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BNP Paribas accelerates ESG integration in equity factor offering

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BNP Paribas has bolstered its offering to address two themes dominating investors’ minds – the continued need to expand ESG investing, particularly tactical strategies like factor investing, and the clear trend to position defensively in response to the continued spectre of Covid-19.

Within the first theme, the bank has developed a suite of ESG-integrated factor indices leading to the launch of its first associated ETF (the BNP Paribas Easy ESG Growth Europe), allowing clients to maintain factor selection as the main objective while delivering on ESG goals. The strategy uses a unique combination of growth descriptors to identify the most promising companies for investors, and seamlessly ties together pursuit of growth with ESG achievements.

Stanislas Mesland, Head of Equities Strategies at BNP Paribas’ Quantitative Investment Strategies, says: “ESG integration in factor investing intends to improve the ESG features of the portfolio while keeping the factor exposure at a very high level. Rather than considering separately the companies’ financial metrics and their non-financial achievements, we are blending them within an enhanced stock selection process. This is a key tool for investors for tilting their portfolio in a dynamic manner, within a strong ESG framework.”

As for defensive positioning, the bank has launched the THEAM Quant Dynamic Volatility Carry fund. It seeks to provide the benefits of long volatility exposure during pronounced market stress scenarios, while exhibiting positive carry on average. The strategy delivers an optimised way of getting long exposure to VIX futures, which reflect the market’s expectations of US equity volatility. It aims to secure on-average positive carry thanks to the daily sale of short-term out-of-the-money put options on S&P 500. This income-generating component leverages on a similar concept implemented in the Equity US Premium Income fund of the same range, which has shown its ability to generate a recurrent alternative income in a low yield environment since its launch four years ago. Both funds have equity and volatility risks and can generate losses in a number of market scenarios, please consult the last available prospectus and KIID of the fund for a full list or risks.
 
Finally, at the cross roads of the two themes, the group has most recently announced the launch of an innovative fund, the World Climate Navigator 90 per cent Protected. It comes with a 90 per cent daily max NAV capital protection feature, and aims to increase the value of its assets over the medium term by being exposed to a dynamic basket of global equities systematically selected on the basis of both ESG and financial robustness criteria as well as the companies’ carbon emissions and their forward-looking energy transition strategy.
 
Vincent Berard, Head of Theam Quant Solutions for the BNP Paribas Global Markets Quantitative Investment Strategy team, says: “These funds fulfil two key issues close to the heart of investors in the current market conditions: first, they demand to break new ground in ESG; second, they look to adopt a more defensive stance while making limited sacrifices to their long-term return prospects. We are very pleased to add these innovative strategies to our product offer, already bolstered this year with the launch of the THEAM Quant – Bond Europe Climate Carbon Offset Plan fund in April.”

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