Tag: united nations

Overseas assets of defaulters, guarantors may soon be within lenders’ reach, BFSI News, ET BFSI

Banking & Finance

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FILE PHOTO: An India Rupee note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

Lenders may soon be able to lay their hands on overseas assets of defaulting firms and personal guarantors.

The government has proposed adopting a global model law that will enable lenders to apply the Insolvency and Bankruptcy Code to defaulters’ assets lying overseas. These will include the offshore personal assets of the promoter if they have issued a personal guarantee. The changes would also allow the execution of orders against defaulters by overseas courts that have adopted the model law.

The model law is provided by the UNCITRAL — a subsidiary body of the United Nations.

The government has invited public comments on the proposed modifications by December 15.

The model law lays down the basic framework for cooperation between domestic and foreign courts and domestic and foreign insolvency professionals.

Personal guarantors

In the case of a personal guarantor, their ‘habitual’ place of residence will be taken into account to decide the jurisdiction where the main bankruptcy proceedings will happen. Debt recovery tribunals and the National Company Law Tribunal (NCLT) benches and their appellate tribunals are platforms where overseas creditors could initiate or participate in proceedings against personal guarantors in India.

The introduction of a cross-border insolvency law in the IBC, that is in line with international best practices and suitable for the Indian context, may be beneficial to all stakeholders. Draft part Z, as recommended by the insolvency law committee, is under consideration for enactment,” the ministry said, while proposing the additional measures regarding personal guarantors.

The changes were proposed after the ILC, constituted under the corporate affairs ministry to review the implementation of the IBC, noted the lack of a framework for cross-border insolvency. The government has decided to put in place a comprehensive framework for this purpose based on UNCITRAL model law on cross-border insolvency, which could be made a part of the IBC by inserting a separate chapter for this purpose.

In January 2020, the government had constituted a crossborder insolvency rules/regulations committee to recommend subordinate legislation.

Banks have approached the National Company Law Tribunal for invoking personal guarantees of promoters of 17 defaulting companies.

The defaulting promoters include those of Punj Lloyd, Amtek Auto, ABG Shipyard, Videocon, Varun Shipping, and Lanco, according to reports.

Armed with a Supreme Court order, banks are looking to invoke personal guarantees of tycoons from Venugopal Dhoot to Kapil Wadhawan to recover unpaid loans from their delinquent firms

The guaranteed debt

According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of bank led by State Bank of India.

The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.



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Bhupender Yadav, BFSI News, ET BFSI

Personal Finance

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Climate finance will be the focus of the upcoming United Nations 26th conference of parties (COP 26) to be held in the UK and attended by Prime Minister Narendra Modi, Union Environment Minister Bhupender Yadav said on Friday.

In an interaction with the media ahead of the international climate conference to be held from October 31 to November 12 in Glasgow, the minister said it is yet to be determined which country will get how much financial support to combat the global climate challenge.

There are many issues which will be on the table but the most vital will be to remind the developed nations to deliver on their promise of USD 100 billion per year to the developing countries, he said.

Yadav said Modi will attend the conference, but did not confirm the date of his visit.

At the United Nations Climate Summit in Copenhagen in 2009, the developed nations had pledged to provide USD 100 billion a year to the developing nations to help mitigate climate change. It is yet to be delivered. The amount has now accumulated to over USD one trillion since 2009.

Elaborating on the issue, Environment Secretary R P Gupta said that the amount to be received by India is yet to be ascertained.

He also said that besides fulfilment of climate funding, India expects the developed nations to compensate for the loss and damage expenditure borne by the country due to climate change and global warming as the developed world is responsible for it.

“The severity and the frequency of floods and cyclones have increased and it is because of climate change. The 1.5-degree Celsius temperature rise globally has happened because of the developed nations and their historical emissions. There should be compensation for us.

“The developed nations must bear the expenditure of the damage because they are somewhere responsible for it,” Gupta said, adding that India is hopeful of a good outcome at the COP 26.

India’s per capita carbon emissions per year is 1.96 tons which is way below China and USA which account for 8.4 tons and 18.6 tons emissions respectively, Gupta said, adding that “we are suffering because of developed nations.”

The world’s average per capita emission per year is 6.64 tons.

Under the Paris Agreement, India has three quantifiable nationally determined contributions (NDCs), which include lowering the emissions intensity of its GDP by 33-35 per cent compared to 2005 levels by 2030; increase total cumulative electricity generation from fossil free energy sources to 40 per cent by 2030 and create additional carbon sink of 2.5 to 3 billion tons through additional forest and tree cover. PTI AG SMN SMN



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What is sustainable finance, and how has it been faring?, BFSI News, ET BFSI

Banking & Finance

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-By Ishwari Chavan

Conventionally, investors have evaluated their performance and made decisions solely on financial measures and have neglected environmental and social impacts that come along with it.

Sustainable finance gained interest from the mid-2010s, especially after the Paris Climate Protection Agreement, 2015. In the agreement, 195 countries, including India, have committed to drive economic growth in a climate-friendly manner and reduce greenhouse gas emissions.

Environmental, social, and governance (ESG) issues, along with the associated opportunities and risks, are becoming more relevant for financial institutions. A common way to opt for sustainable finance is by investing in segments such as energy generation, which include solar photovoltaics, on and offshore wind, hydropower and broader energy services.

Here’s a rundown of all that you need to know.

What is sustainable finance?

Sustainable finance includes making business or investment decisions that take into consideration not only financial returns but also environmental, social and governance (ESG) factors.

Sustainable finance is defined as supporting economic growth while reducing pressures on the environment and taking into account social and corporate governance aspects, such as inequality, human rights, management structures and executive remuneration. Environmental considerations, including climate mitigation and adaptation, conservation of biodiversity and circular economy, are under its bandwidth.

One of the key objectives of sustainable finance is to improve economic efficiency on a long-term basis.

What does sustainable finance include?

Operational and labelling standards

1. Green labelled financial securities, products and services

2. Social-labelled financial securities, products and services

3. Sustainability- labelled financial securities, products and services

4. Unlabelled multilateral development banks financing of sustainability oriented projects

Industry oriented frameworks

1. Inclusion of ESG considerations in investment decisions

2. Sustainable and responsible investment (SRI)

3. Impact finance and impact investing

4. Equator principles-aligned projects

Wider Policy framework

1. Sustainable development goals-aligned finance (SDG Finance)

2. Principles of positive impact finance-aligned investments

3. Principles for responsible banking-aligned finance

4. Paris agreement-aligned finance

5. Climate Finance and Green Finance

6. Government sustainability related spending programmes

What is sustainable finance, and how has it been faring?
How has sustainable finance fared around the world so far?

According to the Global Sustainable Investment Alliance, at the start of 2020, global sustainable investment reached $35.3 trillion in five major markets – US, Canada, Japan, Australasia and Europe – reporting a 15% increase in the past two years (2018-2020).
What is sustainable finance, and how has it been faring?Source: Global Sustainable Investment Alliance

Sustainable investment assets under management make up 35.9% of total assets under management, up from 33.4% in 2018.

What is sustainable finance, and how has it been faring?Sustainable investing assets by strategy & region 2020 (Source: Global Sustainable Investment Alliance)

Sustainable investment assets continue to grow in most regions, with Canada experiencing the largest increase in absolute terms over the past two years (48%), followed by the US (42%), Japan (34%) and Australasia (25%) from 2018 to 2020.

What is sustainable finance, and how has it been faring?Global growth of sustainable investing strategies 2016-2020 (Source: Global Sustainable Investment Alliance)

According to the Global Sustainable Investment Alliance, at the start of 2020, global sustainable investment reached $35.3 trillion in five major markets – US, Canada, Japan, Australasia and Europe – reporting a 15% increase in the past two years (2018-2020).



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BRICS bank NDB admits UAE, Uruguay, Bangladesh as new members, BFSI News, ET BFSI

Banking & Finance

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By K J M Varma Beijing, Sep 2 (PTI): The New Development Bank (NDB) set up by the BRICS group of nations has admitted the United Arab Emirates, Uruguay and Bangladesh as the first batch of new members as part of its expansion drive, the bank announced on Thursday.

Launched in 2015 by Brazil, Russia, India, China and South Africa (BRICS), a group of major emerging economies, the Shanghai-headquartered bank mobilises resources for infrastructure and sustainable development projects in their respective countries and other developing nations, complementing the existing efforts of multilateral and regional financial institutions for global growth and development.

NDB has initiated its membership expansion and started formal negotiations with prospective members in late 2020, the bank said in a press release.

After a round of successful negotiations, NDB approved the admission of the UAE, Uruguay and Bangladesh as its first new member countries, it said.

“We are delighted to welcome the UAE, Uruguay and Bangladesh to the NDB family. New members will have in NDB a platform to foster their cooperation in infrastructure and sustainable development,” NDB President Marcos Troyjo said.

“We will continue to expand the bank’s membership in a gradual and balanced manner,” he said.

NDB has an authorised capital of USD 100 billion, which is open for subscription by members of the United Nations, the press release said.

Since the beginning of its operations, NDB approved about 80 projects in all of its members, totalling a portfolio of USD 30 billion.

Projects in areas such as transport, water and sanitation, clean energy, digital infrastructure, social infrastructure and urban development are within the scope of the bank, the release said.

Commenting on the admission of the UAE, Obaid Humaid Al Tayer, Minister of State for Financial Affairs of the UAE, said it “represents a new step to enhance the role of the UAE economy on the global stage, especially in light of the great capabilities and expertise that the country possesses in supporting infrastructure projects and sustainable development”.

Uruguay’s economy and finance minister Azucena Arbeleche said the country sees in the NDB a great opportunity to harness cooperation with its member nations, aiming to achieve stronger international integration in trade and cross-border investment flows.

Bangladesh’s finance minister A H M Mustafa Kamal said, “Membership of Bangladesh to NDB has paved way for a new partnership at a momentous time of 50th anniversary of our independence.”

“We look forward to working closely with NDB to build together a prosperous and equitable world for our next generation as dreamt by our Father of the Nation Bangabandhu Sheikh Mujibur Rahman,” he said. PTI KJV SCY SCY



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World market themes for the week ahead, BFSI News, ET BFSI

Personal Finance

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Following are five big themes likely to dominate thinking of investors and traders in the coming week.

1. READY, STEADY, GO
New Zealand’s central bank meets on Wednesday and looks set to become the first major economy to lift interest rates since COVID-19 hit.

Super-strong jobs data have cemented expectations of a hike, which would be New Zealand’s first since mid-2014. What a contrast with 2020, when rates were slashed 75 bps to 0.25% and a move below zero became a real possibility.

Norway’s central bank, meeting on Thursday meanwhile, could reiterate it will increase rates in September.

Investors, focused on prospects for Fed tapering as labour conditions improve, have boosted the dollar. New Zealand and Norway are a reminder that the greenback is not the only currency standing to benefit from the monetary policy shift under way in the G10.

2. MALLRATS
The U.S. economy is growing robustly and the labour market is rebounding. However, COVID-19 remains a headwind and coming days should bring a fresh perspective on how consumers are faring.

U.S. retail sales likely fell 0.2% in July, after an unexpected rise in June, data on Tuesday is expected to show.

And several large retailers including Walmart (WMT.N), Target (TGT.N), Lowe’s (LOW.N) and Home Depot (HD.N) will report quarterly results. Earnings are due too from Ross Stores (ROST.O), TJX Companies (TJX.N) and Bath & Body Works (BBWI.N).

These come at the end of a stellar U.S. second-quarter results season. S&P 500 (.SPX) earnings are expected to have jumped 93.1%, well above prior expectations of 65.4%, according to Refinitiv IBES.

Fed policymakers, assessing when to start unwinding stimulus, will be watching.

3. DELTA BLUES

The Delta variant is close to breaching Asia’s COVID-zero fortresses, with outbreaks and lockdowns looming over what once appeared the world’s most promising regional rebound.

Save for Taiwan and New Zealand, where strict border controls appear to have kept the variant at bay, cities from Sydney to Seoul are finding it hard to contain infections.

In China, Delta has been detected in over a dozen cities, bearing down on a faltering economy, forcing economists to cut growth forecasts.

We will get a snapshot of how the economy fared in July as local activity and flight curbs bit – retail sales, industrial output and house price numbers are all due on Monday.

4. APOCALYPSE NOW

If this summer has shown us anything, it’s a glimpse of the sort of havoc the planet faces if the climate emergency is not fixed fast.

Apocalyptic forest fires, floods and drought are laying waste to swathes of Greece, Canada, Turkey, China, Argentina and the United States. Extreme weather consequences include deaths, homelessness, social unrest and rising government debt.

The climate emergency will raise costs everywhere: insurance covers just 60% of disaster-linked losses even in rich North America; it falls to 10% in China, Swiss Re estimates. Worse still, the fires are exacerbating emissions, while forests meant to act as carbon sinks will take decades to regrow.

Until now, warnings, including a recent United Nations one, have had limited impact. But with a global climate conference due in November, this summer’s climate disasters might well swing the pendulum.

5. AFGHAN ABYSS
The Taliban‘s rapid advance towards Kabul has raised alarm not only about Afghanistan’s future but also the wider spillover in what is already a dangerous neighbourhood.

Iran to the west, the central Asian republics of Tajikistan, Turkmenistan and Uzbekistan to the north may be at risk, but for markets, Pakistan to the east will be the immediate focus.

Pakistan has lots of debt and a sizable equity market. It also depends on a $6 billion IMF programme. The prospect of years of Taliban violence and mass waves of Afghan refugees will add to the struggle to repair its finances.



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About Rs 6.19 lakh crore Indian banks’ loans at climate change risks, BFSI News, ET BFSI

Banking & Finance

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The United Nations has flashed the Code Red signal on climate change for humanity with serious warnings for India. The recent floodings and landslides have also underscored the risk of climate change for the Indian industry and that banks that lend to them.

About Rs 6.19 lakh crore of debt at India’s leading financial institutions was at risk from extreme weather events such as droughts, floods and cyclones, according to non-profit CDP that has been lobbying banks to measure and disclose the risk climate change may pose to their portfolio.

The organisation has reached the figure based on information provided by some of the biggest lenders, including the State Bank of India and HDFC Bank.

The reason

Indian banks need to plan for a transition for a cleaner future even though they may be locked into funding coal projects for the near term. That’s because the government is still trying to do coal auctions and the industry is still reliant on coal. A lot of the iron and steel and the heavy industry use coal as a fuel. The encouraging sign is that the government has also initiated a plan for green hydrogen, according to CDP. Banks need to look at these newer technologies, newer methods of fuel substitution. All these things require policy support and public capital.

Bank initiatives

State Bank of India is talking about agriculture and allied agri-activities, HDFC Bank has done a scenario analysis in five states on agriculture, flooding and it’s its portfolio in sectors such as steel, cement, power, oil and gas.

SBI, which is facing concerns from shareholders and investors over its proposal to help fund the controversial Carmichael coal mine in northern Australia, valued its total climate risk at Rs 3.83 lakh crore. The bank said it may “indirectly face reputational risks, should it be involved in lending to environmentally sensitive projects which may have significant public opposition.”

SBI has tied up with the European Investment Bank to jointly pump Euro 100 million in equity financing into Indian small businesses focused on climate change and sustainability.

SBI already invests in a vehicle called Neev Funds for its impact investing objectives, and the two entities have created ”Neev Fund II” for taking ahead this partnership. This is one of the EIB’s first private equity investments in India.

Reserve Bank of India

The Reserve Bank of India (RBI) has been talking about green finance for many years and has taken various steps towards it. It has pushed, on the lines of corporate social responsibility for private companies, the concept of Environmental, Social and Governance (ESG) principles into financing aspects. In April this year, the RBI joined the Network for Greening the Financial System (NGFS) in April 2021. The NGFS, launched in December 2017 at the Paris One Planet Summit, is a group of central banks and supervisors from across the globe to share the best practices and contribute to the development of the environment and climate risk management in the financial sector. It is an institutional yet voluntarily membership, which will also help mobilise mainstream finance to support the transition toward a sustainable economy.

The status

India is the only major economy to not have a net-zero emissions target now, even China has a net-zero target. You need If India wants to be net-zero on emissions by 2050, on a broad calculation, its need to have 50% reduction by 2030, according to CDP. This is the action of the decade on climate change and if the opportunity is missed in this decade, it may be too late, it said, according to an S&P Global report.

UN climate change warning

The Indian Ocean is warming at a higher rate than other oceans, the latest report by the Intergovernmental Panel on Climate Change said on Monday, with scientists warning that India will witness increased heatwaves and flooding, which will be the irreversible effects of climate change.

For a country like India, some of the increase in heat waves is masked by aerosol emissions, and reducing that is important for air quality. We will also see an increase in the heatwaves, heavy rainfall events, and the further melting of glaciers, which will impact a country like India, more compound events from sea-level rise, which could mean flooding when tropical cyclones hit. These are some of the impacts which will not go away,” Friederike Otto, one of the authors of the report, said.



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Investors say banks must toughen climate policies or face AGM rebellion

Banking & Finance

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By Simon Jessop and Lawrence White

LONDON – Investors managing $4.2 trillion on Wednesday called on some of the world’s biggest banks to toughen their climate and biodiversity policies or risk rebellions at their next annual meetings.

The 115 investors, including Aviva Investors and M&G Investments, said they wanted banks to take more action to tackle climate change by aligning their lending with the Paris Agreement on climate.

While many banks have already signed up to voluntary initiatives such as the Net-Zero Banking Alliance (NZBA), the investors say quicker change is needed.

The letter, coordinated by campaigners ShareAction, was addressed to 63 banks including HSBC, Standard Chartered and NatWest.

It comes ahead of the COP26 climate talks, with governments being urged to set more ambitious emissions-reduction targets.

A May report from the International Energy Agency said there should be no more new fossil fuel projects after this year for the world to reach its goal of net zero emissions by 2050.

As well as calling for a commitment to phase out lending to coal companies by 2030 in OECD countries and 2040 elsewhere, the investor group said it wanted each bank to give a pre-COP26 commitment to cut lending to clients planning new coal projects.

While NZBA signatories have agreed to begin setting out climate targets by the end of next year, the investors said they wanted to see 5- to 10-year targets in place before the companies’ annual general meetings next year.

Banks should align their climate plans with the IEA’s net-zero scenario or a similar one, they said.

Lastly, and ahead of the United Nations‘ next biodiversity conference in China in October, the investors called on the banks to commit to publishing a biodiversity strategy.

The investors said they wanted to see a response by Aug. 15.

“Progress against these issues may be taken into consideration within investors’ 2022 AGM voting action and engagement activities, such as voting on special and ordinary resolutions,” the investor letter said.

In response, an HSBC spokesperson said: “We look forward to continuing our engagement with ShareAction and providing a constructive response to their letter in due course.”

StanChart said it had made major strides in its coal policy in recent years, and has pledged to put its transition strategy to a shareholder advisory vote next year, while NatWest likewise highlighted recent progress in its policies.

Banks including HSBC and Barclays have strengthened policies on tackling climate change in the past year in response to pressure from ShareAction and other groups.

(Reporting by Simon Jessop and Lawrence White; editing by Philippa Fletcher)



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