Finance Monthly - May 2022

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As we continue to wake up to news about the ongoing war in Ukraine and the impact it has across the globe, we present you Finance Monthly’s most recent collection of articles and interviews covering some of the most talked-about topics in the world of finance. Here are some of our favourite stories from FinanceMonthly’s May 2022 edition: All of this and so much more - I hope you enjoy the content in our May 2022 issue! For more financial news and commentary, please visit our website to stay upto-date on industry news as it happens, join the conversation on our Twitter (@Finance_Monthly), like our Facebook page and follow us on LinkedIn and Instagram (@FinanceMonthly). Best wishes, Katina Hristova Editor editor@finance-monthly.com Copyright 2022 Published by Universal Media Ltd The views expressed in the articles within Finance Monthly are the contributors’ own, nothing within the announcements or articles should be construed as a profit forecast. All rights reserved. Material contained within this publication is not to be reproduced in whole or part without the prior permission of Finance Monthly. Circulation details can be found at www.finance-monthly.com Universal Media Ltd PO Box 17858, Tamworth, B77 9QG United Kingdom 0044 (0) 1543 255 537 Follow us on Instagram Financemonthly Find us on Facebook Finance Monthly Stay Connected www.linkedin.com/finance-monthly Tweet us @Finance_Monthly Monthly Finance Finance Monthly. Ed i t or ’ s No t e 3 Hello and welcome to the May 2022 issue of Finance Monthly Magazine! 58. Why the Recent Impact of Inflation Has Shown That Portfolio Diversification is Essential 22. Energy, Inflation and the Likelihood of a Real-World Crash What Impact is the Conflict Between Russia and Ukraine Likely to Have on the Price of Commodities? Green Pearls of Wisdom from the World’s Most Sustainable Countries 16. 30.

4 Finance Monthly. Con t en t s CONTENTS 11. INVEST IN OUR PLANET 16. THE MONTHLY ROUND-UP News You Can’t Afford to Miss 8. EARTH DAY 2022 How Businesses Can Do More to Help Tackle Climate Change Green Pearls of Wisdom from the World’s Most Sustainable Countries 12. EARTH DAY SPECIAL

5 Finance Monthly. Con t en t s 26. The Present & Future of Charity Boards 36. How to Preserve Your Wealth During Uncertainty? BUSINESS & ECONOMY Energy, Inflation and the Likelihood of a Real-World Crash The Present & Future of Charity Boards What Impact is the Conflict Between Russia and Ukraine Likely to Have on the Price of Commodities? 22. BANKING & FINANCIAL SERVICES How to Preserve Your Wealth During Uncertainty? Square on How SMEs Can Sustain Recovery Regulating Buy Now Pay Later Is it Justified? The Ins and Outs of Forensic Investigations 36. 40. 44. 40. Square on How SMEs Can Sustain Recovery FINANCIAL INNOVATION & FINTECH Digital Divorces & the Impact NFTs Have on Them 54. 26. 30. 48. INVESTMENT Why the Recent Impact of Inflation Has Shown That Portfolio Diversification is Essential 58.

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7 VOTING NOW OPEN Click here or visit www.finance-monthly.com for more information Recognising and celebrating the successes and achievements of Women in Finance. Monthly Finance Women in Finance Awards2022 FM

8 Finance Monthly. THE MONTHLY ROUND-UP News You Can’ t Af ford to Mi ss The Mon t h l y Round -Up Elon Musk has reached a $44 billion deal to acquire Twitter. The deal was shaken upon on Monday 25 April after weeks of speculation about the social media giant’s future following Musk’s emergence as the platform’s largest single shareholder on 4 April. Ten days later, Musk then declared a takeover bid, offering $54.20 per Twitter share. Initially, Twitter’s board appeared to be against the takeover and introduced a “poison pill” in a bid to block the sale. However, they warmed to the idea after Musk announced a funding package for the deal, which includes $21 billion of his own wealth as well as debt funding from Morgan Stanley. In the past, Musk has criticised Twitter, claiming it does not allow free speech. In a tweet that followed confirmation of the deal being Multi-Billionaire ElonMusk Reaches Deal to Buy Twitter accepted, Musk wrote: “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated […] I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating spambots, and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”

9 Finance Monthly. The Mon t h l y Round -Up Federal Reserve Chairman Jerome Powell has said that bringing down inflation is “absolutely essential” and that aggressive rate hikes may occur as soon as May. Powell’s statements meet market expectations that the Federal Reserve will move away from its usual 25 basis point hikes and instead work quickly to tame inflation that is at its highest rate in over four decades. In its March meeting, the Federal Reserve approved a 25 basis point move, though, in recent days, officials have stated that faster action is necessary, with consumer inflation running at an annual pace of 8.5%. “Our goal is to use our tools to get demand and supply back in synch so that inflation moves down and does so without a slowdown that amounts to a recession,” Powell commented. “I don’t think you’ll hear anyone at the Fed say that that’s going to be straightforward or easy. It’s going to be very challenging. We’re going to do our best to accomplish that.” “It’s absolutely essential to restore price stability […] Economies don’t work without price stability. Jerome Powell Says Taming Inflation is “Absolutely Essential” Netflix lost a substantial number of subscribers for the first time in 10 years at the beginning of the year and expects to lose even more in the spring. The news sent the streaming giant’s share price tumbling again. Netflix Shares Plummet as Subscriptions Drop Amid Cost of Living Crisis Netflix’s share price initially dropped close to 20% on the news that it had lost 200,000 subscribers globally during the first quarter. Wall Street had predicted the company would gain 2.5 million subscribers over the period. In the current quarter, Netflix believes it will lose 2 million global subscribers. Netflix has blamed its sudden drop in subscribers on a range of factors, including increased competition, the cost of living crisis which is leaving households with less disposable income, and the ongoing conflict in Ukraine. In a statement to investors, the streaming giant said: “Streaming is winning over linear, as we predicted, and Netflix titles are very popular globally. However, our relatively high household penetration – when including the large number of households sharing accounts – combined with competition, is creating revenue growth headwinds.”

EarthDay 2022. 12. How Businesses Can Do More to Help Tackle Climate Change Green Pearls of Wisdom from the World’s Most Sustainable Countries 16.

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‘Invest InOurPlanet’ is theboldcall toactionfor thisyear’s Earth Day. Historically, Earth Day is a moment in time to call on businesses, governments, and individuals to work together to help solve the climate crisis. However, this year there is an undeniable focus on the role of businesses as the leading agents of change and how they can be the true enablers of sustainability. Without the backing of businesses, big and small, there is little hope for the kind of transformative change needed to help mitigate the worst effects of climate change. How Businesses Can CLIMATE CHANGE Mathias Lelievre - CEO at ENGIE Impact EARTH DAY 202 2 Do More to Help Tackle Finance Monthly. Ea r t h Da y 2022 13

Climate crisis: a year in review When we reflect on the year just gone by, it remains clear that the world is still not taking the steps it needs to prevent and mitigate climate change. The worrying symptoms of the crisis are being felt across the world, from torrential rainfall in Malaysia to wildfires ravaging the mountains of Greece. The evidence is incontrovertible. Despite the devastation caused by climate change, political and business leaders have been working to turn the tide on the crisis. The three reports released by the IPCC throughout 2021 and into 2022 have all been clear - we all must play a part in tackling the crisis. Just recently, the IPCC released their starkest warning yet, which suggested that we were reaching a point of no return and that if we are to stave off the worst effects of climate change, we would need to significantly strengthen existing targets. 2021 was a big year for climate action, which is the result of an established trend in which climate change has become part of the public consciousness. Each year more people are recognising the devastating effects of climate change – according to a study in the Lancet, for example, more than 60% of young people are ‘extremely concerned about climate change’. Alongside an increase in a public outcry for climate change, 2021’s longanticipated COP26 summit also struck a chord with the public – with commitments made by world leaders being criticised for not going far enough. However, it would be remiss to ignore the important steps international leaders made to help achieve our shared objective of keeping the planet’s warming below 1.5C. For example, 153 countries strengthened existing or made new emissions targets; 137 countries pledged to end deforestation by 2030, and more than 100 countries have committed to reducing methane emissions by 30% by 2030. While further action is needed, the work achieved in Glasgow has kept the 1.5C goal alive. Encouraging corporate decarbonisation: time to change tactics? Now that political leaders have come together to double down on decarbonisation targets, the time has come for public authorities to design bold policies to tackle climate change. At the same time, businesses have a crucial role to play in decarbonising as fast as possible to prevent global warming and stay relevant. Many companies are already rising to the challenge. For example, in March of 2021, 30 of the UK’s biggest companies signed up to the United Nations Race to Zero campaign and many have been making good on their commitments. For example, both BT and Vodafone reached their goal of powering 100% of their UK network by renewable sources, while AstraZeneca more than halved their greenhouse gas emissions (scope 1 and 2). However, while more than 1,000 companies, including 82 Global Fortune 500 companies, have announced Net Zero targets, committing to ambitious goals is far from enough to accomplish a meaningful sustainability transformation and a significant reduction in global emissions. There is great momentum in setting targets but achieving Net Zero implies a transformation journey far beyond the incremental change most companies are accustomed to. Engie Impact’s own research shows that while several companies have set goals, few have proposed a detailed strategy Ea r t h Da y 2022 14 Finance Monthly.

to reach them. I don’t believe that the lack of planning and foresight is a reflection of their attitude to climate change. It instead highlights the complexity of overhauling the existing setup. It is, undoubtedly, a huge challenge, but businesses must not bury their heads in the sand. Technology, skills and knowledge on sustainability are available and advancing rapidly – it’s in a business’s best interests to adopt them and tackle climate change head-on. To encourage businesses to design and implement effective decarbonisation strategies, we must look beyond the method of attempting to force companies to change through government legislation. The recent introduction of mandatory climate risk reporting in April should inspire more companies to get their sustainability house in order. The regulatory pressure will only increase. However, while new regulations are essential, they are not a silver bullet, so companies must recognise the tremendous value in introducing sustainable business practices. Ultimately, it is in their best interests to invest in sustainability transformation. Those companies that engage in sustainability transformation will improve their bottom line as they reduce costs, by consuming less, unlock new revenue streams, retain and attract the best talent, create a competitive advantage compared to their peers, increase client loyalty, be financed through cheaper capital etc. And on top, they will help mitigate the effects of climate change. Looking back … and forward Since the last Earth Day, the spotlight on climate change has gained further momentum, with more of the world’s largest companies announcing ambitious Net Zero targets and investing in their sustainability transformation. Meeting these targets will not be easy, but the good news is that investing in sustainability has become cheaper, with companies now able to take advantage of funds allocated for sustainable projects and a significant reduction in the cost of technologies. These changes have also coincided with advancements in sustainability digital platforms to enable a seamless transformation at enterprise scale. Businesses can now leverage data to simulate precisely how much carbon they can reduce by implementing new internal processes, saving time and enabling companies to expedite their journey to Net Zero. Sustainability transformation is not a choice, it is a business imperative. Companies that refuse to invest in sustainability transformationwill quickly become irrelevant as consumers opt for their greener competitors. While Earth Day continues to shine a positive spotlight on sustainability each year, the fight against climate change is happening every second of every hour. We still have a chance to win the battle, but the time is NOW. In 2021... 153 countries strengthened existing or made new emissions targets 137 countries pledged to end deforestation by 2030 100+ countries have committed to reducing methane emissions by 30% by 2030 30 of the UK’s biggest companies signed up to the United Nations Race to Zero campaign and many have been making good on their commitments. Finance Monthly. Ea r t h Da y 2022 15

There is simply no hiding that our planet is under great pressure. From rising sea levels to increasingly warmer temperatures across the globe, climate change is having a serious impact on the well-being of our environment. In this respect, governments around the world are taking action to limit damage to our surroundings. The UK, for instance, has already begun its race towards a legally binding net-zero target, which must be reached by 2050. To start with, and to stay on track, Britain has to halve its emissions by 2030. Pearls of Wisdom GREEN Flogas Commercial from the World’s Most SUSTAINABLE COUNTRIES Ea r t h Da y 2022 16 Finance Monthly.

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While the UK’s efforts are already bearing fruit, as we top the global charts in marine-protected areas and clean drinking water, there are also many other countries paving theway in the field of sustainability. Specifically, according to World Atlas, Denmark, Luxembourg, and Switzerland are currently the world’s environmental leaders. With reduced traffic and air pollution, as well as careful recycling and waste management, they are playing a substantial role in safeguarding our planet. But it’s not all down to the governments. As businesses, we have a duty of care towards our surroundings too. What can your company do to actively emulate eco-friendly countries? What strategies can you implement to help Britain meet its ambitious targets? Create a green culture As a business owner, you should always aim to lead by example. Sharing your ambitions and desire to favour an environmentally conscious workplace can set the tone for your whole team. InScandinavia,wheresustainability goals are often on top of people’s agendas, companies tend to be very collectivist. This means that managers extend their own green mindset to their business culture and encourage their employees to follow similar eco-friendly practices. These can be simple steps such as switching off lights in unoccupied rooms, cutting down on unnecessary printing, and reducing avoidable food waste. Therefore, not only is it important to have staff that can perform their jobs to a satisfying standard, it is vital that a team holds the same green ideals as you. Following the example of Japanese multinational Sony, you may want to consider offering your workers some volunteering opportunities too. From protecting the planet to helping disadvantaged people, you will be promoting valuable activities to benefit the environment and vulnerable groups. Compensate for your emissions Carbon offsetting is one of the most efficient strategies for companies to minimise their carbon footprint. By compensating for your business’ emissions, you can actively balance out the impact you are having on the planet. Sometimes, using energy is simply inescapable. Whether it is heating the office, downloading crucial documents, or charging electronic devices, there will be inevitable situations in which you will be releasing carbon dioxide in the atmosphere. Carbon offsetting, in this sense, can help even things out. In fact, funding green projects elsewhere can reduce the impact of emissions in the workplace. From supporting renewable energy programmes in poorer countries to financing forest preservation, there are numerous ways to make up for your own ‘pollution’. Google parent company Alphabet, for example, has managed to wipe off its lifetime carbon footprint by buying high-quality carbon offsets. Embrace innovation Another tool in favour of Ea r t h Da y 2022 18 Finance Monthly.

sustainability is the increasing development of technology. Green countries across the world are relying more and more on technological innovation to tackle climate-change issues. Not only can it give you an edge over competitors, but technology can truly help your business shrink its wasteful and damaging practices. Innovative software and equipment may be challenging to grasp at first. But it is also fair to say that its advantages outweigh any kind of drawback. To stay in line with companies from leading environmental countries, you should ensure that your own business is introducing technology as a staple of its policy. Encourage biking schemes As mentioned, Denmark stands on the podium of the world’s most sustainable countries. Its capital city, Copenhagen, is also one of the planet’s greenest cities. From vending-style machines that reward recycling contributions to electric buses and roads devoted to bicycles, the Little Mermaid’s birthplace is taking all the right steps. As a business, why not take inspiration from Copenhagen’s promotion of bike routes and schemes? Instead of hopping in your car to drive to work, you could pedal from your home to the office. Public transport or – if you live close enough – a morning stroll are excellent options too. Again, as an owner or manager, you can act as a model and encourage your employees to cycle or walk as well. By doing so, you will be actively reducing the number of cars on the street, decreasing road congestion, pollution, and both you and your staff’s carbon footprint. As countries across the globe, including the UK, strive to nullify their carbon emissions in the coming decades, businesses can have their say in sustainability efforts too. Taking a leaf out of green nations’ books, ultimately, can aid your surroundings and limit your company’s impact on the environment. Sources https://www.worldatlas.com/articles/theworld-s-most-sustainable-countries.html https://thesustainablelivingguide.com/mostsustainable-countries/ https://www.theguardian.com/ environment/2021/may/04/what-is-carbonoffsetting-and-how-does-it-work https://www.telegraph.co.uk/travel/ discovering-hygge-in-copenhagen/worldsgreenest-city/ https://www.rd.com/list/what-we-can-learnfrom-the-most-eco-friendly-countries-onearth/ https://www.environmentalleader. com/2013/07/worlds-greenest-companiesand-what-we-can-learn-from-them/ https://blueandgreentomorrow.com/ environment/things-green-businessescan-learn-from-scandinavia-onsustainability/?noamp=mobile https://www.texasdisposal.com/blog/mosteco-friendly-countries/ Finance Monthly. Ea r t h Da y 2022 19

Business Economy. 22. Energy, Inflation and the Likelihood of a Real-World Crash The Present & Future of Charity Boards What Impact is the Conflict Between Russia and Ukraine Likely to Have on the Price of Commodities? 26. 30.

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ENERGY, and the Likelihood of a April’s inflation numbers must have been a real disappointment to Central Bankers around the globe. Last year they were assuring us that their financial models showed the inflation generated by supply chain breakdowns during the pandemic would be nothing more than “transitory”…. and we had nothing to worry about. Doh! This year…We all sensed a crisis was coming. The Russian invasion of Ukraine has suddenly crystalised what it is: insecurity in Energy, Food and Commodity markets, the very building blocks of the real global economy. These are real things – unlike the concepts behind bond yields or equity returns. INFLATION REAL-WORLD CRASH Bill Blain Strategist at Shard Capital Finance Monthly. Bus i ne s s & Economy 23

Fasten your seat belts… this ride has only just begun Inflation has now established a firm grip across the global economy, and whatever teenage scribblers and bank analysts say about it peaking… it feels like it is here for the long term. As we demonstrated in 2008, you can pretty much fix a financial problem overnight by throwing money at it. What we are learning today is you can’t fix Germany’s shortage of gas until we build new infrastructure, which will take upwards of two years. You can throw money at broken health services, but you will only fix them by fundamental reform. Money is not a solution. The financial world and the real world are very different places. The problem is financial models written to explain the complex workings and underpinnings of the financial and monetary economy… we are now discovering they have absolutely nothing in common with how the real economy actually works. Ukraine was the wake-upand-smell-the-coffee shock to energy, food and commodity prices that broke the model. The consequences have overturned everything we thought. We were kidding ourselves about how the global economy works. Sophisticated and terribly clever algorithmic financial models predicting financial outcomes have utterly failed to understand the complexity of the real economy, and just how suddenly cascading consequences ripple-like tsunamis through markets, labour and commerce. Consequences, consequences… Even now, I don’t think Central bankers really understand just how overturned the apple cart of monetary stability has become! The triggers for new real inflation impacting the global economy in terms of energy, food and commodity prices, and the consequences of higher wage demands are all clear, but the underlying fuel that has now caught fire is less well understood. Inflation – which I recently described as “the apex predator of the bond market” – is now very real. Balancing rising interest rates as central banks finally acknowledge it’s a problem while putting in place an inflation aware investment strategy to generate returns while balancing the risks of equity markets versus the security of bonds… well, it’s a tricky optimisation game where you can’t know the actual parameters. One critical point about energy and commodity inflation is how it hit markets as “no-see-ums”. For readers unfamiliar with my market blog, the Morning Porridge commentary, a No-see-um is something so blindingly obvious and dangerous your mind refuses to acknowledge the likelihood until it’s actually happening. Also important is the concept of how an SEP (Someone Else’s Problem) makes us blind to the consequences of what’s occurring around us. Central bankers and economists tell us they watch the whole economy. In reality, they all wear blinkers. Traditionally, a monetarist economist will tell you: “inflation is everywhere a monetary Bus i ne s s & Economy 24 Finance Monthly.

phenomenon”, blaming excessive government debt and monetary creation for the current inflationary woe and sense of crisis. They point to the massive monetary creation since 2012 – when we began QE – and ultra-low interest rates as the drivers of inflation. Until recently, however, we didn’t see any realworld inflation… all the inflation generated by QE was locked up in financial assets, driving bond and equity rallies. Inflation started to spiral from financial assets into the real world during the pandemic. Suddenly real events – like the container ship, the Evergiven, blocking the Suez Canal highlighted supply chain crises. Today we have Walmart paying truck drivers $100k salaries to ensure supplies – triggering wage inflation across the retail sector. Consequences beget consequences. The “Monetary Experimentation” we’ve seen since the global financial crisis of 2007-2008 in the form of sustained criminally lowinterest rates and Quantitative Easing did little to boost growth, but it created extreme financial asset inflation - driving inflation into the bond and equity bullmarkets of the last 12 years. Now that inflation is transferring into the real economy, going back to simple monetary tenets: if the money supply rises, inflation follows. All you need to do is light the blue touch paper to trigger an inflationary explosion. What is now driving inflation is the massive amount of liquidity created by low rates and QE. It’s now fuelling the fires of massive real economic commodity and energy inflation. It proves excessive liquidity creates non-monetary real-world inflationary risks. And all it took was a trigger. Ukraine and Energy Insecurity. Suddenly Europe woke up to the frightening reality of dependency on Russia for power. And, as the world woke up to the reality that Russia and Ukraine are dominant agricultural suppliers… ouch. Nothing makes you so aware of reality as a sharp punch in the face. It opens our eyes to finally see the blindingly obvious financial connections hidden in the complexity of the Global financial ecosystem! Commodities, Food, and Energy – the building blocks of everything in the global economy – have become as much distorted by the last 12 years of monetary experimentation as every other kind of asset…. Here’s just part of the problem… As soon as you spot a no-see-um, its effects become very real. As soon as you realise a “someone else’s problem” is also yours, the consequences magnify and become reinforcing. That’s why the moment you spot a crisis is when it gets more dangerous. That moment has occurred. When market commentators start to compare what is happening today to 2008 – pay close attention. There are parallels – but that one was about a financial collapse. This one is about a real economic crisis. Abundant liquidity distorts not just rates, but the real economy also. As the prices of labour, shipping, and logistics change due to inflation you need to understand the whys and hows to anticipate their effects. Wages will rise because that’s how wage inflation rises. Logistics will get more expensive because fuel costs have risen. Food prices will rise because fertiliser costs are up and supply is limited. Real-world consequences… trigger further consequences. The current risks are immense. If central banks get it wrong – and they usually do; policy mistakes cause most recessions - then removing the easy liquidity which has driven the commodities market could trigger a real-world economic crash. Here’s just part of the problem… As soon as you spot a no-see-um, its effects become very real. Finance Monthly. Bus i ne s s & Economy 25

Julie Hutchison abrdn plc Bus i ne s s & Economy 26 Finance Monthly.

Julie Hutchison is the Charities Specialist at abrdn, in the award-winning Charities Investment Team which sits within the UK discretionary management business. Julie’s been in the role for nearly seven years, during which time the charity AUM has more than doubled. Her experience spans the charity, private, public and academic fields, building on her background in law where she specialised in trusts and philanthropy before moving into financial services eighteen years ago. Julie supports the company’s charity, endowment and foundation investment clients on governance and policy issues, in particular where boards are looking to refresh their investment policy statement to consider responsible investment and ESG matters. The Charities Investment Team comprises Portfolio Managers who focus on managing investments for charitable institutions, ranging from household-name charities to less well-known endowments and trusts. In particular, the team has a depth of experience in managing portfolios for grantmakers, health and hospice charities, education bodies and conservation charities. Present & Future of The CHARITY BOARDS Finance Monthly. Bus i ne s s & Economy 27

28 Finance Monthly. Bus i ne s s & Economy Julie, tell us a little bit more about your role. My own role is not portfolio management, but rather I find I act as something of a sounding board for the CEOs, Finance Directors or Investment Committee Chairs of clients on a wide range of policy and governance issues. In doing so, I draw on the full range of my experience in the legal and financial sectors, as well as my academic role at Edinburgh Napier University where I am a Visiting Professor in Governance and Innovation. The forward-thinking approach to flexible working at abrdn plc has enabled me to move to part-time hours in recent years, to accommodate my academic work. abrdn plc has offices around the globe with a global AUM of £542bn (as of 31 December 2021). The focus of my work involves supporting colleagues in the specialist Charities Investment Team in London, Edinburgh and Leeds in particular, as well as liaising with colleagues in our Jersey office. The firm offers investment solutions for charities across the spectrum ranging from liquidity funds to ethically screened bespoke portfolios, to private market solutions. What are the current trends for charity investors? First and foremost, I’ve had a series of conversations with charity boards recently about environmental themes and how they can be reflected in their investment policy and portfolio. This began before COP26 in Glasgow and has continued since, in particular for health bodies and charities focused on young people. There are a range of options abrdn offers charity clients in how they can look to align their portfolio with their charitable purposes. For some charities, they choose to stay invested in oil and gas, preferring that we focus our plc efforts on engagement and voting to influence corporate change in companies that way (to the extent we can alone, or with others in industry coalitions such as Climate Action 100+). Other charities choose to exclude investment in coal/tar sands, for example or have screens relating to biodiversity. There are also a number of charities that avoid investment in coal, oil and gas, either for alignment with their charitable purposes or reputational risk reasons. It’s not a “one size fits all” approach. A reason that we are able to go into depth in how we accommodate individual charity requirements is due to our investment approach, which involves global stockpicking. This means a charity is not faced with a ‘take it or leave it’ pre-determined set of screens that come with a fund: instead, screens can be shaped individually by each charity and we then apply these at individual stock level across a bespoke portfolio of stocks. A more recent trend has been around positive impact investment, aligned to the UN Sustainable Development Goals. This approach filters investments to focus on those addressing the world’s key challenges, such as clean water, clean energy and good health, to name just three. A new development in the last year or so has been the interest shown by some charities in taking on board the input from key stakeholders when framing their “Amore recent trend has been around positive impact investment, aligned to the UN Sustainable Development Goals. This approach filters investments to focus on those addressing the world’s key challenges, such as clean water, clean energy and good health, to name just three.”

29 Finance Monthly. Bus i ne s s & Economy investment policy approach. For education bodies, this can involve pupils or students. For other institutions, it can involvemembers of staff. I’m always pleased to see organisations placing value on that kind of engagement activity and finding ways to incorporate the input received into the end policy – it’s healthy good governance. What is abrdn’s own approach to charitable giving? This is something we’re often asked about, as people want to know what kind of company we are and how we interact with the voluntary sector. There are a number of strands to this. At a very local level, during lockdown, we focused on supporting local parklands. Many of us discovered local parks we had not been in before or parks we had not visited in years, during the time when daily walks became part of the necessary rhythm of life. In more recent times, reflecting abrdn’s future focus, we have formed a partnership with Hello World, to fundWIFI hubs inUganda for online education. We’ve recently formed a three-year partnership with UNESCO to support programmes on environmental sustainability, climate change and ocean science. We’re also co-creating the Centre for Investing Innovation at the University of Edinburgh. What are some of the challenges facing charity boards at the moment? Recruitment of trustees often comes up as a theme. I’d encourage anyone reading this to consider whether they might be interested in volunteering some of their time as a charity trustee or finance committee member – finance experience is always sought-after on a charity board. During lockdown, we launched a webinar series specifically aimed at new trustees, called ‘Next Gen Now’. We’ve covered various topics, including how to read and interpret charity accounts (which have their own accounting standards and norms); and an overview of the many different underlying legal structures to be found in the charity sector. We’ve also looked at case studies of how a charity can change its structure. We’ve found our webinar programme better attended than in-person training events ever were. Our NextGen Now webinars are free and open access – visit abrdn. com/discretionary for more information and to view previous webinars. What does the landscape look like for charities in the next year or two? One area to watch is the kind of reporting required in the trustees’ annual reports and accounts. The accounting standards are currently under review and it’s possible that trustees will need to report on a wider range of matters, such as environmental measures. This would not be a surprise, given all parts of the economy and society are going to be in transition to net zero in the period ahead, and measures are likely to emerge to track progress in that area. The carbon footprint of an investment portfolio could be part of that picture, and we’re already seeing interest from charities about that kind of expanded reporting for their investments. “I’d encourage anyone reading this to consider whether they might be interested in volunteering some of their time as a charity trustee or finance committee member – finance experience is always sought-after on a charity board.”

What Impact is the CONFLICT Between RUSSIA and UKRAINE Likely to Have on the Price of COMMODITIES? Hemant Bansal, Commodity Solution Lead at The Smart Cube, takes a look at how the RussiaUkraine war is likely to impact the price of commodities in the months ahead. Hemant Bansal - Commodity Solution Lead at The Smart Cube Bus i ne s s & Economy 30 Finance Monthly.

n 24th February 2022, Russia launched a full-scale military operation in Ukraine. This followed months of hostile activity from the world’s largest country, which escalated on 21st February when Russia proclaimed the Donetsk and Luhansk oblasts of Ukraine, two regions in eastern Ukraine, to be independent and ordered troops to enter both. In response to the invasion, nations from across the globe have imposed a range of sanctions on Russia. Britain, Japan and the US have sanctioned billionaires and major financial institutions with close links to Russia, while Germany has frozen the Nord Stream 2 gas pipeline project, which had been set to ease the energy price crisis. With the end of the conflict not yet in sight, as countries around the world impose sanctions on Russia and peace talks continue with limited signs of progress, it appears that the crisis will have a major impact on commodity prices. Prices of commodities set to rise in the short term So far, the conflict has resulted in large-scale panic buying of key commodities coming from Russia and Ukraine, which has caused a sharp upward rally in commodity prices. An example of this can be seen when looking at nickel prices. Finance Monthly. Bus i ne s s & Economy 31

32 Finance Monthly. Bus i ne s s & Economy As Russia accounts for 49% of world nickel exports, the RussiaUkraine crisis has led to a shortage of the base metal, causing its price to spike. Further to this, the conflict has prompted short-covering by businesses, including the Chinese group Tsingshan – the world’s largest nickel and stainless-steel producer. Short covering is the process of purchasing borrowed securities to close out an open short position at a profit or loss, while it also involves the purchase of the same security that was initially sold by the holder of the position. As such, this action has further contributed to driving the price of nickel up, with the London Metal Exchange forced to halt trading in nickel on Tuesday 8th March after prices surged 110% to top $100,000 per tonne. Prior to taking a closer look at the expected price increases of commodities, it is worth mentioning that the following estimates have been calculated using a combination of a statistical price forecast model, in tandem with leveraging monthly and daily price data over the last 20 years. This has allowed for sensitivity analysis to take place, whereby the dynamic impact of similar conflicts and resulting sanctions on commodity prices can be evaluated – like the 2014 RussiaUkraine conflict. The expectation is that the continued military conflict in Ukraine is set to see the prices of a range of commodities increase sharply in the short term. For example, the prices of crude oil, palladium, platinum, and aluminium are in line to go up, due to Russia being a major producer and exporter of these raw materials. Looking at this in more granular detail, the price movement (between March 2022 and May 2022) of crude oil is anticipated to be between 10 to 12%, as Russia is the secondlargest producer in the world, meaning there is the possibility of disruption to crude oil supplies. Adding to this, metal prices are

33 Finance Monthly. Bus i ne s s & Economy also expected to surge, due to Russia playing a major role in the global mining of palladium (45% of global production), platinum (15%) and aluminium (6%). As a result of the continuing conflict, it is expected that the prices of these precious and base metals will increase by between 10 and 18%. Further to this, the price of natural gas is anticipated to rise, as Ukraine is an important transit route for Russian natural gas flows from Europe. With Russia accounting for roughly 40% of the European natural gas supply, serious disruption to the supply of the energy product is a distinct possibility. This could see the price movement of natural gas increase from anywhere between 18 and 28%. Additionally, agricultural products are also expected to experience a spike in their prices, due to Ukraine being the “breadbasket of Europe”. In fact, Russia and Ukraine are major global exporters of both corn and wheat, accounting for an estimated 30% of global wheat exports. As such, the price of corn is expected to increase by 10 to 18%, while wheat is set to rise by 12 to 20%. However, if Russia decides to bring its invasion to an end, or if Western countries introduce active initiatives in an attempt to stabilise energy prices, then the expectation is that commodity prices will fall significantly, returning to pre-conflict levels. For example, the prices of crude oil and natural gas have started falling on the back of the US announcing a record release of one million b/d from the US Strategic Petroleum Reserve over the next six months, in addition to The International Energy Agency (IEA) agreeing to release up to 60 million barrels from their respective strategic reserves. In the event of the conflict de-escalating, crude oil is expected to fall by a further 10 to 15%, while nickel is in line for a drop of between 13 and 17%. Nevertheless, at this moment in time, this scenario unfolding is difficult to predict with any certainty. What can organisations do to ensure business continuity? Firstly, it is imperative for companies to actively evaluate alternative suppliers to ensure business continuity. Businesses should be prepared to switch to or identify alternative sources for procuring essential products and services in the event of disruption due to a crisis. An example of this can be seen with the uncertainties Russian suppliers and bankers are having at present, which has resulted in Tata Steel seeking alternative markets for coal imports, choosing to look beyond Russia and instead purchase coal from other regions, such as North America. By having a range of different sources and suppliers, companies ensure that they are prepared in the event that the situation in Ukraine drags out, as they can easily purchase commodities through alternative avenues. As well as this, businesses must continuously monitor the situation, in terms of the conflict itself, as well as the restrictions and sanctions being imposed. This allows organisations to stay up to date on the impact the crisis is having on the supply chain in light of the events taking place and plan for multiple possible eventualities. For example, companies can react quickly and raise the prices of their products if the price of the commodity they require for manufacturing has escalated significantly. Businesses can also brace for cost increases by allocating provisions in anticipation of this possibility, while they should also eliminate or freeze all nonessential spending. Furthermore, there are a number of other actions organisations can take to prevent supply chain disruptions during such geopolitical events as the ongoing Russia-Ukraine conflict. Companies should liaise with suppliers to identify alternative payments methods, while they should also address immediate financial and cybersecurity concerns. This includes reviewing financial hedge positions in light of the volatile Russian and Ukrainian currencies, in addition to identifying and minimising vulnerabilities in cybersecurity. To ensure continuity, it is vital for businesses to constantly monitor the situation as it continues to evolve and develop, while they must also actively evaluate alternative providers and distributors. By doing this, organisations will be able to limit the potential damage caused by supply chain disruptions during geopolitical conflicts, such as the one ongoing between Russia and Ukraine.

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Banking Financial Services 48. 44. 40. How to Preserve Your Wealth During Uncertainty? Square on How SMEs Can Sustain Recovery Regulating Buy Now Pay Later Is it Justified? The Ins and Outs of Forensic Investigations 36.

Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s FinanceMonthly sat downwithDustin Serviss - the founding partner of Serviss Wealth Management – a company that helps people get financially organised and strategic all on one page. The firm uses this one-page map to enable people to livemoreof their lifeandbefinancially responsible for their future and takes pride in facilitating family meetings to bring clarity to wealth transitions be it a business, a cottage, cash or investments. Wealth How to Uncertainty? Preserve Your During Dustin Serviss Founding Partner of Serviss Wealth Management 36

Finance Monthly. Bank i ng & F i nanc i a l Se r v i ce s What are the current trends shaping wealth management in the high-net-worth space? One trend we’re seeing is the push-pull relationship whereby clients have cash on hand and want to deploy it but they have a mental block that is preventing them from deploying large lump sums of their capital. There is a reservation that real estate is potentially overvalued. There is also a reservation about geopolitical issues that affect the stock market or may affect the market in the future. We also see a lot of fortune-telling syndrome happening. 51% of Canadians still don’t have a will and money is starting to move from one generation to the other. I’ve spent 17 years in the business and now more than ever, money is intentionally being given to adult children. “Do something responsible with this X dollars” say the parents. We work with people who are about to sell their company or are thinking about doing it and yet they have no idea what they spend each month. The second part of this situation is a spouse who has not worked for many years, who really has never been part of the finances so getting them to look at how much is being spent can be a challenge. We walk clients through an exercise called BAM. BAM stands for Bare Ass Minimum, referring to monthly expenses that exist regardless of your lifestyle spending. The baseline bills. This is the starting point for someone who is considering retiring and it is useful for clients to accumulate and wonder how much they need to build up before selling. They can accumulate a mix of cash, stocks, real estate and business equity to make a total pot, and then use the BAM to figure out how long the money will last spending X per month with 0 return. That is a starting point. Over the near two decades in the business, I have used permanent insurance where appropriate and some years have not implemented a single policy. In other years I have encountered many clients who have effectively used the permanent insurance solution. Currently in the market with the continuous tax reforms in Canada in the government and limitations being implemented, permanent insurance seems to be more of interest to some clients now. From an estate planning tax standpoint one of the last standing advantages is the Capital Dividend Account. Life insurance death benefit is one of a few items that create a capital dividend account (CDA) which can flow money out of a company tax-free. With the recent real estate values growing at a fast pace and the continuous business sale activity many clients are utilising reorganisations of the corporate structure. For wealthy families, they likely know they will never run out of money or assets, but if they can organise their companies in a certain fashion and it enhances their tax efficiency or enables a more seamless estate transition while they are alive or dead, this 37

can be effective planning. We are working closely with estate lawyers and accountants to set up structures. Having investment accounts in corporations that have large corp loss carryforwards or shareholder owing allows for effective planning. Blended families is a real thing. Wealth and blended families can be a challenge but when you have blood children involved in the family business (or family farm) and new spouses (recent or long time). Ensuring there is estate equalisation is key. More time and communication should be spent by adviser teams to get deep into the motivators of founders and also the family members involved. Dr Tom Dean’s book, Every Family’s Business, is a must-read for all family-run businesses. At Serviss Wealth, we help clients with creating a one-page road map by using a software called Asset Map to provide a visual experience that displays all of a household’s members, entities, financial assets, liabilities, cash flows, and insurance policies. They need to consider our help with this because being successful and running a profitable business has many dynamics to it. Over the years, successful families accumulate a number of financial buckets, property buckets and insurance buckets. Keeping track can be done by some but many of our clients come to us handing us the keys and delegating, so they can live a certain lifestyle, under a certain premise of comfort knowing their wealth, health and dreams are being constantly checking in on. What are your top financial tips during uncertainty? • Invest something regularly if you are unsure there is a correction. • For strategic investors, one idea is to hold some money in a high-interest account and earmark it that if the market goes down more than X% in a month, you invest it. • Consider your “Wealth Edge” or figure out what your wealth edge is. For some, it is generating a large cash flow in their career. A handyman can add more value to a reno house that they flip or accumulate rental houses. Realtors watch the hot sheets for good buys. If you are a manufacturer, consider owning the property where you operate your business. • Buy permanent life insurance if you have a life insurance need. Consider having the insurance forever and then plan to spend and give away your wealth in your lifetime (way more fun than leaving all your buildings and stocks to your kids who likely will be 60+ when you die). • If unsure, pay down debt. Although interest rates are low, debt is debt. When you don’t have any debt, you are free. • Debt can be used very effectively to magnify wealth but if not deployed correctly it can limit lifestyle and attainment of goals if markets are correcting while you hold the debt. Be cautious here with this one. The best wealth preservation advice I can offer is to stay broad in your assets. There is so much conspiracy talk out there that XYZ will happen and if this happens, then that will happen so you should own all ABC assets if you want to be protected. Realty is no one knows what will happen and if you look back at history, some assets perform better than others. Some assets benefit from world events and others don’t. Having investment vehicles that are positively affected by inflation that have been around for decades and navigated through trying times has worked out fairly well in the past. Having some cash in high-interest accounts, doing some research on Bitcoin and Ethereum might be worth looking at for a host of reasons. Physical gold and a small amount of physical cash others say is prudent. Lending money to a quality source provides a different exposure and one asset class often overlooked and considered by some as risky is the Small Cap “The best wealth preservation advice I can offer is to stay broad in your assets.” Bank i ng & F i nanc i a l Se r v i ce s 38 Finance Monthly.

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