This marks another milestone in the pressure to be ‘green’ when investing. Scheme members are already expecting to see a responsible investment approach from their managers, adding to the pressure for trustees to produce a coherent and measured sustainability strategy. These disclosures will further fuel a movement towards responsible pension investing.

In July 2021, pensions minister Guy Opperman described climate change in no uncertain terms, as a “major systemic financial risk and threat to the long-term sustainability of UK private pensions.” While the challenge is very real and very clear, finding the right green pension solution is unfortunately not always as straightforward.

Everyone wants their investments to help in the transition to net zero, but there’s significant debate around how best to make a difference and whether taking ESG into account will affect financial performance.

Empowering investors

At Coutts, we believe that only by understanding which actions taken by investment managers truly make a difference to the sustainability and profitability of companies can we have the fullest impact on the transition to net-zero.

Increased knowledge and communication about effective ESG investing is the key to meaningful change. The default response for many people is to simply shift their allocations to so-called ‘green’ investments, or those that already derive most of their revenue from sustainable activities. Yet the reality is that simply shifting investments from fossil fuel businesses to solar farms won’t be enough to make a difference for the planet.

Such a switch ignores those companies that need support to transition to a net-zero economy, and already have credible plans to do so - even if they are not there yet. We are keenly aware that sustainability is a journey which cannot be undertaken alone. It’s vital we engage with companies at every stage of their path to net-zero and help them change for the better. Research shows that collaboration and engagement adds value, as well as being a truly sustainable approach. At Coutts, we want to lead by example and to encourage others to do the same.

The role of investment managers

Finding out which companies are in the process of effecting a credible transition to net-zero requires serious commitment. It relies on a deep understanding of a company’s operations and strategy which requires relationship and expertise on behalf of investment managers, rather than a kneejerk divestment response. Managers who truly engage, question and are willing to challenge the practices that companies are engaged in can effectively manage the risks to pension funds, as well as make an impact on the planet.

By engaging on these issues, rather than simply divesting, managers can build value and improve outcomes.

A focus on engagement

At Coutts, when choosing where to invest, we focus on stewardship, through both voting and engagement, as well as ESG integration. We know that how a company reacts to its investors, as well as how it integrates its ESG goals, can be financially material – as these aspects of governance are indicative of good management and understanding of risk.

We’re also aware there could be positive financial outcomes when investors engage with investee companies over their low ESG ratings. For example, a 2021 study found that engagement with companies with low ESG ratings could be correlated with financial outperformance compared to their peer group.

The future of green pension funds

As the transition to net-zero continues, all of us will have a responsibility to engage with the businesses we invest in over their investment approaches, climate risk and their plans to reduce it.

Government edicts about reporting on climate change are important but can only do so much. It is also up to us, as investors, to engage positively with the companies we own, to make the biggest difference possible and mitigate the climate-related risks for our members.

At Coutts, by keeping up our rigorous approach to the companies we invest in and continuing to challenge them on their path to net zero, we know we are taking a truly sustainable investment approach, best for our clients, and the planet.

For more information, go to https://www.coutts.com/

1. Borrow Cash From Your Credit Card

In an emergency, you may need access to cash quickly. One way to get cash is to borrow it from your credit card. This can be a quick and easy way to get your money. However, there are some downsides to this method. First, you will likely be charged interest on the loan. Second, if you cannot repay the loan, you may damage your credit score. Consider all of your options before taking out a loan from your credit card. Bad credit loans may have higher interest rates and fees, but they can still be a good option if you need cash quickly and have few other options.

2. Pawn Your Items

If you have valuable items you no longer need, you can always sell them to a pawnshop. To pawn an item, you simply take it to a pawn shop, and they will give you a loan based on the value of the item. You then have a certain amount of time to repay the loan, and if you do not, the pawnshop will keep your item. This is a good option if you have items of value that you are willing to part with for a short period.

3. Sell Your Unwanted Items

You can sell your items online or at a local consignment shop. This is a good option if you have some items that you no longer need or want and you need cash quickly.

4. Pick Up Odd Jobs 

You can advertise your services online or in your local community, and you can often find work within a day or two. You can also control how much work you take on to decide how much money you need to earn. Pick-up jobs aren't always the most reliable source of income, but they can be a lifesaver in an emergency.

5. Access Your Retirement Account

Their retirement account is one of the most valuable assets for many people. While it can be tempting to access this money in times of need, there are several things to consider before taking this step:

1. You will likely incur heavy penalties and fees if you withdraw money from your retirement account before reaching retirement age
2. The funds you withdraw will no longer be earning interest, which can impact the overall growth of your account
3. You may be required to pay taxes on the money you withdraw, further reducing the amount of money you have available

Emergencies can happen to anyone, and when they do, have a plan to deal with the financial stress. Hopefully, you now have a few ideas of ways to get quick cash during an emergency. Remember, it's always best to start with your savings account or checking account as your first line of defence, but if those funds are unavailable, don't hesitate to try one of these methods.

Professional content writer and branding aficionado Annie Button shares some valuable self-accounting tips for freelancers.

A report from Upwork shows that freelance workers contributed $1.3 trillion to the US economy in annual earnings, which were up by $100 million from 2020. Working for yourself brings with it plenty of freedom; you decide when your day begins and when it ends. You can also choose how much or how little you want to work, whatever makes sense for you.

But, while there are plenty of upsides to being a freelancer or self-employed, there are also some things that make life a little trickier. The biggest one is the need to take control of your finances and become an expert in accounting, even if you have no real interest in finance. Fortunately, there are a few simple tips and tricks to make self-accounting easier for freelancers.

Think Of Yourself As A Business

As a freelancer, it can be too easy to not consider yourself as much of a viable business as cafes, florists, or shops nearby, but that’s not the case. Whether you are a creative freelancer or acting as a consultant the principle is the same, you are a business. Experts at Wellden Turnbull, a UK-based chartered accountant firm, agree, “As a freelancer, you are a business owner, and one of the key determinants of your commercial success is how you manage your finances and business accounts”. 

Changing your mindset to think of yourself as a business can help you to create effective accounting and financial management strategies.

Business Or Pleasure, Not Both

Taking the plunge to go full-time freelance deserves credit but it’s important that you commit to it from an early stage. Creating a business bank account that is separate from your personal account makes life a lot easier when it comes to totting up taxes and expenses.

Although not always a legal requirement, it just keeps things simple and is an effective way to begin the process of self-accounting. With just one bank account, everything is going in and out of both your business and your personal life.

It will then take a lot of filtering through and tracking, which is time-consuming. Setting up online banking for your business account allows you to easily track your cash flow and figure out where your earning potential lies.

Track Incomings And Outgoings

Besides any legal requirements, for freelance or self-employed people it’s imperative to track how much money is coming in versus what’s going out. This can determine how much you charge for your services and you'll learn pretty quickly how much work you need to be doing. Then, you will have to decide how much income covers your living expenses and how much you need to live the life you want.

Your expenses should be tracked to better understand where your freelance work is costing you but also because much of this is tax-deductible. That’s a win, especially as you can claim expenses for things like lighting and heating in your home if that’s where you work from.

You can even claim for expenses on small things related to the running of your business, for example, stamps for posting letters or the fuel you may use for visiting and working with clients.

Stay Organised

In a similar fashion to staying on top of your incomings and outgoings, staying as organised as possible will help you in the long term. Did you know that your financial records need to be kept for at least five years? Using receipt makers can help as how you store that data is important and something as simple as a spreadsheet can cover years of invoices and expenses.

Your invoices need to be numbered correctly for traceability. Most invoices will follow some form of sequential numbering, something as simple as 001, 002, 003, etc., or more specific to clients like A01, A02, B01, etc. Automating your invoices makes this process much easier and provides peace of mind knowing that it’s one less job to do.

Embrace Accounting Software

While it’s possible to manage your finances through spreadsheets, or even pen and paper if you prefer, accounting software is perfect for freelancers. Especially for those who maybe don’t have such an organised mind.

Self-accounting software options like QuickBooks, Xero and FreshBooks are purpose-built to make your life easier. You can manage your accounts in a visually pleasing manner and you’ll only have to set aside a small amount of time.

Keep Taxes In Mind

Unfortunately, the ability to avoid paying taxes applies to few people. Freelancers must keep their taxes in mind throughout the year and the best way to do so is by holding money back from each invoice received.

A good ballpark figure to hold back is 25% of your income, which is typically more than enough to pay your yearly taxes. However, if you are fortunate enough to earn a sizable income as a freelancer, you may have to contribute more. For example, in the UK, earnings above £50,000 are hit with a 40% income tax.

Have A Rainy Day Fund

They say you should ‘make hay while the sun shines’ and that sentiment is certainly true for freelancers. Regular employment will see you consistently earn money but freelancing is less predictable. You may find that your services are more in demand at certain times of the year, or that clients can be harder to come by for various economic reasons.

Whatever the case may be, it’s important to consider your overall finances for the year rather than going month by month. Creating good savings habits is a great way to start but that’s not to say you should simply accept lean times.

Alison Grade, the author of The Freelance Bible, says, “We've all got loads of people in our networks, and they might not be able to give you a job, but they may be able to open their address book and help you meet other people.” It’s on you to find new revenues, be that through contacting former clients or reaching out to new ones.

As mutual funds have grown in popularity in India, so has the number of fund houses or AMCs (Asset Management Companies). When you visit the websites of prominent AMCs, you will notice that they provide several sorts of mutual fund programmes to investors.

But have you ever thought about how these strategies came to be? Using NFOs. Investing in a mutual fund scheme during the NFO period could be quite profitable. Consider what NFOs are, how they work, and the benefits they provide.

What Is An NFO?

When a fund house creates a new mutual fund plan, it is referred to as an NFO. Similar to stock market IPOs (Initial Public Offerings), fund houses employ NFOs to obtain initial money for the purchase of securities that are in line with the fund's aim.

The NFO is open for a set length of time, during which investors can participate in the programme at the offer price. The NFO pricing in mutual funds in India is normally fixed at Rs. 10 per unit of the mutual fund scheme. When the NFO period finishes, current or new investors can only purchase units of the plan at a predetermined price, which is usually higher than the NFO price.

Is This A Good Opportunity For You?

The fund house uses an NFO to generate funds from the public to purchase market instruments such as equity shares, bonds, and so on. They are similar to IPOs, in which the general public can purchase shares before they are listed on a stock exchange. Furthermore, the extensive marketing efforts that go into its promotion make it a too-good-to-pass-up chance. However, before selecting one, you should use your discretion and wisdom. Just look at our market for a better view and understand the upcoming NFO of the market.

Types Of New Fund Offers

They are mostly of two types, and they are:

Open-Ended - An open-end fund will announce fresh shares for purchase on a specific launch day in a new fund offer. The number of shares available in open-end funds is unlimited. On their initial launch date and subsequently, these funds can be purchased and sold through a brokerage firm. The shares are not traded on a stock exchange and are managed by the fund business and/or its affiliates. Net asset values for open-end mutual funds are reported days after the market closes.

Close Ended - Because closed-end funds only issue a limited number of shares during their new fund offer, they are frequently among the most heavily marketed new fund issuances. Closed-end funds are traded on an exchange and receive daily price quotes throughout the day. Closed-end funds can be purchased through a brokerage firm on the day they are launched.

Benefits Of Investing In NFOs

1. Disciplined Investing Lock-in Period

Many people invest in mutual funds only to redeem them after a few months. This has a detrimental influence on the investment objectives. However, with NFOs, such as closed-ended NFOs, there is a lock-in term during which you must remain invested. This systematic approach to investing boosts the possibility for profits. Here is the list of a few upcoming NFOs.

• Axis Bluechip Fund
• Invesco India Growth Opportunities Fund
• Mirae Asset Large Cap Fund
• Parag Parikh Flexi Cap Fund
• Samco Flexi Cap Fund
• ICICI Prudential Strategic Metal and Energy Equity FoF Fund
• And More

2. Produce Profits

As previously stated, there might be a large disparity between the NFO and NAV prices. This distinction can be extremely lucrative at times.

3. Invest In Emerging Funds

Many AMCs are currently introducing novel mutual fund plans. Some schemes, for example, invest solely in newly listed stocks and IPOs. In addition, some schemes include hedging tactics to provide higher returns for investors. You can invest in such funds through NFO before they are open to all investors.

This is just the tip of the iceberg, and you can find more that match your financial needs and are good performers.

Should You Be Investing In NFOs?

While NFOs can be quite rewarding, it is incorrect to believe that every NFO would produce large returns. Before investing in NFO, you need to think about a few things. They are as follows:

• The fund house's reputation
• Goals of the Fund
• Returns potential of comparable funds already on the market 
• Investment goal
• In the event of closed-ended funds, there is a lock-in period.

Unlike traditional mutual fund schemes, where you can simply review prior performance before making an investment decision, NFOs do not provide any past performance statistics. As a result, they are risky and are not suitable for risk-averse investors.

Investors That Look To Invest In NFOs

When the markets are at their highest, most investors look for mutual fund investment opportunities. They want to get into the market, whether it's gold or real estate because they believe it will increase further. However, they also favour profitable investments that are offered at a lower cost. Asset management businesses (AMCs) attempt to capitalise on this investor mindset. 

This is why many gravitate toward the ostensibly less expensive NFOs. Investors consider NFOs to be a good value for money and subscribe to them. As a result, the fund houses will be able to meet their goal of boosting their Asset Under Management (AUM).

Conclusion

This can be an opportunity for you to diversify your portfolio, especially given the paperless and instantaneous investment processes. Giving you a heads up - just read the print of the NFO thoroughly and find out if it matches your objective and goal.

Multi-family offices are a great option for high-net-worth investors and families with large estates to manage. In this article, we're going to discuss the advantages offered by multi-family offices, and share some of the aspects to be mindful of when choosing one.

What is a multi-family office?

Before we start getting into the advantages offered, you’re probably wondering exactly what is a multi-family office? A multi-family office is a type of financial adviser that advises multiple clients at once rather than a single client. These firms can generally be found at the centre of a community of lawyers, accountants, and consultants who advise their clients, who are typically from the worlds of real estate, hospitality, oil and gas, and entertainment. But the multi-family office doesn't limit its clients to people in those industries. Most of the wealth of the rich is located outside their industry — professional sports, Hollywood, television, and software, to name a few. Because of this, these wealthy individuals require a little more hands-on care.

Set up of funds

A multi-family office has access to all aspects of an individual's finances and can plan for their eventual demise. Also, for those who hold multiple assets, this provides one location for them to manage all of them, as well as an administrator to help make decisions. This does not replace a family member's role but can give them the time and resources they need to make financial decisions that are best for their families and protect them from "too big to fail" situations.

Monitoring and oversight

When managing multiple family's finances and assets, it can be difficult for a financial advisor to keep all the information up-to-date, so there are benefits to having a team of professionals reviewing everything with the family member, which is almost impossible to do with a family member managing the investments, transactions, and balances. While some professionals will take this into account in how they provide services, the multi-family office has the ability to do this on top of managing many other things.

Managing a non-physical portfolio

There are very few "natural" portfolios out there in terms of a product and strategy that is managed just by portfolio managers. Most clients require an advisor to give them advice on a variety of strategies such as fixed income, equities and multi-asset portfolios, all of which require a different investment approach. A multi-family office can provide a single point of contact that can take the complexity out of this, and also allow the advisor to focus on their clients' financial planning, not just managing assets.

Managing wealth-creation

In a family that has the financial resources of a multi-millionaire or billionaire, it makes sense for a multi-family office to help create or grow wealth. While it can be difficult for an advisor to keep track of all the details, they can manage the planning and create a road map for the family's future. Not only do they help with retirement planning, but they can help build wealth for their children and other heirs as well.

In today's market, it can be difficult for a high-net-worth family to do all their financial planning from a single location. The benefits of a multi-family office can be too hard to ignore and provide peace of mind and visibility into the future of their wealth.

Financial & tax planning

A multi-family office can give the family all the support they need to plan and make decisions for their financial future. Not only can they manage the family's investments, but they can also provide clients with legal and tax advice on estate planning, tax issues, risk management, tax planning, charitable giving and a wide array of other wealth management services. Planning for a financial future is not an easy task, so it is easy to get overwhelmed or lose sight of the big picture. By having a dedicated team, it is much easier to stay on top of what needs to be done.

Global investments

A multi-family office offers a way for families to take their wealth around the world, and manage different assets in multiple locations. Their clients can have a single point of contact to manage everything from their investments in Ireland to their local real estate portfolio. For those that live overseas, it makes sense to have their financial advisor work with local experts to provide advice on real estate, legal and tax laws and more. This provides more transparency to the client and ensures that they know what is going on with their assets in their home country as well as abroad.

While multi-family offices are now on the rise, they are still largely the preserve of the ultra-wealthy and corporations. With recent legal changes, the global financial landscape, and the increased popularity of the sharing economy, this is only set to grow.

The Aspida Group offers a broad range of practical, proactive and forward-thinking advice as well as business support services. The Group is able to assist in matters of fund and wealth management administration, fund structuring, drafting of documentation and agreements, fund and company listings, liaison with regulators, as well as bespoke services including project management, information delivery, business outsourcing, registration services, compliance support, para-legal functions, anti-money laundering and other related areas of activity.

The Group is dedicated to working with clients to provide individual, business-oriented solutions to their problems. Aspida’s independent status and creative approach enable the company to rapidly adapt to business change.

Richard Bray joined Aspida in 2007 and has been working in Fund Administration since 1985, including 13 years with a major Swiss financial institution. Richard has worked on a wide variety of funds, from relatively simple long-only bond and equity funds, through to complex structured products and including private equity, property, commodity, derivative, and hedge funds of various strategies.

Principally from an operational background, Richard has also worked closely with clients with the structuring of their products and following on through to the successful set-up and running of the fund. Richard has in-depth knowledge of all aspects of fund operations across a wide variety of fund types and strategies.

In light of Europe’s new Anti-Greenwashing rules coming into effect, can you tell us a little bit about the impact greenwashing has on the fund management industry?

Greenwashing, which is falsely reporting, or dressing up something to be ‘green’ when it is not really so, is a pernicious threat to anyone looking to place their money in investments that will help to benefit the environment.

Imagine that you invested in a fund that claimed to have green credentials, but then you later found out that the fund invested in items such as oil pipelines (oil being less polluting than coal and transporting it by pipelines is far better and less risky to the environment than tankers), open-cast uranium mining (nuclear power stations don’t emit greenhouse gasses), and rail infrastructure that was primarily used for transporting logs felled from rain forests (because rail is less polluting than road). I think you would quite rightly be rather sceptical of the green credentials of that fund.

The threat of scenarios such as the rather extreme example above could give investors doubts about putting their money into such products. This would then slow down the growth of the green investment fund sector unless some guarantees can be made of the veracity of the environmental claims made in fund literature.

The need to avoid greenwashing and provide a decent return to investors then throws challenges to the fund manager. How can they demonstrate that their investments are truly environmentally friendly? What can they do to engender the trust of the investor community and prove that the trust is well-founded?

The answer to these questions tends to be found within sets of defined rules on investing and reporting.

Although these rules place more work on investment managers and fund administrators, we would expect to see more funds being set up to comply, more money flowing into the sector, more money being invested in environmentally beneficent projects and thus a positive impact on the environment.

What will be the impact of these new rules in your opinion?

Europe’s anti-greenwashing rules are one in a developing line of regulations and guidelines that set out rules for green investing. For instance, we already have The United Nations Principles for Responsible Investing, the Guernsey Green Fund Rules, and the International Capital Market Association’s Green Bond Principles.  So now Europe brings us their Sustainable Finance Disclosure Regulation (“SFDR”) which sits with their Low Carbon Benchmarks Regulation and their Taxonomy Regulation as part of the EU’s commitment to enabling the financing of sustainable growth.

As you may guess from the name, the SFDR focuses on imposing mandatory reporting requirements on Alternative Investment Fund Manager and on UCIT Managers where their products are sold into the European Economic Area. It also demands that investment managers consider the principal adverse impacts of their investment activity. The more claims you make about the product targeting environmentally friendly investments, the more you have to do to back up these claims.

Meanwhile, the Taxonomy Regulation sets out which economic activities can be deemed to be ‘sustainable’, with one of the many defining criteria being that ‘an economic activity should not qualify as environmentally sustainable if it causes more harm to the environment than the benefits it brings.’

So what Europe has done is to provide definitions of environmentally beneficial investments and define reporting standards to follow if you make green investment claims. This should help to give assurance to potential investors that their money will be used as claimed; for example, the oil vs coal example I gave above would, one hopes, fail the Taxonomy test

Although these rules place more work on investment managers and fund administrators, we would expect to see more funds being set up to comply, more money flowing into the sector, more money being invested in environmentally beneficent projects and thus a positive impact on the environment.

Which is undoubtedly a good thing.

What has been the impact of the COVID-19 pandemic on the fund sector in Guernsey?     

The fund sector in Guernsey has proved itself to be resilient during the pandemic. We were forced to adapt to this new environment, this ‘new normal’ but adapt we did. Firms successfully embraced working from home. Virtual meetings became the norm whether between team members, Boards, or potential client meetings.

We were of course able to come out of lockdown and return to the old normal (without travel abroad) sooner than most, but we learned from the experience.

So where are we now, as the world is slowly but surely moving to ‘living with COVID’? Discussions with various people within the fund sector reveal a pretty universal theme of ‘very busy dealing with the new business’. This reflects, I think, on the resilience of the fund sector.

Being able to continue operating throughout the pandemic; and being one of the few jurisdictions that were operating business as usual, allowed us to demonstrate to the finance world the benefits of working with us. Their business was, and is, in good hands.

We do still have some challenges; for example, being able to demonstrate proper substance when people cannot readily come to the island on day trips for board meetings springs to mind. But the fund sector is up to these challenges, and I find that the sector is one that throws up solutions to problems rather than becoming mired in them.

How is Brexit affecting the sector on the island?

Until the UK finalises its financial services agreements with the EU, we will not know the full extent of the effect that Brexit has had on the Guernsey Fund Sector. There were some immediate effects: Guernsey was to be granted third-country passporting rights for marketing funds into Europe, but with Brexit, that process was put on hold.

The Fund Sector has seen the movement of business both ways as a result of Brexit, but our resilience and ability to adapt and move quickly should put us in good stead as matters develop.

What do you think the future holds for funds in Guernsey?

My crystal ball is rather murky on this matter. But our fund sector has demonstrated its strength and resilience. It is able to lead the way in innovations such as the Guernsey Green Fund, it is able to react quickly as financial markets evolve, and it is able to work with Governments and Regulators across the world. While we have strong regulators, and skilled and experienced personnel to support the fund sector, I believe we are well placed to meet whatever challenges are thrown at us.

The only thing faster than light is the speed at which new ESG (Environment, Social and Governance) conferences, funds and advisers are emerging. Every corporate finance desk now boasts an abundance of Green funding expertise, there are more articles on environmental economics and corporate social responsibility than one could ever read, and the market can explain multiple variations of “sustainability” in at least 21 different languages.

Sadly, in my jaundiced dotage, I have become an ESG sceptic. Initially, I welcomed ESG as a promising conceptual framework for improving the global economy – but is becoming something less.

The concept of directing markets to achieve positive social and environmental outcomes for the economy is a good one – whatever nonsense Milton Freidman believed about the purpose of markets only being to deliver returns to shareholders. For years, socially responsible fund managers have tried to steer their funds towards investments likely to do social and environmental good, responding to the public sense of rising environmental and social crisis around the globe.

Now that these fears have become very real, they’ve been formalised – ESG has become an investment imperative.

But it’s also become a lucrative opportunity. ESG “experts” are right up there with compliance officers in getting the big bonuses. Asset management CEOs back it because they believe the ESG zeitgeist attracts client money. It’s all a bit pick and mix as everyone jumps on the bandwagon. There are, apparently, over 160 different voluntary ESG reporting standards and 64 standards-setting agencies worldwide.

Far from empowering stronger corporate governance – by far the most important, yet most neglected aspect of ESG – to frame a discussion on how finance and government can drive social and environmental goals, ESG is morphing into an ill-informed plethora of rules and opinions presented as irrefutable facts. It’s becoming a wall behind which the financially credulous are targets, and where demagogues promote their own agendas. The history of finance is the history of arbitraging bad rules.

The volume of funds with a Green or ESG related theme has doubled to $1.7 trillion over the past year. Predictably, assets perceived to be ESG “good” have risen in price, incentivising the “greenwashing” of less pristine investments. ESG proponents say ESG funds outperform – which is exactly what you would expect when everyone is trying to buy scarce ESG compatible assets. It’s not that green investments are outperforming – their price is distorted by the market’s need to buy them.

According to Fund Performance analyst Morningstar, nearly 250 existing funds were rebranded as ESG, Green, Socially Responsible or Sustainable in the last quarter of 2020. New funds claiming ESG credentials outnumber unbranded firms by at least 10 to 1. Only an idiot would try to finance any new business or project without first carefully outlining its ESG credentials.

There are estimates that over $500 billion of “green/sustainable bonds” will be issued this year. When the European Union recently launched a new social-bond programme to help European Nations recover from the coronavirus pandemic, the press release contained a paragraph about how the funds would be used, and 3 pages explaining how the social impact of the programme would be measured and delivered.

A somewhat bemused UK Government Debt Management Office found itself issuing the first Green Gilt (UK Government Bond) earlier this year – largely because some cabinet minister thought it would be a great idea for the UK to jump on board the bandwagon. I doubt any senior banker, financial or debt management official believes that calling Gilts “Green Gilts” will fundamentally change the UK. Yet the deal was a blowout success as investment managers loaded up to meet ESG quotas.

ESG is morphing into an ill-informed plethora of rules and opinions presented as irrefutable facts.

The variation between what is and what isn’t ESG is often contradictory: one fund will rank a corporate on its gold-star ESG list while another will place the same name on its worst list. It’s not unusual to discover oil majors as large holdings in ESG Funds.

ESG Funds often cite a well-known electric car maker as a core ESG holding, praising it for initiating the shift away from petrol. That firm has a history of spats with the US regulator, bought $1.5 billion of Bitcoin on a whim, is led by a cannabis-smoking CEO who recently changed his title to Technoking, has a poor workplace record, and advocates mining lithium (which is mined in appalling conditions and is almost impossible to recycle). That firm fails every Environment, Social and Good Governance test – but it’s still worth more than the next 5 largest automakers – begging the question of whether ESG investment principals can really direct the market.

A whole industry certifying ESG credentials has sprung up. The nomenklatura of market bureaucrats who administer, report and measure performance want regulations and rules to benchmark and justify their ESG decisions, and the regulators are only too willing to provide them and demand they are enforced. The European Union’s 600-page SFDR (Sustainable Finance Disclosure Regulation) came into effect in March, and it’s a great substitute for any sleeping pill.

Rules and regulation are seldom a problem for Corporate Finance Desks: rules exist to be tested, arbitraged and broken.

Don’t misunderstand me – I am convinced the global economy has major ESG problems to address – but they need to be addressed holistically and sensibly, not in a welter of claims about what is and what is not ESG.

There won’t be much point in saving the environment without simultaneously solving for growth, society and equality. There has to be an agreement on how to allocate scarce financial resources between public goods like infrastructure, transport, health and education versus the investment returns the market seeks from private investments into businesses and commerce. That’s a pretty wide agenda.

Nearly 250 existing funds were rebranded as ESG, Green, Socially Responsible or Sustainable in the last quarter of 2020.

Now we’ve reached a stage where there is a danger of ESG mutating into something very sub-optimal – threatening to distort the efficient allocation of capital in the financial system. In addition to the sudden legion of experts in the field, two other trends are underway:

1. Authorities seek to regulate and control the ESG behaviour of the economy – and nothing is so certain to distort markets and decrease economic efficiency as ill-conceived regulation, and
2. ESG has morphed from being a framework into a quasi-religious crusade, dictating how companies and economies should fit. To question the precepts of ESG, however wrong-headed these are, has become a heresy – punishable by exclusion.

The ESG agenda has quite rightly become all-pervading in markets. It should be about a discussion on investment aims and objectives and the creation of a stakeholder society between government and markets. But rather than promoting discussion, it could become the financial equivalent of “Wokery”. Just as we all fear to offend society’s Woke Collective Mindset, there is a growing reticence to question the developing ESG scripture on what is green, sustainable and socially justified.

Increasingly, it feels like ESG is heading the same way as the woke discussion: telling us what to think, rather than guiding us how to think about how financial markets could improve our planet, economy and society for the benefit of all.

Ill-informed and ill-considered ESG investment rules could prove as distorting to global markets as anything I’ve seen over the past 35 years – which includes multiple Central Bank and government monetary and fiscal policy mistakes, incorrect assumptions about liquidity, leverage, credit and expectations driving multiple market crashes, and financial skulduggery that would make even Lex Greensill blush.

ESG is still an opportunity for success. Government needs to set the agenda towards a stakeholder society that answers the distribution of resources to ensure a sustainable environment and social equality, but when it comes down to the business and commerce aspect of that trade-off, and the role of markets, then there is a simpler solution – Good Corporate Governance, the most neglected ESG principle.

Through 35 years in financial markets, I’ve learnt a simple very basic truth: any firm which is not well managed… will ultimately fail. Any firm that is well managed with clear governance isn’t guaranteed success – but is far more likely to thrive. Good, well-run companies will tend to do the right things. In contrast, firms that are beholden to bad regulation tend to fade into irrelevance.

It’s time to put ESG back on the right track.

You can invest in the stock market directly, meaning when you decide when, how much, and in what way you invest.

For that, you need to have experience in trading on the stock market, the necessary information on market developments, a short-term and long-term strategy, the necessary accounts and trading tools, and most importantly - investment assets.

You can also invest in the stock market through investment funds, which is much more comfortable.

Investing in the Stock Market or Not

This has become a rhetorical question these days. Investing in the stock market is the best way to fertilise your capital and finally make your capital work for you. However, it’s necessary to know how to invest directly in the stock market, and to approach it extremely carefully and only after generous preparations.

If you don’t have the necessary knowledge to be able to invest in the stock market on your own, the best option available to you is through investment funds. Anyone who engages in trading on the stock market and doesn’t have the necessary knowledge is doomed to failure, and even worse - will lose all their invested money.

About 80% of trading on the stock market is done by insufficiently professional traders. That’s why there’s always a great opportunity to make money on the stock market.

Direct Investment in the Stock Market

Direct investment in the stock market means that investors independently hire brokers to whom they give instructions for buying or selling items with which they want to trade on the stock market. They are offered many opportunities: from trading the best shares in the UK, raw materials, derivatives (financial), currencies, cryptocurrencies…

In this sea of offers, investors need to decide what they want to trade with because each of these products requires a different tactic, parameters, trading rules, etc.

In addition to this, it’s necessary to decide the dynamics of trading. This refers to the dynamics with which they want to monitor changes in the stock market. From changes at the level of seconds to changes at the level of days, weeks, or months. The faster the dynamics, the greater the knowledge and self-control required.

Direct Investment Costs

Investing in the stock market isn’t cheap. In addition to the funds you’re willing to invest, it’s necessary to take into account the investment costs, which aren’t small at all. They are different in relation to the amount of planned investment, trading dynamics, conditions under which you start investing…

The most common costs to count on are the cost of opening a trading account, the cost of a broker, the cost of the stock market, the cost of buying, the cost of selling, the cost of taxes, and the cost of withdrawing funds. All of these costs can take away the profits you make through trading, and it’s extremely difficult to make a net profit.

And note: direct investment isn’t recommended for so-called “small“ investors.

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Investing in the Stock Market Through Investment Funds

Investing in the stock market through investment funds is truly the most comfortable way to invest. The investment fund, as a collective investment institution, is designed to help “small“ investors to participate in world markets under the same conditions as “large“ investors. Funds of investment fund members are collected and invested under previously agreed conditions (investment fund prospectus).

The costs are calculated as if invested by one investor and are divided among the members of the investment fund. This reduces investment costs and most of the funds are invested.

Advantages of Investing Through Investment Funds

Investing in stock markets through investment funds has many advantages over direct investing. Let’s list some of them:

• Reducing investment costs
• Provided professional investment management by portfolio managers
• Monitoring market movements by consulting firms
• The possibility of investing in several types of products
• Portfolio diversification by industries, currencies, and geographical diversification
• The ability to choose the risks you want to accept
• Constant control of your investment
• Maximum liquidity of funds
• Cost-benefit transparency

Reducing Investment Risk

The risk of investing in the stock market is always present. We can’t avoid it but we can define and diminish it.

• Defining risk means determining exactly how much risk you’re willing to accept, and therefore how much profit you expect from your investment.
• Risk reduction is achieved by diversifying investments, while the risk is higher if you’ve invested in a smaller number of products.

If you want low risk, you’ll invest in a money market fund, which invests only in bills, bonds, bank deposits, and the like. If you’re willing to accept a higher risk, you’ll look for a balanced fund, which invests part of the money in bonds and part in shares.

For investors who accept even greater risk, the chosen fund is an equity fund. For investors who want a high level of risk, the right choice are hedge funds, Forex, and cryptocurrencies.

Matthew Leaney, Chief Revenue Officer at Silent Eight, examines the issue that correspondent banking poses to the financial sector.

On the one hand, it has long been a key mechanism for integrating developing countries into the global financial system and giving them access to the capital they need. On the other hand, correspondent banking relationships are inherently risky for the global banks that grant access to the respondent bank’s customers without being able to directly conduct Know Your Customer/Customer Due Diligence (KYC/CDD) checks on them.

It’s not a small problem: make access too easy and you risk allowing billions of illicit funds through your door; cut off the relationships and you starve emerging markets of capital and drive their transactions into the shadows.

To its credit, the Financial Action Task Force (FATF) understands the dilemma and has provided continued guidance to clarify the issue. In its October 2016 Guidance on Correspondent Banking Relationships, it explicitly stated that its standards “do not require financial institutions to conduct customer due diligence on the customers of their customer (i.e., each individual customer)”. Rather, they require the correspondent bank to conduct sufficient due diligence on the respondent bank’s processes to understand the risk they present and whether the risk is acceptable within their risk management framework.

Still, many global institutions have decided over the past few years to “de-risk” by shutting down or curtailing their correspondent banking relationships in many countries. It’s easy to see why. It makes sense to exit a relationship when the risk associated with it exceeds your risk tolerance. But the solution doesn’t need to be this drastic. After all, correspondent relationships aren’t inherently bad, they just present a higher level of risk than the bank is willing to accept. Lower the risk and you’re back in business.

It makes sense to exit a relationship when the risk associated with it exceeds your risk tolerance. But the solution doesn’t need to be this drastic.

The solution is straightforward, at least in concept: lower the risk by increasing the effectiveness of respondent banks’ AML/CTF programs. This approach is exemplified by our partner Standard Charter’s “De-Risking Through Education” strategy, featuring regional Correspondent Banking Academies to help raise awareness of best practices and emerging technologies.

Heidi Toribio,Managing Director, Global Head Financial Institutions, Global Banking,at Standard Chartered Bank said that the initiative was key to preserving correspondent banking relationships, and removing ambiguity from compliance standards through partnership. “Correspondent banking goes to the heart of facilitating cross-border trade and financing growth, which is central to our DNA and our purpose as a bank,” she said.

A key element to preserving these relationships is improving the controls within the respondent bank by leveraging emerging technologies like Artificial Intelligence. Silent Eight understands this and has developed solutions to meet this need. With its AI-driven screening system, banks in developing countries could demonstrate a data-driven AI process that learns and improves its output as it addresses alerts. The process gives reliable results, resolving each alert and documenting the reason for the action. The whole AI process is systematic, reliable, consistent and auditable, and provides the analyst clear information on which to make a final determination.

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Leveraging AI solutions into AML/CTF programs is a priority for banks in developing countries so they can demonstrate that their programs are up to global standard. It should also be a priority for global institutions that are or were acting as correspondents, since it allows them to diversify into a broader range of markets at an acceptable level of risk.  Together with initiatives like De-Risking Through Education, the adoption of technology like Silent Eight can help developing economies once again gain access to global financial markets and help keep their financial transactions out of the dark.

There are no healthy people on a polluted planet. In particular, deforestation, the proximity between urban zones and wilderness, and the scarcity of certain animal species, are determining factors in the development of diseases that can be transmitted from animals to humans. As such, at a time of a pandemic requiring the confinement of half of humanity, it is appropriate to analyse this crisis through the lens of the 17 sustainable development goals of the United-Nations, which guide international efforts for a better and sustainable future for all.

Faced with the challenge of protecting the planet, and the effects of climate change in particular, it is essential to develop projects to restore and protect natural ecosystems. The goal is to rethink activities in the logic of a circular economy, to limit their negative impact on nature and to create sustainable wealth. The emergence of sustainable finance is vital for the transformation of the economy towards a low-carbon and inclusive model. Finance must become a tool for health, economic and social development. But how? Finance Monthly hears from Catherine Karyotis, Professor of Finance at France's NEOMA Business School and Anne-Claire Roux, Managing Director of Finance for Tomorrow.

Financial actors must re-invent their activity to support the projects and sectors of the ecological transition, serve the real economy, and preserve biodiversity for a sustainable planet. They must apply best practices to both anticipate transition risks and protect the value of assets, face new risks linked to the physical impacts of climate change, and adapt to regulatory changes. Ultimately, they must enable the transition of the economy to a low-carbon and inclusive model.

The ethics of an investor, a banker, a fund manager, or an insurer go beyond compliance: they have to know how to place their mission of in the present and future contexts, taking into account all economic, financial and ecological dimensions. They can take the opportunity to create wealth, or rather value. To this end, they must identify new sustainable opportunities and put a long-term perspective at the heart of their financing and investment strategies.

Financial actors must re-invent their activity to support the projects and sectors of the ecological transition, serve the real economy, and preserve biodiversity for a sustainable planet.

Already, the entire sector is developing its offers, practices and trade products. Actors are mobilising, initiatives are multiplying, and new professions specialised in sustainable finance are emerging within organizations. However, this paradigm shift will not be possible without expertise and new skills.

A financial analyst must master the accounting and extra-accounting instruments and documents to carry out a joint financial and extra-financial analysis, connecting one to the other and enabling financial policy decisions to be taken in the long term.

A risk manager must know how to assess financial risks in all their dimensions, ranging from credit risk to climate risk to health risk, to then cover them by using derivative markets for this objective, not aiming for speculative short-term gains.

As an asset manager must know how to "price" a bond. Why not do so for bonds labeled "green" or "sustainable"? Likewise, beyond socially responsible investing, how can ESG criteria be introduced into passive management, and how can we revise models by developing a green beta? If we talk about alternative investments, we can also integrate “green” or “adaptation” labels, as well as "green value" into wealth management and into particular real estate investments.

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France is at the forefront of green and sustainable finance. French financial players - whether private or public issuers, arrangers, or even extra-financial rating agencies - are the greatest specialists in "green bonds". They are pioneers in carbon accounting and the financing of natural capital. Collectively, the French financial sector constitutes a driving force for the development of sustainable finance internationally, through initiatives such as ‘Finance for Tomorrow’ and the ‘Climate Finance Day’, the ‘One Planet Summit’, or the ‘Network of Central Banks and Supervisors for Greening the Financial System’ (NGFS).

To strengthen this expertise and pass it on to the next generation of financial professionals, it is necessary to reinforce skills in sustainable finance. From an educational perspective, it is up to teachers and professionals in activity, to transmit to students the tools, which will allow them to reinvent the financial system for a secure, sustainable future.

In the aftermath of the COVID-19 pandemic more than ever, sustainable finance must become a tool for recovery and our students must become the future decision makers of a finance serving the real economy, society and the planet.

Owning and running a small business is no joke. You need to put in a lot of hard work, not to mention a huge amount of time toiling day in and day out in order for your venture to prosper.

Earning money is just one facet of this – you also have to be able to manage it properly. Quite often, a business can be working well, but because the funds are mismanaged, it may seem like you are losing money.

There are many ways to be wise about this. The main tenet is to keep cash on hand at a good level for your operations to continue working smoothly, and to keep your liabilities at the lowest possible level they could be. There are many ways you can practice this as you work in your business. Two key strategies prove especially relevant.

1. Keep Your Fixed Costs to a Minimum

The best way to decrease liabilities is to be prudent with your spending. Keeping your fixed costs as low as possible can help with this. One example of a fixed cost is your rent. Some aspects to consider for this line item are:

-  The location of your office. If the size of the office doesn’t have to be too big, but accessibility is important for the daily transactions of the business, then it would be wise to choose a smaller space that’s centrally located.

-  The size you need to operate. On the other hand, if the location isn’t really an issue, but the size is of greater importance, then you would usually choose the biggest land area you could afford that is farther from the central business districts. Examples of where this is more applicable are businesses that need warehouses or big facilities to house equipment, machines, or vehicles.

Another fixed cost would be the equipment that you have to buy. If you’re into manufacturing, assess whether it’s more prudent to have your goods manufactured by a third party, or if you are saving more in the long run by buying your own machines. Keep in mind that these assets involve a big amount of cash outlay and that you will have to pay for maintenance as time goes by.

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2. Keep the Cash Flow Steady

A business accrues a lot of operational costs – one example is that you need a steady amount of cash to pay your suppliers in order for you to keep your offerings available. However, your cash may be locked in assets that you purchased, or in your payroll budget, or in receivables from your clients.

One thing you can do in order to keep cash flow steady, instead of taking on a bank loan which accrues interest and consequently increases expenses for you, is to sell the receivables that you already have to financing companies. For example, if you are in the trucking business, you can enroll in freight factoring, where you let a factoring company buy your account's receivables so you get cash for them immediately. No need to wait for the 30- to 90-day period you initially have on contract with your clients before you get the cash you need to continue operating.

These are two of the main strategies to keep in mind in order to manage your finances more wisely. As long as you have these principles in mind as you make your decisions, you should find yourself secure, and your business in a pretty healthy financial state.

Managing a household budget is not always easy. Some months, there may not be enough money coming in to meet all of your needs. In other circumstances, you may have big plans or big projects on your mind that will require more funds than you currently have access to. In these cases, knowing where to find the financing you need is important.

Personal loans are a great choice for accessing extra funds in a completely straightforward way. Depending on your ability to take on new debt or your current plans and needs, a personal loan may be just what you need to move forward. If you want to make an informed decision about whether this kind of financing is right for you, then it can be helpful to know how personal loans are commonly used.

Let’s look at five specific reasons why you need to consider a personal loan.

1. Home Renovations

Home renovations are a great way to use the funds from a personal loan. Usually, home renovation projects can rapidly spiral over budget and quickly overwhelm the ability of homeowners to pay for everything. To see your projects through to fruition, and to avoid leaving your property in a half-completed state, then it is prudent to apply for a personal loan. Best of all, home renovations can actually add value to your home which makes a personal loan even more affordable in the long run.

2. Debt Consolidation

Personal loans can be a great way to consolidate your outstanding debts. If you are having a hard time keeping track of your debts and cannot manage to pay back numerous loans to numerous lenders, then simply the situation. Pay back all of your outstanding debts with a large personal loan. This way, you will only have one loan to worry about, and usually at a much more reasonable interest rate.

3. Emergency Medical Expenses

Sometimes, life throws us into situations that we did not expect. Whether your health has suddenly declined or the health of someone in your household is threatened, then the bills can add up quickly. Since health is far more important than anything else, it is worthwhile to take out a personal loan to finance your medical bills.

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4. Boost Credit Score

If you have big plans in your future such as securing a mortgage to buy a home, then you will need a good credit score. If your credit has suffered in the past, however, you will need to improve it first. Taking out a personal loan and then diligently repaying it allows your credit score to rise and will leave you with more options for credit in the future.

5. Travel

It is not generally advisable to use personal loans for discretionary spending. Purchases that are not truly needed are better afforded through diligent saving rather than relying on credit. This is because the interest payments you will make on a personal loan make the overall cost of this spending more expensive.

However, in some cases, discretionary spending on credit can be justified. Indeed, the choice is a personal one. For example, if you are offered a once-in-a-lifetime opportunity to take a dream holiday, then a personal loan can be useful. Nevertheless, be sure to weigh the pros and cons carefully.

Find Financing With Personal Loans

Beyond the five reasons outlined here, there are many more reasonable uses for the funds you can receive from a personal loan. If you have projects or expenses that you need to cover quickly, then find a reputable personal loan provider and start the process of securing this funding right away.