Sustainable investment, which encompasses impact investing, the integration of environmental, social and governance (ESG) criteria has long been poorly defined. The ambiguity has given asset managers scope to overstate their commitment, a practice known as impact washing. However, 2019 has seen a concerted effort to eradicate this practice.

Impact investing has been one of the fastest-growing sectors of asset management. Its popularity is often put down to the power of millennial investors, who have a special interest in social and environmental issues. But the appetite goes beyond this cohort. There has been a huge amount of attention and coverage of impact investing in the past two years. About $502bn in assets is currently dedicated to impact investing, according to the Global Impact Investing Network.

However, the lack of clarity about how impact investments are managed has given rise to concerns about “impact washing”, which affects the industry’s integrity. The 2018 Annual Impact Investor Survey reports that 80% of respondents believe that more transparency around impact investing strategies and results would help reduce the risks of impact washing. Politicians in the EU and individual countries want to crack down on this with a stronger definition of what constitutes sustainable investment. They wish to influence fund managers to disclose how they give consideration to ESG variables. The sector needs standards to include investment strategies that link intent to asset selection, and an impact measurement system that ensures accountability by establishing targets, monitoring of performance, and reporting of impact results.

World Bank latest to tackle ‘impact washing’

 Industry initiatives are proceeding to create greater transparency within socially responsible investments (SRI), ESG and impact investing. Most recently, the World Bank launched a set of principles aimed at creating market consensus around impact investing, supported by the likes of BNP Paribas Asset Management, Amundi, UBS, and Axa Investment Managers. The World Bank stated the rise of product launches claiming to be impact investments was confusing and often misleading for investors.

 The initiative requires asset managers to document the expected and actual impact of investment projects. The framework also proposes that asset managers should consider the achievement of impact investment targets along with financial performance metrics when awarding incentive payments to staff. Regular independent verification reports should be published to ensure the actions of impact investment managers remained consistent with the new standards.

 Unsubstantiated, opaque and incompatible approaches to measurement must be replaced if impact investing is to achieve its potential. We, at Finscoms, are currently working with a fund who in particular strive to bring further stability and confidence to the industry.An impact investment fund that delivers competitive ROI and financial security to investors with appropriate monitoring, assessment and financial evaluation.

For more information click here or contact us. 

Ken Carmody 

Finscoms takes a look at the US real estate outlook fundamentals with a focus on the Office and Retail market. Both markets remain bright despite cloudy forecasts in other real estate sub sectors. The key in these markets is often agility. Can you find a nimble and dynamic investment?

Office Market

Improving U.S. office market fundamentals should continue in 2019, but perhaps at a reduced pace due to higher completions and also the tight labour market’s impact on tenant demand. Older buildings that lack the amenities favoured by a modern workforce and the infrastructure to handle evolving technologies will most likely struggle, mostly in markets where large volumes of high-quality product are being provided. Adding to this, suburban submarkets that offer an array of housing choices coupled with urban amenities (retail and restaurant options, public transit and walkability) are well positioned to capture demand from the maturing millennials.

Improved business confidence in 2018 should support continued office-using employment growth in 2019. Unemployment will likely remain low next year.

The tech sector is set to remain the top occupier. This sector has been accountable for nearly 20% of major office leasing activity in recent years. In primary tech markets like the San Francisco Bay Area and Seattle, as well as emerging, lower-cost tech hubs like Charlotte and Phoenix, it should remain a principal demand driver in 2019. The tech sector is growing at about twice the rate of overall job growth, despite having slowed during the past few years. Several lagging sectors have boosted their shares of office leasing activity in 2018. This is a positive indicator of demand coming from a wider range of industries. Specifically, prospects for reduced financial industry regulation and oil price stabilization have fuelled optimism in the financial services and energy sectors, and markets with concentrations of these industries, such as New York and Houston, should benefit.

The consumer trend toward off-price and discount retail will most likely continue in 2019, with mid-range retailers seeking new ways to limit share losses to lower-priced players. Since the 2008 recession, greater consumer access to lower-priced goods has shifted consumer spending among all age groups toward lower-priced options.

This is especially the case in key soft-goods categories like apparel and with the expansion of key discount and value retail brands. This has placed significant pricing pressures on retailers in the mid-price range, who struggle to compete with the quality and brand cachet of luxury brands and the value offered by low-price players. In 2019, it is anticipated many of these mid-range brands will focus on lower prices and discounting in a bid to retain customer share and adapt to new price expectations of consumers.

Strong rent growth is expected for some non-gateway markets like Atlanta, Houston, Nashville and Denver. These should see rent growth of at least 2.5% over the next five years, as demand outpaces supply. Successful redevelopment in the urban core and a rise in mixed-use projects in the suburbs, together with strong employment and population growth, make these markets especially attractive to investors. Major gateway markets like Washington, D.C. and Chicago, where demographic and demand growth are steady but less robust, are expected to see rents grow, but at a more moderate pace.

Finscoms is helping the investment community. For more about our client in the Real Estate industry within these markets and beyond – agile, nimble, and dynamic projects – click here.

To find out how to get involved please contact us.

Ken Carmody

In 1854, installation began on the first transatlantic telegraph cable, which connected Newfoundland and Ireland. Four years later the first transmission was sent. This advance reduced the communication time between North America and Europe from ten days (message via ship) to a matter of minutes. Transatlantic telegraph cables have since been replaced by transatlantic telecommunication cables running a combined distance of 1.1 million km and some laid at a depth matching the height of Mount Everest. They are responsible for 99% of transmitted international data. We rely heavily on these cables and our reliance will continue into the foreseeable future. The worldwide data traffic is expected to grow at an exponential pace. Projections show a constant growth of at least 10% for the next 5 years.

Alternatives

Right now there are no reasonable alternatives. Competition comes from satellite communications however submarine communications cables are faster and cheaper. Satellites have two major problems: latency and bit loss. Sending and receiving signals to and from space takes too long. Optical fibers can transmit information at 99.7 percent the speed of light. 186,000 miles per second. The circumference of the Earth is only 24,000 miles at the equator, which in essence means data could technically circle the globe almost eight times in one second and all done from the bottom of the ocean. Submarine cables will remain the cheapest and most used technology for years to come.

Ownership

Traditionally, private companies or consortiums formed by telecom carriers owned cables. That model is changing as content providers such as Google and Microsoft are increasingly becoming major investors in new cables. Google already has the world’s largest privately owned fiber optic network, which currently handles a massive 25% of the world’s internet traffic for its search and YouTube offerings, according to the VP of engineering for Google’s cloud business, Ben Treynor. Microsoft and Facebook jointly lay a high capacity subsea cable capable of transmitting 160 terabits of data per second, the equivalent of streaming 71 million HD videos at the same time, and 16 million times faster than an average home internet connection. As more millions around the world adopt cloud computing, we’ll be certain to see even more cables criss-crossing the world’s oceans in the near future.

Drivers affecting demand for increased submarine cable capacity include:

• Global population growth
• Economic development of the BRICs, international trade agreements (Canada-EU, USA-EU, Trans-Pacific Trade Agreement)
• Lower cost of cable data transmission
• Global financial market trading
• Global security and privacy concerns.
• Ongoing surge in ICT developments
• Use of Internet
• Increased video services
• Sophistication of hand-held devices
• Wider geographic cable coverage throughout the oceans (southern hemisphere; around Africa, Australia, South America, India, Canadian/US Arctic) and between island sates (Caribbean, Southern Asia, Pacific)
• The move to offshore routing to avoid permitting issues in densely populated coastal regions).

Congestion and lagging infrastructure

Today’s infrastructure is not sufficient to meet the demand for two main reasons:

• Existing cables are aging and have been built with older technology
• In the last 5 years the number of new cables has been too low compared to the increasing demand

Congestion has become a real concern for example the route between North America and Europe is the most developed but also the most congested. Connexions from South America and Europe are now growing at a faster pace than any other regions but they suffer as all traffic is routed through North America.

Solution

Ideally the world needs deployment of next-generation “100G” technology. This type of cable offers ten times the capacity of previous systems. These lines could have a capacity of up to 60Tbs (600x100Gbps).

We need more direct lines for example a direct line from South America to Europe would alleviate much congestion through North America. The European Commission and some south America countries have set as objective to bypass North America and develop direct connexions.

Our telecoms client looks to achieve the above. To find out how to get involved please contact us.

Written by Ken Carmody

By 2025, $145 Trillion assets under management will be either directly or indirectly exposed to financial water risk. Physical and financial water risks are the largest threats to people, planet and profit. All investors need to be made aware of this inherent risk factor.

The threats to water resources are significant; pollution, increasing global population, growing cities demanding more water, power generation, climate volatility, food production requirements, floods, drought etc. Severe droughts have caused billions of dollars of damage in Southern Europe and California and increasingly other parts of the world. Research from the World Bank suggest that since 2001, rainfall shocks have caused a loss of food production sufficient to feed about 81 million people every day for an entire year – equivalent to the population of Germany.

Water is often compared to carbon in terms of growing operational and strategic risk that investors need to account for. However, where water and carbon differ in this regard is that today’s water threats move rapidly i.e. they can lead to significant or total value destruction in a far shorter timeframe. Water security can be converted to water risk overnight. Recent examples include; BHP and Vale facing a $50 billion fine stemming from compensation claims, officials in northern India ordered Coca-Cola Co. to close a local bottling plant amid protests that they were extracting too much groundwater, a Chilean drought has hampered production for the nation’s copper miners, and Newmont delayed a $5 billion mining project in Peru after community protests over water concerns.

Investors are trying to integrate water risks into their strategies but they are currently using limited data. Our clients seek to bridge the gap by launching a Water Risk Index which will be the first index worldwide to price financial water risk.

The Index tracks corporate management of and action on water security. It informs asset owners, financial institutions and investment managers of the water risk to equities in their financial portfolios. Every security is exposed to financial water risk, which to date has no viable tool or methodology to assess and price this risk.

 Ken Carmody.

 For more information click here or contact us.