A discussion with Mariangela Zappia
A discussion with Mariangela Zappia, Permanent Representative of Italy to the United Nations in New York, Ambassador nominated of Italy to the United States and Rosa Sangiorgio, Head of ESG, Pictet Wealth Management.
The environmental challenges we face today demand a true paradigm shift and a profound reassessment of the concept of growth. Around the world, there is a shift underway from an absolute focus on profit as the only measure of value to one of systemic value, in which the economy, society and the planet are all equally taken into account.
The pandemic as a catalyst
RS: From your vantage point at the UN, how has the Covid-19 pandemic affected the evolution of our economic engine? Do you think these changes are temporary or can we expect a new normal going forward?
MZ: The current context is complex and in constant flux. What we thought of as the future, when we spoke of sustainability before the pandemic, has now become the present. The future crashed into the present by way of the unprecedented global challenges that the pandemic sharpened our awareness of.
At the UN, our focus on these issues led to the launch of the 2030 Agenda for Sustainable Development in 2015. These goals brought awareness to the interrelationships of development: there is no economic development without social development or without sustainability. The equation of our present is for Sustainable Development to unlock society's future.
First of all, the current paradigm shift has been accelerated in an unprecedented way, in part because the pandemic has highlighted the vulnerability of our system. It has rapidly and structurally changed our lives.
Second, today, transition has also become the key word. For the first time, the Italian government has appointed not a Minister of the Environment in general, but a Minister of Ecological Transition, as well as a Minister of Digital Transition.
The third word that characterises our present is resilience. To define a country’s trajectory and prosperity in real terms, gross domestic product (GDP) is an insufficient indicator. We can no longer overlook factors such as environmental impact, natural capital, internet access, digital literacy, gender parity, human and creative capital and even happiness, as well as judicial efficiency, resilience of healthcare systems, and workers' rights. All of these factors are omitted from GDP, making it innately deficient as an indicator of a country's wellbeing.
In this sense, the Italian government has been a pioneer in adopting the UN Sustainable Development Goals (SDGs) in its budget laws. Since 2016, these principles have been part of the economic planning process; they are annexed to economic and financial documents and will guide pandemic recovery policies.
To achieve the SDGs we must bridge the financing gap, which even before the pandemic amounted to USD 2 to 3trn per year .
The new ecosystem of change: public/private symbiosis
RS: These rapid, structural changes and the need to look beyond GDP are changing the ecosystem of institutions and governments and their relationships with the private sector. Is it possible that the private and public sectors will spur each other to raise the financial resources needed to meet these goals?
MZ: Not only is this a possibility, but it is necessary and inescapable. This multi-stakeholder concept presents a new way of addressing the global themes that affect us all, by giving voice to all components of society. The same thing happens at the national level: the six key missions of Italy's Recovery and Resilience Plan, which consists of an unprecedented EUR 220bn in total, must involve all parties. The government plays a key role of orientation and guidance, but there can be no transition without a partnership not only between government and the private sector but also among generations.
RS: Many speak of “being in the same boat” but I like the expression “we're all in the same storm”, because our boats are all different. The UN has made a huge contribution to including sustainability in the investment industry. Can you tell us about the issues the UN is working on? What is highest on its agenda right now?
MZ: The Agenda for Sustainable Development is at its core a vision of a sustainable society made of 17 building blocks, all of which must interlock are mutually interdependent. The pandemic has heightened the awareness that everything is connected, that there is an unsustainable tension between humans and our surrounding environment and that existing inequities must be reduced.
Recognising what a force private industry can be for this change, Secretary-General Guterres created a global alliance of sustainable investors made up of 30 multinational institutions who take the lead by setting a good example. There is also the UN Global Compact, the world’s largest corporate sustainability initiative, which aligns action with the UN principles. So the private sector is wholeheartedly part of the Agenda.
Sustainability is paramount for the new generations of investors
RS: I like to use two words of yours: alignment and transparency, which are particularly pertinent in connecting with the new generation of investors. Millennials approach investing with a mix of distrust and desire to change the future and at the same time now have the means to change society through their sustainable investments. What are your views on this generation of investors?
MZ: Alignment and transparency are two things that young people demand loud and clear. Alignment means having a plan, ideas, and clear prospects. Transparency means not hiding anything; it means communicating this inclusive vision. The paradigm shift goes beyond Millennials to young adults in their early twenties, Generation Z, who have become investors during the pandemic or will start investing soon. They want to participate in change by investing responsibly, without trusting blindly but examining whether there is a real transition in corporate practice. They can distinguish mere marketing exercises from real action by companies to change society. The concept of “value-based investing” is therefore dear to the very young.
RS: We spoke of an international agenda for sustainable transition, what about Italy? Are we aligned with these changes?
MZ: The recent enhanced awareness shaped recovery plans geared strongly toward the SDGs. While national plans may differ in some respects, they all have a common matrix. Looking at the six missions of Italy’s plan, it is clear that domestic and foreign policy are increasingly one and the same, more so than in the past. I see global alignment on what needs to be done and the recognition that there's no time to waste. 2030 is around the corner; present and future have converged.
Global alignment and Italy's role
RS: Will Italy be able to manage the funds it receives and do the right things?
MZ: The current government's vision is to start with the major reforms that have been pending for a long time, like Justice and Public Administration. I think Italy will manage because there's great awareness of what a unique opportunity this is: there has never been so much money available (USD 16trn at the global level, with additional recovery funds being further approved by many countries and organisations). The will is there, and the prime minister has assembled a government with vision that is working toward the same direction. We need to be able to “deliver” on the plans required of us to receive the funds. American investors are greatly interested in Italy because they see an intelligible, singular plan for an Italian comeback, combined with the will to make reforms with alignment and transparency, as we were saying.
Women in the workplace − not just a question of rights, but an engine of growth
RS: The topic of equal opportunities meshes perfectly with responsibility. How can we send a clear message that in this case, too, it's not about “doing good” but rather an opportunity to work better and create value?
MZ: The first “victims” of the economic shutdown have been women. Gender parity is in essence a problem of equal rights. It's a question of both human rights and economic development. The IMF has demonstrated that if countries with few women in the workforce would eliminate gender disparity, their GDP would grow by an average of 35%, an enormous amount. The gender gap in workforce participation is still 31%, which is also an enormous amount. In short, it takes female empowerment to realise the full potential for economic growth. But there are other data to support what you well know: for example, adding just one woman to a bank's management team or corporate board is associated with an 8 to 13% increase in return on assets. Or, as the World Bank has reported, only 11% of senior partners of private equity funds are women but where women make up at least 30% of investment teams, the funds earn 10 to 20% more. So it's not just an ethical question – it makes good economic sense.