Large Spanish companies have been and are the driving force behind innovation, but their role is changing. «Traditionally, large companies innovated because they had the resources, but in the 1990s they began to realise that this was not sustainable, that their capacity was very limited,» says Santiago Descarrega, CEO of Fitalent, part of NTT DATA. Little by little, new ways of fostering innovation outside the home and in a more cost-effective way are emerging. «It’s a way of diversifying, creating innovation hubs for each of the big companies separately,» he adds. In the 21st century, open innovation programmes based on collaboration with people and organisations outside the company have begun to emerge.

After the last two years, Spanish companies are taking systematic innovation much more seriously. It is no longer desirable, but mandatory. It is now on the agenda of CEOs and boards of directors, from the CIO to the director of strategy, marketing and human resources,» says Clara Jiménez, director of innovation at Accenture’s Spanish office. Before the pandemic, innovation was very much focused on the creation of new assets and businesses, whereas «now we are much more focused on scaling and industrialisation». The time for proofs of concept and pilot projects is over.

Jiménez believes that open innovation is the only way to go, «but this is something that large Spanish companies, both public and private, have understood very well and have been doing for 10 years with more or less success». However, he considers it necessary, on the one hand, to strengthen the two fronts of this innovation model, incorporating more scientific and technological centres that are very comfortable in their status quo, but which nevertheless «provide the necessary knowledge for more differentiated and even disruptive innovation». On the other hand, strengthening the transmission bandwidth with the business areas of companies so that innovation really takes off and has a tangible return. He points out that more than 90% of IBEX companies and many public companies have mechanisms and/or initiatives related to the entrepreneurial ecosystem. «Every year, most of these companies identify more than 1,000 Spanish startups or with operations in our country and analyse a hundred of them in search of innovative solutions or new business models and even investment.»

Strategic change

Santiago Descarrega acknowledges that in the beginning, when it came to open innovation, there was a rather voluntary approach, «the ecosystem was not very prepared either». Today, the situation has reversed, with a significant number of start-ups and universities getting ready. «Collaboration between universities and companies is more fluid and is starting to show results, new strategies are emerging». He also notes a difference in the behaviour of companies in the start-up world. Whereas before they were looking for exclusivity, «now big companies understand that innovation has to flow and let them be free because at some point they will benefit from that innovation». In other words, innovation has gone from being an almost exclusive domain of large companies to being a consistent learned innovation, and «now innovation is less directed, it is created by the ecosystem and society joins in», says Descarrega.

Eric Viardot, professor of strategy at the EADA Business School, points out that «one way to succeed is to buy more and more small innovative companies, and the open innovation model, in which large companies that are market leaders buy smaller innovative companies, is catching on». What’s more, «those that don’t are being left behind». There are many differences between sectors when it comes to innovation. Healthcare, for example, is a clear example of open innovation, where there is public-private collaboration. In other sectors, such as chemicals, the opposite is true and innovation is still very closed. Unlike in the previous crisis, there is now a lot of money in the market «invested in innovation». In Viardot’s opinion, big companies are not big innovators per se because they have their own business models and «when they buy innovative companies, they appropriate part of the innovation, but not all of it».

The role of the driver

Accenture points out that large Spanish companies are and will always be the engine of the value chain from their suppliers to their customers (if they are SMEs). This is because «they have the financial and human resources to transform their sectors through innovative projects that make the whole chain more competitive,» says Clara Jiménez. «This ability to gain traction is not limited to innovation, but also to digitalisation and sustainability. Large companies are innovating in sectors such as telecommunications, energy and finance. At the end of the day, they all want innovative suppliers and they want their customers to do well,» she says.

One example of the innovative power of large Spanish companies is Ferrovial. The company has been committed to open innovation for years and «recognises the great potential of start-ups». It offers the opportunity to test technologies and validate the business models of start-ups through its numerous infrastructures: «Working with entities whose business strategies contemplate similar horizons allows us to co-create the scenario of the future and respond more quickly and effectively to challenges. Open innovation thus offers the opportunity to accelerate the process of exploring and building the future of transport infrastructure and mobility,» say Ferrovial sources.

In 2020, for example, it signed 12 collaboration agreements with universities and research centres and carried out 38 projects with startups. It regularly participates with other companies in startup challenges to find the best startups in specific areas and sectors. Examples include the Construction Startup Competition 2021, 5 prinG and Madrid in Motion. In addition, it launched the open innovation platform Foresight in 2020. Proof that R&D is no longer a long and lonely race.

Investing in housing. A classic that never fails. Spain is the country of housing. We are already seeing how the market has dried up after the pandemic, because the recovery has made people buy houses as if there were no tomorrow, and there is a shortage in the big cities.

From an early age we have been told at home and at school that you have to study, work, etc. to buy a good house and not «throw money away» on rent. Home ownership is a «guarantee». But… a guarantee of what?

An investment in a house is supposedly «safe» in the sense that there will always be a return, and a profit, when it is sold. But is this true and will this prophecy, which nobody knows who invented it, but which is practised like a religion in this country, come true?

Because if we look at the hard data, we see that it has not been fulfilled lately… In particular, since the 2008 crisis.

Investing in housing is no longer profitable

The data do not lie. In the last 13 years, those who bought a house and sold it have not recovered their initial investment. Because prices have not stopped falling. First sharply when the crisis hit, and then more moderately. And all over Spain.

According to the latest Idealista report, in these 13 years there has been an overall fall in prices of 11.7%, from 2,053 euros per square metre in June 2007 to 1,813 euros in September this year.

This has occurred in all provinces without exception, although in some the decline has been more pronounced than in others. Some of them have remained at the same level, such as Guipúzcoa, where the price per square metre has remained at 4,978 euros since 2007, or Málaga with 2,433 euros.

In other countries, however, there has been a sharp decline. For example, in Castellón (-42%), Ciudad Real (-41%), Toledo (-40%) or Ávila (-37%), cities in inland Spain that have also been shaken by depopulation and where nobody wants to move.

What does this mean? That investment in housing has long been unprofitable in Spain, more so in some places than in others, yes, but in general it will be difficult these days to recover the initial investment, let alone exceed it. Even if there is a great demand for them.

In fact, we have to realise that we have long been living in a parallel reality with unprecedented prices in a country where housing cannot cost that much at existing wages. Therefore, the market will continue to regulate itself, and downwards. And even if demand increases, the price cannot go up like that, and even less so in the middle of a recovery.

That is why we should not pay too much attention to the housing investment gurus, get out of the comfort zone of the brick and look for profitability in other options that are not so typical and can work much better.

And renting is not a waste of money.

What is sustainable investment?

An investment discipline that takes into account environmental, social and corporate governance criteria to achieve long-term competitive financial returns and positive social impact. It is also referred to as «responsible investment».

Sustainable investment is a broad term. There are many rationales, approaches and definitions. They are based on different concepts, ranging from ethical principles to the simple pursuit of better investment outcomes. There are different approaches to sustainable investing, such as active ownership (engagement and voting rights), integration of ESG factors, best-in-class approaches, thematic investing, impact investing and exclusion.

It is also called «responsible investment».

Sustainable investing is no different from traditional «value» investing because both focus on long-term returns, according to one asset manager.

Value» investing is a strategy of selecting quality companies that appear to be trading below their intrinsic value and have the potential to perform well over the long term.

Incorporating ESG factors can help investors find such companies, said Yimei Li, managing director of China Asset Management, or ChinaAMC.

Environmental, social and governance criteria are used to measure a company’s performance in a range of areas, from carbon emissions to contribution to society and employee diversity.

«I believe investment is about finding the best long-term value. And for fundamental investors, there is nothing more important than sustainable growth,» Li told CNBC television on Thursday at the Sustainable Future Virtual Forum.

Last year, ChinaAMC, in partnership with Dutch asset manager NN Investment Partners, launched a global ESG-focused fund targeting Chinese equities. It said the fund performed well and that over the long term sustainable investments would not offer a «poor» return.

However, ESG standards need to be adapted to local conditions, Li added.

She explained that, globally, corporate governance standards usually emphasise the presence of women on company boards, but in China «it is not so difficult to achieve».

Li said his company has its own «localised» ESG ratings to complement international standards.

No simplistic filter

Sustainable investment has become increasingly popular in recent years, but there has been criticism of this investment strategy.

One of the critical voices was Tariq Fancy, BlackRock’s first global head of sustainable investments in 2018 and 2019, who said that such investments can be a «dangerous placebo that harms the public interest».

Loh Boon Chye, CEO of the Singapore Exchange, also acknowledged the fallacies associated with sustainable investment.

He cautioned investors against using ESG criteria as a «simplistic filter» or a «shortcut» when selecting funds and companies. Instead, investors should assess whether a company is integrating sustainability into its business model and practices, he said.

«One of the problems is that ESG or sustainability or ‘green’ is often used as an umbrella term for different strategies, sectors and investments,» said Loh, who also spoke at the virtual Sustainable Future Forum.

Companies that understand the risks associated with ESG and find ways to address them will be able to increase their long-term financial profitability, the CEO said.

As always, here is our personal recommendation in case you want to go deeper into sustainable investment. Click on the image and discover sustainable foreign investments by Rafael Velázquez Pérez.

Time is up. And the multimillion investment of Aena in the expansion of El Prat has been definitively postponed due to the lack of political agreement in the Generalitat. This Tuesday, the Council of Ministers will approve the DORA, the investment plan for 2022-2026, and the 1,700 million euros that had been prepared for El Prat will not be in the document. In recent weeks there have been attempts at political rapprochement and some sectors, especially the employers’ association Foment, led by Josep Sánchez Llibra, have tried to avoid losing this money, but there has been no room for negotiation.

It was already clear in the meeting between Pedro Sánchez and Pere Aragonès less than a fortnight ago that there was no internal consensus in the Generalitat. Mainly because ERC had rejected the extension agreed in the summer by the government and the vice-presidency of the Generalitat in the hands of Jordi Puigner of the Junts. Some groups, such as the PDeCAT, continue to exert pressure and yesterday, Monday, a non-legislative proposal was approved in Congress with the votes of the PP and Cs in which they ask for further negotiations, but the plan is closed this Tuesday for five years.

The document, which includes an investment plan for all Spanish airports for the coming years, will include an item for the expansion of Barajas airport, which presents an even greater political contrast. In Madrid there is no environmental tension and almost no political debate, so the distance between El Prat and Barajas will continue to grow.

As with the El Prat expansion, the plan will include an initial investment of 179 million euros in the Barajas expansion, which is only a small part of the planned total of 1 694 million euros. The big investment will come in 2026, but plans are already starting to be drawn up.

El Prat will have to wait at least five years, although the government is not too hopeful that a political agreement will be reached at some point in Catalonia. In fact, Aena’s engineers insist that the expansion cannot be carried out without affecting the protected area in any way, as ERC and Unidos Podemos are demanding. The investment will be suspended.

However, this does not mean that there is no money in this plan for El Prat and other Catalan airports. However, the document will be limited to the normal investments already planned to improve the airport, some 250 million euros over five years.

This money will essentially be divided into three actions that are considered essential. On the one hand, there is the work to resurface and improve the surface of the runway, an intervention that is regularly necessary to mitigate the noise and commotion caused by the passage of aircraft. In July 2017, due to the poor state of the maritime runway, the landing gear of a Vueling plane fell into a sinkhole that appeared on the runway.

In addition to the refurbishment, the baggage handling system will be adapted to the new standards required by the European Union. The third major package concerns improvements to the operation of Terminal T1. Security filters and check-in counters will be expanded to speed up passenger check-in on the ground. According to Aena, the old DORA contract, which is still in force, included an investment of 157 million euros for Barcelona.

Tuesday’s approval of the DORA project by the Council of Ministers thus closes the debate on the most important investment raised so far by Pedro Sánchez’s Catalan government. However, the government is preparing many others that it wants to conclude in the framework of the open-ended budget negotiations.