Italian firms rely on internal funds for green investments
A Banca d'Italia study reveals that just over a quarter of Italian firms undertook green investments between 2021 and 2024. These investments were primarily financed by internal resources, with bank credit playing a larger role for smaller companies.
Internal funds fuel green projects
A Banca d'Italia study, drawing on firm-level and bank-level data from 2021 to 2024, reveals that 27 percent of Italian firms engaged in green investments, defined as projects enhancing energy efficiency or renewable energy use.
This trend shows a strong positive correlation with firm size, with larger companies significantly more likely to invest.
Financing for these projects predominantly comes from internal resources, while bank credit plays a more crucial role for smaller firms.
Market-based instruments remain a marginal funding source.
The study also highlights that green loans constitute a limited share of total bank credit to companies, accounting for only 4 percent of disbursed amounts between 2021 and 2023.
Banks surveyed indicate difficulties in integrating firms' environmental sustainability objectives into their credit risk assessment models, which may explain the low uptake of green loans.
Navigating the green transition
The study is set against a backdrop of increasing global concern over climate change and the growing integration of environmental, social, and governance (ESG) factors into financial decisions.
Sustainable finance is crucial for aligning investments with a low-carbon transition, despite challenges in standardizing definitions and taxonomies.
Banks play a significant role, supported by regulators who encourage ESG integration through reporting requirements.
The paper leverages firm-level data from Banca d'Italia's Survey of Industrial and Service Firms (INVIND) and bank-level data from the Regional Bank Lending Survey (RBLS) to provide granular insights into Italian companies.
It also references the evolving landscape of sustainability reporting, such as the Corporate Sustainability Reporting Directive (CSRD) and its recent scope adjustments.
Green finance: More talk than action?
This research offers a crucial reality check on Italy's sustainable finance, exposing a significant gap between ambition and practical implementation, especially in bank lending.
The heavy reliance on internal funds and limited green loan penetration highlight systemic hurdles for smaller entities in the green transition.
Stronger regulatory incentives or clearer ESG integration into credit assessment are vital to accelerate green investment.