A Consistent Approach for Different Types of Projects
Mirova's approach is based on the assumption that responsible investment leads to economic, social and environmental performance by directing savings toward entities, initiatives or projects that promote sustainable development. As a result, the sustainability dimension is an essential element that must be taken into account during the investment process in order to create long term value. Thus, Mirova's infrastructure strategies target projects capable of seizing the opportunities tied to the economic transition toward a more sustainable society, while taking into account any potential environmental, social or governance (ESG) risks.
Until December 2019, the Mirova infrastructure platform included both general infrastructure assets funds and energy transition funds. Each fund was intended to support projects which provide solutions to social and/or environmental issues. In December, the general infrastructure assets left Mirova’s scope to become a separate entity Vauban, which means that from then on, Mirova infrastructure assets only consist in energy transition projects. As such, we will only disclose as of 2019 for energy transition funds' numbers and performance.
Another new feature that bears emphasis is the integration of electric mobility (for instance, electric charging points, hydrogen stations, electric vehicles) in investigation fields of the energy transition funds.
Mirova's infrastructure funds target projects able to capture opportunities associated with the current transition towards a more sustainable economic model, while ensuring that companies integrate environmental, social and corporate governance risks. To identify these projects, Mirova defined a consistent assessment approach applied for all its infrastructure investments. This approach is based on the assessments of:
- The adequacy of project purpose to sustainable development challenges (ONU, 2015);
- Intrinsic environmental and social risks management throughout the project life-cycle (development, construction, operation and dismantling/end-of-life).
These two assessments provide a view of sustainability opinion which includes the concept of positive impacts on the environment and/or civil society while addressing the control of sustainability risks.
Mirova’s sustainability evaluations are based on impact themes defined by Cambridge Institute for Sustainability Leadership (ILG) and Mirova (CISL, 2016): Climate Stability, Healthy Ecosystems and Resource Scarcity with regards to the environment; Basic Needs, Wellbeing and Decent Work in regards to social impacts. These themes include the sustainable development goals (SDGs) adopted in September 2015 by 193 heads of state and other leaders at a UN summit in New York.
Our world is changing evermore rapidly. Countries are facing large scale demographic evolutions, climate change, radical technologic shifts and increased pressure on their governance. In this context and as a responsible investor, it is Mirova’s goal to support long term progress for a sustainable transition. As outlined in SDG 9: “infrastructure provides the basic physical systems and structures essential to the operation of a society or enterprise.” In other words, infrastructures are a public entity’s answer to changing socio-economic needs. As such, infrastructure projects intrinsically respond to Mirova’s philosophy, as they provide the equipment required for continued progress. However, as a long-term investor, Mirova’s interest in infrastructure projects will vary depending on their ability to offer a direct solution to the challenges of sustainable development, as well as their ability to properly mitigate the environmental and social risks implied by their construction, operation and/or maintenance. In cases where socio-economic benefits generated would be uncertain and/or environmental and social considerations insufficiently handled, carrying serious risks for local integration, Mirova would consider their long-term sustainability at risk and thus not fit for its investment strategy.
Composition of the Sustainability Opinion
Mirova’s sustainability analysis distinguishes between a project’s environmental and social contributions and any practices stemming from its management. For each project, the analysis results in an ESG evaluation on two levels:
1 Sustainability opportunities, review of opportunities in order to assess the compatibility of the project with the sustainable development goals. These opportunities are evaluated on a four-point scale: "High", "Significant", "Low or no" and "Negative".
Certain types of projects provide obvious direct positive environmental or social impacts (e.g. renewable energies, hospitals, schools), whereas other have sustainability contributions less tangible. To correctly assess the sustainability added value of infrastructure projects, Mirova uses indicators such as for instance renewable energy produced for renewable energy plants, number of patients reached for health infrastructure, number of jobs created for all.
2 Sustainability risks, review of ESG risks by evaluating the management of the project with respect to environmental and social aspects throughout its life-cycle. This review is evaluated on a three -point scale: “Positive”, “Neutral”, “Risk” and “High Risk”.
At each stage of a project, environmental and social risks are present : upstream (consultation of local stakeholders, respect of specific regulations, including environmental regulation…), at the supply Chain / Raw Material supply level, at the construction level, at the operational and maintenance level.
The combination of both levels provides the sustainability opinion. This assessment structure is applied across all asset classes managed by Mirova: equity, fixed-income, and infrastructures.
The infrastructure assets are therefore assessed according to the same ESG analysis methodology, independently from the nature of the project, whether they be focused on public private partnership projects (PPP) or on renewable energies. However, criteria taken into account are tailored to the kinds of projects (please refer to INF.07 and 12 for further information)