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THE INVESTMENT IMPLICATIONS OF CLIMATE RISK – AN INVESTMENT MAN-AGER’S VIEW

In the final release of its three part series on climate risk, leading independent fixed income manager, Cameron Hume, looks at how attitudes to climate risk can be factored into long term investment decisions and whether those investment decisions can be used to drive the direction of travel with a global response to climate risk.

 

It is widely accepted that greenhouse gas (GHG) emissions must be decreased in order to avoid a potentially catastrophic increase in global temperature.

 

If we also accept that a global response is required to achieve a global reduction in GHGs, but that countries will act according to their own discretion, then the next piece of information we have is the recognition that companies will face different regulatory and legal regimes depending on which part of the world they operate in.

 

It is a complicated set of factors to consider and it can be tempting to put off any decision making. However, the Financial Stability Board has made it clear that action is required now.

 

The 2017 report by the Taskforce of Climate Related Financial Disclosures (TCFD), stated: “The large-scale and long-term nature of the problem makes it uniquely challenging, especially in the context of economic decision making. Accordingly, many organizations incorrectly perceive the implications of climate change to be long term and, therefore, not necessarily relevant to decisions made today.”

 

In a bid to help navigate the difficult process of taking on appropriate exposure to climate risk, the TCFD recommends the implementation of tried and tested methods that financial market participants are already familiar with. Improving disclosure is a key input to supporting better management of climate risk. The TCFD recommend considering climate risk in a framework consisting of Governance, Strategy, Risk Management and Metrics & Targets.

 

For Cameron Hume, Governance means that there is an agreed investment policy that all stakeholders are in agreement with. Strategy should therefore support development of policy and systems which incorporate informed Risk Management. Metrics & Targets must be built into portfolio measures, client reporting and disclosures to bodies such as the PRI.

 

The Cameron Hume Global Fixed Income ESG Fund, launched in 2018, follows the TCFD methodology while selecting issuers judged to manage their ESG risks better than their peers.

 

Chief Investment Officer, Guy Cameron, explains: “In Cameron Hume’s view, a key indicator of an issuer’s sustainability is the quality of its governance and risk management framework, which we know must take into account climate risk.

 

“A company that already has low emissions will be more likely to maintain low emissions in the future than a company with a stated aim of lower emissions but a bad track record of delivering on promises. Even those who reliably commit to a transition plan require access to significant funds, technology or personnel to make such a major shift in operations.

 

“Similarly, as many governments introduce legislation to reduce GHG emissions, inability to achieve the legally mandated targets may weigh on companies even as they transition.

 

“As the likelihood of governments imposing tough targets on emissions differs from country to country, we believe the best way to manage risk is to invest in the companies with the lowest current net emissions, accounting for gross emissions and mitigating factors. Such issuers will likely have the governance framework, risk management capability and strategy in place to allow them to embrace any new rules effectively.

 

“For these reasons, the Cameron Hume Global Fixed Income ESG Fund favours companies with lower net emissions currently, rather than those requiring significant changes.”

 

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VIBEPAY SETS SIGHTS ON GROWTH WITH INTEGRATION OF MORE UK BANKS AND NEW BUSINESS ACCOUNTS

VibePay is continuing on its ambitious path of growth, with the integration of more UK banks and payment providers via open banking, and a business account function in its newly launched social payments app.

With 24 banks now integrated with the app, including new additions Starling, Capital One and Tesco, VibePay is aiming to boost engagement with its 50,000 users and drive more sign-ups amongst its Gen Z audience.

The addition of business accounts for the first time will open up VibePay to a small business audience and appeal to the many Gen Z-ers who earn money from selling on their social channels or platforms like Depop. This functionality will enable them to make and receive payments with no fees and provide instant access to funds and a transaction dashboard to track their payments.

 

The new app will see further functionality added over the next few weeks including:

  • Vibe.me links, giving all users a personalised payment URL
  • Vibe ID – an ‘online passport’ allowing users to link their bank account and seamlessly transact and interact with brands across the web
  • QR codes, to scan for instant payments
  • Vibe Shop – a new way to buy Vibe merchandise via pay with bank functionality
  • Integration with VibeTickets, allowing its 100,000 users to make payments via VibePay with no fees

 

Luke Massie, founder of VibePay, says“This new app is the culmination of months of work – we’ve taken invaluable feedback from the VibePay community and looked at how we can make the app bigger and better so it’s easier, more fun and an indispensable tool for our users’ lives.

 We’re built for Gen Z by Gen Z which means we’re able to reach this critical audience with a unique solution built on their lives. We can’t wait to roll out the new functionality over the coming weeks and see our community continue to grow. We’ve already got our sights set on the next phase of growth for 2020 and beyond.”

 

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BOARD REPORT HIGHLIGHTS COMPLEX DECISION-MAKING PROCESS ACROSS BANKING AND FINANCE SECTOR

‘The State Of Decision-Making’ report from Board, reveals business decisions made in silos without modern planning tools

A third (33%) of Banking & Finance decision-makers believe decisions made in silos, despite majority (63%) of decisions being implemented worldwide

More than half (57%) of Banking & Finance decision-makers rely on spreadsheets for decision-making despite modern planning tools now available

 

Board, the #1 decision-making platform, has today released ‘The State Of Decision-Making’ report focussing on how UK organisations make their important business decisions.

Based on a survey of 500 senior decision-makers, across industries including, Banking & Financial Services, Consumer Goods, Manufacturing, Pharmaceutical, Professional Services, Retail, and Transport & Logistics,  ‘The State Of Decision-Making’ report from Board shows that today’s business decision-making process is increasingly complex, with multiple departments and seniority levels all responsible for some form of decision-making, leading to a lack of cohesion between units and a waste of business resources.

 

The State Of Decision-Making’ research found that while a clear majority of respondents (63%) working within the banking and finance sector say the important decisions they are responsible for get implemented globally, the decision-making process itself is not joined-up across the business, with one third (33%) also saying that crucial business decisions are made in departmental silos.

 

The research, conducted on behalf of Board International by independent research organisation 3GEM, also asked respondents the tools they use to make decisions and, while almost every action within an organisation today will lead to the creation of new data, it seems many businesses are not using the crucial insights which data can provide to make important decisions.

 

More than half (55%) of respondents in the banking and finance industry said they were making business decisions based on data and insights, but ‘gut feeling’ decisions are still made by up to 44% of companies. What’s more over half (57%) of the sector’s companies still rely on spreadsheets to aid their decision-making, despite more modern and reliable tools now available.

 

“In today’s fast-paced, data rich and evolving business environment, making quick and effective decisions is critical to both compete and survive,” explains Gavin Fallon, Managing Director for UK, Nordics & South Africa at Board International. “Important decisions are being made at any one time across multiple business functions, but all too often, important decision-making is disconnected, modular or fragmented.”

 

The research also asked respondents about the challenges banking and finance decision-makers face at their organisation,  with nearly a third (29%) citing a lack of available data and insights and one quarter (25%) citing the fact there are too many people in the decision-making process as their biggest frustrations. However, industry decision-makers believe that the process can be improved with the introduction of new technology, with the majority (57%) of respondents saying this would make their decision-making better, while 41% also felt increased use of data and insights would help.

 

“Businesses have to plan every day for a far more uncertain future and set themselves up to prepare for change and keep changing against the backdrop of a more volatile and uncertain marketplace than ever,” continues Fallon. “A bad decision can have wide-ranging impact across the whole organisation and no business can afford to waste time and resources on bets that may or may not come off.  As the business environment increases in complexity, the ability to not just react, but predict, in real-time, becomes more important than ever.”

 

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