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Economy

Adena Friedman Shares Nasdaq’s 3 Pillars for Sustainable Growth

Nasdaq Chair and Chief Executive Officer Adena Friedman is hopeful for a more stable economic environment going into 2023. With inflation peaking after a turn from the Federal Reserve’s zero interest rate policy, Friedman hopes that investors and companies will now be able to allocate capital more successfully in this new normal and better plan for their futures. Speaking to Bloomberg TV from the World Economic Forum in Davos, Switzerland, Friedman shared her economic outlook for 2023, as well as Nasdaq’s plan for sustainable growth this year and beyond.

For Friedman, rising interest rates don’t mean an end to growth. Rather, they are a signal to shift to a more sustainable growth model. Friedman believes that profitable companies, companies with clear paths to profitability and companies with great business opportunities are more likely to attract investors in this environment. While the IPO market slowed in 2022, she is optimistic that the new economy will bring more listings in the second half of the year.

“We have 200 companies on file to go public that are committed to Nasdaq,” she noted. “The question really is, ‘When will investors be ready to underwrite that as an investment opportunity?’”

Meanwhile, Nasdaq’s own resilient and diversified business model allows it to adapt to the constantly changing economic environment, and it is poised to continue growing into 2023.

“I think the digitization of our economy is going to move regardless of the economic environment,” said Friedman.

As a technology company, Nasdaq’s growth model is centered around three pillars:

  • Market Modernization
  • Environmental Social and Governance (ESG) Data and Analytics
  • Anti-Financial Crime (AFC)

Market Modernization

Friedman believes moving markets to the cloud drives them forward, unlocking greater business insights, accelerating innovation and optimizing operational excellence.

“We support 130 exchanges around the world with our market technology. As we think about the future of markets, that's a huge opportunity for us,” said Friedman.

In 2022, Nasdaq moved MRX options, the first of its North American markets, to the cloud in partnership with Amazon Web Services (AWS) to build the next-generation of cloud-enabled infrastructure for the world’s capital markets and paving the way for Nasdaq to move all its markets to the cloud over the next 10 years.

ESG Data and Analytics

While the debate continues around the merits and metrics of ESG, investments continue to rise, and companies continue to seek the tools to communicate their ESG journey to stakeholders.

ESG assets are growing rapidly, with Bloomberg reporting that they could reach one third of all global assets under management (AUM) by 2025, a whopping $53 trillion. Meanwhile, PwC’s most recent Global Investor Survey found that ESG is among the top five investor concerns.

With growing investor interest and rising value, companies that can accurately report their ESG initiatives and ambitions gain access to new capital and a more diverse investor base.

In response, Nasdaq has expanded its suite of ESG reporting solutions for companies and investors, including the recent acquisition of Metrio, an ESG reporting solution that drives sustainability strategy, communications and stakeholder engagement.

“[We are] bringing corporates and investors closer together to navigate these complexities with our data analytics tools,” said Friedman.

Anti-Financial Crime

With $4 trillion laundered through the financial markets annually, anti-financial crime is an enormous problem but presents a tremendous opportunity, according to Friedman.

Financial criminals use the markets to launder money generated from heinous acts, such as:

  • Human trafficking
  • Terrorist funding
  • Animal poaching
  • Illegal logging
  • Cybercrime

While banks continue to be vigilant against financial criminals, they continue to need better and better technology and tools to combat this issue, according to Friedman.

This means more capital dedicated to identifying financial crime across the markets. According to Juniper Research, in just four years, the amount spent on financial crime prevention tools will rise by 30%, exceeding $28.7 billion.  

Nasdaq is positioning itself to be the future of anti-financial crime technology. Verafin, a Nasdaq company and an industry leader in cloud-based anti-financial crime solutions, keeps banks and credit unions a step ahead of financial crimes. Leveraging its unique big data intelligence and visual storytelling investigation tools, Verafin improves the effectiveness and efficiency of fraud and AML operations.

“We have what we believe is the most advanced technology provider to 2,500 banks today, helping them bring data together to solve that problem with modern A.I. and cloud technology.”

While each of these three pillars has different valuations, they are all orientated toward growth. For example, Friedman noted that AFC is Nasdaq’s smallest growth pillar, but it is the fastest growing one. With an eye toward sustainable growth, Friedman believes they will find equilibrium in the coming years.

“I'd like to think that they'll all thrive,” she said.

With these three growth pillars as Nasdaq’s North Star in 2023, it will continue to adapt to the new market environment, positioning the company to create value through innovation in the markets and technology. Furthermore, Nasdaq will continue its commitment to making the markets safer, more accessible and more transparent for investors and companies alike.

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