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2022 | OriginalPaper | Chapter

3. The ESG World

Author : Cristina Rovera

Published in: Ethics in Banking

Publisher: Springer Nature Switzerland

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Abstract

As mentioned in the second chapter, Banca Etica is the Italian intermediary with the greatest focus on ethics. It doesn’t just aim to make a profit, but to develop a sustainable economy. Let us begin with the bank’s historical background and then move on to its operations in an attempt to clarify its role in Italy and to compare it with the rest of the world.

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previous chapter Ethics in Finance: Definition

next chapter The Fight Against Money Laundering and Tax Evasion

It may be useful to recall the scene in the film Forrest Gump, in which the boy is invited to Washington to speak about the Vietnam War. The images of the audience offer a very representative cross-section of the American situation at that time.

The Baptist pastor Sullivan spoke out publicly against Apartheid, the racial segregation policy instituted in 1948 by the white government in South Africa, which remained in force until 1994.

An analysis of the most interesting case studies is proposed by the Fondazione Cariplo document (2013), Quaderni dell'Osservatorio. SOCIAL IMPACT BONDS. Finance at the service of social innovation?

Società di gestione del risparmio or Sgr in the Italian language.

The real economy’s ever increasing attention to ESG factors also stems from the observation of other recent legislation. Directive 2014/95 (Non-Financial Reporting Directive—NFRD—transposed in Italy with Legislative Decree 254/2016) obliges large public interest companies (including listed companies with at least 500 employees, a balance sheet exceeding 20 million euros or revenues of at least 40 million euros) to disclose non-financial information in their financial statements as of 31 December 2017. This information relates to social and environmental aspects, including—by way of example—personnel management (to ensure gender equality), the fight against corruption and respect for human rights.

Assogestioni has expressed a favourable opinion on the obligation imposed by the SFDR on asset management companies to provide additional information.

“Consob, after consultation with all the parties concerned and after hearing the opinion of the competent supervisory authorities, establishes and regulates the specific disclosure and reporting obligations to which qualified entities promoting products and services qualified as ethical or socially responsible are bound” (article 117-ter TUF)

Article 136 (Disclosure obligations): “Notwithstanding the regulations in force, in the prospectus drawn up in compliance with the schedules set out in Annex 1B of the regulation adopted with resolution no. 11971 of 14 May 1999 and subsequent amendments and in the contracts referred to in article 37 of this regulation, relating to products and services qualified as “ethical” or “socially responsible”, the qualified entities and ... shall provide the following information:

a) the goals and characteristics in relation to which the product or service is qualified as ethical or socially responsible;

b) the general criteria for selecting financial instruments based on the goals and characteristics referred to under letter a);

c) the policies and goals, if any, pursued in exercising the voting rights linked to the financial instruments held in the portfolio;

d) the possible allocation to social or environmental initiatives of income generated by the products offered and services rendered, and the relative extent;

e) the procedures, if any, adopted to ensure the pursuit of the goals referred to under letter a), including the presence of specialised bodies set up within the qualified entities, and insurance companies and their functions;

f) adhesion to codes of self-regulation, promoted by specialists.

1. A brief illustration of the information referred to in paragraph 1 must be made available on the website of the qualified entities”.

Article 137 (Disclosure obligations): “1. Notwithstanding the provisions of the regulations in force, at least in the last report of the year relating to products and services qualified as “ethical” or “socially responsible”, the qualified entities ... shall provide, with reference to the previous twelve months:

a) an illustration of the management activity in relation to the general criteria for the selection of financial instruments identified pursuant to article 136, paragraph 1, letter b);

b) information regarding the exercise of voting rights linked to the financial instruments held in the portfolio;

c) information regarding the possible allocation to social or environmental initiatives of income generated by the products offered and services rendered, and the relative extent.

2. The information referred to in paragraph 1 is made available, in summary form, on the website of the qualified entities”.

Cavallito & Meggiolaro (2018).

The charts that follow are taken from the source mentioned but have been partly adjusted by the author.

The table shows the main categories and the mean values. That is why the total number does not reach 100%. The difference is represented by residual groups of ethical funds.

This risk can be reduced by the attention investors pay to the content of the products they are offered.

Green bonds are sometimes said to offer a greenium, i.e. the possibility to pay a lower yield because they are issued at a higher price. In actual fact, this is not always true. Even when the price goes up due to costs related to certifications and opinions, these have a negligible impact. According to CBI data, between 2016 and 2019, greeniums were found in only 22% of issues in euros and 14% of issues in dollars. Greeniums were found in 52% of cases only at the end of 2020.

Deloitte & Luiss (2021).

A particular category of green bonds is that of blue bonds, a debt instrument issued by Governments or development banks to raise capital for marine- and ocean-based projects.

Bufacchi (2016).

Bufacchi, I. (20th May 2016). “Il 46% dei bond di stato a rendimenti negativi”, Il Sole 24 Ore

Cavallito, M. and Meggiolaro, M. (14th November 2018), “I fondi etici che amano il petrolio (e non solo)”, Valori - Notizie di finanza etica ed economia sostenibile (online Journal)

Deloitte & Luiss (2021), Le infrastrutture sostenibili. Confronto internazionale, finanza e rating

EU Regulation 2019/2088

KPMG (2019a) European Responsible Investing Fund market 2019

KPMG (2019b), The numbers that are changing the world

KPMG (2020), Sustainable investing: fast-forwarding its evolution

Title: The ESG World
Author: Cristina Rovera
Publisher: Springer Nature Switzerland
Book: Ethics in Banking
Print ISBN: 978-3-031-22147-7

Electronic ISBN: 978-3-031-22148-4

Copyright Year: 2022
DOI: https://doi.org/10.1007/978-3-031-22148-4_3

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