Nigeria’s Access Bank continues to put its principles ahead of profit

The UN estimates that achieving its 17 Sustainable Development Goals will require an annual investment of $5-7trn across all sectors. It’s a vast sum, but one the world’s financial markets do have access to. Having recognised the importance of achieving the UN’s goals, many financial institutions are now developing sustainable finance tools with which to mobilise their funds.

Through its Environment Programme Finance Initiative (UNEP FI), the UN supports these forward-thinking institutions. The platform helps banks, insurers and investors scale up their efforts and promote sustainable financing on an international level. It also facilitates collaboration across the sector and promotes adherence to the UNEP FI’s six Principles of Responsible Banking. These principles provide the banking industry with a single framework for its sustainable development, in line with the Paris Agreement.

The private sector represents an influential part of any economy and should therefore play a significant role in its development

A sense of urgency
Of course, public funding is integral to the advancement of sustainability efforts, but governments and non-governmental organisations alone cannot cover the costs of such wide-reaching change. The private sector represents an influential part of any economy and should therefore play a significant role in its development.

Historically, though, banks have not been on the front line of sustainability initiatives. However, the sector cannot continue to finance projects that are at odds with the UN’s goals. Access Bank recognises that sustainable growth is not only urgent, but also brings benefits to its stakeholders. This is why we will continue to contribute to Nigeria’s sustainability efforts.

In 2012, the Central Bank of Nigeria launched the Nigerian Sustainable Banking Principles. The compulsory guidelines require banks to mitigate the environmental and social risks of their business activities.

Even before these principles were launched, though, Access Bank had rooted its corporate identity in sustainability. As key stakeholders in the economic sustainability effort, we believe it is important that the services offered by financial institutions cater to the micro, small and medium-sized enterprises that have long served as drivers of the Nigerian economy.

Sustainable development is so important to Access Bank’s identity that it dedicates one percent of its profits before tax to sustainability projects and partnerships

The bank has exhibited this belief through several laudable initiatives. For example, it hosts a cloud-based applications management platform that provides information on how to acquire grants, helps funding bodies to manage grants and applications, and allows institutions to share information and collaborate. Access Bank also recently held its first Womenpreneur Pitch-A-Ton, which received thousands of applications from highly skilled business owners.

Participating in change
Sustainable development is so important to the bank’s identity that it dedicates one percent of its profits before tax to sustainability projects and partnerships. A trained sustainability unit, headed by top management staff, oversees these initiatives.

Our employees are given many opportunities to participate in environmentally friendly nation-building programmes throughout the year. One of the most engaging ways employees do this is through our Employee Volunteering Scheme, which gives staff the chance to work on impactful social projects from start to finish. Through this scheme, our sustainability unit guides employees in supporting a cause of their choice and partnering with beneficiaries to shape the project.

Alongside the Employee Volunteering Scheme, dedicated members of staff are inducted into the Sustainability Champions Network. There are currently more than 1,700 Sustainability Champions at the bank, working to ensure they have a positive impact on society.

In terms of environmental impact, the bank recently issued Africa’s first Corporate Bonds Initiative-certified green bond – a NGN 15bn ($41.48m) bond that will be used to support climate-friendly projects. It also provides a viable asset class for environmentally friendly investors, helping them reduce their carbon emissions and find opportunities in the fast-developing low-carbon economy.

Access Bank will continue to prioritise environmental, social and governance considerations within all its decision-making processes. Starting at the executive level, commitment to sustainability is expressed throughout the company. It is a value that lies at the heart of every activity and project undertaken by the bank.

Sri Lanka’s life insurance sector is preparing for a significant demographic shift

Sri Lanka’s population is ageing faster than any other in South Asia. According to the most recent Sri Lanka Population and Housing Census, the number of over-60s in the country has more than doubled since 1953, comprising 12.4 percent of the population in 2012. The World Bank estimates that one in four Sri Lankans will be older than 60 by 2041.

According to a 2012 World Bank report on demographic transition, for every 100 working-age people in Sri Lanka in 2001, there were 41 child dependants and 14 elderly dependants. The number of child dependants is predicted to decrease to 25 by 2036, while elderly dependants will increase to 36. As such, there will be fewer people to look after Sri Lanka’s elderly population in the years to come.

The challenges that will emerge as Sri Lanka’s population gets older are vast. World Finance spoke with Rajkumar Renganathan, Chair of Ceylinco Life Insurance, about how the country can adapt to the coming demographic changes.

What is causing Sri Lanka’s current demographic shift?
Declining fertility, falling mortality rates, increasing life expectancy and emigration have become major causes of the country’s growing elderly population. The World Bank reports that the fertility rate in Sri Lanka has steadily decreased over the decades, from 5.54 in 1960 to 2.2 in 2017 (see Fig 1). Life expectancy for Sri Lankans was 76 years in 2019, compared with 59 in 1960. These factors all contribute to a swelling elderly population.

As Sri Lanka’s population gets older, what challenges will arise?
One of the biggest challenges of an ageing population can be quantified by a life cycle deficit, which measures the difference between consumption and labour income for a certain age group. With Sri Lanka’s demographic shift, the proportion of the population that is consuming more than it earns will increase, putting pressure on the working-age population to finance this upward transfer. As the costs of medical care increase, supporting elderly dependants is only going to become more burdensome, especially if there is more than one person to provide for.

Although Sri Lanka is traditionally a culture that cares for its elders, factors such as globalisation, industrialisation, better access to education and emigration have widened the gap between the elderly and the youth populations. The usual family unit has also shifted from extended to nuclear. This could pose a problem to those who become elderly dependants in the future as they have limited access to caregivers.

How should individuals plan for retirement to ensure a good quality of life in their later years?
The alarming statistics already quoted tell us that early retirement planning is of critical importance. Besides the factors outlined, another thing to consider is that the Sri Lankan private sector does not pay pensions after the retirement age of 55. Therefore, it is essential that individuals – especially those working in the private sector – make decisions about their retirement savings early in life. To ensure the whole population has access to advice about their pension, Ceylinco Life has more than 275 branches spread across the country.

What does the company’s La Serena subsidiary offer retirees?
Ceylinco La Serena is a first-of-its-kind retirement resort in Sri Lanka, catering to newly retired or semi-retired individuals who are looking to maintain their independence, be reasonably active and enjoy a hotel-like environment. It comprises 44 self-contained, fully furnished, well-equipped and regularly serviced living units, and is located on beachfront land in the Uswetakeiyawa fishing village, a few kilometres from the capital, Colombo. It is designed to give a sense of community to its elderly residents and bring like-minded people together.

With Sri Lanka’s demographic shift, the proportion of the population that is consuming more than it earns will increase, putting pressure on the working-age population to finance this upward transfer

What makes Ceylinco Life Insurance stand out from other insurance firms in the country?
Ceylinco Life has been in the business of insuring lives in Sri Lanka for more than 30 years. During that time, it was the market leader in the industry for 15 consecutive years. To date, the company has provided cover for nearly one million people and is committed to the principle that life insurance providers should have a relationship with their clients for life.

The company has introduced ‘life insurance week’ and ‘retirement planning month’ to Sri Lanka in order to improve the public’s awareness and understanding of the benefits that preparing for retirement brings. We have consistently focused on the importance of educating people about how they can benefit from doing so. For example, in 2018, the company ran a retirement campaign titled ‘the 30 day plan for 30 years of serenity’. The scheme highlighted how people could prepare for a fruitful retirement in just one month. Some 4,000 members of the Ceylinco Life sales team were deployed in door-to-door visits across Sri Lanka to take this message to the masses.

Ceylinco Life also recently launched an innovative life insurance product, the likes of which had not been seen in Sri Lanka before. Named ‘smart protection’, it offers a payout that is eight times the sum assured and guarantees a refund of the sum assured plus total premiums paid at maturity. Products of this nature help drive penetration of life insurance and retirement planning in the country, setting the company apart from its competition.

Could you go into detail about some of the company’s corporate social responsibility (CSR) programmes?
Ceylinco Life’s CSR projects are mainly focused on education and healthcare. In the area of education, the company has donated 80 purpose-built classrooms to disadvantaged schools over the past 15 years and continues to monitor and maintain each one to this day. Ceylinco Life has invested nearly LKR 50m ($278,500) in this initiative to improve facilities and the learning environment for students.

In the sphere of healthcare, the company is well known for its ‘waidya hamuwa’, or ‘meet the doctor’, programme. In 2018 alone, more than 4,400 Sri Lankans – most of them from rural areas – were provided with access to doctors through the scheme. To date, Ceylinco Life has reached approximately 142,000 people through free medical camps held in 375 locations across the country. These medical camps are overseen by qualified and experienced doctors and nursing staff attached to the state health sector and private laboratories. Medical check-ups and health screenings, including blood sugar, blood pressure, vision, ECG scans and kidney scans, are offered at these medical camps.

The company has also donated high-dependency units (HDUs) to five hospitals since 2012. Clinics that have benefitted are the Kandy Teaching Hospital, Lady Ridgeway Hospital for Children, the National Hospital of Sri Lanka, the Jaffna Teaching Hospital and the Colombo South Teaching Hospital. HDUs are used as a space for patients being upgraded from normal care or as a transition down from intensive care. They can be used for post-surgery care before transferring patients to other wards, or to treat intensive diseases such as dengue fever.

What are Ceylinco Life Insurance’s plans for the next five years?
As the market leader in Sri Lanka, Ceylinco Life Insurance will continue to set the benchmark in the industry by introducing new products and upgrading its existing offering, including attractive retirement plans to suit any client. The company will further drive awareness of life insurance and retirement planning to improve citizens’ later years.

Dubai International Financial Centre has been a catalyst for development in the Gulf region

The Dubai International Financial Centre (DIFC) was established in 2004 as a special economic zone to provide companies with world-class infrastructure. Its opening brought about a paradigm shift for the region, with the adoption of a common law framework, an independent regulator in the form of the Dubai Financial Services Authority and the introduction of an independent judicial system.

Today, the DIFC is ranked among the top 10 global financial centres for its effective business environment, human capital, infrastructure, financial sector development and excellent reputation. Starting with only a handful of companies, the DIFC is now home to more than 2,000 firms from around the globe, at least 600 of which are finance related. It has provided an encouraging platform for many companies to gain a foothold in the market and expand their operations across the region.

The GCC region has seen a good number of deals made over the past couple of years, with more than half struck with countries outside the GCC

The DIFC has played a pivotal role in not only connecting the local region with international markets, but also in establishing Dubai’s – as well as the broader Gulf Cooperation Council (GCC) region’s – place on the world stage. It has enabled overseas entities to establish their management offices, holding companies and family offices closer to assets they own or manage. In 2017, the DIFC launched the FinTech Hive, a first-of-its-kind accelerator in the area, which brought cutting-edge financial services technology to the region. In addition, the success and impact of the DIFC led to the establishment of the Qatar Financial Centre in 2005 and the Abu Dhabi Global Market in 2013, both of which have frameworks similar to the DIFC.

Alpen Capital was one of the first companies established in the newly revitalised DIFC. Over the years, the firm has seen the centre evolve into a vibrant financial hub for the region. World Finance spoke with Rohit Walia, Executive Chairman at Alpen Capital, about the comprehensive range of financial advisory services offered at his company and why the GCC region continues to attract investors from all over the world.

In your opinion, what are the most notable opportunities available in the GCC region today?
The GCC is currently undergoing significant reforms – regional governments are investing in local infrastructure development, tourist attractions and retail establishments. Recently, the UAE introduced changes to ownership laws, which we expect will improve the security of existing businesses and encourage renewed interest from investors. The Saudi Arabian Government has also announced bold infrastructure plans as part of its Vision 2030 programme. Its decision to allow 100 percent foreign ownership for retail and wholesale businesses, alongside the issuance of new tourist e-visas, is expected to improve the country’s economic prospects. The other GCC nations are also implementing similar reforms to create a more lucrative investment climate.

The region has seen a good number of deals made over the past couple of years, with more than half struck with countries outside the GCC. We have successfully closed deals across the food, electronics and manufacturing sectors, the most notable being the sale of a majority stake in the Al Kabeer Group – a frozen-food player in the UAE – to the Savola Group in Saudi Arabia. The region has also witnessed a number of cross-border mergers and acquisitions, with our regional companies acquiring stakes in numerous foreign businesses.

Foreign companies have also made strategic investments in regional entities to strengthen their foothold in the region. We have witnessed a significant focus on e-commerce and online retailing, such as through Amazon’s acquisition of, the largest e-commerce platform in the UAE, and Uber’s purchase of Careem, the foremost transportation network company in the UAE. At Alpen Capital, we are currently working in a broad range of sectors in the region such as food distribution, IT, education, healthcare and manufacturing.

What about opportunities in Africa, Asia and the Levant?
We began exploring the Asian markets about four years ago and have since successfully concluded several transactions in the broader South Asian region. We have raised over $700m for Sri Lankan financial institutions since we entered the market, while also raising capital for clients in Cambodia and Pakistan. In Bangladesh, we are currently raising funds for banks and reputable business groups that have attracted interest from top development finance institutions (DFIs) globally.

Following our success in Asia, we have ventured into the Levant and Africa over the past two years, with both regions providing ample investment opportunities. For example, in Lebanon we raised over $250m for financial institutions and were pleasantly surprised with the opportunities found in Iraq – a market we entered last year. In Africa, we have closed multiple deals over the past year and are currently working on raising capital for local banks and financial institutions. We are also engaged with corporations (both local and international) for capital raising and mergers and acquisitions.

Our work with the Tata Group in support of a complex off-balance-sheet financing transaction for one of its operations in Africa helped demonstrate our core strengths, particularly with regards to raising capital. Owing to the current underdeveloped state of the market, there is substantial interest from international investors, and plenty of opportunity to satisfy their appetite. We believe that venturing into these markets has yielded great results, and we expect to further cement our presence here over the coming years.

Can you tell us about your work with DFIs?
DFIs are typically backed by developed countries, and are often established and owned by governments to provide funds for projects that encompass socially responsible investing. DFIs can include multilateral development institutions or bilateral development institutions. These play a crucial role in providing credit in the form of higher-risk loans, equity status and risk guarantee instruments for private sector investments in developing countries.

Over the past couple of years, we have advised several financial institutions in emerging markets on debt and equity solutions delivered through DFIs. We have concluded multiple transactions with institutions including the Asian Development Bank, the European Investment Bank and Proparco, which has allowed us to enter markets in India, Sri Lanka, Lebanon and elsewhere. One of the transactions in Sri Lanka was funded by three DFIs: the Germany Investment Corporation, the Development Bank of Austria (OeEB) and the OPEC Fund for International Development (OFID). Our client at the time used the funding to support the growth of small and medium-sized enterprises (SMEs).

In your opinion, why is impact investment becoming increasingly popular globally?
Impact investing refers to investments made into companies, organisations and financial institutions with the intention of generating a beneficial social or environmental impact, in addition to financial returns. This source of financing is primarily gaining popularity because it facilitates capital to address the world’s most pressing challenges, such as sustainable agriculture, renewable energy sources, conservation, microfinance and affordable services. Given its progressive goals, this source of funding has attracted a wide variety of investors, both individual and institutional. Historically, we have seen that DFIs can provide capital for emerging economies – however, lately there has been an increasing interest from pension funds, prominent family offices and private foundations.

By establishing financial centres among the top-ranked in the world, the GCC has established a solid ecosystem worthy of global recognition

Can you tell us about some of your most popular social impact transactions? What kind of response have they had?
Most of our transactions have involved the funding of banks or financial intermediaries in emerging markets that subsequently lend to SMEs and microfinance institutions. This supports financial inclusion by making financial products and services accessible and affordable to all individuals and businesses. The benefits here are twofold – underserved individuals, entrepreneurs and SME owners all benefit from being incorporated into the formal economy. Reciprocally, banks and governments benefit from incorporating the underserved into the formal economy, as it provides more customers to loan to and a more regulated economy.

For example, Alpen Capital advised Cambodia’s PRASAC Microfinance Institution in raising a term facility from the Asian Development Bank. The funding has been utilised by PRASAC to expand its lending to SMEs and to develop enterprises in rural areas. In another transaction, we assisted Lebanon and Gulf Bank to raise a syndicated senior term facility from the Netherlands Development Finance Company, the OFID and the OeEB. This led to the creation of jobs in one of the most underserved SME markets in the world.

We are currently working on a transaction to fund a non-banking financial company to lend to female entrepreneurs so they can grow their own businesses. We are additionally looking at raising funds for a solar power plant in South Asia via impact investing funds.

In light of the products and services you provide, what do you think the region’s investment landscape will look like in the future?
The GCC region has been very dynamic and shown sustained growth over the past 15 to 20 years. It has also experienced its share of highs and lows, given the recent economic slowdown, fall in oil prices and geopolitical conditions. However, to mark its presence on the international business stage, the region has undergone massive infrastructural and financial development.

By establishing financial centres among the top-ranked in the world, the region has established a solid ecosystem worthy of global recognition. In order to maintain the flow of capital, governments are implementing regulatory and economic reforms, which I believe will bring an upswing in demand and activity.

Despite existing challenges, we are currently working on multiple merger and acquisition deals within the region, with expected deal closures in the near future. In order to survive the recent economic slowdown and maintain operational efficiencies, there have been consolidations in the market, and I expect this to continue. I also expect to see a revival of private capital funding as economic activity rises.

Going forward, we are anticipating a lot of traction in the broader region from markets in need of infrastructural and socioeconomic development. Alpen Capital will be on hand to support these coming developments.

How the business aviation sector can achieve carbon neutrality

Business aviation is often targeted as a major contributor to climate change but, in actual fact, it contributes just two percent of the wider aviation industry’s total global emissions. Even so, it is imperative for the sector to do its part in reducing that figure. That is why, in 2009, the General Aviation Manufacturers Association (GAMA) and the International Business Aviation Council (IBAC) announced their Business Aviation Commitment on Climate Change, establishing aggressive industry targets to improve fuel efficiency and reduce carbon dioxide emissions. Both GAMA and IBAC urge the industry to lead the way in terms of sustainability, even as demand for business aviation continues to grow.

The future of private aviation may depend on its ability to balance economics and its environmental impact

In fact, business aviation has a strong record of environmental stewardship: as an industry, fuel efficiency has improved by about 40 percent over the past 40 years. GAMA and IBAC are now encouraging the industry to focus on four pathways in order to achieve its sustainability goals: more efficient operations, continuing infrastructure improvements, market-based measures and the use of new technology, including the development of alternative aircraft fuels.

A show of success
Business aviation’s most recent sustainability-related efforts have focused on promoting the use of sustainable aviation fuel (SAF). In May 2018, a coalition of aviation organisations – the European Business Aviation Association (EBAA), GAMA, IBAC, the National Business Aviation Association (NBAA) and the National Air Transportation Association (NATA) – announced their renewed commitment to improving sustainability through technological advances such as alternative fuels. The initiative was created to address a knowledge gap regarding the availability and safety of SAF and to advance the proliferation of these fuels at all the logical touchpoints: manufacturers, ground handlers and operators at the regional, national and international levels.

Accompanying the initiative declaration was the publication of the Business Aviation Guide to the Use of Sustainable Alternative Jet Fuel, which outlined the pathway to the adoption and use of SAF. The SAF initiative was the catalyst that produced the first-ever widescale public demonstration of SAF’s viability and safety at Southern California’s Van Nuys Airport in January 2019. Industry organisations including NBAA, GAMA, IBAC and NATA joined business aircraft manufacturers, local officials and other industry stakeholders in sponsoring the event. An online resource,, was established shortly thereafter.

The first European SAF demonstration day followed in May 2019 at the UK’s Farnborough Airport, ahead of the annual European Business Aviation Convention and Exhibition (EBACE) in Geneva. The Farnborough event hosted a variety of information sessions detailing SAF use and availability. More SAF demonstration events have since followed in Jackson Hole, Wyoming, and at the 2019 NBAA Business Aviation Convention and Exhibition (NBAA-BACE) in Las Vegas. The next major SAF-related event will take place in March 2020 at the Business Aviation Global Sustainability Summit, which is set to take place in Washington, DC. If the business aviation sector is truly committed to achieving carbon-neutral growth in the years to come, the widespread adoption of SAF will play a major role.

Fuel for thought
In aviation, we are continuously exploring new technologies, designs and materials to improve fuel efficiency. Aircraft will produce less carbon dioxide if we continue to improve engines, enhance aerodynamics and use lighter materials in manufacturing. Good examples of business aircraft with a focus on fuel efficiency include the Gulfstream G500 and Gulfstream G600, which entered service in 2018 and 2019 respectively. These aircraft offer best-in-class fuel efficiency, fewer emissions and less engine noise. Additionally, for the first time in the company’s history, Gulfstream is manufacturing the wing and empennage of the G500 and G600 onsite, resulting in decreased transportation emissions and fewer shipping materials.

At Gulfstream, we have long been committed to being good stewards of the environment by focusing on low-noise, low-emission and fuel-efficient aircraft. Much of this has come through technological innovation, including the use of winglets, advanced aerodynamics, state-of-the-art avionics and more efficient engines. Gulfstream is firmly committed to continuing this path of improvement. Additionally, Gulfstream continues to support business aviation’s commitment to reducing its carbon footprint through three pledges: a 50 percent reduction in carbon dioxide emissions by 2050 (relative to 2005 levels); a two percent improvement in fuel efficiency per year from 2010 to 2020; and achieving carbon-neutral growth from 2020 onward. One of the most promising paths for fulfilling this commitment is through SAF.

SAF is a term used to describe non-conventional aviation fuel. Rather than being refined from petroleum, SAF is produced from sustainable feedstocks such as waste oils of biological origin, agriculture residues or non-fossil carbon dioxide. The major advantage of using SAF is that it contributes to the recycling of carbon molecules from within the biosphere, rather than needing them to be continuously extracted from under the ground, where they have been sequestered for millions of years. SAF is also a ‘drop-in’ fuel, which means it can be blended with fossil jet fuel and requires no special infrastructure or equipment changes. Once blended, SAF is fully certified and has the same characteristics and meets the same specifications as fossil jet fuel.

The key to reaching aviation’s goal of a 50 percent reduction in carbon emissions by 2050 is the broad use of SAF in place of fossil-based jet fuel, together with market-based measures.
For its fuel, Gulfstream uses a blend of 30 percent SAF and 70 percent traditional Jet A fuel. Once blended and recertified in accordance with specification ASTM D1655, SAF is truly a drop-in fuel: it meets all the same specifications as traditional jet fuel, requires no changes to the aircraft, doesn’t result in any performance loss and has additional environmental benefits. For the SAF used by Gulfstream, every gallon saves at least 60 percent in CO2 emissions on a life cycle basis versus petroleum-based jet fuel. Some biofuels can reduce CO2 emissions even more. Additionally, these alternative fuels are purer and cleaner to burn.

Designing a safe, reliable and efficient mode of transportation that minimises environmental impact is a vital aspect of the future of aviation

Many Gulfstream flights over the past decade have consistently demonstrated the viability and benefits of SAF: a Gulfstream G450 was the first aircraft to fly a transatlantic route on SAF in 2011, and in 2015, Gulfstream signed an agreement with World Fuel Services for a continuous supply of SAF. Produced by World Energy in Paramount, California, SAF has been used by Gulfstream on hundreds of flights since we began adopting it for our corporate, demonstration and test fleets in 2016, with the total number of nautical miles flown nearing one million.

Today, Gulfstream’s facility in Long Beach, California, offers SAF to all customers and uses it for all completions and delivery flights. Gulfstream’s latest sustainability efforts were announced at the Las Vegas NBAA-BACE event in October. The company has flown its fleet on a blend of SAF and traditional Jet A fuel to previous air shows, but this time, Gulfstream’s five in-production aircraft made carbon-neutral flights to the event using a combination of SAF and carbon offsets. At NBAA-BACE, Gulfstream announced it now offers carbon offsets to customers through a third-party provider. Indeed, the company is taking a strong leadership role in supporting SAF and helping business aviation confront the challenge of reducing global carbon emissions.

In full flight
Designing a safe, reliable and efficient mode of transportation that minimises environmental impact is a vital aspect of the future of aviation. Increasing environmental pressures have resulted in more emphasis being placed on the early stages of aircraft design in order to meet those challenges, which has in turn impacted the basic planform of the wing, fuselage, empennage and engine. The results are low-noise, low-emission and more fuel-efficient aircraft, such as the Gulfstream G500 and Gulfstream G600.

That said, the environmental landscape is changing, and business aviation will need to adapt to this shift. These changes have been caused by various external pressures, both domestically and at the international level, that are often interlinked, with a major focus over the past few years on reducing the industry’s carbon footprint. These pressures are real, justified and valid, and need to be proactively addressed by the business aviation sector. Some have suggested this may be the defining issue of our time.

Gulfstream’s sustainability strategy is driven by both industry-wide goals and our internal commitment to integrity. This is at the core of Gulfstream’s business and is demonstrated through its commitment to conserving resources for use by future generations, protecting our employees, customers and their communities, and innovating sustainability programmes to ensure positive environmental impacts.

The future of private aviation may depend on its ability to balance economics and its environmental impact. We made a commitment to sustainability 10 years ago and reaffirmed that commitment in 2018 at EBACE. We have another 30 years to achieve the 2050 goal of reducing CO2 emissions by half relative to the 2005 level. With a strong economy in place and a continued focus on improving operations and technology, along with the adoption of market-based measures and the increased availability of SAF, the industry’s future looks bright.

For Portugal’s insurance sector, an ageing population could be lucrative

In recent years, Portugal has become an attractive place to live, work and invest. Between 2015 and 2018, the annual number of greenfield foreign direct investment projects in the country grew by 161 percent, according to data published by the Financial Times. This was partly thanks to Portugal’s open attitude towards foreigners – the Iberian nation offers tax breaks to skilled professionals and five-year residencies to non-EU citizens who buy property worth €500,000 ($553,140). What’s more, Portugal’s politically stable climate and low crime rate make it a haven for those looking to avoid the economic downturn and political tension caused by Brexit and the US-China trade war.

But this hasn’t always been the case: six years ago, Portugal’s economy was on its knees. Amid the country’s worst recession in almost 40 years, unemployment climbed above 17 percent and hundreds of thousands of workers – many of whom were young and highly skilled – emigrated in search of jobs overseas. Today, though, Portugal’s economy is booming: unemployment has more than halved to 6.6 percent; two thirds of the 500,000 people who left the country during the crisis have returned; and strong performances in the tourism, export and housing markets have contributed to an economic resurgence that many have deemed miraculous.

Still, there is plenty of work to be done. Portugal is growing slower than Spain, and in recent years has been overtaken by Estonia, Lithuania and Slovakia in terms of GDP per capita (see Fig 1). If Portugal is to make the most of the good times, it needs to address some of its chronic issues.

Growing old together
Portugal boasts a warm Mediterranean climate, beautiful landscapes – from mountain ranges to idyllic coastlines – and a high quality of life for the people who call it home. It’s no wonder that it is the destination of choice for millions of tourists every year. However, Portugal isn’t just known as a tourist hotspot: it has also garnered a reputation in Europe for its ageing population.

In its 2019 World Population Prospects report, the UN outlined the scale of the planet’s demographic crisis: by 2050, 16 percent of the global population will be over the age of 65, up from nine percent in 2019. As life expectancy increases in many developed countries, fertility rates are on the decline. Consequently, the working-age population is shrinking, which will have potentially huge repercussions for economic activity.

Portugal is in no way exempt from this global trend. As a result of the country’s deep recession, many of the young people who didn’t emigrate chose instead to delay starting a family, causing Portugal’s birth rate to plummet. In fact, the Portuguese National Statistics Institute predicts that by 2060, the country will be home to just 8.6 million people, down from 10.5 million in 2012. In the same window of time, the working population – those aged between 15 and 64 – will drop from almost seven million to just over 4.5 million.

With an older population, Portugal could face spiralling health costs

As well as potentially slashing Portugal’s productivity, this could put significant strain on the country’s public services. Although people in Portugal tend to live to the age of around 80 – the average for European countries – they also experience health problems for most of their old age. This compares unfavourably with people in other European countries, such as Denmark. With an older population, Portugal could face spiralling health costs.

A window of opportunity
Although the situation seems alarming, it could present a new opportunity for Portugal. Increasingly, policymakers and economists are recognising that older workers and retirees can fuel economic activity, rather than impede it. As the World Economic Forum has pointed out, the elderly are no longer as financially dependent on their families as they used to be. Furthermore, they have the potential to be both important participants in the labour market and big spenders in the economy.

Through consumer goods and services, older citizens inject huge amounts of money into the ‘silver’ or ‘longevity’ economy, which the American Association of Retired Persons defines as “the sum of all economic activity driven by the needs of people aged 50 and older… [including] both products and services they purchase directly and the further economic activity this spending generates”. A 2018 study by the European Commission valued Europe’s longevity economy at €3.7trn ($4.09trn) in 2015 and suggested it could be worth as much as €5.7trn ($6.31trn) by 2025.

Instead of seeing Portugal’s ageing population as a burden, we should see it as an untapped opportunity. The sheer size of this market should not be underestimated: in terms of scale, it is on par with discovering the economic potential of an entire country, such as India or China when they were on the cusp of huge growth. However, what is unique and unprecedented about the longevity economy is that it has no borders – no country is immune to an ageing population, regardless of its particular social, religious or economic conditions.

Given the new opportunities the longevity economy will create across society, all industries (including the insurance sector) must be able to adapt their product offerings to meet the needs of an older population. At the same time, we need to embrace innovation to address the challenges presented by this major demographic shift. Before we can think about creating products for an ageing population, though, we need to prepare new generations for the future. By encouraging people to save money and educate themselves about financial matters from a young age, Portugal will help its population prepare for the challenges of a longer life and later retirement.

Moulding young minds
We are all faced with financial decisions daily – whether managing a family budget, contributing to our savings or making an investment. With better financial literacy, citizens can be more informed about the decisions they’re making.

In the past few years, aspects of the financial sector that were typically considered to be more obscure – such as insurance, the stock market and investments – have received greater media attention. What’s more, it is now much easier for people to educate themselves on financial topics, thanks to self-help courses and the wealth of information available online. This has helped to demystify these concepts.

Improved financial literacy has benefits for society as a whole. When a country has high levels of financial literacy among its citizens, it is more likely to have a healthy economy. It may also have a more engaged electorate, as its citizens will better understand decisions made around fiscal and monetary policy. There is no doubt that financial literacy is one of the key pillars for building resilience in today’s society – it should be a basic necessity for every individual, no matter their age.

With that said, the sooner people start to develop their financial literacy, the better. The OECD recommends integrating financial education into the school curriculum to help people develop good financial habits from a young age. At Ageas Portugal Group, we believe that improving young people’s financial understanding early on will give them the tools they need to face life’s challenges. As a nation, Portugal has made important steps towards this, implementing initiatives such as the National Plan for Financial Education and introducing financial literacy as one of its citizenship education subjects.

However, there is still a long way to go. Although the need for greater financial literacy is obvious, it is nonetheless a difficult issue to address. That’s why Ageas Portugal Group has helped found Ori€nta-te, a contest that teaches young people in Portugal how to save and prepare for the future. It introduces them to topics such as household budget management, expenditure and income, showing them how to formulate savings strategies so they can achieve their financial goals. Put simply, the contest rewards young people for learning as much as they can about financial products.

Ori€nta-te was such a success that it is now in its second edition. The huge amount of enthusiasm the contest has received in the school community proves that financial literacy doesn’t have to be a chore to learn. In fact, it should be made as engaging as possible. After all, few other subjects have such a profound bearing on the rest of students’ lives.

Standard Insurance is pushing industry-wide change in the Philippines

After steadily expanding over a number of years, the Philippine insurance industry is set to scale new heights, pushed forward by technological innovation. The industry has remained resilient and upbeat in recent times, riding on the country’s evolving economy. Though it faces myriad challenges, the outlook for the Philippine insurance industry remains optimistic.

The Philippines’ Insurance Commission reported an increase in the country’s per capita insurance density of 16 percent from 2017 to 2018 – a value of PHP 2,054 ($40) for each Filipino with insurance.

These numbers indicate a growing demand for insurance cover in the country. More than 60 million Filipinos had some form of insurance coverage by the end of 2018, compared with just 48 million in 2017. More importantly, the fact that the industry’s insurance penetration rate remains low indicates that there is still much opportunity for further growth.

Millennial modernising
The Insurance Commission continues to push for digitalisation and further innovation by encouraging a better customer experience with more relevant products, thus increasing its levels of insurance penetration. Until recently, the industry has been known as a traditional market, with most individuals preferring the added comfort of a face-to-face meeting with an insurance intermediary. However, with the evolving market landscape intensifying as the result of a growing number of technology-savvy young customers, the industry is being challenged to innovate. Increasingly, there is pressure to create products that cater to younger customers by utilising online platforms as promotional channels for products and services.

Standard Insurance continues to focus on proper underwriting, intelligent pricing across all lines and high levels of sustainability, as well as fast and accurate resolutions to claims

Insurance companies have turned to insurance technology (insurtech) as another way to better serve its progressing market. Self-service dashboards, chatbots, SMS updates, the digitalisation of some parts of the claims process, and insurance comparison tools to guide customers to the best deal have all emerged in recent years. In fact, to encourage the use of insurtech, the Insurance Commission has issued a policy statement permitting insurance companies, subject to mandatory security requirements, to sell plans using apps on mobile phones, as well as to offer flexible payment frameworks in lieu of the usual payment methods.

Playing by the rules
The growth of the Philippine non-life insurance sector has not been without its challenges. The Tax Reform for Acceleration and Inclusion resulted in dismal sales for new motorcars in 2018, exacerbated by economic headwinds such as a weakening peso and rising inflation. New car sales for 2018 plummeted by as much as 16 percent, down to a total of just 357,410 new units sold, compared with 2017 sales of 425,673. As a result, motor vehicle loans have slowed down, recording a paltry 9.4 percent growth rate compared with 2017’s 21.6 percent. These conditions have understandably also had a knock-on effect on car insurance rates.

Although motorcar dealers and financial institutions are major sources of insurance business, the industry as a whole – specifically, the non-life insurance sector – still managed to generate over PHP 89.04bn ($1.7bn) in gross premiums in 2018. This figure was six percent higher than the previous year, with the top 10 non-life insurance companies accounting for 63 percent of said 2018 gross premiums.

Furthermore, the Philippine insurance industry is faced with two major regulatory developments: progressive increases in risk-based and minimum net worth requirements, and the forthcoming introduction of the new global insurance accounting standards, the IFRS 17. Based on the Insurance Commission’s list of insurance companies with valid and existing Certificates of Authority as of August 9, 2019, the number of insurance companies has decreased by 13 since 2013. Further contractions, mergers and consolidations are expected to be completed by year-end 2019, as several insurance companies are likely to remain significantly below the mandated PHP 900m ($17.8m) net worth level by this time.

Aggravating the situation is the forthcoming implementation of the IFRS 17, which necessitates the implementation of new systems that change how data is collected, analysed and processed. The International Accounting Standards Board approved the effectiveness of IFRS 17 for 2021 but subsequently proposed a delay until 2022. The implementation was then further delayed to January 1, 2023, with the Insurance Commission recognising a number of challenges to its implementation.

Nonetheless, all these measures are envisioned to further strengthen industry players and make them more competitive when facing their counterparts at the Association of South-East Asian Nations, while also aligning themselves with global insurance accounting standards.

Staking a claim
While insurance technology and other innovations are changing the industry almost imperceptibly, Standard Insurance has invested in a diverse range of skills, perspectives and approaches over recent years, and continues to do so today. This has allowed us to create and develop innovative products and new technologies, and maintain our relevance, even when faced with transformative market shifts.

Standard Insurance continues to focus on proper underwriting, intelligent pricing across all lines and high levels of sustainability, as well as fast and accurate resolutions to claims. Equally important, Standard Insurance has been deploying innovative products and new technologies while improving efficiencies in critical areas of operations to maximise sales potential and distribution networks.

Since 2009, Standard Insurance has been developing and maintaining a proprietary general insurance IT system called iINSURE, the core of which was designed based on a system inherited from Zurich Insurance Group following its acquisition in the early 2000s. Contemporary, flexible and affordably built in house, iINSURE enables Standard Insurance to meet existing and future customer needs.

Standard Insurance is proud to be an all-digital business, and its underwriting tools (such as the Web-Catastrophe Risk Management System), real-time claims evaluation system (iCATS) and telematics products, along with many other solutions, are all possible because of iINSURE. All subsystems that support the critical areas of Standard Insurance’s operations are powered and linked to iINSURE.

Risk and reward
As insurers, risk management is embedded in our nature. As such, a review of the company’s existing systems architecture was undertaken in 2016, which resulted in the eventual transition to using the cloud as a data centre. The past few years have seen the company exploring further ways of creating technological solutions to its business needs, increasing the pace of innovation and dramatically improving its already solid cybersecurity infrastructure.

Standard Insurance is well prepared and resilient when it comes to the challenges facing the industry, including the impact of new regulations

A collaboration with cloud services firm Cato Networks, formalised in early 2017, was used to connect our 60 branches nationwide, linking the head office and the company’s cloud infrastructure as a single software-defined wide area network. Firewalls, intrusion prevention systems and cybersecurity rules are now centralised in the cloud, providing greater operational stability.

In early 2018, iINSURE, iCATS and all related apps were migrated to the cloud, making Standard Insurance the first insurance company to do so. Amazon Web Services was employed to meet the company’s quality, reliability, speed and redundancy requirements.

Complementing the firm’s existing motorcar analytics, Standard Insurance has adapted tools like artificial intelligence and data science to enable a more in-depth analysis of its data sets. This has helped us to better understand the peculiar risks and characteristics related to different vehicle types and markets, to estimate our expected losses, and to improve churn rates. This approach serves as the foundation for intelligent motorcar strategies and pricing, improved customer services and the creation of innovative products that better address the needs of the evolving insurance population.

To develop marketing capabilities that complement our traditional sales platform, we have ventured into online sales, which allows customers to buy private car and travel insurance quickly and easily using our online risk assessments. Our digital sales platform has recently expanded to include social media as a tool for conversational marketing.

As consumers turn to Facebook and Google to find answers about insurance, Standard Insurance is ready to provide them. Initially this involves creating social media posts that build brand awareness, followed by other relevant posts that seek to educate the market on the importance of insurance. Finally, we create brand-building posts that communicate the four pillars of Standard Insurance: innovation, empathy, service and excellence. In 2019, after eight months of regular calibration, the company successfully sold 1,200 policies with a media budget of less than 10 percent of the premium, proving that Standard Insurance is more than ready to develop social media selling as its next major distribution channel.

Standard Insurance is well prepared and resilient when it comes to the challenges facing the industry, including the impact of new regulations, underpinned by the company’s strong financial position and well-developed insurance infrastructure. The company has been able to grow its total premiums business, despite the dismal motorcar sales of 2018, off the back of its expanding branch network and strong business relationships with intermediaries. Likewise, the business is well prepared for progressive increases in risk-based and minimum net worth requirements, and welcomes the implementation of new global accounting standards.

As always, Standard Insurance continues to maximise the effectiveness of innovative solutions to solve the challenges at hand – whether they relate to generating premiums, client servicing or systems support. While our latest efforts in developing artificial intelligence and our use of data science have been geared towards improving operations, the company’s strategic ambition is to become an exponential organisation – one that is able to post disproportionately large growth compared to its peers in the medium term. If we continue to listen, respond to our customers’ needs and push forward with innovative solutions, we hope to achieve this objective.

Andorra’s banking market is small but mighty

Andorra’s banking sector is one of the country’s economic pillars. However, in the past few years, the market, clients and rules of the game have changed radically, forcing banks to adapt and transform in order to offer the modern services that customers want.

Away from the banking sector, the Andorran economy has had to deal with wider change. Although sometimes still referred to as a tax haven, this is no longer a fair description of the country’s regulatory environment: Andorra introduced an income tax in 2015 and now boasts a transparent and highly regarded banking model. While the landlocked principality still offers an attractive tax system and represents an excellent destination for clients looking to diversify their wealth management, it also abides by all the regulatory standards expected of a member of the global economy.

In the past few years, Andorra has been on a significant growth path that has created opportunities for the financial sector

At MoraBanc, reacting to the changes that have taken place in Andorra in recent times has been a challenge, but one we have embraced wholeheartedly. As the first bank in the state to implement a digital transformation – a process that was completed quickly and smoothly – we know all about the difficulties that change brings. Thanks to the efforts of our staff, we are now operating as a fully fledged digital bank.

Making the most of more than 60 years of private banking experience, we now offer a much more global service. We are fully committed to our clients, whether they reside in Andorra or further afield. Still, now is not the time to rest on our laurels: after navigating several years of profound change, we are excited by the challenges that await.

The little things
With a population measuring just over 75,000, Andorra’s internal market is certainly small. This makes gaining market share difficult and requires us to be more competitive. To engage new clients, we must offer high-value, differentiated and personalised services. Additionally, with such close client proximity, it is vital to maintain a high level of trust at all times.

Though we talk about Andorra as a small market, in the past few years it has been on a significant growth path that has created opportunities for the financial sector. The driving forces behind this economic growth have been tourism and commerce, and these sectors continue to generate a great deal of business, with the country receiving more than three million visitors between December 2017 and November 2018.

Andorra’s certification and adoption of international agreements, combined with its beneficial taxation schemes, make the country an attractive destination in which to incorporate businesses that don’t require major industrial logistics. Due to its high level of security and excellent geographic location, Andorra has become a place of residence for professional sportspeople and high-net-worth retirees. All of these factors create a strong internal banking sector that has the potential to find great success in the international market.

Thanks to the transformation of the banking sector and the focus on certification and transparency, new business options are opening up beyond our borders. We have had subsidiaries in Switzerland and Miami for years now, and have upcoming projects in Spain, which we are able to take on thanks to our solid financial footing.

Let’s get digital
Society has welcomed the digital banking revolution because it gives the consumer more freedom: it brings access to services better suited to their needs and lets them choose how and when to acquire and use such products. The banking system, both in Andorra and globally, must respond to these new consumer habits.

At MoraBanc, we have achieved our transformation by making a digital mindset an essential part of the company’s culture. Our strategy hinges on two courses of action: first, we have concentrated all of our strategies under one umbrella, streamlining the decision-making process for our multichannel services; second, we have integrated innovative methodologies in the design and creation of products and services at every stage of our projects.

Our investment in digital banking stood at €7.5m ($8.31m) between 2015 and 2018, during which time we succeeded in positioning ourselves as market leaders. In 2019, our investment totalled €5m ($5.54m), which included technological innovation that responded to regulatory updates, improving internal processes and revamping the client experience. These levels of investment are high given the size of the Andorran market, and reflect MoraBanc’s commitment to being the country’s benchmark digital bank.

However, it’s important to remember that digital innovation is always progressing. We are constantly updating our offering and working on new projects. Over the next few months, we have five key aims. The first is consolidation: we will make the most of our position as a benchmark of online services in Andorra and consolidate our image as a modern digital bank. The second is innovation, which involves improving the tools we have already launched, incorporating new functionality and upgrading our digital solutions every week.

We have not forgotten digital transformation, which is our third goal. We will continue to move our services out of branches and onto our digital platform, investing in new technology to ease the process. In the interest of furthering Andorra’s technological transformation, this year, we headed the first study on the digital maturity of companies in Andorra. Our fourth goal involves delivering an omnichannel customer experience; to achieve this, we must strive to improve the services offered to our customers, expanding their payment options through the digitalisation of transactions and simplifying the payments process. We also wish to provide clients with more information on using point of sale solutions so they are empowered to increase sales and improve their customer service.

Our fifth aim concerns private banking. In January 2019, MoraBanc entered into an exclusive agreement with Goldman Sachs Asset Management to offer unique investment services in Andorra, such as portfolio management and advisory services. The agreement provides differential value for MoraBanc clients, enabling them to obtain exclusive information and a more personalised range of products and services. Information regarding their portfolio’s performance can be viewed via MoraBanc Digital, making it easier for users to assess their investments.

Leading the way
To be viewed as a digital trailblazer, businesses must focus on commitment, adaptability and teamwork. We have displayed commitment through our efforts to implement digitalisation, viewing it not as an option but a necessity that allows us to offer a better service to our clients.

Similarly, adaptability has been fundamental in allowing us to make changes before our competitors, including launching a new website and app, which has shown us to be a benchmark digital bank. Solid teamwork has also been essential in ensuring that everyone at the bank is working towards the same goal of making MoraBanc Digital a reality. From our first meeting about the institution’s digital future to the consolidation of the project, many hours have been dedicated to creating a digital identity that satisfies our clients and the bank’s other stakeholders – shareholders, employees, suppliers and Andorran society.

We apply one ethos to everything we do: we are modern, innovative, accessible, efficient and trustworthy. These values, when transferred to the digital world, enrich our products and services. We want our clients to see us as a bank that responds to their needs and maintains remote channels that give them the freedom to operate at any time and from any place – all our metrics tell us we are achieving this.

We’ve seen remarkable results since launching our digitalisation project in December 2016. Our internal digital banking report, published in April 2019, found a 77 percent increase in digital users, a 181 percent increase in access to online banking across all devices and a 709 percent increase in clients conducting banking through our app.

MoraBanc is optimistic about the future. We are not Andorra’s biggest bank, but the way we have dealt with change in recent years has seen us receive a great deal of recognition. After successfully finalising our transformation strategy, we started a new plan focused on achieving constant, unlimited growth.

We have all the ingredients to make progress: a solid balance sheet, a talented and efficient team, agreements with first-class partners such as Goldman Sachs, and a well-defined, attractive business model in which digital banking plays a hugely important role.

Software firm Vertex delivers a reality check for real-time tax reporting

In light of recent challenges to multilateral cooperation, global corporations, individual countries and tax administrations are striving to improve their coordination on numerous matters, including indirect taxation. One way to enhance this collaboration is through the implementation of technologies that enable the real-time – or near real-time – reporting of a company’s transaction data to tax administrations in certain jurisdictions. Hungary and Spain have already adopted real-time reporting requirements for transactions subject to value-added tax (VAT), and many more countries could soon follow. At least, that’s what one might believe from the large volume of articles and analysis extolling the rapid rise of real-time reporting.

In reality, though, the implementation of instantaneous transaction reporting has not been as widespread – nor as genuinely real-time – as initially predicted. There exists understandable resistance to this new requirement among companies, as well as plenty of confusion about the processes, technology and talent needed to make it work.

Global corporations, smaller to mid-sized companies and public sector organisations are all competing for the same tax technology talent

Hungary may have followed the lead of Spain – which implemented a near-real-time reporting system called Suministro Inmediato de Información (SII) in 2017, whereby companies digitally share VAT sales and purchase invoice data with tax administrators within four days of issuance or receipt – but several issues are slowing the adoption of similar proposals in other countries.

These obstacles must also be overcome if countries and companies are to optimise the potential benefits of real-time reporting, which include reducing a vast VAT revenue collection gap in Europe and avoiding lengthy (and disruptive) tax audits. Additionally, tax administrations will improve the processing time of exemptions, further helping revenue departments with cash flow and revenue cycle management, among other internal administration issues. Given the magnitude of the potential benefits and compliance risks, business and government leaders should develop a clear understanding of these issues and hurdles to implementation.

Not quite the real deal
Real-time reporting can help tax authorities detect suspicious transactions and uncooperative taxpayers at an early stage, as well as prevent tax avoidance and fraudulent activities. The VAT gap – the difference between expected VAT revenues and the VAT that is collected – has been the primary driver of EU countries’ interest in adopting real-time reporting requirements.

According to the European Commission’s 2019 VAT Gap in the EU-28 Member States report, the EU’s member states lost a combined €137bn ($151.5bn) in VAT revenue in 2017 due to tax fraud, tax evasion and inadequate tax collection systems (although bankruptcies, financial insolvencies and miscalculations also contributed to the gap). In the near future, the statistical data collection and analytics from combined taxpayers will provide tax administrations and revenue authorities with an improved understanding of taxpayer behaviour as it relates to compliance.

Although this shortfall has existed for years, in 2017 it finally motivated Spain to adopt its real-time reporting requirement, which has since shown positive results. According to a recent evaluation surveying a three-month period, SII covered 75 percent of the total turnover of VAT taxpayers in Spain, and the data supplied through SII matched the information given in VAT returns in 84 percent of cases. It is important to note, however, that 64,000 companies were initially obliged to join the new regime, but 10,000 companies left the monthly VAT refund regime or VAT grouping (both of which are optional) to avoid SII. Among the remaining companies within its scope, 90 percent complied with SII within the first three months of it being in effect.

While Spain’s foray into real-time reporting may have partly inspired Hungary to follow suit a year later, Hungarian tax administrators were also motivated by an exceptionally high rate of VAT fraud. Hungary’s requirements stand out because they require companies to digitally remit details on B2B sales transactions daily. Spain and Hungary’s adoption of real-time reporting requirements was widely viewed as a trend that would culminate in the adoption of similar tax reporting requirements in most, if not all, EU member states. Irish Revenue Chairman Niall Cody even recently described real-time VAT reporting as “inevitable”. To date, however, no other country has implemented such legislation.

Slow progress
As government leaders and business executives assess the viability and likelihood of new real-time reporting requirements, they should keep in mind several dynamics that affect how easily and cost-effectively these can be implemented. One issue to consider is that real-time reporting does not always translate to instantaneous data transfer or live-data transmission in practice.

Instead, real-time reporting rules may only require companies to submit VAT transaction data every few days, or weekly. Given that companies already collect, report and remit indirect taxes monthly in most EU countries, the actual time savings delivered via new real-time reporting requirements should be clarified and then compared to the potentially significant costs of the changes companies – as well as tax administrations – need to institute to comply.

This cost-benefit balance is crucial for businesses. If transaction data can be shared in real time (or close to it), these transactions can be immediately reviewed from an audit perspective by tax administrations. This would sniff out any inaccuracies within days of the transaction’s occurrence, enabling tax administrations and companies to resolve auditing issues at that point, rather than months or even years later, when the resolution process tends to involve far more time, effort, cost and disruption. This near-real-time assurance would greatly reduce the risk, disruption and cost of tax audits – benefits that can help companies offset the cost of implementing new tax management technology and related process changes.

The quick and secure exchange and storage of a company’s transaction data also requires relatively advanced adjustments to tax data management technology. While a growing number of global companies have this type of technology in place – in large part to keep pace with the competitive challenges posed by the digitalisation of the global economy – many enterprises still need to upgrade their tax technology. In fact, comparatively few tax administrations have the requisite tax data management technology in place.

It is also important to keep in mind that the impetus, receptivity and technological capabilities needed to support real-time reporting vary significantly across EU countries and other regions. Many developing countries with VAT regimes do not currently possess the appropriate technology to achieve automated real-time reporting systems. Even the EU’s 28 member states have different VAT compliance requirements and widely varying technology capabilities. This makes the widespread adoption of similar real-time reporting requirements unlikely.

In the US, for example, numerous state, municipal and local tax jurisdictions set their own unique sales and use tax rates and reporting requirements. There is also substantial pushback to real-time reporting in the US – due, in part, to resistance from credit card companies and retail and trade associations. Furthermore, many assert that this instantaneous reporting is not essential when considering the requirements of current regulation.

Bridging the gap
While the VAT gap represents a massive challenge for EU tax administrations and is a primary driver of the recent push for real-time reporting requirements, two other gaps also figure as major implementation obstacles.

The first is the technology gap. When governments want to implement real-time reporting, they quickly realise that they need systems in place to enable this capability. These systems must be able to accept transaction data from companies, run verification tests on the data and then store it securely. While tax data management systems with these capabilities exist, relatively few tax administrations currently have them in place. The cost-effective implementation of these systems depends on several factors that must be carefully evaluated, including the tax administration’s existing technology environment and any plans it has to alter or improve it.

While some tax administrations rely on traditional on-premises information systems, many government bodies are in the process of migrating technology functions to a private on-demand or public cloud model. Given this fluctuating IT setting, any real-time tax management system should be hybrid-cloud friendly. In other words, it should be able to exist within the three technology models: on-premise, private cloud and public cloud.

The other major challenge to implementing real-time reporting is the talent gap. Having advanced tax technology in place offers little value if an organisation doesn’t have access to the skills needed to operate these systems. And these relatively rare skills are in increasingly high demand: global corporations, smaller to mid-sized companies and public sector organisations are all competing for the same tax technology talent. The demand for technologically savvy tax professionals and the need for cutting-edge tax data management applications should only accelerate in the coming years, as tax compliance requirements intensify and more corporate tax functions implement additional technology such as robotic process automation, blockchain and artificial intelligence.

As the global economy becomes increasingly digitalised, governments and their tax administrations will face growing pressure to advance their technological transformations. This pressure is also likely to increase demand for more expedient data sharing among public and private entities. When this data sharing can be conducted and governed thoughtfully and securely, tax administrations and the companies they work with – not to mention the societies that both entities serve – have an opportunity to achieve significant mutual benefits.

Achieving this state of multilateral cooperation starts with a practical understanding of the issues, challenges, technology and skills needed to make these digital interactions thrive. In today’s modern digital tax compliance environment, both tax administrations and taxpayers should understand that the old technology that got them to where they are today will not be sufficient to take them where they want to go in the future.

Morocco’s infrastructural investment gap is hitting rural areas hardest

As Africa’s sixth-largest economy, with a GDP per capita of just over $3,000, Morocco is certainly no economic minnow. Although growth has slowed of late, it measured a healthy 2.95 percent across 2018 and inflation remains low. But there is still work to do – particularly in terms of the country’s infrastructural development.

According to the Global Infrastructure Hub (GI Hub), in the years leading up to 2040, Morocco is set to face an infrastructural investment gap of $37bn. It is not a challenge that is being left unaddressed, though. In June 2019, the country’s government signed a $237m deal with the Arab Fund for Economic and Social Development (AFESD) to improve its dams and road networks. Then, in November, the African Development Bank approved a €100m ($110.6m) loan to finance further infrastructure projects.

Nobody could accuse Morocco of neglecting its infrastructure in recent years, even considering the funding gap facing the country

The Moroccan Government, however, should be wary of simply throwing more money at its infrastructural deficit. Overall, in terms of infrastructure, the country is actually performing pretty well; it is only in rural areas where a shortfall is particularly prominent. In many respects, Morocco’s infrastructure is the envy of the rest of Africa, but the country should not start patting itself on the back until all of its citizens can enjoy the kind of advantages in transport, education and healthcare that are available to those based in its major cities.

It could be worse
Nobody could accuse Morocco of neglecting its infrastructure in recent years, even considering the funding gap facing the country. After all, no matter which country is being analysed, infrastructure always appears to be in need of development: Japan has an infrastructure investment shortfall of $91bn, while the US has one of $3.8trn. Compared with some countries, Morocco’s infrastructural investment pipeline is not particularly worrying (see Fig 1).

“Morocco’s infrastructure is second to none in Africa today,” said Dr Ali Bahaijoub, Editor-in-Chief of North-South Publications. “There are motorways linking all the major cities, the new Tangier-Med port is the biggest in Africa and the Mediterranean, and there is a new high-speed rail link between Tangier and Casablanca, as well as new airport terminals in Casablanca, Marrakech, Rabat and Tangier. Roads within cities have also been widened to three lanes on both sides.”

These projects owe their existence to the proactive approach the Moroccan Government has taken to finding outside funding sources. Over the last four decades, the AFESD has provided Morocco with 72 loans, totalling some $4.4bn. Nevertheless, Bahaijoub admits that “some regions in the country are better developed than others” and that placing a greater focus on rural areas and creating “schools and hospitals that are accessible to all” should be made a priority.

The money entering the country has, by and large, been funnelled into infrastructure projects that bolster Morocco’s business environment, while residential areas remain underserved. Although corporate executives can travel between Casablanca and Tangier on Africa’s fastest train, in the country’s rural areas, Reuters reports that families are forced to travel by donkey to collect drinking water from outside wells. Infrastructure projects can be hugely effective in bridging inequality but, currently, the new builds in Morocco’s glittering cities are merely serving to accentuate it.

Casablanca’s modern tram system

Work to be done
Walking through the streets of Casablanca’s city centre, which harbours ambitions of becoming the foremost financial hub for companies doing business in Africa, it is easy to forget what life is like for those living outside the country’s urban areas. Approximately 40 percent of Moroccans live in rural areas and this often presents them with significant challenges that simply don’t exist for the urban population.

Rural Moroccans receive an average of 2.2 years of formal education, compared with 6.1 years for their urban counterparts, while rural women are more likely to drop out of school early and exhibit higher levels of illiteracy. For many of these individuals, the difficulty posed by a lack of transport options means there is little time for education or economic development. While in urban areas, 100 percent of the population live within 5km of a healthcare facility, in rural areas, this figure drops to just 30 percent. Thankfully, things have improved in this respect – a 13-year road-building initiative improved rural access to all-weather roads from 54 percent to nearly 80 percent – but more could be done, particularly in the isolated communities that have established themselves around the Atlas Mountains.

The most prominent infrastructural project that the Moroccan Government has planned outside of its urban locales is the Noor Ouarzazate concentrated solar power (CSP) project, which forms part of the country’s Moroccan Solar Plan (MSP). The largest solar complex of its kind in the world, situated where the Atlas Mountains meet the Sahara Desert, the project can supply around six percent of the country’s total energy needs using two million mirrors.

“One of the key projects delivered under the MSP is the Noor Ouarzazate CSP complex, which will be one of the largest single solar complexes in the world,” Marie Lam-Frendo, CEO of GI Hub, told World Finance. “The government of Morocco has set a goal of reaching 52 percent of installed capacity from renewable energy by 2030 and is well on track to meet this target, reaching 34 percent of targeted installed capacity of renewable energy in 2016.”

While infrastructural developments like the Noor Ouarzazate plant may not, strictly speaking, be located in one of Morocco’s urban hubs, the benefits that such projects deliver are unlikely to be felt in the isolated communities that need them most. Any employees will probably be drawn from the nearby city of Ouarzazate and the power it generates will not be much use to the people living in isolated Berber villages – not until much-needed cables are laid and power stations built.

Redressing the balance
While the Moroccan Government has been praised for the way it has sourced funding for its infrastructure projects, it knows there is still much more to do to address the shortfall in those areas outside its major cities. In July 2019, Moroccan Prime Minister Saadeddine Othmani announced that $1bn would be channelled into regional infrastructure projects by 2021 in order to achieve more equitable development. The government would do well to focus its efforts on the particular infrastructural sectors most in need of improvement.

“According to our [Global Infrastructure Outlook] report, Morocco is estimated to have an annual infrastructure investment need of $9.8bn in the years to 2040, primarily in the electricity and roads sectors ($4.5bn and $2.8bn respectively),” Lam-Frendo said. “To meet the UN’s Sustainable Development Goals on universal access to electricity, water and sanitation by 2030, Morocco will need an additional cumulative investment of $16.2bn in the electricity sector and $4.6bn in the water sector.”

Once again, attempts to plug the funding gap would be best served by targeting the country’s poorer regions. Although reports of major development projects being launched in the Laâyoune-Sakia El Hamra region may appear to be a step in the right direction – the area is not home to any of Morocco’s best-known cities – it is already one of the country’s most prosperous regions. According to the World Bank, it ranks first in terms of education and access to fundamental economic, social and cultural rights.

The Finance Act 2019, approved in October 2018, should improve inequality to an extent, with its promise to increase the regional share of corporate and income tax from four to five percent. As will Othmani’s commitment to delivering more interaction between government ministers and voters in these parts of the country. Similarly, a new approach to monitoring regional and local investment programmes should provide better accountability and transparency regarding the progress of any ongoing projects. These are the sorts of measures that are required – not more mega-projects that predominantly benefit those in society’s upper echelons.

Building a framework
The reason why Morocco has been able to achieve its funding goals where other African states have failed is that the country boasts a solid regulatory climate, which gives investors confidence that they will achieve an adequate return on their financial support. “Among the 15 African countries included in the GI Hub Outlook analysis, Morocco is expected to be the country to meet the highest proportion of its infrastructure investment needs by 2040 (85 percent),” Lam-Frendo explained. “This may reflect Morocco’s relatively strong infrastructure-investment-enabling environment.”

In terms of governance, competition frameworks and permitting procedures, Morocco outperforms the average seen across emerging markets, as well as in many of its fellow African nations. And although Morocco does not have a national or sub-national infrastructure plan that covers all sectors comprehensively, the Moroccan Government has launched a number of separate sector-based infrastructure plans, including the 2040 Rail Strategy, Vision 2020 for tourism, the 2030 National Port Strategy and the Noor Ouarzazate solar plan. These plans are often supported by their equivalent-sector-based, state-owned enterprises and should help the country deliver more targeted infrastructure spending over the coming years.

The government would do well to focus its efforts on the particular infrastructural sectors most in need of improvement

Another reason why Morocco has managed to maintain relatively healthy finances is its diversified economy, which is much less reliant on commodities and fossil fuels than its neighbours, such as Libya. This has ensured that, while several states in North Africa have struggled to entice investors to the region, Morocco has not. A stable investment climate should not be taken for granted, however.

Morocco may have an economy that is spread across multiple industries, but it could do more to ensure that it is equally diverse geographically. This is where better infrastructure could make a significant difference. It would also help the country’s poorer citizens support themselves economically as better transport links allow citizens to engage with the job market, sell their wares and access the amenities they need.

Morocco is certainly not ignoring its infrastructural shortfall in the hope that it goes away. The country’s government should be praised for the way it has secured funding sources that have created its first-rate cities, airports and rail networks. However, now is the time to direct this funding elsewhere. Discontent is rising alongside inequality in the country. Another brand-new motorway or high-speed rail connection might see this discontent rise further still.

Kazakhstan is developing a first-rate bond market

Kazakhstan’s financial market is developing rapidly. Its capital city, Nur-Sultan, has ambitions to become one of the world’s foremost financial centres, with investors from East and West beginning to take advantage of the country’s position at the crossroads of Europe and Asia. Tengri Partners Investment Banking, a premier independent investment banking and asset management firm headquartered in Almaty, Kazakhstan, provides full-scale investment banking services in the fields of debt and equity capital markets, mergers and acquisitions, brokerage and asset management, merchant banking, and private equity investments.

Having tapped into IFI bond markets, Tengri Partners has demonstrated that it is a forward-looking enterprise ready to accept new challenges

Established in 2004 as Visor Capital (the investment banking arm of Visor Holding), our firm has advised and executed more than 40 transactions, collectively valued in excess of $17.3bn, over the years. At the end of 2015, Visor Holding sold the firm – the only investment bank in Kazakhstan holding a brokerage licence on the London Stock Exchange – to Tengri Partners Investment Corporation. Since then, the local investment banking market has entered a new era.

A capital idea
Tengri Partners has garnered a reputation as the go-to bank for attracting debt capital, as shown by our repeat clientele and status as the preferred investment bank for international investors on issues related to bond transactions in Kazakhstan. At the end of Q3 2019, Tengri Partners’ presence in debt capital markets significantly increased, reaching 20 percent of total market share, compared with one percent in 2018. Tengri Partners is also the market leader for debt capital in terms of completed transactions.

Our main aim is to boost the development of local capital markets, which are currently suffering severe deficits in terms of new issuers and secondary liquidity. Bringing risk-free instruments denominated in Kazakhstani tenge to local institutional investors has improved the potential for diversification from sovereign bonds and short-term notes. It has also allowed international financial institutions (IFIs) to expand their operations and avoid the currency mismatches that have been present for a number of years.

Tengri Partners brought AAA-rated IFIs to the public debt capital market for the first time in the history of Kazakhstan, at a time when the country’s sovereign rating was BBB. The deals we pioneered strengthened our position in the investment banking sector; now, we are looking to take Kazakhstan’s capital markets to the next level.

Transitioning International Finance Corporation (IFC) bonds out of global medium-term notes programmes and placing them on the Kazakhstan Stock Exchange (KASE) represented the first hybrid transaction in the history of Kazakhstani capital markets. Tengri Partners successfully saw through the adjustment of local legislation and regulation in order to make this a reality. This proved to be the most challenging aspect of the transaction, requiring us to develop new mechanics of issuance and conduct a public offering on the KASE.

Other challenges we faced were: allowing these deals to be settled through a local depositary system; developing a market valuation methodology for these bonds amid scarce secondary liquidity; including IFI bonds with AA and above ratings in the list of eligible collateral for the discount window with the National Bank of Kazakhstan; and applying identical haircuts as sovereign bonds. This final requirement proved to be a game changer for many investors and primary commercial banks, for which secondary liquidity is an extremely important issue.

In July 2018, the first IFC bond was placed for KZT 8.5bn ($22m), representing back-to-back funding for the issuer, with funds being immediately disbursed to the local borrower. The deal was structured to mirror the terms of the loan disbursement and resulted in an amortising fixed coupon bond – the first of its kind in Kazakhstan in almost 10 years. In arranging the deal, Tengri Partners outperformed the sovereign yield curve, which was a great achievement for us and the IFC as the issuer. It reduced the loan cost for the borrower, granting them access to the private sector for affordable funding amid limited local opportunities.

The transaction was an important benchmark in the history of Kazakhstan’s capital markets development. It was the first IFC bond to be denominated in tenge, the first AAA-rated bond placed on the KASE, the first AAA-rated IFI bond primarily for private sector investors in Kazakhstan, and the first time an AAA-rated IFI engaged a Kazakhstani investment bank for a public bond offering.

A done deal
In another unprecedented move, Tengri Partners has managed to engage every type of investor currently present in Kazakhstan, with 19 bids from 10 participants and a bid-to-cover ratio of 2.25. The issuance of the IFC’s tenge-denominated bond is in line with the IFC’s strategy to source long-term funding and create access to local currency finance for private sector expansion, helping to boost economic growth and create jobs.

The IFC almost immediately followed up with two deals in September 2018 and January 2019, worth a combined KZT 25bn ($64.7m), underwritten by Tengri Partners. Again, demand significantly exceeded the offered volume by an average of 1.64 times. The maturities of the three bond issuances were 7.5, four and two years respectively. This perfectly matched with investors’ appetites for risk-free, medium-term instruments. It allowed them to diversify their investment portfolios and comprehensively enhance the average quality of liquid assets.

An Asian Development Bank (ADB) bond issuance in tenge has also provided a back-to-back funding strategy for the issuer. The milestone dual-tranche, inflation-linked bond possesses a highly tailored structure mirroring the terms of underlying loans that will grant cheaper debt funding on market terms.

The hybrid bond approach was crafted by issuing and documenting the transaction under the ADB’s global medium-term notes programme and English law while settling the deal through the local depositary system – a first for the ADB in any developing member country. The issuance was placed exclusively with institutional investors and marked a series of firsts both for the ADB and the local market. It was the ADB’s first tenge bond issuance, the first ADB inflation-linked bond in a local currency and the first inflation-linked bond in Kazakhstan since 2016.

Building a reputation
The European Bank for Reconstruction and Development (EBRD) is the most active development bank in Kazakhstan in terms of project numbers and volume. With the help of Tengri Partners, it is the latest IFI to successfully tap the local market with a tenge-denominated bond issuance. The EBRD already raised KZT 260bn ($673m) through five issues in 2019 alone – another milestone for the local market. We have witnessed the first domestically placed public bond offering for the EBRD in Kazakhstan and the largest single inflation-linked bond issuance by an AAA-rated IFI in Kazakhstan. The execution phase of the deal took just one week from the approval of bond terms to final settlement. The bond issuances also provide proof of the feasibility of tapping spare tenge liquidity for a risk-free borrower.

For Kazakhstani investors, such bonds are important for diversifying their portfolios, while commercial banks and insurance companies that urgently need medium-term, high-quality liquid assets in tenge will also benefit. It is worth noting that the issuance of IFI bonds took place on market terms and was a significant success, since the demand of most placements exceeded the offered volume, emphasising the high rating appreciation by local market participants.

Moreover, the entry of issuers such as the IFC, ADB and EBRD to the KASE opens the way not only for other IFIs, but also entails further interest in local debt capital markets from both international investors and issuers, which is a positive sign for the reputation of the country and the development of capital markets in Kazakhstan.

Having tapped into IFI bond markets, Tengri Partners has demonstrated that it is a forward-looking enterprise ready to accept new challenges. The next cutting-edge solution for local quasi-government companies will be an opportunity to place their bonds among international investors. Tengri Partners has already developed a unique issuance structure that will make tenge-denominated local bonds an attractive security for overseas bond investors. At the same time, local capital markets will experience an investment boost, not a mere capital reshuffling within the country.

In two decades of operations, Irkutsk Oil has transformed East Siberia’s gas industry

Irkutsk Oil Company (INK) was established on November 27, 2000. At the time, the company owned only three fields – Yaraktinsky, Markovsky and Danilovsky, with total annual oil production of just 30,000 tons per year. Delivery of oil to consumers over muddy roads was a major drain on revenue. To switch to year-round production, the company set about constructing a pre-fabricated aboveground pipeline – a unique undertaking considering the severe winter operating conditions in East Siberia. Later, the company built production wells, oil and gas treatment units and several other infrastructure facilities.

Today, INK is a successful operator of oil fields in the East Siberia and Yakutia regions, and has invested RUB 80bn ($1.25bn) in the construction of gas processing plants and a gas chemical complex in the north of the Irkutsk region, in and around the city of Ust-Kut. This covered around 17 percent of the total cost of the project, which is scheduled for completion in 2023.

For the first time in the history of East Siberia, a gas industry is being developed in remote territories, featuring sophisticated engineering solutions based on advanced technology

The project is an impressive one: for the first time in the history of East Siberia, a gas industry is being developed in remote territories, featuring sophisticated engineering solutions based on advanced technology. According to Russian petrochemical analysis firm Rupec, the construction of INK’s gas complex ranks among the most significant projects in the gas, chemical and petrochemical industries of Russia and the Commonwealth of Independent States.

On the up
When the company was first established, its early oil fields were poorly explored. The first production well quickly filled with water and many sceptics doubted whether the Yaraktinsky region held any more than a disappointing three million tons of oil reserves. However, time has proved them wrong. In those early days, finance was scarce, but each employee worked towards the company’s long-term success. Now, INK is among the world’s leading oil and gas companies.

Over the course of a decade, the company was able to reach the next stage of its development. In 2010, it built its Markovskoye oil custody transfer unit to export oil into the East Siberia–Pacific Ocean (ESPO) pipeline. By mid-January 2011, the company began shipping hydrocarbons to the Kozmino port oil terminal via ESPO, and by the end of that year, INK exported more than one million tons of oil into the pipeline. Global partnerships have also supported the company’s growth: since 2007, INK has been engaged in active cooperation with Japan’s Oil, Gas and Metals National Corporation. Currently, two Japanese-Russian joint ventures are successfully operating in the Irkutsk and Krasnoyarsk regions.

INK has been able to increase its production each year and, as of the end of 2018, production reached nine million tons. The company actively develops and implements innovative solutions, affecting core and auxiliary activities. The Yaraktinsky oil field has become a core asset, accounting for two thirds of total production. However, nothing lasts forever: as the oil aspect of INK’s activity begins to slow, the gas part is ramping up. Before long, oil production from Yaraktinsky may be on the decline, but just as soon, INK’s new gas project will be fully deployed.

In the pipeline
The new gas project is already underway. It all began in 2009 when the company started construction on a processing complex in the Yaraktinsky field for the reinjection of dry stripped gas and associated gas into formation – known as the cycling process – while producing gas condensate. The ambitious project has earned the support of the European Bank for Reconstruction and Development, which has a minority stake in INK’s holding company and provided a loan so the group could begin work on the project.

The cycling process was launched in 2010 – the first of its kind in Russia. It provided the company with an opportunity to dispose of unused associated gas and became the predecessor of a larger gas project that launched in 2014. INK then began the staged implementation of the gas project, including the creation of a production, treatment and processing system for the gas liquids produced by the company.

The first stage was accomplished in 2018. At that point, the company had completed construction of the Yaraktinsky gas processing plant, as well as a liquefied petroleum gas uploading facility in Ust-Kut and a unique multiphase pipeline for the transport of natural gas liquids. The pipeline will transport feedstock with up to 40 percent ethane content. In addition, for the first time in the Russian petrochemical industry, the company has begun to use new custom-built railway tank cars to ship its gas mixture to consumers.

At the second stage, three additional gas-processing plants will be erected in the Yaraktinsky and Markovsky fields, with a total capacity of 18 million cubic millimetres a day. The plants will feature innovative technology, enabling them to recover up to 98 percent of the ethane contained in feedstock. Furthermore, construction of a gas fractionation plant is currently underway near Ust-Kut. The plant will produce up to 900 kilotons of high-quality ethane per year for the future gas chemical complex.

The gas project will peak in its third stage, with the construction of a polymer plant in Ust-Kut with an annual capacity of 650,000 tons of polyethylene. The Toyo Engineering Corporation was contracted for the implementation of the third stage of the gas project. That plant will produce polyethylene of various densities, granting the company access to both the Russian and international polyethylene sales markets. In addition, the plant will include advanced technology for the production of bimodal HDPE, the raw material used for the manufacture of European-certified products.

A fuel injection
Another factor behind the company’s success is its implementation of new production programmes and technology for enhanced oil recovery. Oil remains the company’s core product, reinforcing its stability and capacity to pursue business diversification. One of the most promising technologies used by the company – water alternating gas injection – brings a dual benefit: it improves oil recovery in the company’s core fields and preserves gas injected into formation. In the future, these reinjected gas resources will be used to produce a propane-butane mix and provide up to one third of total feedstock for the gas chemical complex.

To make year-round oil production viable, INK constructed an ambitious pre-fabricated aboveground pipeline

The latter stages of the gas project will involve extensive infrastructure construction. In the summer of 2019, INK began testing cold recycling technology on its future plant site. This technology combines tarmac reconstruction and soil stabilisation to make roads suitable for year-round operation. This method of road restoration has been used globally for more than 50 years and has long proved to be an efficient solution.

The creation of an industrial complex in the north of the Irkutsk region will enable the efficient use of vast resources of natural and associated petroleum gas from Siberia’s fields, which have been unused for decades.

Implementation of the company’s projects would require the support of federal and regional governments, which have recognised the benefits that will be brought to local communities. The project is expected to create more than 2,000 highly qualified jobs in the region and generate over $1bn of non-raw material export per year. This will offer a real chance to improve the current situation in the northern towns of the Irkutsk region, which are still struggling in the aftermath of the ruble crises of 1998 and 2014.

This expanding industry will create jobs for local residents and boost the development of towns and settlements, as well as local small and medium-sized businesses. INK is already building a team of several hundred gas industry professionals from across the country to manage the project and, as of the end of 2019, is in the front-end engineering stage of a housing district for up to 3,000 members of staff and their families. The new district will include childcare centres, a school, a polyclinic and a multifunctional culture and education centre.

INK believes its independent status has enabled it to accomplish its goals, which seemed unattainable in the not-too-distant past. The company does not ask for external assistance: it discovers its own fields, builds the necessary infrastructure and is creating new jobs in the region. Over the past 10 years, it has discovered 13 hydrocarbon fields in the Irkutsk region and Yakutia. There is more to come for this ambitious player.

Banking Awards 2019

With Brexit looming and trade wars causing political uncertainty around the world, it’s easy to believe the economic landscape is equally tumultuous. However, almost the opposite is true: a decade after the financial crisis and the banking sector is in one of its strongest states in recent history. The Banker’s Top 1,000 World Banks ranking showed that in 2018, total assets reached $124trn, with the return on assets standing at 0.9 percent.

Banking Guide 2019

Click here to view the World Finance Banking Guide 2019

Instrumental to the recovery of the industry has been the US, which has had one of the fastest recoveries since the financial crisis. Total assets at US banks reached a peak of $17.5trn at the end of last year, according to Deloitte’s 2019 Banking and Capital Markets Outlook, while capital levels are also on the rise. Return on equity for banking is at a post-crisis high of 11.83 percent, and in other metrics, including non-performing loans, the US has fared well. Furthermore, the Deloitte report suggested that aggressive policy inventions and forceful regulations are behind the excellent performance of the country’s banks.
China has also provided a boost to the sector over the past decade, with its banking industry having overtaken that of the eurozone in terms of assets in 2017, according to the Financial Times. In 2007, none of the top five banks in the world were Chinese, but now – thanks to the overwhelming profitability of its institutions – four of them are (see Fig 1). Analysts at Accenture have credited China’s impressive digital strategy for its rapid growth: the country has more than a billion regular users of mobile payments, thanks to apps like Alipay and WeChat, through which Chinese citizens conducted two thirds of all global mobile payment transactions in 2018.

Top Five Banks

Varied landscape
Though the overall performance of banks has been robust, there has been mixed success across specific regions. European banks have become smaller and more risk-averse in their approach, causing them to retreat from international markets. A mixture of low and negative interest rates, a lack of pan-European regulatory agency, structural deficiencies and overcapacity saw the profits of the top five European banks fall from $60bn in 2007 to $17.5bn in 2017. Japan has suffered too, thanks to the impact of slow domestic growth and disappointing exports.
The future for these countries is as varied as their current economic situations. There are indicators that Europe’s fortunes are about to change, with return on equity for the top 1,000 Western European banks rising from 5.5 percent in 2016 to 8.6 percent in 2017. Analysts are cautious about other parts of the world, though: the IMF’s real GDP growth forecasts suggest there will be a deceleration in all regions. Meanwhile, Deloitte economists have said there is a 25 percent chance of a recession in the US this year. China and the US’ tariff war could also drag on, to the detriment of global markets.
In order to accelerate the banking industry, leaders must innovate as much as possible, particularly with regards to their technological processes. Digitalisation is perhaps the most important area for them to stay on top of, with experts warning banks not to be complacent, as a large number of new players are already sweeping in where legacy banks have failed to take hold. The UK is just one example of this, with more than a third of new revenue and 15 percent of overall revenue now flowing to new entrants, according to Accenture. Organisations like Monzo, Starling Bank and Revolut have snapped up millions of customers, many of whom are seeking out a service that’s quick, convenient and easily accessible.

Tech revolution
In the coming years, artificial intelligence (AI), the cloud, robotic process automation (RPA) and blockchain will become increasingly important to banks’ success. Though these systems are complex and difficult to integrate into existing processes, when done correctly, they create a win-win situation for banks and their customers, building trust and engagement in the process. RPA can also lead to better productivity gains, while AI is able to streamline operations and provide important insights into consumer behaviour.
By implementing these technologies, banks can also better meet regulatory requirements. The EU General Data Protection Regulation, for example, requires banks to ensure the privacy of their customers’ data, which they can do much more easily when they have modernised platforms. Institutions that do not prioritise digital transformation can create major hazards for themselves, particularly if their systems do not adequately protect customers. There’s also the growing pressure to provide adequate cybersecurity to contend with.
In order to bolster technological services, human capital is vital. In its Banking and Capital Market Trends 2019 report, PwC suggested this is one of the biggest stumbling blocks for institutions that are trying to evolve, with almost 80 percent of banking and capital market CEOs seeing skills shortages as a threat to their growth prospects. According to the report, 35 percent of CEOs are ‘extremely concerned’, with 44 percent being ‘somewhat concerned’.
Clearly, a large number of institutions understand the need to digitalise: it can help them create more seamless interactions with customers and can bring their brands to life. According to the PwC report, more than 90 percent of CEOs believe AI will be key to their development, but they also need savvy individuals to knit these technologies together. PwC noted: “Technology alone can’t meet customer expectations; consumers still value human interaction and accountability.”
Overall, there is reason to be optimistic about the future of banking, which has made astronomical strides since the financial crisis. But its outlook rests upon a huge number of intricate variables, such as transparency, regulatory compliance and institutions’ ability to harmonise and expand their digital offerings. Organisations that are bold in their approach are most likely to reap the rewards and enhance the overall health of the sector.
The 2019 World Finance Banking Awards have sought to identify the banks that have excelled across a number of areas, including corporate governance, sustainability and innovation, and have played a key role in the industry’s growth. Congratulations to all our winners.


World Finance Banking Awards 2019

Best Banking Groups

Australia Westpac
Finland Nordea
Cyprus Eurobank Cyprus
Chile Banco Internacional
France Crédit Mutuel
Dominican Republic Banreservas
Costa Rica BAC Credomatic
Brunei Baiduri Bank
Spain Santander Group
Russia Sovcombank
Turkey Akbank
Nigeria Guaranty Trust Bank
Myanmar AYA Bank
Macau ICBC (Macau)
Jordan Jordan Islamic Bank
Ghana Zenith Bank (Ghana)

Best Investment Banks

Argentina Columbus Merchant Bank
Germany Berenberg Bank
Greece AXIA Ventured Group
France BNP Paribas
Dominican Republic Banreservas
Colombia BTG Pactual
Chile BTG Pactual
Brazil BTG Pactual
Kazakhstan Tengri Partners Investment Banking
Saudi Arabia GIB Capital
Switzerland Credit Suisse
Thailand Siam Commercial Bank
Russia Sberbank CIB
Norway Carnegie
The Netherlands ABN AMRO
Turkey Akbank
Nigeria Coronation Merchant Bank

Best Private Banks

Belgium ABN AMRO
Liechtenstein Kaiser Partner
Italy BNL-BNP Paribas
Greece Eurobank
France BNP Paribas Banque Privée
Czech Republic Česká Spořitelna
Canada BMO Private Wealth
Brazil BTG Pactual
Singapore DBS Private Banking
The Netherlands Triodos Bank
Poland BNP Paribas Bank Polska
UAE Julius Bär
Nigeria First Bank of Nigeria
Sweden Carnegie Private Banking
Turkey TEB Private Banking
Monaco CMB

Best Commercial Banks

Most Innovative Savings Bank, Greece Eurobank Ergasias
Hungary ING
Belgium ABN AMRO
France BNP Paribas
Germany Commerzbank
Chile Banco Bci
Dominican Republic Banreservas
Canada BMO Bank of Montreal
Sweden Handelsbanken
Macau Bank of China
Nigeria Zenith Bank
The Netherlands ING
Vietnam SCB
Portugal ActivoBank
US Bank of the West
Sri Lanka Sampath Bank

Best Retail Banks

Kenya KCB Bank
Austria BAWAG Group
Bulgaria Postbank
France BNP Paribas
Germany Commerzbank
Chile Banco Bci
Greece Eurobank
Dominican Republic Banreservas
Mexico Citibanamex
Portugal Santander Portugal
Poland mBank
Vietnam Saigon Commercial Bank
Turkey Garanti Bank
Myanmar AYA Bank
Nigeria Guaranty Trust Bank
Sri Lanka Sampath Bank

Best Sustainable Banks

France BNP Paribas
Egypt Arab African International Bank
Chile Banco Bci
Belgium Orange Bank
Poland mBank
The Philippines Bank of the Philippine Islands
Nigeria Access Bank
Jordan Jordan Islamic Bank

Most Innovative Banks

Africa First National Bank
Asia Maybank
Australasia ANZ
Europe EVO Banco
Latin America and The Caribbean Banco Popular Dominicano
Middle East National Commercial Bank
North America US Bank

Bankers of the Year

Africa Segun Abaje – Guaranty Trust Bank
Asia Tatsufumi Sakai – Mizuho Financial Group
Australasia Lyn Cobley – Westpack
Europe Zbigniew Jagiełło – PKO Bank Polski
Latin America and The Caribbean Gianfranco Ferrari – Banco de Crédito del Perú
Middle East Adnan Chilwan – Dubai Islamic Bank
North America Thasunda Duckett – Chase Bank

Liechtenstein walks the walk when it comes to sustainable banking

Quality, stability and sustainability are the three long-term cornerstones of Liechtenstein’s economy and its financial strategy. For the country’s banks, this means offering integrated solutions, tailored products and premium services for their domestic and international clients.

Figures published in April this year prove that Liechtenstein’s banks are on the right track; in 2018, assets under management surpassed CHF 300bn. More than half are booked in Liechtenstein, which underlines its appeal as a location, but also the international reach of the banks the country attracts.

Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from the top

At the start of June, S&P confirmed Liechtenstein’s long-term AAA country rating, highlighting its stability. Not only does the country have a track record of economic reliability, its financial institutions share the same approach. Banks operating in Liechtenstein stand for low-risk business models, as demonstrated by their average Tier 1 capital ratio of over 20 percent.

Weaving sustainability into corporate culture
With its reputation for stability solidified, Liechtenstein’s banks are turning their attention towards sustainability, the third cornerstone of the banking centre strategy. Sustainability is a factor affecting the entire value chain and all levels of a business’s hierarchy. As such, Liechtenstein’s financial institutions operate with a business model that prioritises long-term success over short-term gains. This sustainable approach has become an integral part of their corporate culture.

Sustainable investments will soon become banking’s new normal. Since the Paris Agreement was signed in 2015, there has been an urgent need for action, however, the challenges of achieving sustainability are multi-layered and complex. Therefore, the United Nations developed its own guidelines in the form of its 17 Sustainable Development Goals.

According to consulting firm PwC, the annual global investment volume required to achieve these goals is $7trn. Currently, only one seventh of this immense amount is financed by public funds. Thus, the financial sector, particularly banks, must play a central role in mobilising and channelling these resources. This brings with it great responsibility, but also huge opportunities.

Change comes from the top
Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from business leaders. This is precisely where the strength of Liechtenstein’s financial centre comes from. Consequently, acting in a responsible manner, with long-term outcomes in mind, is a distinguishing feature of the country’s economic landscape.

In Liechtenstein, sustainability is broadly enshrined in policymaking and upheld by the population, reflecting the importance that has traditionally been placed on acting in a sustainable and responsible way. Hence, Liechtenstein and its banks are perfectly positioned to play an active role in guiding the world towards a more sustainable economy. They have shown in the past that they are not just able to talk the talk, but are prepared to walk the walk too.

As proof of their commitment to sustainability, many banks operating in Liechtenstein have set up their own sustainable commitments. For example, LGT’s social and corporate responsibility initiatives focus on the UN’s Sustainable Development Goals. The agenda outlines 17 goals that encompass economic, social and environmental domains, forming the scaffolding of LGT’s sustainable objectives.

Meanwhile, the Liechtensteinische Landesbank offers an ecological and renovation mortgage, which invests in new buildings that meet Minergie energy standards. Neue Bank has also launched a sustainable investment option, in the form of its Primus-Ethics mandate. The asset management product places investment in morally irreproachable securities.

Asset managers and private banks can generate a much greater leverage effect through balance-neutral transactions, incentivising companies towards more sustainable behaviour than is possible through lending alone.

Creating clear guidelines
While some progress has been made, Liechtenstein’s banking sector has not yet achieved its sustainability goals. A major challenge will be to use technology to transform the economy’s environmentally friendly credentials. Younger generations will play a key role in this respect. Schroders’ 2017 Global Investor Study shows that 52 percent of Millennials often or always invest in sustainable funds, compared with 31 percent of Baby Boomers.

Millennials are not only interested in short-term performance, but also in whether their money is being invested in a meaningful and responsible way. What’s more, for this generation, the daily use of digital technology is a given.

The combination of these two factors is set to be a powerful force in the finance sector. The banks and economies that take advantage of the Millennial mindset will find their sustainable transformation significantly more effective.

Additionally, asset owners will be crucial for a more sustainable future. Their preferences ultimately decide how capital is channelled into the economy. At present, there is no commonly agreed definition of sustainable investment. The taxonomy that is currently being developed under the leadership of the European Commission aims to establish an EU-wide classification system.

With a robust and workable definition, banks and other stakeholders will be better equipped to enhance awareness, deliver on investors’ preferences and improve investment advisory and suitability.

The Liechtenstein Bankers Association aims to help the country develop into one of the leading financial centres in sustainable finance. We want to be part of the solution, not the problem. Ultimately, we must make a real impact for the benefit of our clients, future generations and the planet.

Building a bright future for Kuwait

The global economy is changing: technology is becoming more deeply integrated into everything we do; the invisible hand of the market is ever-changing in its preferences; and geopolitics is, as always, casting its shadow across global financial systems. The government of Kuwait and Kuwait International Bank (KIB) understand that it is not possible to stand still amid these moving tides. In order for the economy to grow, we need to understand the dynamics of global finances and be flexible in matching them.

Kuwait aims to strengthen its private sector and drastically increase investment from outside the country

Kuwait has successfully made changes and commitments that will help navigate these coming changes, while also improving the economy’s standing in the international system. In fact, Kuwait’s entry into the upper tiers of the global economy is being carried out against the backdrop of its Vision 2035 plan, which was launched in 2017 as a blueprint for diversifying the economy. As with similar plans like Saudi Arabia’s Vision 2030, Kuwait aims to strengthen its private sector and drastically increase investment from outside the country.

Rising stock
Over the past year, the Kuwait stock exchange, Boursa Kuwait, has been among the best-performing markets in the Gulf Cooperation Council (GCC). In 2018, it advanced its plans to attract international investment via the progressive implementation of international standards, thereby bridging the gap between Boursa Kuwait and the best-performing stock exchanges in the world.

This progress was perhaps best demonstrated by Kuwait’s transition to secondary emerging market status within the FTSE Global Equity Index Series. During a semi-annual review that took place in September 2018, the first half of the market transitioned, and was followed in short order by the second half in December.

Boursa Kuwait’s rapid ascent does not stop there. According to S&P Dow Jones, Kuwait is on track for an upgrade to emerging market status. London-based MSCI, for its part, is also weighing a potential reclassification of Kuwait from being a frontier market to an emerging market.

The exchange has also taken steps to drastically improve its transparency and liquidity, and to increase the number of shares traded by reclassifying its indices. Creating a transparent environment for trading has strengthened confidence in the market itself. The comprehensively supervised mechanisms that Boursa Kuwait has implemented have effectively removed any lingering doubts buyers and sellers may have had about participating in the market.

Further, Boursa Kuwait is increasingly important for the country’s long-term economic prospects. As a result of the significant efforts that have been made to reform it, stocks traded in the market are increasingly attractive to both Kuwaiti and international investors. It is one of the largest stock exchanges in the MENA region, and the country’s economic prosperity is further reflected in its position among the top 10 countries in the region in the World Bank’s Doing Business 2019 report.

Since the stock exchange was privatised, its transition into a competitive trading platform in the region has required the implementation of numerous tools and mechanisms. Today, the stock market has more efficient and accessible capital from both within and outside Kuwait as a result.

Foreign investment
The progress already made does not mean that the country is not taking additional steps to accelerate its climb. A medley of strict standards, international best practices and legislative measures are being implemented across the country to further pry open the floodgates to foreign investment.

The structural modifications made to the stock market, in tandem with changes to the legislative framework governing it, have paved the way for foreign investment. Foreign ownership of local banks, for example, was previously banned before the passing of Decree 694/2018.

An influx of foreign money has had a marked effect not just on capital markets, but on the entire economy, as envisioned in Kuwait’s long-term development plan. Currently, indirect foreign investment stock in Kuwait stands at around $800m. Additionally, Kuwait is one of several Gulf nations whose governments have pivoted towards digitalisation.

This trend is bringing modern technological systems to markets that foreign investors might have otherwise perceived as static or antiquated.
Technological change has not only been pushed at the governmental level, but also by financial institutions that have been at the forefront of the digital revolution. Innovation is both encouraged from the top down and grown organically from the ground up, which in turn is driving innovative business models across the Kuwaiti economy.

Moreover, Kuwait’s high level of political stability had been recognised by the major credit agencies, which see the country as having low political risk. Moody’s has given Kuwait an Aa2 rating, reflecting its strong investment opportunities. Increased investment flows have already had the knock-on effect of stimulating entrepreneurship and creating new businesses, which has then led to increased job creation. Programmes that have been initiated across Kuwait to feed the private sector have further buttressed this.

Human capital
For KIB, a crucial pillar of Vision 2035 is ‘creative human capital’, as it aligns with one of the bank’s core driving principles: supporting Kuwait’s national workforce. It is to this end that KIB has developed a series of training programmes for its staff and devoted significant resources to developing its employee base.

The bank has also implemented a comprehensive financial literacy programme for the wider community, with the aim of improving financial and economic awareness. In so doing, KIB is effectively investing in the future of the country’s financial system, as incoming employees are more in tune with how the economy works. The aggregate effect of this education will benefit not just Kuwait’s financial sector, but every industry in the country.

Human capital is the foundation of financial prosperity, and nurturing it is as important as any investment that can be made. Economies are, after all, managed by humans, and it is only through their success that economies grow. Through such investments, economic growth is not only achieved faster, but more sustainably, as workers become more productive and technologically savvy.

Oil prices
Like most Gulf states, Kuwait’s economy has historically been heavily dependent on its oil revenues. The government is well aware of the fluctuating nature of oil prices and the effects they can have on the economy. This was most starkly demonstrated in 2014 when the price of oil crashed due to high global production, the effects of which were felt not just in Kuwait, but across the Gulf.

Daily oil prices in 2018 were relatively unpredictable, and thereby acted as a function of unprecedented volatility in the market. The macroeconomic, geopolitical and technological factors that have caused instability in oil prices are not expected to see any meaningful change any time soon – these factors include a decrease in aggregate global economic growth and oil consumption.

This slowdown is reflected in industrial activity and freight transportation, which is expected to expand at a slower pace over the next year. Another is increasingly weak demand for oil in Europe and Asia: this can be attributed to environmental concerns and the accelerating uptake of renewable energy, which is maturing to the point of not needing government subsidies.

Separate from the demand-side factors, supply-side considerations include OPEC policies and the growth of shale production in the US, as well as sanctions imposed by the US on oil-producing nations. Kuwait has taken steps to mitigate these effects. In the near-term, the country’s sovereign financial reserves will continue to act as a buffer that softens economic shocks. Sovereign wealth vehicles like the Kuwait Investment Authority provide other revenue streams that reduce the country’s reliance on oil income.

In the long term, the government has a number of fiscal reforms in the pipeline that will apply more stringent measures aimed at bringing government debt under control and spurring economic growth. These reforms include the slashing of unnecessary expenses and the implementation of a value-added tax. The country’s budget will also be restructured to absorb market volatility. Below the governmental level, companies will have to further their technological advances while maintaining strict market discipline and improving their productivity.

Over the next year, we expect Kuwait’s economy to grow despite challenges posed by oil fluctuations and low prices. The fact that Kuwait is largely dependent on oil revenues also means that the country’s finances are heavily influenced by factors outside its full control. One of the more important external factors are policies set forth by OPEC – namely, the level of oil production agreed upon by the organisation. To stabilise prices, OPEC has already made efforts to decrease oil production in a bid to balance the market, carrying out a round of production cuts that took effect in January.

Naturally, steering the economy towards more private sector activity, as well as exploiting other potential markets, will continue to grow as national priorities. The first steps have already been made, and for Kuwait, the only way is up. KIB has been at the forefront of Kuwait’s financial relations with the rest of the world since its creation in the early 1970s and will continue to lead the way for decades to come.

How AVANGRID is working to meet the world’s growing electricity demands

Electricity is essential to our lives today: our connected world, our economy and our society depend on it in a way we never have before, and this will intensify as we embrace innovations like electric vehicles. At the same time, more intense weather patterns are testing our infrastructure in new and challenging ways. Meanwhile, policymakers are looking for ways to lower CO2 emissions and employ clean energy solutions. These trends provide an amazing opportunity for energy companies like AVANGRID to lead the way in delivering safe, reliable and clean energy to meet changing demand.

According to the US Energy Information Administration, the use of wind, solar and other renewables is projected to increase by nearly a third by 2050. However, the shift to renewable energy brings its own set of technical challenges, to which the industry must adapt. Responding to these challenges – and capitalising on the opportunities that arrive with them – requires us to think differently. That’s why AVANGRID embraces innovation as a core value. We invest significantly in talent and technology to unlock innovation across our businesses. Moreover, we have implemented a corporate governance system that firmly entrenches a commitment to sustainable development and ethical conduct – guiding everything we do.

Clean future
AVANGRID is a young company, formed in 2015 from the merger of Iberdrola USA and UIL Holdings. Today, it is listed on the New York Stock Exchange and has approximately $32bn in assets and operations across 24 US states. While AVANGRID’s utilities have been providing electric and gas services to communities on the East Coast for more than 150 years, we are also at the forefront of the transition to a clean energy future. In addition to our focus on bringing innovation to our utility business, the company is a leader in renewable energy through Avangrid Renewables, which owns and operates 7.1GW of electricity capacity and is the third-largest generator of wind power in the US.

More intense weather patterns are testing our infrastructure in new and challenging ways

At almost nine times lower than the US utility average in terms of CO2 emissions intensity, AVANGRID is among the cleanest energy generation companies in the country. We have also pledged to achieve carbon neutrality by 2035. Further, we are investing in better, smarter, stronger power grids that are hardened against extreme weather and can be restored quickly after sustaining damage.

As one of the largest US operators of renewable energy facilities, with approximately 6.5GW of installed renewable capacity, AVANGRID is already at the cutting edge of the clean energy revolution. Now, we’re turning our attention to the largely untapped resource of offshore wind.

The US is ripe for development in this field, particularly in the Northeast corridor, where wind potential is among the best in the country. Currently in the permitting stage, Vineyard Wind – Avangrid Renewables’ joint venture with Copenhagen Infrastructure Partners – is poised to develop an 800MW offshore wind farm off the coast of Massachusetts. With construction due to begin later this year, it’s expected to be the first large-scale offshore wind farm in the US at the start of operations in 2021.

Vineyard Wind and AVANGRID have also won Bureau of Ocean Energy Management lease sales and rights to develop wind farms on additional sites off the coast of Massachusetts and North Carolina. Meanwhile, other East Coast states, including Connecticut, New York and New Jersey, have announced requests for proposal in a bid to bring more offshore wind energy to their power grids.

As part of the global Iberdrola Group, AVANGRID is well positioned to kick-start the industry’s development. Indeed, Iberdrola has the global experience and expertise to help develop offshore wind capacity in the US. Incidentally, offshore wind power is one of the key drivers of Iberdrola’s growth, with 544MW of installed capacity as of 2017, mainly in the UK, Germany and France.

Pioneering solutions
As renewables account for an ever-growing share of the national energy portfolio, we’re imagining new ways to deliver their full benefits to our customers. One such initiative is Avangrid Renewables’ new ‘green’ Balancing Authority, which launched in 2018. The Balancing Authority allows Avangrid Renewables to deliver a tailored blend of energy from various sources to customers in western US states, thereby ensuring a stable, low-carbon supply.




Number of US states in which AVANGRID has operations


AVANGRID’s installed renewable energy capacity

Another project, still in the approval phase, seeks to capitalise on the growing demand for clean energy in New England and the availability of abundant hydropower resources in Canada’s Quebec province. New England Clean Energy Connect proposes to deliver up to 1,200MW of clean, reliable hydropower via a transmission line running from the Quebec border to Lewiston, Maine. If approved, the project will be New England’s largest source of carbon-free electricity through 2063 and beyond. Moreover, it is expected to produce nearly $1bn in economic benefits for Maine through to 2027.

As the energy industry responds to the call for more clean generation, transformational change is also underway on the distribution side of the business, which manages the grid that brings electricity to homes and businesses. The proliferation of private solar power and the rise of electric vehicles, among other trends, threaten to upend decades of conventional wisdom about managing demand and loads on electric grids. Energy companies are challenged to accommodate these new demands on existing infrastructure, while providing customers with opportunities to reduce their energy usage too.

In New York, Avangrid Networks companies recently launched four pilot programmes to evaluate how energy storage systems can help offset load during system ‘peaks’ – when grids are near capacity and energy prices are high – and take advantage of low-cost energy supplies available during low-demand periods.

These systems use batteries to store energy when demand and costs are low, and either return that energy to the power grid or deliver it directly to end users to offset system peaks. For instance, the battery-supported electric vehicle chargers recently installed in Rochester, New York, can provide a quick charge without taxing the grid, and then recharge when demand is low. A similar concept is being tested at the circuit, substation and individual customer level. Broadly applied, these technologies could help Avangrid Networks companies to use existing infrastructure more efficiently, thus avoiding the need for costly upgrades, while also helping to shift demand to periods when clean energy is available at low cost.

We’re also employing new technology to empower customers to better manage how they use energy, thus helping them to reduce their overall usage and lower their costs. Digital smart meters, coupled with web-based customer portals, provide customers with insights into how they use energy, so they can discover opportunities to save. These tools also support programmes and technologies that can incentivise customers to shift some of their energy usage away from peak times. They can even unlock the prospect of improving grid efficiency through remote energy management.

Safe, reliable service
All of these efforts contribute to our provision of a modern and resilient grid that is capable of delivering energy to customers safely and reliably. We are already seeing the impact of increasingly frequent and severe storms on the power grids we operate, so we’re taking action to protect our customers from absorbing the brunt of these weather effects.

In 2013, floodwaters from Hurricane Sandy threatened to inundate a critical power substation in Bridgeport, Connecticut, which could have potentially left thousands without power for weeks. Since then, we’ve launched a project to relocate that substation to higher ground. It is expected to be in service at its new location by 2021.

In New York and Maine, we’ve proposed a $2.5bn, 10-year ‘transforming energy’ initiative to harden our power grids against storms. These measures aim to reduce storm-related outages through accelerated pole replacement, increased preventative vegetation management, and the installation of independently powered microgrids that can keep critical facilities up and running, even when the surrounding power grid goes dark. This initiative includes a full rollout of smart meter systems to electric
customers in New York.

AVANGRID is also taking action to protect customers from the growing threat of cyberattacks, which, if unchecked, could disrupt our systems or even damage our electric and natural gas infrastructure. Through ongoing collaboration with our industry peers, regulators and other partners, we are working to detect attacks and prevent them from endangering the energy grid we all rely on.

Our leadership team is engaged with industry groups, such as the Edison Electric Institute, the American Gas Association and the North American Electric Reliability Corporation (NERC), to combat this issue. We also participate in joint training and drills, such as NERC’s biennial GridEx grid security exercise, to share information and maintain a high level of readiness. Meanwhile, our employees receive annual cybersecurity training that teaches them to recognise and report potential cyberthreats, including malware spread by email, which could leave the organisation vulnerable to intrusion.

Through our scholarships, internships, partnerships with top universities and employee development programmes, AVANGRID actively invests in the next generation of energy leaders, who have the skills and talent to rise to the energy challenges of the future. At our annual Innovation Challenge, AVANGRID employees partner with students from top universities to compete for scholarships and cash prizes in a competition, where they propose solutions to some of the sector’s most profound issues. We see this as a model for how our company and the industry can develop the forward-thinking mindset necessary to adapt to a fast-changing energy landscape.

We live in a world that’s rich in resources and alive with energy. Our challenge is to have the vision and imagination to use them productively and wisely. By harnessing renewable technology, investing in modern, reliable infrastructure and focusing on innovation, AVANGRID is well positioned to lead the industry into a clean energy future.