Responsible investing and ESG

Why things really aren’t that bad

It might seem rather strange for me to be writing an article with this title given everything that is currently going on in the world. In truth, however, I have been vaguely working on this for some months, and whilst in no way am I trying to downplay the difficult situation in Eastern Europe, I have no particular insights to share on the topic (apart from wishing that calmer heads will soon prevail), and I am quite sure everyone is receiving enough information about it already.

We have a natural tendency to focus on bad news for the simple reason that no newspaper ever appeared with the title: “Everything’s going well – not so much to report today”. This is not strictly true – the website Future Crunch offers a periodic newsletter dedicated to good news. It is the perfect complement to the diet of negativity that we receive from traditional news outlets.

I had assumed that I was fairly knowledgeable about the world around me and had an objective view of humanity’s current state of affairs. I was thoroughly disabused of this notion by Factfulness by Hans Rosling, one of the most eye-opening books I have ever read and which I thoroughly recommend to everyone.

However, if you have little time or inclination for reading, you can take the Gap Minder test here, which is based on the work done by Rosling. It won’t take long and I suggest you do it before reading the rest of this article.

So what is my point? We tend not to realise that improvements are so gradual as to be imperceptible to us, and this, combined with the fact that we don’t often receive information that challenges our negative stereotypes, leads to a bias towards negativity. It is interesting how much bad news is anecdotal and how much good news is statistical – but of course you wouldn’t want it to be the other way around!

Is a negative bias worthwhile as we consider challenges such as climate change? I don’t know, but I would say this: panic is not a strategy, and going from bad to slightly better (whilst creating incentives to improve continually) is something we should celebrate. This reflection is also relevant to the field of investments: almost all investment houses now make ESG (Environment, Social & Governance) considerations part of their “process”. Are these processes perfect? Certainly not, but it is a start, and some of the leaders are blazing a trail that others are bound to follow. Again, from bad to not-so-bad is still something to celebrate.

In Italy, it is easy to complain about the bureaucracy, but I have to admit that some things are getting better. For anyone doubting this, consider the advent of SPID (Sistema Pubblico di Identità Digitale), which acts basically as a digital gateway to any interaction with the public administration. It is a Substantial Headache to get set-up (capital letters intended), but once you have it working, it is very useful. Also, consider PEC (Posta Elettronica Certificata) – a sort of “registered e-mail”. For anyone who has spent time and money sending raccomandate from their local post office – and let’s face it, you haven’t really lived in Italy until you’ve had to send a raccomandata, you really should invest in a PEC. For 10 euros or so a year you can send as many digital raccomandate as you like from the comfort of your own home, and they have the same legal validity as their paper counterparts. All companies and state entities have to have a PEC, so they are a very effective way of making official communications.

Of course, this technological advancement has also been a way for the Agenzia to concentrate its tax-collecting efforts. They are no longer in the dark about your assets abroad, thanks to the mechanisms of CRS (Common Reporting Standards). Most people have now come to terms with this and are making the necessary declarations. If you or someone you know have been sitting on the fence – talk to me about the best way of sorting out your situation – the key being that you should do this before you receive any requests for clarification.

There are also a number of tax incentives that have been launched in recent years, favouring pensioners, digital nomads and even very wealthy people. I took the opportunity recently to speak to tax practitioner Judith Ruddock from Studio Del Gaizo Picchioni about a number of them (as well as other matters of interest for Italian residents) and have published a podcast which you can find on Apple Podcasts, Spotify, Google Podcasts or Stitcher.