Markets and Sustainable Finance

As a member of the European Parliament’s Economics Committee, much of my work focuses on creating and amending market regulation, to create an environment that encourages job creation and innovation, while, as its first priority, protecting the consumer.

It is now a decade since the global financial crisis, which sent our country and many others into recession. My priority is that the public should never again have to bail out banks for taking unnecessary risks. To do this we need to work constructively with finance, to produce a relationship between working people and banks that is mutually productive and secure.

However, financing does not always have to come from banks. One important way to develop funding for small and medium sized businesses across the West Midlands is to help develop the EU Capital Markets Union.

We need to make sufficient finance available for SMEs. To do this is important that we grow and develop the EU’s capital markets union. Despite the progress that has been made over the past 50 years, Europe's capital markets are still relatively underdeveloped and fragmented. Compared with the US, European SMEs receive five times less funding from capital markets even though the two economies are about the same size.

If our venture capital markets were as deep as those in America more than EUR 90 billion of funds would have been available to finance companies between 2009 and 2014. The lack of easily available capital means businesses often have nowhere else to turn other than trying to borrow at expensive rates from banks. For many small firms across the West Midlands, this is simply not an option.

A Capital Markets Union should move the EU closer towards a situation where SMEs can raise finance as easily as large companies.

A greener financial future

To beat climate change and to grow prosperity around the world, we need to mainstream green-thinking into all areas of modern life.  Finance - a world driven by profits and returns - may not seem the obvious choice for securing a more environmentally stable future. However, the capital involved in private finance holds the key to reducing our fossil fuel consumption and protecting future generations from natural catastrophes.

The major shift required in the world of finance is from short-term to long-term thinking. While green investments may not appear to fulfil an investment funds fiduciary duty in the space of two years; over 10, 20 and 30 years, green investments will be the most profitable investments. My reasons for believing this are two-fold.

Firstly, without a major green investment program, we are likely to see an exponential rise in the size and frequencies of natural disasters. As well as the tragic human, social and societal cost, this will result in economic catastrophe for those countries affected.

Secondly, it is estimated that one third of oil, 50% of gas reserves and 8/10ths of coal reserves are ‘stranded assets’. As our fuel consumption habits become more environmentally friendly - of the Paris Climate Agreement, which commits us to limiting global warming to less than two degrees - these fossil fuels are likely to be left in the ground. It is believed that investors have failed to fully take into account the high percentage of ‘stranded assets’ into their value calculations, and therefore a sudden drop in prices is expected.

I wrote more about my belief in the need for more green investment in Euractiv here.