BNP AM

The sustainable investor for a changing world

This material is intended for Institutional Investors (as defined in the Securities and Futures Act, Chapter 289 of Singapore) only and is not suitable or intended for persons who do not qualify as such.

Sponsored by BNP Paribas Asset Management, the recent 5th annual conference of the Global Research Alliance for Sustainable Investment and Finance (GRASFI) provided a high-level opportunity for leading investment practitioners, academics and policymakers to assess the latest research on this fast-moving and urgently needed field of finance.  

While the take-up of ‘green’ investment solutions has been burgeoning, many investors have been wary of ‘greenwashing’ when faced with inconsistent extra-financial reporting. The absence of clear policies and comparable standards when assessing the environmental, social and governance (ESG) credentials of potential investee companies and asset owners has been a further concern.

It can be argued that investors cannot judge whether an investment opportunity is truly ‘sustainable’ unless its impact can be measured objectively with independent, rigorous, science-based methods.

This is where partnering with academic researchers can add value. Climate change and biodiversity loss are complex risks for investors, including asset owners: thorough research is needed to grasp the scope of the problems, quantify the risk, and develop solutions tailored to meet demand.

Research helps inform the debate

As the sustainable investor for a changing world, BNP Paribas Asset Management (BNPP AM) sponsors the efforts of the GRASFI alliance of almost 30 universities to produce high-quality interdisciplinary research and teaching curricula on sustainable investment and finance.

BNPP AM believes in science-led sustainable investment. High-quality research helps to inform the broader debate, but also contributes to our constant review of methodologies and approaches on key concepts. These include the sustainable development goals, portfolio temperature alignment, carbon and biodiversity footprinting, impact measurement and physical climate risk.

This is why BNPP AM sponsors GRASFI’s annual conference and why we share relevant scientific findings with investors, clients and the wider asset management industry on our websites.

As sustainable investment practitioners, we are thrilled to benefit from the work presented by the GRASFI academic community in such a growing and emerging field where there is still so much uncharted territory. It is fantastic to see how the GRASFI community has helped evolve methodologies and how useful its work is in informing new policies.” –  Roger Miners, head of distribution, Europe, at BNP Paribas Asset Management. 

A broad range of themes

This year’s conference covered issues such as: 

  • Data and Reporting – ESG metrics and ratings; Financial disclosure and reporting; Measuring climate-related factors; Spatial finance; AI and Big Data.
  • Regulators, Regulation and Policy – The role of central banks and regulators; Political economy and sustainable finance; Sustainable finance and law; Effects of sustainable finance regulation.
  • Stakeholders and Themes – Impact of sustainable investing on the real economy; Behavioural aspects of sustainable investing; Investor preferences; Managerial responses to sustainable investing; Faith-based investors.
  • Finance, Society and the Natural Environment – Biodiversity and nature; Adaptation and resilience; Sustainable sectors (water, agriculture, healthcare, infrastructure investment, etc.); Social and societal effects. 

Compelling academic papers

Over the last two years, we have published a number of summaries of significant GRASFI papers, among them: 

  • Measuring the impact of climate change on equity risk and portfolio choice, which offers a novel framework to help investors understand the impact of climate change on portfolios. This is particularly acute for investors with long investment horizons such as pension funds.
  • Investing in influence: Investors, portfolio firms, and political giving in which the authors uncover and quantify how corporate ownership may be an important tool by which institutional investors and political action committees (PACs) amplify their influence.
  • Making the case for climate risk-adjusted refinancing operations Here, the authors consider that central banks need to do more to manage their exposure to environmental risk. The paper shows how central banks can use climate risk-adjusted refinancing operations (CAROs) to direct bank lending to projects with low climate risks.
  • Research finds US firms talk cheap on climate change in which it is shown that US companies ‘outsource’ their climate change responsibilities, sidestepping ESG commitments by passing greenhouse gas emissions down the supply chain. Indeed, the authors demonstrate that US companies exploit poorer countries by taking advantage of weaker legislation.
  • Mandating ESG disclosures really makes a difference. In assessing whether mandatory ESG disclosure has made any difference, the winning paper from last year’s GRASFI conference notes that it has positive informational effects on market participants because it increases “the availability and quality of firm-specific, non-financial information”, thereby improving the information used to forecast earnings. 

Disclaimer

Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk. This material is produced for information purposes only and does not constitute: 1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. It does not have any regards to the specific investment objectives, financial situation or particular needs of any person. Investors should seek independent professional advice before investing, or in the absence thereof, he/she should consider whether the investments are suitable for him/her.

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