The score measures the amount of ESG data a company reports publicly and does not measure the company’s performance on any data point.

For today we decided to bring you a brief overview of Bloomberg’s 2019 ESG disclosure scores of Croatian and Slovenian blue chips. The score ranges from 0.1 for companies that disclose a minimum amount of ESG data to 100 for those that disclose every data point collected by Bloomberg. Each data point is weighted in terms of importance, with data such as Greenhouse Gas Emissions carrying greater weight than other disclosures. The score is also tailored to different industry sectors. In this way, each company is only evaluated in terms of the data that is relevant to its industry sector. This score measures the amount of ESG data a company reports publicly and does not measure the company’s performance on any data point.

ESG Disclosure Scores of Croatian & Slovenian Blue Chips

Source: Bloomberg, InterCapital Research

As visible from the graph, all companies, with the exception of Telekom Slovenije, have increased or retained their ESG disclosure score. AD Plastik leads the list with 2019 ESG disclosure at 55.37. All 3 pillars of ESG disclosure of the company have increased, with Environmental disclosure score at 55.04, Social disclosure score at 63.16 (the highest of observed companies) and Governance disclosure score 48.21.

Next comes Krka, whose ESG disclosure score stayed at 50. Meanwhile the company’s Environmental disclosure score increased by 2.33 points to 55.81, making it the highest rated company in this segment (of the observed companies).

Triglav has the highest Governance disclosure score of 62.5, while their ESG disclosure score amounted to 39.47.  

We support the fact that many companies from both Croatian and Slovenian prime market are already disclosing ESG related information, which only seems to be increasing. We also find such practices deeply important not only from an environmental and social standpoint but also as a way for companies to distinguish themselves among many others.

We recently published a blog on ESG and its growing popularity which can be found here.

In September 2020, Croatia observed a fall in tourist arrivals by -76.5% and a fall in tourist nights by -62%.

According to the Croatian National Tourist Board, in September 2020, Croatia observed 0.538m tourist arrivals, representing a decline of 76.5% YoY (12.81m arrivals in September 2019). Tourist arrival wise, September was the worst performing month (in relative terms) of the summer season (Jun – Sep). Meanwhile, tourist nights amounted to 4.86m, representing a decrease of 62%. Such figures indicate that the average stay per person increased from 5.6 nights to 9 nights. The high decrease in arrivals could somewhat be explained by the increased restrictions imposed by some European countries, which made traveling complicated.

Foreign tourists accounted for 0.4m (or 74.5%) of total arrivals, representing a decrease of 81.5%. Meanwhile, they accounted for 3.62m of total nights realized (or 88.5%), representing a decrease of 68%. Such figures show a break in trend regarding a slowdown in decline in tourist arrivals and night released compared to the beginning of the Covid-19 outbreak.

If we were to observe the figures since the beginning of the year, so far 7.39m arrivals were recorded representing a decrease of -60.7%. Meanwhile tourist nights reached 52.41m by the end of Q3 (-49.1% YoY). Such figures have outperformed the initially announced estimates of the government, which were published during lockdown.

As June – September account for the vast majority of the Croatian tourist season it is also worth looking at the value of taxable invoices to further observe the impact of a lower performing tourist season. According to the Tax Administration of the Republic of Croatia in the period from 24 February until 27 September 2020, the value of taxable invoices dropped by 18.4% YoY (or HRK 23.35bn) in the period from 24 February till 27 September. Drop in taxable invoices in wholesale and retail trade in the same period was only at 9.97% while drop in accommodation and food services was at 46.6%.

Coming back to solely September, tourist from Germany accounted for 27% of all foreign nights realized, followed by tourists from Poland (10.26%). Tourists from Slovenia follow with 9.78%.

When observing the arrivals realized by counties, Istria leads the list with 24.9% of the total arrivals. The counties of Kvarner and Split-Dalmatia follow, accounting for 17.8% and 17.6% of total arrivals, respectively. Looking at tourist nights, Istria county comes first with 26.7%, followed by Kvarner with 20.9%.

Turning our attention at the nights realized by the type of accommodation, one can observe that private accommodation leads the list with accounting for 30.3% of total nights. Non-commercial accommodation follows with 29.7% of nights realized in them.

Note that hotels recorded 171,953 arrivals (-82% YoY) and 653,366 nights (-81% YoY). It is also worth noting that the nights realized in hotels account for 13.43% of total nights realized, which represents a decrease of 14 p.p. Such a decrease does not come as a surprise, given that certain hotels were not open due to the Covid-19 pandemic, so the demand shifted more towards private accommodation, while non-commercial accommodation witnessed a significantly lower decrease.

The upgrade is driven by the strengthened credit risk profile of the Government of Slovenia and unchanged assumption of a moderate likelihood of government support in case of need for the bank.

Moody’s has upgraded the long-term local and foreign currency deposit ratings of NLB (and NKBM) to Baa1 from Baa2. The outlook on the long-term deposit ratings remains stable.

Concurrently the agency has upgraded the two banks’ local and foreign currency long-term Counterparty Risk Ratings (CRRs) to A3 from Baa1 and their long-term Counterparty Risk Assessments (CRA) to A3(cr) from Baa1(cr). The banks’ short-term local and foreign currency P-2 deposit ratings and CRRs and their P-2(cr) short-term CRAs have been affirmed.

The rating actions follow the recent upgrade of the Government of Slovenia’s long-term issuer and senior unsecured bond ratings to A3 from Baa1

The upgrade of the banks’ long-term deposit ratings is driven by the strengthened credit risk profile of the government of Slovenia, as indicated by the upgrade of the Slovenian government issuer rating to A3 from Baa1 and Moody’s unchanged assumption of a moderate likelihood of government support in case of need for these banks which results in one notch of uplift in the banks’ deposit ratings. Moody’s support assumption considers the two banks’ importance in the domestic banking sector, each accounting for more than 20% of total sector assets.

The stable outlook reflects the agency’s view that the banks’ credit profiles will remain broadly stable over the next 12 to 18 months.

Factors That Could Lead to an Upgrade or Downgrade of the Ratings

The banks’ deposit ratings could be upgraded following a strengthening of their standalone credit profile. An increase in the amount of subordinated liabilities creating a higher cushion for depositors could also lead to an upgrade of the deposit ratings. On the contrary, a worsening in the banks’ standalone credit profile or a lower uplift to deposit ratings following the application of Moody’s Advanced LGF could lead to a downgrade of the banks’ deposit ratings, CRRs and CRAs.