Board of Directors of BNP Paribas met on 30 July 2020. The meeting was chaired by Jean Lemierre and the Board examined the Group’s results for the second quarter 2020 and endorsed the interim financial statements for the first half of the year.
BNP Paribas wins top honours for global CSR, as well as for financing and transaction banking in Western Europe, in Euromoney’s Awards for Excellence 2019.
BNP Paribas’ efforts to place responsible banking front and centre of its long-term strategy has won recognition as the bank is named “World’s Best Bank for Corporate Responsibility” in this year’s Euromoney Awards for Excellence 2019.
Sustainable finance and social engagement are but two areas where BNP Paribas has continued to push the boundaries, as business sectors around the world continue their march towards more sustainable and responsible business models. In addition, the bank’s financing and banking teams won recognition in Western Europe.
Overall, BNP Paribas won top honours in four categories: World’s Best Bank for Corporate Responsibility, Best Bank for Financing, Western Europe Best Bank for Transaction Services, Western Europe Best Bank in Luxembourg.
Following on from being named “World’s Best Bank for Sustainable Finance” by Euromoney in 2018, BNP Paribas has again underlined its commitment to achieving the UN Sustainable Development Goals (SDGs) through aligning its financing, investment and policies to address key social and environmental challenges.
Helen Avery, Euromoney CSR editor, commended BNP Paribas for its approach.
“While some banks lean towards solving social or environmental challenges, BNP Paribas sees the two as inextricably linked,” she explained.
In Euromoney’s regional awards, recognition for the bank’s capital markets and cash management know-how in Western Europe, particularly in its embrace of digital technologies to support clients, saw BNP Paribas winning the top prize in the financing and transaction services arena. The capital markets platform was praised for its leading role in the investment-grade debt and loan space across a range of corporate sectors, with the bank having brought origination, structuring and distribution closer together in the past 12 months.
Finally BGL BNP Paribas, the bank’s Luxembourg entity, was recognised for its active contribution to the financial sector. With 41 branches across the country serving retail, wealth management and corporate and institutional clients, the award – won for the fourth consecutive year – is testimony to the long-term commitment of the bank in the country.
BNP Paribas Asset Management (‘BNPP AM’) announces its plan to implement an enhanced coal- exclusion policy, accelerating its commitment to tackle climate change by divesting from the single largest source of carbon emissions. The tighter exclusion policy on companies engaged in mining thermal coal1 and generating electricity from coal will come into effect at the start of 2020. It will apply to all of BNPP AM’s actively managed open-ended funds, as well as becoming the default policy for segregated mandates.
The policy represents a significant step towards BNPP AM’s 2025 target of aligning its portfolios with the Paris Agreement goal of keeping temperature rises well below 2°C above pre-industrial levels. It will also reduce the economic risk in portfolios as coal becomes increasingly uncompetitive as a fuel for power generation.
BNPP AM will exclude companies that derive more than 10% of their revenue from mining thermal coal and/or account for 1% or more of total global production. The global production limit will capture those companies whose share of revenue from coal is below 10%, but which nonetheless account for a meaningful level of production on an absolute basis.
Power generators whose carbon intensity is above the 2017 global average of 491 gCO2/kWh will also be excluded, with BNPP AM subsequently following the Paris-compliant trajectory for the sector as determined by the International Energy Agency (‘IEA’) in its Sustainable Development Scenario (‘SDS’).2 The IEA’s SDS requires power generators’ carbon intensity to fall to 327 gCO2/kWh by 2025, and BNPP AM will therefore demand that companies reduce their carbon intensity between 2020 and 2025 at a rate consistent with this, excluding those that fail to do so.
BNPP AM acknowledges the importance of encouraging companies to reduce their dependence on coal mining and coal-fired power generation in order to align their activities with the Paris Agreement. It will therefore consider exceptions for those miners and power generators that make credible commitments to reducing their coal-based activities to levels consistent with the Paris Agreement within the required time frame. The credibility of commitments will be determined using quantitative and qualitative criteria, including disposal plans for coal assets or acquisition plans for lower-carbon generation capacity, and the extent to which management are prioritising a lower-carbon business model. Exemptions will be granted on a half-yearly basis, with those companies demonstrating their commitment to the policy expected to comply within two years.
Coal combustion is the largest single source of global warming, while the power sector itself is the largest single source of coal combustion. Reducing emissions from coal is therefore the most effective way of moving towards an energy system consistent with the Paris Agreement. According to the IEA’s SDS, almost all of the emissions reductions from the energy sector required by 2025 to align the global emissions pathway with the Paris Agreement – 2.8Gt out of a total 3Gt – come from cutting back on the use of coal in power generation.3
Since 2015, BNP Paribas has committed to ensuring that its financing and investment activities in the energy sector would evolve in line with the objectives of the Paris Agreement to keep global warming significantly below the 2 ° C threshold. BNPP AM’s new coal policy is fully in line with this Group initiative.
Mark Lewis, Global Head of Sustainability Research at BNP Paribas Asset Management, comments: “From an investment perspective the outlook for the coal industry looks increasingly uncertain as less carbon-intensive fuel sources, in particular renewables, become ever more competitive. The main renewable technologies already compete favourably with fossil fuel power generation,4 and in the best locations for wind and solar globally, new build costs are actually below those of existing fossil-fuel plants. The trend will continue as costs for all renewable technologies continue to fall.”
About BNP Paribas Asset Management
BNP Paribas Asset Management is the investment management arm of BNP Paribas, one of the world’s major financial institutions. Managing EUR 399 billion* of assets as at 31 December 2018, BNP Paribas Asset Management offers a comprehensive range of active, passive and quantitative investment solutions covering a broad spectrum of asset classes and regions. With more than 530 investment professionals and around 500 client servicing specialists, BNP Paribas Asset Management serves individual, corporate and institutional investors in 71 countries around the world. Since 2002, BNP Paribas Asset Management has been a major player in sustainable and responsible investing.
* Managing and advising EUR 537 billion of assets as at 31 December 2018
For more information, please visit bnpparibas-am.com.
1 The new policy does not cover metallurgical coal as there are currently no viable alternatives to metallurgical coal in the steel-making process. By contrast, there are many cleaner alternatives to thermal coal for producing electricity.
2 See IEA, Power: Tracking Clean Energy Progress, © 2019 OECD/IEA. Note that the Paris Agreement (Article 2a) commits its signatories to: “Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.” The IEA’s 2018 World Energy Outlook states (p.89): “The CO2 emissions trajectory to 2040 in the Sustainable Development Scenario is lower than most published decarbonisation scenarios based on limiting the long-term global average temperature rise to 1.7-1.8°C above pre-industrial levels.” Ideally, we would like to see the IEA publish and regularly update a 1.5°C scenario and to adopt a more precautionary stance with regard to negative emissions technologies in its modelling, but the SDS is without doubt the most widely referenced Paris-compliant scenario for the global energy industry, and as such the clearest reference point for governments, companies, and investors concerned with aligning energy emissions with the Paris Agreement.
3 According to the most recent iteration of the SDS set out in the IEA’s 2018 World Energy Outlook, CO2 emissions from energy need to fall by 3.1Gt by 2025 versus 2017 levels, and all of this 3.1Gt reduction comes from lower emissions from coal (emissions from natural gas are slightly higher in 2025 versus 2017 levels, and emissions from oil only slightly lower). Moreover, nearly all of this reduction in coal emissions – 2.83Gt of the total 3.1Gt required, or 93% – comes from the power sector.
4 On a levelised cost of energy (‘LCOE’) basis. LCOE enables the comparative measure of different methods of electricity generation on a consistent calculated by dividing the total cost of building and operating a power-generating asset over its lifetime by the total energy output of the asset over its lifetime.
- Firm-wide strategy to enhance and accelerate commitment to sustainable investment
- Clear definition and application across AUM. Four core components: ESG integration; stewardship; exclusions; and a forward-looking perspective
- Firm-wide targets for measuring and progressively aligning investments with a sustainable future. KPIs relating to: energy transition, environment sustainability, equality and inclusive growth
- 25 person strong Sustainability Centre, with 14 people hired since mid-2018, with an average experience of over 10 years in sustainability
BNP Paribas Asset Management (‘BNPP AM’) reinforces its commitment towards sustainable investment by launching its firm-wide Global Sustainability Strategy. This represents a step further in contributing to a sustainable future, in line with BNPP AM’s focus on delivering long-term sustainable investment returns for clients.
The Strategy details BNPP AM’s approach to sustainable investment, setting clear objectives and commitments, and focussing on three key sustainability themes: energy transition, the environment and equality (the ‘3Es’). It reinforces BNPP AM’s commitment to invest for the long term, and to engage with companies and regulators to promote best practice, as well as raise awareness about the role that finance can play in achieving a sustainable world.
The Strategy covers the four components of sustainable investment, each with its own robust implementation plan. They collectively strengthen the way that BNPP AM invests and delivers long-term returns; how investment ideas are generated; how risk is managed and how the company uses its influence with companies and markets.
The four components are:
- ESG Integration: BNPP AM will integrate ESG (Environmental, Social and Governance) factors into its investment processes including investment philosophy, research and idea generation, portfolio construction, risk management, engagement, voting, disclosure and reporting. This ESG integration is overseen by formal guidelines (developed in 2018), and by an ESG Validation Committee (established in 2018). The goal is that by 2020, every investment process – and by definition, every investment strategy – will have been reviewed and approved by this Committee.
- Stewardship: BNPP AM is an active owner and diligent investor in companies, having had strong and detailed proxy-voting guidelines on a range of ESG issues for many years. Through the Strategy, it will enhance its approach to stewardship, from engagement with investee companies to active involvement with policymakers, regulators and industry groups around issues such as climate and natural capital. BNPP AM is represented on the European Commission’s Technical Expert Group on Sustainable Finance (‘TEG’), the Task Force on Climate-related Financial Disclosure (‘TCFD’), the Institutional Investors Group on Climate Change (‘IIGCC’) and many other initiatives. BNPP AM recently reinforced its capabilities on stewardship, having appointed heads of stewardship in Asia Pacific and Americas.
- Responsible business conduct expectations and sector-based exclusions: BNPP AM follows the UN Global Compact principles and has a set of sector policies that set out the conditions for investing in particular sectors, and guide screening requirements and engagement. The sector policies are applied across all open-ended funds. One example of this is BNPP AM’s recently-published tighter exclusion policy (1) on companies engaged in mining thermal coal and generating electricity from coal.
- Forward-looking – the ‘3Es’: BNPP AM has developed a set of objectives and key performance indicators (KPIs) relating to the ‘3Es’, addressing how it will align its investment research, portfolios, and company and regulatory engagement in support of each. KPIs include:
- carbon intensity (gCO2/kWh) of our investments vs. IEA SDS; green share (%) of AUM (energy transition, Sustainable Development Goals (SDG) 7, 9 and 13);
- water footprint of our portfolios, number of companies that commit/have a policy on No Deforestation, No Peat, No Exploitation (NDPE) (environmental sustainability, SDG 6, 15);
- % of female board members or number of engagements to promote more sustainable corporate capital allocation decisions (equality and inclusive growth, SDG 5, 8 and 10).
BNPP AM has created a roadmap of commitments to implement this strategy over the next three years. In 2020, BNPP AM will introduce measurement and reporting on the impact and progress of its sustainability initiatives, introducing additional targets over time – with appropriate links to one of the 3Es and specific UN Sustainable Development Goals.
BNPP AM’s commitment to sustainability is not new: it has been a major player in sustainable investment since 2002, the year it launched its first socially responsible investment (SRI) fund. The Principles for Responsible Investment (PRI) has assigned BNPP AM an A+ rating, the highest possible, for the past three years in its annual assessment report, thereby demonstrating the firm’s commitment to sustainability.
BNPP AM’s approach is also fully in line with the Group’s leadership on sustainable finance. The Group aims in particular to finance the economy in an ethical way, promote the development of its employees, support initiatives with a social impact and play a major role in the transition toward a low carbon economy. It thereby wants to be a major contributor to the UN Sustainable Development Goals.
Frédéric Janbon, CEO of BNP Paribas Asset Management, comments: “We are at a crossroads: now is the time for decisive action by the financial community to play its part in helping to achieve the sustainable future we need, as laid out by the Paris Agreement and the Sustainable Development Goals. BNPP AM is proud to take on this challenge – we believe it is in the interest of our clients and is central to our fiduciary responsibility. The Global Sustainability Strategy and related investments in our team and our systems, reflects our increased ambition and outlines a blueprint to mainstream sustainability in all that we do – through our investment processes, but also engagement with our staff, companies, policymakers and wider society. This is central to our firm’s strategy and our ability to deliver sustainable, long-term investment returns for our clients.”