This report shows public data only. Is this your organisation? If so, login here to view your full report.

BNP Paribas Asset Management

PRI reporting framework 2020

Export Public Responses
Pdf-img

You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (A) Implementation: Screening

(A) Implementation: Screening

LEI 04. Types of screening applied

04.1. Indicate and describe the type of screening you apply to your internally managed active listed equities.

Type of screening

Screened by

Description

1) All funds ought to comply with our Responsible Business Conduct policy, which:

- Excludes companies in severe breach of the UN Global Compact Principles and OECD Guidelines for Multinational Enterprises (OECD MNEs Guidelines). These are based on the international conventions in the areas of human rights, labour standards, environmental stewardship and anti-corruption. These exclusions can therefore be based on corporate governance practices (e.g. corruption), as well as environmental and social practices and performance (human rights, labour standards, environmental stewardship).

- We have a series of sector policies that set out the conditions for investing in particular sectors, products and activities (e.g. agriculture, palm oil, nuclear).

- We have another set of policies that commit us to exclude particular sectors or activities (tobacco, coal, controversial weapons or asbestos), as we deem them to be in violation of international norms, or to cause unacceptable harm to society and/or the environment, without counterbalancing benefits. These are generally sectors where engagement makes little sense.

 

You can refer to question LEI 04.02 for more details.

2) All SRI labeled funds must also exclude companies active in alcohol, tobacco, gambling, pornography, armament sector (if revenue >10% of the activity).

 

Screened by

Description

1) All funds:

Using our proprietary ESG scoring methodology, we avoid investing in a weakly rated entity (lowest decile) without actively engaging particularly on the key issues identified, and we may disinvest from weakly rated entities which do not respond to engagement.

2) Sustainable + funds with a Best-in-Class approach: We do not invest in companies belonging to the three lowest ESG scoring decile.

Screened by

Description

Since 2012, we have applied the UN Global Compact Principles as a filter to all our open-ended funds. As a result, we exclude those companies in systematic breach from all open-ended funds across BNPP AM. Through our Responsible Business Conduct (RBC) policy we also exclude companies in breach of the OECD Guidelines for Multinational Enterprises. Compliance officers are in charge of ensuring the exclusion lists are respected by portfolio managers. The exclusion list is programmed into our compliance systems, which can block pre-trade and post-trade activity.

We use the UN Guiding principles on Business and Human Rights when analysing how companies are monitoring social risks, in particular in their supply chains, or how companies are enforcing good practices on business ethics. We use the UN Guiding Principles as an analytical framework not as a screening tool.

 

04.2. Describe how you notify clients and/or beneficiaries when changes are made to your screening criteria.

We are aware that Responsible Business Conduct (RBC) practices impact the value and reputation of entities in which we invest. We expect companies to meet their fundamental obligations in the areas of human and labour rights, protecting the environment and ensuring anti-corruption safeguards, wherever they operate, in line with the UN Global Compact Principles and OECD Guidelines for Multinational Enterprises (OECD MNEs Guidelines). These are shared frameworks, recognised worldwide and applicable to all industry sectors, based on the international conventions in the areas of human rights, labour standards, environmental stewardship and anti-corruption. We aim to engage with companies where they fall short, and exclude the worst offenders.

We have a series of sector policies that set out the conditions for investing in particular sectors, and guide our screening requirements and stewardship activities. These criteria are based on relevant international conventions and regulations (including the supplemented criteria provided by the OECD for sensitive sectors such as responsible agricultural supply chains or conflict minerals), BNP Paribas Group CSR Policies, and voluntary industry standards. In each sector, we highlight mandatory sector RBC requirements which have to be met by issuers in order for BNP Paribas Asset Management to invest. We do this because if the activities in question are not conducted properly, then they could cause serious social or environmental damage (such as palm oil). In addition to the compulsory standards, we have also developed additional criteria that we encourage companies to comply with. The latter provides a good framework for further analysis and dialogue with companies.

We have another set of policies that commit us to exclude particular sectors or activities (tobacco, coal, controversial weapons or asbestos), as we deem them to be in violation of international norms, or to cause unacceptable harm to society and/or the environment, without counterbalancing benefits. These are generally sectors where engagement makes little sense.

Implementation:

We are committed to ensuring the consistent implementation of our Responsible Business Conduct policy to all open-ended funds managed or delegated by BNP Paribas Asset Management entities, but related exclusions are not currently applied to all client mandates. This is now the default approach for new mandates, and we will approach existing clients to seek their approval to apply the policy to existing mandates.

Affiliated entities over which BNP Paribas Asset Management or the BNP Paribas Group do not have operational control are invited to adopt this strategy and implement the components of our Responsible Business Conduct Policy. Where we use affiliates or external investment managers for our open-ended funds, we expect them to incorporate Responsible Business Conduct policies in line with our sustainable investment philosophy.

In applying our Responsible Business Conduct Policy, we take into account specific circumstances as they relate to the environmental, social and governance practices of individual issuers. BNP Paribas Asset Management bases its judgment on data gathered from issuers and third-party research providers, and does its best to gather relevant information. However, it is dependent on the quality, accuracy and timeliness of the information collected.

We strive to implement this Policy in the best interest of our clients and operate at arms' length from the BNP Paribas Group and its subsidiaries or affiliate companies.

Our Responsible Business Conduct Policy is publicly available on BNP Paribas Asset Management's website and is reviewed regularly in order to reflect the evolution of ESG standards and market practices.

 


LEI 05. Processes to ensure screening is based on robust analysis

05.1. Indicate which processes your organisation uses to ensure ESG screening is based on robust analysis.

          - Participation of the Portfolio Managers to ESG sector reviews with ESG analysts
- One-to-one interviews with companies by ESG analysts
        

05.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your ESG screening strategy.

05.3. Indicate how frequently third party ESG ratings are updated for screening purposes.

05.4. Indicate how frequently you review internal research that builds your ESG screens.

05.5. Additional information. [Optional]

We are able to assess ESG issues on both quantitative and qualitative aspects. The qualitative overlay takes into account a forward looking analysis based on the firm-wide strategy and ambition.

The ESG analysis of issuers is carried out by grouping companies into peer groups based on geographic, sectorial and sample size considerations. 

By creating a strong analytical framework around ESG research, the ESG team is able to make an independent judgement on companies' commitments to sustainable development, and assess the extent to which their results are consistent with those commitments.

Our proprietary scoring methodology combines a quantitative scoring methodology, which is currently being enhanced, and a qualitative assessment. It then enables an ESG ranking of issuers. This information is disseminated firm-wide: the results are presented formally to fund managers and financial analysts.

The ESG analyst monitors and follows the sector's ESG evolution and the companies' ESG behaviour throughout the year. When a company faces a relevant change and/or controversy, it will be monitored and a meeting may be set up with the company. Depending on the outcome of the meeting, the analyst may raise or lower the company's score and rating, and may or may not recommend to continue allowing portfolio managers to include it in portfolios.

As explained in section 04.2, Responsible Business Conduct and sector policies exclusions are reviewed quarterly - information from our external provider on UN Global Compact breaches is reviewed internally by our ESG research & Stewardship teams. They are then presented to the Sustainability Committee chaired by our CEO for final approval four times a year.

 


LEI 06. Processes to ensure fund criteria are not breached

06.1. Indicate which processes your organisation uses to ensure fund criteria are not breached.

          Updated exclusions and watchlist are sent to investment teams monthly.
        

06.2. If breaches of fund screening criteria are identified, describe the process followed to correct those breaches.

Based on the UN Global Compact Principles, our sector policies and Sustainable + products that are Best in Class or thematic, the exclusion list and the buy list are programmed into our Compliance systems, which can block pre-trade and post-trade activity.

In case of a breach, an escalation process is activated, from on-screen alert messages and emails up to informing the CIO. The portfolio manager then has a maximum time frame of one month to sell the position in the best interest of the client.

06.3. Additional information. [Optional]


Top