Federica Ielasi

Are the determinants of entry into non-performing status the same as those governing its resolution? This paper addresses thisquestion by analysing the post-origination evolution of loans guaranteed by the Italian Central Guarantee Fund for SMEs. Usingadministrative data on more than 3 million guaranteed loans granted between 2019 and 2024, we model guaranteed exposures as athree-state process, distinguishing between performing loans, non-performing loans, and guarantee enforcement. Transition probabilitiesare estimated within a Bayesian probit framework that examines both entry into distress and the subsequent resolution ofdistressed loans through either recovery or enforcement. We find that they are not: the determinants of entry into non-performingstatus differ from those governing its subsequent resolution into recovery or enforcement. Firm characteristics, loan purpose, guaranteestructure, sector and geographical location play a key role in explaining the transition into non-performing status, while theprobability of enforcement versus recovery is strongly influenced by the time spent in distress and by the nature of the guaranteedexposure. These results show that the effects of public guarantee schemes extend beyond credit access to the entire lifecycle ofcredit risk, and that their evaluation should distinguish between deterioration, recovery, and final loss realization — a distinctionrelevant for the design, targeting, and monitoring of public guarantee programmes.

The European sustainable finance agenda has increased the demand for ESG information, yet most small and medium-sized enterprises (SMEs) remain outside mandatory sustainability reporting requirements, which are largely designed for large listed firms. This creates an information gap for banks required to integrate ESG risks into credit assessment, while SMEs often lack proportionate tools to disclose and signal their sustainability-related practices. This paper addresses this gap by examining how an SME-oriented ESG rating can structure sustainability information in bank lending and which criteria and data can support a proportionate assessment framework for resource-constrained firms. Using Banca Etica’s internal socio-environmental rating model and a unique dataset of 2395 Italian SMEs, the study provides descriptive evidence on ESG score patterns by firm size, legal form and economic sector. The results suggest that Social and Governance dimensions are more readily assessable within the rating model, as they rely on observable organisational practices such as labour conditions, gender balance, stakeholder relations and governance structures. By contrast, Environmental scores are systematically lower, suggesting that environmental practices are more difficult to formalise and document through standardised assessment tools, especially when they require monitoring systems, certifications, technological adaptation and upfront investments. The paper contributes to the literature by linking the SME regulatory gap with a parallel gap in ESG rating research and by documenting how an internal bank-based ESG rating can structure SME sustainability information and support credit assessment processes. Rather than providing direct evidence of improved creditworthiness, the study shows how such ratings may function as potential signalling mechanisms for SMEs within relationship-based lending.

We study whether biodiversity loss affects the financial performance of Italian small and medium enterprises (SMEs) and whether these exposures translate into risks for the banking system. We combine firm-level accounting data for 2014-2024 with high-resolution geospatial measures of biodiversity loss and climate shocks. To address endogeneity, we instrument biodiversity loss using exogenous drought conditions. Baseline estimates suggest a statistically significant negative association between biodiversity loss and profitability (-0.0002***), along with small positive correlations with revenues (+0.0003*) and production costs (+0.0005***). Nevertheless, these relationships do not survive instrumental-variable identification, in which the estimated effects become economically small and statistically indistinguishable from zero. However, this average masks substantial heterogeneity. Micro-enterprises experience a significant contraction in activity, with revenues declining more than costs. In addition, firms operating in sectors more dependent on ecosystem services exhibit significantly lower profitability when exposed to biodiversity loss. Aggregating firm-level exposures through bank branch networks reveals pronounced and persistent cross-bank heterogeneity in biodiversity-related risk, with a high concentration of exposure among a small number of institutions. These findings suggest that, while average effects at the firm-level are limited, biodiversity loss may still pose localized risks with potential implications for financial stability.

Asset managers increasingly seek sophisticated and comprehensive models that integrate sustainability factors for assessing market risks. Further, European supervisory authorities endorse the use of prudential models that consider environmental, social, and governance (ESG) factors as key drivers of market risks. Drawing on a prudential risk management approach, this study proposes specific improvements for traditional market risk models by integrating ESG risk measures. The aim is twofold: (i) to evaluate the overall impact of ESG factors on ESG Value-at-Risk ([[EQUATION]] by introducing a novel “synthetic” decomposition of ESG risk and (ii) to provide a solution for financial portfolios containing assets with a negative correlation to other components. The proposed measure, Total [[EQUATION]], is useful for managerial decision-making in multi-asset portfolios, as it considers the potential decorrelation effects, thereby improving the predictive power of market risk measures.

Pension plans may either limit their sustainability approach to commercial purposes or adopt governance practices aligned with sustainability principles, thereby strengthening their Corporate Social Identity (CSI). This paper explores the moderating role of CSI in the relationship between traditional corporate governance mechanisms and pension plans' sustainable investment choices. The study covers a representative sample of Italian pension funds, social welfare funds, and individual pension plans. It employs proprietary survey data collected through ad‐hoc questionnaires for the period 2021–2023, combined with detailed hand‐collected information on governance structures and board members' characteristics. The results confirm the main assumptions of the Upper Echelons Theory, showing that directors' demographic and cognitive characteristics significantly shape the sustainability orientation of pension funds. CSI further amplifies these effects by moderating the relationship between governance attributes and ESG investment choices. The study highlights the role of internal governance mechanisms and organisational culture in the sustainable transition of pension funds and extends the application of the Upper Echelons Theory by introducing CSI as a complementary governance dimension.

This study examines the market reaction to the approval of the Nature Restoration Law, a key component of the EU Biodiversity Strategy, and its implications for biodiversity-related financial risks. Using an event study methodology, we analyze the equity price movements of companies listed in the MSCI Europe Index that are equally weighted in relation to the announcement. We select the RepRisk Due Diligence Score, focusing on incidents linked to landscapes, ecosystems, and biodiversity, as a measure of biodiversity risk. At first, it seems that companies with a high RepRisk Due Diligence Score show limited or positive abnormal returns, suggesting that biodiversity risks are already priced for companies that have experienced incidents linked to this issue. Conversely, firms with lower biodiversity risk exposure see null or negative impacts, reflecting heightened investor concerns about new environmental regulations or compliance costs. Although the event does not have a systemic impact on European companies in the index, it seems that some sectors are affected when analyzed using parametric and non-parametric distributions.

This study investigates the factors influencing the success of sustainability-oriented equity crowdfunding campaigns by analyzing a dataset of 771 campaigns from Italian platforms between 2014 and 2021. The findings indicate that while projects with a sustainability focus tend to achieve better outcomes, their success is contingent on variables such as the economic sector of the proposing company and investor concerns regarding misleading claims about environmental, social, and governance practices. Notably, professional investors play a critical role in early-stage financing, initiating information cascades that drive broader investor participation. Furthermore, the COVID-19 crisis appears to have heightened investor interest in sustainability, further solidifying equity crowdfunding as a viable financing tool for ventures with environmental and social objectives. By identifying the key factors that drive the success of sustainability-oriented campaigns, this study offers valuable insights for entrepreneurs, investors, and policymakers seeking to enhance the role of alternative finance in promoting sustainable innovation.

The world’s 300 largest pension funds manage assets for more than USD 21 trillion. A strict orientation to environmental, social, and good governance (ESG) in the investment portfolio of pension funds can play a key role in triggering the economy toward a sustainable transition. Can responsible pension plans be an attractive investment opportunity for young people? Since the performance of pension funds depends on the demographic characteristics of investors, other than the financial results of investment portfolios, this study aimed to test the convenience of ESG-oriented pension plans for young contributors aged 20–29 with different risk propensities and attitudes towards sustainability. The analysis was started using accurate data provided by an Italian pension fund, observed from 2012 to 2022. The methods applied were a Monte Carlo simulation of the individual actuarial balances, the expected utility, and the willingness to pay. The results show that ESG-oriented pension funds are convenient for young people who invest in riskier lines. Still, it is sufficient for a light green preference to persuade young contributors to invest in ESG-oriented funds and balanced lines. The results of the study can support pension fund managers in defining and offering appropriate ESG lines suitable for younger investors.