8 posts categorized "Financial services"

February 11, 2014

Impact investing: An investment approach starting to interest mainstream investors

This article was co-written with Erik Classon

Blog_tree_money_300x200Since the term, ‘impact investing,’ was first coined in 2009 by the Monitor Group ("Investing for Social & Environmental Impact: A design for catalyzing an emerging industry"), a great deal of interest has grown around this concept. Initially the dialogue around impact investing was concentrated among a niche set of players identifying themselves as impact investors (e.g., social entrepreneurs, foundations seeking to expand beyond grant-making, focused impact investing funds and public sector/supranational organizations). 

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October 03, 2013

Reflections from the World Economic Forum’s Impact Investing Initiative

This article was co-written with Carolien de Bruin and Joel Bryce.

Plant in a money pot ind_fsi_glb_ho_237_hiSeptember marked the completion of Phase 1 of a year-long initiative in which the World Economic Forum (The Forum) engaged Deloitte on its Mainstreaming Impact Investing initiative. The purpose of the initiative was two-fold:(1) Better understand whether the buzz and excitement with impact investing is more than “a flash in the pan” and if it represents a structural shift in how investments are made, especially as it relates to mainstream or institutional investors; and (2) Assess who are making impact investments, and – as importantly – who are not, today.

In this context, impact investing, in its simplest form, is leveraging one’s investment portfolio to intentionally create social value (of course, and financial returns).  Going into this initiative, we knew that many high net-worth individuals, foundations, and development organizations look to create social and environmental value with their investment portfolio. However, we were keen to understand whether “mainstream investors” such as pension funds, insurance companies, sovereign wealth funds, university endowments, and other large-scale asset owners were making a play in the space, and if not, why.

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January 28, 2013

Mainstreaming impact investing: Overcoming the hurdles, addressing the skeptics

Blog_tree_money_300x200Asset management is in a state of flux. Trillions of dollars are expected to change hands over the next number of years as baby boomers begin to transfer their wealth to the next generation – a generation that has grown up in a culture that calls on business to play a more active role in building a better society.  In this context, the field of “impact investing” has taken center stage as a means to enable and empower for-profit business models to address society’s toughest challenges.

But what exactly is impact investing, and isn’t all investing intended to create impact? First coined by the Monitor Group in 2009, impact investing is an emerging industry that places capital in businesses (or entrepreneurs) that intentionally seek to create social or environmental value. This could be an investment in a dairy products producer in Nairobi that works to increase the efficiency and production levels of small-scale farmers in rural Kenya. Or, it could be an investment in an innovative program that seeks to reduce youth recidivism (repeat criminal offense) in New York City. The common thread among impact investments is the notion of intent – when the investor intentionally seeks to create social or environmental value, the investment is an impact investment.

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December 20, 2012

Insights into IFRS Insurance - Greater certainty for new insurance accounting rules

Blog_ifrs_question_markThe unprecedented scale of the reform to achieve consistent profit reporting across the global insurance sector is now fully visible. Preparing for the multi-year implementation effort is an imperative for all insurance companies immediately after their 2012 earnings release next year.

A substantial leap forward

During November the International Accounting Standard Board (IASB) has made a substantial leap forward in removing the uncertainty that surrounded, for the past several months, the timing and content of the fundamental reform of financial reporting rules for insurance companies.

The repercussion of these new decisions is about to produce a significant impact across the global insurance sector, since insurers’ major concern around uncertainty has been addressed. Some of the global software houses have already invested thousands of man-days in the development of solutions to address this challenge and ‘first-movers’ are already developing an approach to the implementation challenges.

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January 29, 2012

From Academic to Actual: Currency volatility and the real economy

International currency In April 2011, my Deloitte colleagues and I, together with the World Economic Forum, put on our binoculars. We, like others passionate about risk to the global economy, looked at the topic of currency volatility and the international monetary system, and saw a potential period of instability. At that time, it could still be argued academic. Today, it is clearly very real. As we begin 2012, the level of uncertainty in international currency regimes is now front and center. We are a long way from the U.S. government’s former AAA debt rating, Italy’s four percent bond yields, and a time when few analysts were seriously discussing any kind of “landing” in the Chinese economy, be it hard or soft.

Markets are now driven predominately by macroeconomic developments, and systemic changes to the global economy seem to lurk behind every new policy announcement. It is clear that studying possible evolutionary paths of the international monetary system has moved out of the realm of academic discussion and into the real world in a way financial services providers cannot afford to ignore.

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April 07, 2011

The alignment of many stars

GrowthAs I indicated last week, this week sees the World Halal Forum coming to Malaysia and an opportunity to debate and discuss the further alignment between the worlds of Islamic Finance and the Halal industry. My view remains the same, in that in order to increase volume and quality, global standards are required.

One of the areas where standards need to be made clearer is in the definition of halal itself. For many, both Muslim and non-Muslim, their only understanding is with regard to the slaughtering of meat, when, in fact, there is much more--in particular, cleanliness, health, and ethical values. So much more could and should be done to promote these values and to build a globally recognizable standard around a halal brand. Imagine if those values were clearly understood how large and strong the market would be.

Such growth could be a driver for the development of Islamic Finance still further, but we still do need to ensure that we maintain our eye on the ball with regards to the development of products that meet consumer needs and concentrate on ensuring that our customer service exceeds all expectations. We also need to keep pushing to ensure that as much of financing business as possible is done in a Sharia’a compliant way. There is still significant room for growth in the GCC, where, even though, Islamic Finance is starting to have a growth spurt; there is still opportunity to develop further. Also with the Sovereign Wealth Funds who need to be encouraged to invest more in Sharia’a compliant assets on a regular basis.

If a true balance between values and returns can be achieved in both the Islamic Finance and Halal spheres can be achieved, then I have no doubt that both industries will be fighting their weight pretty soon.

As always, there is still much to do and not a moment to lose.

Daud Vicary Abdullah is the Global Leader of Islamic Finance at Deloitte and has more than 35 years experience within the finance and consulting industry, working in Asia, Europe, Latin America, and the Middle East. He is a regular commentator in the media on matters relating to Islamic Finance and has written and contributed to a number of books on the subject, including co-authoring the book Islamic Finance: Why It Makes Sense.

March 22, 2011

Islamic Finance in Luxembourg and global interest from pension funds

Dttl_coinjarI returned to Malaysia over the weekend following a few days in Luxembourg meeting with clients, regulators and educational establishments. For a small country with a great deal of focus on financial services, there is an increasing level of awareness regarding the benefits of Islamic Finance and certainly a good deal of support from the Central  Bank.  Indeed, the regulator is a full member of the Islamic Financial Services Board (IFSB), and will be the first European host of the IFSB Summit meeting in May 2011.  Elsewhere in the country educational establishments are running courses in Islamic Finance and many financial institutions are looking at ways to develop their business in IF.

On a more global note it is interesting to see the increasing interest in Sharia’a compliant investments from pension funds around the world.  Already some of these institutions have made investments and are few are looking at making acquisitions into Islamic Financial Institutions. Their interest certainly is a bolster for the development of Islamic Finance and gives further credibility to the term that “Islamic Finance is good for business!"

Daud Vicary Abdullah is the Global Leader of Islamic Finance at Deloitte and has more than 35 years experience within the finance and consulting industry, working in Asia, Europe, Latin America, and the Middle East. He is a regular commentator in the media on matters relating to Islamic Finance and has written and contributed to a number of books on the subject, including co-authoring the book Islamic Finance: Why It Makes Sense.

January 27, 2011

The ‘devil is in the detail’ of global financial regulatory reform

tape measurerAt last year’s World Economic Forum meeting in Davos there was a major focus on framing the regulatory issues facing the financial services industry, including capital reform, liquidity, leverage and systemically important institutions. Those same themes have returned to Davos this year, but with a difference: this year the discussion is all about the detail.

Take, for example, the issue of systemically important financial institutions - or SIFIs as they have been dubbed. The regulators, politicians and financial services executives generally agree that there are certain institutions whose failure could have a catastrophic effect on the financial system and, as a result, should be subject to more stringent rules and regulations.

So far, so good. However, the difficulty arrives when these groups try to agree on what these more stringent rules and regulations should include, or even define which institutions should be categorized as SIFIs. Some have argued that the qualification for SIFI should be based on size, while others maintain that leverage, risk appetite and interconnectivity should all be used in measuring whether an institution is systemically important or not.

Each of these major industry issues are at a different stage in the process of having their detail defined. Some are still at the very early stages of discussion, while others are moving closer to what will likely be their final agreed form. However, one thing is consistent: the financial services industry is going to negotiate right until the very end of the process. They are lobbying hard and making sure that their point of view is heard at this year’s meeting in Davos. Much of this effort is driven by the industry’s concern that the global regulatory response might go too far, driven by the politicians’ desire to appease an angry public.

With such powerful forces still pushing and pulling the debate around the detail it is likely that the industry will experience a continued period of regulatory uncertainty. Perhaps we will witness over-regulation to begin with, followed by sensible retrenchment, before the new global financial regulatory landscape finally settles into something stable and predictable.

So what can financial institutions do while these all important details are still being debated and discussed? Well, I believe institutions should continue focusing on activities that preserve their operational and business ‘flexibility’. Take regulatory compliance as an example. Institutions may need to invest to bring more senior talent into their compliance function over the short-term, and use that experience to empower more flexible decision making and judgment to specific situations as the detail behind the new regulations unfold.

Navigating the journey into the new financial services landscape continues to require delicate decision making on the part of financial services CEOs. If they wait until all the details are worked out they risk trailing those competitors who have marched boldly ahead. However, if they move too quickly, their efforts could be undermined by the still shifting detail behind many of these key issues.

I believe it’s one of the reasons why this year’s Davos discussion will be very closely watched around the financial world.

Jack Ribeiro is Chairman of Deloitte’s Global Financial Services Industry (GFSI) practice. He has over 32 years of experience working with financial services clients and has played a prominent role in the management of some of Deloitte’s key practices around the world.