BNP Paribas has been at the forefront of ESG and SRI approaches to running its business, not least with the bank’s flagship commitment to becoming carbon neutral.
BNP Paribas Asset Management has continued this initiative with its response to growing investor demand for more responsible SRI approaches.
Isabelle Bourcier (pictured), Head of Quantitative and Index-based Management at BNP Paribas Asset Management, explains that investing in a more ethical manner need not necessarily have a negative effect on investment performance.
“The prejudice that a responsible investment approach penalises performance is well entrenched among investors,” she says. “However, current analyses of the past performance of indices show that these preconceived ideas are no longer relevant.”
Bourcier explains that the outperformance of the SRI index versus the standard index depends far more on the region, period and rules that govern the constitution of the index.
“If we look at the MSCI KLD 400 Social Index, which has the longest statistical history, we see that over the period from 31 May 1994 to 29 June 2018, it slightly outperformed the MSCI USA IMI with an annual return of 10.01 per cent compared to 9.93 per cent*.”
Another study from MSCI analysed the relationship between ESG ratings and drops in share prices. Over the period of analysis from January 2007 to May 2017, the 20 per cent of shares with the lowest ESG ratings recorded a drop in their share price of at least 95 per cent – three times more than the best-rated 20 per cent. ESG ratings concern risks that are specific to the shares (business model) as well as systemic risks (change in the market or regulatory environment).
Bourcier also points out that investors have the choice of numerous actively managed funds or ETFs that track the performance of sustainable indices.
“The low total expense ratios, of around 0.25 per cent to 0.60 per cent pa, transparency and the possibility of buying and selling at any time during market opening hours argue in favour of ETFs for certain type of Investors” she says.
BNP Paribas Asset Management offers ETFs that track the SRI indices which cover the major regions and within the BNP Paribas Easy ETF range, there are a number of products that enable investors to reduce the carbon footprint of their portfolio and extend its ethical status.
“BNPP AM has been a pioneer in ESG ETFs since 2008 and we provide since socially responsible investment solutions aimed at institutional and individual investors. We note that investors are increasingly aware of the impact of their investments and would like to invest in financial products aligned with their commitments and beliefs,” says Isabelle Bourcier, Head of Quantitative and Index-based Management at BNP Paribas Asset Management.
As a responsible investor, we believe that Environmental, Social and Governance (ESG) issues may impact the value and reputation of entities in which we invest. We are therefore committed to incorporate ESG standards into our voting criteria to act in the long-term interests of our clients. The voting and engagement policy of BNP Paribas Asset Management is applied to all Funds/ETFs when physical replication is concerned. Positions are cumulated to the BNP Paribas ones in order to obtain a more significant impact and the policy is reviewed every year by the board of BNP Paribas Asset Management.
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