#EFS: From finance leaders to change makers, Part I
The second edition of European Finance Summit – and first event of the year organized by Farvest Group – took place on March 18, 2021. Due to the current health situation, the event was held exclusively online and featured many international and local experts who focused on sustainability and ESG topics.
In his opening speech, Nicolas Mackel (CEO, Luxembourg for Finance) started: “Bill Gates has published a new book and asks one question: how to avoid a climate disaster? He gives the answer in the opening paragraph through two numbers: 51 billion and 0. 51 is the number of tons of greenhouse gases typically added to the atmosphere each year as a result of human activities, and 0 being our aim to avoid climate disaster”. The expert then focused on how to reach this target, which requires many changes and notably the shift from fossil to renewable energy. “New technologies need to be developed to make building more efficient, to improve energy consumption of industrial players, to improve the footprint of transportation, etc. This is where the power and expertise of the financial industry comes in as it connects investors and sustainable projects,” he added. He then shared several examples of recent initiatives such as the Luxembourg Green Exchange, which was a 134% increase in green listings. Moreover, according to him, banks and insurance companies are increasingly committing to the principles of sustainable investment. “We are aware that it is only the beginning of a long and difficult process, but we need to remember that it’s only been 5 years since the Paris Agreement. I’m confident that with the implementation of a robust regulatory framework, sustainable finance will mature rapidly. And the financial industry will then really walk the talk”. He concluded: “Obviously, not all investments can be sustainable as of tomorrow. It takes to transition away from fossil energy. The 0-emission goal has been set to 2050 for good and practical reasons. Yet, the faster we move to sustainable finance, the better it will be for all of us”.
A round-table discussion, entitled “The need for a green recovery” then brought together Linda Zeilina (Founder & CEO, International Sustainable Finance Centre (ISFC)), Raymond Schadeck (Chairman of the board, unature.org), Philipp von Restorff (Deputy CEO, Luxembourg for Finance) and Sachin Vankalas (General Manager, LuxFLAG). The discussion was moderated by Arnaud Gillin (Partner, Innpact) who first explained that rebuilding our economy in a different manner is a must: “we all need to work towards the Paris Agreement. Finance needs to innovate and reinvent itself”. Raymond Schadeck then highlighted that “a lot of money was wasted because of the wrong approach. Now, people are buying in this green recovery trend. Yet, many companies speak about it but still see it as a burden, due to bad communication. Many of them are still reluctant to really change and embed a sustainable business model”. Within unature.org, experts gathered more than 300 research papers on the subject and Raymond Schadeck shared several concrete examples of what nature actually brings us, from the increase in productivity, to its impact on Covid-19. Linda Zeilina agreed that nature does have intrinsic value: “we mismanaged it and have actually depreciated this asset. For years, there was a blind spot in finance regarding nature, but a lot has changed over the past two years”. She then explained that the EU was leading the way when it comes to regulation and that it needs to start with all stakeholders (planet, people and businesses). She then discussed the recent EU taxonomy which will create a system that allows to see which activities align with the Paris Agreement. She added: “the EU tries to create transparency, as investors will be able to better manage if they are provided with more information: more disclosure, data, and transparency. And therefore more information to act on”. According to Sachin Vankalas, “everybody claims to be sustainable: markets are pushing and financial products are obliged to do something about it. But do they all do the same? Does the product have a positive impact in the world? Or are activities mainstream while taking into consideration ESG factors? This is where we need to build more transparency?” LuxFLAG therefore identifies these different types of financial products: “this what investors need to know and labels such as LuxFLAG provide clarity. They will be able to take informed decisions and mobilize capital”. Finally, as explained by Philipp von Restorff, “education is key and so is having everyone on board. Time flies and there is clearly a certain degree of emergency. We need buy-in from people, yet, there is a lack of knowledge, and education is needed at all levels”. He highlighted the need for transparency, comparability and credibility. Philipp von Restorff added: “this is why we need partnerships on the international and local levels”. He concluded his part by sharing one of the latest LFF initiatives which consists in designing a sustainable financial roadmap: “we are now continuing to raise awareness and promote sustainable finance. The next step is to unlock its potential by creating a knowledge-sharing platform”. Finally, Arnaud Gillin concluded by stating that “there’s another way to consider when doing business: have a real purpose, change the perspective and the mindset. And face challenges together”.
“Sustainable Finance Information or Intoxication: Trusting What You Read” was the name of the keynote speech given by David Schrieberg (CEO & founder, VitalBriefing). He focused on the current information tsunami, as 300 hours of video are uploaded to YouTube every minute, 204 million e-mails are sent every minute, etc. He added: “Plus…six million blog posts each day. As one of my clients once said, there has never been so much information just in sheer volume. You cannot absorb it and you cannot sort it out. All the sources have different perspectives, yet you need to have your view of what will happen. You have to focus”. He also highlighted that the World Economic Forum explained that the global risk of massive digital misinformation sits at the center of a constellation of technological and geopolitical risks ranging from terrorism to cyberattacks and the failure of global governance. The expert then focused on several examples around the topic of sustainable finance and ended his presentation by sharing his own tips and tricks: Is the publisher credible? What about the author? Who is in the story? How timely is the information? “Poor grammar and spelling are not necessarily indicative of bad information, given the quality of language translation – but should trigger extra caution,” concluded David Schrieberg.
Anne-Claire Roux (Managing Director, Finance for Tomorrow), Julien Froumouth (Sustainable Finance Adviser, ABBL), Chiara Caprioli (Senior Business Development Manager & Sustainable Finance Expert, Luxembourg Stock Exchange), Hedda Pahlson-Moller (Founder & CEO, TIIME.org) and Rik Coeckelbergs (Founder and Managing Director, The Banking Scene), who acted as moderator, then participated to another round-table discussion. The topic revolved around the sustainability goals for tomorrow’s financial sector. Chiara Caprioli first focused on how the current crisis brought ESG to a point of non-return, as it showed the impact such aspects can have. “Moreover, at the political level, the different recovery plans with a focus on green and social aspects led to a strong push for the rest of the private society and the entire economy. It represents an important paradigm shift: I simply cannot see companies not having sustainable strategies nowadays. They would be at risk and potentially be cut off by investors,” highlighted the expert. According to her, we are going from just investing into green to greening the whole economy, with much broader indicators. As explained by Hedda Pahlson-Moller, “people to be on board, otherwise there won’t be any change. All aspects of ESG are interconnected, just like the SDGs: they all support each other”. She also insisted on the need to boost diversity and inclusion: “we have to leverage new perspectives and different approaches to make these changes happen and achieve these sustainable finance goals. Mainstream finance needs to move faster, recognize its current impact and improve the ratios. According to Anne-Claire Roux, the financial sector has a part to play to tackle ecological challenges. “All stakeholders must work together, it’s our strongest conviction. Ecology is not sustainable yet, but the financial services industry does have enormous power to leverage on these practices. It can provide new tools. Climate risk should be considered as a systemic risk that banks and financial insinuations need to manage. Risk is actually the best approach: use data to measure the risks. We have developed an observatory of sustainable finance to monitor commitment”. Finally, Julien Froumouth added that Luxembourg has a strong expertise in the field of financial services, as a leading center for ESG funds, microfinance, etc. “It was the first country in Europe to launch a dedicated sustainable bond framework and implement a climate law in order to achieve its national target to reduce its greenhouse gas emissions,” he explained. Moreover, he underlined that a sustainable finance strategy was recently launched, with a specific roadmap which aims at creating awareness, development toolkits to leverage the local expertise, and to measure progress made and report on it.
Alex Panican (Head of Partnerships and Ecosystem, LHoFT) took the virtual stage and presented the FinTech European Discovery Program by welcoming several international experts who presented their innovative solutions. Youssef Ziza (Business Development & partnerships manager, Oxyliom Solutions) explained that Oxyliom delivers an integrated platform that supports all parts of identity and trust services for a modern Customer Digital Experience, supporting the various regulations around KYC and AML, but also Open Banking, PSD2, and privacy regulations such as GDPR. Then, Sarah Lokman (Head of Sustainability, Greenomy) took the digital stage to present Greenomy, which consists in digital tools aiming at helping companies measure – because most companies do not have data nor sustainability experts in-house – and improve their sustainability level, and therefore at accelerating the transition to carbon neutrality by 2050. Luc van Laarhoven (CEO, Capilex) explained that Capilex was created through market demand and real estate sector expertise: “We draw on past knowledge and experience to provide mortgages very fast at competitive rates to private individuals and companies. It is a spin-off from Atlantis Financiers N.V., a Dutch company founded in 2013 as a lender for entrepreneurs who struggled to get traditional financing”. Barbara Terra (Sales Director, Hacknowledge Luxembourg) then took the stage to present Hacknowledge, a vendor neutral cyber-security company. It monitors infrastructure 24×7 and expert security engineers detect and respond to threats using a cutting-edge VISION Cyber ManagementTM solution. Finally, Adi Berland (CEO, Kids Life Skills) presented Kids Life Skills, a non-profit organization based in Luxembourg. Its goal is to teach essential tech skills to, by teaching logical thinking, problem solving, teamwork, self-learning, creativity, etc. The organization is supported by several partners in Luxembourg.
Inès Leonarduzzi (Founder & President, Digital For The Planet) then shared her presentation, entitled “Positive finance: the state of a long term thinking”. She started: “Are we being good ancestors? The choices we make today will impact the future of the younger generations. The pandemic, for instance, actually prevents us from thinking long-term; our short-termism is becoming pathological”. She also explained that citizens, through their knowledge and expertise, have a role to play: “now is the time to take risks. Historically, financial institutions have been making the right calculations to reduce risks. We need an important shift of thinking. Therefore, there is a huge spot for positive finance! It needs to transform so that it resembles today’s reality. For instance, banks and companies active in the financial services industry could have experts in charge of the long-term perspective: he/she is here to assess and think in the name of the future generations. This expert would guarantee, at every stage, that we are good ancestors.” Inès Leonarduzzi also participated to a fireside chat discussion, along with Nasir Zubairi (CEO, LHoFT), which ended the morning session. The two experts mainly focused on the use of data and highlighted the concept of data privacy. According to Inès Leonarduzzi, “banks have so much data on us that they can easily paint psychological portraits of their clients. Through the blockchain, we should be able to protect the privacy of the person who could allow the use of his/her data without actually revealing it”. “Does privacy limit innovation?” asked the CEO of the LHoFT. “The problem is that we have fragmented rules because we did not think about it in the very beginning. We have the impression that regulation is preventing progress from happening when progress is actually a set of tools that allow people to have better comfort in life. And so is tech. Yet, we create embarrassing financial gaps between people who diffuse their data and those who wish to protect them,” added Inès Leonarduzzi. Nasir Zubairi then discussed the impact of tech on financial inclusion and asked the guest how data could be used more effectively. She focused on privacy again, stating: “we need to spend time, intelligence and money on privacy-focused technologies, and explore a world that would be fairer and more transparent”. She concluded: “privacy means people are the sovereign of their own data, and they if and how it is used and/or sold, etc. According to me, privacy is therefore more of a balance between power and deciding. I’m not necessarily hiding my data, I’m simply controlling it”.
#EFS: From finance leaders to change makers, Part II
The international and local experts met again, in the afternoon, for the second part of the European Finance Summit, which took place on March 18, 2021, and revolved around the topic of sustainable finance.
The first session of the afternoon was entitled “Investors-to-be: fostering a new generation of financial leaders was the name of the session powered by the ABBL, which featured Julien Froumouth (Sustainable Finance Adviser, ABBL), Catherine Bourin (Member of the Management Board, ABBL), Barbara Daroca (Head of Corporate Services, ING), Julia Neuberg (Student at the Lycée Michel Rodange in Luxembourg) and Thomas Collin (Student, Trainee, Sustainable Finance department, ABBL). The two students first took the stage and shared their own definitions of sustainable finance. According to Julia Neuberg, “there is an immense lack of information and material to raise students’ awareness about sustainable finance”. Thomas Colin added: “Social change is not possible without education”. Julien Froumouth then discussed financial literacy with Barbara Daroca. The latter explained: “financial education is important for banks. At ING, it is actually part of our sustainability stands. Banks are all about risk management, and therefore, if clients are better informed, all parties will benefit from it. In other words, it is better if people know what they are in for: investing is actually the last step: first, they need to understand how to save money, etc. they need to build the basics and then only invest. From a young age, people need to understand the mechanics”. The third part of the discussion featured Catherine Bourin who presented the initiatives of the ABBL in terms of financial literacy: “we set it as high priority and even created a foundation to raise awareness on sustainable ways to manage their money”. Finally, Julien Froumouth added that these workshops, training programs, videos, etc. are destined to the general public, vulnerable populations as well as professionals. These are usually launched in cooperation with ABBL’s different partners in Luxembourg.
“ESG emphasis higher than ever before, what are investors now looking for?” was the name of the presentation given by Solène Garnavault (Client Support Manager, Fidelity International Luxembourg). She first explained that we currently face massive social and environmental challenges that need to be addressed by businesses, governments, institutions and by the population. Solène Garnavault then shared the results of FIL’s analyses, notably showing that sustainable companies generate higher profit. She then commented: “2020 was a pivotal year. Covid-19 actually increased the social reasonability of companies. 54% of funds now regularly discuss ESG principles. Moreover, Europe leads the race to net zero. It is also interesting to underline that to achieve it, companies must tackle their direct emissions as well as indirect ones. 53% of European firms will get to net 0 by 2040”. The expert also described Fidelity International’s positive engagement approach, with its sustainable investing teams which focuses primarily on ESG. Investment analysts are encouraged to participate in such discussions, where the moral and ethical aspects are crucial. She concluded: “ESG represents a huge opportunity for Europe and especially for Luxembourg to become a leading sustainable investment center”.
Carmine De Franco (Head of Fundamental Research, Ossiam) and Arnaud Bisschop (Senior Portfolio Manager, Thematics AM) then shared the stage for a round table discussion entitled “Different shades of ESG” moderated by Sachin Vankalas. The moderator first stated that “without any doubt, investors cannot stay away from ESG finance. And we need to make sure everybody applies the same standards”. The General Manager of LuxFLAG then highlighted the need to differentiate the various shades of ESG, namely ESG investments and impact investing. As explained by Arnaud Bisschop, Thematics AM’s seven investment strategies all include an ESG framework: it ranges from responsible investment to more sustainable, up to impact investing. The two experts agreed on why ESG is booming. According to Arnaud Bisschop, “on the client side, people do not want to invest anywhere and want meaning that aligns with their values. Also, the pandemic has been a catalyst: how do I protect myself against black swans?” Carmine De Franco added: “it is related to a change in the way society understands risks and opportunities. How can this new framework and data help us do a better job? How do we manage those risks in the investments? This clearly drives the demand in the new products”. The experts then focused on the use of new tools, and especially labels, which shows a willingness to reconcile and give transparency to the approaches and processes. “We need to provide more reports: financial, non-financial and extra financial. On a regular basis. It helps investors identify which type of ESG shade they are facing,” commented Arnaud Biscchop. Carmine De Franco then discussed regulation, and notably SFDR and the recent European taxonomy: “the EU is going forward with this: if the rest of the world does not follow, it will be hard to track and correctly measure the activities of the companies we invest in. It’s a good start but we are just discovering it for the moment”. Sachin Vankalas concluded: “we need to bring transparency, so that investors can choose which shade they want to go for: impact or more mainstream?”.
Another round-table discussion, focusing on the race for ESG Funds, brought together Thibaut Ghirardi (Senior Manager, Finance ClimAct and moderator of the discussion), Vitaline Copay (Sustainable Investing Analyst, Quintet Private Bank), Emmanuel Roque (Head of Sales & Business Development, Sogelife) and Xavier Desmadryl (Global Head of ESG Research and PRI, HSBC). Emmanuel Roque first focused on how insurance was impacted by ESG funds: “as insurers, we have the same characteristics as ESG: a long-term vision and the need to prepare and anticipate. And after one year of Covid, anticipation and long term strategies are all the more important: this is why ESG funds have been so successful lately”. He then shared the results of a survey lead by Société Générale: 85% of the group’s partners consider that ESG is a key solution for the future. They also consider that 65% of their clients are ready to buy ESG products, when 22% of the final clients are already asking for ESG by themselves. Moreover, he explained that Sogelife just got the ESR label and that shareholders are actually asking the group to be CSR by design. Vitaline Copay started by explaining that the finance industry has a large role to play toward a carbon neutral society: “there are many ways to make a positive impact”. She then shared the example of low carbon equities, investing in companies that emit less carbon, which significantly reduces the carbon footprint of the portfolio without sacrificing the profit. “Sustainable investing is powerful to unify people around the same purpose. We do not see ESG as a way to protect the portfolio anymore but rather as a way to enhance it”, highlighted the expert. Xavier Desmadryl then added: “at HSBC, we make sure ESG criteria are part of the investing decision we are taking. It makes sense from a financial perspective. In the wake of covid-19, it is obvious that SRI funds and sustainable funds have proved more resilience”. He then insisted on the need to provide the right information and infrastructure, as HSBC is currently developing a Google cloud platform to access the information more easily. He concluded: “we are trying our best to embed ESG at the very first stage of our investment strategies. Moreover, it is important to have stewardship activities, we therefore engage with several companies and are involved in international initiatives. All converge to the same thing: trying to help people make better-informed decision”.
“How sustainable finance is shifting the investment industry, the role of UHNWI” was the topic discussed by Tonika Hirdman (Director General, Fondation de Luxembourg) and Kris De Souter (Head of Private Banking & Member of the Executive Committee, Bank Degroof Petercam Luxembourg) and moderated by Najat Diederich (President & Founder, LAWM). According to Kris De Souter, policymakers are using regulation to realize its climate ambitions: the shift is there and is accelerating. “Europe is ahead. Our industry is impacted as it needs to make its products compliant, how to present their portfolios and how to explain investors how they select securities. It is a fundamental trend,” he added. He also focused on the client-side, explaining that when interacting with individuals, ESG is on their mind: “some want to avoid certain companies, others have a more positive standpoint and others even want to only invest in companies that can have an impact. Degroof Petercam is active in the ESG field and its experts are all working towards offering portfolios that are ESG-minded and compliant. Tonika Hirdman then focused on the link between SRI and philanthropy as they both aim at solving global issues. “With ESG you expect to make money, with philanthropy you give it away. Nowadays, philanthropists don’t want to support companies whose activities are contrary to their values. Foundations need to assure that values are aligned”. She also highlighted that, today, it is the younger generations that push their parents to adopt these new ESG approaches. Moreover, this new generation of donors actually gives more and is more engaged as they actively participate in initiatives. Tonika Hirdman concluded: “the current crisis represents an opportunity: it has catapulted us into the digital age. There will be less business travelling, which is positive for climate change, and we now have the possibility to integrate environmental aspects into investing strategies”.
“The COVID-19 crisis, as a Catalyst to sustainable processes” was then discussed by Florent Albert (Managing Director Europe, Group Chief Financial Officer and Member of the Board of Directors, Lombard International) and Fernando Valenzuela (Chief Financial Officer, RBC Investor Services Bank) in a round-table moderated by François Masquelier (CEO Simply Treasury, Chairman of Luxembourg Corporate Treasury Association ATEL, Vice-Chairman of EACT). “Covid-19 was definitely a catalyst and accelerator of change. During this difficult cycle which lasted 12 months, we have seen an acceleration of the digitalization of financial services, notably on the topic of fraud detection and management,” started Florent Albert. “It tested every business model in every industry. It accelerated the need for digital, not just on the front end but also on the back end and support functions. In 2021, the priority we will be the resilience of business models. There is an important need to modernize the finance departments of companies,” then added Fernando Valenzuela. The Managing Director Europe of Lombard International focused on some projects that have been – and are currently being – led within his company: onboarding, KYC, policy maintenance, etc. “There has been a lot of thinking as we are talking about a multiyear transformation. It was clearly needed: the first-mover advantage could very soon pivot to a competitive disadvantage for companies that did not go digital,” he underlined. Fernando Valenzuela described RBS’ 3-year transformation journey, which aims at making the bank more efficient and at shifting resources to support the business. “We are now in a good position to face the future. But you’re never done, right?” concluded the CFO.
Finally, the event ended with the traditional yet digital ceremony of the Luxembourg Finance Awards. Click HERE to discover who the winners are.
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