How and why Bank of Italy will also make green investments
by Cristina D’Amicis
Bankitalia presents the Charter of sustainable investments, a set of principles and lines of action aimed at structurally integrating financial evaluations with those of sustainability of its investments
The risks associated with climate change also have implications for central banks and their functions, ranging from supervision of intermediaries, to the protection of financial stability, to monetary policy.
The Bank of Italy thus aligns itself with the green revolution that has now been underway for some years, that is to the social change we are experiencing to take care of together with the governments of our planet, with increasingly sustainable investments.
The moment demands it: European aid is on the way from the Recovery Fund, the famous Marshall Plan for post-pandemic European economic recovery for balanced and sustainable economic development.
BANKITALIA PRESENTS THE CHARTER OF SUSTAINABLE INVESTMENTS
In this scenario, in recent days Paolo Angelini, Deputy Director General of the Bank of Italy, presented the Charter of sustainable investments, that is a set of principles and lines of action aimed at structurally integrating financial assessments with those of the sustainability of their investments, in few words the vision that Bankitalia has of sustainability.
The Charter contains the principles and the vision that inspires Palazzo Koch for the sustainable management of its financial investments, with the aim of promoting greater awareness on the issues of sustainable finance by the financial community and encouraging companies to manage carefully. to the environment, society and best corporate governance practices.
The Charter will apply to assets managed independently by Via Nazionale, i.e. to investments in its financial portfolio and to foreign exchange reserves: 190 billion euros at the end of 2020 (148 and 44 billion, respectively, for the financial portfolio and foreign exchange reserves). However, it will not apply to monetary policy portfolios, the management of which is the responsibility of the Eurosystem.
HOW BANKITALIA WILL CHOOSE INVESTMENTS
With the Charter of sustainable investments, the Institute led by Ignazio Visco makes specific commitments towards the community, thus contributing to the common goal of halving world greenhouse gas emissions by 2030 to reach the so-called “carbon neutrality” by half of the century.
The Bank thus decides to favor companies for its investments:
• attentive to the responsible use of natural resources and their impact on ecosystems;
• who maintain adequate conditions of safety, health, justice, equality and inclusion;
• that generate income and work in compliance with ethical principles and with the best corporate governance structures.
The guidelines presented by Bank of Italy for the transition are long-term with initiatives implemented as early as 2019. It starts with the integration of ESG (Environment, Social, Governance) criteria in the euro equity portfolio and in the Italian portfolio and the acquisition of shares of the fund of the Bank for International Settlements which invests in green bonds.
In 2020 Palazzo Koch ordered the replacement of traditional equity UCIs with ESG UCIs for the US and Japanese markets, the integration of ESG criteria in the euro and US dollar denominated corporate bond portfolios of the area, the acquisition of green bonds in dollars in the foreign exchange reserve and financial portfolio.
BANKITALIA COMMITMENTS FOR THE GREEN TRANSITION
In 2021 we arrived at the publication of the Charter of sustainable investments, with which Bank of Italy has decided to make three important commitments:
• promoting ESG sustainability, with initiatives to encourage the dissemination of sustainability information by issuers, intermediaries and other operators in the financial system;
• continue to integrate ESG principles in the management of investments and financial risks and favor investments with the best ESG profile, applying exclusions based on fundamental labor conventions and international treaties on controversial weapons and finally excluding producers of tobacco;
• publish information and analyzes on sustainable finance; periodically communicate the results achieved for their investments and the effects on society and the environment; contribute to the dissemination of a culture of sustainable finance in the financial system and among citizens.
INVESTMENT SELECTIVE CRITERIA
An important aspect of the Charter is the identification of the exclusion criteria on which Palazzo Koch is based to identify the perimeter in which to select investments.
Issuers that do not comply with:
• the eight fundamental conventions of the International Labor Organization (ILO) which commit to respect for fundamental rights, including the elimination of forced labor, trade union freedom, the abolition
child labor and the elimination of discrimination in the workplace;
• international treaties on biological, chemical, anti-personnel mines, cluster munitions, nuclear, invisible fragmentation, incendiary and blinding lasers.
• tobacco producers.
AS PALAZZO KOCH INTENDS TO REACH THE OBJECTIVES
Bankitalia has decided to achieve the objectives it has set for sustainable investments by excluding all financial instruments that do not fall within the three principles of transparency, objectivity and predetermination.
“As early as next year we will start the publication of an annual report on sustainable investments”, reveals Angelini, while in 2023 “we will complete the development of a methodology for measuring exposure to climate risks through scenario analysis to be applied to the Bank’s financial portfolio. “.
For the moment, the Bank of Italy does not seem to want to exclude investments in fossil fuels in order to support companies, including oil companies, which are engaging in the green transition while restrictions may be examined in the future.
Here is the BANKITALIA document
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