Investing in Treviso and Belluno: the sustainable finance

Source: Article by Renato Chahinian

In the previous article Sustainable Development for the Wellbeing of Communities we emphasised the importance of sustainable development as a growth trajectory affecting any community and involving all the three aspects of any society’s situation (economic, social and environmental).

This basic objective can only be achieved through the individual commitment of all of us, but it becomes particularly important if realized at the level of an organisation (public or private, profit or non-profit), because the efficiency and effectiveness of collective actions oriented towards this end increases and leads to greater results. Leaving aside public administration, i.e. the state and national and local public bodies, and also the third sector organisations (the non-profit sector), which by definition should have non-selfish ends (i.e. aimed at the wellbeing of third parties), the problem becomes more complex when we refer to companies that, according to the same legal system, pursue profit-making aims. Indeed, until recently, the only fundamental objective of these was profit maximisation (obviously within the constraints of the law).

Now, also for the companies the need for social and environmental responsibility is increasing , since their activity, strictly economic, determines a considerable impact also in the social and environmental field, whereby the presence of a profit (indispensable for the remuneration of the company’s own capital) may be accompanied by a non-economic activity or purpose, and in any case the achievement of this profit must not damage the existing state of well-being and/or the ecological balance of the community.

The commitment to social responsibility therefore includes:

• ethical and efficient economic governance (oriented towards long-term development results);
• internal (for employees) and external (for the benefit of other stakeholders) social initiatives;
• internal initiatives for the ecological improvement of production processes and external initiatives (for the possible financing of works for environment, culture, etc.).

It is clear that the pursuit and achievement of these new objectives, alongside and in addition to the original economic purpose, create quite a few problems for business management and require much more demanding and complex operational activity than in the past. For this reason, many companies give up on development and prefer to retreat into a very reduced and circumscribed activity that allows a minimum of economic survival, but without any commitment in other directions. Moreover, the achievement of further objectives, being equal to other factors, inevitably depresses economic result in the short term. Thus, a very broad dissemination of the principles of corporate social responsibility in society and public opinion is countered by a much more cautious and gradual actual implementation.

This does not mean that that the this type of need is not progressively spreading, and that more and more companies are adhering to these new principles with conviction, even if there are also many declarations and façade behaviours in practice. Actually, the increased commitment resulting from sustainable management provides many future benefits, both for the community as a whole and for the company itself that embarks on this new path.

From a general point of view, the awareness of national and global social tensions and the catastrophic effects of incipient climate change, as well as the dreaded predictions of the damaging effects of pollution and shortage of natural resources, are leading the most prudent organisations to control their actions and not to further damage an already abundantly deteriorated global situation. But there are also considerable individual benefits for companies that adopt these new trends. Indeed:

• the pursuit of social and/or environmental goals creates considerable reputational recognition around the company among stakeholders and the general public, and these recognitions have a favourable impact on the greater availability of target markets for its products and services (which can even repay in full or in excess of the higher costs resulting from the increased commitments);
• in order to enter some markets, there are indispensable quality requirements that presuppose various production arrangements of a social and ecological nature;
• often the implementation of initiatives and investments with ethical or environmental content requires access to specific public concessions (financial or tax);
• recognition of merit, by authorities and qualified organisations (including the emerging pure certifications in sustainability), allows for a notoriety that also reverberates on broader commercial and institutional relations and greater interest on the part of potential investors.

It is precisely this last consideration that opens the strategy to new horizons.

In fact, the current disconnection between savings and investment in the real economy is well known, as a result of which a significant share of household savings ends up financing unproductive investments or international speculation, with high risks for the very safety of the capital employed (there are always potential crises on the stock markets, which cause serious losses in a short time to savings accumulated after many years of huge sacrifices). The international financial system itself, despite past shocks, is still predominantly based on market strategies oriented towards immediate profit, while irrational behaviour that damages the balance of the entire economic system often occurs.

In such an unstable and extremely variable framework, sustainable finance has been gaining ground for some time now, both in order to seek refuge from the risks mentioned above, and because more capital is needed, since philanthropy and ecological commitment alone are not enough to bring us the prosperity we all desire.

This is the financing of investments that have at least one other appreciable objective besides the economic one. Thus, the potential investor, whether with credit or venture capital, still demands a fair return for his or her financial investment, but is willing to settle for a lower income (fair profit), as long as the same investment is destined, in whole or in part, to social and/or environmental initiatives (or in any case with positive spin-off effects in these two areas). In this way, the preference of savers for renouncing the maximum return, in favour of a higher ethical and sustainable value, which, in the long run, may also yield better economic results, is becoming increasingly widespread. Indeed, recent studies on the subject have shown that sustainable finance:

is less susceptible to financial market instability;
often allows, in the long term, the achievement of a higher income than activities with exclusively economic objectives;
it enjoys the favour of the relevant international authorities;
it is increasingly being developed among institutional investors (banks, insurance companies, mutual funds, pension funds, private equity), so that the opportunity to finance sustainable development activities is becoming wider.

This opportunity should also be taken into account by SMEs, at least those that are already oriented towards social responsibility. While the financial difficulties of smaller companies are currently known, especially in finding new capital to finance development investments,

the sustainability of planned initiatives can be the one that makes the decisive difference, i.e. the one that allows privileged access to funding channels that were previously precluded.

Without going into detail, it is sufficient to consider that

some credit institutions already have dedicated funding for sustainable finance;
many other institutional investors at the international level have been financing sustainable development projects for some time;
non-banking financing channels for innovative SME projects, such as crowdfunding and minibonds, are already present on the market.

In the provinces of Treviso and Belluno, too, there is no shortage of opportunities for sustainable investments in SMEs, since there is already a deep-rooted awareness of social objectives and, more recently, initiatives for ecological transition, especially in the use of renewable energy and the circular economy, are progressively gaining ground.

Translated by Cecilia Flaccavento
Intern at the Chamber of Commerce of Treviso – Belluno|Dolomites