Tuesday, 9 July 2013

Building a Future for Sustainable Finance – a report on the 2013 FT/IFC Sustainable Finance Conference

By Tom Robson from Eton College (edited by Godman Usman, Analyst at Amoo VC Advisory)

The deepening of capital markets through private and public sector co-operation would be another big step forward in the overhaul of the infrastructural deficit identified within emerging markets. Consequentially this would boost SMEs future prospects, who are typically the largest contributors to national output and almost exclusively the main source of employment. Limitations from the misconceptions of the phrase ‘green projects’, coupled with the prevailing culture of short-termism must be reformed in order to bolster such co-operation. Doing so would help design the much needed environment for long-term growth for emerging market economies, which in turn should help alleviate absolute poverty (currently affecting an estimated 1.2 billion people globally) by 2030.

False perceptions
Appropriately, both issues of ‘Sustainable and Responsible Investment’ (SRI) and ‘Environmental, Social and Governance (ESG) dominated the agenda of the FT/IFC Sustainable Finance Conference. James Cameron, Non-Executive Chairman of Climate Change Capital stated that the problem was not a lack of money, but rather the lack of its (allocation) investment into SRI and ESG sectors. Indeed in the context of $130 trillion held as private capital presently, the equivalent of $1 trillion must be invested in clean energy every year according to Nick Rouse, Managing Director of Frontier Markets Fund Managers. To achieve this, the narrative should be to demystify and de-emphasise the existing false perceptions surrounding the word ‘green’ in the eyes of investors as a premium or novelty asset class. Furthermore, Alex van der Velden, CIO at Ownership Capital described the ‘safe bubble’ of the conference, articulating that at the heart of the fund management industry many are sceptical about the benefits of ESG. In the long run however, investors must realise that companies with strong ESG ratings are not only ethical investment opportunities, but do add value to building well-diversified portfolios.




Short-termism
Post the 2008/2009 financial crisis, recent evidence highlights that private investors are avoiding longer term investment horizons and are almost always seeking shorter term horizons; consequently there is a growing short run vs. long run imbalance. The danger is that this may not be an aberration. This myopic culture within the investment selection process fails to see the big picture: that alongside long-term support boosting asset classes with low market capitalisation and improving liquidity- above average bottom line returns are very realistic.

Of course, infrastructural projects in these markets do involve risk, but returns will be higher for all parties if innovative, adaptable ideas are backed with financial support. As Michael Eckhart, managing director of Citibank pointed out, bridging the ‘delivery gap’ is an important step.

It is also noteworthy to state that the art of effective communication and networking between developed and emerging markets is vital to opening new markets and transferring knowledge in both directions. This is particularly true if projects such as the ones nominated for the 2013 FT/IFC Sustainable Finance Awards; Interswitch in Nigeria and Alqueria Dairy in Columbia (both aiming to make profits and equally help eradicate poverty) are supported.

Projects like these provide vivid examples of how to combine new technology effectively to the everyday needs of the poor. Interswitch, an electronic transaction switching and payment processing company, has based much of its business model around the comparison of low banking penetration rates of about 21% with 80% of the population (in Nigeria) having mobile phones. Its SMS service is linked to customer debit card accounts which generates a One Time Password (OTP) for every transaction. Consequently this has aided 80,000 ‘base of the pyramid’ citizens to make transactions easily and more affordably. Our argument however, is the multiplier effect this will have for these same customers who can now progress into middle-income earners and increase the demand for other Interswitch services.


The Private sector vs. Public Sector
Both private and public sector institutions must regain confidence in one another and co-operate in order for ESG compliant companies to be sufficiently funded to provide a sustainable future for emerging markets. This is especially the case where public sector debts are high and private sector investors discount ESG projects. Valuable projects that are being set up are overlooked by investors who find it difficult to benchmark risk profiles, because of the limited empirical data. Emerging markets ought to be supported further by the public sector primarily in providing the tools and incentives for private investors and capital markets to deepen, whilst emphasising the long term importance of ESG projects. However, governments in emerging markets, in a similar way to the IFC, must act as catalysts instead of intervening; because we know state intervention can cause market and price distortions. 

Reasons for optimism

Despite remarks by Martin Wolf of the Financial Times on the paradoxical nature of the phrase ‘sustainable finance’; progress even if slow, is being made. The Sustainable Stock Exchanges initiative was launched not too long ago, chiefly to promote new investments for sustainable companies and increase the availability of information related to ESG. Furthermore it was through the World Bank’s “50:50” campaign, we witnessed over 50 countries and 86 private companies huddle together to highlight the importance of public private sector collaborations on this very same issue. Justine Greening backed this movement up by saying government funds recently set up must be joined by private sector investment. In summary, as a quarter of African countries grow at a rate of over 7%, these markets show great potential for the discerning investor. Today, investors not only have an opportunity to make a handsome return in the long-run, but the ability to make a difference. 

23 comments:

  1. Earn CASH Any Time You Want
    We pay our people very well and we're looking for hardworking, serious minded people only to start immediately. If you follow my steps 1, 2, and 3 and don't make $50, I will personally give you $100!

    ReplyDelete
  2. Your blog is distinctive. I have found your blog innovative. You have chosen very incredible theme for your sketch. I cherished it.
    what is forex trading

    ReplyDelete
  3. Nice report. I can’t understand the points in short-termism can you get me clear idea about this?

    ReplyDelete
  4. Hi Tom! Your blog is really very innovative and helpful. Could you please share some more of your thoughts in your next post. Looking forward for your more sharing. Thanks a lot! apple loans

    ReplyDelete
  5. This is a great article. It gave me a lot of useful information. thank you very much.
    ---
    apply baixar facebook movel online free | baixar facebook | baixar facebook gratis

    ReplyDelete
  6. Thanks for the best blog.it was very useful for me.keep sharing such ideas in the future as well. Thanks for giving me the useful information. I think I need it!
    rollercoaster creator
    super adventure pals
    madness project nexus hacked
    kizi games
    kizi 4
    kizi4
    mickey mouse game

    ReplyDelete
  7. Hotmail is an email account of Microsoft Corporation. Like Google's Gmail, it is full of features usually xuyen.Neu of an email you want to register an account please follow these basic steps:
    Hotmail login

    Hotmail review

    Sign in to hotmail

    Login to hotmail

    Recover hotmail password

    Tank Trouble is a very interesting flash game about tanks, about war and about destruction
    TANK TROUBLE | TANK TROUBLE 2

    One Penguin Takes it personally when he is surfing the web and stumbles upon a web site telling him that he cant fly, after that he sets his mind to research and practice flying until he can prove the world that he can..
    Slitherio | LEARN TO FLY | LEARN TO FLY 2

    Strike Force Heroes is a new game action-packed shooter from the creators of Raze; with 3 game modes, 15 campaign missions and over 65 weapons.
    Strike Force Heroes | Strike Force Heroes 4

    Strike Force Heroes 2

    ReplyDelete
  8. I was working and suddenly I visits your site frequently and recommended it to me to read also. Age Of War 2
    Big Farm | Slitherio
    Tank Trouble | Happy Wheels
    Goodgeme Empire | Slither.io

    ReplyDelete
  9. Amazing .. Thanks for giving me the useful information. I think I need it!
    happy wheels demo | friv4school | girls go games | games 2 girls | happy wheels 2

    ReplyDelete
  10. I wanted to thank you for this excellent read!! I definitely loved every little bit of it.Cheers for the info!!!! & This is the perfect blog for anyone who wants to know about this topic
    baixar facebook , baixar facebook gratis , facebook baixar ,

    ReplyDelete
  11. Your article made me very impressed. I enjoyed it, I would expect at your website, or more articles
    baixar whatsapp, baixar whatsapp gratis, whatsapp baixar,

    ReplyDelete
  12. In your article, points caught my attention the most is how your prose, to give me a deep impression. Wish you would write more. good luck!
    return man 2 game , return man 2 , return man ,

    ReplyDelete
  13. Easily, the article is actually the best topic on this registry related issue. I fit in with your conclusions and will eagerly look forward to your next updates. Just saying thanks will not just be sufficient, for the fantasti c lucidity in your writing. I will instantly grab your rss feed to stay informed of any updates.
    subway surfers game ,subway surfer , subway surfers ,

    ReplyDelete
  14. Do you need an urgent loan to support your business or in any purpose?
    we are certified and legitimate and international licensed loan lender We offer loans to Business firms, companies and individuals at an affordable interest rate of 3% , It might be a short or long term loan or even if you have poor credit, We shall process your loan as soon as we receive your application. we are an independent financial institution. We have built up an excellent reputation over the years in providing various types of loans to thousands of our customers. We Offer guaranteed loan services of any amount to citizens and non-citizens we offer easy

    Personal loans,
    Commercial/business loan,
    Car loan
    Leasing/equipment finance,
    Debt consolidation loan,
    Home loan,

    for all citizens and non-citizens with either a good or bad credit history. If you are in need our company email (Adamfredloanfirm@gmail.com) you can email us with your information.
    email us: Adamfredloanfirm@yahoo.com or Text or call us on +15017229938 OR +18144768385
    Reply

    ReplyDelete
  15. Mostly people have all the same things when they are writing academic task or any other writing, especially light music most people like during the writing.

    subway surf , baixar subway surf, subway surf download , download subway surf

    ReplyDelete
  16. Thanks I have read your article, it is very interesting and exciting
    download go launcher, go launcher apk, go launcher , go launcher androi,

    ReplyDelete
  17. You need to have time to take care of the active. It in fact was a amusement account it. Look advanced to far added agreeable from you.

    entrar hotmail agora , hotmail entrar, entrar hotmail , entrar no hotmail

    ReplyDelete
  18. Mostly people have all the same things when they are writing academic task or any other writing, especially light music most people like during the writing.
    dream league soccer download , dream league soccer apk , download dream league soccer , dream league soccer

    ReplyDelete
  19. You need to have time to take care of the active. It in fact was a amusement account it. Look advanced to far added agreeable from you.
    banana kong ,
    banana kong baixar ,
    baixar banana kong ,
    download banana kong

    ReplyDelete

What are your thoughts?