BNP Paribas plans structured products tied to Sustainable Development Goals

Germany-based index provider Solactive has today launched one of the first indices based around the United Nations’ Sustainable Development Goals (SDGs) – and it will be exclusively licensed to BNP Paribas.

The SDGs are a set of 17 goals established to guide international cooperation to achieve sustainable development, end poverty and tackle climate change. They were adopted by UN member countries in September 2015 and require active participation from governments, corporations and investors.

Last month a coalition of Dutch and Swedish pension fund managers pledged to use the SDGs as a framework through which to make investor decisions, citing the need to meet “mounting social and environmental challenges”.

The new Solactive Sustainable Development Goals World Index consists of 50 equally-weighted companies identified as making a significant contribution to the advancement of the SDGs.

Eligibility for inclusion is based on ESG research firm Vigeo Eiris’ ‘Equitics’ methodology that maps the SDGs against companies’ products, services and behaviours.

Speaking to Responsible Investor, Neven Graillat, Head of Sustainable Investment Solutions at BNP Paribas Global Markets, said until recently SDGs had gone somewhat under the radar given COP21 and wider climate change issues.“The SDG story has started coming up very often and we started to work on investment solutions for the SDGs. The question of how we access the SDGs for our equity portfolio was huge work.”

“The SDG story has started coming up very often”

As well as rating companies on their impact, ESG screens include tobacco, nuclear and firearms. There is also a carbon footprint exclusion filter based on corporate carbon emissions and energy transition strategies. The ESG screenings are combined with a low volatility filter, with country and sector caps.

BNP Paribas plans to issue structured products tied to the indices later this year. Graillat said as well as its institutional clients, it was aiming to reach its retail and wealth management customers. “SDG 17 is about partnership around the goals. The SDGs are designed to say we are all responsible. It’s the reason it is key to reach everyone,” he said.

Henning Kahre, head of research at Solactive, said: “We at Solactive see increasing demand for indices offering ESG compliant access to markets as a result of long-term initiatives such as UN’s SDGs.” RI understands S&P is working on an index based on the SDGs.