Inequality: the threat investors can’t ignore!

?? Unequal access to opportunity and limited social mobility aren’t just moral concerns – as highlighted in BNP Paribas Asset Management ’s new Equality Roadmap, they’re creating a perfect storm for social cohesion, trust, and economic health. Unlike climate change, however, there is no “Paris Agreement” to tackle inequality, and many investors still think this issue has no bearing on the market – wrongly so! Dig in to find out why inequality is everybody’s business – and what investors can do about it.

• What do labour strikes, protests against green policies, and the rise of populism have in common? They are all symptoms of growing frustration with a perceived widening of economic inequalities. Across the OECD - OCDE , nearly 65% of working-age individuals worry they will be less financially secure than their parents. These fears aren’t baseless: global inequalities are now as severe as they were at their previous peak, in the 1910s. And since the 1980s, income and wealth disparities have broadened nearly everywhere, with the most acute inequalities now found not between countries but within them.
• Inequality has always existed, a by-product of an economic system where competition for wealth creation, innovation, and well-being inevitably produces winners and losers. The real issue arises when unfair competition locks people into fixed categories of winners and losers. This “structural inequality” occurs when equality of opportunity (access to quality education, healthcare, decent jobs, and living wages) and effective social mobility are no longer guaranteed. In OECD countries, it takes nearly five generations for children from low-income families to earn their country’s average income.
• But inequality isn’t just a matter of fairness: it poses risks to society and markets at large, not least by limiting the potential for economic growth. In the US, “income inequality is estimated to reduce GDP by 2-4% per year ,” writes Oxfam. And spikes in inequality often precede deep financial crises, such as the Great Depression and Great Recession. Inequality also erodes social cohesion, which the World Economic Forum ranks as the fourth most severe global risk of the next decade. Politically, it concentrates power in the hands of a few, jeopardising democracy. Last but not least, inequality amplifies the damages of long-term and short-term threats such as climate change or Covid and undermines our capacity to address them.
• Despite this, many investors still view inequality as financially irrelevant – much like climate change a few years ago! Yet inequality risk can manifest both systematically in the market and within individual companies, presenting significant risks for investors. At the company level, inequality impacts performance: offering low wages and benefits leads to higher employee turnover, which hurts the bottom line, while identity-based discrimination creates barriers for entire workforce segments, wasting unique talents and raising legal and reputational risk. Conversely, better workplace practices benefit shareholders: a study found that when companies increase wages, the resulting productivity gains outweigh the costs.
• Fortunately, investors are in a strong position to combat inequality, through their support for corporate actions across operations, governance, and products and services. As Jane Ambachtsheer , Global Head of Sustainability at BNP Paribas Asset Management, points out, "addressing inequality represents an opportunity to reverse wage stagnation, strengthen gender equality, and improve our collective capacity for meaningful climate action."

• So what exactly can they do? That is the question at the heart of BNP Paribas Asset Management’s framework for tackling inequality action . When BNP Paribas Asset Management launched its Global Sustainability Strategy in 2019, it identified three preconditions for a sustainable economy: a successful energy transition, healthy ecosystems, and greater equality. Following its Biodiversity Roadmap (2021) and Net Zero Roadmap (2022), the all-new Equality Roadmap offers a framework mapping key corporate actions that can influence inequality outcomes.
• Among the framework’s pillars is a responsible business conduct policy that allows BNP Paribas Asset Management to address inequalities in human rights, labour standards, and anti-corruption by divesting from the worst offenders and engaging with others when possible. Additionally, BNP Paribas Asset Management is incorporating new social data into its investment and engagement processes to better assess companies’ social performance. Too often, social data is limited by inconsistent disclosures, hindering investors’ ability to identify risks and opportunities.
• Stewardship is another crucial area for investors to act on inequality. BNP Paribas Asset Management’s stewardship policy has led to a strong record of casting proxy votes in support of greater gender diversity on boards and challenging executive compensation. Investors’ responsibility regarding inequality also involves offering products and services that promote equality; that is the rationale behind BNP Paribas Asset Management’s solidarity investments, which channel capital into projects that improve access to opportunity and mitigate inequality outcomes.
• The Equality Roadmap makes one thing very clear: once-in-a-century challenges such as climate change and inequality, though they may seem distant from the investment world, are deeply connected to financial choices. This makes investors key players in the transition to a more sustainable world, alongside governments, companies, citizens, and many more. We’re all in this together!

?? The world is currently in the midst of its fourth global coral bleaching event , with coral reefs from the Caribbean to the Great Barrier Reef and the Red Sea in danger. The clock is ticking, and quick action is crucial to protect these vital ecosystems before it’s too late.

• Marine Protected Areas (MPAs) play a crucial role in restoring biodiversity and supporting coastal communities, yet 70% of the world’s 20,000 MPAs struggle to meet basic management standards due to chronic underfunding. With public finance a scarce (and precious) resource, the mobilisation of additional funds and revenue models for marine conservation is vital.
• Enter Blue Finance, a new impact loan facility launched by the Blue Alliance Marine Protected Areas and BNP Paribas’s Impact Investment team. The goal? To provide early-stage financing to reef-positive businesses that strengthen the Blue Economy within MPAs across the Global South, ensuring long-term sustainability.
• Blue Finance is set to protect 1.8 million hectares of coral reefs in Indonesia, the Philippines, Tanzania, and Cabo Verde, while enhancing the livelihoods and food security of 110,000 local community members. Find out more here .

?? In 2022, renewable energy accounted for a strong 43% of the European Union’s total energy production.

• That’s a great start… but it is far from enough. To meet its 2050 carbon neutrality goal, the EU must massively scale up renewable energies. This means not just greening electricity production, but also increasing it massively to encourage changes such as the shift to electric vehicles or from oil and gas boilers to heat pumps. In fact, estimates show the EU will have to boost its electricity production by at least 50% by 2030, while transitioning to rely on solar and wind power.
• This is a daunting industrial and financial challenge, especially in an era of strong budgetary constraints. The EU will have to raise resources that states alone cannot provide, by turning to private capital. BNP Paribas economic expert Jean-Luc Proutat explores the way forward for Europe’s energy transition there ??

?? 1.5 gigatons of CO2 emissions: that’s how much is avoided globally each year thanks to nuclear energy.

• At the COP28 in December 2023, 16 countries backed the Declaration to Triple Nuclear Energy , reflecting growing recognition of the role of nuclear energy in the global energy transition – as a low-carbon power source, of course, but also as a way to build more secure and sustainable energy supply chains.
• Last month, during the New York Climate Week, 14 financial institutions (including BNP Paribas) stepped up and pledged to triple their investments in civil nuclear by 2050. This is no small victory for the transition to clean energy, as expanding access to financing is key to unlocking nuclear’s potential to deliver zero-emission power and heat.
• The next frontier? Developing new financial instruments to make nuclear energy as cost- competitive as other carbon-free energy sources.

?? What if eye movements could become a way of communicating?

• That’s the groundbreaking promise behind startup Wyes ’s connected glasses, which allow individuals with disabilities such as ALS to communicate using only their eyes. A true game-changer.
• In the latest episode of Double Dose - Le Podcast , Wyes co-founder Sarah Mougharbel shares the story of how Wyes developed its technology – and is joined by her BNP Paribas advisor, Marie-Line Eyermann , who recounts how she first heard of Wyes… and how she instantly knew we should support it! Tune in ??