China’s services sector grows at fastest pace in 10 years amid lockdown easing

A private survey has found that activity in China’s services sector rose at its quickest pace in 10 years in June, as the easing of virus-control measures revived consumer spending. The Caixin/Markit services purchasing managers’ index rose to 58.4 last month, up from 55 in May. This puts activity well above the 50 percent reading which indicates a contraction.

Despite the boost in activity within the sector, many services businesses in China are still closed

According to the survey, new export businesses expanded for the first time since January as foreign demand climbed, while services companies were able to lift their prices after months of discounting. The survey noted that “businesses were highly confident about the economic outlook”. However, the sub-index measuring employment in the sector remained negative for the fifth consecutive month, suggesting that companies are still cautious about hiring.

The survey has boosted hopes that a quick recovery might be possible in the world’s second-largest economy. Mainland China’s CSI 300 Index of Shanghai and Shenzhen-listed shares ended the week at a five-year high after rising 1.9 percent.

However, some analysts believe that the survey’s conclusions should be taken with a pinch of salt. Despite the boost in activity within the sector, many services businesses in China are still closed. Other economists point out that an increase in hiring would be a stronger sign of recovery, given that employment rates significantly influence consumer spending.

Widespread lockdowns hammered China’s economy at the beginning of the year, leading the country to record a trade deficit of $7.1bn in January and February. Since it started gradually lifting lockdown in April, economic data from China has so far indicated that a full recovery will take time. Worryingly, new clusters of infections in the country have also stoked fears that lockdowns could be re-imposed.

Sustainability Awards 2020

It used to be the case that the sole focus for most investors was making a profit. Following this, it became fashionable to worry about things like negative externalities, such as the impact companies had on society and the planet. Today, sustainability has well and truly made its way into the mainstream; companies all over the world are making sure they take this into account in relation to their products and services.

Back in 2015, the UN launched its Sustainable Development Goals (SDGs). This collection of 17 ambitions, to be achieved by 2030, covers areas like eradicating poverty, boosting education and supporting clean energy. Many banks have signed up to align their strategies with the SDGs, understanding that they have a huge amount of sway in terms of deciding which businesses receive funding.

While much of the sustainability debate understandably focuses on environmental issues, companies are realising that looking after their human capital is key to long-term success

But even considering the huge increase in prominence that sustainability has gained, there remains much work to be done. In environmental terms, the Global Commission on the Economy and Climate estimates that an investment of approximately $90trn is still required over the next 15 years in order to achieve worldwide sustainable development and to meet climate objectives. More work also needs to be done to ensure investors and businesses do not support organisations that contribute to social ills, such as those ignoring their corporate social responsibility mandates.

Careful consumption
Many businesses are left with a dilemma when it comes to sustainability. Most would, in an ideal world, love to reduce their carbon footprint and energy consumption, but plenty also rely on a continuous cycle of consumption for their revenues. The fashion industry, for example, uses 1.5 trillion litres of water every year. Using current manufacturing processes, cutting this down ultimately means fewer clothes being bought. Other sectors, like tourism and agriculture, are facing similar quandaries.

In 2020, therefore, it is likely that more businesses will concentrate on delivering services and products that enable consumers to live more sustainably. According to a 2019 survey by ING, titled Circular Economy: Consumers Seek Help, 64 percent of Americans believe that people in the US are obsessively focused on consumption. More than ever, individuals are choosing to buy from businesses that understand the damage this is causing to the planet.

For companies to address this change in demand, they should first review their product portfolio, exploring whether sustainability can be integrated in a better way. Airline companies, for example, may look at ways of improving the fuel efficiency of their craft; fashion brands could start making clothing from recycled materials. Organisations should also consider the influence they have on consumer behaviour. As well as promoting a new product, marketing materials could focus more on how it has been sustainably produced or what environmental, social and governance (ESG) efforts the company is making.

People first
While much of the sustainability debate understandably focuses on environmental issues, companies are realising that looking after their human capital is key to long-term success. In 2020, this trend is only likely to accelerate.

The World Health Organisation estimates that around $1trn of global productivity is lost every year due to depression and anxiety. Businesses that value sustainability have a responsibility to bring this figure down. One way that firms can better look after their staff is by enabling them to achieve a more favourable work-life balance. Last year, Microsoft trialled a four-day working week that led to improvements in energy efficiency and employee productivity.

Improving working conditions, making sure that all members of staff receive a living wage and offering the right support, whether in terms of mental health or flexible working, may increase company expenditure in the short term. However, these changes are sure to pay off in the future by creating an environment in which employees can perform at their best.

If businesses want to improve sustainability in terms of employee wellbeing, one of the first things they need to do is listen. It may sound simple, but many members of staff struggle because their workplaces simply do not have channels in place that let them share the challenges they are facing.

Organisations are likely to start collecting more data on their employees’ state of mind, which can indicate whether initiatives aimed at improving staff wellbeing are working. Privacy, of course, will be of paramount importance here, but workplaces cannot look after their employees if they are not aware of any issues.

Making an impact
While the decision to take sustainability seriously in the finance sector should be welcome, it is essential that the new ESG values being espoused by firms are more than just marketing slogans. In 2020, banks will be challenged more than ever to demonstrate that sustainability is about action, not just words.

Last year, the International Capital Market Association’s impact reporting working group issued a handbook advising financial institutions on the most effective way to conduct impact reporting concerning sustainable principles. In particular, the report shares several core indicators that banks should consider when implementing sustainable projects.

In the renewable energy space, financial institutions should remain aware that measuring reporting metrics can be especially challenging when dealing with climate change due to the size and scope of the issue. Nonetheless, banks and investors should use greenhouse gas emissions, renewable energy generation and the capacity of any renewable energy projects as good starting points when assessing new ventures.

Other sustainability challenges will, of course, require different metrics during the impact reporting process. Policies that look to improve energy efficiency will have to examine how much energy is currently being used, while water management must assess how wastewater is treated and disposed of. Many investors and companies will need to get to grips with analysing their current ways of working before they can begin to implement new, more sustainable methods.

In recent times, impact reporting has encountered bottlenecks as organisations discovered that they did not have the processes in place to quickly assess current levels of sustainability. Manually entering data and coming up with analytical solutions can be laborious and prevent firms from advancing with their sustainability initiatives.

Fortunately, there has been some progress here of late. The Green Assets Wallet, for example, was launched last year by a consortium of capital market actors and technology innovators to provide efficiency in the green debt market, including in terms of impact validation.

The online platform offers immutable verification of various evidence points, which are validated by accredited organisations, such as auditor firms. The validation process uses the blockchain to improve transparency, and should make impact reporting far more streamlined. Other organisations are also now looking at using online platforms to similarly improve the process of analysing their green projects.

The majority of businesses are well aware of the importance of sustainability to their customers, employees and shareholders. The ones that are taking this responsibility truly seriously, however, are not simply creating an ESG page on their website: they are implementing significant measures, analysing them and continually looking for ways to improve them. These are the exemplary organisations that have been recognised by the World Finance Sustainability Awards 2020.

World Finance Sustainability Awards 2020

Pharmaceuticals industry
AstraZeneca

Automotive production industry
Audi

Solar energy industry
Azure Power

Glass industry
BA Glass

Transportation industry
Canadian Pacific Railway

Building technology industry
Carbicrete

Footwear industry
CCC

Real estate industry
CDL

Wine products industry
Corticeira Amorim

Logistics industry
CSX

Chemicals industry
Dow

Automotive supplier industry
Faurecia

Infrastructure industry
Ferrovial

Flavour and fragrances industry
Firmenich

Commodities industry
Glencore

Shipping industry
Grieg Star

Coffee products industry
Huskee

Food processing industry
JBS

Winemaking industry
Lapostolle

Textiles industry
Lenzing

Consumer technology industry
Logitech

Semiconductor industry
ON Semiconductor

Lighting industry
Osram

Gas industry
PGNiG

Sports apparel industry
Proviz Sports

Data centre industry
QTS Realty Trust

Meat replacement industry
Quorn

Building supplier industry
Solidia Technologies

Medical technology industry
Sonova

Investment industry
Stat Zero

Jewellery industry
Swarovski

Telecommunications industry
Swisscom

Agriculture industry
Syngenta International

Travel industry
Tourlane

Denim industry
Triarchy

Construction industry
UNIBEP

Aircraft manufacturing industry
Wright Electric

Global Engineering industry
WSP

Wirecard shares plunge after $2.14bn goes missing

Shares of Wirecard plunged 66 percent on June 18, as the German payments company revealed it was missing €1.9bn ($2.14bn) in revenue for 2019. Auditors at Ernst & Young informed Wirecard that they had not found sufficient evidence to confirm the existence of the $2.14bn, which represents around a quarter of Wirecard’s balance sheet.

In a statement, Wirecard said that “spurious balance confirmations” may have been provided by a third party, with the intention to “to deceive the auditor and create a wrong perception of the existence of such cash balances”. The company added that, if accounts are not made available by June 19, €2bn ($2.25bn) of loans made to Wirecard could be terminated.

Softbank’s investment was an important vote of confidence for Wirecard, which has long been plagued by accusations of fraudulent accounting practices

Founded in 1999, Wirecard is a digital payments company that competes with the likes of Worldpay and Stripe. In 2019, SoftBank announced it was investing €900m ($1.01bn) to help the fintech company expand into Asia and provide financial services to SoftBank’s portfolio companies, which include Uber, Grab and Alibaba.

Softbank’s investment was an important vote of confidence for Wirecard, which has long been plagued by accusations of fraudulent accounting practices. Investigators raided Wirecard’s Singapore offices multiple times in 2019 in connection with allegations that the company had inflated sales and profits across its Asia operations. The payments company is also currently facing a fraud lawsuit in London. Wirecard has denied any wrongdoing in relation to both accusations.

Wirecard had delayed the release of its latest audited financial statements several times before they were published. With these accounting irregularities now out in the open, its share price has come crashing down. The company’s CEO, Markus Braun – credited with Wirecard’s aggressive expansion over the years – stands in the firing line. Although the company has repeatedly bounced back from accusations of financial impropriety, this latest accounting scandal could mean that Braun’s days at the helm are numbered.

US planning further oil sanctions on Venezuela

The US Government is formulating plans to tighten economic sanctions on Venezuela, according to sources familiar with the matter. Several reports released on June 9 indicate that the Trump administration is preparing to add a substantial number of tankers to its blacklist – perhaps as many as 50, The Wall Street Journal reports – in punishment for facilitating the trade of Venezuelan oil.

Earlier this month, the White House blacklisted another four companies believed to be working with the beleaguered country’s oil sector. The sanctions prevent these firms from accessing US-held assets, but more importantly, will act as a warning sign to anyone in the international business community that was thinking of entering the Venezuelan market.

Oil revenues represent around 95 percent of Venezuelan exports and have helped prop up the country’s socialist governments for decades

The plans to administer further sanctions drew angry remarks from Venezuelan Foreign Minister Jorge Arreaza, who has previously criticised Washington for meddling in the country’s affairs. “More concrete evidence of Washington’s criminal aggression, aimed at the heart of [Venezuela’s] economy by blocking, in the middle of a pandemic, earnings used for imports such as food, medicine and supplies,” Arreaza wrote on Twitter. “It’s [an] attack against all Venezuelans.”

Certainly, further economic sanctions, and the economic pain they cause, will hurt more than just Venezuela’s political elite. Oil revenues represent around 95 percent of the country’s exports and have helped prop up the country’s socialist governments for decades. Recent developments suggest the escalated sanctions are having an impact: Reuters reported that Chinese oil firms were considering refusing to charter any tanker that had visited Venezuela within the last year.

Not all of Venezuela’s struggles can be pinned on the US, however. Plummeting oil prices have not helped matters, but corruption and mismanagement on the part of the country’s president, Nicolás Maduro, represent a bigger issue. Until Venezuela rectifies its political issues, its economic problems are unlikely to be solved.

Majority of US firms in Hong Kong concerned about security laws, survey finds

More than half of US companies in Hong Kong are concerned about China’s plans to introduce a national security law in the global financial hub, according to a survey conducted for the American Chamber of Commerce (AmCham). Released on June 3, the survey showed that 30 percent of respondents were “moderately” concerned and 53.3 percent were “very concerned” about the proposed legislation, which critics say could curtail freedoms in Hong Kong.

China revealed plans to introduce a national security law in May, after months of protests in the city. The aim of the legislation is to suppress secession, subversion of state power, terrorist activities and foreign interference in Hong Kong.

Hong Kong’s self-governing powers and independent judicial system have been the foundation of its success as an international business hub

AmCham’s survey received 180 responses, which represents 15 percent of its members. The respondents cited ambiguity in the scope and enforcement of the law, the jeopardising of Hong Kong’s status as an international business centre and a possible talent drain as some of their main concerns about the law’s implementation.

Despite their fears around the new law, many respondents remain committed to staying in Hong Kong. In fact, 70.6 percent of those surveyed said their companies didn’t have plans to move capital, assets or business operations out of the city.

Hong Kong is governed under a ‘one country, two systems’ framework that gives the city freedoms not seen in mainland China. Hong Kong’s self-governing powers and independent judicial system have been the foundation of its success as an international business hub.

If passed, China’s new law could erode the existing framework. Experts fear that it could see Hong Kong’s citizens punished for criticising Beijing and that the city’s judicial system could become more like China’s. Particularly alarming to the international community was the suggestion that China might set up institutions in Hong Kong responsible for security.

Six EU states lift ban on short selling shares

When share prices plunged to record lows in March, a number of European nations, including France, Spain and Italy, intervened by banning the short selling of shares. Now, according to the European Securities and Markets Authority, Austria, Belgium, France, Greece and Spain have chosen not to renew these bans, which expire on May 18. Italy’s ban was due to expire on June 18, but the country has lifted its ban early to align with the other five nations.

Critics of the ban claim there is no evidence that short selling is a driver of market routs

Short selling allows traders to borrow shares and then sell them, with the intention of buying them back later at a lower price and pocketing the difference. The practice has been blamed for stoking volatility during times of economic turbulence.

However, the clampdown on short selling has divided European countries. Germany and the UK decided against banning the practice. Critics of the move claim there is no evidence that short selling is a driver of market routs. “It is not – and never has been – true that bans have any other, positive effect on market activity or price levels,” said Nandini Sukumar, CEO of the World Federation of Exchanges, in a statement.

Nonetheless, the French markets watchdog the AMF claims to have witnessed a normalisation in trading since the ban was introduced in France: “Markets have partly reduced their losses, trading volumes and volatility have returned to levels that are still high compared to mid-February, however this reflects market participants’ uncertainties in the current context.”

The decision to lift the bans came after a joint letter was released by the World Federation of Exchanges, the Alternative Investment Management Association, the Managed Funds Association and the European Principal Traders Association. The letter warned that the bans should not continue indefinitely: “Over the longer term, the bans risk undermining confidence in key European financial markets and hampering the goal of a capital markets union, something that will be vital to European recovery from the profound economic shock caused by COVID-19.”

Finding the right work-life balance when trading

I started trading around 2007, after attending an event with a pensions advisor who put the idea of forex (FX) trading in my mind. As the advisor was speaking, I started to consider ways of building up a pension pot over time. I remembered that the GBP/USD exchange rate would vary considerably from year to year, having noted how changeable exchange rates and currencies were when travelling with my parents as a child.

I asked the pensions advisor if I could convert GBP into USD when the exchange rate was working in my advantage, before converting USD back into GBP as the exchange rate went back in my favour the other way. He replied that this was exactly what he was already doing. He was obviously an FX trader too, and it was this initial thought that led me to FX markets and the start of my trading career.

Another day at the office
I usually start my day at 6:30am, reading up on the latest market-moving news that occurred overnight in the US and Asian sessions before analysing the markets and looking at opportunities for the coming day. I then have breakfast at 8am, after which I monitor the squawk service, write articles, engage with fellow traders and have a mid-morning break when I take a short walk. I continue working until 1pm, when I have a break for lunch, before coming back to my desk and monitoring the markets for the rest of my afternoon. If any special events occur, such as a central bank rate announcement, I will stay up to monitor those before heading back to bed.

What I really enjoy about trading is the stories. I love following central bank and political developments and mapping how they move currencies

Every Monday at 12:30pm, I run the HYCM FX Week Ahead webinar, during which I flag upcoming events that are likely to have the greatest effect on markets. These webinars are free to attend and available on HYCM’s website. On Tuesdays, I run the HYCM Online Trading Workshop, where I go over the principle of pairing a weak currency with a strong currency. This session is designed to be more practical, demonstrating the backbones of making a trade.

Finding job satisfaction
What I really enjoy about trading is the stories. I love following central bank and political developments and mapping how they move currencies. Breaking news that changes a currency’s outlook is particularly exciting. I also enjoy being a guide for other people, showing them how to trade and manage their risk. Helping people trade brings me considerable satisfaction and I get to meet some very interesting people along the way.

Of course, trading comes with its risk. For instance, at HYCM, contract for difference (CFD) trades, are always accompanied by a high-risk investment warning. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage – 67 percent of retail investor accounts lose money when trading CFDs with HYCM. Every investor should consider whether they have a full understanding of CFDs before they start trading.

Giles Coghlan, Chief Currency Analyst at HYCM, speaks at the company’s Becoming a Pro Trader course

If I wasn’t a trader I would like to go into politics as it’s a great way to serve your country. However, finding success in politics is much harder than doing so in trading. A trader would consider a year successful if they brought home a positive figure at the end of the twelve months, but being a successful politician is both harder to measure and achieve. As a politician, it is also easier to be viewed as a villain by other people, regardless of how well intentioned you may be.

Helping people trade brings me considerable satisfaction and I get to meet some very interesting people along the way

Off the clock
In my spare time I like to run, read novels, play tennis and visit the theatre. I love reading classic novels because I believe that if a book has been popular for more than 100 years, it must be saying something worthwhile. I also enjoy philosophical novels because the questions they pose seem the most worthwhile to engage in. I am currently reading the fantasy novel Eragon by Christopher Paolini, which my daughter recommended to me. Once I have finished this, I will start Meditations by the Roman emperor Marcus Aurelius.

When I play tennis at home, I play very badly compared to the rest of my family. My wife played tennis to a national level when she was in her teens and my son and daughter both have high national rankings. My son is competing in a Tennis Europe event in Portugal and has reached the top 16, with a ranking of eighth in the UK for the 12-and-under age group. I find it frustrating getting consistently beaten because I am a sporty person, but that counts for nothing in my household.

Trading boom brings some relief for coronavirus-hit investment banks

Investment banks have seen record trading volumes in the first quarter of the calendar year, particularly in rates, equities and currencies, as the COVID-19 crisis continues to stoke market turmoil. Analysts told the Financial Times that market revenues could increase by as much as 30 percent due to volatility. 

The past few weeks have reportedly been the busiest traders have seen since the 2008 financial crisis. According to data from trade organisation SIFMA, an average of 9.3 billion shares were exchanged on US stock markets in February – the highest level of activity since December 2018 – while trading venues such as CME Group and Intercontinental Exchange reported record one-day volumes. 

Market turmoil often leads to sudden shifts in asset prices, which helps traders to drive profit

Market turmoil often leads to sudden shifts in asset prices, which helps traders to drive profit. But the gains made by investment banks are likely to be short lived. 

Currently, banks are bracing for a gruelling year. The freeze in global merger and acquisition activity could put a serious dent in revenues. As a result, Citigroup analysts said in a note to clients on March 23 that they expect major investment banks to report lower revenues this year. To make matters worse, working from home could present a problem for investment banks’ traders, who need to sit together on a monitored trading floor in order to meet regulatory rules.

More broadly, financial markets continue to suffer. Late in February, the S&P 500 Index fell 11 percent in just five days and the Dow Jones Industrial Average dipped to its lowest point since June 2019. Heightened market volatility highlights the significant uncertainty around how much damage COVID-19 will cause and how long its impact will endure. The best-case projections of large investment banks all depend on the virus’ early containment.

By joining forces, traditional banks and fintech firms will bring the best service to customers

Like so many other industries, the world of banking is facing significant upheaval. New technology has disrupted financial institutions, many of which had allowed a state of inertia to develop as a result of market dominance sustained over a number of decades.

Today, new players are challenging that dominance. Regulatory changes and new digital solutions are giving individuals more options than ever before. Now, instead of conducting their finances with established banks, some customers are choosing to partner with fintech firms.

It will be interesting to see how more established banks react to these agile new competitors. They could remain set in their ways, believing their customers will choose history over innovation. At ActivoBank, we know this is a foolhardy approach: we feel that the fintech revolution will bring benefits to new entrants in the financial services market, as well as to established organisations and customers. Rather than fearing the challenges fintech will bring, ActivoBank welcomes them as an opportunity to gather insights about the market as it evolves.

On the same team
Since its foundation, ActivoBank has positioned itself as a digital bank, with the primary goal of giving clients a simpler but more complete offer than other players. This is becoming a bigger challenge every day as the speed and complexity of digitalisation forces us to innovate at an increasingly fast pace, particularly in the banking world.

Even considering the many ways fintech firms are able to outrun traditional banks, we won’t stop viewing them as a growth opportunity

In this context, it’s easy to see why established financial institutions see fintech firms as a threat. They offer solutions that are perceived by clients to be similar to those offered by traditional banks, but at a lower cost. In the majority of cases, fintech companies also demonstrate impressive dexterity, especially during the onboarding process, which may only require a smartphone and a couple of short steps. It’s important to note that fintech firms face different regulations to large organisations within the formal banking sector, meaning they can embrace new developments at a faster rate.

Yet, even considering the many ways fintech firms are able to outrun traditional banks, we won’t stop viewing them as a growth opportunity. By observing their operations and processes, we can learn how to improve our services and take advantage of innovative new approaches to banking. ActivoBank has partnered up with some successful fintech providers, which will allow us to offer our clients the best solutions at a fair price, without losing sight of the values that have always been integral to our corporate mission.

For banking incumbents to adapt to change, it is essential they are able to anticipate change and respond to it in an agile manner. To achieve this, ActivoBank has taken a multidisciplinary approach to the monitoring and evaluation of new solutions. We speak of a multidisciplinary approach because it is important to keep track of the fintech sector in a holistic way, understanding each organisation, its solutions, their impact on the banking sector, their user-friendliness and the advantages and costs for the client.

Designed for convenience
At ActivoBank, we align our objectives with the most secure technological developments available, in keeping with banking best practices. We are currently developing partnerships with fintech companies to further our vision of providing the best user experience to our customers. In 2019, we focused our efforts on international bank transfer technology; for 2020, we are predominantly interested in personal finance management tools.

ActivoBank is currently focused on digitalising all our banking processes in order to provide the most convenient service to our customers

We are also keen to ensure that we have a mobile-first banking solution that appeals to all our customers. Certainly, the Millennial generation values mobile-first banking because they have always known smartphones to play a significant role within their daily lives. However, it would be an oversimplification to suggest that only Millennials are interested in mobile banking: today, smartphones provide all generations with the tools for communication, work, daily organisation and entertainment.

Another social change that has made mobile banking an essential part of any financial institution’s offering is the desire for instant results. Very few people will go to a bank in person to deal with an issue, preferring to complete tasks remotely.

ActivoBank is currently focused on digitalising all our banking processes in order to provide the most convenient service to our customers. However, this is a challenging task. A bank has numerous procedures that must be considered during digitalisation, including opening accounts, providing loans and insurance, and processing payments and transfers. Before any of these processes can be revamped, a bank must carefully consider its customers’ needs.

While banks must tread carefully, they should not be overly cautious – digitalising services is the best way to keep up with changing customer needs. The most important thing is to continue analysing performance and thinking critically about whether new ways of operating are effective or not.

In 2019, we launched our new transactional app, which we redesigned from scratch. Taking into consideration the needs of our clients, the app allows individuals to quickly and easily consult their account balance, withdraw money, start saving and receive an immediate response to a personal loan request. Regarding investments, we have launched another app that allows clients to oversee market developments, conduct transactions and manage their securities portfolio, all with the speed required to find success in the fast-moving world of modern finance.

Close contact
It’s important to remember that being a digital bank doesn’t mean being distant from clients. A client with a digital bank is likely to be more independent when making a decision, but bank employees should remain contactable to ensure they can support customers as soon as they are needed. ActivoBank is able to achieve this thanks to our precise customer relationship management solutions and our commitment to developing products and services that anticipate clients’ needs.

Clients must always feel like there is a human component to a digital bank so they know they can get in contact with staff or even visit a physical branch if necessary

Clients must always feel like there is a human component to a digital bank so they know they can get in contact with staff or even visit a physical branch if necessary. At the same time as being proudly digital, ActivoBank maintains a set of branches – called Pontos Activo – located in easily accessible urban areas and boasting generous opening hours. These branches give our clients the feeling of support that comes with brick-and-mortar outlets. Additionally, our personalised support line means we can always answer our clients’ queries. Of course, social networks have played an integral role in the development of customer service over the past decade: since 2010, we have been active across multiple online channels, answering questions, offering support and sharing information about new developments.

When deciding which functions to digitalise and which should be offered in a more traditional format, banks should remember what customers look for in digital services: autonomy, agility, speed and usability. Sometimes, however, people simply prefer the security that is offered by face-to-face interactions with knowledgeable members of staff.

Looking to the future, ActivoBank will continue to increase its client base, creating value and fostering long-lasting relationships. Digitalisation and innovation will remain the bank’s primary focus and we will continue to embody the values that are a part of our DNA: innovation, accessibility, simplicity, transparency and trust. In the years to come, traditional banking will likely cease to exist. Digital banks will thrive and will operate alongside fintech firms, benefitting from collaborative relationships. Banking will be faster, smarter, safer and more efficient. Institutions that realise this quickly have nothing to fear. If they embrace the change that is set to hit the industry, they can continue to play a major part in its future.

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 Souq.com, 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, futureofsustainablefuel.com, 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.