24 January 2019 - 17:00
Creating value over time
Environment and social development increasingly at the heart of corporate strategies
From energy efficiency to the assessment of company choice impact on stakeholders, both regarding products as well as the approach to investments, using a solid, transparent organisation model: the concepts of “green” and ESG (environmental, social and governance) factors have become the cornerstones for strategies aimed at achieving more balanced and stable company growth.
According to an analysis published recently by “Forbes”, the advantages of proactively addressing ESG factors are considerable. In fact, solid management of these aspects can open the gates to major capital pools, strengthening reputation and brand, and reducing risks, to guarantee long term growth in favour of companies and investors. More specifically, the new approach that is gradually characterising company decisions marks a radical transition away from choices guided by extremely short-term criteria towards more medium to long-term planning that focuses on the social and environmental impact of company activities. The goal is to guarantee the creation of value over time rather than seek instant benefits using tactics that could later expose the company to shocks and losses.
The term ESG was coined for the first time in 2005 in an important study entitled "Who Cares Wins", the result of an initiative launched in 2004 by the then Secretary-General of the United Nations, Kofi Annan, with the aim of finding ways to integrate ESG factors with capital allocation criteria. In the same years, the study “Who Cares Wins” and the “Freshfield” report by the United Nations Environment Programme Finance Initiative (Unep-Fi) showed how ESG aspects are important to financial assessment. The two reports would act as the foundation for the launch, in 2006, of the Principles for Responsible Investment (PRI) at the New York Stock Exchange, followed one year later by the Sustainable Stock Exchanges (SSE) initiative. The UN-supported PRI in 2017 reached 1,600 signatories, representing over 70,000 billion dollars.
In today’s rapidly evolving economic climate, attention paid to ESG aspects is becoming essential for long-term competitive success. According to a recent analysis by the Ussif Foundation, total US-domiciled investments, which select issuers also depending on their sustainability performance and are commonly known as Socially Responsible Investments, reached 8.72 billion dollars, with an increase of 33 per cent on 2014 and 14 times that of 1995. This strategic approach to investments does not only derive from ethical-moral requirements, but increasingly from better financial efficiency.
According to a recent survey conducted by Natixis Investment Management, attention to environmental, social and governance factors is playing an increasingly dominant role in institution investment strategies. In fact, more than half (63 per cent in Asia alone) of the 500 institutional investors interviewed by Natixis agreed that taking into account environmental, social and governance (ESG) aspects in assessing an issuer is a priority. Globally, 43 per cent of investors consider ESG factors as important as basic financial factors in analysing a company, and one fifth consider them an important way to generate long term returns. Research also found that at least three out of five institutional investors include ESG assessment in the selection criteria for securities. Pension funds, which have long-term investment horizons and more conservative strategies, led the demand.
As regards the European financial panorama alone, “green bonds”, that is, bonds linked to the financing of projects addressing climate change, registered positive performances in what is a generally weak primary European market. The sale of green bonds issued in euro grew by 18 per cent in 2018, totalling 53 billion euro (60 billion dollars), in stark contrast with the 10 per cent reduction in the issue of conventional bonds. Despite the possible future decline due to about two years of growth, the sale of green bonds may find new growth factors linked to the development of electric cars and other initiatives to beat climate change and reduce environmental impact, supported by European companies and countries.
Generali Group formalized its commitment to responsible investment in 2006 and in 2010 its own Group Ethical Guidelines were approved.
To find out more, visit the section responsible investments.