It was a great honour to be named 2023 Business Woman of the Year in the Renewable Energy Industry category of the European CEO awards. It’s a testament not just to my success but to the culture of innovation and collaboration at Axpo Bulgaria. Being a female leader in a male-dominated field is not new to me. Over the course of my 21 years in the banking, insurance and financial sectors, a career that has included managerial positions in Raiffeisenbank Bulgaria, UniCredit Bulbank, the Austrian Hypo NOE Investmentbank and Coface, I’ve often been the only woman in the room. I’ve never let that hold me back.
A results-orientated leader
Our Bulgarian team manages energy logistics in Europe and many back-office functions for the Swiss-holding Axpo Group of which Axpo Bulgaria is a subsidiary. My first goal, back when I joined the company in August 2020, was to expand these functions and to optimise and automate certain processes that would allow us to gain more clients and services.
When a leader has created and developed a strong and performing team, everything is possible
I also had strategic goals for Axpo Bulgaria’s development, including turning the company into a trade hub. When I arrived, we only had a couple of salespeople, just three licences, and there were almost no active deals. Now we are managing over 30 electricity and natural gas licences and operating in 15 European markets.
My third project was to achieve sustainable profits. It has worked: for the second year in a row, Axpo Bulgaria is profitable from wholesale trade. Looking to the future, we aim to enter additional markets and diversify more.
Navigating the green transition
The situation is made more challenging by the fact that Bulgaria is a country trying to transition from conventional, polluting energy carriers to greener solutions. Many local stakeholders support the use of lignite in Bulgaria’s energy mix, arguing that it is a local resource, and helps cushion the country from external factors. Not to mention the social price that will be paid in case of a fast coal phase-out.
But I believe in the green transition: Bulgaria has enough natural resources for a healthy green energy mix. To achieve this we will need more efficient administration and e-government. That will help get the funding to the people who need it. Otherwise, we are going to pay a very high price for the delay. Bulgaria should continue diversifying its energy sources, accelerating renewable energy projects, and building and keeping already existing facilities, including nuclear. In turn, the social price will eventually decrease.
Central to Axpo achieving its goals and vision for the future are its people. It was initially quite challenging to find and retain the talent the company needs, but this is now something at which Axpo Bulgaria excels. The company already employs more than 100 professionals, with an attrition rate in 2021 and 2022 of less than five percent. Innovation is also crucial for success, which is why we foster a creative environment that allows the company’s talent to thrive. Each employee has the opportunity to present their ideas to a digital board and see them materialised, if approved.
Being a leader in the energy industry
I have overcome many challenges in more than 20 years of corporate experience, especially as a female leader. For several different business assignments, even at the assessment stage, I had to deliver far better results than my male peers. I have often been underestimated, and this has given me an added incentive to succeed.
Constantly and rapidly changing regulations make it difficult to anticipate the future. My team’s daily challenge is to manage the different regulatory frameworks set by governments in the markets where we are active, and they do this very successfully. This and other challenges can be overcome with the right attitude, passion and a positive approach.
Building and nurturing good relationships with external partners, the company’s stakeholders and team members has also been key. When a leader has created and developed a strong and performing team, everything is possible. Perseverance and discipline are also crucial in achieving sustainable business results. In addition, a high level of agility is required to respond to the rapidly changing environment.
My message to women is to never give up – it’s important to believe that having both a career and a family is possible. The world is changing, and women have incredible potential. Do not underestimate yourselves even when others underestimate you. Push to be better, each and every day.
There is no standard formula that defines what a recession is. A generally accepted principle is that it involves a significant and prolonged decline in economic activity, usually with two consecutive quarters of falling real gross domestic product accompanied by rising unemployment. In the US, there have been 13 of these downturns since World War II. Most were brief and shallow, although some, like the 2008 financial crisis, were quite severe and lasted longer.
One source of concern is that these effects can become self-sustaining and generate a negative feedback loop if left unchecked. For instance, a persistent weakness in demand can lead businesses to fire workers as they scramble to slash costs, which can eventually depress consumption even further, and boomerang back to strike down employment in a vicious cycle.
To prevent this from happening and avoid economic catastrophes, governments and central banks have taken the responsibility of stabilising the economy when needed. The classic recipe once a crisis hits is that the central bank cuts interest rates to stimulate borrowing and investment, while the government rolls out powerful spending programmes or tax cuts to refuel demand.
Leading indicators flash warning signs
Investors typically estimate the probability of a recession by analysing leading economic indicators. Some of the most prominent are business surveys, consumer confidence metrics, housing sector data, and inventory levels. These indicators have a solid track record of identifying turning points in the economic cycle before they happen, in contrast to official government data that is often lagging and backward-looking.
Looking at any single leading indicator in isolation can be misleading, and oftentimes they send conflicting signals. That said, when several of them point in the same direction, their predictive power increases, putting investors on high alert that trouble is on the horizon. One leading indicator flashing red is not overly worrisome, but five of them make a royal flush.
As far as leading indicators go, perhaps the most popular method for predicting recessions is an inversion in the yield curve. When longer-term interest rates on government debt fall beneath short-term ones, it indicates that bond traders are betting the central bank will be forced to cut interest rates in the future to deal with some economic shock.
Such an inversion has preceded every US recession since the 1950s, so the yield curve is considered one of the most accurate forecasters of economic downturns. The main drawback is that this indicator has also generated false signals in the past, warning of a recession when none happened.
That said, there haven’t been many incorrect signals, hence why investors pay such tremendous attention to the yield curve.
The New York Fed has a model that utilises the yield curve to calculate the likelihood of a US recession, specifically by looking at the difference between three-month and 10-year treasury yields (see Fig 1). This model currently attaches a 58 percent probability to a downturn over the next 12 months, much higher than what it estimated before the ‘dot com’ or the 2008 crashes.
A crucial aspect of the yield curve that is often overlooked though, is that the curve un-inverts just before a recession actually begins. This dynamic reflects the fact that once the economic data pulse truly weakens, traders start betting on the central bank cutting rates immediately to help the economy, which drags short-term yields down. In other words, a yield curve inversion signals that storm clouds are gathering, but only when the yield curve steepens again is the recession just around the corner.
Luckily we have not reached this point yet. The curve is still inverted and the inversion continues to deepen, reaching its most extreme levels since the 1980s. Therefore, the US economy is not about to fall off a cliff just yet. Unfortunately, the longer the curve remains inverted and the more extreme the inversion becomes, the more reliable is the signal that there is economic pain in the pipeline.
What pushes an economy downhill?
Several factors can cause an economic downturn. Wars, banking crises, natural disasters, excessive debt levels, asset bubbles bursting, and energy shocks are among the usual suspects. Sometimes these elements can even join forces, inflicting a double whammy on the economy.
In this case, however, it is mostly central banks threatening to torpedo the economy. The Fed has embarked on an exceptionally aggressive tightening campaign, rolling out a series of rapid-fire rate increases in order to slow demand and ultimately crush inflation. This process inevitably involves some economic hardship, and even the Fed’s own research staff recently projected a ‘mild’ recession to start later this year.
With interest rates rising so quickly, the first cracks in the economy are likely to show up in debt markets. Consumer debt levels exploded after the pandemic to hit new record highs in late 2022, with credit card debt in particular rising at a dramatic pace as people struggled to afford increasingly expensive necessities like food or energy.
Credit cards charge consumers exorbitant fees to borrow money, often exceeding 20 percent in annual interest rates. As such, there is growing concern that households are approaching a breaking point, something evident by the rising trend in delinquencies. While US consumers still have excess savings left from the pandemic, that safety cushion is quickly being drawn down and by most estimates will be depleted by the end of this year.
Can a strong jobs market save the day?
One ray of hope comes from the labour market, which continues to fire on all cylinders. The unemployment rate is near five-decade lows, open job positions in the US economy far exceed the number of people actively looking for jobs, and applications for unemployment benefits remain historically low. By every metric, businesses are still competing to attract scarce workers.
At first glance this incredible strength in employment implies that recession fears are overblown. After all, when jobs are plentiful, people spend that income and consumption in the economy is sustained. It’s difficult to have a crisis when the economy is at full employment. The problem with this argument is that the labour market is always at its strongest right before the economy crashes.
Employment is effectively the last domino to fall in every economic cycle. It is one of the most lagging economic indicators, as it takes a long time before rising borrowing costs translate into job losses. By the time unemployment begins to rise, the economy is usually in a recession already. Therefore, labour market indicators typically have limited predictive power.
Instead, a more formidable tool is corporate earnings growth. The usual pattern is that an ‘earnings recession,’ that is a decline in corporate profits for two consecutive quarters or more, usually precedes a slump in the real economy. Unfortunately, this process is already underway. Corporate earnings on Wall Street contracted in the final quarter of 2022 and, according to analysts, the decline is set to persist for another two quarters in the first half of 2023.
Even so, investors have not hit the panic button yet. Stock markets have been remarkably resilient in the face of a plethora of negative events, from the energy crisis to the turmoil in the banking system. Most of this durability likely stems from the colossal liquidity injections by central banks in the aftermath of the banking episode, which helped calm nerves in financial markets. The question is what happens once this liquidity ‘sugar high’ fades, especially in an environment where equity valuations are stretched and arguably disconnected from economic fundamentals.
Don’t fear the reaper
Now to be clear, a recession is not a foregone conclusion. There have been three instances over the last century where the Fed managed to raise interest rates without inflicting severe damage on the economy, most notably in 1994–95 under Chairman Alan Greenspan. This is the famous ‘soft landing’ scenario that the current Fed wants to emulate. It is certainly possible, although history would caution it is not very likely.
On the bright side, a recession is not the end of the world. Every crisis ultimately passes and most downturns in the past were relatively mild and short-lived. The 2008 collapse was a once-in-a-century outlier, not the classic template. This might be particularly true this time, as the economic slowdown is driven mainly by policy decisions, not some external shock. If the Fed is engineering a period of weakness to squash inflation, it can also turn the ship around before it sinks.
From an investment perspective, there is great opportunity in a crisis. Investors that manage to keep their cool in a panic environment are often rewarded with attractive entry points for the long term. In past cycles, markets usually bottom out a few months before the real economy does, so paradoxically, the best time to invest is when the economy is at its worst. Even in the financial world, it is darkest just before dawn.
Delivering green energy security can’t simply be willed into existence. To meet the goal of net zero, the amount of renewable generation that needs to be connected will increase five- or six-fold by 2040. And levels of electricity demand will also grow massively, as we move to cleaner forms of transport and heating.
Electricity networks provide the critical link between these new sources of green energy and helping local homes and businesses to decarbonise. Grids are the backbone of the new energy model and the way forward for the transition to a green economy, enabling the integration of more renewables, sustainable mobility and smart cities. Over a few short years, there will be a rapid increase in the numbers of electric vehicles on our roads and in the deployment of electric heat pumps in homes and businesses. Combined with much greater distributed generation, local energy grids will need to accommodate and manage ever-increasing complexity in the future.
Electricity utilities are digitalising transmission and distribution networks, driving investment in innovation to make our grids as resilient as possible. From new transmission power lines and cutting-edge subsea interconnectors to digitalised substations and the reinforcements needed to manage the connection of more renewables and increased electricity demand, these major investments will need to be planned in a strategic way in order to send as clear a signal as possible to the supply chain and to manage the challenges of cost and resourcing pressures.
Speeding up the delivery of this infrastructure will create significant consumer, environmental, economic and system benefits. That’s why companies need to work in partnership with governments and regulatory authorities to ensure more than just stability and predictability in the business case, while also clearing pathways to reform of planning and permitting processes to best deliver the scale of the changes required.
Turbo-charging renewable generation
The past two decades have led the way on transforming the deployment of renewable energy, from onshore wind and solar power to offshore wind and large-scale floating windfarms. Spurred on by the post-pandemic recovery and the Ukraine crisis, 2023 should be the year for making meaningful progress to align the theory of countries’ ambitious net zero targets with the practical realities of delivering them.
We need to resolve the mismatch between stated climate and energy goals and the obstacles created by long and complex permitting procedures for the deployment of renewable projects. Rather than overall renewables ambitions existing in a vacuum, the mechanisms to deliver them need to be embedded and prioritised in planning policies and environmental permitting processes.
Europe’s REPowerEU plan is among the most ambitious in the world in sending a clear signal that we need to accelerate the energy transition – not only to achieve our climate goals, but to secure energy independence. And in Australia and the US, political leadership has brought new momentum to the drive towards green energy security.
Scaling up green hydrogen
With more than 60 renewable and green hydrogen projects in eight countries around the world, Iberdrola is spearheading the development of green hydrogen as a clean energy solution for those sectors of the economy that will be hard to decarbonise through electrification – like specific segments of the heavy industry and heavy transport sectors.
Produced using 100 percent renewable electricity, green electrolytic hydrogen is a zero emissions way of providing the fuel for energy-intensive applications that will prove invaluable in helping deliver net zero. Green hydrogen is the only truly sustainable type – and as a technology that is ready to deploy now, we expect it to become more competitive in cost, more quickly, compared to hydrogen produced from fossil fuels. The primary point of hydrogen production should be to bring about more rapid carbon emissions reductions – zero should mean zero. Iberdrola aims at producing more than 350,000 tons of green hydrogen a year by 2030. This would save hundreds of millions of tons of CO2 per year compared to producing hydrogen from fossil fuels, helping industry to reduce its polluting emissions by producing hydrogen close to centres of demand – cost-efficiently and emissions-free.
As a pioneer of renewables development 20 years ago, the company is a first mover in this new technological challenge. It recently opened Europe’s largest green hydrogen plant for industrial use in Puertollano, Spain, and will also invest in the Bell Bays Powerfuels project in Tasmania, Australia, which is set to be one of the largest in the world.
Spurring innovation
The ability to innovate is an asset of enormous value in shaping the energy transition and anticipating new, as yet unknown challenges. The complexity and globalisation of business activity means that innovation has become an unavoidable duty for companies in all sectors, particularly for those most exposed to technological change. Innovation is allowing the world to accelerate the energy transition by addressing not only the climate crisis, but also by improving energy security, competitiveness and sustainable job creation throughout the value chain, serving to mitigate the impacts of cost inflation and supply chain constraints.
Electricity utilities are promoting the development of innovative and sustainable technologies, aligned with the key drivers of the transformation of the energy sector: the decarbonisation of generation, through the massive integration of renewable energy, boosting smart grids and demand-side electrification, mainly in transport (through electric vehicles), building (through electric heat pumps) and industry.
Utilities are also promoting new uses of electricity, such as the production of green hydrogen, which is essential to reduce emissions from high-temperature industrial processes and sectors that are difficult to decarbonise, such as heavy transport, shipping and aviation. This will improve processes, operating conditions and the safety of generation facilities, while reducing our environmental impact. Electricity companies are the driving force behind the transition towards a sustainable, competitive and safe energy model based on electrification.
The prize of decarbonisation
The current crisis has reaffirmed the need to accelerate electrification with renewables and electricity grids to achieve full decarbonisation and energy self-sufficiency.
As the energy company with the most ambitious decarbonisation plans in the world, Iberdrola’s goal is to achieve emissions neutrality in its generation plants and consumption by 2030 and to reach net zero emissions in all of its activities by 2040. The company sees net zero emissions as a means of preserving the environment and generating employment and industrial development while it delivers the environmental, economic and social benefits of decarbonisation at pace and at scale. The electricity industry as a whole is adopting and maintaining a similar mindset to tackling climate change, the biggest challenge of our times.
The next decade will be crucial if we are to meet climate targets and protect biodiversity
The war in Ukraine and the global crisis caused by fossil fuels has reinforced the importance of speeding up the energy transition. But it seems like a crisis caused by gas is being paid for by renewables. The next decade will be crucial if we are to meet climate targets and protect biodiversity, and we must all work together to achieve them. Last year was marked by a range of government interventions in energy markets, which were often reactive, short-term and unpredictable in nature.
Rather than divert energy into emergency interventions in electricity markets that penalise renewables developers for no good reason, governments and regulatory authorities now have the opportunity to focus on the long-term prize of backing sustained green investments so that we can emerge from the crisis in better shape.
In today’s world, leadership means more than simply staying the course. It requires business leadership that is based on accelerating climate action rather than hindering it. And it requires political leadership to safeguard investor confidence and regulatory stability through policies that recognise the importance of incentivising long-term investment in green energy security and in the millions of skilled jobs the energy transition will deliver.
The effects of the pandemic have been devastating for many industries but none more so than for aviation, where commercial flights effectively ground to a halt for the duration. The effects of the pandemic are still being felt, but Turkish Airlines has weathered this storm with effective cash management, a robust expense saving policy, a strong demand environment, a wide flight network and extensive fleet, and was able to quickly adapt to the changing conditions. Despite the pressure on costs caused by the rise in oil prices, Turkish Airlines, which achieved great success with its financial statements, managed to emerge from this prolonged struggle strongly and achieved a significant competitive advantage.
Our organisation, which differentiated positively from the sector with its traffic results in 2022, has increased its pricing power along with its market share. Compared to 2019, with an increase of 28 percent in passenger revenue and 121 percent increase in cargo revenue, the airline generated a total revenue of $18.4bn. As a result, Turkish Airlines generated $2.8bn operating profit and achieved an operating profit margin of 15.1 percent exceeding the industry average in profitability. Despite the difficult conditions of the pandemic and the operational process, Turkish Airlines has made a profit for the last six consecutive quarters and was positioned among the most profitable airlines in the world in 2022.
In addition to the negative financial picture experienced in the sector in 2022, problems caused by the lack of personnel and infrastructure were also felt to a great extent. Despite all this, Turkish Airlines continued its operations uninterrupted thanks to its operational agility and the highly qualified workforce it protected during the pandemic. The company focused on developing a wide range of ecosystems from technology to ground handling services and from catering to seat production with its 16 subsidiaries. As a result, Turkish Airlines carried a total of 72 million passengers in 2022, reaching 97 percent of the number of passengers in 2019. Turkish Airlines ranked first among the European network carriers in terms of flights according to the European Organisation for the Safety of Air Navigation (Eurocontrol).
Istanbul Airport, the headquarters of the flight operations of Turkish Airlines, was Europe’s busiest full-service carrier in 2022 and is frequently ranked first in the list of Europe’s busiest airports. The right strategic steps and investments made by our organisation during these challenging times, and when the aviation industry was in this recovery period, also contributed significantly to Turkey being one of the countries that achieved rapid normalisation in aviation.
According to the monthly statistics announced by the General Directorate of State Airports Authority (DHMI), the number of international passengers arriving in Turkey in 2022 reached 95 percent of 2019. In this process Turkish Airlines, which has the ninth largest fleet in the world, also made significant contributions to economic sustainability while performing its operations without sacrificing safety or service quality.
A bridge between east and west
As one of the most important players in the re-emergence of the sector, Turkish Airlines has become the bridge between east and west in cargo transportation with the Turkish Cargo brand. Air cargo, which served as a lifeline for the aviation industry during the pandemic, has also caught a strong growth trend for Turkish Airlines, and cargo investments have been increased accordingly. According to the 2022 data published by the International Air Transport Association (IATA), our airline has quadrupled its market share in cargo transportation in the last 10 years and has sealed its success by ranking fifth among the top air cargo carriers.
We aim to make Istanbul the logistics centre of the world, thanks to our Turkish Cargo brand, which continues its cargo activities with stronger steps using the SMARTIST facility, the new cargo operation centre where all processes are equipped with autonomous and robotic systems, and our unique wide flight network. We plan to reach additional markets by increasing our product range and capacity with the advantages of our new facility, and to carry more than double the world cargo in the medium and long term with the cargo transported by SMARTIST. We aim to make Turkish Cargo one of the top three air cargo companies in the world in the next 10 years.
Turkish Airlines, having moved its cargo operation to a new facility equipped with the latest technologies, sees digitalisation as a strategy in all its processes, as a company that closely follows technology and understands the importance of digitalisation in terms of efficiency. The steps taken by Turkish Airlines in the digitalisation race have greatly contributed to the company’s value creation function. Turkish Airlines has set a goal to be one of the top three airlines in the world in terms of digitisation within three years as part of its strategic plan.
Our organisation, which has successfully overcome the difficult conditions of the airline industry has implemented the right change management strategy not only in the financial and operational areas, but also taking into account the sustainability issues. In line with our commitment to be a ‘Carbon Neutral Airline in 2050,’ we have expanded the use of Sustainable Aviation Fuel (SAF), which has been included in our plans to combat climate change and that we started to use as of 2022, also adding additional lines in 2023.
Turkish Airlines, which made its first flight to Stockholm with its environmentally friendly fuel preference and ‘Green Class’ concept, applied a special design consisting of leaf patterns to the A321 aircraft that provided this special operation, and continued its flight operations with Sustainable Aviation Fuel (SAF) regularly throughout 2022. With the motto of ‘Green Class,’ Turkish Airlines has aimed to continuously improve the in-flight sustainability practices it has already offered to its passengers, and has designed an environmentally friendly concept that adopts the principle of zero waste. In this way, with the concept of ‘Green Class,’ flight operation is carried out with a sense of responsibility towards the environment and society, with the aim being that passengers have a sustainable flight experience.
In addition to the use of SAF, we also continue to support projects that contribute to the development of this fuel. In this context, our airline has once again demonstrated the importance it attaches to the issue by signing the Global SAF Declaration, which expresses the unity of joint work created by the stakeholders in the aviation, space and fuel sector for the decarbonisation of sustainable aviation fuel.
Additionally, it has taken its place among the supporters of the Climate-Related Financial Disclosure Task Force (TCFD) within the scope of the management of climate change risks, and has started its studies for TCFD reporting, in which climate change risks will be discussed in detail.
Serving the greater good
In line with the increasing sensitivity to sustainability issues and in order to both meet passenger expectations and emphasise the importance of acting together in the fight against climate change, Turkish Airlines launched CO2mission, a voluntary carbon balancing platform, in August 2022. With the CO2mission platform, Turkish Airlines offers travellers a platform where they can easily and practically balance their carbon emissions by enabling them to participate in the fight against climate change.
Within the scope of the project passengers are also offered the opportunity to offset emissions from all flights they perform, not only with Turkish Airlines but also with other airlines. The projects in the portfolio of ‘Renewables,’ ‘Community Care’ and ‘Greener World,’ which are offered to passengers based on their preferences and have internationally valid certification in various regions of the world, serve nine different Sustainable Development Goals.
A carbon balancing certificate is created for our passengers who contribute to the desired portfolio and perform the balancing process. Passengers can access their online certificates on the platform at any time, share their certificates on social media and even gift carbon offsetting to their loved ones. Within the scope of the CO2mission platform emissions from all business travels of our employees are balanced by Turkish Airlines.
Turkish Airlines has become the bridge between east and west in cargo transportation
Turkish Airlines participates voluntarily in the performance evaluations of national and international indices and sustainability rating agencies, which support meeting the expectations of the stakeholders by providing a transparent communication network with all the relevant parties.
This participation both enables the analysis of the current situation in the industry and the monitoring of global trends. It is aimed at increasing performance by ensuring the continuity of participation in the performance evaluations of national and international indices and sustainability rating agencies, such as DJSI, FTSE4Good, MSCI, EcoVadis, Sustainalytics, TPI and Borsa Istanbul Sustainability Index, in which we also participated voluntarily in the previous years. As a result of these evaluations made by the world’s leading rating agencies, both company-based and sector-specific scores were raised to higher levels compared to the previous year.
With the 2021 Sustainalytics ESG Risk Rating Score, Turkish Airlines ranked first in the ‘lowest risk’ ranking among 69 participants in the airline sub-sector, and succeeded in being in the ‘lowest one percent risk segment’ in its sector.
Our airline, which was deemed worthy of an award in the ‘Bronze’ category by Ecovadis in 2021, was awarded in the ‘Silver’ category with its performance in 2022. Turkish Airlines has continued its presence in 2022 in the BIST Sustainability Index, which includes companies traded on Borsa Istanbul with high corporate sustainability performance levels and aims to increase its knowledge and practices on sustainability.
Beyond its presence in the Sustainability Index and the BIST Participation Sustainability Index, as the first and only airline to be included in the BIST Sustainability 25 Index, we ranked first among 47 airlines evaluated by Refinitiv for its sustainability performance.
Making a difference in the sector with its outstanding performance in the last 20 years, Turkish Airlines has more than doubled its sectoral growth rate and consolidated its leadership position with an average growth of over 12 percent. Flying to just 77 international destinations in 2003, Turkish Airlines has become an airline company that now reaches 291 international destinations in 129 countries today. This strong and successful growth is a natural result of Turkish Airlines’ knowing its own potential very well, defining trends perfectly in the world, honing its forecasting skills, making effective use of management mechanisms, being flexible in taking rapid actions and turning crises into opportunities. Turkish Airlines with its ever-expanding fleet and wide flight network, will continue to maintain its presence in the sector by creating value for its stakeholders and contributing to employment and the overall economy.
This year we are in very good financial health – the banking system in Bulgaria is stable, liquid, very well capitalised and with decreasing levels of bad loans, and all its indicators are above the European average. The banking sector in Bulgaria is among the most prepared for full euro area membership. Bulgaria now has a functioning parliament and its economic indicators are better than the forecast at the end of 2022. The adoption of the package of laws for the Recovery and Resilience Plan is of key importance, so the 49th Parliament’s legislative programme clearly set these laws as a key priority, along with the country’s accession to the Schengen area and the eurozone. We should pay particular attention to the opportunities that the Recovery and Resilience Plan, which will provide our country with more than €6bn in grant funding, presented to Bulgaria.
The big challenge will be to allocate these funds adequately so as to achieve the desired effect of accelerating the recovery of the Bulgarian economy with a focus on a greener and cleaner future. The Recovery Plan turns the challenges we face into opportunities, not only by supporting recovery, but also by investing in our future: the Green Deal and digitalisation will boost jobs and growth, the sustainability of our society and the well-being of our environment.
Our accession to the euro area and to the second most used currency in the world is also a long-anticipated process, which positively affects our economy and drives the acceleration of reforms, increasing welfare, and reaching European standards of living. Thanks to the euro, it will be easier, cheaper and safer for companies to buy and sell in the common European economic space and trade with the rest of the world.
The biggest advantage of the euro is the minimisation of currency risk for the economy. The banks are ready, we have established internal communication with experts who follow a plan for the introduction of the euro and we are confident that Bulgaria’s accession to the single European currency will bring many benefits to the customers. Our economy will rapidly become a more business-friendly environment.
On a business bearing
Banks are a trusted and supportive partner precisely for the development of this business environment and this year our efforts will be focused in this direction. We will continue to finance valuable projects in key sectors of the economy on the best possible terms, and despite the reversal of the interest rate cycle, we will strive to minimise the effects on our customers. The global process of raising interest rates is having an impact, albeit at a slower pace, on interest rates in Bulgaria, which is also an argument for maintaining the level of the countercyclical capital buffer for bank lending at two percent in the second quarter of 2024. The countercyclical capital buffer of two percent comes into force on October 1, 2023, and is intended to strengthen the resilience of the banking system.
We can therefore expect a smooth transition to higher interest rates, in line with the consistently conservative interest rate policy being set by central banks. In Bulgaria, in view of the specificities of the basis for setting retail interest rates, the dynamics of the deposit market, the high liquidity and the tightening of interest rate policy will be implemented more moderately.
The banking sector is being digitised at an accelerated pace. Innovation and digitalisation are an integral part of the banking community’s strategy and an important part of our success in recent years. Innovation and digital transformation are key to the relationship between consumers and financial institutions. With consumer expectations rising, the banking services and products sector is evolving. Our strategy involves digitising every element of the business – products, services, different channels, risk management.
An integral and very important part of the sector’s development strategy is following the principles of good environmental, social and corporate governance, which are becoming an increasingly important part of any large organisation’s business model. The banking sector can help prepare our economy for a greener future. To this end, banks need to continue to improve their cost efficiency and shift the focus of their business models towards sustainability and longer-term value creation. This requires even greater progress in incorporating climate and environmental risks into our existing risk management strategies and processes.
The consolidation of the sector that we are seeing is part of the sustainable transformation of business thanks to the greater opportunities that market leaders have to invest in innovative technologies, in process optimisation and well-trained professional staff. This is another of the main challenges for the banking sector globally, one that will affect both the global economy and the Bulgarian market over the next few years. It is a challenge that Bulgaria finds itself well prepared to meet.
Thailand hasn’t always been a leader in sustainability. Just three years ago, it ranked a lowly 154th in the Global Sustainability Index. But today, emboldened by leaders on its own shores like UOBAM Thailand, the country is showing real climate ambition. Unlike many other developing and developed economies, these policies are not merely surface-level commitments. They represent a real and genuine commitment initiative to promote sustainable development. Not just words, but policies.
In 2019 the government announced ‘Thailand 4.0’ to shake up some of its long-running economic challenges. Among them are a reliance on heavy industry and a persistent middle-income trap. It’s essentially a framework to transform Thailand into a high-income, value-based economy. And within it lies a steadfast commitment to sustainable growth, be it through a focus on environmental protections, human capital, social well-being or otherwise.
Then in 2020, the government launched Thailand’s Sustainable Development Plan 2030 to again promote sustainable development. This plan included specific targets to reduce emissions, increase the share of renewables in the energy mix, and promote sustainable land use practices.
Alongside this national focus on ESG factors, we’ve seen a nationwide shift towards ESG-focused funds and products in Thailand, which, together with the government’s own policies, will likely put Thailand on a stronger, more sustainable path. We’ve known for some time that measuring any asset’s long-term viability on financial performance alone is insufficient. But at UOBAM Thailand, we go further. Because we see in our own portfolios that integrating ESG evaluation across all investment asset classes can – and often will – boost performance. Looking at ESG returns at this moment, the Morningstar Global Sustainability Leaders Index doubled its broad market index returns in Q1 2023, reaching 21.2 percent. The top holding within the index, NVIDIA Corp (NVDA), posted a massive 90 percent return over that same period.
An early lead on ESG investing
As ESG investment experts, we receive many questions on how we can be sure any investment meets strict ESG criteria. Thankfully, this is where we lead. Our aim is to become the continent’s leading fund manager on sustainability – one that creates long-term value and a legitimate positive impact for our stakeholders. We want to make sustainable investing accessible for all. And it’s why we were one of the first Asian asset managers to integrate ESG principles in our investment philosophy and process. We were also one of the first Asian asset managers to become a signatory of the United Nations Principles for Responsible Investment (UNPRI).
ESG investing is not simply about picking companies, watching, waiting and hoping for them to perform
As for our process, we adopt a holistic approach to ESG investing that considers E, S, and G factors as well as their interrelationships. Since 2020, UOBAM Thailand has launched five ESG-themed mutual funds for retail investors and two ESG funds for institutional investors. In our view, ESG investing is not simply about picking companies, watching, waiting and hoping for them to perform. Instead, we actively engage with the companies we invest in, using our influence as an investor to advocate for positive change. These may include suggestions on how to adopt sustainable practices or improve governance standards. Either way, our role is not just to highlight sustainably minded companies but to actively inspire them.
A well-oiled ESG machine
Though we will have an opinion on whether a company is indeed sustainable or not, our selection criteria are far more rigorous than any one expert’s say. We assign specific E, S, and G pillar weights to companies across 11 classified sectors, using Global Industry Classification Standard (GICS) and referencing the Sustainability Accounting and Standards Board (SASB) materiality map.
All this is to say that we choose only companies with robust sustainable and financial performance and rule out any that have strong financials but fail to meet our sustainability threshold. Of course, E, S, and G factors are ever-evolving, and it is thanks to our ESG news alert system that we can dynamically screen for any changes in our portfolios. Put simply, we use an Artificial Intelligence-Machine Learning (AI-ML) ESG model called the ESG Analyser to find any relevant information.
This lets us track company news and controversies in real time. But we also supplement our overall scoring methodology by regularly engaging with companies on broad ESG themes, local ESG issues, and any specific ESG controversies we find. Unfortunately, far too many ‘ESG investments’ are only skin deep, which is why we use our ESG Analyser, ESG Materiality Map and third-party data to assess companies more consistently, reduce potential human biases, and ultimately create more robust ESG profiles. This process doesn’t only support sustainable development, but, in many cases, it actually boosts performance. In an internal analysis, we found that a positive relationship exists between UOBAM’s Analyser-enhanced ESG ratings and market performance.
Using our proprietary A to D rating scale, with A representing the highest ESG standards, the top-rated companies registered not only higher returns, but lower volatilities and lower maximum drawdowns. A-rated companies outperformed D-rated companies in terms of risk-adjusted returns, which itself suggests that risk-taking can be at least partially offset by its ESG initiatives. In short, our ESG ratings provide a useful indicator of superior performance.
ESG opportunities in Thailand
So, where are the opportunities for ESG investing in an emerging market with ambitions to become a low-carbon society? For one, the government expects renewables to make up 30 percent of the mix by 2037, meaning solar, wind, hydropower, and other forms of clean energy show promise.
Investment in companies focusing on energy efficiency will also help reduce energy consumption and carbon emissions – both vitally important as we make the transition to a low-carbon economy. These companies may, for example, make energy-efficient products, such as LED lighting or smart thermostats, or provide services that help businesses or households reduce their energy use.
Likewise, energy storage solutions, such as batteries or hydrogen fuel cells, will increase the efficiency and reliability of renewable energy sources. Investment in companies developing energy storage technologies will support the growth of this same industry. It’s worth remembering that the many and varied opportunities above have emerged amid an energy crisis. In fact, some have become more attractive precisely because of it. Here at UOBAM Thailand, we consider the energy crisis and hope to provide a kind of antidote to it for investors.
For example, we launched the United Battery and EV Technology Fund (UEV), which focuses on foreign equity funds and/or mutual funds ETFs of the operator in battery production lines, lithium mining, and the development of battery technology companies. The Master funds also invest in the companies that benefit from developing technology, products, and services related to the future of transport.
A fertile land for growth
We recognise of course, that ESG investing is an established sector beyond Thailand. Europe has been a leader in ESG investing and sustainable finance, thanks in part to regulations such as the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR). Similarly, countries in the Asia-Pacific region, particularly Japan and Australia, have taken big strides to adopt ESG best practices.
As for emerging markets, particularly in Asia, many countries are seeing rapid economic growth and rapid urbanisation, which again creates opportunities in public infrastructure, renewable energy, and other areas conducive to sustainable development. That said, financial institutions in Thailand are themselves creating a more fertile landscape for ESG investing in growing – and growing apace.
The Securities and Exchange Commission Thailand (SEC) just recently released guidelines on the disclosure of information for SRI funds for asset managers. These will improve the operational standards of SRI fund management and prevent misleading information or greenwashing.
Just last year, they announced an additional policy requiring listed companies to disclose their ESG practices in annual reports. Guidelines on management and disclosure of climate-related risk by asset managers have also played a big part in building the climate risk management framework.
The Stock Exchange of Thailand (SET) has likewise introduced many regulatory measures to promote ESG investing, such as requiring listed companies to disclose ESG-related information and guidelines for responsible investment. It also launched the Thailand Sustainability Investment (THSI) list, which includes companies that meet ESG criteria and aims to both promote sustainable investment and encourage listed companies to improve their ESG practices.
Thailand, clearly, is something of a hotbed for ESG investing, thanks to government policy, financial regulations, and local leaders such as ourselves. But the spark we’re already seeing in ESG investing is only likely to explode in the coming years, thanks not only to the above factors but growing demand among Millennials and Generation X.
We see that these generations are more likely to prioritise sustainable and socially responsible investing and are increasingly conscious of the impact of their investment decisions on the environment and society. As ESG investing thrusts itself firmly into the mainstream, we hope investors will recognise that countries like Thailand and companies like UOBAM are hot prospects in an exciting sector. Thailand is perhaps the next big thing in ESG investing. You heard it here first.
Artificial intelligence (AI) has made tremendous advancements in recent years. This progress became not just recognisable to the general public, but also testable in late 2022 with the rollout of the ChatGPT chatbot. Be it for summarising books and texts, as a source of inspiration and a brainstorming aid, for artistic/creative input, or even simply for amusement, generative language models can already help us today in our work and can provide fun entertainment.
Self-confidence at a click
In any case, AI certainly doesn’t lack self-confidence, not even when it comes to crafting the right wording. This is demonstrated impressively when the chatbot is asked how Donald Trump would explain Bitcoin – you can hardly get the voice of the former US president out of your head afterwards. But are ChatGPT (from the US-based artificial intelligence research firm OpenAI) or its numerous kin also suitable to act as investment advisors? Our virtual mystery shopping tour revealed that chatbots still lack necessary financial education. Moreover, even more powerful generative language model versions in the future will not be capable of replacing intimate conversations between clients and advisors.
Advisor without a pocket calculator
When we enter OpenAI’s virtual office and ask our first question regarding a suitable investment strategy, the chatbot starts out by alerting us that it is not a certified investment consultant and cannot give specific investment recommendations.
While AI is becoming increasingly sophisticated, it still has limitations
But as is the case with so many other subjects, ChatGPT quickly sheds its restraint when we chat about a hypothetical example. Our query asks ChatGPT to construct for an investor with a moderate risk appetite a multi-asset portfolio composed of 15 to 20 ETFs that outperforms a simple 50/50 portfolio of stocks and bonds over the long term. Within seconds, the advisory bot recommends a mix of low-correlated asset classes. Stocks, bonds, commodities, and alternative assets are just the ticket, the bot says, and it names corresponding ETFs.
After a few more follow-up questions, we end up with a portfolio of 25 ETFs that also incorporates small and mid-caps, sector-based, factor-based, and thematic strategies as well as exposure to international markets alongside the US in its equity component. The original portfolio also becomes broader and more diversified in its fixed-income component and in its allocation to alternative assets in the course of the ‘client advisory conversation.’ However, the electronic advisor seems a little overwhelmed by a sophisticated client like ourself.
Falling short of the benchmark
After ChatGPT recalculated the weights for us, we could now subject the portfolio to a test or, more specifically, to a backtest (see Fig 1). However, the backtest only stretches back to 2017 due to the relatively young theme ETFs in the portfolio. But that’s good enough for an interim appraisal. Over the first six years up until the world equity market’s peak in late 2022, the ChatGPT basket gained more than 60 percent and outperformed the 50/50 portfolio by up to five percentage points. But since the end of 2022, the much better-diversified portfolio of ETFs has fallen behind the simple benchmark. The chatbot thus shares the anguish of so many other investors who have difficulty beating the performance of a simple mix of stocks and bonds in the long run. Two other metrics also disillusion the client: the equity beta and the volatility of the portfolio recommended by the chatbot are both higher than they are for the 50/50 portfolio. This means that the asset mix does not quite fit our risk profile (yet).
Personalised is different
A number of additional question marks pop up for the client in other regards as well. Is the recommended portfolio really tailored to us? ChatGPT seems to be proceeding on the assumption that we regularly trade on US securities exchanges with the focus on US-based ETFs. After we inform the electronic advisor that our domicile is in Europe, it promptly proposes a comparable palette of ‘European’ ETFs that completely excludes the US. A similar scene plays out when we express our desire for a sustainable strategy, which prompts the chatbot to quickly generate a list of ETFs bearing ‘ESG’ in their names. But serious concerns about the quality of the advice arise at the latest when we look at the original portfolio recommendation’s costs, finding that far cheaper alternatives exist. Moreover, the almost single-minded focus on only two fund providers raises doubts about ChatGPT’s independence. The chatbot must be given credit, however, for having pointed out its lack of training as a consultant right from the start.
Refreshingly self-critical
The conversation ends with the consolation that the advisor at least is refreshingly self-critical.
When asked if artificial intelligence poses an existential threat to professional asset managers, the chatbot replies: “Artificial intelligence has the potential to disrupt many industries, including the financial industry. However, it is unlikely that AI will present an existential threat to professional money managers. Here are a few reasons why:
“AI is a tool, not a replacement: AI is a powerful tool that can assist professional money managers in making investment decisions. However, it cannot replace the human expertise, experience, and judgment that professional money managers bring to the table. Professional money managers have a deep understanding of the markets, the economy, and the companies they invest in. They can use AI to enhance their decision-making process, but they will always be needed to interpret the data and make final investment decisions.
“AI has limitations: While AI is becoming increasingly sophisticated, it still has limitations. AI can only analyse data that has been inputted into it, and it cannot predict unforeseeable events that can impact markets. Professional money managers can use their judgment to navigate these unpredictable events and adjust their investment strategies accordingly.
“Human touch is still valued: Many investors prefer to work with professional money managers because they value the human touch. Investors want to work with someone who understands their individual needs and goals and can provide personalised investment advice. While AI can provide data-driven insights, it cannot provide the personalised attention that many investors seek.
“In summary, while AI will continue to play an important role in the financial industry, it is unlikely to present an existential threat to professional money managers. Professional money managers can use AI as a tool to enhance their decision-making process, but they will always be needed to provide the human expertise and judgment that AI cannot replace.”
We have little to add to the bot’s assessment. As things currently stand, an investment advisory meeting in cyberspace cannot replace a dialogue with a private banker in any way whatsoever. Whoever puts trust in the inadequately educated chatbot will most likely end up with an impersonal standard strategy or in the worst case an incredibly risky investment recommendation. Even more powerful generative language model versions in the future will not be capable of replacing intimate conversations between clients and advisors. And you also don’t get a good cup of coffee in a virtual conference room.
Your personal advisor awaits
Founded in 1977 in the Liechtenstein capital of Vaduz, award-winning and family-owned Kaiser Partner Privatbank AG has decades of experience in investment strategy and asset management. Wealth, however, is made up of more than just the liquid means held in your investment portfolio or at your bank. It also includes business assets, real estate, jewellery and collectibles. Holistic asset and wealth planning or advisory require a more comprehensive approach that gathers a number of different experts around the table.
To realise this approach for wealthy individuals and their families in an efficient way, our partner organisation Kaiser Partner Wealth Advisors has introduced the ‘Wealth Table.’ Together with other partners, Kaiser Partner Privatbank AG participates as an independent expert. All these wealth partners, therefore, follow the same goals and interests when answering questions around your wealth to offer you advice – personally and tailored to your individual needs.
Home to over 200 million people and rich in natural resources, Nigeria is a true African powerhouse. The nation boasts the largest economy on the continent, with a high-performing banking industry and a vibrant tech hub based in the commercial city of Lagos. Nigeria is one of the fastest-growing economies of the 21st century, with its young, dynamic population helping to drive the nation forward.
And yet, despite its vast potential, the last few years have certainly proved challenging for Nigeria. In 2016, a slump in oil prices saw the economy shrink for the first time in 25 years, triggering a deep recession that sent inflation soaring and saw unemployment rising. The nation had entered a period of tentative recovery when it was hit by a fresh crisis with the arrival of Covid-19 in 2020.
The pandemic pummelled the Nigerian economy, sending it back into another crushing recession. Despite the government’s efforts to get the economy back on track, Nigeria has struggled to rebound in the post-pandemic years. Inflation remains stubbornly high at over 20 percent, leaving many families struggling to cope with the rising cost of living. Unemployment, too, is a real cause for concern, with 33 percent of the population currently out of work.
The country’s new President, Bola Tinubu, certainly has a daunting in-tray, and will need to prioritise tackling insecurity and inequality in his first months in power. But, while the government has a crucial role to play in reducing poverty and repairing the economy, the private sector is also key to unleashing Nigeria’s potential. And with some of the continent’s largest and best-performing banks based in Nigeria, the banking sector may be in prime position to drive the country towards a brighter, more sustainable future.
Indeed, amid global economic uncertainty and immense domestic challenges, Nigeria’s banking industry has remained strong. The sector continues to outperform the rest of the national economy, with a number of firms reporting healthy rising profits. One of the sector’s greatest success stories is Zenith Bank, which, during these testing times, has maintained its position as one of Nigeria’s most profitable banks, all while growing its customer base and ramping up its commitments to corporate social responsibility projects. With leading firms such as Zenith Bank prioritising Nigerian prosperity, the private sector will be a powerful force as the nation looks to recover from recession and fully unlock its vast economic potential.
Nigerian President Bola Tinubu
Small business champions
Across the globe, small businesses have been particularly hard hit by the Covid-19 pandemic. Repeated lockdowns put immense strain on smaller firms, with stay-at-home orders and social distancing measures dramatically impacting sales – particularly within the informal economy. In Nigeria, street traders, artisans and vendors all saw their businesses grind to a halt with the introduction of a national state of emergency in March 2020. The end of Covid restrictions brought some welcome relief to the nation’s small business owners, but the pandemic has left its mark on the SME sector, with many firms still struggling to find their feet.
The size of Nigeria’s SME market can’t be overstated. Small-to-medium businesses account for an incredible 48 percent of the country’s GDP, while over 80 percent of the Nigerian workforce are either employed by SMEs or run their own microbusiness. The sector is crucial to Nigeria’s wider economic growth and reducing inequality, but has been plagued with problems even ahead of the arrival of the Covid-19 pandemic.
Obtaining finance continues to be one of the most pressing problems for SMEs. According to a 2020 survey carried out by PwC, 48 percent of small business owners rely on friends and family as financing sources, highlighting just how difficult it is for SMEs to secure credit from formal banking institutions. These unmet financing needs are a key constraint to SME growth in Nigeria, holding many firms back when they wish to expand their operations and grow their businesses.
Thankfully, lenders are becoming increasingly aware of the challenges facing SMEs. Zenith Bank, one of the nation’s leading financial institutions, has established itself as a major player in the Nigerian SME ecosystem. Taking an innovative, holistic approach to supporting SMEs, Zenith Bank combines lending services with mentorship programmes, providing entrepreneurs with the tools and knowledge that they need to take the next step in their business journey.
Lenders are becoming increasingly aware of the challenges facing SMEs
“In 2021, the bank launched a trailblazing new product, specifically designed for SMEs,” explains Dr Ebenezer Onyeagwu, Chief Executive Officer at Zenith Bank. “SME Grow My Biz is an innovative platform focused on helping small businesses achieve growth and boost their profitability. At Zenith Bank, we understand the challenges facing the nation’s SMEs, and wanted to create a tool that addressed those major pain points.”
The bank has partnered with Google to offer increased visibility and market reach for SMEs through the SME Grow My Biz (SME-GMB) platform, while entrepreneurs can also receive further training on adopting and optimising digital marketing strategies. This allows small business owners to reach a larger customer base, generating more digital engagement and ultimately driving up sales.
But that’s not the only advantage offered to SMEs. The SME-GMB platform provides discounted prices on a host of essential products and services, including insurance, logistics and training. The bank has collaborated with Visa to expand their offer to small businesses, with the partnership enabling discounted use of Google Ads, Microsoft Office products and virtual assistants.
What’s more, Zenith Bank also partners with other Nigerian organisations and agencies focused on supporting SMEs. The bank is a partner of the Lagos State Employment Trust Fund – a programme designed to provide funding, training and other services to SMEs in the country’s Lagos State. The bank also works alongside the Bank of Industry and the Small and Medium Enterprises Development Agency of Nigeria to further extend access to affordable finance among the nation’s SMEs.
“Through these partnerships, Zenith Bank is helping to foster a collaborative, supportive environment for small business owners in Nigeria,” says Onyeagwu. “In this way, we hope to bridge the financing gap for SMEs and create an ecosystem in which all businesses can thrive.”
Dr. Ebenezer Onyeagwu, CEO, Zenith Bank
Making banking accessible
While access to credit is certainly a barrier to growth for the nation’s SMEs, for many Nigerians, access to any financial services remains frustratingly out of reach. The nation has seen a reduction in financial exclusion over the course of the past decade, but large swathes of the population remain unbanked.
According to the World Bank, 64 million Nigerians do not have a formal bank account with a financial institution – with the majority of the country’s unbanked living in rural and hard-to-reach communities. Financial inclusion is a key tool for driving economic development, particularly among lower-income communities, as it allows individuals to effectively take control of their financial lives.
“Zenith Bank is deeply committed to driving financial inclusion in Nigeria,” says Onyeagwu. “The bank has taken several steps to ensure that people can access financial services and participate in the formal economy – particularly in rural areas where connectivity remains challenging.”
As part of its commitment to financial inclusion, Zenith Bank has launched an agency banking programme, called ZMoney. The programme encompasses a network of agents located in over 760 local government areas throughout the country, each of whom is responsible for delivering basic banking services to people without access to a physical bank branch. This breaks down the geographic barrier to banking for those in more isolated, rural communities, with agents able to carry out vital services such as cash deposits, withdrawals, bill payments and more. Since its launch, the programme has been instrumental in bringing traditional banking services to Nigerians living in financially underserved and excluded areas.
In places where accessing a brick-and-mortar bank – or indeed a remote agent – remains a challenge, new technologies are helping to bring banking to the masses. Zenith Bank has developed a user-friendly mobile banking app, specifically designed with accessibility in mind. The app’s easy-to-use interface is straightforward and intuitive – even for those who are unfamiliar with technology or new to mobile apps. With customers able to access their accounts and perform a range of vital transactions from their mobile phones, the app has unlocked financial freedom for many.
However, while progress has certainly been made in reducing financial exclusion across Nigeria, there remain significant challenges to achieving widespread access to financial services. Financial literacy remains low, with many Nigerians unaware of the specific financial services available to them – and how they may benefit from them in both the immediate and long term. According to a survey carried out by EFInA, a UK-based development organisation, more than half of Nigerian adults have limited financial literacy, particularly when it comes to forward financial planning. As such, boosting money management skills and improving awareness of financial services will help to further expand financial inclusion across the country.
“Zenith Bank is at the forefront of this educational drive,” says Onyeagwu. “The bank partners with a number of non-governmental and community-based organisations to provide financial training to people living in rural areas. It also sponsors several financial literacy seminars across the country, while also organising financial education programmes in schools for the benefit of children in remote, hard-to-reach areas.”
Taken together, this programme of activity aims at boosting financial resilience among Nigerians, giving them a greater understanding of the products – both traditional and digital – that they can make use of in their personal and professional financial lives.
A digital future
Across the globe, technological developments have reshaped the banking industry in recent years – and Nigeria is certainly no exception. The Covid-19 pandemic accelerated an existing trend towards digital solutions, with customers beginning to expect online options as standard. While not seeing mobile money usage at the same levels as early adopters such as Kenya and Tanzania, digital payments were steadily picking up in the years prior to the pandemic – and the arrival of Covid-19 saw many more Nigerians turn to mobile transactions for the first time. With customers embracing digital options at a scale and speed not seen before in Nigeria, this represented an exciting new opportunity for Zenith Bank.
“Since its inception, Zenith Bank has been at the very forefront of technological innovation,” says Onyeagwu. “The bank was one of Africa’s first financial institutions to adopt internet banking, positioning it as a leader in online services from its earliest days as a business.”
For citizens of the 21st century, it is hard to imagine a world with no ATM machines, no debit or credit cards and no digital networks. But those were the very conditions in which Zenith Bank first launched in 1990. The bank was quick to adopt new technologies, opening its first offsite ATM machine in 2003. From there, it looked to unlock the vast opportunities presented by the internet. The following years saw the bank launch real-time online banking, transaction notifications via SMS and email, online payment gateways and QR payments.
“Today, the bank remains equally committed to developing innovative new products and services that best meet the evolving needs of its customers,” says Onyeagwu. “The customer experience continues to shape the bank’s digital transformation, and Zenith Bank is continuously working on new products that will enhance engagement and create a more personalised service.”
One such product is ZiVA, an AI-driven chatbot, which interacts with customers just as a human would. This allows customers to receive help and advice at any hour of the day – even when bricks-and-mortar stores would usually be shut. New customers are even able to open an account through ZiVA, demonstrating just how effective and advanced the platform has become.
Elsewhere, the bank is also revamping its mobile banking platform to improve the overall customer experience. Exciting new features will include lifestyle payments, personal finance management, cardless withdrawal, loyalty schemes, wearable tech and voice banking. These forward-thinking options will further transform the customer experience at Zenith Bank, with new digital options to match what is an increasingly digital world.
However, with online banking fast becoming the norm, staying safe online has never been so important. That is why, as it grows its digital presence, Zenith Bank is equally committed to ensuring robust cybersecurity measures.
“Each month, Zenith Bank sends monthly emails to its customers, providing tips for staying safe while using internet banking,” explains Onyeagwu. “We also employ highly-skilled cybersecurity professionals to constantly monitor threats targeting online banking platforms – that way, we can be assured that we are doing all we can to keep our customers safe.”
From its digital identity intelligence to its fraud monitoring solutions, the bank is guided by international standards and best practices for cybersecurity, and is constantly developing new security technologies to better protect its customers from any cyber threats they may encounter.
Adaptability is key
Just as Zenith Bank takes a proactive approach to managing digital threats, it is just as prudent when it comes to its wider risk management operations. Indeed, the pandemic has served to emphasise the importance of robust risk management in the banking sector, given the heightened operational threats to businesses during times of crisis and uncertainty. The 2008 financial crisis completely transformed risk management in the financial industry, and the pandemic will likely have a similarly profound, long-lasting impact on how banks approach risk functions.
“Risk management is the foundation on which effective and successful businesses are built,” says Onyeagwu. “This is particularly true in the post-Covid global economy, where the ability to successfully navigate a new range of increased risks is defining businesses’ performance and success.”
In these new, challenging economic circumstances, Zenith Bank is leading by example. Risk culture permeates every level of the organisation and all business decisions, with the bank continually striving to maintain a conservative balance between risk and revenue considerations. In fact, Zenith Bank’s risk appetite statement is the core instrument for aligning its overall corporate strategy, and is integral to every aspect of its business.
Zenith Bank has been at the very forefront of technological innovation
This carefully-considered approach has steered Zenith Bank to success, even in the most testing times. From post-pandemic recovery to high inflation rates and cost-of-living pressures, 2022 was a year of many challenges. While Zenith Bank was not immune to these thorny issues, it was able to adapt its strategies and respond effectively to the challenges it faced, ultimately emerging as one of Nigeria’s best-performing banks in terms of profitability.
Like many other financial institutions, one of the most pressing challenges that Zenith Bank has faced over the past year has been rising interest rates. In 2022, the Central Bank of Nigeria took the decision to raise the monetary policy rate (MPR) in order to combat skyrocketing inflation, which had risen to over 20 percent. While a necessary decision to ease cost-of-living pressures on Nigerians, the MPR hike posed a challenge for the bank’s interest-rate sensitive businesses, such as lending and treasury management.
In response, Zenith Bank rebalanced its deposit sources, allowing it to lower its cost of funds, while boosting its loan portfolio to take advantage of the rising rate environment.
Another challenge Nigerian banks experienced in 2022 was the beleaguered redesign of the nation’s currency, the Naira. The policy was announced in October, with new bank notes to be released in mid-December, and old banknotes to cease circulation by the end of January. The speed of the intended phase-out led to a cash shortage, with many Nigerians finding it hard to source the newly-redesigned banknotes. This resulted in long lines outside of Nigerian banks as people sought to get their hands on the new notes.
“The Naira redesign put a severe burden on Zenith Bank’s IT infrastructure,” Onyeagwu explains. “But, in response, the bank launched its Project Tiger initiative, which upgraded and expanded its existing infrastructure to cope with the rising demand. For some time, the bank’s senior management had predicted that there may be a time when the current infrastructure may be overwhelmed, and thus began a series of system transformations in 2020. This stood us in good stead for the challenges of the last few months, when demand peaked.”
In successfully navigating these issues, Zenith Bank has shown that adaptability is key, particularly in testing times. It has shown its customers that it is dependable and resilient, even in the face of wider economic challenges. As a result, last year, the bank succeeded in growing its customer base from 18 million to 22 million customers – a remarkable achievement that speaks to Zenith Bank’s ability to adapt and meet the evolving needs of its clients.
Building prosperity for all
One of the most valuable lessons emerging from the Covid-19 pandemic and the ensuing recovery years is that businesses don’t operate in a vacuum – they are part of a much greater, interconnected world. This is certainly true of financial institutions, which directly and indirectly impact the lives of so many. And, as customers increasingly make financial choices that align with their own principles, sustainable, responsible banking has never been so important.
Zenith Bank has long been a champion of Corporate Social Responsibility principles, embracing honesty, accountability and ethical conduct as its core values. The bank embraces the ‘Triple Bottom Line’ principle, which equally prioritises people, planet and profit, and through its social responsibility projects, is committed to boosting prosperity throughout Nigeria. It has committed itself to the United Nations Sustainable Development Goals and the United Nations Global Compact, and is working to embed sustainability into every aspect of the bank’s overall strategy.
Financial inclusion is a key tool for driving economic development
“At Zenith Bank, we recognise that the long-term viability of our business is closely linked to the value we create not just for our stakeholders, but also for the wider society,” says Onyeagwu. “That’s why we have committed to addressing a number of challenges facing Nigeria – particularly those relating to health, education, poverty elimination, zero hunger, decent work and economic growth, sustainable cities and responsible consumption and production.”
And the bank is following up on its commitments with significant investments, too. In 2021, Zenith Bank invested $10.8m in social projects across Nigeria, directing funding towards public infrastructure enhancements, sports development and women and youth empowerment, among other initiatives. One such project is a flagship Information and Communications (ITC) centre in Niger state, which looks to enhance digital skills and boost opportunities for young people growing up in the country’s largest state.
“Through these community investment initiatives, Zenith Bank is delivering a range of projects with long-term social and economic benefits,” says Onyeagwu. “We are deliberate in our approach to CSR, and want to ensure that we address some of society’s most significant challenges.”
And as the bank looks to the future, these social and sustainable commitments will remain at the very core of its business. By prioritising CSR now and in the years to come, Zenith Bank is making a long-term commitment not just to its valued stakeholders, but to enhancing economic prosperity for all Nigerians.
With Global GDP growth in 2023 likely to remain relatively low, at around 3 percent according to IMF estimates, it reflects a general uncertainty in the economic outlook for the near-term. According to Deloitte’s 2023 banking and capital markets outlook report, “escalation of geopolitical risks, deglobalisation, and fracturing payments systems are pushing the world toward a new economic order.” Despite multiple factors including tightening monetary policy, inflation, supply chain issues and energy shocks leading to ripple effects that many banks have found tough to navigate, a few have stood out during these challenging times.
World Finance Banking Awards 2023
Best Investment Banks
Argentina Puente Brazil BTG Pactual Chile BTG Pactual Colombia BTG Pactual Dominican Republic Banreservas France BNP Paribas Georgia TBC Bank Germany Deutsche Bank Hong Kong Jefferies Jordan Arab Bank Kazakhstan Tengri Partners Investment Banking Kuwait National Investments Company Mexico BBVA Mexico Netherlands ABN AMRO Nigeria Coronation Merchant Bank Oman Bank Muscat Pakistan HBL Paraguay Puente Taiwan Fubon Financial Thailand Siam Commercial Bank Turkey QNB Finansinvest US Puente
Most Sustainable Banks
Brazil BTG Pactual Dominican Republic Banco Popular Dominicano Nigeria Access Bank Turkey Garanti BBVA
Most Innovative Banks
Europe BNP Paribas Latin America BTG Pactual Middle East Commercial Bank of Qatar Africa GT Bank Asia Habib Bank
Best Commercial Banks
Austria Raiffeisen Bank International Belarus Belagroprombank Belgium BNP Paribas Fortis Canada BMO Colombia Davivienda Czech Republic Ceska Sporitelna Denmark Nordea Dominican Republic Banreservas France BNP Paribas Germany Deutsche Bank Hungary OTP Bank Macau Bank of China Netherlands ING Nigeria Zenith Bank Norway Nordea Poland Bank Pekao Portugal Banco Finantia Sri Lanka Sampath Bank Sweden SEB Taiwan Mega International Commercial Bank US BMO Vietnam Sai Gon J.S. Commercial Bank
Best Retail Banks
Austria BAWAG Group Azerbaijan AccessBank Belarus Belarusbank Belgium BNP Paribas Fortis Bulgaria Postbank Canada BMO Chile Santander Chile Colombia Bancolombia Costa Rica BAC Credomatic Denmark Nordea Dominican Republic Banreservas Finland Nordea France BNP Paribas Germany Deutsche Bank Greece Eurobank Hungary CIB CSOPORT Iceland Landsbankinn Israel Bank Leumi Italy Intesa Sanpaolo Macau Bank of China Mexico Banorte Netherlands ING Nigeria GTBank Norway Nordea Pakistan Meezan Bank Peru BCP Poland Bank Pekao Portugal Santander South Africa NedBank Spain Banco Bilbao Vizcaya Argentaria Sri Lanka Sampath Bank Sweden Nordea Turkey Garanti BBVA UAE Mashreq UK Barclays Bank US Bank of America Uzbekistan Asakabank
Best Banking Groups
Austria BAWAG Group Brunei Baiduri Bank Chile Banco Internacional Denmark Nordea Dominican Republic Banco Popular Dominicano Egypt Banque Misr Finland Nordea France Crédit Mutuel Germany Commerzbank Ghana Zenith Bank Ghana Hong Kong HSBC Israel Israel Discount Bank Jordan Jordan Islamic Bank Kosovo BKT Macau ICBC (Macau) Nigeria Guaranty Trust Bank Pakistan Meezan Bank Peru BCP Saudi Arabia Al-Rahji Bank Turkey Akbank UAE Abu Dhabi Commercial Bank UK Lloyds Banking Group
Best Private Banks
Argentina Puente Austria Schoellerbank Belgium BNP Paribas Fortis Brazil BTG Pactual Canada BMO Czech Republic Erste Private Banking Denmark Nordea Private Banking Dominican Republic Banreservas France BNP Paribas Banque Privée Germany Deutsche Bank Greece Eurobank Ergasias Hungary Erste Bank Italy BNL BNP Paribas Liechtenstein Kaiser Partner Monaco CMB Monaco Netherlands ING Nigeria First Bank Norway Nordea Private Banking Paraguay Puente Poland Bank Pekao Portugal Santander Private Banking Spain Banco Santander Sweden Carnegie Private Banking Switzerland BNP Paribas Wealth Management Turkey TEB Private Banking UAE Mashreq UK Standard Chartered Private Bank Uruguay Puente US BMO
Bankers of the Year
Europe Petia Dimitrova (Postbank) Latin America Ilan Goldfajn (Inter-American Development Bank) Middle East Ahmed Hashem (Dukhan Bank) Africa Segun Agbaje (GT Bank) Asia Ilias Tsakalidis (Tengri Partners Investment Banking)
According to a recent report by Harvard Law, the defining corporate governance trends are a critical spotlight on executive compensation, increased scepticism about board quality, and, perhaps most pressingly, the maturation of ESG programmes and disclosures. The report goes on to say: “the Corporate Sustainability Reporting Directive will disrupt the ESG landscape across the European Union by harmonising standards and shaping the reporting environment for years to come”.
The Islamic finance industry is expected to grow by around 10 percent in 2023 into next year and, as Moody’s reports, Sukuk issuance is set to “rise sharply in 2023”. Issuance last year was postponed “because of capital market volatility, companies seeking to refinance near-term sukuk maturities and first-time rated sukuk issuers looking to diversify funding sources,” said Rehan Akbar, a Moody’s Senior Vice President. Demand for Sharia-compliant financing is high and growth is expected in several areas despite an economic slowdown in other major markets. There is also significant growth potential with green sukuk issuance with many Islamic banks adopting sustainability plans. World Finance celebrates those who have led the way to this positive outlook in its Islamic Finance Awards.
World Finance Islamic Finance Awards 2023
Best Islamic Banks
Bahrain
Al Salam Bank
Egypt
National Bank of Egypt
Jordan
Jordan Islamic Bank
Kenya
Dubai Islamic Bank Kenya
Kuwait
Kuwait International Bank
Morocco
Al Akhdar Bank
Qatar
Qatar Islamic Bank
Saudi Arabia
Al Rajhi Bank
Tunisia
Banque Zitouna
UAE
Emirates Islamic
UK
Gatehouse Bank
Best Takaful Insurance
Bahrain
Takaful International Company
Jordan
The Islamic Insurance Company
Kuwait
KFH Takaful Insurance Company
Malaysia
Jubilee General
Qatar
AlKhaleej Takaful Insurance
Saudi Arabia
Tawuniya
UAE
Abu Dhabi National Takaful
Special Recognitions
Best Islamic Banking & Finance Software Solutions
ICS Financial Systems
Best Digital Banking & Finance Software Solutions
ICS Financial Systems
Best Customer-Focused Islamic Banking Products and Services (Kuwait)
Kuwait International Bank
Best SME Bank (UAE)
Emirates Islamic
Best Retail Bank (UAE)
Emirates Islamic
Best Cash Management Bank (UAE)
Emirates Islamic
Best Treasury Management Bank (UAE)
Emirates Islamic
Most Connected and Strategically Located Financial Centre (MENA)
Qatar Financial Centre
Lifetime Achievement in Islamic Banking and Dedication to the Community
Sheikh Mohammed Al-Jarrah Al-Sabah, Chairman, Kuwait International Bank
Lifetime Achievement in Financial Technology Innovation
Robert Hazboun, Group CEO & MD, ICS Financial Systems
Business Leadership and Outstanding Contribution to Islamic Finance
H. E. Musa Shihadeh, Chairman of the Board of Directors, Jordan Islamic Bank
Kuwaiti Visionary CEO – Development & Growth Driver
Raed Jawad Bukhamseen,VC & CEO, Kuwait International Bank
Best Insurance Company for Customer Service Quality (Turkey)
Bereket Sigorta
Best Participation Insurance Company (Turkey)
Bereket Sigorta
The general financial sentiment heading into this year has been that we are rapidly entering a new era “potentially marking the end of cheap money and a long period of low volatility,” according to a research paper authored by the Thinking Ahead Institute. With pension fund asset owners globally controlling $51.9trn, managing increasing macro uncertainty and systemic risk in the past year has been a daunting task to say the least. Balancing the investor desire for returns with the progressive imperative to decarbonise portfolios has added a layer of complexity making the effective stewardship of funds that much harder. With this in mind, we highlight those who have demonstrated resilience in what has been a tough year for the pension fund industry.
World Finance Pension Fund Awards 2023
Australia
Unisuper
Austria
APK Pensionkasse
Azerbaijan
State Social Protection Fund of Azerbaijan
Belgium
Pensioenfonds UZ Gent – UGent
Bolivia
BISA Seguros y Reaseguros
Brazil
Bradesco Seguros
Canada
OMERS
Caribbean
NCB Insurance
Chile
AFP Plan Vital
Colombia
Grupo Sura
Croatia
PBZ Croatia Osiguranje
Czech Republic
CSOB
Denmark
Nordea Pension
Estonia
Swedbank
Finland
IImarainen
France
AG2R LA Mondiale
Germany
HVB Trust Pensionsfonds
Ghana
Pensions Alliance Trust
Greece
Piraeus Asset Management
Iceland
Almenni Pension Fund
Indonesia
BNI
Ireland
Accenture Defined Contribution Pension Plan
Italy
Fondo Pensione Nazionale BCC/CRA
Jamaica
JMMB Fund Managers
Macedonia
Sava Penzisko
Malaysia
Gibraltar BSN
Mexico
Afore XXI Banorte
Mozambique
Moçambique Previdente
Netherlands
Pensioenfonds Zorg en Welzijn
Nigeria
Fidelity Pension Managers
Norway
KLP
Peru
Prima AFP
Poland
Pocztylion-Arka
Portugal
Santander
Serbia
Dunav Voluntary Pension Fund
South Africa
University of Johannesburg Pension Fund
Tackling the climate change headwinds continues to be priority number one on the business agenda and, according to Daniel Hanna, Global Head of Sustainable Finance for the Corporate and Investment Bank, Barclays, “we’re seeing significant momentum in terms of the flow of capital into renewables and new decarbonisation technologies.” Ensuring that we take sufficient steps now to avoid difficulty in the future means businesses must take sustainable action across all facets of their operations.
According to a report by ING Bank, towards the end of 2022, following a historic 18-month dollar bull run, the FX outlook became less clear, with “FX markets in 2023 to be characterised by less trend and more volatility”.
Meera Chandan, Global FX Strategist at J.P. Morgan follows on from this, saying “the confluence of factors that had proved so supportive of the dollar earlier in 2022 has since inverted. Markets are now aggressively pricing Fed easing on the back of growing signs of disinflation, while the outlook for global growth this year is no longer looking as pessimistic as it did earlier in 2022”.
Nevertheless, with continuing economic uncertainty across the globe, navigating the markets has proved especially difficult and once more World Finance has recognised those who have stood out in the forex industry.
A list of the companies awarded in the World Finance Forex awards 2023 can be seen below.
Despite the transition to serving customers digitally during the pandemic not being without its challenges, the banking industry has changed and some of what are being considered ‘new normal’ consumer behaviours and expectations are likely here to stay. However, some of the digital solutions and communications tools deployed as part of this evolution to digital experiences are falling short of providing a seamless experience for customers, resulting in an erosion of trust.
The current cost of living crisis presents opportunities for traditional banks to reimagine the banking model of a ‘one size fits all’ approach and find new ways to perfect it. Fintech brands such as Moneybox and Tink are already taking a fresh approach to some of the tactics deployed by traditional players. Recently Tink and Snoop announced they are teaming up to help UK customers navigate the cost of living crisis through offering its customers money management services.
It’s not too late for financial institutions to reimagine the experience they give customers. Embracing new technologies, developing a better understanding of customer needs and placing a greater emphasis on educating them, will result in trust and greater loyalty.
Setting the right tone
The importance of offering appropriate channels of communication that work for your customers across demographics, thinking styles and usage patterns, is vital for a positive relationship instilled with confidence. Relying on the historical ‘one size fits all’ approach can risk customer longevity. For example, some customers prefer traditional telephone banking because of the human-centric nature of being directly linked to another person in real time. Many banks have invested in upgrading their call centre models, as well as automated messaging services such as chatbots and online FAQs. However, in some cases, we have seen this have an adverse effect, with banks losing human-centricity and being unable to operate consistently across touch points, particularly when it comes to more complicated financial needs.
Banks looking to provide a superior customer experience would do well to follow in the footsteps of First Direct, who have transformed their telephone banking service. Offering a tailored and quick service means customers get reassurance they are speaking to a professional with the capabilities to respond to all manner of financial needs. If the process to reach help is uncomplicated and obstacle-free, customers won’t look to bank elsewhere. To solidify trust and ensure that information is clear, banks could consider recapping the information shared online or discussed over the phone via app, email or text.
Security above all
Around 36 million UK citizens were targeted by scams in 2021, which makes security a big consideration for customers needing to feel high levels of trust in a bank’s approach. Designing security into the digital offering is a great way to make people feel at ease when managing their money online. Examples of enhancement include more progressive disclosure, clear and accessible advice, and sharing educational resources resulting in customers feeling like they are being looked after and proactively protected by their bank.
Customers will, in turn, become wiser about online security threats and learn how their bank operates, instilling greater confidence when moving beyond surface level transactions into more complex financial transactions. Banks need to be clear in their communication with customers, including the exact types of communication they can expect to receive, and how. A simple and definitive ‘we will only contact you via text’ can go a long way to building trust, and decreasing confusion or misunderstanding.
Branch out
Many people still value visiting bricks and mortar branches and receiving an in-person experience despite some shaping products and services around ‘digital-first.’ With many branches having slimmed down their services offered in-store or closed entirely, rethinking how branches operate will be key.
Designing security into the digital offering is a great way to make people feel at ease when managing their money online
Lloyds Bank runs a mobile branch service to help eliminate any disruption to the local community caused by local branches closing. Running on a fortnightly timetable, the mobile branches allow customers to pay bills, deposit cash and cheques, and order foreign currency, among other financial tasks. Understanding what customers still need from an in-person experience, and then reorganising services accordingly is a way of establishing trust and long-term relationships.
Banks should consider turning the branches they do have into financial hubs; central to bringing communities together and providing support and education through seminars or classes. Partnerships with other centres or hubs that act as pillars of the community would also increase loyalty and engagement with banks, while providing extra support.
While financial institutions have responded as best they can digitally to accommodate the ever-changing landscape, digital does not always mean what’s best for the customer. The need now is for banks to move beyond pure digitisation into looking to supplement efficient and automated systems with a greater degree of customer centricity and personalisation.
A complete analysis of how customers interact with the services provided and the cultural context can lead to banks operating proactively, to future-proof tomorrow’s banking experience. By raising the experience bar, they will not only gain trust from customers but ultimately benefit their business too through happier relationships, better supported customers and a chance to build a lifelong relationship.
