The funds industry must transform itself to meet the evolving needs of all generations, including younger generations and societies in general, was the rallying call of Corinne Lamesch, chairperson, Association of Luxembourg Fund Industry (ALFI), during her welcome address on day one of ALFI’s Global Distribution Conference in Luxembourg.
The current geopolitical crises “directly impacting households” was the opening topic discussed by Lamesch; particularly that low-middle income classes are being hit by the energy food crisis. “They [low-middle income classes] have less disposable income, are unable to pay mortgages and, at the same time, a big part of those who can invest, are sitting on idle cash, risking their financial health,” rued Lamesch.
She also pointed out that the current inflationary environment has created uncertainty for investors, leading to redemptions in Q1 and even Q2 2022. She pointed out Luxembourg has been hit by net outflows of €105 billion in the first semester of 2022.
Focal demands have to be tackled by the industry, stressed Lamesch. “We have to manage every market regime we encounter on behalf of our clients. So, it’s obvious that we must put the investor at the heart of everything we do. We will do that at our conference. We will look at investors’ needs. For example, millennials and Gen-Z investing preferences. What tools are we using? Do banks have to change? How are institutional investors dealing with high geopolitical tensions? How can we make ESG meaningful to an investor? These are topics at ALFI”.
The sustainable investor agenda was also highlighted by Lanesch, who commented that Europe is halfway through an ambitious regulatory agenda. “We are committed to the EU green deal. We have a bumpy start, and we have to accept that in this domain, everything isn’t perfect,” stated Lanesch. “In Europe, we are moving towards an important milestone in this journey. We’ve started to ask, ‘what are the investors’ preferences in terms of sustainability?’”
ALFI audience members were told by Lanesch that achieving sustainable needs won’t be easy for those sitting in front of the client. “Another important milestone is the implementation of SFDR level 2, which is filled with very complicated info. We might have great intentions, but ESG disclosures are very difficult to understand for end investors,” she remarked.
A related challenge in this domain is interpretation issues, which are known to result in implementation difficulties, leading to greenwashing accusations. “Best intentions won’t work for our industry. Sustainable finance ambitions must go hand-in-hand with education”, explained Lanesch.
Lanesch also highlighted how indispensable private assets are in times of crisis since private capital plays a role in Europe’s private policy objectives. “They can provide urgently needed funding in climate awareness investments, such as the renewable energy sector”.
The final topic discussed was the funding preference of younger generations. Younger investors lead a digital life, commented, Lanesch, and payment apps are used at scale by them, “which have been particularly commonplace since the Covid-19 crisis”. The younger generation needs and wants to investment through the internet with a few clicks of the mouse, remarked Lanesch. “This is a good example of how our industry must transform itself to better meet evolving meets of all generations, including younger generations”.
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