Capital Markets Corporate

June 7, 2019

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

Financial abuse protection

Measures to identify and help financial abuse victims will be introduced by HSBC, making it the first big bank to implement such initiatives. While normally both parties have to agree for a joint bank account to be closed, HSBC will now allow victims to do this without their abuser’s permission. The bank is also taking measures to avoid identifying locations on victims’ bank cards or account details, meaning customers will now be able to open accounts without a sort code that is traceable to a bank branch. (From The Times, 2nd June 2019)

The end of monogamous banking?

Peer-to-peer consumer lender Zopa has declared the end of “monogamous banking” as its new research shows the average UK adult has seven different financial providers. Its survey also found that two thirds of UK adults actively use products financial providers that are not their main current account provider. Zopa noted that Open Banking will enable a more complete view of people’s financial products. (From P2P Finance News, 3rd June)

FCA considers the pre-paid funeral market

Consumer complaints in the pre-paid funeral market and high pressure sales tactics used by plan providers have resulted in government plans to introduce compulsory FCA regulation of the sector. According to the government’s consultation, high commissions in the market were one of the leading factors behind aggressive sales tactics, as intermediaries are incentivised to sell funeral plans to providers who pay the most in commission. (From FT Adviser, 3rd June)

Going, going, loan

First it was auctions, then direct sales – and now eBay is offering loans too. The online marketplace is collaborating with fintech app Asto, which is backed by Santander, to offer cash flow loans to UK SMEs. Asto will use eBay data to assess individual businesses’ sales and cash flow, and offer loans to suit their business needs. This makes eBay the latest internet company to offer small business clients funding, alongside Amazon, PayPal and Square. (From Finextra, 3 June)

No point in moving

New research by the Resolution Foundation has seen another statistic dwindle – the number of young people moving to big cities. According to the think tank, high rents and stagnant wage growth now wipe out the potential benefits for today’s youth, making them less “job mobile” than previous generations. This fall is particularly surprising as young people are more likely to live in private rented accommodation than own their own home. (From The Times, 6 June)

Green fund management

They may seem unlikely eco-warriors, but fund managers have an important role to play in combatting climate change. By investing responsibly and adhering to environmental, social and governance (ESG) principles, asset managers have the potential to be key drivers in the move towards sustainability.

But how seriously are they taking this responsibility?

ESG is becoming increasingly important to big shareholders as it drives growth, market share and profitability. It also offers one of few growth areas for fund managers who are suffering after years of outflows from active portfolios.

Sustainable investing now measures almost $31tn in assets, including $17.5tn managed in ESG funds: an amount that has risen more than two-thirds in two years. In Europe, half (49%) of total professionally managed assets are committed to sustainable and responsible investment strategies.

Government regulation is helping to reinforce this commitment. This week the pensions minister Guy Opperman MP highlighted government regulations requiring pension scheme trustees to disclose their ESG policies as a “game-changer”. Many pension firms are already tilting portfolios away from fossil fuels and engaging more forcefully with investment firms who fail to take environmental and social issues seriously.

There are, however, ESG investing weak spots. Many companies are guilty of “greenwashing” in that they talk about addressing climate change but don’t walk the walk. The head of BlackRock, for example, wrote to chief executives saying their firms had to show they were making a positive contribution to society and understood how issues like climate change affected their potential for growth. Yet in 2018, BlackRock supported just 10 per cent of climate-related shareholder proposals.

Similarly, asset managers have a tendency to put eco-friendly branding on a conventional fund and overstate its environmental credentials.

As pressure to adhere to ESG principles heats up, institutional fund managers must ensure they are truly committed to the cause and aren’t just backing environmentally and socially friendly funds as a box-ticking exercise. Communications advice will play a key role in helping demonstrating asset management firms’ eco-friendly credentials, and also holding decision-makers to account to ensure their actions stand up to scrutiny when audiences scratch beneath the surface.

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