Clouds of uncertainty with definite silver linings
For this European Investor Summit, Societe Generale Securities Services has chosen to include major topics of interest and concern for the investment industry on the agenda.
SGSS is thrilled to be sharing the stage with globally recognised experts who have graciously agreed to share their knowledge and shed light on the current challenges and opportunities of a complex environment. After all, as an asset servicer, our role in a changing world is also to reflect and engage with our clients and partners on topics that are both prominent in our industry and relevant to them; most notably ESG1, private markets and digitalisation.
These trending topics were already prevalent pre-COVID and have only gained momentum since. With the Russian-Ukrainian war and revived inflation arising as tragic new contributories to global uncertainty, it is undeniably worthwhile pondering the future of these current trends. Will they maintain momentum, accelerate or start to falter?
Firstly, has been going strong for years now, fuelled by regulations with a strong impetus from the EU2, as well being driven by ever growing investor interest. By way of illustration, Bloomberg Intelligence forecasts that ESG assets are on track to exceed $50 trillion by 2025, representing more than a third of the projected $140.5 trillion3 in total global AuM4. However, one might rightfully wonder whether the war in Ukraine will not slow down the bourgeoning energy transition and temper the enthusiasm of even the most fervent ESG advocates. For that matter, one can see a notable change in tone between the last two editions of Larry Fink's letter to BlackRock shareholders. Indeed, whereas 2021’s letter emphasised the company's net zero commitment, the letter in 2022 focuses on the deleterious effects of the Russian-Ukrainian crisis on the energy transition and the need for a step-by-step approach "from brown to light brown to light green to green", which will probably be reflected in the future of the firm’s investment choices.
Secondly, private markets AuM are continuing to grow rapidly, reaching $9.8 trillion as of July 20215, seemingly becoming a perennial source of financial performance for investors of all stripes. And experts only see this groundswell continuing, with AuM expanding by $4.2 – $5.5 trillion by 2025 to $13.7 – $15 trillion in worst/best-case scenarios6. Nevertheless, signs of a potential turnaround, such as all-time high levels of dry powder or concerns about the availability and sustainability of this asset class, are definitely worth being explored.
Finally, the digitisation of operational processes, distribution models and assets continues to gain momentum across the entire financial ecosystem, with the use of advanced technologies such as artificial intelligence, and digital distribution channels becoming more widespread in parallel with the explosion of investor appetite for crypto assets. Evidenced by looking at crypto market capitalisation which has soared from $80 billion to $1.2 trillion between 2016 and the end of May 20227. While apparently these trends may thrive and provide a formidable matrix for the growth and evolution of our industry, some legitimate questions remain, even if only those which address interaction between human and machine or our ability to adapt to these major paradigm shifts.
All in all, I am delighted to have this opportunity to meet with all of you, our clients and partners, at the 2022 European Investor Summit, which I hope will leave you with plenty of food for thought by focusing debate in the right places. I am confident that these high-level debates will lead to passionate and inspiring discussions and I look forward to sharing views with you.
David Abitbol, Head of Societe Generale Securities Services, Societe Generale Securities Services
1Environmental, social and governance.
3Bloomberg Intelligence, ESG 2021 Midyear Outlook, July 2021.
4 Assets under Management.
5McKinsey Global Private Markets Review 2022, March 2022.
6Prime time for private markets: The new value creation playbook, PwC, January 2021.
7Coinmarketcap.com, data as of 29 May 2022.