

The Bank of Italy, the country’s central bank, has welcomed a new report from the United Nations and Italian Ministry of Environment on developing sustainable finance, as it highlights the risk of climate change to the economy and financial system.
It comes as Environment Minister Gian Luca Galletti has reportedly said that the Italian government is working on a so-called Green Act that will be a framework to develop a sustainable Italy, including creating incentives for a green economy.
This proposed Green Act is recommended in the Report of the Italian National Dialogue on Sustainable Finance, written by the Italian Ministry of Environment, Land and Sea and the United Nations Environment Programme after a series of dialogues with Italian banks, investors, insurers, the Borsa Italiana exchange and relevant regulators.
The report finds that there is momentum in Italy around sustainable finance, such as €616bn assets under management invested along SRI strategies. But, it also highlights challenges such as financial decision-making not adequately taking account of long-term issues such as climate change.
It makes 18 recommendations to enhance Italy’s sustainable finance system, including the proposed Green Act and more focus on sustainability in the Italian Corporate Governance Code. The report also recommends that all institutional investors report on how ESG factors impact their portfolios, how they are supporting the climate transition and disclosure of the extent to which their investment and voting policies cover ESG issues.The suggestion on investor reporting is similar to clauses in France’s wide-ranging energy transition law that requires investors to report on how they integrate ESG into their investment processes, outline greenhouse gas emissions of their investment and contribute to the financing of a low carbon economy.
“Improving the assessment of long-term environmental risk is important”
Going forward the report recommends the establishment of a National Observatory on Sustainable Finance to continue dialogue and launch a ‘Green Financial Initiative’ along the lines of London and Paris.
It also calls on Italy’s G7 Presidency in 2017 to promote green and sustainable finance.
The report was launched at the Bank of Italy in Rome. In a speech Deputy Governor of the Bank of Italy Luigi Federico Signorini welcomed the work, adding that climate risk was also on its agenda.
Signorini said: “Improving the assessment of long-term environmental risk is important and, in order to avoid being caught by the ‘tragedy of the horizon’, we shouldn’t underestimate it. Markets are probably underpricing climate-related risk because they think that its effects will materialize only in the long term”.
To manage this risk Signorini called for better climate intelligence, highlighting the Financial Stability Board’s Task Force on Climate-related Financial Disclosures.