In winning the prestigious 2023 Morningstar Award for Best Asset Manager – Sustainable Investing, BNP Paribas Asset Management (BNPP AM) demonstrates its successful commitment to becoming “the sustainable investor for a changing world”. It is a determination that translates into one goal: to generate long-term sustainable investment returns for clients, based on a unique sustainability-driven philosophy.
Commenting on being bestowed the honor, Xuan Sheng Ou Yong, BNPP AM’s Green Bonds & ESG Analyst APAC, points out that they have been a major player in sustainable investment since 2002 with the launch of their first socially responsible investment (SRI) fund. “Sustainability is firmly embedded in our investment philosophy and management processes that take ESG considerations into account, and promote a low-carbon, environmentally sustainable and inclusive economy,” he explains.
Comprehensive approach to sustainable investment
According to Ou Yong, the BNPP AM approach to sustainable investment comprises four major elements:
Firstly, by integrating relevant ESG factors into their company, asset and sovereign evaluation and investment decision–making processes, their analysts and portfolio managers can identify and assess areas of risk or opportunity which may not be understood by all market participants, thereby providing them with a relative advantage and improving risk-adjusted returns for investors. Their every investment process is reviewed and approved by an ESG Validation Committee.
Secondly, BNPP AM believes that stewardship in the form of voting and engagement helps protect company value, influence sound regulatory framework, and promote better social and environmental outcomes. In addition to regular contact with investee companies and country representatives, their portfolio managers also collaborate closely with their peers and civil society organizations to formulate and communicate their vision to make a positive difference to people’s futures.
Thirdly, BNPP AM expects companies to meet their fundamental obligations in the areas of human and labor rights, protecting the environment and ensuring anti-corruption safeguards, wherever they operate. It engages with companies where they fall short, and exclude the worst offenders. In addition to following screening guidelines, it also excludes particular sectors or activities that are deemed to be in violation of international norms and cause detriment to society.
Fourthly, BNPP AM has established a set of targets and developed key performance indicators relating to the ‘3Es’, i.e. the energy transition, environmental sustainability and equality. It engages in in-depth dialogue with companies, encouraging them to improve their carbon footprint, provide greater opportunities for women and minorities, and adopt more equitable and transparent remuneration policies.
In addition to these four elements, BNPP AM has also introduced direct impact investments in unlisted SMEs which are creating economic value alongside direct social and environmental contributions. Also available is a range of thematic funds for more targeted sustainable investments in energy transition, green bonds, water, human development, food, global environment and climate change. In terms of passive investing, it has launched the first low-carbon ETF in 2008, and a zero carbon ETF for clients in 2019.
Sustainability Centre plays a key role
BNPP AM’s Sustainability Centre plays a key role in measuring, tracking and reporting on the company’s impact and progress on sustainability, notes Ou Yong. It provides investment teams with research, analysis and data at company and sectoral levels, and also supports teams in their efforts to fully integrate sustainability-related risks and opportunities into investment strategies.
“This is achieved by our ESG research analysts, whose insights are informed by a variety of external data and research sources, and who provide a range of educational opportunities to colleagues across the organisation,” explains Ou Yong.
The Centre works closely with its clients to share best practices, provide updates on regulatory requirements, and support them in creating their own sustainability policies. It also works hand-in-hand with investment and product development teams to develop and promote high-conviction sustainability strategies and products. ESG Champions have been appointed to help promote sustainable investment within each team, and to liaise with the Sustainability Centre. Training is organised centrally across the teams.
“Sustainable investment is at the core of what we do,” stresses Ou Yong. “Therefore, we take the governance of sustainability seriously in the companies in which we invest, and hold ourselves to the same standard.”
He points out that the company’s approach policies, targets and reporting are overseen by a Sustainability Committee, which is a component of its Investment Committee, chaired by the CEO and Head of Investments. This Committee is responsible for approving its Global Sustainability Strategy and related policies.
Leveraging its capital for positive change
Ou Yong believes that the financial sector carries a significant responsibility as it is entrusted with managing people’s savings and retirement assets, but its responsibility goes beyond that. “As financial institutions, we have the potential to influence the behaviour of entities that we invest in, as well as the regulatory framework within which we operate,” he observes.
BNPP AM currently has around EUR 400 billion assets under management, over 3,000 staff in 36 countries, and is backed by the BNP Paribas Group, whose scale and A rating gives it and its clients the secure foundation to invest and make a positive difference in people’s futures.
The current economic, social and environmental system is failing, he says, and must be transformed in order for financial institutions to deliver sustainable returns over the long term. BNPP AM is committed to using the financial capital it manages on behalf of its clients, as well as its human capital to push towards a more sustainable future.
“This will benefit our employees, our investment returns, our clients, and society at large,” Ou Yong concludes. “We invite our peers to join us in this commitment, as it is by working together that the financial community has the greatest opportunity to be a force for positive change – to be ‘future makers’.”
To learn more about BNPP AM’s sustainable investing capabilities, visit: www.bnpparibas-am.hk/en/sustainable-investing/
