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The Isle of Man is the world’s only ‘entire nation’ Biosphere and the UNESCO Biosphere Awards look to highlight those making a positive contribution to the Island’s sustainable future.

Taking place at the Manx Museum and presented by The Lieutenant Governor, His Excellency Lieutenant General Sir John Lorimer and Lady Lorimer, the awards attracted entries from local organisations across a range of sectors.

Having entered the ‘Economy’ category, Douglas based financial services company, Capital International Group, were proud to be presented with a UNESCO Biosphere Award for a second year running.

The Group set out on its ‘Conscious Capital’ sustainability mission back in 2020 and has since made huge strides in making the business more sustainable. There are many areas where the Group has made significant progress, be that reducing its carbon emissions, optimising employee wellbeing or making a lasting and positive impact in the community. 

This year, the Group’s application was largely based on its sustainable investment management offering. Fusion ESG is the Group’s flagship, 100% sustainable portfolio which focuses on four investment themes: Sustainable-Agriculture, Water, Clean Energy and Healthy Living. Since launch, over £20m has been invested into the strategy.

Investment Specialist, Greg Easton, who manages Fusion ESG, said: 

“We believe clients can achieve their financial goals whilst making a positive environmental and social impact. Investing sustainably shouldn’t compromise performance. In fact, since adopting our ‘Conscious Capital’ non-exclusionary approach, we’re finding our research is helping us to build future-fit portfolios by identifying environmental risks and helping us unearth companies that can deliver sustainable Alpha. Winning this award is fantastic as it serves to highlight all of the great work our Conscious Capital Forum are doing on top of their day jobs.”

Anthony Long, Group Chairman and leader of the Group’s Conscious Capital Forum said:

"Becoming a Net Positive business and investing heavily in sustainable projects over the last few years has been immensely rewarding for everyone in the business. Our four key themes of Responsible Investment, Financial Wellbeing, Community Impact & Climate Change touch all our stakeholders both inside and outside the business. I am immensely proud of everything that we have achieved, and it is wonderful to see this work recognised through the UNESCO Biosphere awards for the second year in a row."

If you’d like to find out more about Capital International Group’s Conscious Capital initiatives, click here

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

BOLD, FOR SURE – BUT JUST WASN’T MADE FOR THESE TIMES? 

Today's emergency financial statement may have lacked the formal designation of a Budget, but in some ways it represents a more significant fiscal and economic event. 

Meanwhile the political implications are clear - after twelve years of Conservative dominated government, the new Administration has repudiated much of the UK's economic record since 2010. 

The Truss/Kwarteng world-view is clear and uncompromising: an overly large State has been taking far too much in taxes, holding back free enterprise and stunting economic growth. After the triple trauma of the global financial crisis (2008), Brexit (since 2016) and the Covid pandemic (2020/1) a radically new approach to economic management is necessary as a matter of urgency......or at least once businesses and individuals have received one final serving of taxpayer funded largesse courtesy of the energy support package. 

This is a long-standing, heartfelt strategic position jointly-held by the now two leading figures in UK politics, who have also been increasingly frustrated from within government, at the failure, as they would see it, to grasp fully the opportunities presented by leaving the regulatory constraints of the European Union. 

The headline initiatives set out by the new Chancellor of the Exchequer and designed to turbocharge growth and productivity in the UK economy include accelerated reductions in income tax and stamp duty; a reversal of the National Insurance hikes imposed earlier in the year; a scrapping of planned corporation tax rises as well as radical deregulation in planning, investment zones and free-ports and much else besides. What the measures in this package have in common is a clear break with the fiscal rules under which the Treasury has operated in recent times. 

A former constituent of mine before he entered parliament, Kwasi Kwarteng shared many of my economic frustrations during the coalition years. Its much vaunted austerity programme failed after five years of reductions in public expenditure to eliminate the budget deficit; the departmental cuts, however, led to diminished service levels in healthcare, criminal justice and welfare provision whose long shadow looms over us today. Ultra-low interest rates have distorted asset values, heightened inter-generational economic conflict and impeded business investment. As Kwarteng put it to me some years ago, "We've now got the worst of both worlds - we've given austerity a bad name, but not actually achieved it in the public finances." 

That simmering discontent lies at the heart of the fixation with achieving rapid economic growth that the government now proposes and in its profound distrust in 'Treasury Orthodoxy'. Simply put, if underlying growth levels can be raised by a percentage point or two, the compound impact on living standards and the public finances will be immense (our national debt is now over three times what it was when the financial crisis hit, a fact disguised by the near zero interest rate regime since then, which has only in recent months begun to unwind). 

Needless to say to bear fruit this aggressively pro-growth agenda will take time, the sands of which are running out as the next General Election approaches. Expect to hear more in the months ahead 

of the 'long-term growth plan' and - a Thatcher-era throwback - 'taking the necessary medicine' with the implicit recognition that tangible results may be sparsely apparent within the next two years.

Nevertheless for the first time since the Brexit vote, political strategy and tactics between Numbers 10 and 11 Downing Street will be closely aligned. The Truss/Kwarteng partnership is strong, not least as there is a clear understanding that any continuation of the acute Johnson/Sunak or May/Hammond tensions would result in mutually assured destruction of the government. The calculation is also that the clear sense of renewed purpose and direction on the part of the government will buy it the provisional support of the international capital markets after a torrid time for sterling. This may prove optimistic. 

The firm emphasis in this statement on growing financial and professional services recognises the importance to the UK economy of this wealth and tax generating sector; it also points to some of the political barriers that lie ahead. Truss and Kwarteng instinctively support the 'Singapore-on-Thames' model of Brexit, yet this has always been at odds with the way leaving the EU was sold to the British public in 2016 and beyond. Assurances of controlled immigration and higher levels of public spending were designed to appeal to the Red Wall voters over the past six years. The deregulatory, supply side revolution that underpins the growth at-all-costs policy now being advanced runs counter to what has happened since we left the EU. Trade barriers have been erected with Britain's nearest, and largest, trading partners with huge new bureaucratic and compliance burdens and costs being imposed upon companies trading with the EU. Labour shortages abound in seasonal work and hospitality where relatively unskilled EU nationals were formerly employed in large numbers and cannot now qualify for visas. Investor confidence and infrastructure development remains subdued as a consequence of continued regulatory uncertainty. 

Even those supportive of this buccaneering new economic strategy are concerned that it represents a bold gamble, especially as it will require nerves of steel from a Conservative parliamentary party that remains deeply divided and traumatised by the events of recent months. Whilst this package will delight those Tory MPs who still fervently believe in the free market, small state, low taxation tradition, many of those from the fabled Red Wall take a more protectionist, interventionist, high-spending and levelling-up approach to economic life - in tune with many of their electors who brought them unexpectedly to parliament in recent years. 

But in her Ministerial appointments to the Treasury, the Prime Minister has made it clear there is no going back to the way things have traditionally been done. 

She and her Chancellor are in essence theoretical free-marketeers. Truss had spells as a management accountant with Shell and economist/policy specialist with Cable & Wireless but by her thirtieth birthday had moved into lobbying and then the think tank world. Kwarteng continued his studies at Cambridge to take a Doctorate in Economic History before a brief spell working in the hedge-fund world and time writing well received history books. 

However, the more junior members of the Treasury team are all over the age of 50, having had substantial financial careers, suggesting they will be strong, independent-minded Ministers, willing to stand up to any sign of Treasury 'group-think'. 

Andrew Griffith, the Financial Secretary, was Finance Director at Sky for almost 15 years; Richard Fuller (Economic Secretary) spent over two decades as a management consultant and tech investor in Australia and the US before returning to the UK to pursue a political career. Meanwhile the Exchequer Secretary, Felicity (Flicker) Buchan, was a senior banker with JP Morgan and then the Bank of America before becoming an MP in 2019. 

No-one will fault the Chancellor in his audacity today and many market professionals support the clear sense of direction and vision in the strategy of the new Administration. However, the acute economic uncertainties, many of which are global in nature, already suggest a bumpy ride for individuals and companies alike in the months ahead without further policy upheaval.

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit.

Since our last update, our Conscious Capital Forum has been busy working on various projects and initiatives all with the aim of making our business more sustainable. We'd like to take this opportunity to share with your some of the highlights from the past few months.

Our Journey to Net-zero:

Tracking the commute:

When calculating our carbon emissions, we have committed to not only including Scope 1 & 2 emissions, but also Scope 3. Scope 1 and 2 emissions are what we can directly control, e.g. the amount of gas burned in our boilers or the electricity we consume. Scope 3 emissions differ, in that they are not directly caused by us, but are a consequence of our activities.Included in Scope 3 is the commute of our employees which currently makes up 42% of our carbon footprint. We see this as an area where we can make significant gains in the short-term by encouraging our staff to change their travel habits.

Product Manager, Alex Long, cycling to the office

Having already put in place cycle to work and electric vehicle leasing schemes for our employees, it’s important that we are able to accurately track the impact of this work. Thus far, our measurements for commute related carbon have been reliant on staff surveys which do not produce the most precise or timely data.

To gain a truer insight into the commuting habits of our people, and the emissions produced as a result, our Development team are in the process of building a travel to work pop-up which will appear as part of the log-in process at the end of each week to ask employees how they travelled to work. This will produce a much more accurate picture of the commute and help us to understand how we can encourage our employees to make positive changes to their travel habits.

Jill Harrison and Sammy Mathewson from our Conscious Capital Forum

Recycling:

Following an audit earlier this year of the waste produced at our headquarters, Capital House, it was found that 70% of what had been thrown in general waste, could have been recycled.

To encourage our employees to recycle more often, we have removed under-desk waste bins from across our offices and installed a recycling area in a central location on each floor. This adds to the recycling facilities already in use in our kitchen areas and we expect this change to vastly increase the amount of waste that is recycled.

INVEST talk:

In July we hosted our first in-person seminar since the pandemic. The main event took place in Johannesburg where we invited over a hundred guests to join us in person. We also invited guests from around the world to dial into the event and we streamed in speakers from South Africa, the Isle of Man and the Channel Islands to share their views on current affairs including climate change, sustainability and investing in the community.

Anthony Long interviewing Kerry Hoffman of Souper Troopers and Martine Botha of KPMG at INVEST talk

In support of our Conscious Capital agenda, we decided against purchasing branded merchandise for INVEST talk attendees and instead made a donation to our South African charity partner, Souper Troopers, to help fund the admin costs of obtaining ID cards for their clients.

To give our guests something to take away with them, we chose to print our event pamphlets on biodegradable seeded paper which can be planted to grow a selection of fragrant flowers or herbs.

The seeded paper pamphlets handed out at INVEST talk

Conscious Capital Investments:

Inflation Reduction Act:

Previously known as the Build Back Better Bill, the US’ Inflation Reduction Act was passed on 7th August with $369bn dedicated to climate and clean energy programmes including:

  • A methane penalty of $900 per metric ton of methane emissions which exceed federal limits in 2024, rising to $1,500 per metric ton in 2026.
  • $30bn will be allocated to fund advanced nuclear reactors, solar panels, wind turbines, batteries and geothermal plants. This will include tax credits over 10 years to replace short-term wind and solar credits.
  • $20bn will be invested in cutting emissions produced by the agriculture sector.

We are already seeing this having a positive impact on our exposure to renewables which contributed to Fusion ESG’s best monthly performance, returning 7.6% in July.

Our investment team has also been shortlisted for the STEP Private Client Awards ‘Investment Team of the Year’ for our Fusion ESG Strategy.

We are planning some changes to the asset allocation for Fusion ESG in H2, predominantly adding exposure to Green Finance, Circular Economy and Biodiversity themes within the equity allocation and introducing Carbon and a sustainably sourced Gold asset as proxies for commodities in the alternatives allocation.

Our Fusion ESG solution is ideal for advisors and professionals who are now required to assess client ESG preferences under the new MIFID II requirements which came into effect at the start of August.

Community:

The Big Splash Trail:

In June, Hospice Isle of Man’s Big Splash Trail went live with 32 dolphin sculptures placed around the Isle of Man. The charity is encouraging people to download the Big Splash App and make their way around the Island visiting each of the sculptures which will later be auctioned off to raise funds.

Clockwork the dolphin designed by Eve Adams

As a sponsor of the trail, we worked with local artist Eve Adams to help make her design, ‘Clockwork’, stand out from the crowd. We used our digital skills to build a webpage featuring family activities, including an interactive quiz as well as a photo competition with the chance to win a family boat trip. You can access the activities here.

Souper Troopers:

Our team in South Africa recently took some time out of the office to visit the Souper Troopers community garden in Bo-Kaap. Alongside the Souper Squad, the Capital volunteers helped to renovate the garden which is used to grow vegetables and herbs.

Capital team members volunteering with the Souper Squad in Bo-Kapp

It was also a pleasure to invite Souper Troopers founder, Kerry Hoffman, to speak at our INVEST talk event in Johannesburg as part of a panel discussion on sustainability. Kerry spoke about the value a partnership with a social enterprise can bring to businesses. Our Marketing team also supported Kerry with a slide pack which she and her team are now able to use when speaking to potential new corporate partners.

Thank you for your continued support. We look forward to updating you on our 2022 initiatives in a few months’ time.

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

The Right Honourable Mark Field

With the new UK Prime Minister now confirmed, Capital International Bank's Chairman and former Minister of State at the Foreign Office, the Right Honourable Mark Field, has provided an update on how he thinks the Tory Party will handle the challenges the UK economy is facing:

How will historians make sense of the unremitting political turbulence that has engulfed the UK since the EU referendum in June 2016?

Well, it is instructive to step back from the trauma that has played out exclusively in the Conservative Party these past six years. The UK is now on to its fourth Prime Minister; during this time two General Elections have taken place; each new Premier has presented themselves as a fresh start, disowning the record of the previous government they have served in; yet each administration has rapidly been bogged down in its attempts to reconcile hardline Brexit ideology with the demands of economic and diplomatic reality.

For the centre-right in UK politics, Brexit always represented an unlikely, implausible and perhaps incompatible merger of two distinct political forces. A Conservative Party that instinctively respects tradition, history and the pillars of the establishment and an insurrectionist force that wilfully dismissed expert opinion and regarded itself as the scourge of scaremongering, complacent orthodoxy as epitomised by our acceptance of steadily centralising EU institutions.

Boris Johnson's talent for infectiously effusive and bombastic campaigning represented and encapsulated both of these things at once. In what may prove unique circumstances in December 2019, he was the figurehead of a startling victory defying usual political gravity. The Tory vote share increased for the sixth consecutive election, and he secured the largest majority in over three decades by winning a swathe of two dozen constituencies in the North, the Midlands and Wales that had been reliably Labour since the Second World War. His traumatic ejection from office and the stark reality that so many Conservative Party members in the country were, and remain, unreconciled to the fact and manner of his defenestration weighed heavily on the campaign to replace him.

Elizabeth Truss has emerged as his successor by skilfully crafting her appeal as the candidate of change whilst also identifying as loyal to her predecessor. In a replay of the successful tactics used in summer 2016, her team was able to paint her opponent, Rishi Sunak, the committed Brexiteer whose resignation on 5 July triggered the final collapse in confidence in Boris Johnson, as pessimistic, inflexible and elitist in the eyes of a majority of the 170,000 Party stalwarts.

In contrast to some of the coverage she has received over the eight years she has served in cabinet, Truss is a highly intelligent, immensely energetic and pragmatic politician with a genuine passion for ideas and policy development. Her track record is, however, more mixed in delivery and implementation which will be key to the immediate success or otherwise of the government she now leads.

As International Trade Secretary and during the past twelve months heading the Foreign Office she has adopted an impulsive, forthright, buccaneering style similar to that of her predecessor – as a free trade globalist with instincts well-tuned to the party grassroots expect her to continue in a similar vein with keen support for strengthening economic and diplomatic ties with the Commonwealth, Overseas Territories and Crown Dependencies.

She will also double down on the Northern Ireland Protocol Bill (for which she has had Ministerial responsibility) regardless of fears that it will trigger an imminent trade war with our largest export market at the moment of maximum economic peril in the UK. This comes at a time when the UK already has the highest inflation in the G7, the lowest rate of economic growth and baked-in commitments for further lavish public spending. Whilst some Tory MPs still fervently believe in the free market, small state, low taxation tradition, many others from the fabled Red Wall take a more protectionist, interventionist, high-spending and levelling-up approach to economic life. This is the legacy of the Boris Johnson era, which the new prime minister will more likely emulate than distance herself from.

Whilst the new Prime Minister has consistently shown herself to be resilient in the face of political pressure, does she (or indeed any potential Leader at this turbulent juncture) have the capacity to rejuvenate a deeply divided and weary parliamentary party, increasingly fatalistic about its electoral prospects? More important still will she be able to lead and inspire the nation through the difficult economic times that are now upon us?

At the next general election the Tories will be seeking an improbable and unprecedented fifth consecutive mandate. The fact that our new Premier featured in the top two amongst her Parliamentary colleagues only in the all-important fifth of five ballots and initially appealed as first choice to fewer than 15% of her colleagues implies that any political honeymoon she has may prove very short, not least given the overflowing in-tray of serious domestic and international crises she inherits.

The unprecedentedly brutal nationwide leadership campaign with Rishi Sunak means a significant group on the backbenches will be unreconciled from day one to her leadership and his avid supporters will be a focal point for dissent during these troubled times.

Similarly Boris Johnson will, for now, be languishing out of office. Whilst his abiding wish in recent weeks was to stop the Sunak bandwagon, his future support for the new PM may be more conditional. A narrative is already being worked up that despite his getting Brexit done, having rolled out a globally innovative vaccine programme and provided international leadership over Ukraine, he has been stabbed in the back by political opponents in his Party. If and when things get tough for his successor Boris will be waiting in the wings. At the best of times he has never been one for sticking to the party line or unreserved loyalty to the Leadership (other than during his own tenure at Downing Street) and he will continue to enthral the media with every utterance in the months ahead.

Moreover, PM Truss’s extensive policy ambitions require the luxury of time - and like her predecessor she is an instinctive risk-taker - so it would be unwise to rule out entirely the prospect of a snap General Election being called within weeks especially if she benefits from the polling boost that accompanies most new Prime Ministers. What may also weigh heavily on her mind is that an election would be the most effective means of imposing the all-important discipline of loyalty on her traumatised parliamentary party. It is also worth remembering that as a consequence of still unresolved sexual assault claims as many as three highly challenging by-elections in Conservative-held seats potentially loom in the months ahead. The risk of morale sapping reverses at the polls might in this way be avoided at a stroke.

So in an ever uncertain world, there is one thing of which we can be sure - political life in the months ahead will be anything but dull!

How are you preparing for challenging economic conditions that lie ahead?

Join us for a free live broadcast on 14th September where Mark Field will be joined by our Chief Investment Officer, David Long as well as Group CEO, Greg Ellison, to summarise what investors and professionals need to know about the state of the UK economy. Click here to secure your free ticket.

Capital International Bank Limited is a wholly owned subsidiary of Capital International Group Limited (www.capital-iom.com) a privately owned financial services group based in the Isle of Man.

Capital International Bank Limited is licensed by the Isle of Man Financial Services Authority and operates as a non-retail, restricted deposit taker under a Class 1 (2) licence. Deposits are not covered by the Isle of Man Depositors’ Compensation Scheme and terms and conditions apply. 

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

Over the last few years, the Isle of Man has been unwavering in its mission to become a centre of authenticity and excellence for all things esports. It is hard to argue that it has not done an excellent job in making itself seen and heard within the esports ecosystem. It solidified its commitment to esports with the creation of a dedicated esports department within its government along with being the home to EU Masters competing organisation, X7. 

With the Island already recognised and respected in a number of sectors, including shipping, insurance and eGaming, there are already a number of providers who can service the esports businesses coming to the Island.

Launched in 2021, Capital International Bank offers a modern, digital corporate banking solution. Onboarding is digital, the look and feel of the user interface is fresh and intuitive and accounts are opened quickly.

Greg Ellison, CEO

Crafted with feedback from respected individuals within the esports sector, the banking solution offers account opening within 10 working days, access to 20 currencies though the Capital Call Account as well as a dedicated Relationship Consultant to walk organisation owners through the entire onboarding process. 

Greg Ellison, CEO of the Capital International Group, explains why he and the team are excited to service the esports industry:

“We understand that a large part of the esports industry is still very much in start-up mode. We see this as a positive. Having over 200 employees ourselves and offices in different jurisdictions, we take the same agile and forward-thinking approach as a lot of start-ups. Our esports offering has been created with the needs of esports organisations in mind. The esports industry moves at such a fast pace. We pride ourselves on being a swift and relationship driven digital bank, which is why we think it is a great fit for the industry.”

Luke Adebiyi, Business Development Manager

Having attended a number of esports networking events, conferences and tournaments, Capital International Bank Business Development Manager Luke Adebiyi said:

“We have already opened accounts for a number of esports clients and we’re keen to build a reputation as the go-to bank for esports organisations.”

Ready to open an account? Get in touch with our specialist Business Development Manager, Luke Adebiyi at l.adebiyi@capital-iom.com  

Capital International Bank Limited is a wholly owned subsidiary of Capital International Group Limited (www.capital-iom.com) a privately owned financial services group based in the Isle of Man.

Capital International Bank Limited is licensed by the Isle of Man Financial Services Authority and operates as a non-retail, restricted deposit taker under a Class 1 (2) licence. Deposits are not covered by the Isle of Man Depositors’ Compensation Scheme and terms and conditions apply. 

Disclaimer: The views, thoughts and opinions expressed within this article are those of the authors and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

Welcome to the Quarterly Investment Review for Q2 2022.

Our Investment team have put together a range of resources to update you on what has happened in markets across the second quarter of 2022. Here you will find: 

  • High-level, global equity performance analysis
  • Soundbites from our team of investment experts
  • A written summary covering the quarter's main market events

Global Equity Performance Analysis:

The graph below shows global equity performance across the quarter and plots world events along the performance line to indicate their impact on markets.

Hear from our Team - Investment Soundbites

Hear from our team of Investment Managers as they each explore an important topic from the quarter, be that the likelihood of a recession, soaring energy prices or inflation.

James Fitzpatrick, Head of Funds: Have we Entered A New Energy Era?

Chris Bell, Investment Manager: Inflation Running Riot: What Will Central Banks Do Next?

James Penn, Head of Equity: Are We Heading For Recession?

Greg Easton, Business Development Manager: ESG in Q2: Is It Good News?

Summary & Outlook - Q2 2022:

It has been a difficult first half of 2022 and we have seen significant retrenchment across most asset classes. Despite rebounding in the aftermath of Russia’s invasion of Ukraine, equity markets have given back most of their 2021 gains. US and European equities fell into a bear market in June and end the half down 21% and 20% respectively. The decline has been most notable in the growth-and-technology-oriented NASDAQ index which has fallen 29%. The UK has provided some refuge with the FTSE350 falling only 5.8%, reflecting its higher exposure to energy companies and the much lower relative valuation of its constituents.

What, in December, was the gentle beginnings of a pivot in central bank policy has rapidly accelerated through the first half into a full-blown clamp down on inflation. Inflation which has not only proved to be far more persistent than originally anticipated but has been further exacerbated by Russia’s invasion of Ukraine which has curtailed the supply of commodities into developed economies. On reflection, the Federal Reserve was too far behind the curve and have created additional volatility by not acting much sooner.

As central banks raise interest rates and taper bond purchasing, bond yields are destined to rise. Through the first half of the year, global aggregate bond indices fell 13.5%. Investors have been unable to seek refuge in fixed income assets and, despite proving to be a haven in the first quarter, commodities have underperformed equities since rallying in the week following the invasion. Ten-year government bond yields reached 3.5% from 1.5% in the US, 2.7% from 1.0% in the UK and 1.75% from -0.2% in Europe. The US Treasury curve has significantly flattened, reflecting the contrast between the long-term and short-term expectations for the economy, and twice inverted during the second quarter, signalling an approaching recession.

It’s a difficult balancing act for central banks as monetary policy is a blunt tool. They can ultimately only dampen aggregate demand and may therefore tip the whole economy into recession in an attempt to control inflation in one corner of the market; say, energy for example. The question over recessionary prospects; If, When and How Deep, are important for market direction from here. Bear markets typically last only six months if they coincide with a recession and the average peak to trough fall is not far from what we have already witnessed. Some parallels are being drawn with the 1970s and 1973-74 was a particularly tough extended bear market. However, there were strong nominal returns for equities over the rest of the decade. Our economic research points to the US, UK and Europe narrowly avoiding recession in the immediate future.

The outlook also tilts heavily on the prospects for inflation, of which the largest contributors have been shelter and transport. With the dramatic shift in energy prices already behind us and as demand contracts, housing markets cool and supply-side pressures ease, we could see inflation beginning to wane.

The situation is more difficult in Europe with seemingly no meaningful solution to a natural gas crisis. The US could make the strategic decision to ramp up shale production and bolster the economies of its NATO allies.

Amid the uncertainty, corporate and household balance sheets are robust, banks are well capitalised, credit conditions remain loose, and these should help buoy the economy. The substitution of capital for labour as the wage share in GDP rises, a push for energy security, supply chain independence, net zero and ‘levelling up’ could all be drivers of a Capex boom in the years ahead. It is also important to recognise that we enter this scenario on the back of a strong, overheating economy with China now re-emerging from zero-covid policy lockdowns.

While it is very difficult to remain positive during a bear market, portfolios have already endured a significant but healthy revaluation in the first half. Inflation only needs to ease as central banks will have a preference for higher inflation over economic depression, and this could be the shift in rhetoric that improves sentiment in the second half. We still believe inflation is the greatest risk to your savings and equities are the asset class which will best protect you against inflation over the cycle.

Disclaimer: The views, thoughts and opinions expressed within this article and soundbites are those of the authors/ speakers and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit

The Agile Way of Working
 on 
June 21, 2022
Company News

In a previous article, I highlighted how the agile methodology first adopted by the software developers and technology team at Capital had spread like wildfire, with other departments across the wider Group becoming excited about implementing agile working into their own processes.  

 In this second part of our agile explorations, I want to delve into the elements of agile working environments that were adopted most quickly outside of the technology teams and the aspects that have made the biggest difference to our organisation. Interestingly, in most cases,  these are working practices and ways of thinking that require no investment in technology tools and can be applied to any business.  

 Here are a few examples of agile working methods:  

 Show don’t tell  

The incremental delivery of complex software products demands that teams constantly show stakeholders what they are doing to help refine the requirements. With agile delivery, there is a finite time between releases (termed a ‘sprint’) which, at Capital, is every 2 weeks. This means that on a weekly basis, the team will demonstrate what they are working on currently and what is about to be released to customers.  

a teacher showing a child how to use a microscope

Regular demos lasting 10 minutes provide an overview of what is about to be released to customers. The stakeholders are taken on a journey. We start with the initial design mock-ups, then explore the tweaks made along the way and finally, we arrive at the end product ready for release.This story-telling session is a massively powerful forum, bringing all disciplines together to sharpen their focus on what is still required and to quickly highlight where things aren’t working as first thought.  

Critically, taking this time to show stakeholders what is happening and bringing them along for the journey is effective in getting operational staff to buy into things that have the potential to rock their world.  

Retrospectives  

Another key practice of agile workplaces is the ‘Retrospective’: an honest and zero-blame review of what went well, what went badly, and what lessons were learnt during the previous delivery cycle. Unlike more traditional monthly operational reporting meetings, which still do exist at Capital, retrospectives involve the people doing the work, and the meetings are facilitated by someone with no line-management responsibilities (a ‘Scrum Master’ in the world of tech).  

 This grass roots focus in a neutral environment ensures that lessons are learnt, changes are made, then a few weeks later the impact of these changes are reviewed in a never-ending cycle of continual improvement.  

Don’t sit when you can stand  

At the start of every day, each team will meet for a short meeting (usually 15 minutes) to escalate any issues, talk through priorities and to get aligned for the day ahead. In agile speak, the meetings are termed ‘Stand-ups’, a remnant from the age when meetings were short enough to allow people to physically stand face-to-face although, in this current age, most stand-ups are held with participants sitting down on a collaborative video conference call. Crucially, stand-ups should be short and sweet. It’s not about getting into the nitty gritty. They simply serve as a bitesize update to ensure everyone in a team pulls in the same direction.  

cats dancing in a garden

Can do KANBAN 

Kanban is a simple scheduling system originally developed at Toyota in the 1940’s with the aim of managing work and inventory at every stage of the production line. The system takes its name from the paper cards that once tracked production within the Toyota factories. 

Kanban board as part of the agile way of working

Today, in its simplest form, nothing much has changed in principle. The stages of a process or workflow (e.g. onboarding a client) are drawn onto a wall and paper post-it notes are used to identify the items at each stage in the process. The post-it notes are then re-arranged at the start of every day during a team Stand-up.  

Having such a strong and simple visual representation of an end-to-end process makes it easy to track progress, identify problems and to agree as a team on the resolutions.  

I distinctly remember feeling that the agile working culture we were living and breathing in the tech team was spreading throughout the business when I found out that our Finance and Marketing teams were using Kanban boards. It was then even more rewarding to learn a client onboarding team had unlocked a 500% increase in productivity by aligning on Kanban principles.  

To be clear, the old-school post-it note method has its limitations, not least when teams are distributed across different working locations. At Capital, we use digital Kanban boards which, in our case, have been created using the project management software, Jira.  

Squads not Silos  

One of the biggest organisational and management mind-bogglers when looking at agile organisations is the departure from traditional, department-led teams in which the co-ordination and decision-making happens principally at the director level of management.  

 As a concrete example, historically, the responsibility for onboarding clients in a financial organisation is typically shared across the ‘front office’ Business Development teams and ‘back office’ operational teams, with the overall ownership then sitting at a CXO level.   

If this process were to undergo an agile face-lift, the onboarding of clients would sit with one cross-functional team who are solely focussed on ensuring a great client onboarding experience. One team with one goal, empowered to take their own decisions and held accountable for their performance.  

At Capital, our approach was to reorganise, bringing previously siloed teams together under a single leader, co-locating all team members together to improve communications and the sense of team identity and then managing the team with the help of daily stand-ups, reviewing KPI dashboards and an onboarding Kanban.  

Open alignment  

Agile OKRs as part of the agile way of working

The single most important foundation for building an agile organisation is to align everyone on a vision and common objectives. Based on experiences gained in tech organisations over the past two decades, the most effective way of doing this is to roll out objectives and key results (OKRs) that are openly shared from the CEO through the entire organisation.  

 In traditional companies, objectives are only visible 1:1 between a manager and a staff member. In contrast, OKRs are based on the principle that everyone’s objectives are visible and aligned.  

Having aligned objectives that are visible to all is key to creating a common sense of purpose. Anyone, at any level, can see how their objectives and key results relate to their manager’s and to their teammates’. This openness helps drive a sense of team ownership and pride in hitting their goals and helps to create a better awareness of how other teams are contributing to those same goals.   

Within Capital, my OKRs as Chief Technology Officer are agreed with the CEO, visible to everyone, and linked to the Technology department OKRs which cascade to every single member of the team.   

Getting to know your users  

The use of customer personas is not exclusively part of the agile way of working; rather, it is a user-centred design technique that emerged in the 1990’s as a way for digital product designers to better understand the needs of the customer.

A persona is a fictional character created to represent a customer type that might use a website or product. It is usual to construct multiple distinct personas representing specific market segments or customer types. Personas are useful in considering the goals, desires and limitations potential customers have in order to help guide decisions about product features, interactions, and visual design.  

At Capital, we implicitly knew that our banking and investment products were used by different types of clients: from direct clients, to independent financial advisors, introducers, CSPs etc. For a long time, we had thought of these clients as being users of the same products, but by focussing on the creation of personas, we identified a staggering 22 distinct types of clients, all with differing needs! This shift in thinking has been profound. With hindsight, it seems obvious but from experience, very few internet banks and investment products are customised based on a detailed understanding of who the customer is and what they really need.   

In conclusion…  

Organisations must constantly adapt to be successful. To quote Winston Churchill: “To improve is to change; to be perfect is to change often.” The finance industry is unique in having ‘Change Management’ in many organisational structures, but in leading digital product organisations change is a constant, handled by everyone through agile ways of working — it is not a department.  

The learnings from Capital, a very mature, traditionally structured financial services company, has shown that organisational agility can be improved not through a top-down directive in a Change Department, but from individuals embracing new ways of working that are supported by members of the technology team. 

Agile ways of working are accessible to all organisations. There is no right way to do things, so start small with a few motivated people and empower others to pick up the agile practises that start to deliver results. 

Disclaimer: The views, thoughts and opinions expressed within this article are those of the author, and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit.

Chairman of Capital International Bank and former MP for Cities of London and Westminster, Mark Field, provides a few thoughts on the implications of yesterday's ballot, which gave Boris Johnson a 211-148 margin of victory:

Any wistful hope that this contest might "clear the air" or even provide a decisive outcome to the leadership question has been thwarted by this outcome.  It will provide succour only to the Conservative Party's opponents.

The fact that over 41% of sitting Tory MPs refused to support their leader (a man who only two and a half years ago delivered the Party its biggest election majority in a third of a century) suggests that today's Conservative parliamentary party is all but ungovernable. Calls for unity will evidently fall on deaf ears and the warring factions will have only been emboldened to continue their battles.

History suggests that the very fact of a confidence vote being called augurs ill for the longevity of the leader concerned. An outcome as close as this makes a further challenge highly likely, especially as there is little to suggest that the economic or political outlook is likely to improve in the narrowing period before the next election.

Where do we go from here? Naturally we now enter the realms of speculation, but I would watch for high profile Ministerial resignations in the weeks ahead. If current senior figures conclude/recognise that the PM will not now survive until the next election, their prospects in any future leadership election risk being irreparably damaged by continuing as members of the administration until its bitter end. It is already clear that several prospective challengers intend to present themselves as "clean skins" untainted by involvement in a government that has lost the confidence of many Conservative supporters.

It is also worth "following the money" - all political parties need to keep their funders content. If several high-profile substantial Conservative donors publicly break with the PM his position will rapidly become untenable.

Openly and bitterly divided political parties do not find favour with the electorate; the outcome means that neither faction can be marginalised and the deep ideological, strategic and personal differences within the Conservative Party will probably only be reconcilable when it is out of office.

Disclaimer: The views, thoughts and opinions expressed within this article are those of the author, and not those of any company within the Capital International Group (CIG) and as such are neither given nor endorsed by CIG. Information in this article does not constitute investment advice or an offer or an invitation by or on behalf of any company within the Capital International Group of companies to buy or sell any product or security or to make a bank deposit.