such as aligning executive compensation with long - term performance and explicitly asking boards of directors to oversee long - term strategies. many investors now embrace environmental, social and governance ( esg ) criteria, which naturally leads them to focus on long - term sustainable returns. the bank of italy has undertaken several initiatives to favour a long - term sustainable approach to finance in 2019 the bank of italy integrated esg factors into the management of its equity portfolio, not only to meet its social responsibility goals but also to lead investors by example. 1 / 4 bis central bankers'speeches we ran a backward test over a ten - year horizon before implementing the new strategy and found that the new portfolio would have had both higher returns and lower volatility than the previous one. these findings, confirmed by several studies, may reflect the fact that the sustainability assessment introduces a forward - looking long - term element in otherwise predominantly backward - looking financial models. furthermore, companies that adopt good esg practices appear to have a competitive advantage resulting from innovation and lower operational, legal and reputational risks. we have also applied sustainability criteria to the management of our foreign reserves. in 2019, we used an external fund managed by the bis to invest in green bonds denominated in us dollars. later on, we started to manage green bonds in - house and we assigned an esg benchmark to the managers of our us dollar - denominated corporate bond portfolio. we also apply esg criteria to ourinternally managed euro - denominated corporate bond portfolio and are implementing low - carbon investments for the bank of italy ’ s pension fund. the bank of italy has also promoted several initiatives in the field of financial education. short - termism does not only affect firms and professional money managers. we all have cognitive and behavioural biases that sometimes induce us to make poor decisions. one common bias is to be much more oriented to the present than to the future, and therefore to make choices that favour the short - term over the medium - and long - term horizon. another tendency is to be overconfident, which sometimes leads us not to consults experts ( for example, professional financial advisors ) when instead we should. the bank of italy has launched financial education initiatives to combat these biases : we participated in pilot projects to bring financial education to schools and we conducted the survey on the financial literacy of italian adults, looking at three factors : knowledge, behaviour and savers ’ attitudes. in 2021, we started a new

creating interconnections that can be a source of distress propagation during crises. 19 regarding these issues, the bank of italy is putting in relentless effort on multiple fronts. as an investor, the bank of italy integrates esg criteria in the management of portfolios not associated with the conduct of monetary policy, as well as engaging in dialogue with high - emitting firms to enable better evaluation of their transition plans. as a supervisor, the bank of italy monitors the exposures of regulated intermediaries to both physical and transition risk, with an eye to combatting greenwashing. in addition, in april 2022, the bank of italy published its ‘ supervisory expectations for climate - related and environmental risks, ’ with the goal of raising banks ’ awareness of climate risk. for these efforts, the bank of italy was recognized by the green central banking scorecard as the second greenest g20 central bank – see ‘ il contributo della banca d ’ italia al dibattito e alle strategie sulla sostenibilita, ’ address by alessandra perrazzelli, deputy governor of the bank of italy, at assolombarda, milan, 15 february 2023 ( only in italian ) ; and the paper on decarbonisation strategies by deputy governor angelini ( 2024 ). contributions from bank of italy economists on this topic include accetturo, barboni, cascarano, garcia - appendini and tomasi ( 2022 ), apicella and fabiani ( 2023 ), and aiello and angelico ( 2023 ). contributions from bank of italy economists on this topic include alpino, citino, de blasio and zeni ( 2022 ). conference paper bauer, offner and rudebusch ( 2023 ) ( mimeo ). the issuance of joint bonds under the next generation eu programme shows that progress towards some form of euro - area public safe asset is possible. research at the bank of italy shows that the gains associated with fiscal diversification would be sizable ( pallara and renne, 2024 ). risk - adjusted redistribution mechanisms could be devised to avoid mutualized debt issuance leading to the systematic transfer of resources to countries with the highest public debt levels ( see cioffi, rizza, romanelli and tommasino, 2019, as well as the reference to this contribution made by governor visco in his concluding remarks for 2020