Agefi Luxembourg - janvier 2025

AGEFI Luxembourg 30 Janvier 2025 Fonds d’investissement By Michaël LOK, Group CIO & Co-CEO Asset Management, Union Bancaire Privée (UBP) T heCovidpandemic has reshaped the global economy. It produced an exogenous shock that caused upheaval across the globe between 2020 and 2022, leading to a newworldorder. The global economyhas becomemore fragmented, and the gapbet- ween countries benefiting fromthat fragmentation and those indifficulty, including strugglingEuropeannations, has grownwider. So as a new era begins, it isworth asking howSwitzerland’s finance in- dustry can continue toprosper in this fractured landscape. As four billion consumers frenetically resumed their spending following the unprecedented and lengthy lockdowns,inflationhithardjustasitseemedtohave beendefeated.Todealwiththespikeinprices,central bankstookdrasticactionandraisedinterestrates.But monetary tightening inevitably stifled growth, with Europe particularly badly affected. Deficit With interest rates gradually returning to normal, the focus shifted to the huge deficits accumulated byall countries, causedby the colossal cost of supporting economies through the pandemic. Although large deficits can be tolerated in the United States, they are less accept- able in Europe, where they are prob- ably regarded as structural and unsupportedbya reserve currency like the US dollar. Switzerland,meanwhile,hasbeen resilient because of its solid fundamentals and the stable Swiss franc,whichhasbecome a safe haven. The country has no structural deficits, which gives it significant room for manoeuvre during an eco- nomic contraction. Its relative immunity against price pres- suresallowstheSwissNational Bank (SNB) to take a flexible ap- proach tomonetarypolicy. In the long term, however, the strong francmay be a drag on the profits of Swiss companies. If they are to continue growing despite their strong currency, at a time when Europe, Switzerland’s main eco- nomic partner, is on the brink, not just economically but politically and socially as well, they will need to be agile and adaptable. Crises always highlightweaknesses. Today, Europe appears to be polarised and threatenedwith reces- sion because it lacks a coherent economic strategy and sufficient political unity to give fresh momen- tumto the flaggingEuropeanproject. This growing fragility is reflected in the performance of the euro. TheUK,meanwhile, has paida highprice for its in- dependence with Brexit, and only an upturn in business investment will allow it to escape reces- sion in 2025. China used to be the main driver of global growth but is now being paralysed by state intervention. Since the pandemic, China has lost its status as a trustedpartner. Beijing’s statements of intent are no longer enough: a change in political ideology is re- quired for the country to regain credibility. India is nowa leadingplayer inAsia. It is becoming a top-tier economic power because of its much stronger GDP growth, while Japan is also getting a secondwind after finally emerging fromdeflation. In this new cycle – characterised by significant growth differentials within the OECD, endemic deficits andstructurallyhigher interest rates – coun- tries are turning inward in an attempt to stabilise their economic output. The return of protectionism marks the end of a period in which globalisation was themaindriver ofworldgrowth.Only thenim- blest economies are performingwell. TheUnitedStates ismorepowerful thanever, as the development of new technologies fuels and funds its economic growth. The reintroduction of tariffs – spurred on by trade rivalries, particularly between theUnitedStates andChina – is further strengthen- ing US supremacy. Credibility Populists are omnipresent, reflecting the inexorable rise of nationalism. Comments by political leaders are raising growing concerns about their political and economic intentions, and as well as doubts about the openness of their domestic markets. The war taking place in Europe is redefining the conti- nent bymaking defence a key spending priority. The conflict inUkraine is leading to a newdoctrine in Europe, with the desire for greater autonomy aside fromNATO, but also a newapproach to tech- nological developments.Against thebackdropof all this upheaval, Switzerland’s ability to maintain its credibility helps it stand out. According to a recent Deloitte Switzerland report*, the country main- tained its leadingposition in the internationalwealth management market in 2024, in terms of both size and competitiveness. Fordecades,theSwissfinanceindustryhasbeenable to evolve and prosper in a globalised world. It must now learn how to remain competitive in an environ- ment that is fragmented in all respects, with a weak- enedandwar-tornEuropeonitsdoorstep,andfacing new types of competitors like Singapore and the United Arab Emirates. The SNB’s autonomy, inde- pendence andagility ensure that Switzerland’s econ- omyandcurrencyremainstable,andthatconfidence in themremains high. Switzerlandmustmaintain its integrityandneutrality,aswellasthecontinuityofits policies, if it is toprotect its unique status. *TheDeloitteInternationalWealthManagementCentreRanking2024, Jean-FrancoisLagasséandPatrikSpiller,October2024 Switzerland and the new world order By Isabelle DELAS, Chief Executive Officer at LuxFLAG & Nairi TARAKDJIAN, Business DevelopmentandMarketingAssociateatLuxFLAG I n today’s rapidly evolving finan- cial landscape, promoting gender equality andmitigating child la- bour practices aremore pressing than ever.A recent breakfast se- minar hostedby LuxFLAG inSeptember brought toge- ther experts to examine the interconnected roles of gender finance, responsi- ble investments andhuman rights issues. The event featured presentations by Ariane Genthon, Programme Officer onChildLabourinAgricultureattheFoodandAgri- culture Organization of the United Nations (FAO), and Etienne de Belloy, Senior Manager, Fund Man- agement at Innpact.Ariane’s discussion emphasized thelinkbetweengender,childlabourprevention,and responsible investment, while Etienne explored in- vestment strategies to foster gender equality. To- gether, their insights underscored pathways for inclusive finance, highlighted enduring barriers to gender equality, andexamined thepervasive issueof child labour in agricultural sectors. This Thought Leadershiparticle aims todelve intokey insights and takeaways from the event, covering the role of gen- der-smartfinancing,strategiestoaddresschildlabour in agrifood systems, and the need for a unified com- mitment across all sectors. Gender-Smart Finance: ATransformative Tool Gender-smart finance aims to proactively address gender-specific challenges in financial products and policies.Traditionalfinancialsystemsoftenfailtomeet women’s needs effectively; as highlighted by the Global Gender Smart Fund (GGSF), world’s largest gender-lens investment fund (1) , there is a $1.4 to $1.7 trillion credit gap for women-owned businesses worldwide (2) ,whileonly2%ofglobalvaluechainpur- chases come fromwomen-ledfirms (3) . The GGSF supports financial institutions in global emergingmarketsbyprovidingdebtfinancinglinked toacommitmentbytheinstitutionstoagenderaction plan, which is measured through gender-sensitive KPIs.GGSFfurtherpartnerswithonlinedataanalytics platformEquilotoincorporateintheinvestmentpro- cessagenderquestionnaire (4) whichevaluatesallgen- der aspects within an institution, both external (outreach to clients) and internal (policies and prac- tices, including on issues such as Gender-Based Vio- lence andHarassment (GBVH)). This approach not only aims at financial empower- ment of women borrowers but also ensures institu- tions adopt inclusive practices. Through part- nershipswithorganizationslikeIncofin,responsAbil- ityandTripleJumpasportfoliomanagerstooriginate and monitor investments, and Niras and Women’s World Banking as technical assistance providers, the GGSFaimstoempowerover100financialinstitutions globally to address gender disparities (5) . The Business Case forGender Inclusion Thegendergapinfinancerepresentsnotonlyasocial issuebutalsoasignificantmissedmarketopportunity. Financial institutions miss out on an estimated $700 billion in annual revenue by not adequately catering to women (6) . Studies indicate that women tend to make more substantial investments in areas like home, health, and education than men, which posi- tions them as valuable but underserved clients. Fur- thermore,datashowthatfemaleborrowersgenerally have lower rates of non-performing loans compared totheirmalecounterparts,whichstrengthensthebusi- ness case for inclusive finance (7) . EtiennedeBelloy’sinsightsonbridgingthefinancing gap for women emphasise that expanding access to capitalisessentialforgenderequalityineconomicsec- tors like agriculture. However, this expansion must considerbroadersocialimpacts,especiallywhenitin- volvesruralcommunitieswherewomenarepredom- inant in agriculture (8) . ThisdynamictiesdirectlyintoArianeGenthon’sfocus on child labour in agriculture. ChildLabour inAgriculture: APersistent Crisis ArianeGenthon’s interventionunderscored the criti- cal yet often-overlookedconnectionbetweenagricul- tural investment strategies and their impact on addressingchild labour. Child labour continues tobe a significant issue in agriculture, accounting for 70% of all child labour globally, with 112million children involved, often in hazardous conditions (9) . The most commondriversbeingthisdauntingobser- vation are rural household poverty and economic vulnerability, food insecurity, thelackofeducationalopportunities,as well as poor awareness on sustainable agricultural practices. FAO data reveals that agrifood sys- tems are a crucial source of liveli- hood for women around the globe, representing 66% of women’s employment in sub-Saharan Africa and 71% in southernAsia (10) . Ariane highlighted that through economic empow- erment, rural women can be empowered to take deci- sions on behalf of their fam- ilies which can in turn help breaking the intergenerational re- production of gender inequality patterns. This means that their daughters and sons are less likely to drop out from school and become involved in child labour. However, the work of women in agrifood systems often involves family labour, which can lead to chil- dren taking on added responsibilities whenwomen becomeeconomicallyactiveanddiversifytheiractiv- ities (11) . Financial investments should not be consid- ered as “child labour neutral” but should instead actively consider and address structural drivers and vulnerabilities that push children into work rather than focusing on the symptoms that emerge in sup- ply chains. Such financial products can help max- imising intended positive impact such as enabling education and improved livelihood opportunities and avoid unintended impacts such as increased workload on children (12) . MitigatingChildLabour throughShared Responsibility andResponsible Investments The 2022DurbanCall toActionon theEliminationof child labour calls for addressing child labour’s root causesthroughincreasinginvestmentintheeconomic and social development of rural areas, educational support, and technical assistance (13) . In the samemanner, the FAOadvocates for a shared responsibility model that includes not only govern- ments and agricultural actors but also financial insti- tutions, the private sector, and civil society. Financial institutions and agribusinesses must integrate child labour considerations into their ESG frameworks to prevent perpetuating poverty cycles that push fami- lies into child labour. FAO’s comprehensive approach to support these ac- torsincludestechnicalsupportandcapacitydevelop- mentinscreeningagriculturalinvestmentprojectsfor child labour risks as well as the design of prevention andmitigationmeasures (14) . These actions contribute to protecting rural communities from unintended negative impacts and to design newmodels for re- sponsible investments. Conclusion The LuxFLAG breakfast seminar highlighted how financial investments can contribute to gender equality and to the prevention of child labour and underscored the need for financial systems to inte- grate safeguards for both women and children — an intersectional approach that considers both the empowerment ofwomenand theprotectionof chil- dren. The insights shared by Ariane Genthon and Etienne de Belloy reveal the urgency for gender- smart and child-safe investment strategies that ad- dress theunique challengeswithin rural economies. Achieving gender equality and reducing child labour require a collaborative approach across sec- tors,unitingfinancialinstitutions,policymakers,and civil society in a shared commitment to sustainable, inclusive growth. By embedding these principles into frameworks like the GGSF’s and following FAO’sapproach,wemoveclosertobuildingafuture wherefinancial empowerment upliftswomenwith- out compromising the well-being of children, ulti- mately advancing global development goals. Throughresponsibleinvestmentsandintentionalpol- icy designs, the private sector can drive progress to- wards a more equitable future. As the conversation aroundgenderandhumanrightscontinuestoevolve, collaborative efforts from all sectors are essential to creating sustainable, inclusive financial systems. We would like to acknowledge the valuable input providedbyArianeGenthon,ProgrammeOfficeron Child Labour inAgriculture at FAO, and Etienne de Belloy, Senior Manager, Fund Management at In- npact in shaping this article. 1)“GlobalGenderSmartFund(GGSF), ”https://ggs-fund.com/. 2) IFC – Closing the Gender Finance Gap through the Use of BlendedFinance–October2022 3) We-Fi – The Case for Investing in Women Entrepreneurs – June 2022 4) Equilo: Gender Equality Insights and Tools.”: https://www.equilo.io/ 5) Women’s World Banking. (2022). Gender and Finance: Em- poweringWomenThroughFinancialServices.Women’sWorld Banking. 6)OliverWyman.(2020).WomeninFinancialServices. 7) IFC – Closing the Gender Finance Gap through the Use of BlendedFinance–October2022 8) Food andAgriculture Organization (FAO). Women inAgri- culture.FAO,2024.Availableat :https://lc.cx/fimwd9 9) International Labour Office and United Nations Children’s Fund, Child Labour: Global estimates 2020, trends and the road forward,ILOandUNICEF,NewYork,2021 10)FAO.2023.Thestatusofwomeninagrifoodsystems.Rome. 11)FAO.2021.Genderdimensionsofchildlabourinagriculture. Backgroundpaper.Rome. 12)FAOandWB.2021.Theroleofinternationalfinancialinstitu- tionsanddevelopmentbanksineliminatingchildlabourinagri- culture.Backgroundpaper.Rome 13 )https://lc.cx/tyfrkj 14) FAO. 2020. FAO framework on ending child labour in agri- culture.Rome Advancing Gender Equality and Child Labour Mitigation in Finance andAgriculture