BNPP AM has restructured the BNP Paribas Human Development fund, now renamed BNP Paribas Inclusive Growth, and managed using a new investment strategy focused on inclusive growth (1). It aims to generate returns through investment in companies with a proactive approach to reducing inequalities in income, education, gender, ethnicity, geographic origin, age or disability.
Combining social factors and financial return
The restructured fund is fully aligned with BNPP AM’s Global Sustainability Strategy, of which equality & inclusive growth is a key pillar, along with energy transition and the environment (collectively the ‘3 Es’). Equality & inclusive growth forms an essential component of companies’ ESG2 scores and the importance of the social dimension is clearly highlighted in the current global economic and health crisis. BNP Paribas Inclusive Growth invests in companies that contribute positively to diversity and inclusion. Its investment strategy is based on five key social challenges identified as major causes of inequalities:
- protecting the most vulnerable members of society
- promoting social mobility
- developing a quality offering accessible to the greatest number of people
- respecting business ethics
- promoting decarbonisation and biodiversity
BNP Paribas Inclusive Growth is based on the strong conviction that inclusive growth creates sustainable financial performance and better management of long-term risk, thereby offering institutional investors and savers attractive returns while contributing to an economy that creates opportunities for all.
Inclusion score based on unique and proprietary methodology
BNPP AM has developed a proprietary methodology that combines its quantitative research expertise with the non-financial data analysis capabilities of its team of ESG experts. This methodology enables all stocks in the universe to be scored out of 100, using ESG indicators associated with a specific range of inclusive growth criteria. These include employment contracts, working conditions, equal pay, employee diversity, percentage of female managers, talent management, professional training, product and service offering for low-income consumers and executive remuneration policy.
The final ‘inclusion score’ enables the identification of companies that are inclusive growth leaders within the investment universe. It incorporates an enhanced weighting for social factors, which account for 65% of the overall score, compared to 20% for governance criteria and 15% for environmental. Companies that score below 20 are automatically excluded from the investment portfolio. This approach enables BNP Paribas Inclusive Growth to meet all the Sustainable Development Goals, with 4 of them being targeted as a priority: decent work & economic growth, reduced inequalities, gender equality and no poverty.
Maria Luz Diaz Blanco and Anne Froideval, Portfolio Managers of the Inclusive Growth fund, comment: “By integrating specific performance indicators, such as employee turnover rate or board diversity, our proprietary model allows us to filter the investment universe to identify the leaders. Our selective approach means that we can build a high conviction equity portfolio of 40-60 stocks from around 1,000 companies initially analysed. This allows us to meets the expectations of our clients who are looking to generate a positive impact on tomorrow’s society while generating long-term value.”
Delphine Riou, ESG Analyst at BNP Paribas Asset Management, comments: “The BNP Paribas Inclusive Growth fund is a continuation of BNPP AM’s work on the social theme and responds to the demands of our clients. We believe that companies that implement the best practices of diversity and inclusion with their employees, their customers or their suppliers can achieve better financial results. This finding resonates all the more strongly during the Covid-19 crisis, which accelerated the emergence of social considerations in investment decision-making.”
1 The OECD defines inclusive growth as economic growth that is distributed fairly across society and creates opportunities for all,
https://www.oecd.org/inclusive-growth/#inequality-puts-our-world-at-risk 2 Environment, Social and Governance