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BNP Paribas Asset Management

PRI reporting framework 2017

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 14. Integration overview

14.1. Describe your approach to integrating ESG into traditional financial analysis.

As part of the ESG integration, we are working with the different investment centers to integrate ESG scores and research in their quality/risk assessment of companies.

The aim is to give a appreciation/depreciation factor according to the ESG profile of the companies, based on the ESG deciles provided by our in-house ESG research team.

14.2. Describe how your ESG integration approach is adapted to each of the different types of fixed income you invest in.

SSA

Our ESG research team has developed dedicated ESG methodologies to assess sovereign, supranat and agencies issuers. The scores are used by SRI fixed income portfolio managers for nmore than a decade in our SRI funds. Wehave started working with the fixed income teams to make use of the ESG scores for non SRI funds.

A country review is organised once a year. The review is prepared by a prior meeting in which the ESG analyst, the ESG research director and the portfolio managers attend to set the major research topics and stakes, as well as the ESG country indicators to watch.

Then the sector review is presented by the ESG analyst to the whole team (other ESG analysts and portfolio managers): exhaustive presentation of ESG stakes, ESG scoring and in/out recommendations (buy list). Simultaneously, a constant monitoring is performed to integrate the news flow coming from all possible sources (external data suppliers, sell side brokers…). Depending on the seriousness of the event, a special surveillance procedure can be triggered by the ESG analysts. Portfolio managers are consequently alerted and any holding reinforcement is forbidden, waiting for a new ESG recommendation from the ESG analysts.

ESG analysis and conclusions coming from the reviews are disclosed and sent to all the portfolio management through a network of ESG Correspondents within the whole IP firm, well above the strict SRI management, in order to better integrate ESG extra financial contents.

Corporate (financial)

Our ESG research is done for issuers, there is no differences between a company releasing a bond or an equity: we apply the same best in class approach with sector-specific ESG indicators.

Each GICS sector is reviewed annually on the same date. The purpose of the sector review is to benchmark all companies within a sector against a set of ESG indicators. These indicators are chosen by the sector analysts after in-depth research and analysis undertaken by the analyst and also based on an ample pool of sources.

For  corporates, a one-to-one meeting or conference call is conducted with each company to doublecheck, verify and discuss findings and data. In many cases, discussions are followed by email exchanges.

There are 10 sector reviews a year ; well prior the review a meeting is set up with fund managers and financial analysts where the analyst presents an overview of the key ESG drivers that will be analysed - including the weighting breakdown between environmental, social and governance issues - in the coming sector review.

Once the analysis is completed, an ESG score and a ranking is given to each company of the sector in which BNPP IP invests or has an interest - icl. non-listed companies within the fixed income universe, large and medium caps,etc. The results are presented formally to fund managers and financial analysts.

The analyst monitor and follow the sector's ESG evolution and the companies's ESG behaviour during the entire year. When a company faces a relevant change and/or controversy the company is put under surveillance and a meeting is set up with the company following which, and the research done, the analyst will change or not the company's score, rating and inclusion in SRI funds.

Corporate (non-financial)

same research process as for corporate financial.

14.3. Additional information [OPTIONAL]


FI 15. Integration - ESG information in investment processes

15.1. Indicate how ESG information is typically used as part of your investment process.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
ESG analysis is integrated into fundamental analysis
ESG analysis is integrated into security weighting decisions
ESG analysis is integrated into portfolio construction decisions
ESG analysis is a standard part of internal credit ratings or assessment
ESG analysis for issuers is a standard agenda item at investment committee meetings
ESG analysis is regularly featured in internal research notes or similar
ESG analysis is a standard feature of ongoing portfolio monitoring
ESG analysis features in all internal issuer summaries or similar documents
Other, specify

15.2. Additional information [OPTIONAL]

the only difference between SRI and non SRI funds requirements is for SRI funds the answers to questions 2,3 and 4 are systematic.

We are making progress in the integration of ESG in the fundamental analysis and the systematicaly integration of ESG analysis in all issuers summaries (it varies depending of the investment centers - we have 65 teams worldwide).


FI 16. Integration - E,S and G issues reviewed

16.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Environment
Social
Governance
SSA

Environmental

Social

Governance

Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

16.2. Please provide more detail on how you review E, S and G factors in your integration process.

SSA

ESG scores are systematicaly used by SRI portfolio managers for the investment/exclusion of SSA of the investment universe (see details on the ESG scoring at question 14.2

We have  started to encourage the non SRI portfolio managers to use the ESG analysis and scores produced by the ESG research team for their investment in SSA decision process : they have access to the sovereign issuers ESG scores, the same level of information as the SRI portfolio managers.

 

Corporate (financial)

As part of our ESG integration process, we consider all the porfolio managers should master the ESG elements of research provided by ou in-house ESG research team the same level as our SRI portfolio managers.

ESG sector reviews and ESG scores are shared to all portfolio managers within the organisation through our network of ESG correspondents and the use of IT tools.

We are moving to a more systematic integration of ESG elements in all the PMs investment processes: it's started in 2015 and we have continued in 2016.

 

Corporate (non-financial)

same answers as above for corporate financial

16.3. Additional information.[OPTIONAL]


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