The Executive Newsletter of TheOfficialBoard

By Hugo Ferreira, Compagnie Benjamin de Rothschild

It is possible to combine the principles of ecology and finance to reach a sustainable development under the regulating umbrella of responsible policy makers.

Our strategic development in green finance is not about philanthropy, it’s about profit. Corporations have to manage new risk created by constraints imposed by the Kyoto treaty limiting carbon emissions.

Promoting those sustainable investments is possible if the corporations are convinced they can improve their ecological impact and reduce their costs in the long run. For example, with the help of BeCitizen, an engineering group in sustainable development, we have helped an important European company to structure the financing of photovoltaic panels on the roofs of its building.

How? In several European countries, the electric utilities have to purchase that kind of produced energy at a fixed price on a long duration. The free cash flow generated minimizes the risk for the investors and helps the company to value those dormant assets. A stable regulatory environment with the right financial incentives is the key ingredient. Customer pressure is also a strong motivation.

The government role is pivotal in passing new laws and incentivizing corporations to adapt their technologies to the new environmental constraints. The Kyoto protocol has forced many companies who don’t match the emission quotas of carbon dioxide to consider investing in projects which reduce emissions in emerging countries. Such an investment receives a certificate which compensates the deficit. Those certificates can help with financing or backing loans.

To help financing such projects, we are about to introduce several private equity funds dedicated to polluted land remediation, sustainable development, green buildings and clean tech.

Corporations will invest only in profitable environmental programs. There are still too few of those projects on the planet. The finance community has to show flexibility and creativity in this transitional phase of sustainable and positive economic development. It won’t be long before sustainability and profitability are successfully meshed.

Hugo Ferreira is member of the management board of Compagnie Benjamin de Rothschild. Compagnie Benjamin de Rothschild is a global leader in asset management and in structuring public/private partnerships.

By Mark Jaugey, PayPal

The common check has a colorful history. In the 1930s, Sir Alan Patrick Herbert, a British humorist created the urban myth that a man called Albert Haddock won a landmark court case to force the tax collector to accept a check written on a cow.

The story was pure fiction, but reminds us that a check was simply an instruction for a bank to pay someone a sum of money. Long ago, people wrote checks on whatever scraps of paper they had at hand.

The earliest recorded check in the UK was dated 16 February 1659 - which means we have just passed its 350th anniversary.

Personally, I saw my first check as a rite of passage when I turned 18. Every year, like many of us, I struggle to remember to write the right year on the check each January. But times have changed.

The check is in the mail often reveals the uncertainty of a timely payment.  In 2009, the idea of paying with a piece of paper which embarks on a slow clearing journey might seem outdated. In France alone, the over 3+ billions checks issued every year represent more than 4000 tons of print paper.

In the UK, Tesco and Marks & Spencer have stopped accepting checks. Why? To speed up checkout, reduce fraud, enhance tracking and cut costs… In Germany, Austria, Scandinavia, Belgium and the Netherlands, checks have been replaced by direct payments and electronic payments issued by consumers.

After the financial sector turmoil, banks may perceive the cost of processing checks too expensive, considering the availability of alternative options. Although small businesses are often portrayed as championing the check, we’re finding more and more of them are jumping at the chance to take online payments.

The tangible process of writing a check remains, for some people, a more reassuring way of paying; it provides a higher level of control and assurance. In most EU countries, adults are more concerned about misuse of their credit or debit card information than about electronic payments.

Paperless money will not happen overnight, but… Most flight tickets are now replaced by one’s passports and a booking code.  The Amazon’s Kindle is reshaping the book publishing model. The countdown for the check’s extinction has started…

Mark Jaugey is Communication Director at Paypal Europe. Founded 10 years ago, PayPal provides electronic payments to 184 million consumers in 190 countries.

By Valéry Marchive

It’s referred to as the Indian Enron : by the beginning of January 2009, the fourth biggest Indian IT services provider has been at the center a huge financial scandal, stemming from the misbehaviour of its former CEO, Ramalinga Raju, just weeks after being banned from the World Bank in a case of “inappropriate benefits.”

Ramalinga Raju is understood to have diverted more than a billion dollars from Satyam, through hundreds of companies while artificially inflating the IT company business results in order to hide the fraud. Now, Satyam will be bought by another Indian IT company, Tech Mahindra.

But the question remains: how isolated is the Satyam case? What kind of a light does it shed on Indian corporate governance practices, in a country well known for its family-run business culture? According to Nasscom, the Indian National Association of Software and Services Companies, this is only a “sad incident as the Indian IT and BPO industry has set up very high standard rules for governance and ethics.” Nonetheless, Nasscom decided, by mid-February, to create its own governance and ethics committee.

According to Gilles Moutounet, Vice President, Strategy and International, Gitanjali Group, a leading Indian Jewellery group, the Satyam scam should not be seen “as a potential Indian issue.” Trying to be reassuring, the Indian Minister for Commerce explained, by the beginning of January, that “all necessary actions have been taken to avoid future scams” like this one.

For the Indian journalist Devidas Deshpande, working with the Pune Mirror (Times Group), the Satyam scam relates to a strong cultural heritage, extracted from the Mahabharata book, often considered the largest poem ever composed. In it, a king lost his kingdom after carelessly following his sons in their misbehaviours. According to Deshpande, there are several examples of this syndrome in the modern Indian worlds of business and politics..

In mid-December, Sucheta Delal, an Indian journalist specializing in corporate finance and governance, pointed out the unfriendly behaviour of the Satyam board, towards investors. In addition, an anonymous source at head of an Indian IT company asserts that local regulations encourage looting. Last but not least, in March the Asia Development Bank stressed the fact that « the Satyam scandal in India highlights the need for sound enforcement of rigorous accounting standards. A particular area for close study is monitoring family-run businesses. » The Satyam may definitely not be as isolated as some may want to believe.

In this quite tense atmosphere, the current Indian Prime Minister, Manmohan Singh, expressed, mid-April, his “confidence” in India regulators to prevent new scams like the Satyam one. Unfortunately, governance rules placed upon listed companies are said to encourage more and more companies to delist. Thus, a new and stronger code of governance is currently mulled for unlisted companies. However, nothing should really change before 2010, at least. But the Institute of Company Secretaries of India just launched a study on international corporate governance practices and intends to compare them to the Indian ones.

Valéry Marchive is senior editor at www.lemagit.fr a leading publication on technology analysis.