BNP Paribas Fortis has introduced the Sustainable Development Note 2026 in Belgium. The capital protected medium-term note offers 75% of the rise in the Solactive Sustainable Goals Europe MV index - a new index comprising 30 shares of European companies which was launched by BNP Paribas in collaboration with Solactive and Vigeo Eiris.
The index is the third underlying linked to socially responsible investing (SRI) theme used by BNPP Fortis for its structured products, after the Ethical Europe Equity, which was first used by the bank in May 2013, and the Ethical Europe Climate Care index.
SRI is a very important theme, not just for BNPP Fortis but also for its clients, according to Jurgen Vanhaverbeke (pictured), head of product management, save & invest, at BNPP Fortis. "The strategy within our bank, both within private banking and retail, is that we are really going for SRI," said Vanhaverbeke. "At the same time we see that more and more clients become interested in SRI too.
"In the past we have launched a number of products on SRI indices [Ethical Europe Equity and Ethical Europe Climate Care], but it's important, from time to time, to change the themes we use," said Vanhaverbeke.
The 30 stocks in the Solactive Sustainable Goals Europe MV index, of which the composition is reviewed every three months, where selected from within the investment range of Vigeo Eiris, by applying a number of filters with regards to sustainability and certain financial criteria.
Whereas in the past BNPP Fortis opted for the classic low volatility indices, selecting the shares with the lowest volatility, the new index is a so called minimum variance (MV) index, according to Vanhaverbeke. "Here we select within the selected universe of shares respecting the environmental, social and governance (ESG) and financial criteria, the portfolio of 30 shares with the lowest volatility over the course of the last six months," he said. "In doing so we can offer an index that is more optimised reducing the option price - allowing better product conditions - with very attractive return perspectives on the underlying index."
The note has a term of 10 years but Vanhaverbeke does not believe the long duration will put of investors. "Most of our products already had a term of around eight to nine years anyway," he said. "There are a lot of clients who are quite risk averse. For these customers the 100% capital protection is very important, more important than the fact that the term of the product is one or two years longer.
"What we see is that if we launch a similar structure, 100% protection versus 90% protection, you do notice the difference in sales," said Vanhaverbeke. "100% capital protected products continue to attract more customers."
Between May 2013 and October 2015, BNPP Fortis launched 36 structured products with a combined sales volume of €833m linked to the Ethical Europe Equity index, according to SRP data. A further nine products (€148m), which were distributed by the bank between October 2015 and August 2016, were linked to the Ethical Europe Climate Care.
BNPP Fortis has issued 46 structured products (€731m) this year to date. Of these, 40 products (€601m) were linked to equities while the remaining six products (€130m)were linked to the interest rate.
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