Do we walk the talk? Sustainability in-formation in the EU: ESG risks, bank assessments and products, and corporate performance. A circular approach
Progetto The project aims to investigate the production, communication, uses of
sustainability information of non-financial companies (NFCs) and its impact
on the supply of innovative financial products as well as on the relationships
between these companies and the financial system in light of the European
Action Plan on Sustainable Finance (2018, 2020a) and related regulations
(e.g., Reg. 2088/2018; Reg. 852/2020). Sustainability information here
refers to the EU Non-Financial Reporting Directive (NFRD) and the
upcoming Corporate Sustainability Reporting Directive (CSRD).
Sustainability reporting represents one of the central pillars on which the
European Action Plan on Sustainable Finance (2018) is built, and it is
expected to document the degree of delivery by companies on sustainability
objectives, thus driving investors’ and stakeholders’ decision-making.
Indeed, the EU overall regulatory framework is likely to impact the quantity
and quality of sustainability information that companies produce and
communicate. It is also expected to affect the way banks assess and monitor
corporate business models, financial viability, and risks as well as their own
financing strategies. New banking products, in turn, should affect the manner
and the extent to which companies include sustainability in their activities.
This generates a circular relation as to sustainability disclosures: NFCs
release this information to banks, which use it for risk assessment purposes
and to develop new financial products that should support companies’
transition to more sustainable business models and performances. The
research adopts a holistic and interconnected approach in a circularity
perspective that, by focusing on the same sample of firms, investigates the
whole sustainability information chain from its production by non-financial
firms to its uses by financial institutions, and back to companies in terms of
business model evolution and sustainability performance. Analysing
sustainability information production, communication, and use, and its
feedback effects on NFCs for the same sample of firms represents one
important strength of the project, which allows it to establish causal
relationships between this type of information release and its effects on
NFCs and financial actors. The expected research outcome is to better
understand the benefits and criticalities of sustainability information in terms
of its impact on risk assessment and bank financing. Useful policy
indications are also expected to inform the European sustainability-related
regulations as well as the objectives of the Next Generation EU Program
(2020b). Reporting is indeed key for monitoring the impact that
environmental and socio-economic factors and risks can have on the
sustainability and resilience of firms. Such information is therefore crucial
to mobilize investments aimed at the transition of the economy, define
sustainable financial instruments and provide firms with a coherent set of
funding.