BNP Paribas Securities Services is to extend its capability in New Zealand to include stock market clearing services, the first global custodian to do so.
The global custodian, which has had a big presence in the NZ institutional market for many years, has to date had almost no demand for such a service, with local providers, including brokers, satisfying the demand.
However, following six new sub-custody (often called domestic custody) clients in the past 18 months, including the NZ$95 billion post-trade services provider Clearstream, BNP has been prompted to provide a competing clearing service.
David Braga, the chief executive of BNP Paribas Securities Services for Australia and NZ, said last week (September 8) that the service would be provided from early next year. It is understood that it will also extend to the second NZ exchange, NZ Clear.
This means that BNP Paribas will become the only asset servicing company among the big global banks which can support the ‘Portfolio Investment Entity’ (PIE) and KiwiSaver retail products.
BNP Paribas picked up about NZ$150 billion of new sub-custody business over the past 18 months from six clients, including Clearstream, which is owned by the German Deutsche Borse AG. The biggest provider of sub-custody to the Australasian market, by a wide margin, remains HSBC.
Unlike Australia, the NZ regulator, the Financial Markets Authority, does not require that companies performing the role of custodian to be separately licensed, making it easier for smaller local players to participate.
Braga also revealed last week that it would roll out from Australia next year its new ESG tool, known as the ‘Manaos platform’, which was launched in Europe this year.
The platform allows clients to measure their assets against the 17 UN Sustainable Development Goals (SDGs) – which include initiatives aimed at reducing global poverty and hunger – and other controversial areas such as weapons manufacturing and tobacco. The tool was built in partnership with fintech Clarity AI.
Braga said: “Underneath the whole challenge of ESG, as our clients are looking what it means to be an investor and holding all of those investments, the reputation management they’re going through is starting to extend out to the full ecosystem of their providers.
“Who is going to augment their reputation and who is going to have the potential to bring reputation risk in for them? That type of analytic is the new way that funds are saying: ‘we have to get some better measures across our book’.”
While European regulators have worked towards clarifying investor responsibility for carbon emissions and climate change through the Sustainable Finance Disclosure Regulation regime – and global regulators are following close behind – the fragmentation and availability of ESG data means that progress can be hard to measure.
“On ESG as a measurable, beauty is still in the eye of the beholder so it’s hard to get good data that will line up against the characteristics of your investments and make your own determination about your fund and how to represent it in terms of its characteristics,” Braga said.
Lachlan Maddock is contributing editor to Investor Strategy News (Australia)