Foreword

Welcome to our first edition of The Custodian for 2022. Of all the lessons we’ve learnt over the challenging past two years, perhaps the most important is the value of collaboration. Among our clients, within our custody business, and across our footprint, we’ve witnessed countless examples of how working together can strengthen our industry for mutual benefit.

It’s now generally accepted that no one intermediary can fulfil all a client’s needs alone. This realisation combined with rapid advancements in technology are fuelling collaborative projects that are bringing innovative developments to our industry – particularly in the post-trade ecosystem. Rather than a flash-in-the-pan trend, we believe this is the beginning of a shift in industry culture, redefining how we derive solutions, create products, and drive industry change.

Most of the positive outcomes from such collaborations – particularly technology-driven ones – have been concentrated in developed capital markets. Yet there is huge potential for this to cascade into emerging and frontier markets, especially as regulatory environments open to foreign investment. And with the benefit of hindsight (drawing learnings from developed-market experiences), these markets have the potential to leapfrog more advanced markets in the application of market-enhancing technology.

It’s important to remember that collaboration is about more than product innovation and official partnerships. And with its many layers comes many avenues to influence change – not just for the benefit of investors, intermediaries, and issuers, but for communities and our environment too.

In our lead article, ‘Collaborate to regulate’, we discuss the benefits that arise when market participants and regulators join forces. Many regulators across our footprint are rapidly evolving the constructs of their capital markets – with COVID-19 and new digital capabilities as catalysts. These regulators’ willingness to work with experienced intermediaries will be critical to success – as will the abilities of such intermediaries to share learnings, best practices, and details of their clients’ pain points.

Among all the talk of digital revolution, we still see a permanent role for human touch in our industry. In ‘The future of custody: How data and technology are transforming conversations’, we reflect on how this people-business is fusing with technology. By working in partnership with technology providers – especially around the evolution of digital currencies – intermediaries now have an opportunity to evolve from service providers into strategic partners.

Fruitful collaboration can also occur beyond the confines of distinct sectors. In ‘Shared values for share values: The overlap between Islamic and ESG investing’, we explore the commonalities between the two and assess how these can be strengthened for future investment potential – and for the advancement of a more sustainable world.

On the subject of responsible investing, in ‘ESG in EM shifts into top gear’, we analyse its increasing momentum in emerging and frontier markets. Here, we again see a clear role for collaboration – not just to improve the infrastructure enabling inflows into ESG-focused investments, but also around the governance of ESG reporting.

Next, we pivot to increased yield-seeking in the Middle East, in the ‘GCC: Investor appetite growing but risks persist’. With better-than-expected recovery following the COVID-19 pandemic, a surge in IPO activity, and bold liberalisation underway, GCC regulators will do well to collaborate with intermediaries who have helped charter exponential market growth elsewhere.

And finally, in ‘Why financial inclusion needs commitment across the capital markets value chain’, we share our recent dialogue with securities exchanges and depositories around the critical need for broader capital market participation, especially in emerging and frontier markets. To achieve greater financial inclusion – which is in line with our Bank’s broader sustainability ambitions – technology and collaboration will once again be essential.

We hope you enjoy these articles and look forward to collaborating with you in 2022.