The Barriers to Inclusive Capitalism in the Words of Justin Excell, Group Managing Director and Head of Rates at Swiss Re

In a society that truly embraces inclusive capitalism, private investors provide capital to the real economy. Long-term investors, such as insurers, therefore play a crucial role in supporting sustainable growth. While investors' interest in allocating more capital to long-term investments has increased over the past years, policy and market-related impediments present a barrier.

First, the current regulatory environment is highly uncertain, making long-term investments an unattractive alternative for institutional investors. Also, current regulation (e.g. Solvency II) applies punitive charges to long-term investments, such as infrastructure debt. Thus, changes on the regulatory front are essential for increasing capital allocation to long-term investments.

Second, there is a lack of suitable long-term financial market instruments. Market participation in infrastructure investing is often limited and inefficient, due to the complex and differentiated nature of the investment. To address this, we need to move towards a harmonised, tradable and transparent asset class.

Reducing the obstacles to infrastructure investment is crucial for enabling long-term investors to play their important role in supporting growth and employment. Issues with the current regulatory framework and the lack of standardisation must be addressed for the benefit of financial stability at large.