Investor Spotlight: Social Impact in Focus for Italian Bank Foundations

Giorgio Righetti
Secretary General, ACRI

Italy's ecosystem of banking-originated Foundations is unique in the financial world. Created as part of a major banking system reform in 1990, these entities—which became the shareholders of savings banks—have an explicit objective to generate positive impact in the local community.

This is a goal that now permeates not only their grant activities but also their approach to investing, with a rise in ‘mission-based investment’ in sectors such as social housing. With a combined AuM in excess of EUR 40 billion, the implications are significant.

bfinance Investor Spotlight recently interviewed Giorgio Righetti, Secretary General of ACRI (the association representing the banking Foundations and savings banks) and former General Manager of a Foundation himself (Fondazione per il Sud) to learn more about the story behind this remarkable group of institutions and their evolving impact-oriented agenda.

Q: Could you give us an overview of the history and main objectives of banking Foundations in Italy? Also, what is the role played by the Acri association?

The so-called Amato Law (No 218 of 30 July 1990) aimed to make the Italian banking system more competitive at European level. The market was characterised by entities like Casse di Risparmio, Banche del Monte and public law institutions: these lacked shareholders, an element whose absence potentially limited their competitiveness. These institutions represented the highest expression of the community’s spirit of solidarity, but were no longer competitive. A change was necessary, but one that would safeguard core values: banking know-how and attention to the needs of communities.

Legislation created two groups, one carrying the value of banking know-how (la Banca conferitaria, or transferee bank), the other the spirit of philanthropy (the Ente conferente, or conferring body, later named Fondazione). The conferee bank became the sole shareholder of the new joint stock company bank. The role of the Foundation was more clearly defined in the subsequent Ciampi Law of 1998 and related Legislative Decree 153 of 1999, which set out their mission, governance and management principles. The mission included the pursuit of socially useful purposes and the promotion of economic development, through 21 thematic sectors of intervention.

There are currently 86 Foundations, with total assets of more than EUR 40 billion, and they have disbursed (through grants to public and private not-for-profit entities) around EUR 26 billion in about 30 years, with an average annual disbursement of just under EUR 1 billion in recent years.

Acri is the association representing 83 of the 86 Foundations of banking origin, as well as Savings Banks. Acri's objective is to promote and protect the interests of its members through advocacy, communication, training, consultancy and the launch of joint projects that can further the objectives of the Foundations on a broader scale.

Q: These foundations support various social and cultural initiatives. Could you tell us which significant projects they have supported in recent years and what social impact these initiatives have generated?

Each year the Foundations support around 20,000 projects in 21 fields of intervention ranging from art and culture to education and training, from scientific research to public health, from social assistance to environmental protection. I would like to mention two large emblematic projects involving almost all the Foundations in cooperation with the Government and the Third Sector: the Fund to Fight Child Poverty and the Digital Republic Fund.

The fund for the fight against child educational poverty was set up in 2016 as the outcome of a process triggered by Acri and its member Foundations, with the aim of increasing opportunities for minors disadvantaged by economic, social or psycho-physical conditions to benefit from education. The Foundations were aware that to tackle such a challenging fight it was necessary to involve other institutions and organisations in the country. The first step was to interest representatives of the Italian Third Sector in order to bring complementary skills and experience, as well as the necessary social consensus. The second was to propose to the Italian government to provide the initiative with the necessary financial and political support. The response was, in both cases, extremely positive. The Fund, fed by the banking foundations and assisted by a tax credit, has so far raised about EUR 761 million, of which about EUR 400 million has already been disbursed, involving thousands of third sector organisations and public institutions, and supporting the educational processes of hundreds of thousands of minors.

Borrowing from the positive experience of the Fund to fight child educational poverty, the Digital Republic Fund was established in 2021 on the basis of discussions with the government. The Fund, in the context of the digitisation objectives set out in the National Recovery and Resilience Plan (PNRR) and the National Complementary Fund (FNC), supports projects – selected through public notices – aimed at digital training and inclusion, to increase digital skills and develop the country's digital transition. Through the impact assessment of the supported projects, the Fund also aims over the five-year period 2022-2026 to select the most effective ones in order to expand their action across the country and reach more people, realising tangible improvements in e-skills and subsequently transforming them into public policy. The Fund allocates a total of approximately EUR 350 million and will be fed by the payments made by banking foundations. Foundations will receive a contribution in the form of a tax credit.

Q: In asset manager selection: what is your view on skills and peculiarities that are generally not apparent from a questionnaire but which are important for a foundation of banking origin?

The 86 Foundations of banking origin are very different in terms of size, organisation and management processes. But one consideration is that foundations are ‘sensitive’ to their reference territory – the link between the investment and the pursuit of their social/community mission (‘Mission Related Investment’). In this sense, without prejudice to the validity of all the criteria used to evaluate investments, the foundations do take these additional mission-related elements into account. A significant example is the Fondo Investimenti per l'Abitare promoted by Cassa Depositi e Prestiti at the instigation of the shareholder Foundations, giving rise to one of the most significant social housing initiatives in Europe.

Q: What is your view of the role of consultants/advisors for Foundations of banking origin? Are there areas for improvement?

Advisors play an extremely important role for Foundations, regardless of size or organisational set-up. They offer specialist expertise, even in highly structured contexts. If I can, however, point to a direction for improvement in the advisors' activities, it is in the reduction of the information asymmetry between them and the bodies of the Foundations. There is variable financial expertise within these bodies, but advisors should have the sensitivity and ability to put them in the position to make informed choices. This includes simplifying language, which is often hyper-technical, and greater effectiveness in comparing investment options and monitoring reporting.

Q: In April 2015 the Foundations of Banking Origin signed a memorandum of understanding Acri-MEF, a document that defines the fundamental issues of governance, diversification of investments and the regulation of transparency of activities. After more than 15 years since its implementation, do you think any adjustments or improvements should be made?

The Ciampi Law 'liberated' the potential inherent in these institutions – which do have full statutory and management autonomy. The subsequent Acri-Mef Protocol clarified the application of some of these principles, helping to make the Foundations' actions more effective and fluid for the benefit of their communities and the country. We do not believe that any adjustments or changes are necessary at this time.