London has always been a gateway to the world. International trade and commerce have been at the heart of life in the capital since Roman times. In many ways, that is truer today than ever before – even if pottery has been replaced by professional services and timber by technology.
During my legal career, London has opened its doors to 40 countries, from Kosovo to Cambodia, as I have tried to play a small part in bringing cheaper, cleaner and more sustainable energy to people the world over. Only in the past year, while working on a project in four of the poorest nations in Africa – Ivory Coast, Liberia, Sierra Leone and Guinea – I witnessed how poor investment conditions have real human and economic consequences.
Energy and finance underpin economic growth in all corners of this increasingly interconnected world. The global population is forecast to reach 9bn by 2050, and the Organisation for Economic Co-operation and Development predicts 3bn people in Africa and Asia will form a new middle class by 2030 – a transformation far greater in scale and speed than the industrial revolution.
This upheaval makes London’s role as a leading financial centre critically important if we are to rise to the complex, long-term challenges posed by this “new normal”. The City is a global marketplace and can help to deliver global solutions to problems such as climate change, scarce resources and urban planning.
Time and again, London has seized the opportunities of every transformational stage of industrialisation: the first modern joint-stock companies in the 17th century; the birth of a global insurance market in the 18th; and formalising the rules for stock exchanges in the 19th.
Now, capitalism has to take another gigantic leap. The City must pioneer sustainable models of finance that deliver long-term value and are fit to serve an urban population predicted by the UN to reach 6.3bn by 2050.
Financing, especially private sector investment, will be a critical component of the development of tomorrow’s cities through smarter design and delivery in areas such as power, sanitation and transport. That is why I have launched the Tomorrow’s City programme to bring together leaders across a range of fields to explore how we can work better together to tackle these big challenges through innovative approaches.
Central to this is putting emphasis on creating value for society. It also means behaving responsibly and with integrity from the top to the bottom – which is the most long-term behaviour of them all. Products and services should be designed to meet customers’ genuine needs, such as sustainable infrastructure financing and legal contracts. Similarly, every shareholder needs to be a good custodian for those citizens, savers and businesses to ensure a shared prosperous future.
That is why we need to ensure market mechanisms encourage companies to approach value creation in the right way, as identified by the Kay Report on UK equity markets. Improved company reporting is one area that I will be exploring along with Mervyn King, chairman of the International Integrated Reporting Council.
We have seen some big companies move away from quarterly reporting because it can lead to an excessive focus on short-term results at the cost of investing in the future. As Paul Polman, chief executive of Unilever, has said: “We are in the business of maximising returns, but we can maximise social and environmental returns too.” This is a vision of enlightened capitalism that everybody in the City should sign up to.
The 2m-plus people who work in finance across the UK all have a stake in ensuring that consumer faith in the system is restored.
Another big issue that the city and London need to tackle is diversity. There has always been a moral case for inclusion, but there is now a clear business case. Recent research found that women hold 6 per cent of executive committee and board positions – a stark statistic that we must address.
The world has changed since I became the first female partner at my law firm CMS 30 years ago. Today, there are 50. But it has not changed fast enough, and we need to make sure far fewer women and people from diverse backgrounds get left behind.
London will lose out if it does not capture the benefits of diversity – fresh perspectives, originality and innovation – by enabling talented individuals to get to the top. This change will not happen overnight but we need to ensure that businesses employ a true meritocracy, so that the best succeed, regardless of gender, race, sexuality or nationality.
Only then will statistics on diversity better reflect modern society.
Finally, London must remain at the forefront of new markets. The chancellor recently announced plans for Britain to become the first non-Islamic country to issue a sukuk, or Islamic bond. The City of London Corporation is also working with government and financial institutions to help the capital develop as a centre for renminbi business – an area in which rivals such as Luxembourg, Paris, Frankfurt and Zurich are trying to steal a march. It is vital we are plugged into these fast-growing forms of finance early on, so we are not left behind as the world changes around us.
It may be true that, as John Maynard Keynes observed, in the long run we are all dead. But, in the meantime, we cannot stand still. London’s success as a global business hub is critical to meeting the challenge of this new normal. We must work together to deliver an enduring revolution that leaves a positive legacy for our grandchildren and the generations still to come.