ESG voting: BNPP AM a top partner for ESG engagement

As well as maximising its positive impact on society and the environment, adopting a responsible approach increases a company’s likelihood of achieving excellent long-term investment returns. For our part, we also initiate dialogue with companies to help them meet our requirements.

As a responsible asset manager, we have developed a voting and engagement policy aimed at improving companies’ environmental, social and governance (ESG) practices. BNP Paribas Asset Management (BNPP AM) has subscribed to the Global Stewardship Principles of the International Corporate Governance Network (ICGN) and the European Fund and Asset Management Association (EFAMA). Our investment approach involves actively voting at general meetings, engaging with companies and incorporating ESG principles into our voting and engagement policy.

1. Exercising voting rights

As an asset manager, voting at general meetings is an important part of our dialogue with the companies in which we invest on behalf of our clients, and an integral part of BNPP AM’s management processes. ESG issues can impact our companies’ value and reputation; we therefore apply the strictest ESG standards in our voting criteria.

Our voting policy1 is based on six principles that specify our expectations of the listed companies in which we invest:

  1. Act in the long-term interest of shareholders
  2. Protect shareholders’ rights
  3. Ensure the advisory structure is independent and effective
  4. Align pay structures with stakeholders’ long-term interest
  5. Disclose accurate and adequate information in a timely manner
  6. Ensure environmental and social performance is sound

Our voting policy is detailed in the Governance and voting policy document2. These principles reflect best corporate governance practices, a factor that in recent years has proved effective in shielding investments from reputational risk. The voting policy is updated annually to take into account changes in governance codes and market practices.

We do not hesitate to oppose draft resolutions that are contrary to our voting policy, and our opposition rate was nearly 20% in 20173. Most of the resolutions we opposed concerned pay and financial transactions.

However, while exercising voting rights is essential, engagement with companies on these issues is also a necessity.

2. Dialogue with companies

Engaging with the companies in which we invest fosters long-term best practices and helps companies change their operating methods.

We favour continuous dialogue with companies throughout the year to explain our voting policy and discuss company practices. General meetings are also a conduit for such discussions. We talk to the company ahead of the vote to obtain comprehensive information on draft resolutions or express any reservations we may have on resolutions in light of our voting policy.

In some cases this engagement has a direct impact and the company changes or withdraws the draft resolution in question. In 2017, engagement with companies was successful in 26% of the 109 cases recorded, most of which involved companies tightening pay plan performance criteria or putting in place genuine long-term plans.

While individual dialogue with companies is an important part of what we do, we also participate in many collective initiatives and work closely with leading bodies in this area4 to improve common practices.

3.  Environmental and social responsibility is an integral part of the voting and engagement policy

Voting and engagement are also used as a tool to help improve companies’ environmental and social performance.

This involves voting against the approval of financial statements or the appointment of directors if a company is not transparent about its CO2 emissions or does not make adequate disclosures about its climate change strategy. In the past we have also jointly tabled shareholder resolutions asking companies to provide information to their investors on how global warming can affect them.

Lastly, we vote in favour of resolutions, in particular those of shareholders, that contribute to improving companies’ ESG performance.

We believe that integrating environmental, social and governance criteria into our voting and engagement approach creates long-term value for our clients and for the economy as a whole.

BNP Paribas - ESG

The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay, these funds including a risk of capital loss. This communication is issued and has been prepared by BNP Paribas Asset Management S.A.S. (BNPP AM SAS),* a member of (BNPP AM).** Investors considering subscribing for these financial instruments should read carefully the most recent prospectus and KIID, available from your BNPP AM correspondent.

* BNPP AM SAS is an investment manager registered with the “Autorité des marchés financiers” in France under number 96002, a simplified joint stock company with a capital of EUR 67,373,920 with its registered office at 1, boulevard Haussmann 75009 Paris, France, RCS Paris 319 378 832.

** BNPP AM is the global brand name of the BNP Paribas group’s asset management services. The individual asset management entities within if specified herein are specified for information only and do not necessarily carry on business in your jurisdiction. For further information, please contact your locally licensed office.

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