Finance & Real Estate

2023-01-23 Andrea Beltratti, Alessia Bezzecchi

The PNRR and Finance for Sustainability

Finance can be the key for sustainability, and the National Recovery and Resilience Plan the ideal instrument to implement courageous and original ideas. Private and public partners have an opportunity to cooperate and use the resources made available at the European level to revive the process of development of our country on a new basis.

Sustainability and policy-making. The Brundtland Report of 1987 reminded all of us that we do not inherit the planet from our parents, but we borrow it from our children, introducing a definition of sustainability that is still relevant today. Some progress has been made, especially if we consider the results in light of the concurrent increase by 60 percent of the overall population, from 5 to 8 billion people. European economic policy has chosen to give great weight to the goal of sustainability, potentially placing the production sector in a position of competitive disadvantage compared to the rest of the world in the attempt to transform its economic structure. The European approach is laudable, although it may not be very pragmatic, but it has a serious defect in terms of communication: it proceeds with centralized prohibitions and impositions that are often not very credible (like the elimination of non-electric cars and restrictions on real estate assets), instead of acting in a decentralized way that can be understood by families, investors, and businesses. Next Generation EU, the European fund with a value of 750 billion euros, is the proper opportunity to change the trend: it can make Europe be perceived as a partner close to individuals and businesses rather than an accounting control association founded in Maastricht. But money and a decentralized approach are not enough without finance.

Finance for sustainability. Finance is at the center of this challenge, contrary to what may be thought. The aggregate results produced by an economy depend on the choices of businesses and consumers, all influenced by market prices and available financial resources. But prices depend on supply and demand, that in turn are influenced by the availability of information and the degree of knowledge and awareness of the consequences of the choices made. Information, education, availability of resources: exactly the ingredients of finance. Considered carefully, instead of asking what finance has to do with sustainability, we should ask how it is possible to think of sustainability without finance. But what can finance do concretely for sustainability? Among many things, we would like to highlight three: financial education, the discovery of the values at issue, finance and technology.

Financial education. All of the international surveys tell the same story: people are not anywhere close to the descriptions of them given by economics textbooks. They suffer from a lack of information, they are not attentive enough, they do not always properly understand available information, they suffer from temporal incoherence, and from nerves. Some of these characteristics cannot be eliminated, since they are linked to human nature (according to neuropsychologists, human beings have difficulty thinking in statistical terms, preferring simple cause and effect associations, whether true or invented), but others are burdens that prevent people from taking advantage of opportunities. How can this be remedied? The role of the family was once very important to learn to manage resources, but today it is increasingly difficult to count on that source of learning, on the one hand because the concepts are difficult and it is not enough to know home economics, and on the other because the time actively spent in the family without outside distractions is much less. This emphasizes the role of school, from primary education to university. Italy is very deficient from this standpoint: among the dozens of subjects studied it is rare to find economics and finance. Many university students graduate without having any idea of how to manage the financial resources they will earn when during their working life they will transform their human capital into financial capital. This is very problematic for a country with 5 trillion euros of financial assets. It as if a country in the Middle East tried to extract oil with a shovel and bucket.

Finance and the discovery of the values at issue. How much is the time we waste in traffic worth? How can a company’s social engagement compensate for the reduction of profits? Does the social benefit of planting trees really offset the cost of CO2 emissions? We will never know the answer without making an effort to measure effects beyond what is indicated by market prices, adding to the calculation the value of activities that do not pass through markets. Companies produce beautiful reports in which they list their many positive social and environmental works, but at the end of the list it is difficult to understand their actual overall impact. To stop being the science that knows prices but ignores value, we need data, but above all methods able to use all of the evidence available to transform lists into numbers that can be compared from a monetary standpoint, and a logical and accounting framework that is able to create a common language. We need to involve individuals in the effort to measure the impact of our daily activities, hoping that, as in quantum physics, the measurement influences the final results.

Finance and technology. We are living in an extraordinary phase of the process of creation and processing of data. When we have more stably resolved the legal questions regarding the possibility of utilizing available data, and the technical problems linked to the use of many sources of company data, we will be able to take further steps forward. The approaching large-scale introduction of quantum computers will exponentially increase the possibility to process data, helping businesses know in real-time the situation of the market and understand and predict their customers’ needs, allowing financial intermediaries to operate on the markets and to finance businesses using information collected from satellite photographs, videos clips, and written texts.

The PNRR and the Bocconi University. Among the various PNRR projects dedicated to universities, those relating to “innovation ecosystems” are particularly important and original. Their goal is not basic research but applied research, in particular from the standpoint of technological transfer to businesses and social impact. In the area of ecosystems, the Bocconi University, together with the Milan-Bicocca University, the State University and Milan Polytechnic, is part of Multilayered Urban Sustainability Action (MUSA), a three-year project financed by the PNRR that involves the collaboration of 24 public and private entities, organized according to the formula of a central hub and various specific spokes. The Bocconi University is responsible for the spoke on finance and sustainability, and through dense and continuous interaction with the various public and private actors, will deal with the subjects previously discussed in this article. The goal? To place its methodological knowledge at the service of the community in order to concretely impact society, in particular at the local level. This is an organizational challenge of extraordinary complexity, but enormous potential. In this case universities have the fundamental task of effectively spending the resources made available by Europe, creating innovation and development and helping businesses, financial institutions, savers, and consumers develop the indispensable tools to make the search for sustainability a bit more concrete.


Andrea Beltratti is a Professor in the Department of Finance of the Bocconi University, where he teaches Economics of the Real Estate Market and Equity Portfolio Management, and Academic Director of the Executive Master in Finance (EMF) at the SDA Bocconi School of Management.

Alessia Bezzecchi is Associate Professor of Practice in Corporate Finance & Real Estate at the SDA Bocconi School of Management, where she is Program Director of the Executive Master in Finance (EMF) and of the Executive Program in Real Estate Finance and Real Estate (EPFIRE).