Category Finance News

Political opposition stalls US momentum in green investing, while Japan takes the lead with GX bonds and a long-term financing strategy.

Japan’s commitment to ESG principles remains steadfast, even as major economies diverge in their approaches. While the United States grapples with an ESG backlash marked by legal challenges and political resistance, Japan is doubling down on its green initiatives, notably through the issuance of Green Transformation (GX) bonds.

Japan has emerged as a leader in climate transition finance, becoming the first country to issue sovereign transition bonds in February 2024. These five-year Climate Transition JGBs raised 100 billion yen (about $680 million), with subsequent auctions planned for 2025, underscoring the government’s dedication to funding decarbonization projects. The Ministry of Finance highlighted that these bonds align with the Paris Agreement’s goals and are designed to support industries in hard-to-abate sectors.

“Japan is taking an evidence-based approach to ESG, focusing on science-based targets and transparency,” said Hiroshi Tanaka, an ESG analyst in Tokyo. “The GX bonds are a clear signal of our commitment to sustainable growth.”

While Japan accelerates its ESG efforts, the United States faces growing skepticism. Over the past few years, conservative lawmakers and political figures have pushed back against ESG investing, arguing that it puts social or political goals ahead of financial performance. States like Texas and Florida have enacted legislation to restrict the use of ESG criteria in state-managed investments. Lawsuits targeting ESG-related disclosures and investment practices have surged, fueled by concerns over fiduciary duty and political polarization. A recent report from Harvard Law School noted that litigation risks have become a significant deterrent for US companies pursuing ESG strategies.

“In the US, ESG has become a political football,” said Sarah Miller, a corporate governance expert. “The backlash reflects deeper ideological divides and fears of overregulation.”

In contrast, Japanese policymakers view ESG as a long-term economic imperative rather than a partisan issue. “For Japan, ESG is not just about compliance; it’s about creating value for future generations,” Tanaka said.

Japan’s approach aligns closely with that of the European Union, where ESG remains central to regulatory frameworks like the Corporate Sustainability Reporting Directive (CSRD). Both regions emphasize transparency and accountability in climate-related disclosures. However, the US has seen efforts to roll back ESG initiatives at both state and federal levels.

A recent Forbes article highlighted this divergence: “While Europe and Japan are embedding ESG into their economic systems, the US is witnessing a retrenchment driven by political opposition and legal challenges.”

Despite global headwinds, Japan appears undeterred in its ESG journey. The government plans to expand GX bond issuance and encourage private-sector participation in sustainable finance. Experts believe this proactive stance will position Japan as a global leader in climate transition efforts.

“Japan’s strategy is pragmatic yet ambitious,” said Tanaka. “It recognizes that achieving net-zero emissions requires both public and private investment.”

As the world navigates complex ESG dynamics, Japan’s commitment offers a stark contrast to the turbulence elsewhere, especially in the US. Whether this divergence will widen or converge remains an open question.

From the establishment of its earliest banks in the mid-19^th century to becoming one of the world’s most advanced financial hubs, Singapore’s banking evolution mirrored the country’s journey from a modest colonial entrepôt for the trade between Asia, Europe, and then the United States to one of the world’s wealthiest and most developed nations. 

Formerly a British colony, Singapore turned to its banks to power its economic growth and transformation after becoming a sovereign country in 1965. Banks provided credit to businesses and entrepreneurs, financed infrastructure projects, and fostered financial inclusion. 

Today, Singapore’s financial system boasts a robust regulatory framework and cutting-edge fintech innovations. The Lion City has also emerged as a leader in sustainable finance, promoting green banking practices and investments that support environmental and social goals.

These are the leading banks in Singapore listed alphabetically, each with its own distinctive strengths and unique history.

Citibank Singapore 

Founded in New York in 1812 as City Bank of New York, Citibank’s roots in Singapore trace back to 1915, when it acquired the International Banking Corporation (IBC), which was established at the start of the century to facilitate trade between East Asia and the United States. Over the following decades, Citibank became a force in Singapore’s banking landscape, helping its transformation from a trading center to a global financial powerhouse. A full-service bank, Citibank pioneered products like credit cards and 24-hour ATMs, and catered to consumers, corporations, and institutions with an extensive portfolio of financial offerings.

In recent years, however, the bank’s traditional branch model has undergone a major overhaul. In 2020, the bank opened in Singapore its largest global Wealth Hub in the region, and in 2024 it closed its last regular branch in Jurong East to focus primarily on high-net-worth clients and online financial services.

https://www.citibank.com.sg

Development Bank of Singapore 

Singapore had only just recently declared its independence when, in 1968, a small group of government officials and entrepreneurs created the Development Bank of Singapore (DBS) with the goal of supporting the newborn country’s economic development. In the years and decades that followed, they fulfilled that mission. DBS funded projects spanning all major industries, helped the public listing of some of Singapore’s most iconic brands (Rollei, Singapore Airlines, and Singtel, to name a few), and even financed the construction of what were then the tallest building and the tallest hotel in the nation. Not only that, during the 1980s, the bank introduced a share ownership program that allowed employees to become stakeholders and rolled out a housing loan initiative that made home ownership more accessible. In 1997, ahead of its competitors, it launched the region’s first comprehensive internet banking platform.

Today, DBS is the largest retail and commercial bank in Singapore with assets of about $450 billion, and maintains a presence in 18 markets globally, providing services for individuals, small and medium enterprises, along with corporate, wealth, and investment banking. The Development Bank of Singapore has won numerous Global Finance awards, including in the Best Private Banks and Best Corporate/Institutional Banks categories.

https://www.dbs.com.sg/

Hongkong and Shanghai Banking Corporation

Best known by its acronym HSBC, the London-based Hongkong and Shanghai Banking Corporation is one of the largest banks and financial services companies in the world, serving more than 40 million personal, wealth, and corporate customers in about 60 countries and territories. 

In 1877, HSBC opened its first office in Singapore, where it had conducted business through an agency since 1865. In those early stages, the Hongkong and Shanghai Banking Corporation extended loans to Chinese merchants and funded the import, export, and entrepôt trade of spices and raw materials. In the early 20^th century, its focus shifted to primarily financing tin and rubber exports, which at the time constituted 35% of Singapore’s total export trade. HSBC also played an important part in the reconstruction and rehabilitation of Singapore’s economy after the Second World War, handling one-third of Singapore’s foreign and trade exchange business by 1948. 

Ever since, HSBC has continued growing with Singapore and Singapore with HSBC. As a regional leader, HSBC offers comprehensive solutions, including retail, commercial, private, and investment banking, as well as wealth, insurance and capital market services, to its clients in the Lion City and across Asia.

https://www.hsbc.com.sg

Maybank Singapore

As the first bank from Malaysia to operate in the country, Maybank’s entry into Singapore in 1960 played a key role in improving cross-border financial operations between the two neighbors and across the region as a whole. Today, the Maybank Group has an international network of over 2,600 branches in 18 countries including all 10 ASEAN nations, with more than 42,000 employees serving customers worldwide.

Locally incorporated and identified by the Monetary Authority of Singapore (MAS) as one of the systemically important banks operating in the country, Maybank Singapore holds assets of about $60 billion and employs approximately 2,000 people. It offers an extensive range of products and services for individuals, businesses, and corporations, including investment banking, asset management and stock-broking, insurance, and takaful. Its presence across Southeast Asia allows the bank to provide clients with seamless cross-border financing and support their overseas investment ventures.

https://www.maybank2u.com.sg

Oversea-Chinese Banking Corporation

On October 31, 1932, three banks—the Chinese Commercial Bank, Ho Hong Bank, and the Oversea-Chinese Bank—merged and consolidated their strengths to form Oversea-Chinese Banking Corporation (OCBC). Since then, OCBC Bank has grown into one of Singapore’s leading financial institutions and the second-largest financial services group in Southeast Asia with assets close to $500 billion, catering to millions of customers through its more than 400 branches and representative offices in 19 different countries.

With a special focus on the ASEAN region and the Greater China clientele, OCBC Bank offers a wide range of products and services, including retail banking, wealth management, and insurance.

A leader in online banking and in providing innovative solutions for its customers, in 2024 OCBC Bank also brought digital banking aimed at children aged 7 to 15, who can now have their own bank account and debit card and improve their financial education. The Oversea-Chinese Banking Corporation has won many Global Finance Awards, most recently for Best SME Bank in the Asia-Pacific region and for excellence in the Sustainable Finance category.

https://www.maybank2u.com.sg/

Standard Chartered Singapore

Then known as the Chartered Bank of India, Australia, and China, Standard Chartered opened its first branch in Singapore in 1859, and has since contributed to its development by facilitating trade, supporting local businesses, and driving financial growth. Officially a London-based multinational bank, Standard Chartered does not operate in the United Kingdom and derives almost all of its profits from operations in Asia, Africa, and the Middle East. Furthermore, its largest shareholder is the Singaporean state-owned multinational investment firm Temasek Holdings. 

With an entire range of financial services across personal, business, corporate and private banking, alongside wealth management, investment banking, and treasury services, Standard Chartered has contributed to the transformation of the country into the world-class financial and commercial center that it is today.  

Its contribution, however, goes beyond the business and trade domains. To promote community involvement, Standard Chartered grants its employees three days of annual leave for volunteer work. Additionally, the bank sponsors the Singapore Marathon, also known as the Standard Chartered Marathon, which attracts approximately 60,000 runners from all over the world each year since 1982.

https://www.sc.com/sg

United Overseas Bank

Alongside the Development Bank of Singapore (DBS) and Oversea-Chinese Banking Corporation (OCBC), United Overseas Bank is one of the three big local banks in Singapore. 

UOB offers a broad spectrum of financial services, from personal banking essentials like savings, loans, and credit cards, to insurance services, trade and corporate finance, and wealth management for high-net-worth clients. Over the years, United Overseas Bank has earned many honors from Global Finance, most recently winning the coveted award for Best Bank in Asia-Pacific and in Singapore for 2024.

In the second part of Global Finance’s conversation with former US Secretary of Commerce Wilbur Ross—who served during President Trump’s first term—the discussion shifts to the impact of Trump’s tariffs and trade policy on CEOs, CFOs, and key trading partners like Canada, Mexico, and India.

Global Finance: What would you recommend to CEOs and CFOs navigating this climate of uncertainty due to US tariffs and trade policy as they determine their near- and long-term strategies?

Wilbur Ross: Yes, reshoring and nearshoring were some things that would develop momentum in any event. President Trump is going to accelerate that.

Whatever plan people had for relocating production, it would be wise to accelerate it. Now, whether that means moving operations to Mexico or the US, that’s another question. But the days when a company could make one component in one country, a second in another, and a third in yet another—then bring them all to a fourth country for assembly—are ending.

Therefore, it should be more of a question of to what degree you relocate facilities and whether or not to do so, and to a degree where to relocate them. The rules of origin will be much more important to Canada, but particularly to Mexico, than before. So, as long as one incorporates that into their thinking, I think relocation is the wise move to make.

GF: Is the message different for CEOs and CFOs outside the US?

Ross: Yes, it could be if they adopt policies similar to Trump’s. We are moving toward an era where what has been called “protectionism” becomes much more of a centerpiece of everyone’s trade policy. But what Europe must do to be effective is to deregulate some. The regulatory burden that European governments impose on their companies is a real impediment to reshoring. Europe has become too intrusive in the business community.

Trump has also said he will require his cabinet members to cancel an even higher ratio of existing regulations relative to any new ones they implement—higher than what we had the first time. The first time, you were required to cancel two for each one you put in. He may be pushing for as many as eight, but certainly more than two. That’s one thing.

Tax policy is the other thing. You have to look at Trump’s trade activities in the context of what he is doing overall. Between deregulation and reducing corporate taxes, he’s changing the economic attractiveness of being in the U.S. regardless of tariffs. And then when you load on top of that, a bit sturdier tariff policy, you have a combination of factors that will prove very powerful.

GF: Which means that you also think this will be the outcome of the current situation?

Ross: Okay, well, there will naturally be a lag. You can’t build a new facility of any size in 10 minutes. There may be some near-term dislocation as we face higher tariffs, but we don’t yet have the increased production to offset them.

Now, that’s not a universal problem. Many of our industries operate at only 70–80 percent capacity. Therefore, not only will they be able to meet increased demand, but this will also help them absorb part of the tariff on imported components. When production increases from 70 or 80 percent capacity, the marginal costs are very small. You’ll have that factor and probably another factor—currency readjustment. How that plays out will have an important impact on how well industries do globally in each area.

To that end, if U.S. Federal Reserve Chairman Jerome Powell is slow to reduce interest rates while Europe moves at a faster pace, that will clearly have implications for currencies.

One of my concerns for Europe is that if they lower interest rates too quickly relative to the U.S., it could have real impacts on their currency. That would hurt imports but help exports. If I were a European manager, I would be more eagle-eyed than ever about the outlook for currency fluctuations.

GF: Looking at the various industry sectors, are there sectors that deserve tariffs? Are there also sectors that should not see tariffs in these negotiations?

Ross: Well, I have focused more on those who might need it than those who might not. However, pharmaceuticals are a big import to the U.S. Since U.S. drug prices are already higher than others, I don’t think hefty tariffs on pharmaceuticals would be particularly well-fitting to our economy.

But they’re going in on the really big item—the automobile. Automobile manufacturing has caused a fair degree of factory expansion here and in Mexico. In the automotive industry, you must look at the U.S. and Mexico combined because of the concept of rules of origin. In those areas, it’s inevitable. So, I think you’re right—it will vary somewhat by industry. But for the most part, most manufacturing businesses probably don’t expect there will be more tariff burdens.

GF: Would large U.S. exporters, such as technology manufacturers, be affected negatively by this?

Ross: Well, Europe doesn’t have the technological content we have so far. The giant companies in Europe are not comparable to what we call “The Magnificent Seven” over here. Europe’s response seems to have been antitrust and tax complaints, trying to hold back American companies rather than doing things that would effectively build up a European champion.

GF: What of those U.S. industry sectors geared more toward exports? Are they at risk because of tariff reciprocity in the near term?

Ross: Well, apparel is a significant import from Asian countries, and it wouldn’t surprise me if that were to continue. Some of those brands, such as the European brand Zara, have become very, very powerful players in the US. It’s a Spanish company, but it mainly produces its material in Turkey. Meanwhile, Vietnam and Mexico have become big competitors in what we used to call sneakers. So, some things will remain there that will not be affected by the tariffs.

But remember, the real purpose of the tariffs—and one that I hope will be achieved long term—is to let the rest of the world know exactly what they must do to bring our tariffs down, namely, to bring down their own tariffs. The unexpected result of the new US tariff policy could very well be lower tariffs in the long term.

Take India, for example. India’s tariffs are extremely high on most products. Prime Minister Narendra Modi wants to industrialize India. It’ is a logical place to be competitive with China if they can meet their infrastructure needs, because Indians have very good quality manufacturing skills, technological skills, and engineering skills. They have a large population base, so there’s no reason they can’t compete. What’s been holding them back has been the need for more roads and railroads. You need things like that in the way of transportation infrastructure to be much more highly developed for India to flourish. There’s a good chance that PM Modi will do that.

Vietnam has already benefited greatly from the pressures being put on China, which will probably continue. However, Vietnam has a much smaller economy and population base, so it can’t remotely replace China.

Read Part 1 of Global Finance‘s interview with Wilbur Ross:

Lenders are scaling up efforts to meet sustainable development targets, with capital directed toward healthcare, education, and essential infrastructure.

Major global banks and financial institutions are increasing their participation in the social bond market, strengthening the role of debt capital in addressing social challenges across the world.

Standard Chartered recently announced the issuance of its first $1.1 billion social bond. The proceeds are primarily earmarked to facilitate lending to small and medium-sized enterprises (SMEs), including support for women-owned businesses. Funds will also be allocated to healthcare, education, infrastructure development, and food security initiatives.

The transaction aligns with the bank’s Sustainability Bond Framework, which applies environmental and social standards across sensitive sectors. For instance, financial services are extended only to clients committed to reducing thermal coal dependence to below 5% of revenue by 2030.

In 2024, Deutsche Bank issued its first social bond, raising €500 million to expand its sustainable asset pool. The proceeds will finance affordable housing and essential services for elderly populations.

In January, the International Finance Corporation, part of the World Bank Group, raised $2 billion through its largest-ever social bond. The funds are aimed at supporting low-income communities across emerging markets.

Social bonds are structured similarly to conventional fixed-income instruments in terms of risk and return. The key distinction lies in the requirement for legal documentation specifying how proceeds will be allocated, ensuring transparency and accountability.

“The increase in the issuance of social bonds is aligned with the societal goals of both public and private entities,” says Conor Moore, Global Head of KPMG Private Enterprise. “While there are ebbs and flows in the political environment around sustainability initiatives, it will remain a priority for many institutions. This should result in further issuances across various regions and sectors.”

Mike Hayes, KPMG’s Global Climate Change and Decarbonization Leader, adds: “It should be noted that while the bulk of global investment will be directed toward sustainable energy and infrastructure, many of these projects involve a critical social dimension—referred to as the Just Transition.”

“In other words, unless social issues such as community and employee buy-in are addressed, projects are unlikely to move forward. This is one important role that social bonds can play in supporting infrastructure investment.”

According to the UN’s Financing for Sustainable Development Report 2024, the global financing gap for sustainable development remains vast—estimated at $4 trillion annually. While social bonds can help bridge part of this shortfall, they are unlikely to close it entirely.

Geopolitics is no longer just a threat—it’s a strategic variable. From great-power competition to technological shifts and a fractured trade order, today’s volatility is reshaping global business. Oliver Jones, head of EY-Parthenon’s Geostrategic Business Group, tells Global Finance how forward-looking companies are embedding geopolitical thinking into their risk frameworks, investment decisions, and long-term planning.

Global Finance: What are some of the most pressing geostrategic risk factors that companies should be concerned about in the next few months?

Oliver Jones: I think I would start by saying that many of the issues that are affecting companies are global in nature. So the way that I often see it is to understand the trends that underpin both the risks and the opportunities across multiple regions.

If you look at the outlook for 2025, we identify three really big themes. One is the shift from this election super cycle of 2024 into new government, and therefore new policy making.

Underlying trend two is the kind of reemergence or the strengthening of geopolitical rivalries, almost a type of old-fashioned geopolitics around who has the most energy, and the active conflicts/wars that sadly still exist and continue.

Thirdly, is a shift to economic competition. No longer is it just about near shoring, or friend shoring. There’s a real premium on industrial activity being onshore in one’s own domestic market. Now we see some of the more recent interventions, for instance, aimed at seeking to compete around things like the large language models and generative AI, and that’s seen as an area of economic competition.

GF: What does that mean for international business, and how they should plan for the future?

Jones: One of the features of this landscape is that geopolitical risk, but also geopolitical opportunity is to be found across almost all geographies at the moment. And so the interesting question for boardrooms and the C-suite is where the opportunities may lie. Where is the playing field becoming more level? How do I change my investment planning away from being almost in survival mode to being about thriving and taking the opportunities.

GF: So if we could think of geostrategic risk and opportunity analysis in terms of a framework. Where do we start?

Jones: It’s really important to professionalize your approach. The first thing to do is to scan the environment, and scan means to understand the outside world and understand the forces that are shaping your environment. It sounds very basic but we know that many companies really struggle to do this. It’s also really important to take a quantitative approach to this rather than simply a qualitative approach and to have a wide range of voices and evidence base in order to really understand what’s going on. The second is to focus, and what we mean by that is to focus on what it means for the business—the impact on future strategy. You have to really incorporate geopolitics into your existing risk management frameworks and it’s centrally important that those risk management frameworks have a voice at the Board.

GF: Who should have the responsibility for understanding geopolitical risk and opportunities?

Jones: The evidence we have at the moment is that there’s not one specific governance format. Sometimes it is one individual being given responsibility. Sometimes it’s a committee given responsibility. But there’s a couple of things that are absolutely crucial, one of which is that a specific person or a specific body must have lead responsibility. This can’t be something that is distributed between three or four parts of the company. There must be a single entity that has ultimate responsibility.

The second crucial thing is that that entity—whether it’s an individual or a group—will have to span across the whole of the company. They need to be able to automatically see the picture across all the different functions because geopolitics is affecting all parts of businesses.

GF:  Where do you see the CFO and finance function best fitting in terms of the analysis of geostrategic risk?

Jones: I think the CFO and the finance function should be central to every stage, and the reason for that is coming back to the point that geopolitics is affecting so many different dimensions of your business. For someone like the CFO it’s crucial that they understand these issues, but that all the different aspects of the business are understanding these issues as well and are reacting in the right way.

I think the finance function, more generally can play an important role in quantitative modeling of these impacts—what happens to the cost base; what it does to potential revenues across all the different dimensions of the business and how to incorporate that into the strategic plan. Clearly that’s front and center of any CFO’s agenda.

More coverage of how corporate leaders are responding to tariffs and supply chain turmoil:

Dyslin, Global CIO and President of Global Investments, discusses managing yen exposure, the role of private investments in the insurance giant’s $100 billion portfolio, and big insurance M&As.

Global Finance: You oversee Aflac’s investment portfolio of about $100 billion, the bulk of which is in Japan, where the company has a large presence. What big changes have you seen there in recent years?

Brad Dyslin: Roughly three-quarters of all things Aflac are Japan-related, as it pertains to my world—earnings, cash flow and investment assets. The biggest change we’ve seen over the last few years in Japan has been interest rates. They had been extremely low for at least the last 25 years, even before the financial crisis. Ten-year government bond interest rates were below 2%, and then they went negative in 2016. That also happened in a few places in Europe, but Japan kept its interest rates very low for a very long time as it tried to stimulate the economy and to rekindle inflation.

Today, we’re finally seeing that happen. Inflation has reignited in many parts of the world, including Japan. That’s caused the Bank of Japan to start moving interest rates up for the first time in at least a generation. In just the last two years, the 10-year bond has gone from 0.4%, or 40 basis points, to about 1.5%. We have a large amount of our portfolio and a significant amount of cash flow denominated in yen, and it’s obviously welcome news to have higher yields.

GF: What asset-allocation framework do you use for managing the portfolio in Japan?

Dyslin: I’ll highlight two things we have done to update our asset allocation in the last few years. The first one is how we’ve utilized U.S. dollar assets for the Japan portfolio. The second, like much of the industry, is how we’ve utilized private assets in the portfolio, notably private credit and private equity.

For the U.S. dollar assets, this is driven by our strategic asset allocation and our approach to asset-liability management. You can think of our portfolio in Japan as consisting of two big pieces. The first chunk is the amount of capital we set aside for future policy claims. Those claims will be in yen for our Japanese customers. We back that liability with yen assets. Supporting that is the capital of our owners—the regulatory and economic capital to make sure there is a strong financial base to support those yen liabilities. That belongs to our U.S.- based shareholders, so we hold that capital in U.S. dollars

To sum up, the money owed to policy holders is in a yen portfolio. The money that belongs to our U.S. shareholders is in a U.S. dollar portfolio. It sounds pretty simple today, but it gets a little bit more complicated when you start factoring in things like regulatory capital and all the regulations an insurance company needs to manage.

GF: What’s the impact of the tariffs being levied by the Trump Administration?

Dyslin: Tariffs are an issue that many business leaders, political leaders and investors are all grappling with. Every indication we’ve seen suggests that they will be inflationary, but the magnitude remains to be seen. As yield-based investors, generally we like higher yields but not at the expense of an economy that could be dealing with higher inflation.

We’ve seen the market respond to tariffs with lower yields. The market is telling us it’s more concerned about a slowing economy than they are about inflation coming from tariffs. So that’s one area we’re watching very closely. At the security level, some companies will be more impacted than others. Some have more ability to adjust to a tariff regime than others, and that’s where our team of around 20 professional credit investors comes in. They focus on understanding these companies. That entails understanding their management teams, their capital structures, and their cash-conversion cycles of all these individual credits. That level of analysis really makes the difference for us.

GF: There’s been some notable M&A activity in which asset managers are acquiring insurers. For example, KKR acquired Global Atlantic Financial Group last year. What’s your take on this trend?

Dyslin: This has involved some alternative managers buying insurers outright, as well as creating strategic partnerships. I’ve been an insurance money manager my whole career, so I find this all very fascinating. It’s gratifying to see these alternative managers taking an interest in insurance company assets, and I expect this trend to continue. It’s exactly what Warren Buffett has done with Berkshire Hathaway—using the stable cash flows and long-term nature of insurance capital to support an investment platform. We’ve seen an explosion of growth that has created some very large managers focused on these various alternative assets.

I expect alternative asset managers to continue forging partnerships with insurance capital. It’s much easier to invest when you’ve got regular, recurring insurance money from premiums and portfolio cash generation, as opposed to having to keep raising new funds. With an insurer, you’ve got an underlying business that generates recurring cash.

GF: How do you incorporate shifting macroeconomic factors into running the portfolio?

Dyslin: We don’t actively reposition the portfolio based on macro conditions like interest rates or currency fluctuations. The way we’ve tried to neutralize our yen exposure is by setting up these two portfolios. So, it’s a yen portfolio for yen liabilities and a dollar portfolio for dollar liabilities, or dollar surplus, which I view as a liability to our shareholders. That’s how we do it in our organization. Every investment manager is managing some sort of liability. It could be to perform against a benchmark. It could be a pension obligation. In our case, it’s future insurance claims. So, investing to meet or exceed the expectations of that liability is the key, and that’s what we really focus on when we set up our strategic asset allocation and making allocation decisions.

I know you’ve asked about how we change the portfolio based on movements in the yen or interest rates. If we’ve done our job correctly—and we have good, solid asset-liability management in place—a lot of that doesn’t matter, or doesn’t matter much. It’s not going to have a big impact on our portfolio. You’re not going to suddenly see the portfolio just shift around because interest rates are 50 basis points higher.

We do make tactical decisions, and aim to be opportunistic, but that’s done more at the security level than at the broader asset-allocation level.

GF: Are most of your holdings government bonds?

Dyslin: We do own a significant portfolio of Japan government bonds, or JGBs. Going back to that yen portfolio I mentioned earlier, we would prefer more yen-denominated credit holdings, but it’s very difficult to find acceptable investments that meet our needs. So we own a lot of JGBs, in part because we need an outlet for yen investments. JGBs also provide liquidity, and they are very long maturity assets, often 30 years. That helps us match our long liabilities against long assets. We also have a very significant corporate public bond portfolio, which provides not only liquidity but also additional U.S. dollar-based income.

GF: Do you have any exposure to high-yield bonds?

Dyslin: It’s about 1% of the portfolio. Most of our high-yield exposure is through private middle-market direct lending, which we believe provides much better value for the risk.

As far as maturity ranges of the securities we hold, it really is across the board and varies by asset class. For our primary outlet for below investment grade—middle market loans—those are generally shorter, often with maturities of five to seven years. Our JGBs tend to be longer, 30-year bonds. Our A-focused investment-grade credit portfolio typically has maturities of 10 to 15 years.

In the second part of Global Finance’s conversation with former US Secretary of Commerce Wilbur Ross—who served during President Trump’s first term—the discussion shifts to the impact of Trump’s tariffs and trade policy on CEOs, CFOs, and key trading partners like Canada, Mexico, and India.

Global Finance: What would you recommend to CEOs and CFOs navigating this climate of uncertainty due to US tariffs and trade policy as they determine their near- and long-term strategies?

Wilbur Ross: Yes, reshoring and nearshoring were some things that would develop momentum in any event. President Trump is going to accelerate that.

Whatever plan people had for relocating production, it would be wise to accelerate it. Now, whether that means moving operations to Mexico or the US, that’s another question. But the days when a company could make one component in one country, a second in another, and a third in yet another—then bring them all to a fourth country for assembly—are ending.

Therefore, it should be more of a question of to what degree you relocate facilities and whether or not to do so, and to a degree where to relocate them. The rules of origin will be much more important to Canada, but particularly to Mexico, than before. So, as long as one incorporates that into their thinking, I think relocation is the wise move to make.

GF: Is the message different for CEOs and CFOs outside the US?

Ross: Yes, it could be if they adopt policies similar to Trump’s. We are moving toward an era where what has been called “protectionism” becomes much more of a centerpiece of everyone’s trade policy. But what Europe must do to be effective is to deregulate some. The regulatory burden that European governments impose on their companies is a real impediment to reshoring. Europe has become too intrusive in the business community.

Trump has also said he will require his cabinet members to cancel an even higher ratio of existing regulations relative to any new ones they implement—higher than what we had the first time. The first time, you were required to cancel two for each one you put in. He may be pushing for as many as eight, but certainly more than two. That’s one thing.

Tax policy is the other thing. You have to look at Trump’s trade activities in the context of what he is doing overall. Between deregulation and reducing corporate taxes, he’s changing the economic attractiveness of being in the U.S. regardless of tariffs. And then when you load on top of that, a bit sturdier tariff policy, you have a combination of factors that will prove very powerful.

GF: Which means that you also think this will be the outcome of the current situation?

Ross: Okay, well, there will naturally be a lag. You can’t build a new facility of any size in 10 minutes. There may be some near-term dislocation as we face higher tariffs, but we don’t yet have the increased production to offset them.

Now, that’s not a universal problem. Many of our industries operate at only 70–80 percent capacity. Therefore, not only will they be able to meet increased demand, but this will also help them absorb part of the tariff on imported components. When production increases from 70 or 80 percent capacity, the marginal costs are very small. You’ll have that factor and probably another factor—currency readjustment. How that plays out will have an important impact on how well industries do globally in each area.

To that end, if U.S. Federal Reserve Chairman Jerome Powell is slow to reduce interest rates while Europe moves at a faster pace, that will clearly have implications for currencies.

One of my concerns for Europe is that if they lower interest rates too quickly relative to the U.S., it could have real impacts on their currency. That would hurt imports but help exports. If I were a European manager, I would be more eagle-eyed than ever about the outlook for currency fluctuations.

GF: Looking at the various industry sectors, are there sectors that deserve tariffs? Are there also sectors that should not see tariffs in these negotiations?

Ross: Well, I have focused more on those who might need it than those who might not. However, pharmaceuticals are a big import to the U.S. Since U.S. drug prices are already higher than others, I don’t think hefty tariffs on pharmaceuticals would be particularly well-fitting to our economy.

But they’re going in on the really big item—the automobile. Automobile manufacturing has caused a fair degree of factory expansion here and in Mexico. In the automotive industry, you must look at the U.S. and Mexico combined because of the concept of rules of origin. In those areas, it’s inevitable. So, I think you’re right—it will vary somewhat by industry. But for the most part, most manufacturing businesses probably don’t expect there will be more tariff burdens.

GF: Would large U.S. exporters, such as technology manufacturers, be affected negatively by this?

Ross: Well, Europe doesn’t have the technological content we have so far. The giant companies in Europe are not comparable to what we call “The Magnificent Seven” over here. Europe’s response seems to have been antitrust and tax complaints, trying to hold back American companies rather than doing things that would effectively build up a European champion.

GF: What of those U.S. industry sectors geared more toward exports? Are they at risk because of tariff reciprocity in the near term?

Ross: Well, apparel is a significant import from Asian countries, and it wouldn’t surprise me if that were to continue. Some of those brands, such as the European brand Zara, have become very, very powerful players in the US. It’s a Spanish company, but it mainly produces its material in Turkey. Meanwhile, Vietnam and Mexico have become big competitors in what we used to call sneakers. So, some things will remain there that will not be affected by the tariffs.

But remember, the real purpose of the tariffs—and one that I hope will be achieved long term—is to let the rest of the world know exactly what they must do to bring our tariffs down, namely, to bring down their own tariffs. The unexpected result of the new US tariff policy could very well be lower tariffs in the long term.

Take India, for example. India’s tariffs are extremely high on most products. Prime Minister Narendra Modi wants to industrialize India. It’ is a logical place to be competitive with China if they can meet their infrastructure needs, because Indians have very good quality manufacturing skills, technological skills, and engineering skills. They have a large population base, so there’s no reason they can’t compete. What’s been holding them back has been the need for more roads and railroads. You need things like that in the way of transportation infrastructure to be much more highly developed for India to flourish. There’s a good chance that PM Modi will do that.

Vietnam has already benefited greatly from the pressures being put on China, which will probably continue. However, Vietnam has a much smaller economy and population base, so it can’t remotely replace China.

Read Part 1 of Global Finance‘s interview with Wilbur Ross: