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Firms wary of ability to comply with CSRD – Industry roundup: 2 May

Companies apprehensive over CSRD reporting requirements, says Workiva

Five in six professionals involved in corporate reporting say that collecting accurate data to comply with the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD) will be a challenge, according to a survey from business data and reporting solutions provider Workiva. Yet most companies plan to align their reporting with the new regulation, even if they don’t need to,

For the study, Workiva’s third annual 2024 ESG Practitioner Survey, the firm canvassed more than 2,200 professionals involved in environmental, social and governance (ESG) reporting across North America, Europe, and Asia-Pacific, including executives and finance and accounting, sustainability, internal audit, legal, and compliance professionals at companies with at least 250 employees and US$250 million in annual recurring revenue.

The survey found that while no less than 98%, of respondents are confident in the accuracy of their ESG data, the  evolving regulatory landscape will increase pressure on companies, with 87% reporting that they will find it challenging to adapt reporting processes to comply with new regulations, and 83% indicating that collecting accurate data to meet the CSRD requirements will be a challenge for their organisations.

The CSRD, which began applying to some companies at the start of 2024, will significantly expand the number of companies required to provide sustainability disclosures from around 12,000 currently to over 50,000 and introduce more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.

Across nearly all disciplines, the professionals reported complying with new regulatory mandates as their top ESG reporting concern, with the volume of requirements as their top compliance return, with other key challenges reported including complying with multiple global standards and measuring qualitative initiatives and specific data points.

Despite the anticipated challenges in meeting the new regulatory sustainability reporting requirements, 81% of respondents that are not required to comply with the CSRD reported that they plan to partially or fully align their sustainability disclosures with the new regulation anyway, including 86% of respondents in North America, and 72% in the UK.

Paul Volpe, Senior Vice President of Growth Solutions at Workiva, said: “Assured integrated reporting is about more than compliance, it is a necessity for demonstrating performance and value in a competitive landscape. Business leaders and their teams understand this is a transformational opportunity that demands serious commitment, and they are preparing to invest in reporting that is integrated across business lines, accessible to all stakeholders, and powered by innovation.”


European funds body backs capital markets union plan

The European Fund and Asset Management Association (Efama). Europe’s funds industry body has voiced its support for a French proposal for a small group of countries to forge ahead with a capital markets union.

Interviewed by the Financial Times Efama’s president, Sandro Pierri, said that further delays and disagreement on reform increased the risk of losing even more companies and investment to the US, and that policymakers should act now.

“If it doesn’t work, it’s better to have four, five, six . . . a good number of countries which are creating an alignment around this priority,” said Pierri, who is also chief executive of BNP Paribas Asset Management.

“The risk is that we’re going to be stalling in a situation which is going to be characterised by endless debate about what needs to be done, giving ever-increasing advantages to other places like the US to capture part of the savings that Europe has generated.”

Efama represents the region’s €28.5 trillion (US$30.4 trillion) investment management sector, whose members are growing increasingly frustrated with the EU’s lack of progress on achieving greater union.

France, Italy and Spain are among countries pushing a plan to unify the bloc’s fragmented capital markets — an ambition outlined a decade ago — as a way of reviving the region’s crisis-hit markets and countering the threat of further capital heading abroad. Trading volumes have fallen sharply, and the region has struggled to attract and retain initial public offerings.

But the proposals, which proponents hope would make it easier for companies to list and for investors to back them, encountered opposition from a majority of member states this month, with many smaller countries wary of handing more control and regulatory powers to Brussels.


IMF raises its Asia growth forecast for 2024

The International Monetary Fund (IMF) has raised its Asia growth forecast for 2024, expressing continued optimism about India’s growth and focused on the need for more stimulus from China.

The IMF now expects Asia’s economy to grow 4.5% this year, up 0.3 percentage points from six months earlier. Its forecast for 2025 remained unchanged at 4.3%.

“The outlook for Asia and the Pacific in 2024 has brightened: we now expect that the region’s economy will slow less than we previously projected as inflation pressures continue to dissipate,” commented Krishna Srinivasan, director of Asia and Pacific at the IMF.

She added that strong private consumption will continue to drive growth in Asia’s other emerging markets.

The upward revision reflects upgrades for China, the IMF said, where it expects policy stimulus to provide support.

It also called India “the world’s fastest-growing major economy,” where “public investment remains an important driver.” India is currently the world’s fifth-largest economy with gross domestic product (GDP) of US$3.7 trillion and aims to become the world's third largest by 2027..

The IMF credited monetary tightening, lower commodity prices and subsiding supply-chain disruptions with lowering inflation in Asia despite high demand growth.

The IMF said the biggest risk for Asia’s economy is an extended correction in China’s property sector. That would weaken demand and increase the chances of prolonged deflation, raising the chances of hitting other economies through “direct trade spillovers.”

“This means China’s policy response matters — for both itself and the entire region,” said Srinivasan.

China needs a policy package that “accelerates the exit of nonviable property developers, promotes the completion of housing projects, and manages debt risks of local governments,” the IMF said. It noted China’s fiscal stimulus in October and March helped ease the impact of declining manufacturing activity and sluggish services.

Shell announces US$3.5 billion share buyback

Oil giant Shell has reported stronger-than-expected first-quarter profit, boosted by higher refining margins and robust oil trading.

The group reported adjusted earnings of US$7.7 billion for the first three months of the year, beating analyst expectations of US$6.5 billion.

A year earlier, the company posted adjusted earnings US$9.6 billion over the same period and US$7.3 billion for the final three months of 2023.

Shell chief executive (CEO) Wael Sawan described the results as “another quarter of strong operational and financial performance.”

The oil major announced a US$3.5 billion share buyback programme, which it expects to complete over the next three months. Thegroup also confirmed its exit from China's power markets as part of Sawan's drive to focus on more profitable operations including its natural gas and oil businesses.

Shell decided to exit the power value chain in China, which includes power generation, trading and marketing businesses, it said in a statement. The decision was effective from the end of 2023. "We are selectively investing in power, focusing on delivering value from our power portfolio, which requires making difficult choices," the group announced.

“Shell’s produced yet another quarter of staggering cash flows,” commented Derren Nathan, head of equity research at financial services firm Hargreaves Lansdown.Higher margins and up time at its refineries more than offset lower earnings in the upstream and integrated gas divisions. The strong cash generation is enabling Shell to reduce debt, reward shareholders (it’s also raised the dividend 20% year-on-year) and continue investing into the business as it targets total expenditure of US$22-$25 billion in both 2024 and 2025.

“Shell remains ‘committed to oil and gas’ which may disappoint environmentalists, but it’s made meaningful reductions in its scope 1 & 2 emissions in recent years and slightly increased its renewable power generation capacity in the quarter. The development portfolio has a wide spread of projects across the energy mix, from the deepwater Mero fields in offshore Brazil through to the 1.5GW Atlantic Shores offshore wind farm, the largest such project in the United States.

“There’s no doubting Shell’s relentless focus on shareholder value and over the long-term the sub 10 times earnings multiple doesn’t look too demanding. Price volatility is an ever-present risk across the sector but it’s one that Shell is navigating admirably.”


Boom predicted for instant payments market

The instant payments market, worth an estimated US$22 trillion this year. Is set to grow by 161% over four years and exceed US$58 trillion by 2028 on the back of open banking and the rise of account-to-account (A2A) payments, predicts fintech market researcher Jupiter.

Its complimentary whitepaper, How Open Banking Is Energising P2P Instant Payments by Michael Greenwood, examines the role of open banking in generating peer-to-peer (P2P) opportunities for instant payment providers, and how this is impacting the consumer instant payments market.

This major expansion of instant payments – where funds are received in 10 seconds or under, and confirmation of the payment to the parties is available in one minute – is primarily fuelled by the growing acceptance A2A wallets like iDEAL and Twint and the growing popularity of open banking. Both facilitate transactions directly from bank accounts, bypassing traditional card systems, thus cutting costs for merchants and simplifying processes for consumers.

Open banking allows digital wallets to leverage bank payments without requiring partnerships with individual banks; boosting access significantly. The report forecasts the ability to quickly and securely access bank accounts through open banking, alongside bank-backed A2A wallets, will increase consumer instant payment transaction volume from 252 billion in 2024, to over 600 billion by 2028.

A2A wallets are popular for P2P transfers, often used for informal lending and repayments to friends and family. The report identifies features such as splitting payments between multiple users as a key driver of their popularity.

Additionally, the report recognises the need for greater merchant acceptance of bank payments. Both in physical branches and in an e-commerce marketplace, it is highlighted as a pressing hurdle to greater consumer adoption.

Report author Michael Greenwood comments: “To increase adoption, we recommend merchants incentivise consumer use by offering purchase discounts when using bank-linked payments. By encouraging adoption, merchants will benefit from lower fees for each transaction in comparison to cards.”

The report notes the importance of open banking within most ecosystems but also acknowledges that it will not be effective everywhere. Establishing regulations is highlighted as the biggest hurdle stopping the implementation of open banking. This is because banks will not voluntarily open themselves up to be used by third parties. However, when regulated, open banking can facilitate seamless A2A payments, specifically in a P2P sphere.

Juniper Research also explores the use cases of P2P payments; examining banking apps, bank cooperation and mobile money. It identifies the impact enhanced data, fraud detection, and anti-money laundering (AML) have on the instant payments space.


Cash crunch forces cocoa traders to hold off West African purchases

A liquidity crunch upending the global cocoa market is forcing traders to delay bean purchases from the world’s largest producers, according to reports based on insights from industry insiders.

Traders are running out of cash as a record rally forces them to put up more money to back their futures position. Buying more physical beans would require them to hedge their purchases in the futures market.

As a result, many traders and chocolate companies are opting to delay purchases of beans for the next season, according to insiders whose identity has been kept anonymous.

Ivory Coast and Ghana, which account for more than half of global supplies usually sell as much as 80% of their cocoa crop before the harvest starts in October. The so-called forward sales allow the nations to guarantee a minimum price to be paid to cocoa farmers, many of which still live below the poverty line.

Bad weather, aging trees and crop disease have slashed output this season, forcing both countries to delay bean deliveries. Market participants are losing confidence in their ability to honour forward contracts, and there’s also uncertainty about the size of the next crop — another reason why many opted to defer purchases, the people said.

The cocoa market has been impacted by a third year of shortages and a liquidity crunch that spurring wild price swings. Prices more than doubled this year and soared well past US$11,000 a ton, making cocoa more expensive than copper. But early this week, futures traded in New York tumbled, at one point falling as much as 27% to head for the biggest two-day decline in data going back to 1960.

Some small and mid-sized trading houses have already been forced to close out their trades as access to financing becomes difficult due to greater scrutiny from banks wary of loan defaults and bankruptcy.


BlackRock to launch Saudi investment platform

BlackRock, the world's largest asset manager plans to launch a new investment platform in Saudi Arabia, backed by up to US$5 billion from Saudi sovereign wealth fund (SWF) the Public Investment Fund (PIF).

BlackRock and PIF said they had signed a memorandum of understanding (MoU), under which BlackRock would establish a Riyadh-based multi-asset investment platform, anchored by PIF's initial cash injection, subject to certain agreed milestones being attained.

The two parties said the platform would accelerate growth of Saudi Arabia's capital markets, with a Riyadh-based investment team looking to raise additional funds locally and overseas.

The PIF is central to Crown Prince Mohammad bin Salman's plans to transform the kingdom's economy by building new industries and investing in massive infrastructure development projects that the government refers to as giga-projects.

A BlackRock spokesperson said its platform would be focused on Saudi Arabia but would span investments across the Middle East and North Africa, including infrastructure and credit within private markets and equities in public markets.

BlackRock chairman and CEO Larry Fink said that Saudi Arabia had become an "increasingly attractive" destination for international investment.

PIF’s deputy governor Yazeed A. Al-Humied said the agreement would help make the Saudi investment market more internationally diverse and dynamic.

The PIF has transformed in recent years from an unambitious sovereign investor into a global investment vehicle that makes multi-billion dollar bets on everything from technology to sports. Last year it invested US$31.5 billion to become the world's top spending SWF.

The deal comes five years after BlackRock launched Saudi investment funds in partnership with HSBC.


TMX Group and Clearstream launch Canadian Collateral Management Service

TMX Group and Clearstream announced the launch of the new Canadian Collateral Management Service (CCMS), described as the first domestic tri-party repo capability within the Canadian market that represents an optimised financing solution supporting the cessation of banker’s acceptances. In addition, the service supports collateral management within a T+1 settlement environment.

“CCMS facilitates the optimisation and collateralisation of securities finance activities throughout the Canadian market and provides exclusive domestic tri-party repo capabilities to increase liquidity and minimise exposure risk,” stated a release.

Five banks – Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), Royal Bank of Canada (RBC), Scotiabank and Toronto Dominion (TD) - participated in the first live transactions, which were cleared successfully with the Canadian Derivatives Clearing Corporation (CDCC).

The five banks conducted inaugural trades via the first tri-party repo solution in Canada. “Tri-party repos provide a viable investment alternative for market participants seeking liquidity and to manage risk exposure. This will be especially important after the disappearance of Banker’s Acceptances (BAs) following the cessation of the Canadian Dollar Offer Rate (CDOR) on June 28, 2024,” the release stated.

“CCMS will help market participants solve legacy technical challenges and operational limitations by automating the end-to-end lifecycle of a repo trade, optimising collateral within the market and truly democratising the repo market.”

TMX Group operates the Toronto Stock Exchange (TSE) and Canadian key post-trade infrastructure including the Canadian Depository for Securities (CDS), while Clearstream Banking is the international central securities depository of Germany’s Deutsche Börse Group.


ISSB issues digital taxonomy for sustainability disclosures

The International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB) announced the publication of the IFRS Sustainability Disclosure Taxonomy (ISSB Taxonomy), a new digital tool aimed at enabling investors to analyse sustainability-related financial disclosures based on the ISSB’s recently released sustainability and climate-related reporting standards.

According to an IFRS statement announcing the new tool, the new Taxonomy “will enable investors to search, extract and compare sustainability-related financial disclosures as ISSB establishes its global baseline of Standards.”

The ISSB was launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards, driven by demand from investors, companies, governments and regulators to provide a global baseline of disclosure requirements enabling a consistent understanding of the effect of sustainability risks and opportunities on companies’ prospects.

The board launched its inaugural general sustainability (IFRS 1) and climate (IFRS 2) reporting standards last June, and the new standards are expected to inform emerging disclosure requirement systems from many regulators globally.

Following the launch of the standards, the ISSB published a proposed digital taxonomy reflecting the disclosure requirements in the first two standards, with the goal of facilitating structured digital reporting of sustainability-related financial information prepared using the standards, in order to improve accessibility and comparability of the reported information for investors.

Similar to the IFRS Accounting Taxonomy used for financial reporting, the taxonomy is a classification system, composed of a set of XBRL files used to identify and structure information to make the information easy to find, and to facilitate communication between preparers and users of the disclosures. The taxonomies enable information to be tagged and exchanged in a structured format to be accessed and processed easily and efficiently.

The IFRS added that the new taxonomy is designed to be consistent with its IFRS Accounting Taxonomy, enabling companies to provide a holistic reporting package to investors, and to enable use with other digital taxonomies.


Bloxcross and JP3E launch global trade finance platform

Payment software provider Bloxcross is partnering with global commodity trading firm JP3E to launch a “comprehensive platform designed to revolutionise global trade finance”. The new platform integrates artificial intelligence (AI) to streamline and enhance financial transactions across international borders.

The platform aims to transform the traditional landscape of trade finance by addressing common challenges such as transaction delays, currency exchange risks, and regulatory complexities. By harnessing the power of artificial intelligence, the platform will reduce costs and improve the speed of transactions, thus providing a competitive edge to international traders.

“Our new platform with JP3E represents a quantum leap in trade finance technology," said Diego Baez, CEO of Bloxcross. "We're not just speeding up transactions; we're also ensuring they are more secure and cost-effective. This technology allows our clients to navigate fluctuating currency markets with unprecedented ease and precision."

The collaboration between Bloxcross and JP3E combines deep industry knowledge with innovative technological solutions, setting a new standard for global trade finance. Clients across various industries can look forward to a range of benefits, including enhanced liquidity management and minimized exposure to currency volatility.

“This platform is more than a technological advancement; it's a tool for expanding businesses including LNG trading businesses around the globe,” said John Park, CEO at JP3E. “We are committed to continuously improving and expanding its capabilities to meet the evolving needs of the global market.”

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