With Socially Responsible Investments your savings are put to good use
In Belgium, as in its other domestic markets, BNP Paribas is increasingly incorporating environmental, social and corporate governance (ESG) factors into the design, promotion and distribution of its financial products and services.
An increasing number of clients in all categories – individual customers, and company and institutional clients – are attracted to the Bank’s diverse range of ‘sustainable’ products and services.
“When clients invest in a sustainability-oriented financial product and thus help to support projects with a positive civic or environmental impact, they really feel that their savings are being put to good use,” points out Alex Houtart, Head of Corporate Social Responsibility. “However,” he stresses, “taking a responsible attitude to economic affairs doesn’t mean that the client has to make do with a lower financial performance. On the contrary, the yield on socially responsible investments (SRI) is at least comparable with the return on many other types of investment.”
In fact during the difficult times that the stock markets have been experiencing over the last few years, investment funds in the SRI range have actually lost less ground than more traditionally-run funds. “This phenomenon is partly due to the fact that the SRI portfolios tend to contain only a small proportion – if any at all – of such instruments as high-yield bonds, emerging country bonds and hedge fund investments,” explains Guy Janssens of BNP Paribas Fortis Private Banking.
Of course past results are no guarantee of future performance. The client must remain aware that socially responsible investments are also subject to the laws of the financial markets.
“In its most elementary form, a socially responsible investment means that various unethical companies or institutions are entirely excluded from our portfolios and investment funds,” underlines Guy Janssens, adding: “To achieve this, we make use of a blacklist based on the ten principles set out in the United Nations Global Compact and the UN’s six principles for Responsible Investment.
Items on the blacklist include controversial arms such as cluster bombs and anti-personnel mines plus organisations that fail to comply with human rights and companies that do not meet basic environmental standards.
Social responsibility criteria carry even greater weight in investment funds bearing the SRI label. Managers of these categories of funds seek out companies that make a positive contribution in the social, civic and/or environmental sphere. A first-level selection will be made of ‘best in class’ companies in their sector on these criteria. A second-level selection will focus on companies working to find future-oriented solutions to the great challenges facing our society, such as climate change and environmental pollution, producing renewable energy or making rational use of natural resources. This two-stage selection process has led to the creation of funds that have successfully identified investment opportunities in such key fields as water supply, waste treatment and renewable energy development.
“These environmental, social and corporate governance considerations are made alongside the financial analysis that we carry out in order to choose the most attractive companies to invest in,” underlines Kristel Cools of BNP Paribas Investment Partners, the BNP Paribas Group asset management specialist.
“By the way, our approach acts as an extra motivation for all concerned to adopt good practice in the sustainable development field.”
Funds targeting the water or renewable energy sector have also posted some excellent results over the last two years. “Since these investment funds focus on fields that are becoming more and more important, they have very favourable prospects for the coming years,” argues Guy Janssens, adding: “This also goes for responsible companies in completely different sectors. Firms which work to reduce their energy consumption, keep their environmental risks under control and take good care of people both inside and outside the company are making a bet on the future from which they will be able to draw benefit. This approach should enable them to achieve long-term growth and at the same time enhance their brand image. This also goes to show that ethical conduct and potential returns can go hand-in-hand for the investor. As always, however, investors should be aware that all financial investments do carry risks.”
A diversified offering
In addition to investment funds, other products also undergo a strict examination against social and environmental criteria.
Since April 2013, clients in Belgium have been able to buy bonds which enable them to give a social or civic responsibility weighting to their investment, in combination with capital protection at maturity and, since 2014, insurance-based savings products with a similar dimension. The yield is not guaranteed but is linked to the performance of an underlying equity index with ethical criteria.
“The bank guarantees that the client’s savings are being placed in a responsible manner, helping to finance projects with a strong environmental or social emphasis,” stresses Jurgen Vanhaverbeke, of Product Management Invest at BNP Paribas Fortis. “This use of the client’s savings is certified by Forum Ethibel, an independent institution which is a recognised authority in this field.” Since its launch, over €100 million have been invested in this product.
Last but not least, our discretionary management experts, who are empowered to make investment strategy decisions on the client’s behalf, are also placing increasing emphasis on sustainability criteria.