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BNP Paribas Asset Management

PRI reporting framework 2020

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe At the core of our investment processes, analysts and managers integrate considerations of ESG factors into their company, asset and sovereign evaluation and investment decision-making processes. This allows them to identify and assess areas of risk or opportunity – e.g. relating to topics such as EV penetration or carbonpricing.
Describe We are able to assess Climate related risks on a qualitative and quantitative basis. We take into account both transitional and physical risk. Our methodology focuses on a sector-based approach.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

An example is that of our Emerging Markets fixed income team that incorporates country level performance on a range of environmental, social and governance criteria (such as renewables to energy ratio, school enrolment gender parity index or the index on corruption perception or press freedom), alongside economic factors.

They use the ESG rating of the 90 EM countries to influence position sizing for investments in our portfolios, by blending the country's alpha opportunity with their ESG rating in portfolio construction. They prioritise high ESG countries, and while they might invest in low ESG countries where the alpha conviction is high, they will invest less in such countries than would otherwise be the case. We also include in our assessment the climate strategies and NDCs so we integrate that into our investment decisions.

The result is an overall ESG-tilted portfolio that neither limits diversification nor truncates the alpha set.


SG 13 CC.


SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

For green investments (and here for low carbon assets) we use our own taxonomy according to our Sustainability Handbook. However we have committed to start using the European taxonomy as soon as it is available.

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description

          Green Revenues
        

14.5. Additional information [Optional]

Within our Global Sustainability Strategy (GSS) we have set key targets related to the energy transition, we will measure primary energy mix & electricity energy mix vs. IEA Sustainable Development Scenario (SDS). We also commit to measure carbon intensity (gCO2/kWh) vs. IEA SDS.

As a KPI to measure and reports we will use CO2 emission per portfolio and the Green Share (which represents green investments in sustainable economic activities such as those defined by the forthcoming EU taxonomy, in % of AUM) of our portfolios

As an investor, BNPP AM recognises the role it has to play in contributing to a sustainable future, as outlined by the Paris Agreement.

This in why in 2016 we formalised a climate change strategy of gradually moving our portfolio holdings towards a below 2 degree scenario in line with the Paris agreement. The strategy is three-fold, translating into actions and initiatives on allocation of capital, responsible stewardship as well as commitment and transparency. With the release of this strategy, we highlighted the depth of our long-term commitment to contribute to limiting the adverse impacts of global warming.

Our strategy includes all of our actions and policies geared to helping tackle climate change, providing a conceptual and an operating framework. Our climate change strategy is an integral part of our long-term approach to business and investment. We believe that exceeding 2 degrees Celsius of global warming above pre-industrial levels will seriously affect humanity and the global economy. This, in turn, might affect the value of investments in the long run. We therefore believe that it is our duty to better understand, assess and manage climate change risks. We are working towards measuring, disclosing and reducing carbon risks in our portfolios; and encouraging companies to report and reduce their carbon footprints. Our climate change strategy is based on three pillars:

ALLOCATION OF CAPITAL:

·       The first and most important step is to fully understand, identify and evaluate carbon risks. Only then can we work towards adapting our investments. Therefore, we are firstly working towards identifying and measuring carbon risks in our portfolios. We are now measuring the carbon footprint of both equity and fixed income portfolios. In May 2015, we were one of the first signatories of the Montreal Carbon Pledge, by signing, we committed to progressively measuring and publicly reporting the carbon footprint of our open-ended funds in an informative and explanatory way. From 26 equity funds in 2015 to more than 200 fixed income and equity open ended funds in 2018.

·       Following our signature of the Montréal Carbon Pledge, we signed the Portfolio Decarbonization Coalition (PDC). By signing the PDC, members commit to measuring and disclosing, via the Montréal Carbon Pledge, the carbon footprint of their portfolios on an annual basis and taking action to decarbonise their investments.

·       We commit to continue working on widening and prioritising our low-carbon product offer, encompassing a complete range of investment solutions in mandates, dedicated and open-ended fund through thematic or best-in-class funds, and low carbon ETF.

RESPONSIBLE STEWARDSHIP

·       Addressing climate change in our voting at AGMs: We believe that voting at Annual General Meetings is a crucial component of our shareholder duties and our investment process. Equally important for us, as part of our ongoing dialogue with the companies in which we invest, is to promote good environmental (including climate change), social and governance practices.

·       Engaging in dialogue with companies: In relation to climate change, our engagement strategy with the companies we invest in aims to improve:

- Companies’ carbon disclosure in line with our duty and commitment to report publicly the carbon footprint of our portfolios

- Companies’ overall environmental performance

- Our understanding of what actions companies are taking to align themselves with the goal of a below 2 degree scenario

A significant part of our engagement is conducted in conjunction with other investors and through our memberships of the Institutional Investor Group on Climate Change (IIGCC), the Principles for Responsible Investment (PRI) and the United Nations Environmental Programme (UNEP). We are active members of three working groups within the IIGCC – the Property working group, Corporate programme and the Policy group; in addition to the UNEP FI Property working group.

TRANSPARENCY AND COMMITMENT

We are committed to monitoring and reporting annually on our activities and progress. We will report on the progress made in relation to our policy and, in particular, public commitments:

- Through the Montréal Carbon Pledge and our commitment to report the carbon footprint of our open-end funds every year

- Through the Portfolio Decarbonization Coalition and our commitment to report annually to UNEP FI on our progress in decarbonising our portfolios

 

 

 

 


SG 14 CC.


SG 15. Allocation of assets to environmental and social themed areas (Private)


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