Disclosure pursuant to Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on the disclosure of sustainability in the financial services sector.
The Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019, concerning the information on sustainability in the financial services sector (hereinafter referred to as SFDR), was adopted in November 2019 and amended in June 2020 with the adoption of the Regulation (EU) 852/2020 (c.d. Taxonomy of eco-sustainable activities). The SFDR introduces a series of disclosure requirements on the integration of sustainability risks and the consideration of the negative effects on sustainability in investment processes. Disclosure obligations have a dual scope: subject-level and product-level and different ways of implementation, namely by publishing information on the company’s website, pre-contractual product information and periodic communications. The disclosures are of two types: those related to sustainability risks and those related to the main negative effects of investment decisions on sustainability factors (c.d. Principal Adverse Impact or PAI). The SFDR also provides important definitions, including sustainability risk, namely the risk that environmental, social or governance (ESG) factors adversely affect the value of the financial investment. The SFDR, therefore, requires a progressive integration of these risks in the investment processes and in the assessment in these processes of the negative effects on sustainability.
The identification of ESG Risks
The Real Group Risk Management Policy sets out guidelines for the identification, assessment, monitoring and mitigation of risks, as well as the definition of operational limits, in line with the general risk appetite defined by the Group.
Among the identified risks, risks related to environmental, social and good governance factors (e.g. ESG risks) are defined as the risks of financial or reputational losses arising from the impacts of environmental, social and personnel issues, respect for human rights and issues relating to the fight against active and passive corruption.
ESG risks impact the types of risk identified and classified in the risk management and assessment framework, as set out in the aforementioned Group Risk Management Policy, as they can change the frequency and/or impact in the short and medium - long term.
ESG risk mapping in the Non-financial Statement and the link with the Group’s top-down risk assessment
In the field of non-financial reporting, Reale Group has undertaken a process aimed at identifying ESG risks related to sustainability issues: through the collaboration between the Group Risk Management Function and the Group Sustainability Function, involving the various operational functions, ESG risks are integrated into the overall risk assessment of Reale Group. Among the risk assessment methodologies used by the Group, the Macro Check List (top-down risk assessment) is the auto-evaluation tooldetection through which the analysis of the risk profile is carried out - at a high level and in a strategic logic - with the aim of identifying any changes to be made to the categorisation of risks, also due to the sale of new products or entry into new markets, major technological or organizational changes.
The risk analysis is also carried out in a forward-looking manner in the ORSA (Own Risk and Solvency Assessment) process*, from 2020, the capital sustainability of the risk profile is assessed against a hypothetical increase in the frequency of accidents caused by weather events compared to expectations. The ESG risks thus assessed include risks related to the material theme "Responsible products and investments", identified as environmental, social or governance events or conditions that, if materialized, would have a significant negative impact, actual or potential, on the value of the investment.
Related ESG factors and risks in sustainable investment policy
The Sustainable Investment Policy (hereinafter referred to as Responsible Investment Policy or SRI) formalises commitments to the integration and assessment of ESG factors in investment management, in order to integrate financial analysis with environmental, social and governance information. The SRI Policy is applicable to all investment portfolios of the Group Companies, including, therefore, the Separate Management, with the exclusion of investments in the balance sheet class D (c.d. unit-linked investments, unit-linked individual pension plans and the Teseo Open Pension Fund). With this document, the Group recognises how ESG factors and the study of risks related to them generate a positive impact on society, contributing to sustainable development, and encourage the pursuit of positive financial results in the long term. In line with the Group’s Sustainability Strategy, an approach to integrating financial considerations with a careful assessment of investments in their social and environmental implications shall be applied in the selection and management of investments, on the basis of criteria that meet ethical and social responsibility requirements. Thus, the scope of traditional financial analysis is broadened by integrating ESG factors in the selection of investments, in order to improve long-term returns, mitigating ESG risks and identifying investment opportunities created or supported by the transition to the progressive application of ESG screening criteria. The approach is differentiated according to the different asset classes: government bonds, corporate bonds and shares, UCITS. Each asset is assigned a proprietary ESG Score, profiled on the Real Group Sustainability Strategy and processed using external, public and reliable providers. In the classification of its products, therefore, Reale Group considers equipped with "environmental and social characteristics" pursuant to art. 8 SFDR, the insurance investment products and pension funds that have as underlying the Separate Management. To these, is added the Teseo Open Pension Fund managed since 2006, adopting SRI criteria, in line with the mutual values that distinguish Reale Group.
Statement on the main negative effects of investment decisions on sustainability factors
Article 4 of Regulation (EU) 2019/2088 (hereinafter "SFDR") requires financial market participants with an average of at least 500 employees to publish on their website a "Statement on the main negative effects of investment decisions on sustainability factors" (hereinafter "Statement" or "PAI Statement"), with which they provide information about:
value and calculation methodology for measuring the indicators that determine the value of the investments they have generated on sustainability factors, including 18 mandatory indicators common to all financial market participants, and 2 chosen from those made available at the choice of each company;
actions taken to mitigate or reduce the negative impact on these factors;
the identification and prioritisation policies of PAI;
the engagement policies adopted by the companies pursuant to European Directive 2017/828 (cd. SHRD2);
the codes of conduct and international standards to which Reale Group adheres or refers in the identification, prioritisation and calculation of PAI;
the reference to the Paris Agreement.
This Declaration shall be issued by 30 June of each year for the previous fiscal year. In addition to Reale Mutua and Italiana Assicurazioni, which by law are required to take PAI into account, the Declaration is also issued by two other companies of the Group, Banca Reale and Reale Vida, which, although not required to write the PAI Statement, choose to take PAI into consideration because of the transparency that the Group intends to reserve to its stakeholders about the seriousness of the commitments undertaken with respect to the pursuit of sustainability objectives and the reduction of the negative impact that its activities generates on sustainability factors.
Each Company is therefore responsible for drafting its own PAI Statement.
Below you can see the PAI Statement of each company:
The integration of sustainability objectives into remuneration policies
Sustainability is an integral and fundamental part of the Group’s Remuneration Policies, which are based on sound, fair and transparent remuneration mechanisms.
The Sustainability Strategy integrates ESG metrics project in remuneration: a system of correlation of variable remuneration to the achievement of ESG and sustainability objectives. In particular, the Group is focused on a process of developing an evaluation system that allows the correlation of variable remuneration to the achievement of ESG objectives. Since 2021 evaluations the individual target scores have a new weight distribution, with a greater emphasis on the objectives of satisfying the expectations of certain categories of stakeholders (internal and external) and the achievement of strategic objectives, with social or environmental impact and linked to innovation and transformation.