Screening : Mirova has developed a comprehensive RI approach that combines positive and negative screenings.
Screening criteria, whether positive (thematic filter) or negative (ESG filter), are established by Mirova’s in-house RI research department.
In concrete terms, for each issuer or project, 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 5-level scale: “Negative”, “Risk”, “Neutral”, “Positive” and “Committed”. Only issuers rated “Neutral”, “Positive” or “Committed” are eligible for investment at Mirova. We thus prioritize positive investment such Green and Social Bonds and issuers assisting the development of the Sustainable Development Goals. (See question FI 04.3 for more details).
Thematic: Mirova’s search to reconcile positive environmental, social, and financial impacts translates to a major investment in promotion and assistance for sustainability bonds, a key part of its fixed-income strategy. Debt instruments offer a variety of possibilities for financial innovation in response to sustainable development issues. The most important of these are green and social bonds, which provide an ideal solution for investors seeking to make an impact. These bonds finance projects with the intent of generating positive environmental and/or social impacts. As these bonds ensure a direct link between projects and financing, they provide all issuers with the opportunity to have their low-carbon activities financed by bond investors and to benefit from improved visibility of these projects.
Since its inception, Mirova has encouraged the development of the green and social bond market through its research, active participation in international market institutions (Green Bond Principles and Climate Bonds Initiative) and French market institutions (TEEC Label, Paris Europlace), regular, constructive dialogue with market players, and, of course, its investment efforts.
In providing fixed-income solutions either wholly or mostly comprised of investments in green and social bonds, Mirova reinforces this position. In fact, since the creation of the company, the portion of green and social bonds held in Mirova’s portfolios has risen steadily. Today, these bonds represent more than 1,2Bn€, which represents more than 60% of Mirova’s fixed income AUM (worldwide, green and social bonds represent about 0,5% of the total fixed income market), (A1)
Integration: For all bonds, an ESG integration analysis is performed, leading even to the exclusion of certain green, sustainability or social bonds where the sustainability opportunities are considered insufficient or sustainability risks are considered too high. This systematic ESG review is applied to all bonds, including sovereign bonds, for which Mirova developed a specific module in its internal research and analysis methodology.