Inaugural High-level Conversation on Unlocking Intangible Asset Finance

November 3, 2022

Leading figures from the public, intellectual property (IP), business and finance communities came together to discuss how intangible assets, including IP, can unlock financing to grow businesses during a High-level Conversation held on November 1, 2022.

In his keynote opening, Director General Tang said,  “intangible assets are like the dark matter of our financial world – mysterious and largely invisible, even if they are now exerting a huge and increasingly visible influence on our companies and economies.”  Estimates peg the value of intangibles, like patents, trademarks, brands, designs, copyright, trade secrets, and data, at over 74 trillion USD – more than the world's five largest economies combined.

Supercharging economic growth through intangible assets

With that much at stake, the role these assets play cannot be understated. Tharman Shanmugaratnam, Senior Minister, Singapore and Chairman of the Group of Thirty in his keynote shared “And that’s the opportunity: recognizing the under-recognized assets in the global economy, and particularly for smaller players and players in the developing world. It’s for every nation; it’s not just for the advanced countries where this is already taking off, it has to be for every nation.” Prof. Muhammadou M.O. Kah, Permanent Representative of the Republic of Gambia to the UN and other international organizations in Geneva, echoed this point. He described access to finance as an “economic imperative for sustainable development.”  “Businesses must be able to use their most valuable assets whether or not they are tangible form.”

However, the potential is not yet realized.  “Innovative SMEs and scale ups are much more likely to face obstacles and difficulties when seeking finance than more classical but less innovative firms,” explained Ms. Kerstin Jorna, Director-General, Internal Market, Industry, Entrepreneurship and SMEs (DG GROW), European Commission.  She described specific interventions, like guarantees and training to the financial community that may shift this dynamic.

Intangible asset finance shows potential. According to Mr. Dato Lim Jock Hoi, Secretary General, ASEAN, “it is certainly one way for ASEAN economic growth to grow from simply outpacing to supercharged.” Mr. Jorge Arbache, Vice President for Private Sector, Development Bank of Latin America, shared a similar outlook. He described intangibles as “a source of sustained and sustainable and inclusive growth.”

WIPO’s role as a convener

Making progress in intangible asset finance is not a task for any single government, agency, institution, or enterprise. Rather it requires a broad coalition of supportive stakeholders that connects the IP community with regulators, financiers, investors, insurers, financial institutions, development banks, accountants, valuers, and others.

WIPO is committed to building these bridges. “What WIPO can offer is our expertise as the UN agency for innovation, creativity and IP, as well as our ability to provide a neutral, professional and global platform for these issues to be discussed and moved forward,” said Mr. Tang.

Tangible examples of intangible asset finance

Momentum is building in intangible asset finance, and several speakers shared examples. Ms. Lally Rementilla, Managing Partner, Intellectual Property-backed Financing at the Business Development Bank of Canada (BDC) described the 160 MM CAD fund launched in 2020, which has already supported 14 companies in healthcare, sustainability and growth. “The real relationship starts after the check is cut,” Ms. Rementilla described. BDC support companies in three areas, development of their IP strategy, IP monitoring of the competitive market, and IP governance. “We push for great IP manage and IP culture at the governance level or the board level.”

Some banks are embracing an IP culture as well. A Portuguese business association is working with local banks to include intellectual property as part of their assessments for financing. “We launched the Inovadora COTEC initiative, which awards a rating for companies that would be able to comply with a number of financial indicators,” said Mr. Jorge Portugal, General Manager, COTEC Portugal.  This includes considering innovation capabilities and IP. After a few years, 800 companies went through the rating system.

In the Republic of Korea, a holistic and pan-governmental approach is being taken according to Mr. Choi, Professor of Law, Hankuk University of Foreign Studies. According to Mr. Chul, there were transactions with a value of around 2 billion USD last year, contributing to the aggregate volume of roughly 6 billion USD since the start of local efforts. At the beginning of the country’s journey, valuation was conducted by a public sector entity. Today, there are 26 government-approved valuation entities, including some from the private sector that support the process. IP-backed finance activity is also support through a specialized IP recovery fund, operated through a public-private partnership. According Mr. Bae Dong Suk, Vice President, Intellectual Discovery, the company that manages the fund, this enables companies with lower credit ratings to access finance.

Moving from the Margins to the Mainstream

Throughout the course of the day, speakers representing 22 countries from diverse backgrounds reflected on the potential of intangible asset finance, and its challenges. “We have got to look at it as a journey,” said Mr. Roland Emmans, Head of UK Tech Sector & Growth Lending, at HSBC UK. He explained that if the hidden value of IP and its impact on a business is understood, ultimately, it will lead to “an acceptance that IP is an asset class in its own right.”

Improving valuation of intangibles came up as a key theme. “There is no single value,” explained Mr. Johannes Post, Global Head of Valuations at KPMG.  There are multiple values. “If we carve out the IP and set it into another context, that’s a completely different use. These assumptions might be different.

“One of the main problems in this ecosystem is the zero capital benefit the intangible assets offer in many mainstream financing regimes,” said Mr. Will Kier, EMEA Head of IP Solutions at Aon. If you gave even small credit to intangibles, “that frees up capital for the banks so they can lend to these companies. “What’s hard for lenders, who regulation encourages to attach more value to tangible assets to understand, is that the value of IP is in its uniqueness, not in the fact that it’s a commodity that’s easy to dispose of,” explained Mr. Martin Brassell, CEO, Inngot.

Another challenge discussed was the relevance of corporate books. “It’s one of the things that accounts struggle with, said Mr. Nick Talbot, CEO of the International Valuation Standards Council.  Mr. Talbot pointed out the growing gap between market capitalization and what appears on the balance sheet. “It’s a really important area that we need to take steps to improve.” For example, “current accounting standards that basically exclude brands, internally developed brands from recognition as an asset and so from showing it on the balance sheet,” said Mr. Zeeger Vink, President, International Trademark Association (INTA). “If the economy moves to a situation where it is predominantly composed of intellectual property assets, then perhaps it is not so prudent anymore to leave it completely out.”

WIPO Action Plan

“WIPO will take an action-oriented approach to intangible asset finance, that takes into account the multi-faceted nature of the field, its political, commercial and technical dimensions,” according to Mr. Marco Alemán, Assistant Director General of the IP and Innovation Ecosystems Sector, WIPO.  He described the three elements of the Action Plan: raise the profile of intangible asset finance, reveal what is happening on the ground, and equip participants in the finance and valuation ecosystems.

In the first element, WIPO aims “to build a community that can make progress in this field,” said Mr. Alemán.  He explained that creating platforms for discussion like the High-level Conversation, play an important role in highlighting why intangible asset finance is imperative to shared economic success.  In addition, expert consultative groups will be created to take a deep dive into key issues.

The second element of the WIPO Action Plan deals with building the evidence base. WIPO will work to close the information gap in this space. This includes a series of country reports that will provide an insider perspective of how intellectual property is currently being used in countries to increase access to affordable capital. Other research projects are planned, including studies on commercial trends and film finance.

The final element of the WIPO Action Plan supports stakeholders to move forward on the ground.  The Organization will develop practical tools to help businesses improve their chances to secure debt and equity financing. This includes a toolkit to help borrowers, lenders and investors communicate more effectively, improving access to valuation expertise through WIPO’s Arbitration and Mediation Center, and exploring ways to improve transparency of IP ownership and transactions.

Share your voice with the community

The High-level Conversation may be over, but the dialogue starts now. Give WIPO your inputs on the potential and challenges of intangible asset finance.

Missed the event?

Watch the webcast and check out WIPO’s work on intangible asset finance.