The latest issuer survey 2019/2020, conducted once a year by the German certificates association with 20 structured products issuers in Germany, reveals that the industry prepares for taking the sustainability topic very seriously in 2020.
The German Derivatives Association - Deutscher Derivate Verband (DDV), annual poll which is aimed at assessing the state of the retail market has unveiled the industry’s views and outlook for a number of topics including sustainable products, business outlook, costs due to regulation and changes in product offer.
The DDV poll found that over a two third of issuers in Germany (65%) are planning to issue sustainable products in 2020, while a third of the issuers was not sure about it and 5% expressed no interest in this investment topic.
“This is a chance for our industry,” said Henning Bergmann (pictured), managing director at DDV. “The growing focus of investors on sustainable investments gives us new impulses. There will be new industry standards developing for structured products.”
According to Bergmann, investors need to be put at the centre of this trend and be motivated in that they are leading the way to finance a shift towards sustainability in the future with their investments.
The political agenda on sustainability is accompanied with guidelines and requirements, as well as new costs that the finacial services industry will have to adapt to.
The DDV survey, also questioned the market about the scope and expectations for growth, and how the market will develop in the future. The poll found that 55% of the issuers assume that there will be no changes, while 35% were optimistic about the future and 10% indicated that business would not be as good as it was in 2019.
Half of the issuers think that costs due to regulation will increase in 2020, while a third of the product manufacturers are not sure about it and a fifth of the respondents don’t expect any increases in costs at all.
Changes in the product mix and demand from investors will be limited with three quarter of issuers planning to offer the same amount of products in 2020. However, a fifth of respondents are planning to wind down their product offering and 5% is actually planning to increase their products catalogue in 2020.
The DDV believes new regulation around the topic of suistainability will be an important aspect for the structured products market in the coming years, after the European commission presented its EU Action Plan for Financing Sustainable Growth, which expects that demand for sustainable products will continue to increase, especially among private investors.
The EU action plan will also lead to changes of the Mifid 2 guidelines, which is going to be reviewed in 2020, according to Bergmann.
‘It is very important that with this revision this time the investor is at the centre of attention so that it results in an added value for them,’ said Bergmann. ‘At the moment a lot of guidelines strain investors and the banks resulting in both groups retreating from the market, which could be fatal because for the capital markets asset building is crucial.”
The poll was conducted by the DDV, which represents 95% of the total market volume.