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BNP Paribas Securities Services

Service Provider Reporting Framework 2017

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Responsible investment policy

SG 01. Responsible investment policy

01.1. Describe how your organisation’s philosophy incorporates environmental, social and governance factors, and the link to your business offerings. 

          BNP Paribas Securities Services has an important role to play in helping its clients adopt and integrate ESG policies and demonstrate the value these can bring to an organisation.

By signing to the PRI in the “service provider category”, BNP Paribas Securities Services is committed to providing, developing and promoting services that support clients’ implementation of the PRI’s six Principles.

The bank fully supports responsible investments and commits in reinforcing risk management among its clients. This represents the primary challenge of our long-term strategy.

For example through our “ESGRA” (ESG risks analytics) solution we allow our Institutional Investors’ client base to have an independent and quantitative assessment of ESG scoring across their investees companies, through a dynamic portal to allow more informed investment decision-making. Our bank wide connectivity can also enhance our clients’ sustainable analysis and investments, implement more efficient indices, allocate to “green” investments to improve risk return and properly meet their long term objectives. 

As part of our ESGRA reporting activity, we integrate external data providers to get the raw ESG data, ESG ratings & underlying datasets (for example to support carbon footprint) to feed our ESGRA reporting platform. All the services that we offer are built on our proprietary risk & performance platforms, and serviced by our risk & performance specialists.

Another example is the already established development of our Planetshare solution (including “Votaccess” platform) that enable our customers to engage actively in shareholder meetings of the companies they invest in, allowing them to express their views on the incorporation of ESG issues into ownership policies and practices.

We are convinced that we can have considerable influence over how our clients address ESG issues. In this respect, in order to better inform our customers, we regularly publish thought leadership papers and articles.

01.2. Indicate whether you have policies that formalise the incorporation of your beliefs in your business offerings.

01.5. Additional information [OPTIONAL]

SG 02. Publically available policies (Not Applicable)

SG 03. Norms used to develop policies (Not Applicable)

SG 04. Policy offerings to clients

04.1. Indicate whether you offer any of the following policies to clients.

Off the shelf
Tailored
Asset class-specific RI guidelines
Sector-specific RI guidelines
Screening/exclusions policy
Engagement policy
(Proxy) voting policy
RI guidelines set out within the Investment Policy Statement (IPS)
RI guidelines set out in a freestanding RI policy
Multi-year RI implementation project plan
Conflict of interest management policy
Stockbroker allocation policy
Securities lending policy
Other, please specify (1)
Other, please specify (2)
Other, please specify (3)
None of the above

SG 05. ESG/RI in business offerings

05.1. Describe how you include ESG/RI factors as an integral part of your business offerings.

Business area

Reporting

How you include ESG/RI factors

We support our clients in integrating ESG factors into their investment strategy with our online reporting platform. Our reporting solution (ESGRA) includes a range of quantitative ESG factors which are used to tailor reporting solutions to our client needs. The underlying data comprises more than 400 data points, converted into KPIs and then scores at the company level. As well we source company ESG ratings which are also integrated into the solution.

Stewardship Services

How you include ESG/RI factors

Our offerings to issuers is oriented to support Corporate Governance requirements in terms of ESG. Thanks to our online tools, being made accessible to both issuers and investors/shareholders, we will continue to  accompany Corporates to share informations and to facilitate voting for stakeholders.

05.2. Describe the resources that your organisation allocates to ESG/RI offerings where these form only a supplementary ESG/RI service.

Business area

Reporting

Describe the resources allocated to ESG/RI offerings

We have a fully dedicated team within our IRP (Investement Reporting and Performance) department:

  • Product development: 4 people in Paris + 4 in Chennai
  • Product & sales specialists: 2 people sitting respectively in Europe and Asia

Other internal resources supporting the ESG/RI offering: CSR team and global coverage

SG 06. Outsourcing of services (Private)

SG 06.2. Outsourcing of services (Not Applicable)

SG 07. Providing training/education

07.1. Indicate whether you provide training/educational services on ESG/RI. Tick all that apply.

SG 08. Level of involvement in collaborative organizations and/or initiatives

08.1. Select the collaborative organisation and/or initiatives of which your organisation is a member, or in which it participated during the reporting year and the role you played.

Collaborative Organisation/Initiative

Your organisation’s role in the initiative during the reporting year (see definitions)

Provide a brief commentary on the level of your organisation’s involvement in the initiative [OPTIONAL]

08.2. Additional information. [OPTIONAL]

SG 09. Applying, advancing and promoting the PRI principles

09.1. Describe how your organisation applies, advances and promotes the PRI Principles.

BNP Paribas Securities Services fully supports sustainability and responsible investment practices, and commits in supporting prudent long-term risk management among our clients. This is one of the key pillars of our long-term strategy. BNP Paribas Securities Services is contributing to the establishment of a range of responsible financial services solutions that help our clients to fulfil their social, environmental and governance responsibilities and their CSR issues at large.

For example through our “ESGRA” (ESG Risk Analytics) solution we allow our Institutional Investors’ client base to have an independent and quantitative assessment of ESG scoring across their investees companies, through a dynamic portal to allow more informed investment decision-making. Our bank wide connectivity can also enhance our clients’ sustainable analysis and investments, implement more efficient indices, allocate to “green” investments to improve risk return and properly meet their long term objectives.

Another example is the already established development of our Planetshare solution (including “Votaccess” platform) that enable our customers to engage actively in shareholder meetings of the companies they invest in, allowing them to express their views on the incorporation of ESG issues into ownership policies and practices.

09.2. Highlight whether there are any ways that your organisation would like to engage further with the PRI. [OPTIONAL]

  • Publish thought leadership papers (approved by PRI) to inform and educate clients partnering with PRI when possible
  • Promote PRI when partcipating to global/local initiatives
  • Potential collaboration with PRI on knowledge share sessions for asset owners and asset managers on various topics (e.g. Art 173, FSB, SDGs...)

SG 10. Actions taken to promote responsible investment

10.1. Indicate which of the following actions your organisation has taken to promote responsible investments, independently of collaborative initiatives.

10.2. Additional information. [OPTIONAL]

We are active in our commitment and support of dialogue in the industry around sustainability and responsible investment issues. In this respect, in 2016 we:

- Have regularly published thought leadership papers and articles (i.e. 3 versions of "ESG made simple guide" translated in 6 languages, "Carbon Pricing Stress-Testing" research paper, ESG special edition of BNP Paribas Securities Services “Quintessence newsletter”,  ESG Risk Analytics Case study / video with one of the largest Australian superannuation funds)

- Have sponsored, organised and participated to several “sustainable events / conferences” in the market (e.g., sponsored the UN PRI in Person in Singapore, hosted a client event in Hong Kong featuring the UN PRI head of Asia ex Japan, organised the flagship global Sustainable Future Forum in Singapore, BNP Paribas Quintessence in London with the Economist, BNPP Roundtable Germany with the German Pension Funds Association, World Pension Council,…)

- Have had multiple interviews focused on sustainability matters in specialised magazines (e.g. FT, RI, Global Custodian, Investment news, IPE, Asian Investor…)

SG 11. Long term trends

11.1. Indicate which of the following long-term trends are addressed in your product outputs.

11.2. Explain how this long term trend affects your product outputs.

With the increased focus on climate change, and the risks this poses to economies and thus to investor portfolios, we are proactively addressing climate change through various measurement practices and through developing solutions to support our clients address the impacts of climate change.

In the multi-year roadmap within our risk & performance business line, this commitment is driven a series of initiatives that support our clients' ability to be compliant with Article 173 (LTE), comprising carbon footprint indicators, alignment with climate-related goals, and exposure to climate-related risks (physical and transition).

For example, for the past two years we have been studying the effects of climate change, the levels of CO2 emitted into the atmosphere, and the overall rise in the Earth's core temperature and how this will affect the overall value of a portfolio or investment scheme. 

We break this down by looking at carbon pricing over 6 markets globally, understanding regulations in the local markets where investments are made, with a heavy focus on the energy, utilities, materials, and industrial sectors. We believe these sectors are disproportionately affected by the price of carbon and are more sensitive to changes in regulation around CO2 emmissions. Lastly, we examine whether these companies would be able to pass on an increase in carbon prices to their customers, or whether they would need to absorb part or all of an increase in carbon costs. 

This strategy helps our clients in two ways: 1. It allows us to help our clients to understand the emissions they are responsible for as an owner of a particular company, 2. It also helps us to model the future profitability of companies with heavy exposure to carbon emissions

11.2. Explain how this long term trend affects your product outputs.

This is still in its infancy for us, but we are partnering with an asset manager to look at water scarcity and how this will affect investments desicions by region. More to follow on as this product develops.

 
          Contribution to the Sustainable Development Goals (SDGs)

11.2. Explain how this long term trend affects your product outputs.

Post the announcement of the Sustainable Development Goals (SDGs) by the UN, BNP Paribas has undertaken a strong commitment across the Corporate and Institutional Banking (CIB) business, in several dimensions, including SDG indices, reporting and various partnerships with industry and clients. Within BNP Paribas Securities Services, this commitment is underlined through development of analyses and reporting solutions to support our clients who incorporate the SDGs into their investment and business policies. We envision this to be as well driven by a multiphase roadmap across the Securities Services business, incorporating the roadmap highlighted in 11.2.

The first SDG we focused on was Climate. This is a two step approach looking at absolute emmsions of an investment portfolio first, based on both equity and bond holdings compared to the enterprise value of the company. The second approach is through our scenario analysis looking at how various different increases in the Earth's temperature (2 degree C increase, 2.74 degree C increase, 3.5 degree C increase, 4 degree C increase, 6 degreee increase) will affect an investment portfolio, and how the physical and transitional risks associated with these temperature changes will affect the investement landscape. 

We are also looking at new ways to incorporate other SDGs into our portfolio analysis products, with a particular aim at targeting: 

  1. How Gender Equality affects the governance measurement of the ESG score, and how this translates to performance and risk mitigation. 
  2. How Affordable and Clean Energy generation affects the price of energy and how companies in the energy and utilities sectors will need to adapt to stay profitable. 
  3. How companies who subscribe to Sustainable Production goals with sustainable business models can out perform their peers who do not in the long term. 

SG 12. Business certifications/accreditations (Private)

SG 13. Interaction with asset owners

13.1. Indicate whether you interact with asset owner clients.

13.2. Indicate the typical frequency and type of interactions with your asset owner clients.

Type of interaction

Frequency

Frequency

13.3. Tick boxes across level of employment of investor contact (C-level, PM etc.) and subject areas typically addressed with the contact(s).

Level of employment

Subject area(s) 

          At the CEO and C-suite level we work with clients to help them understand how they can use ESG data and risk characteristics to incorporate these into their investment strategy. We also demonstrate examples of investment strategies where we have sought to minimize the carbon footprint while still tracking a standard index. Realistic examples such as these help our clients to understand that there are win - win investment strategies, where they can still track or beat an index in terms of performance while simultaneously managing there portfolio in a more sustainable, ethical and environmentally responsible way. Typically at the C-suite level our clients want to take ownership of their strategy and reputation. Demonstrations like this are key to helping them achieve that ownership.

Subject area(s) 

          Please refer to the above answer

Subject area(s) 

          Analysts and portfolio managers are primary interested in understanding all technical aspects of our service. They want to understand what elements we are reporting and analysing, how often data is updated, how we collect and collate our data, the methodologies behind our data, and most importantly the experience of how they can integrate and use our tools to help them day to day. The issues paramount to them are understanding our methodology for carbon foot print measurement, understanding how we can breakdown ESG scores to the asset level, and then break them down further to understand the individual Environmental, the individual Social, and the individual Governance measurement for each company. Lastly, our clients at the analyst and portfolio manager level want to see our thought leadership. Currently, our clients are most interested in our scenario analyses where we model various temperature rises and correlate that to an impact on their portfolio. Of particular interest to this scenario testing are those who invest heavily in the energy, utilities, materials, and industrial sectors.

Subject area(s) 

          Please refer to the above answer

Subject area(s) 

          Please refer to the above answer

SG 14. Aligning approach with investor goals

14.1. Describe how you align your organisation’s philosophy on and approach to ESG/RI with investor goals. 

          BNP Paribas Securities Services aims to be the reference bank for sustainable finance. Sustainability is a strategic pillar in the three year transformation plan launched in 2016. 
To this end, BNP Paribas Securities Services is part of the Sustainable Finance and Investment Program within BNP Paribas CIB, which is dedicated to meeting the needs of our institutions and corporate clients. 
Under the Sustainable Finance and Investment program, BNP Paribas Securities Services helps its clients explore more sustainable business models by enabling asset owners and asset managers to integrate ESG factors more easily into their investment decision-making process

14.2. Additional information. [OPTIONAL]

SG 15. ESG recommendations not aligned with investor goals

15.1. Describe what steps you take, if any, when your ESG recommendations are not in line with investor goals.

15.2. Additional information. [OPTIONAL]

SG 16. Seeking feedback from clients

16.1. Indicate whether you seek feedback from clients on your RI/ESG services and product offerings

16.2. Describe how you use this feedback on your RI/ESG services and product offerings.

We have an active engagement model with our clients to seek feedback on our services and product offers. This is underscored by the firm belief that holistic solutions to support our clients in their ESG integration journey are best served through continuous feedback and a partnership approach. A clear example is the development of our ESGRA solution, which was co-innovated with a large asset owner in an agile and collaborative manner. We continue to work with the asset owner on further developments.

We constantly seek feedback from our clients and industry through hosting workshops, knowledge share sessions and active participation in industry working groups (eg: ISO 14097, Transition Pathway Initiative), to analyse current and potential needs for services and product offers, as well as to upgrade our current reporting services.
Continuing our successful launch of ESGRA, we've formalised the agile development organisation for our product that aims to facilite the sharing with clients with dedicated sprint development sessions for co-creation with them.

SG 17. Managing conflicts of interest

17.1. Indicate whether your organisation has a policy for managing potential conflicts of interest.

17.2. Describe how you manage potential conflicts of interest.

BNP Paribas Securities Services has adopted the BNP Paribas' Code of Conduct which defines the rules of professional behaviours.

https://group.bnpparibas/uploads/file/codeofconduct_va_10_05_2016.pdf

17.3. Describe how you ensure that company employees do not derive any personal gain from the use of information collected during your work process.

BNP Paribas Securities Services has defined codes of conduct aimed at safeguarding good practices and also to protect employees who may be in a situation of conflict of interest situation or in possession of privileged information.
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