financial models. good esg practices enable firms to benefit from competitive advantages stemming from innovation, to mitigate operating, legal and reputational risks, and lead to more efficient resource allocation, all of which tend to lower the cost of capital and to achieve better operational and market performance. for example, some analyses carried out by the bank of italy have provided clear evidence of a return premium on the shares of european electricity utilities with lower carbon emissions. experience has shown that reputational risks and the risk of serious losses for firms and their shareholders can instead arise from inappropriate business practices from an esg point of view. … and its cooperation with other institutions the increasing concern about the possible consequences of climate change for the financial sector has strengthened international cooperation in the field of sustainable finance, with several initiatives being provided by industry and the institutions. the bank of italy has contributed to these projects and will continue to do so. in recent years, in our role as members of the financial stability board, we have discussed the studies of the task force on climate - related financial disclosure ; we participated directly in those of the g20 green finance study group ; we are giving technical assistance to the ministry of economy and finance for the negotiations on the legislative proposals resulting from the european commission ’ s action plan on sustainable finance. in this field we have contributed to drafting both the disclosure requirements as regards the sustainability of the financial products offered to customers by market operators – including banks, investment firms and fund managers – and the regulations on new low - carbon benchmarks. together with the supervisory authorities of the other eu countries, the bank of italy will cooperate with the european banking authority in carrying out the tasks of identifying the risks that sustainability factors pose to the stability of the financial system, drafting methodologies to correctly assess such risks, and selecting the most suitable prudential treatment. it will also take part in the analyses scheduled by the european single supervisory mechanism, which has included climate change in its risk map for 2019. the network for greening the financial system was founded in december 2017, on the initiative of a number of central banks and supervisory authorities. this forum, in which we participate, has a broad membership at international level, and analyses are conducted and best practices are shared within it regarding the management of financial risks linked to the environment and climate change. the network aims to develop scenarios, methodologies and studies to integrate environmental and climate risks into microprudential and macroprudential supervision, collect evidence of the existence of risk spreads between

‘ green ’ and ‘ brown ’ assets, and draw up common guidelines for the adoption of esg criteria for managing central banks ’ financial portfolios. as part of the activities of the italian observatory on sustainable finance, set up by the ministry of the environment, we carried out a survey in 2018 of italy ’ s main financial operators to evaluate their level of preparedness on climate - based risks. the results are mostly in line with those of other surveys and indicate that awareness of the financial risks deriving from climate change remains limited. the issue of sustainability is mainly dealt with from a social responsibility point of view, yet it is generally neglected in the decision - making processes of administrative bodies and in financial risk management systems. greater effort is therefore required on everyone ’ s part in order to focus more on these topics. conclusions the transition towards an economy with low carbon emissions is essential if we want to reduce the risks that climate change poses for our well - being. the financial sector, central banks and supervisory authorities cannot stand in for those who make the policies necessary to decarbonize our energy systems, but they can play an important role in promoting this process. it is in the interests of financial intermediaries to be more aware of how sustainability factors can affect their activities : it would make it easier for them to take into account the corresponding risks in their strategies and governance, thereby helping to improve performance. central banks and supervisory authorities are working towards making the financial system ready to face this transition. the spreading of new financial instruments could be made easier by : the creation of an eu taxonomy of environmentally sustainable activities and the introduction of [ product ] labelling schemes ( including the standards for green bonds ) ; the wider uptake of the new low - carbon benchmarks ; and the application of the new rules on disclosure. italian investors have expressed considerable interest in sustainable finance, but the supply of products is still not sufficient to satisfy demand : there is room for new projects to be financed, we need the right investment instruments, and it is vital that companies be able to provide the necessary information on the sustainability of their activities. bibliography bernardini e, di giampaolo j, faiella i, poli r, ‘ the impact of carbon risk on stock returns : evidence from the european electric utilities ’, journal of sustainable finance & investment, 2019. ciscar jc, feyen l, ibarreta d, soria a ( coordinators ), ‘ climate impacts in europe : final report of