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 Securities Lending Forum hosted the ‘Collateral Management, Securities Lending & New Risks: the Pension Perspective’ panel.
Firzli discussed the coming ‘Age of Geoeconomics’, 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.
“I foresee much more volatility, so we will have to adjust to that new age of geoeconomics, which is symbolised by the accelerating Sino-American ‘new Cold War’ — impacting many sectors of the economy, including tech and finance,” he added.
Although the age of geoeconomic marks the end of the ‘neoliberal’ era of benign financialisation and East–West cooperation (1984 – 2023), in his discussion, Firzli also highlighted a “ray of hope” 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 “this is changing the world for the better”.
Firzli continued: “It sounds like a paradox — 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.”
Addressing the audience, Firzli indicated that “this is a pivotal moment in the history” 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 “fully fulfilling” their natural role in the market — 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: “Private markets are rising. So pension funds, sovereign funds, central banks, endowments and private savers — they’re 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.”
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, “it is at the core of everything that investors do”, to the extent that some of the large European banks have stopped lending money to the oil industry. He added: “A year or two years ago, this would have been unthinkable.”
He concludes: “In 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 ‘prairie populists’ on the Democrat left).”
The Fleming Collateral Management and Securities Lending Forum hosted the ‘Collateral Management, Securities Lending & New Risks: the Pension Perspective’ panel.
Firzli discussed the coming ‘Age of Geoeconomics’, 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.
“I foresee much more volatility, so we will have to adjust to that new age of geoeconomics, which is symbolised by the accelerating Sino-American ‘new Cold War’ — impacting many sectors of the economy, including tech and finance,” he added.
Although the age of geoeconomic marks the end of the ‘neoliberal’ era of benign financialisation and East–West cooperation (1984 – 2023), in his discussion, Firzli also highlighted a “ray of hope” 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 “this is changing the world for the better”.
Firzli continued: “It sounds like a paradox — 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.”
Addressing the audience, Firzli indicated that “this is a pivotal moment in the history” 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 “fully fulfilling” their natural role in the market — 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: “Private markets are rising. So pension funds, sovereign funds, central banks, endowments and private savers — they’re 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.”
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, “it is at the core of everything that investors do”, to the extent that some of the large European banks have stopped lending money to the oil industry. He added: “A year or two years ago, this would have been unthinkable.”
He concludes: “In 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 ‘prairie populists’ on the Democrat left).”
← Previous industry article
SNB Capital and Interactive Brokers enable investors to access Saudi Exchange
SNB Capital and Interactive Brokers enable investors to access Saudi Exchange
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
