How the screening criteria are established and combined
Screening criteria, whether positive (thematic filter) or negative (ESG filter), are established by Mirova’s in-house RI research department. In order to further explore sustainable development issues and analyse their impacts on sectors and companies, Mirova has built up a robust in-house extra-financial research capacity. A dedicated team of 11 specialists in ESG issues, among which 7 dedicated to corporate issuers, undertakes analysis according to a proprietary methodology that is both demanding and practical.
In concrete terms, for each company, the RI research team produces a Sustainability Opinion, which assesses whether the investment is compatible with the UN Sustainable Development Goals. The team’s guiding philosophy is publicly available on Mirova’s website*. The formation of this Sustainability Opinion relies on two main assessments.
-The Sustainability Opportunities Exposure which assesses the compatibility of the company’s business model with sustainable development themes. The level of exposure is calculated in terms of the environmental or social benefits presented by an activity in comparison to a business-as-usual scenario.
-The Sustainability Risks Review, which evaluates how a company addresses environmental and social challenges, regardless of the quality of its business model. It also includes an in-depth analysis of companies’ exposition to severe and repeated controversies (major violations of the UN Global Compact and OECD principles, controversial weapons)
The “Sustainability Opportunities Exposure” is merged with the “Sustainability Risk Review Opinion” to form the overall “Sustainability Opinion”, defined on a 6-level scale: “Worst Offender (WO)”, “Negative”, “Risk”, “Neutral”, “Positive” and “Committed”. Only issuers rated “Neutral”, “Positive” or “Committed” are eligible for investment at Mirova.
As regards the analysis, the RI research team has implemented two types of coverage regarding sustainability analysis:
Core scope, mostly made up of companies held in portfolio: good knowledge of the company (or event extensive for the main holdings), regular monitoring/updates and validation/review of ISS ESG’s analyses on a quarterly basis (ISS ESG is Mirova’s main external research partner), meetings with companies, etc.
Standard scope, i.e. all other companies: the analysis is fully delegated to ISS ESG.
How often the criteria are reviewed
There is no pre-defined frequency to review the RI criteria. The idea generation process and screening criteria, and generally speaking the entire process of extra-financial research, undergo constant improvement and refinement (strengthening sources, constant monitoring of sustainability issues, etc.), while offering continuity.
How Mirova notifies clients and/or beneficiaries when changes are made
Should a significant change of RI approach or criteria occur that might affect the investment process, the fund’s prospectus would be updated. In such a case, changes would be notified to AMF, the French securities regulator, and investors would be properly informed, i.e. by press release or by letter to the unitholders.