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BNP Paribas Securities Services

Service Providers Framework 2020

You are in Strategy and Governance » Policy on ESG beliefs

Policy on ESG beliefs

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 Risk Analytics) solution we support our Institutional Investors’ client objectives 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. Within our ESGRA platform, we integrate external data providers to source the raw ESG data, ESG ratings & underlying datasets (for example to support carbon footprint). All the services that we offer are built on our best of breed risk & performance platforms, and serviced globally by our risk & performance specialists.

Another example is the already established development of our Planetshares 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.

As part of our fiduciary duty and at the request of our Asset Owners clients, we perform specific ESG investment compliance controls on externally managed portfolios (negative/exclusionary screening for specific securities, sectors, countries or positives screening based on ESG criteria or indices). Acting as a depository for those institutional funds, we run compliance checks after each NAV publication.

We are supporting clients in aligning their securities lending programmes with Environmental, Social and corporate Governance (ESG) criteria, integrating ESG principles into the counterparty selection process and ensuring corporate engagement and shareholder actions are in line with our clients’ ESG policies.

End 2018, we have launched "ClimateSeed", the first Social Business of BNP Paribas. ClimateSeed was developed with the support of Grameen Creative Lab, co-founded by Nobel Peace Prize laureate Professor Yunus. In line with Social Business principles, it reinvests all its profits in its development to maximise its positive impact on society and the environment. ClimateSeed is the climate-action partner to help organisations go beyond CO2 reduction. It launched several tools, including a voluntary carbon offsetting platform to connect organisations with tangible projects to cut carbon emissions. The ClimateSeed platform connects businesses looking to offset their unavoidable carbon emissions and contribute to the UN SDGs with project developers offering voluntary carbon credits and looking for funding.The launch of ClimateSeed is part of the commitment BNP Paribas has made to encourage decarbonisation and carbon neutrality. As well as supporting climate action, voluntary carbon offsetting projects often help bring more prosperity and social inclusion in local communities. ClimateSeed aims to increase the transparency, security and efficiency of the voluntary carbon market through a thorough verification process, that is built on simple, secure, and user-friendly digital platform and tools. For that purpose, ClimateSeed performs a three-level verification process on each project promoted on its platform including certification checks by a renowned International Standards, banking due diligence on the project developer and project analysis from a Sustainability Committee. ClimateSeed offers more than 30 carbon reduction projects including reforestation, forest conservation, energy efficiency, renewables, household devices, water and waste management in more than 20 countries. It combines the operational strength of a top tier bank, the agility of a startup ,and the legitimacy of a Social Business.

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

01.3. Indicate the components/types of your internal policy and provide the URL and/or an attachment of the document/s if they are publicly available.

Policy components/types

Public availability

Public availability

          BNP Paribas Securities Services strictly follows the sectors policies identified and implemented by BNP Paribas Group.
        

Public availability

01.4. Indicate how these are put into practice internally across the organisation.

01.5. Additional information [OPTIONAL]


SG 02. Norms used to develop policies

02.1. Indicate what frameworks and guidelines you have used to develop your organisation’s policies. Tick all that apply.

02.2. Additional information. [OPTIONAL]


SG 03. Policy offerings to clients

03.1. Indicate whether you offer standard, off the shelf, policies to clients as part of your product offerings, and/or whether you create tailored versions for individual 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

please specify (1) - Tailored

          "ClimateSeed" a voluntary carbon offsetting platform
        

03.2. Provide a brief description of the key elements, any variations, or exceptions applying to these policies.

Thanks to "ClimateSeed", Corporates, Asset Managers/Owners can offset their carbon emissions and contribute to the SDGs with project developers offering voluntary carbon credits

03.3. Additional information. [OPTIONAL]


SG 04. ESG/RI in business offerings

04.1. Briefly describe how you include ESG/RI factors as 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 flexible multi-provider reporting solution (ESGRA) supports clients in their ability to monitor their ESG risks and exposures:

• Multi-level ESG scoring using partnered data providers

• Business Involvement looks at whether a company derives a proportion of its revenues from certain potentially sensitive activities.

• Controversies are flags raised in response to a company's reputation in the public arena/media, in respect of key ESG issues

• Climate-related risks include carbon footprint metrics like carbon footprint, carbon emissions sales intensity and exposure to carbon intense companies, it give the investors the amount of carbon their investments are responsible for, allowing them to monitor it and set targets. Real life benchmarks allow to compare these metrics to real life indicators like the equivalent emissions of French households, Paris-New-York round trip by plane and others.

Leveraging on our existing look-through functionality we offer institutional investors a harmonized, transparent and consolidated analysis over their direct and delegated investments. Consistent data and methodology help our clients. BP2S’ tool independently assesses their asset managers’ ESG activity and allows for onwards communication to the Asset Owners stakeholders. 

Active Ownership Services

How you include ESG/RI factors

Our offering 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 information and to facilitate voting for stakeholders.

We provide our clients with a global offer -spanning more than 80 markets- enabling a customised and high quality service and access to a proven and reliable technology. We are currently working on a new solution to provide corporate governance metrics on securities in custody.

Research and Data Provision

How you include ESG/RI factors

Publication of a biannual report – the ESG Global Survey- based on an online  survey of over approximately 350 asset owners and asset managers. Respondents include ESG practitioners and those who ultimately decide on the sustainable investing strategy and vision: the C-suite. The research is complemented by a series of in-depth interviews with senior industry figures. The report shows the trends in relation to ESG integration and the governance and data challenges in integrating ESG. The 2019 edition can be found at: https://securities.bnpparibas.com/global-esg-survey.html

Building innovative solutions in co-design with leading institutional investors to help them efficiently and with increased transparency to assess their footprint linked to the SDGs framework. A prototype has been built and tested with the client.

A data scientists team has been put in place this year to address several sustainability data issues as testing ESG fintech data providers, how they can be included in our research and reporting, building a prototype on controversies monitoring, new solutions for coverage enhancement, climate modelling and others.

We made part of UNEP FI Impact assessment working group, having a deep dive on how different industries and products influence positively or negatively the society, environment and the sustainable growth.

Other, specify (1)

          As a leading global custodian, we are active in our promotion and support dialogue in the industry around sustainability and responsible investment issues.
        

How you include ESG/RI factors

We published a wide-range of thought leadership papers and articles which include:

•  An ‘ESG made simple’ guide for institutional investors, adapted to the specific characteristics of three markets (Dutch pensions, UK pension funds and institutional investors) and translated into six languages

•  A research study called ‘Stress-testing equity portfolios for climate change impacts: the carbon factor’, made available in three languages : (https://securities.bnpparibas.com/files/live/sites/web/files/medias/documents/thoughtleadership/art_carbon_en_2016-11-16.pdf).

• A paper on “Fintech and the ESG Data Challenge’ : https://securities.bnpparibas.com/files/live/sites/web/files/medias/documents/thoughtleadership/art_fintechs_esg_2019-09-09.pdf

• Special ESG editions of our Quintessence news bulletin : https://securities.bnpparibas.com/insights/quint-magazines.html

• Interviews with our specialists and articles:

  • https://securities.bnpparibas.com/insights/esg-building-bridges.html, 
  • https://securities.bnpparibas.com/insights/social-hardest-define-integrate.html?themes=attitudes-to-risk, 
  • https://securities.bnpparibas.com/insights/esg-dating-tips-asset-managers.html?themes=attitudes-to-risk, 
  • https://securities.bnpparibas.com/insights/fintechs-esg-data-case-studies.html?themes=attitudes-to-risk

•  ESG Risk Analytics Case study/video with one of the largest Australian superannuation funds

• Two global ESG surveys, one released in 2017 and one released in April 2019, focusing on international trends in sustainability among large institutional investors.

Throughout the year, we sponsor, organise and participate in sustainable industry events and conferences (Sustainable forum in Singapore, PRI in person held in Paris,...)

We are also a member of UN PRI global working group on SDGs and Asset Allocation and the AIMA global working group on ESG, contributing to the dialogue, research and knowledge share efforts in those communities.

04.2. Indicate the roles in your organisation, and indicate for each whether they have oversight and/or implementation responsibilities for ESG/RI within the organisation.

Roles present in your organisation
Oversight/accountability for ESG/RI
Implementation of ESG/RI
Board
Directors
Chief Executive Officer (CEO), Chief Financial Officer (CFO)
Chief Operating Officer (COO), Chief Information Officer (CIO)
Other chief-level staff

Please specify

          Head of Asset Owners & Managers Clients line 
Head of Product Domains (Investment Analytics and Data Services, Custody, Fiduciary & Depositary services , Market and Financing Services, Investment & Collateral Services )
Head of Global CSR
        
Other heads of department
Dedicated ESG/RI staff
Other role, specify (1)
Other role, specify (2)
Other role, specify (3)
None of the above

04.3. Indicate how you ensure ESG/RI expertise for the roles where there are RI oversight/accountability or implementation responsibilities.

04.4. Indicate whether your organisation has any ESG/RI linked incentives for its employees.

04.5. Describe the ESG/RI linked incentives.

Our organisation links incentives to ESG results through our Group Sustainability and Incentive Scheme: eight of the Group thirteen CSR indicators are used in calculating the deferred variable compensation of the Group’s top 6,300 managers and account for 20% of the conditions for attributing this compensation

04.7. Additional information [OPTIONAL]


SG 05. Outsourcing of services (Private)


SG 06. Providing training/education

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

06.4. Additional information. [OPTIONAL]


SG 07. Applying, advancing and promoting the PRI principles

07.1. 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 support our Institutional Investors’ client objectives 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 Planetshares 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. In that respect, in 2018, we have expended the digitalisation of General Meeting centralisation from listed companies (via "Votaccess" platform) to also unlisted companies via "MyVotaccess" platform. Thanks to such online solutions we encourage issuers to provide information to shareholders and ease the access to such information from investors perspective.

End 2018, we have also launched "ClimateSeed", the first Social Business of BNP Paribas. ClimateSeed was developed with the support of Grameen Creative Lab, co-founded by Nobel Peace Prize laureate Professor Yunus. In line with Social Business principles, it reinvests all its profits in its development to maximise its positive impact on society and the environment. ClimateSeed is the climate-action partner to help organisations go beyond CO2 reduction. It launched several tools, including a voluntary carbon offsetting platform to connect organisations with tangible projects to cut carbon emissions. The ClimateSeed platform connects businesses looking to offset their unavoidable carbon emissions and contribute to the UN SDGs with project developers offering voluntary carbon credits and looking for funding. The launch of ClimateSeed is part of the commitment BNP Paribas has made to encourage decarbonisation and carbon neutrality. As well as supporting climate action, voluntary carbon offsetting projects often help bring more prosperity and social inclusion in local communities. ClimateSeed aims to increase the transparency, security and efficiency of the voluntary carbon market through a thorough verification process, that is built on simple, secure, and user-friendly digital platform and tools. For that purpose, ClimateSeed performs a three-level verification process on each project promoted on its platform including certification checks by a renowned International Standards, banking due diligence on the project developer and project analysis from a Sustainability Committee. ClimateSeed offers more than 30 carbon reduction projects including reforestation, forest conservation, energy efficiency, renewables, household devices, water and waste management in more than 20 countries. It combines the operational strength of a top tier bank, the agility of a startup ,and the legitimacy of a Social Business.

07.2. 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 participating 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...)
  • Active participation in UNPRI/UNEP FI conferences globally
  • Take part in PRI collaborative initiatives and thought leadership

SG 08. Actions taken to promote responsible investment

08.1. Indicate which of the following actions your organisation has taken to promote responsible investments during the reporting year, independently of collaborative initiatives.

08.2. Additional information. [OPTIONAL]

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

- Have regularly published thought leadership papers and articles, such as :

  • our global ESG survey. The 2019 edition can be found at https://securities.bnpparibas.com/global-esg-survey.html
  • a paper on “Fintech and the ESG Data Challenge’ : https://securities.bnpparibas.com/files/live/sites/web/files/medias/documents/thoughtleadership/art_fintechs_esg_2019-09-09.pdf
  • an article on “ESG analytics : building bridges to harmonization” studying how institutional investors have a key role to play in addressing the major environmental and other sustainability issues facing our planet. While regulations are evolving fast and investors are increasingly setting ESG targets, harmonization and transparency are essential. https://securities.bnpparibas.com/insights/esg-building-bridges.html

- Have sponsored, organised and participated to several “sustainable events / conferences” in the market actively (i.e. organisation of the Sustainable Future Forum held in Singapore)

- Have participated at the Impact investing panel  at the Global Investment Forum in 2019, an international conference with participants from 20 countries and presented our SDGs and Impact reporting approach

- Have had multiple interviews focused on sustainability matters in specialised media and articles published 

- Were admitted to the UN PRI working group on SDGs asset allocation

- Have been part of the SDCI Network in 2019 becoming a Founding Member of the G17Eco Platform. The fintech World Wide Generation (WWG) has become the technology partner for the UK Government and City of London backed Sustainable Development Capital Initiative (SDCI). They are developing G17Eco, a combined monitoring and marketplace platform that could solve transparency and trusted data challenges using blockchain technology.


SG 09. Long term trends

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

09.2. 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: French Energy Transition Law), comprising carbon footprint indicators, alignment with climate-related goals, and exposure to climate-related risks (physical and transition).

For example, for the past three 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 emissions. 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.

With evolving regulations ongoing in Europe but also globally, we are studying regulatory requirements evolution and how it can be integrated in our existing solutions. This study is done in collaboration with Regulatory Reporting team and Regulatory reporting BNP Paribas Group working groups. For example, it includes Climate taxonomy integration study in our existing products.

09.2. Explain how this long-term trend affects your product outputs.

We are partnering with an asset manager to look at water scarcity and how this will affect investments decisions by region. More to follow on, as this product develops.

          Contribution to the Sustainable Development Goals (SDGs)
        

09.2. 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 analysis 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 steps approach looking at absolute emissions 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 degree increase) will affect an investment portfolio, and how the physical and transitional risks associated with these temperature changes will affect the investment 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 outperform their peers who do not in the long term. 

SG 10. Interaction with asset owners (Not Applicable)


SG 11. Aligning approach with investor goals

11.1. Describe how you typically align your organisation’s philosophy and approach to ESG/RI with your investor clients’ goals.

BNP Paribas Securities Services aims to be the reference custodian bank for sustainable finance. Sustainability is a strategic pillar in the 2020-2024 strategy defined end of 2019. 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 institutional 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.

11.2. Additional information. [OPTIONAL]


SG 12. ESG recommendations not aligned with investor goals

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

12.2. Additional information. [OPTIONAL]


SG 13. Seeking feedback from clients

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

13.2. Describe how you use this feedback in 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 this asset owner, and other key clients, 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 (e.g. 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 have formalised the agile development organisation for our product that aims to facilitate the sharing with clients with dedicated sprint development sessions for co-creation with them.

We are enhancing our sustainable finance offering to support our clients in their sustainable journey. In addition to existing solutions: ESG Risk Analytics, shareholders engagement, screening (negative/ exclusions and positive screening based on Reference index and ESG criteria), Debt solutions (N°1 Listing agent in Lux Green Exchange), ESG lending (selection of counterparties based on ESG criteria), we are working on new products & solutions such as watch lists and climate reporting dashboards, corporate governance metrics,…


SG 14. Managing conflicts of interest

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

14.2. 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_en_11_01_2018_40p.pdf 

14.3. 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 code 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.

14.4. Additional information. [OPTIONAL]


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