Carbon accountability for Professional Services

Carbon accountability for Professional Services

kelp_forest1080-1024x683 Carbon accountability for Professional Services

Kelp forests like a recently protected site off the Sussex coast sequester 35x more carbon than a rainforest by area.

 Article written by Tim Montagu.

A stroll through Covent Garden a few weeks ago was disrupted by an Extinction Rebellion protest which has turned attention to law firms and financial services.  Their reasoning is that the city of London is the ‘arch financier of the carbon economy supporting 15% of global carbon emissions’.  Whilst the rationale for 15% could be debated, it is clear that as a global financial centre, UK regulators and companies should all be striving to influence a low carbon future both in their own operations but more importantly, for their clients regardless of location.

Most professional services firms now have an ESG policy statement a click or two away from the front page of their website.  These highlight the carbon emissions from their own buildings, energy supply and people.  Accounting for the emissions of clients in receipt of professional advice is rare, whereas banks or investment funds accounting for a % of emissions proportionate to the financing they provide is much clearer cut and becoming expected in the market.  Green finance products that offer a few basis points off the price of already cheap debt for clients hitting self-generated targets is insufficient compared to their carbon impact or the scale of the challenge reduce emissions.

Law Students for Climate Accountability is a US action group that claim ‘top law firms conduct 5-10X more work to exacerbate climate change than mitigate it’.  They scored the top 100 US law firms on the three areas where lawyers typically engage with the fossil fuel industry – lobbying, financial transactions and litigation to prevent (or support) climate accountability.  This kind of scrutiny is much needed and will surely follow for UK firms who should be cautious on how they represent carbon and resource intensive companies.

  The obvious defence here is that it is better to be a professional advisor guiding the client towards a greener net-zero future, than it is to allow a deal to proceed with a less environmentally minded competitor.  The same logic applies for UK arms sales to other nations; in theory we have a say in how weapons are used.  Unfortunately, this logic only holds if the supplier has a clear, consistent and publicly accountable policy containing sufficient carrots and sticks to guide the client to more virtuous behaviour. 

Lawyers, accountants and consultants have a key part to play in enabling companies to be more sustainable, these include;

  • helping clients identify, track and report on carbon emissions now required by regulators and initiatives like the Task Force on Climate-Related Financial Disclosures (TCFD)
  • assisting with climate risk stress testing mandated by regulators
  • supporting compliance with environmental regulation
  • developing policies and procedures for assessing climate risks to workforce, assets, operations and transactions.
  • helping identify new commercial ventures enabled by the demands of a more environmentally conscious client.

Progress towards all firms tracking and disclosing their carbon emissions is gathering pace.  Over half of UK top 100 law firms for example have signed up to the Legal Sustainability Alliance, adhere to ISO 14001 environmental management regulations and have ‘science-based targets’ (SBTi) in order to be net zero[1] or the less stringent carbon neutral[2] by 2025 or 2030.  Smaller firms typically have more ambitious and imminent targets in light of their smaller office footprint.  Finding a law firm openly stating it will be selective on clients based on their environmental credentials is a challenge.

CAT_2021.05_2100WarmingProjectionsGraph.original-1024x477 Carbon accountability for Professional Services

The scale of the challenge to limit global warming is stark. Covid caused 2020 emissions to drop 5.6% or 1.9 Gt CO2. However strong recovery in 2021 shows emissions likely back to 2019 levels in 2023.

For audit and advisory firms, it is easy to envisage the carbon credit market becoming as complex and profitable as financial accounting is currently.  Carbon offsetters will need their tree plantations, kelp forests or other sequestration sites monitored.  This will create rural employment financed by big corporations assisting the much-needed economic rebalance.  No doubt there will be audit scandals where carbon off-setters start double charging for their credits but at least the ‘corporate carbon’ link is being forged. 

In any event, the scale of change needed to reach net-zero or carbon negative[3] requires advisors and financiers to be bold and environmentally principled.  If a policy is clear and consistent, a small number of missed opportunities will likely be far outweighed by new sales to clients identifying with a firm’s environmental vision and purpose. 

Finscoms is able to conduct research, create and implement environmental policies and web content for professional services firms wishing to be progressive on sustainability. 

Thank you for reading, do get in touch.  tbm@finscoms.com

 

[1] Net Zero:  Company reduces emissions across all activities as much as possible and then offsets any emissions they do produce.  This is more stringent than neutrality alone.

[2] Carbon Neutral:  Any carbon released to the atmosphere is balanced by the same amount removed by buying carbon credits or offsetting by schemes like reforesting or kelp seeding.  Neutrality does not commit a company to reducing its emissions, they just have to pay to offset them.

[3] Carbon negative:  The most ambitious commitment by removing more carbon than the firm produces, therefore actively helping the planet.  This is also called carbon positive and was in 2020, pledged by Microsoft by 2030. 

 

Distressed Debt Funds Continued Gains

Distressed Debt Funds Continued Gains

Charts Distressed Debt Funds Continued Gains

BlogKMC-copy Distressed Debt Funds Continued Gains

Article written by Ken Carmody.

Eurekahedge reports that Distressed Debt Funds made their tenth consecutive month of gains in July. Returns for the year to date are marked at 11.5%, such returns for this niche have not been seen since 2009.

These type of funds generally make short-term plays on near-default or defaulted bonds, make emergency loans, and in some cases takeover delinquent borrowers via the courts. This strategy has quickly come to fruition due to the rapid market recovery catalysed by government spending and assertive central bank manoeuvres and stimuli along with swift vaccination programmes.

Debt Distressed Debt Funds Continued Gains

Several distressed debt hedge funds have garnered returns of up to 26.2 per cent in the year up to the end of May. These returns have of course been sustained by a significant rally across corporate debt markets. This has resulted in lowered borrowing costs which have been crucial in helping cruise lines, hotel groups, air carriers, and others raise billions of dollars to keep themselves afloat.

As we reach the third quarter of 2021 there are investors looking beyond debt for returns for example UBS’s hedge fund investment unit have recently trimmed its exposure to distressed debt. Also, Preqin recently reported that some investors have “cooled their interest in distressed debt and special situations compared to last year as opportunities proved harder to come by than expected”.

Regardless, plenty of distressed debt specialists raise and deploy money consistently in any cycle, and assert that there will be adequate opportunities due to aftershocks created by the pandemic.

IF​ ​YOU​ ​WOULD​ ​LIKE​ ​TO​ ​LEARN​ ​MORE​ PLEASE​ ​DO​ ​MAKE​ ​CONTACT​ ​AT MKT@FINSCOMS.COM

 

Finscoms adds to its Executive Management Team

Finscoms adds to its Executive Management Team

Tim-Montagu1080-1024x639 Finscoms adds to its Executive Management Team

Finscoms are delighted to welcome Tim Montagu aboard our executive management team. Tim most recently worked for HSBC in their structured finance department, covering professional services clients and those from any sector suited to private equity backed leverage.

“Tim is a natural fit to our clients in their route to the investor, the sourcing of projects and for those requiring assistance with their marketing and communications strategies. We are all excited to work with Tim developing our ESG service line for the benefit of all”   Edward Simpson, co-managing partner 

“I am pleased to join Finscoms who have a clear proposition to assist businesses and investors in finding synergies and communicating their brand.  Financial services often work in silos defined by their investment parameters and risk appetite.  Working across the industry with a strong network and project selection process, gives Finscoms clients a great chance at a successful match and funding.”   Tim Montagu

Tim will have responsibility for Finscoms and our service lines in London and the UK, including a focus on ESG solutions for professional services firms who wish to demonstrate greater impact and keep pace with the sustainability agenda.

If you would like to contact Tim please email tbm@finscoms.com

Finscoms Named Best Financial Marketing & Communications Firm

Finscoms Named Best Financial Marketing & Communications Firm

AIaward-copy-1024x652 Finscoms Named Best Financial Marketing & Communications Firm

Acquisition International today named Finscoms ‘Best Financial Marketing & Communications Firm – the Republic of Ireland’.

Acquisition International, is an international, monthly digital business magazine committed to bringing its readers up to the minute news, comment and analysis. Acquisition International magazine launched in 2010, is circulated to in-excess of 108,000 professionals, including Top Tier Managers, Investment Professionals, Business Advisers and Service Providers.

Finscoms was chosen ahead of 5 other nominees in the category most notably for its dynamic strategy shift in response to a new playing field created by the global pandemic. Finscoms was able to increase exposure to its clients making the very most of the abundance of digital pathways created worldwide.  

 

IF​ ​YOU​ ​WOULD​ ​LIKE​ ​TO​ ​LEARN​ ​MORE​ PLEASE​ ​DO​ ​MAKE​ ​CONTACT​ ​AT MKT@FINSCOMS.COM

 

Survey Records High Levels of Optimism for the Global Economic Recovery

Survey Records High Levels of Optimism for the Global Economic Recovery

bull-1024x683 Survey Records High Levels of Optimism for the Global Economic Recovery

BlogKMC-copy Survey Records High Levels of Optimism for the Global Economic Recovery

Article written by Ken Carmody.

PwC surveyed 5,050 CEOs mainly within organisations with revenues ranging from $100m to over $25b in 100 countries and territories in January and February 2021. The bottom line is that 76% of these global business leaders predict that economic growth will improve in 2021. The PWC Annual Global CEO Survey shows optimism is especially prevalent in North America and Western Europe, with 86% and 76% of CEOs, respectively, from these regions anticipating improved global growth in the year ahead.

The PwC Annual Global CEO Survey certainly tallies with our own straw poll within the Finscoms investor network and is a great boon as we prepare for busy investment quarters ahead.

Here are our main takeaways:

The survey also highlights increased CEO confidence in revenue growth matching the long-term average. There is a wide variation seen across industries, reflecting the varying degrees to which consumer behaviour has ultimately been impacted by the global pandemic. CEOs within the technology and telecommunications sectors show the highest levels of confidence at 45% and 43%, respectively. Whereas, CEOs in the transportation and logistics (29%) and hospitality and leisure (27%) sectors are among the least confident about their chances of growing revenues over the next 12 months.

Interestingly, the survey findings also show that the US has increased its lead as the number one market for CEOs looking for growth over the next 12 months at 35%, seven percentage points ahead of China at 28%. In 2020, this is a six percent extension between the US and China in the favour of the US.

It is noted that US CEOs have bolstered their emphasis on Canada and Mexico as they move away from China. This is mainly due to new political developments and existing tensions. And on the other side of the coin, China CEOs report growing interest in large economies such as the USGermany and Japan as prime destinations for exports.

At 17%, Germany stays in third place on the list of growth destinations. The UK, post-Brexit, moves up to number four (11%), overtaking India (8%). Japan also rises up the ranking to become the sixth most attractive growth destination, surpassing Australia.

IF​ ​YOU​ ​WOULD​ ​LIKE​ ​TO​ ​LEARN​ ​MORE​ PLEASE​ ​DO​ ​MAKE​ ​CONTACT​ ​AT MKT@FINSCOMS.COM

 

Ensuring Quality Deal Flow in Uncertain Times

Ensuring Quality Deal Flow in Uncertain Times

Flow-1024x751 Ensuring Quality Deal Flow in Uncertain Times

BlogKMC-copy Ensuring Quality Deal Flow in Uncertain Times

Article written by Ken Carmody for Family Office Magazine. Click below for full magazine.

FOM-212x300 Ensuring Quality Deal Flow in Uncertain Times

With the current climate of increased volatility and turbulence many Family Offices are now sitting on dry powder waiting for the inevitable opportunities and lower entry valuations that a U-shaped recovery is characterised by. With volatility still relatively high, the VIX is currently twice as high as it was at the start of 2020 but significantly lower than mid-March peak of 83.56, how can you mitigate risk and find the right investments? How can you control and assist investments to help ensure success? More and more Family Offices are looking to clearly define their position within relevant sectors and build a reputation that attracts the best quality compatible investment opportunities. From this juncture many then choose to invest directly, provide strategic guidance, and/or take a position on the board for increased control and the provision of added support for the entity that they have invested in. With such an entangled investment strategy, entrepreneurs, nascent fund founders, project owners, start-ups etc are interviewing the investor to the same degree as they themselves are being interviewed by said investor.

Positioning and Reputation Promulgation

The inclination of the Family Office to become an alternative to venture capital has been rapidly growing due to a repositioning of the traditional Family Office investment strategy and risk appetite. They are increasingly more open and active in venture, particularly in early-stage companies through direct investments and funds,” said John China, President of SVB Capital speaking in August at the release of the Campden Wealth Research Global Family Office. The report shows that Family Offices are increasingly allocating capital to early growth projects. Their latest report states that on average, 10% of overall Family Office portfolios are allocated to venture investing, “divided between direct investments (54% of the average VC portfolio) and funds (46%)”. The majority of Family Office investment allocations are made in the Seed and Series A rounds. The report shows us that this relatively new position of patient capital is providing returns of 14% on average and shows the importance of being well-positioned and being open to change.

Another example of clear positioning is the large move by Family Offices towards impact and ESG (Environmental, Social and Governance) investments. The attraction here is to be able to make a difference while making money. According to the UBS Global Family Office Report 2020, 39% of family offices intend to allocate most of their portfolios sustainably over the next five years, targeting exclusion-based strategies. This type of strategy is set to further increase significantly in the coming years.

To source high quality, attractive deals that match your criteria you must demonstrate clear definition of your objectives and let others know exactly what you are looking for. Be quite specific, allow people to know your sector preferences, your ticket size, EBITDA range, ROI expectancy etc this will narrow your focus and help with worthwhile matchmaking.

Building and managing your reputation will help your office to compete with private equity funds, banks etc in attracting quality deal flow. For example, by being helpful towards quality entrepreneurs whether you intend investing with them or not can help Family Offices to grow quality deal flow quicker than their peers. Within investment circles and entrepreneur networks word can travel fast about an investor who is a valuable source of expertise, ideas, and referrals. You will also need to clearly communicate what motivates your Family Office, your experience, your vision, and your values. This makes it altogether an easier task for potential value-alignment.

Direct Investment and Collaboration

There has been a significant increase in direct investment approaches by Family Offices over the past decade as Family Offices increase in sophistication. In the same recent Campden Wealth Research report, the research points to 76% of Family Offices investing directly in companies. On average, family offices in the study hold eight funds and 10 direct deals. Better value, greater control, and interest alignment are big motivations for this type of investment. Direct investments tend to be focussed in areas where families’ feel they have a competitive edge according to the latest Family Office Direct Investment Report from FINTRX.

Additionally, 72% of family offices provide strategic guidance, 70% participate on boards, and 70% facilitate investment networking according to the Campden report. These value-adds are what many organisations are now seeking as standard as these practices have been shown to help drive growth and returns. The Family Office is now seen as more than just a source of capital and this can help build a stronger more fruitful investment relationship.

The tendency among many investors is to wait to receive deal opportunities rather than getting out there and sourcing for themselves. Currently, we have noticed that the level and magnitude of network building during lockdown and restricted periods has increased due to the ease and acceptance of virtual meetings. It is as good a time as ever to proactively develop strong deal flow through the formation of relationships with companies and other deal sources. “Family offices are becoming a bit more public…. they are building a web presence…this is also partly a generational issue. People are now more used to sharing information and they are seeking deal-flow,” Russ D’Argento, founder and CEO at FINTRX, speaking earlier this year.  With the volume and appetite for webinars within the investment environs increasing there should be no shortage of opportunity to place yourself on a panel or develop as a thought leader via written articles and speaking roles. The most successful investment firms and direct investors that have developed an impressive network of deal partners, have representatives speaking at webinars, arranging break out web rooms with keen leads, and contributing in as much thought leadership as possible. Spending money on visibility is not vital but personal engagement is.

Forward-thinking Family Offices use their own stories as a way of uniquely competing against investment banks and private equity by striking a chord with certain entrepreneurs. How you craft and tell your story should not be underestimated. If your Family Office is looking to bolster its allocations for direct and quality alternative investments then, the onus is on you to be clear on your positioning and build a reputation that appeals to the most suitable investment opportunities.

IF​ ​YOU​ ​WOULD​ ​LIKE​ ​TO​ ​LEARN​ ​MORE​ PLEASE​ ​DO​ ​MAKE​ ​CONTACT​ ​AT MKT@FINSCOMS.COM