Tag: corporate

  • Interesting Corporate Activity Despite Covid-19 Fear Fest

    Pandemics are scary and the loss of life is a genuine tragedy. On a more positive note, the decisive actions of authorities in the likes of South Korea, Hong Kong and Singapore will hopefully provide a public health management template for Ireland and its European neighbours. Containment is key and discipline critical. Contagion can also be an unexpected risk in finance and is usually caused by rogue activity. Step forward Mohammed Bin Bonesaw.

    Not content with the murder of a US-based journalist, the Crown Prince of subtle appears to have set his sights on dismembering Texas and North Dakota from the election coffers of the GOP. Currently, markets are experiencing full-blown panic as Saudi and Russian leaders decided at the weekend that a deliberate oil pricing implosion was just what the world needed. Presumably, Agent Orange in the White House might have a different view after a few calls from Wall Street and Houston have set him straight.

    Good news at the gas pumps maybe, but not so good for oil companies and their creditors, the banks and junk bondholders. Once again the global banking system is about to be challenged. It is not news to readers here that financial services companies are already under pressure. The challenge for them is the adoption of technology to survive competition from nimble new entrants and existing players who execute digital transitions swiftly. Not unlike the Covid-19 crisis, swift decisive action rather than words is required.

    The good news is that recent headlines would suggest that there has been an acceleration of corporate activity which provides hard evidence of a renewed urgency in financial services. Take your pick from the following.

    A global crisis like Covid-19 will remain primarily a challenge for humanity with tragic losses. However, it will hopefully run its course like every other pandemic in human history. As financial observers, it will be instructive to see which sectors took decisive strategic action in a period of huge business uncertainty. It is not unreasonable to suggest that the necessity for certain sectors like financial services to act right now tells a bigger story than mere fear. Some business models have no choice; the failure to act will be fatal.

     

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  • ESG: Corporate Health Is Your Wealth!

    Readers may have noticed yet another deal announced in the health technology sector this week. Irish 3D imaging company, 3D4Medical, is about to be bought by Dutch media giant Elsevier for nearly €50m. This newsflow will no doubt keep venture capital (VC) funds focused on current “hot” sectors, health tech and fintech. However, start-up entrepreneurs and retail investors need not despair if they feel they are being excluded from VC activities. There’s another “health” sector which could offer plenty of wealth creation opportunities.

    This writer attends the odd financial conference and was seriously struck by the size of attendance at this week’s Bloomberg ESG Summit in Dublin. The audience was in the hundreds and it had nothing to do with a campaign for the US presidency or a wonderful display of tractors on St Stephen’s Green. The attendees’ focus was ESG investing. In layperson terms, ESG investing describes the application of environmental, social and corporate governance factors into investment selection processes. The corollary to applying ESG investment criteria is a growing awareness by companies that their own response to these considerations, from water management to employee diversity, will be monitored and ultimately “valued” by these investment houses.

    ESG is a term around since 2005 but SRI (Socially Responsible Investing) predates it as an ethical framework. However, latter-day thinking is the assumption that ESG factors have financial as well as ethical relevance. You will often hear the phrase “sustainable investment ” in ESG discussions and this possibly best captures the financial rationale for an ESG focus. Bluntly, if a company culture is not healthy it is at risk of losing fixed assets, customers, quality staff/management, suppliers or investors. None of these potential losses are good for company or investor returns. Financial fundamentals (or health) were always critical to investment decisions but the wider “corporate health” of a company is now a big deal.

    Current estimates suggest up to $30 trillion of assets under institutional management now include ESG considerations in their investment processes. Clearly, corporate health is a growth area and already forcing both investors and companies to spend money on resourcing this analysis with quality people and information. Remember, all this resource is about outcomes. The luxury goods sector has featured in headlines this week with LVMH making a $16 billion swoop for Tiffany. Perhaps more intriguing, and hidden away from the front pages, was the news that Prada has secured a €45 million bank loan with repayment terms/interest rates conditional on meeting “sustainability targets” in its products and operations. Better health means cheaper capital ….Hmmm. For the entrepreneurs out there here’s a few thoughts as to how one could capitalise on this corporate health rush.

    Companies will need guidance as to best ways to integrate ESG on both cultural and operational bases. This requires expert advice, possible internal training/education and periodic audits of companies’ “health” and responses to ESG considerations.

    Audits require metrics or data. Most ESG conferences these days focus on the challenge of “standardising” ESG compliance. There is a huge opportunity for those that can create and gather credible measures for ESG factors as investors and companies are crying out for benchmarks and raw data. Current thinking is that different companies will provide data in different areas ie carbon footprint(CO2e) and health and safety data(EHS) is likely to come from separate providers.

    The combination of performance and people’s money inevitably attracts the attention of regulators. ESG regulation will follow soon and, of course, the legal profession will be getting giddy at the thought of litigation risk and advisory fees. Be under no illusion, finance always pays the middlemen. As for investors, the evidence is more mixed. So, ESG compliance is going to be a very big area.

    Encouragingly, Ireland is taking the lead in some ESG initiatives. There are currently €140 billion of “Green Bonds” listed on the Irish Stock Exchange as part of the wider Euronext group of international exchanges. This feels like Euronext is betting on Dublin as ESG lead, not unlike the aircraft leasing ecosystem successfully built here too. Furthermore, the existence of a “live” asset class of investment securities in Dublin is a good “lab rat” for enquiring minds trying to figure out how they might monetise the ESG revolution.

    No doubt the VCs will move on from mainstream healthcare one day. However, right now there are 30 trillion reasons for curious minds to get a head start in the rapidly expanding area of corporate health.

     

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