Alain Kinsch (Luxembourg Stock Exchange): Grounding transformation in strength
Luxembourg's finance industry has seen impressive growth over recent years. We talked with Alain Kinsch, president of the Luxembourg Stock Exchange and vice president of the State Council, to explain how we got to this point and what the future holds. Interview.
“It’s impossible to be the best at everything. If you do everything then you do nothing.”
Where is Luxembourg’s finance industry at now, and how did we get here?
The finance industry provides two-thirds of Luxembourg's revenues from corporate income tax and a third of GDP, making it essential not just to our private sector but to the health of the welfare state. That strength is built on transformation. Take private equity, for example. We'd been dealing with private equity players for decades, but in the beginning, this was about intra-European acquisitions, such as a US private equity fund buying a company in Germany through a Luxembourg holding structure. Then, around the year 2000, we asked why these private equity funds weren't based in Luxembourg and how we could transform so that they would bring their investment here. We passed laws that created the tools and vehicles investors wanted, and now all the top investment houses in the US and UK have plans to do more in Luxembourg.
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How do we ensure that Luxembourg keeps that strong position?
Continuous transformation grounded in the strengths we already have. People are always talking about the need to innovate and change, but it's important to concentrate on what we do already, taking our existing position and improving on it. That means looking at the whole value chain of production. In the financial sector, we're currently doing back and middle office work, but not much front office or investor relations, so we should diversify into that, going out and finding the investors, making the deals. But we can diversify in other ways as well. For example, Luxembourg managed to attract the seven biggest Chinese banks, starting with ICBC, to establish their European headquarters here, and branch out in Europe. Through coordination between the government and the private sector, we out-competed places like Paris to attract that hugely significant investment.
What are the big trends going to be in the future?
There are four or five megatrends shaping the near future of finance, and it's important to be aware of them all, but it's impossible to be the best at everything. If you do everything, you do nothing. Instead, we need to focus on our strengths, for example ESG. In 2016, the Luxembourg Stock Exchange created its Luxembourg Green Exchange, the first platform for sustainable securities and now the largest in the world. 2,000 sustainable bonds are displayed there. It's a fantastic achievement, but we need to do more. Our LGX DataHub connected to the exchange covers 150 datapoints on the 14,000 sustainable bonds in the world. If we can plug AI into this database, it can model green portfolios for investment bankers, encouraging ESG investment through Luxembourg. That's transformation building on our strengths.
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