Mirova’s fixed income management team has 3 core beliefs:
-Today, markets are not fully integrating all ESG related information, which in turn creates inefficiencies that can present attractive long-term opportunities for active investors focusing on these areas (e.g. considerable needs for energy transition that can be met through green bonds). “Positive Contributors” are therefore issuers well positioned on solutions to tackle sustainable development challenges.
-Mirova’s ESG analysis helps better avoid black swan events and prevent some default Risks: Major ESG shortcomings could expose issuers to capital destruction and ultimately default risk. This could be due, for example, to high carbon profiles (vulnerable balance sheets), innovation / disruption challenges, low level business ethics (litigation risk), etc.
-By analyzing each issuer (and Green/social project related to sustainability bonds) from an ESG and financial perspective, thanks to its optimum ESG integration approach, Mirova seeks to deliver both financial performance on a long run and positive ESG impacts
That being said, Mirova’s fixed income expertise has a dual-purpose:
-Assisting issuers’ transition to become more sustainable;
-Creating value for client by targeting sustainable assets, which will appreciate over the long run.
This ambitious objective cannot be achieved only through screenings: the thematic filter is a valuable input in idea generation, the ESG filter helps in avoiding issuers with poor ESG practices, but ESG Integration is the third essential component of an efficient and performing RI process.
That’s why ESG factors are incorporated at each stage of the issuers selection process. Once the eligible investment universe is defined, after applying Thematic / Sustainability Bonds / ESG filters and financial filters, an in-depth financial analysis is applied to the active universe (please refer to FI.12 and FI 13 for further details)
This incorporation on ESG criteria into fundamental analysis helps in gaining a more comprehensive knowledge of opportunities and risks related to each issuers. ESG criteria are also taken into account at the portfolio construction level: for equal financial profile, the fixed income portfolio managers prioritize green / social bonds and “positive contributor bonds” as regards to sustainability.