The Investment Association (IA) has outlined how Europe can harness private markets to deliver “long-term growth, innovation and resilience”.
In its report, Foundations of Growth, the trade body for the UK investment management industry, said Europe faces a decisive moment, as policymakers work to deliver the Green Deal, accelerate the digital transition and keep the EU a leading destination for global capital.
The European Green Deal launched in 2019 sets out a plan to transform Europe’s economy, energy, transport and industries for a more sustainable future.
The aim is to cut emissions by at least 50% by 2030 and to transform the EU into a sustainable, resource-efficient and climate-neutral economy by 2050.
The European Commission estimates an additional €800bn annually by 2030 is needed to meet the green transition alone.
Additionally, public finances are stretched and traditional sources of funding are unable to meet the scale of investment required to reach the ambitions set out by Europe.
This is why the IA said private markets have become “increasingly vital in funding strategically important projects across Europe”.
Private markets are already a growing force across Europe, with private equity and venture capital firms now managing approximately €1.25trn in assets, more than double their size a decade ago.
The IA added that private markets play a vital role in financing infrastructure, scaling small and medium-sized enterprises (SMEs), supporting innovation, reducing reliance on foreign investors and creating jobs.
In 2022, private equity and venture capital-backed companies supported 10.9 million jobs across Europe, equivalent to 5% of the EU workforce.
Urgent reform is needed in Europe, the IA has said, or it will fall behind its global peers.
Structural barriers such as fragmented pension systems, regulatory hurdles and inconsistent approaches across member states continue to hold back investment.
“Europe risks missing a transformational growth opportunity.”
The four recommendations the IA has set out for the EU to help mobilise private capital are:
- Deepen capital markets integration under the Savings and Investment Union (SIU)
- Expand retail participation through the European Long-Term Investment Fund (ELTIF) framework
- Promote education and inclusive investment
- Build a transparent investment pipeline and strengthen public-private collaboration
IA chief executive Chris Cummings said: “Europe stands at a crossroads. The scale of investment needed for the green and digital transitions is far beyond what public finances and banks alone can deliver.
“Private markets are a strategic necessity to meeting this challenge. However, policymakers must act now to break down barriers, broaden participation and provide a clear pipeline of opportunities.
“Our recommendations set out a clear roadmap to ensure private capital plays its full part in building a stronger, more resilient Europe. Implementing these reforms will not only strengthen Europe’s financial resilience, but also give citizens the chance to share in its growth story.
“The IA represents over 250 members managing €12.1trn globally, including nearly €3.6trn across Europe. With €961bn already invested in EU businesses, our members have a unique vantage point on how capital is deployed and where reforms are needed.
“That experience underpins our recommendations – to open up private markets, support innovation and ensure Europe remains competitive on the global stage.”
