On June 23rd, in collaboration with ETicaNews, TopLegal, Nedcommunity, Methodos and Dentons, Sodali presented the first findings on the degree of integration of sustainability issues in Italian business strategies. Three roundtables showcased the various observations which emerged from our studies on a best-in-class index among Italian FTSE MIB companies, the degree of awareness on Italian boards, and the current demands of large institutional investors.
First Roundtable: Integrated Governance Index (ETicaNews)
While the sample was not very large, the results were considered to be very significant. The index revealed good practices overall, from the top three best-in-class: UniCredit, Generali and SNAM, and in general, across many of the FTSE MIB companies analyzed. That being said, two main considerations were widely held among the commentators. First, the results reveal a diverse approach between more and less regulated companies and a cultural difference inherent to the Italian market. Second, research moving forward should expand to include also small and medium-sized firms which are less subject to regulation, but which nonetheless are exposed to sustainability issues and ever-growing expectations from institutional investors.
Second Roundtable: Independent Non-Executive Directors (Methodos and Nedcommunity)
Sustainable development goals, such as climate change and others, have become important issues to put into effect, representing both an element of risk and of opportunity to monitor and anticipate over the next five years. As a start, it will be important to establish a more structured definition of integrated governance to ensure uniform understanding by all of the players involved. Significant focus has turned to integration of the non-financial factors with the financial ones. This shift from fragmentation has become fundamental and continues to gain traction by Millennials, pushing more and more for environmental and social developments as a prerequisite to investment and choice. As sustainability is more about coordinating the high priority topics than anything else, the independent NEDs play a strategic role in this regard. In terms of timing, many changes are taking place in Italy due to the additional regulations on businesses and we can expect to see the effects in 2017, after complete integration of the revised July 2015 Code. However, a lot of work remains to be done in Italy, and quickly, in order to carry forward changes. This can be facilitated by engagement with long-term institutional investors as proactive stakeholder response represents one of the main duties of the independent NEDs and reputation is now considered to be at least 50% of company value.
Third Roundtable: Integrated Governance Institutional Investor Survey (Sodali)
While we are at the forefront of transitioning towards integrated governance, the objectives are clear and Italy still has progress to make. A cultural shift will need to be made in order to surpass the uniqueness and diversity seen across Italian companies, moving away from a tendency of over disclosure in response to regulatory norms toward alignment of corporate governance with the achievement of the companies’ strategic objectives. This will entail the adoption of methods, interpretation of data, and better communication of the key figures for the medium to long term (five years).
Eurizon Capital Head of Corporate Governance, Cristina Ungureanu
Governance events that have Sustainability as core theme have been significantly increasing in number and in audience and have seen a diversification of the roles attending, e.g. from CSR to Governance to Legal counsel, to IR & CFO, thus showing the rise of Integrated Governance. Of course this event proved just that.…Not least, it was noticeable Sodali’s involvement as well positioned to monitor the approach taken by both the companies and by the investors towards embedding Governance and Sustainability in their business strategy. I am pleased to see Sodali’s name more and more at events that support such objective.
Corporate Governance Advisory Morrow Sodali