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BNP Paribas Asset Management

PRI reporting framework 2020

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » Implementation processes

Implementation processes

FI 01. Incorporation strategies applied

Indicate (1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and (2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.
SSA
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
0 Integration alone
95 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
5 All three strategies combined
0 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

Screening and ESG integration, guided by our sustainable investment approach and ESG integration Guidelines (as explained in LEI 01.2) are mandatory for all our equity open-ended funds. 100% of investment processes in our ESG Validation scope has been reviewed as of end of December 2019.

Screening, ESG integration and thematic approach: In addition to implementing the four pillar of sustainable investment, our Sustainable + funds go a step further, by implementing more explicit ESG tilts and/or adopting a thematic or impact approach. Thematic funds invest in companies that provide products and services providing concrete solutions to specific environmental and/ or social challenges, seeking to benefit from the future growth anticipated in these areas while contributing capital towards the transition towards a low carbon, inclusive economy (such as our green bond and social bond strategies).

In addition, the Sustainable + range includes a series of fixed income funds using a Best in class approach launched in 2002. These funds are screened using the UN Global compact compliance filter and then an identification of the best companies sector per sector is made by defining sector-specific ESG indicators.

01.3. Additional information [Optional].

Through our Global Sustainability Strategy (GSS) launched in March 2019, we committed to integrating sustainable investment practices across all our assets. This includes actively managed bond portfolios.

Underpinning our approach to sustainable investment and working towards a sustainable future are our beliefs that:

1.     We are long-term, forward looking investors

„ As active investors, we are forward looking.  We analyse the past in order to better anticipate future developments; we place greater emphasis on  identifying and helping to promote positive change in the future than rewarding (or punishing) past or current behaviour.

„ We are long-term investors, and are prepared to be patient to achieve better results for our clients, and for the world at large.

2.     Our fiduciary duty is aligned with sustainable investment

„ We believe that our fiduciary duty to our clients includes taking environmental, social and governance risks into consideration in our investment decisions.

„ We have a fiduciary duty to our clients to make informed decisions taking reputational, operational and financial risks into careful consideration.

3.     Stewardship is an opportunity and an obligation

„ Stewardship is an integral, and crucial, part of sustainable investment. As active asset owners, we believe that we should use company engagement, proxy voting and policy advocacy to influence companies and the world for the better.

„ Stewardship, if done correctly, can reduce risk, unlock value and impact the world around us in a positive way through the promotion of improved sustainability practices, disclosure levels and transparency.

„ We believe that engagement is generally more effective than exclusion but divestment can be effective as a last resort.

„ Company disclosure is a fundamental requirement for sound investment decision-making.

„ Collaboration with other long-term investors and stakeholders can help to achieve our common environmental and social aims, particularly when engaging with companies and regulatory bodies.

„ We are also committed to engaging with our clients to promote greater acceptance and implementation of sustainable investing.

4.     ESG integration helps us achieve better risk-adjusted returns 

As mentioned in our sustainable investment philosophy: 

„ Sustainability is a long-term driver of investment risks, and returns (although these risks also manifest in the short-term).

„ Sustainability is imperfectly understood, under-researched and inefficiently priced – different players have different goals, approaches, accesses to information, levels of understanding, integration into investment processes etc. Information and disclosure levels are imperfect, incomplete and inconsistent.

„ We will make better investment decisions, based on a richer and deeper understanding of risks and opportunities, if we systematically and explicitly integrate ESG factors into our investment analysis and investment decision-making.

„ Risk management needs to incorporate ESG risks.

5.     A sustainable economic future relies on sustainable investment practices

„ We can deliver the same or better financial returns in the long term than traditional investments by investing sustainably, while generating positive environmental, social and governance outcomes.

„ The way we invest, and engage with companies and regulators, can help shape the world around us.  Effectively managing ESG risks will help promote greater market stability, and more sustainable long-term growth.

„ A 4°C warmer world will be uninvestable – we need to align our investments and use engagement to support successful implementation of the Paris agreement.

„ We should carefully monitor ESG performance, and try to measure the impact of our investments. 

6.     Walking the talk is critical to achieving excellence

 

Lastly, we believe that walking the talk is critical to achieving excellence:

„ As a sustainable asset manager, we should match or exceed in our corporate practices, and in disclosure, the standards we expect from the entities in which we invest.

„ Fostering a sustainable culture internally drives sustainable investment by our staff. 

 

As part of the GSS, we define five pillars of sustainable investment:

1.     ESG Integration: Our ESG Integration Guidelines and Policy apply to all of our investment processes (and therefore funds, mandates, and thematic funds). However, they are ‘non-applicable’ for index funds and exchange-traded funds (ETFs).

2.     Stewardship: Shareholder-engagement and public policy advocacy activities are undertaken on behalf of all of our assets under management. 

3.     Responsible Business Conduct policies and sector-based exclusions: To date, we have applied these policies to all our funds, but related exclusions are not currently applied to all client mandates. During 2020, this will become the default approach for new mandates, and we will approach existing clients to seek their approval to apply the policy to existing mandates. 

4.     Forward-looking perspective – the ‘3Es’: As set out in Part II of our GSS, we will measure our exposure to key issues across our full assets under management, and undertake related research in support of all investment processes.

5.     ‘Sustainable +’ solutions: these include our Enhanced ESG, thematic and impact investing strategies, enabling investors to allocate to sustainable investment opportunities.

Together, these approaches strengthen the way we invest, including how we generate investment ideas, construct optimal portfolios, control for risk, and use our influence with companies and markets. Further information on each of these components can be found in the GSS.

https://www.bnpparibas-am.com/en/sustainability/as-an-investor/


FI 02. ESG issues and issuer research (Private)


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

specify description

          Cooperation between ESG analysts and portfolio managers/sector analysts + joint meetings (PM + Sustainability CentreESG) with issuers.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

          ESG Champions have been appointed within each investment team as a first point of contact with our Sustainability Centre.
        

03.3. Additional information. [Optional]

In 2016, we developed an IT solution to store our ESG research and companies' ESG profiles. ESG scores are available in Aladdin, the firm's front to back solution.

In 2018 and 2019, we appointed ESG champions within each investment team to help promote ESG integration within their teams and to liaise with the Sustainability Centre. Trainings sessions are organised centrally, both for the ESG Champions as well as across investment teams, as we work to enhance the firm's overall capabilities on sustainability issues.


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