Green Asset Ratio & Corporate Social Responsibility

Digital transformation process or even though the global economic change has been impacted by pandemics where many stakeholders became respectful of the environment, even though many years passed leaving a large part of the economy to create pollution and plastic in the sea and the air.

All businesses are using rules, laws, and money based on their cultures, organizational span, and capabilities to profit, but nowadays, after Covid-19, things will be slightly different from the past. Here we are touching the insights of this economic change.

FINANCIAL SUSTAINABILITY vs FINANCIAL STABILITY

Research and studies on environmental sustainability in the light of the continuous and unstoppable climatic and ecological damage endanger humanity were arguing on a scientific base what are the solutions when specific scenarios came up. 

During the early 2000s, Scientists brought to the World Economic Forum already the following questions to which a precise answer already had to be given. However, it took additional 20 years to start even thinking 

It is a fact that just a few days ago, the European Banking Authority (EBA) introduced a missing piece in the puzzle. Publishing the ESG document on Environmental Social Governance, writing and placing solid attention that the banking system needs a system of KPIs to improve financial sustainability, implications, and reasons are focused on more broad sustainability touching the future of the planet earth.

The EBA emphasizes the importance of having a KPI Green Asset Ratio that other KPIs support to understand how institutions finance sustainable activities to achieve the objectives of the Paris Global Agreement.

For some time now, we have all been more attentive to climate change and everything we can do to safeguard and improve our future and the planet. Investments must also go in this perspective, which forms the first suggestions should no longer be evaluated solely and exclusively based on the income that the activities can generate and therefore from a purely economic and financial point of view, but also the point of view of financial sustainability and risk management with a strong focus on environmental, social and governance aspects. 

The EBA, the European Bank Authority that provides advice on key performance indicators, or KPIs, highlighted the need for a Green Asset Ratio (GAR). 

ESG INVESTMENTS CRITERIA

The majority of investors are increasingly approaching investments that comply with the parameters mentioned above and set by the EU, and the ESG criteria are as follows:

Criterion E - Environmental is the parameter that refers to the environment, carbon dioxide emissions, the reduction of the use of natural resources, and food safety.

Criterion S - Social, and therefore respect for human rights, equality, conditions in the workplace

Criterion G - Governance concerns, for example, the diversity of the composition of the board of directors of a company, equal pay for men and women, the fight against all forms of corruption.

This last parameter is crucial as it is how external observers evaluate the company; through the ESG Rating, the validity of a company concerning its environmental, social, and governance. The specialized agencies elaborate sustainability scores through the data provided. Nevertheless, it looks like there is still much to do regarding innovation and roadmap to have a friendly RegTech environment...

The fact that investors focus on sustainability and are seeking sustainable investments on a long-term perspective in which to invest automatically leads them to evaluate projects that reduce waste and take into account the impact on the environment in terms of CO2 emission and all the consumption itself.
As a consequence, a start-up company that uses renewable resources and reduces its consumption of energy will undoubtedly attract the attention of investors. 

There is need of regulatory technology - regtech - to avoid that new investments goes again into companies that do not respect environment and pollute. 

UNIGIRO - MONITORING ENTERPRISE CREDIT RISK