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Industry roundup: 24 July 2020

Infor and DBS Bank partner on digital trade financing

Infor has announced that it is partnering with DBS Bank to integrate digital trade financing capabilities into the Infor Nexus global network of more than 68,000 businesses. The two companies’ first joint programme recently went live with one of the world’s largest global apparel companies, providing digital trade financing to suppliers in the apparel company’s supply chain ecosystem, which comprises mostly small-to-medium-sized enterprises (SMEs).

The two companies’ next joint programme for pre-shipment finance, expected to launch in late 2020, will utilise supply chain data as the primary conduit to assess risk and credit worthiness, as opposed to traditional models that result in the majority of suppliers being under-funded or facing challenges to access necessary capital. Infor provides extensive supply chain data, including historic and real-time milestone information on the physical movement of goods, to enable a data-driven representation of a supplier’s performance and credit risk.


FSB stocktake considers climate risks and financial stability

The Financial Stability Board (FSB) has published a stocktake of financial authorities’ experience in including climate-related risks in financial stability monitoring. It draws on information provided by FSB member national authorities, international bodies and a workshop with the private sector.

The stocktake finds that financial authorities vary in terms of whether - and to what degree - they consider climate-related risks as part of their financial stability monitoring. Around three-quarters of survey respondents consider, or are planning to consider, climate-related risks as part of their financial stability monitoring. Most focus on the implications of changes in asset prices and credit quality. A minority of authorities also consider the implications for underwriting, legal, liability and operational risks.

Authorities also consider the implications of these risks for financial institutions. Consideration of climate-related credit and market risks faced by banks and insurers appears more advanced than that of other risks, or of risks faced by other types of financial institutions. Some financial authorities have quantified - or have work underway to quantify - climate-related risks. Such work is hindered by a lack of consistent data on financial exposures to climate risks and difficulties translating climate change outcomes into changes in those exposures. No approach to quantification provides a holistic assessment of climate-related risks to the global financial system.

In some jurisdictions, climate-related risks are being integrated into microprudential supervision of banks and insurance firms (including via requirements for firms’ stress testing and disclosure). However, such work is generally at an early stage. Some authorities report having set out - or being in the process of setting out - their expectations as to firms’ disclosure of climate-related risks. In some cases such expectations explicitly refer to the recommendations of the FSB’s Task Force on Climate-related Financial Disclosures.

The FSB says it will conduct further work by October 2020 to assess the channels through which physical and transition risks could impact the financial system and how they might interact. Particular focus will be given to the potential amplification mechanisms and cross-border effects, and to prioritising channels that could materialise in the short-to-medium term. The FSB will also consider the scope for work to assess available data through which climate-related risks can be monitored, as well as any data gaps. This work will build upon, and be coordinated with, that taking place in other relevant international fora.


RMB up to 5th most active global payments currency

The latest report from the SWIFT RMB Tracker has revealed that, in June 2020, the RMB has climbed one position to the fifth most active currency for global payments by value, with a share of 1.76%. Overall, RMB payments value increased by 14.15% compared to May 2020, while in general all payments currencies increased by 16.05%.

In terms of international payments excluding payments within the Eurozone, the RMB ranked 8th with a share of 1.14% in June 2020.

As a global currency in the trade finance market, based on live and delivered MT 400 and MT 700 messages exchanged on SWIFT, the RMB was the third most active currency, with a 1.95% share, behind the euro (6.62% share) and the US dollar (86.52%). For comparison, in June 2018 the RMB was in fourth place, below the Japanese yen, with a share of 1.61%.

The top economies doing FX spot transactions in RMB in June 2020 were:

  • UK: 32.91%
  • China: 16.02%
  • US: 13.69%
  • Hong Kong: 10.72%
  • France: 7.44%

This is based on the value of FX confirmations, including central banks, inter-group only, looking at MT 300 messages exchanged on SWIFT.


Morgan Stanley joins leadership of Global Carbon Accounting Partnership

The Partnership for Carbon Accounting Financials (PCAF) has announced that Morgan Stanley has joined its global Steering Committee focused on the complex challenge of measuring financed emissions. In addition, Morgan Stanley will lend insights and expertise to help PCAF develop the global accounting standard that can be used by all financial institutions to measure and reduce their climate impact.

Launched globally in 2019, PCAF is a collaboration to standardise carbon accounting for the financial sector, enabling a harmonised approach to the assessment and disclosure of greenhouse gas emissions financed by loans and investments. PCAF is used by asset owners, asset managers and banks to support a broad range of climate initiatives. Morgan Stanley is the first major U.S.-based global financial institution to join PCAF’s 66 formal members, which include financial institutions from around the world and represent more than US$5.3 trillion in assets.

The measurement of financed emissions, defined by the Greenhouse Gas Protocol as Scope 3 - category 15 emissions, provides important data that financial institutions can use to assess risk, manage impact, meet the disclosure expectations of important stakeholders, and assess progress and pathways to global climate goals. PCAF‘s methodology is currently being used in several markets for measuring financed emission in the financial sector and will soon be published as a global methodology which has been the work of a core team of financial institutions, including Morgan Stanley.

PCAF’s Steering Committee is focused on managing the progress and success of this industry-led initiative. PCAF’s Steering Committee members include ABN AMRO, Amalgamated Bank, ASN Bank, Global Alliance for Banking on Values (GABV) and Triodos Bank. In addition to its role on the Committee and its efforts to enhance PCAF’s core measurement methodology, Morgan Stanley commits to start measuring and disclosing lending portfolio greenhouse gas emissions.

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