On the 4th of March, the 1st Belgian SIB ( Social Impact Bond) structured and financed by BNP...
Social and green finance: the positive impact of SRI
What is Socially Responsible Investing (SRI)? How can banks manage and offer these services to customers? Does it have a real impact? Anthony Finan, Distributor Manager at BNP Paribas Investment Partners and CSR delegate, answers our questions.
What are your primary responsibilities?
I am in charge of business development, as well the investment and savings branches of asset management for individual customers and distributors.
The challenges of this business: ensuring that the savings of our individual customers are managed efficiently, and that our offer meets their needs and adapts to changes in the market.
How do you balance financial decisions with environmental and social concerns?
We must take a structured approach to our SRI management, in order to build a product line that includes SRI principles, and a team of dedicated experts, who define our methodology and perform ESG (Environmental, Social and Governance) analysis.
ESG analysis aims to identify companies with the best environmental, social and governance practices, along with those offering solutions to social and environmental challenges. Investing in these businesses serves to finance the green economy and the social economy.
“ over the long term, these investments provide concrete solutions to environmental and social challenges ”
Anthony Finan, Distributor Manager at BNP Paribas Investment Partners and CSR delegate
What is SRI?
SRI is the application of sustainable development principles to financial investments. In addition to financial performance, SRI management also aims to generate social and/or environmental value.
That means evaluating and selecting assets by taking into account new criteria like the direct or indirect impact of the company’s activity on the environment, its employees, customers, suppliers, etc.
SRI offers two complementary approaches that can be employed in combination:
- Best-in-class : For each business sector, this approach selects companies employing the best practices in terms of social issues (job creation, human resources management) or environmental issues (combatting climate change, energy savings, protecting the environment), or respecting corporate governance principles (independent board, respecting shareholder rights)
- Thematic : This focuses on specific sectors or themes connected to the environment (energy savings, renewable energies, water management, waste treatment and recycling) or social issues (products and services intended for disadvantaged groups, promoting health, education, anti-poverty, fair trade, etc.).
Finally, SRI funds can take on an aspect tied to the specific nature of their investments. For example, “solidarity-based” SRI funds invest 5-10% of their assets in social or solidarity-based businesses, or solidarity economy projects.
Is SRI mainly of interest to institutional customers?
That was the case originally with the best-in-class approach: institutional customers were able to align their investment practices with their values. But over the past few years, through the thematic approach, interest in SRI has grown among individual customers. SRI funds focusing on concrete challenges (such as access to water, healthcare, food, etc.) help give meaning to their savings.
So at BNP Paribas Investment Partners, nearly 60% of our SRI sums are held by individual customers, while these funds received the largest share of savings last year.
Employee savings plans have also embraced SRI and social finance, of which it is a key distributor.
SRI has grown among individual customers. SRI funds focusing on concrete challenges (such as access to water, healthcare, food, etc.) help give meaning to their savings.
Why do you emphasize the concept of “investment”, and how do you measure its actual impact?
This remains a financial investment: we carry out a rigorous asset management activity, by combining risk analysis and earnings forecasts. And we expect a return on our investment.
But over the long term, these investments provide concrete solutions to environmental and social challenges. For example, by favoring sectors that are less energy-intensive or that use alternative energies, they help finance the energy transition!
We measure their impact through extra-financial indicators, which our customers can review: including a portfolio’s carbon footprint or job creation rate, as well as the level of independence of the boards of directors for each company in the portfolio.
Why do you say that we need to “dare” to invest in social and green funds?
We need to cast aside our preconceptions! SRI is not reserved for institutional customers, it does not exclusively pertain to asset management, and it does not mean sacrificing financial performance, etc.
It is an investment like any other, practiced with the same vigilance, and ESG analysis even helps identify certain specific risks, which may impact the company’s activity in the medium or long terms.
SRI also makes it possible to identify opportunities in sectors and businesses where new products, services or production methods will create added value.
SRI is not reserved for institutional customers, it does not exclusively pertain to asset management, and it does not mean sacrificing financial performance, etc.
How does BNP Paribas Investment Partners promote green and social investing among its targets?
We pursue a different approach tailored to each customer type:
- A close relationship and an ability to offer tailored solutions to our institutional customers, which are adapted to their constraints and investment portfolios
- An informative approach to individual customers and bank consultants, so they can gain a better understanding of the theme and product line, as well as the design of specific products, in a comprehensible and meaningful way.
Based on the thematic approach, some of our products are seeing a lot of success with our customers: BNP Paribas Aqua for water, BNP Paribas Human Development (social theme), BNP Paribas Responsible Real Estate and the newest addition to our line, PARVEST SMaRT FOOD, an innovative fund that invests in the entire sustainable food value chain.
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