mercoledì 16 maggio 2018

Written by Giulia De Gregorio

Summer holidays are fast approaching and whether you have booked a holiday in the mountains or in a seaside resort, you’ll need sunscreen to shield your skin from the rays of the sun and protect against the risks of burns and skin cancer. 

Reefs at risk

What most of you probably ignore is that the majority of sunscreens currently available in the market cause major damages to the marine eco-system. A research conducted in 2015 by the University of Florida showed that every year about 14.000 tons of sunscreen end up in the ocean and threaten the coral reef. In particular, oxybenzone and octinoxate two powerful sunscreens filters used in creams, disrupt coral’s reproduction and growth cycles and are responsible for its bleaching. The popular beaches of Hawaii are one of the areas with the highest concentrations of these harmful chemicals, which led Hawaii’s Parliament to pass on May 1 a bill banning the sale of sunscreens containing these two components. This is the first case of a State to pass such strict measures, which might become the law by 2021. Laura Thielen, senator of Hawaii, declared that “people need to realize that even if they don’t go swimming after applying sunscreen when they go back home and take a shower, the water still flows into the ocean. So, it doesn’t matter if you use sunscreens at the beach or at home, it’s at the same way harmful for our corals”.

Keeping our reefs safe

It is ok to protect our skin’s health and to prevent it from ageing, however, when using certain products comes to the detriment of the environment, a change in attitudes and in purchase behaviours becomes necessary. The good news is that there are already many environmental-friendly options available in the market. Mineral-based sunscreens are well-known for using titanium dioxide and zinc oxide that are safer, both for people and for coral, and don’t include any toxic chemical.

Among them, there is UJI Sunscreen, an amazingly innovative product which was originally developed by Fleur Himmler, co-founder of the brand and fellow Bocconi student.

How did you come up with the idea of creating UJI Sunscreen?

It all started one year ago when I was 21 and the other co-founders, my brother and our best friend, were 24. My brother and I are diving instructors and we were working for the summer in Koh Tao, a small paradise island in the middle of the Gulf of Thailand. One night at the end of the season my brother asked me: “Do you think we'll still be diving instructors in 20 years?“ “In 20 years? There won’t be much fishes and corals to show to people!” This went out of my mouth and we were shocked to think about it. We started diving when we were kids, the ocean is our happy place. So we thought about doing something or at least trying to do something to protect this fragile ecosystem, and its threatened inhabitants to allow the future generations to enjoy the treasures of the ocean.

Why did you choose the name UJI Sunscreen?

We were looking for a name that included the idea of sun and ocean but we couldn’t come up with anything that sounded good. One day I was googling some words connected to the marine field and their translations in different languages. Among them, there was UJI, which means water in Albanese. We liked it because it was simple to say for people and it was also easy when we had to register the brand name since it’s a random word.

At which stage is the project?

Right now we are done with R&D. We still have some extra tests to run because we want to be 100% sure about the impact of the sunscreen on the marine life. The big milestone is the crowdfunding, which we hope to open for 45 days by the end of June. The most expensive part is the production, indeed around 80% of the crowdfunding will be just for the first production. We will sell online and our biggest market will be Europe, on which we will focus for a couple years and as soon as we will be able to do the bigger volume, we’d like to enter the Asian market.

Which ingredients are used to make it safe for the environment?

When you want to make a sunscreen you have two options for the UV filters: chemical or mineral. Oxybenzone and octinoxate (chemical filters) are really toxic and besides being responsible for coral bleaching, they can alter the sex characteristics of fishes. Moreover, the effects on human health are incredibly bad: since they penetrate your skin, they can create allergies and skin reactions. It is now scientifically proven that some chemical filters have a similar structure to the estrogen hormones and mimic its action. Chemical filters are hormones disruptors and can lead to infertility issues, DNA damages or cancer. Although there is not full unanimity of the scientific community, a recent study has revealed that with one full-body application you’ll end up with the same amount of estrogens as a hormone therapy replacement, so imagine if you do four applications per day. UJI is a mineral sunscreen and relies on zinc oxide and titanium dioxide as UV filters. The advantage is that nothing gets into your body, it creates a layer on your skin and the UV rays are reflected. The protection is even better with mineral sunscreen and it’s safe for the environment and for your body.

What has the ocean taught you?

When people say that they want to work in the innovation sector, they think they should go to Google or Apple. Instead, I think they should become a diving instructor: the greatest innovations and technologies are in the sea. Apple has been doing R&D for forty years, nature for four billion years. For example, shark skin is the best material in the world against turbulences and Airbus has studied its composition and reproduced its features to make planes, while Speedo used it to minimize water resistance for the realization of swimsuits for the Olympics. Mussels produce the best adhesives in the world, no industry and technology so far would be able to do as good as them. What we all have to understand is that we have a lot to learn from nature. Nature and the ocean are like a library of knowledge and instead of reading it we are destroying it!

Why is the marine eco-system restoration such an important challenge?

Humans are co-responsible for this contamination, however, we also have the ability to help these fragile underwater ecosystems to heal.

If we lose coral reefs, we will have lost a vital ecosystem and also hurt the global economy since coral reefs are major tourist attractions that draw visitors from all over the world and are vital sources of income for local populations.

To support UJI Sunscreen’s crowdfunding campaign and remain updated on the project, visit: and follow their Facebook page: .

martedì 17 aprile 2018

Written by Massimo Campi

Perfect competition, the Promised Land of every young microeconomics student. Until they learn about negative externalities: a damage caused by the actions of an individual with whom the damaged party has not had any economic transaction. Put it simple: somebody is bearing the burden of negative effects stemming from someone else’s actions.
From academic theory to real life the leap is short, the most evident example being pollution arising from industrial production. And the question immediately becomes: is there a way to limit negative externalities, like pollution? The answer, as we know, is yes. What few people know, though, is that such ways to deal with pollution can arise from the most capitalistic industry in the world: finance.
Does this mean that finance people working in bulge bracket investment banks are more attentive to switch off the lights when leaving the office or even that they prefere using public transports rather than a luxury car? Not really. In this case finance is just the means used by Governments to reduce negative externalities. In particular, the reference is to a relatively new type of financial instruments like white certificates (also called Energy Savings Certificate or Energy Efficiency Credit).


What is the connection between white certificates and pollution? One of the main sources of air pollution is known to result from the burning of fossils fuels to produce electricity. When a Government’s target is the reduction of air pollution it can therefore intervene on electricity consumption, for example by setting a minimum level of electricity saving that electricity distributors must guarantee in a specific year with reference to a baseline. Which means that the Government requires the electricity providers to find a way to reduce electricity consumption by the public; an example could be by providing the public incentives to substitute old applinces with new, more efficient ones. And here comes the role of white certificates: when an electricity provider meets the electricity savings target, it is given a white certificate. The larger the amount of electricity savings with respect to the target, the higher number of white certificates the electricity distributor is given.
What makes white certificates innovative, though, is that they can be traded, similarly to securities. What happens in fact is that while some electricity provider meet the target, some others do not and therefore incur in the payment of heavy penalties unless they buy white certificates from those who obtained them.

The incentives towards the implementation of electricity saving technologies is twofold: from one hand distributors would try to avoid paying huge penalties, from the other hand virtuous distributors would be able to sell white certificates and cash in the price. Also, there exist white certificates with the same characteristics for gas and fossil fuels providers, industrial companies, etc., thus enlarging the possible beneficial impact of the certificates.


Now, coming from theory to reality, do white certificates have a real impact on limiting pollution?
The answer is not easy and straighforward, but some figures might help understanding. First, volumes and prices of white certificates have increased since 2005 (the year in which they were introduced in Italy, the first country ever adopting white certificates). While at that time a white certificate was traded at an average price close to the face value of 100 €, nowadays a white certificate price is roughly 300 €. More certificates outstanding probably means more electricity/gas/fuel have been saved, while higher prices are a bit more complicated to interpret. With reference to the number of certificates that have been assigned to distributors, the graph below sums up the key trends:

The graph comprises figures reported by GSE, the publicly owned entity that supervises the activities in the energy industry in Italy. Clearly, the number of certificates issued (in red) in 2017 is much higher than in 2005, which is a positive sign of the interest in green technologies by electricity and gas providers, even though the trend has not alway been upward and only half the times the target (in green) hoped by the regulator has been met.
What may arise a bit of concern, instead, is the actual amount of energy that has been saved (measured in Ktep, a specific unit of measure for the purpose) thanks to white certificates according to ex-post estimates (in blue). This means that the new projects to save energy thanks to which electricity and gas companies have been rewarded white certificates has actually underperformed during the last years in terms of efficiency delivered.
Moreover, the increase in price of white certificates may be problematic as well. Before discussing the effects of such increase, a brief look at the causes may be interesting. First, the market for white certificates is structured by the regulator in order to seldom have more offer than demand, thus pushing price up; second, there might be opportunistic and speculative behaviour taking palce, but according to some studies by GSE this is unlikely; finally, it seems that the reason for such an increase may lie in the new regulations which restricts the kind of projects that can be considered valid for the assignment of white certificates, thus making less easy to obtain them.
The effects of an increase in price are different, the most evident ones being the higher degree of financial risk for those companies who do not comply with the energy saving standards, and the impact on cost of consuming electricity for a typical family. The increase of price in white certificates, indeed, is expected to be transferred to final consumers of electricity and gas through higher bills according to GSE. However, this is something that cannot last long when the reduction in energy saving witnessed in the last years is taken into consideration. So apparently in the short term families are going to pay higher costs for utilities without having a sufficient improvement in efficiency.


So, are white certificates another example of public intervention contributing to a more efficient market when in presence of negative externalities? The answer is probably positive, considering the overall results achieved so far, but still the above mentioned issues must be addressed by the regulator in order to obtain the best results.

The most problematic issue is probably the one related to a possible increase in costs for electricity and gas consumes for families, which could potentially counterbalance the social benefits gained on the environmental side. Furthermore, a better matching of actual energy savings and assignment of white certificates could be performed, as shown in the graph.
Nevertheless it is true that white certificates are relatively young and still retain a lot of potential for further improvements as a means to limit pollution. Moreover, a good point in favour of white certificates is that no public expense is required, while private sectors participation is encouraged. Finally, probably one of their best features is that while the reguator defines the participants and the rules, the market decides which techonologies to develop, thus stimulating creativity to deal with environmental issues.
Written by Giulia Galli 

Everybody knows what sustainability is or what finance is, but less people know that there is a link between the two, and this link is called sustainable investing or SRI (socially responsible investing). 
Let’s start from the beginning: ethical finance. This subsector of finance is characterized by the use of both economical and moral criteria to choose investments. As far as the moral criteria are concerned, they can be both religious (as for Islamic Finance) and laic. What we are interested in are the sustainable criteria in particular, that lead to the definition of sustainable finance.

Different phenomena are entangled in this sector; to give some examples, microcredit, that gives funding to developing countries, in small amounts and at low interest rates; Social Banks, which commercialize products giving priority to moral objectives; impact investing, aimed at allocating capital to boost social projects.

There are different strategies through which sustainable finance is pursued. Let’s get through the main ones. Negative screening is the exclusion of companies that do not meet ethical criteria. At the opposite side, there is positive screening, that is the inclusion of companies that respect predefined requirements. A more technical mixture of the two is norm-based screening, according to which firms have to manage their business respecting defined and formal norms, based on the right moral behavior. Already mentioned above, impact investing is focused on environmental and social problems, and especially community investing relates to the development of disregarded communities. Sustainable investing relates to the choice of firms that belong to green sectors such as renewable energies. A little bit more difficult to detect is shareholder action, thanks to which the main stakeholders of a company, namely stockholders, try to intervene in the firm’s decisions in order to make them greener and socially acceptable. At the bottom of the list there is the more diffused one, ESG integration, based on ESG criteria.

What are ESG criteria? They define the benchmarks a company should reach in order to be included in the portfolio of what is called an ethical fund, that is a fund pursuing moral objectives thanks to the above-mentioned strategies. The acronym ESG stands for Environment, Society, Governance. In order to clarify the differences, let’s make some examples of the principles included in each field. Environment analyzes carbon emissions, renewable energies use, animal protection policies. Society includes concerns about suppliers, employees, community or women. Governance requires transparent accounting standards, fight against corruption and protection against conflicts of interests.

The main focus of this article is environment. A first example in this field is the issuance of green bonds. Green bonds are structured as traditional bonds, meaning that the investor provides funding in exchange of interest payments and a principal repayment, amortized or bullet. The difference is that proceeds are used to finance projects that have positive environmental and climate benefits. Generally, these bonds are asset baked, meaning that the entire balance sheet of the issuer acts as a warranty to the payments. There are different types of green bonds: green "use of proceeds" bond, green "use of proceeds" revenue bond/ABS, green project bond, green securitized bond, covered bond and other bonds that all have a common feature: they care for environment protection.

Obviously, there are costs associated with the issuance of this type of securities. The issuer must track and report the use of proceeds, as investors are choosing to allocate their money in a specific way and they want to be sure of the success of the project. Why should investors choose to do so? First of all, there are evident moral considerations, as the concern for climate change and environmental protection is an ethical principle widely spread across people’s minds. Second, there is a strong business case to go green, as it is proved that the big majority of responsible investments allow to make a higher profit by looking at long term benefits instead of short period ephemeral gains. The concerns about high costs associated with this kind of investment are therefore fully balanced by the possibility to make profits, both from a moral and from an economical point of view. These bonds allow the issuer to improve its reputation, to exploit economies of scope and to diversify investor base.

The green bond market was born in 2007 with the AAA-rated issuance from different institutions such as European Investment Bank and World Bank. After that also governments and corporations started to join the flow and ABS bonds were created. In 2014 a 37bn USD bond was issued and in 2017 issuance was almost 157bn USD, the so far accepted record. There are also stock exchanges that launched a dedicated section, such as the ones in Oslo, Stockholm, London, Mexico, Luxembourg, Italy, Shanghai, Taipei, Johannesburg and Japan. As it can be seen the development of the market is strong and the interest is growing, so let’s keep pace with financial evolution!
To make a concrete example of the current situation, Allianz GI vice-chair Elizabeth Corley estimates the UK impact investing market in its broader definition, which includes also green investments, is worth £150bn. Allianz managers seek to increase this market, recognizing its importance and economical potential. Prologis, the global real estate logistics company, launched at the beginning of March 2018 a €300mn green bond, which is the refinancing of an already existent bond. The company has developed a “green bond framework”, of which the March bond is a representative. Moody’s has rated the bond, providing the proof that there exists a green multiplier effect, that ensures the economic gains of this kind of securities, in excess with respect to traditional finance profits.

To sum up, we can say that the green bond market is pleasantly expanding, and the investors’ interest is growing. To ensure a correct development of the sector, concerned and informed investors are needed. The gain is twofold, giving the possibility to build a moral and economical realization, much bigger than what investors are used to. So the question is: what’s next? A first answer is that the next step is gathering information and trying to enter this fascinating market in order to improve as ethical people and as finance people. It is important to keep up with the financial world evolution, a world that must be pushed to grow in the correct way, and, people, it’s up to us to ensure this positive expansion!