The aim of this paper is to investigate whether banks adopt Environmental, Social, and Governance (ESG) practices to reduce reputational damage due to financial penalties and whether the adoption of ESG factors can reduce the probability to receive sanctions. This study extends a previous research (Guerello et al., North American Journal of Economics and Finance, 2018, 48, 591–612) by including ESG scores as determinant of the probability to be sanctioned. The econometric analyses in this paper are based on a sample of 13 Italian banks for the years 2008–2018 and includes ESG scores provided by both Thomson Reuters and Bloomberg. The research shows that ESG score and the probability of sanctions are positively related. However, a careful analysis of causal directions clarifies the meaning of such positive relationship: receiving financial penalties is detrimental for banks reputations, therefore it's necessary for banks to improve their reputation through the adoption of ESG practices.
This study investigates the main factors driving the evolution of the securitization of loans to Italian small and medium-sized enterprises (SMEs). The value of securitization increased in last two years, even though it has not been used as collateral for central banks. The disposal of non-performing loans (NPLs) may have been rather triggered by increasing attention of the international institutions to such an issue, within the general purpose of financial stability. The purpose of this paper is to interpret such a phenomenon focusing on Italian banks and restricting the analysis to the case of securitizations backed with loans to small and medium-sized enterprises (SMEs). The interesting result that emerges, supported by econometrically tested empirical evidence, is that given the orientation of international financial institutions, such as the ECB and the EBA, and reacting to incentives coming from the fiscal policy authorities for the public guarantee of loans, banks have been using securitization to reduce the burden on their bad balance sheets due to (NPLs). It was found that the public guarantee had a positive impact on SME securitization, whereas securitization in other sectors has not been affected significantly. Such evidence suggests that, in the absence of a public guarantee, the financial stability target would have been at risk, and the effectiveness of collateral-based policies in the recent past must be improved to enhance access to credit for SMEs.
Environmental issues have a considerable impact in all economic sectors, also influencing financial markets. As a result, environmental, social, and governance (ESG) awareness is rising in the financial sector. In this perspective, the concept of circular economy (CE) assumes central relevance. The aim of our study is to investigate the relationship between CE strategies and market performance; to this end, we use ESG scores as a proxy for CE. Our initial assumption is that since CE is a component of the “E” factor—in that it can generate positive and measurable environmental impacts—then it can be associated with the ESG score. Therefore, we can methodologically overcome the lack of a specific score related to CE. We use a preselection model based on historical performance by verifying the percentages of the presence of stocks in the two selected indices, namely ESG Euro Stoxx 50® and Euro Stoxx 50-ESG. Overall, we find that ESG profiles have a positive impact on stock performance, although ESG scores do not express higher performance per se. Furthermore, our analysis shows that, to date, there is no evidence that CE initiatives can influence stock returns.
The aim of this paper is to provide evidence on the effectiveness of the current state support mechanism incentive adopted by the Italian government in the wind market. In particular, this paper intends to investigate the effectiveness of the auction mechanism as an incentive tool for renewable sources as required by the transposition of Directive 2009/28/EC. In order to demonstrate the economic and financial feasibility of a typical wind-sector investment, we performed a scenario analysis (Monte Carlo simulation) determining a 52,500 Net Present Value (NPV) by varying the key underlying variables of the investment. The results show that with the mechanism currently in place the percentage of positive leveraged NPV is approximately equal to 70%. Despite the state contribution provided through the “Feed-in tariff” mechanism, the profitability of wind projects is not always successful, and this problem could be amplified by the slowness of the authorization procedures. The article offers prime reflections for scholars and policy makers who have long been committed to promoting sustainable development and important considerations on the introduction of further incentive models.
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