Sustainable SMEs gain more trust from banks

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ESG (Environmental, Social, Governance) investments represent strategic financial choices oriented towards sustainability in the environmental, social and governance areas. The European Union is implementing measures to integrate sustainability into its regulatory framework, with the introduction of specific rules for "sustainable finance". The main objective is to increase investor confidence by addressing challenges related to the quality and completeness of information on rating ESG and the diversity of valuation methodologies.

From the ESG Outlook study by CRIF, it emerges that SMEs with a good ESG score are perceived as less risky and more reliable. Conversely, SMEs with very low ESG scores experienced a 6 per cent decrease in their lending rate, highlighting how sustainability is becoming a key criterion for access to credit. In addition, the analysis revealed that 40 per cent of Italian SMEs maintain a low or very low level of ESG adequacy, while large companies show significant improvement. However, increased awareness and regulatory pressure are also pushing SMEs to implement more sustainable practices.

CRIF also analysed the relationship between sustainability adequacy and credit risk. The results show that the default rate decreases as ESG adequacy improves. In fact, in the second half of 2023, loans with a high ESG score had a 34% lower default rate than the average. CRIF's analysis shows that SMEs with a strong commitment to sustainability receive more trust from financial institutions. "Banks are rewarding companies that stand out for their ESG commitment, facilitating their access to credit," said Marco Macellari, Head of Risk Management & ESG at CRIF. "The increasing integration of ESG criteria not only reflects social and environmental responsibility, but also a new dimension in risk assessment."

CRIF's analysis shows that the path towards sustainability of Italian companies still has considerable room for improvement, with a significant gap between the ESG scores of SMEs and those of large companies, defined as those with a turnover of more than EUR 50 million. In 2023, 40 per cent of SMEs maintain a low or very low level of ESG adequacy, while large companies showed a substantial improvement: a 9 per cent decrease in companies with poor ESG scores and a 22 per cent increase in those with high or very high ESG standards. This progress is attributable to the presence of stronger structures and governance, which facilitate a systematic integration of ESG factors.

To achieve the objectives of the European Green Deal, the Commission has planned to mobilise at least EUR 1 trillion insustainable investments over the next ten years. Of this, 30 per cent of the EU's multiannual budget (2021-2028) and the NextGenerationEU (NGEU) instrument is earmarked for green projects. Member states must reserve at least 37 per cent of the EUR 672.5 billion Recovery and Resilience Facility funds for climate investments, ensuring that such interventions do not compromise the Union's environmental objectives.

European legislation on sustainable finance is developed along three main directives: 1.EU Taxonomy: a classification system for sustainable economic activities, clarifying which activities can be considered as such; 2. Reliability of information: measures to improve transparency and comparability of information, with the revision of the Non-Financial Reporting Directive (NFRD) and the approval of the Financial Sector Sustainability Disclosure Regulation (SFDR); 3. Standards for sustainable financial products: introduction of a European standard for green bonds in order to increase the transparency and comparability of these instruments. These initiatives are based on shared evaluation criteria, facilitating the identification of green bonds.

In the report "ESG indicators for business" it is highlighted how European companies are integrating sustainability into corporate policies. In 2022, the European Parliament approved the Corporate Sustainability Reporting Directive (CSRD), which expands non-financial information reporting requirements from Directive 2014/95/EU. This new legislation provides for a more rigorous monitoring of ESG policies, focusing on risk management, setting sustainable strategies and strengthening business models. The reporting of non-financial information responds to a growing demand for transparency from investors and stakeholders, including social partners, politicians, government agencies and consumers, who expect responsible corporate behaviour regarding the social and environmental impact of activities.

The report analyses the state of ESG reporting of European and Italian companies, extrapolating sustainability data from Refinitiv's ESG database. The indicators used in the analysis include: ESG Score: overall score based on environmental, social and governance pillars; ESG Controversies Score: measures the company's susceptibility related to 23 types of ESG controversies; a score of 100 indicates no controversies, contributing to higher ESG performance; ESG Combined Score: combines the ESG Score and ESG Controversies Score, providing an overall assessment of the company's sustainability impact and conduct; Environmental Score: assesses the company's environmental impact and initiatives to mitigate its effects; Social Score: analyses the company's interactions with employees, customers, suppliers and communities; Governance Score: examines governance practices and structures as well as adherence to ethical principles.

The scores are standardised on a scale from 0 to 100, taking into account sector and country. Over time, an increase in the number of companies reporting ESG information has been observed, with a general decrease in the average ESG score and combined score. From 2010 to 2022, the average ESG score increased from 54.7 to 59.9, and the combined ESG score from 51.6 to 57.2. The ESG Controversies score showed increased volatility, with both upward and downward trends. The number of companies with ESG metrics rose from 329 in 2010 to 783 in 2022. The ESG metrics vary significantly across countries, with a lowest score of 38.4 for Cyprus and highest for Portugal and Spain, where the combined ESG score is 61.6 and 61.5 respectively.

Increased awareness, strong regulatory pressure and the positive correlation between ESG suitability and credit risk reduction are also pushing SMEs to implement more sustainable practices. By promoting a business model that is attentive to stakeholders and various stakeholders, significant advantages can be achieved in the marketplace, including greater acceptance, stability and security. In this context, the XNatura Platform, by 3Bee Ecosystem offers an innovative digital solution for environmental monitoring, designed to identify and address gaps in nature, climate and biodiversity, aimed at companies, local authorities and nature parks. The platform enables fast and intuitive analysis of four risk indices in line with major international reporting standards, including Nature Impact Risk.