Since the last edition of Borsa Italiana’s Sustainability Week, IGD has made a few interesting discoveries about the growing interest of the financial markets in business related environmental and social issues.
More and more investors are looking at ESG ratings when deciding which stocks to buy or to finance debt, even though these ratings can vary considerably based on the criteria used by the different agencies.
We took a closer look at these issues by asking Francesco Soldi, IGD’s Head of Marketing and Corporate Social Responsibility, a few questions.
At the beginning of July, IGD participated in the fifth edition of the Sustainability Week organized by Borsa Italiana during which 62 Italian corporates had the opportunity to meet with 110 international asset management companies. What sort of interest did you see this year?
IGD has participated in Borsa Italiana’s event focused on sustainability since the first edition held in 2017. We have seen the investors interest in our company increase over time. If five years ago we had two meetings scheduled, in 2021 we had one-to-one meetings with five institutions, one of which, for example, manages the assets of 14 pension funds. Above and beyond the number of participants, there has been gradual shift also in the quality of the topics discussed during the meetings. At one time investors frequently used this forum to ask us a wide range of questions, while this time we spoke about specific environmental or social performances and looked at our short-, medium- and long-term policies.
Investors are more focused on sustainability, then. What topics were asked about the most?
I would say topics relating to our environmental impact were the most common. Let’s not forget that ours is a “brick and mortar” business, namely with large, physical assets. Many questions were also asked about social aspects like employee wellbeing and training, as well as relations with the local community.
Were there any questions about Covid-19?
The investors were very interested in understanding how we progressed along our Corporate Social Responsibility path during the pandemic. This gave us an opportunity to reiterate how we continued to implement our polices relative to everything that could not be postponed.
In addition to analyzing the performances relating to past policies, did you also talk about the future?
We indicated that we are working on the Sustainability Plan 2022-2024, which – as in the past – will be included in the Business Plan.
What else did you discover during the meetings with these investors?
We realized that many of these investors use the ESG ratings as part of an initial screening of which Companies to invest in. A few of them wanted to know the reasons for certain ratings that were assigned. It’s true that the agencies that issue the ratings use different criteria to assess a company’s ESG performance which can differ greatly. Even though the ratings are based on public information, the assessment processes used can result in the assignment of very different ratings for the same factor.
How many ESG ratings does IGD have to date?
The number of “unsolicited” ratings – namely the ones “not requested” by the Company – has increased very quickly over the last four years. We had 2 in 2018, 4 in 2019, then 6 in 2020 and, at the moment, we have 8.
To what do you attribute this great interest in IGD’s sustainability?
I believe we are benefitting from the fact that we have been working on a structured sustainability path since 2011 which has been developed over time based on a plan-do-check-act system and integrated with the planning of our core business already beginning in 2014.
If these ESG ratings are based on third party analysis of public information, is there anything IGD can do to ensure that the assessment process is effective and that the results are consistent?
I believe that the EU Taxonomy Regulation will help to develop a shared framework. We are also working on this on an international level by participating in EPRA’s and ECSP’s Sustainability Committee. However, I think that for now the Company will have to continue to provide the rating agencies with active support: on the one hand, therefore, we have worked to improve the clarity of our reporting and, on the other, we have established direct contacts with the agencies in order to ensure that the information we provide is understood correctly and that updated information is used when the assessments are made.
How do you use the ratings you receive?
In IGD the Sustainability division works together with Investor Relations to maintain an updated set of data which explains the ratings assigned. This not only helps us to understand areas in need of improvement, but also, in other instances, to fully appreciate the external validation of results which sometimes are the product of a lot of hard work.
Thank you for this update.