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Investors are eager to spend trillions on energy transition, but too much money is piling into mature projects, while high-risk innovations struggle to attract backing.     

Will there be enough money in the world to save the planet? The answer to this urgent question is not straightforward.

Big-picture prognosticators name staggering sums needed to finance a greener future—and equally daunting shortfalls in securing them. Investment in the energy transition must more than double to $4.5 trillion annually to reach internationally agreed 2030 emissions targets, according to European financier Allianz. The US-based Boston Consulting Group (BCG) estimates an $18 trillion net-zero “capital gap,” in a late 2023 report.

The outlook for 2025 appears even more challenging. US President Donald Trump has reclaimed the office, vowing to dismantle the generous green subsidies his predecessor, former President Joe Biden, had advanced through the Inflation Reduction Act (IRA)—and to “drill, baby, drill” for oil and gas. High energy costs and farmer protests are eroding support for Europe’s ambitious transition agenda, while Canada is poised to roll back its precedent-setting carbon tax.

In financial markets, stubbornly high interest rates are keeping the cost of capital-intensive energy infrastructure elevated for longer. Meanwhile, a surge in data center construction, driven by AI, is supercharging electricity-demand projections—prompting a return to fossil fuel dependency. “One of these data centers can take as much power as a small city,” says Richard de los Reyes, a portfolio manager at T. Rowe Price’s New Era Fund. “There’s an increasing recognition that a lot of that will have to come from natural gas.”

Green Investing’s Mismatched Realities

The view is quite different, though, in the financial trenches, among practitioners who are raising capital and structuring deals. They worry about too much capital chasing too few green investments. “I’m still a true believer that the megatrends of decarbonization and digitalization will transform the way we live,” says Alex Leung, head of infrastructure research and strategy at UBS Asset Management. “But [these sectors] are getting to be crowded trades.”

How can both be true? The renewable energy universe is increasingly divided from a financial perspective. There is no shortage of capital, but much of it is concentrated in a few mature green technologies, while more-innovative or unproven sectors struggle to attract funding.

On one side are established, cost-effective technologies that investors can back with a reasonable expectation of a steady, decades-long payout. Solar and onshore wind power have moved into this category, as economies of scale and an equipment boom in China have driven the costs of these energy sources below fossil fuels.

On the other side are technologies that show promise but not yet profit, such as carbon capture or green hydrogen; or those with uncertain risks and high costs, like offshore wind. These projects still rely on deep-pocketed corporate backers or government support to reach commercial viability.

“Everyone wants to be part of the energy transition on paper,” says Antoine Saint Olive, global head of infrastructure and energy finance at Natixis Capital and Investment Banking in Paris. “But when you have a real deal on your desk, in many cases you are talking about new technologies.”

This mismatch—between an abundance of capital for well-established projects and an undersupply for higher-risk innovations—helps explain why trillions are still needed, even as investors complain of crowded trades.

Perhaps the most critical deals are in a border zone between proven and new technologies: in fast-developing storage systems for solar and wind power, and in adjustments to grids needed to transmit it. Renewable-generation investments will eventually hit a wall without upgraded delivery to the customer, and in some places they may have already.

As a rule of thumb, existing grids can cope until renewables reach 15% of their input, says Rebecca Fitz, a BCG partner and founding member of the firm’s Center for Energy Impact. Some parts of Europe are above 50%, creating “a bottleneck in power market design,” she says.

Europe’s patchwork of national grids and regulators poses special challenges to moving green energy from where it’s best produced—Spain and Portugal for solar, the Netherlands for wind—to where it’s needed, adds Stef Beusmans, an associate partner at Sustainable Capital Group in Amsterdam. “Different national support schemes make it harder for Europe to really fast-track deployment of clean energy,” he says.

Energy Transition Financing At A Crossroads

The enormous scope and complexity of the energy transition present both challenges and opportunities to the venerable, low-profile world of infrastructure finance, which absorbs about 4% of global capital, according to UBS. Plain vanilla deals are rare in this area. Bond underwriters and traders have rating agencies to guide them and liquid markets to distribute risk, but infrastructure investors must structure transactions individually and often hold the risk for the long haul. “Structuring and closing a deal could take up to a year,” Leung says. “Many infrastructure assets require active management after that. This isn’t just clipping a coupon.”

Green investments make the game only harder, says Marta Perez, head of the Americas infrastructure debt team at Allianz Capital Partners. “Traditional project finance models, which were designed around more-predictable long-term assets like fossil fuel power plants, need to evolve for the variable, often decentralized nature of renewable energy systems,” she explains.

Climate activists focus on a range of priorities: planting trees, insulating buildings, and more. For investors, however, the primary concern is electricity. BCG estimates that electric vehicles and other “end uses” of electricity account for 90% of the $18 trillion net-zero capital gap. “Electrified transport” and renewable-energy generation sucked up more than $600 billion each globally in 2023, according to Allianz. Power grid upgrades ran a distant third at $310 billion, and batteries and other energy-related components fourth at $135 billion.

The rush to build AI data centers—massive energy consumers—will drive those numbers only higher. UBS projects US electricity generation to grow by a staggering 20% annually from 2023-2026. The AI craze will be “slightly negative for decarbonization in the short term,” by demanding more power from fossil fuels, says Leung. However, AI also pulls the world’s biggest tech firms deeper into the energy transition. Despite recent fence-mending with Trump, Amazon, Alphabet (Google’s parent), Microsoft, and other hyperscalers that operate data centers remain “among the most committed to net-zero,” Leung says. “They may pay a premium for clean electricity.”

BCG’s Fitz points to a subtler trend: The AI-driven power surge is increasing the role of regulated utilities that can pass costs on through rate increases. That could provide one of the safest funding mechanisms for energy-transition investments. However, public resistance to higher bills—especially to fund Big Tech’s energy appetite—could become a major obstacle. BCG expects North American utilities to rely on renewables for 60% of the upcoming power demand increases, with natural gas supplying the other 35%.

One threat that infrastructure pros view as possibly overrated is Trump. The sheer duration of energy investments—far exceeding a single presidential term—makes policy swings less impactful. UBS research predicts that Trump will also struggle to repeal or gut the IRA. Roughly 70% of US renewable projects under development are in “red” states, which voted for Trump, Leung and his colleagues note. Eighteen Republicans in the House of Representatives already signed a letter opposing repeal, more than enough to be decisive in the narrowly divided chamber. But the impact of this resistance is hard to accurately measure, as Trump has been routinely bypassing Congress.

Texas, firmly in the Republican camp politically, nonetheless leads the US in wind and solar power. Nationwide, more than 70% of Americans support more wind and solar energy, according to Pew Research. UBS’ base-case scenario is that Trump will tweak the IRA rather than dismantle it, allowing Republican-led states to complete near-term renewable projects while still giving the president a political victory.

China Dominates Green Investing

The US, the world’s biggest economy, is not the leader in green investment. That distinction belongs to China, which last year sunk $818 billion into clean energy—more than the US, EU, and United Kingdom combined—according to CarbonCredits.com. Solar capacity in the People’s Republic jumped by 45.2% in 2024. China is also miles ahead in plans for nuclear power, which could be making a comeback in the US, too, if not Europe. Nuclear power emits no carbon, though it brings other well-known risks.

China’s leap forward in renewables is largely financed domestically, so global private capital looks elsewhere. Europe remains committed to a renewables surge to partly replace Russian natural gas imports, which Russian President Vladimir Putin cut off in response to Ukraine-related sanctions. The EU is also betting on more liquefied natural gas, but is still investing 10 times as much in renewables as in fossil fuels, the European Investment Bank (EIB) reports. The bloc’s total energy-transition investment jumped by one-third in 2023 to $360 billion and is expected to keep rising to meet 2030 carbon-reduction targets.

Other nations are also stepping up. India’s renewable capacity surged to nearly half the US level last year, with plans to triple by 2030. Six major solar developers in India have “successfully attracted investments from diverse sources, including foreign institutional investors from North America, Europe, and the Middle East,” S&P Global reports.

Brazil added a record 10.9 GW of power capacity last year, nearly 85% of it from renewables. Saudi Arabia is supporting the world’s largest and most ambitious green hydrogen project, near Neom, the kingdom’s “city of the future,” with $8.4 billion in promised investment, according to Neom. The goal is to split water molecules into their oxygen and hydrogen components using electric current produced from renewable sources, then store the hydrogen as a fuel source. Hot on their heels is the Saudis’ neighbor, the United Arab Emirates, leveraging its abundant sunshine for large-scale renewables projects.

Green Energy Has Plenty Of Investors

Capital for renewable energy is not drying up either. As populations age across the developed world and pension assets grow, managers look harder for investments that can match their long-term liabilities, Leung says. Funds in Australia and Canada, whose pension pools punch above their macroeconomic weight, are shifting up to 20% of their portfolios into infrastructure, he adds.

Environmental, social, and governance (ESG) principles continue to motivate big-ticket investors globally, Natixis’ Saint Olive points out. Banks, which provide at least as much infrastructure funding as institutional investors, still want to “greenify their balance sheets.” At least, banks outside the US do. “Banks and sponsors in the rest of the world still have ESG ambitions,” Saint Olive says. “That’s not going to collapse because there is a new president in one country.”

Private equity investments in green energy are also growing, from next to nothing before the pandemic to $26 billion globally by 2023, according to the EIB. Given the private equity model of leveraging up equity holdings, the money at work could be several times that figure.

Private equity players in the US are particularly focused on onshore wind generation, as solar becomes trendier and Texas officials push legislation that advantages fossil fuels, says BCG’s Fitz. “Private equity is paying a premium for wind assets,” she explains. “They view wind as a critical part of the energy picture going forward.”

Funding the global energy transition remains a monumental challenge. The US interstate highway system—one of the great infrastructure projects of the 20th century—cost $129 billion ($389 billion adjusted for inflation) when completed in 1991, according to the US Department of Transportation. That is a small slice of just one year’s capital needs for green power. The US highway system used proven technology and relied on the federal budget.

“Renewables require not just infrastructure, but also a complete rethinking of how energy is produced, stored, and distributed,” as Allianz’s Perez puts it. Governments, strained by 21st century social commitments, want to offload as much cost as possible to the private sector, China partially excepted.

Most renewable-transition estimates exclude the enormous investment required in mining the metals that will build batteries, grids, and turbines, Saint Olive notes. Mining is a “fully merchant business” too dependent on fluctuating prices to offer fixed, infrastructure-style returns; and it earns investors no green points for regulatory or public relations purposes, he adds. “Many banks don’t see the mining business positively from an ESG perspective,” he says. “They would rather let others finance it.”

Energy-Transition Train Is Already Moving

All the same, the global energy transition is not only continuing but accelerating, whatever the rhetoric coming from the White House. Infrastructure investors need to be part of the “complete rethinking” of a lower-carbon future. “The good-ol’ fully contracted project is getting harder to find,” Saint Olive observes.

But infrastructure investors are also used to designing bespoke solutions for a changing project landscape. “The beautiful part of our profession is that for the same asset you can have 20 different finance structures,” Saint Olive says. “In the US, you may have bank loans for construction, then turn to capital markets. European plants could rely on a 10-year power-purchase agreement. In the Middle East, you can get very long-term financing: construction plus 25 years.”

The critical question isn’t whether the transition will happen—but whether it will happen fast enough to avert ecological catastrophe. Private finance looks set to do its part, if engineers and governments can combine to deliver viable investments. “If projects are generating 20% returns, more capital will come in,” UBS’ Leung states. “Economic viability is a big part of the equation, but not always part of the discussion.”

Wealthy investors are expected to look beyond stocks and bonds, prompting private banks to expand offerings and expertise.

Publicly traded stocks and bonds have been great investments over the last 15 years, but wealthy investors are increasingly looking for alternatives to what the public securities markets offer them.

Whether from fear that public stocks are overvalued, that inflation will rise again, or that market volatility will increase going forward, wealthy investors want a change from the traditional.

Private banks are gearing up to help provide alternatives.

“Historically, [private investors] have been under-allocated to alternative assets compared to institutional investors, but we’re seeing a strong rise in demand,” says Mark Sutterlin, head of alternative investments at Bank of America Private Bank and Merrill Lynch. “We think most of our clients would be better off with an alternatives allocation around 25%.”

That would represent a huge shift in investing behavior for high-net-worth (HNW) investors. According to a 2023 report from consulting firm Bain & Co, ultra-high-net-worth investors and family offices with more than $30 million in assets already have 22% of their wealth invested in alternatives. But those with $5 million to $30 million in assets allocate only an average 3% to alternatives and those with $1 million to $5 million just 0.7%.

With individual investors and family offices holding more than half of the $289 trillion in global assets under management, that represents a huge, largely untapped pool of capital for alternative asset managers. It also represents a major challenge for private bankers aiming to help their HNW clients navigate new investment markets.

Preqin, an alternatives research firm, is forecasting that alternative assets under management—including private equity and credit, venture capital, hedge funds, real estate, and infrastructure investments—will rise from $16.8 trillion at the end of 2023 to $29.22 trillion by the end of 2029. Increased fundraising from private banks, family offices, and individual investors is expected to fuel the growth.

While Preqin is forecasting growth in all segments of the alternatives market—including hedge funds, which suffered an abysmal 2022 when both stocks and bonds took double digit losses—private equity and credit are the hottest markets.

“There’s been a tremendous amount of interest in private equity and private credit all along the wealth spectrum,” says William Whitt, analyst with Datos Insights who focuses on wealth management. “I expect the strong demand will likely last a couple more years as long as the economy stays healthy.”

Kinder, Gentler Offerings

Fueling the demand are kinder, gentler investment offerings from private asset managers.

“The preeminent sponsors recognize the opportunity and have become better partners with investors,” says Sutterlin. Large firms like Blackstone Group, KKR & Co, and Apollo Global Management have launched funds with smaller investment minimums, lower fees, greater transparency and even a degree of liquidity (see sidebar). “Investors are getting better access to the best strategies on better terms. Everything is changing in favor of end investors.”

Some banks are launching separate entities to help shepherd investors into private markets. Deutsche Bank launched DB Investment Partners just over a year ago to give institutional and HNW investors access to private credit investments. With floating interest rates, these vehicles have been in high demand for the last several years. DB Investment Partners operates independently and Deutsche is retaining its existing private credit business.

While the demand for alternatives is most developed in North America and Europe, Asia too is trending alternative.

“We’re seeing much more demand from our clients across the spectrum of alternative assets,” says Chee Jiun Wen, head of alternative investments at Bank of Singapore. “It’s not just about reducing risks but generating alpha and accessing opportunities you can’t get in the public markets.”

The bank, formerly known as ING Asia Private Bank, has been hiring people with institutional backgrounds and experience in alternatives markets. Its roughly 500 relationship managers get in-house training on alternative asset classes and how to incorporate them into client portfolios.

“We’ve been able to expand the investment universe for our clients and provide access to more investment solutions and investing strategies,” says Chee.

The bank is doing the same for its financial intermediary clients. Last year it launched a digital platform in partnership with global fintech firm iCapital that provides independent asset managers (IAMs) with access to over 1,600 funds from 600-plus firms. The site also offers research and tools for due diligence and reports and performance updates on fund investments.

“We’re a first mover in this space in Asia,” says Chee. “We’re giving IAMs the power to pick and choose the managers and investing strategies that make sense for their clients.”

A Key Differentiator

For private banks, helping wealthy clients increase their exposure to alternative assets smoothly and successfully will be a key differentiator in the wealth management industry going forward. While most have experience investing in alternatives for their wealthiest clients, the scale of the expected shift into alternatives in the HNW client space will be a major challenge for firms.

“There is a huge opportunity in private wealth, but banks need to be prepared for the growth,” says Trish Halper, CIO in the family office practice at Northern Trust. Halper’s clients have been investing in alternatives for decades with average allocations between 30% and 50%. “Family offices were early adopters in the alternatives space and high-net-worth investors are now catching up.”

The workload for financial advisors is significantly heavier with private market assets than with publicly traded stocks and bonds.

“The dispersion of returns is much wider in private markets than in public markets, which makes manager selection really important,” says Halper. “Banks need to devote enough resources for strong due diligence because access to information and data is much less in the private markets.”

The sourcing of quality investments is just the beginning. Private asset portfolios need to be diversified across sectors, vintages, and financial sponsors to reduce risk; the investments and the asset managers themselves need to be monitored; capital call obligations must be executed; and distributions need to be managed when investments mature.

“There are a lot more operational and administrative tasks involved in private investments,” Halper notes.

The growth in alternative asset markets represents a major shift in the private banking landscape. Banks across global markets are investing in technology and talent to handle the transition and to ensure that alternatives allocations help to optimize clients’ portfolios and meet their financial goals.

“The capital markets have evolved,” argues Bank of America’s Sutterlin. “For investors who want a truly diversified portfolio, if they’re not invested in private markets in both equities and fixed income, they’re not in a big part of the capital markets now.”

Global Finance: Can you briefly describe what your model does?

Joanne Horton: Yes. We’ve got what we think is a rather exciting model, which we describe in a working paper, that helps forecast in advance the likelihood that a firm will go on to commit accounting fraud.

What’s the likelihood that fraud will take place in the future? There’s lots of motivation, obviously, because a lot of fraud takes place: few cases, but each one is very expensive. In a recent interview, the US Securities and Exchange Commission’s (SEC) enforcement director said they had a record $600 million in penalties in 2024 just for 70 cases. So obviously, the penalties and deterrence for doing it are not doing their role, and we need to find something else that can hopefully prevent this from happening.

But most—well, all—of the research into accounting fraud has focused on detection rather than prevention. We wanted to examine prevention. So, what can we do before the fraud occurs? Can the board of directors, the auditors, or other gatekeepers do something? Can I identify the year the fraud occurred in the account? That’s what all the models currently do.

We’re trying to look at data well before the fraud took place and say, “Would we have red-flagged this firm as likely to be committing fraud in the future?” Our model will not tell you it will happen—it simply says there’s a high risk of it happening in the future, which allows us, hopefully, to take corrective action so the fraud doesn’t take place. We don’t include the fraud at all in our model, so we can accurately identify those who are likely to commit fraud and those who are unlikely to commit fraud at 87.68% of cases on average: 90.58% one year before the fraud takes place, 83% two years, and 75% three years before the fraud takes place.

GF: What does your model tell you about how accounting fraud happens?

Horton: We know the antecedents to fraud: It is never a cliff edge but always a slippery slope. You start off small, and then it starts escalating. If we think about it, a manager—if facing pressure to beat an analyst forecast, or beat last year’s earnings, or wanting a particular bonus—has enough flexibility in the accounting rules to manage those numbers while staying within the rules. So, they change inventory methodology, or they change their assumptions on revenue recognition, and they make it such that they beat these forecasts.

But eventually, they’ll hit the limit, and then the only thing they can do is either come clean or go on to egregious misreporting. Now, we know from the academic literature that three years before the fraud, they tend to beat earnings benchmarks. And there’s a recent paper that says you’re more likely to round up your earnings-per-share number about five years before. However, the problem with this research is that they already know the fraud has taken place.

So, how are we going to track the slippery slope? Ultimately, what the managers are doing is increasing their human intervention in the accounts—legitimately, within the rules, but then that human intervention has to keep escalating because with accruals reversals, you’ve got to cover the reversal, and then you’ve got to increase the amount to beat any forecast. So, human intervention in the accounts escalates.

GF: So how do you capture that human intervention—that higher risk of fraud?

Horton: We use Benford’s law, which is a mathematical frequency model. And what we know from prior literature is that the data in the financial statements and notes will follow Benford’s law on average—if there is no human intervention in the accounts. Now, some human intervention may be legitimate, so it will change the deviation, and some may be illegitimate. So, we have to infer whether the deviations are legitimate or not, and we do that by seeing whether the deviations increase and escalate over time. That shows the slippery slope.

Even if there are small but consecutive increases in deviation, they’re having to use human intervention to cover it up; and it’s still increasing relative to what the firm should look like.

The key benefit of Benford’s law is that it doesn’t matter what kind of firm it is—public, private, what accounting policies it follows, what currency it operates in, whether it’s loss-making, whether it’s a growth company, highly leveraged or no leverage at all—makes absolutely no difference. This enables this model to be universal because you can apply it to any company, country, or industry. Once we’ve got a probability from the model, we use that to determine a red flag. And we have to have a red flag twice, so we don’t have anything that’s just random.

GF: What does it take to get that first red flag?

Horton: If they say they made a legitimate change in depreciation, you’ll see an increase in human intervention, but then the deviation shouldn’t escalate.

The model learns from prior fraud as to what it takes: when it gets to a point where, in other cases, there is a higher likelihood. The model creates this hazard ratio, which tells us the likelihood, and then we compare that to what we’d expect in the overall population. If it’s higher than we’d expect in the population, then it’s red-flagged.

GF: And when does the company get a second red flag?

Horton: So what we’ve actually found out, which is interesting, is that it’s very rare—almost impossible—to stop being red-flagged. The model keeps red-flagging you, and then you either go bankrupt or commit fraud. What we haven’t been able to observe is a firm with a red flag that then suddenly stops.

In firms that commit fraud, there’s a culture where you can be overly optimistic about things and rationalize what you’ve done prior. This is why auditors are hopeless at capturing and identifying fraud: because it’s so incremental. The problem for auditors is that if they agree to one change, it’s quite difficult not to agree to a second change, because you’ve rationalized the agreement on the first change.

GF: How do you know to look for fraud in M&A?

Horton: There’s fraud in a lot of places; and the more opaque, the more fraud. You can hide it more easily in M&A, but it’s more about due diligence. So, you are acquiring another company; and we all know that if it’s a hostile takeover, the company is going to make itself look very expensive. So, more human intervention is needed in accounting. And you see that happening over time. And even if it’s not hostile, you’re going to make yourself look good for a takeover.

The other thing we notice is where most of the fraud takes place. It’s not in the parent company, it’s in the subsidiaries. They’re not under the purview of the top brass. They may have different auditors. The parent may be putting a lot of requirements on their subsidiaries to provide a huge return, and if they can’t do it, how do you alleviate the pressure? You manage your numbers.

GF: Do you have an example?

Horton: Here’s one. HP was under pressure to achieve high revenue targets. Their initial response was to increase their human intervention in 2008: They changed their inventory valuation assumption, their revenue recognition assumptions, and a few other things. But in the end, they couldn’t maintain that. So, they ended up, in 2015 and 2016, creating fictitious revenues, valuing the inventory upward, channel stuffing, and many other things. The SEC announced in 2020 that HP had committed fraud. Our model identified the fraud, and we red-flagged HP in the fourth quarter of 2010. So, we already knew at the end of 2010 that they were likely to commit fraud.

A more recent one is [fitness-beverage maker] Celsius. They committed accounting fraud in the second and third quarters of 2021; it was announced in 2025. We red-flagged it in the fourth quarter of 2019.

GF: How are you making your model available?

Horton: We have been offered quite a lot of money to buy the model. But being an academic, I think research is a social good; and therefore, we would just like to build up the model so it’s global and then provide the output to anybody who wants it. So, we would like to allow anyone to download our red flags. The other thing is that we will publish it in detail so our model will be perfectly replicable.

The other thing we’ve noticed in our analysis is that identifying escalating human intervention also exponentially improves bankruptcy risk models, because what do you do before you go bankrupt? You try to delay it, and you will do that through the accounting. So, we think this human intervention measure should be utilized in IPOs and M&As when you’re doing due diligence—all that sort of thing. In that respect, I want it to be a public good.

GF: Would it be possible for fraudsters to use AI to fly under the radar of Benford’s law?

Horton: That is very difficult, because human intervention is human intervention in whatever form it takes. We actually tried to use AI to create a set of accounts that had a huge level of human intervention but followed Benford’s law, and it was practically impossible. Because the trouble is, if you change a few numbers in revenue, it’s going to change a lot of numbers in accounting. It’s going to change your equity, your retained earnings, your profits, your earnings per share, your EBIT, your EBITDA—all these numbers would change. And it’s incredibly difficult. I’m sure someone could spend a lot of time trying to do it, but doing it quarter on quarter on quarter, we believe, is incredibly difficult, because we’ve tried it. But nothing’s impossible.

GF: Who do you foresee using the model besides academics?

Horton: I think auditors, for sure, because they want to know their audit risk, especially if you are taking over from a previous auditor.

I think board members, because it’s their risk as well. I think for due diligence in IPOs and M&A, because you’ll notice a lot of IPOs that commit accounting fraud. So I think short sellers. Regulators could use it, too.

GF: Will there be some technology available using your model?

Horton: I imagine somebody will be capitalizing on that in the future. But we’ve just got money for a postdoc to put this into AI and see what other things we can do. We have used all listed US firms from 1962 till 2020 because that’s when we wrote the paper. We use quarterly data, which we download from Compustat. Anything in the notes, as long as it’s not a repetition of another number.

Since Benford’s law is indifferent about currency or anything else, we’re going to build the model globally: put India in there, China, the UK, Europe, etc. We’re hoping this might actually improve the accuracy because it’ll have more data to learn. But to date, it’s all listed US firms.

GF: What specific changes do you see that might suggest a company is on the slippery slope?

Horton: We look at misreporting: all types of misreporting. We also looked at fraudulent security class actions. And we also look at firms that have made restatements. Nobody said it was a fraud, but nobody said it wasn’t a fraud, either. We can forecast restatements with quite a high level of accuracy.

GF: Are regulators doing anything to anticipate fraud, or are their efforts all retrospective?

Horton: It’s very difficult because the regulator is going in because something has happened. The Public Company Accounting Oversight Board [PCAOB]  looks at companies’ accounts and audit papers and tries to make sure that the accounting is being done correctly. Here in the UK, the Financial Reporting Council looked into audit papers of the FTSE 100 and basically gave them a good health score. So, I think regulators have been trying to do it, but I don’t think they’re as good as they should be.

I think regulation should be about prevention, because the people who win are the people who commit the fraud, and the people who lose—because who pays these fines?—are the shareholders. They price it in. I would have hoped the PCAOB looked at audit reports, but you still have failure.

GF: Why is so much fraud connected with IPOs? Because they don’t do enough due diligence?

Horton: If they have an IPO, they’ll be big firms, and they’ll follow International Financial Reporting Standards or US GAAP. Even if they’re private, they will still be doing so because they’re larger firms.

So, some of it is because they’re overly optimistic. If you’re overly optimistic, you’ll make more changes because you think it’s all going to happen. You are going to make those sales, right? You’ve got to look like you’ve got a future. And then, of course, they have to maintain it, even if things don’t turn out as optimistically as they thought.

GF: If your model becomes widely used, could its presence deter people or companies from committing fraud?

Horton: I hope it would. However, let’s say you’re the CEO, and you think, “Well, let’s see if I can just get away with it.” You’re going to do a cost-benefit analysis of just keeping going. Then I hope the auditors are looking at it and asking questions. Our model might improve auditing since it can provide a list of X red flags across all listed companies in the US.

Interestingly, we also find problems like a lack of an internal control system, which is also a prelude to human intervention. If you’ve been found to have poor internal controls, you’re highly likely to have this increasing human intervention.

Citing the need for a level playing field in access to critical minerals, deep-water ports and other key infrastructure or assets, the Trump Administration has paused the enforcement of the Foreign Corrupt Practices Act of 1977 (FCPA) until August, with a possible extension to February 2026.

The FCPA, which was passed on the heels of numerous corporate corruption disclosures, makes it unlawful for any corporate officer, director, employee, company agent, or company shareholder “to offer, pay, or promise to pay money or anything of value to any foreign official for the purpose of obtaining or retaining business.”

The “over expansive and unpredictable FCPA enforcement against American citizens and businesses—by our own Government—for routine business practices in other nations not only wastes limited prosecutorial resources that could be dedicated to preserving American freedoms, but actively harms American economic competitiveness and, therefore, national security,” wrote Trump in the executive order.

Under the executive order, US Attorney General Pam Bondi has until Aug. 9 to review the guidelines and policies that govern FCPA investigations and enforcement actions and issue updated guidelines as appropriate to promote Article II authority to conduct foreign affairs. Bondi can extend her deadline for another 180 days if necessary. Upon updating the guidance, Bondi will decide whether the Department of Justice’s remedial actions are needed for previous FCPA investigations and enforcements or if presidential actions are required.

According to the authors of a post on the law firm Case & White’s blog, companies should continue to use their usual business policies.

“Notwithstanding the administration’s dramatic shift in approach to FCPA enforcement, companies should remain focused on anti-bribery and corruption compliance and, as warranted, internal investigations, given the five-year statute of limitations for FCPA offenses and the ability to toll that period for up to an additional three years, the US Securities and Exchange Commission’s parallel enforcement authority with respect to issuers (at least for now), and enforcement regimes in foreign countries and at multilateral development banks,” they wrote.

While Mexico and Canada have secured a one-month reprieve from the Trump administration’s 25% tariff hike, US automakers and parts manufacturers remain on edge, awaiting further developments in the trade dispute among the three nations.

Given the deep integration of the US auto industry’s supply chain with its northern and southern neighbors, any tariff increase after the pause would come at a significant cost.

General Motors, the largest US automaker, produces 40% of its vehicles in Mexico and Canada. According to the Cato Institute, Mexican GM plants exported more than 700,000 vehicles to the US last year. Ford is less exposed. Only 358,000 of its vehicles came from Mexico in 2024. Stellantis—maker of the Chrysler, Dodge, Jeep, and Ram product lines—followed with 314,000 vehicles. The Big Three’s foreign counterparts, Toyota, Honda, and Volkswagen, are also heavily invested in North America and would suffer as well.

Bernstein Research calculates that a 25% tariff would burden the auto industry with a $110 million daily surcharge; and Jefferies, the investment bank, estimates the tariffs would add $2,700 to the average price of a vehicle. Retail prices would go up, prodding consumers to buy less.

“The North American auto industry is highly integrated, and the imposition of tariffs would be detrimental to American jobs, investment, and consumers,” says Jennifer Safavian, CEO of Autos Drive America, the lobby representing foreign carmakers.

Big brands are used to assembling vehicles in the US, Canada, and Mexico. They procure essential components, including motors, transmissions, and simple components, from across the border. Some parts cross back and forth five or six times before they are incorporated into a finished vehicle. A 2025 Cato tariff study tracked a capacitor—an electrical component in a circuit board—on its journey. It was first bought in Colorado and shipped to Ciudad Juarez in Mexico to be included in a circuit board. The component was spotted in El Paso, Texas; and Matamoros, Mexico. It finished its trajectory in two seat-manufacturing plants, in Arlington, Texas; and Mississauga, Ontario.

After more than three years, CIBC Caribbean wrapped up its segment of a groupwide efficiency drive last month with the successful transfer of its Saint Maarten operations to Orco Bank. The divestment drive began in October 2021; since then, CIBC has sold operations in Aruba, Curaçao, Dominica, Grenada, and St. Vincent and the Grenadines, as well.

“Our country divestment program is now over,” said CIBC Caribbean’s CEO Mark St. Hill, in a statement. “These were some very complex transactions, and it is a credit to [CIBC’s team’s and buyer banks’] expertise and professionalism that we were able to complete all of them within the timeframe that we set out and with relative ease.”

Operating as CIBC FirstCaribbean in the Dutch Caribbean, the bank’s reduced regional footprint has resulted in a modern, slimmed-down bank, St. Hill added. Changes included centralizing key functions, including digital sales through LoanStore; launching an agile work plan; and revamping its call centers into contact centers.

Parent CIBC has been refocusing on its core markets to accelerate growth. The ownership changes are subject to local banking regulatory approval, which is expected in the forthcoming months.

“Acquiring CIBC FirstCaribbean’s banking assets presents an excellent opportunity for Orco Bank,” says Edward Pietersz, Orco managing director and CEO. “With an expanded reach, we are well positioned to fulfill our mission of being the preferred partner, offering innovative, customer-driven solutions that enable financial freedom in a responsible and sustainable manner while creating shared value for our communities.”

A similar effort to de-risk the region by National Commercial Bank Jamaica with the sale of its Cayman Islands subsidiary NCB Cayman has fallen through. The transaction failed to be completed within the agreed timeframe, parent NCB Financial Group revealed. But rumors persist that other international banks are considering selling some of their Caribbean assets due to poor performance and high compliance costs in the region.

Hong Kong’s Securities and Futures Commission and Hong Kong Exchanges and Clearing Ltd. (HKEX) are considering whether to ease initial public offering rules for mainland Chinese companies.

Christopher Hui, the territory’s secretary for financial services and the treasury, said at a recent conference in Shenzhen that the bourse pledged to ease listing requirements for Chinese firms. The mainland regards the Special Administrative Region’s (SAR) capital markets as a valuable source of funding in realizing their wider global expansion goals.

Observers expect local markets watchdog and HKEX to propose amendments by the end of the year. Regulators conducting comprehensive studies are expected to showcase proposed measures to better the current fundraising system, Hui said at a meeting of the Shenzhen-Hong Kong Financial Cooperation Committee in mid-February.

Hong Kong’s IPO market is still shaking off a multi-year slump as more mainland Chinese-listed firms seek dual listings on the SEHK.

Mainland firms are keen to learn the degree to which the territory’s regulators will streamline application procedures and lower listing requirements. HKEX figures indicate that, in January, the exchange received 30 IPO applications in January, including seven A+H applications for firms already possessing mainland-listed (A) shares that wanted to add Hong Kong (H) shares, or H shares.

According to Bonnie Chan, HKEX’s CEO, nearly 100 companies were in the city’s IPO pipeline as of January.

In February, electric vehicle battery maker Contemporary Amperex Technology (CATL) submitted listing documents to HKEX. The Ningde-based company will likely raise $5 billion—potentially the SAR’s biggest IPO in more than four years. Proceeds from the proposed IPO will help enhance mainland EV supply chain dominance.

In recent years, Hong Kong regulators have emphasized the importance of closer links between capital markets to uplift the mainland economy. They also stressed the SAR’s role as a bridge between mainland Chinese and global markets, while promising to create more cross-border investment mechanisms to facilitate increased capital flows. CATL, the world’s largest producer of batteries for electric vehicles, said proceeds from the proposed IPO would reinforce its global expansion, which would enhance China’s dominance in the EV supply chain.

The 18 Hong Kong banks comprising the territory’s joint task force on lending to small and midsize enterprises (SMEs) have agreed to discussions with other banks to assist SMEs in addressing cash flow pressures. Six member banks of the Hong Kong Association of Banks’  commercial banking group took the lead in January to negotiate fairer financial arrangements for SMEs facing capital-flow difficulties, especially in the construction sector; Other SME Financing Task Force member banks agreed to join the initiative.

Under the just-announced joint consultation mechanism, when an SME faces sudden, unexpected liquidity woes, it can directly contact its lender bank for relief. After obtaining the client’s authorization, the lending institution can contact other banks to discuss financial arrangements to reduce the pressure on the SME’s liquidity. The bank can then address the situation quickly and smoothly, focusing on reducing the SME’s cash-crunch worries. SMEs represent 98% of Hong Kong’s businesses, employing 45% of its private-sector workforce, according to government data.

In October, 16 major Hong Kong banks said they would provide 370 billion Hong Kong dollars ($47 billion) in their loan portfolios for SMEs. The Hong Kong Monetary Authority—the special administrative region’s de facto central bank and regulator—slashed its countercyclical capital buffer ratio to release another HK$300 billion to HK$400 billion in liquidity to facilitate more lending to SMEs.

Businesses that previously borrowed funds under the government-backed loan plan can apply for a principal repayment grace period of up to a year. Additionally, SMEs that borrowed from banks on the open market—outside the government program—can apply to renew their partial principal repayment options. The 18 banks on board are HSBC Holdings, Hang Seng Bank (owned by HSBC), Citibank (Hong Kong), Standard Chartered Bank, Industrial and Commercial Bank of China, Bank of China, Bank of Communications (Hong Kong), Bank of East Asia, China CITIC Bank International, China Construction Bank (Asia), Dah Sing Bank, DBS Bank, Fubon Bank, Fulong Bank (Hong Kong), Nanyang Commercial Bank, OCBC Bank (Hong Kong), Shanghai Commercial Bank, and PAO Bank.          

China’s financial sector, from banks to brokerages, is rapidly incorporating DeepSeek, the nation’s champion in AI, for customer service, data analysis, and email sorting. Dozens of firms have committed to implementing DeepSeek or specific applications of the AI large language model since January, when the Hangzhou-based app developer emerged as China’s low-cost alternative to Western competitors such as ChatGPT.

State-owned giants Postal Savings Bank and Industrial and Commercial Bank of China (ICBC), as well as regional lenders Bank of Jiangsu, Bank of Nanjing, Haain Rural Commercial Bank, and Bank of Beijing, were among the Chinese banking industry’s first to adopt DeepSeek.

Brokerages including Sinolink Securities, Industrial Securities, and GF Securities quickly followed suit. Ping An Group and New China Life insurers, as well as more than 10 asset managers including Fullgoal and China Universal, have also adopted DeepSeek.

According to a Bank of China Research Institute report, the financial sector has embraced DeepSeek’s promise of high performance and efficient training at costs below its Western peers. State media recently broadcast footage of Chinese President Xi Jinping shaking hands with DeepSeek founder Liang Wenfeng, signaling official support for an AI company whose Chinese clients outside financial circles include smartphone maker Oppo, carmaker BYD, and the Baidu search engine.

Customer chatbots running on DeepSeek are the most common financial sector applications. Postal Savings Bank’s mobile app, Xiaoyou Assistant, answers account holder questions and Haain Bank’s chatbot specializes in marketing queries. ICBC uses DeepSeek for wealth management tasks and financial data analysis. Bank of Beijing uses the app for data analysis through a partnership with Chinese IT conglomerate Huawei.

Bank of Jiangsu says the app is powering “contract quality inspection and automatic reconciliation evaluations” as well as “the mining and analysis of massive amounts of financial data.” In addition, DeepSeek helps the bank sort and respond to thousands of emails received daily. Sinolink had been exploring AI for data analysis and customer service for years before DeepSeek’s rollout, the firm noted in a press release. Already, “the project has achieved positive results, and the company will optimize the DeepSeek model in the future to achieve higher business goals,” including “risk control.”

El Salvador’s heralded adoption of Bitcoin as legal tender appears to be undergoing a significant downgrade as businesses are no longer obliged to accept the cryptocurrency.

As part of a $1.4 billion loan agreed with the International Monetary Fund in December, the government’s involvement with the digital Chivo wallet will be “gradually unwound.” At the end of January, on a vote of 55-2, El Salvador’s Legislative Assembly passed modifications to the Bitcoin law, eliminating the word “currency” but keeping it legal tender. The changes will take effect May 1, 90 days after the legislation appeared in the official newspaper.

“Bitcoin no longer has the strength of legal tender,” economist Rafael Lemus told AFP. “It should have always been that way, but the government tried to force it into existence, and it didn’t work.”

Users are now free to accept Bitcoin or not, but it cannot be used to pay taxes or state bills. President Nayib Bukele admitted that introducing Bitcoin as an official currency alongside the US dollar in September 2021—the world’s first such move—had been his government’s “most unpopular” measure, alongside stringent anti-gang security measures.

El Salvador still has 688 Bitcoin in reserve, worth an estimated $574 million, of which $287 million is profit.

On February 13, Bukele and Microstrategy Executive Chairman Michael Saylor discussed how Bitcoin adoption could be accelerated worldwide, with El Salvador’s National Bitcoin Office considering establishing nodes in each household. The aim was to boost public perception of how Bitcoin can work in daily settings.

“President Bukele continues to buy Bitcoin, we have a Bitcoin Office, we have the Bitcoin Law, Bitcoin can be used in El Salvador,” El Salvador’s ambassador to the US, Milena Mayorga, assured at a Bitcoin conference.” But, “it has not been an easy road.” A survey published by the Jesuit Central American University in January revealed 92% of Salvadorans had not used Bitcoin in 2024. Of the 8% who said they had done so, the average was only 14 times a year. Family remittances via digital wallets amounted to $7.22 million in December 2024, less than 1% of the total sent.