Operating environment, Interim Statement Q1/2024

Development of the global economy and of the capital markets was still surrounded by a high degree of uncertainty in the first quarter of 2024, although, especially from an international perspective, the economy developed more positively than expected. The investment market developed favourably, and as inflation slowed, the rise in interest rates also levelled off. According to the general market outlook, interest rate cuts are expected to start in Europe possibly already in the summer, and in the United States later in 2024. The political strikes experienced in Finland during the first quarter only had a minor impact on Taaleri’s operating environment.  

The operating environment of the capital market also showed positive signs in the first quarter, as the rise in interest rates and inflation stabilised. The growth of alternative investments has slowed, but the asset class has established itself as a significant part of the portfolios of institutional investors, as it offers the opportunity to diversify risks and smooth out returns. The EU’s Sustainable Finance Disclosure Regulation (SFDR) strengthens the position of sustainable investments. In particular, more private capital will be needed in the future to achieve the global emission reduction, energy self-sufficiency and circular economy targets. Europe’s desire to break away from Russian fossil energy sources and to increase its energy self-sufficiency will strengthen the operating environment for renewable energy and bioindustry, in particular.

Infrastructure assets under management ($bn) by primary region focus, 2010-2027F


In the renewable energy business, the operating environment remained good as a whole, although the war in Ukraine, higher interest rates and inflation all increased the costs of project construction and operation. The war in Ukraine has contributed to the acceleration of the green transition, but it has also created uncertainty among investors. While Europe has succeeded in reducing its dependence on Russian energy, the price of energy is still quick to react to changes in the global market. Although the price of electricity has fallen significantly from the peak level of last year, it is still higher than in previous years, especially in Central Europe. The lower price level of electricity has reduced uncertainty related to possible electricity price regulation. It has also intensified discussion on new support mechanisms that would increase investments in renewable energy in Europe. The decline in electricity demand experienced in Europe in 2023 seemed to have stopped in the first quarter of 2024.

The growth of alternative investments has slowed, but the asset class has become a significant part of the portfolios of institutional investors, as it offers the opportunity to diversify risks and smooth out returns 

The continuing challenging economic situation has tightened banks’ lending policy. In the operating environment of bioindustry, this has not only prolonged the implementation of financing arrangements and influenced project schedules, but also created room for manoeuvre in companies’ valuation levels. In addition, the poor availability and/or high price of certain raw materials continued to create uncertainty in the market in the first quarter, as did geopolitical tensions. Overall, the situation in the operating environment still held back the emergence of new products and solutions based on the circular economy and bio-based materials of companies in the scale-up phase in the first quarter, as customers prefer traditional ways of operation during uncertain times. However, there are signs of stabilisation in the operating environment, and in the long term, sustainability elements are expected to become key criteria for customers’ decision-making.

The first quarter of the real estate market was moderate in activity. However, buyers’ and sellers’ perceptions of the pricing of listings began to converge towards the end of the quarter, reflected in a slight increase in trade volumes. Real estate investment shares also developed positively around the world. In the rental market, occupancy rates and levels have remained good, and the Finnish Government’s decisions on housing subsidies, most of which entered into force on 1 April 2024, are expected to increase activity in the market. The long-term fundamentals supporting real estate investments, such as urbanisation, remain a strong influence in the Finnish real estate market. Sustainability and impact will continue to be at the core of investment activities, and capital will increasingly seek out key locations and sustainable investments.

In the operating environment of Garantia Insurance Company Ltd’s insurance operations, economic uncertainty kept consumer confidence low. The weakness of housing market significantly affected the sales of residential mortgage guarantees. However, the creditworthiness of the company’s consumer and corporate customers remained good, and no material changes occurred in the risk position of the guaranty insurance portfolio. Development in the investment market was positive during the first quarter. Especially stock markets performed well, and the fixed-income market was supported by stabilising interest rates.