Sustainable investments

The Mediobanca Group’s firm commitment

Growth and sustainability are distinctive features of the Mediobanca Group. Promoting people, serving the society in which we operate, and reducing the direct and indirect impact on our environment are all an integral part of our growth objectives.

In order to achieve responsible growth at Group level, a Group Sustainability Policy and a Group ESG Policy[1] have been adopted. The former describes the approach used to identify, assess, prevent and reduce potential direct impact in reputational and operational terms, while the latter defines the general principles and guidelines for evaluating Environmental, Social and Governance (ESG) factors as part of the Mediobanca Group's financing, investment and advisory activities.

The Group has set itself sustainability targets as part of the 2019-23 Strategic Plan, with the intention of contributing to the achievement of 6 of the 17 macro objectives described by the Sustainable Development Goals. The Group has also agreed to and signed the 10 Global Compact principles.

Sustainability-related disclosure

SUSTAINABILITY CRITERIA AS AN INTEGRAL PART OF MEDIOBANCA PRIVATE BANKING'S POLICIES FOR PROVIDING INVESTMENT SERVICES

As part of its client individual portfolio management and investment advisory services policies and processes, Mediobanca Private Banking uses a system for monitoring investment funds’ and issuers’ sustainability factors, in order to identify the instruments that have unsatisfactory ESG levels or that operate in sectors considered too controversial under the Group's Sustainability Policies.
These assessments are carried out based on ESG ratings provided by specialist external info-providers, where available, or through proprietary methods for issuers and funds for which no ESG rating is available.

Portfolio management

SUSTAINABILITY CRITERIA AS AN INTEGRAL PART OF INDIVIDUAL PORTFOLIO MANAGEMENT POLICIES

The investment process adopted by the Mediobanca's Private Banking Division applicable to individual portfolio management, allows, through the delegated manager, sustainability risks to be integrated by implementing an approach that combines:

  • Negative screening: implemented through the use of exclusion criteria designed to ensure that shares and bonds issued by the following are not included in the investable universe: companies involved in specific activities or particular sectors; companies directly or significantly linked to production and/or marketing of weapons that violate fundamental humanitarian principles (e.g. cluster and fragmentation bombs, bombs containing depleted uranium, anti-personnel landmines, nuclear weapons, chemical and bacteriological weapons, etc.); 
  • Positive screening: implemented through the assessment of ESG criteria in addition to the traditional aspects taken into consideration in the investment selection process. 

These criteria are aimed at promoting investment in instruments issued by companies and investment funds with high ESG ratings that have not been involved in serious issues. These criteria are implemented through the introduction of specific limits on investment in funds and financial instruments with low ESG ratings, for which no ESG rating is available, or in companies involved in very serious issues (companies for which corporate problems have materialized or are materializing, with possible negative impact for the company in earnings and reputational terms).

This approach aims to improve the overall risk/return assessment of the clients’ portfolios in the long term by taking ESG criteria among others into account.

Mediobanca has integrated factors that could impact on the sustainability risks of the portfolios it manages into the individual portfolio management investment process. In particular, through its delegated manager, the Bank has adopted a system for assessing and monitoring environmental, social and governance aspects as well as the sustainability risk of issuers and CIUs. The aim is to assess possible adverse impact on the financial return of an investment.

The Bank, through the delegated manager, adopts a methodology that combines qualitative and quantitative criteria. It is based on the same positive screening criteria described above and allows the sustainability risk for each managed portfolio to be assessed, along with any adverse impact on the return caused by related events.

A "sustainability score" attributed to each managed portfolio, is assigned with values which varies from 0 (minimum risk) to 5 (maximum risk) to each of which corresponds. A score which can assume one of the following values: Low, Limited, Medium, Relevant or High. When the assessment is “Low”, there is a minimal chance of an event that could affect the sustainability risk or have any adverse impact on it occurring. When the assessment is “High”, the chances of it occurring are very high. This information is provided to the Client within Annex 1 to the contractual inormation set of the management lines. 

It should also be noted that, the model implemented by the Bank stipulates that all transactions related to the portfolio management service on an individual basis (e.g., initial subscription, subsequent deposits, line changes, etc.) are subject to recommendation by the Bank, and therefore the assessment of the appropriateness of the management lines, based on the characteristics and classification assigned to each of them, with respect to the sustainability preferences expressed by customers is carried out in accordance with the provisions for the investment advisory service as described in the following section to which reference is made.

Investment advisory

SUSTAINABILITY CRITERIA AS AN INTEGRAL PART OF INVESTMENT ADVISORY POLICIES

Mediobanca Private Banking offers an extensive catalogue of funds and financial products that promote environmental, social and governance characteristics and pursue sustainable objectives.
In general, the more management policies of financial products take environmental, social and governance factors into consideration in their investment choices and processes, the lower the sustainability risk associated with those financial products.
Therefore, the impact of sustainability risk on a product’s returns depends on the investment policies adopted by manufacturers regarding the integration of ESG factors into investment choices. Manufacturers should disclose this information in the pre‐contractual information for each financial product, as required by the sector regulations.

In particular, in accordance with the European regulatory framework referring to the integration of ESG factors in the assessment of adequacy of transactions, the Bank's model for the provision of the investment advisory service (covering, among other products, portfolio management on an individual basis) includes safeguards aimed at collecting and considering the sustainability preferences of clients, in compliance with the regulations in force from time to time.

The consideration of sustainability preferences within the advisory service remains subordinate and will be activated only after the investment houses and info-providers used have made available to the Bank the data and information related to individual financial products/instruments necessary for carrying out the assessment of suitability with respect to clients' sustainability preferences.

In addition, the Private Banking Division may use model portfolios and defined Top Recommendation lists produced by type of instrument (UCITS, other financial instruments, etc.) and/or by investment theme. The selection of these instruments is carried out by applying specific criteria (positive and/or negative screening) aimed at taking into account ESG factors and sustainability risk.

In this context, the application of specific criteria (negative screening) is aimed at excluding from the scope of Top Recommendation lists, equity and bond instruments issued by companies directly and significantly related to the production and/or marketing of weapons (such as cluster and fragmentation bombs, bombs containing depleted uranium, anti-personnel landmines, nuclear weapons, chemical and bacteriological weapons), which violate humanitarian principles.

Sustainable investments: Global Compact

Mediobanca, through its Private Banking division, has developed a product known as Global Compact, to complement the Global Portfolio Selection products. The product is distinctive for its principle exposure is to equity financial instruments and its focus on innovative sectors and investment themes, such as innovative technologies, sustainable mobility and clean energy.

According to the Sustainable Finance Disclosure Regulation (Regulation (EU) 2019/2088), the new product falls within the definition provided in Article 8 (i.e. “light green”), because it promotes good environmental, social and governance factors.[2]

With reference to investment decisions taken in connection with the Global Compact product, the delegated manager (Mediobanca SGR) applies ESG criteria that include both negative screening (i.e. criteria which rule out certain issuers from the investment universe) and positive screening (i.e. assessing issuers based on their ESG rating and the seriousness of any controversies in which they have been involved). For further details please see the section entitled “SUSTAINABILITY CRITERIA AS AN INTEGRAL PART OF MEDIOBANCA PRIVATE BANKING'S POLICIES FOR PROVIDING INVESTMENT SERVICES".

Investments are also assessed on the basis of precise ESG inclusion criteria. In particular, in order to limit the exposure to issuers or UCIs that do not meet the above characteristics, upper limits have been instituted for the maximum exposure to the following categories.

  • Absence of a rating: company or UCI which is not assigned an ESG rating;
  • Low level ESG rating: company or UCI which is assigned an ESG rating below an established threshold;
  • Involvement in serious controversies (issuers only).

The benchmark for this product is consistent with the one commonly used by investee UCIs which promote ESG characteristics or have making sustainable investments as their objective.

The sustainability risk for the product is measured in accordance with the qualitative and quantitative methodology adopted by the Bank (cf. “SUSTAINABILITY CRITERIA AS AN INTEGRAL PART OF INDIVIDUAL PORTFOLIO MANAGEMENT POLICIES”).

Adverse sustainability impacts statement

As part of the provision of portfolio management services on an individual basis and investment advisory services, Mediobanca, inter alia through the delegated manager, takes negative effects for sustainability[3] (“Principal Adverse Impact”, or ”PAI”) into consideration in making  investment decisions.

In line with the approach established at Group level, Mediobanca has defined the principles on the basis of which the PAIs and related indicators are taken into consideration, ensuring compliance with the principles of management responsibility towards its stakeholders.

Mediobanca has also adopted specific internal regulations aimed at governing the methods and methodologies used in consideration of the PAIs as part of the investment process.

INDIVIDUAL Portfolio management

As part of the provision of the portfolio management service on an individual basis, Mediobanca, through the managing director, takes the negative effects for sustainability at the Company level into account in making investment decisions.

In line with the approach established at Group level, Mediobanca has defined the principles on the basis of which the PAIs and related indicators are taken into consideration, ensuring compliance with the principles of management responsibility towards its stakeholders.

These effects and calculation of the related indicators are taken into consideration the Bank in order to:

  • Adopt a responsible investment approach, in accordance with international principles and standards on climate and the environment, as well as labour rights, human rights and anti-corruption;
  • Define the objectives to be pursued in order to reduce the negative impacts on sustainability deriving from the Bank's investment decisions, and any actions to be taken if the objectives are not achieved;
  • Ensure growing and continuous active engagement on the part of its stakeholders in issues related to sustainability.

CONSIDERATION OF PRINCIPLE ADVERSE SUSTAINABILITY IMPACTS

 In order to take account of the PAIs, the Bank has implemented, consistent with regulatory requirements, an activity of monitoring the PAIs in order to carry out the analyses and assessments regarding the positioning of the indicators and the sensitivity of the portfolio to them. This activity is aimed at the progressive definition of target objectives and their prioritization for achievement to reduce the negative sustainability impacts resulting from investment decisions.

In particoular, beyond the mandatory PAIs, the procedures adopted by the Bank identify the optional indicators to be considered based on the following variables:

  • Consistency between the selected PAIs and the environmental, social and good governance objectives defined at Group level;
  • Availability of data relating to each indicator from external sources and not estimates;
  • Coverage of the data available for each indicator with respect to the weight of the issuers/financial instruments in the portfolios managed.

In order to comply with the requirements of time-to-time regulations on an increasing percentage of managed portfolios, the Bank is constantly committed to obtaining updated and reliable data on ESG issues through the sources indicated above. However, it should be noted that in some cases the availability of data referring to individual PAIs and the level of coverage of issuers may not be guaranteed.

Precise definition of the (1) reduction targets of the PAI indicators and (2) the actions to be taken to avoid or reduce the negative effects on sustainability will take place progressively, based on the monitoring activities and availability of the related information, in order to publish the information referred to in points (1) and (2) by the deadline set by the reference regulation.

COMPLETION PLAN FOR THE CONSIDERATION OF PRINCIPLE ADVERSE SUSTAINABILITY IMPACTS

In order to take PAIs into consideration and calculate the related indicators and targets, plus any actions required in order to manage exposure to them (including in view of possible changes in the regulations), the Bank, inter alia through the delegated manager, has set the following plan for completing the consideration:

Completion of the model for considering the PAIs, including further indicators and related definition of calculation methods;

  • Analysis of the performance of the PAIs on managed portfolios, and definition of targets for reducing PAIs;
  • Adaptation of investment and engagement policies in order to ensure the targets are met;
  • Implementation of the calculation and monitoring process.

ENGAGEMENT POLICIES

The Mediobanca Group believes that compliance with ESG criteria can generate improved long-term performance for investors.  This is why, at every meeting and/or useful contact opportunity, it is committed to encouraging the companies in which it has invested (and in which it intends to invest) to engage in open dialogue regarding their responsible approach and how ESG factors affect their businesses.

Engagement activity is also carried out with a view to achieving the objectives in terms of reducing the negative effects on sustainability.

REFERENCES TO INTERNATIONAL STANDARDS AND CODES OF CONDUCT

The Bank, in line with the Group, recognizes the value of involving its shareholders and stakeholders, in general, by adhering to international principles and standards in line with its own approach as a sustainable and responsible investor.

The Group is a signatory to the UN Global Compact, requiring it to share, support and apply a set of universally agreed principles in its sphere of influence as derived from the Universal Declaration of Human Rights, the ILO Declaration, Rio Declaration and the United Nations Convention against Corruption.

The Mediobanca Group has become a signatory to the Principles for Responsible Banking, in addition Mediobanca SGR is a signatory to the Principles for Responsible Investment (PRI) [4].

In order to guarantee the relationship of trust with the shareholder, the Group has adopted, in compliance with national legislation, an organization, management and control model pursuant to Legislative Decree 231/2001, and the Bank, like all Group companies, has adopted:

  • Its own Code of Ethics, which applies to directors, auditors, employees, consultants, interns, external collaborators and suppliers;
  • Its own Code of Conduct, which defines the fundamental principles underlying the bank's reputation and contains the values based on which its daily operations are performed.investment advisory
investment advisory

In accordance with the European regulatory framework referring to the integration of ESG factors in the assessment of adequacy of transactions, the Bank's model for the provision of investment advisory services (covering, among other products, portfolio management on an individual basis) includes safeguards aimed at collecting and considering the sustainability preferences of clients, in compliance with the regulations in force from time to time.

The sources adopted for the retrieval of information regarding the financial instruments/products being advised on the relative consideration or otherwise of negative sustainability effects and, if applicable, related PAI indicators, are:

- specialized external info providers;

- information obtained directly from the companies/counterparties concerned;

- product governance information disclosed by individual third-party asset managers regarding the products created and managed by them (by means of the European MiFID Template "EMT" and, if available, "EET").

In addition, in order to be able to ensure the performance of a suitability assessment based on the client's overall portfolio, the Bank has planned to use, with reference to financial instruments that do not fall within the perimeter provided for by the relevant regulations (e.g., stocks, bonds, etc.) the indicator referring to the level of ESG Rating assigned to individual instruments.

Without prejudice to the obligation to collect sustainability preferences in accordance with applicable regulations, the consideration of such preferences in the context of the advisory service remains subordinate and will be activated only after the investment houses and info-providers used have made available to the Bank the data and information relating to the individual financial products/instruments necessary for carrying out the assessment of suitability with respect to clients' sustainability preferences.

This is without prejudice to Mediobanca's commitment to procuring the necessary data and information in order to be able to comply with the requirements of the regulations in force from time to time.

CONSIDERATION OF PRINCIPLE ADVERSE SUSTAINABILITY IMPACTS

The collection of client’s sustainability preferences also allows for the consideration of negative sustainability effects within the advisory service.

As stipulated in the relevant regulations[5], the collection of client’s sustainability preferences is also aimed at identifying, among others, whether clients are interested in investment products that take into account negative sustainability effects. This indication is taken into account when assessing the suitability of transactions with respect to client sustainability preferences in the provision of investment advisory services.

The suitability model defined by Mediobanca allows clients to be offered, where consistent with their sustainability preferences, financial instruments/products that consider negative sustainability impacts, with regard to environmental and/or social aspects, by leveraging information published by investment houses, in accordance with the SFDR Regulation and its implementing technical standards.


[1] This Policy also provides for the adoption of additional criteria and safeguards on ESG issues that will be implemented by the Group companies as part of the implementation of this document.

[2] Article 2(24) of Regulation (EU) 2019/2088 (the “SFDR”) defines “sustainability factors”, as meaning “environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters”.

[3] These principles are adopted in accordance with the procedures and timelines set out in Regulation (EU) 2088/2019 and related technical regulatory standards (the "RTS"), and having regard to the information disclosed on the market.

[4] Launched by the United Nations in 2006 with the intention of encouraging the spread of sustainable and responsible investing among institutional investors.

[5] Delegated Regulation (EU) 2017/565, as amended by Delegated Regulation (EU) 2021/1253