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Biden unveils Indo-Pacific Economic Framework – Industry roundup: 24 May

Biden launches Indo-Pacific Economic Framework

President Joe Biden has announced that 12 other nations are joining the US in the Indo-Pacific Economic Framework (IPEF), his economic plan for Asia. Members are “signing up to work toward an economic vision that will deliver for all people on Earth.”

Together, the countries participating in the IPEF – Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam, alongside the US – represent 40% of global GDP and “some of the world's fastest-growing, most dynamic economies”.

The Framework is Biden’s initiative in re- engaging the US with a region coming increasingly under the influence of China and unveiled it as he began the second leg of his debut tour of Asia, which began last week in South Korea and is continuing this week in Japan.

“We’re here today for one simple purpose: the future of the 21st Century economy is going to be largely written in the Indo-Pacific. Our region,” said Biden as he launched the plan. “This framework should drive a race to the top.”

As its name suggests, the IPEF is not structured as a free trade deal but is rather a framework that is being called a “21st-century economic arrangement”, which means most of its components will likely not have to go through Congress, where there is little appetite for new trade deals.

Many still remember President Obama’s Trans-Pacific Partnership (TPP), signed in February 2016 but subsequently scrapped by the Trump administration. Its remaining signatories went on to ratify the agreement (re-christened the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)) without the United States. China also increased its influence in the region through the Regional Comprehensive Economic Partnership (RCEP), which became the largest trade bloc in history after being signed in November 2020.

While exact details of the IPEF have yet to be revealed, the deal will focus on four economic pillars: the digital economy, supply chain pledges, clean energy, and tax and anti-corruption. There will be firm commitments that will be enforceable, according to US Commerce Secretary Gina Raimondo, but will steer clear of tariff arrangements and other traditional market opening tools. Those have become toxic in American politics in recent years despite “greater market access” historically serving as a carrot for the U.S. to set stricter labour standards and intellectual property protections.

By unveiling the framework, Biden appears to be acknowledging he has little intention of re-joining the TPP, which remains unpopular among US lawmakers who would need to ratify the deal. Instead, he hopes to generate an economic sphere that can compete with China, which has responded harshly to the framework, with a senior envoy calling it a “closed and exclusive clique.”

Reports note that the US president aims to keep a delicate balance in revealing the economic framework. While Asian nations are keen for a way to partner with the United States to reduce dependence on China, the President is also facing protectionist sentiments at home. The IPEF’s critics have suggested that it lacks any incentives, such as lower tariffs, as an incentive for joining up. Biden's aides suggest there are other ways to facilitate more trade and market access, and that the framework itself provides an attractive opportunity for participating countries to work closely with the US.

ESG meets growing pushback from investors to politicians

Following Elon Musk’s recent Tweet that “ESG is a scam”, there are growing signs that groups from investors to Republican politicians in the US are pushing environmental, social and governance concerns aside as fears about energy security and mounting costs take precedence.

John Browne, who was CEO of oil major BP from 1995 and 2007, recently stressed that now is not the time to “kick the ESG can down the road” but also admitted: “People are saying: maybe in these very tough, trying times where we have energy shortages, oil and gas prices at record-highs and a lack of security in energy, maybe we should be focused on those things rather than ESG.”

Browne’s warning came as corporate reporting season gets underway and companies hold their AGMs. Hundreds of shareholder resolutions related to ESG issues are being put to a vote, but some are gaining less support than last year. Asset manager BlackRock Inc, which in recent years has pushed for companies to improve their ESG scorecard, said last week that it was withholding its backing from investors who try to micromanage companies on climate.

And despite a surge in ESG investing in the past two years, ESG markets have underperformed against broader financial-market weakness. The average US-based ESG fund has fallen 13% this year as analysts predict that the slump is likely to worsen in the near term. Meanwhile, Moody’s ESG Solutions forecasts that green, social and sustainability-linked bond issuance will remain flat in 2022 at around US$1 trillion, down from an original projection of US$1.35 trillion.

Recent news reports reveal that as US midterm elections approach, the American political right is demonstrating a growing opposition to ESG advocacy. One example is in West Virginia, where state treasurer Riley Moore is preparing a list of banks that he says will lose the state’s business if they attempt to boycott the coal industry and others using fossil fuels. “Certainly ‘woke capitalism’ is something they are very familiar with,” he said. “We’re facing threats from that in my state, right now.”

Credit ratings agency S&P Global Inc is also facing opposition for using ESG information to evaluate municipal debt. Moore joined several other state treasurers last month to demand the ratings agency drop ESG factors from its rating system. His state got a negative social score and a moderately negative environmental score, signalling higher risk than most states, which are rated neutral.

“The ESG movement is nothing but a slippery slope,” Moore said, cautioning that states will be forced to “bend the knee to the woke capitalists or suffer financial harm.”

As the debate over ESG intensifies, a recent survey by US research group NORC for the Finra Investor Education Foundation, found that retail investors expressed strong support conceptually for sustainable investing, with 57% agreeing that investing can be a way to make positive change in the world, while only 37% agreed that a company should focus on maximising earnings and not pursue social or environmental goals.

Yet only one in four respondents could correctly define ESG, and only one in five could say what ESG stands for. Only 9% said they held ESG investments, four times fewer than those who uncertain as to whether or not they owned ESG investments.

Supply chain companies “losing key workers”

Supply chain companies are failing to retain vital workers due to a lack of career opportunities, low pay and a lack of benefits, according to research by UK recruitment multinational Hays. In the UK 59% of professionals working in supply chain and logistics have said they plan to move roles this year and in the US the figure rises to 77%.

Recruitment experts say firms are not listening to employees, while two years of supply chain disruption has created keen competition to fill roles. Hays’ research found that a lack of future opportunities was the most common reason listed for wanting to move at 27%, followed by seeking a better salary and benefits package at 26%, while 55% of supply chain workers said they would be tempted to move job for a better salary and benefits package.

Scott Dance, director of procurement and supply chain at Hays, commented “A consequence of the disruption to the procurement and supply chain landscape over the past two years is that competition for talent is fierce.

“Employers will need to act fast to secure the professionals they need to help their organisations navigate the challenges still to come, meaning hiring managers should be briefed as a matter of priority as soon as a vacancy is identified. With many candidates often having up to four or five job offers to choose from, speed-to-hire is more important than ever.”

Dance added that a strong employee value proposition from both a company-wide and personal perspective is “critical” to attracting the right talent and companies must be more inclusive to retain workers. “The value, furthermore, that professionals increasingly attribute to diverse and inclusive hiring practices cannot be ignored.

“Committing to the use of inclusive language and diverse imagery in recruitment materials, ensuring hiring panels are convened to take in a range of opinions and providing conscious inclusion training to key stakeholders are examples of purposeful action that will help to attract and retain talent staff.”

Hay’s findings are echoed by US supply chain recruitment firm WorkStep, which reports that 77% of supply chain workers are considering leaving their current role in the next three months. WorkStep calculates the average cost of losing a single frontline worker at around US $12,876.

The firm found that 46% of surveyed supply chain workers had been in their current role for less than one year, and 54% said they had switched jobs in the past year., while 38% said they were considering leaving because of limited career growth opportunities. All of those surveyed agreed that flexibility, schedules and hours influenced their decision on whether to take a new role.

WorkStep commented: “We’re in an era where employees are empowered to seek opportunities based on their needs. That’s why it’s more important than ever that companies are listening to workers and actively making changes to meet those needs.”

The firm added that companies were hindering their ability to retain staff by not asking for feedback from employees, with 41% of respondents saying management never sought feedback. “Creating a retention strategy this way will always be unsuccessful,” it noted. For supply chain workers who said their companies do seek feedback, 8% said they’re only asked to provide it once a year and 70% felt their voices weren’t being heard.

Austria joins EU’s green bond market as volume flags

Euro sovereign green bond issuance is down sharply on 2021 volumes, with year-to-date European sovereigns issuing €8.6 billion in green and sustainable debt. By late May last year that amount already stood at more than €27 billion, due in part to new entrants to the market which had pushed issuance higher with their inaugural bumper transactions, such as Italy’s €8.5 billion 20-year green bond launch in March 2021.

However, there should be some catch-up in coming weeks and months, predict ING analysts Benjamin Schroeder and Antoine Bouvet. Writing for ING Think, they report that Austria is also a notable new entrant to the sovereign green bond market. “In its presentation of the green bond framework, the Austrian debt agency indicated around €5 billion of eligible expenditures in 2021 and 2022 each. This would back green issuance primarily in the eight-year to 20-year sector, where most of the other European green counterparts are also situated.

“The novelty is that Austria also wants 20% of its green issuance to be in short-term debt, i.e., green treasury bills and commercial paper. Note that Austria has an overall bond issuance target of €40 billion for this year and targets outstanding volume of €18 billion in short-term debt instruments by year-end.

The authors expect Austria’s market debut to be successful but warn that primary market conditions are challenging. “This will also be a good test of market appetite for sovereign green bonds ahead of the Netherlands reopening its own in mid-June,” they conclude.

Singapore’s MAS forecasts jobs boost for financial sector

Singapore’s regulator the Monetary Authority of Singapore (MAS) forecasts that there will be more than 9,400 hiring opportunities for permanent roles in the city state’s financial sector in 2022, of which more than 3,000 new jobs will be in fintech.

The prediction was made by MAS managing director Ravi Menon, who gave the opening address at last week’s Singapore Financial Forum 2022.

Menon said that the highest demand – providing more than 700 job opportunities – will be for software developers and engineers, who support operations such as designing and developing digital finance services; applying blockchain technology in trade finance; and using artificial intelligence to detect fraud and money laundering.

Sustainable finance will also generate new jobs, from executing environmental, social, and governance (ESG) transactions to advisory services and product development. “Many of these jobs will draw on traditional finance expertise such as product structuring, risk management, reporting and pricing, but layered and infused with new knowledge on sustainability,” he added.

Menon reported that Singapore had created 5,800 net jobs in financial services over the past two years, despite the impact of the Covid-19 pandemic. This was accompanied by growth in the financial sector averaging 7.2% in 2020-21, four times faster than the overall economy. Growth has been broad-based, spanning the banking, insurance, asset management and payment services sectors.

MAS is accelerating its efforts to attract local talent, particularly with polytechnic graduates, mid-career professionals from other sectors and overseas Singaporeans working in finance and technology.

To support mid-career transitions, MAS will work with the Institute of Banking & Finance (IBF) and Workforce SIngapore (WSG) to launch a new wealth management accelerator programme. The three-month programme will be aimed at mid-career professionals keen to develop skills in customer relationship management and with an interest in pursuing a wealth management career.

The programme will include structured and on-the-job training to provide participants will the skills to be licensed and hired into relationship management roles. MAS added that seven major retail banks will participate in the inaugural programme to fill nearly 200 positions.

WTO accepts proposal to finance African trade

The World Trade Organisation (WTO) has accepted a proposal from the Ivory Coast to improve access and trade financing for African countries, with a focus on small businesses.

During a workshop organised by that nation, the WTO and the International Finance Corporation, WTO Director General Ngozi Okonjo-Iweala welcomed the initiative for the business sector and banks to establish a dialogue with the aim of helping merchants reduce the costs of transactions and better integrate into world trade.

She stressed the urgency of improving access to trade finance for small entities in Africa and underlined the serious monetary constraint facing the sub-Saharan region.

Okonjo-Iweala commented that global surveys show that while around 30% of international trade finance goes to small and medium-sized enterprises (SMEs), banks reject around 40% of their applications. Trade finance gaps in Africa, which before Covid-19 totalled around US$80 billion a year, have been exacerbated by the impact of the pandemic.

The WTO director-general said that the lack of monetary resources or their availability at higher costs than the world market are major obstacles to the integration of African nations in global trade.

For countries to be successful in international markets, their logistics, transportation, border crossing and trade financing costs must be competitive, she added. Controlling these costs requires experience and training, which eventually reduces transaction costs.

Okonjo-Iweala took up the post of WTO Director General at the start of March 2021 and is both the first woman and the first African to be appointed to the role. In a recent podcast for the McKinsey Global Institute, she reflected on the impact of the pandemic on trade, the imperative to ensure that vaccines reach Africa and other emerging economies, and how to ensure that trade is more inclusive in the years ahead.

Swedish fintech Dream and Mastercard partner on ESG banking solutions

Swedish fintech Dreams, developer of a financial wellbeing platform, has announced a strategic partnership with Mastercard to deliver sustainable banking products for financial institutions.

Through the partnership, the two firms aim to develop digital banking solutions that will help banks bolster their environmental, social and governance (ESG) credentials and encourage customers to adopt more sustainable consumption habits.

Henrik Rosvall, founder and CEO of Dreams, said: “Through our strategic alliance with Mastercard, we can catalyse digital customer journey transformations within Mastercard’s existing network of banks and financial services, and provide our unique Software-as-a-Service (SaaS) at the fingertips of millions of people.”

Using a methodology rooted in psychology, neuroscience and behavioural economics, Dreams claims its products drive behavioural change towards a more sustainable way of living and increased financial wellbeing.

“Banks who embed our solutions in their offering can capitalise on this expertise to boost customer engagement and digital sales, accelerate their transformation towards net zero, and take a leading stance in the fight against climate change and increased financial wellbeing,” said Rosvall.

Founded in 2016, Dreams says its business-to-consumer (B2C) money-saving app has helped more than 500,000 users in the Nordics save and invest money for the future.

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