EUROPE - If it's economic advancement you want, with sound return on investments, don't forget the importance of the social environment.

To the financial world, this might sound like one isn't looking reality in the face. But David Wright, departing capital markets sage in the European Commission, believes the relatively advanced aspects of life in Europe are on track to bring returns in the long term. 

For Wright, positive investment factors for the EU range from "vital" education to what the former deputy director-general for the Commission's internal markets division describes as the continent's "diversity, creativity and dynamism".

In an interview with IPE, Wright says pension fund investors and other global investors should take into account long-term societal stability factors before taking decisions. These include poverty levels, savings patterns, overall debt levels in economies, environmental progress, infrastructure, quality of life indicators and so on.

Oxford calling
Wright was displaced when Jonathan Faull, a fellow Brit who has been director-general of the justice department, was appointed above him as director-general. At the end of this month, the dyed-in-the-wool European leaves Brussels for an appointment as a fellow at St Anthony's College, Oxford, until next summer.

But Wright, whose history in financial services in the Commission goes back to the EU's Financial Services Action Plan, the master plan that originated at the turn of the century, says he is not necessarily leaving the Commission forever. He remains on the Commission's books and may return to Brussels after Oxford.

Turning to his pet subject - capital markets - he points out that Europe today is much stronger than it was 10 years ago, adding: "We are now seen as one of the big players on the international financial regulatory scene."

Praising the flood of upgrades to financial regulation from Brussels, especially since the crisis, Wright is clearly enthusiastic about the planned Single Market Act (SMA) - as yet un-announced, but due for public airing on 7 October. One of the SMA's 30 or so proposed initiatives could be plans to facilitate access to capital by small and medium-sized enterprise, with a fresh look at the Small Business Act for Europe.

This is despite the fact the Small Business Act's measures were adopted as recently as June 2008, "to put into place a comprehensive SME policy framework for the EU", according to the Commission. Wright says the SMA could bring in reforms to systems for public procurement.

Wright also lists a number of other important elements of current legislative concerns such as effective crisis management, implementing the new Basel agreement, improving corporate governance in financial firms, developing preventive and dissuasive sanctions and modifying parts of MiFID, which regulates investment services within the European Economic Area.

"These changes," he says, "are among the near-term priorities over the next six to nine months."   

Generally, while Wright hopes to see improvements to regulation designed to enhance capital markets, one cannot describe him as an optimist. The crucial question - what about the EU's future economic progress?

"I can't answer about the future," says the man who has seen it all before. Wright, who clearly has doubts, adds: "It all depends. All parts of the financial reform agenda will have to be compatible and work effectively together."

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