Study on Sweden's success model: strengthening the capital market – for financing innovation and securing pensions

Sweden is the EU leader in IPOs. Between 2016 and 2023, there were 508 IPOs – significantly more than in Germany, France and Italy combined. One important reason for this is the high level of acceptance of equity investments among the population: almost every Swede owns equity funds, and one in five holds shares in domestic companies, thereby making a significant contribution to the financing and growth of the Swedish economy. The study presented today, ‘Mit dem Kapitalmarkt zur Zukunftsnation. Sweden's success factors’ by Deutsches Aktieninstitut and Boerse Stuttgart Group, derives recommendations for action for the new federal government in Germany. Particular importance is attached to equity investments in retirement provision and investment savings accounts.

‘In Sweden, share ownership is a matter of course. This means that a significant portion of savings flows into the local economy and contributes significantly to the financing of future investments via the stock exchange,’ emphasises Henriette Peucker, Executive Director of Deutsches Aktieninstitut. In Sweden, the pension system and tax-privileged investment savings accounts are the levers that encourage people to invest more in shares and equity funds. ‘Equity investments in all three pillars of retirement provision should therefore be at the top of the new German government's list of priorities,’ Peucker demands. A tax-privileged investment savings account is necessary to supplement the measures in retirement provision.

In order to continue to keep pace with the global competition from the economic blocs of the USA and China, we need an efficient EU capital market. ‘At the European level, a commitment by the member states to invest 2 per cent of wages and salaries to build up a capital stock in the statutory pension system would be a decisive step,’ Peucker continued. Sweden serves as a role model here as well: there, every taxpayer is required to invest 2.5 per cent of their gross salary in the capital market as part of the statutory premium pension.

Dr. Matthias Voelkel, CEO of Boerse Stuttgart Group: ‘Sweden did not become a country of shareholders overnight. Politicians have consistently promoted equity investments in retirement planning and asset accumulation. This is also urgently needed in Germany to secure our retirement provisions and to mobilise the private capital that is urgently needed for innovation.’ Voelkel sees a private retirement account as a suitable means of doing this, one that enables low-cost investments in equities and is subsidised by the state through allowances and tax incentives: ‘As an exchange group with a focus on private investors, it is very important to us to open up the opportunities of the capital market to as many people as possible.’

Sweden also offers companies access to the capital market without high hurdles. ‘Since the beginning of 2024, we have been able to attract 23 new listings on our Swedish subsidiary exchange NGM alone. Sweden is way ahead of us in IPOs and venture capital financing. Germany should also reduce regulatory hurdles and create an attractive capital market for young growth companies,’ says Voelkel.

The study's recommendations in detail

Making greater use of equities in Germany for the benefit of the people:

• More equities and equity funds in all three pillars of retirement provision: The introduction of a contribution-based capital cover along the lines of the premium pension in Sweden relieves the burden on the pay-as-you-go system and contributes to the financing of the local economy. In the second pillar, it is necessary for pension funds with a high equity component to play a significantly greater role – in Sweden, the major pension funds invest around 40 per cent of their assets in equities and equity funds in occupational pension schemes. To strengthen private retirement provision, the introduction of a retirement savings account is recommended in the third pillar.
• Introduction of a tax-privileged investment savings account: The ‘Investeringssparkonto’ in Sweden contributes significantly to strengthening the equity culture. The introduction of an investment savings account for asset accumulation is also recommended for Germany.
• Education on the economy and finance: In contrast to Sweden, Germany lacks regular points of contact with equities and capital markets, for example through pension schemes. Deutsches Aktieninstitut and Boerse Stuttgart Group advocate ‘Economics and Finance’ as a school subject in all general education schools.

Legal framework that enables growth:

• Make company law more flexible: In Sweden, company law is much more flexible than in Germany. For example, there is no legal limit for the authorised capital that companies often use to expand their business model. The legal limit of 50 percent of the share capital in German stock corporation law should therefore be increased.
• Simplify prospectus regimes: Sweden stands out for the brevity of the prospectuses that companies must prepare to raise capital and be listed. More legal certainty in prospectus liability helps to reduce the length of the prospectus and make it easier to read. The possibility of informing investors about a prospectus error and thus correcting it by means of an ad hoc announcement should be introduced.
• Streamline the EU Market Abuse Regulation: The complexity of the Market Abuse Regulation reduces the attractiveness of the stock exchange as a source of financing. Simplification is recommended, for example, when acquiring or selling companies. It is important to clarify that information must only be published when the transaction is completed and not before.

Increase the attractiveness of the SME growth market:

• 90 per cent of IPOs in Sweden take place on the three SME growth markets there, an entry-level segment in the EU with less comprehensive regulations. To increase the attractiveness of the segment, companies listed on SME growth markets should be able to take advantage of further simplifications, for example when drawing up insider lists.

Here you will find the detailed study ‘With the capital market to the nation of the future. Sweden's success factors.’