BNP Paribas Funds Aqua NFO details

BNP Paribas Funds Aqua (FOF) mutual fund is a NFO from the house of BNP Paribas Mutual Fund.

The fund is based out of Luxembourg and the India Fund will feed into the fund.

It would be an open ended ESG equity scheme investing in companies associated with water.

The fund would be open for subscription from April 16, 2021.

NFO details for BNP Paribas Funds Aqua (FOF) Mutual Fund

Scheme Opens	16/04/2021
Scheme Closes	30/04/2021
Fund Manager	Mr. Abhijeet Dey Mr. Kathikraj Lakshmanan
Benchmark	MSCI World Index (TR)
Fund Category	ESG
Exit Load	1% if redeemed before 1 year

BNP Paribas Funds Aqua Mutual Fund Investment Objectives

The investment objective of this fund is to generate long term capital appreciation by investing in companies following Environment, Social and Governance (ESG) theme with special towards companies associated with water

There is no guarantee that the investment objective of the fund would be realized.

Additional reading: Click Here to read about ESG Mutual Funds

BNP Paribas Funds Aqua Mutual Fund Allocation

The asset allocation for the fund would be something like this

Asset Class	Allocation %
Units of BNP Paribas Aqua (Lux)	95 – 100
Money market instruments and /or units of money market/overnight/liquid schemes of BNP Paribas Mutual Fund	0 - 5

What are esg mutual funds?

ESG mutual funds are more concerned with how money is made rather than how much money is made, they are more concerned with a how a business makes profits rather than how profitable the business is.

A ESG mutual fund is not your traditional mutual fund scheme, it views companies from the ESG lens and therefore the parameters and filters for it are not the same as other mutual fund schemes.

ESG mutual funds are built and run on the following three pillars:

Environment

The fund reviews and judges a company based on:

Its carbon emissions if any
Its positive contribution to climate change
How efficiently it uses the natural resources
Water and waste management.

The fund does not expect chemical or refinery businesses to all of a sudden stop using water but it does expect such businesses to use water more efficiently and only release effluents into a natural body of water after it has been treated well.

Social

The fund reviews and judges a company based on:

Labour management
How it treats its customers
Diversity at the workplace
Gender diversity
Its positive involvement and contribution to society at large
The stand in takes on social issues

The stand the company takes on socially relevant issues has a big say in whether customers want to see themselves aligned or associated with the company.

Governance

The fund reviews and judges a company based on:

It’s Whistleblower policy
Bribery and corruption policy
Diversity and composition of its board

Any irregularities with the numbers reported, financial fraud does not show the company in good light. This not only affects the share price of a company but also puts all the stakeholders in a position where they are compelled to review their decision to be associated with a company they feel they cannot trust.

Additional reading: Click Here to read about the various Types of Mutual Funds

ESG Mutual Funds Investing strategy

ESG mutual funds are more concerned with what companies get right rather than what they get wrong.

The idea is to pick companies that meet certain standards that have a positive impact on the environment in every aspect and thereby a healthy outlook for the company too.

If a company has been fined by the environmental authorities for releasing unfiltered effluents into the waters then it would affect the stock price negatively too.

Other examples would unfair working conditions and any corruption or bribery charges levied against it.

All these events affect everyone related to the company including the shareholders and overall the environment in every aspect.

ESG mutual funds try to avoid these companies and therefore there is better downside protection which is as important as upward movement in share prices.

Advantages of ESG mutual funds

ESG mutual funds tend to be less stable than other mutual funds since they refrain from investing in companies, they believe are not transparent or run the risk of financial malpractices among other things.

The strong filtering process makes sure the fund only invests in sustainable businesses that provide long term growth while complying with all the necessary standards.

They are more favourable to investors that look for overall growth and not merely on the financial side.

Disadvantages of ESG mutual funds

Because of the stringent filtering process, the fund has a limited universe from where it can pick which companies to invest in and which to avoid.

This makes for a very focused portfolio and thereby the fund does not get the privilege of as much diversification as say other equity mutual funds.

ESG mutual funds cannot be the core portion of your mutual fund portfolio since at the end of the day they are still thematic mutual funds.

These funds may not always work in a bull market since they may have to overlook certain companies and sectors that do not meet the ESG requirements.

For portfolio enquiries, email us with your doubts at info@themutualfundguide.com

Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.

Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing