Sustainability at the heart of bnpp am’s strategy
Global sustainability strategy
In a changing world, we focus on achieving long-term sustainable returns for our clients, to make a positive difference in people’s futures. BNPP AM’s strong commitment towards sustainable investment is comprehensively described in its firm-wide Global Sustainability Strategy (GSS)1.
BNPP AM’s Global Remuneration Policy is fully aligned with the GSS, as it represents a core element of BNPP AM’s overall strategy. Set out below are the key remuneration practices that allow to make sustainability risks integration, part and parcel of BNPP AM’s remuneration policy.
Sustainability risks in bnpp am’s remuneration policy & practices
Integration of sustainability risks in relevant employees’ individual objectives
As mentioned in Section 3 of BNPP AM’s Remuneration Policy, “all of our employees, whose remuneration is decided during CRP [Compensation Review Process], are appraised through continuous feedback and annual review against a set of objectives that are specific to the nature of their role.”
First, BNPP AM’s management recognises that each team within BNPP AM does contribute to the achievement of BNPP AM’s overall strategy, hence plays a role in the reaching of its sustainability goals.
More concretely, sustainability-related roles and responsibilities were defined for a set of key internal functions more closely involved with Sustainability at BNPP AM, and specific objectives were assigned, which are cascaded down to teams and individuals where relevant. At the end of the year, the fulfilment of these objectives is assessed, among others, in the annual performance reviews, which are a key input in the determination of the annual variable remuneration awards. This determination remains a discretionary process, in line with BNPP AM Global Remuneration Policy’s standard practice.
Teams with such assignment of specific sustainability objectives are the following:
Where relevant, Executive Committee members have goals relating to the successful implementation of BNPP AM’s Global Sustainability Strategy, and the integration of sustainability risks, across our organisation. The Global Sustainability Strategy encompasses a comprehensive suite of policies and procedures designed to integrate the evaluation of sustainability risks throughout our investment processes and stewardship activities.
The Sustainability Centre
This team plays a central role in the design and implementation of BNPP AM GSS:
- driving our approach to sustainable investment;
- being responsible for developing and implementing the firm’s Global Sustainability Strategy, ESG Integration Guidelines and Policy, Stewardship Policy, Responsible Business Conduct Policy and product-based exclusions, as well as the firm’s ambitious targets on issues such as the energy transition, the environment and equality;
- providing investment teams with research, analysis and data at company and sectoral levels, and also supporting teams in their efforts to fully integrate sustainability-related risks and opportunities into investment strategies;
- playing a crucial role in measuring, tracking and reporting on BNPP AM’s impact and progress on sustainability;
- driving BNPP AM’s ESG-related stewardship activities, which include proxy voting and engagement with companies and policy makers; and setting the strategic direction as well as playing an advisory and coordination role to the investment teams in their dialogues with companies on sustainability-related
Thus, many objectives of Sustainability Centre members do relate to the integration of sustainability risks.
At the core of all our investment processes, analysts and portfolio managers integrate ESG factors into their company, asset and sovereign evaluation and investment decision-making processes.
Investment teams are responsible for implementing our ESG Integration Guidelines for the assets they manage, which include a number of key objectives such as:
- the integration of ESG information (and risks) in investment decision-making; and
- the aim to ‘beat the benchmark’ (where an investible benchmark exists) on the ESG score and carbon footprint of their portfolios (noting that some non-standard cases exist).
Successfully implementing our ESG Integration Guidelines is reflected in the objectives of our Chief Investment Officers, and cascaded to their investment teams where relevant.
ESG Champions have been appointed within Investments and the Global Client Group in order to help promote sustainable investment and integrate sustainability risks within each team, liaising with the Sustainability Centre. Champions typically participate in relevant training sessions, which are organised centrally both for the ESG Champions as well as across investment and commercial teams. Each investment team has at least one ESG Champion who is notably, responsible for communicating issues related to sustainability risks to team members. ESG Champions’ objectives reflect this, including additional goals specific to their Champion role.
Quantitative Research Group (QRG)
- Co-develop ESG Scoring using, among other criteria, a materiality and risk-based approach
- Develop new research methodologies and approaches
- Research on and monitor the link between ESG integration and investment performance This is reflected in the objectives of this department, and cascaded to its members, where
Sustainability risks are included in the RISK function’s controls:
- Respect of ESG criteria objectives described in the fund prospectus’s investment guidelines, and ensure successful implementation of our Responsible Business Conduct (RBC) Policy
- Insertion of ESG criteria within the credit risk policy
This is reflected in the objectives of the RISK function, and cascaded to its members, where relevant.
Inclusion of sustainability risks in our risk-adjusted reward framework
First, section 4.1 of BNPP AM’s Remuneration Policy explicitly mentions that the Bonus Pool is determined annually taking into account “current and future risks (including sustainability ones)”.
In addition, section 3 of BNPP AM’s Remuneration Policy states that “Regulated Staff and SMPs (holders of Senior Management Positions in a Group wide context) have mandatory Compliance and Risk objectives. If these two objectives are not met, the variable compensation of the concerned employees may be reduced under the supervision of the Remuneration Committee”.
Meeting of the mandatory Risk objective is decided by examining the employee’s manager appraisal and the assessment by the RISK function, during a Risk and Compliance review committee at the end of the Compensation Review Process.
Thus, more generally and based on its controls, RISK function is able to raise sustainability risks-related breaches, together with Compliance and HR:
- during the Risk & Compliance review, leading to potential negative impacts on variable remuneration to be awarded at the end of the Compensation Review Process, and
- before the vesting of deferred bonus plans, leading to potential malus on the vesting