Fleming: Industry must adjust to a new age of geoeconomics
11 October 2024 Amsterdam
Image: MRJawich/stock.adobe.com
In the coming quarters and years, there are some changes that will be great for collateral management and securities lending, while some other trends will not be propitious, according to Nicolas Firzli, director general at the World Pensions council (WPc).
The Fleming Collateral Management and 麻豆传媒 Lending Forum hosted the 鈥楥ollateral Management, 麻豆传媒 Lending & New Risks: the Pension Perspective鈥� panel.
Firzli discussed the coming 鈥楢ge of Geoeconomics鈥�, securities finance and AI-driven trading and settlement moving centre stage, and what pension funds and sovereign investors need.
On the whole, he believes financial policy, political, geoeconomic, and technological changes will be quite good for the industry.
鈥淚 foresee much more volatility, so we will have to adjust to that new age of geoeconomics, which is symbolised by the accelerating Sino-American 鈥榥ew Cold War鈥� 鈥� impacting many sectors of the economy, including tech and finance,鈥� he added.
Although the age of geoeconomic marks the end of the 鈥榥eoliberal鈥� era of benign financialisation and East鈥揥est cooperation (1984 鈥� 2023), in his discussion, Firzli also highlighted a 鈥渞ay of hope鈥� in the shape of sustainable finance, as more and more pension executives and board members (trustees) are keen to incorporate sustainable metrics in the way they borrow, lend, and how they do collateral management.
He suggested that 鈥渢his is changing the world for the better鈥�.
Firzli continued: 鈥淚t sounds like a paradox 鈥� the world is becoming more volatile and more cynical because of the Chinese and American rivalry, but at the same time, there is more idealism in the form of sustainability and employee capitalism (fiduciary finance). Yes, it is a paradox. The two are happening and accelerating at the same time.鈥�
Addressing the audience, Firzli indicated that 鈥渢his is a pivotal moment in the history鈥� of economics and finance, especially in Europe and the UK.
Fiduciary capitalism is clearly on the rise, he stated, now that pension funds are progressively 鈥渇ully fulfilling鈥� their natural role in the market 鈥� that of majority asset owners, and ultimate governance arbiters, across asset classes and geographies.
Covering a number of ideas on the industry and where it is heading. Firzli also stated: 鈥淧rivate markets are rising. So pension funds, sovereign funds, central banks, endowments and private savers 鈥� they鈥檙e putting, on average, more money into venture capital, private equity, infrastructure assets and real estate, and even forestry and commodities, and they're putting relatively less money in bonds, and listed equity.鈥�
This shift is accelerating, according to Firzli. He said this means less business for old fashioned listed bonds and stocks. However, there may be more avenues for other lending businesses going forward.
Circling back to sustainable finance, Firzli says ESG is no longer an afterthought or an overlay, 鈥渋t is at the core of everything that investors do鈥�, to the extent that some of the large European banks have stopped lending money to the oil industry. He added: 鈥淎 year or two years ago, this would have been unthinkable.鈥�
He concludes: 鈥淚n Europe, including the UK, we are on the verge of incorporating more ESG metrics in capital requirements themselves on a central bank and financial industry regulation level. So the cost of compliance will rise even more on the Old Continent, at a time when, following US elections, prudential capital and ESG requirements may well be loosened on Wall Street. (Trump Republicans and 鈥榩rairie populists鈥� on the Democrat left).鈥�
The Fleming Collateral Management and 麻豆传媒 Lending Forum hosted the 鈥楥ollateral Management, 麻豆传媒 Lending & New Risks: the Pension Perspective鈥� panel.
Firzli discussed the coming 鈥楢ge of Geoeconomics鈥�, securities finance and AI-driven trading and settlement moving centre stage, and what pension funds and sovereign investors need.
On the whole, he believes financial policy, political, geoeconomic, and technological changes will be quite good for the industry.
鈥淚 foresee much more volatility, so we will have to adjust to that new age of geoeconomics, which is symbolised by the accelerating Sino-American 鈥榥ew Cold War鈥� 鈥� impacting many sectors of the economy, including tech and finance,鈥� he added.
Although the age of geoeconomic marks the end of the 鈥榥eoliberal鈥� era of benign financialisation and East鈥揥est cooperation (1984 鈥� 2023), in his discussion, Firzli also highlighted a 鈥渞ay of hope鈥� in the shape of sustainable finance, as more and more pension executives and board members (trustees) are keen to incorporate sustainable metrics in the way they borrow, lend, and how they do collateral management.
He suggested that 鈥渢his is changing the world for the better鈥�.
Firzli continued: 鈥淚t sounds like a paradox 鈥� the world is becoming more volatile and more cynical because of the Chinese and American rivalry, but at the same time, there is more idealism in the form of sustainability and employee capitalism (fiduciary finance). Yes, it is a paradox. The two are happening and accelerating at the same time.鈥�
Addressing the audience, Firzli indicated that 鈥渢his is a pivotal moment in the history鈥� of economics and finance, especially in Europe and the UK.
Fiduciary capitalism is clearly on the rise, he stated, now that pension funds are progressively 鈥渇ully fulfilling鈥� their natural role in the market 鈥� that of majority asset owners, and ultimate governance arbiters, across asset classes and geographies.
Covering a number of ideas on the industry and where it is heading. Firzli also stated: 鈥淧rivate markets are rising. So pension funds, sovereign funds, central banks, endowments and private savers 鈥� they鈥檙e putting, on average, more money into venture capital, private equity, infrastructure assets and real estate, and even forestry and commodities, and they're putting relatively less money in bonds, and listed equity.鈥�
This shift is accelerating, according to Firzli. He said this means less business for old fashioned listed bonds and stocks. However, there may be more avenues for other lending businesses going forward.
Circling back to sustainable finance, Firzli says ESG is no longer an afterthought or an overlay, 鈥渋t is at the core of everything that investors do鈥�, to the extent that some of the large European banks have stopped lending money to the oil industry. He added: 鈥淎 year or two years ago, this would have been unthinkable.鈥�
He concludes: 鈥淚n Europe, including the UK, we are on the verge of incorporating more ESG metrics in capital requirements themselves on a central bank and financial industry regulation level. So the cost of compliance will rise even more on the Old Continent, at a time when, following US elections, prudential capital and ESG requirements may well be loosened on Wall Street. (Trump Republicans and 鈥榩rairie populists鈥� on the Democrat left).鈥�
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