Exploring the COVID-19 testing strategies in Italy reveals Lombardy and Veneto, the first two regions hit by the virus, embarked on divergent paths in managing the pandemic. Lombardy became unfortunately famous for being the most-hit region in Italy, by both numbers of infections and deaths. Veneto instead, managed to contain the infection, and has now very low numbers compared to Lombardy. Both regions have allegedly good regional healthcare systems (better functioning than many other Italian regions and other European countries), so what did Veneto do that Lombardy did not? The Beginning COVID-19 cases in Italy started rising towards the end of February 2020. There were two initial epicenters of the outbreak, one in Codogno, in the province of Lodi in Lombardy, and one in Vo’, in the province of Padua in Veneto. The two towns were put into lockdown in order to contain the virus, but this did not prevent it to expand to other provinces and regions. In the last week of February cases were confirmed in neighboring regions such as Piedmont, Emilia-Romagna and soon the virus reached almost all regions in Italy from north to south. In the coming weeks, Lombardy’s cases started to soar, together with the number of people hospitalized in intensive care and the number of deaths. Ever since, up until today, Lombardy is the most hit region, by the number of infections, intensive care hospitalizations, and casualties. Veneto instead, from being one of the first two epicenters of the virus in Italy, with tens of people being infected in the first days of the epidemic, followed a very different evolution. The numbers today As of May 21, 2020, according to official government data, Lombardy has 85,775 total cumulative cases, with more than 15,600 casualties whereas Veneto has so far 19,030 total cumulative cases and about 1,800 casualties. It is clear that the two regions have very different numbers. There is however a figure for which Lombardy and Veneto have a much similar value: the number of tests carried out. As of today, Lombardy performed a total cumulative of 607.863 tests, whereas Veneto carried out 536.798. Considering that the population of Lombardy is two times that of Veneto, this means that overall, Veneto implemented a test-intensive strategy, while Lombardy did not. [caption id="attachment_5198" align="aligncenter" width="532"] Figure 1 Cumulative positive cases in Lombardy and Veneto, MoH Data, My Elaboration[/caption] Testing Strategies Lombardy As the number of cases began to soar and hospitals’ ICU beds started reaching capacity, the president of the Region, Attilio Fontana, decided to test only people with serious symptoms due to the limited diagnostic capacity of the region. This was backed by the recommendations published by the Ministry of Health on March 9, which read “people with symptoms should be tested”. Up until late April, Lombardy denied testing to people who requested it, unless they had significant symptoms. GP were instructed to do a triage over the phone and if the patient did not have a respiratory crisis or symptoms that would require hospitalization, the doctor would just suggest they’d keep them informed on the evolution of the symptoms. In addition to this, articles from trustworthy newspapers, have recently stated that Lombardy did not test people with symptoms (even serious ones), thus implying that Lombardy’s authorities have been concealing the truth and that they have not actually followed the Ministry of Health guidelines. Veneto When the first patient affected by Covid-19 was identified in Vo’ on February 23, the region supported the proposal of a group of professors and researchers from the University of Padua, to carry out an epidemiological study on the entire population of Vo', testing everyone in the town. The results obtained provided a fundamental input in the medical research on the nature and ways of spreading of the virus, since the study was carried out on a population with statistically significant size. But most importantly, this study produced some crucial information to design a containment strategy more suited to the nature of this new virus. Among the results obtained, the study showed a very high share (45-50 percent) of asymptomatic infected people able to transmit the virus. With this result in mind, Veneto developed the so-called "active surveillance" strategy. The important aspect of this strategy is the planning of the tests: at the first appearance of symptoms (even mild) the patient is tested (together with the people living with her/him). Then a reconstruction of all the people that the patient came in contact with during the previous days is put together, and once these people are identified, they are also tested. Each time a new positive case is found, the procedure is repeated. In this way Veneto proceeds by concentric circles to identify the potential carriers of the virus- even if asymptomatic- with a higher probability. [caption id="attachment_5199" align="aligncenter" width="621"] Figure 2: COVID tests carried out by region from February 24 to May 14 (per 100,000 people). Data from MoH, my elaboration.[/caption] Conclusions Veneto: A winning Strategy: The two regions opted for two opposite testing strategy: Lombardy tested only the symptomatic patients (with already advanced symptoms), while Veneto proceeded to test symptomatic AND asymptomatic people, by mapping the contacts of the infected individuals. Veneto seems to have followed an approach more similar to Germany and South Korea. These are two countries that have managed to limit both the number of new cases and deaths, by recognizing the importance of testing asymptomatic patients. Scientific opinion leveraged: While Lombardy (allegedly) followed the guidelines of the Ministry of Health, based on the WHO recommendations, the region of Veneto, from the very beginning of the crisis, resorted to a team of scientists and epidemiologists to build a strategy that would best suit the situation. Does this mean that the MoH recommendations are flawed? Or being recommendations, they should be contextualized and tweaked based on the specific needs and capabilities of each region? Public debate and Lombardy’s defense: In the last few weeks a public debate started in Italy on whether Lombardy should be held accountable for the mismanaging of the crisis. The region’s authorities argued that the lack of testing resources and of laboratories forced them to reduce the number of tests and limit them to urgent cases only. They also point at the latest Ministry of Health recommendations from April 4, in which there is a list of people that should be tested in order of priority (in case there is a limited capacity of tests and a state of necessity), in this list, asymptomatic people figure only if they are healthcare staff. However, the same document states also that “if the diagnostic capacities are not sufficient, it is allowed to further expand the number of additional laboratories identified by the Regions and coordinated by the regional reference laboratories, considering the possibility of using mobile labs or drive-in clinics”. Has Lombardy taken advantage of this last point? Lombardy’s mismanagement, are there causes rooted in the regional healthcare policy? It is still early and rather difficult to assess to what extent Lombardy’s failure was inevitable or if it was the result of flawed and possibly completely wrong decisions of its authorities. However, as a recent review of an Italian newspaper suggests, Lombardy’s healthcare system malfunctioning could be attributed to Lombardy’s healthcare policies over the last decades, which highly incentivized the private sector. Nowadays about half of the region’s HC structures are private. Private structures in Lombardy over the years have specialized in profitable services, such as surgical operations and specialists’ visits, while emergency services- being less profitable- were not developed and left to public structures. As a result of this, even though private health care weighs about half of the entire Lombard healthcare system, it has just over a quarter of the intensive care unit beds in the region. Moving forward in the analysis, this aspect should be taken into consideration in order to understand what could have been done better, especially in the face of future emergency situations. Is the testing strategy the ultimate culprit? It is still unclear the extent to which Lombardy’s testing strategy contributed to its high numbers of cases and deaths. This article aimed at comparing two regions that have many similarities, such as healthcare system advancement, favorable economic conditions, and developed technology. With this in mind, since the two regions’ approaches varied substantially in terms of testing strategy, it is fair to attribute some degree of importance to this, while the research continues to assess responsibilities in order to avoid further mistakes in the future. Pietro Morabito - Senior Analyst Sources https://www.fnopi.it/wp-content/uploads/2020/03/Circolare_9_marzo_2020.pdf http://www.trovanorme.salute.gov.it/norme/renderNormsanPdf?anno=2020&codLeg=73799&parte=1%20&serie=null https://www.ilpost.it/2020/05/04/pandemia-coronavirus-lombardia/ https://www.ilpost.it/2020/04/23/tamponi-andrea-crisanti/ http://www.salute.gov.it/portale/nuovocoronavirus/dettaglioContenutiNuovoCoronavirus.jsp?area=nuovoCoronavirus&id=5351&lingua=italiano&menu=vuoto https://www.startmag.it/mondo/covid-19-lombardia-veneto/
The discussion around 'ESG standards and regulations' has become pivotal in the realm of finance, steering a significant shift in how investments are approached Investors have been increasingly pouring money into ESG funds, and asset managers have taken notice and responded to this trend by embracing ESG factors within their strategies to attract more inflows, balancing ESG requirements with traditional risk and reward considerations. Despite a lack of legal requirements from policy makers, stakeholders, both individual and institutional, have been seeking greater clarity regarding the impact of their contributions. They are keen to understand not only “if” asset managers are committing to ESG, but proactively asking questions about managers’ stewardship approach. What is ESG Standards? [caption id="attachment_5144" align="aligncenter" width="687"] Asset management firms manage funds for individuals and institutions by making investment decisions on their behalf while considering their unique circumstances, risk appetite and preferences[/caption] ESG stands for Environmental Social and Governance and refers to the three key factors when measuring the sustainability and ethical impact of an investment. Environmental factors include climate change, greenhouse gas emission, waste, pollution etc. Social include human rights, labor practices, talent management, product safety and data security. Governance refers to a set of rules or principles defining rights, responsibilities, and expectations between different stakeholders in the governance of corporations like board diversity, executive pay, and business ethics. ESG Fund Flows The year 2019 has been a memorable one for ESG investments as it saw a significant jump in sustainable fund flows. In the US, for instance, investors poured a record $21 billion into socially responsible investment funds, almost quadrupling the rate of inflows in 2018. In Europe, sustainable fund flows reached €120 billion in 2019, nearly triple the previous year’s amount which stood at €44.8 billion. [caption id="attachment_5156" align="aligncenter" width="626"] European sustainable fund inflows (€ billion)[/caption] To illustrate ESG’s rising popularity among investors, Legal & General Investment Management “LGIM”, the UK’s largest asset manager with £ 1.2 trillion under management*, has more than doubled its business in 2019 due to its excellent ESG track record. The company’s assets under managements were boosted by a £37 billion mandate from the Government Pension Investment Fund of Japan, the world’s largest retirement scheme (more than $1.5 trillion in assets*) and a vocal advocate of responsible investing. LGIM’s CEO Nigel Wilson stated: “ESG is really contributing to our success... the brand is travelling very well.” Industry Response While the degree to which asset managers have embraced this responsibility varies widely, we see growing evidence that some are taking this role seriously and using their influence to encourage greater sustainability. For instance, in 2019, BlackRock, the biggest money management firm in the world with more than $7 trillion under management*, announced its intention to start divesting from companies that get more than 25% of their revenue from coal production by mid-2020. (* figures are as at 31st December 2020) [caption id="attachment_5158" align="aligncenter" width="628"] A growing number of asset managers have voluntarily signed and embraced the United Nation’s Principles for Responsible Investment “UN PRI”[/caption] Regulatory Challenges: On much of this, the investment industry has been running ahead of the regulator, meeting market demands for a greater focus on ESG. However, the market has not been able to agree on common definitions, resulting in fragmentation. Ultimately, regulators will need to intervene. Investor Sentiments Investors are sending strong signals that they are unsatisfied with asset managers ESG criteria and disclosures. For instance, big names such as Morgan Stanley and Vanguard have been denounced for their “sin” stocks. Morgan Stanley Global Brands Fund had 6.83% in Philip Morris, its third largest holding, compared to 0.29% in the benchmark. The allocation comes despite the fact that the investment policy explicitly states the fund incorporates ESG considerations into its approach. The Vanguard SRI European Stock Fund did not have any tobacco exposure but was also criticized for its 5.7% allocated to alcohol, gaming and defense stocks. When questioned about their ESG criteria, some asset manager respond that they want to maintain a “seat at the table” with companies that do not score well on ESG metrics, that ESG does not equal ethical investment, or that their specific methodology does not reject a given product. Some investors might question such approaches, but from managers’ point of view, they carry potential for gains, both environmentally and financially. A Vanguard spokesperson said: “There are different flavors to socially responsible investing. Investors should look closely at a fund’s methodology and exclusion policy to ensure it matches their beliefs.” ESG Policies In their current form, ESG policies seem to be lacking two core elements: first, a universal consensus on what constitutes an ESG investment and a way for asset managers to assess ESG compliance in their portfolio; and second, reporting on ESG is still non-coercive and even if it were, without a proper framework, these policies remain inefficient. European Regulatory Landscape To demonstrate the ineffectiveness of current regulations, we turn to the EU, leaders in ESG regulations, to get an idea of current world standing in ESG policies. [caption id="attachment_5161" align="aligncenter" width="700"] Europe has been leading the race in sustainable finance regulation. The progress on the matter started immediately after COP 21.[/caption] In terms of ESG compliance, the EU has been working on creating ESG and climate change standards by deploying a Technical Expert Group on sustainable finance (TEG). However, most guidelines are still voluntary, non-legislative and unbinding for now. The current proposals include: - An EU green bond standard: The TEG proposed that the Commission creates a voluntary, non-legislative EU Green Bond Standard to enhance the effectiveness, transparency, comparability and credibility of the green bond market and to encourage the market participants to issue and invest in EU green bonds. In 2019, the TEG published a report on EU Green Bond Standard. - EU taxonomy: On June 2019, the TEG published a report on EU Taxonomy that sets out the basis for a future EU taxonomy in legislation. However, this report only tackles the climate change area of ESG. - Benchmark: The TEG has been working on recommending minimum technical requirements for the methodologies of the “EU Climate Transition” and “EU Paris-aligned” benchmarks, with the objective to address the risk of greenwashing (greenwashing refers to marketing that portrays an organization’s financial products, activities or policies as producing positive environmental outcomes when it is not the case). As part of its mandate, the TEG also worked on recommending the alignment with the Paris agreement and ESG disclosure requirements, including a standard format to be used to report such elements. Nonregulatory bodies have also been looking for solutions to help companies audit green conformity and provide companies with step by step instructions , such as the UN PRI. Signatories of the UN PRI recognize the potential impact of ESG issues on the performance of investment portfolios, they acknowledge that in order to be effective fiduciaries, they must integrate these factors into their investment analysis, seek appropriate disclosures, and incorporate ESG issues into their ownership and voting practices. As per ESG reporting, it is also still voluntary in most EU countries except for France which has made it mandatory for asset managers and institutional investors to report on how ESG are incorporated in their investment and risk-management processes with specific mention on climate change considerations (Article 173 of French Law on energy transition for green growth), and the Netherlands, where pension plans are required to disclose in their annual report if ESG criteria are incorporated. Reporting guidelines were only published recently in 2019 by the TEG and they provide non-binding advice to help disclose climate change mitigation investments and activities. In order to express their frustration, 631 institutional investors with more than $ 37 trillion in assets organized the largest ever joint call for climate change to governments during the 2019 COP 25 in Madrid. These investors wrote and signed a petition reiterating their full support for the Paris agreement and urging all governments to implement the actions that are needed to achieve the goals of the Agreement, with the utmost urgency. Conclusion It has become clear that regulations that govern ESG are still insufficient. The introduction of such regulations will be beneficial threefold: First for investors as they deserve more transparency, second for asset managers to simplify the current disclosure standards that are both confusing and expensive for them and to renew their trust with their clients, and third and most importantly for the greater good of society and the planet. 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New business surges at Legal & General Investment Management, Financial Times, March 4th 2020 Regulating the growth of ESG Investing, A look at the landscape of ESG regulation around the world, across three main areas, Morningstar, June 3rd, 2019 https://www.morningstar.com/blog/2019/06/03/esg-regulation.html The Evolving Approaches to Regulating ESG Investing, Morningstar, June 3rd 2019 The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018, October 1st 2019, http://www.legislation.gov.uk/uksi/2018/988/regulation/4/made The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018 full PDF, made 10th September 2018 http://www.legislation.gov.uk/uksi/2018/988/made/data.pdf US Forum for sustainable and Responsible Investments, https://www.ussif.org/index.asp