Profits, quality of business, growth margins. But also sustainability, which has become increasingly important in company strategies. Environment, Social and Governance, the so-called ESG factors, they are now essential for any company that intends to grow and have a future. This is demonstrated by the policies implemented by Eurizon (Intesa Sanpaolo group) one of the most important asset management companies in the country, which has put sustainability at the center of its investment choices for some time now. It is no coincidence that two years ago the company led by Saverio Perissinotto was among the first in Italy to have joined the Net Zero Asset Managers Initiative. Not only that, it also participates in numerous working groups and international campaigns, including the "Sovereign Bond and Country Pathways working group" promoted by IIGCC and the "Science Based Target Campaign 2023" by CDP with the aim of promoting best practices on the topic of the climate change and the environmental transparency of companies as part of collective stewardship activities. Furthermore, in this regard, Eurizon joined in September "Nature Action 100”, an investor-led global initiative that aims to promote the actions necessary to promote conservation and limit the loss of biodiversity. In short, an all-round commitment to sustainability that looks to the present, but which also and above all aims to promote virtuous actions that have a positive impact on future generations.
Federica Calvetti, ESG Coordinator of Eurizon, explains to FIRSTonline what initiatives the company has undertaken in recent years, what goals have been achieved and what sustainable asset allocation should look like in 2024.
Dr. Calvetti, sustainability and ESG criteria are becoming increasingly central to companies' strategy. How is Eurizon moving?
«In recent years, sustainability has acquired a central role within the decision-making processes of the companies in which we invest and this also applies to us. Eurizon has undertaken a long-term path aimed at creating sustainable models that think about future generations: from 2021 sustainability is one of Eurizon's founding values and is expressed in various areas. First of all, we are an asset management company, so sustainability has been integrated into the investment process. ESG criteria are used in the analysis and selection of financial instruments. First of all, they represent a dimension of risk: mapping and selecting issuers on the basis of ESG factors means taking into consideration which additional risks a company may incur based on the context in which it operates and its own choices and actions. Not only from an environmental and climate perspective, but also from the governance practices adopted and the ways in which human capital is managed. However, ESG factors also represent the dimension of opportunity for a company, especially in light of the environmental challenges in which the company operates and in the context of climate change which is affecting the whole of society. The second way in which sustainability enters our business processes is through stewardship, therefore through engagement with investee companies and the exercise of voting rights. Our role as shareholders in the companies in which we invest allows us to participate in the corporate life of the issuers. Voting thus represents a strategic tool at our disposal to positively influence the companies in which we invest. Lastly, we must also keep in mind the SGR's devolution activities. We have a range of products attributable to the ethical system which undertake to donate a portion of the management commissions or a portion of the assets to the benefit of initiatives promoted annually by the SGR employees and evaluated and approved by a specific Committee. Over the last few years we have supported numerous humanitarian initiatives. The organizations benefiting from these donations update us year after year on the projects they have been able to manage thanks to the funds received. This makes us feel useful from this point of view too."
As you have already mentioned, sustainability does not only mean the environment, but also management of resources and human rights. What are your initiatives in this area?
«Within the activity we carry out in the ESG field, every year we define the key themes that we want to explore and develop. Among these there is certainly the environment, but social and governance issues are also highlighted. In particular on social issues, we pay close attention to the management of human rights also in the supply chains of the companies in which we invest. We investigate how companies undertake to offer and guarantee adequate working conditions for their employees, the practices they adopt towards their workforce and we try to understand what efforts need to be put in place to positively influence value chains. We don't always act alone, this year we signed up to a collective engagement initiative called Advanced. It is sponsored by UNI PRI and is aimed at promoting respect for human rights towards some companies for which the issue is particularly sensitive. We want to dialogue with societies to influence and direct the way in which these issues are addressed, investigating how human rights are respected, delving into the controversies that may arise, especially when there is exposure to particularly critical geographies, and understanding how the company moves in these contexts. For us in particular it is important to understand what the level of attention of management is towards these issues and the way in which it monitors and deals with them".
What other fields do you work in?
«We combine the engagement activity with the vote, which offers an important signal for the management of the company, in particular when we realize that not enough is being done on certain issues, including in terms of governance which for us is the basis of sustainability. Companies that adopt good governance practices generally also perform well on environmental and social aspects. For example, just recently we began to observe how good corporate governance practices are positively correlated with better Net Zero outcomes. Finally, we are active in the Managers Committee of Assogestioni, we participate in the formation of minority lists thanks to which we can have representation in the corporate bodies of the companies in our portfolios and this allows us to be even closer to the company itself. In general, through governance and the exercise of voting rights, we give messages to management on what our minimum expectations are."
What are these expectations?
«To give an example, in matters of corporate governance, we expect there to be a separation between Chair and CEO, that companies adopt criteria of board independence. The board must be diverse in gender, experience and points of view. It must be able to manage the epochal changes we are experiencing and think outside the box."
Let's now focus on gender diversity. According to the latest data, in the EU women continue to earn less than men, with an average pay gap of 13%, while according to the INPS the pay difference between men and women in Italy has reached 7.922 euros per year. How much does gender diversity affect governance and competitiveness and what steps should be taken to reduce disparities?
«Gender equality, including pay, represents a very important aspect for Eurizon. In this regard, the regulator, within the sector regulations, has also focused on the issue of diversity and since the entry into force of the second level SFDR regulation has required management houses to make explicit the unadjusted gender pay gap ( i.e. the uncorrected gender pay gap) and the presence of the less represented gender on the boards of directors of portfolio companies. The industry published this data quantitatively for the first time on 30 June 2023. Salary, overall remuneration and gender representation are extremely important for the regulator and also become central in the stewardship activity that Eurizon carries out. Even within the Assogestioni Managers Committee, we pay close attention to the gender balance of appointments. In the first half of this year, for example, 51% of the candidates elected on the boards in which appointments were made from the minority list were women. To date we have given ourselves guidelines according to which we vote against the management of companies that do not have at least 33% women on the boards of directors, with the exception of China and Japan where it would still be too difficult to respect these percentages. But anyway we ask them that there is at least 1 woman and we monitor their improvements. As far as Europe is concerned, the objective is to reach 40%. In general we can say that in the most developed countries the issue of representation has become important for everyone, while we are behind on the issue of remuneration, which is often also linked to issues of workforce retention and the fact that there are comparable career opportunities between men and women.
Let's go back to Stewardship. What results have you achieved and what do you intend to achieve in the next period? Have you ever voted against certain practices or boards of directors because they did not meet the criteria you established?
«Yes, I'll give you an example: on environmental issues, companies can bring their transition plans to be approved by shareholders during the annual meeting. These are the so-called proposals “Say on Climate”. Eurizon is part of the Net Zero Asset Managers Initiative and therefore we pay close attention to companies' transition plans and how they intend to move their businesses towards low-emission models. This year we have equipped ourselves with a methodology that allows us to objectively evaluate the credibility of the plans. In each of them there must be minimum key elements. If they are not present, we vote against the plan, sending a negative message to the management who presented it. In 2023 we voted against transition plans that did not meet our criteria. We did the same on social matters: for example, in the first half of the year, the SGR voted on 14 resolutions which required companies to have more transparency regarding operations in high-risk countries where human and workers' rights are less protected."
Let's move on to investments, how much does the sustainability of a fund or asset influence your choices?
«The investment process integrates the financial analysis with the consideration of non-financial aspects which are nevertheless "material" for the purposes of evaluating a company. The analysis of the issuer based on financial criteria such as profits, growth expectations, etc. is accompanied by a sustainability analysis that takes into account the risks and opportunities with respect to the economic and social context in which the company itself operates. Then, if we choose to invest, we monitor the results that the issuer achieves both from a financial and sustainability perspective. Finally, we use stewardship to dialogue with management, participate in meeting work and act through voting."
Where does a sustainable asset allocation fit in 2024 for Eurizon?
«Certainly when we talk about sustainability we must also look at the range of investment products available. In Europe the trend is now clear: there is great demand for investment products that integrate sustainability factors or have declared sustainable objectives. I am talking in particular about funds qualified pursuant to article 8 or article 9 of EU Regulation 2019/2088 (SFDR). When this regulation came into force in March 2021, approximately 41% of our funds' assets consisted of article 8 and 9 products. Today we are over 70%. Growth achieved in two and a half years thanks to the evolution and refinement of the tools and strategies for the positive integration of ESG factors in the investment process and the growing penetration over time of sustainability-conscious products. It should also be remembered that our products do not invest in sectors considered not responsible (those of controversial weapons, the extraction and production of electricity from thermal coal and the exploitation of tar sands), but also in issuers which by their nature present risks of sustainability higher than others because they have very low ratings. In this sense, 2024 will certainly be a year of further consolidation of industry numbers and growth of assets that positively incorporate ESG factors into investment choices."
