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Companies lagging on ESG assurance preparations – Industry roundup: 3 October

ESG shortcomings revealed by KPMG survey

Only one in four companies are at advanced stages of preparation to obtain independent assurance on their reported environmental, social and governance (ESG) information, although 66% are required to disclose ESG data or expect to be soon – including 78% of listed companies – according to a survey from global professional services provider KPMG.

KPMG surveyed senior executives and board members at 750 companies in various sectors and regions, with average company revenue of US$15.6 billion, and launched the ESG Assurance Maturity Index, gauging progress companies have made in ESG policies, skills, systems and value chain data to prepare for ESG assurance.

The study comes as companies increasingly face regulatory and stakeholder pressure to report on an increasing range of ESG-related information, with many new and emerging disclosure systems, including the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD)and US SEC’s’ climate-related reporting rules, also requiring companies to obtain independent assurance on their sustainability reporting, similar to requirements for financial disclosure.

Maura Hodge, ESG Audit Leader at KPMG US, said: “Assurance requirements are here. Soon, third-party assurance will no longer be a nice to have; it will be table stakes. While there are some larger companies that have been working to get ESG assurance ready, most companies haven’t built out much of the infrastructure that they need to have their ESG data assured. Now is the time for companies to establish their processes and become assurance ready.”

The KPMG study found that 75% of companies were still in the early stages of ESG assurance preparedness, despite the pending regulatory requirements, across a range of key factors including governance, skills, data management, digital technology and value chain, with even the top 25% of identified “Leaders” having significant work ahead to become ESG assurance ready. The study indicated that 56% of companies are publicly reporting ESG data, and while 93% of these are providing some level of external assurance, only 14% are obtaining reasonable assurance, and 16% limited assurance.

The report found differences in readiness by company size, region and sector, with larger firms (revenue above US$10 billion) scoring well ahead of their smaller peers, North American and European companies outperforming those in Asia Pacific and Latin America, and the highest scores by industry in the Energy & Natural Resources and Manufacturing sectors, and the lowest in Technology & Telecommunications and Life Sciences & Healthcare.

While regulatory pressure, reported by 64% of respondents, is the top driver for companies to obtain assurance over their ESG disclosures, the survey found executives anticipating a wide range of benefits from having their sustainability data assured, including 54% anticipating greater market share as customers and investors look to align their values with their consumption and investment decisions, as well as expectations for improved profitability, and decision making, greater innovation, and stronger reputation.

The study examined the top challenges experienced by companies in preparing for ESG assurance, with the most frequently cited by respondents including high initial costs and a lack of internal skills and experience (each reported by 44%), followed by a lack of clarity and evolving regulations (42%), inadequate supplier ESG performance (42%), insufficient IT or digital solutions (39%), and a lack of clear metrics or measurement tools (36%).


Brazil ready for blockchain-based digital ID

Over 214 million Brazilians will soon be using blockchain technology for digital identity, the government has announced.

Rio de Janeiro, Goiás and Paraná will be the first states to issue identification documents on-chain through a private blockchain developed by Serpro, Brazil’s national data processing service. The entire country should be able to issue identity documents through blockchain technology by November 6, according to a decree issued late last month.

According to Alexandre Amorim, president of Serpro, the immutability and decentralisation of blockchain made it an ideal technology for the country’s digital identification project: “Blockchain technology plays a critical role in protecting personal data and preventing fraud, offering a more secure digital experience for Brazilian citizens. Utilizing the b-Cadastros blockchain platform significantly enhances the security and reliability of the National Identity Card project.”

As per the local government, the national ID project is crucial in targeting organised crime, allowing government sectors to work together, offering a simpler way to access services and streamlining administrative records. Argentina’s capital city of Buenos Aires recently disclosed a similar initiative, allowing residents to access identity documents via a digital wallet.

In recent years, Brazil has been working to unify identity issuance across its 26 states and one federal district. The newly adopted technology will allow a more secure data exchange between the Federal Revenue and government departments, said the announcement.

Another significant development in the country is an upcoming central bank digital currency (CBDC). The government released more information about the project in August, rebranding the digital currency to Drex.

According to previous reports, the central bank plans to expand business access to capital through a tokenisation system associated with the Drex. The Drex code was discovered to allow a central authority to freeze funds or reduce balances, according to a local developer.


Tokyo Stock Exchange to begin carbon credits trading next week

The Tokyo Stock Exchange (TSE) announced that it will start trading carbon credits on October 11, launching Japan's first exchange-based carbon market as the world's fifth-largest carbon dioxide (CO2) emitter moves to tackle climate change.

Japan began introducing ia carbon pricing scheme n stages from April this year to encourage companies and cities to curb emissions and achieve its goal of carbon neutrality by 2050.

The government's plan aims to speed up decarbonisation in tackling climate change. Japan lags other major economies that have already implemented similar policies.

Through the new market, registered members can trade the existing carbon credit, known as J-Credit, on the TSE, a unit of Japan Exchange Group. Under the J-Credit system, the government certifies as “credit” the amount of greenhouse gas emissions, such as CO2, reduced or removed.

The credit has been traded individually between companies and other organisations, but it was difficult for them to find buyers or sellers on their own.

The new TSE market will make it easier for companies to buy and sell credits and provide transparency in carbon pricing, a TSE official said.

The exchange began accepting application for registration from July, and a total of 188 entities had registered as participants as of September 19.

Trading hours are 9:00-11:29 a.m. (0000-0229 GMT) and 12:30-2:59 p.m. (0330-0559 GMT). Transaction prices are set twice a day and published after trading hours.


Apple Wallet can show UK users bank account balances

Apple has quietly launched a new iPhone Wallet feature in beta that allows UK users to check their current account balance, along with recent deposits and payments. It is powered by the UK's Open Banking API, and follows Apple's purchase in March 2022 of UK fintech Credit Kudos, a company that uses Open Banking to give users a snapshot of their financial health and creditworthiness.

The new feature, which also shows users their balances after purchasing something with Apple Pay, arrives as part of the iOS 17.1 developer beta. Users must first authorize it through the Wallet app, then authenticate using their bank's app or website. All banking data will be stored strictly on users' devices and not on Apple's servers. Supported banks in the beta launch include Barclays, HSBC, Lloyds, RBS, Monzo and Starling.

The Wallet addition is a rare Apple feature that premieres in a territory outside the US. Apple doesn't even have its Apple Card available in the UK yet and is a relatively minor player in the region so far. At the same time, its purchase of Credit Kudos gives it major connections in Open Banking. The latter company's API taps into the UK's open banking platform to analyse bank account data, aiming to help banking providers make faster and better decisions for people seeking loans or other financial services.

Open Banking, which requires the UK’s nine major banks to release their data in a secure, standardised form, is unique to the region and does not exist in the US although the government is working on it. Europe introduced a similar system via the Second Payment Services Directive (PSD2) in 2020. The two are similar, so Apple could feasibly bring the same features to Europe, where it effectively dominates smartphone-based payment systems with Apple Wallet.


China’s Helipay discusses cross-border transactions infrastructure with Russia

Chinese payment company Helipay is in talks with Russian banks to set up cross-border transactions, the company’s development director told delegates at the recent International Banking Forum in Sochi).

According to Rustem Zakirzyanov, the Vice Chairman of PJSC Minbank, 99% owned by the Bank of Russia, Helipay are looking for banks that can enable instant payments by Russian customers for Chinese goods. He explained that this is currently problematic, citing payments from Russian clients for Chinese cars, which can take months to process.

Helipay was established in 2013 and has a payment business license issued by the People’s Bank of China (PBOC), according to the company’s official website. The service specialises in transfers and payments, including cross-border payments for small and medium-sized businesses.

“When Helipay receives such an opportunity, it will quickly attract a huge number of small and medium-sized businesses, and other Chinese enterprises to cooperate with Russia,” Zakirzyanov said. He added that Helipay is currently negotiating with three Russian credit institutions, one of which is considered systemically important. Zakirzyanov declined to name the banks, citing the confidentiality of negotiations.

For Helipay to start operating in Russia, legislative amendments will be needed to allow a payment service company to enter into a correspondent agreement with a credit institution.

“This is contrary to Russian legislation, which currently allows only interbank correspondent relations,” Zakirzyanov noted, adding that any such transactions need approval from the Russian Central bank.


Visa joins Pakistani fintech for seamless money movement in UAE

Visa has announced its partnership with a Pakistani fintech, ABHI, along with YellowPepper – operator of the Yepex platform – to introduce account-to-account payments in the United Arab Emirates (UAE).

Visa said the collaboration aims to revolutionise the financial landscape by driving innovation, promoting financial inclusion, and accelerating the adoption of new payment solutions in the Commercial and Money Movement Solutions (CEMEA) region.

“People increasingly want faster and more flexible access to their wages,” Shahebaz Khan, the company’s senior vice president and head of CEMEA, said in a statement.

Visa cited its own UAE study, Money Travels: 2023 Digital Remittances Adoption, which revealed that about 70% of surveyed consumers in the Gulf country were turning to digital apps to send and receive funds internationally, against 53% of consumers globally.

It said that the partnership with the two companies would help provide a cutting-edge payment experience, by facilitating an immediate, reliable and cost-effective way for customers to send and receive money.


Germany’s BaFin installs monitor at Deutsche Bank for Postbank complaints

Germany’s main financial regulator is appointing a special monitor to Deutsche Bank to oversee the lender's handling of consumer service problems at its Postbank unit.

The head of the regulator BaFin described as “unacceptable” the disruptions experienced in Postbank’s online offerings, the difficulty clients had in reaching its customer service and in long processing times.

The issue has been a setback for Deutsche Bank’s effort to restore credibility after fines for lapses in money laundering controls, raids by authorities and other penalties. BaFin already had a monitor in place at Deutsche to oversee money laundering controls since 2018.

“We are making progress in improving processing times at Postbank as part of the action plan agreed with BaFin,” Deutsche Bank said in a statement. A spokesperson said the issue was of the “highest priority”.

Deutsche began the acquisition of Postbank, with its millions of clients and roots in the country's postal system, in 2008 during the global financial crisis but struggled for years to integrate it.

The bank said in July it had completed a final phase of the integration, but in September, BaFin in an unusual rebuke said it had seen “considerable disturbances” at Postbank.

In 2019  Deutsche embarked on a four-year, nearly €9-billion (US$9.5 billion) turnaround plan after years of losses.


UAE’s RAKBANK releases social finance framework

RAKBANK, the National Bank of Ras Al Khaimah in the United Arab Emirates (UAE), has published a Social Finance Framework thesis outlining its strategy for public goods, sustainability and eco-friendliness agenda. The document envisages the ways modern banking entities can support crucial social developments in the long term.

RAKBANK's strategy includes environmental, social and governance (ESG) road maps. The environmental track is focused on managing the bank's carbon footprint and supporting sustainable eco-friendly financial solutions.

The social road map includes supporting entrepreneurs to grow small and medium-sized enterprises (SMEs), fostering financial inclusion and literacy with a focus on underbanked segments of the population.

Ripple is mentioned as one of the partners of RAKBANK's social efforts in the document. “This instant remittance service, powered by RAKBANK in collaboration with Ripple, leverages blockchain technology to mitigate cash vulnerability and enhance access to banking services. By utilizing this innovative solution, RAKBANK improves the speed, efficiency, and security of cross-border remittances, facilitating seamless financial transactions for its customers.”

The governance track includes incorporating ESG criteria into RAKBANK's Balanced Scorecard, which will be added later this year, and establishing clear ESG Governance within the entity. Based on the road map, RAKBANK aims “to accomplish a sustainability status aligned with the United Nations' Sustainable Development Goals (SDG) and the Global Reporting Initiative (GRI).”


Banking platform Leatherback launches in the UK

Leatherback, a neo-banking platform for individuals and businesses, has launched its mobile app in the UK, and aims to make it easier for migrants and businesses to remit funds and conduct cross-border transactions in over 15 currencies across 21 different countries.

SendR, Leatherback’s remittance product, enables students, medical migrants, remote workers, freelancers, parents, business owners, and others to send funds that beneficiaries can instantly receive in the currency of their choice, including GBP, USD, NGN, ZAR, CFA, EUR and more. “By leveraging advanced financial services technology and strategic partnerships with banking networks, Leatherback enables instant fund transfers which makes it easier for recipients to access their funds when they need it,” the company adds.

More than 800 million people around the world receive money from friends and family working or living abroad to pay for food, utilities, education, medical treatment, and other needs. These funds represent a significant source of income and development, and they were the biggest source of capital inflow for low- and middle-income countries (LMICs) last year, exceeding foreign direct investment and aid. However, inefficient money transfer processes and platforms mean these funds can be unnecessarily held up, leading to missed opportunities and other issues.


BBVA begins €1 billion share buyback

Banco Bilbao Vizcaya Argentaria (BBVA) has launched a share buyback programme of up to €1 billion (US$1.06 billion) after it received authorisation from the European Central Bank (ECB).

The Spanish bank said that the buyback programme, under which it intends to repurchase up to 564.6 million shares, began yesterday and will end no later than September 2024.

BBVA said in July it had requested the ECB’s authorisation to launch a buyback programme alongside its second-quarter results.

This is the bank's second extraordinary buyback over the past two years. In April BBVA finished a €422 million buyback and in August 2022 it completed a €3.16 billion buyback.

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