Periodic Reporting for period 1 - TranspArEEnS (MAINSTREAMING TRANSPARENT ASSESSMENT OF ENERGY EFFICIENCY IN ENVIRONMENTAL SOCIAL GOVERNANCE RATINGS )
Période du rapport: 2021-06-01 au 2022-11-30
Improving access to long-term finance for Energy Efficiency (EE) projects and more in general for projects related to sustainability is key to the EU’s 2030 Green Deal targets. However, the lack of standardized disclosure of EE and ESG investments limits firms’ access to financing and especially to long-term financing. Further, poor understanding of EE information in ESG ratings may increase the risk of greenwashing, thus preventing a smooth development of the sustainable finance market. In this context, the EU funded TranspArEEnS project addresses these barriers by mainstreaming a quali-quantitative framework for standardized collection and analysis of firms’ EE and ESG information and the development of a standardized EE-ESG rating. This serves as an EE-ESG filter to inform investment and financial policy decisions about portfolios’ alignment to sustainability. A unique added value of this project is to cover non-listed SMEs, meeting an important market need. TranspArEEnS’ EE-ESG rating will be tested in pilot case studies and capacity building sessions with leading representatives of the financial industry and supervisors. This allows to understand barriers and opportunities for its operationalization in: i) credit risk assessment, ii) development of long-term EE-financing via securitization (covered bonds, European Secured Notes), and iii) introduction of EE-ESG considerations into monetary policies and prudential regulations. By enhancing standardized disclosure of EE investing, TranspArEEnS will decrease uncertainty in the EE and ESG markets, thus promoting the scaling up of new EE financing and investment opportunities in the EU. Moreover, it will help to mitigate the risk of greenwashing, improving financial stability.
WP1. Development of a large scale EE-ESG database
- Development of a database model (D1.1) that will support the collection of relevant quantitative and qualitative information about EE, ESG and financial performances at firm level from different data providers and from the SMEs’ survey.
- Implementation of a database of listed companies (D1.2): collection of historical data for more than 14.000 listed firms in 27 EU countries and the United Kingdom which includes Market, Financial, Credit and ESG/EE-ESG data for listed firms for the period January 2000 to June 2021.
- Improvement of database structure and efficiency in order to incorporate new SME surveys data and to support the development of EE-ESG scores in WP3.
WP2 Standardized EE-ESG SMEs’ survey
- Definition of a standardized questionnaire to collect SMEs information on EE and ESG factors (D2.1). The questionnaire is structured into a core/general section (including 4 macro-sections: business, environmental, social and governance); 3 sectoral declinations on construction, manufacturing metals and manufacturing non metals, and 4 focus on thematic area related to firm dimension and energy efficiency.
- Implementation of the survey on the Italian SMEs market mainly through a dedicated platform and the CRIF commercial network.
WP3 Standardized EE-ESG rating
- SMEs’ EE-ESG credit risk evaluation (evaluation of investments on EE financing activity) (D 3.1)
WP 4. Long term financing instruments for the “green recovery”
- Technical Report on Key opportunities to enhance standardised disclosure of EE-ESG products (D4.1)
- Technical Report on market needs for EE-ESG covered bond disclosure (D4.2)
WP5 Dissemination and capacity building
- Dissemination and Communication Plan (D5.1)
- Report on Dissemination and Communication Activities months 1-18 (D5.3)
- TranspArEEns visual identity (project logo and templates)
- Project website
- 2 press releases and a video for project presentation
- Project flyers (in English and in Italian for SMEs’ involvement)
- Stakeholder involvement process
- Development of a database model (D1.1) that will support the collection of relevant quantitative and qualitative information about EE, ESG and financial performances at firm level from different data providers and from the SMEs’ survey.
- Implementation of a database of listed companies (D1.2): collection of historical data for more than 14.000 listed firms in 27 EU countries and the United Kingdom which includes Market, Financial, Credit and ESG/EE-ESG data for listed firms for the period January 2000 to June 2021.
- Improvement of database structure and efficiency in order to incorporate new SME surveys data and to support the development of EE-ESG scores in WP3.
WP2 Standardized EE-ESG SMEs’ survey
- Definition of a standardized questionnaire to collect SMEs information on EE and ESG factors (D2.1). The questionnaire is structured into a core/general section (including 4 macro-sections: business, environmental, social and governance); 3 sectoral declinations on construction, manufacturing metals and manufacturing non metals, and 4 focus on thematic area related to firm dimension and energy efficiency.
- Implementation of the survey on the Italian SMEs market mainly through a dedicated platform and the CRIF commercial network.
WP3 Standardized EE-ESG rating
- SMEs’ EE-ESG credit risk evaluation (evaluation of investments on EE financing activity) (D 3.1)
WP 4. Long term financing instruments for the “green recovery”
- Technical Report on Key opportunities to enhance standardised disclosure of EE-ESG products (D4.1)
- Technical Report on market needs for EE-ESG covered bond disclosure (D4.2)
WP5 Dissemination and capacity building
- Dissemination and Communication Plan (D5.1)
- Report on Dissemination and Communication Activities months 1-18 (D5.3)
- TranspArEEns visual identity (project logo and templates)
- Project website
- 2 press releases and a video for project presentation
- Project flyers (in English and in Italian for SMEs’ involvement)
- Stakeholder involvement process
Achieving the EU2030 climate and energy targets requires additional investments, estimated by the European Commission (EC) in 260 billion EUR per year. With the European Green Deal launched in 2019, the European Union (EU) scales up its sustainability ambition, aiming to be climate neutral by 2050. Energy Efficiency (EE) investments (e.g. building retrofitting and construction of less energy consuming buildings) have been considered an important tool for addressing climate change mitigation and adaptation.
TranspArEEnS was born with the aim of developing a quali-quantitative framework for a standardized collection and analysis of firms’ EE and ESG disclosure and introducing a standardized EE-ESG rating in accordance with the ESG disclosure and benchmarks’ recommendations of the EU Technical Expert Group on Sustainable Finance (TEG).
The EE-ESG rating that will be developed by TranspArEEnS will be best positioned to make a key contribution to enhance disclosure of firms’ alignment to EU2030 objectives, the EU Taxonomy and ESG benchmarks, focusing on EE investments.
TranspArEEnS will achieve its goal by means of five measurable objectives: (i) develop a standardized large-scale EE-ESG database; (ii) develop a standardized EE-ESG SMEs (Small and Medium Enterprises) survey; (iii) develop standardized EE-ESG rating; (iv) support long term EE-securitization; (v) dissemination and capacity building.
TranspArEEnS deals with 4 main challenges:
1. To develop a standardised and transparent framework to collect and assess information on EE investements and ESG performances for Small and Medium-sized Enterprises, which represent 99% of all businesses and are a driving force of economic growth in the EU, and in Italy in particular. This aspect is crucial to increase market confidence and thus mobilize private capital (including long term EE-financing via securitization).
A survey involving a large number of Italian SMEs will be conducted to collect quantitative and qualitative information on the EE and ESG dimensions in different economic sectors.
2. To promote a robust understanding of SMEs’ EE and ESG credentials and therefore enhance banks’ understanding to the extent to which these ESG credentials influence SMEs creditworthiness and the subsequent performance of exposures to these firms over time.
Data collected via the standardised survey and stored in the firm-level database will be used to generate EE-ESG ratings using a range of techniques, including Artificial Intelligence and Machine Learning, to account for the different types of information and their sources.
3. To identify securitization instruments for EE-financing with attention to long-term. Currently, the lack of data and disclosure of firms - and in particular SMEs – on EE and ESG performances and the subsequent impact on their risk profile, continue to represent an obstacle to the financing of SMEs’ EE and green investments.
TranspArEEnS will address this need by developing long-term EE-financing instruments via securitization (covered bonds, European Secured Notes).
4. To develop a protocol for greenwashing detection in EE and ESG products.
TranspArEEnS will provide recommendations for detecting greenwashing in the assessment of EE and ESG disclosure and the evalutaion of their impact on credit risk.
TranspArEEnS was born with the aim of developing a quali-quantitative framework for a standardized collection and analysis of firms’ EE and ESG disclosure and introducing a standardized EE-ESG rating in accordance with the ESG disclosure and benchmarks’ recommendations of the EU Technical Expert Group on Sustainable Finance (TEG).
The EE-ESG rating that will be developed by TranspArEEnS will be best positioned to make a key contribution to enhance disclosure of firms’ alignment to EU2030 objectives, the EU Taxonomy and ESG benchmarks, focusing on EE investments.
TranspArEEnS will achieve its goal by means of five measurable objectives: (i) develop a standardized large-scale EE-ESG database; (ii) develop a standardized EE-ESG SMEs (Small and Medium Enterprises) survey; (iii) develop standardized EE-ESG rating; (iv) support long term EE-securitization; (v) dissemination and capacity building.
TranspArEEnS deals with 4 main challenges:
1. To develop a standardised and transparent framework to collect and assess information on EE investements and ESG performances for Small and Medium-sized Enterprises, which represent 99% of all businesses and are a driving force of economic growth in the EU, and in Italy in particular. This aspect is crucial to increase market confidence and thus mobilize private capital (including long term EE-financing via securitization).
A survey involving a large number of Italian SMEs will be conducted to collect quantitative and qualitative information on the EE and ESG dimensions in different economic sectors.
2. To promote a robust understanding of SMEs’ EE and ESG credentials and therefore enhance banks’ understanding to the extent to which these ESG credentials influence SMEs creditworthiness and the subsequent performance of exposures to these firms over time.
Data collected via the standardised survey and stored in the firm-level database will be used to generate EE-ESG ratings using a range of techniques, including Artificial Intelligence and Machine Learning, to account for the different types of information and their sources.
3. To identify securitization instruments for EE-financing with attention to long-term. Currently, the lack of data and disclosure of firms - and in particular SMEs – on EE and ESG performances and the subsequent impact on their risk profile, continue to represent an obstacle to the financing of SMEs’ EE and green investments.
TranspArEEnS will address this need by developing long-term EE-financing instruments via securitization (covered bonds, European Secured Notes).
4. To develop a protocol for greenwashing detection in EE and ESG products.
TranspArEEnS will provide recommendations for detecting greenwashing in the assessment of EE and ESG disclosure and the evalutaion of their impact on credit risk.