Working across sectors with extensive experience in investment, financial markets, private equity, and superannuation funds management, Mr. Charles Kiefel AM has made a substantial contribution to businesses and diplomacy in Australia and New Zealand. He is currently the chairman of The Principals Funds Management and a GFCC Distinguished Fellow. He also holds multiple honorary positions and chairs boards of leadership organizations. In this interview for the GFCC, he comments about financial architectures to attract investment, how to use capital to tackle global challenges and enhance impact, promising business areas and technologies, and the skills future generations should focus on to be productive in the innovation economy.
What have you learned about competitiveness that everyone should know? Competitiveness is essential to boost productivity, increase net economic growth, and, ultimately, create wealth.
What key features should regions focus on to attract foreign direct investment, especially in greenfield operations? Policymakers should debate and strive to formulate policies to attract capital to invest in greenfield operations with minimal costs. This could be fast-tracked by eliminating capital gains taxes, thereby attracting capital to the regions and investment projects with the most merit for capital gains.
What financial architectures are needed to attract capital that could tackle global challenges, such as poverty and the energy transition, particularly in emerging markets? Achieving this goal with minimal regulation and interference, requires transparency, validated information, and a commitment from responsible regulatory bodies and agencies to create and adhere to global frameworks. This strategy should try to encourage all investors from the private sector and public-private partnerships (PPPs) to place capital, which will hopefully achieve a reasonable rate of return, to the benefit of all shareholders. This cannot be achieved through government subsidies alone or excessive interference by governmental entities.
How can regions de-risk investments in frontier markets and technologies while enhancing their impact and yield? To de-risk investments in any market, regions can commit, pledge, and prove that there will be no sovereign risk by ensuring that the “goalposts are fixed” (a rugby or soccer analogy). Enhancing investment impact and yield relies on the merit of the investment. This should be based on many factors, including minimal government interference to allow private investors to invest in the most attractive, competitively priced, and transparent contracts. Investment timing is also important. At the discretion of talented private sector decision-makers, the freedom to act without interference by government officials or rogue non-democratically elected forces, criminals, or terrorist groups is also essential. Additionally, golden shares could be established as a veto right.
How can we attract capital to socially and economically transformative investments when economic conditions are not favorable? Based on normal market conditions you can’t do it. However, philanthropists can find a way. One option is to design long-dated structured social bonds, which ultimately reorder a ballon end of the project or “one-off” extra return to satisfy trustees’ responsibility to make investments whole and deliver a long-term reasonable rate of return (RoR). This may also include well-designed PPPs. It should also be noted that incentives must evaluate the net present value (NPV) with free market discount rates.
What role should governments play to make these investments viable and attract private sector capital? Governments should let meritocracy compete and prevail. “The cream always rises to the top.” For instance, they can eliminate all government death duties and negative taxes, such as property taxes. Additionally, another favorable measure would be to promote education based on STEM disciplines and to allow deductions for childcare to increase female workplace participation.
What are the current business areas, technologies, and markets you find most promising, and why? Some promising technologies are robotics and drones, artificial intelligence, quantum computing, leading precision healthcare (life-saving drugs, medical devices, genomics), precision agriculture, and environmentally efficient practices. For business areas, there is growing interest in sustainable organic food, insurance and re-insurance, credible patent protection securitization, wastewater treatment, and water efficiency management and storage. There are also opportunities in private sector wealth management, human services, both public and private equity, infrastructure (overweight energy), selective “blue chip”, property asset classes, and growth assets (based on favorable demographic profiles of pension funds, duration, and period of investment).
As a leader with experience in government, investment, and advisory roles, what skills are essential for working across sectors? A leader working across sectors must hold a combination of skills and values. I consider important skills: dynamic adaptability, teamwork, respect for peers’ views, leadership by example, visionary or strategic judgment, focus, a strong commitment to achieving corporate and shareholder goals, effective, efficient, and polite communication skills, cooperation, and courage to speak up when vital matters arise to protect all shareholders. It is also important to have access to global leadership networks. In terms of values, I consider it important to have integrity, loyalty, strive for excellence, proven sincerity and authenticity, sensitivity, respect for others, positivity and goodness, fight for individual freedom and liberty, happiness for ourselves and for others, humor, and cheerfulness. Finally, we should always encourage youth leadership and not discourage them on their learning path.
How can we develop these skills in future generations? It depends on mentoring, identifying and supporting youth leaders, offering scholarships and long-term savings plans, such as Employee Stock Ownership Plans (ESOPs) and gainsharing plans, and rewarding the achievement of productivity goals for individuals and team members. Additionally, governments could formulate gainsharing plans that tax increased shareholder wealth and save taxpayers from excessive government spending. ESOPs and gain-sharing plans could represent one-third of the total annual recreation of all individual employees aiming to change culture away from the producer model to the consumer-favored model.
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