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Fourteen countries agree new supply chain network – Industry roundup: 30 May

Fourteen countries agree Indo-Pacific supply chain accord

Trade ministers from 14 countries in the Indo-Pacific Economic Framework (IPEF) led by the United States have agreed a pact aimed at improving supply chain resilience and security. IPEF members include Australia, Brunei Darussalam, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, the US and Vietnam.

In an announcement marking the first stage of progress in protracted negotiations since Q2 2022 – including four rounds of in-person negotiations – at their recent ministerial meeting in Detroit IPEF participating countries confirmed an agreement to establish an IPEF supply chain council, supply chain crisis response network, and labour rights advisory network. The group issued a statement highlighting these developments, which are seen as an attempt to decrease their dependency on  China and prepare for potential future supply chain challenges.

Additionally, the meeting discussed the advancements made in the trade, clean economy, and fair economy aspects of the framework. As part of the clean economy initiative, IPEF member countries have committed to establishing a regional hydrogen initiative.

Australia and South Korea will establish a joint initiative to boost the capacity of other IPEF partners to identify, monitor and manage critical supply chain vulnerabilities.

“The first of its kind agreement calls for countries to form a council to coordinate supply chain activities and a ‘Crisis Response Network’ to give early warnings to IPEF countries of potential supply disruptions,” stated US Commerce Secretary Gina Raimondo.

“I can tell you I would have loved to have had that Crisis Response Network during Covid. It absolutely would have helped us secure American jobs and keep supply chains moving,” she added.

The agreement will now undergo the process of being translated into a final text and will subsequently be subject to domestic approval procedures in each participating country.


Insurers exit climate alliance after ESG backlash in the US

A United Nations-convened climate alliance for insurers has suffered a series of departures including the group’s chair, with insurance companies alarmed by growing opposition from US Republican politicians.

At least seven members of the Net-Zero Insurance Alliance (NZIA), which launched in 2021, have now left including five of the eight founding signatories. NZIA, part of the Glasgow Financial Alliance for Net Zero set up by UN climate envoy Mark Carney, requires members to commit to reducing their greenhouse gas emissions.

The latest departures include French insurer Axa, whose Group Chief Risk Officer Renaud Guidée had chaired the alliance. In a statement Axa said that it was leaving to “continue its individual sustainability journey.” Germany's Allianz and French reinsurer SCOR also quit the alliance.

Group members have been increasingly unsettled by growing political opposition from some Republicans in the United States, who claim the group could be violating antitrust laws by working together to reduce clients’ carbon emissions.

Reports suggest that recently 23 US state attorneys general told NZIA members that the group’s targets and requirements appeared to violate both federal and state antitrust laws. In a letter issued May 15 they gave insurers a month to respond in Republicans’ latest tactic against financial institutions factoring environmental, social and governance related (ESG) factors into their decision making.

NZIA members held talks last week to discuss the alliance's options, sources familiar with the group said. John Neal, CEO of Lloyd’s of London, which is a member, told Reuters that the alliance needed to make its membership rules less prescriptive or risk falling apart.

According to its website, NZIA still has 23 members including Aviva, Lloyd’s and Tokio Marine Holdings. Most of those departing have sizeable US businesses, but so do some of those that have remained, “We must wonder whether their ditching of the alliance has more to do with fears of losing business in the US than real legal jeopardy,” said Patrick McCully, senior analyst at campaign group Reclaim Finance.

“Real climate leaders need to fight climate denial, not cave in to it. What is crucial now is that insurers do not reverse their existing climate pledges. If they cannot act together, they must act alone.”

While other financial industry alliances including the Net-Zero Banking Alliance have not suffered many departures, the exit of so many of the world's biggest insurers is a blow to UN-led efforts to harness the power of coalescing financial institutions to try and drive emissions lower.

Reuters reported that legal experts say that it would be difficult to make a legal case using antitrust rules against a company collaborating on tackling climate change through an alliance. The political backlash in parts of the United States had made insurers particularly sensitive to such accusations, they say.

Insurers which have left the NZIA, including Swiss Re, Munich Re, Zurich Insurance and Hannover Re, say their exits will not change their individual commitments to addressing climate change.

Allianz, confirming its decision to leave the NZIA, said that it would stick to its own climate goals. SCOR's new CEO announced its exit at its annual general meeting last week alongside several new climate and energy transition policies.


OCBC Bank and ADDX offer tokenised structured note for US tech giant

Singapore's OCBC Bank has partnered with the country’s private market exchange ADDX to distribute its first tokenised equity-linked structured note to accredited investors.

The fixed coupon note, launched in early May, is the first product issued by a Singapore bank to land on ADDX’s shelf, both parties said in a statement. It also marks the start of a long-term partnership between ADDX and OCBC Bank that will see both parties work together to develop a wider variety of investment products. OCBC is Singapore’s second-largest bank.

The note is linked to shares in a United States-listed tech giant and was launched on the ADDX platform at a minimum size of US$50,000. Fixed coupon notes are equity-linked structured notes that pay regular distributions at pre-defined intervals, provided that no extraordinary event or trigger event has occurred according to the terms of the notes.

Fixed coupon notes offer a way for investors with a specific view on the price movement of an underlying security or a basket of securities to generate additional cashflow while gaining potential exposure on the underlying security(ies).

According to the statement, partnering new digital players like ADDX and deepening banking relationships with high-growth and emerging sectors allows OCBC to increase its customer proposition and tap on a larger investor base. Tokenising the fixed coupon note will in turn allow more accredited investors to access the product.

“While we already have a comprehensive stable of treasury products which includes sustainability-linked interest rate swaps, cross currency swaps, structured deposits and green bonds, it is important that we continue to innovate and find new channels for our products,” said Kenneth Lai, OCBC Bank’s Head of Global Treasury. “We are therefore pleased to be the first Singapore bank to offer an equity-linked structured note in tokenised form on ADDX.”

Lai said that the tokenisation is the first innovation resulting from a longer-term partnership with ADDX, and he is hopeful that it will lead to more diverse product offerings that are relevant and appealing to the global accredited investor base of ADDX. “We are excited about the possibilities ahead, especially given the uniqueness and accessibility of this equity-linked structured note,” he added.

Headquartered in Singapore, ADDX describes its aim as making investing fairer by democratising private markets. Using blockchain and smart contract technology, ADDX reduces manual interventions in the issuance, custody and distribution of private market products.

The resulting efficiency from the use of digital securities allows the platform to fractionalise investments in a scalable and commercially viable manner.

To date, ADDX has listed more than 70 deals on its platform and worked with various blue-chip names. Asset classes available on ADDX include private equity, hedge funds, venture capital, private credit, real estate, debt and structured products.

According to ADDX Chief Executive Officer Oi-Yee Choo, structured products are designed to provide investors with unique risk and return characteristics that may be unavailable through traditional investments and are an attractive option for investors weighing yield-generating options in the current economic climate.

The products can potentially offer higher returns than bonds or fixed deposits and typically include a combination of a fixed-income component and a derivative component providing exposure to the performance of underlying assets such as stocks or commodities, she noted.


Indosat and Mastercard form strategic partnership for digital payments

Indonesia-based internet services provider Indosat Ooredoo Hutchison (Indosat) and Mastercard have announced a strategic partnership to jointly develop digital solutions and experiences that will significantly enhance Indonesia’s digital payment landscape, empowering consumers and businesses in the digital economy and expand financial inclusion across the country.

The Memorandum of Understanding (MoU) was signed by Ritesh Singh, Director and Chief Commercial Officer of Indosat Ooredoo Hutchison, and Navin Jain, President Director of PT Mastercard Indonesia, and witnessed by Vikram Sinha, President Director and CEO of Indosat Ooredoo Hutchison.

Vikram Sinha, President Director and CEO of Indosat Ooredoo Hutchison said: “This strategic collaboration is aligned with our larger purpose to connect and empower Indonesia by accelerating the nation’s digital transformation. Digital upskilling and financial inclusion, especially those in rural areas, are key to unlocking and maximising the potential of every Indonesian. With the spirit of Gotong Royong [mutual co-operation], this joint effort with Mastercard will allow us to create infinite financial solutions for accelerating the digital economy growth of Indonesia.”

Ari Sarker, President of Asia Pacific, Mastercard, said: “Digitisation is a key pillar in the roadmap towards a truly inclusive economy. The digital economy can bring more opportunities to more people, but reaching that potential requires close collaboration. Hence, Mastercard is excited to work closely with Indosat –a partner that shares the same commitment– to empower Indonesians for the digital future, bring more individuals and SMEs into the digital ecosystem, and help advance inclusive growth for the Indonesian economy.

“This partnership also underscores Mastercard’s commitment to bring one billion people and 50 million micro and small businesses into the digital economy globally by 2025.”

Indonesia, Southeast Asia’s largest economy in, has seen the value of its digital economy grow significantly; by 2025, the value of its digital economy is estimated to double to US$130 billion and will continue to grow, reaching between US$220 billion and US$360 billion in 2030. In line with this growth, Indonesians’ demographics and consumer behaviour have changed tremendously in recent years.


Hong Kong lifts restrictions on crypto trading

Hong Kong is set to allow retail investors to trade cryptocurrencies on licensed exchanges starting from June 1, according to an announcement last week by the Securities and Futures Commission (SFC). This move is part of the city's ongoing efforts to support the development of virtual assets (VAs) while ensuring appropriate safeguards and establishing itself as a crypto financial hub.

SFC released the consultation conclusion on the proposed regulatory requirements for virtual asset trading platform operators, a draft guideline that list requirements on VA trading platform operators issued in February. The consultation ended on March 1.

The guidelines set out, among others, safe custody of assets, segregation of client assets, conflict of interest avoidance, and cybersecurity standards. In order to protect individual investors, the SFC will implement measures such as suitability assessments during the onboarding process, good governance practices, enhanced due diligence for tokens, admission criteria, and disclosures.

Julia Leung, the SFC’s Chief Executive Officer, was quoted as saying in a statement on SFC’s website that “providing clear regulatory expectations” is the key to fostering responsible development.

“Hong Kong’s comprehensive virtual assets regulatory framework follows the principle of ‘same business, same risks, same rules’ and aims to provide robust investor protection and manage key risks. This will enable the industry to develop sustainably and support innovation,” Leung said.

In the statement, SFC stressed that the commission has yet to approve any virtual asset trading platform to provide services to retail investors and most virtual asset trading platforms currently accessible by the public are not regulated by the SFC.

"The VA licensing regime is the first comprehensive regulatory framework in the world to include a full range of investor protection features, which are essential to facilitating responsible and sustainable development of the VA sector," a spokesman for the Financial Services and the Treasury Bureau said in a previous statement sent to the Global Times. 

Wang Peng, a research fellow at the Beijing Academy of Social Sciences, told the Global Times on Tuesday that the implementation of the new guideline reflects an encouraging attitude toward fintech innovation and a balanced approach to supervision and development.

Industry insiders said that the Hong Kong authorities have been exploring ways of balancing "a healthy dose of supervision" to prevent the crypto market from going astray while "not putting a fence" up against innovations.

In October, Hong Kong released a policy paper demonstrating its supportive stance on fostering the sustainable development of the local VA sector.


DP World and Standard Bank join forces on Africa trade finance

Standard Bank, Africa’s largest bank by assets, has partnered with supply chain solutions provider DP World to offer trade finance solutions jointly with DP World Trade Finance. This partnership will help in closing the gap in unmet demand for working capital on the continent.

African companies looking for trade finance “will now be able to seamlessly access working capital from Standard Bank via the DP World Trade Finance platform,” a release stated.

Launched in July 2021, DP World Trade Finance has partnered with 23 financial institutions and generated over US$700 million in credit limit submissions. The registration process takes less than five minutes and over 57,000 global clients have signed up for affordable access to trade finance through the platform. DP World Trade Finance also started directly lending to businesses since 2022.

DP World Trade Finance connects business with financial institutions as a fintech platform while also directly offering trade finance facilities on its own. It offers businesses a single window to access trade finance solutions; customers can apply for credit on the digital platform, which will present them with the best options from global financiers who may otherwise be out of their reach. “Access to finance is one of the biggest barriers for businesses seeking global trade opportunities, evidenced by the struggle that many businesses face in securing the upfront funds required to move cargo,” the release noted.

“By bringing Standard Bank onto the platform, DP World Trade Finance now offers an array of financing solutions to African businesses, which face an ever-growing need for logistics and financial support to connect to global trade routes.”


Accenture acquires sustainability consultant Green Domus

Global professional services firm Accenture has announced its acquisition of decarbonisation strategy-focused consultancy Green Domus, the latest in a series of sustainability-related transactions by the company.

Founded in 2005, Brazil-based Green Domus provides a range of services including lifecycle assessments, materiality assessments, sustainability measurement and performance and sectoral analytics projects, with a focus on delivering customized decarbonisation plans based on feasible reduction targets that can also reduce clients’ costs.

The firm develops projects for national and international companies, governments and multilateral agencies, and has enhanced its carbon measurement and net zero transition capabilities across industries including natural resources, agriculture, consumer goods and retail.

Felipe Bottini CEO of Green Domus, said: “Accenture’s scale and focus on sustainability will be critical to helping our clients address the disruption affecting our communities and planet. Businesses are anticipating the impacts of this disruption along with increased regulatory compliance. By joining Accenture, we will use the latest technologies to collaboratively accelerate our ability to embed sustainability into long-lasting solutions that address global challenges such as decarbonization.”

The acquisition marks the latest in a series of moves by Accenture to boost its sustainability and environmental, social and governance (ESG)-focused capabilities, including recent acquisitions of UK-based carbon and climate change strategy consultancy Carbon Intelligence, Munich-based sustainability consultancy akzente, UK-based sustainability consultancy Avieco and sustainability-focused engineering and advisory consultancy Greenfish.

According to Accenture, the acquisition will bring solutions for clients to help embed carbon data and insights into decision-making, through deep knowledge of frameworks such as the Science Based Targets initiative (SBTi), voluntary carbon credits, and regulatory schemes such as the EU’s recently launched Carbon Border Adjustment Mechanism (CBAM).


Japan sets 2050 target for windfarm power

Japan's wind power body has set a mid-century goal to increase capacity to 140 gigawatts (GW) from less than 5 GW now, to meet a third of the country's electricity demand and help it to hit its 2050 carbon neutrality target.

Offshore wind is intended to be central to Japan’s expansion of renewable energy, but progress has been delayed and a government goal of up to 45 GW of offshore wind power in 2040, looks less ambitious than the new Japan Wind Power Association (JWPA) targets.

“We need to map out a clear goal to attract foreign suppliers of wind farms so that they would invest in Japan and build local supply chains here,” JWPA President Jin Kato told a news conference.

The JWPA said Japan, the world's fifth-biggest carbon dioxide (CO2) emitter, should increase its offshore wind power generation capacity to 100 GW by 2050 to help reduce emissions.

As of end-2022, Japan's less than 5 GW of installed wind power capacity included only 0.14 GW offshore.

The government last year temporarily suspended the process of selecting developers for windfarm projects while it revised bidding rules to address business criticism they lacked clarity.

The JWPA said creating an internationally competitive wind power industry required collaboration between the public and private sectors to speed up progress.

In all, it aims to install 40 GW of onshore wind farms, 40 GW of bottom-fixed offshore wind farms and 60 GW of floating offshore, it said.

The installations would have an economic ripple effect of yen (JPY) 6 trillion (US$44.4 billion) per year in 2050, creating 355,000 jobs while reducing fossil fuel procurement costs by JPY2.5 trillion per year, JWPA estimates found.


Saudi Arabia in talks to join BRICS bank

The New Development Bank (NDB), also known as the “BRICS bank”, is reportedly in talks with Saudi Arabia on admitting the Middle Eastern nation as a member, which would strengthen the NDB's funding options amid the impact of the Russia’s invasion of-Ukraine.

“In the Middle East, we attach great importance to the Kingdom of Saudi Arabia and are currently engaged in a qualified dialogue with them,” the NDB said in a statement reported by the Financial Times.

The NDB was established in 2015 to mobilize resources for infrastructure development and sustainable development projects in the BRICS countries of Brazil, Russia, India, China and South Africa and other emerging economies, according to China's Foreign Ministry.

The BRICS, representing 25% of global GDP, are the founding members, while the UAE, Uruguay, Bangladesh and Egypt were the first batch of new members of the NDB. Since its formation, the bank has approved more than 90 projects with loans totalling US$32 billion, it was reported in October 2022.

Reports added that Saudi Arabia’s potential accession to the NDB will further enhance the capability of BRICS nations to hedge against risks amid the sweeping global wave of de-dollarisation.

The NDB has a major role to prevent financial crises in BRICS countries and will be more efficient in crisis assistance, said Pan Helin, joint director of the Research Center for Digital Economics and Financial Innovation affiliated with Zhejiang University's International Business School.

Pan added that Saudi Arabia is in stable financial condition with a relatively small risk potential, so its inclusion in the NDB would enhance the financial strength of the BRICS fund pool, while elevating the nations' capability for crisis management and response.


Indonesia IPO market booms amid global slowdown

Indonesia has become one of the world’s busiest markets for initial public offerings (IPOs) according to reports, although it lacks the global tech giants of countries such as the US and ranks outside the top 10 global economies by size.

The Southeast Asian country currently ranks as the world’s fourth-largest market for newly listed companies when measured by the amount of capital raised, according to data from Dealogic, putting it behind leader China, the United States and United Arab Emirates.

It has overtaken Hong Kong — long one of the top IPO markets — for the first time since 1995, and is outpacing economic powerhouses India, South Korea and Japan.

“It is not normal,” said Perris Lee, who focuses on Asian equity capital markets at data provider Dealogic. This year, he told CNN, “will likely … be the best for Indonesia ever.”

So far this year, investors have poured US$2.1 billion into Indonesian IPOs, he said, just shy of the US$2.2 billion the country’s firms raised over the whole of 2022, while at least five more major IPOs are set to come in 2023.

Indonesia’s IPO success is due in part  to its vast deposits of the metals needed to make batteries for electric vehicles. That has made the country an important engine of the global green transition and a magnet for investors.

It can also be explained by lacklustre performances elsewhere so far this year. Investors have pulled back from equity markets over the past year as rising interest rates have pushed up the cost of capital.

The US IPO market, usually the world’s largest, has suffered given its reliance on particularly rate-sensitive tech companies, Lee said. Hong Kong, meanwhile, has been held back by poor valuations and the legacy of strict Covid lockdowns, he added.

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