Responsibility Equals Opportunity: Planning a Sustainable Future With BNP Paribas
Arnaud Tellier, CEO Asia Pacific at BNP Paribas Wealth Management, on how ESG investing opens up a whole new world of possibility.
Climate change and sustainability can no longer be ignored. While these global issues present challenges, they also create opportunities for investors. A combination of factors—ranging from an increase in extreme weather events to net-zero carbon targets to the Covid-19 pandemic—have put Environmental, Social and Governance (ESG) issues firmly on investors’ agenda.
Arnaud Tellier, CEO Asia Pacific at BNP Paribas Wealth Management, says: “Sustainability is a must for society and a must for investors. It creates lots of opportunities for new types of investment, from impact investing to socially responsible investing (SRI).” The International Finance Corporation estimates that the transition to a sustainable economy will create an opportunity worth US$12 trillion per year for businesses.
Tellier says BNP Paribas Wealth Management has identified four areas to benefit from a sustainable economy: energy transition, ecosystem restoration, the circular economy, and sustainable or smart food.
He further explains the investment opportunities in these four areas, “Firstly, there is a high and inelastic demand for solutions for renewable energy production, energy efficiency technology, and energy infrastructure and transportation. Secondly, businesses involved in ecosystem restoration projects via public-private partnerships offer multiple opportunities for sustainable solutions and consequently impact investments.”
Thirdly, he says, “The expanding circular economy, which aims to increase resource efficiency and introduce new business models for the circular flow of resources, will benefit from the growing sustainability needs. Finally, the Covid-19 pandemic has triggered increased demand for healthy and natural food, improved food safety and more sustainable food production, creating further investment opportunities. We have not only integrated ESG factors into our selection and investment processes, but we have also moved up the ESG scale to target investments that have a positive impact.”
“There is clearly a demand for contributing to a sustainable future, and we are actively supporting our clients in accelerating their participation in this theme. We do this by offering them a wide range of products and services, such as green and sustainability-linked bonds, of which we are one of the top book runners,” Tellier says.
An ESG Pioneer
BNP Paribas Wealth Management prides itself on being a pioneer in ESG, and sustainability is one of the key pillars of its strategic growth plans. Tellier explains: “No country, business or individual can win in the long term in a world that loses. We firmly believe that collective progress will be achieved only through growth that is both sustainable and equitable.”
The group is part of the United Nations Net-Zero Banking Alliance, under which it has committed to aligning its investment portfolio with zero emissions by 2050, and it has also launched initiatives to be a leader in green bonds and SRI. In 2017, it stopped all new financing of coal-fired power plant projects, and it has also committed to reducing its credit exposure to oil and gas exploration and production.
BNP Paribas Wealth Management’s commitment to this effort is further ratified by the findings in its Entrepreneur & Family Report 2021 – Impact Journey, which showed that there was an acceleration for sustainable investments by entrepreneurs in their portfolios, jumping from 47 per cent in 2019 to 58 per cent in 2020.
To help its clients further, BNP Paribas Wealth Management has put in place a detailed and auditable methodology—termed Clover Rating—to rate its investments from zero to ten clovers in terms of their sustainability. It couples this rating system with a client questionnaire, myImpact, which helps to align the products it recommends with the impact its clients want their investments to have according to their values.
“Our mission is to empower the decision-making of our clients to influence, change and improve the world, creating a legacy of impact for future generations,” Tellier says.
The pandemic has led BNP Paribas Wealth Management to realign some investment themes based on the changing values of its clients.
“Changes and shifts in value created by the pandemic have led to new opportunities, and produced an acceleration of trends that were nascent before,” Tellier explains. Some of these investment themes revolve around sustainability, such as the restoration of water and forests, and urban regeneration. Other themes involve remote access healthcare, digital transformation, and reorganising supply chains during the transition to green energy.
Further areas BNP Paribas Wealth Management has on its radar include gaming and the convergence of social platforms with entertainment, which leads to a fast-developing theme ‘Metaverse’.
“The word Metaverse literally means a universe beyond the physical world. More specifically, it is the ultimate virtual reality, a digital world that anyone can connect to. The virtual world itself can be used for practically anything—work, play, concerts, cinema trips—or any usual form of social interaction. It may even eventually include a functioning economy and a virtual civilisation. The potential is limitless.”
Tellier believes that the key beneficiaries would be companies operating in social media, e-commerce-related sectors, payments, augmented and virtual reality, video games and interactive entertainment, as well as companies that build the infrastructure that the Metaverse runs on.
Another trend is 5G, although Tellier cautions that while this technology is important for digital transformation, the enablement of 5G services—which includes infrastructure and devices—does put a strain on the notion of a circular economy. “Things are never black and white, which is why you need a sophisticated methodology,” he says.
Meanwhile, the pandemic has acted as a catalyst for many ultra-high-net-worth individuals in Asia to review their wealth transfer arrangements.
“We support clients with their structuring and planning for wealth transfer. We don’t sell our own structures, as we don’t have a trust company, so we are totally neutral. We see this as an extension of our advisory duties and it comes at no charge to the client,” Tellier says.
BNP Paribas Wealth Management is seeing increased interest in philanthropy; as people want to give back to society, but do not always know the best way to do so. To fill this gap, the bank has been conducting due diligence on what it considers to be the best NGOs and projects to support. “It is an important area where clients expect us to be there to support them,” Tellier says.
This article was first published in Tatler Asia