ESG opportunities: experts share roadmap for sustainable economy

At BNP Paribas' virtual Global Markets Americas Conference, authorities in ESG discussed key sustainability trends for the investment community.


The growing importance of social governance in a post-pandemic world, why standardisation is pivotal, how the competitive landscape is greatly intensifying: these were just a few topics regarding environmental, social and governance that were explored at BNP Paribas’ Global Markets Americas Conference 2020, which took place in virtual format at the beginning of June.

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The GMA 2020 Conference panel, ‘ESG Opportunities’ featured:
  • moderator Gillian Tett, Chair of the Editorial Board and Editor-at-large US at The Financial Times; 
  • Delphine Queniart, Global Head of Sustainable Finance & Solutions at BNP Paribas;
  • Jonathan Bailey, Head of Environmental and Science at Neuberger Berman; 
  • Karen Karniol-Tambour, Head of Investment Research at Bridgewater Associates; 
  • Craig Leeson, Award-winning journalist, filmmaker, television presenter and public speaker;
  • Jennifer Wu, Global Head of Sustainable Investing at JP Morgan Asset Management.
BNP Paribas brought together senior investment professionals, corporate leaders, policy experts and economists to take part in a series of online discussions, exploring the key macroeconomic and geopolitical transformations, the choices ahead, and what these mean for the world as it emerges from the pandemic. In one discussion focusing on ESG opportunities for investors, experts from buy and sell-side financial services firms like Neuberger Berman, Bridgewater Associates, JP Morgan Asset Management and BNP Paribas joined an award-winning journalist from the Financial Times and a prolific filmmaker of the recent documentary, “The Last Glaciers.”

Panellists said that there has been a greater focus on the ‘social’ element of ESG since the Covid-19 pandemic. A number of entities are now issuing social-themed bonds in response to Covid-19, according to Delphine Queniart, Global Head of Sustainable Finance and Solutions at BNP Paribas. For instance, there are now growing issuances of Covid-19 linked bonds, whose use of proceeds are being used to help mitigate the effects of the pandemic though the provision of medical supplies and equipment, research and development for vaccines and treatments, and financial assistance for micro, small and medium-sized enterprises.

Investors have been drawn to ESG funds for a variety of reasons, including growing ESG regulation encouraging inward investment into such products. One panellist said that Europe has led the way with its Sustainable Finance Action Plan, a piece of regulation which will impact non-EU funds being distributed inside the EU. The panellists said lawmakers in other major markets including the US, Japan, China and Hong Kong were now following the EU’s lead and taking ESG very seriously.

  The enticing returns of ESG funds relative to non-ESG strategies have also helped attract inflows. One investment firm said the majority of its sustainability and impact funds had delivered alpha to clients during the volatility of Q1, mainly because their underlying portfolio holdings had sustainable business models, making them more resilient to the market turbulence. As investor interest in ESG continues to accelerate, asset managers will inevitably launch more products.

However, some experts and regulators – including the US Securities and Exchange Commission (SEC) – have expressed reservations about using ESG ratings in aggregate, given the fundamental differences between the three metrics (E, S and G). One fund manager concurred that it separated governance from environment and social metrics when performing analysis due to, for example, some companies that may score highly on the environmental ratings, but not highly on governance or social measurables.

The need to find common standards on ESG will be essential to instil greater confidence in the market, according to panellists. Queniart said BNP Paribas is actively involved in the International Capital Markets Association (ICMA) working group to develop best practices for Transition Finance. Meanwhile, the EU – as part of its Sustainable Finance Action Plan – is developing a taxonomy which will let investors benchmark ESG in their portfolios. This should help provide investors with greater clarity on the nature of the ESG products they are buying.