BNP Paribas Asset Management is seeing strong demand for its ESG thematic products, which include strategies that invest in energy transition, green bonds, human development, food and climate change, according to Gabriel Wilson-Otto, the firm’s global head of sustainability research.
Assets of the firm’s ESG thematic strategies nearly doubled to €13bn ($15.31bn) in 2019 from EUR 7.7bn in 2018.
“We are seeing strong growth in our impact and thematic area,” Wilson-Otto told FSA recently.
Of the different ESG thematic strategies, he noted that both the Energy Transition Fund and the Aqua Fund continue to be “incredibly popular”.
As of this writing, the Aqua Fund has €2.05bn in assets, while the Energy Transition Fund’s AUM is about €688.5m, according to the firm’s website.
Wilson-Otto does not have exact data to show where the assets are coming from, but noted that he is seeing interest from both European and Asian investors.
“The demand for ESG thematic products globally has increased significantly in the last few years and the interest for a particular theme depends on the challenges that a country faces.
“For example, a country like Singapore has potential issues or access to water. It is a very topical issue in the country and we heard from the industry that water thematic funds have been very popular amongst the country’s investor base,” he said.
Meanwhile, investors in China are leaning towards investing into ESG funds that address environmental issues.
“There are a number of ESG-tagged funds in the market that appear to be targeting the environment, especially since some of those issues are salient with the government’s strategy towards environmental clean-up or addressing air pollution issues,” Wilson-Otto said.
LAUNCHING NEW PRODUCTS
With the growing demand for ESG thematic strategies, BNPP AM has also started to roll out new funds.
“We have also launched new products on the thematic space to address client demand,” said Wilson-Otto.
One example is the Environmental Absolute Return Thematic Equity (Earth) fund, which is a long-short product that invests in various environmental themes. Launched in July, the fund now has assets of around $100m.
The firm’s ESG thematic strategies is part of its “Sustainable +” range, which includes enhanced ESG strategies (such as multi-factor and best in class ESG products), thematic funds and impact strategies, according to Wilson-Otto.
Assets of the Sustainable + range increased 8.5% this year to €68.4bn as of end-June from €63bn at the end of 2019. They account for 15% of the firm’s total AUM of about €440bn.
DIFFICULTY OF ROLLING OUT IMPACT FUNDS
Besides thematic strategies, the firm also plans to launch more impact products, according to Wilson-Otto.
However, he acknowledged that it is more difficult to launch impact strategies as they need to measure the impact of their investments.
“One of the reasons why we haven’t launched more impact funds is you have to really measure the impact of your strategy and the incremental change that your investments have caused. The process is more complex and is more from just being aligned to the UN’s sustainable development goals (SDGs),” he explained.
He added that with impact investments, managers should also be able to identify the intentionality of the impact.
“Do you have an intentional impact or unintended impact? Managers should be careful with that to better measure the impact of their investments.”
Currently, the firm is enhancing its impact framework and scoring system to better measure impact, he said.
