Speech As Prepared For Delivery At The 2020 IIF G20 Conference In Riyadh, Saudi Arabia
Good morning. Thank you all for coming and welcome to the 12th annual IIF G20 Conference, here in Riyadh, Saudi Arabia.
To start the day, I want to thank our very generous sponsors, we wouldn’t be here without you. Our lead sponsor is the National Commercial Bank, and our contributing sponsors are: BNY Mellon, Fitch Ratings and the Saudi Fund for Development.
This is our premier event in the Middle East this year, so I would also like to thank each of our members in the region. Your support of this event, and your continued support of the IIF, is invaluable.
Finally, I would like to thank the Saudi government and the G20 Secretariat. This event wouldn’t be possible without their cooperation and support.
I hope that many of you were able to join us for dinner last night, and that you enjoyed the conversation with Kristalina Georgieva, Managing Director of the International Monetary Fund. We were lucky she was able to make time to be with us and to provide her insights.
Our conversation last night hit on some of the points I wanted to make about the global economy. Two years ago we discussed synchronized growth at this event, and last year we saw the beginnings of desynchronization – which leads us to the mixed outlook we see currently.
On one side, the industrial slowdown observed in the last half of the year seems to have passed, and major economies like the United States continue to grow at a steady pace. However, headwinds from trade uncertainty and the as yet unquantifiable impact of the novel coronavirus make it challenging to foresee a broad-based pickup in global growth for the rest of the year.
I’d be remiss not to mention the quantifiable human impact of the coronavirus. Our thoughts are with the Chinese people during this very difficult and stressful time, and we hope to see a return to normalcy soon.
Before we officially get underway with today’s robust program, I want to take a moment to talk to you about why we choose to meet on the sidelines of the G20.
When the G20 met in Pittsburgh in 2009, it was clear that the global community was facing challenges that were impossible to address solely within any one country’s borders. Multilateral cooperation was then – and continues to be – the key to strong, sustainable, and balanced growth. That is why the G20 was designated as the premier forum for international economic cooperation.
If I can quote from the 2009 communique:
“The G20 members also have a responsibility to the community of nations to assure the overall health of the global economy. Regular consultations, strengthened cooperation on macroeconomic policies, the exchange of experiences on structural policies, and ongoing assessment can strengthen our cooperation and promote the adoption of sound policies.”
These words were especially resonant in the throes of the Global Financial Crisis, but they are no less relevant today. Many of today’s most pressing issues can only be addressed through collective action. I will take this opportunity to focus on three: facilitating the global economy’s digital transformation, combating financial crime, and financing the transition to a more sustainable low-carbon economy.
The digitalization of society is accelerating, and we may see even more disruptive technologies, such as quantum computing, come online in the coming years. The financial services industry, like many industries today, is powered by data. It is something the industry understands it must embrace to increase efficiency and its ability to best serve customers.
Because data is increasingly at the core of everything we do, it is essential to strike the right balance between innovation and privacy. Customers have the right to know how and where their data is used but diverging data policies are creating an uneven global landscape that stymies the flow of data across borders.
Consider for example, that Europe has embarked on an unprecedented Open Banking experiment through PSD2. Meanwhile, other jurisdictions are using increasingly strict data localization rules to pool data within their borders.
Or look to cloud, which is set to become a lynchpin for the industry to facilitate the types of services that financial customers have come to expect – but has had its adoption hampered by inconsistent regulatory requirements and data localization standards.
This localization blocks data from being transmitted across borders and used on a global scale, which inherently limits its value for businesses and usefulness for consumers. It is essential that industry and the public sector work together to quickly understand and adapt to the opportunities and challenges created by our new data-driven economy.
The inability to share data across borders has far-reaching effects; let’s take the flow of illicit finance as an example. Despite tens of billions of dollars being invested in AML and CFT efforts worldwide, stemming the tide of economic crime remains incredibly challenging. The amount of money laundered globally each year is estimated to be 2% to 5% of global GDP, or between 715 billion and 1.87 trillion Euros.
It is clear to all involved that the current AML/CFT framework is broken, and the inability to share information across borders is a key problem.
This is why last fall the IIF released, with Deloitte, a new white paper calling for a combination of regulatory reform, cultural change, broader information sharing, and the deployment of new technologies to better counter the threats posed by illicit flows through the international financial system.
Further, greater emphasis must be placed on improving the legal and regulatory framework and risk management toolkit to enhance effectiveness. Central to this reframing is the expansion of public-private partnerships (PPP) and expanding cross-border data exchange.
Moving forward with the intelligence-led approach that we’ve outlined, driven by meaningful reforms, the use of technology, and cross-border cooperation is essential to improving outcomes. I urge policymakers around the world to consider these recommendations quickly, as the impacts of financial crime are felt beyond just the financial sector – it poses grave threats to society as a whole.
Finally, turning to sustainability, we are pleased to continue a G20 discussion that builds upon the one started by the Japanese, Argentines, Germans, and Chinese – who all raised the issue when they played their role as G20 host.
The world faces a monumental task; climate change is the great challenge of our time.
I’m an optimist at heart, and I have confidence that human cunning and ingenuity will persevere, but it will take a global effort and the financial sector must play a central role. The key to a better and more sustainable future lies in our industry’s ability to fund game-changing ideas that allow us to either adapt or mitigate the risks posed by climate change.
The amount of money needed to properly slow or mitigate climate change is estimated to be in the tens of trillions. It’s an astronomical figure, except when compared with the $300 trillion worth of global wealth – much of which could be mobilized to sustainable initiatives.
However, there are several obstacles to overcome before scaling our collective capital pool. The IIF’s Sustainable Finance Working Group has identified many that must be resolved in order to make progress, however in the interest of time I will bring your attention to the two most pressing concerns:
- Data Availability – Data is fundamental to everything else that needs to be done in sustainable finance, but is currently not comparable across data sets and providers, is incomplete, or is missing altogether. Without good data, it is impossible to quantify ESG risks as well as opportunities. This in turn limits the amount of capital available to financing a greener future.
- Alignment – A key to achieving scale in sustainable investing is standardization and alignment of everything from disclosures, to how we define what is green. The industry and policymakers must work to develop an internationally consistent taxonomy that is harmonized to the fullest extent possible. Only then can the industry engage in effective ESG disclosure and reporting. But here again, reporting standards should be comparable across jurisdictions to avoid a fragmented, siloed landscape.
While I’m confident that no task is too large, the IIF and many of you in this room have observed that cooperation doesn’t always come easy in today’s increasingly fragmented world. A growing number of jurisdictions, for reasons ranging from supporting the domestic economy to ensuring financial resilience, are introducing national divergences or new rules altogether that could balkanize our global economy.
I encourage you in the audience, and policymakers around the world, to stay true to the Pittsburgh G20’s vision of multilateral cooperation in the face of uncertainty. As mentioned, I am an optimist by nature, and I am confident that if we work together, we’ll be able to meet the challenges so many of us are facing.
Thank you for listening and thank you for joining us. I look forward to speaking with many of you throughout the conference, but now I think it’s time we turn to our next speaker.
Please join me in welcoming His Excellency, Ahmed Alkholifey, Governor of the Saudi Arabian Monetary Authority.