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BNP Paribas custody arm rivals Morningstar and MSCI with ESG fund scores

Bank will use Thomson Reuters for ESG methodology.

The custody business of BNP Paribas, the French banking group, has joined a growing number of data providers including Morningstar and MSCI that are starting to score investment funds and asset managers on their ESG quality.
The move by BNP Paribas Securities Services could increase pressure on asset managers to be more concerned about their ESG response. Custodian banks hold a large volume of market information on the companies that fund managers invest in, as well as their shareholder voting data. BNP has joined forces with Thomson Reuters, the financial data group, to use its Asset 4 ESG research service as the underlying methodology for the new ESG Risk Analytics service, which was launched in London on June 14 by Patrick Colle, general manager at BNP Paribas Securities Services.
The service, which will be based on client demand, not an open market ranking, will compare funds’ ESG score to a bench rating based on a set of sustainability criteria including business involvement exposure to so-called sin sectors such as tobacco and armaments, data oncarbon footprint/waste management and potential exposure to reputation risks including human and labour rights controversies.

The custody market has become a low-cost, utility business, but custodians are increasingly trying to exploit their big data capacity as a sales proposition for clients. BNP Paribas Securities Services itself has $9.2trn in assets under custody and administers more than 10,000 funds.
Recently, BNP Paribas Securities Services, has been aiming to expand visibility among clients of ESG issues. Last month it launched a ‘made simple guide’ for ESG with the Pensions and Lifetime Savings Association (PLSA), the UK body for pension funds, and launched it at its Local Authority Conference. Link
The move by data providers to rank funds and managers on ESG factors has seen them partner with ESG research houses. Morningstar is working with Sustainalytics, while MSCI is using its own ESG Research division and now BNP with Thomson Reuters.