ETFs and ESG engagement: two investment trends spotted

ETFs and ESG engagement: two investment trends spotted

ETFs and ESG ­engagement: two investment trends spotted Investors have been debating the merits of “active” versus ­“passive” investing for a while now. While ETFs are on the rise, active strategies have a firm place in today’s investment world.

Which trends are shaping the future of asset management? How will information as a basis for investment decisions be gathered in the future? Two managers of major institutional investors in ­Austrian stocks share their views on the role of stock exchanges and the i­mpact the financial industry has on the socio-economic ­development.

Valérie Baudson has been Deputy Chief Executive Officer of Crédit Agricole S.A. and CEO of Amundi since May 2021. She is a member of the Executive Committee of Crédit Agricole S.A. Valérie Baudson held various positions within the Group since she joined in 2007.

© Delporte, Vanguard

Sean Hagerty is Managing Director of Vanguard Europe and responsible for ­leading the operations and distribution efforts of the European business. ­Prior to this role, he was a principal in the Portfolio Review ­Department in the US, responsible for overseeing all of Vanguard’s mutual funds and ETFs, assessing fund performance and portfolio ­consistency, and monitoring Vanguard’s external advisers.

Interview: Wiener Börse

250 years wiener boerse

Valérie Baudson

What is the role of a stock exchange and how will it change in future?

VALÉRIE BAUDSON Equity funding is crucial

for innovation, productivity and overall economic growth. Stock exchanges are the main places for companies to access capital through ­regulated markets and therefore vital factors for strong ­economies, companies and overall prosperity. ­While stock trading remains the core business, going forward stock exchanges have to adapt to changing landscapes with efficiency, innovation and the expansion of their offerings. This is a path that the Vienna Stock Exchange is already s­ uccessfully following through its ­transformation from a stateowned financial marketplace to a ­modern information technology and service ­provider.

What impact does the financial ­industry have on social and economic development?

themselves in an increasingly precarious financial ­situation even now. In many cases they do not know how to save for old age. This may be due to a gap in their understanding of financial markets and products or possibly also due to a lack of trust in providers and intermediaries, or a barrier in the form of high fees. But it does not have to be this way. This is where the financial industry as well as the European regulators need to come together to act and really work their impact. If policymakers reduce barriers to investing, ensure consumers have access to a fair deal and simplify rules across the EU, there will be a positive change in the investment culture of European investors that will improve their long-term financial wellbeing.

is a sign of a healthy economy and critical to the ­prosperity of a country’s population. Asset ­managers play an important role in allocating ­capital and managing risk and return for their clients. At Amundi, we truly believe that our duty to our customers is to deliver robust ­performance and promote a transition to a more ­sustainable, inclusive low-carbon economy in order to ­preserve long-term economic, natural and human ­capital. There is also a need to strengthen social ­cohesion, as inequalities fuel social divisions and foster political and financial market ­instability in our ­societies. As a leading European asset ­manager, deeply committed to ESG, and a major ­shareholder, we use our influence to support issuers on integrating ESG issues on two levels: contributions to energy transition, which is a major challenge for our society today, and ­contributions to social cohesion, which is an important ­balancing factor for our democracies.

SEAN HAGERTY The financial industry plays

SEAN HAGERTY If I had to pick one invest-

a hugely important role on the impact of socio-­ economic development. The European ­population is ageing. A large number of EU citizens find

take a stand for all investors, to treat them fairly and to give them the best chance for investment success. This is important because if you think about today’s markets, you arrive at a simple truth: Investors cannot control the markets, but they can control costs associated with investing.

Because every euro paid in fees is a euro less of potential return. That is why we focus on low-cost, uncomplicated funds that can help investors meet their long-term goals. And this is where ETFs will continue to thrive. They are low-cost, long-term oriented and broadly diversified products that are truly democratising the market. ETFs give end investors the ability to access the financial markets at prices that were formerly only available to large

ment trend, it would be the continued rise of ETFs as a product suitable for the end investor.

Let me explain why: Vanguard’s mission is to

­ anaged funds. As investors increasingly take m control of their financial future, we believe better access to clear and concise financial guidance is needed to help consumers make informed financial decisions. Vanguard research shows that the value of (good) advice is quantified as a plus of around 3 per cent per year in return on investment. It also shows that good information helps investors to stay calm in times of volatile markets and stick to their financial plan. In order to give everyone an equal chance of a good return on investment, there should be more advisory and guidance options, including low-cost, technologybased advice. This will meet the different needs and wishes of the EU’s investing public: The aim should be to provide consumers with information that stimulates competition, that will improve services and reduce costs and that will therefore improve investor returns and increase the financial well-being of people in the long term.

What investment opportunities do you currently see in Central and Eastern Europe (CEE)?

Which investment strategies are you currently focusing on? Which future trends do you predict?

VALÉRIE BAUDSON ESG is and will remain in the coming years a central investment theme for investors. The COVID-19 crisis has accelerated the trend towards sustainable investments. Since 2010, Amundi has been a pioneer in responsible investment, based on two strong convictions: The first one is that companies and investors have a responsibility towards s­ ociety, ­heightened in the context of the social crisis resulting from the p ­ andemic. The second is that ESG and ­responsible investments are an e ­ nabler of long-term financial performance at a time when the energy transition is barely gathering ­momentum five years after the adoption of the Paris A ­ greement. Amundi initiated a three year action plan in 2018, with the ambition of mainstreaming ESG investing, fostering innovation to expand ESG-related financing needs and championing ESG integration vis-à-vis all our counterparts around the world. I am proud to say that we are now recognised as an asset management leader in responsible investment with almost €800 billion ­responsible investment assets under management.

VALÉRIE BAUDSON A strong financial sector

ETFs and ESG engagement: two investment trends spotted

VALÉRIE BAUDSON Amundi’s local flagship fund

Sean Hagerty

i­nstitutional players. We see more investors taking control of their future, we see more investors ­seeking financial advice and ETFs play a major role in this development. More democratisation is needed across Europe to help more people to invest and save for retirement at the right price, diversification and time orientation to achieve the best results. Vanguard’s mission and its underlying index funds and ETFs support this.

What are your preferred sources for ­obtaining ­information when investing in ­companies, sectors and countries?

SEAN HAGERTY As one of the largest providers of index and actively managed funds worldwide, Vanguard takes a deliberate approach to ­providing broadly diversified, low-cost, high-­ quality i­nvest­ments to meet the needs of our ­investors. We undertake this through our proprietary ­academic research, our time-tested principles of investing as well as working closely with index providers and sub-advisors for our actively

(Amundi Austria Stock) is one of the ­biggest equity funds in Austria with a long history and a very strong track record. In Austria there are a lot of very interesting companies, which are kind of niche players or mid-caps in a g ­ lobal ­context but at the same time world market leaders in their b ­ usiness. The investment opportunities in ­Austria from a ­sectorial perspective are very wide r­ anging, from renewable energy to information technology or even biotech.

Amundi is already present in Central and Western Europe. In the coming years, opportunities will come up as the funding of the EU R ­ ecovery Funds will help to accelerate two transformational trends: digital transformation and the Green ­Revolution.

In terms of digital­­transformation, there will be investment o ­ pportunities in companies ­exposed to ­e-commerce sectors that will benefit from ­changing consumer and c ­ ommunication h ­ abits. The green deals will accelerate the t­ransition of countries moving away from use of fossil fuels. This is very relevant for countries such as Poland which relies heavily on coal for energy production. We also see opportunities in r­enewable energy projects in the Baltic region. The main c ­ atalyst for the CEE bank stock prices will come from rising interest rates as growth and inflation pick up in the region. This process has a ­ lready started in the Czech Republic and Hungary, l­eading to a better outlook for interest margins and profitability for banks.