BNP Paribas launches sustainable Asian cities fund

Article 9 fixed income fund takes a two-pronged ESG approach

BNP Paribas Asset Management has launched a sustainable Asia cities fixed income fund to help meet the need for infrastructure development capital.

The BNP Paribas Sustainable Asian Cities Bond fund is domiciled in Luxembourg and benchmarked against the JP Morgan Asia Credit Index. It is classified as article 9 under the SFDR.

The firm said the fund uses a “two-pronged approach” to select portfolio holdings:

  1. Sustainable labelled bonds where the potential use of proceeds is naturally aligned with aspects of sustainable cities (e.g. clean transport, renewable energy or healthcare infrastructure), using the firm’s proprietary approach to assessing thematic bonds.
  2. Bonds from issuers involved in activities that contribute to aspects of sustainable cities – screening issuers who derive a minimum of 20% of their revenue from activities that are directly contributing to smart grid technology products or enablers of sustainable Asian cities, such as real estate developers; both subject to filtering for sound ESG practices.

Jean-Charles Sambor, head of emerging market fixed income and portfolio manager of fund, said: “The need for infrastructure development capital in Asia to make cities more sustainable is secular and long-term, taking place over several decades, rather than being a passing fad.”

Xuan Sheng Ou Yong, green bonds and ESG analyst, added: “This is a focused and relevant theme to the future of Asia. The region already accounts for more than half of the world’s population, and will likely experience increased urbanisation in the decades to come. Coupled with expected higher frequency and intensity of physical climate change impacts, we see great urgency for Asian cities to undergo sustainable change.  

“The regulatory environment is also moving towards requiring better sustainability disclosure requirements to facilitate capital flows towards issuers with better sustainability practices. Nonetheless, more effort is needed and can be done to prepare Asian cities for the future.”