Sustainability has become one of the factors that moves the investment world in recent times and that also affects the governments themselves. Spain is doing its homework in this regard and has managed to position itself among the European leaders in the issue of green bonds, occupying seventh place in the Financial Sustainability Indicator of the Report of the Association of Financial Markets in Europe (AFME, for its acronym in English).
The group formed by our country, together with Sweden, France and the Netherlands contributed a total of 48,700 million euros, that is to say, 71% of total EU green bond issues within the region, according to the report Capital Markets Union KPIs published this Wednesday.
This percentage takes on more dimension when one takes into account that Europe is the region in the world with the most issues of sustainable financial instruments, with a growth of 2,300% in the period between 2013-2018.
In absolute terms, Spain is the fourth country with the most sustainable emissions in 2018 in the EU, after surpassing Sweden and only behind France, Germany and the Netherlands.
The balance, however, is not so positive when it comes to extra-bank financing and the availability of venture capital to help start-ups and SMEs finance their growth. In this case, Spain is relegated to 25th place among the 28 countries of the EU. Specifically, in 2018, Spanish SMEs benefited from only 1.8 billion euros in venture capital investments (from private equity funds, venture capital, collective financing funds and business angels), compared to 194,000 million euros in bank loans.
The availability of venture capital is vital to finance the birth and growth of companies, especially the smallest ones, although judging by the data in the AFME report, there is still a long way to go in Europe. Although in 2018 this type of financing increased in the region to 25,000 million euros per year, this amount is almost eight times less than that of the US, which registered 193,000 million euros. “This represents 1% of the US GDP, compared to 0.2% of the EU GDP,” the study points out.
The lack of liquidity in the market for venture capital investments for new companies has led many entrepreneurs to seek financing outside the borders of the EU, and this explains why a total of 10 European companies raised € 4.6 billion on the US Stock Exchange in 2018.
Problematic assets
In terms of sales of problem asset loans, Spain is the second country out of the 28 with the largest operations of this type, only behind Italy. In 2018, Europe recorded a 32% increase in the sale of these types of portfolios, reaching 182,000 million euros. 84% of these sales corresponded to Italy, Spain and Ireland.
The sales of these bad loan portfolios and other nonperforming assets they help bank financing to be used to finance loans to SMEs, consumers and the real economy.
In 2018, Spanish banks securitized, sold in portfolio packages or converted into financial instruments around 6% of Spanish bank loans outstanding. This compares with 24% in Denmark and 9% in Sweden (both markets deep in covered bonds), 7% in Italy (country with the highest sale of non-performing assets) or 7% in the Netherlands (country with the second largest securitization market, after the United Kingdom).
Bank dependency
Spain has relatively low issuance volumes of both equity products and debt compared to the EU, reflecting its high dependence on bank financing.
In the EU as a whole, there are another 16 countries with volumes similar to those of Spain, which means that most member states have considerable scope to boost their capital markets and better diversify their financing channels.
Nor does our country stand out for promoting sector fintech. One of the most important aspects for the success of this segment is local regulation and its ability to foster innovation, while ensuring consumer protection and the sustainability of the financial system. Spain is in the process of establishing a regulatory body at the national level, a figure that is only present in five of the 28 countries
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