Europe is a global leader when it comes to opportunities, innovation, job creation and industrial output. To support the objective of growth and creation of jobs which are at the core of the EU agenda, the European Union needs to strengthen the competitiveness of its industry.
This requires taking the single market to a new level and ensuring that its regulatory environment is simplified and proportionate. To deepen the single market further and make it fairer, a successful capital markets union (CMU) is needed to strengthen Europe’s economy.
Corporates need a diversification of financial sources, a performing and well-established capital markets union and a tax framework to ensure that financial markets provide the necessary financing for growth and innovation. EuropeanIssuers has thus welcomed from the beginning the European Commission’s project of creating a CMU to foster the flow of capital throughout Europe.
For the success of the CMU in the coming years, the objectives of the action plan should be reassessed so that the forthcoming proposals deliver practical and measurable outcomes. A more horizontal perspective is key for solidifying Europe’s financial system. It is of the utmost importance to design policy measures that integrate resilience and appropriate supervision without undermining innovation, competitiveness and jobs.
A promise from Ursula von der Leyen, the newly appointed president of the European Commission, of a sustainable Europe investment plan is expected to unlock a trillion euros of climate investment over the next ten years. She has pledged to tap into private investment even though the overall strategy to achieve this goal has not yet been disclosed.
EuropeanIssuers believes that corporates have a leading role to play in the sustainability transition as the drivers of the change. Corporates take interest in wider social issues, rather than just those that only impact profit margins. They are aware of the impact of their activities on society and the environment. Their business approach includes corporate social responsibility which can be seen in many countries’ corporate governance codes.
These require companies to promote long-term value creation and incorporate ESG (environment, social and governance) factors in their strategies and reporting. It is important to foster the role these codes play in promoting corporate sustainability by ensuring that they are not undermined by unnecessary legislation. This increases the number of sustainable projects and creates new market opportunities for investors.
As businesses become more global, their operational processes become more complex. To capture this evolution, authorities tend to develop policies which shift more responsibilities from states to corporates. Those policies impose disproportionate obligations to achieve policy objectives that are neither the primary purpose nor the remit of companies.
It is important to note that companies are committed to creating long-term, sustainable value, but they should not serve as a substitute for state authorities and their responsibility to citizens and the environment in the absence of a political solution at the EU and international level. The upcoming commission should understand that this may consequently harm the competitiveness of European companies on international markets and in turn affect public wealth.
Over the past four years, stock exchanges have reported a significant decrease in the number of IPOs being issued as well as a decrease in the number of companies that are publicly listed.
Policymakers should be looking for ways to balance the EU regulatory framework to strike a better balance between entrepreneurial freedom, investor protection and financial stability so that capital markets can be effectively used for the financing and risk management of European companies.
It is encouraging to see that the commission’s new president supports the creation of a private-public fund specialising in IPOs of SMEs. For this to play a part in revitalising capital markets, it must be matched by legislative initiatives which incentivise investment in equity and create a tax framework for savings and capital gains.
Furthermore, existing listing requirements and cost, in both regulated and multilateral trading venues, continue to be disproportionate to the size and level of sophistication of SMEs. EuropeanIssuers therefore believes that a more proportionate regulatory approach should be adopted by the EU as a key principle to support the listing of smaller companies.
Another key issue to be addressed is the development of a harmonised and simplified EU tax system. Ursula von der Leyen rightly points out in her agenda that differences in tax rules can be an obstacle to the deeper integration of the single market and hamper growth. Therefore, EuropeanIssuers proposes a harmonised EU tax system designed to create more certainty and less burden for companies.
As we enter a new phase, EU policymakers should devise a future-proof work programme that sufficiently tackles complex issues and allows for corporates to grow, invest and create jobs. This can be achieved through the strengthening of the European Commission’s Better Regulation approach to pursue simpler, more coherent EU regulation which will create a vibrant ecosystem where companies of all sizes can easily raise capital through public markets and deliver growth over the long term.
Florence Bindelle is secretary general and Frederico de Santos Martins is policy adviser at EuropeanIssuers.