At the end of 2019, the United Nations (UN) Global Compact, the largest global initiative in the field of sustainability, created a Taskforce formed by the Chief Financial Officers of a large number of companies, to face the challenges related to sustainability and the UN’s Sustainable Development Goals (SDGs). This is the first global initiative involving CFOs in an Action Platform (collaboration platform) dedicated to sustainable finance. The network was created recently and has very ambitious objectives, including, most importantly, guiding companies’ financial strategies. We asked Alessandra Genco, Leonardo’s CFO since October 2017, to explain to us how the company interprets the concept of sustainable finance in its strategy.
“In recent years,” says Genco, “awareness has grown globally for the need to invest hundreds of billions of Dollars to achieve the Sustainable Development Goals. Finance plays a central role because without the confluence of huge capital, projects that support sustainable development will never be able to materialise. This is where the CFO Taskforce comes into play; its main task is to direct capital in this direction. In Leonardo, common and comparable indicators and KPIs (key performance indicators) have been developed to promote and measure our contribution to achieving the SDGs. In fact, investors are increasingly placing these objectives at the heart of their strategies to combine financial returns with tangible progress on environmental, social and governance issues. This is why SDG investments are growing. Investing in companies that have sustainability as a strategic commitment generates value.
In Leonardo, sustainability is part of our strategic plan ‘Be Tomorrow - Leonardo 2030’. Our core business is to develop high-tech solutions with a relapse in social terms, for both our base of employees and for our entire production chain. Without forgetting schools and universities, where we offer job opportunities that wouldn’t exist without Leonardo.”
On 21 September in New York, at the United Nations Assembly, the Taskforce illustrated the CFO Principles on Integrated SDG Investment and Finance – signed by all members – to align companies’ financial strategies with sustainability commitments. In your opinion, what are the most interesting points that have emerged?
There are essentially four principles developed by the CFOs: the first commitment is to establish objectives with KPIs that measure the contribution of the company to the achievement of one or more SDGs. The second states that the achievement of the objectives must be geared to an investment strategy which, in addition to the classic risk/reward parameters, also comprehends a new parameter that shows if planned investments help to reach the company’s sustainability goals. The third principle is to develop a strategy to convince investors to buy Leonardo’s debt used to finance sustainable development. This triggers a reward mechanism both for virtuous companies and investors, who are convinced that their investment is positive and profitable. The fourth principle provides for the creation of an integrated reporting approach with sustainability as part of the strategic plan for the medium and long term. Starting this year, Leonardo will deliver a financial statement integrated with sustainability reporting because sustainability is a pillar of our corporate strategy. This does not mean that sustainability is 'pro bono' or that Leonardo has become a non-profit company. It means that we and investors believe that a company inspired by the principles of sustainability has a greater ability to compete and perform better in future decades.
Within the Taskforce, in addition to Leonardo, there is a high proportion of Italian companies. Can we read this as a change of pace for our country, which recognises the urgency of an international debate on the issue of sustainable development?
In recent years, Italy has developed a marked sensitivity on the issues of sustainable development. In fact, even within the Green Deal developed by Europe as part of the Recovery Fund, our country has provided a great contribution to the development of the framework. What we can say is that Italy has developed a very high awareness of sustainability, recognising that it has a significant asset in natural beauty.
In recent years, Leonardo’s sustainability path has become a landmark within its industry; in 2019 it was Industry leader in the Aerospace & Defence sector of the Dow Jones Sustainability Index. It recently entered the UN Global Compact LEAD, the only company among the top ten in the world in this sector. What were the company’s actions that, in your opinion, favoured these awards?
With a pinch of pride and thanking about the colleagues who have made this possible, we can say that a model has been built in Leonardo and choices have been made that are now best practice internationally. Among these, I would certainly mention governance; an aspect that also involved different boards and is a pillar for our company that operates in the aerospace and defence sector where the principles of compliance and ethics are very strong. Another decision was to create integrated and cross-functional transversal teamwork. Ambassadors were appointed in the divisions and central functions, with the aim of creating engagement among all employees. The concept of sustainability was not 'imposed' from above but shared at all levels. Another crucial aspect concerns the integration of sustainability in the corporate strategic plan. Last but not least, was the decision to include a sustainability component in the variable remuneration policies. For example, last year a component of the variable salary of executives was linked to Leonardo's entry into the Dow Jones sustainability index. This policy will be confirmed in the coming years to clearly demonstrate the commitment we all put into achieving sustainable growth and development.