We have customized two additional criteria for the SRI Funds, respect of Human rights and Market Behavior, since we believe both of these have an impact on the long term development of a company. Many of the problems companies have encountered in the recent past derive from these and this has hampered the companies development to its highest potential. This time we would like to address Human Rights. This has always been a filter for us, since companies that do not respect Human Rights will at a certain point in time hit a developmental hurdle they will not be able to surmount, unless they respect human rights. We define Human Rights based upon the first 6 principles of the UN Global Compact, which is based upon the Universal Declaration of Human Rights and the International Labour Organization's Declaration on Fundamental Principles and Rights at Work. Specifically these state:
Human Rights in society
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses.
Human rights in labour
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.
We not only analyze the corporate commitment; but also the implementation of the commitment and how this is monitored and controlled. We apply precautionary measures in case the company is active in sensitive sectors or labour intensive businesses. We exclude those companies were there is an alert or a controversy and then research the facts far as we can, either via dialogue with the NGOs or the trade unions and contact the firm to assess its arguments and its reactivity to the issue. We then submit the case to our independent SRI Advisory Committee.
This all might sound esoteric, but just think about the ability of a company to attract new and better talents, and hold these talents. What would the long term development of a company unable to attract and hold talent be? Is a company able to attract talent if it does not respect human rights? The impact might not be felt now, but at a certain point the impact will be there.
BNP Paribas IP SRI Europe Equities Mandate Portfolio
THEAM’s low-volatility SRI strategy: When smart beta meets social responsibility
While the choice of a sustainable and responsible investment (SRI) strategy is a matter of principle, the financial management behind such a strategy remains very important, as THEAM – the entity within BNP Paribas Investment Partners that specialises in Protected, Indexed and Model driven investments – shows with an innovative strategy that combines SRI and smart beta.
As BNP Paribas Investment Partners is a major SRI player in Europe, in several different asset classes, THEAM felt compelled to take part in a new amLeague SRI mandate from its very launch. Yet, with so many benchmarked investment strategies already on the market, what is the point of proposing a new one?
As smart beta is currently a much-discussed theme, THEAM, having clearly demonstrated the value of a low-volatility approach, has combined low volatility with SRI, allowing it to extend its SRI offer to European institutional investors.
THEAM’s new strategy adapts the mechanism of selecting and weighting the range of low-volatility funds by having the starting universe stemming from the list of stocks selected by BNP Paribas Investment Partners’ extra-financial analysts. This list is based on a best-in-class analysis designed to identify companies that employ the best environmental, social and governance (ESG) practices within each sector. The main effect of this systematic mechanism is to reduce portfolio risk, while benefiting, over the long term, from alpha generated by the low-volatility anomaly.
The strategy has just celebrated its three-month anniversary, so it is still too soon to truly assess its performance, but to date its low risk level, high tracking error, and positive alpha are in line with the behaviour expected from a “smart and SRI” strategy.
Etienne Vincent, Head of Global Quant Management, THEAM
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featuring an in-depth analysis written by bfinance, an independent financial services firm that provides advice to companies and institutional investors around the globe. [Please click here to read this commentary.]
We have customized two additional criteria for the SRI Funds, respect of Human rights and Market Behavior, since we believe both of these have an impact on the long term development of a company. Many of the problems companies have encountered in the recent past derive from these and this has hampered the companies development to its highest potential. This time we would like to address Human Rights. This has always been a filter for us, since companies that do not respect Human Rights will at a certain point in time hit a developmental hurdle they will not be able to surmount, unless they respect human rights. We define Human Rights based upon the first 6 principles of the UN Global Compact, which is based upon the Universal Declaration of Human Rights and the International Labour Organization's Declaration on Fundamental Principles and Rights at Work. Specifically these state:
Human Rights in society
Human rights in labour
We not only analyze the corporate commitment; but also the implementation of the commitment and how this is monitored and controlled. We apply precautionary measures in case the company is active in sensitive sectors or labour intensive businesses. We exclude those companies were there is an alert or a controversy and then research the facts far as we can, either via dialogue with the NGOs or the trade unions and contact the firm to assess its arguments and its reactivity to the issue. We then submit the case to our independent SRI Advisory Committee.
This all might sound esoteric, but just think about the ability of a company to attract new and better talents, and hold these talents. What would the long term development of a company unable to attract and hold talent be? Is a company able to attract talent if it does not respect human rights? The impact might not be felt now, but at a certain point the impact will be there.