Additional information about Mirova’s proprietary methodology
to assess sustainability bonds from an ESG perspective
As a member of the executive committee of Green Bonds Principles (GBP), Mirova naturally endorses the Principles. Its analysis methodology is therefore based on the GBP, and even includes further requirements.
In addition to a full analysis of the issuer, each green or social bond is analyzed independently. The RI Research team scores each issue on a scale from 0 to 10. The bonds are eligible only if they obtain a minimum score of 5 on this assessment, which is based on a qualitative opinion on the following 4 criteria:
-Use of Proceeds: Mirova requires the legal documentation, at the time of issuance, to specify the use of proceeds, financing or refinancing projects with a positive environmental and/or social impact, in one or more of the following categories: Climate Change, Resources, Pollution, Biodiversity, Health and Development.
-Impact on Sustainable Opportunity: The quality of the sustainability impact of the project is analysed. 4 Evaluation levels have been defined with respect to the positive environmental and/or social impact: High, Significant, Low or No, and Negative. Only issues with a High or Significant positive impacts can qualify. Furthermore, it is under this section wherein an analysis is done of the coherence of the green / social bond framework with the overall sustainability strategy of the company. This is where the credibility and pertinence of the projects being earmarked are analysed and verified.
-ESG Risk review, at both issuer and project levels: The RI Research team conducts an analysis of the general ESG practices of the issuer, of the management of the environmental and social risks during the life cycle of the projects, and of the bond’s governance (second opinion, impacts reporting, traceability of proceeds, third opinion). If any human rights breaches are detected, the issue would automatically be excluded.
-Reporting: The issuer has to provide regular reports on the use of proceeds. A lack of reporting would lead to the exclusion of the issue from Mirova’s investment universe. The regular reporting is also used to monitor and re-assess all other aspects of the analysis as described above.