Risk Channel delivers the latest, most relevant and useful business intelligence to key decision makers and influencers, each weekday morning.

A new report by PwC has found that regulatory imperatives and investor demand are driving an increased focus on ESG principles. The study found that three-quarters of fund managers questioned – holding £15.5trn in assets – are being influenced by investors and policymakers to drive sustainability outcomes. Some 76% of respondents cited regulation as a ‘significant' or ‘very significant' factor in their approach to ESG. These include regulatory initiatives introducing new frameworks for sustainable finance, including the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR). Still relevant for UK asset managers with EU entities and investors, the SFDR imposes obligations and transparency over the consideration of ESG factors since it took effect in March this year. The majority of fund managers surveyed noted they were not fully prepared for major regulatory changes, though pressure is rising from the UK government's green recovery plan initiatives. Investor desire for more ESG products is putting sustainable investment considerations high on their agendas - 63% of respondents see an opportunity to develop new product ranges to respond to the change in demand.

 

City A.M.

What 6AMLD means for EU businesses

The European Union has implemented a series of Anti-Money Laundering (AML) Directives since 1991. The Sixth Anti-Money-Laundering-Directive (6AMLD) was transposed into law by EU member states in December 2020 with requirements for reporting entities to adopt its standards by June 3, 2021. This white paper provides Financial Institutions (FIs) with information to better prepare for the new era of extended AML enforcement.  It explores the threats and risks with AML in the EU, key changes to the latest directive, best practices for Customer Due Diligence, and how to support AML programs to reduce financial crime.
Download the white paper

 

Data obtained by law firm Pinsent Masons show the number of penalties issued to finance directors at large businesses by HMRC has dropped from 148 to just 20 in a year. Partner Jake Landman explained that the fall is due to HMRC having to shift the focus of its investigations away from tax disputes with big businesses to investigating furlough fraud. "As more furlough fraud cases are closed and the lockdown finally ends we would expect compliance work focused on big businesses to increase,” he said. “Some finance directors have felt that being personally fined for a breach of the tax rules they didn't know about is unfair. However, HMRC see it as way of forcing finance directors to take more personal responsibility for tax compliance,” he added. “When this regime was designed it was decided that a fine levied against an individual director can act as more of a deterrent than simply fining the overall business,” Landman concluded.

 

City A.M.

David Lindberg, the chief executive of retail banking at NatWest, has said the UK is the worse market in the world for financial scams. "Fraud and scams are an industry," he said. "They're intelligent, and they move fast, and it's heartbreaking to see how they try to destroy lives." He called for more institutions to join the Contingent Reimbursement Model code, which aims to reduce both the occurrence and impact of push payment scams. "It sets out standards for those that are in the code to adhere to. I can see fraud and scams dropping amongst that group. Those that aren't part of that - often the way money is leaving the country and going into the pockets of scammers is through those."

 

The I

BlackRock has increased its opposition to executive pay in Europe over the past year, details of the asset manager’s voting records show, indicating an increased willingness to drive up corporate governance standards. BlackRock said it voted against management on 33% of “say-on-pay” proposals in European companies in the year to the end of June – up from 26% last year. This increase in opposition votes was “largely attributed” to BlackRock's opposition to adjustments that companies made during the pandemic. “BlackRock opposed executive pay programmes when companies were not able to explain how these adjustments supported long-term, sustainable value creation for shareholders, ” said Sandy Boss, global head of investment stewardship.

 

Financial Times

City A.M.

Daily Mail

The City regulator has warned that some debt packager firms, which advise  people on how to deal with their debts, appear to have manipulated consumers’ incomes and outgoings to meet criteria for going financially insolvent, earning them higher fees. The Financial Conduct Authority (FCA) said in some instances consumers’ circumstances and vulnerabilities, including mental health issues and economic abuse, had not been properly taken into account. Sheldon Mills, executive director, consumers and competition at the FCA, said: “The practices we’ve seen in this sector fall far short of the standards we expect from firms, let alone those claiming to offer help to people in need. We will not allow firms to profit from debt advice which puts their customers at risk of harm.”

 

The Independent

An FT editorial considers the Treasury select committee’s report into the collapse of Greensill, suggesting the episode raises concerns over whether British regulation is able to cope with the rise of non-bank lenders.

 

Financial Times

Employers in Germany are coming to the conclusion that new "hybrid" forms of working may become the new normal, reports Deutsche Welle. Dirk Erlhöfer, the managing director of the Ruhr/Westfalen Employers' Association, a lobby group that represents 430 SMEs in the Ruhr Valley industrial heartland of Germany, says remote working has precipitated a better work-life balance that has in turn boosted productivity, and sick days have fallen significantly. Nevertheless, Erlhöfer identifies some novel obstacles presented by new working arrangements.  "It is, for example, more difficult to coordinate processes between administration and production. Technical problems also come into play, and the gradual evolving of a kind of divided, two-class staff could disturb company peace." Deutsche Welle also reports on how German chemical giant BASF is developing a hybrid work model. Valeska Schößler, a BASF spokesperson, said the model does not impose binding rules for everyone. "We are giving our teams a larger degree of flexibility in organising their work," she said, also noting the limitations of such a model: "You cannot oversee a test run in a laboratory from home, nor can our plants be maintained and repaired remotely."

 

Deutsche Welle (EN)

Morgan Stanley chief legal officer Eric Grossman has delivered a "warning" to the bank's outside law firms about their remote work policies and "the lack of urgency to return lawyers to the office." His memo said firms that get lawyers back to the physical workspace "will have a significant performance advantage over those that do not," affecting their work for Morgan Stanley. He said that the bank "will not be accommodating Zoom participation in critical meetings." The ability of law firms to "offer flexibility is a competitive advantage," opined Marcie Borgal Shunk, president of law firm consultancy The Tilt Institute, who said Grossman's perspective was "antiquated" and "unrealistic." Reuters notes that law firm managers have raised concerns that it can be difficult to train junior talent and maintain a cohesive culture outside the office.

 

Reuters

Apollo has withdrawn from a potential bidding war for UK supermarket chain Morrisons. Instead, the US private equity group wants to join forces with another consortium whose £6.3bn ($8.7bn) takeover bid has already been accepted. Earlier this month, Morrisons agreed to an offer by another US group led by the owner of Majestic Wine. The takeover bid, led by Fortress Investment Group, is subject to shareholder approval. However, the supermarket group's directors are recommending acceptance. Apollo said that discussions now under way "may result in funds managed or advised by Apollo forming part of the investment group led by Fortress for the purposes of the Fortress offer." It added: "As a consequence of these discussions, Apollo confirms that it does not intend to make an offer for Morrisons other than as part of the Fortress offer." Politicians have expressed concerns about the takeover, warning that any new owner could strip assets and reduce workers' rights. Morrisons is the UK's fourth-largest UK supermarket chain, with nearly 500 shops and more than 110,000 staff.

 

BBC News

Financial Times

The chairmen of two parliamentary committees have called for an investigation into private equity firms accused of asset-stripping collapsed retailer Debenhams, with the company's pensioners facing a 10% cut to their retirement payments. Although Debenhams was acquired by online fashion giant Boohoo, the closure of the chain saw the loss of 18,500 job losses over the past year. Debenhams' pension fund, which is believed to be around £32m in deficit, is under assessment by the Pension Protection Fund. If the PPF takes the scheme over, payouts for members who have not yet reached retirement age will be cut by 10%. Darren Jones, who chairs the business, energy and industrial strategy committee, and Stephen Timms, chairman of the work and pensions committee, have questioned the management of the chain by its former private equity owners. Labour MP Jones said: "If the Debenhams pension schemes do end up in the PPF then their previous private equity owners should be accountable for their decisions on how far they protected pension scheme members."

 

Daily Mail

Sanjeev Gupta should still be allowed to control Liberty Steel despite concerns over poor corporate governance and opaque financing, the Business Secretary has said. Kwasi Kwarteng told MPs he believes Mr Gupta's firm GFG Alliance could still raise funds to save the firm. However, contingency plans are being drawn up should the government need to step in.

 

The Times

The Independent UK

The Sun

Ben & Jerry's has said it will end the sale of its ice cream in the Palestinian territories of the West Bank and East Jerusalem. The ice cream maker said it was "inconsistent with our values for Ben & Jerry's ice cream to be sold in the Occupied Palestinian Territory (OPT)." Ben & Jerry's said the move reflected the concerns of "fans and trusted partners." In a statement it said the changes will be made by allowing current licensing arrangements to expire at the end of next year. But the company will not say how it will stop its products from reaching places that it doesn't want them to be sold in.

 

Aljazeera

BBC News