Unrest in banking sector and activist investors

Unrest in banking sector

The Professor answers the first question by making an analogy with the banking crisis in 2008. She notes several important differences between the current unrest and the crisis back then. Firstly, in 2008 the crisis erupted due to permanent losses on mortgages in the United States of America. Now, the unrest is on temporary losses on creditworthy obligations. This is due to much better liquidity, higher buffers and stronger regulation now.

However, the question remains whether our current measures are sufficient. According to Pieterse-Bloem, it is good to realise banks’ equity is always relatively low. So, once a bank run erupts, a bank will not be able to hold out very long. Positively, we now see regulators and governments intervening rapidly, such as in the case of Credit Suisse.

Activist investors

Four Dutch investors are supporting activistic movement Follow This in their pursuit of moving TotalEnergies towards a more sustainable business. The Professor sees this a sign for the climate agreements countries have committed themselves to. She recognizes a more general trend where businesses and governments are held accountable for their commitments. Yet, the Professor acknowledges that projects on sustainable energy tend to generate less financial revenue than other projects. Still, she notes that the money allocated towards these projects are an investment in the future. Hence, it is important to make sure the boards of these sustainable businesses remain in place and the directors have the means to make the correct decisions. No one benefits if these companies go bankrupt. Not the shareholders nor the green transition.