The asset management landscape has shifted steeply, with extra-financial considerations now pivotal for clients to meet their fiduciary responsibilities. Engagement is crucial in embedding sustainability within companies’ growth strategy.
The asset management industry is going through a period of profound, transformative change. This process is multi-dimensional, and includes such diverse factors as technology innovations, disruption, unconventional monetary policies and a constantly evolving regulatory landscape.
One of the developments that few of us could have foreseen is how asset managers’ understanding of their fiduciary responsibilities to their clients has shifted from one of return maximisation, subject to risk and guideline constraints, to one which includes extra-financial considerations as well.
BNP Paribas Asset Management has been one of the early movers in the asset management industry in embracing sustainability, a journey which has taken us from being one of the first asset managers to launch social and responsible investment (SRI) funds, and being a founding Principles for Responsible Investment (PRI) signatory, to the landmark decision to move to a fully sustainable fund range. This will rapidly make our mission of “making a difference to people’s life by adding sustainable value to their investments while contributing to a better world for future generations” very real to our clients and employees alike. We are committed to embedding environmental, social and governance (ESG) principles into all of our investment processes, putting sustainability at the heart of what we do.
As with much of our industry, sustainability has its own unique taxonomy, and its own full lexicography of (sometimes baffling) acronyms: this is a world of PRI (Principles for Responsible Investment), GRESB (Global Real Estate Sustainability Benchmark), ATNI (Access to Nutrition Index), IIGCC (Institutional Investors Group for Climate Change), TCFD (Task Force on Climate-Related Financial Disclosures), and many more.
Despite the plethora of different terms, the essential concepts are simple. Engagement is integral to our aim to make the world a better place. Engagement refers to the dialogue we enter into with companies and other institutions about sustainability-related issues, in order to help change awareness, attitudes and behaviour. Engagement may be individual – performed by our analysts, members of our Sustainability Centre or combinations of the two – or collective, i.e. in conjunction with other investors and organisations.
Collective engagement can be particularly powerful in influencing corporate behaviour; there is much common ground on sustainability among investors, both in terms of agreement on principles and also on best practices. Pooling forces helps to save time and increase pressure. In some cases, we have successfully combined both individual and collective approaches.
Over the years, our Sustainability Centre has noticed how the geography of engagement dialogues has shifted. A few years ago, our teams were typically meeting Heads of Corporate Social Responsibility (CSR), a function which was normally embedded in the communications parts of the company. As sustainability has moved into the mainstream, this has been reflected in its location within company structures.
Many of our meetings now are with a member of the respective company’s Executive Committee, sometimes with the chief executive officer (CEO) in person. The same phenomenon is observable among asset managers: Chief investment officers (CIOs) and CEOs are increasingly leading the dialogue on sustainability. For asset managers, asset owners and companies alike, the focus has shifted from communication and transparency, to integrating sustainability into overall company strategy.
Companies that are part of the problem can also, by definition, be part of the solution. Companies in sectors beset by sustainability-related problems are often particularly susceptible to engagement. Some of our most successful initiatives have combined both individual and collective engagement with companies in the energy sector.
Earlier this year we published our 500-page PRI report detailing our sustainability approach. Our achievements in 2017 are impressive: we covered 2 424 companies, interviewing or meeting 210 these on ESG issues and interacting with a total of 480 while being involved in 46 separate initiatives. Numbers like this, impressive as they are, sometimes conceal more than they reveal. It’s difficult to see the hard work and dedication in these statistics, or how we are making a difference. A few examples help to illustrate how our efforts are yielding tangible results.
One such initiative combined both individual and collective engagement, culminating in our co-filing a proposal at Exxon Mobil’s annual general meeting to request deeper disclosure on five climate-change related issues. This resolution was passed, increasing transparency and helping to shape Exxon Mobil’s attempt to address climate change.
Other examples of successful engagement involve our private dialogues with food companies Danone and Group Bimbo, which have helped to influence them to improve the nutritional content of their products. These individual examples, help to illustrate how we, at BNPP AM, are “contributing to a better world for future generations”, a goal towards which we all need to work together as one company, and one for which we will have much more to do, and write about, in the future.
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