Combining financial and extra-financial performance for more sustainable asset management

April 15, 2024

The extra-financial performance of investments is strictly regulated and reflects growing demand among clients ⁽¹⁾, making it an increasingly important factor in the investment strategy of both savers and investment managers. Sustainable investing is thriving, spurred both by clients who seek meaningful investments, as well as by distribution partners, who want to diversify their investment offerings. But what does managing savings more sustainabily exactly means? 

Bertrand Bussière, BNP Paribas Cardif Sustainable Investment Coordinator and Alice Mignon, Head of Impact transformation at BNP Paribas Cardif, share their insights during this interview for the business report. 

How would you qualify BNP Paribas Cardif’s responsible investing policy?
 

Bertrand Bussière: Our approach as a responsible investor is based on a proven methodology that has been applied for around 15 years at BNP Paribas Cardif. This progressive approach is now extremely robust, integrating regulatory changes as they are introduced. We carefully select investments based on how they measure up against responsibility criteria, and different exclusions are applied in stages to narrow the investment range available to our asset managers.
 

How do you integrate ESG (environmental, social and governance) criteria into the asset management process, and what impact does this have on financial performance?
 

Bertrand Bussière: Integrating these criteria is one of the most important steps in the process we apply to reduce the number of corresponding investments. We analyse this data and then exclude companies or countries that have not attained a sufficient score in our view. This leads to the elimination of about a third of the assets during one or the other of our different screening stages. The direct link between ESG criteria and financial performance is difficult to establish for a short-term horizon, but placing priority on investments with the best ESG scores most certainly reduces long-term risks. And this improves their performance, since they will show better resilience in the face of both climate and social changes. The cornerstone of our business as a long-term investor is to generate yield for our policyholders while mitigating risks.
 

How do you define the notion of positive impact investments? And how does this inform BNP Paribas Cardif’s investment strategy?
 

Bertrand Bussière: At the end of the selection process for investments, we qualify some of them as having positive impact. They must therefore meet several criteria, in particular the intention to generate a positive impact. This intention must be quantifiable and measurable using indicators.

Alice Mignon: For example, we have invested in green bonds, which provide financing for projects with high environmental value. We also collaborated recently with several impact funds launched by BNP Paribas Group. One was a debt fund, the Climate Impact Infrastructure Debt Fund, which provides funding for infrastructures that accelerate the transition to a low carbon economy. Another is a social impact bond, the European Impact Bonds Fund II, which supports social innovation at the regional level, such as reuse of waste or job creation for vulnerable members of society. At BNP Paribas Cardif, we are particularly proud of our commitment to allocate an average of €1 billion annually to positive impact investments between 2019 and 2025. In 2023 alone, we invested €1.7 billion in these investments.
 

How can clients identify responsible investment assets?

Alice Mignon: Since 2022, clients in the European Union have been asked about their preferences in terms of sustainability. Their financial advisors are then expected to take these ESG preferences into account when they recommend investments.

Bertrand Bussière: At the same time, Europe’s SFDR ⁽²⁾ regulation requires transparency regarding sustainability for asset managers that market financial products. This regulation establishes categories for investment products, and all information published must be made available to our policyholders.
 

What are the advantages for savers when they choose responsible investment products?

Alice Mignon: These solutions enable savers to choose investments aligned with their personal values and benefit from both asset growth and positive impact. Thanks to our life insurance or retirement savings solutions, they can for example support issues they believe in, such as protecting biodiversity, developing renewable energy sources, or fighting inequalities and corruption. This is clearly in line with the growing trend towards responsible consumption. Consumers see their spending choices as a way to impact the world. And savers increasingly believe that savings should be meaningful thanks to responsible choices and opportunities to help finance a more sustainable economy.

Bertrand Bussière: We see the same priorities among our distribution partners, who want to propose investment solutions matching the specific expectations of their clients, leading to an offer that is better aligned in terms of sustainability. This criteria has become a major differentiating factor in the market. For several years now, two thirds of the financial advisors surveyed say they believe that the responsibility factor is important for a fund. They also recognise the educational role they need to play. ⁽³⁾ Our euro funds available within BNP Paribas Cardif life insurance contracts and pension savings plans, for example, are both classified as Article 8 investment vehicles under the European SFDR regulation. ⁽⁴⁾

Alice Mignon: In France, our policyholders can also consult independent labels, such as ISR, GreenFin or Finansol to identify responsible investment products – there are about 1,300 different investment vehicles offered – and identify those that best meet their goals using filters available on our websites.
 

What are the advantages of choosing BNP Paribas Cardif as the asset manager for sustainable investments?

Bertrand Bussière: I think one of the primary advantages is that savers benefit from the responsible management of our euro fund. For many years now, we have progressively oriented its portfolio towards decarbonised assets. In 2023, in France, 95% of the investments in our euro fund were analysed against ESG criteria. Our unit-linked product offer is also very diversified. Also in 2023, nearly 42% of the €52 billion we manage in unit-linked investments had received a sustainable label from outside independent organisations. Building on this commitment, in 2021 we joined the Net-Zero Asset Owner Alliance (NZAOA) alongside 90 international institutional investors in order to pool our forces, methodologies and ideas. The goal is to align our portfolios with the carbon neutral trajectory by 2050. This entails trajectories to reduce the carbon footprint of assets, placing priority on targeting a reduction of holdings in sectors with the highest carbon emissions, coupled with joints initiatives to dialogue with businesses to foster these issues.

Alice Mignon: We continually seek to create value for our partners and for their clients. Offering responsible investment options is an important factor in respecting our mandate to protect the savings of our policyholders over the long term. Moreover, we want to be recognised as a trusted partner. We believe it is essential to support our distribution partners to help them effectively promote responsible investment solutions for their clients thanks to better disclosure of information and transparency, enabling them to make informed choices regarding sustainability.

Find the full business report here.

⁽¹⁾ 75% of French savers believe that the environmental impact of investments is an important issue. Source: OpinionWay in the French Financial Market Regulator, AMF, July 2023. 
⁽²⁾ Sustainable Finance Disclosure Regulation (SFDR). 
⁽³⁾ Annual survey of investment advisors by Kantar and BNP Paribas Cardif. 
⁽⁴⁾ As defined in SFDR regulation: Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainabilityrelated disclosures in the financial services sector.