By Hakan Enver, Operations Director of Morgan McKinley in London and Trefor Murphy, Managing Director of Morgan McKinley UAE
Despite the economic woes of recent years, the financial services sector is here to stay and for those professionals seeking fulfilling careers, there is no doubt that the world has become gradually smaller and consequently talent has become far more globally mobile. While London remains the number one global financial services centre, aside from the other traditional hubs of New York Frankfurt and Tokyo, there are now other successful financial centres offering a diverse range of roles.
According to City think-tank Z/Yen’s Global Financial Centres Index, Dubai is the most competitive financial centre in the Middle East and Africa region and, it has also been named as one of three emerging global contenders alongside Beijing and Moscow. Against a backdrop of global economic pressure, the UAE region continues to outperform most others and while the Eurozone crisis led to a more subdued recruitment drive last year, confidence during 2013 has been very much on an upward trajectory. And in London, there is increasing evidence that, while cost control and regulation remain a priority for the sector, there is now a real focus on growth – a trend reflected in the latest PWC Financial Services Survey. The survey also reveals that a third of financial services organisations admit that the availability of professional staff has re-emerged as a factor which could have a major impact on their ability to grow.
So what can the ambitious financial services professional expect from the job markets in Dubai and London?
Analysts in the UAE region are bullish about a return to growth for equity and debt capital markets with net profit on the DFM up 138% in the first half of 2013 compared to last year. The UAE will also benefit from an upgrade to ‘Emerging Markets’ status on the MSCI Index in May 2014 and with trading volumes increasing, Global Markets teams are preparing for growth. Most regional banks have maintained strong balance sheets and as they look to lend to increase market share, senior managers are recognising that investing in talent now is key. Banks competing for a share of the region’s growing wealth and investment industry also continue to grow, resulting in competition for experienced private bankers, wealth and investment managers. Additionally, regional banks and sovereign wealth funds are continuing to strengthen their teams to manage their growing portfolio of regional and global assets. In investment banking, an optimistic outlook in the Middle East combined with a slowing down in Europe has created an increased focus on deals in the MEA region. The areas of compliance and risk continue to grow driven by increased regulatory pressures and sanctions at both a global and local level. With increased pressure on internal controls and corporate governance, professionals with solid experience in these areas will continue to be in high demand. Dubai is also well placed to capitalise on the increasing global interest in Islamic Finance. Dubai was a pioneer in this area having created the Dubai Islamic Bank in 1975 and is one of the leading players in the region. At the beginning of 2013 Dubai announced its plan to become the leading Islamic Finance centre in the world, a place currently occupied by Kuala Lumpur and London.
In London there is heightened demand within the compliance arena, namely around AML (Anti Money Laundering) and Financial Crime. Consequently professionals who have had exposure to high risk entities (for example Sanctions and PEPS – Politically Exposed Persons) are particular sought after. There is also an increasing need for contractors within operational and financial change as we edge nearer to the deadline for EMIR implementation. Additionally, professionals with experience around Basel 3, AIMD and FATCA are seeing the opportunities available to them increase significantly. There is also demand within the internal audit space. Roles are now less generalist in nature and more specific to particular areas of a bank. Market Risk Auditors and Quant Auditors, for example, are currently in demand as are auditors who are more product specific. More and more business line candidates, with limited or no prior audit experience, are being considered for these types of vacancies.
And what of cultural differences and working life? Dubai is primarily an Islamic country and so there are laws around public alcohol consumption and the display of public affection is frowned upon. Having said that our experience is that having a common sense approach will leave you with no issues. There is a large expat population and Dubai is a melting pot of cultures, languages, social class, religions, experience and understandings and therefore the way things are done may be very different from what you are used to and sensitivity to cultural differences is important. The UAE is also tax free. This means that in the top earning bracket you can take home up to 50% more than you would at home. If you are coming to the stage of your life when saving is more important than spending, the Middle East could be an even more attractive proposition. Additionally, in the UAE, the average annual rainfall is 4.7 inches, on par with just one very wet weekend in London, so it could be your gateway to a sunnier disposition and an outdoor lifestyle.
For those preferring to stay closer to home and gain a hike in pay, while the available bonus pool has certainly reduced in recent years, professionals looking to move now without losing an accrued bonus do still have time. In fact most banks’ cut off will likely be October/November so those seeking a bonus as part of their package could still negotiate this on a pro rata basis. However, guaranteed packages can be few and far between. Instead we are seeing banks increasing their basic salaries, and our latest employment data for August 2013, shows that the average change in salary moving from one opportunity to another stood at 20%.
So whichever city you choose, one thing is clear – the future is certainly looking bright for professionals with solid financial services experience. Those seeking a new role in the next few months should be sure to partner with a reputable recruitment consultancy. Ensure that they are knowledgeable within their chosen field and that you test them on their market awareness. Once you are certain they know your market and what you are looking for, ensure your updated CV – equipped with your key achievements – is sent to them. Check that they are actively marketing you – not simply being reactive to jobs coming in. Keep in touch with them regularly – this will give you the opportunity to assess how well they are in fact selling your skills to potential employers.
Can Thematic Investing provide investors with growth opportunities in uncertain times?
New whitepaper from CAMRADATA explores
CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.
Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.
“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”
The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.
After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.
Key takeaway points were:
- Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
- It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
- One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
- There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
- In terms of successful themes, one clear winner due to COVID had been digitalisation.
- One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
- One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
- The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
- But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.
The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:
- CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
- Sarasin & Partners: ‘Theme or fad? How to invest for the long term’
To download the Thematic Investing whitepaper, click here
For more information on CAMRADATA visit www.camradata.com
Promises, Promises: Navigating the Reputational Risks of ESG Investment Pledges
By Nir Kossovsky and Denise Williamee, Steel City Re
As the trend towards ESG investment and a low-carbon economy continues, banks are being backed into a reputational corner. Law firms specializing in representing the expanding pool of litigious shareholders are salivating.
On one hand, banks understand the inherent financial risks and challenges involved with making a wholesale move towards a low-carbon economy. The transition to a greener corporate world can’t happen overnight; as long as “brown” assets continue to be profitable, those in bank leadership positions have to balance their green aspirations with their responsibility to shareholders.
On the other hand, while not renewing loans on existing coal mines or fracking sites may improve a bank’s carbon disclosures, it could have social and financial ramifications that disappoint other stakeholders—i.e., causing people to lose their jobs. Still, financial institutions are experiencing pressure from all sides—from ESG investors to social license holders – to divest the fossil fuel industry and adopt drastic “green financing” practices now.
To alleviate these pressures, banks are pledging greener financing initiatives. Almost every large global bank has made some sort of commitment. Goldman Sachs, for example, announced they would spend $750 billion on sustainable finance over the next decade. Bank of America pledged $300 billion.
Bank boards and executives likely don’t fully appreciate the reputational risks posed by the aspirational statements they’re making. They are making promises and raising expectations without the operational or governance systems in place to ensure those expectations will actually be met. Overpromising and increasing the risk of angering and disappointing stakeholders is the very definition of reputational risk.
Banks are in a unique position: integral to every aspect of our economy, well-known brands that work hard to build and retain the trust of their customers and the general public while operating in an environment of intense scrutiny by politicians and regulators at every level of government. Satisfying all the stakeholders calling for greener policies while fulfilling their responsibility to their shareholders is a demanding balancing act fraught with risk. The Business Roundtable pledge, led by JP Morgan Chase CEO Jamie Dimon, and elevating employees, communities, and the environment as stakeholders, was an attempt to strike that balance. Already, though, that pledge is being dismissed by politicians like Senator Elizabeth Warren, who characterized it as an “empty publicity stunt.”
The price of missing expectations is costly, and bank executives and board members could find themselves in a legal hot seat. Federal securities lawsuit filings alleging reputation harm from missed expectations are up 60% over last year, the third year of a rising trend.
This trend stems from SEC regulation S-K that calls for more human capital disclosures, and the Caremark decision that sets the bar for most securities litigation and makes board oversight of mission-critical corporate operations a test of the duty of loyalty. Other cases, like In Re Signet, have made ESG-like pronouncements—historically “immaterial corporate puffery”—now potentially material in the securities arena.
For example, directors’ duty of loyalty were successfully questioned in alleged failures of innovation (In Re Clovis Oncology, Inc., board failure to protect the firm’s reputation for pharmacologic innovation); safety (Marchand v. Blue Bell Creameries, board failure to protect the company’s reputation for food safety); and environmental sustainability (Inter-Marketing Group USA, Inc. v. Armstrong, board failure to protect the firm’s reputation for oil pipeline-related environmental protection).
In other words, aspirational pledges are now being considered by courts with the full weight of a material public disclosure. As wealth managers chase ESG-informed investing and capital markets chase ‘green underwriting’, the plaintiff’s bar chases boards and executives making pledges that appear to be no more than aspirational marketing.
The only way to strike a balance and mitigate these risks is through a robust Enterprise Risk Management (ERM) strategy that’s centered around understanding who your key stakeholders are, what their interests are, and ultimately, what their expectations are. Coincidentally, it is also one of the three key behaviors the world’s largest asset management firm, Blackrock, is demanding of all investee companies in 2021 thus communicating the type of authenticity to its slogan “beyond investing,” that BP failed to accomplish with similar sloganeering a decade ago.
Banks need to create a central intelligence unit with board level oversight to comb through every aspect of the organization to identify stakeholder interests, potential risks and/or exposures. Pledges and communications should be informed by a rigorous and honest self-assessment of the institution’s public filings and operational capacity. Overpromising is costly. ESG pledges must be rooted in achievable goals that a bank’s leadership are confident their institutions can reasonably execute on an operational level. Banks also need to consider transferring or financing risks using the broad range of conventional and parametric insurance products currently available.
Enterprise risk management, when executed properly, will fulfill ESG commitments, reassure stakeholder groups and give marketers, counsel, and investment as well as government relations professionals an authentic story to tell about strong corporate governance. ERM focused on reputational intelligence will provide confidence to ESG funds, institutional investors, bond raters, and government officials alike.
The popularity of ESG investment and chasing ESG ratings is not going to go away, and stakeholder pressures will continue to mount. Investors doubled the size of the ESG sector this year, putting $27.4 billion into ETFs traded in U.S. markets. According to a recent survey conducted by Bank of America relating to ‘Gen Z’—which is just entering the workforce—80% take ESG into account when making their investment decisions.
Bank leadership that is striving to attain the correct balance between stakeholders and shareholders need to lean more into the “governance” portion of the ESG equation; pledges backed by enterprise risk management are the strongest pledges you can make.
ESG – Bubble or Bandwagon?
By Josh Gregory, Founder of Sugi
Isaac Newton was a successful investor, but he lost a fortune (£15m in today’s money) in the South Sea Bubble of 1720. When asked about his misadventure, he supposedly replied that he ‘could calculate the motions of the heavenly stars, but not the madness of people’ (presumably, himself included).
The rise and fall of South Sea stock was one of the earliest and largest instances of a market bubble and crash. Three hundred years later, we’re facing another massive investing trend: sustainable investing. In the last year or so, almost every investment institution has jumped on the sustainability bandwagon.
It’s now arguably more notable to find an asset manager who hasn’t committed to sustainable, ethical, responsible, impact and/or ESG (environmental, social and governance) investing than one who has. The numbers are telling: in August 2020, assets in global ESG exchange traded funds and products topped $100 billion (£73 billion) globally.
Demand for sustainable investments has been bolstered by two main factors. Firstly, with climate change firmly on the global agenda and all eyes watching the Biden administration’s transition to power (and the subsequent climate change policy that will follow), ‘greening up’ has never been more of a priority for businesses and individuals. This includes the investment industry, with both retail and institutional investors increasingly demanding that their money has a positive impact on our planet.
Secondly, since the start of the COVID-19 pandemic reports have continually claimed that ESG funds are outperforming ‘traditional’ investments. No longer is going green cited as a ‘nice to have’; rather, these reports demonstrate the value and resilience of ESG funds to the investor community, increasing demand. Surely, this can only be a good thing? Yes, but only if investors know what they’re buying.
It’s no secret that ESG investing suffers from complexity, lack of transparency and a lack of any universal standard. Fundamentally, this is why we created Sugi – a new platform enabling retail investors to track the environmental impact of their investment portfolios using clear and objective carbon impact data.
Today, ESG terms can lawfully be used to label pretty much anything. Ultimately, this means that the ESG label is not a guarantee of good practice. In fact, an ESG rating is a financial risk metric – the scores calculate the extent to which ESG issues affect a company’s economic value. Many investors, even institutional investors, don’t know how to decipher this. The scores themselves are designed to be used in tandem with portfolio dashboards and other data to make financial decisions. This effectively means that the scores on their own without any context are not of much use to anyone.
This has led to a glut of greenwashing in the sector, where investment products are described as green, ethical or sustainable, but the description is unsubstantiated. And while the top financial performance of ESG funds seems uncontroversial, those digging a little deeper may be surprised at what they find. Many ESG funds are heavily weighted in favour of technology companies, which typically have low carbon emissions. These stocks skyrocketed in 2020 but it’s important to note the context. It was largely due to the COVID-19 lockdowns and had nothing to do with the stocks’ ESG credentials.
The EU, the UK and the US are all working on their own strict definitions of ESG. This should, in theory, go some way to clarify what investors are getting when they choose an ESG or sustainable investment product. However, this will take a while to implement and there will still not be a globally recognised definition or standard.
It would seem many people are pouring money into investments when they don’t know what they’re buying. That’s nothing new. But underneath the ESG label lies something meaningful, worthwhile and, above all, valuable for the world in which we live – environmental, social and governance best practice.
The question remains though, is it a bubble? A bubble exists if ESG investments are over-valued (i.e. over-bought). Right now, ESG funds may be in bubble territory because many of the underlying stocks that make up the funds are themselves in a bubble. But does that make ESG a bubble? If it is, when do we call it?
Historically, all bubbles –whether they be tulips, canals, railways or the internet – no-one knows. And if I knew now, I’d be sunning in the South Seas rather than writing this blog!
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