3 Davos Takeaways Impacting the Banking and Financial Services Industry

The World Economic Forum annual meeting at Davos is one of the most important global events for companies, governments, and communities. The themes and discussions from this annual meeting impact strategy and decision-making throughout the upcoming year and beyond.

As many banking and financial services c-suite leaders were invited to attend and speak at the conference, I found it particularly interesting to examine how some of these themes will impact the industry and influence commercial real estate decisions.?

Now that the dust has settled and delegates are back to business, here are some of my main takeaways.?

#1. Traditional banks face off against digital currencies

?Despite the pervasive hype of digital currencies in 2022 with celebrity endorsements and Super Bowl ads, all of that came crashing down when news reports of the devaluation of Bitcoin and the fall of FTX brought the conversation back to the volatility and high risk of crypto and the need for greater financial consumer protection.?

Despite years of effort by crypto companies to move away from fringe sites outside Davos to have a more prominent voice and presence at the table, conversations around the negative consequences of an unregulated trading market brought digital currencies front and center this year. It was no surprise that assessing the risk and safety of cryptocurrencies and the contrast with traditional banking was a theme that kept coming up with banking executives throughout the Forum.?

Banks and traditional financial institutions have been intensely regulated, particularly after the 2008 financial crash. Much of the conversation at Davos revolved around how regulators haven’t been as quick to impose similar restrictions on crypto or tend to reactively investigate after a crash as we saw with FTX —?where immense fallout left investors vulnerable and raised a clear need for more proactive regulatory consumer protection. By comparison, the traditional banking sector has touted itself as the safer option for investors due to its highly regulated nature.

USB Chairman Colm Kelleher, said in a panel discussion that “regulators have - with respect - taken their eyes off the ball in terms of the non-banking sector. Banks and insurance companies are well-regulated. They're systemically safe.”

As we continue to see the inherent risk present in investing in digital currencies, there is heavy pressure being put on governments to pass stricter regulations on crypto. Though the attractiveness and ease of trading digital currencies remain, crypto still has a long way to go to build its credibility as a leading institution within banking and financial services.

#2. Banks face pressure to clearly define sustainability goals?

Another conversation coming out of this year’s forum is the demand for global adoption of ESG standards and corporate emissions reporting. As the ESG movement has continued to develop momentum over the years, many advocates believe that a comprehensive set of standards is vital, but getting everyone on the same page has proved to be challenging.

“Without that definition, without that convergence, what you had is everybody defined it their own way. Somebody would think this issue’s important or this way to talk about it is important,” explained Bank of America’s Chief Executive Officer Brian Moynihan. Moynihan elaborated further that an informal set of ESG standards means that companies could hide unscrupulous ESG practices further down the supply chain, avoiding any potential repercussions or responsibilities.?

Though risks for deceptive practices remain in any mandated reporting structure, companies still understand that there are real business implications for not having a strategy to comply with climate-related disclosures.

In our recently published 5 CRE Trends Shaping the Financial Services Industry in 2023, we’ve outlined a clear roadmap for banks to follow to highlight upcoming critical dates, disclosure requirements, and initiatives this year and into early 2024. Banking and financial services organizations need to accelerate their approach to achieving net zero to meet these strict regulatory requirements now because starting in 2024 will be too late. Clearly defined climate metrics and overcoming the existing data gap with owners and occupiers will be crucial to avoid costly non-compliance.

#3. The return to office momentum shift is here

As banking and tech were some of the earliest pioneers in return to office (RTO) mandates, many companies have been looking for ways to accelerate the pace at which they require in-office work. In fact, some of our banking and investment management clients reiterated in interviews at Davos how they are continuing to adjust policies on their RTO expectations and goals.

Neil Murray, JLL CEO of Work Dynamics, recently spoke about the “productivity perception gap,” which shows that roughly 87% of workers think they’re productive when working remotely. In contrast, only 12% of executives feel the same way. This gap in perception showcases the need for more conversations around our physical spaces, how and where we work best, and how this fits in with the return to the office.?

In order for these transitions to be successful, financial services organizations need to take human-centric workplace strategies at scale to accommodate employee needs better and use their portfolios to redefine their brands. Employee priorities and expectations shifted post-pandemic. JLL research shows that talent volatility is at its highest for employees with hybrid work policies of 3-4 days a week compared to fully remote or entirely in the office. When employees aren’t given a clearly defined strategy, it leaves a lot of confusion, and there is a tech equity gap that exists.?

While workplace strategies will vary across functions, the financial services organizations that center the workplace ecosystem around the employee experience will influence performance and growth, as well as attract and retain talent.

Let’s continue this conversation

The World Economic Forum Annual Meeting is an event I look forward to closely following each year. I enjoy listening to the panel discussions and hearing the thought-provoking commentary from the event.

These were some of the significant trends and issues that stuck out to me from this year’s meeting, but I would love to hear your thoughts. How are these themes — or others — playing into the strategy and decision-making at your organization? Leave a comment below. Thanks for reading.

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