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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, Chairman 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.
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. We’d been dealing with private equity players from across Europe for decades, but this was about intra-European investment, such as investing in Germany via Luxembourg. Then, around the year 2000, we asked why these 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 vehicles investors wanted, and now all the top investment houses in the US and UK have plans to invest in Luxembourg.
“[…] It’s impossible to be the best at everything. If you do everything then you do nothing.” – Alain Kinsch
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 presence 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 make their European headquarters with us. 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, Luxembourg created its Green Exchange, the first green exchange and now the largest in the world. 1800 sustainable bonds are quoted there. It’s a fantastic achievement, but we need to do more. Our data hub connected to the exchange covers 150 datapoints on the 12,000 green 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.