Financial System Strengthening
The Role of Financial Services in Society
Among the most damaging repercussions of the 2008 financial crisis and other industry scandals is the widespread loss of trust in the financial system. Given how much financial institutions contribute to economic growth via activities such as saving, investing and allocating capital, the restoration of public trust is imperative. This initiative offers a neutral space in which senior leaders of financial institutions, regulators, academics, and representatives of civil society can candidly discuss ways to increase the social and economic value of financial services
The project’s main goals are:
- To define what it means for financial systems to be “socially useful”, including key activities, indicators of success and performance metrics
- Devise standards and mechanisms (other than, and complementary to, specific regulations aimed at financial institutions) to govern the conduct of industry practitioners, regulators and other participants
- Address critical issues that help shape public perception of financial institutions, such as the need to ensure credit growth and manage trade-offs between financial innovation and stability
Disruptive Financial Innovation
Emerging technologies have the potential to disrupt traditional financial services with implications for the market at large. Businesses that successfully harness these changes can expand their reach and reinforce their core value, while those that cannot risk losing their profitability and market share to new entrants. Through research and analysis involving all the relevant stakeholders, this project aims to:
- Identify which new technologies and ideas are most likely to disrupt the financial sector
- Consider the ways in which new business models can affect the stability, efficiency, transparency and accessibility of established financial systems
- Advance thinking on how financial institutions can engage with these changes in ways that support systemic stability, reinforce competitiveness and provide benefits to consumers
Alternative Investments 2020
This project aims to explore the key driving forces that will have an impact on the private equity, hedge fund and venture capital industries in the next five years. This effort will provide practitioners – both general and limited partners – with the opportunity to discuss the different social, economic and regulatory factors that might shape the post-crisis alternative investments landscape through 2020.
Direct Investing by Institutional Investors
Institutional investors, such as sovereign wealth funds and public pension funds, are increasingly hiring people who can make direct investments and manage hard-to-sell parts of their portfolios. It’s a trend that could affect future institutional investment strategies, the asset markets in which they invest and the alternative investments industry at large.
The aim of this project is to produce a comprehensive study of direct investing by institutional investors, and shed light on its potential effects. It will do this by:
- Charting the growth and drivers of direct institutional investing
- Developing and testing hypotheses of how the increased presence of direct institutional investment affects asset markets in private equity, infrastructure and real estate
- Projecting possible trajectories for the future of the trend
Building Local Capital Markets in Emerging Economies
This initiative recognizes that capital markets play a critical role in economic development, yet they remain underdeveloped or are non-existent in small-scale, emerging economies. The project asks whether the challenging, long-drawn-out process of establishing local capital markets can be accelerated, and how this can be achieved.
This initiative will attempt to overcome the orthodox wisdom around the slow creation of capital markets. In addition to policy-makers and multilateral organizations, the project will draw heavily on private sector and industry expertise, and will seek to answer questions on financing of infrastructure, SMEs and retirement funding as well as broader macro-policy issues.
“As we think about addressing the fractures in the financial system, we must consider not just the inefficiencies and shortcomings as highlighted in the last crisis, but also consider emerging and unknown risks.”
– Anshu Jain
Co-Chief Executive Officer,
Deutsche Bank, Germany
and Co-Chair of the
Governors for Financial Services for 2014
Benchmarking Financial Systems
Ensuring sustainable economic growth and financial stability is indispensable in aging societies, especially in emerging markets. At a time when policy-makers are dealing with the aftermath of the 2008 financial crisis and the private sector is operating in an increasingly complex and uncertain environment, this initiative hopes to generate strategic insights and dialogue between politicians, businesses and organizations in order to shape a policy reform agenda and more prosperous financial systems in the 21st century
The project aims to measure and analyse the metrics of financial systems in a number of countries around the world, creating a tool that will develop a macro-economic picture. This tool will not only provide an objective assessment and ranking of selected countries’ financial sectors, but also serve as the basis for convening relevant stakeholders, who can jointly identify priorities for improvement
Mainstreaming Sustainable and Impact Investing
Institutional investors increasingly take into account environmental, social and governance criteria when making investment decisions. Recent studies suggest that, by 2015, the sustainable investing market will more than double, growing from 7% assets under management to 15%-20%. The project aims to share best practices among investors and break down the key barriers preventing sustainable investing from going mainstream. In addition, participants focus on ways to enhance the triple bottom line through impact investing.
More than half of the world’s working-age population does not have quality, affordable financial services, having to rely on informal means of building and securing their assets. However, exciting progress is being made in the creation of an inclusive global financial system. The initial phase of this project has explored core topics, such as bridging the gap between access, usage and supply-side delivery economics, as well as identifying opportunities for industry collaboration in retail and agriculture
This initiative aims for action and tangible impact. A joint innovation agenda for 2014 is expected to extend formal financial services to the underserved via:
- Providing access to a formal digital finance network to support new services, new providers and more efficient business models, and creating a broader network that improves the economics of inclusive finance
- Expanding MSME and smallholder-farmer access to finance
- Making use of new technologies to improve information transfer and transparency