BNP-AXA merger brings sustainability integration into focus
BNPP AM has published its inaugural sustainability plan post the AXA merger
BNP Paribas Asset Management has published a four-year sustainability roadmap. This marks the first sustainability strategy update since BNPP AM’s merger with AXA Investment Management. The transaction, which created one of Europe’s largest asset management businesses with €1.7tn under management, has implications for the combined entity’s approach to sustainability.
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The strategy sets out BNPP AM’s priorities over the next four years – including domains where AXA IM has had differing approaches to BNP AM prior to the merger.
Priorities
The new 2030 plan reaffirms BNPP AM’s efforts to integrate sustainability into investment decisions. “Sustainability is a key enabler of our strategy and investment philosophy. It helps us understand risk, identify opportunity and build resilient portfolios for clients over the long term”, says Jane Ambachtsheer, BNPP AM’s chief sustainability officer.
The document outlines six priorities – a forward-looking approach to risks and opportunities, ESG due diligence, stewardship, investment exclusions, sustainable product offerings and a cultural integration of sustainability within the business.
“Looking to 2030, we will deepen our insight into systemic risks, strengthen stewardship and expand our capabilities across listed and alternative assets”, explains Ambachtsheer.
Coal exclusions
One of the key differences in approaches between AXA and BNP’s asset management divisions prior to the merger was varying approach to exclusions.
AXA IM’s approach to coal exposure traces back to 2017 when the manager implemented a thermal coal exclusion policy. In 2017, the company reduced the thermal coal mining or power revenue threshold from 30% to 15%. The lowered threshold was set out in the context of its efforts to exit thermal coal across OECD economies by 2030 and non-OECD economies by 2040.
Last month, BNPP AM published its responsible business conduct policy, which the new blueprint also cites. For eligible funds, the policy’s thermal coal exclusion rules cover companies in mining, power generation and services.
Revenue thresholds for mining are lower than AXA IM’s, set at 10%. BNPP AM also says it will not invest in power producers with more than 5% of revenues attributable to coal if it accounts for more than 20% of power production.
The policy also sets out a watchlist intended to encourage companies to reduce coal power dependence if they meet criteria such as coal phase out commitments or increasing use of renewable energy. These criteria are linked to investment eligibility and tied to company-level progress. In 2022 when AXA IM outlined its engagement approach for climate laggards, it too deployed an approach with divestment subject to a ‘three strikes’ principle.
Oil and gas
The use of oil and gas exclusions is also a point of difference between the two entities, pre-merger. According to BNPP AM’s policy, investments are excluded from companies with over 10% of their activities or revenues in unconventional oil and gas.
AXA IM, prior to the merger, excluded companies in shale operators with less than 100,000 barrels of oil equivalent per day. This exclusion has been maintained in BNPP AM’s portfolios invested in US high yield and directly managed CLOs, applicable from January 2027.
BNPP AM’s plan also opens the door to placing oil and gas companies on a watchlist – therefore eligible to investment – if they offer credible transition plans and climate commitments.
Elephant in the room
BNPP AM’s latest plan places an emphasis on investing in high emitters with a view to back their transition. “The elephant in the room remains the financing needed to help high-emissions companies to transition to low-carbon business models”, the plan reads.
Its plan outlines a range of industries where transition finance could play a role – a list on which natural gas and transport occupy top spots. The BNP-AXA merger brings the tension between transition investing and fossil fuel exclusions into the spotlight. The 2030 plan sheds some light on the combined entity’s approach to this balance.
To further clarify the company’s stance, BNPP AM is expected to announce net zero targets and publish updated Net Zero Asset Managers Initiative targets by the end of the year.
