BNP Insticash Adds ESG Overlay
BNP Paribas Asset Management e-mailed (offshore money fund) clients recently, saying, "We are pleased to let you know we, as an Asset Manager, have committed to ensuring all our investment strategies will integrate relevant ESG criteria by 2020. This pledge also applies to our Money Market funds, which will hold a strong ESG component within the investment process." The communication included an attachment with a sponsored article in PI Magazine. Gregory Chereau asks, "Can money market funds really be sustainable?" He tell us, "BNP Paribas Asset Management (BNPP AM) has been an early leader in sustainable investment.... At BNPP AM, we have a wide range of money market and short-term investment strategies, and our investment process seeks to favour issuers with better than average ESG ratings. Our objective is to always respect a minimum ESG score, according to our internal methodology, within each of our money market funds. Our ESG research team currently provides a score for 4,000 issuers. All companies included in our money market funds are covered. This team is independent from investment teams and its findings are based on a variety of sources, not limited to ESG data suppliers and includes regular research carried out with issuers directly." It continues, "In practice, we aim to achieve a minimum average ESG score for each of our money market funds. Companies with a low score will have to be underweighted compared to the current exposures (or even arbitrated versus a better-rated name). In addition, as part of our wider commitment to help improve the way companies operate, we may engage with lower-rated companies. Our objective is to raise their awareness of any perceived weaknesses identified through our ESG analysis, and to help them improve their behaviour, and thus their score. In the case of insufficient improvement, we may decide to exclude the company from our buy-list." BNP adds, "In terms of performance, it is difficult to assess the direct impact that our ESG integration approach is having on our fund returns. We do believe that companies with solid ESG foundations should perform positively. Conversely, we believe that companies facing environmental, social or governance difficulties are more likely to suffer operating issues, potentially affecting their credit profile, and thus the pricing of their fixed income instruments. What we are certain of is that our clients are demanding more sustainable investment solutions and that we as a firm are committed to providing this to them. We believe our expertise will give us a long-term competitive advantage in sustainable short-term investing."
