BNP Paribas Asset Management has launched the BNP Paribas Environmental Absolute Return Thematic Fund, an equity long/short alternative UCITS strategy that seeks to identify opportunities among those companies that are facing or addressing significant environmental challenges.
These challenges arise as the increased demand for food, water and energy resulting from forecast global population growth of two billion by 2050 will lead to increased waste production and carbon dioxide emissions, while the world is simultaneously targeting carbon neutrality by the same date under the terms of the Paris Agreement.
With such challenges come opportunities for those investors looking for meaningful ways to deploy capital to help fight climate change. The fund combines thematic, top-down macro, industry and regulatory research with fundamental company analysis, augmented by proprietary quantitative models for portfolio construction, risk management and alpha screening.
Holdings are selected on a thematic, relative value or catalyst-driven basis from a proprietary database maintained by the managers. The investment universe consists of global developed and emerging market companies typically capitalised at more than US$1 billion, each of which is mapped to one or more of eight environment-related Sustainable Development Goals (SDGs).
The fund will take long positions in the most promising and innovative companies globally within the energy, materials, agriculture and industrials markets that are providing solutions to environmental challenges. These are paired with short positions in companies with unsustainable or technologically inferior business models vulnerable to transition risk. Short positions are used both to hedge long positions and as an alpha source, and have a positive impact by increasing the cost of capital for companies failing to address environmental challenges.
In accordance with BNP Paribas’ AM’s Global Sustainability Strategy, environmental, social and governance (ESG) principles are fully incorporated in the fund’s investment process.