By Jesús González-Nieto, Head of BME Growth
In 2021, global regulated securities markets witnessed a year of strong growth experienced by small and medium companies.
Spain was no exception here, which is unsurprising since small and medium companies play a crucial component in the country’s market. More than 99% of Spanish companies are SMEs, and they employ 80% of the country’s workforce and represent 65% of Spain’s GDP.
But how are we supporting these smaller companies in our market? The answer is via BME Growth.
SME activity in Spain: an overview
To support this continually growing and evolving market, we continue to work with SMEs through our SME stock market, BME Growth. For nearly the twelfth year in a rowwe have been bringing small companies closer to the market and help them to access equity financing easily and efficiently.
This initiative ultimately aims to accelerate SMEs’ growth process and in the most successful cases, help them make the jump to the stock exchange. In 2021, we saw continued growth in this area, with 16 new companies listed on BME Growth. When compared to the 10 new companies listed in 2020, we see that SMEs are stepping into centre stage in the global markets.
BME Growth today has 127 companies listed and a market capitalisation of EUR 19.060 billion, almost the double the amount of 4 years ago. Companies listed on BME Growth are also experiencing faster growth than their off-market counterparts. For example, in 2020, in the middle of the lockdown for COVID, sales raised by 7% and workforce by 25% up to 13.827 employees.
One thing is clear – it’s time to take note of SMEs position in the market.
Which SMEs are gaining momentum?
When it comes to the breakdown of sectors which are gaining momentum on BME Growth, the technology, biotech/health, engineering, telecommunications and renewable sectors are the largest. If we consider these SME growth areas, we can build a future-gazing snapshot of how Spain’s economic backbone will be composed in years to come.
The growth experienced by BME Growth in 2021 marks yet another year in which our SME stock market have provided financing to companies who have traditionally found it difficult to diversify their sources of funding, due to their size. €960 million were raised by BME Growth companies in 2021, and more than €5.6 bn since its inception.
What the next year holds for SMEs in Europe
European governments have reaped great benefits from the presence of SMEs in the market. Today, they contribute to over half of Europe’s GDP, employing around 100 million people.
Given that SME lie at the heart of Europe’s economy, it’s vital for the wider market that SME continue their growth within the capital markets infrastructure. This will help SME, both in Spain and further afield, to compete at an international scale while retaining their integrity and ability to learn and grow. As well as setting SME up for success later on, continued support throughout the listing process can also increase healthy competition amongst exchanges.
The European Commission is preparing a set of regulations in this direction – the so called “Listing Act”. It is a perfect opportunity to set up a more efficient and flexible environment that allow SME to tap markets in a faster and costless way. Adapting the documentation that a small company needs to produce and speeding up the registering processes with the Competent Authorities is essential. Also, by rethinking what necessary information is required of listed companies will reduce their costs and time invested.
Why should exchanges continue to encourage SMEs to enter the market?
There are numerous benefits that exchanges can experience by supporting SMEs. For example, it can reduce the costs associated with listing and create a more attractive environment for all businesses in the market. This will ultimately lead to increased listings overall.
Transparency also has a part to play in maintaining credibility and boosting listings in both the SME markets and traditional Stock Exchanges. Today, listed companies are held accountable for their reporting and revenues by numerous investors, analysts, supervisors, and regulatory authorities, which requires an adequate level of transparency.
This requirement for transparency is equally applicable to SMEs throughout their listing journey, which will provide them with greater credibility. As a result of this increasing credibility, SMEs will experience an increase in awareness for their listing, leading to an increase in value in the market. A Pre-Market initiative like Spanish Entorno pre Mercado, an educational program that also provides training, mentoring and networking for companies thinking in going public, has shown its success in recent years. Supporting this growth amongst SMEs will therefore result in greater growth and credibility across the stock exchange market.
Wealth Managers and the Future of Trust: Insights from CFA Institute’s 2022 Investor Trust Study
Author: Rhodri Preece, CFA, Senior Head of Research, CFA Institute
Corporate responsibility is more important than ever. Today, many investors expect more than just profit from their financial decisions; they want easy access to financial products and to be able to express personal values through their investments. Crucial to meeting these new investor expectations is trust in the financial services providers that enable investors to build wealth and realise personal goals. Trust is the bedrock of client relationships and investor confidence.
The 2022 CFA Institute Investor Trust Study – the fifth in a biennial series – found that trust levels in financial services among retail and institutional investors have reached an all-time high. Reflecting the views of 3,588 retail investors and 976 institutional investors across 15 markets globally, the report is a barometer of sentiment and an encouraging indicator of the trust gains in financial services.
Wealth managers may want to know how this trust can be cultivated, and how they can enhance it within their own organisations. I outline three key trends that will shape the future of client trust.
THE RISE OF ESG
ESG metrics have risen to prominence in recent years, as investors increasingly look at environmental, social and governance factors when assessing risks and opportunities. These metrics have an impact on investor confidence and their propensity to invest; we find that among retail investors, 31% expect ESG investing to result in higher risk-adjusted returns, while 44% are primarily motivated to invest in ESG strategies because they want to express personal values or invest in companies that have a positive impact on society or the environment.
The Trust Study shows us that ESG is stimulating confidence more broadly. Of those surveyed, 78% of institutional investors said the growth of ESG strategies had improved their trust in financial services. 100% of this group expressed an interest in ESG investing strategies, as did 77% of retail investors.
There are also different priorities within ESG strategies, and our study found a clear divide between which issues were top of mind for retail investors compared to institutional investors. Retail investors were more focused on investments that tackled climate change and clean energy use, while institutional investors placed a greater focus on data protection and privacy, and sustainable supply chain management.
What is clear is that the rise of ESG investing is building trust and creating opportunities for new products.
TECHNOLOGY MULTIPLIES TRUST
Technology has the power to democratise finance. In financial services, technological developments have lowered costs and increased access to markets, thereby levelling the playing field. Allowing easy monitoring of investments, digital platforms and apps are empowering more people than ever to engage in investing. For wealth managers, these digital advancements mean an opportunity for improved connection and communication with investors, a strategy that also enhances trust.
The study shows us that the benefits of technology are being felt, with 50% of retail investors and 87% of institutional investors expressing that increased use of technology increases trust in their financial advisers and asset managers, respectively. Technology is also leading to enhanced transparency, with the majority of retail and institutional investors believing that their adviser or investment firms are very transparent.
It’s worth acknowledging here that a taste for technology-based investing varies across age groups. More than 70% of millennials expressed a preference for technology tools to help navigate their investment strategy over a human advisor. Of the over-65s surveyed, however, just 30% expressed the same choice.
THE PULL OF PERSONALISATION
How does an investor’s personal connection to their investments manifest? There are two primary ways. The first is to have an adviser who understands you personally, the second is to have investments that achieve your personal objectives and resonate with what you value.
Among retail investors surveyed for the study, 78% expressed a desire for personalised products or services to help them meet their investing needs. Of these, 68% said they’d pay higher fees for this service.
So, what does personalisation actually look like? The study identifies the top three products of interest among retail investors. They are: direct indexing (investment indexes that are tailored to specific needs); impact funds (those that allow investors to pursue strategies designed to achieve specific real-world outcomes); and personalised research (customised for each investor).
When it comes to this last product, it’s worth noting that choosing advisors with shared values is also becoming more significant. Three-quarters of respondents to the survey said having an adviser that shares one’s values is at least somewhat important to them. Another way a personal connection with clients can be established is through a strong brand, and the proportion of retail investors favouring a brand they can trust over individuals they can count on continues to grow; it reached 55% in the 2022 survey, up from 51% in 2020 and 33% in 2016.
TRUST IN THE FUTURE
As the pressure on corporations to demonstrate their trustworthiness increases, investors will also look to financial services to bolster trust. Wealth managers that embrace ESG issues and preferences, enhanced technology tools, and personalisation, can demonstrate their value and build durable client relationships over market cycles.
5 tips to ensure CSR efforts come across as genuine
By Mick Clark, Managing Director, WePack Ltd
Corporate social responsibility – or CSR – is playing an increasingly pivotal role in the long-term success of modern-day companies.
The harsh reality is that only a paltry 46 percent of people trust the brands they buy from. And with more competition than ever in all walks of business, a positive brand reputation needs to be earned or customers will simply take their money elsewhere.
That’s why I share my insights on the importance of CSR in modern business and introduce an effective plan to avoid coming off as disingenuous to your employees and customer base.
The value of CSR
The needs of modern employees and consumers are changing. There is a higher emphasis placed on the ethics and morals of companies and their handling of hot button topics like the environment or social issues.
59 percent of UK workers believe their business should be investing in charitable initiatives. 67 percent of people aged 18-19 feel this way, showing a generational shift in favour of companies that support ethical, social, or environmental causes.
At WePack, we recognise the importance of this and make sure to regularly donate to a variety of charities including RRT (Rapid Relief Team), and donated £6,000 to the charity’s social causes last year.
An example of good CSR can be found in search engine giant, Google. It has had notable success with its CSR initiatives. Its flagship CSR campaign, Google Green, is a companywide commitment to using clean sources of energy, cutting down on its use of fossil fuels and drastically increasing energy efficiency as a direct response to the climate crisis.
It has been so successful that its data centres now require 50 percent less power to run than the average data centre and it’s poured over $1 billion into jumpstarting renewable energy projects.
Customer attitudes are fundamentally changing, and people are far more concerned about the values that their money could be indirectly supporting. In fact, 71 percent of customers prefer buying from businesses that align directly with their values.
In the modern-day, demonstrating high levels of CSR boosts brand perception. Businesses that make it a priority are more attractive – from an investment standpoint – to both customers and potential stakeholders.
For example, more than a third of consumers are also willing to pay more for a product or service if the business prioritises sustainability specifically – so it pays to be responsible.
Businesses with purpose-driven and ethical goals and proven commitments to CSR help retain employees. Millennials will make up 75 percent of the workforce by 2025, and it’s that cohort that is increasingly demanding socially responsible employers.
Those that fail to meet the needs will ultimately see their customers take their purchasing power elsewhere.
Addressing the challenges
As obvious as it may sound for a business to take on as much CSR as possible, many organisations face limitations.
Pressure from investors can disrupt the growth of CSR initiatives. Sometimes, the direction that stakeholders want to take the company doesn’t fully align with plans to target social or environmental issues.
Companies face becoming fixated on linking profitability with CSR programmes. It can be tough to present a genuine CSR programme without it coming across as a marketing ploy – presenting an extra hurdle for businesses to overcome.
Despite the challenges businesses face that are out of their control, many firms unwittingly make their own mistakes that cost them dearly.
For example, businesses can struggle to bolster their CSR programmes if they don’t consult their customers and staff first. A simple survey helps companies decide what issues to put as a priority and target to satisfy their customer base and employees.
Any attempt to create an effective CSR programme needs top-down support. Many businesses wrongly treat CSR as a separate entity, rather than fostering a companywide culture. This can lead any attempt to push back on global issues to appear disingenuous to those looking in.
Shifting the CSR approach
Because of the global shift in public needs and opinions in recent years, businesses need to better demonstrate their efforts to avoid having their campaigns labelled as a box-ticking exercise.
It’s no secret that consumers are doing more research and are becoming more switched on to spotting lacklustre approaches to CSR. Also, everyone can have their say online – it’s much easier to get exposed if your CSR campaign is nothing but an empty publicity stunt.
For example, Volkswagen’s reputation was left in tatters after its ‘greenwashing’ scandal promoted a newer, cleaner diesel vehicle that wasn’t any better for the environment than previous models. The company took it further by fitting a device that helped it cheat emissions tests – resulting in a $125 million fine.
For this reason, CSR campaigns need tangible results to be credible and trustworthy.
Sharing top tips
When it comes to structuring a strong CSR campaign, it’s critical to demonstrate several things to prove your strategy is effective in helping the chosen cause.
Firstly, evidence the fact that your efforts are helping wider communities. Whether it’s through statistics or showing proof of investment in social causes, tangible evidence goes a long way when legitimising your CSR campaign.
Secondly, balance your rhetoric. Effective communications are vital to the success of a campaign. However, it can damage a company’s image when done poorly. Businesses should speak about their chosen issues in their dialogue rather than spending too much time talking about the solutions the company has implemented. This stops them from becoming too self-promotional or sounding braggy.
To further avoid this, make sure you can directly tie your CSR campaign to corporate values and beliefs. As well as helping to strengthen your comms, it will also guarantee that company values are more than just surface-level – helping to facilitate tangible, long-term change.
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