The CBI industry is changing, and its players must look to the next generation to see how it will evolve in the future.
Escaping to a deserted island full metaphor, and one that an increasing number of successful businesspeople are exploring. Against a global backdrop of growing political, economic, social and environmental instability, there’s growing interest in investment migration. In 2023, it is predicted that 125,000 millionaires will look to relocate to more secure and attractive destinations around the world. And it is not just the ultra-wealthy who are looking to move.
Taking a medium-term view, to 2030, it’s a trend that is set to continue. Political fragmentation and growing authoritarianism; economic policy uncertainty and corruption; social polarisation and civil unrest; and changing weather condomless will make many homes shores an unreliable bet into the future. It bodes well for Citizenship by Investment (CBI) programmes. The continued popularity of second, or even multiple citizenships, can be expected as hard-working businesspeople continue to shore up their defences – protecting their finances; growing their businesses and securing better education, healthcare and lifestyle prospects. CBI programmes have long been regarded as a ‘Plan B’ for unpredictable times. In the turmoil of the 2020s, there will be an increasing need for a bolt hole of safety, for those that can afford them.
Meeting global imperatives CBI is often framed as an insurance strategy benefiting individuals and their families. The reciprocal benefits of investment, accrued by small, economically challenged countries receive less attention. In a world still reeling from the effects of the COVID-19 pandemic, distracted by Russian aggression in Ukraine and scrambling to address impending food and energy crises, two major existential deadlines are being put on the back burner. We must have halved our heat-trapping emissions by 2030 to avoid what the Intergovernmental Panel on Climate Change (IPCC) has deemed irreversible damage. By 2030, we also must have met the 17 Sustainable Development Goals focused on ending poverty. It will take the full mobilisation of every consecratory-General UN Secretary-General, Antonio Guterres, who has called for “networked, inclusive and effective multilateralism”. But at global, and even regional level, this co-operation is proving difficult to achieve. For individual nations, especially low- to mid-income countries, the task is daunting.
Post-pandemic recovery in these countries will be hampered by high levels of sovereign debt. With inflation driving interest rate hikes in advanced economies, loans will be hard to pay back. Global macroeconomic conditions will be challenging, driven by what’s likely to be a protracted crisis in Ukraine and almost certain recession. Without foreign direct investment, these countries will be hard-pressed to provide funds, adaptation change mitigation and adaptation, and sustainable development projects.
In the lead up to 2030, CBI programmes could be part of the solution. With time running out to meet climate change and sustainable development goals, they could be valuable and legitimate revenue sources for small nations, and a spur to their sustainable economic growth.
Millennials and Gen Zs environmental, social and governance (ESG) investing is nothing new, but the complex global problems of the 21st century, such as climate change, are driving the emphasis on sustainability in investment circles. From 2020 to 2021, ESG investment doubled. Assets are predicted to reach US$30tn by 2030.
As societal values shift from ‘me’ to ‘we’, there could be implications for the CBI industry too. The 2020s are likely to see the emergence of a new profile of CBI investor, as millennials and Gen Zs assume positions of influence in political, cultural and economic spheres. Distinct in their pragmatism, innovation and willingness to take risks, they will likely see second or multiple citizenships as investment opportunities to new and bigger markets. Most importantly, as global citizens, vested in the survival and the thriving of people and planet they will want to place their money where it will make a difference.
Headwinds and Unpredictability
With democracy in crisis and a growing number of authoritarian governments in power around the world, freedoms are being threatened and could see a tightening of bordering and an increase of measures to prevent capital flight.
The erosion of social cohesion is identified, in the World Economic Forum Global Risks Report 2022, as the global risk that has intensified most since the start of the pandemic. Inequality, is one measure of social cohesion. The richest 10 per cent of the global population takes 52 per cent of global income and owns 76 per cent of all wealth, according to the World Inequality Report 2022. Inequality, as an issue, is likely to move front and centre in the decade ahead with the role of wealth in addressing inequality a key focus of debate.
Continued scrutiny of the CBI industry is a certainty. The European Parliament’s bid to end CBI programmes in Europe by 2025, and the US ‘No Travel for Traffickers’ bill which seeks to deny visa-free travel to countries with CBI programmes are the latest attempts to curtail the industry – believed to be enabling criminal elements, money laundering, tax evasion and corruption. As global security concerns mount, opposition to CBI programmes is not likely to abate. Growing polarisation between East and West will drive geopolitical tensions. These, alongside increased levels of corruption, terrorism and cyber threat, will fuel security paranoia.
It will demand precoordinated-ordinated intervention to mitigate concerns by demonstrating ongoing improvements in due diligence processes and to prove impact. The Caribbean nation of Dominica has declared its intention of becoming the world’s first climate-resilient nation by 2030. It will require US$4bn to US$5bn in funding to do this, and CBI could play a key enabling role. It’s a model that could be applied to other vulnerable nations needing sustainable climatinlutions in the future.
A New ‘Plan A’
Desert islands are symbols of isolation, self-reliance and internal resilience. In the post-pandemic reset, there’s been a shift in trust away from government as individuals obtain second, or multiple citizenships, and take control of their destinies. But looking to the future, CBI programmes will represent much more than a ‘Plan B’ escape strategy. The global citizen of the decade to come will be investing in ‘Plan A’ and a more positive future for people and the planet. It will be about collaboration, empowerment, and transformation, with outcomes for the CBI industry to aspire to.
The world’s most definitive guide on citizenship by investment, the CBI Index, was published on the 22nd of August 2022 by PWM Magazine, a publication of the Financial Times in collaboration with CS Global Partners and offers readers a view of an industry in metamorphosis.