Covering funding needs / Favouring high-performance and sustainable investments

There are substantial funding needs

  • An international race to find funding

There are significant investment needs in Europe in terms of innovation, infrastructure, housing and education. The Juncker plan offers €300 billion for investment in Europe over three years, due mainly to the need to catch up following the decline in investments since 2007. The last estimate of investment needs made by the McKinsey Global Institute was €250 to €550 billion a year to cover future investments.

  • The challenge of energy, digital and demographic transitions

These funding needs correspond in particular to support for the profound changes being experienced: the digital transition/digitisation of the economy and infrastructure; climate change (investments in renewable energy, modernising/adapting housing, etc.); changes in society related to urbanisation (“the smart city”) and the ageing population, etc.


European financial markets are undergoing profound change but are still fragmented and too small

  • Pension funds are too small compared with the United States:  An additional $15 trillion would be available in Europe for long-term investment if European pension funds accounted for a comparable share of the economy to that of American pension funds in their economy
  • European companies would have been able to raise an extra €5 trillion on the financial markets between 2008 and 2013 if Europe’s markets were as developed as those in the United States
  • Amounts raised on the markets by American small and medium-sized enterprises and middle-market companies are five times greater than those raised by European SMEs and middle-market companies (for medium-sized investments, i.e. less than $250 million)
  • The European securitisation market is worth less than 25% of the American market


The need for effective market infrastructure

  • Proximity to local issuers, especially small and medium-sized enterprises and middle-market companies, to adapt to the specific needs of local economies: for example, derivatives based on raw materials used in the French agrifood industry
  • Positive effect on the risk premium requested by investors: lower premium on a strong, stable financial marketplace
  • Need to control systemic risks with a strong clearing house..


Limited number of long investors in Europe, especially in shares

  • Downward trend in how long shares are held, especially (i) for shares held by institutional investors, this has fallen in 30 years from 6-7 years to just a few months now, and (ii) for share UCITS leading to a higher portfolio turnover rate for the latter
  • The lack of pan-European pension funds (personal or group funds) whereas European insurers are not encouraged to play this role because of the regulations and the features of contracts
  • Fragmentation of the capital markets in Europe, due to: (i) different interpretations of European standards by each member country; (ii) a lack of consistency between European legal systems, which prevents the circulation of long-term savings within the European Union but is also a brake on investment in Europe for non-EU long investors, such as North American pension funds
  • National markets – taken individually – below the critical size in the eyes of large institutional investors


Using the European projects (Juncker Plan and Capital Markets Union) in the context of an accommodating monetary policy to improve funding of the economy:

  • Offering diversified channels for business financing in addition to bank funding, which is still predominant in France
  • Taking part in the relaunch of growth in France and Europe and new investment plans
  • Maintaining the presence of decision-making centres in France to preserve our economic sovereignty