ESG criteria between changes and opportunities: the case of Enel

The introduction of ESG criteria in the valuation standards of stocks and bonds is certainly an important novelty with which issuing companies must interface, representing also a possible opportunity for change and innovation for those companies able to seize it, aware of being in front of a phase of deep changes.  Among the companies at the forefront in the Italian and European context is certainly Enel, a well-known Italian company operating in the energy sector, which, thanks to the innovative drive of CEO Francesco Starace and CFO Alberto De Paoli (both appointed in 2014) is positioning itself as one of the leading international companies in the creation of shared value for all stakeholders. The leadership di Enel su tali tematiche è infatti riconosciuta a livello mondiale anche dalla presenza del Gruppo in diversi ranking e indici di sostenibilità, come ad esempio i Dow Jones Sustainability Indices World and Europe, il Refinitiv TOP 100 Diversity and Inclusion Index, il Bloomberg Gender-Equality Index ; inoltre l’azienda italiana è stata tra i vincitori dei 2020 SEAL (Sustainability, Environmental Achievement & Leadership) Business Sustainability Awards, riconoscimento che premia  la leadership, la trasparenza e l’impegno di brand globali in pratiche di business sostenibili. Nello specifico, Enel è stata inserita nella categoria 2020 SEAL Organizational Impact Award, che riconosce la performance di sostenibilità aziendale complessiva e rappresenta le 50 aziende più sostenibili a livello global, e le è stato riconosciuto il ruolo di leadership nell’affrontare il cambiamento climatico e nel promuovere la decarbonizzazione dell’economia globale, promuovendo l’open innovation e pratiche responsabili di gestione aziendale lungo l’intera catena del valore. These recognitions are attracting the attention of socially responsible investors, whose share in the company is constantly growing, and now represents about 13.4% of Enel's capital: CFO Alberto De Paoli, explaining the group's strategies, pointed out that Enel has "a 360-degree value creation policy, clearly defined within our Strategic Plan: we must be sure that a certain business strategy has this circularity in value creation. Value creation towards shareholders is an aspect of the Group's value creation", with relevant consequences in terms of dividend policy, as "the policy and development of a sustainable business leads a company like ours to be more profitable, less risky, to have predictability of results and easier asset management, and important growth paths. This also makes it easy for the dividend policy to rest on a higher level of stability." Analyzing the development of sustainable finance tools, the CFO still sees some elements of delay; in fact, according to his perspective, "sustainable finance is dominated by tools based on a concept of sustainability based on projects and therefore not pervading the company's strategy and business objectives. The evolution is to define a sustainable finance that finances the company as a whole". To this end, Enel has therefore created sustainability linked bonds, initially criticized but then emulated, also thanks to their standardization and the purchase decisions of the ECB. This strategic vision has brought many benefits to Enel, both from a reputational point of view and in terms of market value, since the lower risks and the increase in company profitability have led investors to place their trust in the Italian company's stock (as can be seen in the attached graph); moreover, the clarity and determination with which this vision was first explained and then pursued has significantly increased the stock's reliability, making it one of the most recognized in terms of ESG practices and the sustainability of the business model as a whole.    

Stock market performance of the Enel share over the period 2016-2020


Written by Giorgio Costa of the VGen Finance Hub

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