Esg investments, the Bank of Italy card arrives for a portfolio of 190 billion
The criteria will be applied gradually. Excluding companies that do not respect labor conventions and arms and tobacco manufacturers
by Vitaliano D’Angerio Sole 24 ore
July 5, 2021
The Sustainable Investments Charter with the Bank of Italy stamp arrives. The ESG criteria will be applied, in a gradual manner, to the 190 billion euro of the financial portfolio and foreign exchange reserves. Among the fundamental features of the document, the exclusion of companies operating in the arms and tobacco sector; out of the portfolio also those who do not respect the fundamental conventions of the International Labor Organization (ILO) including those on forced labor and trade union freedoms. Bankitalia’s commitment to sustainable finance launched in 2018 (15 billion already invested with ESG criteria) has already brought two important results: the CO2 cut equal to the annual emissions of 210 thousand people and energy savings equal to the consumption of 158 thousand families.
The perimeter of sustainable investments
«The Charter applies to the activities managed independently by the Bank, that is the investments of its financial portfolio and foreign exchange reserves – declared the Deputy Director General of Bank of Italy, Paolo Angelini, during the presentation of the document -. This is a considerable perimeter: at the end of 2020 it covered assets of approximately 190 billion euros (148 and 44 billion, respectively, for the financial portfolio and foreign exchange reserves). However, it does not apply to monetary policy portfolios, the management of which is the responsibility of the Eurosystem “.
The extension of the Charter of sustainable investments will take place gradually and will therefore also cover government bonds included in the financial portfolio of the central institution. It is certain that they will not be the only criteria with which investments will be selected: the application of the Charter, Angelini reiterated, “will be gradual and will also take into account other considerations, the ESG criterion will not in fact be the primary one in the choices”.
The detail of the Charter
The Bank of Italy’s Sustainable Investment Charter is a key step for the Italian central institution that participates in the Network for Greening the Financial System (Ngfs), a body composed of central banks and supervisory authorities who, on a voluntary basis, share best practices both for the management of environmental and climate risks, and to promote the involvement of the financial system in the transition to a sustainable economy.
But what is the detail of this document? We start from the investment exclusion criteria:
1) compliance with international labor conventions, otherwise it is out of the wallet. In detail: freedom of association and the protection of the right to organize, the
right to organize and collective bargaining, equal pay, the abolition of forced labor, discrimination in employment and professions, minimum age for employment and the worst forms of child labor.
2) compliance with international treaties on biological and chemical weapons, anti-personnel mines, cluster munitions, invisible fragmentation, incendiary and blinding lasers.
3) compliance with the Nuclear Weapons Non-Proliferation Treaty
The definition of sustainable development and commitments
“The Bank – reads the Bank of Italy Charter – accepts the definition of sustainable development understood as a development model capable of ensuring satisfaction
of the needs of the present generation without compromising the possibility of future generations to realize their own “.
As regards Bankitalia’s ESG investments, the document specifies that Bank of Italy will give its preference to “companies that: (a) are attentive to the responsible use of natural resources and the effects on ecosystems; (b) maintain adequate conditions of safety, health, justice, equality and inclusion; (c) generate income and work
in compliance with ethical principles and best corporate governance practices “.
Angelini then stated that with the Charter of sustainable investments, Bank of Italy takes on three commitments:
«1) promoting ESG sustainability, with initiatives to encourage the dissemination of sustainability information by issuers, intermediaries and other operators in the financial system;
2) continue to integrate ESG principles in the management of investments and financial risks and favor investments with the best ESG profile;
3) publish information and analysis on sustainable finance; periodically communicate the results achieved for their investments and the effects on society and the environment; contribute to the dissemination of the culture of sustainable finance in the financial system and among citizens “.
Finally, the inclusion in the Charter of: principles of the United Nations Global Compact, Sustainable Development Goals of the United Nations 2030 Agenda, 2015 Paris Agreement on climate should be noted.
Data provider and ethical ratings
Speaking of data and ethical ratings, Angelini recalled that the Bank of Italy will start publishing an annual report on sustainable investments next year. It should be noted that the central institute uses the information provided by data providers and ethical rating agencies but, at the same time, it will also use the numerous studies and statistical information of its own research department. Great attention is also paid to the methodologies and criteria used by data providers and rating agencies.
Enrico Bernardini of the Bank’s Markets Department and Ivan Faiella of the Economics and Statistics Department of Via Nazionale were also present at the announcement of the Investment Charter.