A BNP Paribas survey of 420 asset owners and managers, hedge funds and private equity firms shows that institutional investors are mobilising capital towards investments that will deliver measurable positive impacts alongside financial returns. Despite data constraints posing the biggest barrier to ESG integration, especially in tackling financial risks posed by climate change, institutional investors are nevertheless incorporating ESG, notably in their portfolio management and investment decisions.

Building on its three previous editions, BNP Paribas’s ESG Global Survey 2023 examines institutional investors’ progress on the path to sustainability through three reports, to be issued separately by the end of the year. The first report (published today) focuses on ESG data and reporting, while the second will examine net zero objectives, and the third will study the integration of ESG expertise in operations.

Key findings of BNP Paribas’s ESG Global Survey 2023 include:

• Low-carbon transition strategies accelerate, despite pressure on investors’ external commitments to net zero targets: 41% of respondents say commitment towards net zero is a current priority in their organisation, and 48% say it will be within the next 2 years. In 2021, only 18% of investors had a net zero commitment, with 33% indicating they were considering a commitment.
• Impact investing is increasing in importance: With 54% of respondents expecting to use it in the next two years (versus 45% now), impact investing is set to become the most popular ESG approach globally.
• Limited data quality remains the biggest barrier to ESG investing: 71% of respondents say inconsistent and incomplete ESG data is a significant barrier to the greater adoption of ESG (+17 percentage points versus 2021). To overcome these data challenges, 65% of respondents say they use and compare multiple sources of data, while 37% conduct their own research methodologies.
• Biodiversity data lags behind climate data: 66% of investors believe they need to do more to take account of biodiversity loss or other environmental goals, such as water use, waste recycling, and ecosystem protection. However, biodiversity data is in its nascent stages.
• Active ownership will play a key role​: 45% of respondents say active ownership will be a key ESG objective in the next 2 years. 76% see climate change and decarbonisation as a priority for voting, engagement and possible investment changes.
• ESG expertise is being integrated into investment-related operations: 51% of respondents say their organisation is integrating ESG expertise and data into portfolio management/investment decisions, with APAC at the forefront (57%). 42% say they have also integrated ESG expertise and data into risk management, and 37% into monitoring ESG compliance rules.
• Regulation and reputational risks are major drivers: Respondents were most likely to have assessed the financial materiality of ESG regulation and reputational risks (60% versus 58% respectively). Investors were least likely to have assessed the financial materiality of biodiversity loss at 32%.

Sophie Devillers, Head of Sustainable Finance, Securities Services, BNP Paribas, stated: “Our latest survey demonstrates that, since 2017, institutional investors have been transitioning from asking “why” integrate ESG, to focusing on the “how” of implementation. They are now increasingly tackling the challenges of using ESG data, achieving their net zero objectives, and integrating ESG expertise into their operations. The next two years will be critical for them to practically implement their ESG strategies.”

Delphine Queniart, Head of Sustainable Finance Client Engagement, Global Markets, BNP Paribas, commented: “This survey shows that sustainable finance is rapidly maturing as investors look to mobilise across all different regions of the globe. We are seeing illuminating examples of investors finding ways to cope with limited data quality, working with others and leveraging new data-management techniques to effectively implement sustainability into the business. As this trend continues, investors will be better able to take advantage of developing opportunities and use their influence to move capital towards investments seeking measurable impacts.”

Marie-Gwenhaelle Geffroy, Global Head of ESG, Sustainability and Private Capital Practice, Financial Institutions Coverage, BNP Paribas, explained: “ESG data must help investors assess portfolios, manage risk, and take into consideration the current and historic impact of the ESG components on performance and strategy. It is more important than ever, if we want to turn sustainability into an opportunity, that ESG data is embedded in investment strategies.”

Notes to editors: Survey based on data collected between April and July 2023 from 180 asset owners, 180 asset managers, and 60 hedge funds & private capital firms across Europe (50%), Asia Pacific (28.6%) and North America (21.4%), with an estimated USD 51.2 trillion in assets under management overall. 64% of all respondents had more than USD 25 billion in assets under management. Results were compared against BNP Paribas’s previous ESG Global surveys.

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BNP Paribas received all regulatory approvals for the completion of the acquisition of Kantox, a leading fintech for the automation of currency risk management.

The acquisition of Kantox illustrates BNP Paribas’ Growth Technology Sustainability 2025 plan, that sets out to accelerate the development of technological innovations, to enhance customer experience, from SME and Mid-Cap clients to large corporates. It is supported by the Global Markets business of BNP Paribas’ CIB division and the business centres of the Commercial, Personal and Banking Services (CPBS) division.

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Thematic investing^[1], fuelled by investors’ desire to achieve a positive impact, is expected to grow over the next three years according to the second thematic investing research report published by BNP Paribas Asset Management (‘BNPP AM’) and BNP Paribas CIB (Corporate & Institutional Banking) in partnership with Coalition Greenwich.

Previously conducted in 2020, the survey covers almost 200 institutional investors and intermediary distributors in Europe, Asia and North America. The Thematics Barometer aims to provide the global investment community with robust, credible and regular information about the key trends evolving within thematic investment.

Key of the latest survey^[2] include:

• Continued demand for thematic strategies, with a noticeable 20% increase in European usage since 2020: 65% of European investors are already using thematic strategies compared to the 46% recorded in the previous survey.
• More than 80% of investors were “familiar or very familiar” with thematic investment, suggesting that thematic investing has become more mainstream. Overall, 8% of investors were not familiar with thematic investing, rising to 18% in the US.  Non-users were held back by concerns over performance (49%) and high fees and costs (41%).
• Yet at the same time, usage of thematic strategies by Asian investors fell to 34% from 54% in 2020; appetite among North American investors is lower still, with 43% not intending to invest.
• Despite differences across the world, investors showed clear interest on the opportunity for thematic investing.  When asked about their plans for the next three years, 70% of all respondents said they planned to increase their focus on thematic investment.
• Thematic investment growth is being fuelled by investor need for positive impact (70%) as well as the expectation of enhancing investment returns (63%).
• Since 2020, the sustainability themes most appealing to investors have shifted from an overall focus on SDGs^[3] (32% in 2023 vs. 59% in 2020) to a more targeted focus on specific themes.
• Consistent with the 2020 study, climate change (56%) and clean energy solutions (49%) were the most appealing.
• Elsewhere, investors were also found to be keeping a close eye on disruptors, particularly in healthcare innovation (60%) and robotics & artificial intelligence (‘AI’) (59%).  Although healthcare remains one of the most innovative sectors in the economy, AI is poised to become more ubiquitous and develop into a key driver of digital transformation.

“Thematic ESG investing is fast becoming mainstream to help investors tackle long term sustainability issues that have the potential to transform markets and create value across portfolios.  Investors are aligning across multiple objectives relating to performance and fiduciary duty, whilst navigating the ever-evolving regulatory landscape.”

Pieter Oyens, Co-Head of Global Product Strategy at BNPP AM

Sustainability and returns are driving growth

Achieving a positive impact and contributing to sustainable outcomes is the main overall objective in using thematic investing, with enhancing investment returns the second most important objective.  84% of investors consider using thematic investing to have a positive impact on long-term investment performance; a third believe it has a positive impact on short-term performance, although this has declined since 2020.

• The most appealing sustainable themes continue to be renewable energy (56%) and climate change solutions (49%).  In addition, 22% of investors indicate an interest in net zero solutions and 23% in water themes.  Social considerations are also key: 20% of respondents are interested in health & wellbeing and 17% in demographics & aging populations.
• Within innovation & disruption themes, healthcare innovation (60%), robotics & AI (59%) and biotechnology (36%) are the most appealing.

Asset allocation to thematic investing: breadth of offering is important

Although equities remain the mainstay of thematic investments, investors are increasingly looking to other areas of their portfolios.  In particular, fixed income is catching up quickly, with 67% of respondents allocating to thematic fixed income strategies.  Notably, the largest allocation to thematic investments in North America is to private markets.

Additionally, investors are split over benchmarks: 55% expect thematic strategies to use a niche thematic or sector benchmark, with 45% expecting a broad market benchmark.  Investors have a predominantly global focus when allocating to thematic strategies, with more than 70% focusing on global equities.

Regulatory drivers are key

There are clear regional differences in the regulatory drivers of thematic strategy selection, with SFDR^[4] classifications dominant in Europe, compared to a strong focus on fiduciary duty in North America.

• SFDR is unsurprisingly a key focus for investors in Europe, with 65% of respondents looking for Article 8 solutions and 60% for Article 9.  Although SFDR is a European regulation, it is being used as a proxy in Asia, where about two-thirds of respondents cited it as a selection criterion.  Alignment with MiFID II^[5] preferences is also a key aspect in both Europe (50%) and Asia (52%).
• In North America, fiduciary duty is the most important regulatory aspect for 87% of respondents, followed by fund labels (20%).

“Although there are divergences in the pace and current composition of ESG thematic investing across regions, the significant momentum we are seeing in Europe is here to stay, as the research highlights that investors are targeting both alpha generation and impact.  The most appealing current ESG themes focus on investing in the energy transition, including pursuing targeted investment strategies across renewables and climate change solutions, as well as emerging areas such as water.”

Constance Chalchat, Head of CIB Company Engagement and Global Markets Chief Sustainability Officer, BNP Paribas

BNPP AM and BNP Paribas CIB jointly sponsored the Thematics Barometer.  It was conducted by Coalition Greenwich, who interviewed 188 institutional investors and intermediary distributors between February and April 2023.  The previous survey was conducted in 2020 in Europe and Asia, but excluded North America.

Footnotes

^{^} [1] Thematic funds are those built around a specific theme aimed at capturing the growth of companies in a defined universe. There are now many themes linked to environmental and social challenges, such as protecting the oceans, climate, inclusive growth, biodiversity, technology and innovation or health.

^{^} [2] Conducted between February and April 2023

^{^} [3] United Nations Sustainable Development Goals

^{^} [4] Sustainable Finance Disclosure Regulation 2019/2088 of the European Parliament and of the Council of 27 November 2019 on information to be provided on sustainable development in the financial services sector.

^{^} [5] European Union Markets in Financial Instruments Directive 2014

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• BNP Paribas is providing more detail on its plans to withdraw from oil and gas exploration and production activities, following its announcement to strengthen its commitments on January 24^th, 2023.
• BNP Paribas will no longer provide any financing dedicated to the development of new oil and gas fields regardless of the financing methods.
• Beyond the energy sector, BNP Paribas continues to align its loan portfolio with a net zero emissions trajectory. and is setting new decarbonisation targets for the steel, cement and aluminium sectors, as presented in its 2023 Climate Report.
• BNP Paribas confirms that it remains on track with the trajectories announced in 2022 for the power generation, oil and gas, and the automotive sectors.
• Since 2022 (including 2023 year-to-date), BNP Paribas has ranked n°1 in global green bonds issuance.

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European payment industry (EPI) launches its new payment solution with the goal to secure the continent’s payment sovereignty. EPI is an account-to-account payment scheme that will enable European banks and acquirers to join forces, delivering greater efficiency and value for customers through direct and instant payments between bank accounts. EPI has an all-in-one digital wallet solution, based on instant payment. Person-to-person (P2P) and person-to-professional (P2Pro) payments will also be possible, several transaction types are going to be supported and the services will grow over time.

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BNP Paribas Germany has joined the Climate Economy Foundation (Stiftung KlimaWirtschaft) as a promotional company.

The Climate Economy Foundation was founded in 2011 as the 2° Foundation. Its founders and supporters are united by the conviction that entrepreneurs’ sense of responsibility and innovative strength make a significant contribution to climate protection. The funding companies and partners want to prove that it is possible to combine ambitious climate protection and competitive economic activity. As an initiative of managing directors, board members and CEOs, the foundation is directly and actively committed to the transformation of the economy to climate neutrality.

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Michel Thebault took over the position of CEO of BNP Paribas Consors Finanz, one of the leading providers of consumer loans in Germany and Austria, effective 1 January 2023. In his new role, he will be responsible for both the German and Austrian markets. He is also a member of the Executive Committee of BNP Paribas Personal Finance in Paris and a member of the Management Board of BNP Paribas in Germany. He succeeds Gerd Hornbergs, who has successfully managed the company since 2005 and retired at the turn of the year.

Michel Thebault has held various positions at BNP Paribas for over 22 years. In 2000 he started as Regional Director in France. Subsequently, he led BNP Paribas Personal Finance subsidiaries in Turkey, Poland and Belgium before assuming responsibility for the development of activities in Asia as CEO of Personal Finance Asia in January 2020.

Thebault’s task will now be to continue the forward-looking strategic transformation of Consors Finanz into an agile and sustainable company and, in particular, to further advance the development from a pure consumer credit lender to a provider of various payment solutions for customers. This includes both the consumer credit business and the mobility business.

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• Strategic partnership sees new mobility financing services launch across nine European markets
• Products and services are now live in Germany, Italy, France, Spain, Belgium, Luxemburg, Netherlands, Austria and Portugal
• Partnership is the first phase in Jaguar Land Rover’s vision of redefining the role of financial services for future clients, as part of its Reimagine strategy

Jaguar Land Rover and BNP Paribas have launched a suite of new mobility financing services across nine European markets as part of their strategic partnership.

The collaboration is the first phase of a transformational plan to reimagine the role of financial services for clients of its Range Rover, Defender, Discovery and Jaguar brands.

Since partnering in February 2022, Jaguar Land Rover and BNP Paribas have been collaborating to innovate and develop a truly integrated offering that covers all aspects of mobility financing needs. This approach will deliver seamless end-to-end connectivity and facilitates personalised modern luxury experiences from website to showroom.

Jaguar Land Rover retail partner networks and clients now have access to a comprehensive suite of competitive retail financing solutions, insurance and services, as well as wholesale financing.

The retail range includes products such as traditional loans, lease-to-purchase, long-term lease, ‘buy now, pay later’, insurance and services products. BNP Paribas leverages on all its business involved in mobility products and services with support from its Corporate and Institutional Banking department:  BNP Paribas Personal Finance supports the provision of wholesale financing, retail loans and financial leases, Arval delivers lease and fleet management, Floa provides ‘buy now, pay later’ services, and BNP Paribas Cardif offers insurance products and services.

• LinkedIn

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GEA, the world’s largest supplier of systems and components for the food, beverage and pharmaceutical industries, was the first company in Germany to combine a share buyback with a sustainability initiative. The second tranche of the buyback program, which GEA implemented with BNP Paribas, was linked to an ESG component.

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• Clear favorite: Battery-powered electric vehicles ahead of plug-in hybrids
• Amazing growth potential for connected car services
• Own car more important again for younger people

On behalf of BNP Paribas Cardif in Germany, the Center of Automotive Management (CAM) analysed central aspects of the current disruption in the mobility industry as part of its study “The future of mobility – future trends in the field of electromobility, connected car and mobility services” (November 2022). The innovation developments in electromobility, connected car and mobility services are analysed and a 2030 scenario for these areas is drawn. Surprising are the growth dimensions in certain areas and the unexpected preferences among younger respondents. The study follows up on the 2018 study “Financing and protection of new mobility concepts”.

Electromobility – New registrations of battery-powered electric vehicles (BEV) exceed registrations of plug-in hybrid models (PHEV)

Overall, the number of new registrations of electric vehicles has accelerated quickly. Between 2020 and 2021, the electric car stock in Germany has more than doubled from almost 600.000 cars to 1.27 million cars. This corresponds to a share of around 2.6 percent of the total passenger car population. It is interesting to note that the volume of new PHEV registrations has reversed in favor of BEVs since August 2021. Also in 2022, more BEVs than PHEVs are newly registered each month.

Scenario 2030: According to a scenario assumed in the study, there will be over 11 million battery-powered electric vehicles (BEVs) on German roads in 2030. This corresponds to a quarter of the total number of passenger cars. New registrations of plug-in hybrid cars (PHEVs) will total just under 4.8 million in 2030, accounting for a market share of around 10 percent.

In addition, according to the 2030 scenario: Electric vehicles will become cheaper compared to combustion models. Relative vehicle’s costs will decrease significantly mainly due to lower battery costs.

“Many consumers are still sceptical about new mobility. It is important to create customer experience around the new fields of the future which increase acceptance. Especially the young generation is approachable for this because they are already much more open to new technologies and networked mobility.”

Prof. Dr. Stefan Bratzel, Director Center of Automotive Management (CAM)

Connected Car – software beats hardware

When it comes to the innovation potential and –activity of the 28 global automotive manufacturers analyzed (including Volkswagen AG, BMW Group, Mercedes Benz Group, Toyota, Tesla, Honda, Stellantis, Ford), the Connected Car segment is of high significance. Specifically, the 28 global automotive manufacturers generated nearly 3000 innovations across the three subsectors „User Interface“(+ 67 percent), „Autonomic driving“ (+ 6 percent) und „Connectivity“ (+ 18 percent) from 2016-2021. These quantitative innovation trends of the automotive manufacturers reflect the disruptive shifts in the future fields.

The future question will be: how do you keep it with the previously highly valued hardware? The study shows a qualitative shift from a hardware orientation, and thus the focus of customers on fixed equipment features, to an increasingly strong software and service orientation. Connected services also offer considerable sales potential.

Scenario 2030: this results in a recurring sales volume of approximately 900 to 1000 euro per year and car. The global Connected Services market volume is estimated at over 200 billion euros in total. The digital ecosystem of connected service providers will play an increasingly important role – with diverse opportunities also for providers of financing and hedging products in the area of mobility.

Surprise in mobility behavior: younger people rediscover own car

The results of the analysis in the area of mobility services and mobility behavior are surprising. The importance of private cars is only slightly declining in Germany. Based on their current mobility situation, a private car is important to 69 percent of respondents, including 42 percent who say that they rely on their own car. It is striking that significantly more young city dwellers aged 18 to 34 say that they are dependent on their own car than four years ago. Currently, 26 percent of respondents in this age group say this (compared with 17 percent in 2018). Overall, 57 percent of young urban respondents consider their private car to be “very important” or “important”. This also represents a significant increase compared with 2018 (45 percent).

With regard to free-floating car sharing (vehicles that can be booked freely in the urban area), a fatigue in usage is emerging. Willingness to use car sharing declined between 2018 and 2022. In 2022, only 26 percent of respondents can imagine using free-floating car sharing (in comparison 2018: 34 percent).

BNP Paribas Cardif sees the study results as a confirmation of its own course of expanding its own “Keep on Moving” product family together with existing and new partnerships. This protects the mobility of a mobile generation by ensuring that they do not have to worry about mobility costs in the event of temporary incapacity to work or involuntary unemployment.

Methodology

Methodologically, this study is based on evaluations of innovation trends of 28 global manufacturers from the CAM AutomotiveINNOVATIONS Database. In addition, meta-analyses of current CAM studies were carried out and a quantitative survey was conducted in cooperation with YouGov to obtain consumers’ assessments of mobility. The current study follows on from the joint study conducted in 2018: “Financing and Securing New Mobility Concepts”. The focus is on trends in mobility behavior in Germany.

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