Bank of Italy values sustainability in its financial investments

Aug 21, 2019 0 Comments in News by
Bank of Italy values sustainability in its financial investments

The Bank of Italy has changed the way it manages its financial investments, giving greater importance to factors that promote sustainable growth. This will result in increased resources for firms with the best environmental, social and governance (ESG) practices.

1. Why give priority to sustainable investment?

The decision is dictated by the goals of promoting corporate social responsibility and improving financial and reputational risk management. The Bank of Italy is committed first of all to sustainable economic development, giving priority in its investment choices to firms that adopt virtuous practices that respect the environment, guarantee inclusive workplaces that are mindful of human rights and adopt the best corporate governance practices.

Inappropriate business conduct can generate costs and risks not only for individual companies but for the economy as a whole and impact on financial stability and on economic growth, sometimes in the short term as well. Vice versa, as confirmed by a great deal of the literature and by empirical studies, companies that are more aware of ESG factors are generally less exposed to operational, legal and reputational risks, and more oriented towards innovation and efficient resource allocation; this is why they are deemed more interesting by investors and benefit from lower cost of capital.

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