Sustainable IPOs and Listed Companies

There is increasing awareness that material ESG factors can be associated with a company’s long-term value.  Largest investors worldwide are allocating capital to companies that are well equipped to benefit from the transition to a green and sustainable economy and are willing to protect their portfolios against downside environmental, social and governance (ESG) risks.

Issuers that are proactively responding to long-term and macroeconomic trends and publishing high quality ESG information are more likely to attract and retain long-term investors, reducing the cost of capital and increasing their ability to raise new capital to finance sustainable projects.

As an issuer, you should incorporate and explain the relevance of ESG factors to your business model and strategy. You should make clear how your company is positioning itself, either to benefit from these factors or to manage and mitigate the risks associated with them, and how you intend to access the new opportunities and revenue streams generated by the transition to a more sustainable economy.

Regardless of the fact that you are going to organise your Initial Public Offering, a new capital increase or you are simply providing regular updates to the financial stakeholders as a listed companies, an integrated strategic thinking will boost your ability to attract and retain long-term investors.

 

Sustainable IPOs

A number of the world’s largest investors are allocating capital to companies that have higher ESG scores, green exposure or are better equipped to fulfil sustainable goals. You will have more chance to conclude your successful IPO, demonstrating resilience as well as readiness to the transition to a more sustainable and green business and looking for capitals to finance it.

One size does not fit all when it comes to ESG data. There is a need for consistency and there is also a need to focus on investor materiality.

Companies wishing to use their capital raised at IPO in order to support a sustainability-oriented strategy will focus on the main drivers of the three pillars - Environment, Social, Governance - through:

  • Investments to enhance the company’s impact on key business pillars;
  • Transition of the company business model towards a sustainable business model;
  • Concrete actions coming from the development of the sustainability culture;

At the same time, our equity markets have been designed in order to support SMEs in raising capitals for growth as well as global leaders with Italian roots who need to consolidate and further strengthen their international competitive positioning.

 

Sustainable Development Goals

The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all in a global partnership.

Entrepreneurs and enterprises are called to contribute as well. The implementation of sustainable development will depend on the active engagement of both the public and the private sectors, with enterprises that are called to develop responsible business practices, such as those promoted by the United Nations Global Compact.

Money raised at IPO, with follow on offerings or with the issuance of ESG and Sustainable Bonds could be used to address the international agenda for Sustainable Development Goals as well as specific sustainable growth projects.

 

How to identify material ESG

Issuers should explain which ESG issues they see as most relevant or material to their business. They should then explain how these impacts may affect business strategy and financial and operational performance, demonstrating resilience to risks and readiness to explore market opportunities.

In order to support the identification of material ESG key performance indicators, Borsa Italiana and London Stock Exchange distributed to their issuers the LSEG guidance on ESG reporting to investors. The Guidance provides also inspiration on quantitative indicators to consider, drawn from the FTSE Russell ESG Ratings Model.  The model is based on the three pillars of Environment, Social and Governance and on 14 Themes adapted to reflect their materiality to each company.

For more details on the methodology please see www.ftserussell.com/esg

When presenting this information to investors, it is important to understand what information and data your investors are looking for. Consistent global frameworks provide an essential tool to allow investors to analyze and compare ESG risks across companies and sectors.

The adoption to global standards and frameworks will help you to move sustainability into your mainstream dialogue with investors, making information more available, consistent and reliable.

Here following you will find a list of international reporting standards and initiatives you could refer to.

Listing

Read more about the Listing path to encourage your corporate sustainability. Here you are the links to the three main segments:


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