Seven Trends to Watch in 2023

  |   For  |  0 Comentarios

Photo courtesy

The key trends to look out for in science, technology and sustainability over the next 12 months – and beyond:

1. Protecting biodiversity 

The world is waking up to the fact that protecting biodiversity is just as important for our survival on Earth as halting global warming. At the UN COP 15 summit in Montreal in December 2022, governments signed a ground-breaking deal to halt biodiversity loss by 2030. To achieve this, we will need to harness new and existing technologies to embed more sustainable practices across industries such as agriculture, forestry, IT, fishery, materials, real estate, consumer discretionary and staples, utilities and pharmaceuticals. Following COP 15, the financial sector is expected to increasingly contribute to this transition. The OECD estimates that investments aimed at protecting biodiversity stand at less than USD100 billion a year – a paltry sum, particularly when compared with what climate change attracts (USD632 billion). Expect that gap to slowly start closing in 2023.

2. High-tech cars

New technology brings disruption and opportunities to almost every industry. The auto sector is no exception. Electric vehicles are becoming ever more popular – not least thanks to the recent surge in petrol prices. 2023 will see new launches from many manufacturers, including Tesla’s iconic-looking pick-up truck. Five years from now, one in four new cars sold is expected to be fully electric.1 That, in turn, will fuel demand for batteries and semi-conductors. Automation is the other key tech shift in the car industry. While fully automous vehicles are still largely the stuff of science fiction, the latest models are offering ever more advanced automation features, backed by ever more complex software. China’s Baidu is even planning to launch a car with a detachable steering wheel. According to Goldman Sachs, the average length of software code per vehicle has doubled to 200 million lines in 2020, and is forecast to reach as high as 650 million lines by 2025, presenting a big growth opportunity for the tech sector.2

3. Computing at the edge

The rise of 5G and advances in AI have opened up a new era of data storage. Edge computing uses augmented reality and machine learning to analyse data at or near the place where it is gathered, or “on the edge”. It then takes advantage of super-fast transfers made possible by 5G to send that data to the cloud. When 6G comes, the process will be even faster. One of the key benefits of such an approach is low latency, which in turn opens the door to the development of new devices and applications which rely on minimal delays. Farms, for example, are starting to embrace edge-enabled ground and air sensors to monitor water and chemicals for optimal crop yields. Edge technology can benefit the environment, as it has lower carbon footprint compared to processing data on the cloud. It also creates new cybersecurity challenges and demand for solutions to address them.

4. Power of the circle

From metals and fossil fuels, to animals and crops, we are consuming a year’s worth of the Earth’s resources in just eight months, which is clearly not sustainable in the long run. The answer is to make the most of what we’ve got and make it last for as long as possible. The circular economy concept ideally envisages a world without waste – a loop whereby resources are used and reused for as long as possible. The emphasis is on creating products that are long-lasting and easy to take apart, repair, refurbish and re-assemble to make other products. The approach also involves making greater use of organic materials (such as wood in construction) that are part of a natural loop. Circular design can be applied both to consumer goods and to industry, and it’s a huge opportunity – the circular economy could unlock up to USD4.5 trillion of additional economic output, according to Accenture.3  Governments are increasingly on board. Circular economy is a key part of Europe’s Green Deal initiative, with targets for 2023 including legislation for substantiating green claims made by companies and measures to reduce the impact of microplastic pollution on the environment.4

5. Drug engineering

Drug development is notoriously slow and costly, with low chances of success. But that may be all about to change thanks to advanced computing. In one of the most exciting recent developments in the healthcare industry, DeepMind, Alphabet’s AI unit, succeeded in developing technology that can be used to predict the shape of any protein in the human body. The breakthrough potentially paves the way for much faster, cheaper and more efficient drug discovery – something Alphabet and others are now working on. Over the next decade, the market could be worth some USD50 billion, according to Morgan Stanley. 5

6. Battle against obesity

The prevalence of obesity in the world has tripled since 1975,6 and it is now responsible for some 3 million deaths a year. Covid increased awareness of how excess weight can make people susceptible to other diseases. There is growing momentum – from governments and individuals – to tackle the problem, which coincides with the development of new treatments. One potentially promising new weight loss drug has recently been approved for use in the US; another one is expected to get the green light in 2023. The global obesity treatment market could top USD54 billion by 2030 from just USD2.4 billion in 2022, according to Morgan Stanley. Insurers are slowly becoming more willing to cover obesity treatment, and there is also a growing appetite from the public to pay out of pocket where such coverage is not available.

7. Learning for life

Demographic and technological change have deeply impacted society. As a result, learning is no longer the mainstay of school. A growing number of countries are embracing lifelong learning as a means to cope with the challenges associated with longer-living populations. The pandemic prompted many people to reconsider their lives and their jobs. Labour shortages in some industries have created opportunities for new workers to step in. At the same time, improved work/life balances – with working from home saving commuting hours – have opened the door for people to take up new hobbies. Growing acceptance of online learning has made studying more accessible. It shouldn’t be a surprise that 2023 has been pronounced the “European Year of Skills”, with extra investment in training and a drive to get more women into science and technology.

 

Opinion written by Stephen Freedman, Head of Research and Sustainability for Pictet Asset Management’s Thematic Equities as well as Chair of the Thematic Advisory Boards

Discover more about Pictet Asset Management’s expertise in thematic investing 

Notes

[1] https://www.alixpartners.com/industries/automotive-industrial/
[2] https://www.goldmansachs.com/insights/pages/software-is-taking-over-the-auto-industry.html 
[3] https://newsroom.accenture.com/news/the-circular-economy-could-unlock-4-5-trillion-of-economic-growth-finds-new-book-by-accenture.htm
[4] https://environment.ec.europa.eu/strategy/circular-economy-action-plan_en
[5] https://www.morganstanley.com/ideas/ai-drug-discovery
[6] https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight

Alternative Assets ETPs as an option in the face of a potential recession

  |   For  |  0 Comentarios

Pixabay CC0 Public Domain

Inflation uncertainty has risen sharply worldwide since the onset of the COVID-19 pandemic, a situation that worsened in 2021 with increased demand and a tightening supply of goods and services. In 2022, the war in Ukraine further boosted inflation, making it difficult for investors to make decisions.

In such a period, alternative assets could be a tool to obtain greater diversification, decrease volatility and obtain better portfolio returns. All this without the need to go to the stock market.

According to Blackrock, there are two main types of alternative investments. The first consists of vehicles that invest in non-traditional assets, such as real estate and private equity. The second involves strategies that invest in traditional assets through non-traditional methods, such as short selling and leverage.

The alternative asset industry is on a growing trend. Hence, portfolio managers see it as a pillar of the modern investment landscape, supported by assets under management (or AUM) being at record levels, accompanied by investor interest.

According to Prequin, from 2015 to the end of 2021, assets under management (AUM) across all alternative asset classes increased at a CAGR of 10.7%. At the end of 2015, AUM stood at US$7.23 tn, rising to US$13.32 tn by the end of 2021, and we expect AUM growth to accelerate to 11.7% and reach US$23 tn in 2026.

For Forbes, 2023 promises that alternative investments will finally gain a daily place within investors seeking broader diversification portfolios.

In 2023, portfolio managers are targeting a more significant allocation in alternative assets due to their low correlation to the secondary market, which could mitigate inflation-induced volatility and potential recession and boost returns more than stocks and dividends alone.

How to distribute alternative assets effectively?

Initially, alternative investments were exclusive to experienced accredited investors. However, tools provided through asset securitization programs allow the distribution of alternative investment strategies quickly, efficiently, and simply.

By securitizing these alternative assets, an ETP (Exchange Traded Product) type investment vehicle is structured and issued, converting any underlying asset into a listed and “Euroclearable” security, which facilitates reaching a more extensive investor base, simplifying subscriptions and broadening distribution.

Repackaging an alternative asset into an ETP currently represents one of the most successful solutions for launching and growing private investment funds, real estate funds, and hedge funds of various sizes. Leading real estate fund managers such as Participant Capital, Black Salmon, and Driftwood Capital use these investment vehicles, or ETPs, to raise international capital for alternative investments.

Main advantages of ETPs for distributing alternative assets

Any alternative asset fund manager can benefit from this option to increase the distribution of their investment strategies. In addition, this type of investment vehicle allows you to customize your strategy thanks to its flexibility: it can be applied to a wide variety of financial assets. A “Eurocleable” financial security is put into circulation, providing the investment vehicle with the appropriate infrastructure to obtain standardization, market transparency, and international reach.

In summary, the advantages offered by an ETP include the following:

  1. Set up an Irish special-purpose vehicle (SPV) for exclusive use by real estate projects, hedge funds, or any private fund.
  2. Offer equity and debt-based investment instruments through a Euroclear listed security.
  3. Increase distribution to a broader investor base.
  4. Price dissemination through Bloomberg and other world-leading brands such as Reuters and Six Financial.
  5. Facilitate access to global private banking, financial advisors, and broker-dealers through their investment platforms and custodians.

Companies such as FlexFunds, based in Miami and with an international presence in Latin America and Europe, offer specialized solutions in structuring and launching ETPs through its asset securitization program.

For more information about FlexFunds’ solutions, contact us at info@flexfunds.com or visit www.flexfunds.com

Emilio Veiga Gil, Executive Vice President, FlexFunds

“Rediscovering Japan”: Outlook and Opportunities

  |   For  |  0 Comentarios

Pixabay CC0 Public Domain

Historically, Japan has been a difficult market for many overseas investors to fully comprehend, with several misconceptions about the Japanese corporate sectors.  This offers compelling opportunities for active managers such as Nomura Asset Management to add value through their proprietary research, market insights and company engagement.

Nomura Asset Management will host the “Rediscovering Japan” virtual conference on January the 26th , where you will learn more about the current opportunities from our experts, and hear market insights from the guest speaker Seiji Kihara, Member of the House of Representatives.

Yuichi Murao, CFA, Senior Managing Director and Chief Investment Officer, Equities, will open the event with the Bank of Japan’s monetary policy outlook and the impact on exchange rates.

Andrew McCagg, Senior Client Portfolio Manager, will present the “Japanese Equity Market Outlook for 2023”.

Seiji Kihara, member of the House of Representatives and deputy Chief Cabinet Secretary, will speak on “Towards Realizing a New Form of Capitalism”. Kihara also serves as special advisor to the Prime Minister for National Security Affairs.

Please register here: click here

Bank of America, NVIDIA and Microsoft Lead JUST 100

  |   For  |  0 Comentarios

JUST Capital, along with media partner CNBC, released the 2023 Rankings of America’s Most JUST Companies, including the marquee JUST 100. The Rankings are the only comprehensive evaluation of how the nation’s largest corporations perform on the Issues that matter most to Americans today, including creating jobs in the U.S., paying a fair, living wage, acting with integrity at the leadership level, supporting workforce retention and training, protecting worker health and safety, providing benefits and work-life balance, protecting customer privacy, minimizing pollution, and more.

Out of the 951 analyzed companies, Bank of America is America’s Most JUST Company for the first time, having risen steadily in the Rankings over the past five years, from #104 in 2018 to #71 in 2020 to #5 in 2022, to the #1 spot in the 2023 Rankings.

Bank of America’s standout leadership on Workers Issues – particularly its efforts to pay all employees a fair, living wage – especially drive this high performance, as well as its work to offer sustainable financing products, eliminate barriers for hiring, and prioritize board diversity and independence.

This year, NVIDIA, Microsoft, Accenture, Truist Financial, Verizon, Hewlett Packard Enterprise, Apple, Intel, and JPMorgan Chase round out the top 10.

“This recognition reflects our commitment to Responsible Growth,” said Brian Moynihan, Chairman and CEO of Bank of America. “That includes all we do to be a great place to work: Investing in our teammates and creating opportunities to help them grow and develop their careers. At the same time, by delivering Responsible Growth we help create jobs, develop communities, foster economic mobility, and address some of society’s biggest challenges.”

For the annual Rankings, JUST Capital collects and analyzes corporate data to evaluate the 1,000 largest public U.S. companies across 20 Issues identified through comprehensive, ongoing public opinion research on Americans’ attitudes toward responsible corporate behavior. JUST Capital has engaged more than 160,000 participants, on a fully representative basis, since 2015.

Crucially, across every demographic surveyed – political affiliation, race, gender, age, or income group – Americans are united in wanting companies to prioritize Workers as the most important stakeholder and Pays a fair, living wage as the most important business Issue today. Over the last six years, Americans have consistently prioritized Worker Issues most highly among all 20 Issues JUST Capital tracks and measures, and this year that outcome has become even more pronounced. Paying a fair, living wage has more than doubled in priority since 2020 (from 9% to 21%), and four of the five Worker Issues regarding wages, health, training, and benefits are among the top six priorities of the public, reinforcing that these issues have become increasingly critical in the minds of American workers and consumers.

About its Methodology

Since 2015, JUST Capital has surveyed over 160,000 Americans – representative of the U.S. adult population – on what they believe U.S. companies should prioritize when it comes to just business behavior. JUST Capital’s latest Issues Report – which includes responses from 3,000 respondents – uses a Max-Diff discrete choice modeling technique that asks Americans what business behaviors are most and least important to defining a just company and then assigns a weight to each based on the probability that a respondent would choose that issue as most important. Those Issues become the foundation by which JUST Capital tracks, analyzes, and incentivizes corporate behavior change. The organization evaluated 951 companies across 20 Issues, five stakeholders, and 245 unique data points to produce the ranking model that drives America’s Most JUST Companies, including the JUST 100 and Industry Leader lists.

High-Net-Worth Investors Embrace Alternative Investments

  |   For  |  0 Comentarios

Guía de Charles Schwab para RIA

Alternative investing is gaining momentum among high-net-worth (HNW) investors (those with $5 million or more in total investable assets). Up from 7.7% of client portfolios in 2020, HNW clientele now have an average of 9.1% of their assets allocated to alternative investing options, and advisors expect this to increase to 9.6% by 2024, according to The Cerulli Report—U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2022: Shifts in Alternative Allocations.

There are numerous reasons advisors are adding alternative investments to client allocations. Portfolio diversification (50%) to help reduce volatility, along with new growth opportunities (50%), are among the top cited.

“Advisors—disappointed in public equity and fixed-income returns—are allocating more to private capital exposures,” says Chayce Horton, research analyst. “By expanding opportunities into private asset and credit markets, affluent and HNW investors are better equipped to properly diversify their portfolios.”

Moving forward, HNW practices report strong intentions to increase alternative investments in almost all strategies over the next two years. Private equity leads the way, with 50% of advisors and executives planning to increase their allocations, followed by private real estate (45%) and direct investments/co-investing (32%). A vast majority (94% or more) of surveyed HNW practices expect to maintain or grow their positions in all types of alternative investment opportunities, outside of hedge funds.

HNW practices are also increasing offerings such as alternative manager search and selection as a primary service, growing from 50% in 2016 to 67% in 2022. Cerulli expects this trend among HNW practices to persist as private markets continue to mature and prospects for additional tailwinds in the space proliferate. “Practices competing in the HNW advisory space should consider making these types of alternative investment consulting and implementation services a core part of their offering,” says Horton. “Access to alternative opportunities is a beneficial aspect of advisors’ service offerings that has proven to both attract and retain HNW clients over time.”

Apex Group Enhances Technology Offering with PFS Acquisition

  |   For  |  0 Comentarios

Apex Group Ltd announces the acquisition of Pacific Fund Systems (PFS), a global fund administration software business, from co-founders and Pollen Street Capital.

This acquisition follows Apex Group’s longstanding partnership with PFS through the use of PFS-PAXUS and will expand use of the technology platform to enhance the delivery of timely, accurate and independent portfolio accounting, fund and investor reporting, the firm said.

Founded in 1999, PFS supports the investment fund clients via its core PFS-PAXUS product. PFS-PAXUS is a specialist accounting and administration software that fully supports the administration of all manner of open and closed ended traditional and alternative funds, including hedge funds and private equity investment vehicles.

PFS-PAXUS is used by more than 4,000 individual users at over 100 clients managing over $1 trillion of assets under management.

PFS-PAXUS integrates all the processes that are normally performed on multiple systems, including: securities portfolio, allocation system, general ledger, fee calculation, share registry, investor communications and web portal. Benefits of this approach include increased efficiency, reduced risk of error, faster valuations, a simplified technical landscape and the ability to support complex investment structures whilst significantly reducing IT costs.

The expanded product offering will allow Apex Group to act as a single-source provider of services across the entire life cycle of client funds for both existing and acquired PFS clients.

Peter Hughes, Founder and CEO of Apex Group comments: “Through a combination of partnerships with award winning technology providers, as well as our own market leading platforms, we deliver high quality solutions to asset managers globally. PFS-PAXUS is a proven global technology solution for the funds industry that enables our clients and third parties to automate all fund administration components on a single platform. Bringing PFS-PAXUS into the Group will help us to continue exceeding client expectations by delivering a single-source solution which improves administrative efficiencies, implements essential controls, and manages our clients’ operational risk.”

On the other hand, Paul Kneen, CEO of PFS further comments: “PFS is dedicated to providing a first-class global business solution to its clients and we are excited to be joining Apex Group which shares these core principles and objectives. My team and I are looking forward to deepening our relationship with Apex Group, an important existing client of PFS, and a supportive home as we continue to enhance and grow our market leading offering.”

James Scott, Partner at Pollen Street Capital, adds: “Since investing in the business just over two years ago, PFS has gone from strength to strength, recording strong organic growth, recurring revenue and margins. This is a great outcome for PFS and the transaction represents the first exit in our flagship Fund IV. Pollen Street is looking forward to continuing its support of Paul and his excellent management team as well as working alongside Apex Group for the next phase of PFS’s growth.”

Terms of the transaction are undisclosed.

Pictet Asset Management: After the Storm

  |   For  |  0 Comentarios

Photo courtesyLuca Paolini, Pictet Asset Management's Chief Strategist

New year, same risks? The global economy continues to face challenges – not least weak growth and tightening monetary conditions – and for this reason we have chosen to retain a defensive stance; we remain underweight equities and overweight bonds.

That said, there are encouraging developments in emerging markets.

China’s unexpectedly rapid exit from its zero-Covid policy is likely to result in a strong acceleration in growth towards the end of this year. This, coupled with a weakening US dollar and emerging market assets’ attractive valuations, should help boost the appeal of emerging market stocks and bonds over the medium term. We have consequently upgraded China and the rest of emerging markets to overweight.

Our business cycle indicators show that the deterioration in global economic conditions is gathering pace. A recession will be unavoidable this year, but it should be both shallow and short before the economy begins to recover in the middle of 2023.

Global inflation is likely to decline this year to 5.2 per cent from 7.7 per cent in 2023, helped by weaker commodity prices and falling wage demands and rental prices.

In the US, the high level of excess household savings should support consumption and help the economy avoid a sharp contraction; we expect the US to register real growth of 0.4 per cent this year.

We also think the risk of a deep recession in the euro zone has somewhat receded. Despite weak economic activity and tighter lending standards, industrial production remains resilient.

Falling energy prices, meanwhile, should lead to a significant decline in price pressures across the region, with core inflation more than halving to 1.6 per cent from a 2022 peak.

Japan’s economy, meanwhile, is likely to outperform the rest of the world next year, supported by improving leading indicators, booming tourism and resilient capital spending.

That said, weak retail sales and consumer morale and a rapid deterioration in the current account balance – which is now negative for the first time since 2014 – point to a weak recovery in the coming months.

China’s recent economic data has been weak across the board, but the recent reopening of its economy suggests plenty of scope for recovery, especially for retail sales, which are currently some 22 per cent below their long-term trend on a real basis.

Beijing is likely to adopt a more pro-growth economic agenda, which should help lift growth in the world’s second largest economy to 5 per cent in 2023 from last year’s 3 per cent, according to our calculations.

Our liquidity indicators support the case for retaining a cautious stance on risky assets over the near term. But conditions will likely improve after the first quarter of 2023, especially in emerging economies.

We expect the global economy to experience a net liquidity drain equivalent to 6 per cent of GDP in 2023 as central banks including the US Federal Reserve and European Central Bank continue to tighten the monetary reins. Investors should however expect a shift in monetary tightening trends.

The Fed is, we believe, entering the final phases of its tightening campaign with the benchmark cost of borrowing set to peak at 4.75-5 per cent in the first quarter of this year. The ECB’s balance sheet contraction, meanwhile, is likely to be more aggressive than the Fed’s, amounting to a reduction of some EUR1.5 trillion, or 11 per cent of GDP, which should add to downward pressure on the dollar.

After a hawkish statement in December, investors now expect euro zone interest rates to rise to 3.25 per cent by September 2023.

The Bank of Japan’s surprise change to its bond yield control policy – it will now allow the 10-year bond yield to move 50 basis points either side of its zero rate target – should pave the way for the central bank’s eventual exit from its zero interest rate policy.

Bucking the global trend, China is leading a moderate easing cycle with the People’s Bank of China delivering targeted support measures.

The credit impulse – a leading economic indicator – is positive while China’s real money supply (M2) is expanding at 12 per cent year on year, the highest in six years. In contrast, developed economies continue to experience tighter conditions.

Our valuation model shows bonds and equities are both trading at fair value.

Valuations for global bonds are neutral for the first time since February, with yields 50 basis points lower than their peak in mid-October.

Global equities, meanwhile, trade at a 12-month price earnings ratio of 15 times, in line with our expectations, but our models point to mid-single digit re-rating of multiples over the next year provided that US inflation-adjusted 10-year bond yields fall to 1 per cent.

Corporate earnings momentum remains weak across the world and we forecast 2023 global EPS growth to be flat, which is below consensus forecasts of around 3 per cent growth, with significant downside risks in earnings in case of weaker than expected economic growth.

Our technical and sentiment indicators remain neutral for equities with seasonal factors no longer supporting the asset class.

Data shows equity funds experienced outflows of USD17 billion in the past four weeks. Emerging market hard currency and corporate bonds posted consecutive weekly inflows for the first time since August.

 

Opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist

Discover Pictet Asset Management’s macro and asset allocation views

AXA IM Appoints Olivier Paquier as Global Head of ETF Sales

  |   For  |  0 Comentarios

Photo courtesyOlivier Paquier, Global Head of ETF Sales of AXA IM

Olivier Paquier is appointed Global Head of ETF Sales of AXA IM, effective immediately.

Paquier has extensive experience in ETF sales from State Street as Head of SPDR ETF distribution in France, Monaco, Spain and Portugal, and then within J.P. Morgan Asset Management where he built their successful active ETF business in EMEA.

In his missions within AXA IM, he will be supported by an ETF business manager and 9 salespeople worldwide who will extend their expertise of selling the AXA IM product range with ETF instruments. Paquier reports to Nicolas-Louis Guille-Biel, Global Head of ETF & Product strategy.

Following the launch of its ETF platform last September , AXA IM continues its journey to build a significant ETF business and grow its footprint on this market.

The AXA IM ETF platform is now centred around three pillars:
1. Products and Capital Markets, with a dedicated product developer and two Capital Markets officers.
2. Investment and Research insights, with ETF portfolio managers getting insights from AXA IM’s Core investment teams.
3. Sales and marketing, with Olivier as new Global Head of ETF Sales, an ETF business manager, a dedicated marketing manager as well as 9 identified salespeople with a global reach.

Commenting on the arrival of Olivier Paquier and the growing ETF platform, Hans Stoter, Global Head of AXA IM Core, said: “We have adopted an entrepreneurial spirit to develop our ETF platform and deliver the project in house, leveraging our internal capabilities with people from different teams, as well as additional skills with external recruitments to continuously strengthen our ETF community. We have now reinforced our ETF distribution value chain and are delighted to welcome Olivier, one of the most recognised ETF professionals in the industry.

FDS Signs Agreement with Polar Capital to Extend their Reach into US Offshore and Latin America

  |   For  |  0 Comentarios

Fund Distribution Services (FDS) has reached an  agreement with Polar Capital to offer their strategies into the US Offshore and Latin American market. 

Polar Capital is an experienced, investment-led, active fund manager. The company prides itself  on its collegiate and meritocratic culture where capacity of investment strategies is managed to enhance and protect performance. Since its foundation in 2001, it has grown steadily and  currently has 15 autonomous investment teams managing specialist, active and capacity  constrained portfolios, with combined AUM of $22.4 billion (as of December 31, 2022), said the firm in a press release. 

“Polar Capital’s distribution strategy is growth with diversification, by both client segment and  geography, and we see significant opportunities outside of our home markets of the UK and  Continental Europe. Our approach to wider global expansion is both targeted and measured.  We are delighted to be partnering with FDS in the US offshore and Latin American markets,” said Iain Evans, Head of Global Distribution, Polar Capital.   

In addition, Evans told that FDS team “brings a wealth of experience and long-standing investor relationships in these markets, and they are the perfect complement to work alongside our existing North American distribution team.”

“Partnering with Polar gives our clients access to highly skilled, specialized managers that  deliver an experience that you would expect from a strong boutique, investment led, organization,” added Lars Jensen, Managing Partner FDS.

Fed Unveils Pilot Plan for Banks to Manage their Financial Risks from Climate Change

  |   For  |  0 Comentarios

The Federal Reserve Board provided additional details on how its pilot climate scenario analysis exercise will be conducted and the information on risk management practices that will be gathered over the course of the exercise.

As described in the instruction document, Bank of America, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley y Wells Fargo will analyze the impact of scenarios for both physical and transition risks related to climate change on specific assets in their portfolios, the release said.

To support the exercise’s goals of deepening understanding of climate risk-management practices and building capacity to identify, measure, monitor, and manage climate-related financial risks, the Board will gather qualitative and quantitative information over the course of the pilot, including details on governance and risk management practices, measurement methodologies, risk metrics, data challenges, and lessons learned.

“The Fed has narrow, but important, responsibilities regarding climate-related financial risks – to ensure that banks understand and manage their material risks, including the financial risks from climate change,” Vice Chair for Supervision Michael S. Barr said. “The exercise we are launching today will advance the ability of supervisors and banks to analyze and manage emerging climate-related financial risks.”

The pilot exercise includes physical risk scenarios with different levels of severity affecting residential and commercial real estate portfolios in the Northeastern United States and directs each bank to consider the impact of additional physical risk shocks for their real estate portfolios in another region of the country. For transition risks, banks will consider the impact on corporate loans and commercial real estate portfolios using a scenario based on current policies and one based on reaching net zero greenhouse gas emissions by 2050.

These scenarios are not forecasts or policy prescriptions, but can be used to build understanding of climate-related financial risks.

The Board anticipates publishing insights gained from the pilot at an aggregate level, reflecting what has been learned about climate risk management practices and how insights from scenario analysis will help identify potential risks and promote effective risk management practices. No firm-specific information will be released.

Climate scenario analysis is distinct and separate from bank stress tests. The Board’s stress tests are designed to assess whether large banks have enough capital to continue lending to households and businesses during a severe recession. The pilot climate scenario analysis exercise, on the other hand, is exploratory in nature and does not have capital consequences.