Environmental, social and governance criteria
Consistent with our duty to act in the best long-term interests of our clients, we are committed to incorporating environmental, social and governance (ESG) standards into our investment criteria and practices.
Environmental criteria refer to the effects a company’s operations have on the natural environment; social criteria refer to relationships with employees, suppliers, customers and communities; and governance criteria examine a company’s leadership, executive pay, audits and internal control and shareholder rights.
What principles and best practices is ESG based on?
The ESG standards used by Alfred Berg companies and BNP Paribas Asset Management are based on the ten principles of the UN Global Compact, which is a shared framework that is recognized worldwide and applies to all industry sectors. These criteria are based on the international conventions in the areas of human rights, labour standards, environmental stewardship and anti-corruption.
The UN principles are complemented by investment criteria for controversial sectors and products, based on relevant international conventions and regulations, the BNP Paribas Group CSR Policies, and voluntary industry standards.
BNP Paribas Asset Management has also developed sector-specific ESG standards for certain environmental aspects. A policy exists for the following sectors:
- Palmoil and Wood Pulp
- Coal-Fired Power Generation
- Controversial weapons
- Oil sands.
For each sector are used:
- Mandatory requirements that have to be met for companies within BNP Asset Management to invest.
- Evaluation criteria that provide a framework for further contextual analysis and dialogue with companies.
Alfred Berg may choose not to invest even though the mandatory requirements are met if the evaluation part is not satisfactory.
How are ESG standards implemented?
At BNP Paribas Asset Management we are applying ESG criteria to investment processes. In practice this implies the following steps:
- Screening of Investment universes with UN Global Compact principles and mandatory requirements.
- BNP Paribas Asset Management establishes and maintains two lists:
- An exclusion list of issuers that are associated with serious breaches of mandatory requirements.
- A watchlist of issuers that are at risk of breaching ESG standards and with whom we engage in a dialogue in order to encourage improvements.
- The lists are communicated to investment teams on a regular basis:
- Investment teams should not initiate new investments in excluded companies.
- Existing investments should be divested.
- Pre-trade and post-trade compliance checks are conducted by Investment Compliance teams to ensure implementation of exclusion lists.
- Dialogue with the companies on the watchlist to promote ESG considerations.
- Exercise of BNP Paribas Asset Management’s voting rights at AGMs to foster high corporate governance standards and good social and environmental practices.
Investments in funds are always related to risk. Past performance is no guarantee of future results. Performances are calculated net of fees. Investments in funds are subject to market fluctuation and risks inherent in investing in securities. The value of investments and the revenue they generate can increase or decrease and it is possible that investors will not recover their initial investment.