Good ESG practices enable firms to benefit from competitive advantages stemming from innovation, to mitigate operating, legal and reputational risks, and lead to more efficient resource allocation, all of which tend to lower the cost of capital and to achieve better operational and market performance.
For example, some analyses carried out by the Bank of Italy have provided clear evidence of a return premium on the shares of European electricity utilities with lower carbon emissions. Experience has shown that reputational risks and the risk of serious losses for firms and their shareholders can instead arise from inappropriate business practices from an ESG point of view.