Corporates leverage Inflation Reduction Act to finance sustainability initiatives

Almost all (98%) of organisations in the US view the Inflation Reduction Act (IRA) as a source of competitive advantage, with 61% having extensive plans to leverage it in the long term. This is according to KPMG LLP’s study, ‘Funding a Sustainable Future: How organizations are leveraging the Inflation Reduction Act (IRA)’.  The study, based on responses from 300 senior executives across various industries, provides insights into how organisations are capitalising on the IRA to drive their sustainability initiatives and gain competitive advantage.

In terms of strategic Influence, the study found that the IRA is reshaping corporate planning. Half (50%) of respondents cite extensive influence on future strategy and project development, while the other half acknowledge moderate effects.

Almost all (99%) organisations are leveraging the IRA to fund their sustainable strategy and decarbonisation plans. Renewable energy, energy efficiency, and transportation are the most widely adopted environmentally focused IRA provisions.

A big majority (86%) of organisations see the IRA as a way to reduce taxes, while 50% anticipate cost savings beyond tax reduction. Some 57% of organisations are interested in participating in the new tax credit transfer market, with more organisations looking to sell credits than buy them.

Despite the enthusiasm, the study also highlights challenges in leveraging the IRA fully. The absence of clear governmental guidelines on IRA provisions is cited as the top barrier by 59% of respondents.

The study suggests that organisations are investing in internal upskilling and data analytics capabilities to maximise IRA benefits, with 72% increasing training to build expertise.

 

US economy still poised for a soft landing

There's a 20% chance of a US recession over the next 12 months, according to Goldman Sachs Research (GSR). That figure is unchanged from GSR economists’ estimate before the US jobs report for employment in August, Goldman Sachs Research Chief Economist Jan Hatzius wrote in a report on the US and global economy. The recession probability is now halfway between the 15% our economists estimated just before the weaker-than-expected July jobs report and the 25% they estimated right after.

While the jobs data fell modestly short of expectations, it showed a rebound from the previous month and a small dip in the unemployment rate to 4.2%. Most other recent economic indicators — including the non-manufacturing ISM, initial jobless claims, and personal consumption — have been solid. GSR’s US GDP tracking estimate for the third quarter remains at 2.5%. 

GSR continues to expect three Federal Reserve rate cuts of 25 basis points each at the remaining Federal Open Market Committee meetings this year. 

“Our confidence that the upcoming cut on September 18 will be modest in size has grown following the latest data, as well as Fed commentary just before the start of the blackout period emphasising that ‘cuts will be done carefully’,” Hatzius added.

 

CEO confidence in M&A market to drive shift to proactive deal strategy 

CEOs globally remain confident about economic growth prospects over the next 12 months, according to the latest EY CEO Outlook Pulse survey of 1,200 executives globally, which includes a new Global CEO Confidence Index. Nearly seven in 10 (69%) of the CEOs surveyed stated that they are feeling optimistic about the global outlook for the coming year.

This confidence comes even though CEOs remain challenged on multiple fronts as they continue to navigate the complexities of an unpredictable and volatile business environment, shaped by emerging technologies, shifting consumer behaviour, and an uncertain geopolitical landscape.

The survey finds that CEOs are struggling to keep pace with the fast-moving external environment. Many CEOs say they are behind when it comes to addressing industry disruption - less than four in 10 (38%) of those surveyed consider themselves ahead of the curve in effectively handling the external forces at play. For the most confident CEOs, this rises to 54% versus just 8% for those feeling less confident.

However, positive CEO confidence combined with a realistic understanding of the risks and rewards stemming from external disruptive forces is expected to boost mergers and acquisitions (M&A) activity for the year ahead. More than three-quarters (78%) of the most confident CEOs reported that they are proactively assessing their portfolio in line with their core strategy as they adapt to disruptive forces, and 98% plan some form of transaction over the next 12 months. Overall, more than a third (37%) plan an acquisition in the next year, with 59% of the most confident planning to buy assets compared to just 16% of the least confident.

In light of the current environment, CEOs recognise that conventional portfolio review processes need to change and that traditional strategic planning and portfolio management are no longer effective. Nearly a quarter (24%) of respondents report that portfolio reviews are not aggressive enough and 23% find the process too reactive. CEOs are in turn expected to focus on adopting a more flexible and proactive approach to their portfolios, driven by a desire to fast-track innovation and transformation to stay ahead of the competition.

Transactions are therefore expected to hold steady over the coming months, underpinned by strategic alliances, joint ventures and divestments. Almost half (47%) of CEOs plan to actively pursue a strategic partnership with a third party in the next twelve months; 44% will chase divestments or IPOs; and 37% will prioritise M&A.

Top investment destinations predicted over the coming months include the US, the UK, Canada, Mexico, and Germany. The most appealing sectors are likely to be banking; asset management; media and entertainment; consumer products; and insurance.

 

J.P. Morgan Asset Management launches guide to ETFs 

J.P. Morgan Asset Management has launched the inaugural edition of its quarterly ‘Guide to ETFs’, a resource designed to provide clarity and insight into the fast-moving ETF landscape. The Guide to ETFs is the cornerstone of the firm's broader ETF Insights programme, a global initiative providing actionable thought leadership and resources to financial professionals and investors.

Despite the popularity of ETFs, there is still demand for information on the structure of the vehicle and market dynamics, and the Guide to ETFs helps meet that need with in-depth analysis, performance metrics, and investing trends. Led by Chief ETF Strategist Jon Maier and his team, the Guide will help educate advisers and their clients on opportunities in the sector.

The Guide covers topics such as active ETFs, the fixed income ETF ecosystem, and other emerging trends. It also highlights the role ETFs can play in enhancing diversified portfolios and details the what and how of their potential tax efficiency benefits - a critical area of focus for advisors and their clients. 

The Guide shows that ETFs have consistently made up about 28% of exchange volume over the past 15 years, acting as crucial shock absorbers during crises like Covid-19 by providing market liquidity. ETFs may also enhance liquidity in less liquid markets and may be used as price discovery vehicles, particularly during periods of market stress.

Active fixed income ETFs: Rates have peaked, making it an ideal time for fixed income. Passive indexes have limitations; investors should consider active management, as a significant percentage of active managers consistently outperform core passive benchmarks over time. ETFs seek to offer transparency, liquidity, and a diversified way to access fixed income, avoiding the complexities and risks of individual bonds.

Additionally, with their on-exchange trading and in-kind securities transfers, ETFs offer tax advantages compared to other investment structures. In 2023, only 61 out of 1,297 active ETFs distributed capital gains, with those funds that distributed gains averaging around one percent, highlighting the tax efficiency of the ETF structure.

 

BBVA incorporates USDC into its crypto asset service in Switzerland 

BBVA’s institutional and private banking clients in Switzerland, as well as those with a NewGen account, can now manage their USDC funds on the same platform where they handle their traditional investments. They can exchange, custody, or automatically convert USDC in near real-time into euros, dollars, or any other currency.

This incorporation also allows BBVA’s institutional clients to manage their operations on cryptocurrency exchanges more efficiently and faster. Investment fund managers and other large companies often use stablecoins, such as USDC, to complete the transactions more quickly. They also provide a way to hedge against the volatility of other cryptocurrencies, by converting assets into stablecoins to preserve value during market fluctuations.

Launched in 2018 by Circle, USDC is a stablecoin that enjoys price parity to the U.S. dollar and is powered by blockchain technology. It provides an option for those looking to maintain the value of their assets in the digital environment without the volatility of other crypto assets. USDC is fully backed by highly liquid cash and cash-equivalent assets and is redeemable 1:1 for US dollars. 

This is the third cryptocurrency BBVA has added to its digital asset service in Switzerland. In 2021, it launched the service with bitcoin and ether, the two largest by market volume and usage, and the most demanded by investors. In late 2023, it migrated its custody capability to Metaco's Harmonize platform, which streamlines transactions and allows connection with other blockchain networks.

 

Navan and Citizens bring fintech tools to corporate cards 

Citizens and Navan have announced a strategic agreement that combines Navan’s travel and expense (T&E) solution and Citizens’ commercial banking services. The partnership leverages the card-link technology of Navan Connect to create a seamless digital experience for Citizens customers. The co-branded T&E system was designed exclusively for Citizens corporate card customers and features a custom design and interface that aligns with the familiar branding Citizens customers know and trust.

By integrating the fintech’s T&E management capabilities with the bank’s commercial card programme, businesses can now access a suite of tools designed to streamline financial workflows and enhance control over expenses.

The integration aims to enable effortless management of travel bookings, expenses, and payments, in one platform. Transactions are automatically reconciled, reducing administrative burdens and ensuring compliance with company policies.

Finance teams can use enhanced spend controls tailored to their specific needs. Whether managing expenses at the employee level or overseeing departmental budgets, the integrated platform offers granular control and real-time visibility, providing actionable insights.