Category Archives: Current Affairs

Cop-27: A Meaningful Step in the Fight Against Climate Change

While some may consider Ireland’s unprecedently warm weather in early November as an excuse to forget the jacket when going into college or get in a few more outdoor pints before we head into the depths of winter, this weather is quite a harrowing glimpse into the future of our planet.  This warmer weather coincided—almost mockingly—with the beginning of COP-27, the 2022 United Nations Climate Change Conference.  As if nature’s way of saying “go ahead, give it your best shot.”  While unfortunately this view is extremely foreboding, as the generation gearing up to bear the burden of rising sea levels and increases in both natural disasters and air pollution, it’s difficult not to be experiencing heightened levels of climate anxiety.  

COP-27 brings together world leaders to brainstorm and negotiate a global approach to tackling climate issues.  This year, the conference took place in Sharm El-Sheikh, a beautiful city in Egypt that boasts lush beaches sat nicely on the coast of the Red Sea.  The city is nicknamed the ‘City of Peace’ due to the large number of international and diplomatic conferences that it has hosted over the years.  While it is easy to get overwhelmed with the future implications of climate change, it is important to push forward and take each win as it comes.  That being said, it is important to acknowledge the historical decision made this year at COP-27 to establish a “loss and damage” fund.  This fund will assist developing countries who have unjustly fallen victim to the adverse effects of climate change that have been mostly perpetrated by developed countries.  The idea of a loss and damage fund has been on the COP agenda for over a decade, so this monumental decision is a significant point of progress.  It is clear that this year’s COP conference has taken a more action-based approach, with commitment to the implementation and adaption of programs to tackle climate change.  This is a refreshing change to past years, where the conference has seemed to focus more on discussing and planning rather than taking immediate and tangible action. 

To further examine the role of business in the context of sustainability and adapting to a more climate friendly business world, it is stimulating to take a look at sessions hosted by EU COP-27 Side Events.  COP 27 Side Events is a series of sessions held by observer organisations, such as NGOs or IGOs, giving a platform for these groups to lead discussions or present their current projects all while engaging the audience through interactive discussions and Q&As.  

One noteworthy Side Events session was titled ‘Documenting the Multiple Benefits and Engagement Mechanisms of Nature Based Solutions: Applying a Common EU Impact Assessment Framework.’ The event was led by Verónica Ruiz, a Resilience Programme Manager at the International Union for Conservation of Nature (IUCN).  Nature based solutions (NBS) “involve working with nature to address societal challenges, providing benefits for both human well-being and biodiversity.” This virtual and interactive NBS Side Event discussed the importance of measuring the impact of NBS, using the EU handbook on impact assessment as a helpful guide, as it will support additional projects and the ongoing development of more sustainable cities and business activities.  

The discussion opened with a description of the EU Evaluating the Impact of Nature-Based Solutions: A Handbook for Practitioners and the associated Appendix of Methods and Summary for Policy Makers.  This handbook provides a detailed description and guidance for developing and measuring the impact of NBS plans.  Five guest speakers talked through NBS projects they have been working on and how they have been measuring and evaluating their impacts.  Among the speakers was Trinity’s very own Mary Lee Rhodes, Associate Professor of Public Management at Trinity Business School.  Rhodes talked through her work on the Connecting Nature Project, focusing mainly on the economic impacts of the plan.  Connecting Nature “co-works with local authorities, communities, industry partners, NGOs and academics who are investing in large scale implementation of nature-based projects in urban settings.”  The results of the project found that NBS in front runner locations not only increased net jobs in the areas, but also increased the number of new businesses in the surrounding NBS area.  Rhodes explained that measuring the impact of imbedding nature into activities of the cities has led to the discovery that firms in front runner locations are engaging in new ways of planning business in a more sustainable way.  

Projects such as those discussed by Rhodes and her colleagues are inspirational and lay the foundation for the future of a more sustainable business world. NBS is a key tool that can be used to engage local communities and businesses under the common shared goal for increased climate action and responsibility. EU Side Events allow those working in the field to engage with everyday observers, providing a bridge between the general public and the deliberations of global leaders at the COP 27 conference.  This helps to make the content more digestible and relevant to the average person’s everyday life.  The recordings of the EU Side Events session are still available for viewing on their website.

To conclude, given the current backdrop of global energy and debt crises, natural disasters, and increases in the spread infectious disease, it is important to consider one’s role and what each individual can personally achieve in regard to tackling climate change.  The projects discussed at this year’s EU COP-27 Side Events are inspiring and give a glimpse into the future of a more globally sustainable business world.  As a business student eager to enter the workforce, it is crucial to understand the importance of encouraging sustainable business practices.  Employing NBS in future business endeavours should be a fundamental consideration as the next generation steps into management and leadership positions.  COP-27 and the associated Side Events help to shine a light on an otherwise bleak and anxiety-inducing matter, calling for action by global leaders, businesses, and local communities alike.

NBS definition: 

https://www.naturebasedsolutionsinitiative.org/what-are-nature-based-solutions

Connecting Nature Project:

https://connectingnature.eu/

EU Side Events:

https://digital.cop27eusideevents.eu/event/eu-side-events-cop27

Why are American Investors Buying European Football Clubs?

The FSG have announced that they are in talks to sell Liverpool football club to a U.S. based investor at a profit of around $4 billion. Earlier this year the Todd Boehly Consortium acquired Chelsea football club, Mr.Boehly said that ‘football is the biggest sport in the world’, he has echoed the American sentiment that football’s commercial value has been underexploited. These stories of American investors in football are becoming more common each year. The American market view football clubs as media companies being run inefficiently and available for purchase at a bargain.

Perhaps the best example of this opportunism is the Fenway sports group acquisition of Liverpool. FSG paid £300 million pounds ($490 million inflation adjusted) for Liverpool in 2010, while other premier league clubs were run in a traditional way, FSG adopted a data-driven model inspired by their success in American sports. After 12 years, FSG have announced that they are willing to sell Liverpool with Forbes valuing the club at $4.45 billion, which would be a 20% annualised return on their original investment. This profitability is mirrored by other owners such as the Glazer family who have made an 8% annualised return over 17 years as well as extracting $1.1 billion from Manchester United.

Football teams are viewed by American investors as underperforming media corporations. It is easy to see why they think this when you compare the NFL to the Premier league. Despite having a smaller target market, the NFL claims that 6.16 billion hours of NFL content was consumed just last year, Statista reports that the NFL reaches revenue of $17.2 billion from this content. In comparison, the premier leagues viewers consumed just 1 billion hours of content and generated just $6.2 billion. American investors believe that they can boost these revenue figures and get a huge return on their investments.

There is also a lower barrier to entry with European football clubs when compared to the American sports industry. While joining the NFL will cost an investor hundreds of millions of dollars, they may purchase a mid-table premier league team for a reasonable price. There is also the option of taking a lower league side through promotion; this option can produce massive returns on investment. This option does not exist in the American sports scene where promotion and relegation do not exist.

However, this does present a problem for American investors. The threat of relegation means that their investment could be massively devalued. It also makes the leagues more competitive, in American leagues there is no threat of relegation so the main focus of sports teams is to make money. While in football, regardless of how profitable a team is, their value will still drop dramatically if they are demoted.

Despite this risk, American investors still believe that they are entering an under-valued asset class and with streaming services entering the sports entertainment industry it seems the potential for growth, and therefore American interest, is set to continue.

Credit Suisse First Boston: Has the Ship Sailed?

On the 27th October, current Credit Suisse (CS) CEO Ulrich Körner announced to shareholders the latest restructuring plan his bank will undertake to regain the share value it has lost in the last few years. A series of scandals, stemming from poor risk management and permissive governance, has led to Credit Suisse’ share price falling close to 60% in the last year. The restructuring plan is the second attempt at stabilising the bank in the last two years, with the former CEO Thomas Gottstein announcing a similar plan before leaving due to pressure from scandals and poor performance.

The latest restructuring plan involves downscaling the investment bank significantly and focusing on Credit Suisse’ strong wealth and asset management businesses. The investment bank will look to offload capital in the volatile securities business and focus more on mergers and acquisitions as well as capital markets. The restructuring will require an additional $4 billion from investors. An external memo released described the investment bank reshuffle as “CS First Boston is expected to be more global and broader than boutiques, but more focused than bulge bracket players”. Critically, the investment bank will spin off into an independent firm, and will be renamed CS First Boston in a nostalgic bow to its banking history.

The recent flurry of scandals began in March 2020, when then CEO Tidjane Thiam was forced to resign after an investigation had found that the bank had hired private detectives to spy on the former head of wealth management Iqbal Kahn after he had left Credit Suisse for competitor UBS. Credit Suisse tried to downplay the event, but further investigation from the Swiss regulator FINMA found that there had been seven other incidents of spying between 2016 and 2019, and stated that there were serious organisational shortcomings within the bank.

A year later, Credit Suisse was marred in further controversy when British financier Greensill Capital collapsed. Greensill Capital was a supply chain finance firm, providing interim finance to businesses that need to pay suppliers in advance. This allowed banks such as Credit Suisse to sell Greensill’s debt to investors. The debt was advertised as low risk due to the fact that the underlying credit was insured. However, in March 2021, Greensill Capital collapsed after its insurance provider stopped underwriting its debt. This led to Credit Suisse freezing $10 billion worth of funds which were not fully repaid, losing a significant amount of money for clients in its asset management division.

The turmoil of March 2021 did not end there for Credit Suisse, when Archegos Capital Management, a family office and client of CS’ prime brokerage business defaulted. This led to losses of $5.5 billion for Credit Suisse, who were the worst affected of the bulge bracket banks by the default. Other investment banks had suffered losses, but these had been limited due to other banks to settling some of their positions with Archegos prior to the default. David Soloman, CEO of Goldman Sachs, stated that “We identified the risk early and took prompt action consistent with the terms of our contract with the client”, praising the risk management of his firm.

An independent report into the incident criticised Credit Suisse for focusing too much on short-term profit maximisation and not recognising the extreme risk-taking behaviour of Archegos. As a result of both losses, Credit Suisse had to raise an additional $1.9 billion in capital from investors to sure up its balance sheet.

The current Chair of CS, Axel Lehmann, admitted in May of this year that CS has failed to be proactive in risk management and that the scandals that have plagued the bank cannot be perceived as isolated incidents. The current restructuring plan intends to limit the sources of risk, but it is likely that a complete reform of how CS assesses risk is also necessary to limit any future scandals.

The use of First Boston to define the new “boutique bracket” investment bank is an interesting strategical move. First Boston was a US-based investment bank, which was first partially acquired by Credit Suisse in 1988, with the acquisition being completed fully in 1996. The bank was renamed Credit Suisse First Boston, commonly referred to as CSFB.

CSFB was a significant competitor in the late 90s, gaining success underwriting IPOs for many high-tech companies. CSFB operated as a bulge bracket investment bank and was officially integrated into Credit Suisse in 2005. Many banks were chasing the universal bank model at the time, making this integration sensible. The might of the original CSFB is in contrast with the new CSFB, which is being downsized to offer a more bespoke service than bulge bracket banks.

If the restructuring takes place as planned, it will be interesting to see how well the investment bank can attract clients due to its reduced offering of services. Direct comparisons in the market are Jeffries and PJT Partners, who have experienced sustained profitability in recent years. However, the detachment of the bank from consumer deposits will make CSFB’s balance sheet more unstable, and the significant losses experienced in 2021 cannot be repeated if the new investment bank is to survive.

CSFB made its name in the late nineties and early naughties, when high risk-taking was rewarded with significant profit and compensation. However, severe risk-taking has led the investment bank to its knees, and it is clear that prudent risk management is necessary. This new risk strategy of CSFB will need to be significantly different from that of the original investment bank.

The recent turmoil has left Credit Suisse vulnerable to a takeover, with rumours of a merger between CS and UBS intensifying. The actions of the new management team will likely decide the future of the bank. A repeat of previous missteps may lead to the vanishing of the Credit Suisse name, let alone First Boston.


Liz Truss: The Great Resignation and its Impact on UK Policy & Economy

Following the resignation of Boris Johnson, Liz Truss distinguished her leadership campaign by her commitment to deliver “growth, growth, growth”. In reflection, Truss’s brief stint in office was disastrous for the British economy. 

Truss’ ‘growth plan’ included cancelling a planned increase to corporation tax, reversing a rise in National Insurance Contributions, cutting the basic rate of income tax and abolishing the higher rate completely. Truss’ policies culminated in an unfunded £45 billion tax cut in her Chancellor of the Exchequer, Kwasi Kwarteng’s mini-budget.

Truss’ rationale seemed to invoke a renaissance of neo-liberal economic policies to fight inflation and stimulate economic growth. Previously supported by Ronald Reagan and Margaret Thatcher, neo-liberal economics purports minimal state intervention, deregulation and confidence in free markets. These austerity-driven financial policies favour the wealthy, and were unsurprisingly met with enormous public backlash in the UK against the current macroeconomic backdrop. In the midst of a cost of living crisis, stagnant growth and an energy crisis, Truss’ plans for the economy were seen as unorthodox by some and frankly naïve and reckless by many.  Upon the news of Kwarteng’s mini-budget, the pound dropped to the lowest level ever against the dollar, UK government bonds saw a heavy sell-off and the FTSE ended the day deep in the red. The Bank of England’s decision to intervene and purchase £65 billion of long-dated gilt was the calamitous culmination to a string of bad days for the British economy.

The backlash culminated in Truss sacking Kwarteng, only to step down herself 6 days later. Truss’ 44 day stint in office makes her the shortest-serving British prime minister in modern history. 

Her resignation has shaken the economy of Britain as it faces a worsened cost of living crisis as well as a looming recession. The election of the more economically moderate Rishi Sunak to No.10 has had somewhat of a calming effect on the economy with the pound stabilising. 

Sunak has outlined that difficult decisions lie ahead as he intends to cut spending. Jeremy Hunt, Chancellor of the Exchequer, warns that the new budget being prepared, is ‘going to be tough”.  

After weeks of financial turmoil, expectations for a recession have intensified and forecasts for its extent deepened.  While the appointment of Sunak has eased economic uncertainty and tensions in the bond market, the country still faces a profound economic challenge with a fourth-quarter GDP decline of 1.6%, predicted by Goldman Sachs’ economists. 

To curb inflation, it is expected that the Bank of England will increase monetary contractions by hiking interest rates 75 basis points in November and December. This will hopefully cool the economy enough to calm inflation and panic.

Truss’ brief stint as PM shows that neoliberal economic policies remain unpopular.  They are particularly unwelcome in economically challenging times and can even be term-ending for its proponents in power. With Sunak we can expect less turbulence but the outlook is still negative for the British economy as businesses and citizens alike brace themselves for tightening monetary policy.

Qatar: A Controversial World Cup Host

We are less than one month away from the beginning of the latest edition of the FIFA World Cup. The hosts to follow the well debated Russian successful bid in 2018 is the wealthy Gulf state of Qatar. Thirty-two nations and over 1.5 million fans are set to descend on Qatar over the month of World Cup action. It should be a time where we celebrate football’s unique ability to bring us all together. However, scepticism over Qatar’s suitability for its role of World Cup host abounds. 

Shoddy labour protection, deaths of migrant workers, the general disdain Qatar holds for the LGBTQIA+ community along with practical concerns such as those over accommodation and leisure have cumulated in unprecedented criticism for the Gulf state and FIFA.  

Scandals of bribery have rocked FIFA over its 2010 decision to make Russia and Qatar consecutive World Cup hosts, with former FIFA President Sepp Blatter banned from football until 2027.  Alas, Qatar remains the host. The nation state has fully committed to their unique opportunity to boost its “soft power and to add to its political influence” by spending over $200bn to act as host. Eight stadia have been refurbished or entirely constructed along with the creation of a new public transport system and international airport to meet the prerequisites for accommodating the tournament. Although Qatar’s oil reserves have made it a wealthy country, an outlay of $200 billion is immense for a country of only 3 million inhabitants.  

Initial projections by the Qatari government of potential revenues generated by the World Cup amounted to $20bn. However, projections have already been revised downwards to approximately $17bn. Financial outlays by former World Cup hosts have not seen the economic returns that were projected, with many financial experts noting the limited economic benefit of hosting a football tournament. The costs simply outweigh the potential financial benefits. However, there is an interesting pattern emerging in the previous hosts of the World Cup since 2010. Qatar, like Russia, South Africa and Brazil beforehand, have all experienced weakened soft power and concerns over political stability. This World Cup acts as a potential public relations boon, and that is what Qatar seeks.  

The image Qatar is trying to project, and the reality, appear very different indeed. According to the Guardian, 6500 migrant workers have died in the Gulf state since 2010. Amnesty International has joined mounting pressure to renumerate workers abused by the unlawful practices in the construction of stadia for the World Cup. Amnesty believes a figure of $440mn would be appropriate to compensate these individuals and their families. This, coupled with Qatar’s prohibition of many activities we have grown accustomed to, has exacerbated concern regarding Qatar’s suitability. These include the consumption of alcohol and tobacco, photography and reading non-Muslim religious texts.  

This all culminates in a situation where Qatar’s bet on this World Cup represents a significant risk.  

Backlash to the World Cup has been noteworthy with commercial sponsors ‘disliking’ the choice of Qatar as host. However, their dislike has not warranted much action as many continue to support the Qatari World Cup. One benefactor has emerged as an exception to this pattern. Danish football team sponsors Dankse Spil and Arbejdernes Landsbank have surrendered their sponsorship position on the Danish jerseys. They have replaced their brands with a series of human rights messages. The Danish Football Association and their sponsors believe they can draw attention to their reservations through powerful symbolism on the Danish football jerseys.  

This stance has been widely lauded by fans across the globe. However, Ricardo Fort, a well-established marketing executive, believes many companies will remain silent about issues in Qatar unless it impacts their companies directly.  

The projected soft power gains and increased tolerance of the Qatari regime will only succeed if we allow it to, by collectively ignoring the reality of those suffering at the hands of the Qatari state. 

We must raise our concerns against a homophobic, abusive regime hosting a tournament that is meant to celebrate our collective differences. As Lewis Hamilton said, “Cash is King”. The sponsors of this tournament will follow our collective morals regarding this contest. This may seem bleak as sponsors merely follow the trends of the time; however, I think this gives ordinary people the power to influence change. As we watch our favourite footballers throughout the month of footballing mania, keep those who have suffered and those who continue to suffer under the Qatari regime in your mind.  

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