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Commercial Awareness Update April 2020
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<blockquote data-quote="Jaysen" data-source="post: 27373" data-attributes="member: 1"><p style="text-align: center"><strong><u>COP26 has been postponed (by [USER=3442]@Rachel S[/USER])</u></strong></p><p></p><p><strong><u>The Story:</u></strong></p><p></p><p>COP26, the United Nation’s annual climate change conference, scheduled to be hosted in Glasgow this November has been postponed until 2021. Environmentalists may be disappointed in the delay, however, with governments struggling to weather the impact of Covid-19, postponement was inevitable.</p><p></p><p>With global economies in lockdown; data suggests major declines in power consumption and emissions. Further, a delay could present real opportunities to rebuild economies in the most sustainable way. For example, governments could make airline financial support linked to more stringent reductions in aviation emissions. During the pandemic, world leaders across the world have shown how action can be taken to tackle a global problem. It is hoped that this same coordinated effort will be put toward tackling the climate crisis.</p><p></p><p><strong><u>Impact on Businesses and Law Firms: </u></strong></p><p></p><p>Investing in more sustainable resources and low-carbon technology may not be economically viable as businesses face the sharpest global downturn since the financial crisis. For example, commercial aircrafts generate roughly 2-3% of global emissions however the FT reports that biofuels take up less than 1% penetration of the market as they remain significantly more expensive than conventional fuel. Similarly, shipping currently contributes up to 3% of greenhouse gases yet the University Maritime Advisory Services suggests it would cost over $1tn to $1.4tn to decarbonise the shipping sector.</p><p></p><p>With talks delayed, law firms will continue to monitor events, for example Norton Rose Fulbright has a ‘Road to Cop26’ blog while Burges Salmon has a ‘Net Zero blog’. Sustainability is also judged by clients, and lawyers are doing their own to support the Paris Accord regardless of COP26. For example, The Chancery Lane Project is an initiative from UK lawyers who have developed The Climate Contract Playbook; “precedent clauses to help businesses fight and prepare for climate change”, and The Green Papers of Model Laws; “new model laws, regulation and policy” to assist companies in meeting their environmental goals.</p><p></p><p style="text-align: center"><strong><u>Threat to Pension Funds Market - (by [USER=1550]@Sairah[/USER])</u></strong></p><p><strong><u>The Story:</u></strong></p><p></p><p>Since the coronavirus outbreak, stock markets have been extremely volatile, falling considerably and then jumping back up as central banks around the world push stimulus policies (e.g. buying government and private-sector bonds on secondary markets to cutting interest rates) in a bid to limit the impact on global growth. In turn, this has raised fears that individuals with pension funds could make a panic dash to withdraw their investments. This is because, if someone saves cash into a pension scheme where the provider (typically a bank) invests the money, they will likely see the value of their pension drop when stock markets fall. </p><p></p><p>At present, countries within Asia-Pacific have been hard hit with this concern. In particular, Australia who has the fourth-largest pension market in the world (more than £1.6 trillion in assets). This comes after its worst quarterly performance since 1987 where its share market has fallen 24% since the start of 2020. As a result, the Australian government has allowed citizens in financial distress to withdraw a maximum of A$20,000 (£9,800) from their superannuation accounts over the next six months. </p><p></p><p><strong><u>Impact on Businesses and Law Firms: </u></strong></p><p></p><p>Pension funds hold a large importance within the financial sector, and are known to be major investors in listed companies. If pension funds shift their allocation away from these companies because of the volatility of the stock market, these companies could be further impacted.</p><p></p><p>Investors have been encouraged not to panic about the short-term performance of stock market movements, however the current sharp fall affecting some funds have led to individuals with no choice but to reconsider their retirement strategies. This is due to the fact that majority of pension funds tend to hold 60-70% of their investments in stock markets.</p><p></p><p>Businesses will therefore need to consider other means to maintain their presence and finances. For example, UK businesses will carefully look at Rishi Sunak’s Budget, where he announced a £30bn package to support businesses throughout the coronavirus crisis. </p><p></p><p>Law firms with strong expertise in pension law like Clyde & Co and Irwin Mitchell will be needed to offer advice to trustees of pension funds and pension providers. Pension lawyers will likely see themselves advising more on the restructuring of pension funds and negotiating amendments or even possible closures to pension plans with clients. As most pensions are subject to specialist tax regimes, tax lawyers may also be needed to assist clients with possible entitlements (or deductions) to tax relief on contributions and tax-free allowances. This will be considered if amendments are made or the structure has changed to pension funds.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 27373, member: 1"] [CENTER][B][U]COP26 has been postponed (by [USER=3442]@Rachel S[/USER])[/U][/B][/CENTER] [B][U]The Story:[/U][/B] COP26, the United Nation’s annual climate change conference, scheduled to be hosted in Glasgow this November has been postponed until 2021. Environmentalists may be disappointed in the delay, however, with governments struggling to weather the impact of Covid-19, postponement was inevitable. With global economies in lockdown; data suggests major declines in power consumption and emissions. Further, a delay could present real opportunities to rebuild economies in the most sustainable way. For example, governments could make airline financial support linked to more stringent reductions in aviation emissions. During the pandemic, world leaders across the world have shown how action can be taken to tackle a global problem. It is hoped that this same coordinated effort will be put toward tackling the climate crisis. [B][U]Impact on Businesses and Law Firms: [/U][/B] Investing in more sustainable resources and low-carbon technology may not be economically viable as businesses face the sharpest global downturn since the financial crisis. For example, commercial aircrafts generate roughly 2-3% of global emissions however the FT reports that biofuels take up less than 1% penetration of the market as they remain significantly more expensive than conventional fuel. Similarly, shipping currently contributes up to 3% of greenhouse gases yet the University Maritime Advisory Services suggests it would cost over $1tn to $1.4tn to decarbonise the shipping sector. With talks delayed, law firms will continue to monitor events, for example Norton Rose Fulbright has a ‘Road to Cop26’ blog while Burges Salmon has a ‘Net Zero blog’. Sustainability is also judged by clients, and lawyers are doing their own to support the Paris Accord regardless of COP26. For example, The Chancery Lane Project is an initiative from UK lawyers who have developed The Climate Contract Playbook; “precedent clauses to help businesses fight and prepare for climate change”, and The Green Papers of Model Laws; “new model laws, regulation and policy” to assist companies in meeting their environmental goals. [CENTER][B][U]Threat to Pension Funds Market - (by [USER=1550]@Sairah[/USER])[/U][/B][/CENTER] [B][U]The Story:[/U][/B] Since the coronavirus outbreak, stock markets have been extremely volatile, falling considerably and then jumping back up as central banks around the world push stimulus policies (e.g. buying government and private-sector bonds on secondary markets to cutting interest rates) in a bid to limit the impact on global growth. In turn, this has raised fears that individuals with pension funds could make a panic dash to withdraw their investments. This is because, if someone saves cash into a pension scheme where the provider (typically a bank) invests the money, they will likely see the value of their pension drop when stock markets fall. At present, countries within Asia-Pacific have been hard hit with this concern. In particular, Australia who has the fourth-largest pension market in the world (more than £1.6 trillion in assets). This comes after its worst quarterly performance since 1987 where its share market has fallen 24% since the start of 2020. As a result, the Australian government has allowed citizens in financial distress to withdraw a maximum of A$20,000 (£9,800) from their superannuation accounts over the next six months. [B][U]Impact on Businesses and Law Firms: [/U][/B] Pension funds hold a large importance within the financial sector, and are known to be major investors in listed companies. If pension funds shift their allocation away from these companies because of the volatility of the stock market, these companies could be further impacted. Investors have been encouraged not to panic about the short-term performance of stock market movements, however the current sharp fall affecting some funds have led to individuals with no choice but to reconsider their retirement strategies. This is due to the fact that majority of pension funds tend to hold 60-70% of their investments in stock markets. Businesses will therefore need to consider other means to maintain their presence and finances. For example, UK businesses will carefully look at Rishi Sunak’s Budget, where he announced a £30bn package to support businesses throughout the coronavirus crisis. Law firms with strong expertise in pension law like Clyde & Co and Irwin Mitchell will be needed to offer advice to trustees of pension funds and pension providers. Pension lawyers will likely see themselves advising more on the restructuring of pension funds and negotiating amendments or even possible closures to pension plans with clients. As most pensions are subject to specialist tax regimes, tax lawyers may also be needed to assist clients with possible entitlements (or deductions) to tax relief on contributions and tax-free allowances. This will be considered if amendments are made or the structure has changed to pension funds. [/QUOTE]
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