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SCF program for PVH – Industry roundup: 8 July

HSBC establishes an SCF program for PVH with environmental and social goals

UK-based bank, HSBC, and PVH Corp, a US-based clothing company that owns Tommy Hilfiger and Calvin Klein, claim to have created the first sustainable supply chain finance (SSCF) program that is linked to both environmental and social goals. Suppliers are said to benefit from low-cost funding under the program, which is based on a set of science-based environmental targets and social elements such as a healthy and secure workplace, compensation and benefits, and management of employment issues.

According to HSBC, suppliers' progress will be measured against PVH's own human rights and environmental supply chain standards. In addition, performance evaluation standards are expected to be measured using methodologies that are consistent with the industry. The Social Labor Convergence Program, which compares a facility's performance to human rights and labour standards, and the Sustainable Apparel Coalition's (SAC) Higg Facility Environmental Module, which evaluates environmental standards, are two examples.

In order to reduce the carbon footprint of global supply chains to zero, small-medium enterprise (SME) suppliers will require up to US $2.8tn annually between now and 2050, according to a recent study from HSBC and Boston Consulting Group. HSBC claims that SSCF is one way to ensure that ESG targets and commitments are met.

According to Sarah Clarke, Chief Supply Chain Officer, PVH, the availability of affordable finance is essential for enabling suppliers to reinvest in their operations and workforces while supporting their shared objective of building an innovative and ethical global supply chain.

This is HSBC's latest SSCF initiative after launching the initial idea in 2019 with Walmart as part of the retailer's Project Gigaton initiative. The bank reportedly revamped the program in 2021 to include science-based emissions reduction targets to meet the Paris Agreement's goals.

HSBC to sell its Russian division to Expobank

HSBC Holdings PLC (HSBA.L), one of Europe’s largest lenders, is reportedly in discussions to sell its Russian division to local bank Expobank, owned by Russian entrepreneur Igor Kim, with offices in over 50 Russian cities offering corporate and retail banking as well as other financial services.

According to Bloomberg, HSBC's negotiations are at an advanced stage, as several major financial institutions have announced plans to exit or reduce their business interests in Russia due to the conflict in Ukraine. HSBC withdrew from retail banking in Russia many years ago and currently serves primarily corporate clients. As of June 2021, the unit's total assets were 89.9 billion rubles (US 1.4 billion), with a workforce of 249 employees.

Members of the Parliament (MPs) on the Treasury Select Committee have urged HSBC to withdraw completely from Russia. The bank announced in April 2022 that it would no longer accept new business or customers at its Russia unit, but that it would continue to operate in the country due to its commitment to multinational corporate clients. In the first quarter, the bank reportedly recorded a $250 million charge related to Russian counterparties.

Mambu, a cloud banking platform, collaborates with Visa

Mambu, a SaaS cloud banking platform, has partnered with global card issuer, Visa, to use its Visa DPS infrastructure. Visa DPS is reportedly one of the largest processors of Visa transactions worldwide, accounting for more than half of Visa's US transactions. According to Mambu, the new integration will provide institutions greater flexibility in offering new card products and services to their clients.

According to reports, Berlin-based Mambu has recently become one of Europe's most valuable fintechs, with a valuation of €4.9 billion following a €235 million Series E fundraising round in December 2021. The round included fintech investors such as EQT Growth, who supported the Dutch payments company, Mollie, and reportedly tripled its year-on-year valuation. Additionally, Mambu partnered with fintech challenger Allica bank in June 2022, which it claimed to help provide customized financing products to small and medium-sized enterprises.

Kevin Trilli, Chief Product Officer, Mambu, emphasized the explosive growth in consumer demand for card payments. In order to scale or go through a digital transformation, Trilli claims that the best approach for financial institutions or fintechs is through strategic partnerships and interoperability with service providers. Visa’s SVP and Global Head of Issuing Solutions, Todd Brockman, commented that their API-based processing capabilities aligned with Mambu's expanding marketplace of composable payment solutions to bring great value to clients and their cardholders in the evolving financial landscape.

The reports indicate that the collaboration stemmed from Visa and Mastercard's payment infrastructure being closely scrutinized by UK regulators. The Payment Systems Regulator is reportedly set to assess the fees charged by the behemoth payment card issuers, deciding if their fees are reasonable and proportional.

Hong Kong Stock Exchange undergoes increased sustainability-focused staff turnover

In recent weeks, the Hong Kong Stock Exchange (HKEX) lost two executives who were in charge of its green and sustainability projects. Hong Kong Exchanges & Clearing Ltd. stated that Till Rosar, Head of Group Strategy, and Julien Martin, Co-head of Emerging Business Development, withdrew to pursue interests outside the business. Martin reportedly led the bourse's fixed income and currency development for six years, contributing to the creation of the Bond Connect in 2017, before joining the emerging business in 2021.

HKEX has reportedly been working to transform the city into a sustainable financial hub competing with Singapore. In February, 2022, Chief Executive Officer Nicolas Aguzin stated that the company is facing higher staff turnover as a result of escalating competition for talent and pandemic restrictions, while the city's market and banking regulators stated that they are having difficulty retaining staff. This year, HKEX has seen three ESG-related executive departures, including the bourse’s head of green and sustainable finance business, Grace Hui, in January 2022.

Reports indicate that Rosar's successor has not yet been revealed, and Daniel Sonder, the former CFO of the Sao Paulo-based stock exchange B3, is still a co-head of emerging business development.

The Hong Kong Stock Exchange has been developing a carbon market in collaboration with financial institutions such as HSBC Holdings Plc and Standard Chartered Plc, according to Bloomberg. HKEX stated that it is still committed to sustainability efforts, highlighting its focus on the carbon initiative.

China considers fast-tracking bond sales as part of a $220 billion stimulus package

Bloomberg reported on Thursday that China is considering an unprecedented fast-track sale of special bonds to accelerate fiscal stimulus, signifying Beijing's economic concerns. The report further indicated that if this occurs, the sale of 1.5 trillion yuan (approximately US $220 billion) in local government bonds would be moved up from the quota for 2023 to the second half of 2022, marking the first-ever acceleration in bond issuance. The debt is said to boost infrastructure spending by providing an additional 1.1 trillion yuan to infrastructure plans.

China's economy has suffered as a result of the pandemic-imposed restrictions, which have only recently been lifted, and the country is reportedly struggling to meet its 5.5 percent annual growth target. Bloomberg polled economists, who predicted that China's growth rate would be around 4.1 percent. China is said to limit the amount of debt that local governments can sell each year. Local governments in China typically do not sell bonds until January 1st, when budgets are reset for the new fiscal year. However, the State Council and the National People's Congress must still approve the expedited local bond sales.

Local governments have long needed more funding according to Wei Yao, Societe Generale's Asia Pacific Head of Research and Chief Economist. Additionally, the report added that the central government is still reluctant to increase its own balance sheet, preferring that local governments bring borrowing quotas beginning in 2023, implying a fiscal cliff next year.

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