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Affordable housing and slum redevelopment

By | Archive, India, News | No Comments

Slum dwellings across India’s urbanised areas have been around for as long as many can remember, growing up alongside wealthy parts of the city as the low paid workforce required to keep those cities working, struggled to find somewhere affordable to live. Indeed, in a country with a population of 1.37 billion, according to the latest UN figures, at least around a quarter of the urban population are living in slums, many of whom don’t have reliable access to sanitation, electricity or homes that are safe to live in.

Recent fires in neighbouring Bangladesh, in the capital city and a coastal slum area, highlight the problems of slum dwellings and the dangers they pose to those living in them and the surrounding areas, too.

In recent years, a number of ways to improve or even remove the slums of the Indian sub-continent, have been discussed. One previously popular way to modify India’s – and other countries’ – slums, was to remove them completely, bulldoze them out of existence. However, while this method does eradicate many of the issues that arise with slum developments, it also displaces everyone who lives in them.

After assessing different approaches to solving the problem of slum areas, which has gained in importance amid the increasingly rapid urbanisation of India, two answers have proven popular enough to take forward. They are:

  • Improve existing slum areas, without displacing those existing households and eradicating their investment.
  • Find ways to build affordable housing across India’s cities for lower income households to live in.

With those solutions now being formalised by the Government, the next step is to find a way to finance these methods, in order to achieve the target of creating affordable housing for the entire population by 2022.  

PPP and affordable housing

Among the ways in which India is seeking to provide enough affordable and safe housing for its growing urban populations, is through Public Private Partnerships (PPP). As the value of land is high in cities and nearby urban areas and can account for up to 60% of the total cost of housing developments, the Government has sought a way to lower the cost of urban real estate. They do this by allocating a proportion of publicly owned land to be developed by private companies and investors.

This vehicle has been created to encourage private real-estate investors, who previously have predominantly favoured higher income developments, to take an interest in India’s affordable housing sector. The potential rewards are three-fold:

  • Affordable and safe housing in the right areas, for India’s fast-developing urbanisation.
  • The beginning of the end of the growth of slum areas in urban regions.
  • Reliable and attractive returns for investors.

There are a number of ways in which this works financially for investors, all of which result in a notable increase in affordable housing across the areas of India in which it’s required.

Coupled with the improvements to investing and doing business in the country, the option of affordable housing and real-estate as an investment vehicle is one that is beginning to appeal to a growing proportion of investors. Both from overseas and within the country, too.

How to access India’s affordable real estate investment opportunities

Of course, knowing about and understanding the real-estate opportunities in a country whose population is undergoing a fast and significant change, is one thing. Accessing those opportunities in a secure and moderated fashion is quite another.

However, doing business in India has become easier, more transparent and accessible to all kinds of investors. Among the ways in which investors can benefit from the opportunities in India’s real estate sector, is through Funds specifically created for the purpose.

According to data from JLL, the value of investment grade, real estate projects under construction, has risen from $173.9 billion in the fourth quarter of 2012, to $242.6 billion in the second quarter of 2018. That number doesn’t take into account future options, plans or approved, shovel ready projects.

Red Ribbon will soon launch its own Indian Real-Estate Fund, to bring investment access into the sector to those investors interested in diversifying their portfolios with something that will benefit from Government support and help provide a solution to a real need from the existing and changing population.

As with all of Red Ribbon’s asset management options, sustainability, eco friendly and broadly beneficial outcomes form the basis of most of the assets that make up the Fund. Providing affordable and sustainable properties for the millions of people moving from rural to urban living is a challenge that can be met, provided every investor in Indian real estate takes it into consideration.

 

Red Ribbon CEO, Suchit Punnose said:

India’s Government has shown real willing to support the rapid urbanisation of the country and encourage a country in which investors can feel confident in doing business, both from a transparency and prospective returns, perspective. Red Ribbon is proud to be the forefront of supporting an economy that is of major importance on a global scale, while working to create a country with real prospects that future generations can enjoy and reap the benefits from.

Our Indian Real Estate Fund will help provide affordable and sustainable homes for the millions of people moving from one way of life to another. It also gives investors the chance to create a well-balanced investment portfolio, with exposure to a growing and developing economy.

Indian Rupee

Broad-based planning supportive of India’s economic ambition

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It may be a New Year, but in many countries, old worries remain. Take the UK, for example. Brexit is as uncertain as ever and that’s unlikely to change any time soon. Not only have forecasts for economic growth in the country been tempered by the lack of a clear path for Brexit, the latest survey data from IHS Markit have served to underscore the worry felt by consumers and businesses, with the country’s dominant services sector close to stagnation during December.

However, the UK isn’t the only country experiencing uncertainty as to how 2019 will unfold.

India has an interesting 12 months ahead as incumbent Prime Minister Narendra Modi must work hard to maintain his position, after recent state election results make the likelihood of a new leader a real possibility. However, Modi has begun 2019 with ideas and a plan to show his support of the large farming industry, which is unhappy with the lack of fiscal support from the Government.

Speaking at the India Science Congress this week, the India PM urged scientists to find low-cost solutions for ‘social good’, including the creation of more affordable and balanced agriculture industry and using big data analytics to improve crop yields for farmers with smaller holdings. Introducing this element to the PM’s broader outlook for India’s economic development may always have been the plan.

Although, there will likely be many who will say its merely a move to encourage more votes in an election year. Regardless of the truth, this latest step is a further sign that Modi’s economic ambitions for the country remain front-and-centre.

Economic outlook

Even before this latest speech, the outlook for growth in the country was upbeat, particularly when compared with global competitors. Despite some GDP forecast downgrades from the likes of Fitch Ratings and the OECD – to a still healthy 7.2% and 7.3% respectively – India is assessed to have outpaced China during 2018 and to do so again in 2019. India’s finance ministry, meanwhile, forecasts economic expansion of 7.8% during 2019, which would likely be similar to the average pace of growth across 2018, despite the slowdown to 7.1% in the third quarter.

Indeed, it appears that the third quarter GDP number is partly behind most of the forecast reductions, although other details also weigh.

They include:

  • Generally weaker global GDP outlook.
  • Global trade worries.
  • Liquidity squeeze.

Modi and his Government, however, are upbeat and standing firm on their positive outlook. Many would say, with good reason.

Despite the difficult global scenario, some developments have been in India’s favour. The high price of crude oil has receded, despite the sanctions against Iran. Meanwhile, the country has moved up the World Bank’s ‘ease of doing business’ rankings. And while there has been some disagreement over the Government’s demands for the Reserve Bank of India to relax some restrictions on weaker banks, inflation has remained under control.

The decision to remain firm on many fiscal elements of governance while creating a more supportive backdrop for businesses and consumers, has been a core driver of the strong level of economic expansion across India. It appears that focus on moving forward with policies designed to encourage start-ups and innovation is very much still in place.

Modi told delegates at the Science Congress that following on from its success of improving its ‘ease of doing business’ score, it must now work to improve the ‘ease of living’ in India. That requires a broad-based plan; working to support businesses across every industry, supporting innovation and new ideas, job creation across every industry and providing a stronger and more reliable infrastructure for consumers.

At Red Ribbon we understand the importance of introducing innovative developments into an existing industry, which is why we believe the Eco Hotel industry is one that can help ensure India’s economic growth ambitions will succeed and even exceed expectations.

Red Ribbon CEO, Suchit Punnose said:

An economy the size of India’s will only flourish if a broad-based outlook is in place that also supports innovation and allows every industry to move in an agile fashion, particularly when it becomes clear that a new approach is required. India’s leisure and tourism industry is a case in point. It draws tourists from within and without the country to its variety of regions and attractions. Introducing a new type of accommodation, such as Eco Hotels, will work to add yet another string to India’s bow as the destination of choice for an even broader range of holiday-makers and business travellers, while supporting jobs growth and industry innovation at the same time. As long as business start-ups and industry innovations are supported and encouraged, they will only have a positive impact on India’s economy, the standard of living and the global environment.

India Cryptocurrency - Red Ribbon Asset Management Plc

India retains cautious Cryptocurrency stance

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India retains cautious cryptocurrency stance

A raft of recent news reports and blogs posts, suggest that those involved in the cryptocurrency markets are becoming a little impatient with the Indian Government and the Reserve Bank of India’s (RBI) caution relating to that specific financial sub-sector. The reports contain some conflicting views from different members of the two panels that are working to research cryptocurrencies and put a regulatory framework in place. However, despite a lack of real progress it appears the overall, official tone towards the crypto market is less negative than it previously was.

One of the Indian government’s panels currently researching the cryptocurrency markets is set to submit a report on its findings. That keenly awaited report has been delayed from July 2018 and right now, no time line is in place for it to be finalised and published. This detail is the cause of some of that unrest.

With that report being delayed, it’s no surprise that any details on possible virtual currency regulation in India is also taking time to be finalised. Without the approved findings of the official report, it simply doesn’t make any sense for a regulatory framework to be put in place.

Among the most likely reasons behind the slow progress of any official view and policy on cryptocurrencies across India, is the lack of a global steer. Also, and perhaps more importantly, is a lack of detailed knowledge and information on exactly what impact cryptocurrencies can have on the economy, particularly over the medium-to-long-term.

Some support for virtual currencies

While uncertainty over exactly how India will regulate and permit cryptocurrencies to be traded and taxed remains, it does appear that the Indian government is more positive on them becoming a permanent part of its financial landscape, than it was.

The Financial Stability Board (FSB), which India is a part of, has said that virtual currencies are not a threat.

“The FSB has undertaken a review of the financial stability risks posed by the rapid growth of crypto-assets. Its initial assessment is that crypto-assets do not pose risks to global financial stability currently,” the RBI report quoted the FSB as stating.

That’s a positive note and relevant to the discussions and research that are ongoing.

Getting it right

Despite that glimmer of support for crypto-currencies, global governments, central banks and other relevant bodies continue to move slowly with regards to implementing official regulation and plans to regulate Bitcoin, et al. But really, is it any wonder?

After surging in value during 2017, many virtual currencies then lost much of those gains during 2018. And now…? Well, the future for those currencies is very much unknown, particularly coming against a backdrop of so much broad-based uncertainty elsewhere.

Of course, the blockchain system that underpins cryptocurrencies is something that the Indian government and RBI are interested in, as are other countries and industries. But, having regulation and utilising one, is likely impossible without also having the other.

This is without doubt, another major reason why the panels formed to investigate cryptocurrencies are taking their time to collate all the details and submit a detailed and useful report. If blockchain is to become a part of India’s government, business industries and the economy, then it’s essential that any risks relating to supporting a regulated cryptocurrency network is clear, robust and performs the task it was created for.

India as a nation is one that welcomes change and new ways of doing things – provided it’s beneficial for the economy and its population. Even though it’s likely that virtual currencies and blockchain fall under that category, both the government and the RBI are right to be cautious over any policy and regulation that’s created, so they can be certain it’s right for India’s economy and its huge population, with its growing appetite for all things digital.

Nobody understands this market potential quite like Red Ribbon, which has placed India at the heart of its investment strategies since the company was founded more than a decade ago. Drawing on a pool of established expertise on Indian market conditions, Red Ribbon Asset Management offers a unique opportunity to share in that potential.

Red Ribbon CEO, Suchit Punnose said:

India’s appetite to be at the forefront of new technology is continuing to develop. However, even though some countries have begun a light touch regulatory oversight on cryptocurrencies, that doesn’t mean the government or RBI will rush into something that has the potential to impact India’s economy and financial landscape over the longer-term.

Indeed, a cautious outlook doesn’t mean digital currencies have no place, or an insignificant one for India’s economy. In fact, it’s more likely to suggest the opposite and that as a country, the government and central bank want to be sure they get their policy implementation on it, just right.

At Red Ribbon, we have the same attitude to new and developing opportunities. We’re willing to take some risk on new industries and investment opportunities, but only when we know exactly what those new industries have done and have the potential to achieve. With Eco Hotels and Modulex, we’ve worked hard to ensure we understand everything those businesses stand for and what they’re capable of, not only from an investment perspective, but on a global sustainability aspect, too.

Mainstream Impact Investment: A Sea Change in the Market

By | News, United Kingdom | No Comments

Businesses that set out to minimise the negative impacts of their activities on the community, our society and on the environment at large are better equipped to be successful in the long term; actively structured to meet the demands of an increasingly social market without compromising on their capacity for commercial success. Indeed, these businesses are better able to succeed commercially precisely because they are responsive to this wider social setting.

That was the conclusion reached by last month’s report from the influential research team at Mckinsey which found that more than a quarter of assets now under management globally are being invested on the premise that environmental, social, and governance issues can significantly impact on a company’s long term performance; and given companies which embrace that same cultural mindset will usually perform better in the long term, that should all point to better short term investor returns too as well as a much more robust and resilient share price.

So it isn’t altogether surprising that the market at large is now starting to sit up and take notice of Mainstream Impact Investment strategies; the same strategies which have been at the heart of portfolio management at Red Ribbon Asset Management since the company was founded more than a decade ago.

Major global institutional investors adopting impact investment strategies include the Government Pension Investment Fund of Japan (the world’s largest, with AUM of over $1.1 Trillion), Norway’s Government Pension Fund Global and ABP, the Dutch State Pension Fund (which is the second largest in Europe). As the Mckinsey Report also points out, these behemoths of the investment world are not just switching course for ethical reasons alone: they are pursuing “a conventional investment aim of maximizing risk-adjusted returns”.

And the Report goes on: “…Sustainable investing has become a large and fast-growing major market segment. According to the Global Sustainable Investment Alliance, at the start of 2016, sustainable investments constituted 26 percent of assets that are professionally managed in Asia, Australia and New Zealand, Canada, Europe, and the United States ($22.89 trillion in total). Four years earlier, they were 21.5 percent of assets”.

As though to make that point good, the Government Investment Fund of Japan announced in July this year that it had selected three sustainability indices as future reference points for its passive investment in Japanese equities; and for its part, ABP had already announced that it would include as part of its cross portfolio investment criteria a reduction of carbon-emissions by 2020 of 25% as well as a commitment to invest at least €5 billion in renewable energy by the same date.

These trends are not just straws in the wind. They are all clear pointers to the future, supporting the new paradigm of Mainstream Impact Investment. And of course, the flip side is important too. Mainstream businesses that calibrate their activities so as to reduce their negative impacts on the community, society and the wider environment will also provide a long term, viable basis from which all three segments can flourish. It is the difference between a one off, short-term social project and an entirely new paradigm for society.

It is that important.

Red Ribbon CEO, Suchit Punnose said:

The influential research team at Mckinsey produced a major new report last month which found long term performance to be significantly affected by good environmental and social market performance, as well as a company’s capacity to deliver effective governance in both fields; and companies that perform well in the long term will usually do better in the short term too, which means compliance with all three criteria is likely to deliver better investor returns and a more robust share price for the company in the short term too. So its not altogether surprising that the market at large is now starting to sit up and take notice of Mainstream Impact Investment strategies; the same strategies which have been at the heart of portfolio management at Red Ribbon Asset Management since the company was founded more than a decade ago.

Read the Mckinsey Report here: https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/from-why-to-why-not-sustainable-investing-as-the-new-normal?cid=other-eml-alt-mip-mck-oth-1710

Read more about Mainstream Impact Investment here: reports.weforum.org/impact-investment/

Read about Red Ribbon Fund Management here: https://redribbon.co/

Impact Investment and Growth Markets: A Changing Paradigm

By | India | One Comment

Red Ribbon Asset Management is making its name at the cutting edge of “Mainstream Impact Investment”, which is a strategy aimed at generating competitive rates of return from businesses with strong growth potential, that not only create value for society, but also strive to reduce the environmental impact of doing so. Recent events have shown that Red Ribbon is certainly not alone in its commitment to combine asset growth with positive social and environmental impacts.

Sir Ronald Cohen, Chairman of the G8 Impact Investing Committee, announced in Mumbai last month that “Impact Investments” in India, which are primarily focused on social interventions, have exceeded $500 Million in 2015 and were expected to rise to $1 Billion by 2020: “Impact Investing is disrupting traditional philanthropy and has a revolutionary promise of becoming a $5 trillion global market, of which $1 trillion will be in India by 2050. With recognition and support from the Indian Government, India can be a world leader in this sector”.

The statistics certainly bear out Sir Ronald’s optimism: impact investments have been growing at a rate of 24% in India year on year since 2007 (socialimpactinvestment.org/).  Furthermore, Impact Investment Funds in Emerging and Growth Markets have also returned 9.1% to investors (as against 4.8% for Developed Markets) according to the Impact Investment Council of India (IIC: iiic.in/impact-investors/).

So exactly how is global business responding to this changing Paradigm?

Some of the answers are to be found in the recent Ernst & Young (EY) Environmental and Social Governance (“ESG”) report, which concluded that there is a strong (and strengthening) connection between non-financial performance data and investor decision-making.   Much of the impetus for more effective and better ESG reporting appears to be coming from the “collective voice of the investor community”, which continues to be the  “strongest advocate” for change in favour of impact investment strategies. In particular, the use of clear and transparent ESG measures is enabling investors to focus on the long-term, the underlying value of the business rather than on short-term gains  (ey-nonfinancial-performance-may-influence-investors.pdf).

The EY report is just one of many, that see a direct correlation between ESG performance and the financial performance of companies in the equities markets.  A report released recently by Barclays (“Sustainable investing and bond returns”), which was the first of its Impact Series, also drew a similar conclusion for Securities on the Bond markets.  In essence what all these reports allude to is the correlation between financial and non-financial factors in businesses with underlying strategies for managing ESG factors.

The conclusions reached in the EY report and others, resonate closely with Red Ribbon’s portfolio management strategies, a central component of which involves assessing the extent to which a business is able to reflect (dispassionately and objectively) on the impacts of its commercial operations by engaging with its internal and external stakeholders.
A business will ultimately be stronger in the long-term if it conforms to a collaborative model of transparent engagement with its stakeholders.  It is not just a matter of regulatory compliance, it is a sound basis for solid and sustainable growth, which is why “Mainstream Impact Investment” is a key component of Red Ribbon Asset Management’s success in securing strong returns for its investors with sustainable and measurable impacts on the community and on the environment.

 

Red Ribbon

At Red Ribbon we understand that the transition towards a resilient global economy will be led by well-governed businesses in mainstream markets, striving to reduce the environmental impact of their production processes on society at large and on the environment as well.

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