We examine the policy announcements in four key sectors from Davos 2016.
The annual gathering of the World Economic Forum in Davos often comes in for some criticism in the media for the lavish dinners, the backdrop of the Swiss Alps and the number of private jets involved in getting there. All this in the name of making the world a better, and arguably more equal, place. The headline writers and picture desks often have a field day.
But the event still has relevance in modern politics and business. With such an impressive guest list of leading figures from politics, business, NGOs and the media, it still provides a platform for major initiatives to be announced. In this blog our team looks at some of the announcements in four key sectors: Financial Services, Technology, Pharmaceuticals and Agriculture
Beyond the financial crisis to the impact of tech on the financial services market
By Andrew Smith
This year’s meeting of the WEF in Davos was the first meeting since the 2008 financial crisis where the response to that crisis, and the wave of regulation aimed at stopping it happening again, didn’t dominate discussions.
Bankers expressed confidence in the recovery of the sector, stating that banks have managed to improve their balance sheets, cut costs, and streamline processes since the financial crisis. There is evidence that public trust in banks is beginning to improve and the political pressure that has driven the tidal wave of regulatory interventions has eased.
Regulation was high on the agenda as UBS’ Chairman, Axel Weber, told a meeting that his bank has to deal with about 40,000 “regulatory events” every year, showing that regulation and compliance is something that needs to be constantly in the forefront of the minds of all bankers. But the big issue on the agenda was the role of fintech on the future of the sector.
The topic that dominated the week’s discussions around fintech was the role of blockchain technology in transforming the way that financial institutions support financial transactions. Deutsche Bank AG Chief Executive Officer, John Cryan, said that he could see the disappearance of physical cash within a decade and there were many questions about if the fintech revolution could do the same to the banking sector as Uber has done to the traditional taxi trade.
Richard Lumb, CEO of Accenture’s financial services business, said in an interview that the rise of fintech was like “a shoal of piranha fishes nibbling away” at banks’ customer base.
The agenda was focused on how banks can collaborate with fintech developers to improve services to their customers and reduce costs. As Richard Lumb highlighted, banks and the fintech sector can work together to deliver growth. Banks want to remain as an intermediary for their customers and fintech companies can use the bank’s existing customer base and regulatory support systems to expand.
The role of technology in the future of financial services was demonstrated by the number of tech entrepreneurs who had made the journey to Davos for the first time. Even though the fintech revolution is still in its infancy, its importance is clear and the tech sector is expected to have a much bigger influence over the future of the financial services sector.
Security versus Privacy: What role for the state and what role for industry?
By Hugo Winn
The tech sector was received with a mixture of applause and scepticism by world economic leaders at this year’s Davos summit. A sharp slide in public and private valuations for prominent technology firms dampened a traditionally techno-enthusiastic crowd (although, as we discussed in our previous blog, fintech received positive attention).
Speculation of a fall in sales of Apple iPhones, which have risen every year since 2007, created a chillier mood on the alpine slopes than in previous years. In particular senior Venture Capitalists appeared to insinuate that the technology sector’s private equity environment was getting colder, largely due to troubles in the Chinese market, but also led by an increased suspicion amongst investors that recent valuations had been pushed as much by public appearance as fundamentals.
The major regulatory discussion focused again on privacy versus encryption. On Thursday leaders held a panel discussion titled ‘Privacy and Secrecy in the Digital Age’, exploring whether companies can blend the need for secrecy with greater data access by consumers and governments. The European Union submitted 63,000 requests for user data from Facebook, Twitter, Apple, Microsoft, and Google during the first six months of 2015, a 24% increase on the previous year. Leaders were clearly eager for even greater access in the year ahead.
Meanwhile Penny Pritzker, U.S. Secretary of Commerce, laid out the two remaining sticking points in the EU-US ‘Safe Harbour’ data-transfer agreement, the key transatlantic data-transfer agreement. First, the Americans are clearly still concerned that there is not enough information available to them about data collection efforts by EU and national agencies to combat security risks in the region. Second, they remain sceptical of the system the EU has created for European Union citizens to make privacy complaints in the US. Both of these concerns allude to complex and wider issues, although it was reported that an agreement was achieved on Tuesday 2 February.
The call for greater data access has never been stronger. But, as we know from the copyright/IP debate, the flow of data is inherently borderless. “The answer is an interlocking legal system between countries,” said one executive at a tech firm with a big presence in Davos. Such a system will be incredibly difficult to achieve. We should expect the debate to rage on for many more Davos to come.
Prevention is the best medicine
By John Lunny
On the global health stage, there was significant interest in a deal between Gavi, the vaccines alliance, and pharmaceutical company, Merck Sharp & Dohme, which saw it pledge $5 million towards the development of an Ebola vaccine. Under the agreement, 300,000 doses of the vaccine would also be made available from May 2016 for use in expanded use clinical trials and/or emergency use while development continues. If approved, the vaccine would become one of the first licensed for Ebola.
With the world still taking stock from the devastating impact of the Ebola outbreak in west Africa last year, governments will be looking to see whether this approach can be applied to other vaccines where so-called ‘market failure’ leads to under investment in areas which nonetheless pose huge risks to public health. How to incentivise innovation in vaccines where there may be little economic potential remains a global challenge and Gavi CEO, Dr Seth Berkley, has argued that the world is still ‘worryingly underprepared for potential future health threats’ and called for a change of mindset to secure investment in research and development.
The need for new ways of thinking was also underlined at Davos by a Declaration on Combating Antimicrobial Resistance, amid ongoing concern over the rise of antibiotic-resistant ‘superbugs’ – which could potentially kill an extra 10 million people each year by 2050 if left unchecked. Signed by 85 companies and nine industry associations across 18 countries, this called for steps to reduce antibiotic resistance, increase investment in R&D and ensure ‘affordable access to antibiotics in all parts of the world’. As with any declaration, and as the UK’s Lord Jim O’Neill noted, himself leading a review into antimicrobial resistance, the challenge now is for industry and governments to agree ‘how we can turn these ideas and principles into concrete action’.
Wasting no time
By Simon Pugh
Spearhead by Tesco chief, Dave Lewis, Davos provided the platform for the launch of the 12.3 campaign, named after Millennium Sustainable Development Goal number 12.3: to halve per capita global food waste by 2030. In the UK, this area has been championed by WRAP and the Institute of Mechanical Engineers and given significant popular appeal by Hugh Fernley-Whittingstall.
Many UK retailers have made considerable strides, reducing food waste at various points in the supply chain. Arguably this originates from pressure from NGOs but there are some indicators that this is permeating into the consumer mindset. Tesco has taken the unprecedented step of reporting waste to investors; another sign of the power of shareholders in driving corporate responsibility and reputation.
This chimes with work closer to home: Labour Shadow Secretary of State, Kerry McCarthy thinks the retail sector has more to do and claims that the government’s strategy has focussed on too much on households, rather than industry. Her 10 Minute Rule Bill, mandating, amongst other things, that retailers donate waste food and publish transparency reports is due for its Second Reading on 4 March.
The WEF’s policy on tackling the challenges faced by our current food system relies on achieving success at a national level, with a coordinated vision provided by global partnerships. This is crucial because the WEF understands that there can be no ‘one size fits all’ world policy. Countries and regions are uniquely suited to grow different products and national diets vary significantly. It is for this reason that the WEF has placed emphasis on a market driven approach and locally owned activity.
Whilst companies may have global ambitions, the WEF’s agenda requires them to think and operate on a local level.