A detailed assessment of companies involved in marine-related activities enables a fair rating of their ESG quality, with a view to ensuring investment is targeted towards companies that not only perform well – they also protect the world’s natural capital.
In its latest analysis around the sustainability theme of ‘natural capital’, BNP Paribas Asset Management has assessed the seafood sourcing and plastic/packaging strategies of companies in the consumer sector, adjusting their overall ESG scores1 on the basis of the outcomes and engaging with companies to promote the adoption of best practices.
This study concerned all European companies in the food retail sector that are constituents of the MSCI Europe index. For the plastic/packaging strategy assessment, we also covered global soft drinks manufacturers and consumer home & personal care products companies.
On seafood sourcing and plastic/packaging, the areas analysed concerned, for example, participation in industry initiatives and stakeholder engagement, transparency, risk management and biodiversity protection. For plastic/packaging, there was an additional analysis of waste management.
In more detail, the questions centred on, for example, sourcing fish from sustainable, responsibly managed sources, crew welfare, and protecting the marine environment. Other areas included full traceability of companies’ seafood and aqua feed, and participating in a fisheries improvement project for wild caught fish.
On the packaging side, the issues we looked at included using plastics from a single raw material source to maximise recyclability, transparency on the volumes used in the company’s operations and supply chain, and its waste reduction policy.
On the basis of their ESG scores, companies are ranked in deciles. For SRI2 best-in-class funds, portfolio managers cannot invest in the bottom three ESG deciles. For non-SRI funds, portfolio managers seek to ensure that funds have more favourable ESG characteristics (e.g. a higher ESG score and lower carbon footprint) than their reference benchmark. Should they want to invest in weakly-rated companies, they need to carry out a qualitative analysis integrating ESG factors.
Along with climate change and the need for a more inclusive growth, natural capital occupies a central role in BNPP AM’s sustainability focused approach to asset management. Indeed, we regard three issues as critical pre-conditions for a more sustainable and inclusive economic system – energy transition, environmental sustainability, and equality and inclusive growth – and are aligning our investment research, portfolios, and company and regulatory engagements in support of each. We call these the ’3Es’. In line with this focus, we will track, monitor and publicly report on indicators related to these 3Es, such as water footprint and deforestation under ‘Environmental sustainability’.
BNPP AM believes it has a key role to play in reducing the pressure on ocean ecosystems and contributing to the UN’s Sustainable Development Goal 14 to conserve and sustainably use the oceans, seas and marine resources for sustainable development. We are looking to adopt a formal ocean policy covering sectors including shipping and tourism, and we will undertake further research into seafood and plastic to raise awareness and understanding of these issues, as well using our voting policy and stewardship activities to influence stakeholders.
The case study is available on the Natural Capital Coalition website: https://naturalcapitalcoalition.org/finance-sector-supplement-to-the-natural-capital-protocol-bnp-paribas-asset-management-seafood-case-study/
1 Using environmental, social and governance criteria
2 Socially responsible investment
This article has appeared in The Intelligence Report
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