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THE MAGAZINE OF THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS
The
International
Banker
The City springs
back to life
RESILIENCE, RENEWAL,
RESPONSIBILITY…
SPRING 2021
INTRODUCTIONS
SPRING 2021
The Worshipful Company
Of International Bankers
EDITORIAL PANEL
Max Asmelash From the Editor
John Bennett MBE (Senior Warden)
Paola Bergamaschi Broyd
Spring is here and it feels great to have
Nigel Brigden
the prospect of a return to a more
Moorad Choudhry
normal life. We are all adapting to a
Angela Greenough
constantly changing world and have
Alison Griffiths
many opportunities in banking for
Simon Hills
making it more sustainable. This edition
Tim Jones
of our magazine therefore focuses on
Robert Merrett (Master)
“Resilience, Renewal, Responsibility”.
Ali Miraj
Jason Van Praagh (Middle Warden)
We have opening articles on some of
Karina Robinson (Immediate
the current challenges and the response
Past Master)
by the City of London - see pages 6
Alexander Rottenburg
and 7. We have a view from the USA,
John Ryan
“2021: the year of the squeeze”, as
Jean Stevenson
described by Freeman Mary Jo Jacobi.
John Thirlwell (Deputy Editor)
We then look at Environmental, Social,
Kathleen Tyson
Governance (ESG) from different Looking inwards, we also find an
Pinar Yetgin
angles, asking how banks and funds abundance of new activities and new
are helping to meet the United Nations faces. The use of online platforms for
Sustainable Development Goals, and the recent events - see pages 36 to 38 - has
THE WORSHIPFUL COMPANY
challenges of using and measuring ESG. been truly transformational during the
OF INTERNATIONAL BANKERS
Liveryman Professor Atula Abeysekera current pandemic. The Company has
12 AUSTIN FRIARS, LONDON EC2N 2HE
provides us with his approach to been able to connect with members
keeping risks in perspective through in a totally different way. We now look
CLERK: NICHOLAS WESTGARTH
learning to manage Black Swan risks. forward to meeting again in person
DIRECT LINE: 020 7374 0212
as the City springs back to life.
FAX: 020 7374 0207
The breadth of the engagement
EMAIL: clerk@internationalbankers.co.uk
and support that the Company I am very grateful to everyone who has
provides to others is very evident contributed so much to the articles.
from page 20 onwards. This includes They are a fascinating reflection of
an article on how Freeman Brenda how we view the current and future
Trenowden CBE has shown support world of international banking.
in banking and diversity. We also
highlight how the Company supports George Littlejohn
306 Hospital Support Regiment Editor – The International Banker
and a wide range of charities. george.littlejohn@btinternet.com
CBP004599
2 THE INTERNATIONAL BANKER / SPRING 2021
INTRODUCTIONS
Contents
From the Master: the WCIB vision and strategy 04
LOOKING OUTWARDS CHARITY AND EDUCATION
Resilience and renewal for the City The great charity pitch 26
of London 06
The power of an hour 27
Keeping the Square Mile competitive 07
Helping the young advance 28
2021: the year of the squeeze 08
Financial education at the forefront 29
Bankers and sustainable development 10
Patient capital and the energy transition 11
Measuring and managing ESG 12 LOOKING INWARDS
ESG-compliant investment 13 Enhancing the Livery experience 30
Modern Monetary Theory: Membership thrives, even in the pandemic 31
not so modern? 14
The first year of the Diversity
Central banks and digital currencies 15 & Inclusion Sub-committee 32
A cashless economy? 16 New Freemen 33
Financial fraud: ever with us 17 A fresh face at the Associates 34
Keeping risk in perspective 18 The growing role of communications 35
Brenda Trenowden: the Lockdown events 36
“accidental banker” 20
From the Clerk 39
Leadership lessons from the Army 22
Forthcoming events 40
Two scholars give their view on the year 25
THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS 3
INTRODUCTIONS
The WCIB vision and strategy
for the next five years
THE MASTER OUTLINES THE COURT’S THINKING ON THE WAY AHEAD
FOR THE COMPANY AS IT APPROACHES ITS 20TH ANNIVERSARY
At the WCIB Court meeting in January, WHAT THE WCIB IS ALL ABOUT online world; we actively engage in
we discussed the objectives of our important charity and education work,
Company, noted all the achievements in (a) To create and accumulate funds with key prize-winning activities and
our first 20 years, considered a SWOT for the benefit of Members of the support in financial services education;
analysis, and then reset the 2020 vision Company and to apply the same and we continue to provide new ways
via a strategy for the next five years. for the purposes of advancement to communicate our wide-ranging
So I wanted to provide everyone with a of the interests of the Company activities.
brief summary outcome. and its Members the relief of
existing Members retired Members
The first step is to remind everyone of or Members suffering hardship
what the WCIB is all about, hence I have and other necessities persons
We also identified the
included several quotes from the Royal engaged or having engaged in the retention and growth of the
Charter: Industry or dependent upon any
such person and for education in
membership as a key ongoing
THE COMPANY’S PURPOSE matters relating to the Industry and necessity of everything we do.
for scholarships prizes and research
‘To promote the development and in connection therewith, and for
Importantly, we need to rely
advancement of the science art and charitable objects; on all of our members to help.
practice of the international banking
and financial services industry (“the (b) To promote, support and
Industry”) for the benefit of the public encourage standards of excellence,
and to afford means of professional and integrity and honourable practice You all know what a wonderful
social intercourse and the exchange in conduct of the Industry and to pleasure it is to socialise with like-
of information between members of uphold the established traditions minded bankers and financial services
the Company, those who practice in of the Industry; to aid Societies professionals at magnificent venues
the Industry and those who benefit and Institutions connected with such as Mansion House; together with
therefrom …’ such Industry and to award prizes, the importance of giving back via all the
scholarships or exhibitions to charity and education work and grants
There is also additional wording which persons engaged in the Industry that all of you so magnificently support.
reminds us of the need… or elsewhere in industry and But unless all of you spread the good
commerce generally; word, other potential members, in
particular females and those from
(c) To further interest within the overseas, simply will not get to hear
Worshipful Company of the history, about us and will miss out on joining
traditions and customs of the City this wonderful Company. So please
of London to support the Lord introduce us to new members.
Mayor, Aldermen and Corporation
of the City of London in all matters
relevant to the life and dignity of
the City of London.
The good news is that we have been
actively pursuing all of these. We
have built a very good reputation
as a successful modern livery
company; we have over 600 members
and representation from over 50
nationalities; we have a very active
programme of events which has been
successfully adapted to the current
4 THE INTERNATIONAL BANKER / SPRING 2021
INTRODUCTIONS
As the table below shows, I also wanted promote the progression of members We will also continue with our active
to highlight the key Committees, the to being Liverymen, and support those events programme, important military
Chairs and Deputies, and the various who want to join the Court and aim to affiliations, and other programmes
working groups, that play a vital role be the Master. such as mentoring the Mansion House
in thinking about and executing our Scholars.
vision. Each Committee has some key We will also continue to run a
aims and will now seek to deliver these. successful company aided by our Clerk. All of this work will be supported
The column on the right shows some Our finances and £1m investment by ongoing enhancement of our
key targets running through the next portfolio continue to be well managed. communications via our magazine and
few years. We are also reviewing our activities to digital channels.
make sure we adopt the latest advice
This also ties in with my theme of on ESG. I hope you have found this summary
“Freeman, Liveryman, Master”. We useful. Please contact me, the Wardens,
will actively promote succession We will continue to provide over Committee Chairmen or our Clerk if
planning at all levels, seek to strengthen £100,000 of charitable grants each you would like to play a more active
the Buddying and Journeyman year and have decided to set up a new part in this vision and strategy for our
programs, encourage more female Fundraising Committee to co-ordinate ongoing success.
and international members, actively our fundraising and legacy initiatives.
WCIB COMMITTEES AND VISION
CHAIR AND KEY WORKING TARGETS OVER
COMMITTEES
DEPUTY GROUPS / PROJECTS NEXT FIVE YEARS
Robert Merrett, Refresh all Terms of Reference
Master’s Nominations, ESG
John Bennett Succession Planning
FME 500+
Tim Skeet,
Membership Diversity & Inclusion, Buddying female >30%,
Mary Foster
international > 30%
Jordan Buck, Minimum 1 event per month
Events
Chris Sanders New committee volunteers
Charity & Education Wide range of charities,
Ali Miraj, Grants £100,000+ pa
Schools Working Group,
Tom Newman New committee volunteers
Educational Awards Group
Jason Van Praagh,
Fundraising Fundraising and Legacy Donations Raise extra £50,000+
Tom Newman
Minimum 6m liquidity
Jenny Knott,
Finance Investments Investment return above inflation
Stephen Evans
Member funding for key projects
Tim Jones, Magazine Editorial Panel, 5+ female members on panel
Communications
John Thirlwell Digital Platforms 450+ on LinkedIn
Simon Hills, Journeymen, Military Affiliations,
Liverymen’s 225+ Liverymen
David Dwek History project, Anniversary book
Associates Jago Toner
THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS 5
LOOKING OUTWARDS
Resilience and renewal
for the City of London
LIVERYMAN PROFESSOR JOHN RYAN REVIEWS THE CHALLENGES
On 1 January 2021, UK financial firms lost blanket access to working so far. Amsterdam has overtaken London as Europe’s
the EU under the single market passporting regime and are largest share trading centre in January 2021. The UK’s share
now reliant on Brussels granting regulatory equivalence to its of the Euro-denominated swaps market decreased from 40%
financial services sector. in July 2020 to 10% in January 2021 with mainly New York,
Paris and Amsterdam benefiting. The City of London and
The political imperatives of Brexit have made the negotiations the UK government cannot afford to be complacent. Brexit
exceedingly difficult. There have been two main Brexit drivers will over the next few years have a negative impact on jobs,
which have been largely detrimental to City interests: first, activity and tax receipts.
Getting Brexit Done by concluding a boilerplate agreement on
goods, while neglecting financial services; second, leaving the After the recent tensions regarding the Northern Ireland
single market and ending freedom of movement making a deal Protocol, the deeply eroded level of trust between the EU
on financial services near to impossible. and UK is making a memorandum of understanding on
equivalence probably untenable in the foreseeable future.
The European Commission’s assessment of the Brexit deal
bluntly says the EU “will consider equivalence (decisions)
when they are in the EU’s interest”. EU Financial Services
Commissioner Mairead McGuinness said on 19 January 2021
that Brussels would not grant Britain’s financiers access to the
For the City of London this means that it
bloc before assessing the risks to financial stability – and that will have to adapt to the harsh realities of a
to do otherwise would be an “experiment”. “It’s not a question
of Europe trying to bring everything back home, not at all. It is
hard Brexit, perennial tensions with Brussels
a question of Europe ensuring that at home Europe is strong, and growing competition from continental
and can be strong globally,” she said.
financial centres and from New York.
In a recent speech, Bank of England Governor Andrew Bailey
said it would be unfair of the EU to impose tougher rules on
the UK than it has on other non-EU countries, insisting that
Britain could not accept becoming a “rule-taker”. In his view, However, it is unlikely that there is a single city in the EU with
the UK can make the most of its opportunity to diverge, if the physical infrastructure or regulatory infrastructure to
needed. At the same time, the UK will continue to help set the take the role London has. Instead, we will see regionalisation
agenda at the global level, vital for the raft of firms in the City. and fragmentation in services. The most significant winner
is probably going to be New York, as the only global financial
The City UK, the industry group for UK financial services, centre that could absorb migration of jobs and services from
published a paper outlining the “key outstanding issues” London on a large scale. There are however also signs of
facing Britain’s financial and professional services industry. resilience and it is noticeable how the view in the City has
Their appeal for greater access to the European Union single changed. London has gained a competitive advantage in some
market comes amid fears of the deteriorating relations of the of the key growth areas, such as green finance, building upon
UK government with the EU which could leave large parts of its previous strong position in growth areas such as Fintech,
the City of London at a distinct disadvantage in the years to Islamic finance, and the offshore Chinese renminbi.
come. UK financial firms are far from reaching certainty in the
post-Brexit world. As anticipated in late January, in a blow to London’s inherent characteristics are acknowledged as
the City of London, the European Commission announced strengths such as English common law, time-zone, language,
that the US’ financial regulator’s rules are equivalent to the flexible workforce, its creative hubs as well as the skills,
EU’s, allowing American competitors to operate in a market knowledge and experience based here. London has proved
that London’s clearing houses have dominated. to be a good place to do business in, and from, hence its
global appeal.
The EU sees Brexit as a once in a generation opportunity
to rewind the clock 20 years. If the UK had got a more London will recover at some stage but will have to adapt and
comprehensive deal or a higher degree of equivalence, fewer live with the twin impacts of a world in which COVID will not
firms would have moved jobs and activities to the EU or will disappear any time soon and a Brexit deal that is in all but
do so in the coming months The EU’s approach appears to be name a No Deal to many sectors of the economy.
6 THE INTERNATIONAL BANKER / SPRING 2021
LOOKING OUTWARDS
Keeping the Square Mile, London
and the UK competitive
CATHERINE MCGUINNESS, CHAIR OF POLICY AND RESOURCES
AT THE CITY OF LONDON CORPORATION
A recent report by the City of London A recurring theme from the global
Corporation found that London and firms, the investors and the senior
the UK have the strongest overall leaders that the Lord Mayor and I
competitive offering of all financial speak to, is that London is London
centres surveyed. Whilst several global because of its people, diversity, and
centres had strong offers on some innovation ecosystem. By ensuring
dimensions of competitiveness, the that the City is London’s (and the
UK performed consistently strongly world’s) thought leadership hub, we
across all measures. These included will grow an innovation ecosystem
innovation, reach of financial activity, where firms and entrepreneurial talent
resilience and business infrastructure, will continue to succeed. Fostering our
talent and skills, and regulation. already world leading offer for green
finance, fintech and other fast-moving
However, economic uncertainty sectors will be critical. Businesses of all
in the wake of the pandemic and a sizes need to see the City as the place
new relationship with the EU, mean to establish, grow, and transform to
this is no moment for complacency. meet future challenges. The financial
The COVID-19 crisis has significantly and professional sector and tech are
disrupted traditional working the backbone of the City economy
patterns in financial services, as in – to broker growth in all strategic They recognise the value of working
other industries, and accelerated sectors, the City of London can be a alongside customers, clients and
technological trends. With the right catalyst for cross-industry, national and competitors. Therefore, we know that
action, London’s business hub will international partnership, attracting there will, in the long term, always be a
emerge from the pandemic crisis experts from all over London and the need for a physical hub. Undoubtedly,
stronger than it entered. The London globe and breaking down industry siloes. workplaces will adapt to changes in
Recharged: Our Vision for London in new ways of working. Transforming the
2025 report, produced in partnership day-to-day of life within workplaces will
with Oliver Wyman and Arup, is a call make going to work a way to become
for action by business, government and
Business thrives when its healthier – mentally and physically.
academia, to work together to ensure people thrive. We need to This means investing in tomorrow’s
medium-term recovery for London tech, a focus on resilience, and building
and the UK. The report shows that
make sure the City is a great sustainability into individual offices and
London’s future success will depend place to be for the workers at new developments.
on collaboration, innovation and
sustainability.
the heart of firms. There are several shared challenges
where collaboration, both at home and
Recommendations need to be followed internationally, will be crucial in order to
with action. To take this work forward, This means nurturing a vibrant retail, find common solutions. These include
the committee which I chair – our Policy hospitality, tourism and cultural tackling climate change and responding
and Resources Committee – along offering that is engaging, dynamic, and to the digitalisation of the economy.
with our Planning and Transportation animated. More crucially, people need
Committee, are developing a blueprint to feel that they belong. By promoting, The UK must also show global
to address the most urgent issues to celebrating and enabling diversity leadership as we take over the G7
keep the Square Mile competitive. Our and inclusion across the Square Mile presidency and prepare for COP26 in
Taskforce will ensure the Square Mile is we’ll extend a warm welcome to all Glasgow. Our financial and professional
the world’s most innovative, inclusive communities. The industry leaders, services sector has a vital role to play in
and sustainable business eco-system: an and the international investors we talk tackling climate change and driving the
attractive place to invest, work, live and to, have overwhelmingly reported that recovery from the COVID-19 pandemic.
visit – as is London more widely. they are committed to central London.
THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS 7
LOOKING OUTWARDS
2021: the year
of the squeeze
MARY JO JACOBI, ONE OF OUR MOST
DISTINGUISHED FREEMEN, CASTS HER EAGLE
EYE TOWARDS HER NATIVE USA
“Save me, save me, save me from this pandemic. In the US stock market, With a 50:50 Senate giving Democrats
squeeze” were the words of Ray Davies a group of online retail investors in control only with the vote of Vice
in The Kinks’ chart-topping hit “Sunny the US acted in concert to squeeze President Kamala Harris, and Democrat
Afternoon” in the summer of 1966. hedge funds holding the most heavily- House of Representatives Speaker
Davies said he was referring to the shorted stocks, creating volatility in the Nancy Pelosi’s majority shrunk to only
squeeze by high taxes taken by broader markets. Elsewhere, shares nine seats, the new President is already
Harold Wilson’s government from “the of energy stocks such as ExxonMobil, squeezed. He is sandwiched between
wealth I had created for myself.” BP and Shell have been squeezed by his moderate inclinations, shared by
climate concerns and the move toward a tiny smattering of Congressional
electrification. In US fiscal policy Democrats, and the force of
the prospect looms of a squeeze of Congressional progressives demanding
2021 is proving to be a year significantly higher taxes on individuals that he go big on spending to solve
of new squeezes. Institutions and companies like what prompted Ray America’s ills from COVID to climate
Davies to write “Sunny Afternoon”. change, crumbling infrastructure to
and relationships are facing a soaring student debt. As we saw in the
variety of squeezes, pressures There are squeezes in American Senate’s 12-hour Vote-a-Rama on the
politics, too. President Joe Biden massive $1.9 trillion COVID package,
on how they operate and was elected as the widely-despised going big seems mean going it alone
forcing them to change. President Donald Trump was squeezed with none of the promised unity or
out of office by a coalition of organised bipartisanship.
labour and progressive activists, a
dash of Republicans and dollop of Biden’s Republican opposition is
To take the most obvious example, big business that, according to Time being squeezed, too. Without Trump
the response to COVID is squeezing Magazine, worked for two years to the Party is without a clear leader,
out many countries from the rollout “fortify” the election to ensure Trump’s finding it difficult to define Trumpism
of the vital vaccines to stop the ousting. without Trump and struggling to deal
8 THE INTERNATIONAL BANKER / SPRING 2021
LOOKING OUTWARDS
with those who want to eradicate the
former President versus those who Will it work, or will the Special Relationship be squeezed out by
believe his policies underpin their
way forward in the 2022 and 2024
the EU or a broader shift to China or Asia? The answer lies in
elections. Traditionally the party of the 46th President’s sense of what best furthers his supporters’
fiscal moderation, they surrendered
the fiscal prudence high ground as
interests - and therefore his own.
the national debt soared from $20 to
$27 trillion in four years. Republicans
may be squeezed, but not squashed.
Although losing their Senate majority, priority, another relationship must invited to visit the House of Commons,
they made serious gains in the House be considered, one that has been key a courtesy denied his immediate
and they have full control of the to US foreign policy since the end of predecessor. Will it work, or will the
legislative and executive branches in the War of 1812: the UK-US Special Special Relationship be squeezed
24 states whilst Democrats only enjoy Relationship, symbolised by a bust of out by the EU or a broader shift to
such trifectas in 15. Winston Churchill. Illustrating shared China or Asia? The answer lies in the
values and trust, the bust was lent to 46th President’s sense of what best
President George W Bush after 9/11 furthers his supporters’ interests - and
and has come and gone in the Oval therefore his own.
Even as the spending policy Office, removed by Barack Obama,
restored by Trump and now removed
squeeze stymies consensus again by Biden. Is there a message
at home, President Biden being sent here?
is touting a renewed The American Embassy in London’s
commitment to global website states that the US “has no
closer ally than the United Kingdom,”
alliances, with rejoining the and an Embassy video claims that
WHO and Paris Climate investments by the two countries in
each other matter more than “just a
Change Agreement among bust”. A bilateral trade agreement was
his first official acts. expected to be completed quickly after
Brexit, but Treasury Secretary Janet
Yellen said this isn’t high among the
President’s priorities.
He pledged to “repair our alliances and
engage with the world once again”, Another signal lay in the different Mary Jo is an internationally-renowned
confronting abuses whilst cooperating summaries of the initial call between expert in reputation, brand and crisis
with “competitors”. He described the President and Prime Minister management and a trusted advisor on
his conversations with allies as “re- Johnson: both commented on a desire the complex dynamics of international
forming the habits of cooperation and to strengthen the relationship, but only corporate, economic and governmental
rebuilding the muscles of democratic the PM said the conversation included relationships. Her expertise was honed
alliances.” Biden claims that the days of mention of a trade agreement. in the C suites of some of the world’s
“rolling over” to Russia’s actions “are largest corporations, including Lehman
over” and that he will “confront” China Like Obama, Biden opposed Brexit. Brothers and HSBC, and among the
whilst being “ready to work with Beijing It remains to be seen whether his power brokers of Washington and
when it’s in America’s interest”. multilateralist pro-EU preferences will Westminster, where she was appointed
colour his approach to the Special to office by two American Presidents
Iran, however, presents another Relationship. An indication may come and two British Prime Ministers. Like all
squeeze: Biden must decide soon in June at the G-7 meeting in Cornwall. of our contributors, Mary Jo has kindly
whether to fulfil his campaign Plans are underway for Her Majesty provided her personal views.
promise to rejoin the 2015 Joint The Queen to host him for a private
Comprehensive Plan of Action within meeting at Buckingham Palace, making
his first 100 days. But the Middle East him the 12th President she’s met
and Iran are quite different from when during her 69-year reign.
he left office as Vice President, and
his willingness to confront Iran will be This and other Buckingham Palace
tested. With international engagement events will be part of a broader charm
and multilateral alliances a Biden offensive that sees the President
THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS 9
LOOKING OUTWARDS
Bankers meet the challenge of the
UN Sustainable Development Goals
WCIB MASTER ROBERT MERRETT SHOWS HOW STANDARD CHARTERED AND BGF USE THEIR
ASSETS TO HELP MEET THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
Bill Winters, Group Chief Executive, are struggling to raise finance for their Commercial & Institutional Banking
Standard Chartered, is in no doubt net-zero transition.” at the bank, has commented (in the
about the challenge the journey to bank’s Sustainable Finance Impact
net-zero carbon emissions presents Daniel Hanna, Global Head of Report in September 2020): “While
to bankers: “Good intentions are the Sustainable Finance at the bank believes we are a leading international bank,
first step towards sustainable change. that “the world needs corporate leaders 91% of our sustainable finance assets
Now is the time to translate strong to be climate leaders. Governments, are located in emerging markets where
words into bold action. We need to investors, companies, and consumers the need for finance to be a positive
understand how far companies have need to rapidly scale renewables as a catalyst is greatest. Our financing of
come on their journey, what’s blocking source of power, put ESG at the heart solar projects in India, for example, will
their path and what might help them of their business and investment plans, help avoid over seven times the CO2
move faster.” and develop low carbon alternatives from a similar-sized project in France
for emission intensive businesses. given the current sources of power on
He was introducing a ground-breaking We need to catalyse, standardise and those countries’ grids.”
survey – “Zeronomics” – of senior democratise access to sustainable
business leaders and investors finance to drive greater capital to Standard Chartered has published a set
published by his bank in March 2021. those facing the greatest risk from of “Sustainability Aspirations,” which
The study reveals that most companies climate change and the regions where build on three sustainability pillars
intend to transition to net-zero by there is the greatest opportunity to and has measurable targets to show
2050 but have yet to take the action leapfrog to low carbon technology and how the bank is achieving sustainable
needed to get there. “A majority business models.” outcomes across the business.
cite funding as an obstacle, saying
they need medium to high levels of Standard Chartered has reported that it
investment to transition to net zero,” has provided $24.3 billion of sustainable
says Mr Winters. “Carbon-intensive finance solutions as of December 2020.
The three pillars are
industries and emerging market The bank has reached more than 1.3m Sustainable Finance, a
companies struggle the most with people through loans provided to micro
funding. One reason for this might finance institutions and over 20,000
Responsible Company and
be an unintended consequence of small and medium enterprise loans Inclusive Communities.
the rise of environmental, social and have been disbursed. The bank also
governance (ESG) investing, which reported that it reduced the carbon
means that carbon intensive companies emissions of its operations by 37% in
2020. In response to COVID-19, the • The first of these includes the
bank provided $27.8m to community target of $75 billion for sustainable
organisations across its markets for infrastructure projects and renewable
emergency relief. energy projects between the years
2020 and 2024.
Its total loans and advances to • The second includes a commitment
customers were $281.7 billion as of 31 to reducing the bank’s own impact on
December 2020. Hence the $24.3 billion the environment. Examples include a
of sustainable assets represents just reduction in annual office paper use
8.6% of the total. But the bank’s target of 57%, with a reduction of just over
is to increase sustainable assets to $75 50% achieved by December 2020,
billion by the end of 2024, which would and having all energy from renewable
see this percentage grow to potentially sources by 2030.
over 26%. It also shows the magnitude • The third includes a commitment to
of adjustments that all banks will need to invest 0.75% of prior year operating
make over the next few years to achieve profits in local communities for health
a better environmental profile. and education. For 2020, it invested
Simon Cooper, CEO, Corporate, $95.7 million, representing 2.6%.
10 THE INTERNATIONAL BANKER / SPRING 2021LOOKING OUTWARDS
“Patient capital” to fund
the energy transition
Stephen Welton, executive chairman sustainability efforts. He says: “Our
of BGF (Business Growth Fund), says: mission at BGF is to invest in the growth
“As we come out of the COVID-19 economy and make a real difference
crisis, a major and radical shift to new to growing companies in the UK and
sectors of the economy is now going Ireland. That means playing our part in
to happen much faster. Top of the list supporting the transition in all sectors
is the environment. Turning net-zero to net zero carbon emissions by 2050,
emissions pledges into reality is a huge or 2045 in the case of Scotland. This is
opportunity for investors, but it requires BGF’s responsibility, but it is also good
a significant amount of capital. BGF business. Companies involved in the
plans to increase our investments into clean economy have strong growth
sustainable businesses from 5% today to dynamics, a great deal of government
up to 20% in the next 18 months.” and regulatory support, and good exit
prospects. This makes for an attractive
BGF was set up in the wake of the global investment proposition.”
financial crisis to provide much-needed
equity finance to small and medium- “We consider the sustainability sector as
sized businesses, which had seen companies involved in carbon reduction
their access to capital dry up during and resource efficiency, though in
the credit crunch. Since inception in reality this is a major investment theme
2011, BGF has invested some £2.5 across all sectors. However, most of
billion in about 400 businesses in the our carbon emissions are from four
UK and Ireland. BGF’s financial backing broad areas – energy systems, buildings,
is supplied by Barclays, HSBC, Lloyds mobility and industry.” recent investments, Bramble Energy
Bank, NatWest and Standard Chartered. and Aceleron, are both part of this
BGF has a network of 16 offices across “I am excited by the sheer scale and broad theme, and there are many more
UK and Ireland. impact of the UK’s offshore wind sector exciting storage and grid management
with huge additions in generating technologies being developed out there,
BGF provides “patient capital”. capacity planned for the next ten years. including batteries and hydrogen. This
The model is to make investments This comes with a need to engineer, goes alongside the need to rewire the
of between £1-15m and to invest install, monitor, maintain, repair and country for the end of sales of internal
as minority shareholders, so that replace a lot of infrastructure. That’s combustion engines in 2030. The UK
management teams retain control. This a large opportunity for the UK’s and has an innovative automotive base, and
allows companies to grow at the pace Ireland’s small and medium-sized clean vehicle technology is moving on at
that is appropriate for them. BGF has businesses.” great pace. Similarly, the imminent end
achieved more than 80 exits to date. for new gas boilers and development of
“With renewable energy comes a modern heating systems and sustainable
Mike Sibson, head of the Aberdeen need to store power, whether at the building materials will make a huge
office at BGF, is heavily involved in BGF’s grid level, or at a local level. Our two difference to our environment.”
Green goes the City
The City of London Corporation has a new Climate Action Strategy, approved by the councillors in October 2020. The
strategy includes a new £40m green energy agreement with Voltalia to buy all the electricity produced by a new 95,000
solar panel farm in Dorset for 15 years. The capacity of 49.9 megawatts will provide over half the City Corporation’s
electricity, powering buildings including its historic Guildhall, Mansion House and the Barbican arts centre.
So in future, when WCIB members are attending events in the City of London, they could well be enjoying the benefits of
electricity produced with lower CO2 emissions.
THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS 11LOOKING OUTWARDS
ESG: “If it cannot be measured
it cannot be managed”
FREEMAN PAOLA BERGAMASCHI BROYD ON HOW PETER DRUCKER’S FAMED
MANAGEMENT DICTUM IS BEING BROUGHT TO BEAR IN THE WORLD OF ESG
The value of global assets applying strategies and ESG indexes captured profit organisation, has developed
environmental, social and governance about 60% of new asset inflows in industry-specific standards across
data to drive investment decisions has the U.S. in 201 and the trend is not environmental, social, and governance
almost doubled over four years, and weakening. The wall of liquidity and topics, working toward a consensus on
more than tripled over eight years, to savings generated by the everlasting the sorts of disclosures that the issuers
$40.5 trillion by the end of 2020. low interest rate environment has of securities should and will make to
There are seven key types of been exacerbated by the COVID their investors. In November 2018,
responsible investment strategies pandemic and it is boosting the ESG SASB released complete standards
distributed on a spectrum : negative or passive alternatives as the cheapest for 77 industries. A separate source
exclusionary screening, ESG integration, and quickest way to participate in of guidance on the specific issue of
corporate engagement, norms- responsible investing. climate-related transparency ( a subset
based screening, positive screening, of the overall ESG universe) is the Task
sustainability-themed investing and With investment products increasingly Force on Climate-related Financial
impact investing . characterised by so many different Disclosures (TCFD), which was created
shades of grey all under the same under the umbrella of the Financial
In 2016, negative screening represented banner of “ESG” how can the individual Stability Board in 2016.
66% of responsible assets under saver navigate the waters with clarity
management, while ESG integration and identify what really reflects his/hers Over the past couple of years the EU
accounted for 45%. But asset appetite for responsible investing? The Technical Expert Group has created
managers are currently opting for more key issue to achieve transparency and a taxonomy for sustainable finance,
sophisticated strategies that couple avoid “green washing” is increasingly supported by a technical screening
exclusions of controversial industries one of agreed standards. list of criteria for 70 climate change
with ESG integration and a positive or mitigation and 68 climate change
best-in-class screening approach (the adaptation activities. But unity and
latter is estimated at only 2-3% of the convergence is going to be the name of
total at this point). It is very important
The urgent problem to solve the game. Fragmentation is the enemy.
to understand that positive screening is one of agreeing on a unified
is what drives really better behavior
at the corporate level given the
set of criteria, standards and
granularity of the research attached to rules that would parallel the
the investment decision. As highlighted
in the latest Opima report : “ With
work done by the Financial
positive screening, you’re selecting Accounting Standards
stocks within, say, the oil industry, but
you’re selecting the best-in-class within
Board (FASB) on corporate
the oil industry.” accounts eons ago.
Active strategies represent the
majority of ESG-related assets under
management, at 75% in the U.S. and The Sustainability Accounting
82% in Europe. However, passive ESG Standards Board (SASB), a non-
12 THE INTERNATIONAL BANKER / SPRING 2021LOOKING OUTWARDS
Are your investments
ESG compliant?
COURT ASSISTANT JENNY KNOTT, CHAIR OF THE FINANCE COMMITTEE
The ESG movement is a force for good. However, there is a Rules, and the Eco Label for Retail Financial Investment
lot of confusion out there when investing. Let’s recap some of Products Regulation.
the basics first.
Given that ESG is attracting a great deal of attention, why is
Environmental, Social and Governance (ESG) criteria are the there so much confusion around investing? Let’s start with
measures used to evaluate non-financial performance; that the obvious. What is ESG Investing? Put simply, it’s about
is the sustainability and critical impact of an organisation and aligning your values with how a company treats the planet,
its social value to the community. They commonly include people and how it is run. And, by the way, ESG is an umbrella
considering the organisation’s policies, practices and activities term which covers a a maze, including Sustainable Responsible
in relation to the three themes: Investments (SRI), Sustainable Investments, Green Funds,
Ethical Investments, Impact Funds and much more.
• Environmental Factors. Examine how a business performs
as a steward of our natural environment, including: waste Let’s consider some of the factors that may help you better
and pollution; resource depletion; greenhouse emissions; determine whether your investment is ESG compliant:
deforestation; and climate change.
1. The first factor to question concerns the stringency
• Social Matters. Look at how a business treats people employed by the ESG fund, since they apply a broad
namely: employee relations and diversity; working conditions; spectrum of censoring when selecting their ESG
local communities; health and safety; and conflict. investments. Does the fund merely “consider” ESG factors
and avoid the obvious fails or does it “focus” on a particular
• Governance Considerations. Evaluate how a business area? An Impact Fund which seeks businesses with a real
polices itself and how it is governed. Consider: strategy; positive impact in relation to certain criteria such as energy
executive remuneration; donations and political lobbying; efficiency or fair pay would be more stringent. A Sector or
corruption and bribery; and board diversity and structure. Thematic fund would be the most conservative as they only
invest in companies that are involved in achieving a specific
ESG is linked to the UN’s Sustainable Development Goals purpose, for example, clean water or clean energy.
published in 2015 with a call to action to end poverty and to
protect the planet to ensure all enjoy peace and prosperity by 2. The second factor to examine is the concept of screening.
2030. What methodology does the fund employ? Screening can
just mean “screening out” or eliminating the ‘worst of the
ESG is further embraced by the Stakeholder Capitalism worst’, as opposed to “positive screening” where the fund
Movement led by Professor Klaus Schwab, the Chair of the actively seeks investees involved with and focussed on
World Economic Forum and which formed the basis of their activities that match positive ESG criteria.
Davos Manifesto in 2020.
3. Finally, beware of the ESG index. There are many ranging
from Morgan Stanley’s MCSI ESG index that focusses only
on financially-relevant risks, to that of the FTSE which they
The mission being to measure a allege, look for evidence of changing corporate behaviours.
company’s performance success not ESG ratings are meant to provide transparency, hold
companies responsible for the way they make money and
by profit but well-being. the quality of decision-making in a company.
It is clear we cannot simply leave it to funds to self-regulate
The white paper published in September 2020 recommends what matters. It is unlikely that they will voluntarily align
22 core metrics. standards and definitions, be robustly transparent and
ensure their investees actually deliver improved outcomes.
Regulators too have been busy with ESG and the EU have We, as investors, have to do a bit of digging and ask some
issued several regulations that are in force, or are due challenging questions.
to come into force shortly, including: the Non-Financial
Reporting Directive, the Sustainability Related Disclosures Jenny Knott is a Non Executive Director
Regulation, the Taxonomy Regulation, the Sustainability of British Business Bank
THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS 13LOOKING OUTWARDS
The Tudors, Modern Monetary
Theory, and COVID-19
FORREST CAPIE AND GEOFFREY WOOD OF THE BUSINESS SCHOOL, CITY, UNIVERSITY OF LONDON
(FORMERLY CASS) ON LESSONS FROM HIGH-SPENDING GOVERNMENTS OF YESTERYEAR
Inflation and debt have long been associated with government spending, financing, and borrowing can be found in countries
demands for revenue. There was inflation from around experiencing civil wars or at least serious social disorder. In
the mid-fifteenth century to the Civil War, that is, running these cases the established government has spent either to
through Tudor and Stuart periods. It was driven by an excess attempt to placate the rebellious sector or to suppress it.
of money supply over demand. Sometimes it was gold and With increased spending and falling tax revenues, budget
silver coming from the new world, sometimes a collapse in deficits opened up. When borrowing to cover such deficits
output due to pandemic. But its biggest spike was probably in reaches its limit the authorities resort to printing money.
Henry VIII’s reign, and that was the result of a surge in what Rampant inflation has almost invariably followed. But there
would now be called government spending. were occasions when it did not. What was needed to prevent
such a failure was for the authority to have established a
That is a familiar story. Many countries have experienced reputation for probity and to make a credible commitment to
inflations. Some of these inflations have been due to both service and repay the debts that had been incurred. The
mistakes, but the big ones have been because, just like Henry UK’s behaviour over a long period of war in the eighteenth
VIII, governments wanted resources quickly and did not want century is one example.
to, or could not, raise taxes to pay for them. COVID-19 has
produced another such demand for resources and that has This is not something that can be experimented with. The
given an opening to Modern Monetary Theory (MMT). insidious argument is that “just once will do no harm.” This
is akin to the alcoholic’s “one little drink” cannot matter. But
MMT is the supposedly recently developed view that the of course time and again flirting with inflation has resulted in
government’s printing of money can be carried out (by disaster. In recent times an understanding has emerged that
government borrowing from an obliging central bank) once inflationary expectations have been revised upwards it
without the risk of any negative economic consequences. It is becomes increasingly difficult to deal effectively with inflation.
not new. It has been popular with governments for centuries.
But whenever it has been tried it has been refuted. President Should we be concerned about our rising debt and rising
Biden has advisers who are among its advocates. debt/income ratio? The short answer is not necessarily, and
not unduly, and that there is no need for any immediate
increase in taxation. The debt is sustainable so long as the
rate of interest at which the government borrows is lower
MMT’s advocates do not limit its application than the rate of growth of the economy – which is the case at
to crisis periods. present. All the focus should therefore be on allowing growth
to flourish, and that requires keeping taxes as low as possible.
The UK has on several occasions had debt/income ratios
worse than those of the present and in each case coped with
But the recent COVID-19 crisis has given them the kind of the debt without resort to increased taxation.
opportunity to advance the view. Governments’ responses
to the COVID-19 crisis have meant that large tracts of the COVID-19 has led to a great strain on government finances
economy have been closed down but governments have almost worldwide. This has led both to a belief that money
protected those thrown out of work and in addition have printing brings more goods, and at the opposite extreme that
spent in several other related ways. There has been hugely any debt incurred should be repaid immediately. Both beliefs
increased government spending financed by the central are false. A trusted government can avoid inflation and repay
banks, but a diminishing tax base, growing budget deficits, debt slowly and steadily. Any government with that course
and a spiralling debt and debt/income ratios. available should take it.
The dangers are twofold. The first is that the debt will Forrest Capie, The Business School, City, University of
not be sustainable, leading to all manner of economic ills. London; Geoffrey Wood, The Business School, City, University
The second is that the financing will lead to accelerating of London and University of Buckingham.
inflation and all the consequent damage that follows. When
the pattern just described has been found in the past
it has often resulted in disaster. Most examples of such
14 THE INTERNATIONAL BANKER / SPRING 2021LOOKING OUTWARDS
Central bank digital currencies – is it
time to throw caution to the wind?
FREEMAN MAX ASMELASH GAZES INTO HIS CRYSTAL BALL
AND THE WORLD OF OFFICIAL DIGITAL CURRENCIES
In August 2020, the Bank for International Settlement (BIS) • Addressing the consequences of the decline in cash.
published a seminal working paper. It said that banks have • Meeting future payment needs in a digital economy.
changed their attitude favourably towards digital currency. • Improving the availability and usability of central bank money.
Indeed, they point to a survey carried out earlier in the
same year and found that 80% were working in some way According to the Bank of England, users can register with
towards deploying them. This is not new. We did take payment providers who have access to CBDC. They will
some small steps towards it in the 1990s. Remember the need to use an electronic device such as a computer or
smart card electronic cash system, Mondex? Most thought smartphone with an app. Authorised and regulated payment
it had “failed.” Some saw instead the hand of entrenched providers have user-friendly interfaces connected to the
interests smothering the new-born at birth in Swindon to ledger. The Bank moved the game forward significantly in
stop it usurping their highly profitable worlds. But now many mid-April 2021. In a joint announcement with HM Treasury it
countries are considering digital currency systems, especially announced the creation of a hefty CBDC taskforce for Britain,
in China. And a number are ahead of the UK and the US, by to be co-chaired by Deputy Governor for Financial Stability at
some strides. the Bank of England, Jon Cunliffe, and HM Treasury’s Director
General of Financial Services, Katharine Braddick.
The problem for the central banks is not only about
implementation. It’s also about how they can keep control.
Bitcoin, for example, isn’t controlled by central banks. It
isn’t regulated. The banks have no control over Bitcoin’s
Many countries seem content to take the
issue or authority which has led to criticism of its use for development of CBDC slowly.
illicit purposes. Bitcoin is seen to be deflationary when
compared to fiat currencies which have grown in continuous
comparison to gold. Since the supply of Bitcoin is known, Like the UK, the United States is still discussing the
sceptics are saying many holders will be reluctant to sell, implications of CBDC, with no mention of trials.
which reduces the likelihood of its replacing fiat for day-to- Sweden is one of the first countries in the world to consider
day consumer use, for example, buying weekly groceries. digital currency for real. Its central bank already has a pilot
project with Accenture PLC.
The solution therefore might come from CBDC (Central bank
digital currency). This won’t be run along the same lines as Japan, meanwhile, announced in December 2020 that it
cryptocurrency. There will be some distinct differences. would conduct a feasibility study in 2021 and they hoped to
In October 2020, the BIS published a report taken from a have “some form” of digital currency by 2023. Meanwhile, in
series of collaborations with several central banks and the January 2021, China announced its fourth trial using digital
European Central Bank. The report outlined 16 core features yuan. During 2020 China’s digital currency program launched
a potential CBDC would need. These include: three trials and it has already applied for more than 120
patents for its digital currency. Chinese e-commerce company
• Convertible – The ability to exchange, at par, with private JD.com announced in December 2020 that its fintech arm, JD
money and cash. Digits, would accept digital yuan as payment on some of its
• Convenience – CBDC should be as easy as using cash, a card product lines. China is expected to officially introduce digital
or scanning with a mobile phone. currency in 2022 which will put it ahead of all other countries.
• Accepted and available – CBDC should be accepted like
cash, which will include point of sale and person-to-person. And what does this all mean for dollar hegemony? Will the
Plus, the ability to make off-line transactions (possibly with introduction of digital currency help China to get what it
some restrictions). wants and become the global currency? Put simply, if Chinese
• Low cost – Available at either a low cost, or no cost to end digital currency becomes popular and traders start to order
users. goods from China using digital currency as a payment method
then the demand for the dollar will decrease and, as a result,
There’s no doubt that CBDC will have its benefits. In a Bank it could lose its dominance.
of England discussion paper, published in March 2020, they
include:
THE WORSHIPFUL COMPANY OF INTERNATIONAL BANKERS 15LOOKING OUTWARDS
Time for the economy to go cashless?
FREEMAN MOORAD CHOUDHRY DEBATES THE WORTH OF CASH IN OUR POCKETS
The pandemic stress event of 2020 over-the-counter, online or via
witnessed an expansion in the role of telephone would be undertaken using
the “state” and central government to e-money.
levels not seen since the second world
war, principally with regard to public In some ways this is happening already,
sector borrowing. Something else that in no small part due to lockdown
increased in magnitude was digital policy. In towns and cities throughout
commerce, be this online shopping, the country it is quite common to
online meetings or online transactions. find shops and cafés taking card and
Not only did the number of transactions smartphone payments only, and
made using physical cash fall, so too not accepting cash. This may be for
did the number of businesses accepting health-related reasons, although the
cash as a payment medium. Has the evidence that one can contract the
COVID-19 crisis and “lockdown” policy coronavirus from coins and banknotes
hastened the demise not only of the is not conclusive; but in any case once
office but also of physical cash as well? a business stops taking cash, how likely
And if yes, would this be a positive is it that they will revert to it once the
societal development? virus risk has reduced? consider this as a permanent solution?
This of course is a whole different
This is not an article about Bitcoin. Commercial businesses and financial debate, but it illustrates the extent to
The debate on whether fiat currency market participants have an interest which the state can apply public sector
will be replaced by some alternative in this trend continuing: dealing with resources.
cryptocurrency is a separate one to physical cash involves security, physical
this. Rather, we will assess the impact banking and operational controls that Let us remember this in the CBDC
of commercial transactions becoming are not required with e-money. debate then, because removing physical
entirely electronic, and ask if that is what cash from the economy does not
consumers genuinely desire, irrespective in itself have to worsen the level of
of whether it is inevitable or not. financial inclusion. If every adult citizen
But would a move to cashless in the UK was given a CBDC account at
There has been much comment help or hinder the moves to the Bank of England, the problem would
recently about central bank digital disappear. And before one scoffs at that
currencies, which a number of
increase levels of financial idea, let’s remember that if anyone had
countries are looking into. Investopedia inclusion? suggested in 2019 that the state could,
states that, “A central bank digital or indeed should, pay the salaries of
currency (CBDC) uses a blockchain- millions of its populace for over a year
based token to represent the digital he or she would have been laughed at
form of a fiat currency of a particular The FCA estimates that 1.3 million then too.
nation (or region). A CBDC is adults in the UK do not have a bank
centralised; it is issued and regulated by account. While this is only 2¼% of In theory therefore, the state could
the competent monetary authority of the adult population, as an absolute ensure that every adult that desired it
the country.” number it is a substantial figure. How could be guaranteed financial inclusion
might one address this? by enabling him or her to have their
Practically, this is not a gigantic own CBDC account. If that or a similar
departure from today; as Wikipedia Earlier we highlighted the rise of state solution was not adopted however, it is
states, CBDC is a “form of central involvement in the economy because it difficult to see how exclusion would not
bank money…that is different from is relevant. Consider the government’s worsen if physical cash was withdrawn.
balances in traditional reserve or job retention scheme, now moving Given the steady rise in income
settlement accounts.” So the concept well into its second year. Those not inequality (however one measures it)
of a centralised currency under state necessarily brought up in the Chicago from the 1980s onwards that would
control remains unchanged. School of free market economics surely not be a worthy outcome.
might well ask, “If it can be done for 13
The key word is “digital”. It would be months, why not 13 years?” If we are Moorad Choudhry is an Independent
e-money, held (like cryptocurrency) going to nationalise whole swathes of Non-Executive Director at Recognise
in e-wallets. All transactions, whether the economy in all but name, why not Bank
16 THE INTERNATIONAL BANKER / SPRING 2021You can also read
