Investing your savings responsibly: How does it work?

What is a responsible savings solution? How is it created? How is it monitored?

Responsible savings solutions rely on a number of selection, measurement and certification tools that clearly identify investments oriented towards responsible funds and therefore ensure their ethical nature and commitments.

Asset management companies use all international criteria for extra financial ESG (Environmental, Social and Governance) assessments to build their sustainable investment funds. They integrate these ESG criteria into their choices of investments in companies and projects that:

• Either have a positive impact, through SRI, solidarity or thematic funds;
• Or, at least, have a non-negative impact, which is the very first level of sustainable investment.

These ESG criteria assess the environmental commitments of companies and their stakeholders (employees, partners, subcontractors and customers).

• Environmental criteria take into account, for example, greenhouse gas emissions, the protection of biodiversity and the prevention of environmental risks.
• Social criteria take into account accident prevention, employee training, compliance with employee law, the subcontracting chain, social dialogue, etc.
• Governance criteria check the independence and diversity of the board of directors, executive compensation, the management structure and the presence of an audit committee.

A new European regulation, SFDR (Sustainable Finance Disclosure Regulation), has imposed transparency obligations on financial market participants since March 2021. It answers the question "how is ESG taken into account?" And thus classifies investment funds open to savers into 3 categories: Funds that do not have a sustainability objective, funds that promote ESG and funds that have a explicit sustainability or impact objective. This will allow for more standardised transparency, which will make it easier for clients and investors to compare products and players. BNP Paribas has taken advantage of this new regulatory requirement to accelerate its already pro active approach to this issue. 84% of BNP Paribas Asset Management's open-ended funds distributed in Europe are already classified as "Articles 8 or 9", based on SFDR. 

Labels can help show the way

Sustainable finance labels, meanwhile, allow savers and professional investors to easily identify funds that implement a robust, responsible investment methodology and that will lead to measurable, concrete results. Created and managed by the governments of different countries, they are attributed after a strict monitoring process led by independent bodies. 

• The French SRI label (Socially Responsible Investment) along with the Belgian label Towards Sustainability - the latest in the European sustainable finance label landscape – are leading the way.
• The other European labels, in particular LuxFLAG ESG, the German FNG-Siegel and Umweltzeichen, and the North European Nordic Swan continue to be dynamic tools, despite relatively modest volumes of assets under management.
• Some labels specialise on a theme, such as Finansol, a French label for solidarity savings investments, and GREENFIN, which ensures that savings products contribute actively to financing the energy and ecological transition.

The SRI (Socially Responsible Investment) label - the best known of its kind - is a powerful accelerator for the development of responsible investment for individuals, enabling savers and professional investors to identify easily the investments that incorporate responsible investment criteria while targeting the same financial returns as traditional products.

• Best in class ESG selection funds: These finance companies with sustainable development best practices according to ESG criteria;
• Exclusion funds or "ethical investments": These exclude for ethical or moral reasons certain sectors such as armaments, gambling, tobacco, etc., or companies whose activity is deemed hazardous to the environment (coal, GMOs, nuclear, etc.);
• Thematic funds: These invest in companies or sectors linked to sustainable development such as renewable energies, water, the fight against climate change or are committed to social themes: health, access to education, job creation, professional integration, etc.
• Solidarity funds: A solidarity fund invests up to 10% of its assets in socially responsible companies and associations; It also contains the word ‘solidarity’ in its name, while the other 90% is invested in traditional listed companies with good CSR practices.

By taking all of this into consideration, asset management companies that have a real impact on savings, like BNP Paribas Asset Management and BNP Paribas Real Estate Investment Management, can design SRI solidarity funds and sustainable thematic funds that are more easily identifiable by clients. This is also the case for insurers like BNP Paribas Cardif, which offers sustainable units of account (certified) and integrates ESG criteria into the management of its general funds.

BNP Paribas Asset Management offers highly targeted SRI themed funds, such as BNP Paribas Human Development, BNP Paribas Inclusive Growth, BNP Paribas Aqua, BNP Paribas Social Business France, BNP Paribas SMaRT Food, BNP Paribas Green Business, BNP Paribas Energy Transition, BNP Paribas Climate Impact, and most recently BNP Paribas Ecosystem Restoration. All actions dedicated to a more inclusive society and a better-protected environment that meet the interests of Europeans.

BNP Paribas Real Estate Investment Management also offers a range of responsible real estate funds, such as the BNP Paribas Diversipierre, the first property investment mutual fund (“OPCI”) to obtain the SRI (Socially Responsible Investment) label in November 2020. This has set out an ESG roadmap with performance indicators and a commitment to the new SFDR regulations in force. In addition, BNP Paribas Real Estate Investment Management recently launched the European Property Impact Fund, the first European real estate fund with a positive impact and in line with the Paris Agreement on climate change. Positive social impact is also being sought through the launch of a healthcare real estate fund, the Healthcare Property Fund.

Step 2: Choosing your responsible investment product

Once designed, how are these specific responsible savings products distributed? The major banks have both the production, investment and distribution capabilities for this type of solution and this is done for all their clients:  Institutional clients, corporates, individuals and private clients.

BNP Paribas teams receive training to master these subjects, allowing them to support their clients with the key information they need to make their choice.  

For individual customers, this support comes directly through retail banking network branches, independent brokers and advisers, insurers and distributors of financial products. The idea is to promote responsible savings solutions and make them accessible to all, regardless of their distribution channel.’ To complement this support, BNP Paribas Wealth Management has designed innovative practical tools such as:

• The digital myImpact questionnaire, which converges savers' convictions and financial and/or philanthropic solutions offered by the bank, helping clients define their priorities and the level of impact they want to achieve;
• Rating methodology (‘Notation Trèfle’): BNP Paribas funds, as well as those recommended by the bank, are rated between 0 and 10 clovers (‘trèfle’ in French)according to their level of sustainability integration, allowing customers to compare easily before investing and have a view of the sustainability of their entire portfolio by financial instruments.   

Measuring the impact of responsible investments must be just as rigorous as reporting on financial results.

To achieve this objective, the Group's businesses, such as the Sustainability Centre of BNP Paribas Asset Management(Opens in a new tab), are deploying practical tools and resources. One of its tasks is to steer a coherent vision of responsible investment and to monitor its progress towards achieving objectives.

Meanwhile, improving data collection and analysis is a top priority, while strengthening the analysis of companies that are part of the investment universe of asset managers.