Author: admin

As technology continues to impact busi­nesses and people around the world, inves­tors are trying to understand how these changes will affect their portfolios. The J.P. Morgan Tech Exchange 2022, held earlier this year, explored the changing technol­ogy landscape by bringing together lead­ing experts to present insights on topics ranging from digital assets to the net zero transition.

One of the buzziest areas of interest was the emergence of the virtual world known as the metaverse, a platform that could potentially transform the way we work, live and play. The metaverse has existed in some form for decades, with online gam­ing applications like Second Life in the early 2000s and, more recently, in immersive games that boast hundreds of millions of users and huge supporting economies.

While the definition of the metaverse is still fluid, and likely to be for the foreseeable future, most experts view it as the next, more immersive, version of the internet that replicates elements of the physical world. Many people already see the poten­tial of a new digital economy arising from the metaverse as a platform for users to create, buy and sell goods and services.

According to a J.P. Morgan report, Oppor­tunities in the metaverse,¹ “The key point is that there is no one virtual world but many worlds, which are taking shape to enable people to deepen and extend social inter­actions digitally. This is done by adding an immersive, three-dimensional layer to the web, creating more authentic and natural experiences.”

The report also notes that the metaverse will likely penetrate every sector to some extent in the coming years, with market opportunity estimated at over US$1 trillion in annual revenue.² A number of new tech­nologies have come together to enable this vision of the metaverse, including AR and VR headsets that have become cheaper and more powerful to improve user expe­rience and accessibility.

Meanwhile, blockchain solutions are driving the growth of digital currencies and non-fungible tokens (NFTs) that can facilitate economic transactions virtually. Recognizing the huge potential of the metaverse, J.P. Morgan was one of the first financial institutions to establish their pres­ence in this digital world.

A Fully Immersive Experience

While there is a vague sense of what the metaverse is, there is yet to be a clear con­sensus on what actually makes up this vir­tual realm. In a session at the J.P. Morgan Tech Exchange titled “Game On: The Meta­verse and Web 3.0”, John Riccitiello, Presi­dent and CEO at Unity, shared his views on where he thought this phenomenon was heading.

As head of the world’s leading platform for creating and operating interactive, real-time 3D (RT3D) content, Riccitiello is spearheading the company’s drive to grow RT3D adoption to non-gaming industries, including film and entertainment, architec­ture, construction and automotive.

“I haven’t seen many moments where there’s so much confusion about what something actually is. And part of that confusion is driven by some of the mega-cap companies that are trying to vision the metaverse through their own P&L. And so, they’re explaining the metaverse through the P&L advantage that they see for them­selves,” says Riccitiello.

“The consequence of that is you get some very odd notions out there; that it’s all about avatars and so on, and it’s just not about what so many of them are talking about.”

Riccitiello believes that the metaverse will be comprised of 3D, interactive and fully immersive digital places that will allow you to travel without leaving your home. “Imagine having a million places you can travel to from your living room, and fully immerse yourself in. A place that feels so real that it’s like being there, and you are going to be in the middle of it.”

For instance, consumers will be able to experience “live” concerts in their liv­ing rooms as if they were actually at the venue. “We can now put artists in places where they’re just as tall as you are, and you see them standing on the stage and hear as they perform live. And we can lit­erally increase the audience that can con­sume that live performance exponentially, and make it feel like you’re meters away,” explains Riccitiello.

Boundless Opportunities Across Industries

The economic possibilities and potential of the metaverse have enabled more market opportunities for every sector and indus­try. For instance, consumers with avatars can buy limited-edition, digitally branded clothing that they pick after browsing a vir­tual showroom. Entrepreneurs could start small businesses such as an art gallery to display their collections. And instead of having stores in every city, a major retailer might build a global hub in the metaverse that is able to serve millions of custom­ers. Many retail brands have already been experimenting.

The metaverse will also provide a mas­sive opportunity for business-to-business enterprises. For instance, a manufacturer could test their production line in a virtual environment in the metaverse at a lower cost. Imagine being able to build a com­plex digital twin of a factory, or industrial space, at massive scale, and test how robot­ics systems will interact with the physical environment.

Riccitiello notes that interest in the meta­verse is especially large in Asia: “My sense is this is the right time to make the invest­ments in that market to address the height­ened interest.”

Investing in the Metaverse

While it is still early in the game, oppor­tunities are already emerging for inves­tors to capitalize on the huge potential of the metaverse.

“We think it’s a little bit too early to say who’s going to be the winners out of this. So, when it comes to investing in the meta­verse, we think about the building blocks that will be necessary for the metaverse to be successful, and which companies already have well-established businesses in these areas,” says Cameron Chui, Execu­tive Director and Equity Strategist for J.P. Morgan in Asia.

In particular, Chui highlights different categories of themes that could benefit from the metaverse.

Firstly, the growth of the metaverse is likely to require more processing power, which will in turn increase demand for advanced chips and give a boost to semi­conductor companies. A similar explosion in data that will result from activity in the metaverse will fuel the need for more data center and cloud infrastructure-related companies to house and process this massive volume of data.

Gaming companies that have strong intellectual property or gaming experi­ence will also be well positioned to benefit from the metaverse, as they have experi­ence in creating content that keep users engaged in a particular virtual universe for an extended period of time.

Meanwhile, social media companies have been very successful in fostering interaction between people and giv­ing their users a sense of community, which will be a key part of the metaverse experience. Finally, companies with expe­rience in digital payments will benefit from the commerce that will take place in virtual worlds.

“These are already well-established busi­nesses, and even without the metaverse they will perform perfectly fine,” says Chui. “But if you give them the additional option­ality of the metaverse opportunity as well, this will be a new revenue stream for these companies.”

---

 ¹ Opportunities in the metaverse: How businesses can explore the metaverse and navigate the hype vs. reality.
Available at:  https://jpmorgan.com/metaverse Date as of: February 2022.

² Grayscale, November 2021. ‘THE METAVERSE Web 3.0 Virtual Cloud Economies.’
Available at: https://grayscale.com/wp-content/uploads/2021/11/Grayscale_Metaverse_Report_Nov2021.pdf Date as of: July 2022.

---

Staking a Claim in the Metaverse

Reflecting its commitment to leading-edge technologies, JPMorgan Chase & Co. maintains a virtual space in the meta­verse known as the Onyx Lounge, which is located at Decentraland.org.

The Onyx Lounge was created by Onyx, a J.P. Morgan business formed in 2020 to build commercial blockchain-based appli­cations, products and infrastructure. J.P. Morgan was motivated to set up the Onyx Lounge by the idea that the metaverse will become a primary channel for com­merce, providing richer, more immersive experiences.

“As a global bank with a leading pay­ments business, offering payments solu­tions in this new paradigm will enable our clients to meet their own customer’s evolving behaviors by providing seamless payment capabilities across traditional and digital currencies,” says Tyrone Lobban, Head of Blockchain Launch & Onyx Digital Assets at J.P. Morgan.

“We also believe that open, interoper­able metaverses will be based on block­chain technology, so there is a natural rea­son for us to participate more deeply given our blockchain expertise and thesis.”

Lobban notes that being an early adopter in the metaverse demonstrates to J.P. Morgan’s clients that Onyx is com­mitted to staying abreast of the emerg­ing trends and committed to finding new ways of doing business based on client demand.

“While it is not clear as to how the meta­verse will evolve, what is clear is that the significant investment in different meta­verse solutions, the attention being paid by large tech companies, the maturing of decentralized blockchain protocols, and the ability for digital assets to create new ownership models with user-centric control, will mean that the metaverse as a concept is almost certainly here to stay—and, in fact, we will probably see special­ized metaverses focused on different domains in time,” he explains.

Earlier this year, J.P. Morgan released its 2022 Summer Reading List in the Onyx Lounge. A summer tradition for more than two decades, this the first time the list has been presented in the metaverse. For a limited time, visitors can use an avatar to explore a curated interactive library exhibit at the lounge, where they can learn about the books and view exclusive interviews with select authors.

Looking ahead, Onyx will continue to explore and participate in multiple meta­verse environments.

J.P. Morgan Tech Exchange 2022

The Seventh Annual J.P. Morgan Tech Exchange brought together a highly impactful group of CEOs and entrepreneurs with the world’s most influential investors for an opportunity to engage in direct dialogue.

“This event has steadily emerged to become one of the most consequential forums on technology investment—and that’s because of the spotlight we put on Asia. It is recognition of Asia’s growing importance as a center of innovation and consumer demand, plus a confirmation that our region is the bedrock of increasingly complex global supply chains. From advanced electronics to semi-conductors, Asia is moving towards the heights of the global value chain,” said Kam Shing Kwang, CEO of J.P. Morgan Private Bank in Asia & Vice Chair of Investment Banking for Greater China at J.P. Morgan, in her welcome remarks.

Some of the illustrious speakers at the event included: Jack Zhang, Co-founder and CEO of Airwallex; Andrew Forrest, Chairman and Founder of Fortescue Metals Group and Fortescue Future Industries; and Robert M. Gates, the 22^nd U.S. Secretary of Defense.

Participants were also able to explore the latest developments in the tech world through a virtual showcase at the event.

Click here for more information

learn.more@jpmorgan.com

As the net zero transition becomes top of mind for business leaders and policymakers around the world, affluent investors in Asia are gradually recognising the importance of incorporating sustainable solutions into their portfolios.

In Thailand, high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals and their families are beginning to incorporate ESG (Environmental, Social and Governance) factors into their investment decisions, says Saranya Arunsilp, Country Head, Thailand, Global Private Banking and Wealth Management at HSBC.

However, as the bank ramps up its efforts to educate clients on the importance of sustainable finance, awareness of ESG is growing.

“ESG investments are gaining popularity among Thai investors as HSBC has been educating our clients and offering them relevant sustainable finance solutions,” explains Arunsilp.

“Our clients are starting to understand that sustainability is important for growing their business and investments, but it will take some time before they see the performance associated with sustainable products.”

A more conducive regulatory environment is also expected to fuel demand for sustainable investments. Earlier this year, the Stock Exchange of Thailand introduced a Sustainability Reporting Guide for listed companies, together with ESG metrics for each industry group.

HSBC is well-positioned to capture a big slice of this growing green market as it has established an enviable track record of completing sustainable finance deals in Thailand. The bank recently supported a prominent global petrochemical company in issuing its debut THB10 billion (US$283 million) Sustainability-Linked Bond (SLB). This deal was the largest THB SLB issuance in Thailand. 

HSBC was also the Joint Lead Manager and Joint Bookrunner for the first green bond issued by a Thai policy institution, the Bank for Agriculture and Agricultural Cooperatives. The proceeds were then used to fund forestry and environmental conservation projects.

In another milestone, the bank introduced the first Green Deposits in the country for two large Thai corporates. The Green Deposit aims to encourage Thai companies to fulfill their sustainability objectives by investing their surplus cash balances with HSBC, which will then be allocated to eligible businesses and projects.

Furthermore, HSBC completed a trio of firsts for a Thai client by executing their inaugural Sustainability-Linked Loan, Sustainability-Linked Supply Chain Financing Solution and Sustainability-Linked Hedge.

A Deeper Presence on the Ground

To more effectively service its HNW and UHNW clients, HSBC opened a new private banking business in Thailand last year. The move is timely as rising affluence in the country is driving demand for wealth planning, investment diversification and international banking.

The expected rebound in intra-regional trade and activity is also expected to lead to the creation of private wealth in Thailand as businesses expand. Against this backdrop, international banks like HSBC—with a global footprint and full range of capabilities to serve the fast-changing needs of affluent clients both onshore and offshore—will have a competitive edge in the country.

In recent years, The Bank of Thailand has also introduced a series of measures to relax foreign exchange regulation and encourage greater flexibility in the financial markets under the Capital Account Liberalisation Master Plan, opening up opportunities for selective offshore investments.

The new private bank is HSBC’s second onshore business in Southeast Asia after Singapore, and will provide Thai clients with access to international capital markets by leveraging its existing infrastructure of advisory, investment methodologies, controls and systems in Asia. The Thailand-based team will cover client management and advisory services, while clients’ assets will be booked in HSBC Global Private Banking in Singapore, a preferred wealth management hub for Southeast Asian HNW individuals.

“We successfully launched our onshore private banking business in Thailand last year, and second onshore private banking business in ASEAN, to offer a distinctive, onshore experience to serve growing wealth needs in Thailand. Our team is able to leverage the HSBC Group’s expertise and global network to serve our Thai friends better,” says Arunsilp.

As private banking is very much a people-centric business, Arunsilp believes that it is important to have a dedicated team on the ground to develop a more intimate relationship with clients, and better understand their unique wealth needs.

The expansion of the private banking business in Thailand is part of HSBC’s broader strategy to grow its wealth management footprint in Southeast Asia and invest in its wealth capabilities as it aims to provide best-in-class products and services for clients, and deliver on its ambition to become the leading wealth manager in Asia.

Achieving Net Zero

HSBC’s Thai businesses will also play their part in helping the bank achieve its target of transforming its operations and supply chain to net zero by 2030, and to do the same for financed emissions in the portfolios of its clients by 2050 or earlier.

This transition will involve an investment of between US$750 billion and US$1 trillion over the next 10 years. Financing of coal-fired power and thermal coal mining will also be phased out by 2030 in markets under the European Union and Organisation for Economic Co-operation and Development (OECD), and in other markets by 2040.

“Achieving net zero requires significant changes. The financial services industry has an important role in ensuring that capital is allocated to support projects and investments needed to fulfill these goals,” says Giorgio Gamba, CEO of HSBC Thailand.

“The transition to a net zero economy is the key to unlocking long-term sustainable growth, protecting the financial system from climate risk and safeguarding society,” he adds.

HSBC’s sustainability strategy can be boiled down to three key components: becoming a net zero bank; supporting customers in their transition journey; and unlocking new climate solutions. In doing so, the bank also wants to help transform sustainable infrastructure into a global asset class through the development of a pipeline of bankable projects.

HSBC views collaboration with its clients and other stakeholders as key to achieving its sustainability objectives. Says Gamba: “In partnership with our clients, we will help develop de-carbonisation plans starting with high transition risk sectors. This will allow us to understand how they are incorporating climate change into their business and to identify how we can support their transition.”

 

 

---

Disclaimer

The information contained in this article has not been reviewed in the light of your individual circumstances and is for information purposes only. It does not purport to provide legal, taxation or other advice and should not be taken as such. No client or other reader should act or refrain from acting on the basis of the content of this article without seeking specific professional advice. Issued by The Hongkong and Shanghai Banking Corporation Limited.

---

 

 

With the world facing challenges on multiple fronts, investors are increasingly looking for robust solutions and strategies that can help them make a positive impact through their investing activities. In particular, many are keen to incorporate Environmental, Social and Governance (ESG) factors into their investment processes.

Sustainable investing can come in many forms, but generally involves four main approaches. These include integrating ESG factors with traditional considerations to assess the risk/reward profile of an investment; screening out controversial companies that do not meet sustainability criteria; identifying those that are ranked highly in their sector based on sustainability factors; and investing in companies that deliver a measurable social or environmental impact.

To help their clients navigate this increasingly complex space, J.P. Morgan is enhancing its sustainable investing capabilities, and zooming in on key areas of sustainability that it believes will generate the most meaningful impact.

One such area is carbon sequestration in forests worldwide, which will play an important role in the burgeoning carbon offset market. Forests sequester carbon by capturing carbon dioxide from the atmosphere and transforming it into biomass through photosynthesis. Sequestered carbon is then accumulated in the form of biomass, deadwood, litter and in forest soils. As such, forests can help to mitigate carbon emission by acting as a carbon reservoir.

Aiming to become an active participant in carbon offsets, J.P. Morgan recently acquired Campbell Global, a leading player in forest management and timberland investing. Through this investment, the bank is able to strengthen and diversify its sustainability focus through carbon sequestration, and provide investment opportunities related to climate, conservation and biodiversity.

Campbell Global is a recognized leader in global timberland investment and natural resource management. The U.S.-based firm has more than three decades of experience, US$5.3 billion in assets under management, and manages over 1.7 million acres worldwide with over 150 employees.

Seeing the Whole Picture

Another key aspect of an effective sustainable investing strategy involves having full visibility of one’s investment portfolio, especially in terms of being able to monitor ESG risks. J.P. Morgan is helping its clients do this more effectively through its recently acquired subsidiary OpenInvest, a leading financial technology company that helps investors better understand the non-financial impact of their portfolios. The firm’s proprietary platform scrapes all manner of data so that it will eventually be able to create portfolios that are more in line with investors’ values.

This will help satisfy the growing ranks of investors who demand a clearer and more holistic understanding of the ESG impact of their portfolios, and use those insights to make more informed investment decisions that better align with their goals.

One key obstacle to higher-quality sustainability-related data and transparency, however, is the lack of a standardized regulatory framework. Creating a globally aligned taxonomy will be critical to improving the reliability of ESG data for investors.

Some progress has been made in this regard. In November last year, for instance, ASEAN released the “ASEAN Taxonomy for Sustainable Finance – Version 1”. This initiative provides a framework for discussions with official and private sector stakeholders to work together on the development of the ASEAN Taxonomy. However, a truly cohesive regulatory framework for ESG reporting and disclosure globally appears to be some way off.

In the meantime, J.P. Morgan is helping clients navigate the inconsistent regulatory landscape through specialist teams that are dedicated to selecting specific sustainability strategies through meticulous due diligence.

Onboarding Specialist Talent

With growing interest in sustainable investing, J.P. Morgan is investing in new talent to provide the necessary expertise to guide clients on their journey. For example, it recently made two key hires from Calvert Research and Management to help grow the private bank’s sustainable investment options and enhance ESG integration.

Significantly, J.P. Morgan is one of the few financial institutions to feature a climate scientist on its sustainability team. Dr. Sarah Kapnick, Senior Climate Scientist and Sustainability Strategist for J.P. Morgan, joined the bank in 2021 to support sustainability and climate action efforts, and advise on new business and investment opportunities and risks.

“Our approach has been to start bringing in subject matter experts; climate experts like me who do climate modeling and understand physical risk, but also people with experience with integrated assessment modeling. So we’re bringing experts in across the bank with the idea that climate sits within every line of business,” says Dr. Kapnick.

Dr. Kapnick’s team not only produces thought leadership on climate, which continues to be the primary focus of sustainability strategy, but also speaks directly to clients on how climate risks can impact their portfolios, as well as identify potential opportunities in this space.

Investing in the Fight Against Climate Change

J.P. Morgan has developed a “Three Rs” approach to climate investing that investors can adopt to play a role in helping achieve a “net zero” world, where emissions from a range of sources are brought to zero or balanced out by carbon removal.

Investors can participate in these three approaches—greenhouse gas reduction, removal and retrofitting—through investment opportunities in traditional and emerging technologies.

“The main way to deal with climate change is to reduce emissions as much as possible, and get to net zero as fast as possible, through traditional methods such as clean energy. But there is also energy efficiency, a focus in Europe right now, and process transformation, which includes reducing emissions from concrete or reducing emissions from agriculture,” Dr. Kapnick explains.

“Then you also have carbon removal, either through nature-based or mechanical solutions. And then the last part is retrofit. It’s the adaptation part of climate change, where we need to adapt to the new climate that we will have now and in the future because society was built on a climate that no longer exists.”

By employing targeted strategies such as the Three Rs developed by leading sustainability experts, and combining them with cutting-edge technology, J.P. Morgan is helping investors capture opportunities in sustainability and playing a role in the urgent transition to a low-carbon world.

Says Dr. Kapnick: “With estimates of what the capital needs are for the low-carbon transition, all of that money can’t come from governments. For capital expenditures and also for new technologies that are being developed, funding has to come from the private sector as well. As a result, helping our clients understand what those problems are, and how to efficiently deploy capital, is a critical piece of the puzzle.”

---

Dr. Sarah Kapnick, Managing Director, Senior Climate Scientist and Sustainability Strategist at J.P. Morgan explains:

“The main way to deal with climate change is to reduce emissions as much as possible, and get to net zero as fast as possible, through traditional methods such as clean energy. But there is also energy efficiency, a focus in Europe right now, and process transformation, which includes reducing emissions from concrete or reducing emissions from agriculture.”

---

Where’s the Snow?

Dr. Sarah Kapnick, Sustainability Strategist and Senior Climate Scientist at J.P. Morgan, discusses the economic implications of lower snowfall on winter sports.

Climate change is currently making snow scarcer in regions where snow sports have traditionally thrived. Recent Olympics have increasingly depended on snow-making machines as insurance when holding events in previously snowy regions that no longer have reliable snowfall due to warming (Sochi) or in cold regions that support snow-making but do not typically have snowfall (Beijing).

Snow on the ground requires two conditions: below-freezing temperatures and water in the atmosphere to form snowstorms. As global warming continues, the total number of snowy days around the world can be expected to decrease. For example, in the U.S. the snow sports season could be one week to several months shorter by 2050, depending on the location and emissions scenario.

Warming and changes in storminess have also increased variability in snowy days and snowy years, with higher likelihoods for “snow droughts,” months to years in which snow does not fall at all.

Snow sports enthusiasts may thus be forced to chase snowfall around the globe. They may only visit their favorite locations when snowfall has been confirmed, or prioritize visiting locations with the most snow in the world, like Japan. An extreme response may see them forgo snow sports altogether.

Declining lift ticket sales and equipment rentals would not be the only potential sources of lost revenue. Transportation, hotels, shopping and entertainment would also likely suffer losses. This would affect resort profitability, the local economies and real estate prices unless tourism from snow sports was replaced. The snow resort industry is forming partnerships or consolidating into entities large enough to diversify snow risk by offering all-access passes to far-flung properties in numerous countries and continents.

The impact of climate change on winter sports—disappearing snow and its follow-on effects—has mobilized several groups to work on solutions, research and communications to raise awareness.

Climate investing approaches and how they work

Investment examples

---

Click here for more information

learn.more@jpmorgan.com

The ranks of next generation family business leaders are swelling in Asia and beyond, with some 680,000 individuals with a net worth of at least US$5 million expected to pass on wealth to their heirs by 2030.¹ This unprecedented inter-generational wealth transfer—which represents almost one-quarter of the world’s wealthy population—is happening as a growing number of budding entrepreneurs are minting new fortunes by disrupting the status quo with innovative offerings.

Most of these young entrepreneurs are tossing out the rule book to find new areas of growth and novel ways of generating value. This often involves leveraging digitalization to drive performance, while maintaining a focus on sustainability to ensure business resilience and longevity.

Among wealthy clans, potential second and third generation members keen to run their family’s traditional businesses are few and far between. Across industries from real estate, trading and manufacturing, these new breed of business leaders aim to transform their existing businesses to create a legacy of their own, one that more accurately reflects their values and vision.

“The new generation is quite different from the patriarchs and the matriarchs who founded the family business,” says Kam Shing Kwang, CEO for Asia Private Bank and Vice Chair for Greater China Investment Banking at J.P. Morgan. “They have their own style of leadership, unique view of wealth and legacy, and the competitive environment they operate in today differs greatly from their parents’ time. Next-gen members who assume control of their family businesses today are keen to stamp their own personal character on the business. They want to be seen as leaders in their own right.”

However, pivoting a successful enterprise, often with a long history, requires the support of the existing team within the organization, and fresh talent who have the skillsets to drive change. Simply put, next generation leaders must not only find ways to gain the trust of long-time corporate leaders, but also seek out external executives amid increasing competition for the best and brightest across industries and geographies.

Preparing for Transition

A major obstacle facing next-gen leaders is the continued involvement of the previous generation even after handing the reins to their heirs. Understandably, there will continue to be a high level of deference to the patriarchs and matriarchs of the family business, even after they step aside. While it’s useful for the younger generation to consult the old guards on matters pertaining to the business, an overreliance on their predecessors may undermine the authority of the new leader.

To overcome this issue, the family should clearly identify and articulate the accountability and responsibilities of incoming leaders. The previous generation should also stay within the boundaries of an advisory role as much as possible. Until this happens, the lines between the generations will be unclear, leading to frustrations and possibly inter-generational conflicts.

The long-term success of a family business requires striking a delicate balance between honoring tradition and embracing change. Therefore, it is important for patriarchs and matriarchs to discuss plans with their children for modernizing the business while not disregarding the family’s core values. One way to achieve this is to involve next-gen family members in the day-to-day business operations well before handing over control.

Proving their Worth

Despite their best efforts, however, some next-gen leaders may find it difficult to convince their parents to hand over full control. One solution is for potential leaders to run one aspect of the business to showcase their leadership skills, before assuming control of the entire enterprise.

For instance, next-gen entrepreneurs could establish a new business line, seek to improve the performance of an existing one, or even manage the family office. If successful in these endeavors, the heirs can earn the trust and respect of not only their parents, but also their employees.

Furthermore, Kwang believes that communication is the key to winning over employees. “Don’t be afraid to over communicate and share with your people what you are like, what your expectations are, your visions and your strategies, so that your team knows exactly where you are coming from.”

She also advises new leaders to be humble and empathize with employees, helping them achieve their goals whenever possible. “I often ask my team ‘How I can help?’ And if you’re able to help them solve some of their problems, you gain trust and credibility. At the end of the day, if you’re the leader, you have to demonstrate that your team can rely on you as much as you on them.”

Attracting the Right Talent

With technological disruptions becoming the norm for many businesses, organizations will need to regularly acquire new skills and knowledge to succeed. This is even more crucial for family businesses moving into new sectors or seeking to transform the way their companies operate.

To attract the right talent, new leaders must clearly articulate their company’s vision and values. This is especially important when hiring younger employees, as they tend to look up to leaders whose values are aligned with their own.

“It’s important for an organization to be visible, so that people know what you stand for,” says Kwang. “At J.P. Morgan, we have a distinct culture and values that mostly only people within the firm know. So we’ve decided that we need to come out and articulate our values to our existing and potential clients, as well as prospective employees. This will help especially in attracting younger talent who want to work for an organization with similar values to their own.”

For instance, the bank has made its stance clear on climate change by declaring its intention to become carbon-neutral by 2030, and to help companies on their own journeys towards that goal. J.P. Morgan’s employees are also given the opportunity to spend up to three months abroad working on charitable projects that help to bring about positive social change.

“These efforts help employees feel that their values and the organization’s are aligned, and that this is an employer that can help them realize their personal goals,” says Kwang.

Designing effective compensation and incentive programs is also important to attract and retain employees, especially if the business is pivoting to new areas or changing their processes.

When compensation is based on meritocracy and is managed carefully, it aligns people’s behavior with the company’s strategy and generates better performance.² “When it’s managed poorly, the effects can be devastating. For example: the loss of key talent; demotivation; misaligned objectives; loss of client confidence and poor shareholder returns.”

Furthermore, companies must implement training and development initiatives to ensure that the skills and career progression of their employees remain relevant.

---

Kam Shing Kwang, CEO for Asia Private Bank and Vice Chair for Greater China Investment Banking at J.P. Morgan says,

“The new generation is quite different from the patriarchs and the matriarchs who founded the family business. They have their own style of leadership, unique view of wealth and legacy, and the competitive environment they operate in today differs greatly from their parents’ time. Next-gen members who assume control of their family businesses today are keen to stamp their own personal character on the business. They want to be seen as leaders in their own right.”

---

Fostering Innovation

Amid a fast-changing business landscape, innovation and agility have become key competitive advantages for companies. To succeed, next-gen leaders will need to foster a culture that promotes these attributes.

Kwang advises rewarding employees who are stepping up to drive innovation within the organization. “One way you can encourage innovative thinking is to prominently recognize people who have contributed to innovation,” she says. “This will help inspire others to think out of the box [to come up with] different ways of working. It’s also important that you give employees the time and space away from their usual work to work on projects that help improve performance.”

Next-gen leaders should also strive to adopt best practices gleaned from the experiences of other businesses, or by engaging external advisors or mentors. Through an annual initiative called the FLEX program, J.P. Morgan provides next-gen clients an exclusive platform to exchange ideas and network with their peers as well as access to expert advice.

The bank, in partnership with 6E Capital, has also created a special event series called E+ Circle that brings together industry veterans, financial advisors and entrepreneurs to network and exchange views and insights on topics such as growth, innovation and leadership. Kwang advises next gen leaders to be open to soliciting support from external parties, which could help develop a more dynamic and innovative organization.

“We like to play a role in helping the next-gen because we want to make sure they are aware of all the opportunities as well as challenges ahead and that we are here to support them with the right network and solutions, just as we have done with their parents,” she says. “So we spend a lot of time thinking about how we can help them chart their unique path forward.”

---

SUPPORT FOR NEXT GENERATION LEADERS

J.P. Morgan offers its next generation clients a number of programs that aim to advance their learning and development.

Tsinghua University School of Economics and Management:

J.P. Morgan partnered with Tsinghua University School of Economics and Management on two programs designed to develop next-gen leaders.

In the first program, J.P Morgan specialists and MBA students from the School of Economics and Management worked jointly on consulting projects. With the bank’s specialists serving as mentors to the students, the aim of the program was to promote a two-way exchange of ideas and skills.
The second program was a classroom partnership with the Tsinghua YES Program that focused on family succession, with the aim of preparing the next generation of Chinese business leaders.

Campus Recruitment:

Every year, J.P. Morgan offers summer internships that provide penultimate year students with on-the-job training and experience.

They will attend senior speaker events, skills-building workshops and networking opportunities. Interns who complete the program may receive an offer of full-time employment.

E+ Circle – Entrepreneurs & More:

An exclusive invitation-only platform for next generation business leaders and entrepreneurs created by J.P. Morgan in partnership with 6E Capital. The initiative features a series of special events that bring together industry veterans, former C-suite executives, financial advisors and entrepreneurs to network as well as exchange views and insights on topics such as growth, innovation and leadership.

This intimate and private forum addresses top-of-mind questions to build businesses and improve performance through achieving operational excellence, talent, financial, capital management and innovation.

FLEX Program:

J.P. Morgan offers an invitation-only summer event series designed to equip next generation participants with the necessary skills to be effective leaders. Featuring internal and external speakers, topics of interest range from sustainable investing to blockchain and digital finance.

---

1. Wealth-X Family Wealth Transfer Report 2021. Data as of 2021.
2. Harvard Business Review. Data as of January-February 2021.

 

Click here for more information

learn.more@jpmorgan.com

---

“HSBC was born from one simple idea—a local bank serving international needs. Since then, we have always been focused on helping our clients around the world capture opportunities.”

---

Growing an Intergenerational Nest Egg

With the increase in wealth in the region comes an increase in the number of family offices. “We’re seeing greater interest from Asian clients, who are turning to family offices to ensure a smooth transfer of wealth,” confirms Kunz. “The task of creating meaningful legacies for affluent families is becoming more complex and challenging.

To meet this demand, HSBC set up the new Institutional Family Office in Hong Kong and Singapore last year. The service allows single-family-office clients access to the bank’s investment banking specialists and solutions, on top of private banking benefits.

“We believe that the enhanced coverage will better serve the growing needs and levels of sophistication of family offices, especially with the increased demand for sustainable investment solutions,” Kunz says.

There is indeed a generational change in investment attitudes, and proper management of a family’s legacy cannot be achieved without bridging the gap between one generation and the next.

“The new and rising generation of wealth owners are increasingly driven to influence the world and exert a positive social impact,” Kunz shares. “Our goal is to give this unique group of individuals the support they need to plan strategically for the wealth and businesses they will come to manage or influence.”

Putting Money Where It Matters

Sustainability has become a hot button topic that permeates every aspect of society today. “When people think about going green, they probably don’t immediately think that it has anything to do with the way they bank,” Kunz admits.

In 2020, research by Ernst & Young found that 52% of banks view environmental and climate change matters as a key emerging risk over the next five years. This shift in mindset is one that reflects demand on the investor side, too.

Likewise, going green has become a strategic priority at HSBC. The bank has released ambitious plans to transform its operations and supply chain to net zero by 2030, and to do the same for financed emissions in the portfolios of its clients by 2050 or earlier, in line with goals set out in the Paris Agreement.

It’s a transition that will involve an investment of between US$750 billion and US$1 trillion over the next 10 years. Financing of coal-fired power and thermal coal mining will also be phased out by 2030 in markets under the European Union and Organisation for Economic Co-operation and Development (OECD), and in other markets by 2040.

“Climate change is a serious concern, especially in Southeast Asia,” says Kunz. HSBC research has shown that out of the 20 cities most vulnerable to rising sea levels globally, 15 are in Asia, of which five are in ASEAN. “This is alarming,” he notes, “because cities are where populations and resources are concentrated. If left unmitigated, climate change can threaten to wipe out decades of hard-won economic growth in Southeast Asia.”

HSBC is taking the initiative to lead the transition to a global net zero economy, not just by financing it, but by helping to shape and influence the global policy agenda.

Among the many regional initiatives it has a hand in are Green Deposits, a programme it launched that puts investor dollars into environmentally beneficial projects and businesses; Indonesia’s Green Sukuk, sharia-compliant bonds that finance climate change mitigation; and a partnership with Temasek in Singapore to catalyse sustainable infrastructure projects, with an initial focus on Southeast Asia.

“A bank like ours has a huge responsibility to lead on climate change—not just for our shareholders, but more importantly for our clients, colleagues and the communities we have been operating in for over 155 years.”

For the Greater Good

Green investing isn’t the only way wealth can be mobilised for good. For clients with more varied philanthropic interests, HSBC Global Private Banking has been helping wealthy individuals and families with their pursuit of important social causes for more than 65 years.

“We believe one’s philanthropy plans and charitable structures belong at the heart of the overall wealth management strategy. In turn, we’ve helped the growth of a thriving philanthropic society.”

Simply put, it is much like an end-to-end solution for investors who wish to do good but are not quite sure how—from helping the client find a focus and drawing out a strategy to running a charitable trust and reviewing outcomes, and the provision of dedicated specialists who will provide guidance, based on sound philanthropic practices, every step of the way.

“A strategic approach, with researched, planned and directed activities built around the issues that the client supports,” says Kunz, “is likely to achieve significantly more for the causes they care about.”

 

---

Disclaimer

The information contained in this article has not been reviewed in the light of your individual circumstances and is for information purposes only. It does not purport to provide legal, taxation or other advice and should not be taken as such. No client or other reader should act or refrain from acting on the basis of the content of this article without seeking specific professional advice. Issued by The Hongkong and Shanghai Banking Corporation Limited.

Wealth. It’s a privilege. And it’s a responsibility that comes with its challenges. Deciding where your personal priority lies with regard to its use may just be about the most critical undertaking for every ultra-high net worth (UHNW) family across Asia and beyond. This is particularly the case when it comes to determining how wealth should be managed during an individual’s lifetime and the strategies for its transition to the next generation.

Increasingly, many UHNW families are discovering the power of J.P. Morgan’s goals-based planning approach as they seek to resolve such issues. Its appeal is not hard to see—it’s a straightforward discipline that establishes the groundwork for delivering on long-term objectives.

At the heart of this dynamic and flexible practice are four pivotal considerations. First and foremost, there is the issue of purpose, essentially, “What do you want to achieve with your wealth?”

Secondly, there is the matter of stewardship, which seeks to focus the family on thinking about who is best suited to take responsibility for the management of their wealth over the longer term.

As a third consideration, there is a need to decide how assets should be held and how best to prepare them for any future transfer. It could be, for instance, that the founder’s intention is that the ownership of an existing family business is structured in such a way as to provide sufficient flexibility for future generations to decide how to deal with their respective share. Alternatively, the intent could be to ensure that the family business is collectively owned and managed in perpetuity.

Finally, there is the question of horizon—Is there a near-term, mid-term and long-term plan? At the key generational transition points, what are the assets that would be transferred and to whom?

---

Highlighting the benefits of the goals-based planning approach, Sameer Mehta, Head of Goal-Based Advice of J.P. Morgan in Asia says,

“Essentially, this process allows personal/family preferences to be considered and for a clear route map to be agreed upon by all stakeholders as a means of achieving these predetermined objectives.”

 

---

Third Party Insights and Consensus-Led Commitments

Finding satisfactory and enduring answers to these questions may require a considerable degree of reflection, but families should also be aware that their aims and preferences may evolve as circumstances change. The perspective of a neutral third party, such as advisors from J.P. Morgan, working alongside family members and their legal/tax advisors, can be of benefit here. This is especially the case when such advisors share their accumulated insights and extensive knowledge of the best practices across their field.

With the right team in place and a degree of consensus achieved, the wealth of the family can be apportioned to such priorities as liquidity, lifestyle maintenance, legacy and the perpetual expansion of an existing asset base. There are also three significant strategic areas that can be evaluated (or revaluated) via the prism of goals-based planning—investing, succession planning and family governance.

When it comes to investing, the framework allows for flexibility to be built into any growth initiatives. It also ensures that the related decision-making process is transparent for all stakeholders.

On the succession planning front, a long-term strategy should be adopted, with bespoke succession structures created to ensure the coordinated management of assets and the seamless transfer of wealth to future generations. The family governance applications, meanwhile, provide a means of ensuring all of the relevant parties remain engaged and informed. This helps minimize potential areas of conflict and paves the way for the formation of an organization dedicated to managing shared prosperity along agreed guidelines—a family office.

Family Office Founding Principles

The desire to establish and maintain a family office is frequently observed amongst UHNW families. Given that every family is different, though, there can be no one-size-fits-all solution, especially when it comes to setting up a Single Family Office (SFO)—a bespoke entity entrusted with managing the various financial and non-financial needs of UHNW family members.

Applying the principles of goal-based planning to define the structure and mandate of the SFO, the first recommended step is to agree on a set of core principles. Essentially, it enables the family to formalize the communication and decision-making process for the wider family network.

With the family’s vision and strategy already agreed in the initial stages of the goals-based planning process, three additional questions need to be asked at this juncture:
1. What functions are required from the family office on an ongoing basis?
2. Who, principally, is the family office there to serve?
3. What services does the family want (and not want) the office to provide both now and in the future?

A Joint Stake in a Shared Financial Future

With delivering clarity one of any SFO’s founding protocols, it can then address such matters as helping mitigate a family’s internal challenges (notably instances where individual family members may have incompatible wealth management objectives or needs) and preparing for any external risks that may have been identified, as well as deciding where outside support is required from third parties. This latter issue often sees specialists in legal, tax or investment sought out and appointed to provide ongoing support to the SFO.

Summarizing the importance of family members taking an active role in both the initial planning process and the formation of a family office, Amanda Lott, the Executive Director and Head of Wealth Planning Strategy for J.P. Morgan in the U.S. says, “When we have a hand in building our financial plans, we have a greater sense of ownership. The very process of building a plan makes it more valuable and drives commitment. It also highlights where the family’s strengths lie and where it is best all round to call upon the skills of specialist third parties.”

---

Expanding upon this, Elvin Ho, Executive Director and Senior Wealth Advisor of J.P. Morgan says,

“The first recommended step is to agree on a set of core principles, often considered the “North Star” of such an establishment. This underpinning framework should assist the family concerned when it comes to setting the policies that govern the purpose of the office, its investments and the deployment of its resources.”

---

 

1          LEGACY PLANNING FOR ART COLLECTORS

The passion involved with building a fine art collection shouldn’t preclude a thoughtful succession management strategy.

Given the passion involved with building and curating an art collection, it can be easy to forget it is also an asset requiring thoughtful organization, structuring and, ultimately, succession planning. As ever, the ideal first step is to define your goals—essentially, “What future do you envision for the treasures that you have amassed over the years?”

Initially, it is well worth considering who you would like to pass the collection on to, whether that be an individual or an institution. You also need to decide if you want the collection to stay intact, be divided among your heirs or sold and the proceeds shared with the next generation.

Next, it is prudent to draw up inventory of what you own and where it is located. It is then important to keep all of the related files updated, including any legal documents and dealer insurance estimates.

When thinking of passing a collection on, future costs also need to be factored in. This should include funding for tax liabilities, as well as for any insurance, transportation, storage or repair overheads.

If you intend to pass your art collection on to your children, it is best if you can discuss your strategy with them at the earliest opportunity. If they are too young to participate in any meaningful way, clearly outlining your preferences in your will is the most reliable fallback position.

Similarly, should you wish to pass the collection on intact to a designated institution, it is advisable to start the discussions early. Setting up a dedicated foundation or museum and establishing its governance structure is also best accomplished within your own lifetime.

You may also need to consider whether professional assistance is required in order to optimize the management of the collection.

2          PROTECTING A DIGITAL ASSET PORTFOLIO

Forgetting to properly plan for the succession management of your digital assets could leave your heirs and beneficiaries with a virtual nightmare.

It is easy to think that the term digital assets solely refers to items such as non-fungible tokens (NFTs) or cryptocurrencies. In fact, the term encompasses a broad array of online account or service protected by log-in security that may be valuable to a family, both from an emotional perspective (such as photos stored online) and in terms of operational needs (notably access to critical email accounts).

Essentially, planning for digital asset succession needs to consider how authorized access to any online account or service, social media platform, cloud storage service or subscription can be maintained following an individual’s demise. This extends to access to online payment processing services, proprietary domain names, medical records and any digital banking accounts.

When looking to safeguard the digital assets of a family, making a detailed inventory is always the first step. This should include a record of the names of all of the relevant accounts, as well as details of the information needed to gain access. It is prudent to ensure all such details, particularly with regards to financial accounts, are accessible by a trusted contact person, an individual identified as a suitable steward for your digital legacy.

Should you fail to factor your digital assets into your succession plan, your heirs may well be either barred from accessing them or face considerable inconvenience when it comes to their recovery. Lack of proper legal planning here could also result in estate or inheritance tax liabilities.

It is also advisable to plan to ensure you always keep up with the latest developments in this fast-developing area. For peace of mind, it’s also best to keep your legal representatives and wealth advisors informed of any new digital activity that could affect your financial status and your family’s future well-being.

3          ENHANCING GOVERNANCE VIA A FAMILY CHARTER

A mutually agreed charter ensures all family members are on the same page when it comes to how decisions should be made with regards to a family’s wealth.

When it comes to ongoing governance, one of the primary issues family members need to resolve is whether they wish to cooperate when it comes to managing any family business or shared wealth. This becomes more challenging when family members live in different jurisdictions, with many of them inevitably having quite distinct wealth management expectations. While some will prioritize liquidity (short-term needs), others may favor lifestyle (spending), legacy or growth.

For many families looking to take a holistic approach to the future, the first step is to define a common mission for their shared wealth, often in the form of a charter that clearly outlines collective intent.

Properly implemented, such a charter can then lead to all parties agreeing to establish other family forums, such as a family assembly or council. These bodies are designed to ensure that a fair and transparent regime is maintained with regards to family wealth-related decisions. At the same time, they are also there to keep family members informed of any relevant issues or developments that may arise.

---

Advising on how to optimize the effectiveness of this process, Paul Knox, Managing Director and Senior Wealth Advisor of J.P. Morgan says,

“As a means of heading off any potential future disputes, it is important to have as many family members as possible participating in the development of the vision embodied in the charter, while it is also a useful way of gauging who has the appropriate skills/emotional intelligence to take a leadership role in the management of shared assets.”

---

 

 

Click here for more information

learn.more@jpmorgan.com