Author: CFI.co Blogger

Bonds

Région Ile-de-France is the first European Sub-Sovereign to issue an ESG benchmark bond with a negative yield on the financial markets

Author ByCFI.co Blogger

In order to fund its annual investment programme, in particular its regional recovery plan (€6.8bn between 2020 and 2022), Région Ile-de-France issued a new €500mn public bond on 12 April 2021.

Région Ile-de-France becomes the first European Sub-Sovereign issuer to print an ESG benchmark bond with a negative yield (-0.12%).

Investors demonstrated a massive support for this transaction, despite a negative yield, highlighting their confidence into the Région Ile-de-France’s credit. Indeed, the issuance attracted up to €3.5bn of interests, i.e. 7 times the amount announced, with a total of 114 orders. As a reminder, the previous record for the Région was €1.3bn in 2018 (in comparison, the raised amount was also €500mn). This record is now exceeded by +€2.2bn.

The Région keeps on diversifying its investor base with 16 jurisdictions participating in this new transaction. France, Germany, Italy and Switzerland accounted for more than 60 % of the interests. The bonds were allocated to buy and hold investors committed to sustainable financing.

This strong success confirms the Région Ile-de-France’s position as a European leader in sustainable financing. Since 2019, the Région is committed to issuing 100% of its funding programme in sustainable format, representing 80 % of its outstanding debt versus 35 % in 2015.

This is the first transaction of the Région issued under its updated framework for Green, Social and Sustainable bond issuance, aligning with the European taxonomy. In its Second Party Opinion, Vigeo ranked the use of proceeds, the selection and evaluation process, as well as the management of funds as “best market practices”.

Région Ile-de-France is also the first European Sub-Sovereign issuer to have engaged in the alignment of its framework to the upcoming European standards, contributing to the success of the transaction.

Despite the Covid-19 related economic crisis, the Région’s financial ratios will stay on a more favorable track in 2021 compared to 2015. The current margin rate would stand at 32.1% in 2021 (vs. 20.5% in 2015). The self-financing capacity doubled compared to 2015.

At the end of 2021, the outstanding debt will be in line with the 2015 level. As a reminder, between 2004 and 2015, it increased by an average annual rate of + 10 %. At the end of 2021, the debt payback ratio should amount to c. 4.5 years, way below its late 2015 level (7.5 years).

Thanks to a tight operational expenditure control since 2016 (- €2bn in multi annual expenditures), the Région Ile-de-France was able to face the Covid-19 crisis with a solid financial position.

The Région has received the best rating possible at this time in France, in line with the Republic of France (Fitch “AA” and Moody’s “Aa2”). Fitch affirmed its rating on Friday 9 April, highlighting that: “Ile-de-France has tight control of expenditure, as reflected by a continuous decline in operating expenditure in the last years” […] “Ile-de-France’s liabilities carry little risk” […] “[its] debt payback ratio remained sound in 2020” […] “despite the impact of the pandemic” […] “In 2020, net adjusted debt declined for the third year in a row”

In March 2021, Région Ile-de-France received the Capital Finance International – CFI.co – « Best sustainability bond issuer – France » award.

Economics

Secular Stagnation and the Big Balance Sheet Economy

Author ByCFI.co Blogger

Otaviano Canuto, Policy Center for the New South

Private balance sheets have risen relative to GDP in advanced economies in the last decades, in tandem with a trend of decline in long-term real interest rates. Asset-driven macroeconomic cycles, along with a structural trend of rising influence of finance on income growth and distribution, have become part of the landscape. Underlying secular trends of stagnation may also be suggested, making the macroeconomic dynamics dependent on the balance sheet economy getting bigger and bigger.

Economics

The Pandemic Will Leave Scars on the Job Market

Author ByCFI.co Blogger

Policy Center for the New South

Also: Seeking Alpha, TheStreet.com, Capital Finance International

All economies affected by the pandemic have something in common. The rate of vaccination of the population—quite different in different countries—has been the main factor determining the prospects for the resumption of economic activity, as it is a race against local waves of transmission of the virus.

Personal contact-intensive services have borne the economic brunt of the pandemic. To the extent that vaccination enables them to restart, one may even be able to witness some temporary dynamism in the sector because of pent-up demand. However, international tourism will not be included at the outset since vaccination will have to reach an advanced level both at the origin and destination of travelers.

But let us not be deceived: the pandemic will leave scars and countries will not return to where they were. There will be a need for retraining and job reallocation for part of the populations of all countries.

The pandemic is leaving a trail of unemployment, particularly affecting minorities, low-skilled workers and, in Emerging Market and Developing Economies, women, who predominantly occupy jobs in contact-intensive services. Figure 1 displays estimates presented in chapter 4 of the IMF April World Economic Outlook released on March 31.

Figure 1 – Average Unemployment Rate Change in Percentage Points
Figure 1: Average Unemployment Rate Change in Percentage Points. Source: IMF (2021), World Economic Outlook, April (ch. 4)

Before the pandemic, it was already known that ongoing technological changes—automation and digitalization—were posing challenges in terms of the need for training or retraining for part of the workforce. Well then! The response of companies and consumers to the pandemic has deepened these trends and is not expected to be entirely reversed.

A February 2021 report by the McKinsey Global Institute estimated that in eight countries (China, France, Germany, India, Japan, Spain, the United Kingdom and the United States), more than 100 million workers will have to find new, more qualified jobs by 2030. This is 25% more than they had previously projected for developed countries. Figure 2 shows their estimates of shifts in occupations by 2030, with a relative rise in healthcare and science, technology, engineering, and mathematics (STEM), while jobs in food service and customer sales and service roles decline. Less-skilled office support roles would also tend to shrink.

Figure 2 – The mix of occupations may shift by 2030 in the post-COVID-19 scenario
Figure 2: The mix of occupations may shift by 2030 in the post-COVID-19 scenario. Source: McKinsey Global Institute (2021). The future of work after COVID-19, February.

Why? Many of the practices adopted during the pandemic are likely to persist. Where done, consumer surveys indicate that sales via e-commerce, which have grown substantially during the crisis, are not expected to shrink too much. Also, remote work will not be fully reversed, with the hybrid organization of work processes becoming more common. The fact that employees in remote occupations have worked more hours and with greater productivity during the pandemic will encourage continued telework.

McKinsey suggests that changes in “work geography” will have consequences for urban centers and workers employed in services, including restaurants, hotels, shops, and building services—25% of jobs in the United States before the pandemic, according to David Autor and Elisabeth Reynolds (The Nature of Work after the COVID Crisis: Too Few Low-Wage Jobs; July 2020). Indeed, demand for local services in cities has dropped dramatically as remote work has increased, regardless of confinement.

Autor and Reynolds indicated four trends for the world of work after the pandemic. In addition to automation, they highlighted the increase in remote work, the reduction of density of workplaces in urban centers, and business consolidation. The latter is due to the growing dominance of large firms in many sectors, something exacerbated by the bankruptcies of smaller and more vulnerable companies.

All these trends have negative impacts on low-income earners and the distribution of income. They tend to increase the efficiency of processes in the long run, however, leading to harsh consequences in the short and medium terms for workers in personal services, who are generally not present among the highest paid. Workers at the top of the wage pyramid, including professionals in STEM, will see their opportunities grow.

Technological progress is one of the main causes of the increase in income inequality in advanced countries since the 1990s. The acceleration of inequality with the pandemic therefore tends to intensify the challenges. In a way, it can be said that the pandemic is accelerating history, rather than changing it.

The role of public policies will be central in the post-COVID-19 world, both in strengthening social protection—including through unemployment insurance and income transfer programs—and in the requalification of workers. Instead of denying technological advancement, it is better that public authorities help people to adapt, minimizing the resulting scarring.

Otaviano Canuto, based in Washington, D.C, is a senior fellow at the Policy Center for the New South, a nonresident senior fellow at Brookings Institution, an adjunct assistant professor at SIPA – Columbia University, a professorial lecturer of international affairs at the Elliott School of International Affairs – George Washington University, and principal of the Center for Macroeconomics and Development. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund and a former vice-president at the Inter-American Development Bank. He is also a former deputy minister for international affairs at Brazil’s Ministry of Finance and a former professor of economics at University of São Paulo and University of Campinas, Brazil.

Economics

Global Inequality

Author ByCFI.co Blogger

Otaviano Canuto, Policy Center for the New South

The global trend towards increasing globalization since the 1990s seems to have had two different distributional consequences: income inequality between countries has declined, while economic inequality within countries has increased. However, technological progress has made the biggest contribution to rising income inequality over the past two decades. Domestic policies – fiscal policies, social protection – are the locus where inequality is to be tackled.

Economics

China’s Economic Rebalancing

Author ByCFI.co Blogger

Otaviano Canuto, Policy Center for the New South

China’s growth trajectory in the second decade of the century has been one of a rebalancing toward a new growth pattern, one in which domestic consumption is to rise relative to investments and exports, while a drive toward consolidating local insertion up the ladder of value added in global value chains also takes place. Services should also keep rising relative to manufacturing. Declining GDP growth rates from two digits in previous decades to 6% in 2019 – and likely lower ahead – would be the counterpart to rising wages and domestic mass-consumption, and to the transition toward higher weights of services and high tech.

We point out two major challenges in the rebalancing. First, the transition toward a less investment- and export-dependent growth model has been taking place from a starting point of exceptionally low consumption-to-GDP ratios. Besides high profit-to-wages ratios, low levels of public social protection and spending lead to high household savings. An additional challenge comes from the lack of progress in rebalancing between private- and state-owned enterprises, something that is taking a toll on productivity.

Economics

Trade Globalization

Author ByCFI.co Blogger

Otaviano Canuto, Policy Center for the New South

In the 1990s and 2000s, the world manufacturing production to a substantial extent moved from advanced countries to some developing countries. This was the result of the combination of an increase of the labor supply in the global market economy, trade opening, and technological transformations that allowed for fragmentation of production processes. As a result, foreign trade expanded, and world poverty diminished. Such trade globalization process stabilized in the 2010s and tends to be partially reversed by the new wave of technological changes.

Technology

A Guide for Crypto Trading for Beginners

Author ByCFI.co Blogger

A lot of investors are looking to diversify their portfolios by investing in crypto. The main reason for that is the possibility of higher returns, especially since most cryptocurrencies are deemed volatile. In case you’re a beginner in this field, then it’s important to take the time and learn more about cryptocurrencies, blockchain technology, and online trading sites. In this guide, we cover essential information to help you make your first crypto investment.

A Guide for Crypto Trading for Beginners

What is Cryptocurrency?

A cryptocurrency is a digital or virtual currency that is used as a medium to transfer money on the internet. Bitcoin was the first cryptocurrency that was launched in 2009. Today, the competition is increasing as a lot of companies are developing their own digital currencies, and currently, there are over 4000 cryptocurrencies available on the crypto market. Even though there are some differences that make each cryptocurrency unique, what they have in common is the blockchain technology.  

This underlying technology is what made cryptocurrencies successful, and it is one of the main reasons why the crypto market is thriving today. Blockchain technology is a decentralized and highly secure system of recording information that was created to enable crypto transactions without the supervision or control of a central institution. Some of the benefits of blockchain technology are irreversible transactions, short processing time, low transaction costs, anonymity, and other perks. Plus, by design, cryptocurrencies are deflationary currencies, and their supply is finite. 

Reliable Online Trading Sites

Before opening an account on an online trading site, you should take some time and research the cryptocurrency. A good starting point is to read the white paper of the cryptocurrency because you need to find out more about how it operates and what are the main advantages of using it. For example, Bitcoin is known as a safe-haven asset because it is widely used and is the largest cryptocurrency by market cap, while its total supply is restricted to 21 million.

When you have a good idea about the group consist you want to include in your portfolio, then you can find a reputable and trustworthy crypto exchange site that suits your preferences and main financial goals. A reliable platform that compares different exchange sites is https://buyshares.co.uk/cryptocurrency/exchanges/. 

The detailed review includes top crypto exchange UK platforms, their main features, payment methods that are available on the site, commission fees, withdrawal fees, among other relevant information that will help you make your decision.  

Storage Options

It doesn’t matter whether you’re looking to make long-term or short-term investments. Choosing the right and safe storage option for your cryptocurrencies is a vital step as a new investor. You can choose from different crypto wallets, including online, mobile, desktop, and hardware wallet. A suitable wallet for online trading is the web wallet because you can access the funds from a web browser. 

But make sure to have a good understanding of how your private and public keys are stored. They can be more vulnerable when they are stored on third-party servers. Otherwise, mobile, desktop and hardware wallet are considered safer options, but it is more convenient to use a hot wallet when it comes to online trading such as web and mobile wallet. 

Final Thoughts

It is also important to learn as much as you can about the crypto market and to keep up with the latest trends and news. For this purpose, it is beneficial to choose a platform that has a mobile app because you can easily access your account from your smartphone and make changes according to the latest developments in the market.

Also, make sure to learn more about trading and pick a strategy that works for your budget and for your portfolio. One good example is the Elliott Wave Theory , which is based on long-term price patterns and repetitive patterns to predict future price movement.

Finance

VEON and Mastercard enter into global partnership to boost digital financial services

Author ByCFI.co Blogger

Partnership to accelerate scaling of VEON’s digital financial services business

Amsterdam, 3rd February 2021 – VEON Ltd. (NASDAQ and Euronext Amsterdam: VEON), a leading global provider of connectivity and digital services, announces a strategic global partnership with payment technology leader Mastercard to boost digital financial services in key markets.

The partnership, covering core portions of VEON’s footprint (Russia, Pakistan, Ukraine, Kazakhstan and Bangladesh), will allow VEON to further scale its digital financial services business by offering consumers and merchants in these countries best-in-class products tailored to their needs. By working together, the companies will support the financial and digital inclusion of traditionally underserved consumers in each geography.

VEON’s co-Chief Executive Officer Sergi Herrero commented: “Expanding digital financial services is a key growth priority for VEON as we look to meet the evolving needs of our consumers. Our partnership with Mastercard provides our operating companies in five countries with world-class capabilities to fast-track their plans for developing digital financial services and demonstrates the trust Mastercard has in VEON’s ability to encourage greater financial inclusion through these transformative platforms.”

Jorn Lambert, Chief Digital Officer, Mastercard said: “As digital transformation accelerates, there is also an opportunity to expedite its many benefits, including the way it effectively addresses consumer needs and experiences. Mastercard strongly believes in the power of partnership and we look forward to working closely with VEON to expand financial inclusion and greater access to the digital economy.”

The partnership is an expansion of the relationship between the two companies that began in May 2020 when Mastercard partnered with Mobilink Microfinance Bank Limited, VEON’s financial services provider in Pakistan, to boost financial inclusion across that fast-growing nation. It further cements the joint commitment of VEON and Mastercard as strategic partners on this ambitious but vital journey to empower individuals and communities though financial services access.

About VEON

VEON is a NASDAQ and Euronext Amsterdam-listed global provider of connectivity and internet services, headquartered in Amsterdam. Our vision is to empower customer ambitions through technology, acting as a digital concierge to guide their choices and connect them with resources that match their needs. 

For more information visit: http://www.veon.com.

About Mastercard

Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments and businesses realize their greatest potential. Our decency quotient, or DQ, drives our culture and everything we do inside and outside of our company. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all.

For more information visit: www.mastercard.com

Finance

Why trust and transparency are the key ingredients for strong leadership in 2021

Author ByCFI.co Blogger

Jonny Combe, UK CEO of PayByPhone, gives his 7 Top Tips on leading a remote team in 2021 

Jonny Combe, UK CEO of PayByPhone
Jonny Combe, UK CEO of PayByPhone
  1. Build a foundation of trust

Leadership is about empowering your people and one of the main ways to do this is to trust your team to make responsible decisions – just as they did in an office-based set-up. In a remote office model, it’s important to trust them to make good judgements about time and personal commitments. And whatever your leadership style, trust engenders an adult-to-adult model of interaction. This has always been the case but is even more crucial now with so any of us working from home. Leaders can also build trust by demonstrating authenticity. We’re all human and acknowledging the challenges we encounter in these strange times helps to build trust and also encourages people to speak up about any struggles they are facing.

  • Work out what really matters

Being suddenly plunged into remote working patterns in 2020 was a shock for leaders and employees alike – it’s easy to talk about being more productive but suddenly you had to deliver it. The situation forced leadership to work out what the truly key tasks were and to ensure their team delivered them. This focus continues to be a benefit of remote working and helps leaders direct their people towards a more outcome-based model of working. 

  • Intentional communication with staff

Frequent communication and contact with staff have always been important and being remote shouldn’t have changed that. What has changed is that as a leader, you now have to be more intuitive and tap into your EQ. Whereas in the office you might pick up on someone’s mood changes and check in, now you have to check in on people intentionally. After nearly a year of working remotely, this has become almost second nature for many leaders and managers. However, there is a danger that as lockdown conditions drag on, some of these good habits can fall by the wayside. Leaders must not underestimate the importance of connecting – both on a personal and a professional level. These regular connection points help people feel valued and significant – which encourages them to feel good about themselves, what they do and the value they bring. As well as being the right thing to do on a human level, on a business level, it also means people will want to do their best work. 

  • Empower your leaders to lead 

Businesses have to adapt to changing circumstances – as a leader you have to work out the most effective way to recalibrate and to communicate with your leadership team and your staff. You’ve got to keep your leaders and all your people in the loop. Leaders should also look to capitalise on opportunities and the pandemic is certainly an ideal time to embrace great internal comms.

At PayByPhone we walk the talk – we have introduced a senior management team call three times a week, which are good connection points for us. We also have a more formal leadership meeting once a month, and we have an all-staff virtual meeting every Monday morning.

  • Follow up on your promises to your staff

Many leaders tell their people how important they are, but you have to follow this through with action. There are some great examples of intentional actions and at PayByPhone we have opted to pay for Disney+ subscriptions for those employees with children as a way to support them during lockdown. For employees who don’t have children or who already have a Disney+ subscription, we pay for them to have the new Joe Wicks app to help them get active and to maintain a positive mental attitude. These are small gestures in themselves, but they are important because they help people feel valued and remind them that out-of-sight isn’t out-of-mind. 

  • Adjust your expectations 

Paying tribute to flexible working and actually demonstrating flexibility are vastly different things. At PayByPhone we were already advocates of flexible working when we were office-based so it hasn’t felt like a huge leap. For us, it has never been about ‘face time’ at your desk, or ‘presentee-ism’, it’s about getting your job done. 

Right now, however, the game changer is having multiple employees with children who need home schooling, so it’s crucial that as a leader, I adjust my expectations. A single parent trying to juggle home working and home schooling will inevitably have their work impacted, despite their best efforts. Frankly any working parent right now probably deserves a superhero cape! Accepting that some employees may be unable to give 100% focus and being aware of the pressures is vitally important as a leader. And it’s also essential to set clear boundaries and goals about the achievements and outcomes you expect. Just make sure they are realistic. 

  • Recruit from a wider talent pool and consider a hybrid-remote office

Part of good leadership is seizing opportunities and since the pandemic has accelerated the working-from-home revolution, it’s now possible to source employees from a wider area. Leaders should cast their recruitment net wide and carefully consider the kind of skills, experiences and diverse ways of thinking that would help take their organisation to a new level. By securing the very best employees, leaders can add more value to their organisation. We used to restrict our hiring pool to people within a relatively small radius of the office. Now, we’re looking within a 100-mile radius of the office, which will enable us to operate a hybrid-remote office with people in the office once a week even when we are clear of the pandemic crisis. The flexible nature of remote working has the added benefit that it attracts Millennials and Gen Z who like a portfolio approach to work. Having these digital natives on board and harnessing the mindset of different generations is all part of creating a vibrant and diverse workforce – and for PayByPhone this helps us consolidate our position as a leader within our industry.