Sustainable Finance, Frankfurt

What is Sustainable Finance and why is it reaching the mainstream of financial markets?

Increasing pressure on the environment, damages to ecosystems and environmental changes are presenting a global challenge. Integrating sustainability considerations into the financial system can play an important role in meeting the objectives agreed upon in the United Nations’ Sustainable Development Goals (SDGs) and the Paris Climate agreement. Therefore, the inclusion of sustainability criteria in the financial sector are essential to address the future challenges – this also includes the establishment of financial market structures that create incentives for large-scale shifts in investments and a more future-friendly capital allocation.

As part of the growing awareness that a shift in the financial industry is needed, sustainable finance is increasingly gaining attention from global financial and political actors as well as the broad public. But what does it mean?

Sustainable Finance aims at integrating environmental, social or governance (ESG) criteria into financial services. Decisions about investments and capital expenditures should take those criteria into account, while being beneficial to both the investor and society at large. Moreover, the sustainability risks that may impact the stability of the financial system should be made transparent. However, the future-oriented investment strategies should be based on valid data as well as medium to long term risks and returns. While this previously was a niche investment strategy, the approach increasingly reaches the mainstream of international financial markets.

An important component of Sustainable Finance is Green Finance, which refers to raising capital and financial investments into companies, services, products and projects that accelerate the development of an environment friendly and climate-resilient economy – an undertaking to which technological innovation and digital finance are essential to. By using big data, artificial intelligence and the internet of things Green FinTechs present innovative and efficient opportunities to further the greening of the financial system while mainstreaming the green finance approach by making sustainable financial services more accessible.

Helaba Financial Centre Study “In Pole Position for Brexit Bankers”

The latest financial centre study by Helaba’s Research unit, which was published today, shows that the German financial centre is in pole position when it comes to competing for businesses and workers looking to relocate from London. A number of banks have already announced that they will relocate jobs from the river Thames to the river Main, which will have an impact on employment figures: “We anticipate that at least half of all financial sector jobs that are leaving London will be relocated to Frankfurt. Over a period of many years, this would equate to a minimum of 8,000 employees. Therefore, by 2019 we see employment in Frankfurt’s financial sector rising by 4 percent to around 65,000 (end of 2016: 62,400). This is despite a simultaneous consolidation process in the German banking industry that is set to continue”, explains Dr. Gertrud Traud, Helaba’s Chief Economist and Head of Research, at the presentation of the study in Frankfurt.

A novelty of Helaba’s long-running financial centre research in this study is its own regional employment aggregate – financial sector employment within “BIG FFM”, an area that was created by transposing Greater London onto the area around Frankfurt. The following picture emerges from this comparison: At the end of last year, around 118,000 people subject to social security contributions were employed in the sector of financial and insurance services, which compares to approximately 360,000 in Greater London. Employment density (in relation to the population), however, is at the same level of just over 4 percent in both conurbations.

The role of the German financial centre as the favourite in the Brexit-related restructuring process is no coincidence: Frankfurt is the leading financial centre in Continental Europe. In terms of relocating jobs from the river Thames to the river Main, the following locational qualities that Frankfurt possesses are particularly significant: the stability and strength of the German economy, the headquarters of the ECB in its dual function as central bank and supervisory institution, the role of the Rhine-Main area as a transport hub with good infrastructure, relatively affordable rates for leasing office space as well as a high standard of living that also offers a varied range of recreational activities in the city and its green environs.

“Since we created our financial centre ranking in 2016, Frankfurt’s relative attractiveness has risen even further”, explains Helaba’s financial centre expert, Ulrike Bischoff. In contrast, it is already undeniable that the City of London has been weakened by Brexit. The continuing high level of uncertainty over future arrangements in the United Kingdom means that it is losing favour among foreign financial centre participants. On top of that, the collapse of the attempted merger between Deutsche Börse and the London Stock Exchange is positive for Frankfurt, since the strong Frankfurt exchange is now able to go its own way. Furthermore, the German financial centre could become even stronger as the European centre for supervision if the EU-wide banking supervisory authority EBA is relocated to Frankfurt.

The relocation of jobs to Frankfurt is shifting the focus onto the regional property market and city’s educational infrastructure, in particular. “In view of a still ample vacancy rate and a number of construction projects underway, satisfying additional demand on the office market should be possible without any difficulty”, expects Helaba’s real estate analyst Dr. Stefan Mitropoulos. On the residential market, though, there is no appreciable vacancy rate. However, the considerable rise in new construction activity, projects planned for the next few years as well as the abundant land reserves available in the surrounding area suggest that there will not be any significant tightening on Frankfurt’s housing market as a result of Brexit. Apart from the real estate market, the range of educational facilities is a key locational criterion. The Frankfurt financial centre region already offers a broad array of international educational establishments that has visibly grown over the last few years. In view of strong demand for school places even beyond the additional demand created by Brexit, there will need to be a further expansion in the infrastructure for children of all ages, including all types of schools.

Dr. Gertrud Traud draws a positive conclusion from the study: “Despite the challenges posed by the impending influx of employees from the river Thames to the river Main, Brexit represents a unique opportunity to improve Frankfurt’s position even further in the competition between international financial centres.”

Download the full study from Helaba here (German).


Financial Centre Focus: “Brexit – Let’s go Frankfurt”

Financial Centre Frankfurt the preferred destination for Brexit-induced job relocation

In a comparison of European financial centres, Frankfurt clearly ranks in second place behind London. With numerous qualities in its favour, the German banking centre is an attractive location for domestic and international players in the financial sector and has the potential of becoming the preferred destination for Brexit-related job relocations. The following assets that Frankfurt possesses are of particular benefit: The stability and strength of the German economy, the headquarters of the ECB in its dual function, a transportation hub with a good level of infrastructure, relatively low office rents as well as a high quality of life. This is the conclusion that Helaba’s economists arrived at in their Financial Centre Study “Brexit – Let’s go Frankfurt”. But it has serious competition in the shape of Paris, Dublin, Luxemburg or even Amsterdam.

Dr. Gertrud Traud, Helaba’s Chief Economist and Head of Research, stresses: “If Frankfurt really is to become the principal winner of Brexit, it will require a concerted effort on regional, national and European levels as well as a more self-confident approach.”

Forecast for banking sector employment 2018: Stable at around 62,000 jobs

In addition, a further improvement in the conditions offered by the city is essential to ensure its success. In view of Frankfurt’s excellent position in the framework of European financial centres, demonstrated by various studies, Helaba’s economists believe that it has good chances of picking up at least half the jobs in the financial sector that will be shifted from London to Frankfurt in a restructuring process lasting many years. Thus, Frankfurt now faces the task of putting the necessary prerequisites in place, e.g. in the housing market. Based on very cautious assumptions, a total of at least 8,000 employees would come to Frankfurt over a multi-year period. Since companies cannot wait for the outcome of negotiations, more than 2,000 jobs are expected to be relocated by as early as the end of 2018 already.

“This Brexit-induced effect on the labour market will act as a counterbalance to consolidation in local banks”, says the author of the study, Ulrike Bischoff. Both effects should, more or less, cancel each other out within the forecasting window. By the end of 2018, the study anticipates a total of just over 62,000 bank employees in the German financial centre.

The complete Helaba study is available for download here.

Financial Centre Study: every crisis brings opportunities

Helaba presented its third major financial centre study in April 2009. This year’s study examines the effects of the global financial crisis on the German banking capital and finds that the Financial Centre Frankfurt has been less affected by the crisis than London, thus has the chance to improve its position in the financial world. Read more

Financial Centre Focus: the largest banks in Frankfurt

In their new study, Helaba ranks the Financial Centre Frankfurt’s largest banks by employee strength for the first time. This new, survey-based ranking comprises the twelve largest banks and three major financial institutions. “Together, these players together make up more than three quarters of local bank employment – a broad basis for our employment forecast,” explains Dr. Gertrud R. Traud, chief economist at Helaba.

The consolidation-related staff cuts in the Frankfurt are expected to remain manageable. “A major reason for this development is the increasing need in the financial services sector as a result of new, more stringent regulatory requirements,” said Traud. First off, commercial banks require staff for the implementation of the new regulatory requirements. Secondly, by the end of next year, approximately 1,000 people are likely needed to build up the Single Supervisory Mechanism under the umbrella of the European Central Bank. “Through the acquisition of European bank supervision in Frankfurt, the financial centre will again be reaffirmed as the centre of European monetary and banking policy,” says Traud.

By the end of 2015, Helaba experts expect a total of about 61,300 bank employees in the Main Metropolis. Based on the latest available information in accordance with the new zoning for the Frankfurt area labour bureau (Q1 2013: 62,250), prediction means about 1,000 fewer jobs, a 1.5 percent reduction. The crisis induced personnel adjustments since the end of 2008 amount to a loss of 3,500 jobs. Considering this, the decline in employment in Frankfurt is lower compared to other financial centres.

Download the study

Financial Centre Focus: moderate jobs reductions at Frankfurt’s banks

The financial center Frankfurt has a good chance to emerge as a relative winner from the adjustment process in the financial world brought on by the crisis. So far, the number of banks has barely dropped in the wake of the financial crisis, and the metropolis on the Main has proved itself an attractive center for foreign players. Several foreign banks are planning to expand their business activities and are already looking for more highly qualified specialists.

The trend toward a concentration of German banking employment in the financial center on the Main also limits the job reductions in Frankfurt. Between now and the end of 2012, we expect to see a decline in employment of around 3 % at Frankfurt’s banks as a result of consolidation, which means that we have halfway to go. The overall decline in jobs of 6 % would thus be only half of what it was after the bursting of the dotcom bubble.

To the complete Helaba study

Financial Centre Study: Frankfurt is a magnet for foreign banks

The financial center Frankfurt is a highly attractive location for foreign banks. This is the conclusion drawn from the findings of the current Financial Center Survey carried out by Helaba, which has been presented in January 2011. “One of the most important prerequisites for the sustained success of a financial center is its internationality. The fact that about 200 foreign banks from 40 nations are located here, demonstrates the good competitive position of Frankfurt. Nevertheless, we need to further sharpen the profile of the location. For us as the leading regional bank in the economic region of Hesse, promoting the financial center Frankfurt will therefore also in the future remain one of our main concerns – be it by conducting specific research on the financial center, by supporting the Financial Center Index calculated by the Center for Financial Studies, or by supporting the Initiative Frankfurt Main Finance,” says Hans-Dieter Brenner, Chairman of the Board of Managing Directors of Helaba Landesbank Hessen-Thüringen.

For the foreign banks, four location factors in particular have been crucial for their decision to locate in Frankfurt: ‘Reputation of the financial center and the national economy,’ ‘Proximity to important players,’ ‘Function as a hub,’ and ‘Location-specific qualities’ – such as low cost of living and office rents. “From the point of view of the foreign banks located in Frankfurt, the city is the leading financial center in Continental Europe and is expected to uphold this position also in the future. The decisive factors for the choice of this location by foreign banks are Frankfurt’s excellent reputation in the financial community and, increasingly, also the outstanding significance of the German economy,” explains Dr. Gertrud R. Traud, Chief Economist of Helaba.

When it comes to Frankfurt’s positioning in the future, there was an unequivocal sentiment shared by both surveys: The financial center Frankfurt will retain its uncontested leadership position in Germany. “As for cross-border competition, the foreign banks continue to accord Frankfurt good development prospects, also in relation to London,” underlines Stefan Winter, Chairman of the Board of the Association of Foreign Banks in Germany.

The survey is based on a poll among foreign banks that only recently came to Frankfurt, and which was performed by Helaba in cooperation with the Association of Foreign Banks in Germany. A total of 20 foreign banks participated in the poll.

The complete Helaba Financial Center Survey 2011

Financial Centre Focus: bank employment in Frankfurt – no need to panic

As a result of the crisis, a very perceptible consolidation process in the German financial sector is underway. In many banks jobs are being shed to reduce costs. Although the financial centre of Frankfurt will not be able to resist this development completely, there are many factors that should militate against a drastic staff reduction in the local financial sector. As a consequence, it can be assumed that there will be a moderate adjustment process, which will be spread over many years. By the end of 2014, we anticipate that employment in the German financial centre will decline by around 2 % to approximately 73,000 banking staff. That would mean that there will most likely be a loss of around another 1,500 jobs in Frankfurt’s bank towers and that the number of redundancies resulting from the crisis would only just top the 3,000 mark. This shows how well the financial centre of Frankfurt has come through the crisis, in particular when com-pared to other countries. Its significance as the German financial centre and as a European hub of financial supervision is growing. On the flipside of these opportunities for positioning itself in the international competition among financial centres are the risks of overregulation.

To the complete study in English

Financial Centre Focus: Frankfurt advances to become capital of European banking supervision

The financial centre of Frankfurt is increasingly sharpening its profile as the European hub of financial supervision. In the current development of the European system of regulation and supervision, Germany’s leading financial centre, which is already the location of a number of supervisory institutions, has a crucial role to play. Read more

Financial Centre Focus: banking sector employment in Frankfurt – consolidation remains limited

  • Frankfurt’s position in competition with international financial centres strengthened
  • Crisis-induced consolidation not concluded yet
  • Slight decline in banking sector employment by end of 2016

The establishment of the European banking supervision and the creation of the first renminbi trading centre in the euro area have provided a lasting boost to Frankfurt’s position as a financial centre. “This is also reflected in employment in the banking sector”, explains Dr. Gertrud R. Traud, Helaba’s Chief Economist. “The expansion of the European Central Bank to become the principal supervisory authority for banks in Europe has, by itself, led to the creation of around 1000 new jobs in Frankfurt’s financial sector. Although the consolidation process in the industry has not been completed yet, overall we only anticipate a modest decline in employment by the end of 2016, of approximately 2 per cent, to slightly more than 60,000 bank employees”, Traud added. On the other hand, for Germany as a whole, a dwindling branch network can be expected to lead to more extensive job losses.

In comparison to other European banking centres, Frankfurt – where bank employment was only 4 per cent below its pre-crisis level – ranks in the middle of the pack. In London’s financial services industry, most recent figures even show a slight rise in staff levels than in 2008 (+1 per cent), while the financial district of Paris experienced significant personnel reductions (-7 per cent). In this regard, the German financial centre came through the crisis relatively unscathed.

With its wide variety of qualities as a location, Frankfurt remains an internationally attractive financial centre. After a slight crisis-related dip, the number of banks is growing once again. In the third quarter of 2013, 193 banks had established headquarters in Frankfurt. On the other hand, the number of representative offices of foreign banks appears to be declining, while the number of operating branches seems to be on the rise.

To Study in English or German