The BNP Paribas group’s (“BNP Paribas”) mission is to contribute to responsible and sustainable growth by financing the economy and advising clients according to the highest ethical standards. The BNP Paribas’ Corporate Social Responsibility Policy (the “BNP Paribas’ CSR Policy”) is one of the main components of this approach. In line with the United Nations’ Sustainable Development Goals, it is based on four pillars (economic, social, civic and environmental) that reflect its corporate social responsibility (“CSR”) challenges, as well as BNP Paribas’ concrete achievements.
In 2019, BNP Paribas has published its corporate purpose, a text which was prepared by the BNP Paribas Executive Committee, based on three texts resulting from a work with many different employees. These include: the Shared Convictions (Mission and Vision), the Code of Conduct and the Engagement Manifesto.
Moreover, BNP Paribas has been committed for several years by setting itself BNP Paribas’ sustainable investment principles, notably additional obligations in several sensitive sectors through:
Global General Partner (“GGP”) is an alternative investment funds manager (an “AIFM”) as defined by the Directive 2001/61/UE of 8 June 2011 on alternative investment fund managers and by the Luxembourg Law of 12 July 2013 on alternative investment fund managers, as amended from time to time, duly authorized by the Commission de Surveillance du Secteur Financier (the “CSSF”) in the Grand Duchy of Luxembourg.
As an affiliate of BNP Paribas, GGP is required to follow the abovementioned BNP Paribas’ policies.
GGP manages a range of closed-ended feeder funds (the “Feeder Funds”) which grant access to BNP Paribas Wealth Management clients to what we deem as the best Private Equity, Real Estate and Infrastructure funds across the industry.
Hence, the investment objective of these Feeder Funds is to invest their assets in one master fund (the “Master Fund”) selected by GGP through a thorough due diligence.
If they occur, environmental, social or governance (“ESG”) events or conditions (the “Sustainability Risks”) could cause an actual or a potential material negative impact on the value of the investments made by the Master Fund and, consequently, on the Feeder Fund which is invested therein.
Article 3 of Regulation (EU) 2019/2088 of 27 November 2019 on sustainability-related disclosures in the financial services sector (the “SFDR”) requires that information about the AIFM’s policies on the integration of sustainability risks in its investment decision-making process is published.
Due to the feeder nature of GGP’s Feeder Funds, Sustainability Risks cannot be integrated “directly” into investment decisions taken at the level of underlying assets or companies but are taken into account at the level of the Master Funds in which the Feeder Funds are invested.
However, GGP believes that unmanaged or unmitigated Sustainability Risks can impact the returns of a Master Fund and therefore of the related Feeder Fund. Specifically, the negative impact from Sustainability Risks can affect companies and/or assets via a range of mechanisms including:
1. lower revenue;
2. higher costs;
3. damage to, or impairment of, asset value;
4. higher cost of capital; and
5. fines or regulatory risks.
Due to their nature, the chance of Sustainability Risks impacting the returns of a Master Fund and therefore of the related Feeder Fund is likely to increase over longer-term time horizon.
As a result, GGP applies the following multi-layered approach in terms of the integration of Sustainability Risks and in order to further its duty to maximise risk-adjusted returns for investors:
As part of GGP’s due diligence process on the Master Fund and its manager, GGP reviews its ESG approach, if applicable, focusing on the main following topics:
1. quantitative ESG factors:
1. ESG framework: PRI signatory, ESG policy, ESG reports, team dedicated to ESG topics;
2. The manner in which sustainability risks are integrated into investment decisions of the Master Fund;
3. Outsourcing of ESG management and/or integration of diversity indicators at Master Fund’s general partner level; and
4. Exclusions related to ESG features at portfolio companies/investment level.
2. qualitative ESG factors:
Included in the ESG disclosures provided by the Master Fund’s general partner.
As a BNP Paribas’ affiliate, GGP applies BNP Paribas’ sustainable investment principles (the "BNP Paribas Sustainable Investment Principles") when it decides to select and to invest the Feeder Fund’s assets in a Master Fund.
As a result, GGP discloses to the Master Fund the fact that within the framework of its CSR, BNP Paribas has developed policies available on its website and governing its investments in the nine following sectors: defense, palm oil, wood pulp, nuclear power, coal-fired power, mining industry, oil sands, agriculture and tobacco.
These policies define a certain number of rules and standards that go beyond legal requirements and address the social and environmental issues considered as essential by BNP Paribas in responsibly conducting its activities in these sectors.
Any investment made by a Master Fund in a company with controversial practices in one of the sectors defined in the BNPP Sustainable Investment Principles could generate reputational as well as financial risks for the related Feeder Fund, its investors and GGP.
In order to mitigate such risks, our subsidiary PrivAccess General Partner S.à r.l., which acts as managing general partner of our Feeder Funds, negotiates a side-letter with the Master Fund’s general partner, which typically includes an excuse clause as well as other provisions related to other topics.
By the application of such excuse clause:
1. our Feeder Fund certifies to the Master Fund’s general partner that indirect participation of the Feeder Fund through the Master Fund in a defined list of investments corresponding to the categories listed in the BNPP Sustainable Investment Principles (being defined as the “Prohibited Investments”) could generate a material violation of BNPP Sustainable Investment Principles otherwise binding upon the Feeder Fund, and
2. the Master Fund’s general partner expressly accepts that the Feeder Fund will be entitled to elect to be treated as an excused investor in the Master Fund with respect to any Prohibited Investment by declining to participate in the related capital calls.
Article 4(1)(b) SFDR requires that where financial market participants “do not consider adverse impacts of investment decisions on sustainability factors, clear reasons for why they do not do so, including, where relevant, information as to whether and when they intend to consider such adverse impacts”.
For the reasons outlined above regarding the feeder nature of GGP’s Feeder Funds, GGP cannot currently consider adverse impacts of investment decisions on environmental, social and employee matters, respect for human rights, anti-corruption and anti-bribery matters (“Sustainability Factors”).
BNP Paribas’ engagement with society embraces promoting sustainability and limiting Sustainability Risks, i.e. ESG risks. To embark its employees towards those aspirations, BNP Paribas align them with these targets by integrating Sustainability Risks in the remuneration policies of its affiliates.
BNP Paribas requires, for this purpose, within its compensation principles, that the variable remuneration of financial market participants (including GGP) and financial advisors shall not encourage excessive risk-taking with respect to Sustainability Risks for investments and financial products governed by the SFDR.
These compensation principles also apply to GGP and its remuneration policy is therefore consistent with the integration of Sustainability Risks as described above.
In addition, GGP aims, within its remuneration policy, at promoting a professional behavior in compliance with the standards defined in the BNP Paribas Code of Conduct. The BNP Paribas Code of Conduct promotes involvement with society, presenting the rules and requirements for employees of BNP Paribas to uphold its aspirations to be a contributor to responsible and sustainable global development and to have a positive impact on the wider society. This involvement notably relies on three pillars:
1. Promoting respect for human rights: The employees of BNP Paribas are expected to support the respect of human rights, considering the direct and indirect impacts of their activities, and to ensure compliance with the criteria relating to the impact on human rights of the company/project when operating in sectors covered by a CSR financing and investment policy;
2. Protecting the environment and combating climate change: BNP Paribas strives to limit any environmental impact indirectly resulting from its banking activities or directly from its own operations;
3. Acting responsibly in public representation: BNP Paribas intends to make a constructive contribution to the democratic process by providing public decisions-makers, in strict compliance with legal and ethical rules, with information to assist their discussions and to help them to take fair and informed decisions. BNP Paribas sets a duty to act responsibly with respect to public authorities.
Within GGP, the individual allocations of all employees take into account their compliance with the BNP Paribas Code of Conduct, alongside other criteria.