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Climate change to cost German economy billions, warns report– Industry roundup: 7 March

Climate change “could cost Germany up to €900 billion by 2050”

Climate change could cost Germany up to €900 billion (US$960 billion) in cumulative economic damage by mid-century, a study suggests, as Europe’s biggest economy searches for ways to mitigate the impact.

The analysis by the economic research company Prognos, the Institute for Economic Structures Research and the Institute for Ecological Economic Research was released as Berlin works on a climate adaptation strategy soon to be presented by the environment ministry.

Germany’s economy and environment ministries said the study demonstrated that extreme heat, drought and floods could cost from €280 billion (US$300 billion) to €900 billion between 2022 and 2050, depending on the extent of global warming.

The costs include declining farm yields, damage or destruction of buildings and infrastructure due to heavy rain and flooding, impairment of goods transport and impacts on the health system.

The scenarios are not exact predictions as certain of climate change, such as reductions in the quality of life, are hard to quantify economically.

“The costs of climate change may turn out to be much higher than determined by the scenarios in the model,” the study said.

Climate change and extreme weather are already estimated to have cost Germany upwards of €145 billion from 2000 to 2021, of which €80 billion relate to the past five years alone, including the 2021 floods in the states of Rhineland-Palatinate and North Rhine-Westphalia, the economy ministry said.

The costs of expected damage could be reduced completely through climate adaptation measures, such as carbon storing, if climate change was only mild, the study found, adding that about 60% to 80% of the costs could be prevented under such measures depending on how strongly the climate would change.

Challenger banks overtake UK’s big five in SME lending

The UK’s high street and traditional banks lost their domination of the SME lending market last year, with challengers and specialist rivals lending £35.5 billion (US$42.7 billion), or the equivalent of 55% of the market.

Britain’s big five banks – Barclays, Lloyds Banking Group, HSBC, NatWest Group and Santander – have traditionally dominated smaller business lending.

More recently though, well-established challengers such as TSB and Metro Bank and specialists like Shawbrook Bank and Paragon Bank have taken hold of a growing share of business customers.

The figures, released by the state-owned British Business Bank, mark the third time alternative lenders have accounted for the majority of the UK SME lending market, after briefly overtaking incumbents in 2018 and 2021 with a 51%share.

“The report finds strong growth from challenger and specialist banks, as well as asset finance provision, as businesses seek alternative finance options,” said Louis Taylor, CEO of the British Business Bank. 

As a whole, gross bank lending to SMEs grew by 12.8% to £65.1 billion, however, net lending fell by £8.5 billion due to businesses repaying their Covid loans.

The volume of loans also fell, with 33% of SMEs using external finance in 2022 compared to 44% in 2021, however the headline figure still rose due to larger average loan sizes.

“Smaller businesses are clearly adapting to a challenging economic climate, with many reducing their use of external finance,” said Taylor.

The report reveals the smaller business asset finance market also reached a record level in 2022, with an increase in new business of 11% in 2022 to £22.1 billion. This was driven in part by some easing of supply chain shortages and by rising asset prices.

The data show a considerable drop in the demand for external finance - in Q3 2022 only 3% of smaller businesses were using external finance, compared to 44% a year earlier. Gross lending still grew as firms using finance sought larger loans to support their business due to inflationary pressures.

Citi to beef up its Paris operation

Citigroup is developing a new trading floor in Paris as the US group prepares to nearly double its staff in the French capital.

The new floor in its existing building — located close to the Avenue des Champs-Élysées and the Arc de Triomphe — will help Citigroup increase staffing for its trading division to 250 in the coming years, up from 130 currently, said Fabio Lisanti, head of the bank’s trading business across Europe, excluding the UK. The new floor is set to include at least 85 desks.

Fabio Lisanti, head of Citigroup's European trading business, which excludes the UK, is overseeing the creation of a new trading floor and the near-doubling of his Paris workforce.

Lisanti, who was previously based in London for six years, told Bloomberg that the French capital was emerging as a top destination for US banks and Citigroup had been able to “hire talent in Paris that we would never have been able to attract in London.

“London remains the main trading hub for us. But we have and will move certain risk management and risk books in Europe. We’ve already moved quite a few and there's more to go.”

He added: “What has brought people to Paris is the fact that it's a very international town to begin with.

“One of the things we should not forget is us moving to Paris or to Europe, there is a strong commercial reason for that. We will cover our clients better, we will create better teams, stronger teams and ultimately be able to generate revenues more effectively and efficiently.”

Other major banks have also opted to transfer more of their operations to Europe post-Brexit, specifically the trading of European Union assets such as government bonds.

Bybit powers crypto Mastercard in EU and UK

Bybit has introduced a debit card that can be used on the Mastercard network and would deduct cryptocurrency holdings from accounts when making purchases.

The launch of Bybit’s virtual and physical debit card offerings comes days after the Dubai-based exchange announced it will stop accepting bank transactions in US dollars.

Bybit has released a free virtual card that can be used for online purchases, with a real card coming out next month.

By using the card, customers can directly debit funds from their cryptocurrency wallets rather than going through exchanges or other off-ramp providers.

Clients in qualifying countries across Europe and the United Kingdom will be able to access it after completing the necessary Know Your Customer and Anti-Money Laundering (KYC/AML) processes.

Customers will receive plastic cards in the mail that can be used at any ATM and at any merchant worldwide, up to the combined spending limit of all the currencies in their Bybit account.

Bitcoin (BTC), Ethereum (ETH), Tether (USDT), the U.S. Dollar Coin (USDC), and Ripple (XRP) are the first supported cryptocurrencies for Bybit Card.

When a customer from Europe or the UK submits a payment request, their digital asset balance will be converted into the appropriate fiat currency at the time of the request.

Ex- JPMorgan duo launch women-led emerging market investment firm

Two former JP Morgan credit bankers have launched a new women-led impact investment advisory firm focused on emerging market infrastructure, with a minority stake by UK insurer Legal & General’s alternative investments arm.

The new firm, ImpactA Global, aims to help address the World Bank's estimated need for US$1 trillion in annual investment in emerging market infrastructure to meet development goals.

The two founders and co-CEOs, Isabella da Costa Mendes and Victoria Miles, say the new firm seeks to bridge funding gaps in transformational infrastructure projects and unlock critical investment to drive climate transition and reduce inequalities in emerging markets. They are joined by Susan Ward and Audrey Caulliez-Louis as Partners in the business.

“There is an urgent and pressing need to address the critical social and environmental challenges that the world is facing, in particular in emerging markets,” said Isabella da Costa Mendes. “We believe in the potential of impact investing to unlock the capital to meet these challenges."

Victoria Miles, who will serve as chief information officer in addition to co-CEO, added: “We have launched ImpactA because we believe that closing the infrastructure gap is key to maintaining economic growth and reducing income inequality in the Global South.

“We saw an opportunity to launch an infrastructure debt fund focused exclusively on emerging markets, a market overlooked by traditional players. We are thrilled to be partnering with L&G, and with a team that shares our passion for inclusive capitalism and recognises the imperative to finance sustainable infrastructure assets in emerging markets.”

Southeast Asia “is the new China” for global supply chains

Southeast Asia is the “new China” and should be the centre of the global supply chain, claims the head of an influential regional business body.

In an interview with Al Jazeera News, Arsjad Rasjid, chairperson of the ASEAN Business Advisory Council (ASEAN-BAC), said the 10-member Association of Southeast Asian Nations (ASEAN) should be the “supply chain of the world.”

“ASEAN should be the supply chain of the world, the new China is ASEAN,” Arsjad told Al Jazeera.

Arsjad, who also leads the Indonesian Chamber of Commerce and Industry, said the bloc is on track to take China’s spot “good as tomorrow” due to the region’s rich resources of nickel and other key minerals.

“ASEAN countries also have food and agriculture,” said Arsjad, who was in Malaysia’s capital, Kuala Lumpur to meet with government officials and business leaders.

ASEAN-BAC, the private sector arm of ASEAN, is mandated to facilitate economic cooperation and integration in the region. Indonesia is the chair of ASEAN this year.

Indonesia has the world’s largest nickel reserves at 21 million tonnes, which accounts for nearly one-quarter of the global total, according to data from the US Geological Survey. The Philippines has the fourth-largest reserves, with 4.8 million metric tonnes. Nickel is a crucial element in the manufacture of stainless steel, electronic devices and electric-powered vehicles.

“Indonesia contributes 40% of the nickel [output] to the world. If you add the Philippines, it becomes 50-60%,” Arsjad said.

Indonesia, along with Thailand and Vietnam, is aiming to become a key player in the electric vehicle supply chain by leveraging its large nickel reserves to attract investment.

Arsjad stressed that although Southeast Asia is rivalling China’s position at the heart of global supply chains, firms in the region are keen to complement and work together with China.

“We are always open to China. We are saying to China to invest here [in ASEAN] … not just buy the raw materials. Create the value added [production] here,” he said

“It is time for us to create our own down-streaming … our own ecosystem, to add more small and medium-sized enterprises … and create jobs.”

Yose Rizal Damuri, executive director of the Jakarta-based Center for Strategic and International Studies, said ASEAN has the resources to be at the heart of the global supply chain.

“But each of them needs to realise that individually, they cannot do much. There must be a regional supply chain that they first need to build,” said Damuri. “They have to cooperate and allow for certain production stages to be developed in [fellow] ASEAN countries.”

MUFG, SBI close landmark US$1 billion social loan

Japan's MUFG Bank has completed a US$1 billion syndicated social loan facility for State Bank of India (SBI), India’s largest bank, that is MUFG’s second social loan in India and SBI’s inaugural social loan.

This syndicated transaction is one of the largest environmental, social and governance (ESG) loans to a commercial bank in the Asia-Pacific region, and the second-largest social loan globally. Proceeds from this loan will be used to finance social projects, such as affordable housing and lending for small and medium-sized businesses, including women entrepreneurs, micro entrepreneurs, self-help and joint liability groups, and smallholder farms.

MUFG is the lead social loan coordinator for this transaction, and one of two lead arrangers, underwriters and bookrunners mandated to arrange a US$500 million facility with a greenshoe option. The syndication closed successfully with commitments received from 22 banks, and the facility was subsequently upsized to US$1 billion.

An announcement of the deal said that the “transaction underscores SBI’s longstanding commitment to supporting green and social projects in India. As lead social loan coordinator, MUFG worked with SBI on publishing its sustainable financing framework, covering both the green and social uses of proceeds.”

This framework is in line with the 2021 Green Loan Principles and Social Loan Principles – globally-recognised methodologies developed by the Loan Market Association, the Asia Pacific Loan Market Association and the Syndications and Trading Association to consistently certify, track and monitor the environmental and social impact of financing assets. MUFG also worked with SBI in engaging Sustainalytics to provide the second-party opinion.

Shashank Joshi, deputy CEO of MUFG Bank India, commented: “This deal is a testimony to SBI’s status as India’s national banking champion and the transformational role it plays in the Indian ESG financing landscape.”

FOMO Pay joins Singapore Clearing House Association

FOMO Pay, a Singapore-based major payment institution, has announced its official membership in the Singapore Clearing House Association (SCHA), the organisation comprising the Monetary Authority of Singapore (MAS) and elected financial institutions.

As an SCHA member, FOMO Pay will leverage the association’s clearing services and facilities to enhance the reconciliation process for direct fund transfers between financial institutions, ensuring FOMO Pay clients’ timely business transactions while safeguarding all parties involved by recording transaction details and validating fund availability, FOMO Pay said in a statement.

This membership represents another significant milestone for FOMO Pay after becoming SWIFT network member in December 2022.

The SCHA is an association formed in December 1980 to establish, manage and administer clearing services and facilities for cheques and debit and credit items of its members. It is responsible for the Singapore Automated Clearing House (ACH), which runs the Singapore Dollar Cheque Clearing System, the United States Dollar Cheque Clearing System and the Interbank GIRO System.

Founded in 2015, FOMO Pay offers  three flagship products: FOMO Payment – a one-stop digital payment solution for merchants, corporates and financial institutions; FOMO iBank, which facilitate businesses’ everyday requirements for transactional banking needs; FOMO Crypto, the Asia’s first licensed gateway bridging digital currency and fiat.

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