The asset manager for a changing world

Transcription

1 INVESTING FOR A SUSTAINABLE WORLD For professional and institutional investors only 2017 The asset manager for a changing world

2 INVESTING for a sustainable world I 2017 I 2 OUR INVESTMENT PHILOSOPHY The economy is currently faced with a series of social, environmental and governance challenges. Given the magnitude of these issues, BNP Paribas Asset Management is committed to a more responsible economy, and is developing investment solutions for its clients that seek to capture growth opportunities resulting from sustainable development. BNP PARIBAS ASSET MANAGEMENT, A LEADER IN SRI Since the launch of its first SRI fund, BNP Paribas Asset Management has continuously reinforced its expertise in this area, notably with the creation in 2002 of a dedicated SRI research team. In 2006, BNP Paribas Asset Management was among the first signatories of the United Nations Principles for Responsible Investment (PRI). Our SRI expertise today covers a complete range of investment solutions (mandates, dedicated funds and UCITS) and asset classes tailored to the needs of investors. ESTABLISHED EXPERTISE EUR 25 billion of assets under management 1 More than 50 investment professionals in 8 investment centres 15 years experience and a leading role in SRI industry initiatives and working groups OUR SRI DEFINITION Sustainable & Responsible Investment is a form of investment that seeks to generate financial returns while taking into account social and/ or environmental benefits. To achieve this goal, SRI systematically integrates Environmental, Social and Governance (ESG) criteria in the evaluation and selection of assets. SRI ASSETS (UNDER MANAGEMENT) IN BILLIONS EUR INNOVATION AND MARKET RECOGNITION UCITS, dedicated funds and mandates covering major asset classes and SRI strategies (equity, fixed income, asset allocation and alternative investments); Extra-financial reports dedicated to the environmental, social and governance performance of the portfolio; SRI labels awarded to a complete range of UCITS; Institutional references in Europe, North America and Asia Pacific At end of December 2016

3 INVESTING for a sustainable world I 2017 I 3 CONCRETE ACTION IN LINE WITH RESPONSIBLE INVESTING Monitor investments in sensitive activities (e.g. palm oil, mining, weapons) at the entire group level for all investments. Promote the integration of minimum ESG standards by adopting a UN Global Compact filter for ALL funds Exercise voting rights at Annual General Meetings to foster high corporate governance standards and good social and environmental practices Take part in individual and collective commitments or initiatives for Responsible Investing. SRI INVESTMENTS IN ALL ASSET CLASSES AND STYLES OF MANAGEMENT At BNP Paribas Asset Management, SRI is fully integrated across all our investment centres. Best-In-Class and Thematic Equities Global Environmental Strategies Eurozone core Fixed Income Corporate Fixed Income ESG SUSTAINABILITY RESEARCH TEAM Model Driven, Indexed and Protected Funds Money Market Multi Asset Solutions Fund of Funds

4 INVESTING for a sustainable world I 2017 I 4 BEST-IN-CLASS STRATEGIES Supporting the best Environmental, Social and Governance Practices (ESG) PROPRIETARY EXTRA-FINANCIAL RESEARCH Research implemented by our analysts for Best in Class portfolios seeks to evaluate environmental, social and governance practices and is based on quantitative and qualitative criteria according to a methodology tailored to each business sector and each issuer category (corporate, sovereign, banks, etc.). BEST-IN-CLASS STRATEGIES This category focuses on companies that demonstrate superior commitments in social and environmental responsibility (human resources management, fighting climate change, etc.), and implement robust corporate governance practices (board independence, respect of shareholders rights, etc.). These principles are adapted to different types of issuers (sovereign, supranational institutions, etc.) for fixed-income portfolios. Issuer selection is based on proprietary research conducted by our dedicated team of extra-financial analysts. This analysis is based on proprietary research supported by regular meetings with companies and external sources of information (ratings agencies, brokers, NGOs). Every issuer is given a positive, neutral or negative rating, with each category representing approximately one third of the investment universe. Only issuers with a positive or neutral rating from our extra-financial analysts are eligible for SRI portfolios. Conversely, issuers with a high level of ESG risk receive a negative rating and are systematically excluded from SRI portfolios. EXAMPLES OF ESG CRITERIA USED TO ASSESS COMPANIES Environmental protection: Reduction of greenhouse gas emissions, energy efficiency, prevention of industrial accidents, water consumption, waste management, etc. Social responsibility: Occupational health and safety, dialogue with employee representatives, training and remuneration, restructuring plans, management of suppliers and contractors, etc. Corporate governance: Respect of shareholders rights, competence and independence of board members, executive remuneration, risk control, business ethics, etc. THE UNITED NATIONS GLOBAL An essential reference for Initiated by the United Nations, the Global Compact is an international standard intended to promote corporate responsibility in terms of human and labour rights, environmental protection and business ethics.

5 INVESTING for a sustainable world I 2017 I 5 THEMATIC STRATEGIES Investing in activities with high social and environmental added value Thematic strategies target activities, products and services linked to environmental protection and/or social welfare. Because they bring concrete solutions to sustainable development, these activities are expected to benefit from attractive growth opportunities compared to the rest of the economy. ENVIRONMENTAL THEMES COMPACT our SRI strategies This category brings together a range of products and services linked to environmental protection and conservation of natural resources: Energy efficiency in industry, buildings, transportation and electricity distribution networks. Renewable energy: wind, solar, biomass, etc. Water: technologies and infrastructure for water treatment and distribution, wastewater management, etc. Pollution control: monitoring, testing and measurement equipment, etc. Waste management: collection, recycling and treatment of household, industrial and hazardous waste, etc. Food: food waste, recycling of packaging, logistics and infrastructure, distribution, food safety. This global standard is complemented by a set of sector policies applicable to all businesses of the BNP Paribas Group and constitutes a set of minimum criteria applicable to all Best-in-Class and Thematic SRI strategies. SOCIAL THEMES This category includes a range of activities related to social welfare: Access to health care: generic drugs, response to pandemics, health infrastructure, etc. Fight against poverty and access to basic needs: safe drinking water, food, financial services, etc. Sustainable socio-economic development: urbanisation, infrastructure, education, etc. Emerging issues: ageing population, food security, public health, etc. Microfinance: social integration, social housing, microcredit, etc. How do we identify companies eligible for thematic funds? Thematic investments require defining specific investment universes. To this end, our analysts conduct a detailed study of companies activities to determine the share of investments, turnover, or earnings in the targeted sectors. In order to qualify, companies must have at least 20% business exposure to targeted activities. For some portfolios, this threshold may be raised to 50% in order to further increase exposure to the targeted themes.

6 INVESTING for a sustainable world I 2017 I 6 An enhanced measurement of SRI benefits Our extra-financial reports have become a market reference to better measure and communicate the environmental and social benefits of SRI portfolios. INCREASED TRANSPARENCY... In order to meet investors expectations, SRI requires additional transparency on investment objectives, implementation methods and concrete results. BNP Paribas Asset Management fulfils these expectations by providing investors with practical and comprehensive information on investment processes and performance of its SRI portfolios. EXTRA-FINANCIAL REPORT EQUITIES EXTRA-FINANCIAL REPORT June 30 th, 2016 INVESTMENT STRATEGY Parvest Global Environment is an international equity fund invested in small, mid and large caps within environmental services markets. It is composed of 50 to 65 companies generating at least 20% of their revenues in the following areas: renewable energies, energy efficiency, water, pollution control, waste management and environmental services. Furthermore, a filter aimed at ensuring that the companies comply with the principles of the United Nations Global Compact and BNP Paribas Group sectoral policies is used as part of the fund's investment process. This fund is managed by IMPAX Asset Management, our investment partner dedicated to the environmental sector (1). WHAT DOES THIS EXTRA-FINANCIAL REPORT CONTAIN? In this extra-financial report we present a series of sample indicators to measure in concrete fashion how the fund implements its SRI investment strategy vs. its benchmark (2) : - The breakdown of companies by business sector shows the various environmental technologies that the portfolio is invested in. - The degree of exposure to the environmental sector indicates the proportion of revenues that portfolio companies generate in this area. - Trends in staff headcount show how fast companies are creating jobs compared with the rest of the economy. - The degree of independence of the Boards of Directors serves to emphasize the quality of governance practices of portfolio companies. - Exclusion of securities considered non-compliant with BNP Paribas Investment Partners' SRI policy. - The exercise of voting rights puts a spotlight on support (or lack thereof) for draft resolutions presented at the annual general meetings of portfolio companies. These indicators are supplemented with a list of companies in the portfolio organized according to sector and country and, for the main lines, a description of their activities linked to the environment. WHAT DO THE LUXFLAG AND NOVETHIC LABELS MEAN? The LUXEMBOURG FUND LABELLING AGENCY (LuxFLAG) is an independent, nonprofit making, association created in Luxembourg in July 2006 by seven founding partners who are the Charter Members. The Luxflag Environmental label is reserved for funds with a portfolio of investments in environmentrelated sectors. In addition, the funds must be invested in assets showing good performance in their management of Environmental, Social and Governance (ESG) responsibilities. For more information on the Luxflag label, go to Launched in 2009, the Novethic label that has been awarded to this fund aims to encourage transparency in the investment process and in the composition of SRI funds, and therefore offers a concrete benchmark for individual savers. The Novethic label is based on four criteria: - An analysis of at least 90% of the portfolio based on environmental, social and governance (ESG) criteria - Transparency in the investment and extra-financial research processes - Regular extra-financial reports providing qualitative and quantitative information on the portfolio's ESG characteristics - Disclosure of the portfolio's entire composition The Novethic Green Fund Label is awarded to funds that finance companies who create solutions to environmental problems. It provides investors with a guarantee of the quality and the transparency of the environmental aspects of labelled funds, and of their contribution to sustainable development. Further information on EXTRA-FINANCIAL REPORT- June 30 th, SAMPLE INDICATORS 1- PORTFOLIO BREAKDOWN BY SECTOR 7% 30% 49% Energy 10% 4% (1) The sector breakdown is compliant with the Environmental Classification System (EMCS) as defined in the indexes. This system is described at: Sector breakdown calculated according to weighting of portfolio companies. Source: IMPAX Asset Management The fund is invested in all environmental businesses, which cover several complementary areas. The main sub-sectors are Water Infrastructures and Technology (49%), Energy (30%) and Diversified Environmental (10%) (1). (1) For more information on the investment process, view the transparency code developed for this fund on our website as well as for the French Social Investment Forum (French SIF) at and Eurosif (European Sustainable Investment Forum) at (2) Measured based on the most recent data available on the publication date of the extra-financial report. 2- PORTFOLIO COMPANIES' EXPOSURE TO ENVIRONMENTAL BUSINESSES Within the portfolio : - Companies generate an average (2) of 60% of their revenues in the environmental sector (3). - 36% of companies generate at least 75% of their revenues in the environmental sector. Water Infrastructure & Technologies Waste Management & Technologies Diversified Environment Food, Agriculture & Forestry OF OUR INVESTMENT STRATEGIES By adhering to Eurosif s European SRI Transparency Code, the European standard of disclosure for SRI funds, BNP Paribas Asset Management provides investors with: a description of ESG research criteria used by extra-financial analysts; the principles followed by portfolio managers for investments and divestments related to ESG criteria; 100% 93% 80% 60% 48% 36% 40% 20% 15% 7% 1% 0% 0% 0% (2) Weighted average of portfolio companies. (3) The proportion of revenues that portfolio companies generate in environmental sectors is determined on the basis of the indexes' Environmental Classification System (EMCS) methodology as PARVEST GLOBAL ENVIRONMENT MSCI WORLD (NR) described at: Source: IMPAX Asset Management 3,90% 4,0% 3,82% 3,64% 3,43% 3,5% 3,0% 2,5% 2,45% 2,29% 2,30% 2,14% 2,0% The investment universe includes nearly 1,400 companies that generate more than 20% of their revenues in the environmental sector. This universe represents nearly 8% of the MSCI World. The comparison with the MSCI World highlights the portfolio's heavy exposure to the environmental sector. 3- STAFF HEADCOUNT TRENDS The portfolio (4) is outperforming its index by investing in companies that raised their total headcount by an average of 3.63% per year vs. 2.14% for the benchmark (5). PARVEST GLOBAL ENVIRONMENT (4) Staff headcount trends are calculated for each business sector on the basis of the one-year change in fulltime equivalents, based on the latest data available at the end of the quarter. Changes above 30% are not MSCI WORLD (NR) considered in order to limit the impact of changes in scope related to mergers and spin-offs. (5) In order to highlight variations between portfolio and benchmark that reflect stock selection (as opposed to sector allocation), benchmark average is calculated using portfolio sector weights. Source: BNP Paribas Asset Management, Factset EXTRA-FINANCIAL REPORT- June 30 th, BOARD OF DIRECTORS AND SUPERVISORY BOARD INDEPENDENCE To comply with standards of good corporate governance, companies are recommended to have a sufficient number of independent directors, thus allowing the Board to adopt a more objective view on the company's strategy and performances. The average percentage of board independence relating to the portfolio (1) totals 49.1%; versus 49% for its benchmark (2). (1) Board independence is calculated on the basis of data compiled by MSCI ESG Research Inc All rights reserved.. The proportion of independent directors is closely dependent on national legislation requiring, for example, degrees of employee representation. (2) In order to highlight variations between portfolio and benchmark that reflect stock selection (as opposed to sector location), benchmark average is calculated using portfolio country weights. 5- COMPLIANCE WITH INTERNATIONAL STANDARDS AND CONVENTIONS Change in number of staff as % Portfolio on Index weight in % 55% 54,0% 54% 53% 51,5% 51,1% 51,2% 52% 51% 50% 49,1% 50,6% 49% 50,2% 50,0% 48% 49,2% 49,0% 47% 46% 45% PARVEST GLOBAL ENVIRONMENT MSCI WORLD (NR) Source: BNP Paribas Asset Management, MSCI ESG Research Inc All rights In accordance with BNP Paribas Investment Partners' SRI policy, the fund does not invest in companies with clear and repeated cases of violations of the UN Global Compact principles (3) and/or BNP Paribas Group policies on controversial products and sectors (4). These exclusions include more than 170 companies worldwide. (3) The UN Global Compact Principles ( promote 10 major principles applicable to companies in the areas of respect for human rights, labour standards, environmental protection and business ethics. The internationally recognised principles are based on the following standards and conventions: - The Universal Declaration of Human Rights, - The Declaration of the International Labour Organisation on Fundamental Principles and Rights at Work, - Rio Declaration on Environment and Development, - United Nations Convention Against Corruption. (4) BNP Paribas Group sectoral policies seek to limit these investments in controversial sectors and currently pertain to the following sectors: - Palm oil and Wood pulp - Mining - Nuclear power generation - Tar sands - Coal-fired power generation - Controversial weapons - Basic agricultural commodities - Asbestos A specific policy concerning BNPPIP SRI investments excludes all companies that deal with weapons, tobacco, alcohol or gambling. For 4% Against / Abstention 96% (5) The principles of good governance within the BNP Paribas Asset Management voting policy concern the defence of rights and long-term interests of shareholders, Board of Directors' composition and operation, executive pay and transparency in terms of financial and extra-financial communication. Source: IMPAX Asset Management 6- EXERCISE OF VOTING RIGHTS % of independent directors During 2015, voting rights were exercised in 51 annual general meetings. These votes were exercised according to corporate governance principles defined in IMPAX Asset Management voting policy (5). Among the 592 draft resolutions presented at annual general meetings, we opposed or abstained to 24 resolutions, or nearly 4% of the total votes exercised. These mainly concerned questions related to a lack of Board independence and financial operations contrary to minority shareholders' interests.. reserved. the policy for exercising voting rights attached to securities held in the portfolio. AND OF OUR SRI PORTFOLIOS BNP Paribas Asset Management periodically produces extra-financial reports containing quantitative and qualitative information on the ESG characteristics of SRI portfolios, including: the ESG rating of the portfolio and key characteristics of individual securities; performance indicators comparing the portfolio against its benchmark from an environmental, social and governance point of view (carbon footprint, job creation, board independence, etc.); overview of proxy voting activity during the last calendar year. These extra-financial reports provide investors with objective and concrete information about social and environmental benefits of our SRI portfolios, and have been praised on several occasions by market observers. Example of extra financial reports

7 INVESTING for a sustainable world I 2017 I 7 BNP PARIBAS ASSET MANAGEMENT S COMMITMENTS As a leading asset manager, BNP Paribas Asset Management is committed to responsible investment. Our Corporate Social Responsibility (CSR) policy aims to reconcile our clients performance imperatives with the new social and environmental challenges inherent in our changing world. This policy is based on two main priorities: - to develop investment solutions that have a broad positive impact on society - to lead by example in terms of our organisation and how we carry out our business. By incorporating these commitments in our investment methods, we can enhance our risk management expertise and identify new growth opportunities. By applying them to our organisation and how we carry out our business, our company can continue to advance in terms of our human resources, our environmental impact and our relationship with society as a whole APPLYING ESG CRITERIA TO MAINSTREAM INVESTMENTS As a signatory of the United Nations Principles of Responsible Investment (UN PRI), BNP Paribas Asset Management integrates Environmental, Social and Governance criteria into mainstream investments. ESG investment criteria are complemented by an ongoing dialogue with issuers and a systematic exercise of voting rights at general meetings. MONTRÉAL CARBON PLEDGE In 2015, BNP Paribas Asset Management became one of the first mainstream investment managers to sign the Montreal Carbon Pledge. The Pledge was launched on September 2014 in Montréal and is supported by the Principles for Responsible Investment (PRI) and the United Nations Environment Programme Finance Initiative (UNEP FI). It aims at improving investors awareness of carbon risk by inviting them to measure and publicly disclose the carbon footprint of their equity investments. A portfolio s carbon footprint provides a snapshot of how it may be contributing to the carbon intensity of the economy. It is calculated by totalling the greenhouse gas emissions of companies held, proportional to their market capitalisation and portfolio weight to give a measure of carbon intensity per euro invested. By signing the Montréal Carbon Pledge, BNPP AM is demonstrating its long-term commitment to working towards a low carbon economy. Sustainable development within BNP Paribas Promoting sustainable development within BNP Paribas contributes to sustainable development in society as a whole. This vision is reflected in our slogan, The bank for a changing world, and in the fact that social and environmental responsibility is firmly embedded in all businesses and operations within the Group. BNP Paribas Asset Management is committed to the fight against climate change with the IIGCC Because climate change is a major challenge for all investors and requires joint action, BNPP AM has actively supported the IIGCC since 2004 in its work with companies and regulators to reduce greenhouse gas emissions and support the transition to a low-carbon economy.

8 To learn more To read articles written by our SRI experts about the key issues affecting the environment and society go to BNP PARIBAS ASSET MANAGEMENT France, the investment management company, is a simplified joint stock company with its registered office at 1 boulevard Haussmann Paris, France, RCS Paris , registered with the Autorité des marchés financiers under number GP This material is issued and has been prepared by the investment management company. This material is produced for information purposes only and does not constitute: 1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. Opinions included in this material constitute the judgement of the investment management company at the time specified and may be subject to change without notice. The investment management company is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor s investment portfolio.given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/ their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the financial instruments may have a significant effect on the results portrayed in this material. All information referred to in the present document is available on Juin Design : AM STUDIO - P _NL The asset manager for a changing world