The three companies on the podium of integrated governance remain Generali, Snam and Enel, with the Lion taking first place compared to the 2017 edition. While Hera, fifth in the general ranking, takes first place in the extraordinary survey on the links between business and responsible finance. But it is the entire sample of the Integrated Governance Index 2018, a model for analyzing the degree of integration of ESG factors in corporate strategies, which takes a leap forward. The number of companies involved increased by 42%, and the level of participation of professionals within the companies increased considerably (to 144 managers), massively involving the finance area. These are the key aspects that emerged during the Integrated Governance Conference organized on Tuesday in Milan, during which various researches were presented. The initiative is promoted by ETicaNews and TopLegal, with the scientific support of Nedcommunity, Andaf, Methodos and Morrow Sodali. The project was carried out thanks to the support of the international law firm Dentons and with partners the law firm Gianni Origoni Grippo Cappelli & Partners and BMO Global Asset Management.
RESEARCH
IGI 2018
The Integrated Governance Index was created by involving the top 100 Italian companies by capitalization. Each company was invited to analyze and report their own sustainability governance model in a questionnaire of about forty questions. IGI 2018 obtained the participation of 47 companies, with an increase of 42% compared to the 33 companies of last year, thus coming close to a redemption of 50 percent (not counting at least a dozen companies that asked for information to start work for the 2019 edition). Three further elements confirm the growth of awareness on the need to integrate sustainability into strategies: 1) the average score has improved in the ordinary area of the survey (the one that can be compared year on year), despite the expansion of the sample compared to the 2017 edition; 2) the professional figures involved in the survey were on average 3 per company, with a tangible presence of managers up to now "unrelated" to sustainability; 3) ESGs have fully involved the finance areas of companies, given that at least 50% of CFOs have integrated them into their strategies (or plan to do so), and that 2 out of 3 companies have activated forms of investor engagement management responsible. Among the other findings that emerged, the following should be noted:
The sectors with the highest scores were “Energy & Utilities” and “Finance”. The “Telecommunications” and “Commodities” segments are missing. The “Corporate Governance and Sustainability Code” and “Materiality” areas did well, the “CSR integrated into remuneration” and “Succession plans” areas did badly
89% of the responding companies are subject to the NFS obligation. 38% of these companies develop the NFS as a Sustainability Report
The sustainability committee is present in 44% of the panel
The share of responses declaring that the remuneration of executive directors is not linked to ESG performance falls below 50%.
NON-FINANCIAL SURVEY
IGI 2018 envisaged an extraordinary part of the survey, focused on "The links between Companies and SRI finance: SRI Investors, Engagement, Role of the CFO, Tools", carried out together with Andaf (National Association of Administrative and Financial Directors). There is still room for greater involvement by the board, but, in terms of managing Sri investors and engagement, it seems that Italian companies have really changed pace. The first sign comes from the fact that, of the 47 companies that participated in IGI 2018, 44 also responded to the extraordinary survey area. This finding is not so obvious, as it was a rather complex part of the questionnaire, designed to monitor an already advanced integrated governance situation. Furthermore, 72% of respondents answered that they had identified "a figure or team responsible for relations with responsible investors"; 68% say that "the company monitors and manages the engagement of responsible investors?"; over 50% of chief financial officers responded that they have integrated ESG into their function or are ready to do so.
INDEPENDENT DIRECTORS AND INTEGRATED GOVERNANCE
The research was carried out by Nedcommunity and Methodos – the Change Management Company, within the network of independent directors and statutory auditors associated with Nedcommunity. The survey asked directors to express their opinion on governance models "from the inside". Among the key points, it emerges that in 53% of cases, ESG issues are dealt with within the Control and Risk Committee; in 74% of cases the composition of the BoD was not changed to oversee ESG issues; the practice of the BoDs of dedicating one or more specific sessions to the process of elaborating the corporate vision is clearly increasing, in order to ensure the supervision of all the areas of decree 254 relevant to the business model and strategies; almost 100% of the sample believes that Independent Directors should actually play a more active and specific role in guiding strategies and assessing risks in a long-term perspective, but only 48% play an active role in this sense in Council in which it operates. "The data from our research - declared Livia Piermattei, Managing Partner, Methodos-the Change Management Company - show that the "gap" between awareness and behaviors spontaneously acted in the Boards with respect to the integration of long-term issues in the strategies and business model is still significant. It is appropriate to intervene on the corporate culture, starting from the Board to accelerate the taking charge of the change and the spontaneous example and create the conditions for the entire organization in its various components and hierarchies to develop decision-making processes based on integrated thinking”.
INTERNATIONAL INVESTORS AND INTEGRATED GOVERNANCE
The third annual Morrow Sodali survey, carried out at the beginning of the year, involved 49 global institutional investors, for 31 trillion dollars of assets under management. A turning point emerges in the relationship between large global investors and the companies to which they direct their capital: sustainability aspects outweigh financial performance, and cause ESG disintermediation (big wealth seeks direct answers from companies) and decorrelation (there is no follow the recommendations of the proxy advisors).
PENSION FUNDS AND INTEGRATED GOVERNANCE
ETicaNews has developed, with the support of BMO GAM, a survey of pension funds on ESG integration and engagement issues. It contacted the 32 Italian pension funds associated with Assofondipensione, with a response rate of 34 percent. ESG policies are already present in 72,7% of the sample. On the other hand, the reasons still seem to have little focus on financial logic: the main drive for ESG of the Funds (28% of multiple answers) is in fact represented by the positive influence «on the reference social sphere». Nearly half of respondents (45%) say engagement is expected. But the systems for monitoring and reporting the results of engagement are very limited (20-30%).
PRIVATE BANKING AND INTEGRATED GOVERNANCE
ETicaNews has also developed, again with the support of BMO GAM, a survey at the Italian private banking. The study, which will also be the subject of a Bocconi degree thesis by Gianluca Banfi, is the first in Italy to take stock of the strategies implemented in the private world on the sustainability and ESG engagement front. It involved 40 Italian private banks with a response rate of 40% of the total. 87,5% of respondents stated that they have not yet developed an ESG policy. But the "ESGs are integrated without policy" for 29% of those who answered negatively to the previous question; the same percentage believes that the policy "will be defined in the future". Those who integrate ESG parameters (with or without a policy) do so by "customer request" today or in the future (over 30% of multiple responses). 75% of private banks expect engagement.
