Margaret Harwood-Jones, co-head financing and securities services at Standard Chartered, shares her insights on platform standardisation, opportunities in Asia and regulatory change to encourage sustainable development.
What are your top business priorities for the next 12 months?
The two key attributes for the world of securities services are technology and people, and our 2020 strategy is strongly predicated around those two. For people, it’s continuing to invest in the team we have – making sure that we have the right resource in the right place doing the right things. That’s critical when you’re leading a portfolio of geographies that are emerging and frontier markets. There is a dynamic in those geographies that requires excellence in communication, very regular connectivity with clients and a very strong flow of information – all of those things are driven by the performance and positioning around people. Technology alongside that, or the platform, is also key.
At Standard Chartered, we are working through ‘Securities Services 3.0’, so there are some elements within the plan in 2020 which means we are now tackling the final phase of our platform standardisation. We have two markets to go: Korea and Taiwan. We started Korea last year – and will be finished this year. We are starting Taiwan this year to finish next year. Those two markets are particularly nuanced locally, and there are a lot of requirements for very specific deployment in those markets, so it’s not a straightforward affair to say: ‘I’ve got a single global architecture and I deploy that in those markets as I do elsewhere.’ That’s a characteristic of emerging markets, that’s why those two are at the end of our queue, but we now have enough experience and opportunity to get through those.
We will also finalise the rollout of ‘single instance’, which is the way that we work with asset manager clients and with other institutional investors who appoint us in the hub. They will ask us to do a regional solution, but then we have perfected the model where there is instant connectivity from that hub, or regional overlay, into the individual markets behind that and into the markets within those markets. That’s a unique element of our proposition and again, something that is key – understanding the geographies that we have.
According to data from the World Bank, the world economy is set to experience a modest rebound with growth set to rise 2.5% this year. But China’s growth rate is set to dip below the 6% mark while other economies are also set to decelerate. What’s your view on the current fragility and do you still see opportunities?
We absolutely do see opportunities. We would describe 2020 in the markets where we are to be a year of soft but stabilising growth, despite some of the well-discussed and documented aspects, whether it’s trade wars or other disruptions, such as Covid-19. When you look at the ASEAN countries, half of them are identified as top drivers for growth in 2020, so we are encouraged by that. The Bloomberg analysis of the IMF world economic outlook in October 2019 cites India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam to be in the top 20 growth [category]. That’s very synonymous and strongly aligned with the portfolio and geographies that we have – and borne out by our own Trade20: rising stars of global trade index published in September 2019. The export figures for 2018/19 also cite a country like Vietnam to have been a very strong beneficiary in recent times – even accounting for the US-China trade war or Covid-19 outbreak
In terms of growth from the region, it’s predicted to be around 5% and will be the lowest rate of growth since the global financial crisis. We have to bear that in mind, and cautious optimism is certainly what we’re seeing. At a country level, in our marketplace we have the two growth engines of China and India. There are signs that the growth is there and if you looked more broadly across the world stage and draw comparisons across Europe or the US, then you would still say that Asia is a part of the world where you still can set yourself up for growth.
Standard Chartered was the first overseas bank to be granted a domestic fund custody licence by the China Securities Regulatory Commission (CSRC). How has this helped investors identify and take advantage of investment opportunities in China’s capital market?
This was a very exciting development and the granting of the licence means that we have the opportunity to participate in the full range of investment products offered by domestic funds and asset managers across mainland China. In spite of current challenges, we continue to see a relatively strong Chinese economy, correspondent growth in personal wealth, and continued growth in local demand for more sophisticated investment products – and for the range of professional services that it takes to deliver that.
How concerned are you by the threat of increasing protectionism globally?
From the securities services perspective, the book of clients that we have and the services that we offer are suitable and directed at both domestic client portfolios as well as the inbound flow – whether that comes from Europe or the US. Because of that balance in the book, we are somewhat insulated from the extra-jurisdictional events. It certainly puts us into a place where we are responding to a change in local regulation, but also helping local markets understand the impact of regulatory change elsewhere in the world, so you are absolutely involved in the agenda at both the international and local levels.
What makes Singapore a good hub for fund domiciliation and what added impetus will the Variable Capital Company (VCC) bring?
In terms of a gateway to investment in Asia, or investment products, Singapore is extremely strongly positioned. For 2018, 67% of new inflow of assets were coming into Asia-Pacific and 38% of the 67% then came into the ASEAN countries, so it shows the investment flow is definitely there – and having that vibrant, thriving ecosystem across Asia with somewhere like Singapore being very strongly positioned, we certainly see that happening.
More broadly across Asia, when you have programmes such as the ASEAN Collective Investment Scheme (CIS), or the Asia Regional Funds Passport (ARFP), there is a momentum and seriousness about that, which is echoing the priority that Singapore sees in this space. Singapore is certainly a standout in terms of how it is positioned and what it can do – and there are a number of characteristics that underscore that. There is no doubt that all of the agencies or stakeholders that need to get behind something like the VCC to come together really do work strongly in a cohesive manner – whether that’s the Monetary Authority of Singapore (MAS), Singapore Exchange, the Inland Revenue Authority of Singapore or the Investment Management Association of Singapore, there is a real galvanisation or cohesion in the development of new initiatives with a very strong practitioner input. This initiative is not just for Singapore – it will benefit Singapore – but this is really a cross-border initiative and while UCITS has been around longer, there is a reflection on some of the learnings of the performance of UCITS that are coming into the market. Alongside that, if you look at where Singapore sits geographically and the powerhouses of China and India – it’s not a bad place to be at the intersection of.
Why is now a good time for fintechs to raise capital from a VCC structure and is Singapore an ideal one-stop shop globally?
A VCC in Singapore is going to help to give the region’s start-up ecosystem a boost. It’s absolutely going to provide sources of capital for fintech companies. You can see private equities, hedge funds supporting these new start-ups and their participation in multiple mega-fund rounds – so that environment, ability, investment flow and opportunity is already a course that is well architected in Singapore. The opportunity is definitely there and so is the environment to enable it to happen, so that can make those things relatively straightforward. We think the VCC structure will help solidify Singapore’s position as a technology and innovation hub for the region.
What are your top sustainability goals and what is Standard Chartered’s approach to delivering them sustainably? From a global perspective, which one sustainable theme would you like to see in 2020?
The goals are very much in line with the United Nations’ Sustainable Development Goals (SDGs). Of the 17 SDGs, the three big themes for us are: ending poverty and other deprivations through the improvement of health and education, the reduction in inequality and the tackling of climate change – particularly around oceans and forests.
From a global perspective, we would like to see regulatory change to encourage sustainable development, for example, capital charges for brown assets – so around fossil fuels. Why do I say that? That would be a very natural progression from the things that we’ve been talking about – the key decisions we made in 2018 and 2019 which were directly in light of the significant emissions and climate impact of coal power. For example, we announced in 2019 is that we would only support clients who actively transition their business to generate less than 10% of their earnings from thermal coal. We need our clients to make that transition by 2030, so we are giving them time.
Also last year, we quite publicly withdrew from three projects which we had agreed to fund pre-2018. They all involved coal-fired power plantations. What we are now ensuring is that our lending portfolio that we have as a bank is aligned with the Paris goals of limiting global warming, and we are making sure that we are developing methodologies that we can both manage and ultimately, reduce emissions-related efforts in our own activities, but also in the financing decisions that we make around our clients’ activities.
We have ceased the financing of any new coal-fired power stations anywhere in the world, save for one or two where there was an existing commitment to complete. Sustainability is high on our agenda – we have a dedicated team to help us stay true to the strategy that we set in 2018 that helps to make sure that we’re deploying the capital against those three UN SDGs. That’s now beginning to manifest itself into the business. So, as a custodian bank we want to have a sustainable strategy, so we’re working on that now and will do that in two ways. Firstly, we are looking to support our clients’ requirements as they increase their investments into ESG [environmental, social and governance] – whether that is reporting, benchmarking or other related services, that is all now being rolled out within the capability. We also have an initiative where we’re looking for BCP sites – so, our business continuity sites – that they are only powered by renewable energy sources. That is something that we will have in place before the end of the year.
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