Sustainability: The watchword for future finance

While the pandemic has severely strained the global economy, it has also revealed that the most sustainable businesses have been better equipped to cope with the new challenges and are therefore more resilient.

The results of a BlackRock survey of more than 200 investors show that sustainability has now become a structural trend.

Being sustainable is no longer optional, but a necessary requirement for any business that wants to be a key player in the future.

It is therefore no surprise that in recent years green bonds have become increasingly popular both nationally and internationally.

Europe is driving this change and, in this context, Italy is playing a leading role. Indeed, four Italian companies (ENEL, ENI, Pirelli and Terna) have been instrumental to creation of the CFO Taskforce, set up by the UN Global Compact to support companies in the process of aligning their finance strategies with the UN Sustainable Development Goals (SDGs).

Large companies are the first to recognize the economic and financial value of sustainability and ENEL has even included a plan devoted entirely to sustainability in its strategy. The company is a prime example of sustainable finance.

As Nicole Della Vedova, Head of Corporate Finance, observes, sustainability and innovation are two mutually reinforcing concepts for ENEL, which is why the company is always looking for new instruments to adopt. In addition to green bonds, Enel was the first company to issue Sustainability-Linked Bonds, bonds linked to a specific target that must be reached within a certain time frame.

Another example of the successful combination of finance and sustainability is Flowe, a benefit corporation owned by Banca Mediolanum, defined by Oscar di Montigny, Chief Innovation, Sustainability & Value Strategy Officer, as a platform company designed to provide financial services in a sustainable way.

Reducing its CO₂ emissions, helping to curb deforestation and preserving marine biodiversity are just some of the actions taken by Flowe. According to di Montigny, being sustainable not only means responding to the emergencies we are facing but, above all, it means adopting a new lifestyle. Sustainability is closely linked to the concept of interdependence: Being sustainable means protecting the community that you belong to and aiming to reduce your impact on it to zero.

Increasingly “green” investments

According to Giovanni Sandri, Head of BlackRock Italy, in the coming years we will witness a major reallocation of capital toward a sustainable economy. BlackRock’s survey shows that this journey of change is only just beginning, as there are still many challenges to face, most notably that of finding good-quality data. This problem stems from the lack of standard data collection methodologies. In the meantime, however, institutional investors are working to standardize taxonomy with a view to defining a shared language and methodology.

Europe, in particular, has set out six environmental goals on which it wishes to focus:

1. Climate change mitigation
2. Adaptation to climate change
3. Sustainable use and protection of water and marine resources
4. Transition to a circular economy
5. Pollution prevention and control
6. Protection and restoration of biodiversity and ecosystems

Consequently, Europe has stipulated that in order to be considered truly sustainable, economic activities must meet the following requirements:

• Make a substantial contribution to achieving at least one of the six environmental goals
• Do not significantly harm any of the environmental goals
• Be carried out in compliance with minimum social safeguards
• Comply with “technical assessment criteria”

Finally, transparency is also a fundamental requirement that can be achieved by reporting revenue, operating and capital investments and eco-sustainable activities. Large investors have an opportunity to make a major contribution in this regard since, through transparent communication, they can produce a knock-on effect by encouraging the many companies that they work with to be sustainable.

In a future in which sustainable finance instruments will be increasingly prevalent, we at Way2Global offer our specialist expertise and experience as a benefit corporation to spread and optimize business communication in every language and in every market.

We specialize in financial translations and work with numerous investor relations offices representing listed Italian and foreign multinationals, auditing firms, investment funds (asset management companies and SICAVs), brokers, merchant banks, credit institutions, real estate firms and insurance companies. In addition to our headquarters in Milan, we operate in the world’s main global financial capitals, covering all time zones.

To find out more, visit our page or contact us for more information.