With the Capital Markets Union package unveiled today, the Commission has presented an extensive array of proposals aiming to ensure the EU financial sector fuels the twin green and digital transitions, and to cement the sector’s global competitiveness. This package is expected to impact a wide range of financial services providers including asset managers, investment banks, hedge funds and clearing and execution venues.

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The UK Prime Minister Boris Johnson has opened the UN’s COP-26 Conference in Glasgow (1 November) arguing that it is no longer up to politicians and big businesses to direct the world’s climate fate. He believes that it is already the case that ‘punters’ (also known as citizens) are now in the driving seat. 

However, new research shows that citizen-led direct action is limited when it comes to how punters direct their household savings and investments. Cicero/amo and Architas surveyed over 11,000 people in Europe and Asia to benchmark their views on ESG investing. When choosing when to invest, the common denominators consist of investment growth potential, past performance, and investment fees. ESG is still on the fringes of people’s mindsets with only a quarter of Asian investors (25 percent) citing sustainability as an investment factor. This falls to just 16 percent among Europeans. 

This is problematic on many fronts. The world will not reach even the half-hearted efforts to transition towards net zero without fully engaging capital markets. Over $100 trillion of finance is needed to meet the UN’s Social Development Goals. Governments cannot achieve that target alone. That means retail and institutional investors directing their capital towards sustainable investments. To make green capital markets a reality, there is still much work to do. Clearly, retail investors still don’t really ‘get’ what ESG investing means. Yet several steps – involving fund managers and regulators working together – could help promote the faster take up of green retail funds.

1 – The investment industry uses too many terms to describe the same thing: sustainable, green, social, community, impact. Investors are confused and this confusion can lead people to procrastinate: As many of the commentators at Glasgow point out, Planet Earth doesn’t have time to put-off important changes in behaviour.

2 – We need better climate disclosures on investment products. Generally, around 80% of our respondents supported the need for greater information around what ESG objectives are being met, what ESG KPIs and indicators are being used, and how ESG screeners work.

3 – We need to address the fear of greenwashing and potential mis-selling of green investments, a concern among over half of women and older investors.  This fear will also put off potential investors.

4 – We also need to beef up the role of financial advisors. As many as 1-in-5 investors said that they had not discussed ESG investing with their advisor but would have valued such a conversation. What are financial advisors waiting for?

Defining what is green goes to the heart of all the points above. For example, our findings showed 38% of Asian investors would screen the oil and gas sector out of their portfolios on ESG grounds, but this fell to around 5% if the oil company used those funds to invest in renewable energy. Understanding such complex ESG investment trade-offs during the transition phase to net zero is not a simple binary choice between green on one side and brown on the other. Mobilising capital markets to go green will involve a shift over time, not a one-off event. Even more reason to pick up the pace of change now.  

Cicero/amo is pleased to share with you our analysis of the 2021 Budget Statement and Spending Review, which provided a number of ‘firsts’ for Chancellor Rishi Sunak – the first multi-year Spending Review since the COVID-19 pandemic and Brexit, and the first Budget delivered by Sunak which set out a long-term economic plan for this Government.

For business, this was a positive Statement following a tumultuous relationship with Government of late, having been positioned as one of five pillars to deliver a stronger economy. However, announcements on the green finance agenda were a glaring omission despite the UK hosting the COP26 Summit in a matter of days, and an anticipated rise in inflation threaten to kybosh the Chancellor’s extra wiggle room following the economic recovery from the pandemic.

Click here to access Cicero/amo’s overview of the Autumn Budget and Spending Review 2021

To help business leaders and policymakers understand how European households have changed their saving behaviour throughout the pandemic, Cicero/amo has conducted research on those living in Europe’s ‘big four’ economies, based on responses from 4,006 people living in the UK, France, Germany and Italy.

This latest research gives light to what the legacy of the pandemic may mean for the future of spending and saving among households. A third of households in the UK and Italy either saved for the first time or are now saving more as result of the pandemic.

Many aspects of everyday life have been changed by the pandemic, and while some changes will be temporary, others may become permanent. Across Europe, a sizeable minority expect newfound saving behaviours to remain beyond the pandemic. This raises the questions:

• Will accumulated funds will be unleased as society reopens to give a much-needed economic boost?
• And will ‘accidental savings’ seen in the pandemic translate into higher levels of household saving in the future?

Click here to access Cicero/amo’s research into changes in saving behaviours following the pandemic.

Cicero/amo’s research team was delighted to support Tech Nation Insurtech Board’s Open Finance: The future of insurance innovation report, that explores the benefits, challenges and next steps on Open Finance and what it means for the future of insurance innovation.

The report finds that whilst Open Finance may present many opportunities, it is still in a nascent stage of development, and offers a series of building blocks to help ensure Open Finance can effectively progress from concept to reality.

Click here to access the full report, which looks at the future of innovation and its effect on insurers, insurtechs and customers.

#OpenFinance #InsurTech

The European Commission has this week published its long-awaited anti-money laundering and countering terrorist financing (AML/CTF) package. Fragmented and differentiated implementation of EU-wide rules have led to significant obstacles to cross-border service provision and effective enforcement of EU AML/CTF rules. National competent authorities currently apply the rules differently, thus creating different standards for companies to follow depending on the regions they operate in. This fragmentation is the main issue the AML/CTF package adopted this week has tried to resolve.

Click here to view Cicero/amo’s overview of the new EU AML package.

I do hope you find this of use and please do get in touch if you would like to discuss further.