Road to New Reality

CHRYSTELLE VEECKMANS: Thanks Rachel and thank you Naim for taking the time to share your views with our audience. Covid-19 has put a renewed spotlight on ESG, as we know ESG has been a topic close to your heart as well as with Candriam’s. Just last year H∓K Responsible Investment Brand Index recognized Candriam as one the asset management brands most committed to ESG, and also ranked 2nd on ESG ranking by Broadridge. And you were named "Best CEO in the sustainable investment industry" … How did it all begin Naim?

NAIM ABOU-JAOUDE: Thank you Chrystelle for this question and good morning everyone. To be honest, it wasn’t always a quiet journey. Some years we were really on a bumpy road with ups and downs. As I was appointed CEO in 2007 and we experienced strong growth in 2008. Afterwards the financial crisis was really challenging, after that, we had the sale process of the company to New York Life in 2014 and since then we are really in a better shape and we are one of the fastest growing asset managers in Europe. But one thing that has always been here for us and constant over these years was our focus on ESG and sustainability. For us at Candriam, it all started in 1996, 24 years ago. In the deepest silence we launched two ESG strategies, but back then I remember that nobody wanted to hear about ESG, actually nobody even wanted to manage this fund as it was perceived as a losing game. For two decades we were struggling to see demand but our conviction that responsible investment was the right way to go never faded. Actually, for us, it’s 2008 where things start changing and it was a real turning point. The financial crisis of 2008 revealed so many inefficiencies in our system and acted as a wake-up call for the industry. It showed in reality the interdependence between societies, governments, economies and financial markets and has encouraged all players to think more long term. We are very proud today of where we are, not because we were pioneers in this field, but because over the last 25 years we continued our efforts constantly even when we were not making a lot of money. The reality is we kept going in this direction as we have always believed that traditional financial analysis alone does not reflect all the risks and opportunities of an investment. And this is mainly for two reasons, today we have to know that 80% of company valuation is based on intangible assets such as patterned brand reputation and long-term value of companies can’t ignore major environmental and social challenges. Today Candriam by being consistent over the last 25 years and constantly investing in ESG is positioned as one of the top three brands in Europe and in fact we are now managing over 50 billion in core ESG strategy which is more than a third of our AUM. It really shows that the long-term vision pays off with time. Moreover, as a company we don’t want to be only recognized as a pioneer in ESG investing but we want to be recognized as a responsible company at all levels. Practicing what we preach and walking the walk and talking the talk and this is what we are doing and have been doing for years. Applying to ourselves what we expect from the companies we invest in. For example, we have a strong corporate culture, responsibility is part of our identity and our DNA, and by the way Candriam stands for conviction and responsibility in asset management, we created the name in 2014. We have been developing a CSR strategy for more than 15 years towards all stakeholders, issuing every year our CSR report since 2005. We also created an institute for sustainable development dedicating up to 10% of all our ESG funds, taking 10% of the management fees to appease our social impact on society and develop research and education on ESG. To conclude on this question, I am really very optimistic for the future of sustainable investing as we are seeing an acceleration of other players in this field especially since the COP 21 and since the establishment of the sustainable development goals and now even more with last year, the pandemic. The trend on ESG is global, this trend is here to stay and it’s not only a trend that we are seeing in Europe, it’s a trend that we see accelerating and catching up with Europe and we are seeing exactly the same trend in Japan and some parts of Asia as well.

CHRYSTELLE VEECKMANS: It’s a remarkable long way to ESG Naim. So, you spoke about you know, acceleration and really now people are saying that ESG adoption will accelerate the finance industry post pandemic. Do you think that’s true and what are investors telling you they want?

NAIM ABOU-JAOUDE: Maybe, before I tell you what investors are asking us, let me give you a little bit of context. The ESG market has now reached 45 trillion, this is a huge level, it was only 25 trillion four years ago. As I previously said, ESG is definitely a global and circular trend that was accelerated after 2008, 2015 and last year with the pandemic. Investors are more engaged in the ESG discussion than ever before. It’s clearly a buzzing topic. The ESG market is still driven at 75% by institutional investors with pension funds leading the way and this is a global trend today we see it in Europe, in the US and Japan. However, the retail segment is catching up fast as individuals are becoming more and more educated on sustainable finance. We are seeing a clear conversion from the needs and requests from both the institutional and the wealth segment. They are mainly asking us two things; solid client servicing and to behave responsibly as an investor and as a company. On the first level they are much more demanding in terms of reporting and transparency, they notably expect us to give them maximum information on what generates performance, either financial or extra financial factors, but also precise information on how their investments create impact. For instance, better carbon footprint, better social indicators. They are also requiring their asset managers to behave responsibly and embrace ESG at all levels, not only as an investor as I said before, but also as a company. Our clients want us to be active managers engaging with corporates on the topics that matter most to them.

CHRYSTELLE VEECKMANS: Yes, I believe that the purpose of corporates is to really make an impact at KPMG also. We want to make an impact.

NAIM ABOU-JAOUDE: Now Chrystelle, if we take a closer look at investment strategies because we spoke about what are investors telling us today, we spoke about the request, it’s solid client servicing, behaving responsibly, but in terms of investment strategies, we are clearly seeing a strong demand for ESG products across all asset classes, even on products such as ESG emerging markets or ESG high yields. The second trend we are seeing is the growing interest for ESG thematic products. Thematic investing provides investors access to powerful value creating trends or teams which concern them individually, such as health scare, aging population, circular economy, demographic trends… morning star data shows that AUM into thematic funds over the last few years has grown three-fold from 75 billion to 195 billion. At Candriam, we have launched several thematic funds over the three years, and it is working really well. For example, we have launched an oncology product, a biotech, a climate action fund, and in the case of the climate action fund, 10% of our management fees go to charities and NGOs actively working on the fight against climate change. And the third trend that we see today is impact investing. It consists of the investment made with the intention to generate positive, measurable, social and environmental impact alongside a financial return. In fact, the new generation of investors, the millennials, are really pushing in that direction as they want to invest with purpose, they want to express their values in their investment and have a real impact on the economy. At Candriam, what we did is we launched our first impact fund called Impact One in order to meet client demand in the impact side.

CHRYSTELLE VEECKMANS: Very good, let’s talk and let’s touch about regulation. As you know ESG regulation for asset managers is accelerating in Europe. Have you found tightening regulations helpful in raising standards or are they sometimes too restrictive for companies such as Candriam who are seeking to be ESG leaders?

NAIM ABOU-JAOUDE: In my opinion, the main challenges and opportunities that I see to accelerate ESG adoption are twofold. A better standardization, this is achieved mainly through regulation and better reporting, in other words a common ESG language. Now, this question is about regulation on which Europe is clearly leading the way. Following the Paris Agreement in 2015 the European Commission launched an action plan on sustainable finance aimed at channeling capital towards sustainable growth. This great plan covers several initiatives of which the taxonomy, the NFRD and the SFDR, are going to be key for corporates and investors. The first requirement is to define what a sustainable company is. This is precisely the objective of the EU taxonomy of sustainable activities. Taxonomy in fact is just another word for classification of company activities. At the same time, investors need companies to provide them with comprehensive and reliable information about their ESG performance, this is what we call NFRD. And finally, all asset managers will have some minimum disclosure requirements on ESG risk and opportunities at the corporate level and at the funds level. As you can see there is some logic linking these regulations, once investors have a definition of sustainable company activities and the data from these companies, they should be able to integrate it with current sustainable investment products. Now, while Europe’s regulatory drive on ESG is going in the right direction it doesn’t come without some challenges. First, it is going to require a lot of work from companies and asset managers to gather all the data. Second, the timing is not ideal as asset managers we have to comply by March this year for the SFDR, whereas for companies it is not until 2022. And lastly, the taxonomy is really focused on environmental issues while climate has been dominating the ESG discussion for the last few years, it is crucial that we bring social considerations at the same level.

CHRYSTELLE VEECKMANS: Yes, that’s true that we see effectively a lot of companies very busy for the moment to work on this regulation. There is a lot of uncertainties still to be clarified, but fully sharing in your views on this regulation Naim. So now on the reporting standards, you know a key complaint that I hear regularly is that the data supplied by the companies is incomplete at best. How much of a problem is it, and what needs to happen to improve the situation?

NAIM ABOU-JAOUDE: No, you are completely right Chrystelle, as I just said, regulation is key, but it won’t be enough if we don’t have a harmonization of the reporting. There is a need for a common reporting framework, a common language between corporates, investors and regulatory bodies. Because as of today there are more than 360 different ESG accounting reporting standards. 360… and companies are simply drowning under data. The good news is that things are moving in the right direction, a few initiatives are emerging and could help reporting to converge pretty quickly. Let me give you some of these initiatives. An interesting one is the recent announcement by the SASB, GRI and TCFD that they were working to harmonize their standards on ESG disclosure. A second one is that the big four accounting firms with the World Economic Forum have launched a set of recommendations that are to a large extent based on SASB, GRI and TCFD and the objective is to come with an internationally accepted standard. As I just mentioned, the EU is doing a great job as well in creating a comprehensive standard, NFRD, SFDR, from company disclosure to how investors integrate them and even where they can find the information. And lastly, the last standardization initiative I would like to point out, which in my opinion is the most interesting one, it’s the IFRS because the IFRS wants to build up in SASB, GRI and TCFD and create a new sustainability standard board, SSB to develop a global reporting framework and it is really a break through as this would clearly accelerate global systemic integration by companies while also fitting in the financial framework that the IFRS developed. To conclude on this important point and question I believe it is absolutely crucial that we have a global conversion both in terms of regulation and reporting and across all regions. This is the only way we will accelerate the ESG adoption and the ESG trend. But for all the reasons we have already discussed I’m very optimistic that things are going in the right direction.

CHRYSTELLE VEECKMANS: It’s indeed a huge task to do but a necessary task as you said so in the financial reporting, we have the GAAP as a common language and so that in ESG we also need to build this you know, global ESG framework. Now, with the Covid crisis there has been a shift of focus to the “S” of ESG, the social aspect. How do you achieve positive environmental outcome while avoiding social disruption?

NAIM ABOU-JAOUDE: Yeah, thank you for this question, I think it is a key topic and not an easy answer. I would like to start first that the year 2020 has been absolutely dramatic in many aspects, with so many people impacted by the crisis we are going through unique and unprecedented times. In a year like this it is very difficult, almost impossible to think about any positive. But, if I have to pick one silver lining from this crisis, from an investor standpoint I would think that the fact that all these events have brought the “S” element on ESG to the forefront, to the top of the agenda. The reality is, the threat of climate change has dominated the agenda for ESG so far however the pandemic has highlighted the importance of social issues. The pandemic has proved that the social element should be considered just as critical as environmental and governmental factors. This topic is not new for us at Candriam or to our clients. We have been integrating materiality aspects on the “S”, social in our ESG analysis for a long time. We have always seen the social and environmental issues as deeply interlinked. For me, environmental challenges act as a multiplier effect for social disruptions. We believe that we must address both together in order to have a positive impact on the long term. As we accelerate toward climate action it is crucial that we avoid negative social impact. It is crucial to avoid social disruptions, we have an urgency to act against climate change, but at the same time it is our duty and priority to ensure that the transition protects workers and communities. As we shift towards a greener economy millions of jobs will become obsolete while others will be in high demand. Let me give you an example, moving towards 100% renewable energy system by 2050 could create 52 million full time jobs but also cause the loss of 27 million jobs within the traditional energy sector. But how do you achieve positive environmental impact while avoiding negative social implications? The answer for me lies in two words “just transition”. This concept was included as part of the 2015 Paris Agreement and in fact to achieve this just and fair transition we need to analyze the labor market impact of the transition to a net zero economy in terms of green jobs created but also high carbon jobs that are lost. And for that we need reskilling, more education, training opportunities, and we need finally a huge and large investments. This is why finance in general and the investors in particular have a big role to play because they are the ones who can and who must channel assets to the real economy as it is really a big challenge as I said before it can only be a collective effort and a shared responsibility.

CHRYSTELLE VEECKMANS: Yes, it is very inspiring, thank you for your inspiring views on making goods not just for the environment but making good for the people, and I think you give really concrete examples of that and as you said, the task is huge. Now what’s your view on the European Green Deal and the recently approved budget dedicated to climate and energy transition?

NAIM ABOU-JAOUDE: The European Green Deal is Europe’s plan to make the EU’s economy sustainable. It aims to turn climate and environmental challenges into opportunities and make the transition just and inclusive for all. The European Green Deal provides an action plan to boost the efficient use of resources by moving to a clean circular economy, restore biodiversity, and cut pollution. The EU also aims to be climate neutral in 2050, which is great news. They proposed a European climate law to turn this political commitment into a legal obligation, reaching this target will require action by all sectors of the economy, including in investing in environmental friendly technologies, supporting the industry to innovate, decarbonizing the energy sector, ensuring buildings are more energy efficient, and working with international partners to improve global environmental standards. The EU will also provide financial support and technical assistance to help those most affected by the move towards the green economy. This is called the just transition mechanism, that I just covered before. In my opinion this is a great and ambitious plan, now we have to see how it is going to be implemented. The EU needs to organize itself on how it is going to manage both the Green Deal and the Covid recovery plan. It is not an easy task when you have a multitude of stake holders with different interests. It is also essential to keep in mind that around 80% of the EU budget is managed by member states. Therefore, the realization of EU targets is very much dependent on the member states finding the right projects. To conclude, I think this plan is really remarkable, but it is not enough. It’s not enough because we have huge challenges ahead and first what I think that we have to do should extend beyond Europe because today Europe produces less than 10% of CO2 emissions. And this project about a green deal we have to do it at a global level, it has to include China, the United States and Europe and the rest of the world. Second, because there is an urgency to act, we are today the last generation that can do something about it. It has to be a collective effort, not only from the governments but also from corporates, cities and people at all levels, and of course investors. We all have a role to play to resync our society and turn this recovery into real opportunities to move towards a green but growing inclusive economy.

CHRYSTELLE VEECKMANS: Thank you Naim. To wrap up, what are the key things the asset management industry can do to contribute to a more sustainable and inclusive society?

NAIM ABOU-JAOUDE: In my opinion there are a few things that the asset management industry can do to contribute to a better and more inclusive society. It’s about active engagement, it is helping channeling assets from the financial sector to the real economy, allocation of assets, education, bridging the gap in education, and behaving responsibly as a company. First, as active investors, it is a big part of our job to engage with corporates. In order to act long term an investor needs to be active, exercise its voting right and file shareholder resolutions, engaging with companies we invest in on the topics that are most material. All this can create a strong and positive impact. Involvement and partnership with industry association such as CCFD, the workforce disclosure initiative, the PRI or academic bodies also demonstrates great commitment for asset managers. The second thing that asset managers can and must do as I previously said, is to channel assets to the real economy in a responsible way. This means investing in projects and companies that are driving the transition to a green and inclusive economy. This will unlock a huge opportunity to create new jobs and build back a better society. Third, even though the ESG trend is growing fast, there is still a big knowledge gap and its our duty as investors to continue educating clients but also all the stakeholders of the finance industry on responsible investing topics. In order to help bridge that gap Candriam has decided a few years ago to launch the Candriam Academy, it is the first free to access learning platform on ESG and today we have more than 6,000 members from 30 countries, we are very happy to contribute in that field. And finally, as I said before, as a company, we must practice what we preach, act responsibly and apply to ourselves what we expect from the companies we invest in.

CHRYSTELLE VEECKMANS: Thank you very much Naim for sharing your inspiring and insightful views with our listeners.

NAIM ABOU-JAOUDE: Thank you Chrystelle it was great to be here, thank you for your invitation.

PIERRE KREEMER: Thanks Rachel, and thanks Sven for being our guest, I really look forward to this interesting exchange and also to benefit from your expertise in the real estate field. So, the future of the office, is a very current and hot topic, so my first question would be the following.

According to a survey conducted by the Civey Opinion Research Institute on behalf of SPIEGEL, ¾ of the working population envisions working from home more often in the future. How will this impact the value of commercial real estate, or is it too soon to tell?

SVEN ANDERSEN: Well, we have now about nine months of the Coronavirus epidemic and we see some impacts in the commercial real estate market. What we definitely see is that it has a price impact in the short term, but it varies considering the market, considering the country, considering the region and of course which office you are talking about. What we have seen in the market in the last couple of months or even weeks because we are still in the market and we continue to invest that we have seen discounts of about up to 15-20% in the maximum versus prices pre-covid. As you know, we are investing in Western Europe, so we see the largest discounts in Southern Europe, and we see the lowest, or the smallest discount in Germany, Switzerland and Austria, so they are called the safe countries, but it is not only a kind of measurement in terms of the volatility in the market, so the price discounts, it also of course factors in the future demand of office space. We think there will be in the future a changing environment in office space demand and we think coming later, I think a little bit more intensively, but in the mid and long-term the decrease of demand will be off-set by job growth, meeting space growth and change to space per worker, so bigger space for more workers.

PIERRE KREEMER: Thank you Sven, that’s quite interesting. Going on perhaps with some other survey results…one of which being from the IFO Institute Survey for Randstad. They discovered that 73% of the 800 participating firms would like to continue work home measures after the pandemic. So, with less people heading into the office, how do you believe this will change the way office space is used?

SVEN ANDERSEN: So, what we see also I think at KPMG but also in FREO and other companies, a lot of people have now gotten used to working from home. So, it’s not more a kind of black hole something you don’t know, so everyone has his laptop, his computer at home, so it is getting much more flexible in that regard. But, having said that, one or two days at the home does not mean automatically we are having a dramatic decline for demand of office space. And what we believe is that offices will always be a place where employees can be creative and innovative, exchange and collaborate with colleagues and have face to face meetings. And we think that is very, very important, so you can see it, and I’ll give you one example. All the restaurants over Europe and cinemas have closed. So, people have a lot of needs and you see a lot of appetite to go again, to see other people, to have a collaboration, to meet people face to face. So, we think that yes it will be more flexible in the future but that does not mean that office space is totally out. So, what it’s changing is the way, how you’re using the office space, you should not be only a desk anymore and working there, that you can do at home. It should be a collaborative space, a place for communication and a space where you can have more than only a desk, that is very important. So, what we think is that the post-pandemic office must offer less but better space, that is for us, very important. And now that the vaccine is found of course, is that we return to a kind of, not normal life, but a life that will also encourage the people to go back in the office at least for, I don’t know, three or four times a week, something like this. Now, coming from an investor point of view, and this is a very interesting question, we have a lot of talks with our investors, as you know we are raising funds, so there we will look at how important it is to have the right location. We are looking of course at the major European cities where we have historically low vacancy rates, a diversified economy with innovation and government components. So, it is now much more important than ever before to create a space which is smart, which is modern, which is flexible, that is very suited to collaboration, learning and productivity, that is very important.

PIERRE KREEMER: Thank you Sven. Following up on this conversation, we see certainly big office properties where you have large headquarters almost empty at the moment. So, in your view what do you think will happen to these more or less empty headquarters? Will there be a need to modify the way they are organized? And all of this will certainly present a cost for the landlord etc. and also the tenants, so I would like to get your views on this.

SVEN ANDERSEN: This can’t be said in general terms, it really depends on the case by case basis. The way we would approach this situation at FREO is first to analyze the asset and determine the highest and best use and then make the decision whatever it makes sense to redevelop the office to fulfill the needs. For an institutional investor or change of type of use into residential or micro apartments or something like that it really depends on the location, and the market, sometimes what we see is very interesting that you have in this type of big headquarters, big buildings. We see that more and more coming, that you have different kind of uses in the same building. So for example, to put some We Work or in the gathering together in the ground floor or the first floor you have some space and the upper floors maybe you have some residential in the more quiet zones and you have some retail, some restaurants, some shops and stuff like that. So, you have always, that is maybe also the future you are gathering much more uses together in the same building, and not have a pure office building you use much more of this kind. And we believe we will see much more kinds of this type of buildings.

PIERRE KREEMER: So, heading much more towards mixed use type of usage.

SVEN ANDERSEN: Absolutely.

PIERRE KREEMER: And on the theme, working from home, because all of us, we made our own experiences. From feeling less stressed and more satisfied, to also saving time, many benefits have emerged from long-term home working. Are there any changes that could be made to the use of office space that could make working from the office as desirable as staying at home? Or is it a losing battle?

SVEN ANDERSEN: Well, we think it is important to offer the employees room for social interaction with your colleagues, with your clients, with your competitors, with a lot of other groups. At home you might be able to focus better, right, if you have a separate office and your children are at school. However, we believe that the creativity and innovation that leads directly to an exchange or collaboration is a face to face meeting at least once, twice, three times a week with your colleagues. Furthermore, and that is very important also what we have learned in the last couple of months, you can’t neglect the fact that a lot of employees, in particular the juniors, the trainees, starters, they need training and supervision and that is very tough if you are only working from home. Also, if you want to be promoted, and you are always at home, I think it is hard to get the attention from the relevant people who are promoting you. So, I think after Covid is over, it will be a new kind of normal in a way, but it will definitely not, as we believe, only working from home.

PIERRE KREEMER: I would definitely agree with your comments and we should all be more centered on the human. The thing is really to play the devil’s advocate and just to rebound on your latest comments. So, as we briefly mentioned working from home would remove crucial opportunities for collaboration and creativity and we absolutely need that face to face interaction to succeed as human beings. So, as the dust settles do you think there’s a chance that office life could return to what was viewed as “normal” before the pandemic?

SVEN ANDERSEN: Well, whatever was normal, I think will be changing, it will definitely be changing as outlined. It will be that the office has to change to be of a more flexible use, that is very very important. To have the humans needs in the focus, in the mindset also of the developers, investors and stuff like that. So, it will be a normal way of doing business in the office, but it has to be much more flexible in that regard, and of course you have to innovate more in the office space. This means new hardware, better materials, cleaning processes, data analytics, and stuff like that, that is very crucial for the next couple of decades. And don’t forget green, so all the ESG things, it is no longer a nice to have, it is a must now.

PIERRE KREEMER: So, you would see kind of a mix between partly working from home and being partly in the office or something like this?

SVEN ANDERSEN: Well of course it depends on the sector, if you are an advisor or something you may work from home more than an account or stuff like that, it depends of course on the sector. But yes, generally speaking it will be more from home than before the pandemic, but it will not be 100%.

PIERRE KREEMER: Moving on, we briefly touched base on this, but I think it is an important aspect to this human dimension of the real estate business. So the desire for face to face interaction is certainly not the only reason people may want to return to the office because pre pandemic, if I take the example of a 100 m2 apartment, it was sufficient for lets say two adults and two children, but having to factor in working space within these measurements has left a majority of the population feeling cramped. So, in the long-term, is the home office only useful for high earners?

SVEN ANDERSEN: So, this is a very interesting question and I think there will be a lot more studies and reports coming out in the next couple of years. What is the impact of the pandemic on our social life? It’s not only what you have said it is also schooling, what about the children and stuff like that. So I think, as already outlined, of course you save the way to the office, of course you save the time not in a traffic jam or something like that but on the other hand if you’re having a 100 m2 apartment as you outlined, it is difficult to really have in your home a kind of environment where you can easily work for eight hours with no kind of hiccups or something like that. So especially if you have no office space meaning an extra room for it or you’re only having a desk in your dining room or something in the kitchen, it works for two or three months but on the longer run I think its very hard. And we see from our experience that these people want to get back at least to normal, meaning at least four times a week to the office. So, in the long run, we do not see a dramatic change in that, that the people will get a bigger apartment or something like that, because this is also quite expensive, especially in the big cities. So, we will have a mix, of course there will be a kind of people who are looking now for an extra room or something if they are now looking for a new home or apartment or new house, but it is a mix of both.

PIERRE KREEMER: Okay, I have a friend who is a real estate broker and we were discussing this topic recently and he was saying to me that he was well, acknowledging the fact that there is an increased demand for residential housing with either a garden or terrace or balcony, to help more often being at home than before, so that’s an interesting trend that we will see if it continues or not and what could be the impact on pricing as well.

SVEN ANDERSEN: Yeah, I totally understand that, but you have to see that a lot of people are living in big cities where it is, first of all, quite expensive to get this and secondly you have also to build first this. There is of course a lack, but I see a trend that it is also a little bit that some people are moving out of the cities to more the suburbs or to extend their space.

PIERRE KREEMER: You mention big cities, and frankly it is a whole topic in itself, but I always learned that real estate means “location, location, location”, this is driving price, this is driving demand, investor appetite, fund manager interest, etc. etc. Question would be that, I mean, we are used to consider, at least this is my experience and you also commented on this, there is a big appetite to go to big cities when investing in properties, now with the pandemic and this working from home trend do you think we would also need to consider the cities where the offices are located? Which might not always completely match where people live, so the pandemic has caused people to leave major cities sometimes, if they have a second place in the country side etc. to enjoy a more relaxed atmosphere and this might have been also causing rent prices to plummet in some major hubs. So, how can cities reinvent themselves in light of this?

SVEN ANDERSEN: This is a very interesting because we at least can a little, as you outlined from your broker dealer there is a little trend that the people are looking for more greener areas, where the garden is, or more space in their private apartments or private houses so they can better work from home and they can have more space but at the same time as you see not only in the major cities in Western Europe the prices are increasing heavily in these suburbs. So yes, there will be a kind of moving out, but I think we have to wait until the pandemic is over. There is still a big trend to this, I really doubt that it is a really big trend because cities themselves are also positive and with the vaccine leads to a new normal, what the city is all about, so to have everything inside, cultural, a lot of people will look for this again. We will see what the future brings but I think there will be a trade off between both.

PIERRE KREEMER: Thanks, and again to work on this kind of balance between private life and working from home and professional life and social interaction in the office, do you think satellite offices and co-working spaces could be the answer to this mass exodus from major cities, or to avoid these traffic jams and time lost, etc.?

SVEN ANDERSEN: Well, the concept of co-working is now booming and for example Germany has quadrupled to almost 1,300 since the beginning of 2018, so it is a huge increase. So, I think we see that as a useful edition to additional workspace, but it will not offset the traditional, it will be a complimentary additional working space. And we see especially Luxembourg already has in place for some of the Big 4’s, they have satellite offices for their people who are working in other countries and we will see it also in other countries can have both, so the opportunity to talk to people from other industries, also events, but not having the way to the office is not as far as the normal office or the headquarters. So, it is a complimentary addition to the traditional workspace.

PIERRE KREEMER: Now, a question which I love to ask, if you had money to invest and your investment strategy was commercial real estate, what would be your project?

SVEN ANDERSEN: I would focus on offices in European smart cities with historically low vacancy which we could, or I can be acquired for a discount. I think offices will have a good future as outlined, but you have to invest into the right space and into the right cities, and I would invest into this kind of strategy.

PIERRE KREEMER: And do you want to be a bit more precise, or not?

SVEN ANDERSEN: Well, this should be fine for this time.

PIERRE KREEMER: Okay, and just to come back to these latest comments, from a geographic point of view, do you have preferred countries and for which reason?

SVEN ANDERSEN: Well, I would focus on Western Europe because I think in the next couple of years it is safe and on the other hand it also has the perspective of growing especially if you look to France or to Spain, so I think now of course Spain is heavily affected by the pandemic but I think it will come back in a couple of years. So now you can make sure that you participate in the upcoming again of the market.

PIERRE KREEMER: Interesting, thank you very much for sharing your views. Now, before we finish could you describe the state of the real estate industry in five words.

SVEN ANDERSEN: I would say the following, we can manage the change.

PIERRE KREEMER: Okay, that’s an interesting one, for sure what my takeaway from this conversation is that the world of tomorrow will be different to what it was before the pandemic and this is particularly true and relevant for office space. Well, there are still some certain adaptations to be made in the market and in the economy, but this is also leading to many new opportunities I would say, and a new way of considering real estate investment. I would like to thank you Sven for your views for sharing your visions, your forward-looking ideas for what the real estate market will be in relation to commercial real estate. And I would like to thank you for your time and also for being with us this afternoon. Anything else you would like to add from your side?

SVEN ANDERSEN: No, and I would like to also thank you and KPMG for being able to share the views, my views, or FREO’s views on this so thank you very much for the invitation.

PIERRE KREEMER: You are most welcome Sven, it was a pleasure, thank you again.

SVEN ANDERSEN: Thank you.

PIERRE KREEMER: To conclude, I would say there are lots of encouraging signs for the economy to recover with the vaccines and the Covid crisis hopefully coming in a few months to an end, and the economy expects to be again very active and real estate will for sure continue to be a very appealing, very looked after asset class in the center of many investors strategies. So, I really look forward to seeing how the market will react, having in mind there is still so much cash being available and investors willing to take risks. This asset class, real estate and office buildings in particular, perhaps in the revised shape we have seen in this discussion with Sven, from FREO, we will see how this interesting dynamic will evolve in the coming months. Thank you again to everyone for listening to our podcast and I look forward to your feedbacks. Thank you! Bye bye.

VALERIA MERKEL: Thank you Rachel, welcome Maria, it’s great to have you here. Thank you so much.

MARIA LOWENBRUCK: Thank you Valeria.

VALERIA MERKEL: COVID-19 is a living example of how risks that may not seemingly be attached to an investment outcome, market volatility, or the economy broadly, can quickly turn into exactly that. How does this impact the pension schemes? Prior to COVID-19 the European pension schemes were facing increasing pressure from aging population and declining birth rates, how stable would you Maria say our social security in Europe is?

MARIA LOWENBRUCK: That’s a very interesting question, thank you Valeria. I believe that the impact of the pandemic on long-term investments in general, like pension schemes is rather low even that in the long-term markets tend to experience growth due to innovation and increased efficiency and every crisis is followed by an upward cycle. But I will give you an example of a German study. A recent study in which 500 of our clients were involved showed that 63% of our investors expect the economy to fully recover from COVID-19 in the next three years and 70% of them do not fear the consequences of COVID-19 in their respective portfolio. So, I think the pressure that comes with demographic change and aging society is very different from that of the momentous shock like that a pandemic or an economic downturn. I would argue that European social security that you ask for, the systems are stable I think but that all stakeholders must work on new solutions in order to be prepared. Because most developed economies must face the issue so that the working population is required to anticipate this evolution and find suitable solutions to top up its state and work pension plans with private pension savings.

VALERIA MERKEL: Yes, that’s interesting and I think we are facing a lot of changes in the current environment so what changes do you Maria, hope to see over time?

MARIA LOWENBRUCK: Hmm, what I hope, what I hope to see? That’s also very interesting, I think. Because, when we have a look at the private person, we see, private pension savings and building up a capital buffer for emergencies that are the two most stated investment goals from the clients across all age groups we see in our company, approximately 80%. This result shows that we must focus I think, on long term consistent products that cover those needs. I read that about 40-50% of all Europeans keep their savings in cash and suffer substantial losses from inflation and the persistence of low interest rates. In other words, they rely on state or corporate pensions as well as for personal savings for their retirement. I think the EU’s contribution for this issue is PEPP. A Pan European Pension Product with high transparency and comparability through standardized disclosure of information. PEPP offers many advantages which are not offered by current products such as cross-border portability and for example, flexible pay outs. The other major of changes of trends I see is the importance to implement sustainable growth across asset classes and the role of the asset managers to contribute it. This concept, like PEPP should also be seen as an opportunity to enable European savers to combine the benefits of sustainable growth and cost-effective retirement solutions and to be consistent with the EU action plan you know. The regulator plans to include the ESG requirements for the PEPP products which the asset manager also and our house also supports. And I think that could be a possibility for changing. For changing in PEPPs and for changing in sustainable growth.

VALERIA MERKEL: That’s a great intro actually, you mentioned very important things like sustainability, you mentioned pension plans, you mentioned a whole lot of money that is flowing into the asset managers. So, asset managers will get huge responsibilities. Do you think, is the asset management industry ready for this huge responsibility?

MARIA LOWENBRUCK: I think we can see on one hand, the role of the asset manager and on the other hand the role of the states. The state has the role to regulate the economy, innovate and fulfill the society’s needs. The asset managers have a lot of responsibility, clients trust their ability to manage their wealth. Regulatory intervention and a solid regulatory framework are important for the asset management industry which is the reason why the regulation is continuously changing and adapting to socio economic factors. So, I think it should not be viewed as a shift in responsibility or change but an exchange and optimizing between the state and the financial industry. I can give you an example if you want.

VALERIA MERKEL: Sure.

MARIA LOWENBRUCK: Let’s take an example of sustainable investing. The financial industry as a whole can make a strong contribution to help achieve the sustainable development goals of the UN 2030 agenda. A major part of industries and businesses is helped through asset managers like our company and we help to provide liquidity to the economy. So, we can give the right signal to the real economy by valuing sustainable aspects, for example in portfolios and maintaining the dialogue with the companies. The change to a more sustainable economy of course can only be done if our efforts are backed by governments and all the other economic players and if we ensure sustainability. So, I think, in a global inter-connected world we all have our part of the responsibility in resolving this global change, also the asset manager.

VALERIA MERKEL: That’s a big responsibility I would say, and I also think there is growing interest in tracking actually. This impact return on investment probably rather than monetary returns, we all know what monetary return is. Is this something you and your company are already doing for your clients? And if yes, is there anything that you would suggest for the industries that are not yet there or players that are not yet there?

MARIA LOWENBRUCK: Yeah, yeah, yes, it is, our company has been involved in impact investments for more than 20 years starting in 1990 with Church banks. So, for us, this has always been an important aspect for many of our institutional clients. With our experience and focus on integration of ESG aspects and investment strategies we are very proud to be one of the leading ESG managers in Germany and towards the end of the first quarter 2020 we managed around €50.4 billion and 174 sustainable products. Depending on selected classes we have different techniques to track records and analyze the different ESG impacts in our investments and beside this data analyzes, we represent our clients’ interests through activism and engagement with the target companies. But needless to say, there is always room for improvement. In particular, the social impact factor is more difficult to measure, given that there is a lack of available data and it is hard to provide a quantitative measurement for it. And so, to enhance the transparency and concurrently the product quality the relevant data has to be collected and disclosed by companies. And that’s, I think, a very important point, asset managers must come up with more precise and complete models to analyze this data. Again, this is an issue that has to be considered by all stake holders I think, not only by the asset managers, also by the real economy and also regulators. But I’m quite confident that the recent process and input is going in the right direction I think in order to achieve the set targets for sustainable development.

VALERIA MERKEL: I believe that there is tremendous value in getting transparency actually into – what is sustainable, what is less sustainable, how to deal with that. I read a very interesting research done by the Financial Times where actually a UK law firm found out that 73% of millennial participants felt a sense of responsibility to use their money in a way that had a positive impact. So that’s no surprise to me, but only 16% had invested in sustainable or social impact funds. So, I would ask myself, why is that? The study concluded that the lack of action coincided with a lack of understanding and information about how such sustainable environmental and governance investments perform and how they fit with the portfolio and this show the lack of transparency maybe you just touched on. So, what is in your view that younger generation, how will they play a role in the evolution of this?

MARIA LOWENBRUCK: It’s very interesting you said, because a recent study made by a market researcher in Germany showed similar results as younger persons from 19 to 29 were more open to sustainable investments than all other age groups and that the affinity is the lowest for persons between the age of 50 and 60. But then, ask about current holdings about sustainable investments and only 2% of the younger age group and 5% of the persons over 60 claimed to possess sustainable investments. So, the recent expansion of sustainable products was mostly led by institutional investors, retail investors (inaudible) for a long time. But many persons, especially I see the younger generation are reconsidering their habits for a more conscious way of living but when it comes to investment choices there is still a lack of relevant information and of knowledge. And that’s something that I think we have to improve. We noticed that many young clients are still unsure of which type of sustainable investment strategy fits their risk profile and return expectations. So, what we see, traditional investments may seem easier to understand many of them, for many of them. I personally think that active managers with ESG expertise profit from this unused potential by offering an enhanced focus on sustainability rather than providing advisory services for example and by increasing transparency and available information, so it could be a chance.

VALERIA o, Maria, younger generation plays definitely a huge role in this. I know they are not as old maybe to think about their pension plan yet but, what about them? How will they play a role in the evolution of social security? Can PEPP help to line up the younger generation’s needs?

MARIA LOWENBRUCK: Yes, I think that younger generations are the pillar of our social security system. Their contributions ensure the well being of former generations. And it is important to highlight the importance and the current younger generations considering that they will be once making the decisions in the future. In the last few years I think we saw an impressive engagement amongst the younger generations in the climate change debate. Which proves that younger generations are involved and that want to take the society in which they will be living in the future. Important topics such as financial education, and retirement planning must be addressed as soon as possible, I think. We rely on younger generations and we should maintain an exchange and include them to optimize and innovate our systems. And for asset managers that means that we must learn which aspects are missing and current solutions and how we can offer even more tailored products. And I think there are a lot of questions. For example, can we include new factors like more flexibility, or how can we use digitalization to optimize cost structures? How can we provide more transparency, how can we provide better risk protection and maintain positive returns? How can we improve our contribution in helping to achieve the sustainable development goals and coming back to your question to PEPP? I think products like PEPP are completing the market and providing an opportunity to create synergies between social security and ESG and allocating more capitol into an ESG investments. The success of PEPP will also strongly depend on the decisions taken by the EU member states to resolve the national and the cross-border trade agreement of this product. So, the focus of active managers offering retail investments must be to explain new products and investment strategies to the clients to minimize their bases and extend their financial knowledge. And this is very important for a younger person and show them the different solutions that are available depending on their individual preferences.

VALERIA MERKEL: That’s great Maria, I hear your call to action for the asset management industry and a little bit also for the younger generation, to get themselves familiar. So, to close on this, how would you describe the state of your industry in five words?

MARIA LOWENBRUCK: In five words I would say stable, client focused, forward-looking, competitive, and versatile.

VALERIA MERKEL: That’s great, call to action for everyone and we end on this, I thank you very much Maria for this insightful conversation.

MARIA LOWENBRUCK: Thank you Valeria.

RACHEL FEATHERSTUN: Ever wondered what Clark Kent and cloud technology have in common?

Well, you’re in luck.

This is road to New reality podcast and I’m your host Rachel Featherstun.

On this episode, Ravi Beegun, head of Asset management at KPMG sits down with Eduardo Gramuglia, Senior Vice President and Country Head of State Street in Luxembourg to discuss who and what will save the day for a financial industry at a crossroads.

RAVI BEEGUN: Thanks, Rachel. Eduardo, glad to have you on board today.

EDUARDO GRAMUGLIA: Thanks Ravi, good afternoon.

RAVI BEEGUN: So, I think today we're going to talk a bit about what we can look for in the future. You know, post Covid. I think one of the things that we've seen in terms of transformation happening, or at least a mindset; there's a meme floating around the Internet that says who's led the digital transformation of your company? Is it the CEO? Is it the CTO or is it Covid-19? So, Eduardo, what’s your take on it?

EDUARDO GRAMUGLIA: Well, I think that's a good meme. I actually used that for my strategy document with the leadership team whilst we were working through the Covid situation all from home. As the story goes, we were right about to…I took on the leadership role in Luxembourg in November. I was planning to take the team out for some offsite strategic meetings, too. And then Covid hit just like the week that we were planning to do it. So obviously that didn't happen. But then still the strategy needs to be built. We need to give certainty to our employees and to the market. And we were doing the sessions to be a video, and somebody sent that through. And I said, well, actually, let's put it on the strategy document. And the reason for it is because the strategy, as we were designing it before, is we were thinking about it before Covid, it got partly disrupted. Let's say, let's put it mildly, by Covid. So, yes, I don't think that Covid-19 led the digital transformation, it had already started in fairness. But I think it has been an accelerator, a strong accelerator of that transformation.

RAVI BEEGUN: So that's very interesting. In fact, in an article I was reading recently the author discussing how Covid has been the spark that lit the match for digital transformations. And here I just want to read a quote of his. It says…

“Nothing silences an individual’s or an organization’s inner perfectionist like a full-blown crisis. In response to dramatic disruption, many organizations have undergone a healthy renegotiation of their relationship to digital technology. Prioritizing “hey it works” over “after years of slaving over this initiative, this is the best we can do””. Do you think this is the way forward?

EDUARDO GRAMUGLIA: I do. I think the view is, is I share that view. I think connecting to what we were saying before about the acceleration, even if you look at the simple things, all this digital technology that we're using to communicate with each other in a state of lockdown, we had it, we just weren't using it. We've gone from zero to 98 percent of our people working from home and not just in Luxembourg, but across the globe. And so, the use of this technology has really increased exponentially. So much so that at the beginning we were having capacity issues, the providers were having capacity issues and others came around and so on and so forth. So, yes, what Covid taught us as well is that we have been probably slow in adopting new technology and transforming ourselves, just like the simple example of the communication tools that we're using now. There's a lot of red tape in an organization like ours, global organization, many stakeholders. When Covid came around, it was impressive how fast we could deploy 98 percent working from home. So, the demonstration is there. When push comes to shove, and I think Covid was that, we all smartened up and did what was right. Now we need to leverage that lesson. We need to capitalize on it. We need to make sure that what we learned in the last three months, we cannot forget after six, but use in the next five years, whatever the time period that this author is quoting. But I think for me, that is the important. That's what we're trying to do.

RAVI BEEGUN: Yes, so just echoing on that, I think technologies like Cloud really saved the day during the lockdown period. And so far, we have seen there was some reluctance to go into the cloud route. And as you say, the danger is that if people come back to the office, we may start forgetting about that. I mean, what steps should we take so we don’t start forgetting about that when we come back to the office?

EDUARDO GRAMUGLIA: I think it's upon us to start any type of transformation that we want to maybe or that we had in mind and we were keeping it on the side because there were other priorities. I think this is now the priority. And if we want to really capitalize on that, we need to start the process of adopting cloud technology or whatever that is, or maybe increasing it, expanding it whilst what was is still vivid in our memories. And it still is because Covid is still amongst us. It hasn't been eradicated. The vaccine has not been found. So, I think through the ups and downs that we will have in the coming months, maybe years, hopefully they'll come up with a vaccine before then. I think we should yeah, we should work and really remind ourselves of how helpful it was and how it can help us in the future. Hopefully not, because we're going to get other Covids, but because we've learned a lesson that it's very important to transform our industry. We have already been adopters of the cloud for some time. Now, for me it’s time... Luxembourg needs to drop a bit of those concerns that it has. I think, by and large, the regulator I think we’re going to touch upon that later. But the regulator has…. if I recall, it was on a call that we had on the AGM of ABBL. One comment from the regulator, from Claude Marx was that there was a lot of concern around the cloud computing, around cyber security etc., Covid forced the regulator to be a bit pragmatic about it and allow for organizations to use it a bit more widespread. And what they found out was that, you know what? It's worked. Now, let's not lower our guard. Cybersecurity is still a very important thing to bear in mind. High concern. But I think we we're looking at it differently across the industry and I’m not speaking for the regulator, but let's see what happens. We've been told that there's going to be a new circular this month. Let's see what that tells us.

RAVI BEEGUN: So, in terms of new technologies and where the future lies, where do you think…which are the technologies you think, you know, in terms of the financial sector for your own organization will be your focus, now, for the next months or years?

EDUARDO GRAMUGLIA: I mean, I think all of the above, why I say all of the above… what transformation has shown us, in the beginning there was a lot of buzz, big words around some of these technological advancements that would disrupt the financial industry, that would disrupt banks. I still think it's there. I think it was a bit more ambitious than what it could do. I think now the realization is that we can get there, but by small increments. So, what am I trying to say? I haven't seen any new product, innovative product coming out from Covid that can replace the current settlement systems that we have, that can replace Central Security Depository. I think, though, there are a lot of projects out there and be that crypto currencies, tokenization, they are slowly getting there. And I think with time, that's probably where the industry might go. There's still a lot of things to prove because what we have, let's say it's not broken. It's just a bit slow and dated, but it's not broken. And if we consider the amount of transactions, money that we still process through the old systems, the let's say, the “old way” … it's still coping. So, we still need to see those great ideas not come out, they're out there, but really manifest themselves and become more concrete. So, what specifically? I mean, all of the above, cloud computing, it's now it's here. We've seen it through Covid, let's push. Communication technology, it's here, it's now, it's brewing. Let's push. We still need to cater for the current needs. For the BAU, as they call it, for the markets to continue to operate the way they have to for, for resiliency etc. For the future, lets look at tokenization, let’s look at crypto currency, let’s look at bitcoin, lets look at DLT, whatever you want to look at, all these big words. Let’s look at what will work and what won’t work. I think as I say, right now what we’re seeing, a lot of those large projects which were a bit too ambitious and no one has really proved that they work, if we start reducing them and doing a bit at a time, I think we’re going to get there.

RAVI BEEGUN: Alright, in terms of innovation, I think some industries are seeing we will see five years of innovation in the next 18 months, do you think that applies to technology in the financial sector or innovation?

EDUARDO GRAMUGLIA: As I say, I haven’t seen anything innovative as it relates to a lot of what we do, but I have certainly seen acceleration of a lot of the projects that were already there. Will we do five years in 18 months? That’s quite aggressive, I think. We’re still the industry that we are, we are still the organizations that we are. Maybe in some areas we’ll see, I don’t know, crypto currencies, if they really are a solution to a problem out there, we’ll see them accelerate. The whole industry, I doubt it.

RAVI BEEGUN: What we’ve seen as well, this year Alfi set out their 2025 Ambition paper so one of the objectives they have there, we need to drive innovation and the digital transformation of the Luxembourg Fund Industry. In that context where do you think the Luxembourg Fund Industry should be focusing to achieve this digital transformation?

EDUARDO GRAMUGLIA: Several areas, I think if I can boil it down to, it is the data. I think a lot of the intersections of the initiatives of the 2025 ambition paper resides in the data. So, if you want to go ESG, digital, whichever direction you want to go… at the core of that transformation, at the core of that acceleration to be able to do it in five years is being able to master the data. And I don’t think we’re quite there yet. The data in terms of, for example to be able to assess the industry with one metric. If you are looking at the alternatives industry, the growth it has, we still don’t have really the data that is able to tell you what the alternative regulated business versus the unregulated business. What are the products that are more in demand versus others that are a bit straggling there. And then if you look at ESG right now, getting ESG labels, being able to call yourself ESG, being able to promote that area in Luxembourg, which Luxembourg wants to do I think a lot of the key in that is still in the data because there are a lot of things that need to be normalized. A lot of the metrics, a lot of the ways you measure what is ESG and what is greenwashing. The data is at the core of all of this.

RAVI BEEGUN: I mean data is a big topic, even at an organizational level, how do you really make progress on data?

EDUARDO GRAMUGLIA: Well we launched a data business line global exchange, which was launched several years back now with the acquisition of CRD, but also with the creation of the alpha platform which is a platform created for front office systems. The acknowledgement is that data is at the core. The acknowledgement is that we are coming from the back office trying to make a difference versus our peers to asset managers that are coming from the front office. At the center was this middle office that was always very manual, undigitized if you want, that needed a bit of automation and straight through processing, at the core of all of that was the data. You need one data source, one main data point that for the fund manager starts from the trading, from the input on the front office system. Which we didn’t have, and from us, comes the TA, from the investor, that we did have. How do you marry the two? Well for us, I think we found agreement within the organization that mastering the whole transaction from the beginning from the end, from the front to the back, now it is Alpha. It is basically mastering that data from end to end having one data source and creating one data point that will be the one that will be reconciled across the whole value chain. I think as an organization we found the agreement that that was the solution. We are having I suppose some validation of that vision with the work that we are doing with asset managers, clients, current clients and new ones that we are talking to.

RAVI BEEGUN: Now if we talk about the role of the regulators, and the legal system, when we talk about data, when we talk about transformation, sometimes there is a feeling that the current laws and regulations are not really adapted to really encourage the transformation. Where do you think we need to work more with the regulators to kind of make innovation and transformation easier for the industry?

EDUARDO GRAMUGLIA: We are currently preparing a letter and the subject is - I think I have found that as an industry, in Luxembourg we use regulations also sometimes to hide ourselves, to protect ourselves. Luxembourg has become very global, it is a cross border industry, a cross border market, we cannot afford to be insular any longer. Now when I took this role, and I have asked lets use this technology, why do we have what we have, and I’m not going to go into the details on that, but it always comes back to me because the regulations don’t allow and we have a committee that’s looked at it… and at one point I got a bit upset. I said, can someone black and white spell out exactly where the issue is. When we start challenging ourselves, it’s not so black and white, regulations have progressed a little bit. Not as much as we’d want it, but a little bit. And, there are certain things that we can do that we think we can’t. That we always say that regulations haven’t allowed us. But with that challenge, we are now going to give our views to the regulator, and to the ministry of finance, and just spell out from our perspective, what are those rules that still cause a bit of let’s say a bit of an impediment, for us anywhere from adopting technology that the group has already adopted elsewhere that we could leverage here, and sometimes we find we need to duplicate the set ups because of the regulations. So, as I say, it’s a bit of an internal and external challenge. I think for the regulators what we can do, what we have to do is, really spell out factually, concretely what is in our view, as a global player, what is a kind of a hindrance. Not because, it might not technically prohibit something, but because when you are trying to apply it, and, it is quite constrained, it does slow us down, it duplicates things and ultimately makes us drop down certain projects. We will just express our views, I think some regulations were written 40 years ago for a financial industry that was a private banking industry, private banking is still there, but the fund industry is quite more prevalent at this point. So, some of the constraint and some of the rational for certain regulations maybe can be reviewed. I am not saying it will change, but let’s give it a try.

RAVI BEEGUN: Which is good because I think the regulator in Luxembourg has said they want to go more digital in the future, so I think that is a good place to start from.

EDUARDO GRAMUGLIA: Absolutely, that’s what we are going to be doing.

RAVI BEEGUN: To end our conversation on a more positive note, what do you think are the positive changes you hope this pandemic will bring about?

EDUARDO GRAMUGLIA: Somebody asked me in another conversation, who’s been the winners and who’s been the losers of Covid? Covid has been a tragic situation so I don’t think there are any winners, if I can point to one, that’s been the environment. Look at the streets, less cars, look at the mileage on your own car, or the air miles on your loyalty plans, I don’t think that that could have been fathomed anywhere closely to what it has been, and I think that has been a good thing. The economy obviously has suffered from it because a lot of the people who make their living out certain industries and businesses haven’t been able to do so. I think we are going to have to find the balance somewhere in the middle because what we have been able to do from an environmental perspective is quite astonishing and it is something we should value and try to maintain to the extent possible for the generations to come.

RAVI BEEGUN: In five words or less what would you say is the current state of the financial sector?

EDUARDO GRAMUGLIA: I would say it’s at a crossroads.

RAVI BEEGUN: Eduardo, thank you very much, it’s been great!

EDUARDO GRAMUGLIA: Thank you, it’s been a pleasure.