SPECIAL REPORT: THE BAHAMAS 2023-4
ENTER
SPECIAL REPORT: THE BAHAMAS
SPECIAL REPORT: THE BAHAMAS 2023 – Part One
CONTENTS
The carbon credits market and The Bahamas
Antoine Bastian of Genesis Fund Services Limited explains how The Bahamas' huge wealth of seagrass meadows can contribute to addressing climate change
Delivering for a captive audience
Michele Fields, Superintendent of Insurance, Insurance Commission, gives her thoughts on legislative amendments and the captive and international market
Navigating the digital frontier
Christina Rolle at the Securities Commission of The Bahamas discusses the latest reforms in the region and how that impacts on both digital and traditional investments
Getting real on climate finance
Aliya Allen, Partner at Graham Thompson, looks at how The Bahamas is taking a leading role in the global fight against climate change
Foreword
International Investment Publisher Gary Robinson introduces this Bahamas mini ezine
Key developments in banking and finance
Higgs & Johnson looks at the state of The Bahamas economy, what the Central Bank is doing to update the country's payment system, and how the government is planning to modernise regulation of digital assets
Aliya Allen, Partner at Graham Thompsom, looks at how The Bahamas is taking a leading role in the global fight against climate change
Interviews
All nine videos from this mini ezine
All four video interviews from this mini ezine, with insights from Shonalee Munroe of Genesis Fund Services, Michele Fields of the Insurance Commission of the Bahamas, Aliya Allen of Graham Thompson and Christina Rolle of the Securities Commission of The Bahamas
A preeminent jurisdiction for wealth management
Dinesh Menon of Higgs & Johnson explains what sets The Bahamas apart from other offshore and onshore locations and what it offers wealth managers and wealth creators
The pillars of innovation
Paul Winder of Deltec Bank & Trust Limited lays out the five foundational elements that drive innovation, and explains why they're needed to face today's problems
systematic trading overrides bad decision making
Dr Iyandra Smith Bryan of Quantfury Trading Ltd discusses how sophisticated trading software is saving human traders from their own dark urges and frailties
Investment strategies through systemic research
Carl Illing of ActivTrades explores how technology has changed the way businesses operate and advises on how traders can deal with a world still in crisis mode
systematic trading overrides bad decisions
Dr Iyandra Smith Bryan of Quantfury Trading Ltd discusses how sophisticated trading software is saving human traders in The Bahamas and elsewhere from their own dark urges and frailties
a leading jurisdiction for wealth management
Paul Winder of Deltec Bank & Trust Limited, lays out the five foundational elements that drive innovation, and explains why they're needed to face today's problems
Dr Tanya McCartney, CEO and Executive Director of The BFSB discusses what financial services can expect in the juristiction over the next 12 months
CEO Message
BFSB MESSAGE
Dr Tanya McCartney, Consultant at The BFSB, discusses what financial services can expect in the juristiction over the next 12 months
Gary Robinson, Publisher of International Investment, previews what to expect from this ezine, featuring key stakeholders from The Bahamas thriving financial services centre...
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s the world has endured this seemingly endless period of limbo and restricted international travel, there has been no
foreword
We also speak to Michele Fields, Superintendent of Insurance, Insurance Commission of The Bahamas, giving her thoughts on legislative amendments and the captive and international market. And Christina Rolle, Executive Director, Securities Commission speaks about the latest reforms in the region and how that impacts on both digital and traditional investments including the revamp of the landmark DARE Act. Aliya Allen, Partner at Graham Thompsom, also looks at how The Bahamas is taking a leading role in the global fight against climate change.
ello and welcome to this latest International Investment ezine, created in association with The Bahamas Financial Services Board – the 2023 Special Report on The Bahamas.
Dr Iyandra Smith Bryan of Quantfury Trading Limited discusses how sophisticated trading software is saving human traders in The Bahamas and elsewhere from their own "dark urges and frailties". The features from Deltec, Quantfury Trading and ActiveTrades have exclusive video interviews with their authors and rounding off the videos, Higgs and Johnson brings us an interview with Senior Associate Keith Major, who discusses aviation in The Bahamas, recent achievements in the industry, and why there's 'always room at the top'. With its updates to DARE Act, and in its dealings last year with the FTX situation, it is clear that the industry continues to be on the front foot when it comes to any challenges and ensuring that it is up to date with global regulation. Thanks for reading and viewing. Best Regards. Gary Robinson, Publisher, International Investment
On the front foot
Small is beautiful
Here they discuss the varied range of options that the jurisdiction has to enable wealth creators to put in place robust, flexible and resilient wealth management structures as part of their wider planning strategies. Carl Illing of ActivTrades explores how technology has changed the way businesses operate and advises on how traders can deal with a world still in 'crisis mode'. Antoine Bastian, Executive Chairman and CEO of Genesis Fund Services Limited, explains how The Bahamas' huge wealth of seagrass meadows can contribute to addressing climate change.
the industry continues to be on the front foot when it comes to any challenges and ensuring it is up to date with global regulation...
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This ezine features several informative features and videos, including an excellent interview with BFSB's Dr Tanya McCartney introducing this mini ezine and discussing some of the acheivements and, indeed, challenges of the last 12 months. It was fantastic to once again visit the Caribbean's finest archipelago and conduct most of these interviews face to face, and it was particularly pleasing to be able to personally present Dr Tanya Tanya McCartney with the International Investment Contribution to Diversity and Inclusion Award 2022-23. We have an excellent feature submitted by Higgs and Johnson entitled The Bahamas: A Preeminent Jurisdiction for your Wealth Management & Structuring Plans.
Divorce and separation have been shown to affect a trader’s performance
Antoine Bastian, Executive Chairman and CEO of Genesis Fund Services Limited, explains how The Bahamas' huge wealth of seagrass meadows can contribute to addressing climate change. We also speak to Michele Fields, Superintendent of Insurance, Insurance Commission of The Bahamas, giving her thoughts on legislative amendments and the captive and international market. And Christina Rolle, Executive Director, Securities Commission speaks about the latest reforms in the region and how that impacts on both digital and traditional investments including the revamp of the landmark DARE Act. Aliya Allen, Partner at Graham Thompsom, also looks at how The Bahamas is taking a leading role in the global fight against climate change. Dr Iyandra Smith Bryan of Quantfury Trading Limited discusses how sophisticated trading software is saving human traders in The Bahamas and elsewhere from their own "dark urges and frailties". The features from Deltec, Quantfury Trading and ActiveTrades have exclusive video interviews with their authors and rounding off the videos, Higgs and Johnson brings us an interview with Senior Associate Keith Major, who discusses aviation in The Bahamas, recent achievements in the industry, and why there's 'always room at the top'. With its updates to DARE Act, and in its dealings last year with the FTX situation, it is clear that the industry continues to be on the front foot when it comes to any challenges and ensuring that it is up to date with global regulation.
Scroll down
Dr Tanya McCartney, Consultant, The Bahamas Financial Services Board discusses what financial services can expect in the jurisdiction over the next 12 months
CEO message
Dr Tanya McCartney, Consultant, The Bahamas Financial Services Board, discusses what financial services can expect in the jurisdiction over the next 12 months
Dinesh Meno is Of Counsel in the Private Client & Wealth Management practice of Higgs & Johnson
Keith Major, Senior Associate at Higgs & Johnson, discusses the current state of aviation in The Bahamas, recent achievements in the industry, and why there's 'always room at the top'
Examples include Argentina, Brazil, Mexico, Kuwait, Spain, Italy, Saudi Arabia, among others.
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It is clear that The Bahamas is well positioned to enable wealth creators to put in place robust, flexible and resilient wealth management structures as part of their wider planning strategies. As a well-regulated jurisdiction with a long history in the wealth management industry, it stands notably ahead of most other offshore and onshore alternatives.
Closing remarks
The Exempted Limited Partnership Act, 1995, offers wealth creators the option of including Exempted Limited Partnerships as part of their wider wealth management structures, which may be holding trading entities or high-risk assets. An Exempted Limited Partnership limits the liability and exposure of its limited partner(s), which is an attractive key feature.
4) Exempted Limited Partnership
Foundations have been widely used for close to 100 years in Europe and Latin America, hence their greater familiarity to clients from those regions. They serve as effective tools for tax, asset protection and estate planning, organising corporate ownership, assisting charities, and the ownership of PTCs, to name a few. With the Foundation Act 2004, The Bahamas became the first common law jurisdiction to introduce foundations’ legislation, providing wealth creators with another vehicle to develop their wealth management structures. A Bahamas private foundation is the common law equivalent of the civil law foundation. Unlike a trust, a private foundation has a distinct legal entity; however, like a Bahamian trust, a founder may reserve certain powers and the foundation is not subject to a perpetuity period. Assets placed within a foundation are owned solely by that foundation and a change in the foundation’s governing body does not affect the legal ownership of its assets.
3) Private foundation
A private trust company (PTC) generally acts as trustee of a specific trust or a group of trusts. The Banks and Trust Companies Regulation Act, 2000, introduced specific regulations for PTCs. Provided it does not conduct trust business, it is exempt from licensing requirements. A PTC allows wealth creators to retain control over the ad¬ministration of his/her own trust, and by using a BEE to hold the shares of their PTC they remove the need for a special purpose trust to hold such shares further simplifying the administration of their structure.
2) Private trust company
The Bahamas Executive Entity (BEE) is a legal entity that is designed to act as a ‘power holder’, whereby it exercises one or more powers/functions within wealth management and corporate structures. For example, it can serve as the protector of a trust or foundation, the settlor of a trust, the ultimate shareholder in a family holding structure or shareholder of a private trust company, among others. Consequently, it can hold key ownership, management, supervisory and investment advisory roles usually held by individuals within such structures, which allows for enhanced governance safeguards and structural continuity, while reducing individual liability and protecting individual identities. It also offers the potential to simplify the operations and reduce the long-term costs of complex structures.
1) Bahamas Executive Entity
B) The following is a summary of a range of other Bahamian wealth management vehicles that are available to wealth creators to use on their own or in conjunction with their trust:
the bahamas stands notably ahead of most other offshore and onshore alternatives
Wealth creators may also be interested to note that there are no income, capital gains, wealth or estate taxes in The Bahamas. The Trustee Act, 1998, exempts trusts for non-resident beneficiaries specifically from taxation. The only exceptions to this are a small nominal fee, called a Trust Duty, that needs to be paid at the time a trust is created and a stamp duty (on an ad valorem basis) that is only charged when Bahamian real estate is conveyed to trustees or non-beneficiaries.
6) Taxes
To protect legitimate creditor claims, the Bahamas Supreme Court has jurisdiction under the Fraudulent Dispositions Act, 1991 (FDA) to adjudicate whether a disposition of assets constitutes a fraud on a particular creditor who has brought an action. If the court finds that the assets were fraudulently transferred, it can set the disposition aside, but only to the extent necessary to meet the claims of that creditor. However, wealth creators may be interested to note that there is no jurisdiction under the FDA to invalidate a trust in its entirety, and under Section 4(3) of the FDA, a claimant needs to commence proceedings within two years of the date of the asset’s disposition/transfer.
5) Firewall / asset-protection features
The concept of forced heirship refers to particular testamentary laws of certain countries that limit an individual’s freedom of testation by stipulating how that person may dispose of his or her assets upon death. In such countries, the deceased’s heirs have a right to claim a portion of that partible inheritance. These forced heirs are persons, usually children and spouse, whom the testator cannot exclude from inheritance due the prescribed portion of the estate they are each entitled to under law. Such rules undermine a person’s freedom to implement a carefully customised succession plan for his/her wealth. In The Bahamas, the combined effect of Sections 7(2)(a) and 9 of the Trusts (Choice of Governing Law) Act, 1989, as amended, and Section 79A of the Trustee Act, 1998, ensure that heirs from forced-heirship jurisdictions would not have a claim against a Bahamian inter vivos trust or its assets, unless the settlor intended for them to be beneficiaries of such a trust.
4) Anti-forced heirship
Wealth creators may also be interested to note that there are no income, capital gains, wealth or estate taxes in The Bahamas
A perpetuity period is the period that defines the life span of a trust and in which the income of the trust may accumulate. Prior to 30 December 2011, all Bahamian trusts had a perpetuity period that was either incorporated into the trust instrument, or if not incorporated, was prescribed by statute. This mandatory period was a product of the long-standing “rule against perpetuities” that prohibited trusts of excessive duration. The Bahamas abolished this rule and consequently trusts created on or after 30 December 2011 can last indefinitely. This allows for the creation of dynastic trusts and avoids expensive and time-consuming restructuring exercises when a trust approaches the end of its perpetuity period.
3) Trust period
While The Bahamas has robust rules in place to enhance the integrity and resilience of its financial industry, it has managed to deftly strike a balance between regulation and preserving privacy and confidentiality for genuine reasons. Bahamian trustees are not required to routinely disclose or file trust documents, details of the trusts they administer and personal particulars of trust-related parties, provided they take all necessary steps to ensure the structures they administer do not facilitate criminal conduct and are fully compliant with world-standard regulations that are regularly updated. Additionally, trustees in The Bahamas need not disclose trust documents to any person without a vested interest, but they are obliged to take reasonable steps to ensure at least one person who can enforce the trust is aware of its existence. This strikes a sensible balance between ensuring the trustee is held to account by at least one person who can enforce the trust and preserving privacy and confidentiality.
2) Disclosure and confidentiality
It is not unusual under modern trusts for a settlor/grantor or a trusted member of the settlor’s circle to reserve certain powers to him/herself, like powers of investment or to provide investment directions. Most trust-friendly jurisdictions will support such trusts; however, only a few jurisdictions specifically allow for this under their statute. Section 3 of the Trustee Act, 1998, expressly provides for the reserving of powers under a trust. This allows wealth creators to establish carefully tailored wealth management structures without losing total control over how the assets are managed and enhanced.
1) Reserved powers
The wealth management industry in The Bahamas has evolved to provide wealth creators with the types of features and solutions they would find especially beneficial. A) The following is a summary of such useful features of a Bahamian trust:
What sets The Bahamas apart
he Bahamas is a sovereign archipelagic nation of 700 islands and cays located off the coast of Florida, US. It was a
former British colony, attaining independence in 1973 while still remaining a member of the British Commonwealth. The first trust company established in The Bahamas in 1936 was The Bahamas General Trust Company Ltd, which is now known as Société Générale Private Banking (Bahamas) Ltd. Eighty-seven years later, The Bahamas continues to be widely regarded as a leader in trusts and wealth management solutions. Many of the world’s renowned financial institutions have well-established presence in The Bahamas, taking advantage of the country’s stable political and economic systems, reliable business infrastructures, a legal profession and judiciary that are very familiar with complex issues relating to wealth management structures, and critical proximity to key markets in North and Latin America.
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The Bahamas: A preeminent jurisdiction for your wealth management and structuring plans
Feature
The wealth management industry in The Bahamas has evolved to provide wealth creators with the types of features and solutions they would find especially beneficial
The first trust company established in The Bahamas in 1936 was The Bahamas General Trust Company Ltd, which is now known as Société Générale Private Banking (Bahamas) Ltd. Eighty-seven years later, The Bahamas continues to be widely regarded as a leader in trusts and wealth management solutions. Many of the world’s renowned financial institutions have well-established presence in The Bahamas, taking advantage of the country’s stable political and economic systems, reliable business infrastructures, a legal profession and judiciary that are very familiar with complex issues relating to wealth management structures, and critical proximity to key markets in North and Latin America.
he Bahamas is a sovereign archipelagic nation of 700 islands and cays located off the coast of Florida, US. It was a former British colony, attaining independence in 1973 while still remaining a member of the British Commonwealth.
The best trading platforms should give the investor a wide selection of indicators and trading tools to further assist with analysing a specific instrument. For example, technical chart indicators help to assess the market and provide an overview of price developments in graphical form over time. They identify trends, support and resistance levels, which then enables investors to find the right times for making buying and selling decisions. Indicators that show trends are called trend indicators or trend followers. However, some of the most used technical indicators are: Moving Averages, Bollinger Bands, Relative Strength Index (RSI), MACD (Moving Average Convergence Divergence), Stochastic Oscillator. Traders often use a combination of technical indicators in their analysis. But even more important than the user friendliness of the platform is the seriousness of a trading platform or the corresponding broker. A trader can recognise a legitimate broker if the company ticks the following boxes: licensed and regulated by a reputable financial institution (Securities Commission of the Bahamas), offers client fund protection, knowledgeable and reachable customer service and segregated client accounts. And where the broker is regulated should be of utmost importance to every trader. As seen during the fall of a well-known crypto exchange in late 2022, multiple international liquidators must sort through the chaotic aftermath of the collapse and work hand in hand with each other. The main US liquidator praised the Bahamian Securities Commission for taking swift action to protect the digital assets held by the crypto giant from being hacked and stolen. If you orientate yourself on the points mentioned, you reduce the risk that you will end up with a dubious broker and thus lose part of your capital or bear excessive costs related to your investment decisions and/or strategies. Overall systemic research is essential for all investors looking to capitalise on the opportunities in the various market segments. By analysing the broader economic and social context in which companies and clients operate, the investor can develop more effective strategies that are better aligned with the changing realities of the global business world.
What to look for in a trading platform
Investment ideas that could drive markets in 2023 include the comeback of mega-cap stocks, carbon capture technologies breakthrough and the up-swing in the commodities super-cycle. Diversify your portfolio by investing in a range of companies across different industries. This will reduce your exposure to the risks associated with a disruption in any one sector. The savvy investor should also keep a close eye on regulatory developments. By staying informed about regulatory changes, investors can anticipate potential risks and adjust their investment strategies accordingly. To take advantage of the volatile markets, traders can rely on state-of-the-art trading platforms. There are numerous trading platforms on the internet, via which speculative investors can trade in various financial products. These include stocks, bonds, ETF’s, currencies, crypto and derivatives. Unfortunately, not all operators of such trading platforms are reputable and need to be diligent when making their selection.
In the search for investment success in the financial markets, every investor – whether private or institutional – is confronted with an unmanageable amount of information. With a realistic self-assessment, you quickly realise you cannot process this wealth of information and condense it into an investment success on your own. In order to understand what is driving the performance of a portfolio, it makes sense to look at the factors and their application. A wide variety of factors are used as filters to screen available company and price data to evaluate possible investment markets. Systematic investing is an investment approach that emphasises data-driven insights, scientific testing, and disciplined portfolio construction techniques to seek varied portfolio outcomes. The mid-cycle environment is still a positive one for riskier investments, and clients remain invested with a moderate risk appetite. The exact rate of inflation and growth is uncertain and will probably remain controversial in the coming months, which means that volatility can be expected to persist. Diversification remains the key to the construction of more robust portfolios. For this purpose, investors might also consider the partial allocation of their investment portfolio into hedge funds. Aside from this macroeconomic stimulus, there are also a variety of factors driving general asset allocation. The fiscal priorities of the individual states are likely to be on infrastructure investments, while the fields of biotechnology, AI and equipment should be carefully observed. However, in 2023 and beyond, the topic of environmental sustainability will probably dominate some of the investment strategies. The earth needs help. The most recent natural disasters around the world show that climate change is top of mind, and the urgency to address it on a scale of 1 to 10 sits at 9.9. It is real and everyone must do their part to avert what scientists have dubbed “the sixth mass extinction event”.
Diversification remains the key to the construction of more robust portfolios. For this purpose, investors might also consider the partial allocation of their investment portfolio into hedge funds
most violent atrocities of war back onto the map of Europe. The associated increase in energy prices is partly responsible for the return of inflation, which we thought was dead, and which is still on our minds to this day. Investment strategies that are formed through systemic research can help the retail investor make better-informed decisions by considering the broader economic and social context in which companies operate. Systemic research involves analysing the interconnected relationships between different factors such as economic trends, industry performance, market conditions and government policies. By looking at the larger picture, the educated investor can gain a deeper understanding of the risks and opportunities the different markets and industries face, and develop his or her investment strategy. One major factor that is currently affecting businesses is technology. The way that companies communicate, operate, and compete in the different markets is changing. One example is the rise of digital payment systems and E-commerce platforms. With their introduction, companies can now reach new clients and areas worldwide. At the same time, the advances in Artificial Intelligence (AI) and machine learning are allowing companies to gain new insights into customer preferences and behaviours. This leads to targeted and more personalised marketing strategies.
ho would have thought that when the Covid-19 pandemic subsided, we would fall into the next crisis mode. Completely new information had to be processed on the financial markets in 2022. The Ukraine conflict has shaken the global community to its core and brought the
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Investment strategies through systemic research – how technology is affecting business
Carl Illing is account representative at ActivTrades
recent natural disasters show climate change is top of mind, and the urgency to address it on a scale of 1 to 10 sits at 9.9
Completely new information had to be processed on the financial markets in 2022. The Ukraine conflict has shaken the global community to its core and brought the most violent atrocities of war back onto the map of Europe. The associated increase in energy prices is partly responsible for the return of inflation, which we thought was dead, and which is still on our minds to this day. Investment strategies that are formed through systemic research can help the retail investor make better-informed decisions by considering the broader economic and social context in which companies operate. Systemic research involves analysing the interconnected relationships between different factors such as economic trends, industry performance, market conditions and government policies. By looking at the larger picture, the educated investor can gain a deeper understanding of the risks and opportunities the different markets and industries face, and develop his or her investment strategy. One major factor that is currently affecting businesses is technology. The way that companies communicate, operate, and compete in the different markets is changing. One example is the rise of digital payment systems and E-commerce platforms. With their introduction, companies can now reach new clients and areas worldwide. At the same time, the advances in Artificial Intelligence (AI) and machine learning are allowing companies to gain new insights into customer preferences and behaviours. This leads to targeted and more personalised marketing strategies.
ho would have thought that when the Covid-19 pandemic subsided, we would fall into the next crisis mode.
Dr Iyandra Smith Bryan is Chief Operating Officer at Quantfury Trading Ltd
Dr Iyandra Smith Bryan discusses remote working, prospective areas for further growth, and her objectives for the year ahead
For those beginning their journeys into the capital markets, it is easier than ever to trade or invest in a systematic way. There are a host of global retail brokerages, such as Quantfury, that make it easy for users to submit orders automatically via mobile applications, making fully automated trading a possibility. Moreover, data such as historical prices, company research and news reports can be downloaded from various websites easily and at no cost. Systematic trading and investing allows users to make investment and trading decisions in a methodical way, with a high degree of ease.
Systematic trading and investing is accessible
Countless research has been done on the performance of systematic investing versus discretionary investing; it has shown that systematic investing often generates far higher performance and is more consistent than discretionary investment. In the Journal of Alternative Investments, researchers concluded that systematic trend-following fund managers had higher returns and better performance than those in other categories. Similarly, researchers from the Man Group analysed the performance of systematic and discretionary managers and concluded that systematic macro funds outperformed discretionary macro funds.
Systematic investing has produced better performance
Systematic investing often generates far higher performance than discretionary investment
A systematic trading approach permits traders to be more disciplined in managing risks, as an appropriate risk management framework can be constructed within the trading strategy itself, rather than being treated as a side-note. The trader can apply or operate within a stated level of risk or permit a variation of risk within a specified range. Statistical techniques permit traders to determine volatility forecasts with a reasonable measure of accuracy, both in the short and medium term, enabling them to keep risks within an approximately limited band. The trader can use conscientious statistical methods to evolve a sound risk-management framework. Together with the use of scientific methods to gauge volatility, systematic trading allows limits to be posited and observed in order to control risks and exposures. Upon these limits being reached, position sizes can be automatically capped or minimised.
A modern example of a commitment mechanism is to be found in Victor Niederhoffer’s 1998 book, Education of a Speculator, where Victor, a hedge fund manager, has a large long position in silver futures. In the book, the Hunt brothers, who had been manipulating the market upwards, are about to succumb to market events that will cause the price to drop. “I decided to set my loss limit at 50% of my winnings... The model story on this point is Odysseus... I locked myself inside a racquetball court instead of tying myself to a ship’s mast. I issued instructions to my assistant and future wife, Susan. ‘Do not listen to my entreaties if I wish to double further. If the losses reach 50% of the winnings, reduce my positions by one half. If I beg to be released, sell everything out’...Some rumours about liquidation by the Hunts had hit the fan... I immediately placed a call to Susan: ‘Untie me, disregard everything I said before’...My faithful companion followed my original directions.” Susan, Victor’s partner, was the commitment mechanism. She closed the entire position and Victor went on to continue his journey. Not all of us have a Susan, so a trading system helps ensure that we remain committed to the goal at hand. Systematic trading, in other words, provides traders with a transposable groundwork for trading that can be better managed from a risk perspective.
We humans are vastly superior to IT systems when we perform tasks that require fundamental analysis and critical thinking, but our emotions often hinder us from using the intelligence that we need to make sound trading decisions. The solution to this problem lies in systematic trading and investing. When we put a trading system in place, it eliminates impulsive reactions and cuts out the human behavioural biases to which so many of us are prone. It also makes it easier for us to pursue a steady and logical trading strategy. System trading and investing also institutes a commitment mechanism that prohibits the interference that may result from the cognitive biases that we humans have. When we institute an objective trading system, we create an omnipotent commitment mechanism. Such a system sets a line in the sand, delineates the rules, is backed by objective data, is a lever that puts just enough friction in place to disincentivise meddling, and produces sounder results.
The solution: Systematic trading and investing
Edwin so eloquently captures one of the weaknesses associated with being human: our inability to remain calm in the midst of panic. What do so many of us do when the market is collapsing? We panic, we run, we exit. Robert Carver, a portfolio manager for one of the world’s largest hedge funds, wrote that during the financial crisis of 2008 his team was terrified and considered liquidating all of its positions in global financial institutions. He wrote in his book Systematic Trading: “After yet another crisis meeting, where we decided to take no action for now”, despite the portfolio managers feeling that it would be best to make some decision, Carver returned to his office the next day and “for the first time in our firm’s history... we had made over a billion dollars in a single day. Our computer system had stuck to its pre-programmed set of trading rules and mechanically exploited the market moves almost to perfection, while [we] terrified humans had discussed [just the day before] us closing it down.” Another frailty of human psychology embedded within a large cognitive bias is overconfidence. We often believe we are smarter than we are, that we have more knowledge about the trading system than we do. This overconfidence can propel us to make decisions on the theory that because we are smarter, we know more and, as a result, our decisions are more sound. This, however, could not be further from the truth. The confidence that we have in our capabilities is often too great because it fails to take into account one of our greatest limitations. Significant personal ‘life events,’ such as divorce and separation, have also been shown to affect a trader’s performance. In an article entitled Limited attention, marital events and hedge funds in the Journal of Financial Economics, the authors’ research concluded that fund managers generated lower realised returns in the years surrounding their divorces. Their stock-selection skills were poorer and their risk-adjusted returns deteriorated and were weaker when compared with control samples. This is evidence that human frailties make discretionary trading and investing so much more arduous over an extended period of time.
Writing in 1923 about the famous discretionary speculator Jesse Livermore, the American author Edwin Lefèvre captured the fallibility of human psychology when it comes to trading or investing in financial markets. “It is inseparable from human nature to hope and to fear. In speculation, when the market goes against you, you hope that every day will be the last day, and you lose more than you should have had you not listened to hope... And when the market goes your way, you become fearful that the next day will take away your profit, and you get out – too soon. Fear keeps you from making as much money as you ought to.”
The problem: How can we protect ourselves from our own frailties?
Fear keeps you from making as much money as you ought to
to make unsound financial decisions. This even applies to those of us who deem ourselves knowledgeable about the markets. Think about the time you have been faced with a decision to buy or sell a position, when sentiments of fear or notions of greed began to obscure your ability to make a decision in a rational and logical manner. We are all driven by irrational factors; ‘being human’ can, unsurprisingly yet regrettably, get in the way of us making the best financial decisions for ourselves and for our lives.
o many of us often find it difficult to manage our investments without emotions of panic or anxiety, leading us
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Dr Iyandra Smith Bryan of Quantfury Trading Limited discusses how sophisticated trading software is saving human traders in The Bahamas and elsewhere from their own dark urges and frailties. The results are often spectacular
How systematic trading and investing overrides bad decision making
accuracy, both in the short and medium term, enabling them to keep risks within an approximately limited band. The trader can use conscientious statistical methods to evolve a sound risk-management framework. Together with the use of scientific methods to gauge volatility, systematic trading allows limits to be posited and observed in order to control risks and exposures. Upon these limits being reached, position sizes can be automatically capped or minimised.
A systematic trading approach permits traders to be more disciplined in managing risks, as an appropriate risk management framework can be constructed within the trading strategy itself, rather than being treated as a side-note. The trader can apply or operate within a stated level of risk or permit a variation of risk within a specified range. Statistical techniques permit traders to determine volatility forecasts with a reasonable measure of
objective data, is a lever that puts just enough friction in place to disincentivise meddling, and produces sounder results. A modern example of a commitment mechanism is to be found in Victor Niederhoffer’s 1998 book, Education of a Speculator, where Victor, a hedge fund manager, has a large long position in silver futures. In the book, the Hunt brothers, who had been manipulating the market upwards, are about to succumb to market events that will cause the price to drop. “I decided to set my loss limit at 50% of my winnings... The model story on this point is Odysseus... I locked myself inside a racquetball court instead of tying myself to a ship’s mast. I issued instructions to my assistant and future wife, Susan. ‘Do not listen to my entreaties if I wish to double further. If the losses reach 50% of the winnings, reduce my positions by one half. If I beg to be released, sell everything out’...Some rumours about liquidation by the Hunts had hit the fan... I immediately placed a call to Susan: ‘Untie me, disregard everything I said before’...My faithful companion followed my original directions.” Susan, Victor’s partner, was the commitment mechanism. She closed the entire position and Victor went on to continue his journey. Not all of us have a Susan, so a trading system helps ensure that we remain committed to the goal at hand. Systematic trading, in other words, provides traders with a transposable groundwork for trading that can be better managed from a risk perspective.
System trading and investing also institutes a commitment mechanism that prohibits the interference that may result from the cognitive biases that we humans have. When we institute an objective trading system, we create an omnipotent commitment mechanism. Such a system sets a line in the sand, delineates the rules, is backed by
We humans are vastly superior to IT systems when we perform tasks that require fundamental analysis and critical thinking, but our emotions often hinder us from using the intelligence that we need to make sound trading decisions. The solution to this problem lies in systematic trading and investing. When we put a trading system in place, it eliminates impulsive reactions and cuts out the human behavioural biases to which so many of us are prone. It also makes it easier for us to pursue a steady and logical trading strategy.
wrote that during the financial crisis of 2008 his team was terrified and considered liquidating all of its positions in global financial institutions. He wrote in his book Systematic Trading: “After yet another crisis meeting, where we decided to take no action for now”, despite the portfolio managers feeling that it would be best to make some decision, Carver returned to his office the next day and “for the first time in our firm’s history... we had made over a billion dollars in a single day. Our computer system had stuck to its pre-programmed set of trading rules and mechanically exploited the market moves almost to perfection, while [we] terrified humans had discussed [just the day before] us closing it down.” Another frailty of human psychology embedded within a large cognitive bias is overconfidence. We often believe we are smarter than we are, that we have more knowledge about the trading system than we do. This overconfidence can propel us to make decisions on the theory that because we are smarter, we know more and, as a result, our decisions are more sound. This, however, could not be further from the truth. The confidence that we have in our capabilities is often too great because it fails to take into account one of our greatest limitations. Significant personal ‘life events,’ such as divorce and separation, have also been shown to affect a trader’s performance. In an article entitled Limited attention, marital events and hedge funds in the Journal of Financial Economics, the authors’ research concluded that fund managers generated lower realised returns in the years surrounding their divorces. Their stock-selection skills were poorer and their risk-adjusted returns deteriorated and were weaker when compared with control samples. This is evidence that human frailties make discretionary trading and investing so much more arduous over an extended period of time.
Edwin so eloquently captures one of the weaknesses associated with being human: our inability to remain calm in the midst of panic. What do so many of us do when the market is collapsing? We panic, we run, we exit. Robert Carver, a portfolio manager for one of the world’s largest hedge funds,
with a decision to buy or sell a position, when sentiments of fear or notions of greed began to obscure your ability to make a decision in a rational and logical manner. We are all driven by irrational factors; ‘being human’ can, unsurprisingly yet regrettably, get in the way of us making the best financial decisions for ourselves and for our lives.
o many of us often find it difficult to manage our investments without emotions of panic or anxiety, leading us to make unsound financial decisions. This even applies to those of us who deem ourselves knowledgeable about the markets. Think about the time you have been faced
How systematic trading and investing overrides bad, emotional decision making
1. mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/the-eight-essentials-of-innovation
2. innovationmanagement.se/2009/05/08/the-people-focus-in-innovation/
3. digitalcxo.com/article/the-people-part-of-the-innovation-equation
4. www.fastcompany.com/90847467/most-innovative-companies-finance-2023
5. www.entrepreneur.com/leadership/11-proven-habits-of-highly-innovative-people/313733
6. www.businessinsider.com/sam-altman-chatgpt-openai-ceo-career-net-worth
7. www.washingtonpost.com/brand-studio/wp/2021/05/24/feature/how-better-collaboration-can-boost-innovation-and-success-in-the-new-normal/
8. hbr.org/2022/10/4-types-of-innovators-every-organization-needs
9. qmarkets.net/resources/article/4-innovation-culture-best-practices-from-the-worlds-most-successful-companies/
References:
Today, innovative ideas are needed more than ever as the world faces unprecedented social and environmental challenges. However, these ideas need to be transformed into concrete action, which require a leap of faith. The Googles, Amazons and Microsofts of the world could not exist without the commitment, faith, and continued passion of their entrepreneurial leaders. For over 75 years, Deltec Bank & Trust Limited has been a champion of innovators, entrepreneurs, and nomads. Our commitment to the global innovation ecosystem is built on a belief in embracing calculated risks, investing in bold thinkers in order to help bring their ideas to life. With tailored financial services that cater to highly demanding, rapidly scaling, complex and innovative entrepreneurs and their respective ventures with prudence and sound risk management, Deltec hopes to usher in a new era of innovation aimed at tackling some of the world’s biggest challenges.
Turning ideas into action
Innovation demands an almost complete reverse order of how corporate hierarchy operates. Therefore, it also demands humility. Top executives should serve to create the structure and the environment conducive to idea generation, refinement, and implementation by their employees. This is the other side of the coin to the generally accepted practice of promoting stock ownership among employees and giving them a reason to care. World-leading companies have shown us that revolutionary ideas, the ideas that make the other attempts worth it, require constructive feedback from all departments within a global corporate culture that encourages failure. It's the sincere trying that matters, in addition to, or perhaps much more than, the results. Among today’s leaders, W.L. Gore and BMC Software encourage employees to fail, which ironically indicates their leadership. Failing means that innovation is happening, and that employees feel unafraid to submit their ideas. Because sparks are flying like a reusable rocket's factory floor, a great idea is all the more likely to land.
Pillar 5: Humility
World-leading companies have shown us that revolutionary ideas, the ideas that make the other attempts worth it, require constructive feedback from all departments within a global corporate culture that encourages failure
Companies across industries oscillate between ideation, refinement, and implementation. When new ideas and potential new revenue streams become essential to operations, companies are in the ideation phase. When ideas surface, whether organically or through strategic acquisitions, they must be refined. Finally, implementation of the ideas. The overall need and life cycle of the firm dictates the relative importance of each. A heavily saturated market desperately in need of new technology or innovation for further growth prompts ideation. Phones before Apple's iPhone were an example of an existing technology in need of a refresher. Refinement refers to the improvement of an existing idea, product, or both. Similar to the continuous improvements of Apple's products today, it scans for areas to improve to increase brand power and customer loyalty. Implementation refers not only to the doing, but to the timing. Effective implementation calls for militaristic thinking. The task here remains to define who the best team members are for bringing the idea to fruition, and then to scale. The fourth step to innovating is to know your team – treat them like individuals with unique passions, likely expanding beyond contract objectives. We will find that some are highly adept at generating ideas, others at viewing ideas from different angles, and others at seeing them come to life.
Pillar 4: Mobility
The next step in the innovation ecosystem is collaboration, the act of coming together, connecting and ideating on a joint project. In an innovative company, leading executives support the ideas best addressing client needs, both now and in the future. They avoid stifling or constraining thinking, understanding that their role is to create an inspirational environment that nurtures innovative thought. The United States’ Defense Advanced Research Projects Agency follows what it calls the 'Heilmeier Catechism' to evaluate proposed ideas. Self-assessments provide inherent structure, allowing the team to assess risk and define their targets, immediate and long-term needs, costs and overall benefits. By focusing on clients first, we receive ideas that drive cost-effective growth. Multibillion materials science company W.L. Gore asks explicitly about the customer needs and new products will answer. Then, various stakeholders chime in and judge the merits of proposed ideas, with successful ventures circulating across all the company's departments. The third step to innovating is to define the client-centric structure, and with it, require discipline. Discipline fans the flame and brings diverse teams together to celebrate their collective enterprise within a culture that explicitly rewards the group while honouring the initial inventor. Effective government agencies or billion-dollar companies follow this model.
Pillar 3: Collaboration
Good ideas come from the petri dish of many other ideas. Incomplete ideas tend to have grains of brilliance but suffer in their remaining aspects and fail to reach fruition but offer a starting point for others
Good leadership inspires and nurtures innovation, facilitates growth and rewards strategic and creative thinking. Good leadership not only produces a robust culture but also cultivates the leaders of tomorrow. The immediate impulse may be to consider ideas that do not meet the threshold of a “great idea” and terminate these ideas before they are fully realized. However, this only reflects decades of poor culture management and a failure to understand innovation. More often than not, failure breeds success, ushering the next idea, or prompting the evolution of an existing concept. Good ideas come from the petri dish of many other ideas, either incomplete or already in place. Incomplete ideas tend to have grains of brilliance but suffer in their remaining aspects and fail to reach fruition but offer a starting point for others. Amazon presented a model to follow. It established the 'PR/FAQ' format – a press release outlining a product's intended vision at launch and a FAQ explaining the customer benefit. These employee- submitted ideas then receive evaluation and circulate amongst other innovators. The collective process distributes rewards and recognition instead of one individual out of many but honours the first idea generator.
Pillar 2: Leadership
The primary element driving innovation throughout centuries is passion. Also referred to as 'intrinsic motivation’, this is the rare spark of doing the work for enjoyment's sake. From timeless works of art, to elite sport and engineering masterpieces, passion is at the core, driving inherent satisfaction and joy. Psychologist Teresa Amabile discovered that the explicit expectation of judgement as part of a greater reward effectively killed creativity. It destroyed innovation in its tracks, while a lack of judgement inspired creativity. Embracing passion and affording it the space to grow and spark creative thinking naturally allows for bold, innovative thoughts and actions. This feels counterintuitive but is in fact logical at its core. Those who anticipate or allow space for intrusive thoughts and negative feedback are often prevented from exploring the full depths of their creativity and do not innovate. Instead, they cater to what evaluators might perceive as ‘good’ and lose their passion and concern for the project beyond the immediate, external reward. The first step to innovating is to find a purpose. Professionals who spot the whitespace, the problems to be fixed, the new frontiers to explore and opportunities to engage with are few and far between. For that exact reason, this rare group of individuals are in high demand.
Pillar 1: Passion
However, more often than not, innovation simply comes in the form of a new process or mode of thought; a more efficient way of doing something, an approach for streamlining business practices or a tool to enhance and achieve a goal. Innovation stems from the world around us, as global citizens draw upon their lived experiences, surroundings and networks. At its core, innovation can be broken down into five foundational elements: passion, leadership, collaboration, mobility, and humility. We will explore each element to uncover its role in driving innovation and the respective business implications today and in the future.
he word ‘innovation’ often calls to mind the technical and the complex. We think of new industrial or biomedical revolutions, such as reusable rockets or antibiotics, or ground-breaking consumer products, such as smartphones.
Paul Winder, fiduciary services at Deltec Bank & Trust Limited, lays out the five foundational elements that drive innovation, and explains why they're needed to face today's problems
Paul Winder is head of fiduciary products and markets at Deltec Bank & Trust Limited and CEO of Deltec Fund Services
2. innovationmanagement.se/2009/05/08/ the-people-focus-in-innovation/
revolutionary ideas require constructive feedback within a global corporate culture that encourages failure
Good ideas come from the petri dish of many other ideas, either incomplete or already in place
revolutions, such as reusable rockets or antibiotics, or ground-breaking consumer products, such as smartphones. However, more often than not, innovation simply comes in the form of a new process or mode of thought; a more efficient way of doing something, an approach for streamlining business practices or a tool to enhance and achieve a goal. Innovation stems from the world around us, as global citizens draw upon their lived experiences, surroundings and networks. At its core, innovation can be broken down into five foundational elements: passion, leadership, collaboration, mobility, and humility. We will explore each element to uncover its role in driving innovation and the respective business implications today and in the future.
he word ‘innovation’ often calls to mind the technical and the complex. We think of new industrial or biomedical
An interview with Michele Fields, Superintendent of Insurance, Insurance Commission of The Bahamas, giving her thoughts on legislative amendments and the captive and international market
Local insurance managers and other financial intermediaries are still finding ways to promote both their own services and the jurisdiction as a whole in the captive market. The Bahamas Financial Services Board (BFSB) has helped them do so, highlighting the jurisdiction as a competent and competitive international financial centre that promotes synergies between the industries of the financial services sector. The Insurance Commission of The Bahamas, the insurance industry’s supervisory authority, continues to enhance the captive industry by streamlining the application process and maintaining a robust regulatory and supervisory framework that meets international standards. Over the past ten years, the number of licensed captive insurance entities registered in The Bahamas has grown – at first very rapidly and, in the last five years, steadily. As a result, growth has occurred in overall net premium volume along with the expansion in the number of parent company regions throughout the US and Europe. The growth in The Bahamas’ captive market is largely attributed to small-to-medium sized entities (SMEs) seeking to set up their own segregated accounts. This option has proven to be cost effective for those SMEs, especially since they can and do outsource administrative and operational oversight to locally registered insurance managers, financial and corporate service providers and other financial service professionals such as lawyers and accountants. In 2021, as part of its strategic plan to amalgamate legislation, the commission began a review of the jurisdiction’s two principal insurance laws – the Insurance Act, 2005 and the External Insurance Act, 2009. As Michele Fields, Superintendent of Insurance, Insurance Commission of The Bahamas, outlines below, the purpose of the review, which is still in progress, is to streamline regulatory and supervisory requirements and to enhance legislation to help insurance structures. In this Q&A, Gary Robinson, Publisher, International Investment caught up with Fields at the Insurance Commission of The Bahamas' HQ in Nassau earlier this year.
he Bahamas’ participation in the captive insurance industry dates back to the 1960s. Given the islands’ rich history in this niche industry, The Bahamas Government has taken steps in recent years to ensure this business actively contributes to the overall growth of the financial services sector.
Wendy Warren is Managing Director at Caystone Solutions. You can email her at contact@caystone.com
We have two pieces of legislation. We have the Insurance Act of 2005 and the External Insurance Act of 2009. What we are doing now is amalgamating those two pieces of legislation. Whereby the intent is that the categories of licenses will change so that the emphasis will be on the type of business that the entity is doing and the structure of the entity rather than where the policyholders are located. Where we are now is that the amalgamation is well underway, the draft legislation we expect to go to consultation [in Q2/Q3 2023], and then we look to get that put through parliament. We want to be as nimble as possible, and being a small jurisdiction, we can get greater access to the politicians and powers that be so we can make things happen more quickly. We are trying to do the leg work internally so that when we do send to government it is in a state where it is all ready to go.
Tell me about the ongoing legislative amendments in the insurance industry in The Bahamas
Michele Fields Q&A
I think what it will do is that we will not have that demarcation of international business versus domestic business. We have a very robust domestic business in The Bahamas for insurance. We want the external insurers to have the same level of supervision. Whether the policyholders are here or abroad, we look at the size, nature and complexity of the institution, as to the regulatory measures we take.
Will this improve international business and help the growth?
The thing that drives almost any business is profit. Policyholders and active owners look for more control and more control over their costs. So, what causes owners to look at the particular domicile? Some of it is costs. We think that The Bahamas is a fairly priced jurisdiction. Our regulatory framework is such that we can oversee any type of international insurance business. The service providers are here. We have the accountants and lawyers, managers and there is the possibility of outsourcing in any service that needs it. The regulatory costs are fair and the way we look at the risk-based approach, I think, is welcome for international businesses.
What are the factors that you think are necessary for the continued growth for international and captive business in The Bahamas?
The prospect for the future is wide open. The captive, alternate risk transfer mechanism is always going to be a consideration for company owners, because they are looking at containing costs. So that will always be in the table as a mechanism.
What does the future prospect look like for the captive and international market?
We have a very robust domestic business for insurance. We want the external insurers to have the same level of supervision
Aliya Allen, Partner at Graham Thompson, answers questions on how The Bahamas is tackling ESG issues
The Bahamas gets real about climate finance
Aliya Allen discusses Graham Thompson's hopes and objectives for the future, the importance of carbon credits to The Bahamas, opportunities in the digital space, and international business
we sit in a hurricane corridor, hoping and praying with bated breath that another Hurricane Dorian does not visit us. We know that climate change is real
Thirdly, it is an outside-in standard with the host of disclosure regimes from the EU’s Taxonomy Regulation and Non-Financial Reporting Disclosures, the UK with the Task Force on Climate-Related Financial Disclosures, the more recently released International Sustainability Standards Board IFRS S1 and S2. Global regulatory attitudes are coalescing around what climate-related and other social and governance disclosures look like, and they are largely aligned but not the same. Finally, and this is why we should care about ESG in The Bahamas, we sit in a hurricane corridor, hoping and praying with bated breath that another Hurricane Dorian does not visit us. We know that climate change is real. ESG is
What does ESG mean for The Bahamas specifically, and how does it differ from the global landscape?
I’m currently co-chair of the Financial Services Practice of the firm, which encompasses many aspects of financial services, but my current practice is primarily regulatory, advising investment managers, funds, banks, trust companies on a host of regulatory issues. ESG is a complex and challenging area. For boards it involves consideration of what is mandatory, and what is advisable in the light of shifting societal, shareholder, and regulatory expectations.
Can you briefly describe your current role and its intersection with ESG?
The climate disclosure landscape is at the forefront of most of these institutions’ minds. It’s important to realise that a lot of public companies voluntarily disclose climate risk, as a financial risk. What has changed more recently is a global coalescence and enhancement of standards. They aren’t the same, but many contain similar features. Material information disclosure is a feature of The Bahamas’ securities and fund disclosure regime as well, and it is basically any information that would affect an investor’s decision to invest. The ISSB standards will certainly influence all companies. IFRS S1 and IFRS S2 will usher in a new era of sustainability-related disclosures in capital markets globally, including the Bahamas, which requires funds to adopt either IFRS or GAAP.
How does ESG influence capital markets and investment funds in The Bahamas, and what frameworks are being developed or should be considered to support this?
i) ii)
Firstly, boards should be educated about broader considerations for directors as fiduciaries. They have a duty to act in a way the director considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole. Boards need to understand how to balance fiduciary duties, litigation risk, their duty to promote corporate success for shareholders, and truly understand how their ESG policies and frameworks exist holistically to advance the purpose and promote the success of the company. Secondly, whatever framework is adopted should sensibly require disclosure of sustainability factors and how they are employed in decision making, if at all. It should also discourage misleading claims about such processes or the products or funds marketed.
It is very clear we are, in some respects, in a state of immaturity with ESG and boards. Compliance should raise ESG issues with boards, be prepared to assist them with navigating their fiduciary duties and support the organisation of ESG committees with board representation. Boards should expect advancements in transparency and ethical conduct requirements and proactively prepare for the coming standards. Finally, compliance and risk managers should understand the risks associated with ESG factors in the company’s supply chain.
What compliance aspects are crucial for ensuring that boards follow through?
Well, virtually all voluntarily adopted standards become mandatory, with global alignment on a single comprehensive classification and metric. Organisations that do not fully adopt comprehensive ESG policies will find themselves unable to attract significant capital or cut off from companies supply chains. Even with the ESG backlash that we have seen in some investment circles, we will see attitudes towards ESG course correcting. Martin Luther King Jr reminded us that “the arc of the moral universe is long, but it bends toward justice”. I think we are seeing the bending of that arc; even with all the tragedy and inhumanity surrounding us, there is hope that we can still change the world.
What happens in the next decade?
Whenever I look at ESG, I look at it more narrowly and then extrapolate it to The Bahamas. First, more narrowly, it is a top-down standard, at first mostly voluntarily adopted by institutions embracing a broader set of factors than just “financial” by which to measure a company’s commitment to being a good corporate citizen. Most of the SNP 500 companies already make sustainability disclosures. Second, it is also a bottom-up standard; investors in such companies demand it. Funds allocating to ESG require it. They require a host of sustainability metrics to evaluate investments because they also likely have their own ESG policies as a) younger investors care, and b) we are in the midst of the ‘great wealth transfer’ from Boomers to Millennials.
not just a way for more information to be circulating in the public sphere for investors to feel good about themselves. The goal, at least on the “E” side, is the decarbonisation of industries to achieve ne-zero emissions, so that we and our children may be spared a climate catastrophe. A reporting regime can’t solve the social ills that face us globally, but with concentrated effort, targeted investment, public policy support, and corporate responsibility, we may eventually arrive at a better world.
if we are fighting for climate justice globally, we have a moral obligation to do the work at home
In addition, it will be important to understand where the interests are being marketed, what rules are in place in that jurisdiction. For investment managers, what disclosure and other rules are they subject to in their jurisdictions of registration, and if more than one, in all jurisdictions in which they are registered. There are more than 2,000 ESG standards globally. So where should The Bahamas be in all of this? What regulation should we have? Well, IOSCO has already endorsed IFRS S1 and S2. The Bahamas is an ‘A’ signatory of IOSCO, so it has
at least indirectly endorsed this as well. We are still waiting for regulatory positions to be communicated in The Bahamas on this. As for what other sustainability disclosures are required domestically, for now it’s perhaps best to actively begin developing a best practice framework of guidance for disclosures to get in front of what will likely be global mandatory standards, in short order. In the meantime, The Bahamas does not want to simply add requirements that are not useful but if we are fighting for climate justice globally, we have a moral obligation to do the work at home. That likely means not being the last to implement standards that are meant to assist the most vulnerable of us. In the interim, there are a few concrete actions that will help boards better implement ESG factors while managing litigation risk:
From its inception, the Commission has intended for DARE to remain sufficiently flexible to adapt to the ever-changing digital asset landscape
The rapid emergence of digital assets and cryptocurrencies has presented many challenges for regulators in the global financial sector. Recognising the need for a robust regulatory framework to bring legal clarity to this dynamic, evolving space, The Bahamas has taken a progressive approach to the regulation of digital assets. This article, by Christina Rolle, Executive Director, Securities Commission of The Bahamas, explores the rationale behind The Bahamas’ decision to regulate digital assets, the development of the Digital Assets and Registered Exchanges (DARE) Act, 2020, and the key provisions shaping the regulatory landscape that influenced the new DARE Bill, 2023, which we anticipate will become law this year.
The Securities Commission of The Bahamas, (the Commission), the statutory regulator for the nation's capital markets, began developing legislation for digital assets in 2018 after monitoring the industry's rapid growth over several years. The Commission took a thoughtful, deliberate approach to determining what threats, if any, the space represented. The Commission was faced with several considerations, including the lack of legal definition and a globally agreed taxonomy for digital assets, as well as what its overarching approach to digital assets in or from within the jurisdiction would be.
Christina Rolle Q&A
The Commission also fielded significant interest from international and domestic digital asset businesses and related industry stakeholders who thought digital asset businesses could thrive in The Bahamas’ financial services ecosystem. Consistent with the Commission’s mandate to protect investors, facilitate clear and efficient markets, and reduce systemic risk, we opted not to rely on preexisting frameworks as these did not clearly define or scope digital asset businesses and activities. Instead, the Commission sought to develop a bespoke regime that provided legal clarity and definitions for the oversight of digital asset operators and related business activities.
Navigating the digital frontier: The Bahamas’ approach to regulating digital assets
The path toward regulation
First and foremost, The Bahamas had to determine whether it wanted to: (1) allow digital asset businesses to operate within the jurisdiction without a specific regulatory framework; (2) develop a specific regulatory framework to ensure that all digital assets and digital asset activities fall within the perimeters of the regulator’s scope; or (3) prohibit digital asset business activities altogether. From a policy perspective, the Government of The Bahamas determined that it did not want to prohibit digital asset activities, so the Commission then set out to ensure that, in the context of a virtually non-existent domestic market for digital assets, any digital asset businesses operating within the jurisdiction would only do so within an appropriate regulatory framework and with proper regulatory oversight.
Benchmarking international best practices
Crucial to the development of The Bahamas’ regulatory framework was extensive research and evaluation of international regulatory policies, and engagement with policymakers, industry participants, and stakeholders. The DARE Act, 2020 framework was originally benchmarked against legislation from 13 jurisdictions. Careful consideration was given to best practices for activities-based approaches to registration, risk-based regimes for the supervision of digital asset business and related activities, as well as ensuring The Bahamas’ commitment to the global fight against money laundering, terrorism, and proliferation financing.
As a result of this comprehensive development process, the Commission established two important principles for providing the appropriate levels of oversight. First, we determined the legislation would take an activities-based approach to registration. DARE aims to regulate the stated or intended activity of prospective registrants. Secondly, our goal was to develop a risk-based supervisory approach. Consequently, DARE assesses potential risks based on the nature, scope, and complexity of each individual digital asset business. Activities-based registration and risk-based supervision are fundamental to providing the appropriate levels of oversight, safeguarding market integrity, and protecting investors in this evolving digital asset space.
The DARE Act 2020, was enacted in The Bahamas in December 2020 as a robust, bespoke regulatory framework that was specifically designed to protect investors and consumers, align with international anti-money laundering, counter-terrorism and proliferation financing provisions (AML/CFT/CPF), and mitigate associated risks. From its inception, the Commission has intended for DARE to remain sufficiently flexible to adapt to the ever-changing digital asset landscape. This entails ongoing legislative reviews and appropriate
The DARE Act 2020
Significant developments in the digital assets space have continued since the DARE Act, 2020, was enacted. By the time the ‘Crypto Winter’ hit in 2022, the Commission had already begun to see new risks that were not apparent in previous years or even relevant to prior months. Consequently, the Commission identified aspects of DARE that required further consideration. In April 2022, we began consolidating our ongoing review of DARE for the purposes of addressing any legislative gaps, ambiguities, and procedural concerns within the legislation. Our work updating DARE coincided with the International Organization of Securities Commissions’ (IOSCO) development of crypto and digital asset markets recommendations for regulators, to which The Bahamas has significantly contributed.
The Digital Assets And Registered Exchanges Bill, 2023
The DARE Bill 2023 expands the scope of digital asset activities captured under international standards and best practices. Notably, the Bill encompasses a comprehensive range of digital asset activities and appropriate protection mechanisms for the registration and ongoing supervision of operators. The Bill represents an even greater focus on consumer and investor protection by strengthening the existing safeguards afforded to digital asset participants. Such protections include increased disclosure and reporting requirements for digital asset businesses, expanded activities-based registration obligations for potential registrants, and enhanced, ongoing supervision of operators. Notably, the framework addresses the safekeeping and accessibility of digital assets, requiring operators to have adequate systems and controls in place.
Expanding digital asset business activities
To help address these revisions, the Commission engaged the international law firm Hogan Lovells to draft the amendments to DARE and benchmark the proposed DARE Bill, 2023 regime against legislation from jurisdictions such as Hong Kong, the European Union, and New York, USA.
Operators of digital asset exchanges must align their systems and controls with the scale and nature of their businesses. If an entity establishes and operates a digital asset exchange that also provides custody of digital assets or custodial wallet services, it must comply with all requirements applicable to digital asset businesses. Exchanges must segregate customer assets from their own, providing enhanced protection for clients. The Commission has the authority to prescribe additional rules for digital asset exchanges as necessary.
Operating digital asset exchanges
The DARE Bill, 2023, introduces a single comprehensive framework for custody of digital assets or custodial wallet services, prioritising the protection of client interests. The framework establishes clear procedures for the ongoing safety and accessibility of digital assets, along with transparent client disclosures and several requirements specifically concerning the segregation of client assets from the assets belonging to the operator or other non-client assets.
Custody of digital assets or custodial wallet services
The DARE Bill 2023 introduces a first-of-its-kind, dedicated disclosure regime for staking activities that promotes transparency and accountability within the digital asset ecosystem. Authorised registrants must disclose essential information to clients, including details of staking protocols, lock-up periods, potential rewards or interest earned, penalties, and participant selection criteria.
Staking
The Bill includes a new stablecoin regime that requires stablecoins to be backed by reserve assets. Stablecoin
Stablecoin Issuers
The Bill brings a significant set of guardrails to DARE that provide more clarity and legal definitions to its bespoke regime. For example, the categorisation of Non-Fungible Tokens (NFTs) under the DARE Bill, 2023, now depends on the distinction between financial or consumer assets, resulting in financial NFTs falling within the scope of regulation, whereas consumer NFTs, particularly in the realm of gaming, do not.
Guardrails and other provisions
The DARE Bill, 2023, builds on the foundation of the DARE Act, 2020, with an even stronger, comprehensive regulatory framework for digital assets and digital asset businesses. This pioneering legislation establishes a new precedent for current, proactive, and internationally compliant standards and best practices. With refined definitions and exclusions, and expanded provisions and requirements, the new Bill demonstrates the commitment by The Bahamas to investor protection while maintaining a regulatory environment that is designed for innovation, development, and responsible growth in the digital asset industry.
Moreover, the Commission has taken proactive measures to address liquidity events through mandatory reporting requirements, while also granting flexibility to introduce additional safeguards for investor protection. Furthermore, the Bill introduces specific standards to address conflicts of interest and regulate connected third-party relationships. Notably, the Bill also prohibits the issuance of privacy tokens under the legislative framework, although digital asset businesses are not prohibited from conducting business with privacy tokens.
The DARE Act 2020, was enacted in The Bahamas in December 2020 as a robust, bespoke regulatory framework that was specifically designed to protect investors and consumers, align with international anti-money laundering, counter-terrorism and proliferation financing provisions (AML/CFT/CPF), and mitigate associated risks. From its inception, the Commission has intended for DARE to remain sufficiently flexible to adapt to the ever-changing digital asset landscape. This entails ongoing legislative reviews and appropriate updates to the legislation from time to time. In 2022, the Act underwent amendments and the DARE (AML/CFT/CPF) Rules were introduced. The DARE framework aligns with the Financial Action Task Force (FATF) Recommendations, and the legislation has received international recognition for its investor protection and globally compliant standards.
updates to the legislation from time to time. In 2022, the Act underwent amendments and the DARE (AML/CFT/CPF) Rules were introduced. The DARE framework aligns with the Financial Action Task Force (FATF) Recommendations, and the legislation has received international recognition for its investor protection and globally compliant standards.
The Bill brings a significant set of guardrails to DARE that provide more clarity and legal definitions to its bespoke regime
issuers must disclose these assets for evaluation by the Commission. Under the Bill, the issuance of algorithmic stablecoins is expressly prohibited in The Bahamas.
blue carbon credits can potentially mean a 'carbon wealth', with a value north of $50 billion
Key developments and latest trends in banking & finance in The Bahamas
ith the worst of the COVID-19 pandemic and related restrictions firmly in the past, the Bahamian economy has continued to recover over the last 12 months, primarily due to strong performance in the tourism sector, which some are referring to as “revenge tourism”.
In the Monthly Economic and Financial Developments Report for July 2023, the Central Bank of The Bahamas indicated that “the growth trajectory of the domestic economy persisted, although at a moderate pace”, and this growth is projected to continue for the remainder of 2023. While this positive news is being well received, the cost-of-living crisis, high inflation, record energy costs and climate change remain at the forefront of the minds of Bahamian consumers (as applies to consumers in most other countries).
Christel Sands-Feaste, Alexandra T. Hall and Julia Koga da Silva of Higgs & Johnson look at the state of The Bahamas economy, what the Central Bank of The Bahamas is doing to update the country's payment system, and how the government is planning to modernise regulation of digital assets
A number of themes have continued to dominate the legal and regulatory framework this year relating to financial services in The Bahamas, including:
The continued focus of policymakers on strengthening public finances; The ongoing modernisation of the Bahamian payment system; and The establishment of a new regulatory frame¬work for the digital assets space.
• • •
As part of the government’s ongoing efforts to increase revenue and strengthen public finances, additional human resources were allocated to the revenue collection sections of the Department of Inland Revenue. Meanwhile, the enforcement provisions in various revenue-related statutes, including the Value Added Tax Act, 2014, have been enhanced. In addition, the new Business License Act, 2023 (the ‘new BLA’), came into force on 1 July 2023, as a part of the annual budget exercise. The new BLA, among other things, repealed the prior Business License Act, 2010, and expanded the categories of businesses subject to business license tax. The requirement for financial institutions to pay an annual tax based on turnover remains.
While not restricted to the financial services sector alone, another important development impacting all Bahamian entities is the recent overhaul of the economic substance legislative framework.
Continued focus of policymakers on revenue enhancement
The Central Bank of The Bahamas Payment Systems Modernization Initiative is ongoing. 31 December 2024 remains the target date for the elimination of cheque usage. Local financial institutions continue to encourage customers to utilise virtual platforms for the delivery of their services. Regarding the ‘Sand Dollar’, a digital currency denominated in Bahamian dollars, there have been increased efforts to raise public awareness of it and promote its use as an alternative to cash.
Ongoing modernisation of the Bahamian payment system
The legislation regulating the digital assets space (the DARE Act) was initially implemented in 2020. In 2022, the government of The Bahamas published the Policy White Paper on The Future of Digital Assets in The Bahamas (the ‘White Paper’), outlining its vision and policy position on the regulation
Modernisation of the regime related to digital assets
• • • • •
Expanding the scope of digital asset activities that will be subject to regulation; The introduction of capital requirements as prescribed by the Commission; Mandatory ongoing financial reporting (including audited financial statements); The mandatory segregation of client assets; and Enhanced investigation and enforcement powers for the Commission.
It is anticipated that the new Bill will be brought into force later in 2023.
The recent overhaul of the regulatory framework relating to economic substance has impacted all Bahamian entities, not just those in the financial services sector. For background, in accordance with international best practices, in 2018, The Bahamas implemented legislation requiring Bahamian entities engaged in certain activities to establish a substantial economic presence in The Bahamas, and for all Bahamian entities to comply with substance reporting requirements. On 1 September 2023, the 2018 legislation was repealed and the Commercial Entities (Substance Requirements) Act, 2023 (the “new CESRA”), was brought into force. The new CESRA, among other things:
Overhaul of the economic substance framework
The accompanying guidelines for the new CESRA were circulated on 8 September 2023.
• • • •
Shifted the reporting obligation from the entity itself to its registered agent or, if the entity does not have a registered agent, the Compliance Commission; Expanded the list of information which must be reported to the competent authority; Mandates that registered agents or the Compliance Commission obtain this information from each Bahamian entity; and Made some modifications to the classifications for reporting purposes.
First published in Chambers Global Practice Guides, Banking & Finance 2023
Conclusion
The upward trend of the Bahamian economy is welcomed with cautious optimism. The recent legislative changes reflect The Bahamas’ commitment to complying with international best practices and maintaining a sound regulatory framework, while still encouraging innovation.
The Central Bank of The Bahamas, Nassau
of the digital assets space over the next five years. The objectives outlined in the White Paper included growing the sector, increasing the attractiveness of The Bahamas for digital assets businesses, establishing The Bahamas as a leading digital assets hub, and encouraging innovation in the fintech space. In order to address the rapid evolution of the sector and to strengthen the robustness of the regime, the Securities Commission of The Bahamas (the ‘Commission’) confirmed its intention to review and amend the DARE Act during the first half of 2022. As a result, a draft of the Digital Assets and Registered Exchanges Bill, 2023 (the ‘new Bill’), was circulated for industry consultation earlier in 2023. The new Bill seeks to enhance investor protection while maintaining sufficient flexibility to facilitate innovation. The amendments contemplated include, among other things:
Christel Sands-Feaste is is a partner in the law firm of Higgs & Johnson
Alexandra Hall is a Partner at Higgs & Johnson and Deputy-chair of the firm's Tax practice group
Antoine Bastian, Executive Chairman and CEO of Genesis Fund Services Limited, explains how The Bahamas' huge wealth of seagrass meadows can contribute to addressing climate change
Beyond natural beauty: The carbon credits market and The Bahamas
and the Tropic of Cancer Beach in Exuma have allowed me to visualise even more of what The Bahamas has in terms of obvious natural assets and resources. The value proposition of The Bahamas has never truly envisaged the oceans, seas, mangroves and marsh lands as having the potential to create a blue economy with direct contribution to the GDP in and by themselves. Rather, the perspective has always been that the true value of The Bahamas’ natural beauty, embodied in white sandy beaches and balmy breeze, was inextricably hitched to tourism sector. Today, however, with the climate crisis top of mind, the seagrass meadows, mangroves and salt marshes of The Bahamas may well be the answer to a considerable uptick in the overall Bahamian economy, with global implications for challenges posed by carbon emissions.
t has been a privilege for me to grow up in The Bahamas and enjoy the crystal-clear, aquamarine waters as a child and now I continue to marvel at its beauty on my daily drive to work. The opportunities to visit the idyllic, pristine, white sandy beaches at Cape Santa Maria in Long Island,
I
While the economic upside has enormous potential, the Paris Agreement is keenly focused on the impact on society inclusive of adaptation and mitigation for the overall reduction of greenhouse gases, and the sale of any carbon credit in the voluntary market wrapped around a country’s National Determined Contribution. (NDC). NDCs are at the heart of the Paris Agreement and the achievement of its long-term goals. NDCs represents policies and or legislation submitted to the United Nations by each country to reduce national emissions and adjust to the impacts of climate change. In this regard, The Bahamas has taken steps to meet these objectives by submitting to the UN its ‘Updated Intended Nationally Determined Contribution (NDC)’ and “The Bahamas’ First Biennial Update Report to the United Nations Framework Convention on Climate Change”(BUR). Together they form the basis for The Bahamas beginning to install two railway tracks… the rail for economic success but also the rail to impact the environment. The Paris Agreement stipulates that each Party must prepare, communicate and maintain successive nationally determined contributions (NDCs) that it intends to achieve. The Bahamas NDC provides a fundamental framework that will evolve and develop. It clearly articulates the commitment of The Bahamas to achieving the UN’s published sustainable development goals. Carbon credits in the voluntary markets will not be successful if some of these goals are not included in the overall monetisation plan and work has begun in The Bahamas to realise this objective.
The Bahamas is keen on having its citizens transformed from tourism jobs, which accounts for more than 50% of GDP, to careers as stewards of the seagrass meadows, mangroves and pine forests restoration, or simply custodians of the Bahamas’ plethora of natural assets environmental biodiversity. The Bahamas is set to change its nations and its people’s narrative if the program to monetise blue carbon credits is successful. The imagery of pleasure boats or majestic cruise ships laden with excited tourists sailing through Bahamian waters is likely to be altered and enhanced with that of ships of environmentalist working to pioneer the global endeavor to lower greenhouse gases, achieve the reduction of global warming and save the planet from a climate catastrophe. The success of the blue carbon project in The Bahamas could be a global success. We must wait and see how The Bahamas reveals itself beyond its natural beauty and as a forerunner in the “blue” carbon market space and also a leading nation committed to the overall reduction of greenhouse gases.
Further, the commitment to monitor, enhance and add more nationally protected areas like the Exuma Cays Land and Sea Park that was established in 1958 requires large funding. The ideology of conservation is a critical and a meaningful element for the monetisation of carbon credits in The Bahamas. Again, the ongoing funding for a generational endeavor may be made possible through the proceeds and the sale of the Bahamas’ blue carbon credits. The success of The Bahamas’ plan for its part in climate change and the reduction of greenhouse cases is an expensive venture for a nation of approximately 400,000 people. The World Bank’s designation of The Bahamas as a “high-income, developed country” eliminates the country from certain environmental funding for climate adaption and mitigation. During the period 2010 to 2020, The Bahamas government had financial inflows to use towards adaption and mitigation of climate change of approximately $154m. Of this, approximately $50m was earmarked from domestic taxes and other government funding. The reality of the statistic is sobering and is shockingly small compared to the ambitious seven-year commitments that was made by The Bahamas for the reduction of greenhouse gases and the overall principles of addressing climate change. However, successful monetisation of carbon credits may be able to achieve BUR and NDC commitments.
Potential impact on The Bahamas
The 17 sustainable development goals (SDGs) to transform our world:
Environmentally centred and internationally focused
Sun, sand, sea and science
According to more recent scientific research, it is estimated that there is up to 92,000 sq. km of seagrass meadows throughout Bahamian waters, storing billions of tons of greenhouse gases (CO2e). In fact, and by some estimates, The Bahamas is believed to have at least 30% of the world’s seagrass meadows habitat. While it is perhaps not a helpful thought for sea bathers and sea waders, the discovery was formed through an innovative partnership with cameras on the backs of tiger sharks. As a result, the further ground truthing and mapping of the world’s largest seagrass meadows has convinced the government of the Bahamas that a new revolutionary economic, social and environment impact can be brought to fruition through the monetisation of its blue natural assets and development of a blue carbon credit regime. Under the terms of the United Nation’s Article 6.4 of the Paris Agreement, and in particular the United Nation’s Carbon Offset Platform (offset.climateneutralnow.org), for the avoidance and removal of greenhouse emissions from the atmosphere, via projects in the developing world, The Bahamas Government enactment of the Climate Change and Carbon Initiatives Act, 2022 (the CCCIA) now provides regulatory framework for the accreditation and transactions of blue carbon credits. The Bahamas has also enacted the Carbon Credit Trading Act, 2022. This legislation now enables the Securities Commission of The Bahamas to regulate the trading of carbon credits securities related to this new asset class. While the current legislation allows entities or individuals to manage the monetisation of blue carbon sales or trading, the seagrasses, saltmarshes, and mangroves remain the property of the government. In its current arrangement, 92.5% of all proceeds after operational costs will be the proceeds of the government of the Bahamas.
Based on the preliminary mapping and core samples already done by Beneath the Wave (the group of marine scientist overseeing the project), the current seagrass meadows of The Bahamas, having regard to the trajectory for its decline (i.e. net of degradation) and additionality (i.e. possibility of expansion) could mean at the outset, at least 2.5 million carbon credits available in The Bahamas for the market as early as 2024, and up to 10 million carbon credits may be available on the voluntary market by 2030. Most analysts think that the estimated price for carbon credits will be around $90, or greater, per credit by 2030. Admittedly, the prices of carbon credits in the voluntary market, which have varied from a few dollars to over $100 per ton, have also been volatile and is predicated on many other difficult factors, including the nature of the project, the verification factors of additionality, the transparency of the project and more importantly the actual impact in the communities of the project.
The economic opportunity
GOAL 2: Zero Hunger
GOAL 3: Good Health and Well-being
GOAL 4: Quality Education
GOAL 5: Gender Equality
GOAL 6: Clean Water and Sanitation
GOAL 7: Affordable and Clean Energy
GOAL 8: Decent Work and Economic Growth
GOAL 9: Industry, Innovation and Infrastructure
GOAL 1: No Poverty
GOAL 10: Reduced Inequality
GOAL 11: Sustainable Cities and Communities
GOAL 12: Responsible Consumption and Production
GOAL 13: Climate Action
GOAL 14: Life Below Water
GOAL 15: Life on Land
GOAL 16: Peace and Justice Strong Institutions
GOAL 17: Partnerships to achieve the Goal
Shonalee Munroe, Chief Operating Officer, Genesis Fund Services discusses changes she has seen over the past 17 years, what investors should look for in fund administration companies, and the qualities she thinks makes The Bahamas stand out as a place to do business
and the Tropic of Cancer Beach in Exuma have allowed me to visualise even more of what The Bahamas has in terms of obvious natural assets and resources. The value proposition of The Bahamas has never truly envisaged the oceans, seas, mangroves and marsh lands as having the potential to create a blue economy with direct contribution to the GDP in and by themselves. Rather, the perspective has always been that the true value of The Bahamas’s natural beauty, embodied in white sandy beaches and balmy breeze, was inextricably hitched to tourism sector. Today, however, with the climate crisis top of mind, the seagrass meadows, mangroves and salt marshes of The Bahamas may well be the answer to a considerable uptick in the overall Bahamian economy, with global implications for challenges posed by carbon emissions.
The successful sale of blue carbon credits can transform the very nature of agriculture and aquaculture
While this article cannot articulate with any certainty how proceeds from the sale of carbon credits, will be spent, Goal 2, which addresses the need for food security and the improvement of nutrition and sustainable agriculture, should be a priority. “The Bahamas National Pathway for Food Systems Transformations” prepared by the Ministry of Agriculture and Marine Resources, sets out bleak and worrisome facts about the nature of the Bahamas’ food imports. The reality is that 90% of all food items are imported. Capital injections for the development of efficient farms or for the purchase of very costly farm machinery and highly efficient farm solutions is a priority for The Bahamas. The successful sale of blue carbon credits in the global market can transform the very nature of agriculture and aquaculture by adding capital inflows generated by the sales which automatically reduces the need to import and use foreign currency in doing so. The innovation of efficient farms eliminates old methods of slash and burn, thus making an immediate positive impact on the reduction of greenhouse gases due to cleaner methods of farming. The development of modern agricultural practices is paramount to building a sustainable and self-sufficient country, but these require large capital funding. Goals 14 and 15 are also important and critical aspects of ensuring that the price in the voluntary carbon market of The Bahamas’ carbon credits is hitched to substantive adaptation and mitigation programs. The BUR and the NDC reports suggest that there is a lack of financial and technical support for the continuation of ongoing mitigation and adaption policies essential for the Bahamas’ part in the global climate improvement. While legislation exists to improve the natural assets of the Bahamas, like the law banning commercial shark fishing and the selling and trading of shark, or the law that bans long-line fishing, fishing for turtles or stingrays, it is difficult to meet the NDC without major funding. Further, the commitment to monitor, enhance and add more nationally protected areas like Exuma Cays Land and Sea Park that was established in tin 1958 requires large funding. The ideology of conservation is a critical and a meaningful element for the monetisation of carbon credits in The Bahamas. Again, the ongoing funding for a generational endeavor may be made possible through the proceeds and the sale of the Bahamas’ blue carbon credits. The success of The Bahamas’ plan for its part in climate change and the reduction of greenhouse cases is an expensive venture for a nation of approximately 400,000 people. The World Bank’s designation of The Bahamas as a “high-income, developed country” eliminates the country from certain environmental funding for climate adaption and mitigation. During the period 2010 to 2020, The Bahamas government had financial inflows to use towards adaption and mitigation of climate change of approximately $154m. Of this, approximately $50m was airmarked from domestic taxes and other government funding. The reality of the statistic is sobering and is shockingly small compared to the ambitious seven-year commitments that was made by The Bahamas for the reduction of greenhouse gases and the overall principles of addressing climate change. However, successful monetisation of carbon credits may be able to achieve BUR and NDC commitments.
Goals 14 and 15 are also important and critical aspects of ensuring that the price in the voluntary carbon market of The Bahamas’ carbon credits is hitched to substantive adaptation and mitigation programs. The BUR and the NDC reports suggest there is a lack of financial and technical support for the continuation of ongoing mitigation and adaption policies essential for the Bahamas’ part in the global climate improvement. While legislation exists to improve the natural assets of the Bahamas, like the law banning commercial shark fishing and the selling and trading of shark, or the law that bans long-line fishing, fishing for turtles or stingrays, it is difficult to meet the NDC without major funding. Further, the commitment to monitor, enhance and add more nationally protected areas like the Exuma Cays Land and Sea Park that was established in 1958 requires large funding. The ideology of conservation is a critical and a meaningful element for the monetisation of carbon credits in The Bahamas. Again, the ongoing funding for a generational endeavor may be made possible through the proceeds and the sale of the Bahamas’ blue carbon credits. The success of The Bahamas’ plan for its part in climate change and the reduction of greenhouse cases is an expensive venture for a nation of approximately 400,000 people. The World Bank’s designation of The Bahamas as a “high-income, developed country” eliminates the country from certain environmental funding for climate adaption and mitigation. During the period 2010 to 2020, The Bahamas government had financial inflows to use towards adaption and mitigation of climate change of approximately $154m. Of this, approximately $50m was earmarked from domestic taxes and other government funding. The reality of the statistic is sobering and is shockingly small compared to the ambitious seven-year commitments that was made by The Bahamas for the reduction of greenhouse gases and the overall principles of addressing climate change. However, successful monetisation of carbon credits may be able to achieve BUR and NDC commitments.
Exuma Cays Land and Sea Park
While this article cannot articulate with any certainty how proceeds from the sale of carbon credits, will be spent, Goal 2, which addresses the need for food security and the improvement of nutrition and sustainable agriculture, should be a priority. “The Bahamas National Pathway for Food Systems Transformations” prepared by the Ministry of Agriculture and Marine Resources, sets out bleak and worrisome facts about the nature of the Bahamas’ food imports. The reality is that 90% of all food items are imported. Capital injections for the development of efficient farms or for the purchase of very costly farm machinery and highly efficient farm solutions is a priority for The Bahamas. The successful sale of blue carbon credits in the global market can transform the very nature of agriculture and aquaculture by adding capital inflows generated by the sales which automatically reduces the need to import and use foreign currency in doing so. The innovation of efficient farms eliminates old methods of slash and burn, thus making an immediate positive impact on the reduction of greenhouse gases due to cleaner methods of farming. The development of modern agricultural practices is paramount to building a sustainable and self-sufficient country, but these require large capital funding. Goals 14 and 15 are also important and critical aspects of ensuring that the price in the voluntary carbon market of The Bahamas’ carbon credits is hitched to substantive adaptation and mitigation programs. The BUR and the NDC reports suggest that there is a lack of financial and technical support for the continuation of ongoing mitigation and adaption policies essential for the Bahamas’ part in the global climate improvement. While legislation exists to improve the natural assets of the Bahamas, like the law banning commercial shark fishing and the selling and trading of shark, or the law that bans long-line fishing, fishing for turtles or stingrays, it is difficult to meet the NDC without major funding.
Further, the commitment to monitor, enhance and add more nationally protected areas like the Exuma Cays Land and Sea Park that was established in 1958 requires large funding. The ideology of conservation is a critical and a meaningful element for the monetisation of carbon credits in The Bahamas. Again, the ongoing funding for a generational endeavor may be made possible through the proceeds and the sale of the Bahamas’ blue carbon credits. The success of The Bahamas’ plan for its part in climate change and the reduction of greenhouse cases is an expensive venture for a nation of
approximately 400,000 people. The World Bank’s designation of The Bahamas as a “high-income, developed country” eliminates the country from certain environmental funding for climate adaption and mitigation. During the period 2010 to 2020, The Bahamas government had financial inflows to use towards adaption and mitigation of climate change of approximately $154m. Of this, approximately $50m was earmarked from domestic taxes and other government funding. The reality of the statistic is sobering and is shockingly small compared to the ambitious seven-year commitments that was made by The Bahamas for the reduction of greenhouse gases and the overall principles of addressing climate change. However, successful monetisation of carbon credits may be able to achieve BUR and NDC commitments.
The economic opportunity for The Bahamas with regards to the carbon credit market is not only promising, but the overall potential impact of the sale of blue carbon credits could be revolutionary. As the world heads to a carbon dioxide reduction of 1.5 degrees, The Bahamas' nature-based global, institutional offering of blue carbon credits can potentially mean a “carbon wealth”, all owned by the sovereign, with a value north of 50 billion, and generating revenues in the hundreds of millions per annum.
VIDEO LINKS
Dr Tanya McCartney, Constultant at The Bahamas Financial Services Board, discusses diversity and inclusion in the jurisdiction, and what financial services can expect in the next 12 months
Paul Winder, Head of Fiduciary Products & Markets, Deltec Bank, and CEO of Deltec Fund Services, explains how the pandemic is affecting the 'seismic transfer of wealth' from Baby Boomers, and how their heirs differ in investment profiles and philosophies
Keith Major, Senior Associate at Higgs & Johnson, discusses the current state of aviation in The Bahamas and recent achievements in the industry, and why there's 'always room at the top'
Chris Illing, Chief Commercial Risk Officer at ActivTrades, answers question on volatility, the challenges awaiting the industry in 2023, and the advantages of being based in The Bahamas
Dr Iyandra Smith Bryan, Chief Operation Officer at Quantfury Trading Ltd, discusses remote working, prospective areas for further growth, and her objectives for the year ahead
video links
Dr Tanya McCartney, Consultant at The Bahamas Financial Services Board, discusses diversity and inclusion in the jurisdiction, and what financial services can expect in the next 12 months
Paul Winder of Deltec Bank and Deltec Fund Services explains how the pandemic is affecting the 'seismic transfer of wealth' from Baby Boomers, and how their heirs differ in investment profiles and philosophies
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info@equitytrustbahamas.com
info@slcfservicesgroup.com
www.equitybahamas.com
www.liongatebahamas.com
www.equityinvestfunds.com
www.equitytrustbahamas.com
www.slcfservicesgroup.com
