Optimism in the face of economic adversity: future looks bright for mainland European leasing companies

The conference focused on sustainability and the challenges and opportunities facing the leasing industry in the face of current economic adversity.

Mike Berners-Lee opened the conference with a sobering look at climate change and the immediate actions needed to be taken by the finance industry: “This agenda affects everything a business thinks, says and does.” Berners-Lee pointed to a required change in the culture of products to circularity, resale, recycle and longevity. “We need to be honest about what we do.” he told delegates.

A look at how the green transition impacts the leasing industry followed on day two of the event with Marije Rhebergen, head of sustainability at DLL; Odile de Saivre, CEO of Societe Generale Equipment Finance; and Matthias Grossmann, CEO of commercial finance at Siemens Financial Services focusing on the EU action plan on sustainable finance and the ESG policies which businesses must now adopt.

The EU Green Deal has created a legal and reporting framework which presents a big challenge for businesses, who need to take action. Rhebergen highlighted an optimism that we are entering a new era where “the current sustainability paradigm is disrupting business as we know it.” She believes that, as an industry, we have a “collective power” to really make a change.

With the regulation on climate change constantly changing and evolving, we must use data and insight to jump into new strategies, looking at green financing solutions such as financing green transitions, a sustainable finance framework, and green assets. Rhebergen reinforced that it is essential for all business to join forces, take responsibility and start to make a difference with green assets and transitions: “We must create an environmental impact through businesses.”

Odile de Saivre discussed the need to reinvent business in order to create a positive sustainable impact. The climate change challenge must be viewed with optimism as sustainability provides opportunities for all including: vendors (new assets and offers), assets (new technologies), clients (new behaviours and needs) and lessors (new financing structures and risks).

“Even if the solution is not clear, we must all look in the same direction,” stated de Saivre.”We must all be fully engaged in the transition and become green ‘by design’ in our business culture and everything we do.” de Saivre highlighted that SGEF is addressing the issue and working with their vendors to bridge the sustainability gap. SGEF believes that “recycling and refurbishment is key” in this process.

By combining the real and digital worlds, Siemens’ Matthias Grossmann highlighted that finance can enable customers to invest in digital transformation and address sustainability challenges. Grossman sees the finance industry playing a key role in enabling the circular economy.

Nearly three-quarters of global greenhouse gas emissions are emitted in sectors where Siemens’ technologies can help customers to decarbonise, which Grossmann sees as a gigantic opportunity but with a lot of risk included. However, the risk must be taken in order to experiment and make the necessary changes.

DLL’s Rhebergen concluded that the industry must create a “broader partnership model” as climate change is a “journey for all of us.”

The sustainability challenges facing the industry were further addressed by Asset Finance Connect’s head of equipment finance content, John Rees, as he led the CEO panellists in their discussion about the state of the European leasing industry. The panel all believe that the focus on ESG and sustainability offers a vast opportunity for economic growth for asset financiers combined with positive environmental impact. Loc argued that businesses need to evolve to address the economic challenges with a focus on the circular economy, with O’Donohue highlighting a number of initiatives at Dell including the ‘Right to Repair’ scheme.

With European leasing companies dominant on the global stage, 2021 leasing figures provided by Leaseurope members highlighted that the leasing markets are resilient with positive growth in most countries, not surprising after the huge drop experienced during 2019-20 due to COVID. Most countries reported a return to pre-pandemic trading levels in 2021. The UK however was an outlier with performance remaining lower than before. This was the last time the UK figures are likely to be included, a consequence of the FLA withdrawal from membership, earlier this year.

The four panellists – Mathias Wagner, CEO, CHG Meridian; Tim Albertsen, CEO, ALD Automotive; Richard O’Donohue, Head of Leasing Partner Solutions EMEA, Dell Financial Services; and Isabelle Loc, CEO, BNP Paribas Leasing Solutions – all portrayed an optimistic outlook for the equipment and auto finance sectors during the second half of 2022 and beyond, with Rees concluding that the asset finance industry has always been counter-cyclical, and when the economy is low the asset finance industry picks up.

For 2021 over half of European markets had penetration rates for equipment exceeding 20 per cent presenting a further picture of stability. And in a new survey among SMEs, leasing was revealed as their main source of finance.

With this positive growth comes new opportunities and competition with new fintech entrants entering the market with no legacy systems. However, fintechs entering the market face problems expanding their operation so they partner with banks to have an opportunity to bring their products to the market.

As O’Donohue pointed out, “So many things are evolving in the industry which presents huge opportunities.” He pointed to the fact that companies are still investing in technology regardless of

the negative economic forecast, with Wagner confirming that digitalisation is still an important trend in the medium to long term.

Albertsen highlighted that despite auto supply issues, ALD Automotive’s order book had doubled showing that the commercial situation is strong and, with the move from ownership to usership, he anticipates significant growth despite the economic situation.

“The leasing industry has an agility to bring the right products to the market at the right time,” concluded John Rees, with the 2022 Leaseurope convention depicting an evolving industry that will unite to face and overcome barriers to combat a catalogue of challenges from climate change to the energy and cost-of-living crisis.