2022.06 Report on sustainable investments and cryptoassets - CONSOB AND ITS ACTIVITIES
REPORT June 2022
The Report analyses the emerging trends in sustainable investing and in the markets for cryptoassets, also with regard to the developments that can affect the achievement of CONSOB remit.
Over the past two years, sustainable investments experienced a significant growth, against a fluctuating performance of the main equity benchmarks. ... more
|At the global level and within the euro area, indices that include the companies considered most attentive to sustainability issues (also ESG indices from now on) have shown a significant recovery from the drop recorded in the early 2020s during the health emergency triggered by Covid-19, settling at higher levels than the pre-pandemic ones at the end of May 2022. Both in the euro area and in Italy, ESG benchmarks show slightly higher performance than the market as a whole and similar or slightly lower levels of volatility, against a composition that replicates that of the corresponding reference index by at least 70%.
In recent years, both the number of listed companies in the euro area and Italy with an ESG score and the median value of the score (overall and by single factor; Refinitiv data) have increased. In Italy, issuers with higher ratings are characterised by higher market capitalisation and lower share price volatility; they are also more frequently active in the utilities and energy sectors.
In terms of the supply of sustainable financial instruments, Europe sees its leading role confirmed: as of June 2022, around 50% of the global aggregate of ESG bond issues refer to European countries, while the assets of European ESG mutual funds account for more than 80 per cent of the global figure.
In the first half of 2022, green bonds accounted for 60% of the total issued amount, followed by sustainable bonds (i.e. linked to financing projects or activities with positive environmental and social impacts, accounting for 26% of the total) and social bonds (i.e. aimed at financing projects with positive social impacts, accounting for 14% of the total). Among green bonds, slightly more than half are in line with the standards of the Climate Bond Initiative (CBI), while in the remaining cases the greenness of the bonds is only attested by the issuer (the figure rose from 10% in 2021 to 23% in the first half of 2022). In the largest euro area countries, ESG bond issuances mostly refer to financial companies, followed by those operating in the utilities and transport sectors and, from 2020, public issuers. In Italy, the launch of public programmes in 2021 has boosted the growth of green bond issues, partially closing the gap with the other main euro area countries.
With regard to ESG funds, in March 2022 the European funds was almost 5,000, with total assets close to 2,300 billion of USD, with an year-on-year increase of 40%. A similar trend can be observed in Italy, where at the end of the first quarter of 2022, the number of ESG funds exceeded 1,900 (1,266 as at March 2021), while the assets rose to 431 millions of euro (295 as of March 2021).
Since 2020, the number of cryptocurrencies has been growing, rising from just over 2,400 to over 10,300 in April 2022. ... more
|Capitalisation has also increased significantly, although it remains small in comparison to the capitalisation of the stock markets, standing for example at 2.5 per cent of the cumulated value of the S&P500 and the Stoxx Europe 600. At the end of May 2022, more than 60% of the total capitalisation of cryptocurrencies is attributable to Bitcoin and Ether, while the figure stands at 13% for stablecoins.
Decentralised finance applications (Decentralised Finance or DeFi), which through blockchain infrastructures enable the creation and exchange of cryptocurrency-related financial products and services, disintermediating traditional operators and centralised infrastructures, have also grown at the same pace. In particular, the value locked in DeFi applications (used as a size proxy) increased from 16.5 billions of USD at the end of 2020 to about 56 billions in May 2022 (peaking at over 95 billions at the end of 2021). Cryptocurrencies keep being characterised by extremely volatile prices that are declining since the beginning of 2022. In the May 2021 - May2022 period, for example, Bitcoin's volatility and returns were at levels far above and far below those of some non-digital asset classes, respectively. The prices of popular cryptocurrencies are only mildly correlated with the performance of major stock indices, although this link has strengthened slightly in recent months.
The cybersecurity of applications underlying cryptoassets remains a major critical profile: some statistics on 120 digital platforms dedicated to cryptoassets show that only 16 can be considered very secure. Moreover, according to other sources, from September 2020 to end of May 2022, the total amount of funds stolen from DeFi applications as a result of cyber-attacks exceeded 2 billions of USD, with the most significant growth in 2022.
Since 2021, interest in cryptocurrencies has grown significantly, as evidenced by the uprise in the number of searches made online for terms associated with them. The share of population owning cryptoassets peaks in Ukraine and Russia (13% and 12% respectively), while among the major European economies it ranges from 5% in the UK to 2% in Italy. Globally, mutual funds dedicated to cryptoassets have also increased, especially in North America, with some estimates pointing to a rise in their assets under management from 36 USD billion at the end of 2020 to almost 70 USD billion in March 2022.
The Report was prepared by:
Nadia Linciano (coordinator) - CONSOB, Head of Research Department (firstname.lastname@example.org)
Valeria Caivano - CONSOB, Economic Studies, Research Department (email@example.com)
Daniela Costa - CONSOB, Economic Studies, Research Department (firstname.lastname@example.org)
Simona Di Rocco - CONSOB, Economic Studies, Research Department (email@example.com)
Monica Gentile - CONSOB, Economic Studies, Research Department (firstname.lastname@example.org)
Thanks to Gaetano Finiguerra for his contribution to the definition of contents and the organisation of the Report. The opinions expressed in this Report are the authors' personal views and are in no way binding on CONSOB.