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ESG investors committed to transition - Industry roundup: 24 November

ESG investors committed to transition

Investors, especially in Europe, remain committed to achieving environmental, social and governance (ESG) goals and are concerned about the economic transition, according to a Deutsche Bank’s Private Bank Chief Investment Office (CIO) survey. The annual survey of private clients and institutional investors showed that climate change remains the most significant environmental issue for investment decisions, even though the number cited (44%) has fallen since last year’s survey.

The survey also showed that investors favour regulation to protect the environment. But when it comes to company transition plans, they prefer market-driven solutions like better production processes, technology improvements and consumer education versus policy-led initiatives.

The findings also reveal that while investors understand climate risk and are concerned about the need for economic transition, only a small proportion of investors consider themselves well-versed in ESG. Even with the significant rise in ESG investing in the past three years, especially during Covid-19, still only 15% of investors said they had a good knowledge of ESG, while just 3% identified themselves as ESG experts.

The energy transition is the most preferred (18%) investment opportunity compared to investing in AI, manufacturing and the circular economy. While investors expect environmental change to impact individual asset classes and see nature as a critical factor in individual investment decisions, faith appears to be waning in the ability of ESG to manage portfolio risk. Lower than last year’s survey, 37% of respondents strongly or slightly agree that ESG factors can help manage portfolio risk.

The survey also found a difference in attitudes between men and women. More women (27%) would avoid an investment if sustainability-related factors do not meet their expectations compared to men (19%), and more women (54%) wanted more information on company transition plans, compared to men (40%). Some 70% of women believed stronger international regulation is required to protect the ocean and biodiversity, compared to 58% of men.

The CIO received 1759 survey responses between June and the end of July this year, with the majority of responses (around 55%) from Germany, followed by Spain (18%) and Italy (16%). Between these three European nations, there was a difference in the degree of investor belief and strong conviction in ESG. More investors in Italy agreed that ESG factors will improve performance and manage risk, when compared to responses from German and Spanish investors.

On the other hand, German investors were less likely to strongly agree to the survey’s ESG propositions and more likely to disagree strongly. They were also more sceptical about ESG’s impact on portfolio performance and risk or the availability of ESG product solutions. However, the bulk of investors across Italy (78%), Spain (74%) and Germany (73%) strongly or even slightly agreed that investors need more information on how companies plan to transition to a sustainable business model. 


Premium volume of global trade credit insurance market hits US$13.89bn

The global trade credit insurance market reached a premium volume of US$13.89bn in 2022, according to research by the International Credit Insurance & Surety Association (ICISA). This covers insured shipments valued at just over US$7 trillion, with a penetration rate of 13.16% of world trade as measured by the World Bank. Private market participants, particularly ICISA members, contribute 69% of this protection.

While variations exist in estimates from different sources, the consistency in results provides confidence in the size and impact of the trade credit insurance market in the context of world trade.

Trade credit insurance is a protection against the non-payment of trade receivables, serving as a vital tool for businesses to secure financing on favourable terms, enhancing cash flow security. Banks also use credit insurance to reduce exposure to credit risk, enabling them to extend financing further throughout the real economy.

The ICISA statistics highlight the significant value the trade credit insurance industry brings to the real economy. However, they also underscore a substantial protection gap, likely affecting smaller businesses, especially outside Europe, where the product is less established.


Chalhoub Group scores sustainability-linked working capital facility

Mashreq has extended its first sustainability-linked working capital facility to Chalhoub Group in a strategic move that the bank says underscores the growing importance of sustainable financing in the Middle East. 

The sustainable finance product is structured around a comprehensive set of key performance indicators (KPIs) for the next three years, spanning the entire ESG spectrum, beyond achieving net-zero emissions. Chalhoub Group, known for its robust sustainability framework, received validation of their 10-year science-based targets initiative (SBTi), aimed at significantly reducing carbon emissions and paving the way for net zero by 2040. 

The facility also includes social and governance KPIs, emphasising women’s representation in senior leadership and the response rate for the Group’s sustainability supplier scorecard. This move not only showcases Chalhoub Group’s dedication to ESG but also sets a precedent for other corporates in the region.

“Our dedication to fostering responsible practices and driving positive environmental and social impact is at the core of our strategies,” said Patrick Chalhoub, Group President at Chalhoub Group. “Through this sustainable finance facility, we are creating additional accountability on our side, founded on our belief that it takes concerted collective efforts to achieve on ambitious targets.” 


73% of financial services execs expect genAI “will eventually take their job”

Nearly three-quarters (73%) of financial services executives expect that generative AI “will eventually take their job”, according to a study by FintechOS titled ‘Generative Artificial Intelligence: The Technology Polarising the Financial Services Industry. The report explores stark divisions among financial institutions on this groundbreaking technology's expectations, implementation and impact. However, amid these often conflicting views, there is one common consensus: the expectation that genAI will inevitably reshape the workforce and displace jobs.

The research found that the financial services industry is split on whether genAI is a “friend” (45%) or “foe” (40%), and characterised by a blend of excitement, curiosity, apprehension and fear. Half (50%) of institutions are already investing in genAI. UK institutions invest between £800,000 and £1.6m, while US institutions invest between US$2.1m and US$5m.

Two-thirds (66%) of executives anticipate a 20% average increase in revenue due to genAI within the next three years. Even more (57%) believe that genAI will result in job losses, with an average headcount reduction of 30% over next three years.

The study notes there is no ‘one size fits all’ strategy for genAI adoption. While institutions are divided on what’s needed to take the technology forward, every financial institution has started its genAI journey. They are united in that the right tech stack needs to be in place to capitalise. This includes open data models (23%), data architecture centralised for natural language processing (21%), and low-code technology (19%).


HSBC launches Business Go to deepen support for businesses

HSBC Singapore has launched Business Go, a business-to-business (B2B) digital community platform for business owners. The platform employs machine-learning and API technologies to support entrepreneurs with the latest markets and business insights, while connecting with like-minded peers across Singapore, Hong Kong, Malaysia, and India.

Through the platform, HSBC Singapore aims to create an ecosystem that encourages businesses to adapt to the rapidly changing market environment through mutual support, idea exchange and experience sharing.

A feature of the platform is International Navigator, an all-in-one knowledge hub, supported by EY. International Navigator provides a holistic view of HSBC-generated market insights, research reports and country guides, and up-to-date information on corporate tax, personal tax, international tax, government incentives, foreign direct investment regulations, and currency regulations from EY.

During the initial phase, International Navigator will offer market insights on Singapore, Malaysia, and Indonesia, with plans to include other key markets and add knowledge contributors over time

“ASEAN offers huge potential for Singapore-based firms to look overseas for growth opportunities, but we also recognise that it requires a lot of time and resources for companies to take that first step,” said Amanda Murphy, Head of Commercial Banking, South and Southeast Asia, HSBC. “We have developed HSBC Business Go based on client feedback to make it easier for firms to access the insights, expertise, and network that we bring to help them successfully venture overseas.”


CBI migrates its interbank corporate banking network to the cloud

Italian consortium CBI, comprising approximately 400 banks and other financial intermediaries, has announced the effective migration of its Interbank Corporate Banking network to the CBI Hub Cloud (CHC), a private cloud-based technological architecture connecting all banks and client payment service providers (PSPs). The migration of the Interbank Corporate Banking Network, used by over 3 million companies in Italy, and retail customers and the public administration (services managed within it) to the cloud is expected to unlock a true technological paradigm shift.

The CBI Hub Cloud project represents a significant innovation effort over the past four years, engaging all ecosystem players - banks, technical structures, industry associations, and authorities. It aims to transform the network infrastructure managing over 60 multi-banking payment, collection, and information functions between Italian companies and towards public administration, from proprietary protocols to virtualised and centralised solutions based on even more modern, flexible, and scalable open standard network protocols.

This transformation should enable PSPs to offer their corporate and retail clients as well as the public administration more advanced real-time transactional and open finance services, significantly enhancing efficiency, security, and integration levels in the payment market among all stakeholders in our country.

CBI Hub Cloud, housing centralised processing, diagnostics, and monitoring functions, will serve as the backbone structure with a capacity to adapt and evolve to host new services and functionalities supported by API technology, ensuring improved time-to-market of new services and better performance monitoring by CBI. The solution was implemented in collaboration with Italian paytech Nexi. 


ScotPac and Ebury to help Australian businesses grow their global footprint

Non-bank business lender ScotPac and financial services firm Ebury have announced a partnership aimed at making trading on a global scale faster and more accessible for all Australian businesses.

The collaboration will provide clients of both businesses access to ScotPac’s working capital solutions and Ebury’s global expertise in foreign exchange and cross-border payments.

For businesses of any size or location, the technology-backed platforms operated by ScotPac and Ebury aim to make doing business with international customers as simple as dealing with local trade partners. The pair say that the benefits of the initiative will include expert insights and capabilities, simplified transactions, and improved cash flow management.


Pecunia Treasury and Finance and Treasury Delta form strategic alliance

Pecunia Treasury and Finance (Pecunia), a boutique treasury consultancy firm in The Netherlands, has partnered with Irish fintech Treasury Delta.  Together, they will use digital technology to streamline and simplify corporate treasury transactions with banks and technology vendors.

Pecunia specialises in treasury consultancy, interim management, risk advisory and corporate finance. One of the corporate treasury areas the firm wants to improve on relates to managing RFP-type transactions.  These projects are very costly for corporate clients and treasury consultants given all the manual processes and numerous counterparties involved.  This is why Pecunia has decided to collaborate with Treasury Delta, to offer their consultancy services at a lower cost in a more efficient timeframe for their clients.

“An RFP is only the start of an improvement project,” commented Patrick Kunz, MD, Pecunia. “The goal should be to finish the RFP as quick and efficient as possible whilst remaining transparent to all stakeholders in the RFP process and keeping it fair. Treasury Delta’s technology will help Pecunia do RFPs quicker, cheaper and more transparent for all internal and external parties involved. The time and effort saved can be used to implement more efficiently and with greater diligence. This is where the treasury consultant is going to add even more value to corporates.”


RMB retains fifth place among most active global payments currencies

Swift’s RMB Tracker has shown that in October 2023, the RMB retained its position as the fifth most active currency for global payments by value, with a share of 3.60%. Overall, RMB payment value decreased by 2.74% compared to September 2023, while in general, all payments currencies increased by 0.21%. Regarding international payments, excluding payments within the Eurozone, the RMB ranked sixth with a share of 2.52% in October.

The tracker uses data from live and delivered MT 103 and MT 202 - customer-initiated and institutional payments - and ISO equivalent messages exchanged on Swift. RMB’s fifth place out of all international currencies in September saw it behind the US dollar (47.25% of all global payments value), the euro (23.36%), the British pound (7.33%) and the Japanese yen (3.91%).

As a global currency in the trade finance market, based on live and delivered inter-group only MT 400 and MT 700 messages exchanged on SWIFT, RMB ranked third based on value, accounting for 5.12% of October’s trade finance transactions, dropping back below the euro (5.85%). This field remains dominated by the US dollar (84.22%).

Regarding FX spot transactions, RMB was October’s sixth most used currency for FX confirmations, dropping below the Canadian dollar. The US dollar was the most used, followed by the euro, pound and yen. In terms of the top economies carrying out FX spot transactions in RMB, the UK came out on top in October (42.04%), followed by the US (13.00%), Hong Kong (11.63%), France (6.99%) and China (5.89%).


Government of Canada selects CIBC for updated Green Bond Framework

CIBC has been selected by the Government of Canada on its recently updated Green Bond Framework as the sole structuring advisor. CIBC was selected to advise on all aspects of the updated green bond framework to align with the latest sustainable finance developments, including assistance with a second-party opinion from Sustainalytics, confirming alignment with the International Capital Markets Association Green Bond Principles 2021.

CIBC’s investments towards sustainability include a commitment to achieve net-zero greenhouse gas emissions associated with operational and financing activities by 2050. In 2022, the firm established interim targets for its oil and gas and power generation portfolios, against a 2020 baseline.

“With intensifying environmental challenges, Canada's updated green bond framework is an important step in the development of a stronger sustainable finance market,” said Siddharth Samarth, Managing Director and Head, Sustainable Finance, CIBC. 


Volt launches in Australia 

Real-time payments platform Volt has announced its expansion into Australia following sustained growth for the UK-headquartered fintech company. Following Volt’s US$60m funding round earlier this year, this development marks the latest step in its growth plans to meet market demand for real-time payments across the globe.

Having already established itself across the UK and Europe, and expanding its global footprint by entering the South American market via Brazil in 2021, with a network of more than 5,000 banks, Australia represents a milestone for Volt and the account-to-account (A2A) payments industry. Volt’s gateway will be integrated with PayTo, an Australian digital payment platform that enables consumers to authorise and control payments directly from their bank account.

While the adoption of real-time payments in Australia is still relatively new, with debit and credit cards dominating the payment landscape, there is an appetite for new and innovative payment methods. A recent report from Cognizant found that Australia is the second leading market in adopting new payments technology, following China with Juniper Research reporting predicting the value of open banking payments will reach US$330bn globally by 2027.

Volt will also be establishing a physical presence in Australia, looking to make a number of significant hires to manage and grow the Australian market very shortly.


Swedbank Robur launches two climate funds

As a next step in line with its climate strategy, Swedbank Robur has launched two more funds focusing on the climate, Climate Bond and Climate Bond High Yield. The funds, classified as Article 9 under EU Sustainable Finance Disclosure Regulation (SFDR), will finance projects and company operations assessed to contribute to the UN's climate goals.

As early as 2019, Swedbank Robur established its climate strategy and was among the first to set its climate goals, five and 10 years ahead of the targets specified in the Paris Agreement. In 2020, the fund company developed a method and ensured several funds aligned with the Paris Agreement. In 2021, a new equity fund specifically focused on the climate, Climate Impact, was launched. Now, the next step is taken with two additional climate funds, this time focusing on the bond market.

“As Sweden's largest fund company, we take a clear stance on issues important to our savers, investments, and society at large,” said Pia Haak, CIO at Swedbank Robur. “The continued growing interest in sustainable and climate-focused investing is a crucial and positive driving force in our efforts to continue shifting capital in a more sustainable direction.”

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