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FORWARD THINKING | PODCAST – 13:42 MIN

Talking Heads – Where do we stand on sustainability?

In this article:

    Sustainability is front and centre in all aspects for our activity as an asset manager. Each year we update investors regularly on our key sustainability objectives. These include the integration of Environmental, Social and Governance (ESG) considerations into our investments, the alignment of our investments with net zero goals by 2050 and conducting  business responsibly as an asset manager.  

    Listen to this Talking Heads podcast with Jane Ambachtsheer, Global Head of Sustainability, and Andy Craig, Co-head of the Investment Insights Centre, as they discuss our annual Sustainability Report – Towards a sustainable transition.  

    Jane highlights the work done on defining sustainability, engaging with stakeholders, advancing responsible business conduct, working towards a just energy transition, safeguarding biodiversity, and ensuring equality and inclusive growth. Areas of development include burnishing our company culture, continued bold stewardship and enhancing our science-based approach to sustainability-related investing.

    You can also listen and subscribe to Talking Heads on YouTube.

    XXX BNP AM

    Read the transcript

    This is an article based on the transcript of the recording of this Talking Heads podcast

    Andrew Craig: Hello and welcome to the BNP Paribas Asset Management Talking Heads podcast. Every week, Talking Heads will bring you in-depth insights and analysis on the topics that really matter to investors. I’m Andy Craig, Co-head of the Investment Insight Centre, and I’m delighted to be joined by Jane Ambachtsheer, Global Head of Sustainability at BNP Paribas Asset Management. Welcome, Jane, and thanks for joining me.

    Jane Ambachtsheer: Thanks for having me.

    AC: In our latest annual, comprehensive sustainability report, we highlight key achievements in terms of the integration of environmental, social and governance factors into our fund offering, and our commitment to supporting investing aligned with net zero emissions by 2050. Could you tell us what you see as the main points in our 2022 sustainability report?

    JA: The report kicks off with an introduction from our CEO about his commitment to sustainability, our ambition, how sustainability has become a core part of our culture and who we are as an organisation. Then we set out in detail the six pillars of our approach and include a number of case studies.

    AC: What are the six pillars?

    JA: We introduced the pillars when we launched our Global Sustainability Strategy a few years ago.

    The first is around ESG integration, how we work with different investment teams on idea generation and portfolio construction, and how we’re reporting to clients. Everyone in Europe has been focused on the sustainable finance disclosure regulation (SFDR). 89% of the assets of our European-domiciled open-ended funds are classified as Article 8 or 9 under the SFDR framework.

    Our big focus last year was integrating a definition of sustainable investing and aligning our ESG integration and portfolio construction processes with the EU taxonomy.

    The second pillar is stewardship – how we vote at [investee] company meetings, how we engage with companies and policymakers. This is one of the most significant elements of our report. Clients like to have examples of companies we’re engaging with, where things are going well, where things are more challenging. This chapter of the report is also available as a standalone stewardship document.

    The third pillar is responsible business conduct – our expectations for corporate behaviour and sector-based exclusions. We talk about how we approach areas like coal in the context of our net zero commitment.

    Speaking of net zero, the fourth pillar is what we call the three E’s, our forward-looking perspective on the Energy transition, net zero Environmental sustainability, protecting biodiversity and nature loss, and Equality and inclusive growth. We describe how we as an industry and as an investor can advocate for better outcomes around the three E’s. This is important for us as an organisation and in the report we give examples of research. We’ve undertaken strategic stewardship and collaborative initiatives that were part of our focus on the three E’s.

    ESG integration, stewardship, responsible business conduct and the 3 E’s help inform our different investment strategies through which we manage more than EUR 500 billion for investors in different asset classes around the world.

    The last two [of our six] pillars are slightly different.

    One concerns our investment solutions for sustainability – our range of investments focused on sustainable themes. These might be impact investments or investments that have a specific industry label. In fact, we are the largest sustainable thematic manager in Europe and we continue to add to this exciting range.

    We have some examples in the report of interesting active and passive, private and public investment strategies focused on achieving sustainable outcomes.

    Finally, our sixth pillar is around corporate social responsibility – in other words, about us ‘walking the talk’, making sure our own organisation lives up to the expectations we have of investee companies. This is an important part of our organisational culture.

    AC: In terms of the areas in development, what do you see as particularly important for the future?

    JA: As to where we go from here over the next three to five years, there are a few areas that we’re focused on and that can help us differentiate ourselves.

    One is our culture. We will continue to focus on education for our investment teams. We have a large number of colleagues across all the parts of our business that have already completed or are in the process of completing sustainability certifications.

    Continuing with our bold approach to stewardship is also important. The report shows we vote against [investee company] management more than a third of the time. That’s a significant figure. It doesn’t mean we’re in conflict with management. It means we’re having a dialogue, discussing areas like board diversity, disclosure of effective management, issues like climate and biodiversity, and our expectations for companies in those areas.

    Another important element is to have a science-based, transparent approach to how we measure things like net zero alignment, alignment with the [United Nations’] Sustainable Development Goals, and implementation of SFDR-related regulation. It’s important that we link to science-based indicators and are transparent in our approach.

    AC: What do you see as the most important future trends in sustainability and the regulatory environment for us as an asset manager?

    JA: The implementation of SFDR in Europe has been transformative for the industry in embedding a structured and systematic approach to a number of required disclosures. That’s a transition many [asset] managers have gone through and now many more of those indicators are available publicly. We’ll look at how different asset managers have interpreted the regulation and what information is being provided to end-investors.

    Our approach to net zero is a natural evolution of that. One of the ways we interpret the implementation of sustainable investing under the SFDR – whether a company is sustainable – is to see if it has a credible 1.5°C-aligned business plan. That is one way in which we’re bringing net zero integration into our overall approach to SFDR.

    I think that we, collectively, need to put more focus on that. If we look at the heat wave that we’re seeing right now around the world, climate change is ‘front and centre’ and will continue to be for the asset management industry and for global society.

    AC: Thank you, Jane

    JA: You are very welcome.

    Disclaimer

    Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
    Environmental, social and governance (ESG) investment risk: The lack of common or harmonised definitions and labels integrating ESG and sustainability criteria at EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, (the Sub-Fund's) performance may at times be better or worse than the performance of relatable funds that do not apply such standards.

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