#EFS: From finance leaders to change makers, Part II

Farvest

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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