ESG in Italy - Embracing sustainability

ESG has grown as a central topic in the agendas of major organisations, worldwide as in Italy.

Linklaters advises the Joint Lead Managers on Europe’s first ever general purpose SDG linked bond

The discussions on such themes is indeed “hot”, but what are organisations really doing to this end? A practical response to such themes is not always easy to be found, as a lack of proper guidance makes it hard for companies to direct investments to specific ESG targets.

  • Is this lack going to jeopardise a real shift by decision makers in this direction?
  • What do good practices look like, and how do you achieve tangible results?

Our new video collection, which goes hand in hand with the Firm’s attention to embrace sustainability and recognise and address environmental, social and governance risks, tries to respond to all these questions. We interviewed major experts from major companies in the Italian landscape by asking where they are right now and where they are going.

What’s on the horizon - legal and regulatory developments

January 2021

The EU's new Conflict Minerals Regulation
  • On 1 January 2021 a new law came into full force across the EU – the Conflict Minerals Regulation. It aims to help stem the trade in four minerals – tin, tantalum, tungsten and gold – which sometimes finance armed conflict or are mined using forced labour.
Letter to EU commission on priority issues relating to SFDR application
  • On 7 January 2021 the ESAs sent a letter to the EU Commission requesting urgent clarifications on certain priority questions pertaining to the SFRD to facilitate an orderly application of the regulation from 10 March 2021.

February 2021

ESAs delivered draft RTS under SFDR to the Commission
  • On 4 February 2021, the Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) delivered to the European Commission the Final Report, including the draft Regulatory Technical Standards (RTS), on the content, methodologies and presentation of disclosures under the EU Regulation on sustainability-related disclosures in the financial services sector (SFDR).
European Commission’s consultation on sustainable corporate governance
  • In October 2020, the European Commission launched a consultation on sustainable corporate governance. The consultation closed on 8 February 2021 and a draft legislative proposal is expected in Q2 2021. This initiative aims to improve the EU regulatory framework on company law and corporate governance. It would enable companies to focus on long-term sustainable value creation rather than short-term benefits. It aims to better align the interests of companies, their shareholders, managers, stakeholders and society. It would help companies to better manage sustainability-related matters in their own operations and value chains as regards social and human rights, climate change, environment, etc.
Discussion Paper on management and supervision of ESG risks for credit institutions and investment firms (EBA/DP/2020/03)
  • The EBA’s consultation on its Discussion Paper on management and supervision of ESG risks for credit institutions and investment firms ended on 3 February 2021. The Discussion Paper provides a comprehensive proposal on how ESG factors and ESG risks could be included in the regulatory and supervisory framework for credit institutions and investment firms.
Joint ESA Supervisory Statement on the application of the Sustainable Finance Disclosure Regulation
  • On 25 February, the ESAs published a Joint supervisory statement on the effective and consistent application and national supervision of SFDR. The ESAs recommend the draft RTS be used as a reference when applying the provisions of the SFDR in the interim period between the application of SFDR as of 10 March 2021 and the application of the RTS at a later date.

March 2021

Taxonomy DA on Transparency of undertakings in non-financial statements - ESAs final advice
  • On 1 March, the ESAs sent to the Commission their final reports on the Taxonomy Delegated Act on Transparency of undertakings in non-financial statements (under Art. 8 Taxonomy Reg).
ESAP: Commission consultation closes
  • The consultation on the establishment of a European single access point (ESAP) for financial and non-financial information publicly disclosed by companies will end on 3 March 2021. The purpose of the targeted questionnaire is to seek general and technical views on the way to establish a European single access point (ESAP) for companies’ financial and sustainable investment-related information made public pursuant to EU legislation.
CONSOB warning notice and Q&A on the disclosures obligations on sustainability in the financial services sector
  • On 4 March 2021, CONSOB published: (i) a warning notice concerning the SFDR, whereby it called upon FMPs and FAs to incorporate a description of the measures taken and the controls carried out to comply with the provisions of the SFDR into periodic reports submitted to CONSOB pursuant to Resolution no. 17297/2010; and (ii) the first version of its Q&A on the SFDR.
The Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088)
  • Most provisions of the Sustainable Finance Disclosure Regulation entered into force on 10 March 2021.

    The Regulation lays down sustainability disclosure obligations for manufacturers of financial products and financial advisers toward end-investors. In addition, the co-legislators added disclosure obligations as regards adverse impacts on sustainability matters at entity and financial products levels, i.e. whether financial market participants and financial advisers consider negative externalities on environment and social justice of the investment decisions/advice and, if so, how this is reflected at the product level.
Bank of Italy statement on the disclosures obligations on sustainability in the financial services sector
  • On 17 March 2021, the Bank of Italy published a statement on the SFDR where it shared the view taken by the ESAs in their Joint Supervisory Statement of 25 February 2021 on the early compliance with the level 2 provisions during the interim period from 10 March 2021 (i.e., the date of application of the SFDR) until the entry into force of the RTS.
Joint consultation on taxonomy-related sustainability disclosures
  • On 17 March 2021, the ESAs published a consultation paper with an updated version of the draft SFDR RTS (updated from the version included in the previous 4 February SFDR Final Report) – but this time to include Level 2 provisions proposed under the Taxonomy Regulation regarding disclosures of financial products investing in economic activities that contribute to an environmental investment objective.
European Parliament’s letter to the Commission on the ESAs draft RTS
  • On 17 March the European Parliament ECON Committee sent a letter to the Commission on the ESAs draft RTS raising a number of concerns and inviting the Commission to amend the RTS.

April 2021

EIOPA issues Opinion on the supervision of the use of climate change risk scenarios in the ORSA
  • EIOPA has issued an Opinion on the supervision of the use of climate change scenarios in insurers' Own Risk and Solvency Assessment (EIOPA-BoS-21-127 - 19 April 2021). The Opinion is addressed to national supervisory authorities and sets out EIOPA's expectations on the supervision of the integration of climate change risk scenarios by insurers in their ORSA.
2019-2020 European Delegation Law
  • Law no. 53 of 22 April 2021 (the “2019-2020 European Delegation Law”) was approved by the Italian Parliament and published in the Italian Official Gazette no. 97 of 23 April 2021. The law entered into force on 8 May 2021.

    The 2019-2020 European Delegation Law mandates the Italian Government to implement a set of European directives, including directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources, directive (EU) 2019/883 on port reception facilities for the delivery of waste from ships, directive (EU) 2019/904 on the reduction of the impact of certain plastic products on the environment, directive (EU) 2019/944 on common rules for the internal market for electricity, directive (EU) 2019/1152 on transparent and predictable working conditions in the European Union, directive (EU) 2019/1161 amending Directive 2009/33/EC on the promotion of clean and energy-efficient road transport vehicles.
Sustainable Finance Package
  • On 21 April 2021 the European Commission adopted an ambitious and comprehensive package of measures to help improve the flow of money towards sustainable activities across the European Union. The package is comprised of: (i) the EU Taxonomy Climate Delegated Act, (ii) a proposal for a Corporate Sustainability Reporting Directive (CSRD) and (iii) six amending Delegated Acts on fiduciary duties, investment and insurance advice.
EU Taxonomy Climate Delegated Act
  • The EU Taxonomy Climate Delegated Act aims to support sustainable investment by making it clearer which economic activities most contribute to meeting the EU's environmental objectives. While the College of Commissioners reached a political agreement on the text of the Delegated Act on 21 April 2021, it will be formally adopted only once it has been translated in all EU languages at the end of May.
Commission’s review of the NFRD (Directive (EU) 2014/95)
  • The Directive – which amends accounting directive 2013/34/EU - lays down the rules on disclosure of non-financial and diversity information by large companies which were required to include non-financial statements in their annual reports from 2018 onwards.

    As part of the Sustainable Finance Package, the Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend the existing reporting requirements of the NFRD. The proposal:

- extends the scope to all large companies and all companies listed on regulated markets (except listed micro-enterprises);

- requires the audit (assurance) of reported information; - introduces more detailed reporting requirements, and a requirement to report according to mandatory EU sustainability reporting standards;

- requires companies to digitally ‘tag’ the reported information, so it is machine readable and feeds into the European single access point envisaged in the capital markets union action plan.

The next step is for the European Parliament, and the Member States in the Council, to negotiate a final legislative text on the basis of the Commission's proposal.

Delegated Acts on ESG preferences under MiFID, UCITS and AIFMD
  • As part of the Sustainable Finance Package of 21 April 2021, the Commission adopted six amending Delegated Acts on fiduciary duties, investment and insurance advice that will ensure that financial firms, e.g. advisers, asset managers or insurers, include sustainability in their procedures and their investment advice to clients:

- on investment and insurance advice: when an adviser assesses a client's suitability for an investment, they now need to discuss the client's sustainability preferences.

- on fiduciary duties: the amendments clarify the obligations of a financial firm when assessing its sustainability risks, such as the impact of floods on the value of investments;

- on investment and insurance product oversight and governance: manufacturers of financial products and financial advisers will need to consider sustainability factors when designing their financial products.

May 2021

Voluntary regime for the publication of the Non-Financial Statement (NFS): publication of the results of the CONSOB consultation
  • CONSOB has published on its website a summary report dated 11 May 2021 on the results of the call for evidence launched on 1 September 2020 on the voluntary regime for the publication of the NFS.

    The report may represent a useful source of information for non-obliged companies wishing to approach non-financial information as well as for the national legislator with regard to the application of the voluntary regime provided under national law (i.e., Legislative Decree no. 254 of 30 December 2016), and to the European negotiations regarding the review of the NFRD.

June 2021

Publication of the third CONSOB Report on the non-financial reporting of Italian listed companies
  • On 11 June 2021 CONSOB has published its third report on the analysis of the non-financial reporting of Italian listed companies, following the application of Legislative Decree no. 254 of 30 December 2016 transposing the NFRD in Italy.
Taxonomy DA on Transparency of undertakings in non-financial statement
  • The Commission is expected to adopt the Taxonomy Delegated Act on Transparency of undertakings in non-financial statements in June 2021.

July 2021

EU Green Bond Standard: Commission proposal
  • The European Commission is expected to publish its legislative proposal for a Regulation on a European green bond standard on 6 July 2021. This proposal is part of the broader European Commission agenda on sustainable finance and is expected to be published together with the Renewed Sustainable Finance Strategy.
Renewed Sustainable Finance Strategy
  • The European Commission is expected to adopt the Renewed Sustainable Finance Strategy on 6 July 2021.

Coming months

New Corporate Governance Code
  • In January 2020 the new Corporate Governance Code was approved. It applies to listed companies adopting the code from the first financial year starting after 31 December 2020, while the relevant disclosure shall be provided in the corporate governance report to be published during 2022.
Transposition of the SHRD II in Italy
  • The implementation of Directive EU 2017/828 (“SHRD II”) in Italy took place first with Legislative Decree no. 49 of 10 May 2019 and then with Legislative Decree no. 84 of 14 July 2020. At a secondary law level, in 2019 and 2020 CONSOB and, for certain aspects, the Bank of Italy launched market consultations, now closed, on proposed changes to their existing regulations regarding, in particular, remuneration’s transparency, asset managers and shareholders’ activism as well as shareholders’ identification, transmission of information and exercise of rights of listed companies’ shareholders. These changes will be effective gradually in 2021.

LinkChat: 5 minutes with…

Episode 1

Paolo Bertolini, our head of public law, interviews Giovanna Giusti del Giardino, Head of Group Sustainability, Mediobanca Group. The interview, conducted in Italian, focuses on human rights, environment and sustainability and aims to cover, in a nutshell, what Mediobanca is doing to such extent.

Watch now >

Episode 2

Paolo Bertolini, our head of public law, interviews Giulia Genuardi, Head of Sustainability Planning and Performance Management, Enel. The interview, conducted in Italian, focuses on the hardship of balancing social/environmental aspects with commercial needs and the relevance of circular economy.

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Episode 3

Linda Taylor, our co-head of Italian ESG practice, interviews Nicole della Vedova, Head of Corporate Finance, Enel. The interview focuses on Enel’s journey in the sustainable finance market and on sustainability-linked bonds. 

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Episode 4

Linda Taylor, our Co-Head of the ESG group in Italy, in a conversation with Enrico Camerini, Director, Head of Institutional Clients of iShares Italia, BlackRock, explores the initiatives put in place by BlackRock and the direction of investments towards financial products with ESG characteristics.

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Episode 5

In light of the imminent entry into force of Regulation 2019/2088 (the "SFDR Regulation"), our Financial Regulation Managing Associate Samuele Manfredo Pio interviews Roberta Casali, Chair of the Board of Directors of Tages Capital SGR S.p.A., an Italian asset management company that manages infrastructure funds with a focus on renewable energies, currently the second largest photovoltaic operator in Italy.

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Episode 6

Paolo Bertolini, Head of Public Law and member of the ESG working group of Linklaters, interviewed Silvia Mazzanti, product and sustainability manager of Save The Duck S.p.A., on their views on sustainable corporate governance and supply chain due diligence.

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Episode 7

In view of the imminent legislative interventions that the EU institutions should adopt on sustainable corporate governance and supply chain due diligence, Lucia Ciocarlan, Managing Associate and member of the ESG working group of Linklaters, interviewed Daniela Fiorentino, partnership specialist of UNICEF, currently involved in some projects in Ghana.

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Episode 8

Laura le Masurier, managing associate and member of the ESG working group of Linklaters, has interviewed Federica Calvetti, Head of ESG in EMEA at Deutsche Bank, on the growing interest in sustainable finance.

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Episode 9

As sustainability-linked financing transactions gain momentum in the Italian market, Lucia Ciocarlan and Benedetta Marino, managing associates and members of the ESG working group of Linklaters, have interviewed Francis Ravano, Head of Structured Finance at ERG S.p.A., on aspects related to Key Performance Indicators used by ERG for such type of transactions and the benefits resulting from implementing sustainable finance solutions in general.

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Episode 10

Laura Le Masurier and Marta Fusco, members of the ESG working group of Linklaters, interviewed Sergio Molisani, Finance, Insurance and Tax Director & Senior Vice President International Assets at SNAM S.p.A., on SNAM's strategy in the field of sustainable finance.

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Episode 11

Federico Barbero, head of Employment and Incentives in Italy of Linklaters, has interviewed Roberta Marracino, Head of Group ESG Strategy and Impact Banking at UniCredit.

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Episode 12

Marta Fusco, associate and member of the ESG working group of Linklaters, has interviewed Piero Munari, Chairman of the Italian Investor Relations Association, and Margherita Sacerdoti, board member of the Italian Investor Relations Association.

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Episode 13

Marta Fusco, associate and member of the ESG working group of Linklaters, has interviewed Francesco Surace, head of Corporate Governance in Italy of Georgeson.

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Episode 14

Marta Fusco, associate and member of the ESG working group of Linklaters, has interviewed Francesca Fiore, head of companies supervision and protection of shareholders’ rights at CONSOB.

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Episode 15

Matteo Farneti, managing associate and member of the ESG group at Linklaters, has interviewed Daniele Guarnieri, Director of Legal Affairs and Compliance of the Nestlé Group in Italy.

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Episode 16

Paolo Bertolini, managing associate and member of the ESG group at Linklaters, has interviewed Marta Schiraldi, Safety, Health, Environment and Sustainability Head of the Nestlé Group in Italy.

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Episode 17

Linklaters perspective: Federica Barbero, Head of Employment and Incentives in Italy, has interviewed Alexandra Beidas, Global Head of Employment and Incentives in London, Feriel Aliouchouche, Managing Associate Employment and Incentives in Paris and Laure de Panafieu, Head of Employment and Incentives in Singapore.

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Episode 18

Federica BarberoHead of Employment and Incentives in Italy and Lucia Ciocarlan, managing associate and members of the ESG working group of Linklaters, have interviewed Gianluca Gramegna, Head of Environment, Social & Governance at ERG S.p.A. about the Group’s new 2021-2025 ESG Plan. 

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Episode 19

Federica Barbero, Head of Employment and Incentives in Italy and Mara Ruberto, associate and members of the ESG working group of Linklaters, have interviewed Marusca Giacomini, HR Manager Italy – Switzerland – Austria, Edoardo Vaquer, Customer Success Account Manager e Sustainability Community Lead and Chiara Montalbano – HR Shared Services at Microsoft Italia about their Diversity & Inclusion strategy, with particular focus on disabled employees.

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Episode 20

Paolo Bertolini, managing associate, and Mara Ruberto, associate and members of the ESG group at Linklaters, have interviewed Giulio Giannini, Responsabile Affari Legali e Compliance at DS Smith about “circular economy” and the challenges they are facing to achieve their sustainability goals.

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