Financial Actors Research Articles

Financialization in the European Periphery and the Sovereign Debt Crisis: The Portuguese Case

:The financial sector has acquired great prominence in most developed economies. Some authors argue that the growth of finance is at the root of the financial and economic difficulties of the past decade. This article aims to analyze this claim by looking at financialization in the European periphery, focusing on the Portuguese case. The emergence of this phenomenon is contextualized from a historical, economic and international perspective. Based on the analysis of several indicators, the article concludes that the Portuguese economy exhibits symptoms of financialization that are typically found in Southern European countries and that these differ significantly from the patterns characterizing financialization processes in more advanced economies. The article discusses how the increasing importance of financial actors and motives in the Portuguese economy played a decisive role in the emergence of the crisis.

Managing workers’ capital? Limits and contradictions of labour investment funds

Labour-controlled investment is often touted as an alternative, pro-worker form of finance. Since 1983, the province of Quebec in Canada has experimented with workers’ participation in the form of workers’ funds controlled by the two major trade union federations. Drawing on research from secondary sources, archival material and semi-structured interviews, this article offers a comprehensive portrait of one of Quebec main workers’ funds, the FTQ Solidarity Fund. To date very little has been said about the impact of workers’ funds on firm governance, employment quality and labour relations. The article argues that any attempt to use investment to shape firm behaviour in the interests of workers and local unions is a limited and contradictory project. The argument is sustained through a discussion of the historical formation and institutional practices of the Solidarity Fund. The presence of large union-controlled investment funds offers local firms an alternative source of capital investment, protecting small and medium-sized firms from more aggressive financial actors. However, the main results show persistent tensions and contradictions between the Fund’s social goals and financial logics, as well as unintended effects on workplace union practices and power.

Transnational Municipal Climate Networks and the Politics of Standardisation: The Contested Role of Climate Data in the New Global Covenant of Mayors for Climate and Energy

This article analyses the formation of a new global network, the Global Covenant of Mayors for Climate & Energy (GCoM), by two existing initiatives, the EU-based Covenant of Mayors and the UN-supported Compact of Mayors. While this merger of two transnational networks provides evidence for the increased coordination and standardisation of transnational municipal climate action, this remains a contentious and incomplete process. The article identifies different modes of transnational climate governance that have contributed to conflict between the founding networks and zooms in on the role of municipal climate data. Using empirical evidence, it analyses the contested politics of municipal climate data, including the role of the Global Protocol for Community-Scale Greenhouse Gas Emission Inventories (GPC) as a standard tool, the definition of a common target, and the inclusion of financial actors. Concerns over the reshaping of public-private boundaries and the possible commodification of public data are identified as major obstacles for the (EU) Covenant of Mayors, which consequentially seeks to remain as independent as possible within the new GCoM. Data politics emerges as a crucial factor for the future direction of transnational municipal climate policy and the ongoing processes of standardisation and coordination.

This can(’t) be an asset class: The world of money management, “society”, and the contested morality of farmland investments

Drawing on several years of fieldwork-based research on and in the “farmland investment space”, this paper argues that a combined reading of debates on assets and assetization in financialized capitalism and convention theory offers novel insights into the moral struggles associated with the transformation of farmland into an “alternative asset class”. It demonstrates that central to the assetization of farmland is the globally distributed effort to bestow it with a legitimate financial worth. While many financial actors paint the picture that farmland has an absolute or intrinsic value, and that this value can be “unlocked”, the paper demonstrates that farmland only gains its financial worth through collective yet contested practices of classification, valuation and valorization. This process has internal (related to the financial industry) and external (related to “society”) dimensions. Farmland only becomes a legitimate asset class if it can be meaningfully set in relation to other asset classes, and if the underlying “assets” generate legitimate returns to investors. At the same time, the legitimation of farmland as an “asset class” has been threatened by attacks of social forces such as NGOs, as accusations of immorality (i.e. “land grabbing”) have become major reputational risks for the supertankers of the industry – institutional investors. This notwithstanding, “capital” and its supporters have worked hard to overcome these internal and external barriers. Eventually, the case presented here allows us to problematize and repoliticize the often-invisiblized morality of finance, which is as much about “value” as it is about “values”.

The Bank of England, operational independence and the financial crisis

The Bank of England played a key role in the management of the 2007–2008 financial crisis, a decade after being granted independence, and has since become an increasingly powerful monetary and financial actor. However, most accounts of the financial crisis in the UK have tended to approach the management of the crisis in terms of unified state action. This paper argues that this approach is limited as it ignores how the conflicts and tension between the now independent Bank of England and the British government shaped the response to the crisis. It is argued that we need to have a clearer understanding of how states and central banks interrelate in order to understand both the management of the crisis and the implications of the emerging monetary and financial order. Specifically it is argued that central banks and other state agencies engage with finance differently and face different problems in doing so and thus develop potentially conflicting strategies. Central banks, as distinct from other state agencies, should be perceived as key structural actors in order to understand the development of the crisis and the implications of the post-crisis regime.

Financial market actors as urban policy-makers: the case of real estate investment trusts in Brazil

ABSTRACTFocusing on the growth of Real Estate Investment Trusts in Brazil, the paper explores how financializing policy instruments intertwine financial markets and the urban built environment. It studies the career of REITs and questions the role of financial market capital and actors in urban dynamics. The paper uncovers three processes usually considered separately: i) how a network of public and private financial market actors coaxes state bodies into using their regulatory powers and financial resources to transform real estate into an asset class; ii) how the government-run financial market authority and banks lure urban households into liquid real estate through marketing and education campaigns; and iii) how asset managers are “applied economic geographers” insofar as they channel households’ capital into a selected cities and properties. The active role played by financial actors in the design, enhancement and implementation of such a policy instrument leads us to conclude on their role as urban policy-makers.

Impacts of the Fossil Fuel Divestment Movement: Effects on Finance, Policy and Public Discourse

The fossil fuel divestment movement campaigns for removing investments from fossil fuel companies as a strategy to combat climate change. It is a bottom-up movement, largely based in university student groups, although it has rapidly spread to other institutions. Divestment has been criticised for its naiveté and hard-line stance and dismissed as having little impact on fossil fuel finance. I analyse the impact of divestment through reviewing academic and grey literature, complemented by interviews with activists and financial actors, using a theoretical framework that draws on social movement theory. While the direct impacts of divestment are small, the indirect impacts, in terms of public discourse shift, are significant. Divestment has put questions of finance and climate change on the agenda and played a part in changing discourse around the legitimacy, reputation and viability of the fossil fuel industry. This cultural impact contributed to changes in the finance industry through new demands by shareholders and investors and to changes in political discourse, such as rethinking the notion of ‘fiduciary duty.’ Finally, divestment had significant impact on its participants in terms of empowerment and played a part in the revitalisation of the environmental movement in the UK and elsewhere.

California's carbon market and energy prices: a wavelet analysis.

Carbon price is a key variable in management and risk decisions in activities related to the burning of fossil fuels. Different major players in this market, such as polluters, regulators and financial actors, have different time horizons. We use innovative multivariate wavelet analysis tools, including partial wavelet coherence and partial wavelet gain, to study the link between carbon prices and final energy prices in the time and frequency dimensions in California's carbon market, officially known as the California cap-and-trade programme. We find that gasoline prices lead an anti-phase relation with carbon prices. This result is very stable at lower frequencies (close to 1-year period cycles), and it is also present before mid-2015 in the 20-34 weeks frequency band. Regarding electricity, we find that at about a 1-year period, a rise in carbon prices is reflected in higher electricity prices. We conclude that the first 5 years of compliance of the California cap-and-trade programme show that emissions trading is a significant measure for climate change mitigation, with visible rising carbon prices. The quantitative financial analytics we present supports the recent decision to extend the current market to 2030 without the need for complementary carbon pricing schemes.This article is part of the theme issue 'Redundancy rules: the continuous wavelet transform comes of age'.

Banking for health: opportunities in cooperation between banking and health applying innovation from other sectors.

The annual funding need for global health SDG targets is estimated by WHO at US$134 billion per year, rising to US$274-$371bn by 2030. This paper examines the challenge of making sustainable investment structures in global health more attractive for mainstream financial markets. The objective is a framework for targeted future debate with financial sector actors. Four case studies of innovative sustainable investment mechanisms are analysed, elaborating potential transfer of green and impact investment models in order to channel additional private sector funds to health. To increase private sector involvement, profit must accrue to providers of finance. The paper shows how health criteria can be incorporated into structures, which create triple bottom line return opportunities. Health infrastructure projects based on risk sharing models with governments or multilateral agencies could use long-term funding, with better credit ratings and lower cost of capital. Outcomes based investment, similar to green or social impact bonds, with third-party certification of measurable health impact, satisfy the private sector need for return with social interest objectives. Responsible investment could expand by adding a ‘health’ (H) criterion to the Environmental, Social and Governance (ESG) framework, implementing ESG+H for mainstream investment screening. These models are scalable, satisfy the need to dedicate funds to health and incorporate consistent critical success metrics. The conclusion finds that strong legal frameworks and exploration of fiscal incentives will be critical next steps to facilitate scaling up and broadening of interest from private sector financial actors. The impact these investments have on overall population health is a positive externality of sustainable global health investment.

Agriculturalizing finance? Data assemblages and derivatives markets in small-town New Zealand

The financialization of agriculture appears to be proceeding apace. In New Zealand, the creation of a futures market for dairy lends weight to this story. What is less well understood about the process of financialization in agriculture, however, is how exactly it is proceeding. This paper focuses on NZXAgri, an offshoot of the New Zealand sharemarket operator NZX, which is tasked with the creation of the dairy derivatives market, and on the data infrastructure that is being assembled to underpin this trading space. The making of NZXAgri has been a complex process, resulting from the dissipation of a previous agriculture data assemblage during neoliberalization, and now with multiple political and economic projects partially aligned under its banner. Meanwhile, the emerging data assemblage relies on all manner of material and immaterial relational work to produce the necessary dairy production information for consumption by international financial actors. It is this kind of assembling work that is shaping the financialization of agriculture, and it requires constant negotiation with the diverse agencies of farmers and their rural contexts. This suggests that we are seeing the agriculturalization of finance alongside the financialization of agriculture.

Banking for health: the role of financial sector actors in investing in global health.

The world faces multiple health financing challenges as the global health burden evolves. Countries have set an ambitious health policy agenda for the next 15 years with prioritisation of universal health coverage under the Sustainable Development Goals. The scale of investment needed for equitable access to health services means global health is one of the key economic opportunities for decades to come. New financing partnerships with the private sector are vital. The aim of this study is to unlock additional financing sources, acknowledging the imperative to link financial returns to the providers of capital, and create profitable, sustainable financing structures. This paper outlines the global health investment opportunity exploring intersections of financial and health sector interests, and the role investment in health can play in economic development. Considering increasing demand for impact investments, the paper explores responsible financing initiatives and expansion of the global movement for sustainable capital markets. Adding an explicit health component (H) to the Environmental, Social and Governance (ESG) investment criteria, creating the ESG+H initiative, could serve as catalyst for the inclusion of health criteria into mainstream financial actors’ business practices and investment objectives. The conclusion finds that health considerations directly impact profitability of the firm and therefore should be incorporated into financial analysis. Positive assessment of health impact, at a broad societal or environmental level, as well as for a firm’s employees can become a value enhancing competitive advantage. An ESG+H framework could incorporate this into mainstream financial decision-making and into scalable investment products.

Finans Alanında Geliştirilen Mobil Uygulamaların Finansal Okuryazarlık Üzerindeki Etkisi - The Impact of Mobile Applications Developed in Finance on Financial Literacy

Policies on financial literacy have been developed since 2012, especially by the G20 and OECD countries, including Turkey, as a priority global policy. Although the use of mobile devices has increased in the last decade, new opportunities have emerged by facilitating access to information. This study aims to examine whether mobile applications developed on financial markets and literacy can influence financial literacy and help individuals become effective financial actors by directing the use of the internet. In this research, as an example, Faculty of Economics and administrative Sciences, Faculty of Business Administration, Faculty of Economics, etc. Adnan Menderes university students who have been educated in faculties and vocational schools have been selected. The findings of the research will make significant contributions to the information stock, which is one of the most important production factors of the information economy, by revealing original values both in Turkey and in the global context with its scientific and technological aspects.

La finanziarizzazione del welfare

The article identifies and analyses the process of financialization of welfare in the context of the rise of Social Impact Investing. Building on a wide international debate, it aims at pushing the analysis of the Italian case further and it focuses specifically on the intersections between philanthropic and financial actors and tools.In this perspective, two policy tools are analysed and discussed – the Integrated System of Funds (SIF), for Social Housing and the Social Impact Bond – that exemplifies such intersection. While they differ under many respects, they also share some common blindspots and contradictions, already highlighted in the literature on finacialization. While they open up new space for capital accumulation in the realm of social policies, they pose significant problems in terms of governance, accountability, public finance and incentives to the Non-Profit Sector. The article suggests that such critical aspects of the phenomenon should carefully be considered not only in the academic but also in the public debate on Social Impact Investing.

Governing the ‘ungovernable’? Financialisation and the governance of transport infrastructure in the London ‘global city-region’

The governance of infrastructure funding and financing at the city-region scale is a critical aspect of the continued search for mechanisms to channel investment into the urban landscape. In the context of the global financial crisis, austerity and uneven growth, national, sub-national and local state actors are being compelled to adopt the increasingly speculative activities of urban entrepreneurialism to attract new capital, develop ‘innovative’ financial instruments and models, and establish new or reform existing institutional arrangements for urban infrastructure governance. Amidst concerns about the claimed ‘ungovernability’ of ‘global’ cities and city-regions, governing urban infrastructure funding and financing has become an acute issue. Infrastructure renewal and development are interpreted as integral to urban growth, especially to underpin the size and scale of large cities and their significant contributions within national economies. Yet, overcoming fragmented local jurisdictions to improve the governance and economic, social and environmental development of major metropolitan areas remains a challenge. The complex, and sometimes conflicting and contested inter-relationships at stake raise important questions about the role of the state in wrestling with entrepreneurial and managerialist governance imperatives. City and government actors are simultaneously engaging with financial actors, the financialisation of the built environment, the enduring and integral position of the state in infrastructure given its particular characteristics, the transformation of infrastructure from a public good into an asset class through the agency of private and state interests, and what relationships, if any, exist between ‘effective’ urban governance systems and improved economic performance.Contributing to theoretical debates about the apparent ‘ungovernability’ of global cities and city-regions, this paper presents analysis and findings from new research examining the financialisation and governance of transport infrastructure in the London global city-region. The continued rise in London’s population is placing significant demands upon existing infrastructure assets and systems and provoking debates about the extent and nature of growth in the UK’s capital, the development of and relationship between urban and sub-urban built environments, and the ability of national, sub-national and local actors to plan infrastructure renewal and investment both within London’s formal administrative boundary and wider city-region. Combining aspects of urban entrepreneurialism and managerialism amidst the challenges of governing a global city-region, the search for new infrastructure investment by state actors is leading to the revival of specific funding and financing mechanisms and practices. The mixing of existing and new funding and financing techniques as well as governance arrangements in distinct and, at times, hybrid ways, is amplifying the novel challenges facing actors and institutions responsible for London’s governance.

Beauty-Contests in the Age of Financialization: Information Activism and Retail Investor Behavior

Keynes (The General Theory of Employment, Interest and Money, Harcourt Brace and Co., New York, 1936) had rightfully argued that picking stocks is akin to a beauty contest. The chances of winning are amplified if one's choice matches the likelihood of the panel's choice. In this era of financialization, where profit-making has shifted to speculative sways rather than fundamental trade and commodity production measures (Krippner, Socio-Econ Rev 3(2): 173-208, 2005), similar beauty contests have become even more acute. Online, real-time media channels along with pervasive investments applications have ushered in unprecedented online financial information and retail investor interest, ranging from dealing in penny stocks to sentiment-based trading. More than information sources, similar investment sites compete to recommend investment directions and strategies, not driven by strict fundamentals used by “arbitrageurs” or rational speculators but on pseudo-signals proffered by various information investment channels with varying degrees of credibility. This behavior, referred to herein as information activism, concomitantly adds a sociopsychological dimension to the concept of financialization (Lagoarde-Segot, Int Rev Financial Anal 2016) – wherein technology-driven information reach and range contribute to financial dominance of financial actors and practices. Using information activism as a lens, this research empirically evidences the extent to which information activism affects retail investor behavior under various market conditions. This study examines the differential effects of two primary, albeit reputable, sources of information activism: an investment news channel (CNBC – Mad Money) and an online financial blog (SeekingAlpha), and the effect on investor behavior during the 2008 financial crisis. In identifying the specific downstream effects of information activism on capital markets and investor behavior, factors related to investor behavior, such as trading volume and price reaction, are analyzed surrounding information activism events. Results indicate that retail investors appear to rely on online information activists during uncertain economic conditions. Findings denote that abnormal returns are associated with information activism during uncertain economic conditions and for buy recommendations when information asymmetry is high. Abnormal trading volume is also associated with information activism during economic uncertainty and with buy recommendations when information asymmetry is high particularly for stocks exchanges where unsophisticated investors tend to trade more heavily.

Facing financialization: The divergent mutations of agricultural cooperatives in postapartheid South Africa

AbstractThis paper analyses the transformation of the South African (former) grain cooperatives since 1994. These entities played a key role in the institutional architecture of the apartheid regime, ensuring the domination of white commercial farmers over the sector. Within the framework of the deregulation of the economy and the agricultural sector, such entities faced transformations of modern capitalism, especially the growing power of financial actors and markets. Although white commercial farmers still largely retain these inherited structures, these companies are presently being targeted more and more by private takeovers and/or private equity deals. Based on two specific empirical examples of private equity deals affecting South African grain cooperatives, this paper describes this financialization process in practice, in particular by analysing the interaction between financial and agricultural actors and the alliances on the ground that determine its “success.” In doing so, it details the different trajectories of these (former) cooperatives, highlighting the resilience, mutation, and extinction of commercial agriculture in South Africa.

Financialization and Hysteresis: The Case of Chile

The changing relationship between the financial and non-financial sectors in both developed and developing economies during the past three decades has been labelled ‘financialization’ — a process entailing the “metastasization of financial motives, financial markets, financial actors and financial institutions in the operation of domestic and international economies” (Kotz 2009). In Chile, this transformation has been maligned by all manner of deleterious macroeconomic consequences, including tepid real economic growth, increased financial instability, widening distributional inequality, stagnant productivity and, most notably, a ‘missing link’ between profits and investment (T. Palley 2007). By way of a simple, post-Kaleckian, endogenous growth model, we explicate the following overarching causal conduit between these phenomena: a self-perpetuating cycle of rising inequality, financialization, deficiencies in effective demand, financial speculation, reduced investment, stagnant productivity, slow growth, and so forth (Hein 2015). A remedial policy regime, based on inclusive development and the socialization of investment, is accordingly posited.

Occupational pensions in Europe: Trojan horse of financialization?

AbstractThe aim of this article is to shed light on the nexus between occupational pensions (OPs) and the financialization of pensions in Europe. In particular, we address the following questions: Has the recent evolution of OPs contributed to the financialization of pension policy? Is the nexus between OPs and financialization the result of the increased influence of financial markets in the pension field? Or of a more complex interaction of state, market, and social actors?By comparing Italy, the Netherlands and the United Kingdom, we show financialization is a broad process that affects the three countries, but it has followed three different paths. In Italy, financialization is spreading through individual pension schemes rather than OPs. The Dutch collective OPs are still a central part of the pension systems, but are increasingly influenced by the financial markets. In the United Kingdom, employer‐led OPs are in the hands of the financial services industry.This proves that financialization is a powerful trend, but has to deal with domestic socioeconomic institutions (a country's political economies and pensions institutions) that shape actors' strategies and reforms. Financial actors have an increased role in pension politics, but are involved in complex interactions with the state, employers, and trade unions.

The Mutual Fund Industry and the Protection of Human Rights

This article considers the appropriate application of the United Nations Guiding Principles on Business and Human Rights (UNGP) to the mutual funds industry. Mutual funds can impact human rights by financially supporting oppressive states or abusive companies. Given the indirect nature of such impacts, along with the exclusively external management of the funds, this article argues that a unique approach to implementing the UNGP is necessary for this industry. Divided into five parts, the article outlines the governance structure of mutual funds and the expectations on states and businesses in the UNGP, before assessing the appropriateness of applying current guidance for banks and other financial actors to mutual funds. The article concludes with practical recommendations for both fund managers and states on the implementation of the UNGP in this industry.

How do small business owners actually make their financial decisions? Understanding SME financial behaviour using a case-based approach

ABSTRACTConventional approaches to the study of SME finance tend to focus on the changing financing options and preferences as small businesses move through different stages. However, one of the limitations of such approaches is that they do not explain how small businesses make decisions that lead to their financial structures. This paper suggests that small business owners deliberately choose how they manage their firms’ finance as a direct consequence of their personal objectives for owning a business. This paper summarizes the findings of a qualitative study with 11 small business owners using a novel qualitative model developed by Holmes and Gupta [2015, Opening Aladdin’s cave: Unpacking the factors impacting on small businesses. In A. Moore & J. Simon (Eds.), Small business conditions and finance (pp. 37–56). Sydney: Reserve Bank of Australia.]. The results uncover a series of underlying factors (such as personal perspectives, life events and future outlook) which shape the goals and perceptions of small business owners, and influence their financial decision, actions and future funding options, thereby reinforcing the view that small firms are an extension of their personal objectives.