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BNP Paribas : Remuneration Of Shareholders And Responsible Dividend Policy

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Carbon Footprint: No One Can Achieve The Impossible

While the remuneration of managers and employees is often a point for discussion, both in political and economic spheres, shareholder remuneration is talked about much less frequently.

However, as a responsible investor, it is important for BNP Paribas to delve further into this subject: an excessive dividend policy can call into question the company’s ability for long-term development (jeopardising the means to invest in expansion or innovation) and also undermine the necessary cohesion between the different stakeholders (shareholders and employees, in particular). A good balance in the distribution of the added value seems necessary so as not to compromise the company’s long-term strategy.

Dividend policy and the distribution of added value

Issues of dividend policy and the distribution of added value require the definition of the governance model to be followed. Founded on agency theory 1 , this assumes that the company’s primary objective is to maximise value for its shareholders. In practice, this is the predominant model: although shareholders have the possibility to speak out about dividend distribution 2 , they generally approve it to a large extent, with approval rates even exceeding 99% 3 in extreme cases. Shareholders can also propose resolutions asking for a different distribution rate. But generally speaking, the purpose is to claim an increase in the dividend in the context of shareholder activism practices 4 , which favour the short term maximisation of shareholder returns.


We believe that the most suitable approach should be closer to the so-called double convergence 5 model: that of a company with multiple objectives and which seeks the
maximisation of shareholder profit, while also acting in the interests of the other stakeholders (employees, but also customers, suppliers, governments, creditors 6 , etc.) and thereby aiming to find a form of sustainable balance. We consider that this equilibrium involves seeking a balanced distribution of added value between shareholders, managers and employees. As an investor, we have a critical role to play in such a policy.

The BNP Paribas Investment Partners approach to dividend policy

Our approach calling for a reasonable distribution policy firstly translates into a detailed voting policy in terms of the circumstances which may lead to a resolution being supported or rejected. We do not, therefore, support a dividend which calls into question the company’s investment capabilities or which is made at the expense of the remuneration of the other stakeholders. One of the indicators used is that of the distribution rate, which must be reasonable.
Through shareholder engagement with the issuers, BNP Paribas Investment Partners also seeks to improve the long-term performance of our shareholdings by encouraging the best governance practices. The communication of our voting policy and the dialogue on the dividend policy demonstrate our willingness to influence corporate practices in terms of distribution levels.
However, the importance of the asset manager’s role as a responsible investor also lies in the investment solutions it offers to clients.

The responsible dividend

BNP Paribas Investment Partners has a long-standing experience in strategies which promote investing in high-dividend stocks, so we wanted to offer clients this approach, while Partners integrating the ‘responsible dividend’ concept.

To define the universe of eligible companies for the responsible high-dividend theme, we have made sure that we address the following questions:

Is the company the subject of serious and repeated controversies? Is it concerned about environmental, social and governance issues?
Under our responsible investment policy, we ensure that we invest in companies that respect the 10 principles of the United Nations Global Compact. In parallel, we apply sector policies to control our investments in sensitive sectors. By building on the results of the extra-financial analysis of an issuer’s ESG practices, we make sure we exclude from our investment universe any issuers with the worst ESG practices in their sector
Does the company’s business have a negative social impact?
We believe it is important to look at the company’s main business activity. Indeed, sectors
such as tobacco have a particularly high average of distribution rates. Yet it is crucial that we do not ignore the social cost of these activities. For this reason, a responsible dividend must not be paid to the detriment of the community as a whole. We therefore strive to exclude companies generating distributable income through activities with a negative social impact.
Does the dividend policy jeopardise the future development of the company, particularly its capacity to invest or innovate?
Regarding long-term management, shareholders want to invest in companies that are able to develop successfully over the long term and in particular having the means to invest to expand or innovate. For this reason, we feel it is important to ensure that the dividend policy does not weaken the company’s future prospects. If that were the case, excessive dividends would run against the interests of stakeholders such as the employees, but also those of long-term investors.
And so within our strategy which aims to invest in equities offering a responsible dividend, we exclude from our investments any companies which adopt a generous dividend policy even though they have recorded a loss for two consecutive years. Similarly, a company which decides to distribute income to shareholders beyond the amount of the annual profit does not, in our view, follow a responsible dividend policy.
Lastly, isn’t a high distribution rate for shareholders decided on to the detriment of other stakeholders of the company, particularly the employees?
As a responsible investor, we think it is important to analyse the distribution of the added value generated within a company. In this way, we believe that if the profit distribution rate increases considerably faster than the remuneration of employees, this may call into question the cohesion which is essential for the proper functioning of the company. The investor must ensure that all those involved in the success of the company, and therefore the success of the investment, are mobilised, particularly though a responsible dividend policy.

Conclusion

Investors committed to offering their clients responsible, long-term management should address the subject of shareholder remuneration, just as they do executive remuneration. At BNP Paribas Investment Partners, this is reflected in our new European equity strategy, which wholeheartedly follows the ‘responsible dividend’ approach. This concept has been integrated into our voting policy and the discussions we hold with equity issuers for quite some time. We consider that greater emphasis should be placed in the future on the more general subject of the fair distribution of added value within the company. This is not only in the interest of stakeholders such as employees, but also shareholders who are eagerly searching for yield in the long term.


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Green Weddings Trend: Why 70% of Newlyweds Are Going Green

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A couple of months ago, my best friend got married to her new husband. They are both very eco-conscious people, so they decided to have a unique twist on their wedding. They asked for the following:

  • They arranged a carpool with their friends.
  • They didn’t have any balloons. Instead they used umbrellas.
  • They used plant materials instead of plastic confetti.
  • My friend insisted her husband not purchase a diamond. In addition to being ecologically conscious, she didn’t like the idea of having a stone that was used in conflict zones.

My friends aren’t the only ones making these changes. In fact, nearly a quarter of all newlyweds are organizing green weddings.


Green Weddings Are Becoming the Norm

People are more concerned about green living than ever before. They are trying to incorporate environmental protectionist ideas into every facet of their lives, even the most intimate, such as marriage. A growing number of people are trying to have green weddings, which can make a big difference in reducing their carbon footprint.

How much of a difference can this make? Here are some statistics to bear in mind:

There are a number ofreasons that green weddings are becoming more important. Here are a few.

People Are More Worried About Environmental Preservation than Ever Before


Green living in general is becoming a greater concern for most people. Even younger conservatives are breaking from their older counterparts by insisting on fighting climate change. According to a poll from Pew Research earlier this year, 75% of Americans say that they are very concerned about protecting the environment. Having green weddings is a good way to act on this concern.

One of the biggest changes people are making is using recycled products for their green weddings. This is explained by the research from Pew:

“Overall, 32% of U.S. adults say they are bothered a lot by people throwing away things that could be recycled. Roughly six-in-ten Americans (61%) who say they always try to live in ways that protect the environment say it bothers them “a lot” when others throw away things that could be recycled. Among those who are less focused on environmental protection, only a quarter say it bothers them a lot when others don’t recycle. People who are environmentally conscious are also twice as likely as others to say that seeing someone incorrectly putting trash in recycling bins bothers them a lot (42% vs. 21%).”

Indifferent Politicians Are Driving them to Take More Initiative

Many politicians in power have been very hesitant to take action on climate change. Many of them have openly stated that it is a hoax. These politicians are forcing people to do what they can in their own lives to make a difference. Making small changes, such as hosting green weddings, is a great way to improve the environment without waiting for political momentum.

Cost and Simplicity

A couple of the biggest reasons that people want to host green weddings have nothing to do with their concern for the environment. Running green weddings is simply cheaper and simpler than having a massive, traditional one. One of the biggest changes is that they are buying green engagement rings from the best brands.

Green Weddings Are the Future

Green weddings have become very popular over the past few years. They will probably account for close to 90% of all marriages by 2025. People that are planning to get married should look into the benefits and plan accordingly.

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Green Tech Start-Ups: Are they the Future?

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Endless innovations are occurring in green companies, reinventing the industries they belong to. Gradually, they are beginning to amass more success and popularity. Consequently, these factors serve as a good indicator for green technology businesses, and their development must begin somewhere.

Green tech start-ups boast a wide array of opportunities for the economy and environment, while boosting recruitment openings with valuable services. While the technology industry is littered with high revenues and competition, the green tech start-ups are the clear sign of a cleaner future.


Fulfilling a Genuine Need

Many tech companies will market themselves as the ultimate tech giants to shift stock and make profit. As they all vie for attention through warped corporate rhetoric, there is only one ethical winner; the start-up green tech company.

Some argue that mainstream tech businesses have grown far too big, branching out into other industries and standing between the consumer and practically everything they do. However, green tech start-ups go beyond the shallow ambitions of a company, answering a call to sincerely help the customer and climate in any way they can. Of course, this is an attractive business model, putting customers at ease as they contribute to a humanitarian cause that is genuine through and through.

After all, empathy is a striking trait to have in business, and green tech start-ups maintain this composure by their very nature and purpose.

Creating Opportunities

Despite the pursuits for clean energy still needing more awareness, green tech is an area that is ripe for contribution and expansion. There’s no need to copy another company or be a business of cheap knockoffs; green tech start-ups can add a new voice to the economy by being fresh, fearless and entrepreneurial.


Technology is at its most useful when it breaks new ground, an awe that eco-friendly innovations have by default in their operations. Of course, green tech start-ups have the chance to build on this foundation and create harmony instead of climate crisis. Ultimately, the tech advancements are what revolutionise clean energy as more than an activist niche, putting theory into practice.

Despite the US gradually becoming more disengaged with green technology, others such as China and Canada recognise the potential in green technology for creating jobs and growth in their respective economies. The slack of others spurs them on, which creates a constant influx of prospects for the green tech sector. Put simply, their services are always required, able to thrive from country to country.

A Fundamental Foresight

Mainstream technology can seem repetitive and dull, tinkering with what has come before rather than turning tech on its head. Since 2011, technology has been accused of stagnation, something which the internet and petty app services seem to disguise in short reaching ideas of creativity.

However, green tech start-ups aren’t just winging it, and operate with a roadmap of climate change in the years ahead to strategize accordingly. In other words, they aren’t simply looking to make a quick profit by sticking to a trend, but have the long-term future in mind. Consequently, the green tech start-up will be there from the very start, building up from the foundational level to only grow as more and more people inevitably go green.

They can additionally forecast their finances too, with the ability to access online platforms despite the differing levels of experience, keeping them in the loop. Consequently, with an eye for the future, green tech startups are the ones who will eventually usher in the new era.

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