Engaging in sustainability for a better future
BNP Paribas Asset Management (BNPP AM) is a multiple award winner in Asia Asset Management’s Best of the Best Awards 2022. The company won the accolade of Best ESG Engagement Initiative in both Hong Kong and Malaysia and was also recognised in Hong Kong for Best Application of ESG and Fund Launch of the Year, and in Singapore for Most Innovative Product.
“We have committed to putting sustainability at the heart of strategy, integrating sustainable investment practices across the range of our investment strategies. We are also committed to using our investments, our voice and our leverage to shape a better future, and believe this is in the financial interest of our clients and the economy at large,” says Paul Milon, head of stewardship, Asia Pacific.
Four key pillars guide the firm’s global sustainability strategy, which as well as ESG integration include stewardship through proxy voting and governance principles, responsible business conduct relating to key topics such as human rights and the environment, and the company’s role as a ‘future maker’ which sets out to tackle issues including energy transition, environmental sustainability, and equality and inclusive growth. As at December 2021 81% of BNPP AM’s open-ended fund range was classified as either promoting sustainability characteristics or having a sustainable objective under Articles 8 and 9 or the EU Sustainable Finance Disclosure Regulation or SFDR.
Milon observes that institutional investors, including those in Asia – are increasingly conscious of the threat sustainability risks represent for their assets. Key sustainability issues such as climate change or biodiversity loss, he says, if not addressed, could have a severe impact on our economies, threatening the ability to generate returns over the long term. Indeed, half of global GDP is threatened by nature loss according to the World Economic Forum, while the urgency of climate change is repeatedly highlighted by reports such as those by the IPCC, which is prompting action from governments, regulators and investors alike to enhance their management and disclosure of climate risks. Looking at Asia specifically, Milon notes that ESG-related regulation in APAC has more than doubled in the past five years and now represents over 20% of global ESG regulations and amendments.
That said, appetite for ESG by institutional investors is not only driven by risk awareness or regulations.
“Sustainability issues present growing risks but also opportunities for companies, which increasingly influence their ability to succeed over the long-term. As a result, an increasing number of institutions are now looking to consistently integrate ESG factors in order to make better-informed investment decisions that will help them achieve long-term sustainable investment returns,” he adds.
Engagement matters
In 2021, BNPP AM stepped up its corporate engagement activities globally and across Asia. Last year, the company had close to 500 engagements with 281 companies through its ESG engagement initiative, with a 28% success rate when engaging companies prior to AGMs. In addition to individual engagements, the company is also active in over 40 collaborative initiatives and organisations, including leading or co-leading engagements with nine companies, including three in Asia, as part of the flagship Climate Action 100+ initiative.
In the same year, Milon, who co-chairs the Asia Investor Group on Climate Change (AIGCC)’s Engagement and Policy working group, took a leading role in engagement via the newly launched Asian Utilities Engagement Program. Successes included engagement with Hong Kong-listed CLP Holdings, which announced in September that it would exit coal-fired power generation by 2040 and target net zero emissions by 2050, marking a critical market signal in Asia’s transition towards net zero power.
“We play a key role in contributing to sustainability-related regulations, guided by our Public Policy Stewardship strategy,” notes Milon.
In Asia, BNPP AM is a member of no less than ten regulatory and public policy groups.
“For instance, in Hong Kong, we are members of the Security and Future Commission’s Technical Expert Group, through which we have contributed to recent regulations such as the management of climate-related risks by fund managers and the circular on ESG funds. In Singapore, we are a member of the Green Finance Industry Taskforce convened by the Monetary Authority of Singapore to support its green finance agenda,” he explains, adding that BNPP AM’s long-term commitment to, and successful track record of public policy engagement has played a major part in advancing its sustainability goals.