REPAiR LAB meets Euronext Growth Milan companies to discuss the new ESG ITA GROWTH index.

Being among the 30 "best in class" companies that make up the index offers several advantages and can have a positive impact on the liquidity of the stocks.

Following the presentation of the research project "SMEs listed on EGM (Euronext Growth Milan)," Michele Calcaterra, Chief Operating Officer of REPAiR Lab at SDA Bocconi and Senior Lecturer in Corporate Finance, in collaboration with CRIF and Ambromobiliare, invited companies belonging to the segment to a workshop aimed at analyzing the opportunities to be part of the new ESG ITA GROWTH financial index.

"About six months ago, we started to consider the opportunity to build a financial index dedicated to small and medium-sized enterprises listed on the Euronext Growth Milan market," explains Calcaterra. "Our index selects the 30 best-in-class companies based on three elements: liquidity, market capitalization, and the ESG score obtained through the rating model developed by CRIF. Why did we think of an ESG index? Because we know that investors today base their resource allocation on evaluations of the sustainability of listed companies."

The ESG ITA GROWTH index is also an opportunity for companies participating in this listing market: it demonstrates that being sustainable is an added value to attract investment. It is not surprising that the index has outperformed the FTSE Italia Growth benchmark for 12 out of the 17 months examined.

But how does the rating model developed by CRIF and used to assign the ESG score to EGM companies work exactly? The model collects only public information acquired through open data from CRIF's information assets and is processed using models, macroeconomic and climatic scenarios, sector benchmarks, as well as machine learning methodologies and rules based on CRIF Ratings' experience, CRIF's Credit Rating agency.

The weight distribution of the three components of the score is as follows: 50% E, 30% G, and 20% S. Several indicators are examined for each component, which are normalized to make them comparable across different companies. The final output is a rating in 5 classes that allows the assessment of the adequacy of each individual company in relation to the considered E-S-G factor.

Regarding one of the most critical indicators in the rating model, Calcaterra offers further food for thought: "We know that the inclusion of geospatial information is perhaps the aspect that companies like the least. Virtuous companies located in less virtuous territories may be penalized. Conversely, less virtuous companies present in highly virtuous environments improve their rating by benefiting from investments made by others. I understand that it may not be pleasing, but it is important to understand that being listed implies not only thinking differently from a financial point of view but also being able to change the reference context through lobbying activities, urging institutions to invest in the territory through environmental initiatives. Working on the social fabric, in terms of sustainability, is a responsibility of listed companies."

To improve their ESG profile, CRIF and Ambromobiliare suggest that companies invest in measurement and reporting, purchase green certificates, and improve the energy classes of their properties. They also propose using the funds from the National Recovery and Resilience Plan (PNRR) for business transformation and focusing on reducing the gender gap by adopting remuneration policies that can narrow the gender pay disparity and through the composition of Board of Directors.

SDA Bocconi School of Management