European financial markets

Companies cannot be starved of cash during climate transition, says Mackel

Nicolas Mackel of Luxembourg for Finance addressed Brexit, China and climate change during a Financial Times conference on 21 September 2021. Library picture: Nicolas Mackel is seen speaking at a Delano Live event, 14 September 2021. Photo credit: Simon Verjus/Maison Moderne

Nicolas Mackel of Luxembourg for Finance addressed Brexit, China and climate change during a Financial Times conference on 21 September 2021. Library picture: Nicolas Mackel is seen speaking at a Delano Live event, 14 September 2021. Photo credit: Simon Verjus/Maison Moderne

The financial sector cannot get ahead of companies in the “real economy” when it comes to climate change, Nicolas Mackel of Luxembourg for Finance has said.

“Everyone would like the financial sector to be much further ahead” in addressing the climate crisis and carbon transition, according to Nicolas MackelNicolas Mackel, CEO of Luxembourg for Finance, a state-backed promotion body. However, “the financial sector is there to help the real economy and the real economy itself is in a transition to a low carbon economy.” During the transition period, the “financial sector cannot shut off cash to firms which are not yet carbon neutral.”

“Of course, the financial sector can help speed up the process” of transitioning to carbon neutrality, by “being more committed towards greening its portfolios, greening its loan books.... and in the way they engage with the firms they help finance,” Mackel stated on Tuesday. As firms transition, the “financial industry has a very, very important role to play.”

The comments came during the Financial Times “FT Future of Europe: Strengthening Europe’s financial sector” webinar.

Stéphane Boujnah, CEO and chairman of the managing board at Euronext, which runs stockmarkets in Amsterdam, London, Paris and elsewhere, called climate finance--and more broadly the shift to ESG criteria--“probably the largest transformation of capitalism in our lifetime.” He argued that “Europe is ahead of the curve” in terms of producing standards, investor behaviour and the transition to renewable energy. “The EU is ahead of the US,” Boujnah reckoned.

“We have very strong expectations,” when it comes to the climate change, stated Sharon Donnery, deputy governor for central banking at the Central Bank of Ireland. This includes “boards having a proper plan” and financial firms “pricing risk correctly”. While “we see many firms getting more and better data”, they need to be sure that they assess risks correctly, she explained.

Importance of China

“Relations with China are becoming more complex because the EU finds itself in a geopolitical triange with the US and China,” Mackel said in reply to an audience question. The EU has “always been very open” and several Chinese banks and asset managers have set up operations across the bloc. However, “more importantly, it’s EU investors and global investors investing through the EU” accessing “Chinese capital markets to piggyback on China’s growth rate,” he said. “China is the engine to a large degree of the global economy and we need this wind in our sails as well.” Mackel argued that the EU needs to remain “as open and transparent as possible” with both China and the US. “We will have to maintain an open dialogue… and hopefully Europe can play a role between China and the US that is helping to calm the waves.”

Brexit assessment

The panelists were asked about the impact of Brexit on European financial markets and which financial centre has gained the most. All three said Brexit merely reinforced previous strengths.

“I don’t think there’s been one clear winner,” commented Mackel, although “Dublin has done a very good race.” He said five markets had emerged as “winners”: Dublin and Luxembourg, most notably in asset management, Paris and Frankfurt in banking and trading, and Amsterdam in market infrastructure.

Mackel reiterated a point, that he frequently has made, that Brexit is not a single point in time. “It is something that will continue during the next five, 10, 20 years,” he told the FT Live audience. “Many people will see a real shift of activity and buildup of activity within the EU” over time.

“Very few people in reality have moved from London to the continent,” said Boujnah. New jobs have been created locally or filled by European expats moving from London back to the EU, he stated. “People underestimate the personal element of moving people.”

Donnery pointed out that not only financial firms have had to shift staffing plans, but so have regulators. “We have also had to focus on [finding] the right people with the right skills to supervise” financial institutions as they grow and evolve, she noted.

Harriet Agnew, asset management editor at the Financial Times, who moderated the “Capitalising on opportunities in Europe’s financial markets” panel discussion, said the webcast would be available to view for 90 days.