EBRD Joins Forces with Baltic Nations for MSCI Initiative, Strengthening Investor Appeal

(IN BRIEF) Estonia, Latvia, and Lithuania, in collaboration with the EBRD, EC, and Nasdaq Baltic, are welcoming the MSCI initiative to consolidate their markets into a single index. This integration will raise the region’s profile among international investors who track MSCI indices. The new MSCI Baltic Index, launching in August 2023, aligns with the goal of creating a pan-Baltic capital market and supports the EU’s Capital Markets Union initiative. Initially focusing on Estonia and Lithuania, the index may include Latvian securities in the future. The consolidation will result in a larger index with more constituents, enhancing investment opportunities in the Baltic region.

(PRESS RELEASE) LONDON, 24-May-2023 — /EuropaWire/ — The European Bank for Reconstruction and Development (EBRD), a multilateral developmental investment bank, together with the Ministries of Finance of Estonia, Latvia, and Lithuania, the European Commission (EC), and Nasdaq Baltic, proudly supports the MSCI initiative aimed at consolidating the Estonian, Latvian, and Lithuanian markets for efficient index construction and maintenance purposes.

The introduction of a unified index, scheduled to launch during the August 2023 Index Review, will enable seamless integration of the three Baltic markets into the MSCI universe. This development will significantly enhance the region’s visibility among international investors who closely follow MSCI indices.

The regional consolidation initiative perfectly aligns with the ongoing endeavors of all key stakeholders to establish a robust pan-Baltic capital market, as outlined in the 2017 Memorandum of Understanding. It also serves as a crucial building block for the European Union’s Capital Markets Union initiative, fostering closer integration and cooperation within the European financial landscape.

Initially, the MSCI Baltic Index will consist of Frontier Market constituents from Estonia and Lithuania. As the initiative progresses, Latvian securities meeting the necessary criteria may be included in the regional index. Ultimately, the consolidation of these jurisdictions will result in a more comprehensive MSCI Baltic Index, boasting a greater number of constituents. This outcome underscores the advantage of regional screening compared to separate assessments for each jurisdiction.

The EBRD is pleased to be part of this collaborative effort, which marks a significant milestone in advancing the Baltic capital markets and unlocking new opportunities for investors. The integration of the Estonian, Latvian, and Lithuanian markets into the MSCI Baltic Index will undoubtedly enhance market liquidity, increase investor engagement, and support the growth and development of the Baltic region’s financial sector.

“This is an extremely positive step reflecting, in part, five years of constructive dialogue with global institutional investors and index providers,” commented Jim Turnbull, Deputy Director of Capital and Financial Markets at the EBRD. “We need to support the momentum by building an inventory of debt and equity products and encouraging secondary market liquidity.”

He continued: “It is encouraging to see that the Baltic states stakeholders remain committed to encouraging new companies – including state-owned enterprises – to open their capital structures and tap the capital market. The EBRD remains focused on supporting further policy initiatives and providing investment support across asset classes to achieve these goals.”

Valdis Dombrovskis, Executive Vice-President of the European Commission, said: “I welcome the initiative to launch the MSCI Baltic Index as a further step towards the creation of a single pan-Baltic capital market. A single index classification will raise the region’s profile for international investors and provide a basis for deeper cross-border capital markets across Europe as we advance with building a true Capital Markets Union. It will also help to overcome some of the constraints that Baltic economies face in accessing finance and attracting investment due to their limited size. This initiative sends a clear message to global investors that Baltic countries are open for investment. I am glad the reform also builds on the support provided by the Commission through the technical support instrument.”

Mart Võrklaev, Minister of Finance of Estonia, said: “This is another important step in the regional cooperation of three Baltic states in developing our capital markets together. We already harmonised our covered bonds framework in this corner of Europe a few years ago. This is a good example of how small EU member states can win more from cooperation than from doing it alone. In this respect, the MSCI Baltic Index puts Baltic companies on the radar of a larger pool of international investors. We hope that the MSCI Baltic Index attracts more foreign investment and improves access to capital for Baltic companies, which will benefit our economy.”

Arvils Aseradens, Minister of Finance of Latvia, said: “We welcome the introduction of the MSCI Baltic Index and closer cooperation on capital market development in the Baltic states. The index will improve the visibility of our companies to investors. The Latvian government has committed itself to activating operations on the capital market and facilitating listings of state-owned enterprises.”

Gintarė Skaistė, Minister of Finance of Lithuania, said: “I am very pleased that our efforts of the last few years are producing tangible results – the MSCI Baltic Index. Merging the markets will increase the competitiveness of the Baltic countries by developing capital markets and promoting international investments. Moreover, the integrated Baltic securities trading infrastructure will encourage more companies to take advantage of the significantly increased capital market, open up their capital structures and use other instruments, issue shares and bonds, with the help of which the capital raised could be used to finance projects.”

Kaarel Ots, CEO of Nasdaq Tallinn, said: “Regional consolidation of Estonia, Latvia and Lithuania in the new MSCI Baltic Index will support a common regional capital market by overcoming the constraints we would face due to our individual sizes. This is definitely a step in the right direction, but the index will still be part of the Frontier Markets. Our ambition is to upgrade our region to a Developed Market classification one day.”

EBRD Joins Forces with Baltic Nations for MSCI Initiative, Strengthening Investor Appeal

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