking. The only difference from conventional banks is that participation banks do not carry out any transactions that violate those principles.

As is the case for conventional banks, participation banks in Turkey are subject to the Banking Law. Moreover, participation banks carry out all of their banking activities in line with the principles of Islamic banking while complying with the national Sharia board. While each participation bank has its own advisory board, the Participation Banks Association of Turkey operates a Central Advisory Board, which acts as a supreme board. These structural and procedural differences in banking transactions are what distinguish participation banks from conventional banks.

 

Raising the flag
With a history dating back 35 years, participation banking in Turkey has played an increasingly important role in the finance industry in recent years. The share of participation banks in terms of total banking assets grew eight percent year on year in 2018, and 19 percent in 2019. Ziraat Participation Bank’s share in the market also grows day by day: as of year-end 2019, our total assets grew 64 percent, cash loans grew 63 percent and total funds grew 68 percent from the previous year.

The upward trend of participation banking is expected to continue in parallel with the potential clients we reach. And with recent advances in technology driving improvements in communications tools and information sharing, Ziraat Participation Bank can now reach a wider audience, demonstrate the benefits of participation banking over conventional banking and promote our activities more effectively.

One of our key missions at Ziraat Participation Bank is to listen to the needs of our clients and develop appropriate solutions based on the principles of participation banking. In this context, we have introduced various firsts to the participation banking industry in Turkey. Through the joint investments model, we launched a capital-partnership-based financial product – the first of its kind in the sector – and introduced the first project-based partnership model outside the construction sector.

We have developed mobile applications that enable participation banking customers to digitally manage their financing facilities. We have also taken a more active role in fundraising activities by enabling the involvement of participation accounts with maturities shorter than one month with the investment wakala product. With these and similar solutions, we have brought a wave of innovation to the sector, encouraging other players to develop pioneering products tailored to the needs of their clients.

Driven by Ziraat Participation Bank’s approach of playing an effective role in the development of the sector, we aim to enhance client satisfaction through the financial services we provide and, as a result, make a considerable contribution to the market share of participation banking.

 

The road ahead
According to 2019 year-end data, the share of participation banking in the larger banking industry in Turkey grew by 25 percent to reach 8.4 percent in total funds, by eight percent to reach 5.5 percent in fund facilities, and by 19 percent to hit 6.3 percent in assets. While motivating, these figures also show that we have a long way to go. Participation banking’s goal is to reach an asset size market share of 15 percent by 2025.

We have numerous leverages that stand to provide an advantage if managed properly, including increasing awareness of participation banking, clients’ preference for interest-free banking products, the presence of a large, previously untapped base of banking clients, the existing potential of non-participation banking clients in Turkey, the growing prevalence of participation banking in parallel with increasing trade with other Islamic states and the associated demand for Islamic banking products, and the potential for participation banking to develop alternative products tailored to the market’s needs. All of these factors are expected to play a crucial role in increasing the efficiency of the sector.

Operating in a sector of continuously increasing competition necessitates keeping up with changes and predicting developments. It’s a time-consuming endeavour to adapt traditional practices to today’s needs. As such, having good human capital that is open to development is crucial. It’s also essential that human resources investments continue to ensure sustainable development.

Another important aspect is to adapt technological advancements for use in the sector. This shows the significance of the in-house development of globally feasible technology applications. Utilising an artificial-intelligence-based system to catalogue customer feedback, identify priority needs, and develop and launch products to meet those needs would provide a remarkable contribution to our development as a bank.

Participation banks more broadly will continue to lay the foundations of systems that will facilitate clients’ access to banking services, meeting their needs in the most rapid, lean manner and enhancing service quality in general. Turkey benefits from a significant population of well-educated young people, which will be its greatest asset in overcoming any challenges.

As a member of the Ziraat Finance Group – one of Turkey’s oldest financial institutions, with 156 years of experience – Ziraat Participation Bank will continue to leverage its rich history, drawing strength from the past even as we look forward to greater success in the future. We strive to continually expand the reach of our value proposition, first across Turkey and the wider region, and then the entire world.

Creating a stable future

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Last year, Mexico’s National Commission of the Retirement Savings System approved a proposal to make the most important changes to the Mexican pension system since the sweeping reforms of 1997. Under the new scheme, pension plans will become more flexible, allowing for greater investment diversification and, hopefully, greater returns for recipients. The system now takes into account one of the most sophisticated trends in asset management regarding pension funds, which maximises the replacement rate (the percentage of an individual’s last expected wage paid out by a pension programme) rather than asset returns.

The new scheme aligns a number of different factors – including contribution rate, retirement age and wage growth – with asset and risk allocation, adjusting these throughout the individual’s working life. This brings all the advantages of long-term investing together to create a smoother and more efficient investment cycle.

Since the inception of Mexico’s pension scheme, the investment regime has evolved from featuring portfolios containing only bonds to a highly diversified system that contains everything from bonds to alternative assets, both in local and international markets. Efficient use of these diversification tools has been key to meeting our fiduciary responsibility and, of course, to maximising the pensions of our customers, which is the main target of the scheme.

 

Think smart
Afore XXI Banorte’s investment capabilities helped to ease the transition process, allowing us to design one of the more diversified and sophisticated glidepaths in the system. A glidepath is the mechanism through which investment profiles automatically move a client’s pension pot towards more secure investments as they get closer to retirement age. The company is the only retirement fund administrator in the Mexican system that has gained all the approval licences from the national regulator. This means we boast a wider investment universe than our competitors, offering traditional assets and alternatives, as well as different investment vehicles like mandates (both private and public), futures, forwards and options.

Our investment philosophy is based on the benefits of diversification, and this is reflected throughout our glidepath design. With our proprietary capital market assumptions, the optimisation process considers a wide range of scenarios that result in the best risk-adjusted portfolios and de-risking profile, giving us an optimal replacement rate for our clients. This reflects our various investment capabilities, licences and our commitment to the customer.

During the creation of the glidepath, we integrated principles of responsible investment into our strategy. We are a signatory of the UN Principles for Responsible Investment and have committed to transparency regarding our environmental, social and corporate governance (ESG) standards.

 

Retiring in a better world
We are currently moving from the awareness phase of our ESG process to the integration phase, which contains a holistic philosophy that assesses issues like climate change, the local community and the corporate practices of the issuers we work with. This change of stance is hugely significant and signals that we are making progress. In 2019, our investment team launched more than 300 questionnaires to companies that were part of our investment portfolio, with the intention of learning more about their ESG standards. Now, we are including external managers from public and private markets, as well as international and local managers, in these questionnaires.

This approach has proved to be groundbreaking in local markets because it was the first time a local pension fund was asking such questions of its partners. Part of our task was to make our managers and the companies in our portfolios aware that our fiduciary responsibility extends beyond providing a favourable replacement rate, but also includes creating a better environment in which to retire.

Our fiduciary responsibility extends beyond providing a favourable replacement rate, but also includes creating a better environment in which to retire

The integration of these principles represented a major overhaul in the investment process because it meant that not only returns were considered when approving an investment strategy, but also the impact on the environment, society and the relevant governance criteria. As for external managers, we have created a scoring process to evaluate both their performance against their peers and their performance in terms of ESG factors. In this way, we are able to favour the strategies and managers that prioritise ESG in their investment process.

Last year, Afore XXI Banorte became the first Mexican pension fund to adopt the Code of Ethics and Standards of Professional Conduct formulated by the CFA Institute, the world’s largest association of investment professionals. This meant it adopted the highest standards of ethics, education and professional excellence in portfolio management. By implementing these initiatives, Afore XXI Banorte has set a new standard for the pension fund system in Mexico.

A digital strategy
Our efforts to evolve are not only related to the investment process. Technology is at the core of our value chain and operations, so this year we started our digital transformation process through the Afore Digital initiative. Our main target is to continue transforming the way we approach our business operations and strategy using digital technology.

Most importantly, we understand that the use of digital channels will enhance the experience of our customers and create a closer connection and an improved service. Afore Digital is leveraging digital technologies in both infrastructure and applications to increase our business capabilities, boost efficiency, improve our ability to use information, bolster information security and reduce costs. COVID-19 has accelerated this transformation, and we have fast-tracked and broadened our omnichannel capabilities by making more services available digitally to reduce the need for our customers to visit our branches. We are confident that we are on our way to becoming a data-driven organisation capable of designing a better customer experience, while also becoming more agile, efficient, competitive and profitable.

A major difficulty for the pension fund industry is that it offers an intangible product that does not solve any immediate problems; in fact, it actively reduces the client’s income in the short-term. That’s why our marketing strategy highlights that we not only offer the best place for our clients’ money to grow, but also that, by investing with us, they are having a positive impact on our world and society.

We are fully committed to our customers because our main goal is to deliver what our clients need at the precise moment they need it. We listen closely to their feedback through our 10 contact channels, which we will increase across the coming year. This allows us to be available 24 hours a day, wherever our clients are located. The use of digital platforms allows us to identify our customers’ interests and habits in a very precise way, letting us provide the right advice as they make their way towards retirement.

In addition, we are developing a loyalty programme that will allow our customers to capitalise on their pension fund every day. This, like all our products and services, is guided by our strategy of enhancing the customer experience and constantly striving to improve. We want our customers to take control of their future, safe in the knowledge that we are on hand to assist them throughout their working life. Making retirement savings accessible to the customer will always be at the heart of our strategy.

Spain’s unemployment rate rises to 15.33 percent

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Spain’s unemployment rate rose to 15.33 percent in the second quarter of 2020, according to data released by the National Statistics Institute on 28 July. This means that joblessness in the country is now at its highest level in two years.

Experts fear that the situation will only get worse. According to OECD forecasts, unemployment in Spain could surge to 22 percent by the end of 2020, if there is not a second wave of infections. However, if there is a second wave, as many as 25.5 percent of Spanish workers could face unemployment, which would make its labour market one of the worst-hit in Europe.

The recent data still does not show the full extent of the unemployment crisis. Tens of thousands of companies in Spain have signed their employees up to the country’s furlough scheme, but these workers are not considered unemployed in the survey. The National Institute of Statistics has also decided to exclude from the data over a million people recently made unemployed. This was on the grounds that they don’t fit the technical criteria for unemployment, which includes actively job-seeking.

Spain is among the countries worst affected by the coronavirus pandemic. According to data released on 24 July, it has so far recorded over 270,000 cases and more than 28,000 deaths. Its already-vulnerable economy has also taken a battering. This is partly because the country implemented one of the strictest lockdowns in Europe, which brought economic activity to a halt. What’s more, the tourism sector – which contributes to about 14.3 percent of GDP – was crippled by global travel restrictions.

However, long before the pandemic began, Spain was grappling with high unemployment, inherited from the sovereign debt crisis almost a decade ago. In the first quarter of the year, unemployment in Spain stood at 14.41 percent – more than double the EU average.

Investment in a small yet ambitious nation

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The Commonwealth of Dominica is one of a group of islands forming the eastern boundary of the Caribbean Sea as it meets the Atlantic Ocean. Nicknamed the Nature Isle of the Caribbean, the country is famed for its biodiversity and boasts the Morne Trois Pitons National Park, which is the Eastern Caribbean’s first UNESCO World Heritage Site. The park is home to the second-largest boiling lake on Earth, as well as heavily protected rainforests, rare fauna and marine life.

The island garnered international recognition for its recovery efforts in the wake of Hurricane Maria, which damaged 90 percent of Dominica’s housing in 2017. Thanks to funds from the country’s Citizenship by Investment (CBI) Programme, the island resolved to “build back better” and has since reached levels of development that exceeded all expectations.

 

Investing in resilience
Dominica’s CBI Programme has earned the top spot in the CBI Index for the last three years. In exchange for a significant investment in the country, well-vetted applicants and their eligible dependents can obtain citizenship of the lush island nation in around three months. The programme offers two routes to citizenship: applicants can make a direct contribution of at least $100,000 to the government’s Economic Diversification Fund, or invest in pre-approved real estate valued at a minimum of $200,000. Direct contributions are used to support Dominica’s economic development and have positively impacted all aspects of life on the island, financing both public and private sector projects.

As well as being instrumental to the country’s recovery efforts, CBI is the driving force behind Dominica’s goal of becoming the world’s first climate-resilient nation. Part of this mission has been Prime Minister Roosevelt Skerrit’s Housing Revolution scheme, which aims to build more than 5,000 homes using climate-resilient structures that are designed to withstand hurricanes and earthquakes. Another aspect of the scheme has been the repair of healthcare centres and hospitals, as well as the construction of a new, climate-resilient smart hospital.

Dominica’s determination to become a world leader in sustainability and the fight against climate change – bolstered by its long-standing, harmonious relationship with nature – owes much to the interest that CBI has garnered across the globe. Yet it is not just the country’s native population that has benefitted from CBI: for participants in the programme, the advantages of holding
Dominican citizenship are numerous.

 

Rewards and returns
With Dominican citizenship comes unfettered access to a country that has gained recognition from the Financial Times’ fDi Intelligence division as a top leisure destination for wellness and ecotourism. Although there is no requirement that CBI investors reside on or visit the island in order to gain citizenship, for eco-conscious investors, Dominica is the perfect country in which to live and raise a family. A magnet for tourists searching for a holiday off the beaten track, Dominica is home to many luxury, climate-conscious resorts – shares of which can be purchased under the real estate arm of the country’s CBI Programme. These shares can be sold within three to five years of purchase (depending on the buyer) and promise lucrative returns. Additionally, new economic citizens will find they are able to expand their travel horizons and business opportunities. That’s because Dominicans can travel to 140 destinations worldwide without the need to obtain a visa.

Family reunification is an important feature of the island’s CBI Programme and, accordingly, applicants can add dependents to their citizenship application. Dominica encourages the inclusion of a spouse, children under the age of 30, parents and grandparents. Children aged 18 to 30 must generally show they are in full-time attendance at an institution of higher learning and are fully supported by the main applicant.

For family members planning to undertake higher education, Dominica provides access to excellent educational institutions where English is taught as the first language. The country’s membership of the Commonwealth of Nations grants further education opportunities. In the UK, for example, Dominican citizens are eligible for various scholarships at master’s and PhD level.

For those seeking to broaden their global presence, relocate to a beautiful country or simply make a difference to a small yet ambitious nation, Dominica’s CBI Programme is an ideal solution that is just one investment away.

How Macau is developing diversified industries for sustainable economic development

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The national development strategy of the Guangdong-Hong Kong-Macau Greater Bay Area states that Macau must link up with China’s broader national strategy and promote a moderately diversified development of the economy, focusing on ‘one platform, one centre, one base’. The purpose of diversified economic development is to maintain a moderately balanced industrial structure, cultivate new pillar industries and drivers of economic growth, and promote the sustainable development of Macau’s society and economy.

Since the start of the year, a novel coronavirus has raged around the world, forcing major countries to go into lockdown, economic activities to suddenly halt, social confidence to weaken and the global economy to fall into recession. Notably, the price of oil has fallen and US stock markets have slumped, hitting their emergency circuit breakers several times in a short period and triggering financial turmoil. In response, Macau has developed an economic and industrial strategy of moderate diversification to help the country tackle the crisis and achieve sustainable development.

 

Branching out
Since reuniting with mainland China, the Government of the Macau Special Administrative Region (MSAR Government) has fully administrated the ‘one country, two systems’ constitutional principle as mandated by law. Macau’s economy has developed rapidly, displaying abundant social wealth and recording one of the highest GDP per capita in the world (see Fig 1), all while maintaining social harmony and general prosperity.

 

As one of the world’s most open economies, Macau has established stable business relations with 120-plus countries and regions. It is a member of 30 international economic organisations and adheres to more than 100 international conventions and multilateral treaties. International assets and liabilities account for more than 80 percent of Macau’s total bank assets, and business-operating standards are in line with international norms. What’s more, Macau’s investment and business procedures are simple, encompassing a low tax system and the free flow of capital. The MSAR Government also has close ties with Portuguese-speaking countries and many overseas Chinese.

However, as a typical microeconomy, Macau’s economic structure is fragile and relies heavily on the gaming industry, which makes economic growth highly volatile, reduces the city-state’s capacity to respond to challenges and risks, and delivers weaker growth momentum. In early 2020, as the COVID-19 pandemic took hold, socioeconomic life in Macau was almost completely shut down, forcing the gaming industry to engage in an unprecedented 15-day closure in February. As of mid-March, around 80 percent of Macau’s casino tables were back in action, albeit with social distancing restrictions in place. Nevertheless, gross gaming revenue in Q1 2020 was MOP 30.48bn ($3.82bn), a 60 percent decrease from the same period in 2019, according to Macau’s Statistics and Census Service (DSEC).

As a tourism hub, Macau is a free market economy and frequently engages in economic exchanges with surrounding and Portuguese-speaking countries. It has been greatly affected by the coronavirus pandemic and the resulting global economic recession, which highlights the urgency and necessity of developing a moderately diversified economy. As such, Macau needs to make greater efforts to cultivate diversified industries and promote sustainable economic development.

In recent years, the MSAR Government has made steady economic development and orderly structural adjustment a priority in its policy address. It has focused on supporting the growth of industries such as tourism, exhibitions and conventions, culture, entertainment and traditional Chinese medicine. In conjunction with the Belt and Road Initiative and the economic outline for the Greater Bay Area, the government also intends to broaden the scope of the region’s financial industry and emphasise the development of specialised finance. It will provide support in terms of talent, systems and laws to assist the finance industry, helping it to cooperate with the mainland and surrounding areas, as well as create value in the disciplines of financial leasing, wealth management and asset management.

 

A specialised service
The development of a specialised finance industry is the most realistic way for Macau to achieve moderate economic diversification within the framework of the government’s strategy. Developing such an industry requires three steps, the first of which is to leverage unique advantages. Based on a national strategy of creating a service platform for commerce and trade cooperation between China and Portuguese-speaking countries, Macau will leverage a platform economy to promote the development of specialised finance.

The second step is to focus on specialised industries. Macau will emphasise its advantages and develop distinctive financial services – notably, finance leasing and wealth management – with neighbouring financial centres. The third is to serve specialised areas. Macau will serve the western part of the Pan-Pearl River Delta, Portuguese-speaking countries and countries along the Belt and Road route, playing a different role to other financial cities by facilitating coordinated regional development.

Developing specialised finance also focuses on three sectors. The first involves the development of industrial sectors, including financial leasing, wealth management, online banking and green finance. The second concerns the establishment of a service platform and the strengthening of the financial features of the existing Sino-Portuguese business cooperation service platform. It will endeavour to promote the mutual benefits and synergies inherent within Sino-Portuguese financial capital, focusing on the construction of the Sino-Portuguese renminbi clearing centre and the expansion of the Sino-Portuguese cooperative development fund. The third is to cultivate trading market sectors, including bond markets, commodity markets and financial derivatives markets.

ICBC (Macau), the largest locally registered bank in Macau, is the main local credit issuer in the region, maintaining a leading position in terms of channel layout and financial technology. The bank, one of the most localised institutions in the ICBC Group, displays robust operational performance and plays an important role in sustaining Macau’s long-term prosperity and stability through economic diversification. In March 2018, the MSAR Government signed a memorandum of cooperation with ICBC Group to promote the development of Macau’s specialised finance system. In December 2019, on the 20th anniversary of Macau’s return to China, the MSAR Government awarded ICBC (Macau) the Medal of Merit (Industry and Commerce) for the outstanding professional services it has provided to the public.

 

New markets
At the beginning of 2020, ICBC Macau Branch opened, making ICBC Group the first dual-licenced financial institution in Macau. In this context, the capabilities of banking services and businesses will be greatly increased moving forward. Further, the government has granted ICBC Group a local licence for financial leasing, giving the bank a comparative advantage and great development potential in terms of specialised finance and diversification.

With a focus on integrating into the Greater Bay Area, expanding in Portuguese-speaking countries and extending to countries along the Belt and Road route, ICBC (Macau) will develop a specialised finance industry to better serve local markets and enhance its support for larger enterprises in their aims to go global. Meanwhile, in support of Macau’s commitment to the Greater Bay Area and the Belt and Road Initiative, the bank will enhance the positioning of its Sino-Portuguese asset platform to promote the balanced business development of assets and liabilities. This should also help to steadily increase profits, enabling us to become an important platform that connects domestic customers, funds, products and markets with those overseas.

In March 2018, we launched our Sino-Portuguese asset platform, collectively undertaking nearly 20 projects in the Portuguese language worth $3bn. Through the establishment of Macau’s first financial asset exchange, the bank issued $500m worth of 10-year US-denominated subordinated notes in September 2019. The offering was substantially oversubscribed, with more than 130 sophisticated institutional investors from 16 countries applying – the largest bond offering in the international market by a locally registered bank.

In October 2019, the subordinated notes were listed on the Macau Financial Asset Exchange, further enriching the trading products of the Macau bond market. What’s more, the Central Government of the People’s Republic of China issued sovereign bonds in Macau for the first time. As the deputy underwriter and the placing bank, ICBC (Macau) completed the initial issuance in Macau, shouldering the responsibility to promote the development of specialised finance.

In the face of the COVID-19 pandemic, the bank will continue to actively cooperate with the government to implement economic support policies and meet the needs of SMEs by introducing various financial relief measures to restore social confidence and stabilise the local economy. Then, once the pandemic has passed and life begins to return to normality, ICBC (Macau) will be ready to support the economic recovery.

Shifting the focus towards sustainable finance

Posted on by itsupport

With the public gaining awareness of the social and environmental problems facing the planet, sustainability issues have moved into the mainstream. There are plenty of news stories about the increase in extreme weather, plastic pollution and people living without food or basic sanitation. Sustainability is the intersection of the triple bottom line, known as the three Ps: people, planet and profit. This business concept focuses on growing the economy while also taking into account the needs of the environment and society.

Humanity has been operating out of balance with the natural world for decades, placing economic growth ahead of environmental and social costs. Individuals, businesses and governments are starting to realise that we need to radically change this. An economy cannot thrive without a healthy planet or people. Most recently, the coronavirus crisis has demonstrated this quite dramatically.

 

A global effort
Solving environmental and social problems is no longer the purview of non-governmental organisations and governments alone. The finance sector plays a crucial role in economic growth. It controls the flow of money and can direct capital to companies that understand and manage their sustainability issues well, or are developing business models to solve the global challenges that society faces.

Banks finance the real economy and have the opportunity to contribute to a more sustainable world. How money is used today determines the world we will live in for decades to come. The UN’s 17 Sustainable Development Goals outline the challenges that must be overcome by 2030. The funding gap that needs to be bridged in order to achieve these goals is estimated to be $2.5trn a year. Put another way, this is a multitrillion-dollar opportunity to invest in companies that are providing sustainable solutions.

Businesses can help create conditions that push sustainable finance into the mainstream. For example, they can meet the growing demand for socially responsible products and services. The Global Sustainable Investment Alliance reports that sustainable investing grew 34 percent in the two years to 2018, reaching $30.7trn (see Fig 1). And the appetite for sustainable investing is not limited to Millennials: the 2019 Schroders Global Investor Study found that Generation X is the most likely to consider sustainability factors when selecting an investment product.

Similarly, investors and rating agencies are increasingly integrating sustainability into their analyses. Through the UN Principles for Responsible Investment, more than 2,200 investors with $80trn of assets under management have committed to integrating environmental, social and governance (ESG) factors into their investment decisions. Likewise, 19 credit agencies have committed to integrating ESG factors into their ratings.

At the same time, regulators are implementing policies and requirements for sustainable finance. Requirements already exist for non-financial disclosures, and this is only set to increase. As countries develop their strategies in line with their commitments to the Paris Agreement, the finance industry will have to adapt. The European Commission’s action plan on sustainable finance is a bold initiative to redirect capital towards a greener European economy; there is global coordination backing up these efforts. In October 2019, the EU, alongside 10 countries outside the bloc, launched the International Platform on Sustainable Finance, which aims to provide cohesion and promote integrated markets for global sustainable finance.

Governmental initiatives are not the only thing encouraging companies to operate more sustainably. Increasingly, employees want to work for businesses that place sustainability at the heart of their culture and values. Additionally, consumers are more aware of the role financial institutions have in working towards a sustainable future, and so they expect companies to reduce their environmental impact. Some social movements are galvanising people around the world to demand action from political and business leaders.

 

Get your priorities straight
The topic of sustainability is broad and can be confusing. Given the role of the finance sector and expectations from stakeholders, banks should consider the risks and opportunities sustainability brings to their business. This helps define what sustainability means to them specifically.

The first step is to prioritise. A common framework for helping companies decide what is important to them is a materiality assessment. Engaging with internal and external stakeholders – including employees, shareholders, clients, regulators and experts – is a useful way to bring these perspectives together. Topics that are identified as highly important to the company and society can then be used as the basis for developing a corporate strategy and guiding implementation. The materiality assessment should look at how a company’s activities can be improved by integrating ESG into all decisions.

A successful sustainability plan needs to be embedded in a company’s overall business strategy. Without this alignment, it is difficult to realise value and grasp opportunities. At VP Bank, we have a unique ownership structure comprising three long-term anchor shareholders that provide solid foundations. This core characteristic has supported the bank’s long-standing commitment to the principle of sustainable action. For many years, the bank has implemented measures including using renewable energy, reducing waste, supporting art and philanthropy, and offering an ESG mandate.

Building on our history of support for sustainable initiatives, VP Bank has developed its sustainability goals in line with its Strategy 2025, which was announced in March 2020. An extensive stakeholder engagement process helped us define our material topics and shape the plan accordingly.

Our ambition is to grow our business while creating a positive impact. We will do this by offering our clients sustainable solutions through our Investing for Change initiative. This includes integrating ESG into our investment decision process and aiming to create a net positive impact through our offering. We have developed a methodology based on the understanding that sustainability is much more than the mere exclusion of companies from an investor’s portfolio: the aim is to use sustainability indicators to identify opportunities as well as risks. In addition to growing our assets under management in sustainable investments, we also integrate sustainability into our business operations.

 

The right game plan
Our sustainability plan sets out what we want to achieve by 2025, but we do not yet have a clear path to reach these goals. Still, we are working with stakeholders and partners to develop the right solutions. In our business activities, we are committed to achieving carbon-neutral operations and improving gender diversity across our workforce. Meanwhile, in our product offering, we will integrate ESG issues into the investment process and grow our assets under management in sustainable investment solutions.

Sustainable investing is simply good business. Integrating ESG into the investment decision process allows investors to understand how sustainability poses risks or opportunities to long-term value creation. This means identifying attractive investments in pursuit of financial returns. Even with the supportive conditions that stakeholders are providing, there are some challenges to scaling up. These include a lack of consistent and comparable data and the need for common standards and definitions. These are not insurmountable problems: for instance, we expect that increasing disclosure requirements will lead to improvements in data quality, which will result in better comparability and more robust ESG ratings.

One of the misconceptions surrounding sustainable investing is the view that there is a trade-off between returns and doing the right thing. This myth has been debunked by many studies. A meta-analysis of 2,000 studies published in the Journal of Sustainable Finance and Investment found that, in 90 percent of cases, integrating ESG led to the same level of performance or outperformance of the benchmark. This holds true even during times of crisis: the Financial Times reported in April that ESG leaders had outperformed the benchmark rate in Europe, Japan and the US since the start of 2020.

Another misconception that has been debunked is that this is a short-lived fad. Sustainability and sustainable investment make good business sense and will continue to grow – the demand is there, as demonstrated by the rate of inflows. Stakeholder groups are creating an environment that will propel the industry forward.

Sustainable investing is simply intelligent investing where sustainability factors are integrated into the decision-making process. Capital flows are directed towards solving solutions to global challenges while generating returns. ‘Investing for change’ is VP Bank’s motto; we know the future is determined by how we invest today.

Garanti BBVA leads Turkey’s response to COVID-19

Posted on by Max Tomlin

Founded in 1946, Garanti BBVA is Turkey’s second-largest private bank, with consolidated assets of approximately TRY 456bn ($67.6bn) as of March 31, 2020. We are an integrated financial services group that operates across every segment of the banking sector. Throughout our many decades of service, we have witnessed numerous changes within the financial services industry; even so, the last decade has delivered innovation at an unprecedented scale and pace. We are committed to playing a leading role within this transformation.

We currently deliver a wide range of financial services to more than 18 million customers via our 18,000-plus members of staff and our distribution network of 904 domestic branches, seven foreign branches in Cyprus and one in Malta. We also have two international representative offices in Düsseldorf and Shanghai. As consumer demands shift, we believe that an omnichannel approach is the best way to provide a seamless experience for our customers, whether it’s through our 5,260 ATMs, our award-winning call centre or our online and digital banking platforms. Wherever our customers need us, that’s where we’ll be.

Moving with the times
In terms of retail banking, Garanti BBVA rolled out its green mortgage in 2017 to promote the development of efficient and environmentally friendly buildings – to date, we have provided a total TRY 379m ($56.2m) in financing. Garanti BBVA also took an important step in 2019 to manage its direct impact on climate change and started working on its Scope 1 and Scope 2 emissions targets.

Garanti BBVA is here to stay and grow with its customers, even on the hardest of days

In light of these developments, the bank signed a contract at the beginning of 2020 with utility companies across Turkey to purchase 100 percent renewable energy for its buildings and branches that have the compatible infrastructure. Garanti BBVA will continue to support its stakeholders in climate change transition, encouraging customers to become aware of their impact on the planet and helping them to adapt their behaviours, including the use of public transportation, electric or hybrid vehicles and other green products. The bank will maintain its key role as an advisor to its customers, supporting them in their endeavours within the sustainable space, such as contributing to the circular economy, sustainable investment funds and sustainable innovation.

As emerging technologies and the changing world rapidly transform customer expectations, the banking sector is being asked to constantly renew itself. Looking ahead to the next decade, we anticipate technological revolutions will continue at an increasing pace, with data analytics, machine learning, artificial intelligence (AI) and automation technologies set to gain further importance. That is why it is key to establish an experience that is both empathetic and instantaneous.

To this end, we make it our goal to adapt to evolving market conditions in a swift and agile manner, making new collaborations that create pioneering business models and channels while maintaining our human-centric approach. As technology, innovation and new opportunities continue to make our customers’ lives easier, the most important guarantors of our success will be our employees, who enable us to establish long-term, deep and emotional bonds with our customers.

Garanti BBVA conducts monthly usability surveys to better observe its users’ needs and devise solutions for problems associated with existing functions. Additionally, these surveys ensure the user experience is the focal point when we launch any new product. A recent example was the enhancements we made to our personal loan service, which provides customers with the loans they need for shopping on digital platforms. Our customers can apply and use the loans for their online shopping expenses as an alternative payment method in e-commerce transactions.

We have also renewed our public dashboard and implemented new features in our app, Garanti BBVA Mobile. We analysed the customer journey and conducted a variety of usability research initiatives within this. Now, the dashboard is easier to use, actions are more visible and the end-to-end digital experience is enhanced. With our digital onboarding project, we streamlined the process of becoming a customer by digitalising our customer acquisition process.

Garanti BBVA will continue to develop new instruments, channels and processes in keeping with this goal, utilising big data, AI and Internet-of-Things-orientated marketing activities, as well as delivering tailored solutions for our customers’ on-site needs.

Guiding the market
With its effective delivery channels and successful relationship banking, Garanti BBVA’s market share in retail lending increased further among private banks in 2019. Preserving its leading position in retail products, the bank continues to respond effectively to its customers’ needs with branches spread across all cities in Turkey. What’s more, Garanti BBVA always approaches its customers in a transparent, clear and responsible manner, improving customer experience continuously by offering products and services that are tailored to their needs.

In 2020, asset growth is anticipated to be around 10 percent and remains loan-driven. Turkish lira loan growth is expected to fall somewhere between 15 and 18 percent, in line with the rebalancing of the economy. While growth is expected to be present across the board for all loans, Turkish lira investment loans will likely lead the way. On the retail banking front, Garanti BBVA will keep focusing on customer satisfaction and loyalty by deepening customer relationships, all while expanding its customer base.

We continue to deliver an innovative experience to all of our retail customers, including the 1.2 million new customers who joined last year. As of December 2019, 524,000 people had become homeowners through Garanti BBVA, and our share of the mortgage market was 10.6 percent. Meanwhile, our share of the consumer loan market was measured at 13.1 percent – putting us first when it comes to consumer loans among our private banking peers – and our consumer deposit market share reached 10.5 percent.

At Garanti BBVA, we believe the requirements of retail banking customers will deepen with every passing year, and the customisation of services and products aimed at these needs will become even more important. In 2020, the bank’s main focus will be to deliver products that are fit for purpose through the right channels and at the right time, thus improving customers’ experiences.

Adapting to the new normal
At the beginning of March, as the COVID-19 pandemic took hold, the world came to a grinding halt. For us at Garanti BBVA, the safety of our employees and the satisfaction of our clients have always been – and always will be – paramount. As such, we immediately adapted to the situation at hand and started multiple initiatives to ensure our goals would continue to be met.

 The COVID-19 pandemic has shown us the undeniable importance of digital services

Garanti BBVA was one of the first Turkish companies to organise efforts to fight this crisis. The bank donated TRY 10m ($1.5m) to university hospitals for the purchase of medical devices and materials. Further, we delivered 500 ventilators – worth approximately TRY 30m ($4.4m) – as part of BBVA’s global campaign to help the countries it serves by providing medical equipment and materials to treat COVID-19 patients.

Within days, we moved our customer support centre off-site and provided a series of products, services and changes that would ensure all of our customers and employees felt safe and taken care of. As of March 31, 2020, 90 percent of the staff at our headquarters (approximately 7,000 to 8,000 employees) had started working from home, and only 30 percent of the entire bank continued working in the office.

While all call centre employees were sent home, we have ensured remote staff continue to receive regular updates during this tough period. As the best retail bank in Turkey, we understand that it is our responsibility to be at the forefront of the battle against COVID-19 and come up with new solutions and technologies that will make all of our stakeholders proud. And once the pandemic passes, we are ready to adapt our offices so employees can return safely when appropriate. We have shown during these troubled times that Garanti BBVA is here to stay and grow with its customers, even on the hardest of days.

All in all, the COVID-19 pandemic has shown us the undeniable importance of digital services. In this vein, Garanti BBVA has emphasised the importance of investing in digital channels and technological systems – it’s something that we have been committed to for more than 25 years. In the months to come, Garanti BBVA will continue to focus on digital transformation and remote services, identifying the most suitable tools for employees and customers to adapt seamlessly to the ‘new normal’.

The code of conduct: why recycling is key to ON Semiconductor’s sustainability efforts

Posted on by Max Tomlin

Being a good corporate citizen means more than just considering the ethical and legal responsibilities within an organisation: it means accounting for the needs of wider society, too. At ON Semiconductor, our mission is to provide high-quality, energy-efficient and sustainable semiconductor solutions that enable customers to innovate while operating in an ethical and socially responsible manner.

As a global company, we must put sustainability at the forefront of our operations. That’s why we reuse, reduce and recycle materials at all of our sites and help make the world a greener, safer and more connected place with our energy-efficient semiconductors. Our products help industries become more environmentally friendly, while our business units and research and development department focus on efficiency and green applications. Put simply, we are committed to creating environmental, social and economic value through our sustainability, diversity, governance and social responsibility programmes.

A power of good
The energy grid and its associated infrastructure are facing accelerating change, with prices for solar power and energy storage falling and the load from electric vehicle charging growing across the globe. According to the US’ National Renewable Energy Laboratory, solar installation costs have dropped by more than 80 percent in the US over the past decade. These critical pieces of infrastructure require solutions with the highest levels of efficiency, reliability and safety.

ON Semiconductor has the technology, reliability and application knowledge to enable the decarbonisation of energy infrastructure

ON Semiconductor offers all the elements required for optimal energy solutions, from insulated-gate bipolar transistors, superjunction metal oxide semiconductor field-effect transistors and wide band gap semiconductor devices to power modules, gate drivers and operational amplifiers. Whether at grid, commercial or residential scale, we have the technology, reliability and application knowledge to enable the decarbonisation of our energy infrastructure.

Coal-fired power plants are the largest contributor to global carbon dioxide (CO2) emissions, which drive air and water pollution, facilitate the destruction of habitats and create health hazards. Our power solutions and products improve the efficiency of the overall system to enable a better return on investment on solar installations, further supporting CO2 reduction and combatting the effects of climate change. These improved efficiencies also result in cost reductions, encouraging further solar installations. What’s more, our products help countries reach their solar energy capacity goals while enabling them to retire or convert more of their existing fossil-fuel power plants – to date, ON Semiconductor has shipped enough power solutions to replace 70 coal-fired power plants. In 2019, we reduced emissions by 9,341 tonnes of CO2-equivalent through 35 projects in four countries.

Our Internet of Things portfolio includes solutions for energy-harvesting platforms, which are battery-free solutions with advanced wireless connectivity. The use cases for this technology are exponential, but a few examples include wide-range temperature sensing and combined digital humidity and pressure sensing. The demand for such tools is rapidly growing within the smart farming industry, resulting in cleaner air, enhanced energy efficiency, cost savings and ease of maintenance.

Another area that is gaining rapid momentum – especially as environmental and sustainability concerns grow in tandem with stricter clean air legislation – is the decarbonisation of automobiles and other transportation modes. In this category, our products provide energy-efficient technologies and a complete system solution for electric vehicle charging systems of all types and power levels.

Sustainability on a global scale
In addition to our products creating a safer, more sustainable world, we must continue to abide by our mission statement and operate responsibly. Back when ON Semiconductor was still a part of Motorola, the company had a monthly auction of retired equipment and scrap manufacturing materials. Eventually, the company decided to develop the ON Semiconductor Reclamation Centre (OSRC), which continues to operate efficiently after 40 years. In 2019, approximately 910 tonnes of scrap material and 1.38 tonnes of precious metal from ON Semiconductor’s global manufacturing facilities were processed, sorted and sold for reuse at the OSRC. The reclamation of these materials recouped over $22m.

The OSRC reflects our commitment to environmental sustainability and resource conservation while optimising our network, protecting intellectual property and maximising profits. It reclaims scrap materials from 22 of our factories and most of our subcontractors globally. Furthermore, we continually refine our methods, researching ways of reclaiming materials that consume less power and boost our revenue generation.

Based at our headquarters in Phoenix, Arizona, the OSRC supports both local and national refineries. When choosing partners, we place an emphasis on refiners – and brokers – that are contracted or have contractual agreements with integrated smelters. This was an important factor for us, especially considering there are only six integrated smelters in the world that are capable of accepting electronic waste and running all of their operations in strict accordance with environmental, health and safety policies – something that directly aligns with how we operate as a company.

Refiners that do not use integrated smelters could decide to piecemeal their scrap to brokers, increasing the chance of waste ending up in countries like China and India, where it will likely contaminate the land, water and air. We also implemented more than 72 projects in 2019 focused on energy conservation, waste reduction, chemical recycling, material optimisation and water conservation. Combined, they allowed the company to save an estimated $10.8m.

Regardless of whom we do business with – whether it’s a partner in the reclaim department, a distributor or any other strategic partner – their business objectives, ethics and sustainability initiatives must align with our own. Together with our partners, we are creating a more sustainable world and making Earth a better place in which to live.

 Together with our partners, we are creating a more sustainable world and making Earth a better place in which to live

Heeding the call
We believe the actions we take today will shape the future of the planet. Our leaders like to challenge employees to do simple things that make a difference to the communities ON Semiconductor serves. Whether large or small, we encourage workers to incorporate more sustainable actions into their everyday lives, such as using public transportation, saying no to plastic bags and single-use plastics, picking up and properly disposing of rubbish, and donating to local charities that help the planet.

In 2019 alone, we prevented eight tons of pollution in Phoenix by encouraging our staff to use alternative modes of transportation as part of their commute. When our employees contribute positively to the community and share their time, talent, energy and effort with others, it makes our planet stronger.

The industry recognition we’ve received for our employees’ work in upholding our commitment to corporate social responsibility, sustainability, ethics and compliance is extremely rewarding, including being named one of the world’s most ethical companies by the Ethisphere Institute for the fifth consecutive year, ranking on Newsweek’s America’s Most Responsible Companies list and placing on Barron’s 100 Most Sustainable Companies list for the third consecutive year, among many other accolades. Looking to the future, we will continue to make sustainable investments to enhance our competitive position in strategic end markets, improve our industry-leading manufacturing cost structure and make the world a greener place.

The recent BlackRock letter to CEOs and other business leaders calling on companies to give stakeholders a clear picture of sustainability aligns with our values and reflects our reporting efforts to date. For example, we conduct the essential elements of our business through the lens of sustainability and are working towards reporting through the Sustainability Accounting Standards Board and/or Task Force on Climate-related Financial Disclosures frameworks. What’s more, we have implemented five-year targets relating to the environmental conservation performance at our wafer fabrications, assembly locations and test operation sites, and are currently working to develop appropriate science-based targets. These include plans to reduce carbon emissions, water consumption, energy waste and chemical usage.

As the world looks for new means of protecting the natural environment while driving innovation and not compromising on our way of life, ON Semiconductor is proud to lead the way with its sustainability initiatives.

BDSwiss: how to successfully adapt business operations in the age of COVID-19

Posted on by Max Tomlin

As COVID-19 continues to wreak havoc on millions of lives, global economies are being devastated and businesses – both large and small – across the globe are being forced to undergo radical changes. Leading economies have been put on standstill as prolonged lockdowns designed to stop the spread of SARS-CoV-2 have pushed stock markets lower, causing mass unemployment and increasing fears of a global recession. Given the severity and unpredictability of the situation, many companies were far from prepared to deal with the slew of challenges triggered by the pandemic.

While some businesses have benefitted from major shifts in consumer behaviour – including a turn towards online services – all companies have been compelled to make swift and often significant changes to their operational models. BDSwiss Group, a global financial services business, is one of the companies that – thanks to its purely online operational model – has been able to respond quickly and efficiently to the ongoing crisis. Importantly, it has done so without compromising its client experience. Moreover, the company has managed to expand its client base during this period by continually onboarding new talent and tripling its average trading volume.

Established in 2012, BDSwiss offers retail forex and contract for difference (CFD) investment services to more than 1.3 million clients from 180 different countries. Having acquired multiple licences, it now operates on a near-global scale, delivering world-class online trading experiences in a regulated and transparent environment. BDSwiss’ growth projections for 2020 remain promising despite prolonged lockdowns.

All companies have been compelled to make swift and often significant changes to their operational models

Putting people first
Like all companies in these times, BDSwiss finds itself in an unprecedented situation. Nevertheless, its approach to the COVID-19 crisis has enabled it to weather the storm. As an online investment services company, its product delivery and distribution channels have remained unaffected. Still, there was a lot to be done on an operational level; due to the way its teams and operational systems are set up, BDSwiss was able to make fast and decisive changes to ensure business continuity.

Unlike many industries, investment firms and other financial services companies have the advantage of predominantly offering their products online. Even so, the sector has had to transition from staffed offices to a work from home (WFH) ecosystem. With almost 200 employees and offices in multiple countries, BDSwiss quickly and efficiently pivoted to a WFH system, prioritising its employees’ health and safety while doing so. The company cancelled all employee travel and seminars, adhering to the instructions of local health authorities. On March 13, BDSwiss was in a position to allow all employees to WFH – thanks, in large, to the firm’s infrastructure, automation and company culture.

Ensuring the safety of the workforce was paramount – understandably so, given employees are unable to perform their responsibilities when their wellbeing is at stake. Having established an operational model that supports telecommuting, BDSwiss employees were able to benefit from remote working early on. The company addressed its employees’ concerns and ensured they had access to all the necessary equipment and support required to be able to deliver a great customer experience in a WFH environment. In addition to its technological capabilities, the company’s strong corporate culture facilitated the move to WFH – at BDSwiss, employees are trusted to deliver a professional level of service, whether working in the office or remotely.

By adjusting its leadership approach to better guide employees through the crisis, BDSwiss maintained a transparent and global communication channel with all its teams, providing clear instructions and guidelines. It has motivated teams by giving assurances of support throughout the crisis and offering step-by-step plans to work collaboratively and manage the challenges presented when working at home.

Notably, BDSwiss also safeguarded all of its employees’ jobs – nobody was furloughed or made redundant. In fact, the business welcomed new employees throughout the crisis, and continues to do so. It also performed frequent assessments, feedback sessions and employee evaluations to ensure high staff productivity and performance.

Innovation and expansion
In times of crisis, a customer’s experience of a company dramatically impacts their sense of trust and loyalty towards it. When it comes to online forex and CFD trading services, clients rightly expect the same platform responsiveness, quality conditions, pricing, execution speed and support. Addressing clients’ concerns, BDSwiss continued to provide an exceptional level of service, fully operational platforms and customer support. At the same time, the company delivered clear and helpful cross-channel client communications via email, social posts, company newsletters and updates. In a pre-emptive effort to counteract possible cyberthreats, BDSwiss further strengthened its cybersecurity controls, taking all necessary precautions and informing clients of how best to keep their accounts secure.

While COVID-19 has had a devastating impact on global financial markets, it has also inadvertently created opportunities through market volatility, encouraging more people to invest. As a result, some financial services firms have faced an unexpected influx of new clients. To onboard them effectively without interrupting or impeding operations – and to handle the sudden increase in trading volumes and customer support enquiries – best-in-class brokers such as BDSwiss have had to make important investment decisions and allocate new funds for server capacity, onboarding procedures and staff resources.

The company not only invested in better server infrastructure, but also upped its expansion and innovation efforts, improving its clients’ experience even during the pandemic. Compromising customer experience was never an option. BDSwiss saw increased demand and acted fast, investing in more servers, hiring new talent and working relentlessly to refine its products and platforms.

BDSwiss’ commitment to expanding its services was on show during its seventh annual kick-off meeting, which was held in late February before many lockdowns had been put in place. During the event, management shared key metrics and achievements from the previous year, including the opening of five new offices and the doubling of BDSwiss’ global workforce to manage the sizeable influx of new traders.

Monitoring customers’ changing preferences in real time has enabled BDSwiss to pivot intelligently and adapt to new market conditions

Even considering the disruption caused by the COVID-19 pandemic, the company’s multistep process for global expansion continues to stand it in good stead. BDSwiss remains committed to investing in employee training, interdepartmental communication and operational excellence, and believes remaining true to these values will bring more success in 2020.

Leading the field
Working closely and intelligently with partners has been another vital component of BDSwiss’ successful response to COVID-19. Its affiliates have also had to deal with increasing client volumes, amplifying the need for new marketing materials and novel ways of engaging with audiences. BDSwiss was quick to address its partners’ needs, working on new ways to communicate with customers through localised online promotions, education and support.

Introducing brokers (IBs) faced a completely different set of challenges that demanded a more proactive approach. Given that IBs traditionally adopt an offline business model, the strict lockdown measures forced them to establish new communication channels with their audiences. BDSwiss’ business development managers worked closely with IBs, helping them to find ways of keeping in touch with clients. They introduced rewards on top of their current payouts and aligned the company messaging with their affiliate and IB partners, providing new ways of informing prospects and customers, including the use of regional promotions.

As a result, the business was able to expand its global network of partners and maintain a successful growth trajectory. Adapting to the operational challenges brought on by COVID-19 has also enabled the company to mitigate risk and turn problems into positive change. For example, BDSwiss managed to respond successfully to the surge in demand for online trading services by investing in the necessary infrastructure.

Monitoring customers’ changing preferences in real time has enabled BDSwiss to pivot intelligently and adapt to new and uncertain market conditions. In light of extreme volatility, more people are keen to capitalise on significant price trends through online CFD trading, as it offers quick and easy access to financial markets. This, in turn, demands more brokers to provide quality support, an excellent user experience and competitive conditions. It’s why BDSwiss has continued to invest in its customer experience, growth and innovation. During this terrible crisis, the company has been incredibly proud of all its employees for their amazing efforts. Throughout it all, the business has managed to do more, not less, and remains committed to delivering value for all its customers and stakeholders.

Kaiser Partner secures personal values, not just wealth, for future generations

Posted on by Max Tomlin

Maintaining individual or family wealth through generations is one of the major preoccupations of wealth advisors, with people often making very detailed arrangements for how their wealth should be passed on. All too often, though, the values of founders or family members are relegated to the status of informal considerations.

Companies and investors that practise responsible leadership and long-term thinking have something to teach us about ensuring values continue to have an influence in the long run. Family businesses, in particular, provide a good model, as they are often driven by the values and views of their founding members – the need to think and act sustainably is rooted in their DNA. Value-based investing provides family companies with a tool kit to articulate and promote their values and social commitments while mastering global challenges, such as their operational business, investments or philanthropic work.

Making it count
Like investment strategies, values can be integrated into legal structures from the off. When safeguarding wealth, people often set up foundations, trusts or similar legal vehicles. These can generally accommodate all types of assets, including investments in companies, real estate, art collections and, of course, liquid assets.

All too often, the values of founders or family members are relegated to the status of informal considerations

Most people who set up such structures use them not only to provide a safe home for their wealth, but also for planning and structuring. Such plans have to be precisely defined and clearly embedded within the structures. At Kaiser Partner, a leading family-owned wealth advisory group based in Liechtenstein and Switzerland, our experts emphasise the need to define and closely coordinate the details of family governance, business governance and investment governance so that clients’ values can be directly integrated.

In most cases, the priority is to clarify two aspects: family governance and business governance. Family governance issues will typically include details of any claims to foundation assets, criteria for the distribution of income or capital, clear instructions about which family members should be involved in decisions about such distributions, and the uses to which funds may be put.

For a family company that is held via a trust or foundation, business governance will always include detailed provisions of how long this asset should be held and who should receive dividends under which conditions. The criteria for selling stakes in family companies will also be defined, as will the criteria governing whether family members can work for the company and at what point they must leave.

By contrast, foundations and trusts often neglect the topic of investment governance, with most structures failing to establish an investment policy for liquid assets. Consequently, assets are invested conservatively and excessive risks are avoided, which often means there is no opportunity to shape a sustainable long-term strategy. The person or institution setting up the foundation (the settlor) often forgets that they can define specific management criteria, whether that’s in the foundation documents, the trust agreement or in special investment governance and regulations.

Within these guidelines, the settlor can lay down rules about the investment process and give direct instructions that must be considered when eyeing new investments. Alternatively, they can delegate such decisions to a committee. If no instructions are in place, the responsible bodies of the foundation or trust decide on the investment rules.

Assistance from client advisors and investment managers who specialise in responsible and sustainable investing is vital when establishing a value-based approach to investment

Taking responsibility
Over the past decade, value-based investing has become an increasingly important method of long-term wealth preservation for foundations and trusts, with younger generations in particular keen to focus on responsible and sustainable investments. Value-based investing is a strategy that concerns itself with the environmental and social impacts of a company’s actions, products and management. This approach covers various practices and is known variously as socially responsible investing, environmental, social and governance (ESG) factor investing, sustainable investing or impact investing.

An increasingly large number of people want to use value-based investing to put their money into organisations and companies that have a positive impact on the environment, culture, society and government, but they don’t want this to come at the cost of financial returns. Targets of such value-based investments include organisations with inclusive boards and management teams, companies that proactively reduce their consumption of water and production of emissions, and businesses that give something back to society. The latter might take the form of creating long-term jobs or building schools to help educate future generations.

Successfully establishing a value-based approach to investment for a foundation or family business requires perseverance and support, particularly when it comes to younger generations. According to the World Economic Forum’s 2019 report, Impact Investing for the Next Generation: Insights from Young Members of Investor and Business Families, young members of wealthy families face four main obstacles when trying to introduce value-based investing: opaque asset structures and impact objectives; a lack of confidence in their abilities; a dearth of expert support; and concerns about confidentiality. There is a desire, meanwhile, for honest experience and deal sharing.

Support systems
Assistance from client advisors and investment managers who specialise in responsible and sustainable investing is vital when establishing a value-based approach to investment. With the right experts, issues concerning clarity and confidence can be avoided. Another 2019 study, the Centre for Sustainable Finance and Private Wealth’s Impact Investing: Mapping Families’ Interests and Activities, came to a similar conclusion. It found that around 46 percent of the wealthy families surveyed were dissatisfied with private bank or wealth managers who weren’t specialised in impact investing, feeling their plans didn’t have the right support. Those advised by impact investing specialists were, however, mostly satisfied.

In the same survey, more than half of the 32 wealthy families living in the US said they would be investing 90 percent of their investable assets according to impact investing principles over the next 10 years. Studies such as these underline once more the rapid growth of the market (see Fig 1) and the greater diversity of products and services. This presents challenges to investors and client advisors.

It is equally clear that there is a greater demand for experts who can provide clients with solutions tailored to their values. Any advisory relationship should start with a value-based interview with the interested parties, which is exactly what Kaiser Partner Privatbank in Liechtenstein offers. The family-owned private bank, which has specialised in responsible investing since 2009, uses a comprehensive checklist to map out the areas that are close to the investor’s heart. Put simply, it seeks to identify the investment areas in which the client wishes to make a positive impact as well as the areas that should be avoided.

Clients can fundamentally exclude investments in specific categories, such as defence and weaponry, and cap the revenues generated in others, like alcohol and tobacco. In general, assets that generate revenues in segments that are important to the investor are given a high weighting, while those judged to have a negative impact are reduced to the maximum defined percentage or excluded altogether.

A dynamic process
The client-weighted standards and restrictions are put through Kaiser Partner’s screening service for ESG business involvement. As well as ensuring the effective implementation of client requirements, the service facilitates reliable and efficient portfolio management. Thanks to constant monitoring, the defined assets can also be adjusted at any time.

Investors and wealth advisors can make these adjustments with the help of heat maps, which are currently being put together based on an extensive survey of wealthy families. Heat maps are designed to identify underinvested market segments and show which impact topics, regions or asset classes are oversaturated.

Specialist asset managers have a clear task: creating new and innovative solutions while constantly monitoring the asset owner’s needs and interests. There is also a steady stream of new alternatives for philanthropy that wealthy individuals and families can use to express their values through foundations and other structures.

Values such as sustainability and responsibility lie at the roots of Kaiser Partner Wealth Advisors, Kaiser Partner Privatbank and Kaiser Partner Family Office Services. Based in Liechtenstein and Switzerland – two of the most stable and independent jurisdictions in the world – our specialists in sustainable and responsible strategies support wealthy families from all over the planet. The successful, long-lasting partnerships they forge are based on personal values, which are applied to all investment decisions.

Whether it’s in the underlying structure of foundations, the investment strategies or a philanthropic project, asset management can reflect personal values in countless individualised ways. And it can do this without reducing the wealth intended for future generations or compromising on financial returns. Now more than ever, investors and asset managers have the unique opportunity to use this dynamic and reciprocal process to innovate and give a personal slant to
financial, local and global interests.

Here’s the deal: what the EU-Mexico trade agreement means for both parties

Posted on by Max Tomlin

Getting an international trade deal over the line is never easy. The Comprehensive Economic and Trade Agreement between Canada and the EU took seven years to negotiate, while the North American Free Trade Agreement (NAFTA) was initially thought up in 1980 but wasn’t ratified until 1993. Signing the deal is only the beginning, too: trade agreements are subject to changes and disagreements, as the recent NAFTA wrangling has shown. That particular deal was replaced at the start of July.

Businesses and wealthy individuals may be interested in the terms of the agreement that make it easier for investments to be made in each market

Nevertheless, parties that do manage to reach an agreement should be allowed to feel at least a moment of pride for the culmination of their efforts. This is likely how the EU and Mexico are currently feeling after wrapping up four years of negotiations by finalising a new trade agreement in April. The deal makes almost all goods traded between the two parties duty-free, but that does not mean all disagreements have been put to bed.

EU and me
Mexico is currently the EU’s biggest trading partner in Latin America, while only the US and Canada trade more goods with Mexico than the 27-member bloc. Despite the vast distance and cultural differences between the two parties, there are already a fair few economic connections between the EU and Mexico: trade in goods alone rose by 148 percent between 2000, when the original trade agreement between the two states came into force, and 2018.

“The economic, social and political differences between the EU and Mexico constitute the comparative advantages of each side to engage in mutually beneficial trade in goods and services,” Dirk De Bièvre, a professor of international politics and chair of the Department of Political Science at the University of Antwerp, told World Finance. “These differences make them complementary economies, creating the prerequisites to reap benefits from the trade facilitation and the stabilisation of mutual expectations that a trade agreement can offer.”

Yet, the kind of general incentives mentioned by De Bièvre are usually not enough to galvanise exporters, trade-dependent sectors and public authorities on both sides to invest in arduous yearlong trade negotiations. Extra political incentives have to give this general idea a final push. For the current update of the EU-Mexico agreement, there were incentives to deepen and solidify the level of commitment.

“The new type of committal signed by the EU and Mexico ensures a stability and credibility upon which investors and exporters can reliably build their long-term investment and distribution channel decisions,” De Bièvre said. “It gives political and legal certainty – an asset that is [in] gravely short supply in the US now. For Mexico, having this type of stable and deep trading relationship with one of the three most important players in international trade policy, the EU, is an important insurance policy.”

Given that the US-Mexico-Canada Agreement – the agreement that replaced NAFTA on July 1 – offers less favourable terms than Mexico enjoyed previously, the signing of a new deal with the EU has come at an opportune time.

Agree to disagree
The question of how the new agreement will impact the respective economies is difficult to answer at this stage. Tariff reductions are substantial, and they will be eliminated entirely on poultry, cheese, pork and numerous other agricultural and food products.

“The transition period for phasing out all tariffs is seven years – a typical transition period for this type of radical elimination of all tariffs,” De Bièvre explained. “Presumably, this will lead to some farming sectors specialising in some niches on both sides. This constitutes an important shift, yet remains only one of the many building blocks of regulatory cooperation (conformity assessments, facilitation of import and export procedures, and the like) for all trade in goods, not just agricultural ones. These are at least as important as the plain elimination of tariffs.”

But not everyone is pleased with the new agreement. France’s national livestock and meat association, Interbev, warned that the deal risked opening up the European market to “20,000 tons of Mexican beef” that were previously banned. Criticism also centred on food security matters, which appear all the more pertinent given the supply chain disruptions caused by the COVID-19 pandemic. Protectionism and self-sufficiency are back in vogue.

With agriculture only constituting little more than one percent of the EU’s GDP, the threat posed by Mexican goods may not cause much distress outside of farming circles. Instead, businesses and wealthy individuals may be more interested in the terms of the agreement that make it easier for investments to be made in each market, with limits removed on the number of enterprises that can carry out a specific economic activity. Changes to food standards may make the headlines, but new investment criteria will determine where the real money ends up.

Fine wine is the perfect asset in times of volatility

Posted on by Max Tomlin

With COVID-19 sending markets around the world into a state of flux, investors are looking for alternatives to enter. One of the top-performing assets is fine wine, which offers stability and decent year-on-year returns.

The top end of the fine wine market is self-contained and, to a large extent, divorced from financial markets, because it shadows the movement of wealth around the globe rather than being permanently attached to a single economy. This unique characteristic means it is less susceptible to the fluctuations witnessed in conventional markets and, more importantly, provides flexibility, as its appeal is less open to fashionable interpretation than other luxury collectables.

World Finance spoke about upcoming developments in the fine wine market with Andrea Elia, Managing Director of the Swiss fine wine company UKV International, which buys, sells and trades some of the most sought-after wines on the planet.

Why do you think the fine wine market attracts such a high level of interest?
Collecting fine wine to trade in the future is not a new concept. It has, however, become one of the most popular soft commodity markets, enjoying a perpetual increase of investment over the last 25 to 30 years, because it enjoys an extremely stable environment, flexibility and favourable tax treatment from regulators.

Historically, the fine wine market has outperformed many other investments and is considered a safe haven for funds

The wine market originated when aristocrats and gentry would buy more than they intended to drink, before selling some to subsidise their own consumption. Fine wine was also frequently used as an alternative currency and was exchanged for other goods, used to pay debts or offered as security against financial borrowings. Today, it is used more as a safe place to park money in the medium term, realising a decent return on the capital element.

Why does fine wine have such international appeal, particularly among canny investors and the wealthy?
After the 2008 financial crisis, people looked for areas to safeguard funds that were not directly linked to the financial markets and therefore were free of the exposure that traditional investors are often forced to endure. Investors were drawn to assets that would be less volatile and more sustainable over time.

The tangible aspect of a fine wine may be another reason why investors like this market; it is comparable to property without the maintenance or dependence on trends. Few tangible assets can be easily traded internationally, and even fewer are not reliant on a single economy.

In 2008, fine wine showed a brief dip in values before bouncing back to record highs. How does the market remain stable in turbulent financial periods?
I believe the wine sector remained resilient in 2008 because, while some financial markets were in meltdown, others, like the Far East, were bullish. In this way, fine wine is quite mercenary and unique as it follows the money, moving to active markets to maintain a strong presence.

Historically, the market has outperformed many other investments and is considered a safe haven for funds. In the first quarter of this year, the COVID-19 crisis sent stock markets into free fall. While the S&P Global Luxury Index fell 23 percent, the Liv-ex Fine Wine 1000 slipped just four percent and had begun its recovery by May (see Fig 1).

How does the market remain strong as political landscapes and financial horizons change?
The market maintains a strong position within the performance rankings because it is always attracting new money. While luxury goods and markets are often led by fashion, fine wine seems to have a much broader appeal. In many countries, it signifies success, not unlike an impressive property or exotic supercar that can be displayed as a status symbol in social or business circles. By broadcasting success in this way, fine wine is given an extra dimension as an investment.

The simplicity of the market also adds appeal. Driven by the simple laws of supply and demand, trading fine wine makes economic sense to investors – even those with no experience of this asset.

What drives demand in the market?
The market has attracted investment from wealthy individuals, which has increased demand on an already limited supply chain. To appreciate this, one needs to realise some of the leading Châteaux in Bordeaux and Burgundy produce less than 2,000 cases per year. This demand grows exponentially as the market attracts new areas of wealth, but with production remaining static, it is easy to see how demand outstrips supply of the most sought-after wines.

Wine is regarded as an armchair investment that requires no maintenance and has minimal costs except storage and insurance to safeguard the asset. It is important the wine is held in a secure facility with automated atmospheric conditions suited to the long-term storage of wine to ensure its condition is maintained.

Unlike many luxury consumables, there is a definitive stock at the end of each harvest year, because you cannot produce more than the capacity of the vineyard. Therefore, you cannot increase production to meet demand. Additionally, not every harvest produces the same quality of grape. Extreme weather will create a lower yield, forcing Châteaux to be more critical with their grape selection for top labels. In some instances, this reduces production to as little as a third, which naturally affects the values of the new vintage and subsequent vintages.

The fine wine market maintains a strong position within the performance rankings because it is always attracting new money

Do you have any advice for someone who wants to get involved in fine wine?
Our clients are from many walks of life, but the one thing they have in common is that they prefer to have funds outside the more volatile mainstream markets. They know this is not an in-out, buy-sell marketplace, which means they don’t have to monitor market performance on a regular basis. Most clients appreciate wine as a medium-term investment and know that if they get between seven and 14 percent growth per annum in a tax-efficient environment and the wine is held for eight to 10 years, they will have a valuable fine wine collection.

Anyone wanting to get involved in the fine wine market should understand this and look elsewhere if they are pursuing massive overnight profits or quick returns. This market remains stable because it is about a steady, incremental growth over months and years. My advice to anyone looking to enter the marketplace would be to see it as an asset they can add to frequently. They should lay a solid foundation and then build on it.

How could an individual engage with the market before committing financially?
UKV International holds luncheons and social events, to which we invite both prospective and long-standing clients so they can network, gain first-hand examples of how the market works and hear feedback about the service we provide.

This allows would-be clients to get an idea of the marketplace, enjoy the social aspect of our services and set their expectations in terms of time frames, returns and exit strategies. Many different people from a variety of geographical areas and social backgrounds attend these events, showing that the market is not the preserve of a particular demographic.

Our clients have many reasons for entering the fine wine market. Many of them are successful entrepreneurs who simply want funds outside the mainstream markets; they are company owners and directors who have utilised all of their personal tax allowances and traditional tax wrappers and want an additional tax-efficient vehicle. Additionally, many of our clients are looking to bolster their pension or retirement plans.

Levels of entry differ and can be flexible depending on the client’s circumstances and objectives. Most clients enter the market with between $24,000 and $61,000 to create a foundation to build upon. Some start with as little as $12,000 and add regularly to build a solid portfolio over 12 to 18 months.

Those who are looking for income from their investment usually transfer more volatile or underperforming funds, and so their entry levels are much higher. In these cases, entry levels are between $600,000 and $1.2m, but it largely depends on the individual, the purpose of holding wine and what they are looking to get out of the market. Whatever they are looking for, the message in the bottle is: fine wine is not just for drinking.

Businesses must do more to support their employees’ mental health

Posted on by Ashton Wenborn

The world is no longer ignoring mental health. It can’t. According to the World Health Organisation (WHO), around 450 million people are currently living with some form of mental health condition, and 25 percent of people will experience a mental or neurological disorder at some point in their lifetime. This makes it one of the leading causes of ill health across the globe.

Alongside the personal, unquantifiable impact of this mental health crisis, the economic costs are stark: the Lancet Commission on Global Mental Health and Sustainable Development estimates that mental disorders will cost the global economy $16trn by 2030. That’s before taking into account lost tax revenues, benefits payouts and increased pressure on public health services. It’s before even considering the impact of COVID-19, which the WHO predicts will see mental health issues across the globe soar in the coming months and years.

The pressure to attend work despite health problems is not conducive to employee wellbeing or good business

It’s not just governments feeling the impact of the global mental health crisis. Businesses – and their bottom lines – are bearing the brunt too. In January, Deloitte published a study titled Mental Health and Employers: Refreshing the Case for Investment, which found that mental-health-related issues cost UK firms as much as £45bn ($56.72bn) a year, up 16 percent from 2017. In the US, the figure sits closer to $100bn, Forbes reports.

Hitting the bottom line
The costs of poor mental health come from a variety of factors. Laurie Mitchell, Assistant Vice President for Global Wellbeing and Health Management at Unum Group, explained: “Lost productivity, lower morale or ‘presenteeism’, when employees continue to work, yet function at a lower level than when they are healthy, mean costs can add up for employers. When you consider that nearly half of employees say they’ve struggled with their mental health in the previous year, it’s easy to see the impact.”

According to Deloitte’s report, presenteeism alone costs UK employers between £27bn ($34bn) and £29bn ($36.6bn) a year, pointing to a facetime culture so ingrained in our psyches that many don’t even question it. In its 2018/19 Workplace Wellbeing Index, mental health charity Mind found that 81 percent of employees said they always or usually came into the office when they were struggling with their mental health and would benefit from time off. According to Unum’s 2019 Strong Minds at Work report, 22 percent of respondents with a mental health issue said that work stress triggered their conditions to flare up or worsen (see Fig 1).

The pressure to attend work despite health problems is not conducive to employee well-being or good business, but neither is absenteeism. Forbes reports that in the US, depression accounts for 400 million lost working days every year. Meanwhile, in the UK, a staggering 54 percent of all sick days taken in 2018-19 were a result of work-related stress, anxiety or depression, according to a report by the government’s Health and Safety Executive.

Enacting change
Businesses have started to wake up to the importance of looking after their employees’ mental health. According to HR consultancy Buck’s global 2018 Working Well report, 40 percent of the organisations surveyed had some form of wellbeing strategy in place, up from 33 percent in 2016. “Wellbeing programmes have really risen up the business agenda over the last five years,” said Paul Barrett, Head of Wellbeing at the Bank Workers Charity. “In 2019, for the first time, health and wellbeing became the biggest HR priority in the UK – something that would have been inconceivable five years earlier.”

Last year, more than 40 CEOs from across the US, led by executives from Johnson & Johnson and Bank of America, attended the American Heart Association CEO Roundtable, where they set out strategies for employers to help workers manage depression, anxiety and other mental health conditions. Meanwhile, in the UK, 30 organisations signed up to the government’s Mental Health at Work Commitment, which outlines core principles that employers should follow to improve the mental health of their staff.

For some organisations, caring for the wellbeing of their workforce is nothing new; Johnson & Johnson established its Live for Life programme as early as 1979, with the ultimate aim of improving productivity and limiting healthcare spending. But for the vast majority of companies, this is a relatively recent change – one that was spurred on by the 2008 crisis and spearheaded by the finance sector. “Banks were among the first to actually develop wellbeing strategies,” Cary Cooper, President of the Chartered Institute of Personnel and Development, told World Finance. “They were the ones to think of wellbeing as a strategic issue rather than ping pong tables, or sushi at your desk, which isn’t proper wellbeing.

It is important to question whether companies are adopting programmes for the sake of ticking boxes and looking good

“That’s because they wanted to retain top talent. They were hit the worst during the recession – there were fewer people doing more work, feeling more job insecure, working longer hours and getting ill from stress-related illnesses, so they weren’t retaining people.”

Among those leading the wellbeing trend in the sector was UK bank Barclays. The company launched its This is Me campaign in 2013 with the aim of combatting stigma surrounding mental health by sharing videos of employees speaking about their experiences. It sparked a London-wide This is Me in the City campaign, which saw other banks follow suit.

Santander also made mental health a priority by establishing its employee-led wellbeing network and launching its Thrive app, which is dedicated to improving users’ mental health. Lloyds has taken a similar approach by launching a personal resilience portal to help colleagues better understand the measures that can be taken to prevent illness, both in terms of mental and physical health. The bank plans to train 2,500 of its employees to become mental health advocates by 2021.

Lloyds says its initiatives have helped to open up the conversation around mental health and improve employee engagement. “Over the past three years, we have seen an increase in the number of colleagues who feel comfortable telling us they have a mental health issue,” said Fiona Cannon, Director for Responsible Business, Sustainability and Inclusion at Lloyds. “The engagement level of colleagues with a mental health condition has also increased by 22 percentage points.”

Businesses outside the banking sector have started to take action too, and with positive results. Accenture reported an eight percent rise in employee engagement, a three percent increase in productivity and a 9,000-hour drop in absenteeism after implementing its wellbeing strategy. Meanwhile, e-commerce company Next Jump said its annual sales growth quadrupled after it invested in health and wellbeing, climbing from 30 percent to 120 percent.

Barriers to progress
While such progress is promising, there is more to be done. Those businesses already taking action are the exception rather than the rule, with 60 percent of organisations across the world still operating without a wellbeing strategy in place, according to Buck’s survey. In the UK, the same survey found that only 26 percent of businesses had implemented a strategy. Concerningly, even among those that have introduced initiatives, many aren’t evaluating their success. “Unfortunately, a lot of companies will do mental health first aid training, or they’ll do mindfulness at lunch, and they don’t know whether it works or not,” Cooper said. “They just do it because it’s low-hanging fruit, it’s easy to do, and it doesn’t cost much.”

Cooper explained that the success of mental health first aid training in particular was still up for debate: “Companies use it because it’s easy – they send their employees on a training programme, but there’s no clear evidence it works yet. There are lots of questions about it: should employers select people instead of asking for volunteers? Is the training adequate? Is it actually effective for employees, or does it benefit the mental health first aiders themselves more than their colleagues?”

Employee assistance programmes (EAPs) are another topic that’s up for debate. They have a great deal of potential, providing free assessments, short-term counselling, referrals and follow-up services for employees, yet their effectiveness is unclear. A report by the Employee Assistance Professionals Association found that only nine percent of surveyed HR managers had attempted to evaluate the return on investment via sickness absence, productivity, performance or engagement. “The EAP [is] considered to be simply the ‘right thing’ to offer,” the report read. “There is a fundamental perception of EAPs as a ‘cost-effective’ or ‘far less expensive’ option than other wellbeing improvement schemes.”

It is important to question whether companies are adopting programmes for the sake of ticking boxes and looking good, rather than implementing strategies that actually work. In reality, the uptake of EAPs is limited. Research by Towergate Health and Protection found that while 76 percent of UK firms offered access to an EAP, only five percent said they were being used. That’s not to say they can’t be effective, though – a large part of the problem is the lack of communication, according to Mitchell. “We find there’s an education gap between what resources companies offer and what employees are aware of,” she said.

While the conversation around mental health has changed substantially in recent years, for many it’s still a difficult subject

According to Unum’s report, 93 percent of employers said that their company provided an EAP, but just 38 percent of employees knew this resource was available to them. The same knowledge gap existed in relation to other mental health resources (see Fig 2). This is due, in part, to inadequate training. According to Unum’s report, only a quarter of managers in the US have been trained on how to refer colleagues to mental health resources, and more than half of employees were unsure of how they would help someone who came to them with a mental health issue.

The stigma surrounding mental health is another barrier to the uptake of support schemes. While the conversation around mental health has changed substantially in recent years – in a survey by Accenture, 82 percent of respondents said they were more willing to talk about issues now than they were only a few years ago – for many it’s still a difficult subject. In the Unum report, 81 percent of employees said the stigma around mental health issues has prevented them from seeking help. Nearly half feared they would be given fewer opportunities for advancement, and 37 percent worried they would be shunned by colleagues.

“Many of those struggling with mental illness keep their issues secret, often fearing discrimination, reputational problems, or even the loss of their job,” Mitchell said. “But mental health issues are prevalent and treatable and/or manageable. Someone with a mental health issue such as depression or anxiety should not be treated any differently than an employee with heart disease or asthma.”

Culture shock
Wellbeing programmes – even those with a decent uptake and proven return on investment – can only go so far. Prevention is the real key to easing the mental health crisis. Deloitte’s report showed that organisation-wide cultural change, education and other early interventions produced a higher return on investment than later-stage, in-depth support tools. Such culture changes involve a fundamental review of our working lifestyles and a thorough analysis of what is causing work-related mental health issues.

For Unum medical consultant David Goldsmith, our growing reliance on technology and the move away from physical interaction is the problem. “Five years ago, I would sit in a room with my peers and talk face to face,” he said at a Disability Management Employer Coalition webinar on mental health. “As technology moves along, I spend more time looking at a computer screen and talking on a headset… We’re driven by metrics. Everything is monitored and the employee feels threatened… The bond between the employer and the employee doesn’t feel like family anymore.”

A culture of always being contactable is also taking its toll on employees’ wellbeing. According to a survey by the Chartered Institute of Personnel and Development, 40 percent of people check their work emails at least five times a day outside of working hours and nearly a third feel that remote access to work means they can never completely switch off. Some firms have taken action to help combat the problem: in 2012, Volkswagen stopped its Blackberry servers from sending messages to employees when they weren’t working, while France has implemented a ‘right to disconnect’ law that gives staff the legal right to avoid emails and calls outside of work hours. For the vast majority of workers, however, being available at the touch of a button has become part of the job description.

Culture changes involve a fundamental review of our working lifestyles and a thorough analysis of what is causing work-related mental health issues

The long hours resulting from the show-your-face culture that characterises working life is just as problematic. “We need to get rid of the long hours culture – it’s a big problem,” Cooper told content platform Work in Mind. “Bad managers are appalling at seeing when people aren’t coping, or when they’re working long hours. They reinforce that behaviour, which burns people out. It’s important to remember that long [hours] means illness, not efficiency.”

It’s up to business leaders to ensure their company is doing enough. According to Cooper, they should question each aspect of their operations: “Do they have good people skills? Do we have a long-hours culture? Do we have an excessive email culture? Do we train people to be more resilient? Do we get social support systems? Do we allow them to work flexibly? That flexibility means trusting people to work when and where they want, whether from home or from a central office. As long as they finish and complete it and do a good job, who cares?”

The COVID effect
With the COVID-19 crisis forcing many businesses to allow their staff to work from home, greater flexibility may well become the norm in the future. That should at least push businesses to rethink the traditional nine-to-five day and find new ways of working that are more conducive to good mental health and productivity.

But while the novel coronavirus could encourage businesses to be more flexible with their staff, it brings significant mental health challenges. The UN has warned that we could see “a major mental health crisis… if action is not taken”, and that mental health must be “front and centre of every country’s response to and recovery from the COVID-19 pandemic”. A survey by NRC Health found that more than half of respondents, across all generations, were experiencing worse mental health due to coronavirus (see Fig 3).

Adding to people’s anxiety about COVID-19 is the effect of the resulting economic downturn, which the IMF has predicted will be the “worst recession since the Great Depression”. For Cooper, this could be the biggest issue of all. “A lot of people are going to lose their jobs, meaning [the] people that remain will be overloaded and feeling job insecure,” he said. “They will feel unable to cope with their workload, and they’ll come into work ill. In other words, they’ll suffer from presenteeism at higher rates, delivering no added value, but they’ll be at work because they’ll be frightened of not being at work. But they’ll also be the good workers that employers can’t afford to lose. So it’s the scenario we saw in 2008 writ large.”

It’s a challenging time for employers and employees. If businesses are to succeed, they will have to take action to retain top talent. They will have to think hard about how to reduce stigma so employees feel confident talking about their mental health, and establish effective, tried-and-tested strategies to support those who are struggling. More importantly, they will need to go beyond investing in the easy, image-friendly wellbeing products, and instead hold a mirror up to the principles that have for decades governed working life.

If they do it right, businesses might emerge from the crisis stronger than before. If they don’t, they will likely find themselves left behind and it will be up to governments and the wider economy to support those who have been failed by their employers.

BOCM: what Macau’s unique global position means for the country moving forward

Posted on by Max Tomlin

Bank of China Macau Branch (BOCM) has developed in step with the Macau special administrative region (SAR) since the founding of the People’s Republic of China, and was a key source of stability around the 1999 resumption of Chinese rule. As the bank’s general manager, I am looking forward to a new period of development opportunities as BOCM celebrates 70 years in operation.

Founded in 1950, soon after the establishment of the People’s Republic of China, BOCM (formerly known as Nam Tung Bank) has always been an essential pillar of the Macau SAR’s economy and society. It accounts for nearly half of all banking business in the region and is the most profitable overseas branch of the Bank of China Group, China’s primary international bank.

In 1987, Nam Tung Bank received approval to change its name to BOCM. The change was the culmination of governmental efforts to broaden the range of products and services provided by financial institutions in the region, and helped to boost internationalisation in the domestic financial sector. The bank’s new name also recognised the important role that Bank of China was playing in stabilising the financial market as talks about the future relationship between Macau and mainland China progressed. Then, as today, BOCM is committed to ensuring Macau’s future economic prosperity.

The ‘one country, two systems’ policy allows BOCM to capitalise on the opportunity to perform on a large stage

I am proud to highlight the bank’s clear and obvious advantage within the ‘one country, two systems’ policy. The policy allows BOCM to capitalise on the opportunity to perform on a large stage. China’s 40-year ‘reform and opening up’ era led to grand growth initiatives running across Macau, such as the Belt and Road Initiative and the development of the Guangdong-Hong Kong-Macau Greater Bay Area, and increased foreign direct investment into the mainland’s previously closed economy (see Fig 1). As China continues to pursue ambitious development projects and collaboration with other countries, BOCM and the entire SAR are set to benefit.

Promoting development
Since its establishment in Macau in 1950, BOCM has unswervingly followed its mission statement: rooted in Macau, serving Macau. The bank has shown dedication to fostering economic development, promoting industry and commerce, supporting disadvantaged communities and constructing smart infrastructure, all to guarantee the continued prosperity and stability of Macau. The result is that we have won the trust of the region’s citizens, making us the region’s preferred bank.

BOCM is not only a Macanese-pataca-issuing bank, but it is also the government’s public banking representative and a renminbi-clearing bank. Besides these formal roles, over the years the bank has organised charity events, supported education initiatives and been instrumental in the development of new talent in the banking industry. Our achievements are the result of joint efforts spanning several generations. The past decade, in particular, has seen a marked increase in development in this area.

Under the Belt and Road Initiative, BOCM has seized the opportunity to meet the financing needs of Chinese firms that are investing overseas. Chinese organisations expanding into Portuguese-speaking countries and companies from Portuguese-speaking nations entering the Chinese market will find BOCM’s services particularly beneficial.

Macau is uniquely positioned as a core city for the Greater Bay Area and the Belt and Road Initiative, presenting BOCM with many opportunities but also a great deal of responsibility. We are keen to ensure that businesses, both domestic and international, have access to the capital they require in order to participate in these ambitious development programmes.

BOCM’s progress in promoting Macau’s financial development, especially in the Guangdong-Hong Kong-Macau Greater Bay Area urbanisation initiative, is very gratifying. BOCM has issued pataca bonds worth $1.8bn, offshore renminbi bonds worth CNY 4bn ($562m) (part of a growing number of ‘lotus’ bonds) and offshore One Belt One Road renminbi bonds worth CNY 4.5bn ($633m), among other themed bonds. As a global coordinator, we have successfully implemented the Ministry of Finance’s plan to issue government bonds worth CNY 2bn ($280m) in Macau.

In addition, in 2019, BOCM successfully issued the first green bond in Macau. This was also the first secured overnight financing rate bond for commercial institutions in emerging markets and the Asia-Pacific region; launching the product greatly enhanced the reputation of Macau’s financial institutions in the international bond market.

Clear the way
As a renminbi-clearing bank, BOCM has led the way in opening the first renminbi bank account in Macau for Portuguese Commercial Bank, thereby accelerating the development of Macau as a Sino-Lusophone renminbi-clearing region. In May 2019, the Conference of Central Bankers, Financial Supervisors and Financiers from China and Portuguese-speaking Countries coordinated the efforts of Chinese banks to engage with five bank associations from Lusophone countries. This united a wide range of participants in financial services, leading to improved trade cooperation between China and Portuguese-speaking countries.

At the same time, BOCM has expanded the geographical reach of the bank and diversified the wealth management channels available to residents. For instance, the Shanghai Gold Exchange has authorised BOCM to handle its offshore accounts, making business simpler for the bank’s account holders. The deal will promote the trading of precious metals in Macau.

BOCM is also a pioneer of digital banking in Macau, having embraced areas such as fintech. BOCM is taking the lead in this area with the creation of BoC Pay, an online payment channel that supports Alipay, WeChat and UnionPay. By the end of 2019, the platform had welcomed 7,860 merchants. Other digital initiatives that we have promoted include online banking for personal and corporate customers, which offers self-service functionality safeguarded by the highest security standards.

Branching out
The Bank of China Group has established branches in Portugal, Brazil and Angola, creating a service network in Portuguese-speaking countries to help customers pursue opportunities in Sino-Lusophone development. In the construction of the renminbi-clearing centre for Lusophone countries, BOCM has joined the Cross-Border Interbank Payment System, which covers these countries. At present, the bank has established an agency relationship with 17 banks in Lusophone countries. In 2018, business in this network reached CNY 2.5bn ($350m).

At the same time, BOCM is working on creating a Sino-Lusophone investment and financing service platform. This would provide a wealth of information on investment projects in Lusophone countries, promoting the integration of Sino-Lusophone projects and project matching. Thus far, BOCM has successfully assisted the Portuguese central bank in issuing panda bonds in China, becoming a model for foreign central banks to issue panda bonds on the mainland. BOCM also supported an enterprise in Macau to purchase a Portuguese farm for €35m ($38m) to promote the development of agricultural and commercial cooperation between China and Portugal.

As we look to the future, BOCM will continue to support the development of Macau’s economy and society, helping to improve people’s lives in accordance with the Macau SAR Government’s policy agenda. The bank will also fully support the development of the Guangdong-Hong Kong-Macau Greater Bay Area, thereby promoting the integration of Macau into the country’s overall progress.

BOCM will maintain its position as a well-rounded, mainstream bank in the region and strive to become an important financial institution serving the Guangdong-Hong Kong-Macau Greater Bay Area, as well as serving the Belt and Road Initiative, especially among Portuguese-speaking countries.