BNP Paribas Green Bond Trust

Product Name

BNP Paribas Green Bond Trust

Issuer

BNP Paribas Asset Management Australia Limited

Category

Investment

Type

Fund or Trust

Target

Retail, Wholesale, Institutional

Certified Since

2021

Asset Classes

Fixed income

Markets

New Zealand, Australia

Investment Approaches

Impact investing, ESG Integration

It Includes:

  • Riaa icons 32 Green property
  • Riaa icons 11 Impact investments
  • Riaa icons 10 Renewable energy and energy efficiency
  • Riaa icons 15 Social and sustainable infrastructure
  • Tree green background Sustainable land and agricultural management
  • Riaa icons 13 Sustainable transport
  • Riaa icons 31 Sustainable water

It has some level of screening for:

  • Riaa icons 33 Fossil fuels
  • Riaa icons 34 Logging
  • Riaa icons 50 Nuclear power
  • Riaa icons 35 Tobacco

It fully excludes:

  • Riaa icons 52 Human rights abuses
  • Riaa icons 38 Labour rights violations

Overview

The Trust offers exposure to an active pure play green bond strategy. Green bonds are a mechanism to support activities with low greenhouse gas emissions and support low-carbon and climate-resilient developments. BNPP AM’s approach to managing green bonds is unique: • BNPP AM applies a very strict in-house definition of what a green bond is, through in-house extra financial research, avoiding “unauthentic green bonds” (or “greenwashing”) above all; • BNPP AM aims to invest when possible in bonds issued in primary markets; • BNPP AM ensures that all of the green bonds that the Underlying Fund invests in are ESG compliant, excluding 10% of the worst issuers according to proprietary ESG criteria. Integral to the team’s investment process, BNPP AM’s green bond assessment framework is a 2-step process (before and after issuance), and has four components. Green bonds that meet internal requirements are included in the eligible green bond universe for available for investment by the investment team. The strategy centres around the following pillars: • Green bond selection: A specific and proprietary approach to green bond selection, avoiding greenwashing. BNPP AM only invests in green bonds that it believes are authentic in financing a shift towards a sustainable economy. The Underlying Fund’s investment universe is based on the Green Bond Principles as formulated by the ICMA. In addition, BNPP AM assesses green bonds via its own framework to identify those which carry material negative reputation risks. Reputation risks can lead to material negative financial outcomes if associated securities become materially less desirable by the market. As more sectors begin to invest in more sustainable activities, more issuers that are “unauthentic” might ride the sustainable financing trend. Therefore, the need to identify “unauthentic green bonds” or “greenwashing” becomes more important;


Description


The BNP Paribas Green Bond Trust offers exposure to an active pure play green bond strategy. Green bonds are a mechanism to support activities with low greenhouse gas emissions and support low-carbon and climate-resilient developments. BNPP AM’s approach to managing green bonds is unique: 
  • BNPP AM applies a very strict in-house definition of what a green bond is, through in-house extra financial research, avoiding “unauthentic green bonds” (or “greenwashing”) above all;
  • BNPP AM aims to invest when possible in bonds issued in primary markets;
  • BNPP AM ensures that all of the green bonds that the Underlying Fund invests in are ESG compliant, excluding 10% of the worst issuers according to proprietary ESG criteria.
Integral to the team’s investment process, BNPP AM’s green bond assessment framework is a 2-step process (before and after issuance), and has four components. Green bonds that meet internal requirements are included in the eligible green bond universe for available for investment by the investment team.

Green bond selection: A specific and proprietary approach to green bond selection, avoiding greenwashing. BNPP AM only invests in green bonds that it believes are authentic in financing a shift towards a sustainable economy. The Underlying Fund’s investment universe is based on the Green Bond Principles as formulated by the ICMA. In addition, BNPP AM assesses green bonds via its own framework to identify those which carry material negative reputation risks. Reputation risks can lead to material negative financial outcomes if associated securities become materially less desirable by the market. As more sectors begin to invest in more sustainable activities, more issuers that are “unauthentic” might ride the sustainable financing trend. Therefore, the need to identify “unauthentic green bonds” or “greenwashing” becomes more important

BNP Paribas Asset Management’s Global Sustainability Strategy governs the approach to sustainable investment, which consists of the implementation of ESG integration, responsible business conduct standards and stewardship activities (as defined below) into the investment process applied to the Underlying Fund. The sustainable investment approach is incorporated at each step of the investment process of the Underlying Fund and includes the following elements:

Responsible business conduct standards: defined in BNPP AM’s Responsible Business Conduct Policy (“RBC”). They include respecting: • Norms-based screens: such as the UN Nations Global Compact principles and OECD Guidelines for Multinational Enterprises. These two shared frameworks are recognised worldwide and applicable to all industry sectors. Companies that violate one or more of the principles are excluded from the Underlying Fund’s investments, and those at risk of breaching them are closely monitored, and may also be excluded; • BNPP AM sector policies: BNPP AM has also defined a series of guidelines relating to investments in sensitive BNP Paribas EARTH Trust PDS 17 sectors, listed in the RBC. Companies from these sensitive sectors that do not comply with the minimum principles specified in these guidelines are excluded from the Underlying Fund’s investments. The sectors concerned include, but are not limited to, palm oil, wood pulp, mining activities, nuclear, coal-fired power generation, tobacco, controversial weapons, unconventional oil and gas and asbestos.

ESG integration: It involves the evaluation of the below three non-financial criteria at the level of the companies in which the Underlying Fund invests: • Environmental: such as energy efficiency, reduction of emissions of greenhouse gases, treatment of waste; • Social: such as respect of human rights and workers’ rights, human resources management (workers’ health and safety, diversity); • Governance: such as board of directors’ independence, managers’ remuneration, respect of minority shareholders rights. ESG scores, as defined by an internal proprietary framework, can be made available to assist in the ESG evaluation of securities’ issuers. BNPP AM’s proprietary ESG scoring framework aims to quantify ESG considerations by producing both company-level ESG scores (based on a company’s performance on material ESG issues relative to peers) and a portfolio-level ESG score (that aggregates the average company-level ESG scores of the companies in the portfolio). ESG integration is systematically applied to the investment strategy of the Underlying Fund. The Underlying Fund aims to maintain an average portfolio ESG score that is higher than the one of its investment universe. The process to integrate and embed ESG factors in the investment decision-making processes is guided by formal ESG Integration Guidelines.

Stewardship: It is designed to enhance the long-term value of shareholdings and the management of long-term risk for clients, as part of BNPP AM’s commitment to act as an efficient and diligent steward of assets. Stewardship activities include the following categories of engagement: • Company Engagement: the aim is to foster through dialogue with companies, corporate governance best practices, social responsibility and environmental stewardship. A key component of company engagement is voting at annual general meetings. BNPP AM publishes detailed proxy-voting guidelines on a range of ESG issues; • Public Policy Engagement: BNPP AM aims to embed sustainability considerations more fully into the markets in which it invests and in the rules that guide and govern company behaviour as set out in its Public Policy Stewardship Strategy. 

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