Annual report on sustainable investments and climate-related risks for 2021

The approaches and methodologies described in this Report are based on the current state of the debate, the available data and the relevant legislation. They are therefore subject to continuous scrutiny and may evolve in line with new developments.


The introduction of sustainability criteria into the investment decision-making process, did not require any significant changes to be made in the way the Bank makes its investment choices: the various departments were tasked to add sustainability considerations to the pre-existing financial criteria. To ensure a consistent approach to sustainability topics across all the Bank's functions, a Climate Change and Sustainability Committee was set up, chaired by a member of the Governing Board; a Hub was created to support the Committee in coordinating and directing the Bank's activities around all ESG issues (portfolio investments, banking and financial supervision, economic research, and business operations).


Since 2019, the sustainable investment strategy has been extended in terms of both financial asset classes and targets, steadily paying greater attention to ESG factors and in particular to the climate-related ones. Moreover, this choice aims to contribute to the achievement of the sustainability objectives identified both at a European level, with the approval of Regulation (EU) 2021/1119, outlining the framework for achieving climate neutrality, and at a national level, with the amendment of Articles 9 and 41 of the Constitution, which introduced a reference to the protection of the environment, biodiversity and ecosystems, also in the interest of future generations.

At the end of 2021, the value of the portfolios with potentially sustainable investment policies was around €210 billion. For the government bonds of the euro area, which account for a large share of the total, the sustainability metrics are currently monitored but do not contribute to investment decisions, for various reasons; an exception is made for the green bonds of sovereign issuers in the euro area and of supranational institutions, whose share of the Bank's investments is destined to grow over time.

Risk management

The Bank's policy for investing in private sector instruments (in particular equity) used to follow the market neutrality principle (the composition of the portfolio replicated that of the market, although excluding some sectors). Since 2019, the Bank has gradually introduced climate and sustainability factors into the existing risk management models. At first, they were taken into consideration after the asset portfolio allocation step, and involved first selecting securities for the equity portfolios, and then for the bond portfolios. Subsequently, the sustainability considerations were also applied in the asset allocation step but only for the private sector issuers. In this way, the ESG factors are taken into account during the whole investment process.

The sustainable investment strategy is implemented by means of a combination of different portfolio management policies: for private sector securities the criteria considered are: (a) a priori exclusion of certain companies from the investment universe; (b) preference for companies with the best ESG practices (best in class); and (c) introduction of ESG factors into financial models. In addition, there are thematic investment policies in place for both public and private sector investments (e.g. for the purchase of green bonds).

The ESG metrics applied so far in the portfolio investment decisions of private sector issuers are backward looking. The use of forward looking data is in fact complicated by the uncertainties about time horizons, the type of metrics, and the probability and severity of the related events. Nevertheless, information on companies' transition plans is a good starting point, since they have fewer scenario assumptions. From the current year, therefore, investment decisions also take into consideration the decarbonization commitments and transition plans of companies. The Bank will start a dialogue with companies to gather information on sustainability strategies and on the results achieved. A thematic investment equity portfolio will also be initiated, including those companies best enabling the ecological transition, in order to seize the opportunities linked to technological innovations and to foster structural change in the economic system.

Metrics and targets

The analysis of metrics and target shows the progress made by the Bank in recent years. For the internally managed equity portfolio (worth €16 billion and accounting for over 90 per cent of the Bank's private sector investments), the carbon footprint was reduced by 60 per cent compared with 2018 - the year prior to the launch of the sustainable investment strategy - and is 37 per cent lower than the benchmark. Carbon intensity (-24 per cent), use of electricity (-21 per cent), water (-14 per cent) and waste production (-28 per cent) are also better than the benchmark. With regard to social metrics, the share of women employed is 7 percentage points higher than the benchmark and the injury rate is 9 per cent lower.

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