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Responsible investing and ESG

By Andrew Lawford
This article is published on: 12th July 2022


Why things really aren’t that bad

It might seem rather strange for me to be writing an article with this title given everything that is currently going on in the world. In truth, however, I have been vaguely working on this for some months, and whilst in no way am I trying to downplay the difficult situation in Eastern Europe, I have no particular insights to share on the topic (apart from wishing that calmer heads will soon prevail), and I am quite sure everyone is receiving enough information about it already.

We have a natural tendency to focus on bad news for the simple reason that no newspaper ever appeared with the title: “Everything’s going well – not so much to report today”. This is not strictly true – the website Future Crunch offers a periodic newsletter dedicated to good news. It is the perfect complement to the diet of negativity that we receive from traditional news outlets.

I had assumed that I was fairly knowledgeable about the world around me and had an objective view of humanity’s current state of affairs. I was thoroughly disabused of this notion by Factfulness by Hans Rosling, one of the most eye-opening books I have ever read and which I thoroughly recommend to everyone.

However, if you have little time or inclination for reading, you can take the Gap Minder test here, which is based on the work done by Rosling. It won’t take long and I suggest you do it before reading the rest of this article.


So what is my point? We tend not to realise that improvements are so gradual as to be imperceptible to us, and this, combined with the fact that we don’t often receive information that challenges our negative stereotypes, leads to a bias towards negativity. It is interesting how much bad news is anecdotal and how much good news is statistical – but of course you wouldn’t want it to be the other way around!

Is a negative bias worthwhile as we consider challenges such as climate change? I don’t know, but I would say this: panic is not a strategy, and going from bad to slightly better (whilst creating incentives to improve continually) is something we should celebrate. This reflection is also relevant to the field of investments: almost all investment houses now make ESG (Environment, Social & Governance) considerations part of their “process”. Are these processes perfect? Certainly not, but it is a start, and some of the leaders are blazing a trail that others are bound to follow. Again, from bad to not-so-bad is still something to celebrate.

In Italy, it is easy to complain about the bureaucracy, but I have to admit that some things are getting better. For anyone doubting this, consider the advent of SPID (Sistema Pubblico di Identità Digitale), which acts basically as a digital gateway to any interaction with the public administration. It is a Substantial Headache to get set-up (capital letters intended), but once you have it working, it is very useful. Also, consider PEC (Posta Elettronica Certificata) – a sort of “registered e-mail”. For anyone who has spent time and money sending raccomandate from their local post office – and let’s face it, you haven’t really lived in Italy until you’ve had to send a raccomandata, you really should invest in a PEC. For 10 euros or so a year you can send as many digital raccomandate as you like from the comfort of your own home, and they have the same legal validity as their paper counterparts. All companies and state entities have to have a PEC, so they are a very effective way of making official communications.

common reporting standard

Of course, this technological advancement has also been a way for the Agenzia to concentrate its tax-collecting efforts. They are no longer in the dark about your assets abroad, thanks to the mechanisms of CRS (Common Reporting Standards). Most people have now come to terms with this and are making the necessary declarations. If you or someone you know have been sitting on the fence – talk to me about the best way of sorting out your situation – the key being that you should do this before you receive any requests for clarification.

There are also a number of tax incentives that have been launched in recent years, favouring pensioners, digital nomads and even very wealthy people. I took the opportunity recently to speak to tax practitioner Judith Ruddock from Studio Del Gaizo Picchioni about a number of them (as well as other matters of interest for Italian residents) and have published a podcast which you can find on Apple Podcasts, Spotify, Google Podcasts or Stitcher.

Italian Financial Adviser

Please also check out my other podcasts, available on
SpotifyGoogle PodcastsApple Podcasts and Stitcher.

ESG – Responsible Investing

By Mark Quinn
This article is published on: 20th January 2022


Many investors are turning to environmental, social and governance responsible investing – otherwise known as ‘ESG investing’. In fact, between 2019 and 2020 the flow of wealth into such funds has more than doubled, and the sector has seen a 42% (US$17.1 trillion) increase since 2018 according to a 2020 Trends Report.

What is ESG investing?
It is not the traditional ‘avoidance of bad’ companies or sectors, like oil or munitions. It covers a broad range of non-financial factors applicable to all industries and individual businesses, such as:

Environmental – climate change, carbon emissions, pollution, biodiversity, deforestation, water security.

Social – data protection, equal opportunities, working conditions, human rights, child labour and slavery, philanthropy.

Governance – business ethics, security pay, bribery and corruption, political lobbying and donations and tax strategy.

Whilst these are not commonly part of mandatory financial reporting, companies are increasingly making such disclosures on their financial reports, and official bodies are making changes to define, homogenise and incorporate these factors into investment processes.

So, what is driving this change in investment ideology?
Firstly, growth in the sustainable sector has outperformed other more traditional sectors such as auto and energy, and importantly have proved lower volatility during the Covid pandemic.

We saw markets take a battering during the initial phase of the pandemic in February and March 2020, but according to analysis by Morningstar, 66% ESG funds ranked in the top half of their categories and 39% ranked in the best quartile during these months.

There is also Morningstar research showing portfolios with ESG and sustainable funds perform better in the long term. They found that over 10 years, 80% of blended sustainable equity portfolios outperformed traditional funds. Moreover, 77% of ESG funds that existed 10 years ago are still going, compared to 46% of traditional funds.

There has also been an increased demand from retail and institutional investors, and it is not just the younger generation. 80% of asset owners across all age groups are incorporating sustainable and ethical investments within their portfolios. This is supported by Morningstar’s recent poll in the US which showed that 72% of adults had a moderate interest, with 21% expressing a high interest, and only 11% preferring to focus on the more traditional higher return industries. Likewise, financial advisers believe their clients are more committed to ESG investing, with research showing 74% of clients are incorporating such funds in their portfolios, up from 30% in the previous 2 years.

Legislation has also had its part to play. Denmark, France, Hungary, New Zealand, Sweden and the UK, have made carbon-neutral targets law, with the US and a further 23 countries committing this to policy. A further 132 countries have committed to becoming carbon neutral by 2050. This trend and development at a governmental level will provide further opportunities for ESG investors.

ESG funds

What can we expect in the future?
It appears that the demand for ESG investments will only continue to rise, and there are expectations that this industry will increase 433% between 2018 and 2036 to US$160 trillion.

This movement is supported, and pushed on, by institutional investors such as Amundi (the largest EU asset manager), who announced that it would use ESG in 100% of its investments by the end of 2021. Similarly, Blackrock (the world’s largest asset manager), will increase its sustainable asset holdings to US$1 trillion by 2029, up from US$90 billion in 2019. Such support from the ‘big boys’ will not doubt fuel demand at both retail and institutional levels.

At an individual level, investors are embracing the movement and supporting renewable energy. They are actively making choices to fight climate change, and this is no longer simply taking your reusable bag to the supermarket, it is entering our investment portfolios.