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Italian corporates improving climate transparency and strategies - Industry roundup: 10 May

Italian corporates improving climate transparency and strategies

Italian companies and banks are advancing their environmental, social, and governance (ESG) transparency and strategies by responding promptly to the evolving regulatory environment, according to a new report from Sustainable Fitch. A combination of EU directives and national policy developments are reshaping Italy’s approach to sustainable finance.

Italian corporates are embracing rigorous third-party validations for their climate commitments, such as those provided by the Science Based Targets initiative, the report states. Moreover, they are integrating ambitious targets for reducing Scope 3 emissions into their sustainability-linked financial instruments, reflecting a trend towards comprehensive ESG strategies. The use of green bonds is strategic and focuses on funding renewable energy and energy-efficiency projects.

Banks are improving their transparency by disclosing Scope 3 emissions in their financing and investment portfolios, the report notes. The requirement for banks to disclose their green asset ratios from January 2024 will further enhance the openness of sustainable finance practices. Banks are also advancing their low-carbon strategies, with increasing transparency regarding their financed portfolios’ environmental and social impacts. The alignment with global sustainability standards is evident, as Italian banks join such initiatives as the Net-Zero Banking Alliance.

Development and cooperative banks are noteworthy for their contributions to social impact investing, particularly in support of the UN Sustainable Development Goals. However, there remains room for improvement in addressing the gender pay gap within the banking sector, despite progress.


The top 5 attraction drivers for finance function employees

Compensation, work/life balance and location are the top attraction drivers for finance function employees, according to a survey of 1,132 finance staff in the fourth quarter of 2023 by Gartner, Inc.

“Compensation is usually the top attraction driver and one of the main challenges CFOs have with retaining talent,” commented Shannon Cole, Senior Director Analyst, Research, in the Gartner Finance practice. “Our survey showed that only 43% of finance employees are satisfied with compensation. The importance of work/life balance and location as attraction drivers should give CFOs pause for thought about the potential challenges that may arise from return-to-office mandates.”

After compensation, work/life balance and location, health benefits and vacation were the next most cited attraction drivers among finance employees.

“Fifty-eight percent of finance employees say they are happy with location, the attraction driver they are happiest with in the top five,” said Cole. “However, this perspective may change as more companies increase their expectations around employee time spent in the office.”

Gartner experts caution that while return-to-office mandates do generate marginal increases to discretionary effort and employee engagement, they are likely to reduce intent to stay by a larger amount, particularly so among high-performing employees (-16%) and women (-11%).

“Finance employees have high confidence in the labour market right now. Moving away from a flexible working model will likely make it harder for finance leaders to attract new staff and comes with a significant attrition risk,” added Cole. “Finance leaders should weigh the pros and cons rather than assume a return to previous ways of working is the right thing to do.”

Given that employees are confident in the labour market and prone to job-seeking behaviour, maintaining an organisation’s competitiveness on the top attraction drivers will be key to both recruitment and retention of staff in 2024.

“Given the prevalence of hybrid working models since the pandemic, it can be argued that four of the top five attraction drivers for finance staff all relate to the employees’ lives outside their offices,” concluded Cole. “Aside from offering market-beating pay, paying close attention to the employee value proposition when they are not in the workplace should drive better attraction and retention.”


BoE maintains bank rate in May’s monetary policy meeting

At the Bank of England’s Monetary Policy Committee (MPC) meeting for May 2024, the MPC voted by a majority of 7-2 to maintain the bank rate at 5.25%. Two members preferred to reduce the rate by 25 basis points, to 5%.

Following modest weakness last year, UK GDP is expected to rise by 0.4% in 2024 Q1 and grow by 0.2% in Q2. Despite picking up during the forecast period, demand growth is expected to remain weaker than potential supply growth throughout most of that period. A margin of economic slack is projected to emerge during 2024 and 2025 and to remain thereafter, in part reflecting the continued restrictive stance of monetary policy.

With respect to indicators of inflation persistence, services consumer price inflation has declined but remains elevated, at 6.0% in March. In the statement accompanying the rate decision, the BoE noted that there remains considerable uncertainty around statistics derived from the ONS Labour Force Survey. It is, therefore, more difficult to gauge the evolution of the labour market. Based on a broad set of indicators, the MPC judges that the labour market continues to loosen but that it remains relatively tight by historical standards. Annual private sector regular average weekly earnings growth declined to 6.0% in the three months to February, although that series tends to be volatile. Alternative indicators also suggest easing pay growth.

Twelve-month CPI inflation fell to 3.2% in March from 3.4% in February. CPI inflation is expected to return to close to the 2% target in the near term but to increase slightly in the second half of this year to around 2½%, owing to the unwinding of energy-related base effects. There continue to be upside risks to the near-term inflation outlook from geopolitical factors, although developments in the Middle East have had a limited impact on oil prices so far. The May report notes that conditioned on market interest rates and reflecting a margin of slack in the economy, CPI inflation is projected to be 1.9% in two years’ time and 1.6% in three years.

The statement stressed that monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC’s remit. The MPC has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates. The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. 

“Today's decision to maintain interest rates at the same level will reassure some businesses and consumers but frustrate others,” commented Douglas Grant, Group CEO of Manx Financial Group. “The path however is set for rates to come down and small and medium-sized enterprises (SMEs) should seize this opportunity to reevaluate their current lending arrangements and strengthen their positions.”

Tom Hopkins, Senior Portfolio Manager at BRI Wealth Management, added: “Inflation in the UK continues to trend closer to the 2% target with the March reading printing 3.2%, If inflation continues to trend downward, optimism of a rate cut over the summer will grow.”


Transaction banking revenue growth in 2024 highly dependent on interest rates

Global transaction banking revenue growth in 2024 would be "highly dependent" on interest rate levels as major central banks are poised for cuts later in the year, Eric Li, a research director at Coalition Greenwich, said in an interview.

"The normalisation of rates is clearly going to have an impact on transaction banking because in the last two years, revenues were driven by [rising] interest rates globally," according to Li.

Revenues at the world’s 10 largest transaction banks rose 25% year over year to some US$47.3bn in 2023, reaching its highest level on record, as shown by the latest sector report of Coalition Greenwich. The revenue growth in 2023 was driven by a surge in cash management revenues, fuelled by the high interest rate environment.

Trade finance revenues declined in 2023 “due to weakened global trade, a drop in commodity prices and an increase in the cost of financing,” Coalition Greenwich said.

The company tracks the performance of Bank of America, Barclays, BNP Paribas, Citigroup., Deutsche Bank, HSBC, JPMorgan Chase., Societe Generale, Standard Chartered and Wells Fargo.

Rising net interest income resulting from higher rates boosted the banks’ revenues across regions, with Asia-Pacific recording the strongest revenue increase of 36% in 2023, the Coalition Greenwich data shows.

The rapid rate hikes done by major global central banks, including the US Federal Reserve, the European Central Bank and the Bank of England, in 2022 and 2023 were aimed at fighting rising inflation. As inflation started to ease in late 2023, the market expected rate cuts as early as the second quarter of 2024, yet central banks have signalled that rates would remain higher for longer.

Fewer cuts mean better transaction banking revenues. However, Coalition Greenwich's central case is for a slight decline in 2024 revenues, versus the strong 2023 result. Independently of this, business payment volumes continue to grow.

Yet it is difficult to gauge where 2024 sector revenues will land without knowing how many cuts the central banks will announce by the end of the year and whether the cuts will be synchronised across the Fed, the ECB and the Bank of England, Li noted.


PSR consults on directing APP scams reimbursement for CHAPS payments

The UK’s Payment Systems Regulator (PSR) is proposing to direct banks and other payment firms participating in CHAPS to reimburse their customers who have been victims of authorised push payment (APP) scams. The PSR’s direction will underpin the Bank of England’s new CHAPS reimbursement rules.  

In June 2023, the PSR published its policy requiring payment firms to reimburse APP scam victims who lose money through transactions over the Faster Payment System (FPS) – the system over which the majority of these scams happen. These FPS protections, which come into effect on 7 October 2024, mark a step change in the payments culture to improve scam prevention and focus firms on protecting people.   

However, criminals operate across multiple payment systems and in December 2023, the PSR said it would support the Bank of England as it introduces similar requirements for CHAPS. This means consumers will benefit from consistent protection across two major UK payment systems and more payment firms will be incentivised to tackle scams, reducing the likelihood of criminals switching from FPS to CHAPS due to differences in firms’ defences.  

The PSR has made its approach to CHAPS as similar as possible to its approach to FPS to reduce unnecessary duplication of work for directed payment firms while ensuring a high level of protection in both systems.  

After considering the responses to this consultation, the PSR expects to finalise and publish the specific direction in September 2024. The PSR is proposing 7 October as the go-live date, the same as the FPS reimbursement policy, meaning APP scam victims will get the same protection across both payment systems.  

“It is important that we make it harder for fraudsters to operate,” said Kate Fitzgerald, the PSR’s Head of Policy. “Providing consistent incentives across payment systems is a crucial step in ensuring everyone does their best to tackle scams. The action we’re taking on APP scams is world-leading. It will help to close existing gaps and to make sure more payment firms across systems are incentivised to prevent scams from happening in the first place, while protecting those who do fall victim.” 


Basware acquires AP Matching

Basware has announced that it has acquired AP Matching. The acquisition will expand the former’s market offering, which it says will bring accurate financial data and increased cost savings to the entire invoice processing cycle. This should solve a critical pain point for finance and accounting teams, by ensuring the accuracy of financial records through automated statement reconciliation.

Based in the UK, AP Matching (formerly Statement Matching) is a provider of cloud-based solutions for managing invoices and reconciling statements. Its platform reconciles buyer and supplier statements and delivers matched invoices to customers’ ERP or Source to Pay (S2P) systems, requiring minimal input from the AP team.

The integration of Basware and AP Matching will provide solutions to harmonise financial statements, reduce the risk of erroneous payments and increase the integrity of CFOs' financial data. Through the acquisition, Basware will also integrate AP Matching's Managed Services division. The managed services team specialises in automated invoice processing and managed data capture services, specifically for SAP customers.

“CFOs often struggle to oversee the complexities of invoicing processes end-to-end, which can lead to erroneous payments slipping through the gaps,” said Jason Kurtz, CEO of Basware. “The repercussions of failure in statement reconciliation is money lost from a company’s P&L [profit and loss statement]. But it can be fixed and automated. We’re excited to combine forces with AP Matching, so that CFOs can enhance their AP automation processes and increase the accuracy of financial recording.” 


New TranscendAP venture to deliver accounts payable automation solutions 

TranscendAP, Inc., a specialist in accounts payable (AP) automation solutions, has announced that it is operating as a newly formed company. Formerly a business unit of Optima Global Solutions, TranscendAP has supported mid-market to large enterprises since 2018, automating all aspects of AP operations with its software.

The new company and its namesake technology platform will build on this foundation. The latest version of TranscendAP integrates artificial intelligence, machine learning, and functionality that is designed to drive team efficiency and cost-effectiveness.

“Building on the hard work of our team, innovative technology, and diverse customer base, the market opportunity for TranscendAP is vast, especially as we innovate around AI, machine learning, and advance workflow functionality across our platform,” said Jeff Weinstein, Co-Founder and Chief Executive Officer of TranscendAP, Inc.

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