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How to know if you've been greenwashed: a survival guide
June 29, 2020--'What used to be appendices material has now jumped to the forefront of product presentations,' says Financiè re Arbevel fund selector Vincent Morel, speaking about the rise of ESG.
Over the last five years, demand for ESG-compliant funds has rocketed, and those making sales pitches have been quick to seize on the trend, sometimes in a facile way.
"There are two main aspects to greenwashing," says Philippe Mitaine, a senior fund analyst at Lyxor Asset Management. 'It predominantly consists of presenting funds which claim to use extra-financial criteria in their investment decisions, while their ESG processes actually do not constrain much of their strategies.'
It also occurs when asset managers questionably claim that the companies they hold have a positive impact.
Bassanese Bites: Shelter in place
June 29, 2020--Global markets
The continued rise in U.S. COVID-19 cases further undermined risk sentiment last week- even though, as U.S. President Trump noted, increased testing appears an important factor behind the rise (although the percentage of positive tests is also increasing). The S&P 500 lost 2.9%, with a hefty 2.4% decline on Friday.
Gold again demonstrated its safe haven status, rising 1.6% and breaking above its consolidation range of the past few months. At 3,009 points, the S&P 500 is now a hair's breadth away from its 11 June closing low of 3,002 (and intra-day low of 2,965 on June 15), which if broken would confirm the first significant 'lower high' and 'lower low' in the rally since late March.
World Bank-EFI Prospects Group-Global Monthly-June 2020
June 29, 2020--Overview
According to the June 2020 Global Economic Prospects report, COVID-19 is triggering the deepest global recession since the Second World War.
Emerging market and developing economies (EMDEs) as a group will experience their first contraction since at least 1960, tipping millions back into extreme poverty.
Global output is projected to contract by 5.2 percent in 2020, and recover to 4.2 percent in 2021, as the effects of the pandemic fade.
The global recession this year could be even deeper if bringing the pandemic under control takes longer than expected, or if financial stress triggers cascading defaults.
Special Focus: Scenarios of possible global growth outcomes
Since near-term global growth projections are subject to an unusual degree of uncertainty, this special focus presents three scenarios to illustrate possible global growth trajectories for 2020-21.
In addition to presenting the baseline scenario of the June Global Economic Prospects report, a downside scenario explores the possibility of a deeper and more protracted global recession, while an upside scenario illustrates a prompt recovery.
Even in the upside scenario, the 2020 global recession would be about twice as deep as the 2009 global recession.
While the pandemic will have a particularly severe impact on advanced economies, EMDEs will also be substantially affected, with the magnitude of the downturn and subsequent recovery varying across EMDE regions.
FSB evaluation finds too-big-to-fail reforms made banks more resilient and resolvable, but gaps need to be addressed
June 28, 2020--The Financial Stability Board (FSB) today published for public consultation an evaluation of too-big-to-fail (TBTF) reforms for systemically important banks. The TBTF reforms were endorsed by the G20 in the aftermath of the 2008 global financial crisis and have been implemented in FSB jurisdictions over the past decade.
The evaluation examines the extent to which the reforms are reducing the systemic and moral hazard risks associated with systemically important banks, as well as their broader effects on the financial system.
Equity fund managers retreat from European banks
June 27, 2020--Allocation to lenders drops to its lowest level for at least a decade
Uncertainty about the scale of potential financial losses caused by coronavirus has accelerated a retreat from the European banking sector by global equity fund managers who have cut allocations to these lenders to the lowest level for at least a decade.
Actively managed global equity fund managers have reduced their exposure to European banks from 2.6 per cent at the start of 2018 to just 1.1 per cent, a record low according to Copley Fund Research. The consultancy examined data from 406 global equity funds with combined assets of $760bn dating back to January 2011.
IMF-A Crisis Like No Other, An Uncertain Recovery World Economic Outlook Update, June 2020
June 25, 2020--Global growth is projected at -4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent.
Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.
As with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around this forecast. The baseline projection rests on key assumptions about the fallout from the pandemic. In economies with declining infection rates, the slower recovery path in the updated forecast reflects persistent social distancing into the second half of 2020; greater scarring (damage to supply potential) from the larger-than-anticipated hit to activity during the lockdown in the first and second quarters of 2020; and a hit to productivity as surviving businesses ramp up necessary workplace safety and hygiene practices. For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity. Moreover, the forecast assumes that financial conditions-which have eased following the release of theApril 2020 WEO-will remain broadly at current levels.
IOSCO consults on AI/ML guidance for market intermediaries and asset managers
June 25, 2020--The Board of the International Organization of Securities Commissions is requesting feedback on proposed guidance to help its members regulate and supervise the use of Artificial Intelligence (AI) and Machine Learning (ML) by market intermediaries and asset managers.
The use of these technologies may benefit firms and investors, such as by increasing execution speed and reducing the cost of investment services. However, it may also create or amplify risks, potentially undermining financial markets efficiency and causing harm to consumers and other market participants.
ETFGI reports assets invested in Environmental, Social, and Governance (ESG) ETFs and ETPs listed globally reached a new record of US$82 billion at the end of May 2020
June 25, 2020--ETFGI, a leading independent research and consultancy firm covering trends in the global ETFs/ETPs ecosystem, reported today that Environmental, Social, and Governance (ESG) ETFs and ETPs listed globally gathered net inflows of US$4.33 billion during May, bringing year-to-date net inflows to US$28.53 billion which is significantly more than the US$7.19 billion gathered at this point last year.
Total assets invested in ESG ETFs and ETPs increased by 10.4% from US$74.03 billion at the end of April 2020 to reach a new record of US$82 billion at the end of May, according to ETFGI’s May 2020 ETF and ETP ESG industry landscape insights report, an annual paid-for research subscription service. (All dollar values in USD unless otherwise noted.)
Highlights
Assets invested in ESG ETFs and ETPs listed globally reached a new record of $82 Bn.
YTD through end of May, ETF/ETP listed globally gathered a record level of net inflows of $28.53 Bn
IMF-World Economic Outlook Update, June 2020-A Crisis Like No Other, An Uncertain Recovery
June 24, 2020--Global growth is projected at -4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020.
The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.
As with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around this forecast. The baseline projection rests on key assumptions about the fallout from the pandemic. In economies with declining infection rates, the slower recovery path in the updated forecast reflects persistent social distancing into the second half of 2020; greater scarring (damage to supply potential) from the larger-than-anticipated hit to activity during the lockdown in the first and second quarters of 2020; and a hit to productivity as surviving businesses ramp up necessary workplace safety and hygiene practices. For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity.
view the IMF-World Economic Outlook Update, June 2020-A Crisis Like No Other, An Uncertain Recovery
IMF FinTech Notes-Distributed Ledger Technology Experiments in Payments and Settlements
June 24, 2020--Summary:
Major transformations in payment and settlements have occurred in generations. The first generation was paper-based. Delivery times for payment instruments took several days domestically and weeks internationally. The second generation involved computerization with batch processing.
Links between payment systems were made through manual or file-based interfaces. The change-over period between technologies was long and still some paper-based instruments like checks and cash remain in use. The third generation, which has been emerging, involves electronic and mobile payment schemes that enable integrated, immediate, and end-to-end payment and settlement transfers. For example, real-time gross settlement systems have been available in almost all countries. DLT has been viewed as a potential platform for the next generation of payment systems, enhancing the integration and the reconciliation of settlement accounts and their ledgers. So far, experiments with DLT experimentations point to the potential for financial infrastructures to move towards real-time settlement, flatter structures, continuous operations, and global reach. Testing in large-value payments and securities settlement systems have partly demonstrated the technical feasibility of DLT for this new environment. The projects examined analyzed issues associated with operational capacity, resiliency, liquidity savings, settlement finality, and privacy. DLT-based solutions can also facilitate delivery versus payment of securities, payment versus payment of foreign exchange transactions, and efficient cross-border payments.
view the IMF FinTech Notes-Distributed Ledger Technology Experiments in Payments and Settlements