Geopolitical uncertainty and market volatility may negatively impact returns on investments. How can investors protect themselves? Maurice Bauer offers a solution: sustainable investments.
What challenges do stock exchanges face this year?
There are a lot of open questions that add to market uncertainty. Current and future political decisions are likely to have a major impact on the financial sector throughout 2019. To name a few:
- Brexit and its consequences for economic players on both sides of the Channel,
- The potential developments in South America, in particular, the new president of Brazil,
- The insecurity around the future of diesel, with the rise of oil prices and climate change-related challenges.
Capital markets do not like lingering questions. How long it will take to find answers to current issues will determine the behavior of the markets in the short- and mid-term.
How will this uncertainty affect savings of Europeans?
Unlike their American counterparts, European savers have traditionally opted for other strategies than investing in capital markets. This happens in spite of nowadays capital markets’ rich offer of products for each type of investor.
What we notice, however, is the emergence of a clear trend to invest more in green and sustainable finance. Until recently, some investors would think that a sustainable financial product’s return on investment is less satisfying. But now they are starting to understand that this is a myth. Data shows that returns on a sustainable instrument can be as good as on a conventional product.
Do you expect the trend to last?
2019 will be a pivotal year. The paradigm shift needed to ensure climate protection will require brave political and business decisions. The European Commission has been very active in pushing forward the transformation of the financial system into a sustainable one.
It takes a lot of work to set up a solid framework for sustainable finance with definitions, standards, and common control mechanisms. This is why we should not just sit and wait for proposals, but meet their efforts halfway.
Do investors have a role to play in making this shift happen?
Absolutely. Savers should become more demanding when it comes to their financial investments. We should all ask our advisors and/or bankers for sustainable investment opportunities, instead of settling for traditional investments only.
Bankers and investment advisors will have to develop the skills and products to meet the expectations of the clients. Policy makers will then follow and create the necessary regulatory framework.
With a simple question asked when deciding where you put your money, you can trigger a snowball effect, with positive impacts not just at a national level, but also in the European context. It’s only together that we can succeed.